Comba Telecom Systems Holdings Limited — Capital/Financing Update 2006

Jun 20, 2006

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

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 2342)

CONNECTED TRANSACTION LOAN TO A NON WHOLLY-OWNED SUBSIDIARY

On 20 June 2006, the Lender and the Borrower entered into the Agreement pursuant to which the Lender agrees to lend a principal amount of US$650,000 (equivalent to approximately HK$5,070,000) to the Borrower subject to the terms and conditions of the Agreement. The Agreement constitutes a connected transaction of the Company under Rule 14A.66(2) of the Listing Rules which is subject to the reporting and announcement requirements and is exempted from the independent shareholders’ approval requirement applicable to connected transactions involving the provision of financial assistance by a listed issuer to its connected person under Chapter 14A of the Listing Rules. The Directors (including the independent non-executive Directors) are of the view that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and its shareholders as a whole. Details of the Agreement will be disclosed in the next published annual report and accounts of the Company in compliance with Rule 14A.45 of the Listing Rules.

THE AGREEMENT

On 20 June 2006, the Lender and the Borrower entered into the Agreement pursuant to which the Lender agrees to lend a principal amount of US$650,000 (equivalent to approximately HK$5,070,000) to the Borrower subject to the terms and conditions of the Agreement.

The major terms of the Agreement are summarised below.

Date : 20 June 2006 Parties : (a) WaveLab Holdings Limited (as the borrower), a 60%owned subsidiary of the Company and an investment holding company

(b) Cascade Technology Limited (as the lender), a 100%owned subsidiary of the Company

Principal amount of the : US$650,000 (equivalent to approximately HK$5,070,000) Loan

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• Availability period : the Loan will become available for drawing by the Borrower at any time during the period from the date of the Agreement and ending on 31 December 2006 on and subject to the terms and conditions of the Agreement. If the Loan is not drawn by the Borrower before the last day of the above availability period, the Loan shall cease to be available for drawing and the Agreement shall forthwith terminate

• Interest : the Borrower shall pay interest on the drawing(s) of the Loan at a rate of LIBOR (as displayed on the Bloomberg screen at 11:00 a.m. London time) plus 1.25 per cent per annum in accordance with the Agreement

• Purpose and application of : unless otherwise agreed by the Lender, the Loan shall be the Loan applied by the Borrower for the purpose of increasing the registered capital of WaveLab (Guangzhou), a wholly-owned subsidiary of the Borrower (and a non wholly-owned subsidiary of the Company and a member of the Group)

• Repayment : the Lender may, at any time upon giving notice in writing, demand repayment of the Loan in full or in part of up to the outstanding Loan not yet repaid and/or payment of any part of the interest accrued thereon as at the date of the written demand of the Lender

• Re-borrowing : Amounts repaid by the Borrower may not be re-borrowed under the Agreement

REASONS FOR AND BENEFITS OF THE AGREEMENT

The Agreement provides that, unless otherwise agreed by the Lender, the Loan shall be applied by the Borrower for the purpose of increasing the registered capital of WaveLab (Guangzhou). WaveLab (Guangzhou) is a non wholly-owned subsidiary of the Company and a member of the Group. The Loan will provide additional funding for the development of WaveLab (Guangzhou) which is principally engaged in the sale and manufacture of digital microwave system equipment. On this basis, the Directors are of the view that the Agreement is in the interest of the Company and its shareholders as a whole.

CONNECTED TRANSACTION

The Lender is a wholly-owned subsidiary of the Company and 60% of the entire issued share capital of the Borrower is owned by the Lender. The Borrower is hence a non wholly-owned subsidiary of the Company. As Mr Zheng Guo Bao, an executive Director and a connected person of the Company, is a shareholder of the Borrower holding 32% of the issued share capital of the Borrower, the Borrower (being a non wholly-owned subsidiary of the Company and an associate of Mr Zheng Guo Bao) is a connected person of the Company under the Listing Rules. To the knowledge of the Company, the remaining 8% of the issued share capital of the Borrower is held by third parties who are independent of and not connected with the directors, chief executive or substantial shareholders (as defined in the Listing Rules) of the Company or its subsidiaries or any of their respective associates.

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The Agreement was not entered into by the Lender in the ordinary and usual course of its business. As each of the Percentage Ratios calculated with reference to the Loan is less than 2.5% and the Agreement (including the terms relating to the interest payable on the Loan and the repayment of the Loan) is on normal commercial terms, the Agreement constitutes a connected transaction of the Company under Rule 14A.66(2) of the Listing Rules which is subject to the reporting and announcement requirements and is exempted from the independent shareholders’ approval requirement applicable to connected transactions involving the provision of financial assistance by a listed issuer to its connected person under Chapter 14A of the Listing Rules. To the knowledge of the Company, no loan agreement (other than the Loan) had been made between the Borrower and its shareholders (excluding the Lender) pursuant to the Agreement as at the date of this announcement.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and in the interest of the Company and its shareholders as a whole.

Details of the Agreement will be disclosed in the next published annual report and accounts of the Company in compliance with Rule 14A.45 of the Listing Rules.

GENERAL

The Borrower and its subsidiaries are principally engaged in the research, development and the sale and manufacture of digital microwave system equipment. The principal activity of the Company is investment holding while its subsidiaries are engaged in the research, development, manufacture and sale of wireless communication network enhancement system equipment and the provision of relating engineering services.

DEFINITIONS

• “Agreement” the loan agreement dated 20 June 2006 and entered into between the Lender and the Borrower relating to the Loan

• “associate” has the meaning ascribed to it under the Listing Rules “Borrower” WaveLab Holdings Limited, a company incorporated under the laws of the Cayman Islands owned as to 60% by the Lender and a non wholly-owned subsidiary of the Company

• “Company” Comba Telecom Systems Holdings Limited ( ), a company incorporated under the laws of the Cayman Islands the shares of which are listed on the main board of The Stock Exchange of Hong Kong Limited

• “connected person” has the meaning ascribed to it under the Listing Rules “Directors” the directors of the Company “Group” the Company and its subsidiaries

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• “HK$” Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of the PRC

• “Lender” Cascade Technology Limited, a company incorporated under the laws of the British Virgin Islands and a wholly-owned subsidiary of the Company

• “Listing Rules” The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “Loan” a loan in the principal amount of US$650,000 (equivalent to approximately HK$5,070,000) which the Lender agrees to make available for the Borrower subject to the terms and conditions of the Agreement

• “Percentage Ratios” the percentage ratios (other than the profits ratio) under Rule 14.07 of the Listing Rules

• “PRC” The People’s Republic of China, which for the purpose of this announcement excludes the Hong Kong Special Administrative Region of the PRC, the Macao Special Administrative Region of the PRC and Taiwan

• “US$” United States dollars, the lawful currency of the United States

• “WaveLab (Guangzhou)” WaveLab Telecom Equipment (Guangzhou) Limited, a company incorporated under the laws of the PRC which is wholly-owned by the Borrower (and a non wholly-owned subsidiary of the Company and a member of the Group)

• “%” cent

• per cent

• By order of the board of Directors Chan Kai Leung, Clement

• Executive Director and Company Secretary

Hong Kong, 20 June 2006

As at the date of this announcement, the board of directors of the Company comprises the following executive Directors: Mr FOK Tung Ling, Mr ZHANG Yue Jun, Mr CHAN Kai Leung, Clement, Mr WU Jiang Cheng, Mr YAN Ji Ci, Mr ZHENG Guo Bao and Mr YEUNG Pui Sang, Simon; and the following independent non-executive Directors: Mr YAO Yan, Mr LAU Siu Ki, Kevin and Mr LIU Cai.

Please also refer to the published version of this announcement in The Standard.

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