Annual Report 2006 年報

CASIL TELECOMMUNICATIONS HOLDINGS LIMITED 航天科技通信有限公司 * Stock Code 股份代號 : 1185

the Chinese name of the Company is for reference only 本公司之中文名稱只作參考 Contents ͌፣

Corporate Information 2-4 ʔ̇༅ࢿ

Group Financial Highlights 5 එ྆ল৻࿂߬

Directors' Business Review 6-10 ໎ԑผพ৻Αᚋ

Biographical Details of Directors and Senior Management 11-18 ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

Corporate Governance Report 19-31 ͬพဳ؝ంй࣊

Report of the Directors 32-38 ໎ԑผంй࣊

Independent Auditor’s Report 39-41 ዟ͓࣏ᅕ࢑ంй࣊

ٲConsolidated Income Statement 42 ၃΋ฌऩ

ٲConsolidated Balance Sheet 43-44 ၃΋༅ଐ߲ඦ

ٲConsolidated Statement of Changes in Equity 45 ၃΋ٖ׭ᚬऩᛰ৽

ٲݚ൴ټConsolidated Cash Flow Statement 46-47 ၃΋ଊ

ഽڃNotes to the Financial Statements 48-111 ল৻ంй

Five Years' Financial Summary 112 ʄαল৻༅ࢿล߬

Annual Report 2006 ɀཌྷཌྷʒαం 1 Corporate Information ʔ̇༅ࢿ

BOARD OF DIRECTORS ໎ԑผ

ਨϷ໎ԑڈ Non-executive Directors

ٽMr. Wu Yansheng (Chairman) дዘ́ͱ́໎ԑ ٽMr. Liang Xiaohong (Vice-chairman) ષɩߧͱ́৹໎ԑ Mr. Tang Guohong ࡌਝѩͱ́

Executive Directors ਨϷ໎ԑ

ٽͱ́৹໎ԑלMr. Han Shuwang (Vice-chairman) ᒚኹ Mr. Wang Xiaodong ˔ኮ׭ͱ́ Mr. Li Guang ңͮͱ́

ਨϷ໎ԑڈIndependent Non-executive Directors ዟ͓

Mr. Yiu Ying Wai ۢᕯ৩ͱ́ Mr. Wong Fai, Philip ඡ๧ͱ́ Mr. Zhu Shixiong χ˖ඐͱ́ ͱ́ڭMr. Moh Kwen Yung ˉᗐ

AUDIT COMMITTEE ᄗ࣏կࡗผ

Mr. Yiu Ying Wai (Chairman) ۢᕯ৩ͱ́˚࢐ Mr. Wong Fai, Philip ඡ๧ͱ́ Mr. Zhu Shixiong χ˖ඐͱ́ ͱ́ڭMr. Moh Kwen Yung ˉᗐ

REMUNERATION COMMITTEE ᑀ༭կࡗผ

Mr. Wu Yansheng (Chairman) дዘ́ͱ́˚࢐ Mr. Wong Fai, Philip ඡ๧ͱ́ Mr. Yiu Ying Wai ۢᕯ৩ͱ́

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 2 Corporate Information ʔ̇༅ࢿ

DEVELOPMENT AND INVESTMENT ೕࢄʥҙ༅կࡗผ COMMITTEE

Mr. Liang Xiaohong (Chairman) ષɩߧͱ́˚࢐ ͱ́לMr. Han Shuwang ᒚኹ Mr. Wang Xiaodong ˔ኮ׭ͱ́ Mr. Tang Guohong ࡌਝѩͱ́ Mr. Wong Fai, Philip ඡ๧ͱ́

COMPANY SECRETARY ʔ̇ो࣊

Mr. Au-Yeung Keung, Steve ᅩඈੜͱ́

REGISTERED OFFICE ഽ˫ፒԑ୮

Ugland House Ugland House South Church Street South Church Street P. O. Box 309, George Town P.O. Box 309, George Town Grand Cayman, Cayman Islands Grand Cayman, Cayman Islands British West Indies British West Indies

PRINCIPAL PLACE OF BUSINESS ࠗಋ˚߬ᏪพΔᒨ

Suite 4701 ࠗಋ 47/F Central Plaza ᜪˠ 18 Harbour Road ಋᜪ༞18໔ Wanchai ɻ᏷ᄤ௿ ۩Hong Kong 47ᅢ4701

WEBSITE ၉ࠒ www.castelecom.com www.castelecom.com

E-MAIL ADDRESS ཋ൯Δэ [email protected] [email protected]

Annual Report 2006 ɀཌྷཌྷʒαం 3 Corporate Information ʔ̇༅ࢿ

AUDITORS ࣏ᅕ࢑

Deloitte Touche Tohmatsu ᄨඵgᗐඡஹʿผ߮࢑Ϸ 35/F One Pacific Place ࠗಋ ᘸ༞88໔ټ Queensway 88 Hong Kong ʪ̀ᄤ௿ȹ࢔35ᅢ

SHARE REGISTRAR ٖͫ೔ত୮

Standard Registrars Limited ᅟๅᖬԴ೔তτࠉʔ̇ ৻୮רShare Registration Public Office ᖬԴ೔ত 26/F Tesbury Centre ࠗಋ ΍ɣ༞׭28໔ޒ Queen's Road East 28 ᘸමɻʶ26ᅢټ Hong Kong

PRINCIPAL BANKS ˚߬֡ԞႺϷ

Bank of China (Hong Kong) Limited ɻਝႺϷࠗಋ DBS Bank (Hong Kong) Limited ܱࢄႺϷ Hang Seng Bank Limited ܏́ႺϷ The Hongkong and Shanghai Banking මᔔႺϷ Corporation Limited

ᚋਐ܁ؒ LEGAL ADVISERS

Richards Butler ღВᓤ܁࢑Ϸ ࢑ԑ৻ֺ܁Sidley Austin ଞᄨ Sit, Fung, Kwong & Shum ᑇඟㅽѰ܁࢑Ϸ Maples and Calder Maples and Calder

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 4 Group Financial Highlights එ྆ল৻࿂߬

2004 2005 2006

(a) Financial data (a) ল৻ᅕኣ (expressed in HK$'000) ˞ɝಋʏͶ͐

Turnover Ꮺพᔾ 148,126 185,784 156,199 Gross profit ˉС 54,170 65,077 12,079 Profit (loss) for the year attributable ̯ʔ̇ᚬऩܛτɁᎶЌ (to equity holders of the Company b̯α۹ึС ᑋฌ 5,368 (29,781) (64,562 Total borrowings ࠥ൘ᐢᔾ 99,189 105,652 265,667 Equity attributable to equity holders ̯ʔ̇ᚬऩܛτɁ of the Company bᎶЌᚬऩ 180,546 151,997 90,274 พdذAcquisition of property, νᑪ plant and equipment bᄥָʥஉௐ 25,112 13,846 9,787 Development costs ɰଐֶ́༅̯ʝ incurred or capitalised bɾ඀ೕι̯ 1,327 2,418 1,620 Staff costs ࡗɮι̯ 23,829 24,980 28,956 Net asset attributable to equity Ұٖ̯ʔ̇ᚬऩ holders of the Company bܛτɁ૱༅ଐࠤ ഽ 1 0.178 0.149 0.089ڃ per share(HK$) (note 1) bಋʏ

(b) Financial ratios (b) ল৻ˈଅ ഽ 2 2.36 1.35 1.78ڃCurrent ratio (note 2) ݚ৽ˈଅ ഽ 3 1.74 1.09 1.38ڃQuick ratio (note 3) ஠৽ˈଅ ഽ 4 55% 70% 294%ڃGearing ratio (note 4) ߲ඦˈଅ

ഽiڃ :Notes

Net asset attributable Equity attributable (1) Ұٖ̯ʔ̯̇ʔ̇ᚬऩ (1) Number of issued α֛ɰೕϷ to equity holders of = to equity holders of ÷ ᚬऩܛτɁ = ܛτɁᎶЌÒ shares at year end ٖͫᅕ͌ the Company per share the Company ᎶЌ૱༅ଐࠤᚬऩ

Current ratio = Current assets ÷ Current liabilities (2) ݚ৽ˈଅ = ݚ৽༅ଐÒݚ৽߲ඦ (2)

Quick ratio = (Current assets – Inventories) ÷ Current liabilities (3) ஠৽ˈଅ = ݚ৽༅ଐ Ð Φஒ Òݚ৽߲ඦ (3)

Equity attributable ̯ʔ̇ᚬऩܛ (4) Gearing ratio = Total borrowings ÷ (4) ߲ඦˈଅ = ࠥ൘ᐢᔾÒ to equity holders of τɁᎶЌᚬऩ the Company

Annual Report 2006 ɀཌྷཌྷʒαం 5 Directors' Business Review ໎ԑผพ৻Αᚋ

τࠉʔ̇ ̯ʔڌ໎ԑผcล߸ॾʨޫҌ஝ٲOn behalf of the Board of Directors, the business performance of ᔑˤ ࿀ϭɀཌྷཌྷʒכ ᙔʔ̇ ଻ီ ̯එ྆ڃCASIL Telecommunications Holdings Ltd. (the "Company") and its ̇ʥԯ ଊeٲα۹ɾพ৻ܧsubsidiaries (collectively the "Group") for the financial year ended αɊɀ˂ɍɊȹˀ˅ল 31 December 2006 is summarized in the following paragraphs.

RESULTS SUMMARY พᐜ࿂߬

As of 31 December 2006, the Group’s turnover for the year 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆2006αα amounted to HK$156.20 million with a loss of HK$65.23 million in ۹ɾᏪพᔾݯ15,620ຒಋʏcᑋฌ6,523ຒಋʏc ༖Ꮺพᔾݯ18,578ຒಋʏʥᑋฌݯ2,936ޚcontrast to those for the year 2005 of HK$185.78 million and 2005α۹ ᗐพ৻ʿࠍؿޚཋ঩כHK$29.36 million respectively. The loss for the year was mainly ຒಋʏe̯α۹ᑋฌ˚߬ͅ ҙɃ՗਩ө౨ኒߎ൒͂ᄈ˱eכattributable to various allowances relating to the ᅆௐcณพ৻̳୮ telecommunication business made whereas there were expense increases upon the investment and development period of new businesses.

BUSINESS REVIEW AND PROSPECTS พᐜΑᚋၤࢄશ

உௐሻਕʥͲଈڌWhile the Group continued the sales of communication equipment ̯එ྆2006αα۹৖ᘗᙩ຤Ꮺ஝ ৻೩ඖพ˞̔c̯එ྆͛ዶרand the application services of Global Positioning System (GPS) for ᇯܱցϽ GPSᎶ͂ the year 2006, the Group also continued increasing its investments รׅࢄณؿพ৻ეਟcݯ̯එ̰྆Ԟೕࢄ਩өณؿ ᙩᄈ˱ҙ༅ܛᒨeȹʿࠍٽСᄈޔin new business intensively, aiming at exploring new operations ຤Ꮺพ৻՗ณؿ ɰୃ߮ҙɃ1.00ყಋʏc̊کand new earning sources for its future development during the year. ࠓɈೕཋ௿ඖ͌c͌ ɀཌྷཌྷȼαɀ˂ɊʄˀʥɀཌྷཌྷȼαכIn addition to continuation of increasing the investments in wind ȹʿࠍcҡ energy plant project with the total accumulated investments to ɍ˂ɀɊȼˀcၤ̴ʔ̇ɻਝ༜༗ˌᆰҌ୺ޢӠ৑ date of HK$100 million, the Group on 15 February 2007 and 27 ˌᆰ৑ ᖋ߯τᗐ̯එ྆൬ȹү੣̴ʔ̇νᑪพ March 2007 entered into agreements whereby the Group will ৻ɾԾᘪcνᑪพ৻˳ܢࠓཋஉௐɾޢೕdႇ஥c further acquire from its parent company, China Academy of Launch Ӂӹೕ৽ዀဳଉӡ଻ʥ৉ͧɾႇ஥dӹӸ਽۬ӡ଻ ೕdႇ஥ඖ͌cνᑪˤძݯޢVehicle Technology (“CALT”), new businesses comprising research ɾႇ஥dೣɠཋዀɾ ѧکɀཌྷཌྷȼαȾ˂ɍɊˀכand development and production of wind energy facilities, 9.00ყಋʏeϊඖ඘ ɀཌྷཌྷȼαכ˰ᘪνᑪԑඖ໯ੱc̯ʔ̇ɰۺautomotive engine management systems and components ιɾ manufacturing, automotive sealing products manufacturing, rare- ̒˂ɀˀʔЗʑe earth-permanent magnetic motors manufacturing, at the purchase consideration of HK$900 million. The details of the proposed acquisitions that will be completed by 30 September 2007 were set out in an announcement made by the Company on 2 April 2007.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 6 Directors' Business Review ໎ԑผพ৻Αᚋ

ʶ஝༦஛ȹӡͶؿЦɈcݯඑ྆৖ΕཋڌThe Group has confidence to bring new profits and returns from ̯එ྆τ ᗐพ৻˞̔ؿณॶ฻ࠓɈೕཋ௿՗ೕཋዀcޚڌ the new areas of new energy businesses (wind energy plant and generator), new material business (rare-earth-permanent magnetic ณҥࢿೣɠཋዀ೩cӁӹཌྷௐͧཋᄂc਽۬ૈ motors), automotive component (electrical spraying and sealing ೩ეਟ੓ԞณؿСᅼ՗Αంe strip) apart from the telecommunication business through these successive efforts.

Telecommunication Business ཋ঩ޚᗐพ৻

พ৻˚۪߬ʸݯɻਝଫ৽dɻਝᐲ஝dڌThe major customers of the Group’s communication business are ̯එ྆஝ dɻਝ၉஝ʥɻਝᚁ஝೩ʑΔ༜Ꮺਆcʥڌoperators in the PRC such as China Mobile, China Unicom, China ɻਝཋ cۂଐڌTelecom, China Netcom and China Railcom. We provide these ᅩ޻̟௿ɐcݯˢࠨొԜֲძˈ᎚௝ؿ஝ operators as well as those in the markets of Europe and America Ўʌα஛డ࠯˚߬༜Ꮺਆྦྷ5.8GHzಲᇃઅɃ၉ਥ̯ ኒߎˉСଅؿɎࠌcԚ੡ʌαجஉҙ༅Ꭶᐛ՗ᘏۺ .with communication equipment of high capability/price value αˮଊɎไe˾ྦྷޚሻਕۂଐڌHowever, due to the reduction of investment in infrastructure of ஝ 5.8GHz wireless access network by those major operators and the drop in profit margin in consequence of the keen competition, the sales of communication products for the year recorded a decrease as compared with last year.

ɀཌྷཌྷʒαɊȹ˂ɀɊɀˀc̯ʔ̇ၤཽᘚਝ჌כ On 22 November 2006, the Company entered into an agreement with Brightness International Holdings Ltd. whereby it disposed of ઁٖτࠉʔ̇ᖋ߯Ծᘪˮਕॾ஝഼঩Ҍ୺ࠗಋτ ഼঩พ৻כof the entire equity interests in CASTEL Videotech (Hong Kong) ࠉʔ̇ɾ60%ٖᚬᚬऩcЩˮਕ̯ʔ̇ 60% ɻਝʗכҙɃʥᏵՅൕʿټLtd. in disposing its 60% interest of its video conferencing business ɾ60%ᚬऩ˞ʵ൬ณ༅ ɻਝɾᤇ௿eכin effect in the course of introduction of new capital injection in ሻ၉೼຤᛻˞ᒷɣ̯ʔ̇ the business and acquiring the experience of the said purchaser in the PRC distribution network with a view to extending the sales in PRC market.

Annual Report 2006 ɀཌྷཌྷʒαం 7 Directors' Business Review ໎ԑผพ৻Αᚋ

Wind Energy Projects ࠓɈೕཋඖ͌

ᙔʔ̇ڃɀཌྷཌྷʒαɍ˂ɍɊˀc̯ʔ̇ɾͲ༅כ On 30 March 2006, Crownplus International Ltd., a wholly-owned ਝ჌τࠉʔ̇ၤ᎘฻ཋɈඑ྆ʔ̇ʥ˵ԕຒ฻ڥ˱ subsidiary of the Company, entered into a joint venture agreement உdၐᙶʥۺޘΕɻਝፗྟכwith Longyuan Electric Group Corporation and Beijing Wan Yuan ɮพʔ͓̇߯ȹͫᗐ Industry Corporation in respect of building, maintenance and ຤ᏪࠓɈೕཋᄥʥஉܪɾ΋༅຤ᏪԾᘪe஛̯ܰඑ ਄ၤؿ଱܃ࠓɈೕཋᄥɾޘ׳ʥ΁ޘoperation of wind energy plants and facilities in the Liaoning ྆ᘗɻਝϐᘣ Province of the PRC. This is the third wind energy plant project ɍࡼࠓɈೕཋᄥਿ࣐e following those in Jiangsu and Jilin, PRC.

΋ᏪͬכɻਝཋɈԜᎶ೛ॠc̯එ྆ੀผՇయכͅ The Group will benefit from the joint venture in strengthening the Group’s investment in wind energy power plants given the shortage พc˞˱ੜ̯එ྆ΕࠓɈೕཋᄥɾҙ༅c˱ɐΐ᏷ ɾᕡɣ჏܃ˀړଉͅͲଈᑭΉԚ͂ʹ́ॶ฻cᆢړ of electricity supplies in the PRC and the global trend towards renewable energy for environmental reasons assuring the ұe tremendous demands in the future.

Others ԯˢ

ˌɀཌྷཌྷȼα̒˂ɀˀʔйcၤ̴ʔ̇כThe Group has made an announcement on 2 April 2007 that the ̯එ྆ɰ Group entered into acquisition agreements with its parent ᆰ৑ᖋ߯νᑪਿ࣐Ծցcੀ൬ȹүׅࢄณพ৻੣ company, CALT, in exploring new businesses of new energy, new ณॶ฻dณҥࢿ՗Ӂӹཌྷ஫ͧพ৻ɻ਩өˮҡɣؿ materials, and automotive component and developing larger profit ޔСᒨe centres.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 8 Directors' Business Review ໎ԑผพ৻Αᚋ

HUMAN RESOURCES AND REMUNERATION ɁɈ༅฻ʥᑀ༭ܧ೪ POLICY

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆ࠗಋᐢ஫ͳכ As at 31 December 2006, the Group had 37 employees (2005: 41 employees) in the Hong Kong head office and 428 employees (2005: τࡗɮ37Ɂɀཌྷཌྷʄαi41ɁcϤɻਝ ʑΔፒԑ 531 employees) in the China Mainland offices. Remuneration of ୮ͳ428Ɂɀཌྷཌྷʄαi531Ɂeࡗɮᑀ༭ɾ߯ց ᑭබټଊʥɺ΃Δ ਂଊϷɾᑀٲ๑࠯П཭ࡗɾܘemployee is determined according to individual employee’s Ƚ ʥټperformance and the prevailing trends in different areas and ϤᔤցcҰαผ൬ϷᏎদe̯එ྆ɖొԜੜዶ ଊ٦ٲ፮e̯එ྆͛உ τͅ໎ԑ৊ੱᔤցɾړreviewed on an annual basis. The Group also provides Mandatory ᔢᏻ Provident Fund and medical insurance to its employees. In addition, ޴ʥᑪٖᚬི߮e discretionary performance bonus and share option schemes are available and are at the discretion of the Directors.

FINANCIAL REVIEW ল৻Αᚋ

ʥল৻༅฻ټLiquidity and Financial Resources ݚ৽༅

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆ɾᐢ൘ಁݯכ Total borrowings of the Group as at 31 December 2006 were HK$265,667,000 (2005: HK$105,652,000), which were fixed rate 265,667,000ಋʏɀཌྷཌྷʄαi105,652,000ಋʏȽ borrowings (2005: HK$58,765,000). All borrowings of the Group ՞ցࢠଅ൘ಁɀཌྷཌྷʄαi58,765,000ಋʏe̯ were determined at market interest rate. The Group has not issued එ྆ɾ൘ಁяܘ̟௿Сଅᔤցe̯එ྆ԎಲೕϷͨ ጪɮԮАݯྦྷ ҿֶԯˢ͂பeټany financial instruments for hedging or other purposes. Є

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc߲ඦˈଅࠥ൘ᐢכ Gearing ratio (total borrowings over shareholders’ equity) as at 31 December 2006 was 294% (2005: 70%). ᔾ৖˞ٖ׭ᚬ ऩݯ294%ɀཌྷཌྷʄαi70%e

׋אPledge of Assets ༅ଐ

˞ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆ͳכ As at 31 December 2006, certain assets of the Group of HK$1,537,000 (2005: HK$11,631,000) have been pledged to secure 1,537,000ಋʏɀཌྷཌྷʄαi11,631,000ಋʏɾߗ ׋eא׋ʀႺϷАݯႺϷጪ༅ؿאbank facility. ɳ༅ଐ

Annual Report 2006 ɀཌྷཌྷʒαం 9 Directors' Business Review ໎ԑผพ৻Αᚋ

Exchange and Other Exposures මЙʥԯˢࠓ፮

ಋʏdɁ̵ྫྷʥ޻ʏ˞ޑמMost of the Group’s business transactions were conducted in Hong ̯එ྆ɾɣ஫ͫพ৻͚ Ԏಲ൬ܨ Kong dollars, Renminbi and United States dollars. The Group ߮ࠤeད౨̯එ྆ؿමЙؐ৽ࠓ፮รГc expected that the exposure to exchange rates fluctuation was ϷͨЄྦྷҿݠ৽e minimal and therefore has not engaged in any hedging activities.

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ̯එ྆ลಲֶτ߲כ The Group did not have any contingent liabilities as at 31 December 2006. ඦe

A loan of US$6,000,000(HK$46,800,000)from a related company, ߮Ƀࠥ൘ɻԞϬᗐடʔ̇cЩɻਝॾʨޫҌඑ྆ɾ ᙔʔ̇)ɻڃChina Great Wall Industry Corporation, (“Great Wall”) which was an ᐲᏪʔ̇(Ϭɀཌྷཌྷ̒αɊɀ˂ݯͲ༅ ɾ൘ಁ6,000,000޻ʏےٽɮพᐢʔ̇ےٽassociate or wholly-owned subsidiary (from December 2004) of ਝ ༦֡ϬɀཌྷཌྷȹαɊɀ˂ɍɊכChina Aerospace Science & Technology Corporation, included in (46,800,000ಋʏ)c ʑΕɺݯ෮ɎͶݯԞϬዟ͓ٲborrowings was described as a loan from an independent third ȹˀɰеంɾল৻ం ంй̯כparty or not separately disclosed in the previous reported financial ଱ɍʿɾ൘ಁֶԎಲʗ඀ׄᚉe໮೫൘ಁ ɾ൘ಁeΐ൘ےٽ௰ዟׄᚉݯԞϬٲstatements from those 31 December 2001 inadvertently. The loan ʑ၃΋ল৻ం ׋אwas separately disclosed as a loan from Great Wall in the ಁૈಁαСଅ4.25᯵ݯȹঁਆพૈಁcʥԎಲ מconsolidated financial statements herein. This connected loan ̯එ྆༅ଐАݯొԜ൘ಁɾૈͧc໮ᗐட൘ಁ͚ ଱14.24(8)ૈʥଊϷɐ̟ஃڬɐ̟ஃکܘtransaction was and is exempted from any disclosure or ༦֡ʥଊࣂ ଱14A.65(4)ૈᏵᑥЛ჏ׄᚉʥٖ׭ғ࠿ɾஃցeڬ shareholders approval requirements under the Rule 14.24(8) of the former Listing Rules and Rule 14A.65(4) of the current Listing Rules by virtue of normal commercial term of interest rate 4.25% per annum and no security over the assets of the Group as the condition for the provision.

APPRECIATION სᑢ

Αᚋα۹ɾЦɈכI would like to take this opportunity to thank my fellow directors ̯ɁᔑᔄϊዀผగΈ໎ԑʥࡗɮ ᑢ෮eٲand all the staff members for their hard work and dedication during ʥ঳ᘆ૯ the year under review.

By Order of the Board ֻ໎ԑผ՜

Wu Yansheng дዘ́ ٽChairman ໎ԑ

Hong Kong, 19 April 2007 ࠗಋcɀཌྷཌྷȼα̒˂ɊȾˀ

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 10 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ਨϷ໎ԑڈ NON-EXECUTIVE DIRECTORS

૜ജɣነཋዀכӠࡗcଓพޢMr. Wu Yansheng, professor, aged 43, obtained his Bachelor's дዘ́ͱ́c43ัc degree in Electrical Engineering from Tsinghua University and ɮೡӡcՅ੡ॾʨȹ৑ȹ஫ࠔϷኂஉ߮ਿพဨɡነ ऋࣦݛൎc୽઒ʀॾʨޫҌඑ֚ܧMaster's degree in Space Vehicle Design from CALT. Mr. Wu obtained Ͻe࿘Ᏽਝ৻৑ great honours, such as Special Allowance from State Council of the ྆ʔ̇τޯˮ঳ᘆਿࡼီ໔c࿘ᏵॾʨޫҌඑ྆ʔ People's Republic of China, Specially Contributed Expert of China ̇2000d2001α۹ॾʨᆉc୽઒ʀॾʨޫҌඑ྆ʔ Aerospace Science and Technology Corporation ("CASC"), Space ̇§༗Ɂॾʨͱ൬࠯Ɂ¨ ီ໔c୽઒ʀɻജͲਝᐢɮ Prizes of CASC in 2000 and 2001, Excellent Contributor in Manned ผͲਝʄȹ௜৽ᆉ௃c୽઒ʀɻਝͬพᐲ΋ผdɻ Space Project from CASC, Labor Medal Winner from China ਝͬพࡼԾผঢ়ज़ᓻพ຤ଉc୽ɻਝޫԾ઒ʀ §Ͳ ˌFederation of Labor Unions, Senior Professional Manager from ਝ᎚ӞޫҌɮАّ¨ ီ໔e 1989α൬Ƀɻਝ༜༗ ˚۩dٽӠ৑ȹ஫ɮАcዃͨஉ߮ࡗdୂޢChina Enterprise Confederation and China Entrepreneur ᆰҌ୺ Association, and Excellent Researcher from China Association of ͨd˚ͨe2002αϭʌͨɻਝ༜༗ˌᆰҌ୺ޢӠ৑ e֤ٽӠ৑ዃ̌ɐ௖αႦؿ৑ޢcɖܰٽScience and Technology. Since joining in the Astronautical Systems ଱Ɋͨ৑ ਨϷ໎ԑʥ໎ԑڈ2006α2˂14ˀ঴ˮ̯ͨʔ̇כ Engineering Institute of CALT in 1989, Mr. Wu has assumed the posts eٽ .of Designer, Section Chief, Division Chief and Director successively Since 2002, Mr. Wu has served as the 10th President of CALT (the youngest ever in CALT). He was appointed as a Non-executive Director and Chairman of the Company on 14 February 2006.

ɻ̕ᙉ࣎כMr. Liang Xiaohong, senior engineer, aged 51, obtained his ષɩߧͱ́c51ัcঢ়ज़ɮೡ࢑eଓพ Master's degree in World Economy from the Party School of the ޢӠ́৑˖ވ຤Ꮬਿพe˵ԕɣነ຤Ꮬဳଉነ৑ਿ ˌӠࡗe1987঴ͨᓻɻਝ༜༗ޢӠֺऋາޢCommunist Party of China (“CPC”) Central Committee. He has been ࣐ဳଉ honoured with Specially Appointed Expert of school of Economics ᆰҌ୺ޢӠ৑ᐢ᛽஫c2000αͨᓻɻਝ༜༗ˌᆰҌ Хଉ࠹৑ፒ˚ͨ೩ᓻ৻cٽኪͨ৑܃Ӡ৑cͱޢManagement of Beijing University. He started to work with ୺ & ౨ΕɻਝٽeٽӠ৑৹৑ޢAstronautical Systems Engineering Institute of CALT in 1987. He has ଊͨɻਝ༜༗ˌᆰҌ୺ been the President Assistant cum Director of Administrative Office ॾʨეਟɮАcτടᔔఒؿɁɈ༅฻ဳଉd຤Ꮺဳ 2006α2˂14ˀ঴ˮכof CALT since 2000. At present, he acts as Vice President of CALT. ଉଉሃ՗ɮАྡྷሚ຤᛻e֤ eٽਨϷ໎ԑʥ৹໎ԑڈWith great efforts for years, he has accumulated rich experiences ̯ͨʔ̇ and theories on human resource management and business administration. He was appointed as a Non-executive Director and Vice-chairman of the Company on 14 February 2006.

Annual Report 2006 ɀཌྷཌྷʒαం 11 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ॾʨيԕॾ˵כӠࡗcଓพޢMr. Tang Guohong, professor , aged 45, graduated from Beijing ࡌਝѩͱ́c45ัc ᙔټUniversity of Aeronautics & Astronautics ("Beihang University") with ɣነcՅ੡ɮೡဨɡነϽc1987α߳Ϲᄨ৛ౝ ॾʨɣነҥيMaster's degree in Engineering. He went to Germany in 1987 and ֺcՅ੡ɮነ௟ɡነϽe౦ͨ˵ԕॾ dӡ৹˚ͨdઠ઒h౦ͨɻਝͨ˚۩ޢobtained PhD from Max-Planck Institute for Metals Research. He ࢿޫነӡઠ has served as Director of Staff Office, Deputy Dean and Professor in ॾʨɮพԜሻᐢʔ̇৹ᐢ຤ଉd੒৻৹ᐢ຤ଉeଊ eΕޫٽӠ৑຤Ꮺҙ༅஫஫ޢthe Material Science and Engineering Department of Beihang ͨɻਝ༜༗ˌᆰҌ୺ University, Deputy General Manager and Administrative Deputy ነޢӠd຤Ꮺဳଉ՗༅̯༜Аʿࠍኟτᔔఒ຤᛻e ਨϷ໎ԑeڈ2006α2˂14ˀ঴ˮ̯ͨʔ̇כ֤ & General Manager with China Aerospace Industry Supply Marketing Corporation. He now acts as the Chief of Business and Investment Depatment of CALT, with rich experiences in scientific research, business administration and capital operation. He was appointed as a Non-executive Director of the Company on 14 February 2006.

EXECUTIVE DIRECTORS ਨϷ໎ԑ

΃Ꮬɣነཋ຾כӠࡗeଓพޢͱ́c42ัcלMr. Han Shuwang, professor, aged 42, obtained Bachelor's ᒚኹ ɣነ຤Ꮬဳଉဨɡe΃Ꮬɣነ۪࢔ઠڲdegree in Computer Science and Master's degree in Economics and ӡc޻ਝϹ Management from Tongji University and American Southwest ઒cɻਝॾʨޫҌඑ྆ʔ̇ॾʨᆉᏵ੡ّe1988α ӠֺޢӠ৑ॾʨϬ৽ઁԹޢUniversity respectively. He is a Visiting Professor of Tongji University ൬Ƀɻਝ༜༗ˌᆰҌ୺ Хଉdٽand achieved Space Award from CASC. He served as Deputy Division ɮАcዃͨ۩৹˚ͨd৹˚ͨஉ߮࢑dֺ ؝஫ܧӠ৑ޢc1997αͨɻਝ༜༗ˌᆰҌ୺ٽChief, Deputy Chief Designer, Director Assistant and Deputy Director ৹ֺ ˚۩Ӡ৑ፒʔޢwith the Institute of Space Automation Control of CALT between ৹˚ͨc1998αͨɻਝ༜༗ˌᆰ 1988 and 1997, Deputy Director of Political Division of CALT in 1997, ͨc1999α঴ͨ˵ԕຒ฻ɮพʔ̇ᐢ຤ଉc2000α Хଉc2002αͨɻٽӠ৑৑ޢDirector of Administrative Office of CALT in 1998, General Manager ͨɻਝ༜༗ˌᆰҌ୺ eτᔔఒؿͬพኝ଑ٽӠ৑৹৑ޢof Beijing Wan Yuan Industry Corporation in 1999, President ਝ༜༗ˌᆰҌ୺ 2006α2˂14ˀ঴ˮͨכӠd຤Ꮺဳଉ຤᛻e֤ޢ Assistant of CALT in 2000. Since 2002, he has served as vice president eٽof CALT, possessing rich experiences in strategic research and ̯ʔ̇ਨϷ໎ԑʥ৹໎ԑ business administration. He was appointed as an Executive Director and Vice-chairman of the Company on 14 February 2006.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 12 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

Mr. Wang Xiaodong, aged 41, is the Executive Director and ˔ኮ׭ͱ́c41ัcݯ̯ʔ̇ਨϷ໎ԑʥᐢ຤ଉe ॾʨɣነcՅ੡ཋɥɮೡነيԕॾ˵כGeneral Manager of the Company. Mr. Wang graduated from Beijing ˔ͱ́ଓพ ዌݘɣነཕ઒ɮਆဳଉነဨɡነڲUniversity of Aeronautics and Astronautics with a Bachelor's degree ɡነϽcԎᏵ ංҌيɻਝכᓻͨ܃in Electronic Engineering and obtained an MBA from the University ϽeϬ1989α঴ϭ1998αංͱ ॾيӠ৑ֺᑲɎɾ˵ԕࠔϷኂஉ߮ᐢ᛽஫dॾޢof South Australia. During 1989 to 1998, he worked with Beijing ୺ Institute of Spacecraft System Engineering under the China ʨɮพ஫၃΋ི߮̇dॾʨɮพᐢʔ̇ፒʔᜨcዃ Academy of Space Technology, the Comprehensive Planning Bureau ͨХଉɮೡ࢑dɮೡ࢑dঢ়ज़ɮೡ࢑dᐢ຤ଉो࣊ 1999αˮͨॾכof the Ministry of Aerospace Industry of China and then the General ࠹ᐢ຤ଉፒʔ۩৹˚ͨ೩ᓻ৻e֤ כOffice of China Aerospace Corporation, as Assistant Engineer, ʨޫҌਝ჌එ྆τࠉʔ̇ਨϷ໎ԑ৹ᐢ຤ଉe֤ 1999α5˂঴ˮכӠʥဳଉʿࠍኟτᔔఒ຤᛻eޢ Engineer, Senior Engineer, and Secretary to the President cum Deputy Director of the President Office. In 1999, he, possessing ̯ͨʔ̇ਨϷ໎ԑe extensive experience in research and management, was appointed the Executive Director cum Deputy General Manager of China Aerospace International Holdings Limited. He has been appointed as Executive Director of the Company since May 1999.

כMr. Li Guang, senior engineer, aged 43, graduated from Tianjin ңͮͱ́c43ัcɮೡဨɡcঢ়ज़ɮೡ࢑eଓพ University with Master's degree in Industrial Automation. He has ʨݛɣነcՅ੡ɮพϬ৽ʝਿพဨɡነϽe1991α Ӡ৑14ֺஉ߮ࡗhޢbeen the Designer with the 14th Institute of CALT between 1991 ϭ1996αͨɻਝ༜༗ˌᆰҌ୺ and 1996, Division Chief of Development Division, and General 1996αϭ2005α౦ͨɻਝ༜༗ˌᆰҌ୺ޢӠ৑˵ԕ ֢ঢ়ޫҌٽc˵ԕٽ֢ঢ়ޫҌʔ̇Ҍ୺඀ೕ୮୮ٽ Manager of Beijing Long March Hi-tech Corporation from 1996 to 2005. He has acted as Deputy Manager of Beijing Wan Yuan Industry ʔ̇ᐢ຤ଉh1998αϭʌͨɻਝ༜༗ˌᆰҌ୺ޢӠ ۂӠdଐޢCorporation since 1998. Mr. Li Guang exhibits excellent experience ৑˵ԕຒ฻ɮพʔ̇৹ᐢ຤ଉeΕޫነ 2006α2כೕd຤Ꮺဳଉʿࠍኟτᔔఒ຤᛻e֤ޢ in scientific research, product development and business 2007α3˂16ˀכadministration. He was appointed as an Executive Director of the ˂14ˀ঴ˮ̯ͨʔ̇ਨϷ໎ԑԎ Company on 14 February 2006 and as a Deputy General Manager ˮͨ৹ᐢ຤ଉe on 16 March 2007.

Annual Report 2006 ɀཌྷཌྷʒαం 13 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ਨϷ໎ԑڈINDEPENDENT NON-EXECUTIVE DIRECTORS ዟ͓

Mr. Yiu Ying Wai, aged 54, was appointed an Independent ۢᕯ৩ͱ́c54ัc2004α9˂30ˀᏵկͨݯ̯ʔ τࠗಋܛਨϷ໎ԑʥᄗ࣏կࡗผ˚࢐e֤ڈNon-executive Director and the Chairman of the Audit Committee ̇ዟ͓ ዾነʼነɡc͛ݯߜਝʔႏผ߮࢑ʔผ༅૯ۺof the Company on 30 September 2004. He held a Bachelor's degree ɣነ in Architectural Studies from The University of Hong Kong. He was ผࡗd˱ࢬɣဳଉผ߮࢑ʔผผࡗdʥࠗಋผ߮࢑ ݯඡ৩ਦผ߮࢑ԑ৻ֺکa fellow member of the Association of Chartered Certified ʔผਨพผࡗeۢͱ́͌ Accountants, a member of Certified Management Accountants of ΋͟Ɂcኟτ༩20αࠗಋ՗࣏ࣵ̔ᅕdผ߮ʥল৻ Canada and also a practising member of the Hong Kong Institute ဳଉؿ຤᛻e of Certified Public Accountants in Hong Kong. Mr. Yiu is currently a Partner of W. T. Wong and Company. He has over 20 years of experience in auditing, accounting and financial management in Hong Kong and overseas.

Mr. Wong Fai, Philip, aged 50, was appointed an Independent ඡ๧ͱ́c50ัc2004α9˂30ˀᏵկͨݯ̯ʔ̇ ਨϷ໎ԑeඡͱ́੣ԑ༅঩ޫҌϷพ༩20ڈNon-executive Director of the Company on 30 September 2004. Mr. ዟ͓ ࠗಋ՗ɻਝ༅঩ޫҌϷพೕࢄʥ਄ၤΈכWong has over 20 years' experience in the IT industry. He was highly αcߎɈ α੡ᆉّdޫڇผʔ৻e֤౦ݯࠗಋɊɣ௑ˮمinvolved in many social activities of IT industry in Hong Kong and ඖ ௚ፒɁʥࠗಋଉɮɣነ࣎໎eඡͱ́ټ෯ഁਥވthe PRC as well as public service to the business community. He Ҍ ݯۤ᎘ޫҌඑ྆໎ԑdɐ͚ࣵ஝ɣነᚋਐʥʪک͌ was awarded the Hong Kong Ten Outstanding Young Person, and was the founder of Hong Kong IT Charity Fund and the Council ̡ݗ຤Ꮬ΋АଉԑผᑲɎɻਝʪ̡ݗ຤Ꮬ΋АͲਝ Member of Hong Kong Polytechnic University. At present, he is the կࡗผɾɮਆկࡗผᚋਐկࡗe Director of ValenceTech Ltd., the Advisor of Shanghai Jiao Tong University and the Advisory Member of China National Committee for Pacific Economic Cooperation under Pacific Economic Cooperation Council.

Mr. Zhu Shixiong, aged 65, is the current Vice Chief Executive χ˖ඐͱ́c65ัcଊͨࠗಋɻਝͬพԾผ৹ᐢ෦ τʝነਿพነϽeܛɐࣵޫҌɣነcכof the Hong Kong Chinese Enterprises Association Limited. He ԑe֤ଓพ ȹᓻe౦ኪͨٽɐ̟ࣵʝነɮพѫˮͨ৹ѫכgraduated from the Shanghai Municipal University of Science and ֤౦ Technology with a Bachelor's degree in Chemistry. He previously ɐࣵྡྷพඑ྆τࠉʔ̇ɾ੒৻໎ԑ৹ᐢസʥࠗಋ e֤Εʝɮٽheld the posts of Deputy Director of the Shanghai Municipal ʨᄡՈ၀ʝነɮพᄥτࠉʔ̇ɾ໎ԑ Chemical Industrial Bureau, Executive Director and Vice-President ́ଐdҌ୺ʥͬพဳଉʿࠍኟτ༩20αɾ຤᛻e֤ of Shanghai Industrial Investment (Holdings) Company Limited and Ϭ1997α5˂ˮ̯ͨʔ̇໎ԑcΕ2001α5˂ݯȹዟ ਨϷ໎ԑϭʌeڈ͓ Chairman of the Tien Chu Ve-Tsin Chemical Industries (H.K.) Ltd. He has over 20 years of experience in chemical production and technology as well as enterprise management. He had been a Director of the Company since May 1997 and was an Independent Non-executive Director from May 2001.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 14 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ͱ́c68ัc1958αɣነɠ˃ɮೡӡଓพڭMr. Moh Kwen Yung, aged 68, graduated with a university ˉᗐ ཋஉ߮৑ɾஉ߮ˋۺ1958ϭ1962αˮͨါכBachelor's degree in Civil Engineering in 1958 and worked as a ́cԎ Design Engineer with Fujian Hydroelectric Design Centre with ɮೡ࢑c਄ၤஉ߮ఀᚇd፬༞dࣵಋʥˋɈೕཋ ዾτࠉʔ̇ۺജړparticipating in designing dams, tunnels, harbours and ॎe1962ϭ1971αංc֤Εࠗಋ hydroelectric power stations from 1958 to 1962. From 1962 to 1971, ͨᓻΔᆚ߲ஐɁe1971αcˉͱ́˞ዟ༅ʿβι͓ ዾʔ̇c຤Ꮺϭ1982αe֤ۺዾʔ̇Ծιۺhe worked as a Site Agent for Paul Y. Construction Co. Ltd. in Hong ̯Ӹɾ ዾۺ1982αၤˀ̯ਝɠΕࠗಋι͓΋Ꮺʔ̇ԯɡכ ,Kong. In 1971, he established his own construction company ϭ1989α֛ଫ̵قSuccess Construction Co., as a sole proprietor and ran the company τࠉʔ̇cˮͨ໎ԑ࠹ᐢ຤ଉc ࠗಋc֤Ϭ1997α5ٵuntil 1982. In 1982, he entered into a joint venture with Japan ˱ࢬɣݯ˅e1993αc֤ࠇ ਨϷڈDevelopment to form Chevalier Construction Company Ltd. in Hong ˂ˮ̯ͨʔ̇໎ԑcΕ2001α5˂ݯȹዟ͓ Kong, where he worked as a Director and General Manager until he ໎ԑϭʌe emigrated to Canada at the end of 1989. In 1993, he returned to Hong Kong. He had been a Director of the Company since May 1997 and was an Independent Non-executive Director from May 2001.

SENIOR MANAGEMENT ঢ়ज़ဳଉɁࡗ

Mr. Zhou Xiaoyun, aged 58, is a Deputy General Manager of ՚ኮඔͱ́c58ัcݯ̯ʔ̇ɾ৹ᐢ຤ଉe՚ͱ́ 1985α˱Ƀᒤαཋɥτࠉʔ̇ᒤαcଊݯᒤכ the Company. Mr. Zhou joined Hung Nien Electronics Limited ҳɮነ৑e՚ͱٽכ1975αଓพכe֤ٽHung Nien") in 1985 and was the Chairman of Hung Nien. He αɾ໎ԑ") 30αɾ຤᛻eٶӠʥɮพဳଉʿࠍኟτޢɮೡכ́ graduated from Changsha Engineering Institute in 1975. Mr. Zhou 2006כ1997α5˂Ᏽկͨݯ̯ʔ̇ਨϷ໎ԑʥכ֤ has around 30 years of experience in engineering research and industrial management. He was appointed as an Executive Director α2˂14ˀᖽ̯ͨʔ̇ਨϷ໎ԑᓻ৻e of the Company in May 1997 and resigned therefrom on 14 February 2006.

Mr. Han Jiang, aged 44, is the Financial Controller of the ᒚϐͱ́c44ัcݯ̯ʔ̇ল৻ᐢဟeᒚͱ́ଓพ ጪነ৑cݯ຤ᏜነነɡcʥΕ޻ਝՅټܧɻ̕লכ Company. Mr. Han graduated from the Central Institute of Finance ॾʨɮพ஫ল৻̇ɮيΕॾ܃and Banking with a Bachelor's degree in Economics and is a ੡ผ߮࢑༅ࣟeଓพ 1992כဳଉe֤ټι့̯࣏ʥᏪ༜༅ۂCertified Public Accountant of America. After graduation, he worked Аc߲ஐଐ ᇯܱτࠉʔ̇c৖ˀ੒ল৻ɮАڌwith the Finance Department of China Aerospace Corporation and α˱Ƀԓʪ஝ was responsible for product costing and working capital ̔c౦਄ၤΛඖᇯܱጪ༅dͬพ൘ಁʥɐ̟ɮАe 2006כ2001α9˂Ᏽկͨݯ̯ʔ̇ਨϷ໎ԑʥכ֤ management. In 1992, he joined APT Satellite Holdings Limited and had participated in the works of satellite project financing, α2˂14ˀᖽ̯ͨʔ̇ਨϷ໎ԑᓻ৻e corporate financing and initial public offering in addition to normal financial duties. He was appointed as an Executive Director of the Company in September 2001 and resigned therefrom on 14 February 2006.

Annual Report 2006 ɀཌྷཌྷʒαం 15 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ဍᏛɮพۄכMr. Zang Wei, senior engineer, aged 38, obtained his Bachelor's ၢ৩ͱ́c38ัcঢ়ज़ɮೡ࢑eଓพ כᇲଓพ܃degree in Engineering at the Wireless Engineering Faculty and his ɣነಲᇃཋɮೡӡcᏵɮነነɡነϽe ၤཋɥɮೡነဨɡነϽcڌဍᏛɮพɣነcᏵ஝ۄ Master's degree in Telecommunication and Electronic Engineering רɻਝɁ̵ɣነᏵ຤Ꮬነ௟ɡነϽc1992α঴כfrom Harbin Institute of Technology. He also obtained PhD in ʥ Ӡ৑ޢංҌ୺يcዃͨɻਝپɻਝॾʨɮพ஫כEconomics from Remin's University of China. Since he joined the ৻ cɻਝॾʨޫҌඑ྆ʔ̇༅ଐ຤ٽChina Aerospace Industry Department in 1992, he has assumed the ਝ჌΋А୮৹୮ cɻਝʨΔᇯܱٖͫٽc຤Ꮺҙ༅஫৹஫ٽDeputy Director with the International Cooperation Division of Ꮺ୮୮ ֺAٖɐ̟໎ԑdᐢസcמChina Academy of Space Technology, the Deputy Director with τࠉʔ̇ɐࣵᖬԴ͚ ٖ ֺAמAssets Management Department, Trading and Investment ɻਝ׭ʿ޴ᇯܱٖͫτࠉʔ̇ɐࣵᖬԴ͚ 2007α3˂16ˀᏵկכDepartment of CASC, the Director and Managing Director of China ɐ̟໎ԑdঢ়ज़৹ᐢസe֤ Spacesat Co., Ltd. (listed on the Shanghai Stock Exchange as A share ͨݯ̯ʔ̇৹ᐢ຤ଉe company), the Director and Senior Vice President of China Spacesat Technology Co., Ltd (listed on the Shanghai Stock Exchange as A share company) successively. He was appointed as a Deputy General Manager of the Company on 16 March 2007.

Mr. Shi Weiguo, senior engineer, aged 36, graduated from ̌৩ਝͱ́c36ัcঢ়ज़ɮೡ࢑e1992αଓพɘᘣ Soochow University with a Bachelor's degree in Science in 1992. ήɣነcᏵଉነነɡነϽcͱ܃గᓻɘཋɈ஫ᘣή Ӡֺcɻਝϐᘣਝ჌຤ᏜҌ୺΋Аʔ̇eޢHe successively joined the Nuclear Department in Suzhou Nuclear ᆅɮ כPower Research Institute Co., Ltd and China Jiangsu International 2005α12˂గͨ˵ԕຒ฻ɮพʔ̇৹ᐢ຤ଉe֤ Economic Technical Cooperation Corporation. Since December 2007α3˂16ˀᏵկͨݯ̯ʔ̇৹ᐢ຤ଉe 2005, he has assumed the office in Beijing Wan Yuan Industry Corporation as a Deputy General Manager. He was appointed as a Deputy General Manager of the Company on 16 March 2007.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 16 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ജɻɮነכMr. Li You, senior engineer, aged 43, senior engineer. Graduated ң༶ͱ́c43ัcঢ়ज़ɮೡ࢑eଓพ from Huazhong University of Science and Technology with the ৑cՅ੡ཋɥҥࢿၤኂͧਿพɮነነɡነϽcԎΕ Bachelor's degree in Electronic Material and Component ˵ԕଉɮɣነဳଉɮೡޢӠ́ऒӡ଻ነୌȿ຤Ꮬd ܃ጪ՗ͬพဳଉᇾೡcϬ1986α঴ϭʌͱټSpecialized Technology, he has studied courses in economics, ႺϷd ޢӠֺdɻਝ༜༗ˌᆰҌ୺ޢԕႭಡҌ୺˵כbanking, finance and business management of engineering ኪͨ cዃͨٽ඀ೕ஫৹୮ۂ؝஫d৑ፒʔ۩d̵ܧmanagement research class in Beijing Institute of Technology. Since Ӡ৑ c੣ԑ༦ਿ࣐඀ೕdޫҌ෦஫ဳٽhe successively served in Beijing Telemetering Technical ၃΋ဳଉ୮୮ ,1986 Ӡ৑̵͂ଐพ၃΋຤ᏪဳଉޢဳଉdڝResearch Institute, CALT’s Political Division, Administrative Office, ଉdʔͳᗐ Civilian Use Development Department as Deputy Director, ɮАe2003α঴గͨɻਝ༜༗ˌᆰҌ୺ޢӠ৑຤Ꮺ Ӡ৑̵͂ଐพ຤Ꮺི߮ဳޢc߲ஐٽComprehensive Management Director in which he was engaged ҙ༅஫৹஫ in the special case development, technical division management, ଉdʔ̇ဳଉd༅ଐࠇୂd຤Ꮺϣ࣏ɮАcኟτ༖ 2007α3˂16כpublic relation management, and civil assets intergrative ᔔఒؿॾʨ̵͂ଐพဳଉ຤᛻e֤ management work. In 2003, he served as Deputy Chief of ˀᏵկͨݯ̯ʔ̇৹ᐢ຤ଉe Investment Management Department in CALT, responsible on CALT’s civil assets planning management, corporate management, capital restructuring, and management appraisal work. Having possessed extensive experience in aerospace civil industry management, he was appointed as a Deputy General Manager of the Company on 16 March 2007.

ଉɮɣነ̯ޫଓڲജכMr. Chau Chiu Suen, aged 51, graduated from South China ՚൚ۧͱ́cଊα51ัc พঢ়ᄙဳଉͬێPolytechnic University. He has over 10 years of experience as senior พcኟτ൚༦10α˞ɐɻਝʑΔɣ management of conglomerates in the Mainland China and has ຤᛻cΕಲᇃཋ஝঩၉೼Ꮺ༜՗ౣॶ͚஝ӡ଻එι extensive business experience in the operation of wireless ʥԜᎶਆʿࠍԮτᔔఒؿਆ৻຤᛻cଊͨ˵ԕթജ ٽtelecommunication access, integrated Intelligient Transportation ஝঩τࠉʔ̇ʥࡌɬթജᇯܱցϽτࠉʔ̇໎ԑ eٽSystem (‘ITS’) and ITS suppliers. He is the Chairman of Beijing Qihua ɾᓻe֤͛ݯॾ஝ౣॶ͚஝τࠉʔ̇ɾ৹໎ԑ Communications Limited and Tangshan Qihua GPS Limited. He is also the Vice-chairman of CASTEL Intelligent Transportation System Limited.

Annual Report 2006 ɀཌྷཌྷʒαం 17 Biographical Details of Directors and Senior Management ໎ԑʥঢ়ज़ဳଉɁࡗɾ࠯Ɂ༅ࢿ

ࠗಋτࠉʔڌMr. Ng Yat Keung, Frederick, aged 52, is the Managing дˀੜͱ́c52ัcݯॾʨޫҌ஝ ߜਝჴኽ࣊৑Ᏽঢ়ज़ਝכDirector of China Aerospace Telecommunications (Hong Kong) ̇ɾ໎ԑᐢ຤ଉe֤ଓพ ጑ԓɡནɣነɮਆעLimited. Mr. Ng graduated from the Cambridgeshire College of Arts ͓ਆพဳଉʼንeԎᏵߜਝВ and Technology in Britain with a Higher National Diploma in ဳଉဨɡe֤ݯߜਝဳଉነผผࡗcΕႇ஥Ϸพୃ כBusiness Studies and obtained an MBA degree from the University ዶȿτ20α̟௿ઐᄤʥɮೡဳଉʿࠍؿ຤᛻e֤ of Aston in Birmingham in Britain. He is a member of the British 2000α9˂˱Ƀ̯එ྆e Institute of Management. Mr. Ng has over 20 years of experience in marketing and manufacturing operations in telecommunications and electrical products. He joined the Group in September 2000.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 18 Corporate Governance Report พဳ؝ంй࣊ͬ

INTRODUCTION ѵӰ

ಳొе̯එ྆࿀ϭɀཌྷ؀ The Board of Directors of the Company (the "Board") is pleased to ̯ʔ̇໎ԑผ ໎ԑผ present the Corporate Governance Report of the Group for the year ཌྷʒαɊɀ˂ɍɊȹˀ˅α۹ɾͬพဳ؝ంй࣊e ended 31 December 2006.

COMMITMENT TO CORPORATE ͬพဳ؝ֻኪ GOVERNANCE

ӪΡͬพဳ؝੒ஃʥೡѵɾࠇֲ߬cᆢעThe Company acknowledges the importance of good corporate ̯ʔ̇૯ ௑ˮؿ໎ԑผdᖇ৪ɾʑ஫ဟઁdΉͲ᛽ٖ׭߲ڌ governance practices and procedures and regards as preeminent ፓړɾ࣏ʶ߬ॖe̯එ྆ေɈᆢڬboard of directors, sound internal controls and accountability to ஐȽͬพဳ؝ࡈ ʥᅟๅ຤Ꮺพ৻eڬʥஃԝʥሬ͂Ψڬall shareholders as the core elements of its corporate governance ๑ஃ principles. The Group endeavours to ensure that its businesses are conducted in accordance with rules and regulations, and applicable codes and standards.

CORPORATE GOVERNANCE PRACTICES ͬพဳ؝੒ஃ

࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹cכThe Group has complied with all principles as set out in the Code ̯එ྆ ֺτמΑᚋα۹ʑሬ̯͂එ྆ɾࠗಋᐲ΋͚כon Corporate Governance Practices in Appendix 14 of the Rules ፓΨ ፣Ɋֺ̒༗ͬڃ ڬɐ̟ஃ ڬGoverning the Listing of Securities (the "Listing Rules") on the Stock ࠉʔ̇ᖬԴɐ̟ஃ c৖ৱᔴΨڬֺͶͲ஫ࡈ ڬΨ ڬExchange of Hong Kong Limited (the "Code"), which became พဳ؝੒ஃΨ ʑτᗐૈʼcڬʼ̔cɰፓΨΨૈڬ଱A.4.1ૈΨڬ applicable to the Group in respect of the year under review, and ਨϷ໎ԑ඘Ᏽկͨऋցͨ౨Ԏڈcomplied with the relevant code provisions in the Code throughout ໮ૈʼஃցcዟ͓ the year ended 31 December 2006, with the exception of one ˿ᐶፕடͨe deviation from the Code Provision A.4.1 of the Code which . stipulates that Non-executive Directors should be appointed for a specific term subject to re-election.

ਨϷ໎ԑя̰Ᏽկͨऋڈዟ͓ܢ˳All of the Directors of the Company including the Independent Non- ̯ʔ̇Ͳ᛽໎ԑ ɾঽͨૈʼڬexecutive Directors are not appointed for a specific term but are ցͨ౨cЎ඘ፓ๑̯ʔ̇ୂᓱ௃ೡୀ ʔ̇ɾٖ׭൪αɣผረࠤঽͨʥᐶፕடͨeΐ̯כ subject to retirement and rotation and re-election at the Company's එ྆ؿ̯ͬړᆢܪAnnual General Meeting ("AGM") in accordance with the retirement ϊc̯ʔ̇ႏݯcɰઔՅ˨ʗઉ ɻֺஃցّᄖᕌeڬprovisions under the Articles of Association of the Company. The พဳ؝੒ஃɺ༖Ψ Company considers that sufficient measures have been taken in this regard to ensure that the Group's corporate governance practices are no less exacting than those in the Code.

Annual Report 2006 ɀཌྷཌྷʒαం 19 Corporate Governance Report พဳ؝ంй࣊ͬ

THE BOARD ໎ԑผ

ڝBoard Responsibilities and the Relationship ໎ԑผɾᓻஐʥ໎ԑผၤဳଉᄙɾංؿᗐ between Board and Management

The Board has the responsibility for management of the Group, ໎ԑผ߲ஐဳଉ̯එ྆cԯɻ˳ܢԹ߯พ৻೪଑d which includes formulating business strategies, and directing and ܞኒʥဟဳ̯එ྆ԑ৻cᄗғɻ౨ంйʥαంdɻ ೪cʥܧsupervising the Group's affairs, approving interim reports and ౨ၤͲαพᐜɾʔЗʥณၘᆨhਆদٖࢠ annual reports, announcements and press releases of interim and ᄗғೕϷd৉ೕֶˮਕֶ઒ˮ̯එ̰྆ೕϷณٖɾ final results, considering dividend policy, and approving the issue, ᑪٖᚬֶඦԴe allotment or disposal or grant of options in respect of unissued new shares or debentures of the Group.

The overall management of the Group's business is vested in the ໎ԑผ߲ஐྦྷ̯එ྆พ৻ؿኬ᛽ဳଉe Board.

ܢ˳The Board takes responsibility to oversee all major matters of the ໎ԑผֻኪဟઁ̯එֺ྆τࠇ߬ԑඖؿஐͨc ೪ԑփdኬ᛽೪଑dʑ஫ဟઁʥܧGroup, including the approval and formulation of all policy matters, ғ࠿ʥԹցֺτ ଊeٲoverall strategies, internal control and risk management systems, ࠓ፮ဳଉӡ଻c˞ʥဟྦঢ়ज़ဳଉᄙؿ and monitoring the performance of the senior management.

຤Ꮺพ৻c຤Ꮺพ৻ȽဳଉᄙɾڈThe Board's role is not to manage the business whose responsibility ໎ԑผؿӯϳԎ remains vested with management. The Board and management ஐͨe໎ԑผʥဳଉᄙ˨ʗଉ໬ԯΈϬɾᓻஐcя ৪Ͳɾͬพဳ؝ʼʝe͓ۺܛfully appreciate their respective roles and are supportive of the ʻ development of a healthy corporate governance culture.

ʥᏪ༜ɰ઒ᚬ̯ʔ̇ဳଉܧThe day-to-day management, administration and operation of the ̯එ྆ؿˀ੒ဳଉdϷ Group are delegated to the management. The Board gives clear ᄙ߲ஐe໎ԑผగဳଉᄙؿဳଉᚬɈ˞ʥЄိੱؗ ʵeֺτ໎ԑя˿ʥࣂܞdirections to the management as to their powers of management, Ɏ඘මం໎ԑผ೽ʀ૜౞ ᗐ༅ࢿ˞ʥᏵ̯ʔ̇ो࣊ొԜ෮Ӯޚand circumstances under which the management should report Ͳࠍ݅ቇֺτ ʥڬᗐஃޚፓΨ໎ԑผೡѵʥֺτړ৻c˞ᆢרback. All Directors have full and timely access to all relevant ʥ information as well as the advice and services of the Company ஃԝeΈ໎ԑτᚬΕሬ๫ؿੱؗɎc຤Ή໎ԑผА Secretary, with a view to ensuring that the Board procedures and ˮᇼұ܃cఖұዟ͓ਿพ෮Ӯ˞ᄚϷԯ˲ॶʥᓻ all applicable rules and regulations are followed. Each Director is ஐc൒̯͂ͅඑ྆ʻ˟e entitled to seek independent professional advice in appropriate circumstances in carrying out their functions and duties after making a request to the Board at the Group's expenses.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 20 Corporate Governance Report พဳ؝ంй࣊ͬ

჏߬כEach Director is given contact details of the senior management Έ໎ԑяᏵొԜঢ়ज़ဳଉᄙɾᐲᖎ༅ࢿcʥ and is accessible to them for obtaining information and making ࣂ˿અᘩ֤೩˞ᏵՅ༅ࢿʥАˮ݅໺e enquiries when required.

Board Composition ໎ԑผୂι

ɍϽਨϷ໎ԑdɍϽܢ˳ɊϽ໎ԑͅکThe Board currently comprises ten directors including three ໎ԑผ͌ ਨϷڈਨϷ໎ԑୂιeڈਨϷ໎ԑʥ̒Ͻዟ͓ڈ Executive Directors, three Non-executive Directors and four Independent Non-executive Directors. There is a majority of non- ໎ԑЌɣΛᅕc֤೩ኟτᔔఒɾ຤᛻ʥɷॶcॶਪ ଊʥ༅฻೩ਐᕀАˮτძࠤɾРᒾe໎ٲexecutive directors on the Board, with a wide range of experience ྦྷ೪଑d αం଱11ࠒϭ15ࠒc๫ɻ༗̯כand calibre bringing valuable judgment on issues of strategy, ԑɾ࠯Ɂ༅ࢿ༗Ͷ ᖫd຤᛻ʥ༅كperformance and resources. The biographical details of the ͶȿΈ໎ԑɾΛᅚʝҌॶdਿพ Directors are set out on pages 11 to 15 of this Annual Report, which ࣟe demonstrates a diversity of skills, expertise, experience and qualifications.

଱ڬଲ΋ɐ̟ஃقɀཌྷཌྷʒα۹c໎ԑผȹכ During the year 2006, the Board at all times met the requirements ਨϷ໎ԑɾڈof the Rules 3.10(1) and 3.10(2) of the Listing Rules in appointment 3.10(1)ૈ ʥ 3.10(2)ૈగͨ՜ӷਪዟ͓ of a sufficient number of four Independent Non-executive Directors ᅕ͌̒Ͻɾஃցcԯɻۢᕯ৩ͱ́ۢͱ́( )ኟ ᖫc༗كof whom Mr. Yiu Ying Wai ("Mr. Yiu") has appropriate professional τ΋ሬɾਿพ༅ࣟdผ߮ʥল৻ဳଉਿพ αం଱14ࠒe̯כqualifications, accounting and financial management expertise as Ͷ set out on page 14 of this Annual Report.

଱3.13ڬɐ̟ஃכਨϷ໎ԑȽፓΨ༗ͶڈThe appointment of Independent Non-executive Directors adheres ͨ՜ዟ͓ ਨڈʵe̯එ྆ɰνԷΈϽዟ͓ܞto the guidelines for assessing independence set out in Rule 3.13 ૈിЅዟֲ͓ɾ of the Listing Rules. The Group has received in writing confirmation Ϸ໎ԑዟֲ͓ɾ࣊ࠍᆢႏ࣊ʥႏݯ֤೩яݯၤဳଉ ؿዟ͓Ɂɡcԯዟ͓РᒾɺผՇԷʪɣڝof their independence from each of the Independent Non-executive ᄙԎಲᗐ ਨϷ໎ڈਨϷ໎ԑʥዟ͓ڈDirector and considers them to be independent of the management ᄧᚊe໎ԑผႏݯҰϽ and free of any relationship that could materially interfere with the ԑяΉ໎ԑผ঳ᘆԯϬӸɾޚᗐਿพҌॶe exercise of their independent judgment. The Board considers that each of the Non-executive Director and Independent Non-executive Director brings his own relevant expertise to the Board.

੪඘˟ˮӷਪࣂංʥ၀ु˞୮ଉ̯එ྆ԑكThe directors are aware that they shall give sufficient time and ໎ԑ attention to the affairs of the Group. ৻e

Annual Report 2006 ɀཌྷཌྷʒαం 21 Corporate Governance Report พဳ؝ంй࣊ͬ

Chairman and General Manager ˚࢐ʥᐢ຤ଉ

The Chairman and the General Manager of the Group are Mr. Wu ̯එ྆˚࢐ʥᐢ຤ଉᓻϽʗПͅдዘ́ͱ́ၤ˔ኮ ʗ඀cͅɺޚYansheng and Mr. Wang Xiaodong respectively. The roles of the ׭ͱ́ኪͨe˚࢐ʥᐢ຤ଉɾᓻϽʃ ɮАڏ˞Chairman and the General Manager are segregated and assumed ΃࠯Ɂኪͨc˞༠ߎᚬɈၤ઒ᚬɾяጫc Єȹ࠯Ɂe໎ԑผ˚࢐߲ஐეኒԑͨכby two separate individuals to strike a balance of power and ஐͨɺඑɻ ྦྷڬauthority so that the job responsibilities are not concentrated on փd̯එ྆ɾ೪଑ʿΉʥ໎ԑผԑ৻cᐢ຤ଉ any one individual. The Chairman of the Board is responsible for ̯එ྆ɾ຤Ꮺʥೕࢄ߲τኬ᛽Ͳࠍဳଉɾஐͨe the leadership, Group strategic and Board issues, while the General Manager has the overall general management responsibilities for Group operations and development in general.

Appointment, re-election and removal of Directors կͨdࠇፕʥᇋЛ໎ԑ

The Group does not have a Nomination Committee. There are ̯එ྆Ԏಲஉ͓ొΊկࡗผe̯ʔ̇గ໎ԑɾկͨ ۹ɾೡѵeעformal, considered and transparent procedures for the appointment ʥᇋЛ߯τ̳βd຤ᄗ෶ϣᄬʥԮ஦ and removal of Directors. The Board as a whole is responsible for ໎ԑผͲࡗ߲ஐ࣏࠿կͨณ໎ԑʥΕٖ׭ɣผɐొ ॠֶᄈ૚໎ԑΊيthe procedure of agreeing to the appointment of its members and Ί΋ሬɁፕᎶፕc˞ි໤໎ԑ τᗐϷพܢ˳ڬfor nominating appropriate person for election by shareholders at ᔾeొΊ༦ೡɻc໎ԑผؿ਄ϣๅ the AGM, either to fill a causal vacancy or as an addition to the ؿιగʥ຤᛻dਿพʥઠө߇ౡ˞ʥԯҙɃؿೡ ᗐԑ৻ؿᗐ؇೩eޚॶਪ˟ˮؿࣂංʥྦྷܢ˳existing Directors. In the nomination process, the Board of Directors ۹c make reference to criteria including accomplishment and experience in the industry, professional and educational background and commitment in respect of available time and relevant interest.

ؿஃցፒଉcڬ๑̯එ྆ୂᓱ௃ೡୀܘThe process for re-election of a director is in accordance with the ࠇፕ໎ԑȽ Group's Articles of Association, which require that, other than those ৖Εα۹ʑᏵկͨؿ໎ԑ̔cɍʗɾȹɾଊͨ໎ԑ Ұαٖ׭൪αɣผɐረࠤйঽc˘τ༅ࣟᐶፕכDirectors appointed during the year, one-third of the Directors for ඘ ɾٖ܃the time being are required to retire by rotation at each AGM and டͨeαʑᏵ໎ԑผկͨɾ໎ԑ඘जͨϭ፭ ։ࣂᐶፕடͨeαంכare eligible to stand for re-election. For those Directors appointed ׭൪αɣผ೶ҢcԎτ༅ࣟ by the Board during the year, they shall hold office until the next ʥٖ׭ɣผؿ஝Բɐ༗τᏃᐶፕடͨɾ໎ԑؿ໯ୀ Һੱك׭ྦྷԯፕᐾАˮٖڏ˞following AGM and shall then be eligible for re-election. The annual ༅ࢿʥ࠯Ɂᄚዃc report and the circular for AGM contain detailed information on ցe election of Directors including detailed biography of all Directors standing for re-election to ensure shareholders to make an informed decision on their election.

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Board Meetings ໎ԑผผᘪ

The Board conducts meetings on a regular basis and on ad-hoc ໎ԑผܘพ৻჏߬cᐾϷց౨ʥᐽࣂผᘪeαʑc ɀཌྷཌྷʒαɀ˂Ɋ̒ˀୂιɾଊ໎ԑผͳᐾϷʒכ basis, as required by business needs. During the year, the current Board formed on 14 February 2006 held a total of six meetings and ωผᘪcϭʭҰտ۹ȹωe໎ԑผɾୂιʥ໎ԑˮ at least once quarterly. The composition of the Board and ࢐ଅ༗ͶΣɎ: attendance of the Directors are set out below:

Attendance / ˮ࢐þ Number of Meetings ผᘪωᅕ ਨϷ໎ԑڈ Non-executive Directors Mr. Wu Yansheng (Chairman) 1/6 дዘ́ͱ́˚࢐ 1/6 Mr. Liang Xiaohong (Vice-chairman) 1/6 ષɩߧͱ́৹˚࢐ 1/6 Mr. Tang Guohong 3/6 ࡌਝѩͱ́ 3/6

Executive Directors ਨϷ໎ԑ ͱ́৹˚࢐ 3/6לMr. Han Shuwang (Vice-chairman) 3/6 ᒚኹ Mr. Wang Xiaodong 6/6 ˔ኮ׭ͱ́ 6/6 Mr. Li Guang 6/6 ңͮͱ́ 6/6

ਨϷ໎ԑڈIndependent Non-executive Directors ዟ͓ Mr. Yiu 5/6 ۢͱ́ 5/6 Mr. Wong Fai, Philip 5/6 ඡ๧ͱ́ 5/6 Mr. Zhu Shixiong 6/6 χ˖ඐͱ́ 6/6 ͱ́ 6/6ڭMr. Moh Kwen Yung 6/6 ˉᗐ

ɀཌྷཌྷכ໎ԑผک Apart from the said meetings of the current Board, there was also a ৖ɐ߸ଊ໎ԑผ̂඀ɾผᘪ̔c meeting of the former Board held on 14 February 2006 where all of ʒαɀ˂Ɋ̒ˀc͛ᐾϷȹωผᘪcͲ᛽໎ԑ᮶ኮ ͱ́d˔ኮ׭ͱ́d՚ኮඔͱ́dᒚϐͱ́d஬؁ ,the Directors, Mr. Rui Xiaowu, Mr. Wang Xiaodong, Mr. Zhou Xiaoyun ജͱ́d৛̽ιͱ́dۢᕯ৩ͱۺMr. Han Jiang, Mr. Guo Xianpeng, Mr. Xu Jian Hua, Mr. Ma Yucheng, ͱᗩͱ́d࢘ ˮ࢐໮ޑͱ́ڭMr. Yiu, Mr. Wong Fai, Philip, Mr. Zhu Shixiong and Mr. Moh Kwen ́dඡ๧ͱ́dχ˖ඐͱ́ʥˉᗐ Yung attended the meeting . ผᘪe

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For a regular Board meeting, notice of at least fourteen days is given ̂඀ց౨໎ԑผผᘪ඘Ή̯එ྆Ͳ᛽໎ԑೕˮϭʭ ೩τዀผੀ֤೩ႏݯሬ΋ɾদ֤ڏ˞cكto all Directors of the Group, who are given an opportunity to Ɋ̒ˀ஝ include matters in the agenda for discussion, and an agenda and ሃԑඖढ़Ƀผᘪᘪೡeผᘪᘪೡட΃໎ԑผʼͧผ ϭʭɍʨ঺͚̯کҰω໎ԑผց౨ผᘪᐾϷ๫ˀכ accompanying document for discussion are sent to all Directors of the Group at least three days before the intended date of a regular එ྆Ͳ᛽໎ԑê඀ԯˢ໎ԑผผᘪ͛჏೽ʀ΋ଉ eكBoard meeting. For all other Board meetings, reasonable notices ஝ should be given.

Φ໎ԑผʥ໎ԑկࡗผผᘪতړMinutes of Board meetings and meetings of Board Committees are ̯එ྆ɾो߲࣊ஐ ؗɎԜ݅ቇe̊ੱكඑ྆໎ԑ΋ଉ஝̯כkept by the secretary of the Group and are open for inspection at ፣cԎ any reasonable notice by any Director of the Group. Further, minutes ̔c໎ԑผʥ໎ԑկࡗผผᘪত፣඘ӷਪ໯ୀত༗ of the Board meetings and meetings of Board Committees recorded ໎ԑผʥ໎ԑկࡗผֺϣᄬɾԑඖʥֺ༠ιɾҺ ༠ɾʦྦྷ෮ٲ໎ԑֺొˮɾͨЄဘਐֶֺܢ˳in sufficient detail the matters considered by the Board and the ᘪc כɾผᘪত፣উᆨʥୄᆨผ܃Board Committees and decisions reached, including any concerns ӮeҰω໎ԑผผᘪ raised by Directors or dissenting views expressed. Draft and final ໎ԑผผᘪ̂඀܃΋ଉࣂංʑʗೕʀ̯එ྆Ͳ᛽໎ versions of minutes of Board meetings are sent to all Directors of ԑc˞Ԝ֤೩ొԜ෮ӮֶΦᏌe the Group for their comment and records respectively, in both cases within a reasonable time after the Board meeting is held.

ȹԑඖɻΦܺכIf a substantial shareholder or a Director has a conflict of interest in ࠱໎ԑผႏݯȹΊ˚ٖ߬׭ֶ໎ԑ ڬa matter to be considered by the Board which the Board has ΕСऩᇰޯcϤ໎ԑผҺց໮ԑඖݯࠇɣԑඖc determined to be material, the matter shall not be dealt with by a ໮ԑඖɺผ˞կࡗผʿβ୮ଉ࣓ኣ໎ԑผผᘪ஝ Committee (except an appropriate Board Committee set up of that ༦ɾҺᘪ࣐గ໮ԑඖι͓ɾሬ๫໎ԑկࡗผ৖̔c purpose pursuant to a resolution passed in a Board meeting) but a ϤผᐾϷȹω໎ԑผผᘪਆদτᗐԑඖc໮໎ԑ։ τᗐכҙ଩e̯ӸʥԯᐲᖎɁૃיผᘪɐ̦඘כBoard meeting shall be held, during which such Director must ࣂ ਨϷ໎ԑੀ˿ˮ࢐໮ڈɻяಲࠇɣСऩؿዟ͓מabstain from voting. Independent Non-executive Directors who, and ͚ whose associates, have no material interest in the transaction shall ໎ԑผผᘪe be present at such Board meeting.

Board Committees ໎ԑկࡗผ

The Board has established three committees, namely, the ໎ԑผɰι͓ɍ࠯կࡗผcЩᑀ༭կࡗผdᄗ࣏կ Remuneration Committee, Audit Committee and Development and ࡗผdೕࢄʥҙ༅կࡗผc˞ဟྦ̯එ྆ԑ৻ɾऋ Investment Committee, for overseeing particular aspects of the ցეਟe̯එ྆ɾΈ໎ԑկࡗผя˞࣊ࠍވցᓻᚬ එ྆၉ॎʥ̯כGroup's affairs. All Board Committees of the Group are established ᆲ௼e໎ԑկࡗผɾᓻᚬᆲ௼˰༗ ׭߬ұࣂొԜ݅ቇeٖכ˿ with defined written terms of reference. The terms of reference of the Board Committees are posted on the Group's website and are available to shareholders upon request.

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כThe Board Committees are provided with sufficient resources to ໎ԑկࡗผᏵొԜӷਪ༅฻c˞ᄚϷԯᓻ৻cԎ Εሬ๫ੱؗɎcఖұዟ͓ਿพ෮܃discharge their duties, and upon reasonable request, are able to ొˮ΋ଉ߬ұ seek independent professional advices under appropriate Ӯc൒̯͂ͅඑ྆ʻ˟e circumstances at the Group's expenses.

A) Remuneration Committee A) ᑀ༭կࡗผ

ڈਨϷ໎ԑʥԭΊዟ͓ڈThe Remuneration Committee consists of one Non- ᑀ༭կࡗผͅȹΊ executive Director and two Independent Non-executive ਨϷ໎ԑୂιeᑀ༭կࡗผ˚߲߬ஐగ̯එ Directors. The Remuneration Committee is responsible for ྆໎ԑʥঢ়ज़ဳଉɁࡗɾᑀ༭ܧ೪ʥܼ࿚c βʥԮ̳͓ۺ೪ʥܼ࿚ܧmaking recommendations to the Board on the Group's ʥగԹ߯τᗐᑀ༭ ᘪeۺ۹ɾೡѵcΉ໎ԑผొԜઐᔈעpolicy and structure for all remuneration of Directors and ஦ senior management and on the establishment of formal and transparent procedures for developing policies on such remuneration.

ݯiڬ೪ɾ˚߬ࡈܧThe main principles of the Group's remuneration policies ̯එ྆ᑀ༭ are:

No Directors or any of his associates is involved in 1. ลಲ໎ԑֶԯᐲᖎɁɡ਄ၤᔤցԯ̯ .1 deciding his own remuneration; Ӹɾᑀ༭h

2. Recommendations will be made to the Board at least 2. ҰαᎶϭʭగ໎ԑʥঢ়ज़ဳଉɁࡗɾ ါСdঽͤذྡྷܢ˳one time per year of the specific remuneration Ԯ᛽ᑀ༭ါС ˅ᔴᓻֶୄܢ˳ᚬСʥ໤᎛˟ಁټ packages of all Executive Directors and senior ਨϷ໎ԑɾᑀڈmanagement, including benefits in kind, pension կͨɾᎶ˟ላ᎛ʥ ᘪȹωeᑀ༭կࡗۺrights and compensation payments which include ༭Ή໎ԑผొԜ any compensation payable for loss or termination ผᎶϣᄬΛඖΐॖcԝΣ˿༅ˈ༖ʔ d໎ԑ˟ˮɾࣂංʥټof their office or appointment, and the remuneration ֺ̇ʻ˟ɾᑀ ɾາ͂ੱؗcپof Non-executive Directors. The Remuneration ᓻஐd̯එ྆ԯˢ஫ ଊݯ̯Ϥᔤցɾᑀٲ˞Committee should consider factors such as salaries ˞ʥᎶЯઐϷ paid by comparable companies, time commitment ༭e and responsibilities of the Directors, employment conditions elsewhere in the Group and desirability of performance-based remuneration; and

3. Review and recommend performance-based 3. ࣓ኣ໎ԑผɺࣂ஝༦ɾʔ̇͌ᅟcᏎ ଊݯ̯ɾᑀ༭eٲ˞remuneration by reference to corporate goals and দʥઐᔈ objectives resolved by the Board from time to time.

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The Remuneration Committee has reviewed and discussed ᑀ༭կࡗผɰᏎদʥਆদ໎ԑʥঢ়ज़ဳଉɁ ˋeկࡗผ͛ɰ࣓ኣ֤೩ΈϬᓻஐټthe remuneration of the Directors and senior management. ࡗɾᑀ ଊdϷพᅟๅdଊϷ̟ؗʥ̯එ྆ɾٲThe Committee has also approved the remuneration and ̡ʥ ټଊcғ࠿໎ԑʥঢ়ज़ဳଉɁࡗɾᑀٲthe discretionary bonuses of the Executive Directors by ল৻ α̯כʥͨЄԯˢټreference to their respective levels of responsibilities and ʥ৊ੱ٦޴e໎ԑɾ஀ ʑׄٲඑ྆ɾল৻ం̯כټperformance, industry benchmarks, prevailing marketing ۹Ꮆ˟໎ԑɾᑀ conditions and the Group's financial performance. The ᚉe Director's fees and any other reimbursement or emolument payable to the Directors during the year are disclosed in the Group's financial statements.

One committee meeting was convened for discussing the ɰ̂඀గਆদ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹ ೪ɾȹωկࡗผผᘪʥҰܧremuneration policy for the year ended 31 December 2006 ˀ˅α۹ɾᑀ༭ and the attendances of each committee member at the Ͻկࡗผιࡗɾˮ࢐ੱؗ༗ͶΣɎi meeting are set out as follows:

Attendance / ˮ࢐þ Number of Meetings ผᘪωᅕ ਨϷ໎ԑڈ Non-Executive Director Mr. Wu Yansheng (Chairman) 1/1 дዘ́ͱ́˚࢐ 1/1

ਨϷ໎ԑڈIndependent Non-Executive Directors ዟ͓ Mr. Yiu 1/1 ۢͱ́ 1/1 Mr. Wong Fai, Philip 1/1 ඡ๧ͱ́ 1/1

B) Audit Committee B) ᄗ࣏կࡗผ

ਨϷ໎ԑୂιeᄗڈThe Audit Committee consists of four Independent Non- ᄗ࣏կࡗผ̒ͅϽዟ͓ executive Directors. The written terms of reference which ࣏կࡗผɾᚬɈၤᓻஐɾ࣊ࠍᓻᚬᆲ௼Ƚ਄ describe the authority and duties of the Audit Committee ๑ࠗಋผ߮࢑ʔผཕ̠ɾᄗ࣏կࡗผτࢽ ϤᇁԹʥઔढ़eڬʵʥΨܞwere prepared and adopted with reference to "A Guide for ༜А Effective Audit Committee" published by the Hong Kong Institute of Certified Public Accountants and in accordance with the Code.

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The Audit Committee is responsible for the appointment of ᄗ࣏կࡗผȽ߲ஐͨ՜̔າ࣏ᅕ࢑dᏎদ̯ external auditors, review of the Group's financial එ྆ɾল৻༅ࢿʥဟྦ̯එ྆ɾল৻ʥผ߮ information and oversight of the Group's financial and Ϸݯdʑ஫ဟઁʥࠓ፮ဳଉeԯ߲͛ஐᄗቇ accounting practices, internal control and risk management. ̯එ྆ɾɻ౨ʥ̱౨พᐜe It is also responsible for reviewing the interim and final results of the Group.

The audited financial statements for the year ended 31 ᄗ࣏կࡗผɰᄗቇ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍ eٲDecember 2006 have been reviewed by the Audit Ɋȹˀ˅α۹ɾ຤ᄗ࣏ল৻ం Committee.

࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹ʑכ Two committee meetings were convened during the year ended 31 December 2006 and the attendances of each ɰ̂඀ԭωկࡗผผᘪʥҰϽկࡗผιࡗɾ committee member at these meetings are set out as follows: ˮ࢐ੱؗ༗ͶΣɎi

Attendance / ˮ࢐þ Number of Meetings ผᘪωᅕ ਨϷ໎ԑڈIndependent Non-Executive Directors ዟ͓ Mr. Yiu 2/2 ۢͱ́ 2/2 Mr. Wong Fai, Philip 2/2 ඡ๧ͱ́ 2/2 Mr. Zhu Shixiong 2/2 χ˖ඐͱ́ 2/2 ͱ́ 2/2ڭMr. Moh Kwen Yung 2/2 ˉᗐ

The Audit Committee has reviewed the terms of ᄗ࣏կࡗผɰᄗቇ̔າ࣏ᅕ࢑΋΃ɾૈಁd຤࠳߯ ంйʥɀཌྷཌྷʒαܧdɀཌྷཌྷʒαɻ౨লڬengagement of the external auditors, the revised accounting ผ߮ๅ eᄗ࣏կࡗผ͛ɰᄗቇʑ஫ဟઁӡٲstandards, the 2006 interim financial report and the 2006 α۹ল৻ం ผӮ̔າ࣏ᅕ࢑Ԏၤ֤೩ᇹکᄗ࣏඀նɾכannual financial statements. The Audit Committee also ଻dʥ reviewed the internal control systems, and met with the ሃᄗ࣏ʥ͇ంຮ৻ɾ̯ሔʥᆲ௼e external auditors to discuss with them the nature and scope of the audit and reporting obligation prior to the commencement of the audit.

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C) Development and Investment Committee C) ೕࢄʥҙ༅կࡗผ

ਨϷ໎ԑdԭڈԭϽܢ˳The Development and Investment Committee consists of ೕࢄʥҙ༅կࡗผ ਨϷ໎ԑeೕࢄʥڈtwo Non-executive Directors, two Executive Directors and ϽਨϷ໎ԑʥȹϽዟ͓ one Independent Non-executive Director. The Development ҙ༅կࡗผ߲ஐᄗቇʑ஫ဟઁӡ଻ɾࢽऩc ʥ༜Ꮺဟઁၤܧলܢ˳and Investment Committee is responsible for the review of ૪ၰֺτ˚߬ဟઁc the effectiveness of the system of internal control covering ࠓ፮ဳଉᓻॶe all material controls, including financial and operational controls and risk management functions.

The Board has considered the better allocation of resources ໎ԑผɰϣᄬҡԙ༅฻ʗ৉cԎܞ͐ᄗ࣏կ and has instructed the Audit Committee to discuss the ࡗผদሃ̯ʔ̇ʑ஫ဟઁӡ଻ɾࢽऩeΐ එ̯྆ړeffectiveness of the system of internal control of the ϊc̯එ྆ႏݯɰА˨ͫᄗቇcᆢ Company. As such, the Group considers that sufficient ʑ஫ဟઁτૈɺॕcܨϊcɀཌྷཌྷʒαɊɀ review to ensure that the Group's internal control is in order ˂ɍɊȹˀ˅α۹ʑԎಲ̂඀ೕࢄʥҙ༅կ has been taken and no Development and Investment ࡗผผᘪe Committee meeting was convened during the year ended 31 December 2006.

αం଱3̯כThe composition of the Development and Investment ೕࢄʥҙ༅կࡗผɾୂι༗Ͷ Committee is set out in the corporate information on page ࠒɾʔ̇༅ࢿ e 3 of this annual report.

Internal Control ʑ஫ဟઁ

The Directors have the overall responsibility for internal control and ໎ԑผኬ᛽߲ஐʑ஫ဟઁʥԹց΋ሬɾܧ೪e໎ԑ setting appropriate policies. The Board, through the Audit ผ஝༦ᄗ࣏կࡗผcɰᄗቇ̯එ྆ʑ஫ဟઁӡ଻ɾ Committee, has reviewed the effectiveness of the Group's system ࢽऩe of internal control.

The Group's internal control system includes a well defined ̯එ྆ʑ஫ဟઁӡ଻˳ܢވց૜౞˘ࠉցᚬɈɾဳ ჋༅ଐЛՇړmanagement structure with limits of authority which is designed ଉ೶࿚cஉ߮րοݯѧιਆพ͌ᅟc ሬ๫޵፣ʥΦᏌcݯʑ஫͂ړfor the achievement of business objectives, so as to safeguard assets ኞֶ͂ኞϬ୮ສ, ᆢ ޚፓ๑ړagainst unauthorized use or disposition, to ensure proper பֶʔ඀ೕЗొԜ˿ቌɾল৻༅ࢿcԎᆢ maintenances of books and records for the provision of reliable ᗐؒԝؒஃe financial information for internal use or publication, and to ensure compliance with relevant legislation and regulations.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 28 Corporate Governance Report พဳ؝ంй࣊ͬ

ڬɾᅟๅΨמMODEL CODE FOR SECURITIES ໎ԑ൬ϷᖬԴ͚ TRANSACTIONS BY DIRECTORS

During the year ended 31 December 2006, the Group has adopted ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹ʑc̯එ྆ ፣Ɋֺ༗ɐ̟ೕϷɁ໎ԑ൬Ϸᖬڃڬthe Model Code for Securities Transactions by Directors of Listed ɰઔढ़ɐ̟ஃ cАݯ໎ԑൕሒ̯ڬᅟๅΨڬɾᅟๅΨמissuers (the "Model Code") as set out in Appendix 10 to the Listing Դ͚ ʔ̇АˮԮ᛽݅໺̯כeͲ᛽໎ԑڬRules as the code for dealing in securities of the Group by the එ྆ᖬԴɾΨ ֺ༗ᅟๅΨڬፓΨᅟๅΨقcᆢႏ֤೩αʑȹ܃ Directors. Having made specific enquiry, all the Directors confirmed eڬ .that they have complied with the Model Code throughout the year

DIRECTORS' RESPONSIBILITY FOR FINANCIAL ໎ԑగল৻͇ంɾஐͨ REPORTING

ړcʥᆢٲThe Directors acknowledge their responsibilities for the preparation ໎ԑᆢႏ֤೩߲ஐᇁԹ̯එ྆ɾল৻ం of the financial statements of the Group and ensure that the ̯එ྆࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹ɾল ɰፓ๑ࠗಋผ߮࢑ʔผೕˮɾࠗಋল৻ంйٲfinancial statements of the Group for the year ended 31 December ৻ం ʥࠗಋʔ̇ૈԝɾڬʥ໻ᘷdࠗಋʔႏผ߮ࡈڬhave been prepared in accordance with Hong Kong Financial ๅ 2006 Reporting Standards and Hong Kong Accounting Standard and ׄᚉஃցᇁԹe Interpretations issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and disclosure requirements of the Hong Kong Companies Ordinance.

The statement of external auditors of the Group, Deloitte Touche ̯එ྆ɾ̔າ࣏ᅕ࢑ᄨඵ • ᗐඡஹʿผ߮࢑Ϸτᗐ ̯כ༗עɾ͇ంஐͨᐰٲTohmatsu, about their reporting responsibilities on the ԯྦྷ̯එ྆ɾ၃΋ল৻ం consolidated financial statements of the Group is set out in the αం଱39ࠒϭ଱41ࠒɾዟ͓࣏ᅕ࢑ంйʑe Independent Auditor’s Report on pages 39 to 41 of this annual report.

Annual Report 2006 ɀཌྷཌྷʒαం 29 Corporate Governance Report พဳ؝ంй࣊ͬ

ټAUDITOR'S REMUNERATION ࣏ᅕ࢑༭

එ྆ɐ։ٖ̯כ( )Deloitte Touche Tohmatsu (“DTT”) was appointed as the external ᄨඵgᗐඡஹʿผ߮࢑Ϸᄨඵ auditors of the Group by the shareholders at the last AGM of the ׭൪αɣผᏵկາݯ̯එ྆ɾ̔າ࣏ᅕ࢑e ࿀ϭɀ ༗ټGroup. The remuneration to DTT recognised for the year ended 31 ཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹ᆢႏᄨඵɾ༭ December 2006 was set out as follows: ͶΣɎ:

৻ɾ൒͂רFees relating to services rendered τᗐֺొԜ HK$'000 ɝಋʏ ৻ 1,629רAudit services 1,629 ᄗ߮ ৻ 252רᄗ߮ڈ Non-audit services 252 1,881 1,881

COMMUNICATION WITH SHAREHOLDERS ၤٖ׭ɾ฼஝

ݯ̯එ྆ɾٖ׭ొԜτᗐ̯כThe objective of shareholder communication is to provide the ၤٖ׭฼஝ɾ͌ؿΕ ʿβϷԚАੱك˞೩ॶਪ֤ڏ˞Group's shareholders with detailed information on the Group so එ྆ɾ໯ୀ༅ࢿc that they can exercise their rights as shareholders in an informed ݯٖ׭ɾᚬСe manner.

ଊʥพ৻АٲԯྦྷړThe Group uses several formal channels to ensure fair disclosure ̯එ྆஦༦Λ࠯̳βபࢗcᆢ ۹ؿంйe໮೩பࢗעand comprehensive and transparent reporting of its performance ˮʔ̡ؿׄᚉ՗ͲࠍϤԮ஦ and activities. These include interim and annual reports, ˳ܢɻ౨ంйdαంdʔЗʥ஝Բe announcements and circulars.

τঢ়ړThe Group encourages its shareholders to attend AGM to ensure a ̯එ྆ར᎞ԯٖ׭ˮ࢐ٖ׭൪αɣผc˞ᆢ high level of accountability and to keep informed of the Group's ۹ؿਐஐֲcʥᜑٖ׭ᐃ໬̯එ྆ؿ೪଑ʥ͌ᅟe strategy and goals. The Chairman of the Board and the chairman of ໎ԑผ˚࢐ʥֺτ໎ԑկࡗผɾ˚࢐ֶΣ֤೩̰ ׭ɣผɐٖכΈկࡗผɾԯˢιࡗੀڬall the Board Committees, or in their absence, other members of ॶˮ࢐c the respective committees, are available to answer any questions Α೮ͨЄొਐe˚࢐ผగҰඖΕٖ׭൪αɣผɐᄗ from the shareholders. A separate resolution is proposed by the ᘪɾᘪᕀ˳ܢࠇፕ໎ԑొе࠯ПɾҺᘪ࣐e Chairman in respect of each issue to be considered at the AGM, including the re-election of Directors.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 30 Corporate Governance Report พဳ؝ంй࣊ͬ

ɀɊȹʨΉͲ᛽ٖ׭ೕˮכɺʭکAn AGM circular is distributed to all shareholders at least 21 days Εٖ׭൪αɣผ Һٲprior to the AGM, setting out details of each proposing resolution, ٖ׭൪αɣผ஝Բc໯ͶΈඖᏃొеҺᘪ࣐d ᗐޚҺؿೡѵʥԯˢٲ߬ұʥᐾϷҙ଩ܢ˳voting procedures (including procedures for demanding and ೡѵ conducting a poll) and other relevant information. ༅ࢿe

߬ұʥᐾϷעผʹω႓کThe Chairman explains the procedures for demanding and ˚࢐Εٖ׭൪αɣผ඀ն Һ͚ˤɰٲ߬ұҙ଩ڈҺؿೡѵcԎ˘৖ٲconducting a poll again at the beginning of the AGM, and (except ҙ଩ ଩ᅕe࠱˞ҙٲwhere a poll is demanded) reveals how may proxies for and against ՇԷҙ଩ᖳιʥʦྦྷΈҺᘪ࣐ؿˤ ׭ɣผٖכผڬҺɾ೶׮ٲҺcҙ଩ٲhave been received in respect of each resolution. In case poll voting ଩ʿβ൬Ϸ ˰Ɏȹ࠯ᏪพˀΕ̯එ྆၉ॎʥᐲֺ͚၉ॎʑ܃ is conducted, the poll results will be posted on the websites of the Group and the Stock Exchange on the business day following the ೔e shareholders' meeting.

As a channel to further promote effective communication, the ̯එ྆ɰஉ͓၉ॎ၉эݯhttp://www.castelecom.com Group maintains a website at http://www.castelecom.com where c˞Аݯᄈ൬τࢽ฼஝ɾಒ༞cϤ̯එ྆ɾʔЗd the Group's announcements, business developments and พ৻ೕࢄʥᏪ༜dল৻༅ࢿdͬพဳ؝ʥԯˢ༅ࢿ ໮၉ॎʑ˰೔eכoperations, financial information, corporate governance practices я and other information are posted.

Annual Report 2006 ɀཌྷཌྷʒαం 31 Report of the Directors ໎ԑผంй࣊

The Directors present their annual report and the audited financial ໎ԑผ΃ਹଊᔑੀ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ statements for the year ended 31 December 2006. ˅α۹ɾαంʥ຤ᄗ࣏ሏ͌еᙴe

PRINCIPAL ACTIVITIES ˚߬พ৻

ᙔʥᐲᏪڃThe principal activity of the Company is investment holding and ̯ʔ̇ɾ˚߬พ৻ݯҙ༅ઁٖcϤ˚߬ ഽ36eڃ၃΋ল৻ంйכthe activities of its principal subsidiaries and associates are set out ʔ̇ɾพ৻˰༗ in note 36 to the consolidated financial statements.

MATERIAL TRANSACTIONS ࠇɣԑඖ

Wind Energy Project ࠓɈೕཋඖ͌

ᙔʔ̇ڃɀཌྷཌྷʒαɍ˂ɍɊˀc̯ʔ̇ɾͲ༅כ On 30 March 2006, Crownplus International Ltd. (“Crownplus”), a ਝ჌ ၤ᎘฻ཋɥඑ྆ʔڥ˱ ਝ჌τࠉʔ̇ڥ˱ wholly-owned subsidiary of the Company, entered into a joint ޘΕɻਝፗྟכventure agreement with Longyuan Electric Group Corporation and ̇ʥ˵ԕຒ฻ɮพʔ͓̇߯ȹͫᗐ ɾ΋༅຤ᏪԾܪஉdၐᙶʥ຤ᏪࠓɈೕཋᄥʥஉۺ ,Beijing Wan Yuan Industry Corporation in respect of building maintenance and operation of wind energy plants and facilities in ᘪeτᗐ΋Ꮺͬพॾʨ᎘฻ ้̯ ࠓɈೕཋτࠉʔ the Liaoning Province of the PRC. The details of the joint venture ̇ɾ໯ᇼΣɎi company, Aerospace Long Yuan (Benxi) Wind Power Co., Ltd., are as follows:

Business scope:wind power generation; wind field ຤Ꮺᆲ௼i ࠓɈೕཋhࠓɈᏳৼ઄ʥஉ߮ survey and design and construction ʥܪɮ work Operation period : 20 years ؒց຤Ꮺ౨i 20α உஃᅡi 30ϛຒ̿ۺ Production capacity : 30 megawatt Total investment : RMB 284,230,000 ᐢҙ༅ᔾi Ɂ̵ྫྷ 284,230,000ʏ ਝ჌ڥ˱Total registered capital : RMB 93,800,000 (Crownplus’ share: ഽ˫༅̯i Ɂ̵ྫྷ 93,800,000ʏ 40%, RMB 37,520,000) Ќi40%cɁ̵ྫྷ37,520,000 ʏ

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 32 Report of the Directors ໎ԑผంй࣊

POST BALANCE SHEET EVENT ೶့ˀ܃ԑඖ

ٲ၃΋ল৻ంכୀ˰༗עԑඖɾ܃Details of the post balance sheet event of the Group are set out in ̯එ྆ɾ೶့ˀ ഽ35eڃ .note 35 to the consolidated financial statements

RESULTS พᐜ

The results of the Group for the year ended 31 December 2006 are ̯එ྆࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅ɾα۹ɾ ʑeٲ଱42ࠒɾ၃΋ฌऩכset out in the consolidated income statement on page 42. พᐜ˰༗

ᘪݢೕͨЄٖࢠeۺThe Directors do not recommend the payment of a dividend. ໎ԑԎɺ

พdᄥָʥஉௐذ PROPERTY, PLANT AND EQUIPMENT

พdᄥָʥஉௐɾذMovements in property, plant and equipment of the Group during ̯αʑ̯එ྆ʥ̯ʔ̇ ഽ15eڃ၃΋ল৻ంйכthe year are set out in note 15 to the consolidated financial ᛰ৽ੱؗ˰༗ statements.

̯ٖ SHARE CAPITAL

ٲ၃΋ল৻ంכαʑɾᛰ৽˰༗כMovements in the share capital of the Company during the year ̯ʔ̇ɾٖ̯ ഽ28eڃ .are set out in note 28 to the consolidated financial statements

PURCHASE, SALE OR REDEMPTION OF ᑪൕdˮਕֶᚿΑٖͫ SHARES

ᙔʔ̇ลಲᑪൕdˮਕֶڃNeither the Company nor any of its subsidiaries purchased, sold or ̯α۹̯ʔ̇ʥԯͨЄ redeemed any of the Company's listed securities during the year. ᑪΑͨЄ̯ʔ̇ɰೕϷٖͫe

PRE-EMPTIVE RIGHTS ᎚ͱᑪൕᚬ

඀ਅະࢌؒԝɾஃցֶڬʔ̇ʔ̇ୂᓱ௃ೡୀ̯ܘ There are no provisions for pre-emptive rights under the Company's ԝΉଊٖ׭߬޸ณٖcԎಲˈܘArticles of Association or the laws in the Cayman Islands, which ϊஃց̯ʔ̇඘ would oblige the Company to offer new shares on a pro-rata basis ͨЄ᎚ͱᑪൕᚬe to existing shareholders.

Annual Report 2006 ɀཌྷཌྷʒαం 33 Report of the Directors ໎ԑผంй࣊

SHARE OPTION SCHEME ᑪٖᚬི߮

၃΋ল৻כୀ˰༗עαʑɾכDetails of the share option scheme of the Company during the year ̯ʔ̇ɾᑪٖᚬི߮ ഽ29eڃٲare set out in note 29 to the consolidated financial statements. ం

DISTRIBUTABLE RESERVES OF THE COMPANY ̯ʔ̇ɾ˿Ԝʗݢ᎝ௐ

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯ʔ̇Ԏಲ˿Ԝʗכ The Company’s reserves available for distribution to shareholders as at 31 December 2006 were nil (2005: HK$16,028,000). ݢʀٖ׭ɾ᎝ௐɀཌྷཌྷʄαi16,028,000ಋʏe

DIRECTORS ໎ԑผ

The Directors during the year and up to the date of this report are: ̯αʑʥ࿀ϭ̯ంйˀ౨˅ɾ໎ԑΣɎi

ਨϷ໎ԑڈ Non-executive ٽMr. Wu Yansheng (Chairman) дዘ́ͱ́໎ԑ ɀཌྷཌྷʒαɀ˂Ɋ̒ˀᏵկͨכ (appointed on 14 February 2006) ٽMr. Liang Xiaohong (Vice-chairman) ષɩߧͱ́৹໎ԑ ɀཌྷཌྷʒαɀ˂Ɋ̒ˀᏵկͨכ (appointed on 14 February 2006) Mr. Tang Guohong ࡌਝѩͱ́ ɀཌྷཌྷʒαɀ˂Ɋ̒ˀᏵկͨכ (appointed on 14 February 2006)

Executive ਨϷ໎ԑ ٽͱ́৹໎ԑלMr. Han Shuwang (Vice-chairman) ᒚኹ ɀཌྷཌྷʒαɀ˂Ɋ̒ˀᏵկͨכ (appointed on 14 February 2006) Mr. Wang Xiaodong ˔ኮ׭ͱ́ Mr. Li Guang ңͮͱ́ ɀཌྷཌྷʒαɀ˂Ɋ̒ˀᏵկͨכ (appointed on14 February 2006)

ਨϷ໎ԑڈIndependent Non-executive ዟ͓ Mr. Yiu Ying Wai ۢᕯ৩ͱ́ Mr. Wong Fai, Philip ඡ๧ͱ́ Mr. Zhu Shixiong χ˖ඐͱ́ ͱ́ڭMr. Moh Kwen Yung ˉᗐ

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 34 Report of the Directors ໎ԑผంй࣊

ਨϷ໎ԑɾͨ౨ݯϬԯᏵڈਨϷ໎ԑʥዟ͓ڈThe terms of office of the Non-executive Director and each of the ҰϽ ረ࢐йঽڬIndependent Non-executive Director is from the date they were last ፕͨˀ౨ϭԯԗ๑̯ʔ̇ୂᓱ௃ೡୀ elected to the date of their retirement by rotation in accordance ˅e with the Company's Articles of Association.

଱99ૈಁஃցc˔ኮ׭ͱڬMr. Wang Xiaodong, Mr. Zhu Shixiong and Mr. Moh Kwen Yung shall ࣓ኣ̯ʔ̇ୂᓱ௃ೡୀ ЩੀᐾϷɾٖ׭כͱ́඘ڭretire by rotation at the close of the forthcoming annual general ́dχ˖ඐͱ́ʥˉᗐ meeting in accordance with Article 99 of the Company's Articles of ൪αɣผ܃ረ࢐йঽc੹ଲ΋༅ࣟԎᗙᐶፕடͨe Association and, being eligible, offers themselves for re-election.

৻΋޸רDIRECTORS' SERVICE CONTRACTS ໎ԑ

ЩੀᐾϷɾٖ׭൪αɣผɐᐶፕடͨɾ໎ԑลכNone of the Directors proposed for re-election at the forthcoming Ꮓ ᙔʔ̇ᖋ߯ͨЄɺ˿ͅາͨʔڃannual general meeting has a service contract with the Company ಲၤ̯ʔֶ̇ͨЄ ৻רȹαʑୄ˅ϤЛ˟໤᎛ؒց໤᎛৖̔ɾכ̇ or any of its subsidiaries, which is not determinable by the employing company within one year without payment of ΋޸e compensation, other than statutory compensation.

΋޸ɻɾСऩכDIRECTORS' INTERESTS IN CONTRACTS ໎ԑ

ڃαୄࣂֶ̯α۹ʑͨЄࣂංc̯ʔ̇dԯͨЄכ No contracts of significance to which the Company, or any of its ᙔʔ̇яಲ਄ၤͨЄၤڃsubsidiaries, its holding companies or its fellow subsidiaries was ᙔʔ̇dઁٖʔֶ̇΃ӡ ɾࠇ߬΋ڝઅֶංઅτࠇɣСऩᗐقparty and in which a Director of the Company had a material ̯ʔ̇໎ԑ interest, either directly or indirectly, subsisted at the end of the year ޸e or at any time during the year.

Annual Report 2006 ɀཌྷཌྷʒαం 35 Report of the Directors ໎ԑผంй࣊

ᗐٖͫʥޚdٖͫכɁࡗܧDIRECTORS' AND CHIEF EXECUTIVES' ໎ԑʥ˚߬Ϸ INTERESTS AND SHORT POSITIONS IN ඦᚬᖬɾᚬऩʥ૗࠸ SHARES, UNDERLYING SHARES AND DEBENTURES

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯ʔ̇໎ԑʥ˚߬כ As at 31 December 2006, none of the Directors and chief executives ޚʔ̇ʥԯ̯כɁࡗֶ֤೩ΈϬɾᐲᖎɁลಲܧof the Company or their respective associates had any interest or Ϸ short positions in the shares, underlying shares and debentures of ᐲؒ྆ցຮӮᖬԴʥ౨ஒૈԝᖬԴʥ౨ஒૈԝ ᗐٖͫʥඦᚬᖬɻኟτԗኣᖬޚthe Company and its associated corporations (within the meaning ଱XV஫ɾٖͫd ผ̯ʔ̇ʥࠗكof Part XV of the Securities and Future Ordinance (the "SFO")) which Դʥ౨ஒૈԝ଱XV஫଱7ʥ8ʗ஫඘ ࣓ኣᖬԴܢ˳ֺτࠉʔ̇ᐲֺ͚מare required to be notified to the Company and The Stock Exchange ಋᐲ΋͚ of Hong Kong Limited (the "Stock Exchange") pursuant to Divisions ʥ౨ஒૈԝτᗐૈʼԯ୽๫А഼ֶݯኟτɾᚬऩʥ ԗኣᖬԴʥ౨ஒૈԝ଱352ૈ඘Φכand 8 of Part XV of the SFO (including interests and short positions ૗࠸hֶত፣ 7 which they are taken or deemed to have under such provisions of ສɾ೔ত˫ɾᚬऩֶ૗࠸hֶԗኣᐲֺ͚ᖬԴɐ̟ ؿᅟמɐ̟ʔ̇໎ԑ൬ϷᖬԴ͚ڬɐ̟ஃڬSFO), or to be recorded in the register required to be maintained ஃ ผ̯ʔֶ̇ᐲֺ͚ɾᚬऩֶ૗࠸eك඘ڬpursuant to Section 352 of the SFO, or otherwise to be notified to ๅΨ the Company or the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Companies in the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules").

DIRECTOR'S RIGHTS TO ACQUIRE SHARES OR ໎ԑᑪൕֶٖͫඦᚬᖬɾᚬС DEBENTURES dτᗐٖͫʥඦᚬᖬɾٖͫכᐢസܧApart from as disclosed under the headings "Directors' and chief ৖໎ԑʥϷ executives' interests and short positions in shares, underlying shares ᚬऩʥ૗࠸˞ʥᑪٖᚬֺི߮ׄᚉ̔c౨ං̯ ᐲؒ྆ցຮӮᖬԴޚᙔʔֶ̇ԯͨЄڃand debentures" and "Share option scheme", at no time during the ʔ̇dԯ period was the Company, its subsidiaries or any of its associated ʥ౨ஒૈԝ଱XV஫ลಲ͓߯ͨЄΪખc˞Ԛ̯ʔ ஦༦νᑪ˿ڬcorporations (within the meaning of Part XV of the SFO) a party to ̇໎ԑֶԯᐲᖎɁցຮӮɐ̟ஃ any arrangements to enable the Directors of the Company or their ̯ʔֶ̇ͨЄԯˢؒɁ྆᛽ɾֶٖͫඦᚬᖬϤᏵՅ associates (as defined in the "Listing Rules") to acquire benefits by Сऩe means of acquisition of shares in, or debentures of, the Company or any other body corporate.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 36 Report of the Directors ໎ԑผంй࣊

SUBSTANTIAL SHAREHOLDERS ˚ٖ߬׭ c৖໎كɀཌྷཌྷʒαɊɀ˂ɍɊȹˀcኣ໎ԑֺכ As at 31 December 2006, so far as is known to the Directors, the ̯כɁࡗ̔c˞ɎɁɡþྡྷ᛽ܧpersons/entitles (other than a Director or chief executive of the ԑֶ̯ʔ̇˚߬Ϸ ᗐٖͫɻኟτᚬऩֶ૗࠸cϤ࣓ኣᖬޚCompany) had an interest or short position in the shares and ʔٖ̇ͫʥ underlying shares of the Company which would fall to be disclosed Դʥ౨ஒૈԝ଱XV஫଱2ʥ3ʗ஫ɾૈʼஃց඘Ή̯ ˿੓ᚬСڃઅֶංઅኟτقto the Company and the Stock Exchange under provisions of ʔ̇ʥᐲֺ͚ׄᚉcֶ එ྆ͨЄԯˢιࡗʔٖ̇׭ɣผ̯כDivision 2 and 3 of Part XV of the SFO, or, who was, directly or ΕͨЄੱؗɎ indirectly, interested in 10% or more of the nominal value of any ɐҙ଩ɾͨЄᗘПٖ̯ࠍࠤ10%ֶ˞ɐɾᚬऩcϤ ໮೩ᖬԴɾᚬऩֶτᗐ໮೩ٖ̯ɾכclass of share capital carrying rights to vote in all circumstances at ໮೩ɁɡΈϬ general meetings of any other member of the Group and the ͨЄ౨ᚬᅕᔾΣɎi amount of each of such person's interest in such securities or in any options in respect of such capital were as follows:

Number of Percentage of Name Capacity shares (Note 1) shareholding ˈഽ1 ٖᚬϛʗڃΊီ Ӹͫ ٖͫᅕ͌

CASC Interest of a controlled corporation (Note 2) 449,244,000 (L) 44.17% ഽ2ڃɻॾᐢ ኟτՇઁԹʔ̇ᚬऩ CALT Interest of a controlled corporation (Note 3) 449,244,000 (L) 44.17% ഽ3ڃᆰ৑ ኟτՇઁԹʔ̇ᚬऩˌ Astrotech Beneficial owner 449,244,000 (L) 44.17% ྡྷऩኟτɁ

ഽiڃ :Notes

࠸eٽɾٖͫכ׭ٖܞThe letter "L" denotes the shareholder's long position in the shares. 1. L .1

CASC is deemed to be interested in 449,244,000 shares as it holds 2. ɻॾᐢ୽഼ݯኟτ449,244,000ٖٖͫɾᚬऩcΐ .2 τˌᆰ৑100%ɰೕϷٖ̯eܛof the issued share capital of CALT. ԯ 100%

ᙔʔ̇eΐϊcˌᆰڃAstrotech is a wholly owned subsidiary of CALT. Accordingly, CALT 3. AstrotechȽˌᆰ৑ɾͲ༅ .3 Ͳ஫ٖͫɾᚬऩeܛis deemed to be interested in all the shares held by Astrotech. ৑୽഼ݯኟτAstrotechֺ

ʔ࣓̇ኣᖬԴʥ౨ஒૈԝ̯ܘSave as disclosed herein, according to the register of interests kept ৖̯ʼֺׄᚉّ̔c ɀཌྷཌྷʒαכby the Company under Section 336 of the SFO and so far as was ଱336ૈϤஉΦɾᚬऩ೔ত˫ֺ͐ʥ ˚c৖໎ԑֶ̯ʔ̇كknown to the Directors, there is no other person/entity (other than Ɋɀ˂ɍɊȹˀcኣ໎ԑֺ ޚʔٖ̇ͫʥ̯כɁࡗ̔cลಲɁɡþྡྷ᛽ܧa Director or chief executive of the Company) who, as at 31 ߬Ϸ December 2006, had any interest or short position in the shares of ᗐٖͫɻኟτᚬऩֶ૗࠸cϤ࣓ኣᖬԴʥ౨ஒૈԝ underlying shares of the Company which would fall to be disclosed ଱XV஫଱2ʥ3ʗ஫ɾૈʼஃց඘Ή̯ʔ̇ʥᐲֺ͚ ੓ᚬС˿ΕͨЄੱؗɎڃઅֶංઅኟτقto the Company under Divisions 2 and 3 of Part XV of the SFO or ׄᚉcֶ එ྆ͨЄԯˢιࡗʔٖ̇׭ɣผɐҙ଩ɾͨЄ̯כ who was, directly or indirectly, interested in 10% or more of the τᗐ໮೩ٖכnominal value of any class of share capital carrying rights to vote ᗘПٖ̯ࠍࠤ10%ֶ˞ɐɾᚬऩcϤ in all circumstances at general meetings of any member of the ̯ɾͨЄ౨ᚬe Group in any options in respect of such capital.

Annual Report 2006 ɀཌྷཌྷʒαం 37 Report of the Directors ໎ԑผంй࣊

MAJOR CUSTOMERS AND SUPPLIERS ˚۪߬ʸʥԜᎶਆ

For the year ended 31 December 2006, turnover attributable to the ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹c̯එ྆ʄ five largest customers of the Group accounted for approximately ɣ۪ʸͳЌ̯එ྆Ꮺพᔾ޸38.23%e̯එ྆௖ɣ۪ 38.23% of the Group's turnover and turnover attributable to the ʸЌ̯එ྆Ꮺพᔾ޸21.94%e Group's largest customer accounted for approximately 21.94% of the Group's turnover.

For the year ended 31 December 2006, purchases attributable to ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹c̯එ྆ʄ the five largest suppliers of the Group accounted for approximately ɣԜᎶਆ΋ͳЌ̯එ྆ઔᑪᔾ޸7.87%c̯එ྆௖ 7.87% of the Group's purchases and purchases attributable to the ɣԜᎶਆЌ̯එ྆ᐢઔᑪᔾ޸3.87%e Group's largest supplier accounted for approximately 3.87% of the Group's purchases. cΈ໎ԑd֤೩ɾᐲᖎɁɡֶኟτ̯كNone of the Directors, their associates or, to the best knowledge of గ໎ԑผֺ Єʄɣ۪ʸͨכthe Directors, any shareholder who owns more than 5% of the ʔ̇ɰೕϷٖ̯5%˞ɐɾٖ׭Ԏಲ Company's issued share capital had any interests in the above five ֶԜᎶਆɻኟτͨЄྡྷऩᚬऩe largest customers or suppliers.

ٖܛPUBLIC FLOAT ʔଠ

قThe Company has maintained a sufficient public float throughout ̯ʔ̇࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅αʑȹ ൴eٖܛӷɾʔଠ˨ܛthe year ended 31 December 2006. ၐ

AUDITORS ࣏ᅕ࢑

A resolution will be submitted to the annual general meeting to ȹඖҺᘪ࣐ੀొеٖ׭൪αɣผc˞ᙩາᄨඵgᗐ re-appoint Messrs. Deloitte Touche Tohmatsu as auditors of the ඡஹʿผ߮࢑Ϸݯ̯ʔ࣏̇ᅕ࢑e Company.

On behalf of the Board ֻ໎ԑผ՜ Wu Yansheng дዘ́ ٽChairman ໎ԑ

Hong Kong, 19 April 2007 ࠗಋcɀཌྷཌྷȼα̒˂ɊȾˀ

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 38 Independent Auditor’s Report ዟ͓࣏ᅕ࢑ంй࣊

TO THE SHAREHOLDERS OF ߎi τࠉʔ̇ΈϽٖ׭ڌCASIL TELECOMMUNICATIONS HOLDINGS LIMITED ॾʨޫҌ஝ ඀ਅະࢌഽ˫ι͓ɾτࠉʔ̇כ (Incorporated in the Cayman Islands with limited liability)

଱42ϭ111ࠒɾॾʨޫכWe have audited the consolidated financial statements of CASIL ̯࣏ᅕ࢑Ϸɰѧιᄗ࣏༗ ᙔʔ̇ ൔඑڃτࠉʔ̇ ൔʔ̇ ʥԯڌTelecommunications Holdings Limited (the “Company”) and its Ҍ஝ ɀཌྷཌྷʒαɊɀ˂ɍכܢ˳subsidiaries (collectively referred to as the “Group”) set out on pages ྆ɾ၃΋ল৻ంйc ʥ࿀ϭ໮ˀ˅α۹ɾ၃΋ٲto 111, which comprise the consolidated balance sheet as at 31 Ɋȹˀɾ၃΋༅ଐ߲ඦ 42 cٲݚ൴ټʥ၃΋ଊٲd၃΋ٖ׭ᚬऩᛰ৽ٲDecember 2006, and the consolidated income statement, the ฌऩ ഽeڃ೪ʥԯˢ໬ᘷֲܧconsolidated statement of changes in equity and the consolidated ˞ʥ˚߬ผ߮ cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

඘ֻኪؿஐͨٲDirectors’ responsibility for the consolidated ໎ԑగ၃΋ল৻ం financial statements

The directors of the Company are responsible for the preparation ൔʔ̇໎ԑ඘߲ஐ࣓ኣࠗಋผ߮࢑ʔผཕЗɾࠗಋ ๑ࠗಋ ʔ̇ૈԝ ؿׄᚉஃցᇁܘʥڬand the true and fair presentation of these consolidated financial ল৻ంйๅ e஛ஐͨٲstatements in accordance with Hong Kong Financial Reporting ႇʥभྡྷϤʔ̡ΔͶం໮೩၃΋ল৻ం Standards issued by the Hong Kong Institute of Certified Public ˳ܢஉ߮dྡྷܪʥၐᙶၤᇁႇʥभྡྷϤʔ̡ΔͶం ɺΦΕͅٲᗐɾʑ஫ဟઁc˞Ԛল৻ంޚٲAccountants and the disclosure requirements of the Hong Kong ল৻ం ಂ൅ֶ፟႒Ϥኒߎɾࠇɣ፟႒ஹ߸hፕእ՗Ꮆ͂כ ,Companies Ordinance. This responsibility includes designing ؗɎАˮ΋ଉผ߮Ѕ߮eੱܘ೪hʥܧimplementing and maintaining internal control relevant to the ሬ๫ؿผ߮ preparation and the true and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Annual Report 2006 ɀཌྷཌྷʒαం 39 Independent Auditor’s Report ዟ͓࣏ᅕ࢑ంй࣊

Auditor’s responsibility ࣏ᅕ࢑ɾஐͨ

ٲOur responsibility is to express an opinion on these consolidated ҈ࠨؿஐ࣓ͨܰኣ҈ࠨؿᄗ࣏ྦྷ໮೩၃΋ল৻ం financial statements based on our audit and to report our opinion Аˮ෮ӮcԎඩΉኬ᛽ٖ׭ంйc৖ϊɾ̯̔ంй solely to you, as a body, and for no other purpose. We do not assume Пಲԯˢ͌ؿe҈ࠨɺผగ̯ంйؿʑࢀΉͨЄԯ responsibility towards or accept liability to any other person for ˢɁɡ߲ɐֶֻኪͨЄஐͨe҈ࠨɰ࣓ኣࠗಋผ߮ ߬ڬ൬Ϸᄗ࣏e஛Ԓๅڬthe contents of this report. We conducted our audit in accordance ࢑ʔผཕЗؿࠗಋᄗ߮ๅ with Hong Kong Standards on Auditing issued by the Hong Kong ұ҈ࠨፓΨ༞ᄨஃᆲcԎஃིʥਨϷᄗ࣏c ˞΋ଉ ЯɺΦτͨЄࠇɣ፟႒ஹ߸eܰٲInstitute of Certified Public Accountants. Those standards require ᆢցϊ೩ল৻ం that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

ᔾʥټֺ༗ٲAn audit involves performing procedures to obtain audit evidence ᄗ࣏ࣹʥਨϷೡѵ˞ᏵՅτᗐল৻ం ࣏ᅕ࢑כabout the amounts and disclosures in the consolidated financial ׄᚉ༅ࢿؿᄗ࣏ንᖬeֺፕցؿೡѵՅҺ ٲಂ൅ֶ፟႒Ϥኒߎল৻ంכിЅͅܢ˳statements. The procedures selected depend on the auditor’s ؿРᒾc judgment, including the assessment of the risks of material Φτࠇɣ፟႒ஹ߸ؿࠓ፮eΕിЅ໮೩ࠓ፮ࣂc࣏ misstatement of the consolidated financial statements, whether ᅕ࢑ϣᄬၤ໮ʔ̇ᇁႇʥभྡྷϤʔ̡ΔͶంল৻ం ᗐؿʑ஫ઁԹc˞உ߮ሬ๫ؿᄗ࣏ೡѵcЎԎޚٲ due to fraud or error. In making those risk assessments, the auditor ˳෮Ӯeᄗ࣏͛ٲݯྦྷʔ̇ؿʑ஫ઁԹؿࢽॶೕڈ considers internal control relevant to the entity’s preparation and ೪ؿ΋ሬֲʥֺАˮؿܧിძ໎ԑֺઔ͂ؿผ߮ܢ true and fair presentation of the consolidated financial statements ؿኬ᛽ٲin order to design audit procedures that are appropriate in the ผ߮Ѕ߮ؿ΋ଉֲc˞ʥിძ၃΋ল৻ం circumstances, but not for the purpose of expressing an opinion Ͷంʿβe on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. c҈ࠨֺᏵ੡ؿᄗ࣏ንᖬܰ˨ӷ՗ሬ๫ΔڌޚWe believe that the audit evidence we have obtained is sufficient ҈ࠨ and appropriate to provide a basis for our audit opinion. ݯ҈ࠨؿᄗ࣏෮ӮొԜਥᓣe

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 40 Independent Auditor’s Report ዟ͓࣏ᅕ࢑ంй࣊

Opinion ෮Ӯ

In our opinion, the consolidated financial statements give a true ̯Ϸႏݯɐ߸၃΋ল৻ంйɰ࣓ኣࠗಋল৻ంйๅ ˂ɀཌྷཌྷʒαɊɀכbൔඑ྆ܮभྡྷʥʔ̡Δʦڬ and fair view of the state of affairs of the Group as at 31 December ؗʥbൔඑ྆࿀ϭ໮ˀ˅ɾᑋฌرand of the Group’s loss and cash flows for the year then ended ɍɊȹˀɾল৻ 2006 ๑ࠗಋʔ̇ૈԝɾׄᚉ߬ұϤܘݚ൴c˘ɰټin accordance with Hong Kong Financial Reporting Standards and ʥଊ have been properly prepared in accordance with the disclosure Ѣഁᇁႇe requirements of the Hong Kong Companies Ordinance.

Deloitte Touche Tohmatsu ᄨඵgᗐඡஹʿผ߮࢑Ϸ Certified Public Accountants ਨพผ߮࢑ Hong Kong ࠗಋ

19 April 2007 ɀཌྷཌྷȼα̒˂ɊȾˀ

Annual Report 2006 ɀཌྷཌྷʒαం 41 Consolidated Income Statement ٲ၃΋ฌऩ For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα Notes HK$’000 HK$’000 ഽ ɝಋʏ ɝಋʏڃ

Continuing operations ܛᙩ຤Ꮺพ৻ Turnover Ꮺพᔾ 6 141,275 173,478 Cost of sales ሻਕι̯ (134,495) (111,785)

Gross profit ˉС 6,780 61,693 Other income ԯˢνɃ 20,775 2,914 Distribution costs ʗሻι̯ (9,458) (9,355) Administrative expenses Ϸܧ൒͂ (74,795) (46,665) Impairment loss recognised in ᆢႏಲѼ༅ଐ respect of intangible assets bɾಕࠤᑋฌ (9,403) — Reversal of (allowance for) amount ᎶνȹᐲᏪʔ̇ಁඖ due from an associate bᅆΑ ᅆௐ 10,019 (27,633) Finance costs ল৻ι̯ 8 (9,370) (5,803) Share of results of associates ᎶЌᐲᏪʔ̇พᐜ (1,300) (259)

(ᑋฌ (66,752) (25,108کLoss before taxation ৖ೢ Taxation ೢඖ 9 1,751 439

Loss for the year from continuing ܛᙩ຤Ꮺพ৻ (operations b̯α۹ᑋฌ (65,001) (24,669

Discontinued operation ୄ˅຤Ꮺพ৻ Loss for the year from discontinued ୄ˅຤Ꮺพ৻ (operation b̯α۹ᑋฌ 10 (224) (4,695

(Loss for the year ̯α۹ᑋฌ (65,225) (29,364

Attributable to: ˞ɎɁɡᎶЌi Equity holders of the Company ̯ʔ̇ᚬऩܛτɁ (64,562) (29,781) Minority interests ʭᅕٖ׭ᚬऩ (663) 417

(65,225) (29,364)

Loss per share z Basic Ұٖᑋฌz ਥ̯ 14 From continuing and discontinued bԞϬܛᙩ຤Ꮺพ৻ operations bbʥୄ˅຤Ꮺพ৻ HK(6.35) centsಋ˦ HK(2.93) centsಋ˦

From continuing operations bԞϬܛᙩ຤Ꮺพ৻ HK(6.33) centsಋ˦ HK(2.47) centsಋ˦

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 42 Consolidated Balance Sheet ٲ၃΋༅ଐ߲ඦ At 31 December 2006 ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀכ

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα Notes HK$’000 HK$’000 ഽ ɝಋʏ ɝಋʏڃ

ݚ৽༅ଐڈ Non-current assets พdᄥָʥஉௐ 15 42,879 54,432ذ Property, plant and equipment Goodwill ਆᙷ 16 — 1,607 Intangible assets ಲѼ༅ଐ 17 9,800 33,634 ᐲᏪʔ̇ɾᚬऩ 18 84,864 8,650כ Interest in associates

137,543 98,323

Current assets ݚ৽༅ଐ Inventories Φஒ 19 62,910 48,808 ʥԯˢᎶνಁ 20 92,615 165,873מTrade and other receivables ൗ Amounts due from related Ꮆνᗐடʔ̇ಁ companies 21 15,291 15,291 Amounts due from associates ᎶνᐲᏪʔ̇ಁ 22 25,969 323 ׋ႺϷΦಁ 23 1,537 1,351אPledged bank deposits ɰ 22,387 81,777 24 ټBank balances and cash ႺϷ೶Φʥଊ

280,099 254,033

Current liabilities ݚ৽߲ඦ ʥԯˢᎶ˟ಁ 25 41,587 85,385מTrade and other payables ൗ Amounts due to related companies Ꮆ˟ᗐடʔ̇ಁ 21 4,407 4,407 Amounts due to associates Ꮆ˟ᐲᏪʔ̇ಁ 22 13,365 — Taxation ೢඖ 330 65 ȹαʑԷ౨ɾ൘ಁכBorrowings z amount due b within one year 26 97,350 98,998

157,039 188,855

Net current assets ݚ৽༅ଐ૱ᔾ 123,060 65,178

Total assets less current liabilities ༅ଐᐢᔾಕݚ৽߲ඦ 260,603 163,501

ݚ৽߲ඦڈ Non-current liabilities Է౨ɾ൘ಁ܃ȹαכ Borrowings z amount due after one year 26 168,317 6,654 Deferred taxation Ⴎ֝ೢඖ 27 — 2,217

168,317 8,871

92,286 154,630

Annual Report 2006 ɀཌྷཌྷʒαం 43 Consolidated Balance Sheet ٲ၃΋༅ଐ߲ඦ At 31 December 2006 ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀכ

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα Note HK$’000 HK$’000 ഽ ɝಋʏ ɝಋʏڃ

Capital and reserves ༅̯ʥ᎝ௐ Share capital bٖ̯ 28 101,714 101,714 Reserves b᎝ௐ (11,440) 50,283

Equity attributable to equity holders ̯ʔ̇ᚬऩܛτɁ of the Company bᎶЌᚬऩ 90,274 151,997 Minority interests ʭᅕٖ׭ᚬऩ 2,012 2,633

Total equity ᚬऩᐢᔾ 92,286 154,630

ɀཌྷכ଱42ϭ111ࠒɾল৻ంйcȽ຤໎ԑผכ˰ The consolidated financial statements on pages 42 to 111 were ٲapproved and authorised for issue by the Board of Directors on 19 ཌྷȼα̒˂ɊȾˀғ࣏ʥ઒ᚬcԎͅ˞Ɏ໎ԑˤ April 2007 and are signed on its behalf by: ᖋອi

Han Shuwang Wang Xiaodong ኮ׭˔ לᒚኹ DIRECTOR DIRECTOR ໎ԑ ໎ԑ

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 44 Consolidated Statement of Changes in Equity ٲ၃΋ٖ׭ᚬऩᛰ৽ For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

Attributable to equity holders of the Company ʔٖ̇׭ᎶЌ̯ Share Share Special premium Exchange General Accumulated Minority capital reserve account reserve reserve losses Total interests Total ʭᅕٖ ٖͫ ऋП᎝ௐ ึძሏ මЙ᎝ௐౝ஝᎝ௐୃዶᑋฌ ᐢᔾ ׭ᚬऩ ᐢᔾ ̯ٖ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ (Note) ഽڃ

ɀཌྷཌྷʄαȹ˂ȹˀ 101,714 117,554 473,093 829 3,430 (516,074 ) 180,546 796 181,342כ At 1 January 2005 ʑᆢႏٲ၃΋ฌऩכ̰ Exchange difference arising on ᙔڃ̔˞translation of operations outside ɾҗ့ࠗಋ Hong Kong not recognised in the bʔ̇ল৻ంйଐ́ consolidated income statement bɾමЙ࢏ᔾ ———1,232 — — 1,232 7 1,239 ( Loss for the year ̯α۹ᑋฌ —————(29,781 ) (29,781 ) 417 (29,364

Total recognised income (expense) ̯α۹ɰᆢႏ for the year bνɃ඀ʻ ᐢᔾ ———1,232 — (29,781 ) (28,549 ) 424 (28,125 )

Capital contribution from minority ʭᅕٖ׭ˮ༅ shareholders — — — — — — 1,413 1,413

˂ɀཌྷཌྷʄαɊɀכ At 31 December 2005 and 1 January 2006 bɍɊȹˀʥ bɀཌྷཌྷʒαȹ˂ȹˀ 101,714 117,554 473,093 2,061 3,430 (545,855 ) 151,997 2,633 154,630 ʑٲ၃΋ฌऩכ̰ Exchange difference arising on translation of operations outside bᆢႏɾҗ့ࠗಋ ᙔʔ̇ڃ̔˞Hong Kong not recognised in the b consolidated income statement bল৻ంйଐ́ bɾමЙ࢏ᔾ ———2,707 — — 2,707 42 2,749 ᙔڃReleased on disposal and deemed ˮਕʥ഼Аˮਕ disposal of subsidiaries bʔ̇ࣂᅆΑ ———132——132 — 132 ( Loss for the year ̯α۹ᑋฌ —————(64,562 ) (64,562 ) (663 ) (65,225

Total recognised income (expense) ̯α۹ɰᆢႏ for the year bνɃ඀ʻ ᐢᔾ ———2,839 — (64,562 ) (61,723 ) (621 ) (62,344 )

ɀཌྷཌྷʒαכ At 31 December 2006 bɊɀ˂ɍɊȹˀ 101,714 117,554 473,093 4,900 3,430 (610,417 ) 90,274 2,012 92,286

ʔ̇ɰೕϷٖ̯ࠍࠤၤ̯̯ܞഽi ̯එ྆ɾऋП᎝ௐڃ Note:The special reserve of the Group represents the difference between ᙔʔ̇ɰೕϷٖ̯ࠍࠤɾ࢏ᔾʥ࣓ڃthe nominal amount of the share capital issued by the Company ʔֺ̇ᑪɃ ȹȾȾȼαɄ˂Ɋȹˀ൬ϷࠇୂϤͅכand the nominal amount of the issued share capital of the ኣ̯එ྆ ᔾ116,025,000ಋʏeټsubsidiaries acquired by the Company and the aggregate amount ԯˢ᎝ௐᔝᅆɾᐢ of HK$116,025,000 transferred from other reserves pursuant to the Group’s reorganisation on 11 August 1997.

Annual Report 2006 ɀཌྷཌྷʒαం 45 Consolidated Cash Flow Statement ٲݚ൴ټ၃΋ଊ For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα Note HK$’000 HK$’000 ഽ ɝಋʏ ɝಋʏڃ

ݚ൴ټCash flows from operating activities ຤Ꮺݠ৽ଐ́ɾଊ (ᑋฌ (66,931) (29,874کLoss before taxation ৖ೢ Adjustments for: గɎͶΈඖАˮሁኬi Interest income СࢠνɃ (567) (154) Interest expenses Сࢠ඀ʻ 9,447 5,889 Share of results of associates ᎶЌᐲᏪʔ̇พᐜ 1,300 259 Amortisation of intangible assets ಲѼ༅ଐᚫሻ 12,900 5,016 พdᄥָʥذ ,Depreciation of property plant and equipment bbbஉௐɾҗᓿ 7,714 7,203 พdᄥָʥذLoss on disposal of property, ˮਕ plant and equipment bbbஉௐɾᑋฌ 48 45 Impairment loss recognised గಲѼ༅ଐᆢႏ in respect of intangible assets bbbɾಕࠤᑋฌ 9,403 — Gain on disposal and deemed ˮਕʥ഼Аˮਕ — (ᙔʔ̇ɾνऩ (2,641ڃdisposal of subsidiaries bbb Impairment loss recognised in గਆᙷᆢႏɾ respect of goodwill bbbಕࠤᑋฌ 542 2,668 Allowance for doubtful debts вሏᅆௐ 22,170 5,178 (Reversal of) allowance for amount ᎶνᐲᏪʔ̇ಁඖ due from an associate bbb ᅆΑ ᅆௐ (10,019) 27,633 Allowance for obsolete inventories ஹᓿΦஒᅆௐ 1,916 274 Write-off of development costs ඀ೕι̯࿄ሻ — 228 Write-back of interest payable Ꮆ˟СࢠᅆΑ (14,585) — Effect of foreign exchange rate ʔ̇ං೶቗̔ྫྷමଅ changes on intercompany bbbᛰ৽ɾᄧᚊ balances (3,531) (1,017)

کᛰ৽ټOperating cash flows before Ꮺ༜༅ ݚ൴ (32,834) 23,348ټmovements in working capital b຤Ꮺݠ৽ଊ (Increase) decrease in inventories Φஒɾ ᄈ˱ ಕʭ (25,903) 22,754 ʥԯˢᎶמDecrease (increase) in trade and other ൗ receivables bνಁಕʭ ᄈ˱ 43,941 (45,342) Increase in amounts due from ᎶνᐲᏪʔ̇ಁɾᄈ˱ associates (15,601) (8,466) ʥԯˢᎶ˟ಁמDecrease) increase in trade and ൗ) other payables bɾಕʭ ᄈ˱ (5,382) 16,071 Increase in amounts due to related Ꮆ˟ᗐடʔ̇ಁɾᄈ˱ companies — 592 Increase (decrease) in amounts due Ꮆ˟ᐲᏪʔ̇ಁ to associates bɾᄈ˱ಕʭ 13,316 (887) ᙔઁٖʔ̇قDecrease in amount due to immediate Ꮆ˟ٖ׭ɾ holding company of a shareholder bಁɾಕʭ — (923)

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 46 Consolidated Cash Flow Statement ٲݚ൴ټ၃΋ଊ For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα Note HK$’000 HK$’000 ഽ ɝಋʏ ɝಋʏڃ

ټ฻Ϭ຤Ꮺɾଊכ͂ Cash (used in) generated from operations (22,463) 7,147 Income taxes (paid) refunded ɰ˟ɰᏵঽᑹֺ੡ೢ (118) 31

฻Ϭ຤Ꮺݠ৽כ͂ Net cash (used in) generated from ᔾ (22,581) 7,178૱ټoperating activities bɾଊ

Investing activities ҙ༅ݠ৽ Capital contribution to associates ΉᐲᏪʔ̇ˮ༅ (66,476) (7,640) พdذPurchase of property, plant ᑪສ (and equipment bbᄥָʥஉௐ (9,787) (13,846 (׋ႺϷΦಁɾᄈ˱ (175) (87א Increase in pledged bank deposits Interest received ɰνСࢠ 567 154 พdᄥָʥذProceeds from disposal of property, ˮਕ plant and equipment bbஉௐֺ੡ಁ 458 184 Net cash inflow in respect of ˮਕʥ഼Аˮਕ ᙔʔ̇ڃdisposal and deemed disposal bb — ݚɃ૱ᔾ 30 199ټof subsidiaries bbଊ Development costs paid ɰ˟඀ೕι̯ — (2,418)

(ᔾ (75,214) (23,653૱ټҙ༅ݠ৽ɾଊכ͂ Net cash used in investing activities

Financing activities ጪ༅ݠ৽ New loans raised ณࠥɃ൘ಁ 208,911 4,717 Repayments of bank loans b᎛ᑹႺϷ൘ಁ (44,800) (471) Interest paid ɰ˟Сࢠ (7,463) (3,905) Capital contribution from minority bʭᅕٖ׭ˮ༅ shareholders — 1,413

Net cash from financing activities ጪ༅ݠ৽ֺଐ́ ᔾ 156,648 1,754૱ټbɾଊ

ذ೩ძټʥଊټNet increase (decrease) in cash and ଊ cash equivalents bᄈ˱ಕʭ૱ᔾ 58,853 (14,721) Effect of foreign exchange ̔ྫྷමଅᛰ৽ɾᄧᚊ rate changes 537 (508) ʥټɾଊٱCash and cash equivalents at α 37,616 22,387 ذ೩ძټbeginning of the year bଊ

ټʥଊټCash and cash equivalents at end α̱ɾଊ ႺϷ೶቗ذof the year, representing bank b೩ძ 22,387 81,777 ټbalances and cash bʥଊ

Annual Report 2006 ɀཌྷཌྷʒαం 47 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

1. GENERAL 1. ȹঁ༅ࢿ

඀ਅະࢌഽ˫ι͓ɾτࠉʔכThe Company is incorporated in the Cayman Islands with ̯ʔ̇ݯȹࡼ ֺτࠉʔ̇ ᐲמࠗಋᐲ΋͚כlimited liability and its shares are listed on The Stock ̇cԯٖͫ અ˚ٖ߬׭ݯقExchange of Hong Kong Limited (the “Stock Exchange”). Its ֺ͚ ɐ̟e̯ʔ̇ɾ ඀כimmediate substantial shareholder is Astrotech Group Astrotech Group LimitedAstrotech Limited (“Astrotech”), a company incorporated in the ਅະࢌഽ˫ι͓ cԯܛτ̯ʔ̇ 44.17%ɾ Cayman Islands which holds 44.17% of equity interest in the ઁԹֲٖ̯ᚬऩeAstrotechͅɻਝˌᆰҌ୺ Company with controlling interest. Astrotech is wholly ޢӠ৑ ˌᆰ৑ Ͳ༅ኟτeɻਝॾʨޫҌ અઁٖˌᆰ৑ιقowned by China Academy of Launch Vehicle Technology එ྆ʔ̇ ɻॾᐢ ஦༦ Limited (“CALT”). China Aerospace Science & Technology ݯ̯ʔ̇ɾ˚ٖ߬׭eɻॾᐢʥˌᆰ৑яݯ ɻജɁ̵ͳ՗ਝ ɻਝ ι͓ɾʔ̇eכ Corporation (“CASC”) is a substantial shareholder of the Company via the immediate shareholding of CALT. Both CASC and CALT are companies established in the People’s Republic of China (the “PRC”).

The address of the registered office and principal place of ̯ʔ̇ഽ˫ፒԑ୮Δэʥࠗಋ˚߬ᏪพΔᒨ αంɾʔ̇༅ࢿȹຝe̯כbusiness of the Company are disclosed in the corporate ׄᚉ information to the annual report.

The financial statements are presented in Hong Kong dollars, ল৻ంй˞̯ʔ̇ɾ˲ॶஒྫྷಋʏеͶe which is the same as the functional currency of the Company.

ᙔʔ̇ʥڃThe Company is an investment holding company. The ̯ʔ̇ݯȹࡼҙ༅ઁٖʔ̇cԯ ഽ36eڃכprincipal activities of its subsidiaries and associates are set ᐲᏪʔ̇ɾ˚߬พ৻༗ out in note 36.

2. APPLICATION OF NEW AND REVISED 2. Ꮆ͂ณཕʥ຤࠳߯ࠗಋল৻ంйๅ ڬ HONG KONG FINANCIAL REPORTING STANDARDS

α۹c̯එ྆ࠖωᎶ͂ࠗͅಋผ߮࢑ʔ̯כ ,In the current year, the Group has applied, for the first time a number of new Hong Kong Financial Reporting Standards ผࠗಋผ߮࢑ ʔผ ཕЗɾΛඖณࠗಋল dࠗಋผ ڬࠗಋল৻ం йๅ ڬHKFRS”s), Hong Kong Accounting Standards (“HKAS”s) and ৻ంйๅ“) ʥ໻ᘷ ˞Ɏ଻ီ ڬࠗಋผ ߮ๅ ڬInterpretations (hereinafter collectively referred to as “new ߮ๅ ɀͅڬc໮೩ๅ ڬHKFRSs”) issued by the Hong Kong Institute of Certified ݯณࠗಋল৻ంйๅ Public Accountants (“HKICPA”), which are either effective for ཌྷཌྷʄαɊɀ˂ȹˀֶɀཌྷཌྷʒαȹ˂ȹˀ ඀նɾผ߮౨ං঴́ࢽeᎶ͂ณࠗಋ܃accounting periods beginning on or after 1 December 2005 ֶԯ ౨ֶ֡౨ผ߮౨ංɾพᐜ̯ྦྷڬor 1 January 2006. The application of the new HKFRSs had ল৻ంйๅ ؗɾᇁԹʥеͶʿβԎಲࠇɣᄧرno material effect on how the results and financial position ʥল৻ for the current or prior accounting periods have been ᚊeΐϊcಲ඘А֡౨ሁኬe prepared and presented. Accordingly, no prior period adjustment is required.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 48 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

2. APPLICATION OF NEW AND REVISED 2. Ꮆ͂ณཕʥ຤࠳߯ࠗಋল৻ంйๅ ᙩڬ HONG KONG FINANCIAL REPORTING STANDARDS (Continued)

Ꮆ͂˞Ɏࠗͅಋผ߮࢑ʔผکThe Group has not early applied the following new ̯එ྆Ԏ̰ొ d࠳߯ڬstandards, amendment and interpretations that have been ཕЗɾɰཕЗЎֆ̰́ࢽɾͲณๅ dڬissued but are not yet effective. The directors of the ̯ʥ໻ᘷc̯ʔ̇໎ԑད౨Ꮆ͂໮೩ๅ رCompany anticipate that the application of these standards, ࠳̯߯ʥ໻ᘷɺผྦྷ̯එ྆ɾพᐜʥল৻ amendment or interpretations will have no material impact ؗ஥ιࠇɣᄧᚊe on the results and the financial position of the Group.

଱1໔༅̯ׄᚉ1ڬHKAS 1 (Amendment) Capital disclosures 1 ࠗಋผ߮ๅ ࠳̯߯

HKFRS 7 Financial instruments: Disclosures 1 ࠗಋল৻ంй ল৻ɮԮiׄᚉ1 ଱7໔ڬๅ

HKFRS 8 Operating segment 2 ࠗಋল৻ంй ຤Ꮺʗᗘ2 ଱8໔ڬๅ

ڬHK(IFRIC) — INT 7 Applying the restatement approach ࠗಋਝ჌ল৻ంй Ꮆ͂ࠗಋผ߮ๅ under HKAS 29 Financial Reporting ໻ᘷկࡗผ ଱29໔ᗲࠇ஝ഌ຤ in Hyperinflationary Economies 3 ໻ᘷ଱7໔ Ꮬɻɾল৻ంй ඖɎࠇͶؒ3

ڬHK(IFRIC) — INT 8 Scope of HKFRS 2 4 ࠗಋਝ჌ল৻ంй ࠗಋল৻ంйๅ ໻ᘷկࡗผ ଱2໔ɾᆲ௼4 ໻ᘷ଱8໔

HK(IFRIC) — INT 9Reassessment of embedded ࠗಋ ਝ჌ল৻ంй ࠇЅৼɃβ derivatives 5 ໻ᘷկࡗผ ߪ́ɮԮ5 z ໻ᘷ଱9໔

HK(IFRIC) — INT 10 Interim financial reporting and ࠗಋ ਝ჌ল৻ంй ɻ౨ল৻ంй impairment 6 ໻ᘷկࡗผ ʥಕࠤ6 z ໻ᘷ଱10໔

ڬHK(IFRIC) — INT 11 HKFRS 2 — Group and treasury ࠗಋ ਝ჌ল৻ంй ࠗಋল৻ంйๅ share transactions 7 ໻ᘷկࡗผ ଱2໔z එ྆ʥ 7מz ໻ᘷ଱11໔ ࢒Φٖ͚ͫ

৻ऋஈᚬԾᘪ8ר HK(IFRIC) — INT 12 Service Concession Arrangement 8 ࠗಋ ਝ჌ল৻ంй ໻ᘷկࡗผ z ໻ᘷ଱12໔

Annual Report 2006 ɀཌྷཌྷʒαం 49 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

2. APPLICATION OF NEW AND REVISED 2. Ꮆ͂ณཕʥ຤࠳߯ࠗಋল৻ంйๅ ᙩڬ HONG KONG FINANCIAL REPORTING STANDARDS (Continued)

඀նɾα۹౨ං܃ɀཌྷཌྷȼαȹ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 January 1 1 2007. ́ࢽe ඀նɾα۹౨ං܃ɀཌྷཌྷȾαȹ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 January 2 2 2009. ́ࢽe ඀նɾα۹౨ං܃ɀཌྷཌྷʒαɍ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 March 2006. 3 3 ́ࢽe ඀նɾα۹౨ං܃ɀཌྷཌྷʒαʄ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 May 2006. 4 4 ́ࢽe ඀նɾα۹౨ං܃ɀཌྷཌྷʒαʒ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 June 2006. 5 5 ́ࢽe ඀նɾα۹౨܃ɀཌྷཌྷʒαɊȹ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 November 6 6 2006. ං́ࢽe ඀նɾα۹౨ං܃ɀཌྷཌྷȼαɍ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 March 2007. 7 7 ́ࢽe ඀նɾα۹౨ං܃ɀཌྷཌྷɄαȹ˂ȹˀֶԯכ Effective for annual periods beginning on or after 1 January 8 8 2008. ́ࢽe

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪

The consolidated financial statements have been prepared ၃΋ল৻ంйȽ࣓ኣዃ̌ι̯ྻԝؒᇁႇe under the historical cost convention.

๑ࠗಋผ߮࢑ʔผֺཕЗܘThe consolidated financial statements have been prepared ၃΋ল৻ంйȽ ᇁԹeϊ̔c၃΋ল৻ڬin accordance with Hong Kong Financial Reporting ɾࠗಋল৻ంйๅ ʥࠗಋʔ̇ૈڬᐲֺ͚ᖬԴɐ̟ஃܢ˳Standards (“HKFRS”s) issued by the HKICPA. In addition, the ంй consolidated financial statements include applicable ԝֺஃցɾሬ͂ׄᚉe disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and by the Hong Kong Companies Ordinance.

Basis of consolidation ၃΋ሏ͌ਥๅ

ᙔʔ̇ɾলڃʔ̇ʥԯ̯ܢ˳The consolidated financial statements incorporate the ၃΋ল৻ంй financial statements of the Company and its subsidiaries. ৻ంйe࠱̯ʔ̇τᚬɈဳࠉȹྡྷ᛽ɾলܧ ഼ݯՅڬ೪ᔄ˞੣ԯพ৻ɻᏵऩcܧControl is achieved where the Company has the power to ʥᏪ༜ govern the financial and operating policies of an entity so ੡ԯઁԹᚬe as to obtain benefits from its activities.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 50 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Basis of consolidation (Continued) ၃΋ሏ͌ਥๅᙩ

ᙔʔ̇พᐜʗПͅνڃαʑνᑪֶˮਕɾכ The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement ᑪ́ࢽˀ౨঴ֶ࿀ϭˮਕ́ࢽˀ౨˅Σሬ ʑeٲfrom the effective date of acquisition or up to the effective ͂߮Ƀ၃΋ฌऩ date of disposal, as appropriate.

כʥ೶቗ɰמAll significant intercompany transactions and balances ̯එ྆ʑʔ̇ංɾȹʘࠇɣ͚ within the Group are eliminated on consolidation. ၃΋ሏ͌ʑҿሻe

ᙔʔ̇༅ଐ૱ࠤڃMinority interests in the net assets of consolidated ʭᅕٖ׭ᚬऩᎶЌɾ΋ԡ ሏ͌ʑၤ̯එ྆ɾٖ̯ʗ඀еͶeʭᅕٖכ subsidiaries are presented separately from the Group’s ࡈพ৻΋ԡˀ౨ɾܢ˳equity therein. Minority interests in the net assets consist ׭ᚬऩֺЌ༅ଐ૱ࠤ ᔾc˞ʥϬ΋ԡˀ౨঴ʭᅕٖ׭ټof the amount of those interests at the date of the original ໮೩ᚬऩ business combination and the minority’s share of changes ᎶЌɾٖ̯ᚬऩᛰ৽eʭᅕٖ׭ᎶЌᑋฌ൚ එ̯כᔾټᙔʔ̇ᚬऩɾڃin equity since the date of the combination. Losses ˮʭᅕٖ׭ᎶЌ ʭᅕٖ׭Ԯτ޸ҢɈஐͨכapplicable to the minority in excess of the minority’s interest ྆ᚬऩྦྷሻc੹ in the subsidiary’s equity are allocated against the interests ʥԯτॶɈАˮᔾ̔ҙ༅˞Ꮄ໤໮೩ᑋฌّ of the Group except to the extent that the minority has a ৖̔e binding obligation and is able to make an additional investment to cover the losses.

Annual Report 2006 ɀཌྷཌྷʒαం 51 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Goodwill ਆᙷ

νᑪଐ́ɾਆᙷکGoodwill arising on acquisitions prior to 1 January 2005 ɀཌྷཌྷʄαȹ˂ȹˀ

ᙔʔ̇Ϥଐ́ɾਆᙷԯԾᘪˀ౨ݯڃGoodwill arising on an acquisition of subsidiaries for which νᑪ כνᑪι̯ঢ়ܞcکthe agreement date is before 1 January 2005 represents the ɀཌྷཌྷʄαȹ˂ȹˀ ᙔʔ̇ɾˀᎶЌτᗐʔڃνᑪτᗐכexcess of the cost of acquisition over the Group’s interest in ̯එ྆ the fair value of the identifiable assets and liabilities of the ̇ɾ˿ፑᖫ༅ଐၤ߲ඦʔ̡ࠤɾᅕe relevant subsidiary at the date of acquisition.

For the purposes of impairment testing, goodwill arising గಕࠤಡ໰ϤӰcνᑪֺଐ́ɾਆᙷȽ୽ʗ ௰Ͻټ௰ϽcֶᑨՅଊټfrom an acquisition is allocated to each of the relevant cash- ৉ԷΈτᗐᑨՅଊ generating units, or groups of cash-generating units, that ɾୂПcད౨֤೩੣νᑪɾԾ΃ࢽᎶɻՇ ௰ϽҰαʥɓ௰ټare expected to benefit from the synergies of the acquisition. ऩeɰᏵ৉ਆᙷɾᑨՅଊ A cash-generating unit to which goodwill has been Ͻτ˿ॶˮଊಕࠤɾ༌ോࣂ൬Ϸಕࠤಡ໰e α۹ɾνᑪֺଐ́ɾਆᙷϤܧ࠯লܺכallocated is tested for impairment annually, and whenever గ αܧ໮লכ௰Ͻټthere is an indication that the unit may be impaired. For ӰcɰᏵ৉ਆᙷɾᑨՅଊ ௰Ͻɾټ൬Ϸಕࠤಡ໰e๫ᑨՅଊکgoodwill arising on an acquisition in a financial year, the ۹ѧ೶ ൬Ϸʗڬ໮௰Ͻɾሏࠍࠤcכᔾʭټcash-generating unit to which goodwill has been allocated ˿νΑ ಕ໮௰Ͻɾਆᙷሏࠍڨis tested for impairment before the end of that financial year. ৉ಕࠤᑋฌcࠖͱ ˈܘ௰ϽΈ༅ଐɾሏࠍࠤݯਥๅ˞܃When the recoverable amount of the cash-generating unit ࠤcԯ is less than the carrying amount of the unit, the impairment ԝʗ৉ϭ໮௰Ͻɾԯˢ༅ଐɾሏࠍࠤeਆᙷ ʑᆢٲ၃΋ฌऩכઅقloss is allocated to reduce the carrying amount of any ɾͨЄಕࠤᑋฌȽ ౨ංɺʀᅆΑe܃ԯכgoodwill allocated to the unit first, and then to the other ႏeਆᙷɾಕࠤᑋฌ assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

ᙔʔ̇ࣂc୽༅̯ʝɾਆᙷᎶЌڃˮਕ܃On subsequent disposal of a subsidiary, the attributable ԯ ᔾࣂ߮Ƀ༜့eټᔾผΕᔤցˮਕฌऩټ amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 52 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

ᐲᏪʔ̇ɾᚬऩכ Interests in associates

An associate is an entity over which the Group has ᐲᏪʔ̇ܞ̯එ྆ॶྦྷԯϷԚࠇɣᄧᚊɈc ΋Ꮺͬพɾᚬऩɾྡྷכᙔʔֶ̇ڃڈsignificant influence and that is neither a subsidiary nor an ϤԎ interest in a joint venture. Significant influence is the power ᛽eࠇɣᄧᚊɈܞ˿਄ၤՇҙ༅ʔ̇ɾল৻ ೪ܧto participate in the financial and operating policy decisions ʥᏪ༜Һ೪ЎɺॶઁԹֶͳ΃ઁԹ໮೩ of the investee but is not control or joint control over those ɾᚬɈe policies.

The results and assets and liabilities of associates are ᐲᏪʔ̇ɾพᐜd༅ଐʥ߲ඦȽ˞ผ߮ᚬऩ ໮೩၃΋ল৻ంйɃሏe࣓ኣᚬऩؒcכؒ incorporated in these consolidated financial statements ၃΋༅ଐ߲ඦכι̯ܘᐲᏪʔ̇ɾᚬऩȽכ using the equity method of accounting. Under the equity ɻͶሏcԎగ̯එ྆ʗЌ໮ᐲᏪʔ̇ɾฌٲ method, interests in associates are carried in the consolidated balance sheet at cost as adjusted for post- ऩʥᚬऩᛰ৽ɾνᑪ܃ᛰ৽Аˮሁኬc˞ʥ acquisition changes in the Group’s share of the net assets ಕ˾ͨЄɰᖫПɾಕࠤᑋฌe๫̯එ྆ʗЌ ໮ᐲᏪכ൚ˮԯֶכ೩ޚof the associate, less any identified impairment loss. When ܺᐲᏪʔ̇ɾᑋฌ ٽ౨ᚬऩcϤ໮ٽЄͨܢ˳the Group’s share of losses of an associate equals or exceeds ʔ̇ɾᚬऩԯ ໮ᐲᏪʔ̇ɾҙכits interest in that associate (which includes any long-term ౨ᚬऩྡྷሔɐ࿚ι̯එ྆ එ྆ɺʹᘗᙩᆢႏ̯ڬinterests that, in substance, form part of the Group’s net ༅૱ᔾɾȹ஫ͫc investment in the associate), the Group discontinues ԯʗЌɾ൬ȹүᑋฌeᔾ̔ʗЌɾᑋฌȽ୽ recognising its share of further losses. An additional share ᅆௐcϤ߲ඦඩ˞̯එ྆ɰଐ́ؒցֶઐց ໮ᐲᏪʔ̇Аˮ˟ಁّݯࠉ୽ᆢٲof losses is provided for and a liability is recognised only to ஐֶͨˤ the extent that the Group has incurred legal or constructive ႏe obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share νᑪι̯൚ˮ̯එ྆ᎶЌνᑪ๫ˀᆢႏΕᐲ of the net fair value of the identifiable assets, liabilities and Ꮺʔ̇ɾ˿ᖫП༅ଐd߲ඦʥֶಳ߲ඦɻֺ contingent liabilities of the associate recognised at the date Ќʔ̡૱ࠤɾͨЄ࢏ᔾяᆢႏݯਆᙷeਆᙷ of acquisition is recognised as goodwill. The goodwill is Ƚ߮Ƀҙ༅ɾሏࠍࠤcԎగ३ၿ൬ϷിЅc included within the carrying amount of the investment and Аݯҙ༅ɾȹ஫ʗe is assessed for impairment as part of the investment. cמWhere a group entity transacts with an associate of the ๫එ྆ྡྷ᛽ၤ̯එ྆ɾᐲᏪʔ̇൬Ϸ͚ τᗐᐲᏪכሻcᅕᔾ˞̯එ྆אޚGroup, profits and losses are eliminated to the extent of the ฌऩผʃ Group’s interest in the relevant associate. ʔ̇ɾᚬऩݯࠉe

Annual Report 2006 ɀཌྷཌྷʒαం 53 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Revenue recognition νɃɾᆢႏ

ޚɰνֶᎶνˤძɾʔ̡ࠤ߮൴cԎܘRevenue is measured at the fair value of the consideration νɃ ৻רʥۂΕˀ੒พ৻༜Ꮺ༦ೡɻొԜஒכreceived or receivable and represents amounts receivable ๫ for goods and services provided in the normal course of ϤᎶνɾಁඖcಕҗκʥሻਕޚᗐೢඖe business, net of discount and sales related taxes.

ɰ຤˟༜ʥኟτᚬۂஒכɾሻਕνɃȽۂSales of goods are recognised when goods are delivered and ஒ title has passed. ɰᔝଫɾੱؗɎᆢႏe

৻ࣂᆢႏeרԜొכ৻νɃר .Service income is recognised when services are rendered

೶቗ʥሬ͂ྡྷټInterest income from a financial asset is accrued on a time ল৻༅ଐСࢠνɃȽ਄ϣ̯ ࣂංਥๅ့߮cτᗐСଅݯๅᆢ஦ܘbasis, by reference to the principal outstanding and at the ჌Сଅ effective interest rate applicable, which is the rate that ༦ল৻༅ଐɾད౨Ԛ͂α౨˞ൎଊЅ̰߮Ԟ νɃϭ༅ଐɾሏࠍ૱ࠤeټexactly discounts the estimated future cash receipts though ଊ the expected life of the financial asset to that asset’s net carrying amount.

พdᄥָʥஉௐذ Property, plant and equipment

ԯι̯ಕୃ߮җᓿʥͨܘพdᄥָʥஉௐذ Property, plant and equipment are stated at cost less accumulated depreciation and any identified impairment Є˿ᖫПಕࠤᑋฌɃሏe losses.

˿ԯЅ߮כᇃؒق˞พdᄥָʥஉௐඖ͌ذ Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful Ԛ͂α౨Ϭԯ˿ԮԚ͂ˀ౨঴߮ʥ߮Ƀԯ lives from the date on which they are available for use and Ѕ߮௛቗ძࠤ܃c࿁ሻԯι̯˞Аҗᓿe after taking into account of their estimated residual values, using the straight line method.

๫ད౨ֶ܃ˮਕכพdᄥָʥஉௐඖ͌Ƚذ An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are ܛᙩԚ͂໮༅ଐੀɺผଐ̰́Ԟ຤ᏜСऩࣂ Յࣱᆢႏ໮༅ଐࣂଐ́ɾͨЄכexpected to arise from the continued use of the asset. Any Յࣱᆢႏe gain or loss arising on derecognition of the asset (calculated νऩֶᑋฌ˞ˮਕֺ੡ಁඖ૱ᔾၤ໮ඖ͌ ໮ඖ͌Յࣱכas the difference between the net disposal proceeds and ɾሏࠍࠤɾ࢏ᔾ့߮Ƚ߮Ƀ ʑeٲthe carrying amount of the item) is included in the ᆢႏα۹ɾ၃΋ฌऩ consolidated income statement in the year in which the item is derecognised.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 54 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Intangible assets ಲѼ༅ଐ

ι̯ᆢܘүᆢႏࣂc࠯ПಲѼ༅ଐȽٱכ On initial recognition, intangible assets acquired separately cԮௐτࠉ˿Ԛ͂α౨ɾ܃үᆢႏٱכare recognised at cost. After initial recognition, intangible ႏe assets with finite useful lives are carried at costs less ಲѼ༅ଐܘι̯ಕୃ߮ᚫሻʥͨЄୃ߮ಕࠤ accumulated amortisation and any accumulated ᑋฌᆢႏeԮௐτࠉ˿Ԛ͂α౨ɾಲѼ༅ଐ ᇃؒᚫሻeق˞ԯЅ߮˿Ԛ͂α౨כ impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives.

ˮਕֺ੡ܘGains or losses arising from derecognition of an intangible ՅࣱᆢႏಲѼ༅ଐֺଐ́ɾฌऩ ༅כasset are measured at the difference between the net ಁඖ૱ᔾၤ༅ଐሏࠍࠤɾ࢏ᔾ߮൴cʥ ʑᆢႏeٲdisposal proceeds and the carrying amount of the asset and ଐՅࣱᆢႏࣂΕ၃΋ฌऩ are recognised in the consolidated income statement when the asset is derecognised.

Research and development expenditure ޢӠʥ඀ೕ൒͂

ଐ́౨ංᆢႏݯ඀ʻeכӠݠ৽൒͂ޢ Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from ฻Ϭ඀ೕ൒͂ɾʑ஫ଐ́ಲѼ༅ଐcඩผΕ ցඖ͌ଐ́ɾ඀ೕι̯˿Εވᆢעdevelopment expenditure is recognised only if it is ད౨໮୽ anticipated that the development costs incurred on a ̰Ԟਆพ༜АɻνΑࣂնʀ˞ᆢႏeֺଐ́ ˞ԯ˿Ԛ͂α౨ᚫሻcԎܘᇃؒق˞ڬclearly-defined project will be recoverable through future ༅ଐ commercial activity. The resultant asset is amortised on a ι̯ಕˀ܃ୃ߮ᚫሻʥͨЄୃ߮ಕࠤᑋฌͶ straight line basis over its useful life, and carried at cost less ሏe subsequent accumulated amortisation and any accumulated impairment losses.

඀ೕ൒ڬWhere no internally-generated intangible asset can be ࠱ಲʑ஫ଐ́ಲѼ༅ଐ˿ʀᆢႏc ଐ́౨ංᆢႏݯ඀ʻeכ͂ recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Annual Report 2006 ɀཌྷཌྷʒαం 55 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Impairment (other than goodwill) ಕࠤਆᙷ৖̔

Έ࠯೶့ˀc̯එ྆ᄗቇԯ༅ଐɾሏࠍࠤכ At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any ˞ᔤցܰЯτͨЄ༌ോᛷ͐໮೩༅ଐၬՇಕ כᔾЅ߮ʭټindication that those assets have suffered an impairment ࠤᑋฌe࠱ȹඖ༅ଐɾ˿νΑ ˿ಕϭԯڨloss. If the recoverable amount of an asset is estimated to ԯሏࠍࠤc໮ඖ༅ଐɾሏࠍࠤੀ ᔾeಕࠤᑋฌȽЩࣂᆢႏݯ඀ʻeټbe less than its carrying amount, the carrying amount of the νΑ asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

ᅆΑc໮ඖ༅ଐɾሏࠍࠤ܃ԯכWhere an impairment loss subsequently reverses, the ࠱ಕࠤᑋฌ ᔾc੹ᄈټcarrying amount of the asset is increased to the revised ੀᄈ˱ϭԯ຤࠳߯Ѕ߮ɾ˿νΑ α۹໮ඖ༅ଐک˞כestimate of its recoverable amount, but so that the increased ˱ɾሏࠍࠤɺผ൚༩࠱ carrying amount does not exceed the carrying amount that ಲᆢႏಕࠤᑋฌֺᔤցɾሏࠍࠤeಕࠤᑋฌ would have been determined had no impairment loss been ᅆΑȽЩࣂᆢႏݯȹඖνऩe recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Inventories Φஒ

ι̯ࠤʥ˿ᛰଊ૱ࠤԭّɻɾ༖ГܘInventories are stated at the lower of cost and net realisable Φஒܰ ᚬ̡яι့̯ؒ߮e˱ܘvalue. Cost is calculated using the weighted average cost ّͶሏeι̯ܰ method.

Borrowing costs ࠥ൘ι̯

All borrowing costs are recognised as and included in ֺτࠥ൘ι̯ȽᆢႏԎ߮Ƀଐ́౨ං၃΋ฌ ɾল৻ι̯eٲfinance costs in the consolidated income statement in the ऩ period in which they are incurred.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 56 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Taxation ೢඖ

ଊࣂᎶ˟ೢඖʥႮ֝ೢඖɾᐢܞIncome tax expense represents the sum of the tax currently ֺ੡ೢ඀ʻ payable and deferred tax. ՗e

α۹ᎶᇾೢึС့߮e̯ܘThe tax currently payable is based on taxable profit for the ଊࣂᎶ˟ೢඖȽ ɻֺంึСcٲ၃΋ฌऩכyear. Taxable profit differs from profit as reported in the ᎶᇾೢึСτП Εԯˢα۹Ꮆᇾೢֶ˿κೢɾνܢ˳consolidated income statement because it excludes items ΐԯɺ ੣̰ᇾೢʥκೢɾඖכܢ˳of income or expense that are taxable or deductible in other Ƀֶ඀ʻc͛ɺ ೶့ˀɣߎ߯ցכyears, and it further excludes items that are never taxable ͌eଊࣂೢඖඦ৻Ƚઔ͂ or deductible. Current tax liabilities are measured using tax ֶ߯ցɾೢଅ߮൴e rates that have been enacted substantively enacted by the balance sheet date.

༅ଐʥ߲ඦܘ၃΋ল৻ంйɻכDeferred tax is recognised on differences between the Ⴎ֝ೢඖȽ Ꮆೢਥˮଊޚcarrying amounts of assets and liabilities in the consolidated ሏࠍࠤၤ့߮ᎶᇾೢึСֺ͂ ߲ඦؒ୮ଉeٲfinancial statements and the corresponding tax base used ɾ࢏ᔾᆢႏcԎ˞༅ଐ߲ඦ in the computation of taxable profit, and is accounted for Ⴎ֝ೢඖ߲ඦ஝੒ผగֺτᎶᇾೢᐽࣂ࢏ᔾ ॶˮଊ˿С͂˿כڬusing the balance sheet liability method. Deferred tax ᆢႏcϤႮ֝ೢඖ༅ଐ ȹכliabilities are generally recognised for all taxable temporary ᐽࣂࣂ࢏κೢɾᎶᇾೢึСࣂᆢႏeߗ พ৻΋ܢ˳үᆢႏ̰ٱɻΐਆᙷֶמdifferences and deferred tax assets are recognised to the ඖ͚ ɺܫextent that it is probable that taxable profits will be available ԡੱؗ༅ଐʥ߲ඦϤʵߎɾᐽࣂࣂ࢏ ɺผڬagainst which deductible temporary differences can be ᄧᚊᎶᇾೢึС͛ɺᄧᚊผ߮ึСc utilised. Such assets and liabilities are not recognised if the ᆢႏ໮೩༅ଐʥ߲ඦe temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Annual Report 2006 ɀཌྷཌྷʒαం 57 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Taxation (Continued) ೢඖᙩ

Ұ࠯೶့ˀᄗכᔾټThe carrying amount of deferred tax assets is reviewed at Ⴎ֝ೢඖ༅ଐɾሏࠍ νڏ˞each balance sheet date and reduced to the extent that it is ࣏cԎΕɺʹ˿ॶτӷਪᎶᇾೢึС no longer probable that sufficient taxable profit will be ΑͲ஫ֶ஫ͫ༅ଐࣂАሁಕe available to allow all or part of the asset to be recovered.

߲ඦ૜᎛ֶ༅ଐᛰଊ౨כད౨ܘDeferred tax is calculated at the tax rates that are expected Ⴎ֝ೢඖȽ ೶့ˀ߯ցֶɣכ˞to apply in the period when the liability is settled or the ʑሬ͂ɾೢଅ့߮cԎ ၃΋ฌऩכasset realised, based on tax rates that have been enacted or ߎ߯ցɾೢଅݯਥๅeႮ֝ೢඖ e੹࠱Ⴎ֝ೢඖٲɻκ৖ֶ߮Ƀ၃΋ฌऩٲ substantively enacted by the balance sheet date. Deferred અΕٖ̯ᚬऩɻκ৖ֶ߮Ƀٖ̯ᚬऩقtax is charged or credited to the consolidated income ࣹʥ ᚬऩɻ୮̯ٖכႮ֝ೢඖ͛ผڬstatement, except when it relates to items charged or ɾੱؗc credited directly to equity, in which case the deferred tax is ଉe also dealt with in equity.

Leasing ै༉

ੀτᗐ༅ଐɾ೸ɣ஫ͫࠓ፮עLeases are classified as finance leases when the terms of the ࠱ै޸ૈಁͶ ໮೩ै޸ลͶАጪڬlease transfer substantially all the risks and rewards of ʥνऩᔝᜑʀֻैɁc ownership to the lessee. All other leases are classified as ༅ै༉eֺτԯˢै޸я഼А༜Ꮺै༉e operating leases.

The Group as lessee ̯එ྆АݯֻैɁ

ฌכᇃؒق˞ᗐै౨ޚܘټै˟Rental payable under operating leases are charged to profit ༜Ꮺै༉Ꮆ or loss on a straight line basis over the term of the relevant ऩሏκ৖eАݯ͓߯༜Ꮺै༉ᆉ᎞ɾɰνʥ ټᇃؒᆢႏݯैق˞༉౨ʑैכlease. Benefits received and receivable as an incentive to ᎶνСऩȽ enter into an operating lease are recognised as a reduction ඀ʻɾಕʭe of rental expense over the lease term on a straight line basis.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 58 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Retirement benefit schemes ঽͤါСི߮

Է౨Ꮆ˟ࣂκ৖ͶכPayments to the defined contribution retirement schemes ցᔾঽིͤ߮ɾԜಁȽ are charged as an expense as they fall due. ݯ඀ʻe

Financial instruments ল৻ɮԮ

Financial assets and financial liabilities are recognised on ๫එ྆ྡྷ᛽ιݯɮԮɾ߯޸ૈʼɾ߯޸ʿ ٲ၃΋༅ଐ߲ඦכthe consolidated balance sheet when a group entity ࣂcল৻༅ଐʥল৻߲ඦ ʔ̡ࠤ߮ܘүٱbecomes a party to the contractual provisions of the ᆢႏeল৻༅ଐʥল৻߲ඦ ܘinstrument. Financial assets and financial liabilities are ့eΐνᑪֶೕϷল৻༅ଐʥল৻߲ඦ initially measured at fair value. Transaction costs that are ʔ̡ࠤΕฌऩሏʑ୮ଉɾল৻༅ଐʥল৻߲ үᆢႏٱכι̯מઅᎶЌɾ͚قdirectly attributable to the acquisition or issue of financial ඦ৖̔Ϥ ሬ͂ੱؗ˱ɃֶκϬ໮ඖল৻༅ଐֶলܘassets and financial liabilities (other than financial assets and ࣂ financial liabilities at fair value through profit or loss) are ৻߲ඦɾʔ̡ࠤeΐνᑪܘʔ̡ࠤΕฌऩሏ અᎶЌɾقadded to or deducted from the fair value of the financial ʑ୮ଉɾল৻༅ଐֶল৻߲ඦϤ ฌऩሏᆢႏeכι̯Щࣂמassets or financial liabilities, as appropriate, on initial ͚ recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets ল৻༅ଐ

The Group’s financial assets are classified as loans and ̯එ྆ɾল৻༅ଐʗᗘݯ൘ಁʥᎶνಁඖe ˀמ͚ܘ receivables. All regular way purchases or sales of financial ֺτ̳੒ᑪൕֶˮਕɾল৻༅ଐc assets are recognised and derecognised on a trade date ɾਥๅᆢႏʥɺʀᆢႏe̳੒ᑪൕֶˮਕল ๑̟௿ஃցֶྻԝ඘Εȹݒ౨ܘܞbasis. Regular way purchases or sales are purchases or sales ৻༅ଐܰ of financial assets that require delivery of assets within the ࠉʑ൬Ϸ༅ଐ͚˟ɾল৻༅ଐൕሒe̯එ྆ ೪༗ͶΣܧtime frame established by regulation or convention in the గ൘ಁʥᎶνಁඖֺઔढ़ɾผ߮ marketplace. The accounting policies adopted in respect of Ɏe loans and receivables are set out below.

Annual Report 2006 ɀཌྷཌྷʒαం 59 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Financial instruments (Continued) ল৻ɮԮᙩ

Financial assets (Continued) ল৻༅ଐᙩ

Loans and receivables ൘ಁʥᎶνಁඖ

Loans and receivables are non-derivative financial assets ൘ಁʥᎶνಁඖȽɺΕଊϷ̟௿઎ಶɾ՞ց үᆢٱכߪ́ল৻༅ଐeڈwith fixed or determinable payments that are not quoted ֶ˿ᔤց˟ಁɾ in an active market. At each balance sheet date subsequent ႏ܃ɾΈ೶့ˀc ൘ಁʥᎶνಁඖ˳ܢᎶ to initial recognition, loans and receivables (including trade ν൘ಁʥԯˢᎶνሏඖdᎶνᗐடʔ̇ಁd ׋ႺϷΦאand receivables, amounts due from related companies, ᎶνᐲᏪʔ̇ಁdႺϷ೶Φʥɰ ઔ͂ྡྷ჌Сଅ့ؒ߮ɾɰᚫሻι̯ಕܘamounts due from associates, bank balances and pledged ಁя ۪˿כbank deposits) are carried at amortised cost using the ͨЄɰᖫПಕࠤᑋฌɃሏeಕࠤᑋฌ ໮ܘɻᆢႏc Ԏٲฌऩכ༅ଐಕࠤࣂעeffective interest method, less any identified impairment ᜮᖬ losses. An impairment loss is recognised in consolidated ༅ଐɾሏࠍࠤၤܘࡈͱྡྷ჌СଅҗᜑɾЅ߮ ݚ൴ɾଊࠤංؿ࢏ᔾ߮൴e๫༅ଐټincome statement when there is objective evidence that the ̰Ԟଊ ֺ܃ᆢႏಕࠤכasset is impaired, and is measured as the difference between ɾ˿νΑᅕᔾᄈ˱Ƚ۪ᜮၤ ผ܃፭כಕࠤᑋฌผڬ the asset’s carrying amount and the present value of the ʵߎɾԑͧτᗐࣂc ಕࠤ୽Αᅆɾכestimated future cash flows discounted at the original ߮౨ංʀ˞Αᅆc ੹໮༅ଐ effective interest rate. Impairment losses are reversed in ˀɾሏࠍࠤɺ੡൚༦̰ᆢႏಕࠤࣂɾɰᚫሻ subsequent periods when an increase in the asset’s ι̯e recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 60 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Financial instruments (Continued) ল৻ɮԮᙩ

Financial liabilities and equity ল৻߲ඦʥᚬऩ

Financial liabilities and equity instruments issued by the ̯එ྆ೕϷɾল৻߲ඦʥٖᚬɮԮȽ࣓ኣ΋ Group are classified according to the substance of the ΃Ϊખɾֲሔၤল৻߲ඦʥٖ̯ɮԮɾցຮ κಕֺτ߲כඑ̯྆עcontractual arrangements entered into and the definitions ʗᗘeٖᚬɮԮȽᖬ of a financial liability and an equity instrument. An equity ඦ܃ɾ༅ଐɻኟτ௛቗ᚬऩɾͨЄ΋΃eऋ instrument is any contract that evidences a residual interest ցল৻߲ඦઔढ़ɾผ߮ܧ೪༗ͶΣɎe in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities are set out below.

Bank borrowings ႺϷ൘ಁ

ʔ̡ࠤᆢႏcԯܘүٱInterest-bearing bank loans and overdrafts are initially ߮ࢠႺϷ൘ಁʥ஦ʻ ᚫሻι့̯߮eֺ੡ಁඖܘ჌Сଅؒྡྷ˞܃ measured at fair value, and are subsequently measured at ι̯ၤ᎛ᑹֶᚿΑ൘ಁɾං࢏מamortised cost, using the effective interest rate method. Any ɰκ৖͚ ࠥ൘αכ೪ܧdifference between the proceeds (net of transaction costs) ᔾ࣓ኣ̯එ྆ࠥ൘ι̯ɾผ߮ and the settlement or redemption of borrowings is ౨ᆢႏe recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowings costs.

Other financial liabilities ԯˢল৻߲ඦ

˟ሏಁʥԯˢᎶמᎶ˟ൗܢ˳Other financial liabilities including trade and other payables, ԯˢল৻߲ඦ amounts due to related companies and amounts due to ሏಁdᎶ˟ᗐடʔ̇ಁʥᎶ˟ᐲᏪʔ̇ಁȽ ɰᚫሻι̯߮൴eܘઔ͂ྡྷ჌Сࢠؒ܃associates are subsequently measured at amortised cost, ፭ using the effective interest rate method.

Equity instruments ٖᚬɮԮ

ɰνֺ੡ಁඖܘEquity instruments issued by the Company are recorded at ̯ʔ̇ೕϷɾٖᚬɮԮȽ અೕϷι̯তሏeقthe proceeds received, net of direct issue costs. κ৖

Annual Report 2006 ɀཌྷཌྷʒαం 61 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Financial instruments (Continued) ল৻ɮԮᙩ

Financial liabilities and equity (Continued) ল৻߲ඦʥᚬऩᙩ

Derecognition ɺʹᆢႏ

ݚɾᚬСɰԷ౨c ֶল৻ټFinancial assets are derecognised when the contractual ߗ੣༅ଐνՅଊ ল৻༅ଐኟτכrights to receive cash flows from the assets expire or the ༅ଐɰᔝᜑʥ̯එ྆ɰੀԯ ল৻༅ଐڬ assets are transferred and the Group has transferred ᚬɾ೸ɣ஫ͫࠓ፮ʥΑంᔝଫc ɺʹᆢႏল৻༅ଐࣂc ༅כsubstantially all the risks and rewards of ownership of the ੀ୽Յࣱᆢႏe כઅقfinancial assets. On derecognition of a financial asset, the ଐሏࠍࠤၤɰνʥᎶνˤძɾ࢏ᔾʥ ฌऩሏɻᆢႏeכdifference between the asset’s carrying amount and the sum ٖᚬᆢႏɾୃ߮ฌऩੀ of the consideration received and receivable and any cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

ஐͨᏵ໬৖dഽሻֶ։࿶עFinancial liabilities are derecognised when the obligation ๫τᗐ΋޸ֺ߯ specified in the relevant contract is discharged, cancelled ࣂc ল৻߲ඦੀ୽໬৖ᆢႏe໬৖ᆢႏɾল or expires. The difference between the carrying amount of ৻߲ඦɾሏࠍࠤၤɰ˟ֶᎶ˟ˤძංɾ࢏ᔾ ߮ᑋฌɻᆢႏeୃכ the financial liability derecognised and the consideration paid or payable is recognised in accumulated losses.

Foreign currencies ̔ྫྷ

In preparing the financial statements of each individual ᇁႇҰං࠯Пඑ྆ྡྷ᛽ɾল৻ంйࣂc˞໮ מgroup entity, transactions in currencies other than the ྡྷ᛽˲ॶஒྫྷ˞̔ɾஒྫྷ̔ྫྷֺ൬Ϸ͚ functional currency of that entity (foreign currencies) are Ƚ˞ԯ˲ॶஒྫྷЩ໮ྡྷ᛽༜Ꮺɾ˚߬຤Ꮬ ˀ౨ɾ˚߬මଅɃ੔eמ͚ܘrecorded in its functional currency (i.e. the currency of the ᏷ྊɾஒྫྷ ೶ܘΈ೶့ˀc˞̔ྫྷͶࠤɾஒྫྷඖ͌Ƚכ primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates ့ˀɾ˚߬මଅࠇณ౒့e˞̔ྫྷዃ̌ι̯ ɺʀࠇณ౒့eڬஒྫྷඖ͌ڈof the transactions. At each balance sheet date, monetary ߮൴ɾ items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 62 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

3. SIGNIFICANT ACCOUNTING POLICIES 3. ˚߬ผ߮ܧ೪ᙩ (Continued)

Foreign currencies (Continued) ̔ྫྷᙩ

Exchange differences arising on the settlement of monetary ஒྫྷඖ͌೶့ʥஒྫྷඖ͌౒့ଐ́ɾමЙ࢏ ଐ́ɾ౨ංᆢႏݯึСֶᑋฌeכitems, and on the translation of monetary items, are ᔾȽ recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial గеం၃΋ল৻ంйϤӰc̯එ྆ɾࣵ̔พ ೶့ˀɾ˚߬මଅ౒့ݯܘstatements, the assets and liabilities of the Group’s foreign ৻༅ଐʥ߲ඦȽ operations are translated into the presentation currency of ̯ʔ̇ɾеంஒྫྷЩಋʏcϤ֤೩ɾνɃ αɾ̡яමଅ౒့c੹࠱౨ʑ̯ܘڬthe Company (i.e. Hong Kong dollars) at the rate of exchange ʥ඀ʻ ઔ͂ڬ໮ੱؗɎcכ৖̔cڬprevailing at the balance sheet date, and their income and මଅᛷടؐ৽ ˀ౨ɾ˚߬මଅeֺଐ́ɾමЙ࢏ᔾמexpenses are translated at the average exchange rates for ͚ the year, unless exchange rates fluctuate significantly during ΣτȽᆢႏݯᚬऩɾዟ͓஫ͫමЙ᎝ ˮਕࣵ̔พ৻ɾ౨כthe period, in which case, the exchange rates prevailing at ௐe໮ඖමЙ࢏ᔾȽ ฌึሏʑᆢႏeכthe dates of transactions are used. Exchange differences ʑ arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

νᑪࣵ̔พ৻ֺଐکɀཌྷཌྷʄαȹ˂ȹˀכ Goodwill and fair value adjustments arising on acquisition of foreign operations prior to 1 January 2005 are treated as ́ɾਆᙷʥʔ̡ࠤሁኬ୽഼Аࣵ̔พ৻ɾ༅ assets and liabilities of that foreign operation and translated ଐၤ߲ඦcԎܘ೶့ˀɾ஝Ϸමଅ౒့eම ౒့᎝ௐᆢႏeכat the rate of exchange prevailing at the balance sheet date. Йଐ́ɾ࢏ᔾ Exchange difference arising are recognised in the translation reserve.

Annual Report 2006 ɀཌྷཌྷʒαం 63 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

KEY SOURCES OF ESTIMATION 4. Ѕ߮ɺᆢցֲɾ˚߬Ԟ฻ .4 UNCERTAINTY

The key assumption concerning the future, and other key ྦྷɎȹলܧ౨ංɾ༅ଐʥ߲ඦሏࠍࠤԮࠇɣ ೶כԞɾ˚߬৥உ˞ʥ̰כsources of estimation uncertainty at the balance sheet date, ሁኬࠓ፮cԯᗐ Ɏʼeכthat have a significant risk of causing a material adjustment ့ˀɾԯˢɺᆢցֲɾ˚߬Ԟ฻༗ to the carrying amounts of assets and liabilities within the next financial period, are discussed below.

ᎶνಁdᎶνᗐடʔ̇ಁʥᎶνמEstimated impairment of trade receivables, Ѕ߮ൗ amounts due from related companies and ᐲᏪʔ̇ಁಕࠤ amounts due from associates

When there is objective evidence of impairment loss, the ๫τಕࠤᑋฌ۪ᜮ༌ോࣂc̯එ྆ผϣᄬ̰ ؗɾ௖ณ˿੡رݚЅ߮ʥඦ৻Ɂল৻ټGroup assesses impairment loss by taking into consideration Ԟଊ ݚГټthe estimation of future cash flows and the latest available ༅ࢿԞЅցಕࠤᑋฌeΣྡྷ჌̰Ԟଊ ผଐ́ࠇɣಕࠤᑋฌeֶڬད౨cכ information of the financial position of the debtors. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Estimated impairment of intangibles Ѕ߮ಲѼ༅ଐಕࠤ

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆ɾҌכ The Group’s net carrying amount of technology license right as at 31 December 2006 was approximately HK$9,800,000. ୺઒ᚬஈ˿ᖬɾሏࠍ૱ࠤ޸ݯ9,800,000ಋ The management estimates the recoverable amount of the ʏeဳଉᄙЅ߮ಲѼ༅ଐ˿νΑᔾɾʿβݯ ݚ൴cʥ͂˞့߮ټintangibles by estimation of the future cash flows expected Ѕ߮ད౨ଐ́ɾ̰Ԟଊ to arise and a suitable discount rate in order to calculate ଊࠤɾሬ๫ൎଊଅeЅ߮ɐɾᛰ৽˿ྦྷಲѼ the present value. Change in the estimation may have a ༅ଐ˿νΑᔾ੓Ԟࠇɣᄧᚊe material impact on the recoverable amount of the intangibles.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 64 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

5. FINANCIAL RISK MANAGEMENT 5. ল৻ࠓ፮ဳଉ͌ᅟʥܧ೪ OBJECTIVES AND POLICIES

ʥԯˢᎶνמൗܢ˳The Group’s major financial instruments include trade and ̯එ྆ɾ˚߬ল৻ɮԮ other receivables, amounts due from related companies, ಁdᎶνᗐடʔ̇ಁdᎶνᐲᏪʔ̇ಁdႺ ʥԯˢᎶ˟ಁdᎶ˟ᗐמdൗټamounts due from associates, bank balances and cash, trade Ϸ೶Φʥଊ and other payables, amounts due to related companies, டʔ̇ಁdᎶ˟ᐲᏪʔ̇ಁʥࠥಁe໮೩ল ഽɻeၤ໮೩লڃכamounts due to associates and borrowings. Details of these ৻ɮԮɾ໯ੱʗПׄᚉ financial instruments are disclosed in the respective notes. ৻ɮԮτᗐɾࠓ፮ʥ̯එ྆ݯಕГ໮೩ࠓ፮ Ɏʼeဳଉᄙဟઁ໮೩ࠓכ೪༗ܧThe risk associated with these financial instruments and the Ϥઔ͂ɾ ሬ๫ʿؒ˞ʥࣂʥτࢽɾʿβྡྷړpolicies applied by the Group to mitigate these risks are set ፮cᆢ out below. Management monitors these exposures to ܪe ensure appropriate measures are implemented in a timely and effective manner.

൘ࠓ፮ڌ Credit risk

ᎶνಁdᎶνמThe Group’s major financial assets are trade receivables, ̯එ྆ɾ˚߬ল৻༅ଐݯൗ ೶ټamounts due from associates, and amounts due from related ᐲᏪʔ̇ಁʥᎶνᗐடʔ̇ಁdႺϷଊ ൘ࠓ፮ڌcompanies, bank balances, which represent the Group’s ቗c̯එ྆గ໮೩ল৻༅ଐֻՇɾ maximum exposure to credit risk in relation to financial ݯ௖ঢ়e assets.

ᎶνಁdᎶνᐲᏪʔ̇ಁʥᎶνᗐמIn order to minimise the credit risk in relation to trade ݯੀൗ ൘ࠓ፮ࠌϭ௖Гc̯එ྆ဳଉڌreceivables, amounts due from associates, and amounts due டʔ̇ಁɾ ඦ৻dᎶνᐲᏪמΈ೶့ˀྦྷΈ࠯Пൗכfrom related companies, the management of the Group ᄙ ᔾ൬Ϸټreviews the recoverable amount of each individual trade ʔ̇ಁʥᎶνᗐடʔ̇ಁɾ˿νΑ ᔾАˮ˨ʗಕࠤټɺ˿νΑྦྷړdebt, amounts due from associates and amounts due from Ꮞদc˞ᆢ related companies at each balance sheet date to ensure that ᑋฌeΕϊʿࠍc̯ʔ̇໎ԑႏݯ̯එ྆ɾ ൘ࠓ፮੡˞ɣɣࠌГeڌ adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

൘ࠓ፮τࠉcΐݯɣΛᅕڌֺՇɾټThe credit risk on liquid funds is limited because the majority ݚ৽༅ ൘ज़ڌ൘ിज़ዀ࿚ിݯঢ়ڌяݯᏵਝ჌מof the counterparties are banks with high credit-ratings ͚ assigned by international credit-rating agencies. ПɾႺϷe

Annual Report 2006 ɀཌྷཌྷʒαం 65 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

5. FINANCIAL RISK MANAGEMENT 5. ল৻ࠓ፮ဳଉ͌ᅟʥܧ೪ᙩ OBJECTIVES AND POLICIES (Continued)

Interest rate risk Сଅࠓ፮

The Group’s interest rate risk relates primarily to fixed-rate ̯එ྆ɾСଅࠓ፮˚߬τᗐ՞ցСଅႺϷࠥ ܧݚ൴Сଅྦྷҿټborrowings. The Group currently does not have policy to ൘e̯එ྆ଊࣂԎಲଊ against its interest risk. However, the management monitors ೪eಳϤcဳଉᄙผဟྦСଅࠓ፮cΕτ჏ interest rate risk exposure and will consider implementing ߬ࣂcੀϣᄬྦྷҿࠇɣСଅࠓ፮e appropriate measures when significant interest rate exposure is anticipated.

6. TURNOVER 6. Ꮺพᔾ

Turnover represents the gross invoiced value of goods sold Ꮺพᔾ˳ܢ˞ɎνՅ຤κ৖җκʥঽஒɾሻ ৻΋޸ଐ́ɾνɃeרೕ଩ᐢࠤʥͅۂless discounts and sales related taxes and revenue from ਕஒ ᙩ຤Ꮺʥɰୄ˅຤Ꮺพ৻ɾܛservice contracts. An analysis of the Group’s revenue for the ̯α۹̯එ྆ year from continuing and discontinued operation is as νɃʗ׹ΣɎi follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Continuing operations ܛᙩ຤Ꮺพ৻ ሻਕ 134,690 165,713ۂSales of goods ஒ ৻΋޸νɃ 6,585 7,765ר Revenue from service contracts

141,275 173,478 Discontinued operation ୄ˅຤Ꮺพ৻ ሻਕ 14,924 12,306ۂSales of goods ஒ

156,199 185,784

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 66 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘ SEGMENTS

(A) Business segments A พ৻ᗘП

Ɏ຤Ꮺ˞ܘکFor management purposes, the Group has been గဳଉϤӰc̯එ྆͌ organised into the following divisions: ୂПୂιi dౣॶ͚஝ӡ଻d഼঩ผᘪۂCommunication Products, Intelligent Transportation ஝঩ଐ Systems (“ITS”), Video Conference System, ӡ଻dᄖ੓ಲᇃઅɃʥࠓɈೕཋஉ eϊ೩ᗘПݯ̯එ྆еంԯਥ̯ʗܪ Broadband Wireless Access and Wind Energy Facilities. These divisions are the basis on which the ᗘ༅ࢿɾਥๅe Group reports its primary segment information.

Principal activities are as follows: ˚߬พ৻ΣɎi z ႇ஥ʥʗሻཋ ۂCommunication — manufacture and ஝঩ଐ ۂProducts distribution of ঩ଐ telecommunication products

ITS — development, ౣॶ͚஝ӡ଻ z ඀ೕdႇ஥d manufacture, ʗሻʥΪ໦Ͳ distribution and ଈᇯܱցϽӡ ۂinstallation of global ଻Ꮆ͂ଐ positioning system application products

Video Conference — development, ഼঩ผᘪӡ଻ z ඀ೕdႇ஥d ഽ ʗሻʥΪ໦ཋڃ ,System (Note) manufacture distribution and ഼ผᘪӡ଻ installation of video conference system

Broadband — development, distribution ᄖ੓ಲᇃઅɃ z ඀ೕdʗሻʥ Wireless Access and installation of Ϊ໦ᄖ੓ӡ broadband system, ଻dஉௐʥ৉ equipment and ͧ accessories

Wind Energy — maintenance and ࠓɈೕཋஉܪ Ķ ၐᙶʥ༜Ꮺࠓ Facilities operation of wind Ɉೕཋᄥʥஉ energy plants ܪ and facilities

ഽi αʑc̯එ྆ୄ˅຤Ꮺԯ഼঩ผڃ Note: During the year, the Group has discontinued its ഽ10ڃoperation in video conference system (see note ᘪӡ଻Ӯ 10).

Annual Report 2006 ɀཌྷཌྷʒαం 67 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(A) Business segments (Continued) A พ৻ᗘПᙩ

(i)Segment information about these i ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹ businesses for the year ended 31 December ˀ˅α۹cτᗐϊ೩พ৻ɾʗ 2006 is presented below: ᗘ༅ࢿеͶΣɎi

ٲIncome statement ฌऩ

Discontinued operation Continuing operations ୄ˅຤Ꮺ ܛᙩ຤Ꮺพ৻ พ৻

Broadband Wind Video Communication Wireless Energy Conference Products ITS Access Facilities Others Eliminations Total System Consolidated ౣॶ͚ ᄖ੓ಲᇃ ࠓɈೕཋ ഼঩ผᘪ ሻ ᐢᔾ ӡ଻ ၃΋א ԯˢ ܪ஝ӡ଻ અɃ உ ۂ஝঩ଐ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

TURNOVER Ꮺพᔾ External sales ྦྷ̔ሻਕ 55,506 32,073 53,696 — — — 141,275 14,924 156,199

RESULT พᐜ Segment result ʗᗘพᐜ 4,503 (1,115 ) (62,892 ) (520 ) (117 ) — (60,141) 582 (59,559 )

Unallocated corporate expenses ̰຤ʗ৉ʔ̇൒͂ (13,851 ) — (13,851 ) Unallocated corporate income ̰຤ʗ৉ʔ̇νɃ 14,585 — 14,585 ᙔʔ̇ڃGain (loss) on disposal and ˮਕʥ഼Аˮਕ deemed disposal of subsidiaries ɾνऩᑋฌ 3,325 (684 ) 2,641 Finance costs ল৻ι̯ (9,370 ) (77 ) (9,447 ) Share of results of associate ᎶЌᐲᏪʔ̇พᐜ 540 (671 ) (723 ) (446 ) — — (1,300 ) — (1,300 )

( ᑋฌ (66,752 ) (179 ) (66,931کLoss before taxation ৖ೢ Taxation ೢඖ 1,751 (45 ) 1,706

( Loss for the year ̯α۹ᑋฌ (65,001 ) (224 ) (65,225

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 68 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(A) Business segments (Continued) Aพ৻ᗘПᙩ

(i) Segment information about these i ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹ businesses for the year ended 31 December ˀ˅α۹cτᗐϊ೩พ৻ɾʗ 2006 is presented below: (Continued) ᗘ༅ࢿеͶΣɎiᙩ

ٲBalance sheet ༅ଐ߲ඦ

Broadband Wind Communication Wireless Energy Products ITS Access Facilities Others Consolidated ԯˢ ၃΋ ܪౣॶ͚஝ӡ଻ ᄖ੓ಲᇃઅɃ ࠓɈೕཋஉ ۂ஝঩ଐ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

ASSETS ༅ଐ Segment assets ʗᗘ༅ଐ 52,033 35,709 195,588 2,828 167 286,325 ᐲᏪʔ̇ɾᚬऩ 530 1,320 3,423 73,675 5,916 84,864כ Interest in associates Unallocated corporate assets ̰຤ʗ৉ɾʔ̇༅ଐ 46,453

Consolidated total assets ၃΋༅ଐᐢᔾ 417,642

LIABILITIES ߲ඦ Segment liabilities ʗᗘ߲ඦ 11,746 18,957 7,379 5 47 38,134 Unallocated corporate liabilities ̰຤ʗ৉ɾʔ߲̇ඦ 287,222

Consolidated total liabilities ၃΋߲ඦᐢᔾ 325,356

Annual Report 2006 ɀཌྷཌྷʒαం 69 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(A) Business segments (Continued) A พ৻ᗘПᙩ

(i)Segment information about these i ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹ businesses for the year ended 31 December ˀ˅α۹cτᗐϊ೩พ৻ɾʗ 2006 is presented below: (Continued) ᗘ༅ࢿеͶΣɎiᙩ

Other information ԯˢ༅ࢿ

Discontinued Continuing operations operation ܛᙩ຤Ꮺพ৻ ୄ˅຤Ꮺพ৻

Broadband Wind Video Communication Wireless Energy Conference Products ITS Access Facilities Others Unallocated Total System Consolidated ౣॶ ᄖ੓ ࠓɈ ഼঩ ԯˢ ̰຤ʗ৉ ᐢᔾ ผᘪӡ଻ ၃΋ ܪ͚஝ӡ଻ ಲᇃઅɃ ೕཋஉ ۂ஝঩ଐ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

˱Capital additions ༅ֲ̯ᄈ พdᄥָʥஉௐ —4,758 4,817 — — 25 9,600 187 9,787ذ Property, plant and equipment z — Depreciation and amortisation җᓿʥᚫሻ พdᄥָʥஉௐ 163 1,608 5,190 — 3 403 7,367 347 7,714ذ Property, plant and equipment z — — Development costs z ඀ೕι̯ 856 2,619 3,475 — 3,475 — Technology license right z Ҍ୺઒ᚬஈ˿ᖬ ——9,425 — — — 9,425 — 9,425 Allowance for doubtful debts вሏᅆௐ ——22,170 — — — 22,170 — 22,170 Allowance for obsolete inventories ஹᓿΦஒᅆௐ 5—1,911 — — — 1,916 — 1,916 พdᄥָʥஉௐᑋฌذLoss on disposal of property, plant and ˮਕ equipment —48————48—48 Impairment loss recognised in respect of: ᆢႏɾಕࠤᑋฌi — Development costs z ඀ೕι̯ — 207 146 — — — 353 — 353 — Technology license right z Ҍ୺઒ᚬஈ˿ᖬ ——9,050 — — — 9,050 — 9,050 Impairment loss recognised in respect ਆᙷಕࠤᑋฌ of goodwill ——542—————542 ᙔʔ̇ɾνऩᑋฌ — 980 2,345 — — — 3,325 (684 ) 2,641ڃGain (loss) on disposal of subsidiaries ˮਕ

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 70 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(A) Business segments (Continued) Aพ৻ᗘПᙩ

(ii) Segment information about these ii ࿀ϭɀཌྷཌྷʄαɊɀ˂ɍɊȹ businesses for the year ended 31 December ˀ˅α۹cτᗐϊ೩พ৻ɾʗ 2005 is presented below: ᗘ༅ࢿеͶΣɎi

ٲIncome statement ฌऩ

Discontinued Continuing operations operation ܛᙩ຤Ꮺพ৻ ୄ˅຤Ꮺพ৻

Broadband Wind Video Communication Wireless Energy Conference Products ITS Access Facilities Others Eliminations Total System Consolidated ౣॶ ᄖ੓ ࠓɈ ഼঩ ሻ ᐢᔾ ผᘪӡ଻ ၃΋א ԯˢ ܪ͚஝ӡ଻ ಲᇃઅɃ ೕཋஉ ۂ஝঩ଐ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

TURNOVER Ꮺพᔾ External sales ྦྷ̔ሻਕ 39,284 35,399 98,795 — — — 173,478 12,306 185,784 — — — ( ංሻਕ*—469 11,156 — — (11,625پInter-segment sales* พ৻஫

Total ΋ͳ 39,284 35,868 109,951 — — (11,625 ) 173,478 12,306 185,784

RESULT พᐜ Segment result ʗᗘพᐜ (904 ) (893 ) 23,209 — (1,533 ) — 19,879 (4,680 ) 15,199

Unallocated corporate expenses ̰຤ʗ৉ʔ̇൒͂ (38,925 ) — (38,925 ) Finance costs ল৻ι̯ (5,803 ) (86 ) (5,889 ) Share of results of associates ᎶЌᐲᏪʔ̇พᐜ —(259)— — — —(259 ) — (259 )

( ᑋฌ (25,108 ) (4,766 ) (29,874کLoss before taxation ৖ೢ Taxation ೢඖ 439 71 510

( Loss for the year ̯α۹ᑋฌ (24,669 ) (4,695 ) (29,364

ංሻਕܰ˞ଊϷپInter-segment sales are charged at * พ৻஫* prevailing market prices. ̟ძАძe

Annual Report 2006 ɀཌྷཌྷʒαం 71 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(A) Business segments (Continued) A พ৻ᗘПᙩ

(ii) Segment information about these ii ࿀ϭɀཌྷཌྷʄαɊɀ˂ɍɊȹ businesses for the year ended 31 December ˀ˅α۹cτᗐϊ೩พ৻ɾʗ 2005 is presented below: (Continued) ᗘ༅ࢿеͶΣɎiᙩ

ٲBalance sheet ༅ଐ߲ඦ

Video Broadband Wind Communication Conference Wireless Energy Products ITS System Access Facilities Others Consolidated ԯˢ ၃΋ ܪౣॶ͚஝ӡ଻ ഼঩ผᘪӡ଻ ᄖ੓ಲᇃઅɃ ࠓɈೕཋஉ ۂ஝঩ଐ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

ASSETS ༅ଐ Segment assets ʗᗘ༅ଐ 14,849 39,607 19,134 251,562 — 372 325,524 ᐲᏪʔ̇ɾᚬऩ —1,010 — — 7,640 — 8,650כ Interest in associates Unallocated corporate assets ̰຤ʗ৉ɾʔ̇༅ଐ 18,182

Consolidated total assets ၃΋༅ଐᐢᔾ 352,356

LIABILITIES ߲ඦ Segment liabilities ʗᗘ߲ඦ 16,356 17,790 3,175 41,511 — 594 79,426 Unallocated corporate liabilities ̰຤ʗ৉ɾʔ߲̇ඦ 118,300

Consolidated total liabilities ၃΋߲ඦᐢᔾ 197,726

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 72 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(A) Business segments (Continued) Aพ৻ᗘПᙩ

Other information ԯˢ༅ࢿ

Discontinued Continuing operations operation ܛᙩ຤Ꮺพ৻ ୄ˅຤Ꮺพ৻

˱Capital additions ༅ֲ̯ᄈ พdᄥָʥஉௐ 493 1,995 10,508 — 787 — 13,783 63 13,846ذ Property, plant and equipment z — — Development costs z ඀ೕι̯ ——2,418 — — — 2,418 — 2,418 Depreciation and amortisation җᓿʥᚫሻ พdᄥָʥஉௐ 119 1,334 4,902 — 13 410 6,778 425 7,203ذ Property, plant and equipment z — — Development costs z ඀ೕι̯ —944 1,560 — — — 2,504 250 2,754 — Technology license right z Ҍ୺઒ᚬஈ˿ᖬ ——2,262 — — — 2,262 — 2,262 (Reversal of) allowance for doubtful debts вሏᅆΑᅆௐ —(48 ) 3,561 — — — 3,513 1,665 5,178 Allowance for amount due from ᎶνᐲᏪʔ̇ಁᅆௐ an associate —————27,633 27,633 — 27,633 Allowance for obsolete inventories ஹᓿΦஒᅆௐ —274— — ——274—274 พdᄥָʥஉௐᑋฌذLoss on disposal of property, plant and ˮਕ equipment —3510———45—45 Impairment loss recognised in respect ਆᙷಕࠤᑋฌ of goodwill ———————2,668 2,668 Write-off of development costs ඀ೕι̯࿁ሻ —228— — ——228—228

Annual Report 2006 ɀཌྷཌྷʒαం 73 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

7. BUSINESS AND GEOGRAPHICAL 7. พ৻ʥΔਂʗᗘᙩ SEGMENTS (Continued)

(B) Geographical segments B Δਂʗᗘ

ࠗಋʥɻਝɾԯˢכThe Group’s operations are located in Hong Kong ̯එ྆ɾพ৻Ͻ and other parts of the PRC. Δਂe

Δਂܘ༗Ͷ̯එ྆ሻਕᔾٲi)The following table provides an analysis of i Ɏ) the Group’s sales by geographical market: ̟௿ɾʗ׹i

Turnover Ꮺพᔾ 2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

PRC ɻਝ 71,715 141,775 Hong Kong ࠗಋ 14,100 15,919 United States of America ޻ਝ 69,191 25,783 Others ԯˢ 1,193 2,307

156,199 185,784

พdᄥذii) The following is an analysis of the carrying ii ˞Ɏʗᗘ༅ଐʥ૚ສ) amount of the segment assets, and additions ָʥஉௐʥಲѼ༅ଐɾሏࠍࠤ ༅ଐֺ୮ɾΔਂ൬ܘto property, plant and equipment and ʗ׹cȽ intangible assets, analysed by the geographical Ϸʗ׹e area in which the assets are located.

Additions to property, Carrying amount plant and equipment of segment assets and intangible assets พdᄥָذ૚ສ ʗᗘ༅ଐሏࠍࠤ ၤஉௐʥಲѼ༅ଐ 2006 2005 2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

PRC ɻਝ 186,514 269,905 7,860 15,739 Hong Kong ࠗಋ 99,811 55,619 1,927 525

286,325 325,524 9,787 16,264

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 74 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

8. FINANCE COSTS 8. ল৻ι̯

Continuing Discontinued operations operation Consolidated ܛᙩ຤Ꮺพ৻ ୄ˅຤Ꮺพ৻ ၃΋ 2006 2005 2006 2005 2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα ɀཌྷཌྷʒα ɀཌྷཌྷʄα ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

Interest on: Сࢠʻˮi Bank borrowings ႺϷࠥಁ ʄαʑכwholly repayable within z ඘ — five years bbb੪ᅕ᎛ᑹ 2,367 3,161 77 86 2,444 3,247 ʄαכnot wholly repayable within bz ˇ඘ — five years bbbʑ੪ᅕ᎛ᑹ — 494 — — — 494 Other loans ԯˢ൘ಁ ʄαʑכwholly repayable within Ķ඘ — five years b b੪ᅕ᎛ᑹ 7,003 — — — 7,003 — ʄαכnot wholly repayable within z ˇ඘ — five years b bʑ੪ᅕ᎛ᑹ —2,148 — — — 2,148

9,370 5,803 77 86 9,447 5,889

Annual Report 2006 ɀཌྷཌྷʒαం 75 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

9. TAXATION 9. ೢඖ

ЛאTax credit (charge) for the year ̯α۹ೢඖ comprises: bʻˮ˳ܢi

Current tax: Щ౨ೢඖi Hong Kong ࠗಋ (330 ) — — — (330 ) — Other regions in the PRC ɻਝԯˢΔਂ (104 ) — — — (104 ) —

(434 ) — — — (434) —

Under)overprovision in prior years: ֡αᅆௐɺӷ) b൚ᔾᅆௐi Hong Kong ࠗಋ (13 ) (19) — — (13 ) (19 ) Other regions in the PRC ɻਝԯˢΔਂ (19 ) — (45) 71 (64 ) 71

(32 ) (19) (45) 71 (77 ) 52

ഽ27 2,217 458 — — 2,217 458ڃDeferred tax credit (note 27) Ⴎ֝ೢඖ

1,751 439 (45) 71 1,706 510

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 76 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

9. TAXATIONᙩ 9. ೢඖᙩ

ᑋฌɾྦྷሏΣɎiکЛၤ৖ೢאThe reconciliation of tax credit for the year to the loss before ̯α۹ೢඖ taxation is as follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

ᑋฌکLoss before taxation ৖ೢ Continuing operations ܛᙩ຤Ꮺพ৻ (66,752) (25,108) Discontinued operation ୄ˅຤Ꮺพ৻ (179) (4,766)

(66,931) (29,874)

Tax credit at Hong Kong Profits Tax ܘࠗಋС੡ೢೢଅ17.5% of 17.5% (2005: 17.5%) bɀཌྷཌྷʄαi17.5% ့߮ɾೢඖʻˮ 11,713 5,228 Share of results of associates ᎶЌᐲᏪʔ̇พᐜ (228) (45) Tax effect of expenses not deductible for ɺ˿గೢ৻͌ؿκ৖ɾ tax purpose b඀ʻɾೢ৻ᄧᚊ (977) (1,243) Tax effect of temporary differences not ̰຤ᆢႏɾᅗࣂ࢏ᔾ recognised bɾೢ৻ᄧᚊ (823) — Tax effect of income not taxable for ɺ඘గೢ৻͌ؿᇾೢ tax purpose bɾνɃɾೢ৻ᄧᚊ 889 497 Tax effect of losses not recognised ̰຤ᆢႏɾೢඖᑋฌ bɾೢ৻ᄧᚊ (10,317) (11,561) ຤ᆢ̰کUtilisation of tax losses previously ৽͂ͱ not recognised bႏɾೢඖᑋฌ 2,319 366 Effect of different tax rates of ΕɻਝԯˢΔਂ຤Ꮺ ᙔʔ̇ɾڃsubsidiaries operating in other พ৻ɾ regions in the PRC bɺ΃ೢଅᄧᚊ (739) (320) Under)over provision in prior year ֡αᅆௐɺӷ൚ᔾᅆௐ (77) 52) ᙔʔֺ̇ᏵೢඖڃTax effect of tax exemption granted ɻਝ to a PRC subsidiary bᑥЛɾೢ৻ᄧᚊ — 7,530 Others ԯˢ (54) 6

Л 1,706 510אTax credit for the year ̯α۹ೢඖ

ೢܘα۹Ѕ߮ᎶᇾೢึС̯ܘHong Kong Profits Tax is calculated at 17.5% of the estimated ࠗಋС੡ೢȽ assessable profit for the year. ଅ17.5%့߮e

Annual Report 2006 ɀཌྷཌྷʒαం 77 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

9. TAXATION (Continued) 9. ೢඖᙩ

ɻਝ຤Ꮺכஃc̯එ྆ؒ܁Pursuant to relevant laws and regulations in the PRC, the ࣓ኣɻਝτᗐؒ ᙔʔ̇˿Ԕτߗɳೢඖ᎚యʥᄖಕڃGroup’s subsidiaries operating in the PRC are entitled to พ৻ɾ τᗐܘexemption and deductions from income tax under certain ϤᏵᑥЛʥᄖಕᖔढ़ֺ੡ೢe ֺ੡ೢ tax holidays and concessions. Income tax is calculated at ᄖಕೢଅ့߮e rates given under the respective concessions.

10. DISCONTINUED OPERATION 10. ୄ˅຤Ꮺพ৻

On 22 November 2006, the Group entered into a sale and ɀཌྷཌྷʒαɊȹ˂ɀɊɀˀc̯එ྆గˮਕ ᙔʔ̇ॾ஝഼঩Ҍ୺ࠗಋτࠉʔ̇ॾڃ purchase agreement in respect of the disposal of a subsidiary, CASTEL Videotech (Hong Kong) Limited (“CASTEL ஝഼঩͓߯ൕሒԾᘪcͅ໮ʔ̇൬Ϸ̯එ Videotech”), which carried out all of the Group’s ֺ྆τ഼঩ผᘪӡ଻ؿ඀ೕd́ଐdʗሻʥ ˨ݚɃ˞Ԝᒷټdevelopment, manufacture, distribution and installation of Ϊ໦eˮਕԑඖοΕଐ́ଊ ɀཌྷཌྷʒכvideo conference system. The disposal was effected in order ̯එ྆ԯˢพ৻ֺ჏eˮਕԑඖ to generate cash flows for the expansion of the Group’s αɊȹ˂́ࢽc੣ɻˮਕඑ྆ɾઁԹᚬᔝଫ other businesses. The disposal was effective in November ϭνᑪɁe 2006, in which the control of the disposal group passed to the acquirer.

The loss for the year from the discontinued operation is ୄ˅຤Ꮺพ৻ɾα۹ᑋฌʗ׹ΣɎi analysed as follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Profit (loss) of video conference ̯α۹഼঩ผᘪӡ଻ system operation for the year bพ৻ɾึСᑋฌ 460 (4,695) Loss on disposal of video conference ˮਕ഼঩ผᘪӡ଻พ৻ — (ഽ30 (684ڃsystem operation (see note 30) bɾᑋฌӮ

(224) (4,695)

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 78 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

10. DISCONTINUED OPERATION (Continued) 10. ୄ˅຤Ꮺพ৻ᙩ

The results of the video conference system operation for ഼঩ผᘪӡ଻พ৻࿀ϭˮਕˀ౨ɾพ৻Ϥ߮ ΣɎiٲthe year up to the date of disposal, which have been Ƀ၃΋ฌऩ included in the consolidated income statement, were as follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Turnover Ꮺพᔾ 14,924 12,306 Cost of sales ሻਕι̯ (9,625) (8,922) Other income ԯˢνɃ 460 189 Distribution costs ʗሻι̯ (1,530) (888) Administrative expenses Ϸܧ൒͂ (3,647) (7,365) Finance costs ল৻ι̯ (77) (86)

(Сᑋฌ 505 (4,766ึکProfit (loss) before taxation ৖ೢ Taxation ೢඖ (45) 71

(Profit (loss) for the year ̯α۹ึСᑋฌ 460 (4,695 Loss on disposal of video conference ˮਕ഼঩ผᘪӡ଻ system operation พ৻ɾᑋฌ (684) —

(224) (4,695)

During the year, the video conference system operation paid αʑcˮਕ഼঩ผᘪӡ଻พ৻ྦྷ̯එ྆຤Ꮺ ݚ൴૱ᔾ঳ᘆ5,771,000ಋʏɀཌྷཌྷʄټHK$5,771,000 (2005: HK$1,145,000) to the Group’s net ଊ operating cash flows, paid HK$205,000 (2005: HK$54,000) α: 1,145,000ಋʏcྦྷҙ༅ݠ৽঳ᘆ205,000 in respect of investing activities and contributed ಋʏɀཌྷཌྷʄα: 54,000ಋʏcʥྦྷጪ༅ݠ HK$5,000,000 (2005: nil) in respect of financing activities. ৽঳ᘆ5,000,000ಋʏɀཌྷཌྷʄαiཌྷಋ ʏe

ˮਕˀ౨ɾሏࠍכThe carrying amounts of the assets and liabilities of the ୄ˅຤Ꮺพ৻༅ଐၤ߲ඦ ഽ30ׄᚉeڃכdiscontinued operation at the date of disposal are disclosed ࠤ in note 30.

Annual Report 2006 ɀཌྷཌྷʒαం 79 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

LOSS FOR THE YEAR 11. α۹ᑋฌ .11

Continuing Discontinued operations operation Total ܛᙩ຤Ꮺพ৻ ୄ˅຤Ꮺพ৻ ᐢ߮ 2006 2005 2006 2005 2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα ɀཌྷཌྷʒα ɀཌྷཌྷʄα ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

Loss for the year has been arrived ̯α۹ᑋฌ at after charging: bɰκ৖i

3,774 1,164 — — 3,774 1,164 ټDirectors’ emoluments ໎ԑ༭ Other staff costs ԯˢࡗɮι̯ 23,672 18,282 2,718 2,017 26,390 20,299 Other staff’s retirement ԯˢࡗɮঽͤ benefits scheme ါСི߮Ԝಁ contributions 1,338 860 64 47 1,402 907

26,174 22,916 2,782 2,064 28,956 24,980

Amortisation of intangible assets ᚫሻಲѼ༅ଐ ഽ 12,900 4,766 — 250 12,900 5,016ڃNote) b) 1,200 1,629 5 — 1,195 1,629 ټAuditors’ remuneration ࣏ᅕ࢑༭ Cost of inventories recognised as ᆢႏݯ඀ʻ an expense bɾΦஒι̯ 118,832 100,964 7,784 8,921 126,616 109,885 พdᄥָʥذ Depreciation of property, plant and equipment bஉௐҗᓿ 7,367 6,778 347 425 7,714 7,203 พdᄥָʥذ Loss on disposal of property, plant and equipment bஉௐˮਕᑋฌ 48 45 — — 48 45 Loss on disposal and deemed ˮਕʥ഼Аˮਕ — ᙔʔ̇ɾᑋฌ — — 684 — 684ڃdisposal of subsidiaries b Impairment loss recognised in respect ਆᙷಕࠤᑋฌ ܧϷכܢ˳of goodwill (included in administration b expenses) b඀ʻ 542 — — 2,668 542 2,668 Minimum lease payments paid గɠΔʥᅢΧ࣓ኣ under operating leases in respect bጪ༅ै޸ʻ˟ɾ 3,449 3,814 97 89 3,352 3,725 ټof land and buildings b௖Гै Research and development expenses ޢೕ඀ʻ 1,620 696 — — 1,620 696 Allowance for doubtful debts в੔ᅆௐ 22,170 3,513 — 1,665 22,170 5,178 Allowance for obsolete inventories ஹᓿΦஒᅆௐ 1,916 274 — — 1,916 274 Write-off of development costs ඀ೕι̯࿁ሻ — 228 — — — 228 Exchange loss recognised ɰᆢႏමЙᑋฌ 1,247 248 — — 1,247 248

and crediting: ʥ߮Ƀi

Interest income СࢠνɃ 559 145 8 9 567 154 Write-back of interest payable ᅆΑᎶ˟Сࢠ — ഽ26 14,585 — — — 14,585ڃsee note 26) Ӯ) Gain on disposal and deemed disposal ˮਕʥ഼Аˮਕ — ᙔʔ̇ɾνऩ 3,325 — — — 3,325ڃof subsidiaries b

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 80 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

LOSS FOR THE YEAR (Continued) 11. α۹ᑋฌᙩ .11

ഽi αʑcᚫሻಲѼ༅ଐ޸12,900,000ಋʏ(ɀڃ Note:During the year, amortisation of intangible assets of approximately HK$12,900,000 (2005: HK$4,264,000) and nil ཌྷཌྷʄαi4,264,000ಋʏ)ʥಲ(ɀཌྷཌྷʄ (2005: HK$752,000) were included in cost of sales and αi752,000ಋʏ)ɰʗП߮Ƀሻਕι̯ʥ administrative expenses respectively. Ϸܧ඀ʻʑe

ټDIRECTORS’ AND EMPLOYEES’ 12. ໎ԑʥ཭ࡗ༭ .12 EMOLUMENTS

(a) Directors a໎ԑ

The emoluments paid or payable to each of the ɰ˟ֶᎶ˟Ɋ̒ϽɀཌྷཌྷʄαiȾ ΣɎiټfourteen (2005: nine) directors were as follows: Ͻ໎ԑΈϬɾ༭

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα Other emoluments Other emoluments ټԯˢ༭ ټԯˢ༭ Retirement Retirement Salaries benefits Salaries benefits and other scheme and other scheme Fees benefits contribution Total Fees benefits contribution Total ʥ ঽͤါСټʥ ঽͤါС ᑀټᑀ ԯˢါС ི߮Ԝಁ ᐢᔾ ټԯˢါС ི߮Ԝಁ ᐢᔾ ஀ ټ஀ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

Wang Xiaodong ˔ኮ׭ — 814 12 826 — 1,053 12 1,065 Han Jiang* ᒚϐ*—67269—755 12 767 Zhou Xiaoyun* ՚ኮඔ*—67269—747 12 759 ജ*—————711 12 723ۺXu Jian Hua* ࢘ Ma Yucheng* ৛̽ι*—————260 — 260 Liang Xiaohong ષɩߧ ———————— Wu Yansheng дዘ́ ———————— Li Guang ңͮ ———————— ———————— לHan Shuwang ᒚኹ Tang Guohong ࡌਝѩ ———————— 50 — — 50 50 — — 50 ڭMoh Kwen Yung ˉᗐ Zhu Shixiong χ˖ඐ 50 — — 50 50 — — 50 Wong Fai, Philip ඡ๧ 50 — — 50 50 — — 50 Yiu Ying Wai ۢᕯ৩ 50 — — 50 50 — — 50

Total ᐢᔾ 200 948 16 1,164 200 3,526 48 3,774

࿀ϭɀཌྷཌྷʒαɊɀכThese directors were resigned during the year * ໮೩໎ԑ* ended 31 December 2006. The amount shown ˂ɍɊȹˀ˅α۹ʑᖽͨeɐͶ ೩ˮͨ໎ԑ౨ංֺν֤ٲabove represents the directors’ emoluments paid ᅕΥˤ eټduring their period of services as directors. Յɾ໎ԑ༭

Annual Report 2006 ɀཌྷཌྷʒαం 81 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙩټDIRECTORS’ AND EMPLOYEES’ 12. ໎ԑʥ཭ࡗ༭ .12 EMOLUMENTS (Continued)

(b) Five highest paid individuals b ʄϽ௖ঢ়ᑀ༭཭ࡗ

The five highest paid individuals included three (2005: ʄϽ௖ঢ়ᑀ༭཭ࡗ˳ܢɍϽɀཌྷཌྷ four) directors, two (2005: nil) of whom resigned during ʄαi̒Ͻ໎ԑcԯɻԭϽɀཌྷཌྷ the year and became employees of the Group. ʄαiಲ໎ԑα۹ʑɰᔴᓻʥιݯ ̯එ྆ɾ཭ࡗe

ΣɎiټThe emoluments of the five highest paid individuals ʄϽ௖ঢ়ᑀ༭Ɂɡɾ༭ were as follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

ʥԯˢါС 3,227 3,939ټSalaries and other benefits ᑀ Retirement benefits scheme ঽͤါСི߮Ԝಁ contribution 60 60

3,287 3,999

ᐢᔾټThe aggregate emoluments paid to each of the highest αʑʻ˟Έ௖ঢ়ᑀ༭཭ࡗɾ༭ paid individuals during the year did not exceed ɺ൚༦1,000,000ಋʏe HK$1,000,000.

DIVIDENDS 13. ٖࢠ .13

No dividend was paid or proposed during the year ended 31 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹c̯ December 2006, nor has any dividend been proposed since එ྆ลಲݢೕֶᏃݢೕͨЄٖࢠcϬ೶့ˀ ᘪݢೕͨЄٖࢠɀཌྷཌྷʄαiۺthe balance sheet date (2005: nil). ˞Ԟ͛ಲ ಲe

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 82 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

LOSS PER SHARE — BASIC 14. ҰٖᑋฌÐਥ̯ .14

From continuing operations ܛᙩ຤Ꮺพ৻

ᙩܛτɁᎶЌ̴ʔ̇ԞϬܛThe calculation of the basic loss per share from continuing ့߮ౝ஝ٖٖ̯ operations attributable to the ordinary equity holders of the ຤Ꮺพ৻ɾҰٖ຤ᏪᑋฌȽ࣓ኣɎͶᅕኣe parent entity is based on the following data.

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Loss for the purpose of basic గҰٖਥ̯ᑋฌϤӰɾᑋฌ loss per share (64,562) (29,781) Less: Loss for the year from ಕiୄ˅຤Ꮺพ৻αʑᑋฌ discontinued operations 224 4,695

ᙩ຤Ꮺพ৻ɾҰٖਥ̯ܛLoss for the purpose of basic loss per గ share from continuing operations bᑋฌϤӰɾᑋฌ (64,338) (25,086)

Number of shares ᅕٖ͌ͫ 2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα

Weighted average number of shares గҰٖਥ̯ᑋฌɾ for the purpose of basic loss b˱ᚬ̡яٖͫᅕ͌ per share 1,017,139,763 1,017,139,763

From discontinued operation ୄ˅຤Ꮺพ৻

Basic loss per share for the discontinued operation is HK0.02 ୄ˅຤Ꮺพ৻ɾҰٖਥ̯ᑋฌݯҰٖ0.02ಋ cents per share (2005: HK0.46 cents per share), based on the ˦(ɀཌྷཌྷʄαiҰٖ0.46ಋ˦)c࣓ኣୄ˅຤ loss for the year from the discontinued operation of Ꮺพ৻ɾ̯αᑋฌ224,000ಋʏ(ɀཌྷཌྷʄ ɐʼҰٖਥ̯כHK$224,000 (2005: HK$4,695,000) and the denominators αi4,695,000ಋʏ)cʥ໯Ͷ detailed above for basic loss per share. ᑋฌɾʗ̴༜့e

Annual Report 2006 ɀཌྷཌྷʒαం 83 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

พdᄥָʥஉௐذ .PROPERTY, PLANT AND EQUIPMENT 15 .15

Plant, Leasehold equipment Moulds Furniture land and and and and office Motor buildings machinery tools equipment vehicles Total ޸ɠΔ ᄥָdஉௐ ᅡԮ ்ᯫʥۖ ʥᅢΧ ʥዀኂ ʥɮԮ ፒʔ۩உௐ Ӂӹ ᐢᔾ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

COST ι̯ ɀཌྷཌྷʄαȹ˂ȹˀ 15,075 31,732 1,007 18,872 3,696 70,382כ At 1 January 2005 Exchange adjustment මЙሁኬ 290 616 12 102 40 1,060 Additions ᄈ˱ 7,133 2,890 144 3,015 664 13,846 Reclassifications ࠇณʗᗘ —(2,087) 2,052 5 30 — Disposals ˮਕ —(199) (146) (357) — (702)

ɀཌྷཌྷʄαכ At 31 December 2005 bɊɀ˂ɍɊȹˀ 22,498 32,952 3,069 21,637 4,430 84,586 Exchange adjustments මЙሁኬ 668 972 79 239 63 2,021 Additions ᄈ˱ 1,161 3,469 25 4,007 1,125 9,787 Disposed of on disposal and ˮਕʥ഼Аˮਕ ᙔʔ̇ڃdeemed disposal of b subsidiaries (8,388) (2,939) (129) (6,958) (1,023) (19,437) Disposals ˮਕ (3,758) (323) — (308) (288) (4,677)

ɀཌྷཌྷʒαכ At 31 December 2006 bɊɀ˂ɍɊȹˀ 12,181 34,131 3,044 18,617 4,307 72,280

DEPRECIATION җᓿ ɀཌྷཌྷʄαȹ˂ȹˀ 2,713 5,669 310 12,630 1,858 23,180כ At 1 January 2005 Exchange adjustment මЙሁኬ 53 121 5 55 10 244 Provided for the year ̯αᅆௐ 684 3,501 595 1,937 486 7,203 Reclassifications ࠇณʗᗘ —(163) 132 29 2 — Eliminated on disposals ˮਕࣂҿሻ —(164) (47) (262) — (473)

ɀཌྷཌྷʄαכ At 31 December 2005 bɊɀ˂ɍɊȹˀ 3,450 8,964 995 14,389 2,356 30,154 Exchange adjustment මЙሁኬ 103 260 23 105 22 513 Provided for the year ̯αᅆௐ 616 3,927 592 2,067 512 7,714 Eliminated on disposal and ˮਕʥ഼Аˮਕ ᙔʔ̇ࣂҿሻڃ deemed disposal of subsidiaries (51) (1,068) (45) (3,089) (556) (4,809) Eliminated on disposals ˮਕࣂҿሻ (3,758) (69) — (242) (102) (4,171)

ɀཌྷཌྷʒαכ At 31 December 2006 bɊɀ˂ɍɊȹˀ 360 12,014 1,565 13,230 2,232 29,401

NET BOOK VALUES ሏࠍ૱ࠤ ɀཌྷཌྷʒαכ At 31 December 2006 bɊɀ˂ɍɊȹˀ 11,821 22,117 1,479 5,387 2,075 42,879

ɀཌྷཌྷʄαכ At 31 December 2005 bɊɀ˂ɍɊȹˀ 19,048 23,988 2,074 7,248 2,074 54,432

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 84 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

พdᄥָʥஉௐᙩذ .PROPERTY, PLANT AND EQUIPMENT 15 .15 (Continued)

ᇃؒق˞พdᄥָʥஉௐɾඖ͌ذThe above items of property, plant and equipment are ɐ߸τᗐ depreciated on a straight line basis at the following rates ܘ˞Ɏαଅҗᓿi per annum:

Leasehold land and 4 – 5% or over the unexpired ۖ޸ɠΔʥᅢΧ 4 z 5%ֶֆ቗ۖ޸ buildings lease terms α౨ Plant, equipment and 9 – 15% ᄥָdஉௐʥዀኂ 9 z 15% machinery Moulds and tools 25% ᅡԮʥɮԮ 25% Furniture and office 10 – 25% ்ӝʥፒʔ۩உௐ 10 z 25% equipment Motor vehicles 18 – 25% Ӂӹ 18 z 25%

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀc̯එ྆˞ሏכ At 31 December 2005, the Group has pledged land and buildings having a net book value of approximately ࠍ૱ࠤݯ޸10,280,000ಋʏɀཌྷཌྷʒαiཌྷ HK$10,280,000 (2006: nil) to secure general banking facilities ಋʏɾɠΔʥᅢΧАݯ̯එ྆ᏵՅȹঁႺ ׋eאgranted to the Group. Ϸጪ༅ɾ

τɻ౨ैܛɻਝכพᚬऩݯذThe Group’s property interests shown above were held ̯එ྆ɐ߸ɾ under medium term leases in the PRC. ޸e

Annual Report 2006 ɀཌྷཌྷʒαం 85 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

16. GOODWILL 16. ਆᙷ

HK$’000 ɝಋʏ

COST ι̯ ɀཌྷཌྷʄαȹ˂ȹˀʥכ At 1 January 2005 and 31 December 2005 bɀཌྷཌྷʄαɊɀ˂ɍɊȹˀ 4,275 ᙔʔ̇ࣂҿሻڃElimination on disposal and deemed disposal ˮਕʥ഼Аˮਕ of subsidiaries (1,065)

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ 3,210כ At 31 December 2006

IMPAIRMENT ಕࠤ — ɀཌྷཌྷʄαȹ˂ȹˀכ At 1 January 2005 Impairment loss recognised for the year ̯α۹ᆢႏɾಕࠤᑋฌ 2,668

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀ 2,668כ At 31 December 2005 Impairment loss recognised for the year ̯α۹ᆢႏɾಕࠤᑋฌ 542

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ 3,210כ At 31 December 2006

CARRYING VALUES ሏࠍࠤ — ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀכ At 31 December 2006

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀ 1,607כ At 31 December 2005

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 86 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

17. INTANGIBLE ASSETS 17. ಲѼ༅ଐ

Development Technology costs license right Total Ҍ୺઒ᚬ ඀ೕι̯ ஈ˿ᖬ ᐢᔾ HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ

COST ι̯ ɀཌྷཌྷʄαȹ˂ȹˀ 14,444 35,100 49,544כ At 1 January 2005 Exchange adjustment මЙሁኬ 122 — 122 Additions ᄈ˱ 2,418 — 2,418 Write-off ࿁ሻ (457) — (457)

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀ 16,527 35,100 51,627כ At 31 December 2005 Exchange adjustment මЙሁኬ 139 — 139 Disposed of on disposal ˮਕʥ഼Аˮਕ ᙔʔ̇ڃand deemed disposal b of subsidiaries (8,048) — (8,048)

ɀཌྷཌྷʒαכ At 31 December 2006 bɊɀ˂ɍɊȹˀ 8,618 35,100 43,718

AMORTISATION AND ᚫሻʥಕࠤ IMPAIRMENT ɀཌྷཌྷʄαȹ˂ȹˀ 8,590 4,563 13,153כ At 1 January 2005 Exchange adjustment මЙሁኬ 53 — 53 Amortised for the year ̯α۹ᚫሻ 2,754 2,262 5,016 Eliminated on write-off ࿁ሻࣂҿሻ (229) — (229)

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀ 11,168 6,825 17,993כ At 31 December 2005 Exchange adjustment මЙሁኬ 62 — 62 Amortised for the year ̯α۹ᚫሻ 3,475 9,425 12,900 ᙔʔ̇ڃDisposed of on disposal ˮਕʥ഼Аˮਕ and deemed disposal of subsidiaries (6,440) — (6,440) Impairment loss recognised ᆢႏɾಕࠤᑋฌ 353 9,050 9,403

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ 8,618 25,300 33,918כ At 31 December 2006

NET BOOK VALUES ሏࠍ૱ࠤ ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ —9,800 9,800כ At 31 December 2006

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀ 5,359 28,275 33,634כ At 31 December 2005

Annual Report 2006 ɀཌྷཌྷʒαం 87 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

17. INTANGIBLE ASSETS (Continued) 17. ಲѼ༅ଐᙩ

ᇃؒᚫሻiقIntangible assets are amortised on a straight line basis over ಲѼ༅ଐȽగɎͶ౨ංઔ͂ the following periods:

Development costs 3 – 5 years ඀ೕι̯ 3Ð5α Technology license right 3 years Ҍ୺઒ᚬஈ˿ᖬ 3α

Development costs are internally generated. Technology ඀ೕι̯Ƚͅʑ஫ଐ́eҌ୺઒ᚬஈ˿ᖬ ʗሻᚬȽΉ଱ɍʿᑪ੡eαۂᄖ፼ଐܢ˳ license right, which included the right of distribution of broadband products, was acquired from third party. During ʑc໎ԑࠇณϣᄬҌ୺઒ᚬஈ˿ᖬɾ˿Ԛ͂ ད౨ੀଐ́Сऩɾα౨Ϥੀτᗐכthe year, the directors reconsidered the useful life of the α౨cਥ technology license right and changed the estimate from 15 Ѕ߮ͅ15αҝݯ3αeЅ߮ɾҝᛰኒߎ̯α years to 3 years based on the expected years of benefit to ۹ʥ̰Ԟα۹αᑋฌᄈ˱7,085,000ಋʏe be generated. The change in estimate has resulted in an increase in loss of HK$7,085,000 per annum in current year and future years.

During the year, the directors conducted a review of the αʑc໎ԑᏎদȿ̯එ྆ɾಲѼ༅ଐԎᔤց ۂGroup’s intangible assets and determined that certain ߗɳಲѼ༅ଐτಕࠤcࡈΐܰߗɳᄖ፼ଐ intangible assets were impaired due to cessation of certain ɾϬϷ඀ೕݠ৽ɻᒾeΐϊcʗПగ඀ೕι self-development activities of the broadband products. ̯ʥҌ୺઒ᚬஈ˿ᖬᆢႏಕࠤᑋฌ353,000ಋ ௛቗ɾ܃Accordingly, impairment losses of HK$353,000 and ʏʥ9,050,000ಋʏe඀ೕݠ৽ɻᒾ ᗐޚɾʗሻᚬcۂHK$9,050,000 respectively have been recognised in respect ಲѼ༅ଐȽ̯එ྆ᄖ፼ଐ of the development costs and technology license right. The ༅ଐɾ˿νΑᔾܘԯԚ͂ࠤᔤցeጫ൴Ԛ͂ remaining intangible assets after such cessation represents ࠤɾൎଊଅݯ11%e the Group’s right of distribution of broadband products, the recoverable amounts of the relevant assets have been determined on the basis of their value in use. The discount rates in measuring the amounts of value in use is 11%.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 88 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᐲᏪʔ̇ɾᚬऩכ .INTEREST IN ASSOCIATES 18 .18

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

ɐ̟ҙ༅ɾι̯ 86,572 9,058ڈ Cost of unlisted investments Share of post-acquisition losses ᎶЌνᑪ܃ᑋฌ (1,708) (408)

Share of net assets ᎶЌ༅ଐ૱ࠤ 84,864 8,650

The Group has discontinued recognition of its shares of ̯එ྆ɰୄ˅ᆢႏԯᎶЌߗɳᐲᏪʔ̇ɾᑋ losses of certain associates. The amounts of unrecognised ฌeɺᆢႏᎶЌ໮೩ᐲᏪʔ̇ɾಁᔾ̯α share of those associates, both for the year and cumulatively, ʥୃ߮ΣɎi are as follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Unrecognised share of profit of ̯α۹ɺᆢႏᎶЌ associates for the year bᐲᏪʔ̇ึС 530 576

Accumulated unrecognised share ୃ߮ɺᆢႏᎶЌ of losses of associates bᐲᏪʔ̇ᑋฌ (78,492) (79,022)

Annual Report 2006 ɀཌྷཌྷʒαం 89 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᐲᏪʔ̇ɾᚬऩᙩכ .INTEREST IN ASSOCIATES (Continued) 18 .18

The summarised financial information in respect of the ̯එ྆ᐲᏪʔ̇ɾล߸ল৻༅ࢿΣɎ Group’s associates is set out below:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Total assets ༅ଐᐢᔾ 1,513,265 67,144 Total liabilities ߲ඦᐢᔾ 1,221,662 122,306

Net assets (liabilities) ༅ଐ߲ඦ૱ࠤ 291,603 (55,162)

Revenue νɃ 15,207 38,578

Loss) profit for the year ̯α۹ᑋฌึС (5,101) 547)

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆˚߬כ Details of the principal associates of the Group at 31 ഽ36eڃכDecember 2006 are set out in note 36. ᐲᏪʔ̇໯ੱ༗

19. INVENTORIES 19. Φஒ

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Raw materials ࡈҥࢿ 2,019 9,814 15,878 11,091 ۂWork-in-progress Εႇ 23,116 49,800 ۂFinished goods ႇι

62,910 48,808

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 90 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ʥԯˢᎶνಁמTRADE AND OTHER RECEIVABLES 20. ൗ .20

Ꮆνಁמൗܢ˳ʥԯˢᎶνಁמIncluded in trade and other receivables are trade receivables ൗ of HK$82,615,000 (2005: HK$155,577,000). The Group allows 82,615,000ಋʏɀཌྷཌྷʄαi155,577,000ಋ ڌcredit periods ranging from 45 days to 180 days to its ʏe ̯එ྆೽ʀԯ۪ʸ̡я45ˀϭ180ˀ e໎ԑ৊ੱ೽ʀᅕΊ˚۪߬ۂcustomers for sales of goods. At the discretion of the ൘౨Ԝሻਕଐ ৻ר൘౨Ўɺ൚༦ȹαeగڌכdirectors, several major customers were allowed to settle ʸᑹಁ౨Λ Ꮆמ൘౨e ൗڌtheir balances beyond the credit terms up to one year. The ΋޸νऩ೽ʀ۪ʸ̡яȹα ೶့ˀɾሏᙍʗ׹ΣɎiכaverage credit period of one year will be given to customers νಁ for revenue from service contracts. The following is an aged analysis of trade receivables at the balance sheet date:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Within 30 days 30ˀʑ 44,039 37,642 Between 31 — 90 days 31 — 90ˀ 2,682 21,741 Between 91 — 180 days 91 — 180ˀ 649 77,649 Between 181 — 365 days 181 — 365ˀ 832 7,647 Over 1 year ൚༦ȹα 34,413 10,898

82,615 155,577

ʥԯˢᎶνಁɾʔמ೶့ˀc̯එ྆ൗכ The fair values of the Group’s trade and other receivables at ߗeޚᔾټᎶሏࠍޚthe balance sheet date approximate to the corresponding ̡ࠤၤ carrying amounts.

21. AMOUNTS DUE FROM/TO RELATED 21. Ꮆν/Ꮆ˟ᗐடʔ̇ಁ COMPANIES

The amounts represent amounts due from/to China ໮ಁඖܞᎶν/Ꮆ˟ॾʨޫҌਝ჌එ྆τࠉ ᙔʔ̇ɾಁඖeॾʨڃAerospace International Holdings Limited (“CASIL”) and its ʔ̇ॾʨʥԯ subsidiaries. CASIL is an associate of CASC. ݯɻॾᐢɾᐲᏪʔ̇e

߬ұ᎛ᑹe̯ܘ׋dЛࢠʥאThe amounts are unsecured, non-interest bearing and ໮ಁඖݯಲ ټ೶့ˀɾሏࠍכrepayable on demand. The directors of the Company are of ʔ̇໎ԑႏݯc໮ಁඖ the opinion that their fair values at the balance sheet date ᔾၤʔ̡ࠤޚߗe approximate to the carrying amounts.

Annual Report 2006 ɀཌྷཌྷʒαం 91 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

22. AMOUNTS DUE FROM/TO ASSOCIATES 22. Ꮆν/Ꮆ˟ᐲᏪʔ̇ಁ

߬ұ᎛ᑹe̯ʔܘ׋dЛࢠʥאThe amounts are unsecured, non-interest bearing and ໮ಁඖݯಲ ᔾၤټ೶့ˀɾሏࠍכrepayable on demand. The directors of the Company are of ̇໎ԑႏݯc໮ಁඖ the opinion that their fair values at the balance sheet date ʔ̡ࠤޚߗe approximate to the carrying amounts.

׋ႺϷΦಁאPLEDGED BANK DEPOSITS 23. ɰ .23

එ྆ݯᏵՅȹঁႺϷጪ༅ᔾ۹Ϥ̯ܞThe amount represents deposits pledged to banks for ໮ಁඖ ՞ցαСଅܘ׋ʀႺϷɾΦಁe໮೩Φಁא general banking facilities granted to the Group. The deposits ೶့כcarried fixed interest rate at 3.15% (2005: 3.1%) per annum. 3.15᯵ɀཌྷཌྷʄαi3.1᯵߮ࢠe ޚᔾټᎶሏࠍޚThe fair values of bank deposits at balance sheet date ˀcႺϷΦಁɾʔ̡ࠤၤ approximate to the carrying amounts. ߗe

ټBANK BALANCES AND CASH 24. ႺϷ೶Φʥଊ .24

яСଅ3.2᯵߮ࢠɾ̡ܘܢ˳ټBank balances and cash comprise demand deposits at an ႺϷ೶Φʥଊ ೶့כaverage rate of 3.2%. The directors of the Company are of ݠ౨Φಁe̯ʔ̇໎ԑႏݯ໮೩ಁඖ ߗeޚᔾၤʔ̡ࠤټthe opinion that the fair values at the balance sheet date ˀɾሏࠍ approximate to the carrying amounts.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 92 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ʥԯˢᎶ˟ಁמTRADE AND OTHER PAYABLES 25. ൗ .25

Ꮆ˟ಁמൗܢ˳ʥԯˢᎶ˟ಁמIncluded in trade and other payables are trade payables of ൗ HK$19,844,000 (2005: HK$31,023,000). The following is an 19,844,000ಋʏɀཌྷཌྷʄαi31,023,000ಋ ೶့ˀɾሏᙍʗ׹ΣכᎶ˟ಁמaged analysis of trade payables at the balance sheet date: ʏeൗ Ɏi 2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Within 30 days 30ˀ 14,576 14,641 Between 31 – 90 days 31ˀ — 90ˀ 1,167 8,651 Between 91 –180 days 91 — 180ˀ 901 1,753 Between 181 – 365 days 181 — 365ˀ 84 1,120 Over 1 year ൚༦ȹα 3,116 4,858

19,844 31,023

ʥԯˢᎶ˟ಁɾʔ̡מ೶့ˀc̯එ྆ൗכ The fair values of the Group’s trade and other payables at ߗeޚᔾټᎶሏࠍޚthe balance sheet date approximate to the corresponding ࠤၤ carrying amount.

Annual Report 2006 ɀཌྷཌྷʒαం 93 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

26. BORROWINGS 26. ࠥ൘

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

׋ — 7,157אBank loans – secured ႺϷ൘ಁ z τ ׋ — 24,387אBank loans – unsecured ႺϷ൘ಁ z ಲ ׋ — 14,528אBank overdrafts – unsecured ႺϷ஦ʻ z ಲ

Total bank borrowings ႺϷࠥ൘ᐢᔾ — 46,072

ഽa 56,756 59,580ڃOther loans (note a) ԯˢ൘ಁ — ഽb 40,594ڃShort term shareholder’s loan (note b) ೛౨ٖ׭൘ಁ — ഽc 168,317ڃ౨ٖ׭൘ಁٽ (Long term shareholder’s loan (note c

Total other loans ԯˢ൘ಁᐢᔾ 265,667 59,580

Total borrowings ࠥ൘ᐢᔾ 265,667 105,652 כLess: Amount due within one year ಕiͶݯݚ৽߲ඦϤ඘ included under currentbbȹαʑ᎛ᑹɾಁඖ liabilities (97,350) (98,998)

Amount due after one year ȹα܃Է౨ɾಁඖ 168,317 6,654

The maturity of the Group’s එ྆ɾࠥ൘ɾԷ౨౨ࠉΣɎi borrowings is as follows:

On demand or within one year Щ౨᎛˟ֶȹαʑ 97,350 98,998 Between one to two years ȹαϭԭα — 536 Between two to five years ԭαϭʄα 168,317 1,837 Over five years ʄα˞ɐ — 4,281

265,667 105,652

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 94 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

26. BORROWINGS (Continued) 26. ࠥ൘ᙩ

On 26 October 2006, the Group entered into an agreement ɀཌྷཌྷʒαɊ˂ɀɊʒˀc̯එ྆ၤȹႺϷ with a bank in respect of the Group’s outstanding bank గ̯එ̰྆᎛ᑹႺϷࠥ൘͓߯Ծᘪ՗໬Ծ borrowings (the “Settlement Agreement”). Pursuant to the ᘪe࣓ኣ՗໬Ծᘪc̯එ྆ᔄ᎛ᑹ Settlement Agreement, the Group has discharged all the 39,000,000ಋʏϤ໬৖̰᎛ᑹ൘ಁடСࢠ liabilities in respect of the outstanding loans (including ɾȹʘஐͨeΐϊ೶ᔝᎶ˟Сࢠ޸ ᅆٲαʑΕ၃΋ฌऩכinterest payable) by the repayment of HK$39,000,000. 14,585,000ಋʏɰ Accordingly, the interest payable brought forward Αe amounting to approximately HK$14,585,000 has been written-back in the consolidated income statement during the year.

ഽiڃ :Notes

(a)The amount in 2006 (2005: HK$54,773,000) represents a ɀཌྷཌྷʒαಁඖɀཌྷཌྷʄαi54,773,000 ɮےٽᙔʔ̇ɻਝڃɻॾᐢͲ༅ܞadvance from China Great Wall Industry Corporation, a ಋʏ wholly-owned subsidiary of CASC, and the respective พᐢʔ̇ྌ˟ɾಁඖʥτᗐɾᎶ߮Сࢠe αСଅ4.25᯵ɀཌྷܘ׋dאinterests accrued. Such advances are unsecured, bears ໮೩ྌಁݯಲ ߬ұࣂ᎛ᑹeכinterest at 4.25% (2005: 4.25%) per annum and are ཌྷʄαi4.25᯵߮ࢠʥ඘ repayable on demand. The interests accrued of Ꮆ߮Сࢠ9,957,000ಋʏɀཌྷཌྷʄαi ߬כ׋dЛࢠʥ඘אHK$9,957,000 (2005: HK$7,973,000) is unsecured, non- 7,973,000ಋʏݯಲ interest bearing and repayable on demand. The remaining ұࣂ᎛ᑹeɀཌྷཌྷʄα௛቗ɾԯˢ൘ಁݯ balance of other loans in 2005 represented advance from ዟ͓଱ɍʿྌಁc˞αСଅ5.8᯵߮ࢠe an independent third party with interest rate at 5.8% per annum.

(b) The amount represents loan advanced from CALT through b ໮ಁඖܞॾʨ஝༦ॾʨޫҌল৻τࠉʔ̇ ॾʨޫҌল৻τࠉʔ̇ (“CASIL Finance”) as the trustee. ॾʨল৻АݯՇপɁྌ˟ɾಁඖe αСଅ5.10᯵߮ࢠʥܘ׋dאThe amount is unsecured, bears interest at 5.10% per ໮ಁඖȽಲ ɀཌྷཌྷȼαɄ˂ɀɊȾˀ૜ᑹeॾʨכannum and repayable in full on 29 August 2007. CASIL ඘ ᙔʔ̇ڃFinance is a subsidiary of CASC. ল৻ݯɻॾᐢɾ c) The amount represents loan advanced from CALT through (c) ˌᆰ৑˞ॾʨল৻АݯՇপɁྌʻɾ൘ಁ) αСଅ5.04%ܘ׋dאCASIL Finance as the trustee. The amount is unsecured, ಁඖe໮ಁඖݯಲ ͲکɀཌྷȹȹαɄ˂ɀɊȾˀכbears interest at 5.04% per annum and repayable in full ߮ࢠʥ඘ on 29 August 2011. ᅕᓊᑹe

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀɾࣺࢠכThe Group had variable-rate borrowings at 31 December ̯එ྆ 2005 which carried interest at 2% to 3% above prime rate. ࠥ൘Ƚܘ௖᎚యСଅ˱2ϭ3᯵߮ࢠe

೶့ˀɾʔכIn the opinion of the directors of the Company, the fair value ̯ʔ̇໎ԑႏݯc̯එ྆ࠥ൘ ߗeޚᔾټᎶሏࠍޚof the Group’s borrowings at the balance sheet date ̡ࠤၤ approximates to the corresponding carrying amount.

Annual Report 2006 ɀཌྷཌྷʒαం 95 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

DEFERRED TAXATION 27. Ⴎ֝ೢඖ .27

The followings are the major deferred tax liabilities (assets) ̯එ྆ɰᆢႏɾࠇɣႮ֝ೢඖ߲ඦ༅ଐΣ recognised by the Group. Ɏe

Accelerated tax Development Technology depreciation costs license right Tax losses Total Ҍ୺઒ ˱஠ೢඖҗᓿ ඀ೕι̯ ᚬஈ˿ᖬ ೢඖᑋฌ ᐢᔾ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

ɀཌྷཌྷʄαכ At 1 January 2005 ȹ˂ȹˀ 477 104 5,344 (3,250) 2,675 (Лʻˮ (134) (34) (396) 106 (458אCredit) charge for the year ̯α۹)

ɀཌྷཌྷʄαכ At 31 December 2005 Ɋɀ˂ɍɊȹˀ 343 70 4,948 (3,144) 2,217 (Лʻˮ (191) (70) (3,233) 1,277 (2,217אCredit) charge for the year ̯α۹)

ɀཌྷཌྷʒαכ At 31 December 2006 Ɋɀ˂ɍɊȹˀ 152 — 1,715 (1,867) —

ϤӰcߗɳႮ֝ೢඖ༅ଐٲFor the purpose of balance sheet presentation, certain గеͶ༅ଐ߲ඦ ሻeא˞deferred tax assets and liabilities have been offset. ʥ߲ඦɰʀ

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆τ̰כ At 31 December 2006, the Group has unused tax losses of approximately HK$247,758,000 (2005: HK$231,436,000) ৽͂ೢඖᑋฌ޸247,758,000ಋʏɀཌྷཌྷʄ ɾึ܃ሻˀאavailable for offset against future profits. A deferred tax asset αi231,436,000ಋʏ͂А has been recognised in respect of approximately Сeଊɰగ໮ೢඖᑋฌɻ޸10,669,000 ಋʏ HK$10,669,000 (2005: HK$17,970,000) of such tax losses. No ɀཌྷཌྷʄαi17,970,000ಋʏᆢႏႮ֝ೢ ܨɾึСԞ฻c܃ॶЅ߮ˀ̰כdeferred tax asset has been recognised in respect of the ඖ༅ଐeͅ remaining tax losses of approximately HK$237,089,000 ̰τగԯ቗޸237,089,000ಋʏɀཌྷཌྷʄ HK$213,466,000) due to unpredictability of future αi213,466,000ಋʏɾೢඖᑋฌᆢႏႮ֝ :2005) profit streams. Included in unrecognised tax losses are losses ೢඖ༅ଐḛᆢႏೢඖᑋฌ˳ܢᑋฌ of HK$67,937,000 (2005: HK$55,000,000) that may be carried 67,937,000ಋʏɀཌྷཌྷʄαi55,000,000ಋ forward indefinitely. The remaining unrecognised tax losses ʏ˿ʀಲࠉ౨೶ᔝeԯ቗̰ᆢႏೢඖᑋฌ ʄαʑԷ౨eכwill be expired within five years. ੀ

೶့ˀc̯එ྆˿κಕᅗࣂ࢏ᔾ4,705,000כ At the balance sheet date, the Group has deductible ᎶᇾೢึСɺכtemporary difference of HK$4,705,000 (2005: nil). No ಋʏɀཌྷཌྷʄαiಲeͅ deferred tax asset has been recognised in relation to such ɣ˿ॶଐ́˞৽͂˿κಕᅗࣂ࢏ᔾcܨಲగ deductible temporary difference as it is not probable that ϊ˿κಕᅗࣂ࢏ᔾᆢႏႮ֝ೢඖ༅ଐe taxable profit will be available against which the deductible temporary difference can be utilised.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 96 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

̯ٖ .SHARE CAPITAL 28 .28

Number of shares Amount 2006 & 2005 2006 & 2005 ̯ٖ ᅕٖ͌ͫ HK$’000 ɝಋʏ

˦Ordinary shares of HK$0.10 each Ұٖౝ஝ٖࠍࠤɊಋ

Authorised: ؒցi ʥαୄ 10,000,000,000 1,000,000ٱαכ At beginning and end of the year

Issued and fully paid: ɰೕϷʥᖔӷi ʥαୄٱαכ At beginning of the year and at end of the year 1,017,139,763 101,714

SHARE OPTION SCHEMES 29. ᑪٖᚬི߮ .29

ȹȾȾȼαȼ˂ɀɊɍˀ́ࢽʥτࢽכUnder the terms of the share option scheme of the Company ࣓ኣ ϭɀཌྷཌྷȼαȼ˂ɀɊɍˀɾ̯ʔ̇ᑪقthe “CASTEL Scheme”) which became effective on 23 July ౨) and shall be valid until 23 July 2007, the board of ٖᚬི߮ॾ஝ི߮c໎ԑผ˿ΉͨЄͲ 1997 ᙔʔ̇ɾڃʔ̇ʥþֶԯͨЄ̯ܢ˳directors may offer to any full time employees, including ᓻ཭ࡗ ٖͫכɺʭܘ˿executive directors of the Company and/or any of its ਨϷ໎ԑ઒ˮᑪٖᚬcԚԯ ˀٖמʄ࠯͚کsubsidiaries, options to subscribe for shares in the Company ࠍࠤʥ၇અᑪٖᚬ઒ˮˀ౨ ᐲֺ͚ɾ̡яν̟ძɾ80%˞༖ঢ়ّݯכͫ at a price which is not less than the higher of the nominal ʔ̯̇כvalue of the shares and 80% of the average of the closing ๅႏᑪ̯ʔ̇ɾٖͫc੹˞ɺΛ prices of the shares on the Stock Exchange on the five ɺࣂɰೕϷٖ̯ɾ10%ݯࠉe࣓ኣᐲֺ͚ᖬ ଱17௃c̯ʔ̦̇ڬɐ̟ஃڬtrading days immediately preceding the date of grant of the Դɐ̟ஃ options, subject to a maximum of 10% of the issued share ඘ፓΨᑪٖᚬི߮ඖɎᑪٖᚬϷԚძ̦඘ϭ ઒ˮˀ౨כcapital of the Company from time to time. Pursuant to ʭݯ˞Ɏ༖ঢ়ّɾஃցiiٖͫ Chapter 17 of the Rules Governing the Listing of Securities ̦඘ݯᏪพˀΕᐲֺ͚ɾν̟ძhʥii ʄ࠯Ꮺพˀٖͫɾ̡яν̟کon the Stock Exchange (the “Listing Rules”) with which the ၇અ઒ˮˀ౨ ЄɊɀ࠯˂౨ංੀΉҰΊ਄ၤّೕͨכCompany must comply, the exercise price of options under ძe an option scheme must be at least the higher of: (i) the Ϸɾᑪٖᚬᐢᅕɺ੡൚༦̯ʔ̇ɰೕϷ closing price of the shares on the Stock Exchange on the date of grant, which must be a business day; and (ii) the average closing price of the shares for the five business days immediately preceding the date of grant. The total number of options to be issued to each participant in any twelve- month period must not exceed 1% of the share capital of

Annual Report 2006 ɀཌྷཌྷʒαం 97 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

SHARE OPTION SCHEMES (Continued) 29. ᑪٖᚬི߮ᙩ .29 the company in issue. The options granted must be accepted ٖ̯ɾ1%e઒ˮɾᑪٖᚬ̦඘Ε઒ˮˀ౨28 c཭ࡗ඘஦܃ᘪۺઅढ़ᑪٖᚬכwithin 28 days from date of grant. Upon acceptance of an ʨʑઅढ़e ˿offer of options, an amount of HK$1 by way of consideration ༦ʻ˟ಋྫྷ1ʏɾʿβАݯˤძeᑪٖᚬ ʔ̇໎ԑผҺցɾͨЄࣂ౨ʑϷԚc੹̯כ is payable by the employee. Options may be exercised at ڈany time for a period to be determined by the directors of ɺ˿൚༦ͅॾ஝ི߮́ࢽˀ঴߮Ɋαe৖ the Company, which shall not exceed ten years from the ΐԯˢࡈΐ୽ୄ˅ֶ࠳߯cॾ஝ི߮ੀ́ͅ τࢽcݯ౨Ɋαeܛړadoption of the CASTEL Scheme. Unless otherwise ࢽˀ঴ terminated or altered, the CASTEL Scheme will remain in force for a period of ten years from the date of adoption.

The purpose of the Scheme is to recognise the contribution ᑪٖᚬི߮οΕᆢႏ཭ࡗྦྷ̯එֺ྆Аˮɾ of employees of the Group. ঳ᘆe

ɀཌྷཌྷʄαɊɀ˂ɍɊȹˀʥɀཌྷཌྷʒαכ No share option under the CASTEL Scheme was granted to ᙔʔ̇ɾ໎ڃthe directors or employees of the Company or its Ɋɀ˂ɍɊȹˀc̯ʔֶ̇ԯ subsidiaries at 31 December 2005 and 31 December 2006. ԑֶ཭ࡗลಲᏵ઒ͨЄᑪٖᚬe

ᙔʔ̇ڃDISPOSAL AND DEEMED DISPOSAL OF 30. ˮਕʥ഼Аˮਕ .30 SUBSIDIARIES

ᙔʔ̇ॾڃOn 30 June 2006, CASTEL Qihua Hi-Tech Investments Limited ɀཌྷཌྷʒαʒ˂ɍɊˀc̯ʔ̇ (“CASTEL Qihua”), a subsidiary of the Company, entered into ஝թജঢ়ޫҌҙ༅τࠉʔ̇ॾ஝թജၤ an agreement with Concord Pacific Satellite Technologies ዟ͓଱ɍʿΧॾᇯܱޫҌτࠉʔ̇Χॾᇯ અҙقLimited (“Concord Pacific”), an independent third party, ܱ͓߯ԾᘪcኣϊcΧॾᇯܱ΃෮ ॾʨܱ၉ࠗಋ஝঩τࠉכunder which Concord Pacific agreed to invest HK$2,000,000 ༅2,000,000ಋʏ directly in CASTEL Spaceinet (Hong Kong) Communications ʔܱ̇၉ࠗಋcϤܱ၉ࠗಋੀʗП৉ೕ Limited (“Spaceinet HK”) and that Spaceinet HK would allot 1,020,000ٖʀΧॾᇯܱʥ979,998ٖʀॾ஝թ cΧॾᇯܱੀኟτܱ၉ࠗ܃ѧιמshares to Concord Pacific and 979,998 shares to ജe໮͚ 1,020,000 CASTEL Qihua respectively. Upon the completion of the ಋɰೕϷٖ̯ᐢᔾɾ51%eܱ၉ࠗಋ຤ᏪͲ ɾ඀ೕdʗሻʥΪۂᗐଐޚtransaction, Concord Pacific owned as to 51% of the total ଈցϽӡ଻ʥ issued shares of Spaceinet HK. Spaceinet HK was engaged ໦eˮਕνऩ980,000ಋʏɰʀᆢႏe in the development, distribution and installation of Global Position System application and related product and a gain on disposal of HK$980,000 was recognised.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 98 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ᙩڃDISPOSAL AND DEEMED DISPOSAL OF 30. ˮਕʥ഼Аˮਕ .30 SUBSIDIARIES (Continued)

ᙔʔڃOn 30 September 2006, CASTEL Broadband Holdings ɀཌྷཌྷʒαȾ˂ɍɊˀc̯ʔ̇Ͳ༅ ૯Γڌ૯Γτࠉʔ̇, wholly-owned ̇ॾ஝ᄖ੓τࠉʔ̇ʥॾʨޫҌ஝ڌLimited and ॾʨޫҌ஝ subsidiaries of the Company, entered into an agreement τࠉʔ̇ၤዟ͓଱ɍʿHao Hsin Trading and with Hao Hsin Trading and Investment Company Limited Investment Company LimitedHao Hsin߯ (“Hao Hsin”), an independent third party, under which Hao ͓ԾᘪcኣϊcHao Hsin΃෮ҙ༅15,000,000 Ҍ୺඀ೕ૯Γτࠉʔڌॾʨಲᇃ஝כҌ୺ ಋʏڌHsin agreed to invest HK$15,000,000 in ॾʨಲᇃ஝ ѧιࣂcॾʨಲמ໮͚כ඀ೕ૯Γτࠉʔ̇ (“CASTEL Wireless”). Upon completion ̇ॾʨಲᇃe of the transaction, the share capital of CASTEL Wireless was ᇃɾٖ̯ͅ5,006,781ಋʏᄈϭ20,006,781ಋ ኟτॾʨಲᇃ຤ᒷɣɰೕڬincreased from HK$5,006,781 to HK$20,006,781, and Hao ʏcϤHao Hsin ڃHsin owned as to 75% of the total enlarged issued shares of Ϸٖͫᐢᅕɾ75%eΐϊcॾʨಲᇃʥԯ CASTEL Wireless. Accordingly, CASTEL Wireless and its ᙔʔ̇଻ီॾʨಲᇃඑ྆ιݯ̯එ྆ subsidiaries (collectively referred to as “CASTEL Wireless ᐲᏪʔ̇eॾʨಲᇃඑ྆˚߬੣ԑᄖ੓ӡ Group”), became an associate of the Group. CASTEL Wireless ଻dஉௐʥ৉ͧɾ඀ೕdʗሻʥΪ໦eϊඖ ɾˮਕνऩ2,345,000ಋʏɰʀᆢႏeמGroup was principally engaged in the development, ͚ distribution and installation of broadband system, equipment and accessories. A gain on disposal of HK$2,345,000 was recognised from this transaction.

On 22 November 2006, the Company, entered into an ɀཌྷཌྷʒαɊȹ˂ɀɊɀˀc̯ʔ̇ၤཽᘚ agreement with Brightness International Holding Limited ਝ჌ઁٖτࠉʔཽ̇ᘚዟ͓଱ɍʿ߯ (“Brightness”), an independent third party, under which ͓Ծᘪcኣϊcཽᘚ΃෮˞4,100,000ಋʏɾ Brightness agreed to acquire 40% equity interests of CASTEL ˤძνᑪॾ഼ɾ40%ٖ̯ᚬऩeཽᘚ͛΃෮ Videotech at a consideration of HK$4,100,000 from the ˞4,000,000ಋʏɾˤძႏᑪ2,505,000ٖณ ؿͲ஫ɰ܃מѧι͚כCompany. Brightness further agreed to subscribe 2,505,000 ٖcႏᑪᅕ͌Ќॾ഼ ι܃ѧιמɐ߸͚כnew shares for a consideration of HK$4,000,000, ೕϷٖ̯ɾ20%eॾ഼ representing 20% of the total issued shares of CASTEL ݯ̯එ྆ᐲᏪʔ̇eॾ഼˚߬੣ԑ഼঩ผᘪ Videotech after completion of the transaction. CASTEL ӡ଻ؿ඀ೕd́ଐdʗሻʥΪ໦cˮਕᆢႏ Videotech became an associate of the Group upon ᑋฌ684,000ಋʏeɐ߸ˮਕॾ഼࿚ι̯එ྆ ˮਕכᙔʔ̇ڃcompletion of the above transactions. CASTEL Videotech ୄ˅຤Ꮺพ৻cΐॾ഼ʥԯ එ഼྆঩ผᘪӡ଻ؿ඀ೕd́ଐdʗ̯ྦྷک ,was principally engaged in the development, manufacture ഽ10eڃdistribution and installation of video conference system and ሻʥΪ໦พ৻τ঳ᘆӮ a loss on disposal of HK$684,000 was recognised. The above disposal of CASTEL Videotech constituted a discontinued operation of the Group as CASTEL Videotech and its subsidiary contributed to the Group’s development, manufacture, distribution and installation of video conference system before the disposal (see note 10).

Annual Report 2006 ɀཌྷཌྷʒαం 99 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ᙩڃDISPOSAL AND DEEMED DISPOSAL OF 30. ˮਕʥ഼Аˮਕ .30 SUBSIDIARIES (Continued)

Spaceinet CASTEL CASTEL HK Wireless Videotech Total ܱ၉ࠗಋ ॾʨಲᇃ ॾ഼ ᐢᔾ HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

NET ASSETS DISPOSED OF ˮਕɾ૱༅ଐ พdᄥָʥஉௐ 1,906 11,775 947 14,628ذ Property, plant and equipment Intangible assets ಲѼ༅ଐ —1,608 — 1,608 Inventories Φஒ 172 1,328 9,724 11,224 ʥԯˢᎶνಁ 279 7,765 6,101 14,145מTrade and other receivables ൗ 1,901 494 1,254 153 ټBank balances and cash ႺϷ೶Φʥଊ (ʥԯˢᎶ˟ಁ (2,510) (15,692) (7,421) (25,623מTrade and other payables ൗ Bank borrowings ႺϷࠥ൘ —(6,453) — (6,453) Taxation ೢඖ ——(130) (130)

—1,585 9,715 11,300 Attributable goodwill ᎶЌਆᙷ ——1,065 1,065 Exchange reserve realised ᛰଊɾමЙ᎝ௐ — 216 (84) 132

—1,801 10,696 12,497 Gain (loss) on disposal ˮਕɾνऩᑋฌ 980 2,345 (684) 2,641

Total consideration ᐢˤძ 980 4,146 10,012 15,138

Satisfied by: ʻ˟ʿβi

ᐲᏪʔ̇ᚬऩ 980 4,146 5,912 11,038כ Interest in associates 2,100 2,100—— ټCash ଊ Other receivables ԯˢᎶνಁ ——2,000 2,000

980 4,146 10,012 15,138

Net cash (outflow) inflow ˮਕࣂଐ́ɾ૱ ݚˮݚɃټarising on disposals: ଊ

ˤძ ——2,100 2,100ټCash consideration received ɰνଊ Bank balances and cash ˮਕɾႺϷ (1,901) (494) (1,254) (153) ټdisposed of ೶Φʥଊ

(153) (1,254) 1,606 199

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 100 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ᙩڃDISPOSAL AND DEEMED DISPOSAL OF 30. ˮਕʥ഼Аˮਕ .30 SUBSIDIARIES (Continued)

There was no significant impact on the Group’s results and గˮਕܱ၉ࠗಋྦྷ̯α۹̯එ྆ɾพᐜʥଊ ݚ൴Ԏಲࠇɣᄧᚊeټ cash flows in the current year in respect of the disposal of Spaceinet HK.

ݚ൴ʻټDuring the year, CASTEL Wireless paid HK$6,355,000 to the αʑcॾʨಲᇃྦྷ̯එ྆૱຤Ꮺଊ ঳ᘆڬGroup’s net operating cash flows, contributed ˟ 6,355,000ಋʏcҙ༅ݠ৽ HK$10,906,000 in respect of investing activities and paid 10,906,000ಋʏcጪ༅ݠ৽ʻ˟5,511,000ಋ HK$5,511,000 in respect of financing activities. CASTEL ʏeॾʨಲᇃ̯α۹ྦྷ̯එ྆঳ᘆᏪพᔾ Wireless contributed turnover of HK$6,273,000 and profit 6,273,000ಋʏʥึС1,630,000ಋʏe for the year of HK$1,630,000 to the Group.

CAPITAL COMMITMENTS 31. ༅ֻ̯ኪ .31

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀc̯එ྆඘ֻכ At 31 December 2006, the Group was committed to capital ԭංɻ̔΋Ꮺͬพɾҙ༅ɾ༅̯඀ʻ޸כexpenditure of approximately HK$54 million (2005: HK$108 ኪ million) for the investment of two sino-foreign joint ventures 54,000,000ಋʏɀཌྷཌྷʄαi108,000,000ಋ of the Group. The sino-foreign joint ventures are engaged ʏe໮ԭංɻ̔΋ᏪͬพʗПΕɻਝϐᘣ c̯ͅඑܪ຤ᏪࠓɈೕཋᄥʥஉޘ׳ʥ΁ޘ in the operation of wind energy plants and facilities power in the Jiangsu and Jilin Province of the PRC respectively and ྆ኟτ25%ᚬऩe are owned as to 25% by the Group.

එ྆ȹ΋Ꮺͬพ̯כIn addition, the Group was also committed to capital ϊ̔c̯එ྆͛඘ֻኪ expenditure of approximately HK$25 million (2005: nil) for ɾҙ༅ɾ༅̯඀ʻ޸25,000,000ಋʏɀཌྷཌྷ the investment of a joint venture of the Group. The joint ʄαiಲe໮΋Ꮺͬพ੣ԑΕɻਝፗྟޘ venture is engaged in the operation of wind energy plants ຤ᏪࠓɈೕཋᄥʥஉܪc̯ͅඑ྆ኟτ40% and facilities in the Liaoning Province of the PRC. The joint ᚬऩe venture is owned as to 40% by the Group.

Annual Report 2006 ɀཌྷཌྷʒαం 101 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

OPERATING LEASE COMMITMENTS 32. ຤Ꮺै༉ֻኪ .32

೶့ˀc̯එ࣓྆ኣ຤Ꮺै޸ϤᎶ˟̰Ԟכ At the balance sheet date, the Group had future minimum lease payments payable under operating leases in respect ɠΔʥᅢΧ௖Гै޸ಁඖΣɎi of land and buildings as set out below:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Within one year ȹαʑ 1,498 3,118 In the second to fifth years inclusive ଱ɀαϭ଱ʄα ࠖѮԭα˳ܢΕʑ 440 1,477

1,938 4,595

כټLeases are generally negotiated for an average term of two ै޸ȹঁ˞̡яԭα౨൬ϷਆদcϤै years and rentals are fixed for the lease period. ै౨ʑɺᛰe

33. RETIREMENT BENEFITS SCHEME 33. ঽͤါСི߮

The Group operates a Mandatory Provident Fund Scheme ̯එ྆గࠗಋֺτ΋༅ࣟ཭ࡗᄚϷੜԹֲʔ ི߮໮ི߮e ໮ི߮ɾ༅ଐȽၤ̯ټthe “Scheme”) for all qualifying employees in Hong Kong. ዶ) পɁઁԹe̯එ྆ڌThe assets of the Scheme are held separately from those of එ྆༅ଐʗ඀୮ଉԎͅ the Group in funds under the control of trustee. The Group గτᗐᑀ༭ι̯ɾ5%АˮԜಁcϤ཭ࡗ͛А contributes 5% of relevant payroll costs to the Scheme, ˮ΃೩Ԝಁe which contribution is matched by employees.

ဳଉ֚ܧᙔʔ̇཭ࡗݯɻਝڃThe employees of the Company’s PRC subsidiaries are ̯ʔ̇ɾɻਝ members of the state-managed retirement benefits scheme ɾਝࡼဳଉঽͤါСི߮Ɏɾιࡗe̯ʔ̇ ᙔʔ̇඘గ֤೩ɾᑀ༭ݯঽͤါСڃoperated by the PRC government. The Company’s PRC ɾɻਝ subsidiaries are required to contribute a certain percentage ི߮ܘߗɳϛʗˈАˮԜಁ˞ʻ˟ါСe ̯ of their payroll to the retirement benefits scheme to fund එ྆గঽͤါСི߮ɾ਒ȹஐͨݯ࣓ኣ໮߮ the benefits. The only obligation of the Group with respect ིАˮֺ჏ɾԜಁe to the retirement benefits scheme is to make the required contributions under the scheme.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 102 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

þ೶቗מRELATED PARTY TRANSACTIONS/ 34. ၤᗐடɁɡɾ͚ .34 BALANCES

αʑc̯එ྆ၤᗐடɁɡɾࠇɣ̯כ a)During the year, the Group had the following a) ΣɎiמsignificant transactions with related parties: ͚

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Sales of goods to associates ሻஒϭᐲᏪʔ̇ 444 1,794 Purchase of goods from ੣ᐲᏪʔ̇ᑪஒ associates 9,853 15,158

Other than the above, the Group also has balances ৖ɐ߸̔c̯එ྆ၤᗐடɁɡɾ֡Ԟ ഽ22ׄᚉeڃഽ21ʥڃכwith related parties disclosed in note 21 and note ೶቗ɰ 22.

(b) Compensation of key management personnel b ˚߬ဳଉɁࡗɾᑀ༭

The remuneration of key management during the αʑ˚߬ဳଉɁࡗɾᑀ༭ΣɎi year was as follows:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

Short-term benefits ೛౨ါС 3,427 4,399 Post-employment benefits ᔴᓻ܃ါС 60 60

3,487 4,459

ٲThe remuneration of key management is ˚߬ဳଉɁࡗɾᑀ༭ͅᑀ༭կࡗผ഼࠯Ɂ determined by the remuneration committee having ଊʥ̟௿ᑭබᔤցe regard to the performance of individuals and market trends.

Annual Report 2006 ɀཌྷཌྷʒαం 103 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

þ೶቗ᙩמRELATED PARTY TRANSACTIONS/ 34. ၤᗐடɁɡɾ͚ .34 BALANCES(Continued)

þ೶מc)Transactions/balances with other state-controlled c ၤɻਝԯˢਝࡼઁԹྡྷ᛽ɾ͚) entities in the PRC ቗

અֶංઅق֚ܧɻਝͅכThe Group operates in an economic environment ̯එ྆ଊࣂ currently predominated by entities directly or ኟτֶઁԹɾྡྷ᛽ਝࡼઁԹྡྷ᛽ indirectly owned or controlled by the PRC ˚ኒɾ຤Ꮬ᏷ྊɎ຤Ꮺeϊ̔c̯එ Թɾɻॾᐢઁ֚ܧgovernment (“state-controlled entities”). In addition, ̯྆Ӹᒕᙔͅɻਝ the Group itself is part of a larger group of ࿏Ɏɾ༖ɣʔ̇එ྆e companies under CASC which is controlled by the PRC government.

Apart from the disclosure in (a) above, the Group also ৖ɐʼaֺׄᚉّ̔c̯එ྆͛ၤ conducts business with other state-controlled ԯˢਝࡼઁԹྡྷ᛽τพ৻֡Ԟe໎ԑ entities. The directors consider those state- ႏݯcగ̯එ྆ၤ֤೩ɾพ৻֡ԞϤ controlled entities independent third parties so far Ӱc໮೩ਝࡼઁԹྡྷ᛽яᙔዟ͓଱ɍ as the Group’s business with them are concerned: ʿi

ˀ੒พ৻༦ೡɻΕߗכi) The Group has certain deposits placements, i ̯එ྆) borrowings and other general banking ɳႺϷяݯਝࡼઁԹྡྷ᛽τ facilities with certain banks, which are stated- ߗɳΦಁdࠥಁʥԯˢȹঁႺ ɾמ໮೩ႺϷ͚כcontrolled entities in its ordinary course of Ϸጪ༅eᛆ business. In view of the nature of those ֲሔc໎ԑႏݯcగϊА௰ዟ banking transactions, the directors are of the ׄᚉԎಲྡྷሔ෮ຮe opinion that separate disclosure would not be meaningful. ii) The Group also has certain sales and ii ̯එ྆͛ၤߗɳ۪ʸʥԜᎶਆ) c໎ԑႏݯcמpurchases transactions with certain τߗɳൕሒ͚ ܰמcustomers and suppliers in which the ߬ᆢցྦྷʿӸͫʥ໮೩͚ directors are of the opinion that it is ЯܰၤԯˢਝࡼઁԹྡྷ᛽൬Ϸ impracticable to ascertain the identity of the ྡྷᙔɺʘྡྷ჌e counterparties and accordingly whether the transactions are with other state-controlled entities.

Except as disclosed above, the directors are of the ৖ɐʼֺׄᚉّ̔c໎ԑႏݯၤԯˢ එ྆ɾ̯ྦྷמopinion that the transactions with other state- ਝࡼઁԹྡྷ᛽൬Ϸɾ͚ controlled entities are not significant to the Group’s ຤ᏪԎಲࠇɣᄧᚊe operations.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 104 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

þ೶቗ᙩמRELATED PARTY TRANSACTIONS/ 34. ၤᗐடɁɡɾ͚ .34 BALANCES (Continued)

૯Γ)τࠉʔ̇ d ɀཌྷཌྷʒαɄ˂ɍɊˀc̯ʔ̇Ͳ༅)ڌd) On 30 August 2006, ॾʨޫҌ஝) ૯Γτࠉʔڌᙔʔ̇ॾʨޫҌ஝ڃ CATSZ”), a wholly-owned subsidiary of the“) Company, entered into two loan agreements for a ̇ॾ஝૯Γ஝༦ॾʨল৻Аݯ sum of RMB41,000,000 (approximately ՇপɁၤˌᆰ৑͓߯ԭඖ൘ಁԾ HK$40,594,000) and RMB170,000,000 (equivalent to ᘪc൘ಁᔾɁ̵ྫྷ41,000,000ʏ޸ approximately HK$168,317,000) with CALT through 40,594,000ಋʏʥɁ̵ྫྷ170,000,000 CASIL Finance as the trustee. These loans are ʏ޸168,317,000ಋʏe໮೩൘ಁȽ αСଅ5.10%ʥ5.04%ܘ׋dʗПאunsecured, bear interest at 5.10% and 5.04% per ಲ ɀཌྷཌྷȼαɄ˂ɀכannum and are repayable on 29 August 2007 and ߮ࢠcԎʗП඘ 29 August 2011 respectively. ɊȾˀʥɀཌྷȹȹαɄ˂ɀɊȾˀ᎛ ᑹe

35. POST BALANCE SHEET EVENT 35. ೶့ˀ܃ԑඖ

˂ɀཌྷཌྷȼαɀ˂Ɋʄˀʥɀཌྷཌྷȼαɍכ ,On 15 February 2007 and 27 March 2007, the Company Astrotech and Advanced Grade Holdings Limited ɀɊȼˀc̯ʔ̇dAstrotechʥAdvanced (“Advanced Grade”) entered into a sale and purchase Grade Holdings Limited Advanced Grade agreement and a supplemental agreement pursuant to ͓߯ൕሒԾᘪʥ໤˨Ծᘪcኣϊc̯ʔ̇τ ΃෮ˮਕڬwhich the Company conditionally agreed to acquire, and ૈͧ΃෮νᑪϤAstrotech Astrotech agreed to sell the entire issued share capital of Advanced GradeͲ஫ɰೕϷٖ̯cˤძݯ ټ Advanced Grade for a consideration of HK$900,000,000. The 900,000,000ಋʏeˤძੀ˞iଊ consideration is to be satisfied by (i) HK$130,000,000 in cash 130,000,000ಋʏʥiiΉAstrotech৉ೕʥೕ and (ii) the allotment and issue of 2,200,000,000 Ϸ2,200,000,000ٖˤძٖͫɾʿβʻ˟e໮ ంйˀ౨ֆ̰ѧιe̯כמconsideration shares to Astrotech. The cash consideration ͚ will be financed by the proceeds from an open offer of shares. The transaction was not yet completed as at the date of this report.

Annual Report 2006 ɀཌྷཌྷʒαం 105 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

35. POST BALANCE SHEET EVENT (Continued) 35. ೶့ˀ܃ԑඖᙩ

ߜᙔၐဍԕະࢌഽ˫ιכAdvanced Grade is a company incorporated in the British Advanced Gradeݯ ᙔʔڃVirgin Islands with limited liability and a wholly-owned ͓ɾτࠉʔ̇cԎݯAstrotechɾͲ༅ ܃ѧιמ͚כsubsidiary of Astrotech. It is an investment holding company ̇eԯݯҙ༅ઁٖʔ̇cԎੀ and will hold the entire equity interest in Beijing Wan Yuan ܛτ˵ԕຒ฻ɮพʔ̇˵ԕຒ฻ɾͲ஫ ࠇୂכIndustry Corporation (“Beijing Wan Yuan”) after completion ٖᚬe˵ԕຒ฻ݯҙ༅ઁٖʔ̇cੀ of the transaction. Beijing Wan Yuan is an investment ѧι܃ܛτ˵ԕᄨဍါຒ฻ೕ৽ዀဳଉӡ଻ ᄨӁӹ਽ټholding company which, upon completion of restructuring, τࠉʔ̇ɾ49%ٖᚬd˵ԕຒ฻ ήॾʨຒ฻תτࠉʔ̇ɾ40%ٖᚬdۂwill hold a 49% equity interest in Beijing Delphi Wan Yuan ۬ႇ ڲEngine Management Systems Co., Ltd., a 40% equity interest ೣɠཋዀᎶ͂Ҍ୺τࠉʔ̇ɾ29%ٖᚬd in Beijing Wanyuan GDX Automotive Sealing Products Co., ஝ॾʨຒ฻ΪӾॶࠓཋஉௐႇ஥τࠉʔ̇ɾ Ltd., a 29% equity interest in Hangzhou Aerospace Wan Yuan 45%ٖᚬʥ˵ԕᄨဍါຒ฻ೕ৽ዀဳଉӡ଻ REPM Motor Application Technology Co., Ltd., a 45% equity τࠉʔ̇ɾ45%ٖᚬ଻ီ͌ᅟᐲᏪʔ interest in Nantong CASC Wanyuan Accoina Wind Turbine ̇e Manufacture Corporation Ltd., and a 45% interest in Beijing Delphi Wan Yuan Engine Management Systems Co., Ltd. (collectively referred to as the “Target Associates”).

The Target Associates are mainly engaged in automotive ͌ᅟᐲᏪʔ̇˚߬੣ԑӁӹೕ৽ዀဳଉӡ଻ engine management systems and components ʥ৉ͧɾႇ஥dӹӸ਽۬ӡ଻ɾႇ஥dཋસ manufacturing, automotive sealing products ͂ೕཋዀɾႇ஥dࠓཋஉௐɾႇ஥ʥ˿ʹ́ manufacturing, elevator motor manufacturing, wind turbine ॶ฻ඖ͌e manufacturing and renewable energy projects.

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 106 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ʥᐲᏪʔ̇༅ࢿڃPARTICULARS OF PRINCIPAL 36. ˚߬ .36 SUBSIDIARIES AND ASSOCIATES

ɀཌྷཌྷʒαɊɀ˂ɍɊȹˀɾ̯එ྆˚߬כ Details of the principal subsidiaries and associates of the ᙔʔ̇ʥᐲᏪʔ̇༅ࢿΣɎiڃ :Group at 31 December 2006 are as follows

Nominal value of Percentage of equity ˈissued ordinary ٖ̯ᚬऩɾϛʗ share capital/ held by attributable Name of company registered capital the Company to the Group Principal activities ɰೕϷౝ஝ٖ̯ɾ τ ̯එ྆ᎶЌ ˚߬พ৻ܛʔ̇Ίီ ࠍࠤþഽ˫ٖ̯ ̯ʔ̇ %%

Subsidiaries ᙔʔ̇ڃ

Incorporated and operating in Hong Kong: ࠗಋഽ˫ι͓ʥ຤Ꮺiכ

China Aerospace HK$10,000 100 — Distribution of Telecommunications Limited broadband business τࠉʔ̇ 10,000ಋʏ ʗሻᄖ੓พ৻ڌɻਝॾʨޫҌ஝

CASTEL Intelligent Transportation HK$11,600,000 — 70 Distribution of System Limited ITS business ॾ஝ౣॶ͚஝τࠉʔ̇ 11,600,000ಋʏ ʗሻౣॶ͚஝ӡ଻พ৻

China Aerospace HK$10,000 — 100 Distribution of Telecommunications broadband business (Hong Kong) Limited ࠗಋ)τࠉʔ̇ 10,000ಋʏ ʗሻᄖ੓พ৻)ڌॾʨޫҌ஝

CASTEL Qihua Hi-Tech Investments HK$8,000,000 — 70 Investment holding Limited ॾ஝թജঢ়ޫҌҙ༅τࠉʔ̇ 8,000,000ಋʏ ҙ༅ઁٖ

Hung Nien Electronics Limited HK$30,001,000 — 100 Distribution of telecommunication products ۂᒤαཋɥτࠉʔ̇ 30,001,000ಋʏ ʗሻཋ঩ଐ

Annual Report 2006 ɀཌྷཌྷʒαం 107 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ʥᐲᏪʔ̇༅ࢿᙩڃPARTICULARS OF PRINCIPAL 36. ˚߬ .36 SUBSIDIARIES AND ASSOCIATES (Continued)

Subsidiaries (Continued) ᙔʔ̇ᙩڃ

Registered and operating in the PRC: Εɻਝഽ˫ʥ຤Ꮺi

Beijing Qihua Communications US$1,239,000 — 55 Distribution of Co., Ltd.# ITS business ˵ԕթജ஝঩τࠉʔ̇#1,239,000޻ʏ ʗሻౣॶ͚஝ӡ଻พ৻

CASTEL Intelligent Transportation HK$8,000,000 — 70 Distribution of System (Beijing) Ltd.## ITS business ॾ஝ౣॶ͚஝˵ԕτࠉʔ̇## 8,000,000ಋʏ ʗሻౣॶ͚஝ӡ଻พ৻

ॾʨॾ஝ޫҌ˵ԕτࠉʔ̇## RMB15,000,000 — 100 Distribution of broadband business Ɂ̵ྫྷ15,000,000ʏ ʗሻᄖ੓พ৻

૯Γτࠉʔ̇## HK$20,000,000 — 100 Distribution ofڌॾʨޫҌ஝ broadband business 20,000,000ಋʏ ʗሻᄖ੓พ৻

ι஭ॾʨܱ၉஝঩τࠉʔ̇## RMB3,000,000 — 36 Distribution of ITS business Ɂ̵ྫྷ3,000,000ʏ ʗሻౣॶ͚஝ӡ଻พ৻

ɻਝഽ˫ɾɻ̔΋༅΋Ꮺͬพכ # Sino-foreign joint equity enterprise registered in the PRC#

ɻਝഽ˫ɾͲ̔༅ͬพכ ## Wholly foreign-owned enterprise registered in the PRC ##

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 108 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ʥᐲᏪʔ̇༅ࢿᙩڃPARTICULARS OF PRINCIPAL 36. ˚߬ .36 SUBSIDIARIES AND ASSOCIATES (Continued)

Associates ᐲᏪʔ̇

Registered and operating in the PRC: ɻਝഽ˫ι͓ʥ຤Ꮺiכ

Ҍ୺඀ೕ૯Γ HK$20,000,000 — 25 Distribution ofڌॾʨಲᇃ஝ τࠉʔ̇# broadband business 20,000,000ಋʏ ʗሻᄖ੓พ৻

CASTEL Intelligent Transportation RMB5,000,000 — 25 Distribution of System (Shenzhen) Ltd. # ITS business ॾ஝ౣॶ͚஝૯Γ τࠉʔ̇# Ɂ̵ྫྷ5,000,000ʏ ʗሻౣॶ͚஝ӡ଻พ৻

CASTEL Spaceinet (Shenzhen) RMB1,071,000 — 25 Distribution of Co. Ltd. # broadband business ૯Γ̟ॾʨܱ၉஝঩τࠉʔ̇# Ɂ̵ྫྷ1,071,000ʏ ʗሻᄖ੓พ৻

CASIL Telecommunications HK$10,000,000 — 40 Manufacture and (Shenzhen) Co., Ltd.## distribution of உௐ૯Γ 10,000,000ಋʏ telecommunicationڌௗ౜࣮ဍ஝ τࠉʔ̇## products ۂႇ஥ʥʗሻཋ঩ଐ

Southern Telecommunication US$8,400,000 — 41 Manufacture and Development Company Limited# distribution of యή)ྡྷพτࠉʔ̇#8,400,000޻ʏ telecommunication)ڌʿ஝ڲ products ۂႇ஥ʥʗሻཋ঩ଐ

Annual Report 2006 ɀཌྷཌྷʒαం 109 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

ᙔʔ̇ʥᐲᏪʔ̇༅ࢿᙩڃPARTICULARS OF PRINCIPAL 36. ˚߬ .36 SUBSIDIARIES AND ASSOCIATES (Continued)

Associates (Continued) ᐲᏪʔ̇ᙩ

၉஝঩τࠉʔ̇ #RMB5,000,000 — 21 Distribution of ITSڌɐࣵॾʨ business Ɂ̵ྫྷ5,000,000ʏ ʗሻౣॶ͚஝ӡ଻พ৻

ϐᘣ᎘฻ࠓɈೕཋτࠉʔ̇ #RMB211,610,000 — 25 Maintenance and operation of wind energy plants and facilities Ɂ̵ྫྷ211,610,000ʏ ၐᙶʥ༜ᏪࠓɈೕཋᄥ ʥஉܪ

᎘฻ࠓɈೕཋτࠉʔ̇ #RMB269,020,000 — 25 Construction of wind׳΁ energy plants and facilities in progress Ɂ̵ྫྷ269,020,000ʏ ࠓɈೕཋᄥָʥ உ൬Ϸɻۺɾܪஉ

ॾʨ᎘฻(้̯)ࠓɈೕཋτࠉʔ̇ # RMB93,800,000 — 40 Construction of wind energy plants and facilities in progress Ɂ̵ྫྷ93,800,000ʏ ࠓɈೕཋᄥָʥ உ൬Ϸɻۺɾܪஉ

ɻਝഽ˫ɾɻ̔΋༅΋Ꮺͬพכ # Sino-foreign joint equity enterprise registered in the PRC#

ɻਝഽ˫ɾͲ̔༅ͬพכ ## Wholly foreign-owned enterprises registered in the PRC ##

τɐ߸ʔܛɻਝι͓ɾʔ̇̔c̯එ྆כExcept for the companies established in the PRC, the classes ৖ of shares held by the Group in the above companies are ٖ̇ͫɾᗘПݯ໮೩ʔ̇ೕϷɾౝ஝ٖe ordinary shares issued by those companies.

ڃֺ༗ɾ̯එ྆ٲThe above table lists the subsidiaries and associates of the ໎ԑɾ෮ӮႏݯcɐͶΈ Company which, in the opinion of the directors, principally ᙔʔ̇ʥᐲᏪʔ̇cȽᄧᚊ̯එ྆พᐜֶ༅ affected the results or assets or form a substantial portion ଐɾ˚߬ʔֶ̇ݯୂι̯එ྆ɾ༅ଐ૱ࠤɾ ᙔʔ̇ʥڃof the net assets of the Group. To give details of other ˚߬஫ͫe໎ԑႏݯc໯Ͷԯˢ eٽʕכsubsidiaries and associates would, in the opinion of the ᐲᏪʔ̇ɾ༅ࢿcੀ˥̯ຝ༦ directors, result in particulars of excessive length.

ᙔʔ̇ลಲೕϷͨЄඦඖڃNone of the subsidiaries had issued any debt securities at ࿀ϭ̯αα֛c the end of the year. ᖬԴe

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 110 Notes to the Consolidated Financial Statements ഽڃٲ၃΋ল৻ం For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹ 37. BALANCE SHEET INFORMATION OF THE 37. ̯ʔ̇ɾ༅ଐ߲ඦ༅ࢿ COMPANY iܢ˳೶့ˀc̯ʔ̇ɾ༅ଐ߲ඦ༅ࢿכ Balance sheet information of the Company at the balance sheet date includes:

2006 2005 ɀཌྷཌྷʒα ɀཌྷཌྷʄα HK$’000 HK$’000 ɝಋʏ ɝಋʏ

ݚ৽༅ଐڈ Non-current assets พdᄥָʥஉௐ 1,011 1,389ذ Property, plant and equipment ᙔʔ̇ɾᚬऩ 20 30ڃכ Interest in subsidiaries — ᐲᏪʔ̇ɾᚬऩ 3,604כ Interest in associates

4,635 1,419

Current assets ݚ৽༅ଐ ʥԯˢᎶνಁ 3,023 801מTrade and other receivables ൗ ᙔʔ̇ಁ 77,885 159,567ڃAmounts due from subsidiaries Ꮆν Amounts due from associates ᎶνᐲᏪʔ̇ಁ 30,710 — Amounts due from related companies Ꮆνᗐடʔ̇ಁ 41 41 701 2,163 ټBank balances and cash ႺϷ೶Φʥଊ

113,822 161,110

Current liabilities ݚ৽߲ඦ ʥԯˢᎶ˟ಁ 3,546 8,148מTrade and other payables ൗ ᙔʔ̇ಁ 13,029 8,047ڃ˟Amounts due to subsidiaries Ꮆ Amounts due to related companies Ꮆ˟ᗐடʔ̇ಁ 7,647 7,647 Borrowings ࠥ൘ — 20,945

24,222 44,787

Net current assets ݚ৽༅ଐ૱ᔾ 89,600 116,323

Total assets ༅ଐᐢࠤ 94,235 117,742

Capital and reserves ༅̯ʥ᎝ௐ Share capital ٖ̯ 101,714 101,714 (Deficit) reserves ᑋି᎝ௐ (7,479) 16,028

Total equity ᚬऩᐢᔾ 94,235 117,472

Loss of the Company for the year ended 31 December 2006 ̯ʔ̇࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α amounted to HK$23,507,000 (2005: HK$48,007,000). ۹ɾᑋฌݯ23,507,000ಋʏɀཌྷཌྷʄαi 48,007,000ಋʏe

Annual Report 2006 ɀཌྷཌྷʒαం 111 Five Years' Financial Summary ʄαল৻༅ࢿล߬ For the year ended 31 December 2006 ࿀ϭɀཌྷཌྷʒαɊɀ˂ɍɊȹˀ˅α۹

Year ended 31 December ࿀ϭɊɀ˂ɍɊȹˀ˅α۹ 2002 2003 2004 2005 2006 ɀཌྷཌྷɀɀཌྷཌྷɍɀཌྷཌྷ̒ɀཌྷཌྷʄ ɀཌྷཌྷʒ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

Turnover Ꮺพᔾ 113,534 143,872 148,126 185,784 156,199

(ᑋฌ ึС (406) 26 6,722 (29,874) (66,931 کLoss) profit before taxation ৖ೢ) Taxation ೢඖ (1,529) (1,079) (2,544) 510 1,706

(Loss) profit for the year ̯α۹ ᑋฌ ึС (1,935) (1,053) 4,178 (29,364) (65,225)

At 31 December Ɋɀ˂ɍɊȹˀכ 2002 2003 2004 2005 2006 ɀཌྷཌྷɀɀཌྷཌྷɍɀཌྷཌྷ̒ɀཌྷཌྷʄ ɀཌྷཌྷʒ HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ ɝಋʏ

ASSETS AND LIABILITIES ༅ଐʥ߲ඦ Total assets ᐢ༅ଐ 269,685 317,032 357,333 352,356 417,642 Total liabilities ᐢ߲ඦ (141,200) (173,938) (175,991) (197,726) (325,356)

CASIL Telecommunications Holdings Limited τࠉʔ̇ڌॾʨޫҌ஝ 112 CASIL TELECOMMUNICATIONS HOLDINGS LIMITED 航天科技通信有限公司* Stock Code 股份代號 : 1185

Tel 電話 : ( 852 ) 2586 1185 Fax 傳真 : ( 852 ) 2531 0088 email 電郵 : [email protected] Suite 4701, 47th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong 香港灣仔港灣道18號中環廣場47樓4701室 website 網址 : http://www.castelecom.com

the Chinese name of the Company is for reference only 本公司之中文名稱只作參考