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

COMBA TELECOM SYSTEMS HOLDINGS LIMITED 京信通信系統控股有限公司

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

Interim results announcement

For the six months ended 30 June 2013

RESULTS

The board of directors (the “Board” or the “Directors”) of Comba Telecom Systems Holdings Limited (the “Company”) announces the unaudited interim results of the Company and its subsidiaries (collectively referred to as the “Group”) for the six months ended 30 June 2013, together with the comparative fi gures for the same period in 2012. These condensed consolidated interim fi nancial statements have not been audited, but have been reviewed by the Company’s audit committee.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2013

		For the six months	ended 30 June
	Notes	2013	2012
		(Unaudited)	(Unaudited)
		*HK$’000*	HK$’000
REVENUE	5	2,162,422	2,591,529
Cost of sales		(1,610,747)	(1,872,225)
Gross prof t		551,675	719,304
Other income and gains	5	18,614	23,840
Research and development costs		(86,461)	(200,602)
Selling and distribution expenses		(237,351)	(249,578)
Administrative expenses		(355,307)	(425,723)
Other expenses		(1,696)	(2,699)
Finance costs	7	(26,033)	(16,468)
LOSS BEFORE TAX	6	(136,559)	(151,926)
Income tax expense	8	(18,174)	(15,129)
LOSS FOR THE PERIOD		(154,733)	(167,055)
Attributable to:
Owners of the parent		(150,676)	(160,960)
Non-controlling interests		(4,057)	(6,095)
		(154,733)	(167,055)
LOSS PER SHARE ATTRIBUTABLE TO
ORDINARY EQUITY HOLDERS OF
THE PARENT (HK cents)	10
Basic		(9.98)	(10.68)
Diluted		(9.98)	(10.68)

Details of the dividends payable and proposed for the period are disclosed in note 9 to these

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2013

	For the six months	ended 30 June
	2013	2012
	(Unaudited)	(Unaudited)
	*HK$’000*	HK$’000
LOSS FOR THE PERIOD	(154,733)	(167,055)
OTHER COMPREHENSIVE INCOME/(LOSS)
Other comprehensive income/(loss) to be reclassif ed to
prof t or loss in subsequent periods:
Cash f ow hedge:
Effective portion of changes in fair value of
hedging instrument arising during the period	—	518
Reclassif cation adjustments included in
the condensed consolidated income statement	—	(170)
Income tax effect	—	(85)
	—	263
Exchange differences on translation of foreign operations	30,426	(67,460)
Net other comprehensive income/(loss) to be reclassif ed to
prof t or loss in subsequent periods	30,426	(67,197)
OTHER COMPREHENSIVE INCOME/(LOSS) FOR
THE PERIOD, NET OF TAX	30,426	(67,197)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD	(124,307)	(234,252)
Attributable to:
Owners of the parent	(121,105)	(227,477)
Non-controlling interests	(3,202)	(6,775)
	(124,307)	(234,252)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 June 2013

Notes NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease payments Goodwill Long-term trade receivables 12 Deferred tax assets Intangible assets Restricted bank deposits Total non-current assets CURRENT ASSETS Inventories 11 Trade receivables 12 Notes receivable Prepayments, deposits and other receivables Restricted bank deposits Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade and bills payables 13 Other payables and accruals Interest-bearing bank borrowings 14 Tax payable Provisions for product warranties Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	30 June 2013 (Unaudited) *HK$’000* 790,080 51,914 28,571 93,435 131,757 119,900 9,595 1,225,252 2,297,369 4,521,490 12,691 667,887 21,843 864,170 8,385,450 3,138,311 974,044 1,585,882 61,122 76,654 5,836,013 2,549,437 3,774,689	31 December 2012 (Audited) HK$’000 826,277 30,807 28,571 134,695 132,423 30,257 7,650 1,190,680 2,243,009 4,452,866 63,194 580,957 24,367 1,536,638 8,901,031 3,281,193 1,206,888 1,558,656 87,174 78,315 6,212,226 2,688,805 3,879,485

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 June 2013

NON-CURRENT LIABILITIES Deferred tax liabilities Total non-current liabilities Net assets EQUITY Equity attributable to owners of the parent Issued capital Treasury shares Reserves Non-controlling interests Total equity	30 June 2013 (Unaudited) *HK$’000* 17,341 17,341 3,757,348 152,620 (13,572) 3,564,965 3,704,013 53,335 3,757,348	31 December 2012 (Audited) HK$’000 17,326 17,326 3,862,159 152,620 (14,370) 3,667,372 3,805,622 56,537 3,862,159

Notes

1. CORPORATE INFORMATION

The Company was incorporated as an exempted company with limited liability in the Cayman Islands on 17 May 2002 under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.

The head offi ce and principal place of business of the Company is located at 611 East Wing, No. 8 Science Park West Avenue, Hong Kong Science Park, Tai Po, Hong Kong.

During the current period, the Group principally engaged in the research, development, manufacture and sale of wireless telecommunications network system equipment and the provision of related engineering services.

2. BASIS OF PREPARATION

The condensed consolidated interim fi nancial statements for the six months ended 30 June 2013 have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 Interim Financial Reporting issued by the Hong Kong

These condensed consolidated interim fi nancial statements do not include all the information and disclosures required in the annual fi nancial statements, and should be read in conjunction with the Group’s annual fi nancial statements for the year ended 31 December 2012.

3. ACCOUNTING POLICIES

The accounting policies adopted in the preparation of these condensed consolidated interim fi nancial statements are consistent with those followed in the preparation of the Group’s annual fi nancial statements for the year ended 31 December 2012, except for the adoption of new standards and interpretations as of 1 January 2013, noted below:

HKFRS 1 Amendments	Amendments to HKFRS 1_First-time Adoption of_
	Hong Kong Financial Reporting Standards — Government Loans
HKFRS 7 Amendments	Amendments to HKFRS 7_Financial Instruments:_
	Disclosures — Offsetting Financial Assets and Financial Liabilities
HKFRS 10	Consolidated Financial Statements
HKFRS 11	Joint Arrangements
HKFRS 12	Disclosure of Interests in Other Entities
HKFRS 10, HKFRS 11	Amendments to HKFRS 10, HKFRS 11 and HKFRS 12_— Transition Guidance_
and HKFRS 12 Amendments
HKFRS 13	Fair Value Measurement
HKAS 1 Amendments	Amendments to HKAS 1_Presentation of Financial Statements — Presentation of Items_
	of Other Comprehensive Income
HKAS 19 (2011)	Employee Benef ts
HKAS 27 (2011)	Separate Financial Statements
HKAS 28 (2011)	Investments in Associates and Joint Ventures
HK(IFRIC)-Int 20	Stripping Costs in the Production Phase of a Surface Mine
Annual Improvements	Amendments to a number of HKFRSs issued in June 2012
2009–2011 Cycle

The adoption of the above new standards and interpretations has had no material effect on the accounting policies of the Group and the methods of computation in these condensed consolidated interim fi nancial statements.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

4. OPERATING SEGMENT INFORMATION

The Group is principally engaged in the research, development, manufacture and sale of wireless telecommunications network system equipment and the provision of related engineering services. All of the Group’s products are of a similar nature and subject to similar risks and returns. Accordingly, the Group’s operating activities are attributable to a single operating segment.

Information about major customers

Revenue from continuing operations of approximately HK$1,180,104,000 (six months ended 30 June 2012: HK$1,349,911,000) and HK$306,102,000 (six months ended 30 June 2012: HK$572,908,000) were derived from two major customers, which accounted for 54.6% (six months ended 30 June 2012: 52.1%) and 14.2% (six months ended 30 June 2012: 22.1%) of the total revenue of the Group respectively.

5. REVENUE, OTHER INCOME AND GAINS

Revenue, which is also the Group’s turnover, represents the net invoiced value of goods sold and services rendered during the period, net of value-added tax (the “VAT”), and after allowances for returns and trade discounts. All signifi cant intragroup transactions have been eliminated on consolidation.

An analysis of revenue, other income and gains is as follows:

Revenue Manufacture and sale of wireless telecommunications network system equipment and the provision of related engineering services Warranty services Other income and gains Bank interest income Government subsidy VAT refunds* Others	For the six months ended 30 June 2013 2012 (Unaudited) (Unaudited) *HK$’000* HK$’000 1,986,888 2,495,824 175,534 95,705 2,162,422 2,591,529 5,031 4,635 2,010 12,580 11,573 — — 6,625 18,614 23,840

Comba Software Technology (Guangzhou) Limited (“Comba Software”), being designated as a software enterprise, was entitled to VAT refunds on the effective VAT rate in excess of 3% after the payment of statutory net output VAT of 17%. Such VAT refunds were approved by the Guangzhou Municipal Offi ce, SAT, P.R. China (廣州市國家稅務局) and received by Comba Software.

6. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging/(crediting):

Cost of inventories sold and services provided
Depreciation
Recognition of prepaid land lease payments
Amortization of computer software and technology
Research and development costs:
Deferred expenditure amortized
Current period expenditure
Minimum lease payments under operating leases in respect of
land and buildings
Employee benef t expense (including directors’ emoluments):
Salaries and wages
Staff welfare expenses
Equity-settled share option expense
Awarded share expense
Pension scheme contributions
#
Exchange loss, net
Provision for product warranties
Loss on disposal of items of property, plant and equipment

For the six months ended 30 June
2013
2012
(Unaudited)
(Unaudited)
HK$’000
HK$’000
1,585,416
1,833,484
51,678
57,854
491
382
3,954
2,604
1,138
—
85,323
200,602
86,461
200,602
53,379
53,301
378,746
459,383
38,642
40,793
4,554
23,001
14,942
33,869
37,234
43,150
474,118
600,196
24,978
23,502
14,843
21,607
1,605
—

At 30 June 2013, the Group had no forfeited contributions available to reduce its contributions to the pension schemes in future years (30 June 2012: Nil).

7. FINANCE COSTS

		For the six months	ended 30 June
		2013	2012
		(Unaudited)	(Unaudited)
		*HK$’000*	HK$’000
Interest on bank loans wholly repayable within f	ve years	26,033	16,468

8. INCOME TAX

Hong Kong profi ts tax has been provided at the rate of 16.5% (2012: 16.5%) on the estimated assessable profi ts arising in Hong Kong during the period. Taxes on profi ts assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Current — charge for the period Hong Kong Mainland China Elsewhere Deferred Total tax charge for the period	For the six months ended 30 June 2013 2012 (Unaudited) (Unaudited) *HK$’000* HK$’000 2,454 — 11,719 20,938 1,260 2,085 2,741 (7,894) 18,174 15,129

Comba Telecom Systems (Guangzhou) Limited (“Comba Guangzhou”) and Comba Telecom Technology (Guangzhou) Limited (“Comba Technology”), subsidiaries of the Company established in the PRC, were designated as High-New Technology Enterprises on 14 December 2009 and 16 December 2008, respectively. The qualifi cation of Comba Guangzhou and Comba Technology being designated as High-New Technology Enterprises were renewed in April 2013 and August 2011, respectively. Being High-New Technology Enterprises, Comba Guangzhou and Comba Technology were entitled to the preferential tax rate of 15% for the period ended 30 June 2013.

9. DIVIDEND

The directors of the Company have resolved not to declare an interim dividend for the six months ended 30 June 2013 (six months ended 30 June 2012: Nil).

10. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of basic and diluted loss per share is based on:

Loss Loss for the period attributable to ordinary equity holders of the parent, used in the basic and diluted loss per share calculations Shares Weighted average number of ordinary shares in issue during the period used in the basic and diluted loss per share calculation	For the six months ended 30 June 2013 2012 (Unaudited) (Unaudited) *HK$’000* HK$’000 (150,676) (160,960) Number of shares For the six months ended 30 June 2013 2012 (Unaudited) (Unaudited) 1,510,387,000 1,506,585,000

The computation of diluted loss per share for the six months ended 30 June 2013 and 2012 does not assume the conversion of the Company’s outstanding share options as the exercise price is higher than the Company’s share price. The effects of awarded shares have also been excluded from the computation of diluted loss per share for the six months ended 30 June 2013 and 2012 as their effects would be anti-dilutive.

11. INVENTORIES

Raw materials Project materials Work in progress Finished goods Inventories on site	30 June 2013 (Unaudited) *HK$’000* 201,015 138,917 202,729 455,683 1,299,025 2,297,369	31 December 2012 (Audited) HK$’000 168,603 122,008 168,700 429,797 1,353,901 2,243,009

12. LONG-TERM TRADE RECEIVABLES AND TRADE RECEIVABLES

The Group’s trading terms with its customers are mainly on credit. The credit period is generally for a period of three months and is extendable up to two years depending on the credit worthiness of customers. The balances also include retention money of approximately 10% to 20% of the total contract sum of each project, and are generally receivable after fi nal certifi cation of products by customers, which would be performed six to twelve months after sale, or upon completion of the one to two years warranty periods granted to customers. The credit terms for major customers are reviewed regularly by senior management. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise the credit risk. Overdue balances are reviewed regularly by senior management.

An aged analysis of the trade receivables as at the end of the reporting period, based on the invoice date, is as follows:

Within 3 months 4 to 6 months 7 to 12 months More than 1 year Provision for impairment Current portion Long term portion	30 June 2013 (Unaudited) *HK$’000* 1,238,082 459,039 1,514,810 1,420,846 4,632,777 (17,852) 4,614,925 (4,521,490) 93,435	31 December 2012 (Audited) HK$’000 1,928,491 723,420 823,579 1,129,660 4,605,150 (17,589) 4,587,561 (4,452,866) 134,695

The aged analysis of the trade receivables that are not considered to be impaired is as follows:

Neither past due nor impaired Past due	30 June 2013 (Unaudited) *HK$’000* 4,083,081 505,428 4,588,509	31 December 2012 (Audited) HK$’000 4,201,023 373,790 4,574,813

Receivables that were neither past due nor impaired relate to a large number of diversifi ed customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a signifi cant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances.

13. TRADE AND BILLS PAYABLES

An aged analysis of the trade and bills payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 3 months 4 to 6 months 7 to 12 months More than 1 year	30 June 2013 (Unaudited) *HK$’000* 1,353,668 570,476 880,806 333,361 3,138,311	31 December 2012 (Audited) HK$’000 1,474,001 678,770 759,928 368,494 3,281,193

The trade payables are non-interest-bearing and are mainly settled for a period of three months and are extendable up to two years.

14. INTEREST-BEARING BANK BORROWINGS

Analysed into: Within 1 year	30 June 2013 (Unaudited) *HK$’000* 1,585,882	31 December 2012 (Audited) HK$’000 1,558,656

All the bank loans at 30 June 2013 and 31 December 2012 were unsecured. Loans denominated in Hong Kong dollars amounted to HK$292,399,000 (31 December 2012: Nil) and loans denominated in United States dollars amounted to HK$1,293,483,000 (31 December 2012: HK$1,558,656,000).

In addition to the short-term interest-bearing facilities, the Group had entered into a three-year term loan facility agreement amounted to US$210,000,000 on 26 June 2012 (the “Facility Agreement”) with certain fi nancial institutions (the “Lenders”).

Under the Facility Agreement, there are specifi c performance obligations that Mr. Fok Tung Ling, who is the controlling shareholder of the Company, and Mr. Zhang Yue Jun, who is the substantial shareholder of the Company, shall maintain benefi cial ownership in aggregate, directly or indirectly, of at least 35% of the entire issued shares (of each class) of and equity interests in the Company free from any security. Pursuant to the Facility Agreement, both Mr. Fok Tung Ling and Mr. Zhang Yue Jun shall also maintain the ability in leading the management in determining the directions of overall strategies and business development for the Group. At the date of approval of these condensed consolidated interim fi nancial statements, such obligations have been complied with.

The Company and three of its wholly-owned subsidiaries, namely Comba Telecom Systems Investments Limited, Praises Holdings Limited and Comba Telecom Limited, were parties to the Facility Agreement who act as guarantors, to guarantee punctual performance of the obligations under the Facility Agreement which, inter alia, include the satisfaction of the fi nancial covenants under the Facility Agreement.

As at 30 June 2013, the Group had utilized US$171,000,000 (equivalent to HK$1,325,860,000) and repaid US$34,200,000 (equivalent to HK$265,172,000) under the Facility Agreement.

For the six months ended 30 June 2013, one of the fi nancial covenants under the Facility Agreement was not satisfi ed. According to the relevant accounting standard, the long-term portion of the loans under the Facility Agreement, which amounted to HK$530,345,000, was classifi ed as a current liability as at 30 June 2013.

Prior to the date of approval of these condensed consolidated interim fi nancial statements, the Group had applied and the Lenders of the Facility Agreement had granted to the Group waivers from strict compliance with the said fi nancial covenant. All other terms of the Facility Agreement will continue in full force and effect.

15. COMPARATIVE AMOUNTS

During the period, certain comparative amounts have been adjusted to conform with the current period’s presentation.

Management Discussion and Analysis

BUSINESS AND FINANCIAL REVIEW

During the fi rst half of 2013, the global economic environment remained challenging while showing signs of improvement. Recent market indicators showed that the U.S. economy was returning to healthy growth and the recession in the Eurozone was fading to some extent. On the other hand, growth in China’s GDP slowed down to 7.6% in the fi rst half of 2013. Moreover, weaker domestic demand and slower-than-expected growth within several key emerging market economies were additional concerns weighing on the market.

Revenue

For the six months ended 30 June 2013 (the “Current Period”), the Group’s revenue was HK$2,162,422,000 (2012: HK$2,591,529,000), representing a decrease of 16.6% over the revenue for the six months ended 30 June 2012 (the “Prior Period”). The decline was mainly attributable to the tight monetary supply in the PRC and the postponement of certain investment activities as PRC mobile operators were more prudent in the timing of investments.

In respect to international markets (including core equipment manufacturers), the Group recorded revenue of HK$431,739,000 (2012: HK$432,983,000), accounting for 20.0% (2012: 16.7%) of the Group’s total revenue. The growth in international customers was offset by the decline in core equipment manufacturers, resulting in a stable trend of the overall revenue of international markets.

During the Current Period, sales from third generation of mobile communications (“3G”) mobile network projects reported stable revenue of HK$990,580,000 (2012: HK$991,153,000), accounting for 45.8% (2012: 38.2%) of the Group’s total revenue.

By customers

Revenue generated from China Mobile Communications Corporation and its subsidiaries (collectively referred to as the “China Mobile Group”) decreased by 12.6% to HK$1,180,104,000 (2012: HK$1,349,911,000), accounting for 54.6% of the Group’s revenue in the Current Period compared to 52.1% in the Prior Period.

Revenue generated from China United Network Communications Group Company Limited (formerly known as “China United Telecommunications Corporation”) and its subsidiaries (collectively referred to as the “China Unicom Group”) decreased by 46.6% to HK$306,102,000 (2012: HK$572,908,000), accounting for 14.2% of the Group’s revenue in the Current Period compared to 22.1% in the Prior Period.

Revenue generated from China Telecommunications Corporation and its subsidiaries (collectively referred to as the “China Telecom Group”) increased by 8.1% to HK$214,701,000 (2012: HK$198,583,000), accounting for 9.9% of the Group’s revenue in the Current Period compared to 7.7% in the Prior Period.

Revenue generated from international customers and core equipment manufacturers stabilized at HK$431,739,000 (2012: HK$432,983,000), accounting for 20.0% of the Group’s revenue in the Current Period compared to 16.7% in the Prior Period. The international customers recorded an increase in revenue as a result of network deployment for some international sports tournaments and infrastructure such as the Brazil World Cup and Sochi Winter Games in Russia as well as the continuous demand for wireless solutions within certain international customers. However, the increase from international customers was offset by the decline in demands from the core equipment manufacturers.

By businesses

Revenue generated from the wireless access and transmission business in the Current Period decreased by 48.9% to HK$181,897,000 (2012: HK$355,640,000) and accounted for 8.4% (2012: 13.7%) of the Group’s revenue. The decline in revenue was mainly due to lower-than-expected sales from WLAN products due to change in market demand and the fact that Small Cell products have yet to reach large-scale ramp-up. However, the management expects the Small Cell revenue contribution should rise in the second half of this year in view of new network rollouts and upgrades.

Revenue generated from the wireless enhancement business in the Current Period decreased by 20.4% to HK$556,900,000 (2012: HK$699,227,000), accounting for 25.8% (2012: 27.0%) of the Group’s revenue. The decline in revenue was mainly due to the postponement of certain investment activities by mobile operators and fi erce market competition within the traditional wireless enhancement products which substantially affected the overall performance of this business segment.

Revenue generated from the antennas and subsystems business decreased by 18.2% to HK$711,931,000 (2012: HK$869,990,000), accounting for 32.9% (2012: 33.6%) of the Group’s revenue in the Current Period. The decrease in revenue was mainly due to a decrease in the demand for base station antennas as a result of the postponement of certain investment activities by the PRC mobile operators.

Thanks to the increasing contribution from system integration and maintenance projects, revenue from services increased by 6.8% to HK$711,694,000 (2012: HK$666,672,000), accounting for 32.9% (2012: 25.7%) of the Group’s revenue in the Current Period. Owing to the seasonal nature of the industry, most of the inspections will be completed in the second half of the year, thus the management expects the performance of the services segment will improve in the second half.

Gross profi t

During the Current Period, the gross profi t declined by 23.3% to HK$551,675,000 (2012: HK$719,304,000) as compared to the Prior Period. Meanwhile, the Group’s gross profi t margin dropped slightly to 25.5% in the Current Period, compared to 27.8% in the Prior Period. The slight decline was mainly caused by the change of product mix and the intense market competition. For the year ended 31 December 2012, the gross profi t margin was 25.5%.

To improve the gross profi t margin, the Group will strive to optimize the product mix by launching new products and solutions as well as to expand the scope of services to customers. In addition, the Group will continue to implement stringent cost control measures, ramp up the scale of new products and businesses, expand its market coverage and broaden its revenue sources to achieve economies of scale.

Research and development (“R&D”) costs

During the Current Period, R&D costs decreased by 56.9% to HK$86,461,000, representing 4.0% of the Group’s revenue (2012: HK$200,602,000, representing 7.7% of the Group’s revenue). The decrease in R&D costs was mainly attributable to: 1) capitalization of certain R&D costs amounting to HK$92,212,000; 2) the stringent cost control initiatives and the resources optimization and reallocation devoted to the development and expansion of product portfolio.

Despite lowering R&D costs, the Group has always attached great importance to R&D as it is strongly committed to product innovation. As at the end of the Current Period, the Group achieved signifi cant accomplishments in creating new products and solutions utilizing its own intellectual property rights and has applied for more than 1,400 patents (as at 31 December 2012: more than 1,300 patents).

Selling and distribution (“S&D”) expenses

During the Current Period, S&D expenses decreased slightly by 4.9% to HK$237,351,000, representing 11.0% of the Group’s revenue (2012: HK$249,578,000, representing 9.6% of the Group’s revenue). The decrease in S&D expenses was mainly attributable to the decrease in revenue and the cost saving program implemented by the Group since last year.

Administrative expenses

During the Current Period, administrative expenses were reduced by 16.5% to HK$355,307,000 representing 16.4% of the Group’s revenue (2012: HK$425,723,000, representing 16.4% of the Group’s revenue). The decrease in administrative expenses was mainly due to the optimization of the administrative staff and offi ce organizational structure.

Awarded shares expenses

On 12 April 2011, the Board of the Company resolved to award 26,000,000 awarded shares to 365 selected persons under the share award scheme adopted on 25 March 2011, by way of issue and allotment of new shares pursuant to the general mandate granted by the shareholders of the Company at the annual general meeting held on 24 May 2010. These awarded shares will be held in trust for the selected persons by the trustee appointed by the Company until the end of each vesting period. For these awarded shares, there are four vesting dates, which are 12 July 2011, 12 April 2012, 12 April 2013 and 12 April 2014. Upon each vesting date, those awarded shares will be transferred at no cost to the selected persons.

The fair value of the 26,000,000 awarded shares was approximately HK$226 million, measured at the closing market price of HK$9.32 per share at the date of grant and amortized over each of the vesting periods up to 12 April 2014. During the Current Period, the awarded shares expenses amounted to approximately HK$15 million. For the second half of 2013 and the full year of 2014, the awarded shares expenses are estimated to be approximately HK$8 million and HK$4 million respectively.

Finance costs

During the Current Period, fi nance costs rose 58.1% to HK$26,033,000, representing 1.2% of the Group’s revenue (2012: HK$16,468,000, representing 0.6% of the Group’s revenue). The rise in fi nance costs was mainly due to the increase in the borrowing costs and bank borrowings.

The management has always been prudent in managing credit risk and the level of bank borrowings as well as improving cash fl ow. To cope with the growth of the business, the management has closely monitored the latest developments of the fi nancing market and arranged the most appropriate fi nancing for the Group.

In addition, the management has utilized the advantages of interest and foreign exchange rates differentiation among different countries in order to minimize fi nance costs. As of 30 June 2013, the gross gearing ratio of the Group, defi ned as total interest-bearing borrowings divided by total assets, stood at a manageable level of 16.5% compared to 15.9% as of 30 June 2012. The gross gearing ratio of the Group was 15.4% as of 31 December 2012.

Operating loss

During the Current Period, the operating loss was HK$110,526,000 (2012: operating loss of HK$135,458,000) owing to decreases in both revenue and gross profi t margin.

Tax

During the Current Period, the overall taxation charge of HK$18,174,000 (2012: HK$15,129,000) was composed of a profi ts tax charge of HK$15,433,000 (2012: HK$23,023,000) and a deferred tax debit of HK$2,741,000 (2012: credit of HK$7,894,000). During the Current Period, the overall taxation charge was mainly due to the assessable profi ts in certain subsidiaries and a deferred tax debit.

Net loss

During the Current Period, loss attributable to shareholders was HK$150,676,000 (2012: net loss of HK$160,960,000). The net loss was mainly due to the decrease in the Group’s revenue during the Current Period.

PROSPECTS

Despite an uncertain economic environment, the telecommunications industry continued to show positive performance with uninterrupted growth of both mobile subscribers and data usage. As at 30 June 2013, the number of global mobile subscriptions was more than 6.4 billion and is expected to reach 9.1 billion by the end of 2018, according to the market estimates. Thanks to the growing popularity of affordable smartphones, smartphone penetration has maintained a strong upward trend. At present, there are more than 1.2 billion smartphone subscriptions worldwide, and China alone accounts for approximately 20%, with growth showing no signs of abating.

Based on market projections, global data traffi c will increase in multiples, driven by fast rising mobile data subscriptions, more data-hungry devices and rapid development of mobile apps. To meet the accelerating growth in mobile communications and data traffi c, upgrade of existing networks and commercial launches of fourth generation of mobile communications (“4G”) longterm evolution (“LTE”) services around the world are gathering pace. 4G brings a better user experience by providing faster internet access. In China, the market is expecting the Ministry of Industry and Information Technology to release 4G telecommunications licenses by the end of this year. In addition to yearly investments in network upgrades and maintenance, mobile operators are anticipated to continue increasing their investments in 4G networks for service rollout and network migration. These investments will present immense opportunities to the Group in the future. Globally, against the backdrop of economic recovery, with its efforts at strengthening branding and reputation, improving product quality together with its greater market experience, the management expects that the Group’s international markets should continue to grow next year.

Under these circumstances, the management remains cautiously optimistic about the future prospects of the industry and the Group.

Wireless access

The Group has remained at the forefront of technological innovation within the industry, consistently demonstrating its leadership in product innovation such as in the development and deployment of a series of Small Cell products within mobile networks. These advances greatly enhance its core competitiveness and mark a new milestone in the Group’s progress. Small Cell business development in China is progressing well, with commercialization and trial runs in different provinces. Small Cell solutions alleviate costly network traffi c congestion by offl oading hotspot traffi c while providing better coverage of blind spots and weak coverage areas. It also helps accelerate overall LTE network deployment and provide end users with a better mobile experience.

With the rapid development of the mobile internet and the substantially increasing demand for data usage driven by the increasing numbers of mobile users, it is believed that greater investment will be directed towards both network upgrades and rollouts of 4G LTE networks. The Group plans to seize the huge opportunities thus presented by further strengthening its core competitiveness and achieving business transformation via Small Cell products.

Wireless enhancement

As mobile network development has evolved far beyond simple connectivity, mobile operators must address new network challenges. This need will only intensify with the advent of LTE which requires higher capacities and enhanced performance. Hence, wireless enhancement becomes an on-going mission of mobile operators to ensure network quality and to address customers’ growing data demand thereby providing an optimal mobile user experience, especially when enhancing multi-network co-ordination. The Group’s new generation of wireless solutions help facilitate rapid network rollouts for mobile operators. The Multi-Service Fiber Optic Distributed Access System (“MDAS”) solutions launched by the Group last year are able to support 4G, 3G, 2G and WLAN simultaneously and have been successfully identifi ed by some mobile operators as a key product for both network coverage and enhancement. MDAS solutions are especially suitable for large scale applications such as within stadiums and shopping malls. In view of the increasing long-term demand, the Group intends to continue to develop and offer more end-to-end wireless solutions.

Globally, the Group continues to actively expand into international markets and explore more opportunities to further strengthen its market presence there. It has achieved several landmark wins including wireless projects for the 2014 World Cup in Brazil and the 2014 Winter Games in Russia. In particular, the Group completed the initial phase of the World Cup project in time for the recent 2013 Confederations Cup which are held in the same World Cup venues and are now proceeding to full implementation in time for the tournament. In Russia, the Group has already completed the fi rst phase of a multi-stage project to supply wireless solutions at venues hosting the 2014 Winter Games events to be held in Sochi. In addition, the Group will be expanding the scope of solutions and providing solutions to more sporting venues for the 2014 Winter Games. Looking ahead, capitalizing on its abundant experience of providing wireless solutions for prestigious projects, the Group is striving to expand its project portfolio across different regions.

Antennas and subsystems

The Group has consistently demonstrated its leadership in product quality as evidenced by being ranked among the top three suppliers of base station antennas by market share, according to the latest global market research report conducted by EJL Wireless Research in 2012. The Group has an extensive antenna product portfolio from single-band to multi-band, covering all frequencies and standards to cater to different needs of customers. Early this year, the Group unveiled a new generation of LTE antennas which can support ultra-wideband with large range of variable electronic tilt, excellent beam shaping features and high reliability, thereby providing customers with a smooth migration solution from 2G/3G to LTE with an unrivalled cost/performance ratio.

Looking ahead, the Group will solidify its leading position by offering more innovative products and technologies which support 4G, 3G and 2G multi-standard and multi-network deployment along network migration.

Wireless transmission

Digital Microwave Systems

The Group’s end-to-end wireless backhaul solutions enable faster delivery and higher effi ciency of microwave links with fl exible networking. The solutions have been deployed in a wide range of applications including 2G, 3G and 4G mobile backhaul segments and support a smooth transition to all-IP networks for increased capacity. The Packet Transmission Network (“PTN”) solutions, which the Group launched last year, received positive feedback from clients. The PTN enables both voice and data transmission over IP backhaul with high capacity and throughput. Thus, the PTN is an optimal solution for data-intensive 3G and 4G networks and is expected to become more widely adopted by mobile operators in view of the forthcoming 4G network deployments. The Group is pushing full speed ahead to promote these new products and solutions in both the PRC and international markets.

Satellite emergency communications

Aligned with the complete end-to-end wireless solutions of the Group, satellite communications solutions play a key role in providing reliable and emergency communications networks during natural disasters and large-scale events. When Ya’an City in Sichuan Province was hit by a 7.0 magnitude earthquake in April 2013, the Group swiftly set up an earthquake disaster relief and response team to help restore mobile networks to support on-site disaster relief. Moving forward, the Group expects more opportunities will emerge in view of stronger emphasis placed by the PRC government on the development of emergency communications. At the same time, the Group intends to drive further technology advances through innovation in order to launch more new innovative products to the market.

Services

The Group has an unwavering commitment to maintain its competitive edge and provide bestin-class services to customers while consistently earning their trust. Adhering to the philosophy of value creation with our commitment to R&D, the Group brings together the technologies, skills and expertise required for the increasingly sophisticated heterogeneous networks to address evolving market dynamics and radical changes in user behavior. Currently, the Group’s services team comprises more than 5,000 seasoned professionals spanning across the PRC and several international markets, such as South America, southeast Asia, etc. They are dedicated to provide customized services to address clients’ specifi c requirements.

Looking ahead, the Group is strengthening its product portfolio and services capabilities aimed at offering more value-added services to improve its value proposition to customers.

Rail communication

To seize the immense market opportunities associated with extensive rail transportation development under the PRC government’s plan in recent years, the Group is unveiling several solutions focusing on telecommunications projects for rail transportation. The management identifi es this new business unit as a new growth driver in the future and more cross-product synergies are expected to be created.

Conclusion

The global telecommunications industry is now experiencing steady growth. In China, modern industrialization, informationization and urbanization are also stimulating demand which presents enormous opportunities to the Group.

Over the years, by adhering to the industry trend and catering to the customers’ demands, the Group has adopted innovative marketing strategy, production technology, solutions and management practices and has therefore progressively established its leading position in the market both at home and abroad. At present, the Group’s development has reached a key turning point and its products are undergoing transformation to capture the opportunities available in the era of data. Although the Group has encountered challenges in the transformation process, through its years of technology development and experience, the management is fully confi dent it is moving in the right direction of product transformation and believes the efforts and resources it has devoted will soon reap rewards.

On the other hand, the management will stay prudent in maintaining a healthy fi nancial position of the Group via strengthening its organizational structure, streamlining its production processes, adopting stringent cost control measures and striving to maximize its operational effi ciency.

This year marks the 10th listing anniversary of the Group and the Board of the Company would like to take this opportunity to extend its heartfelt gratitude to all staff for their dedicated efforts and contributions. We also greatly appreciate the continuous support of customers, suppliers, shareholders and business associates. The Group is sparing no effort to achieve satisfactory results through our innovative products and commitment to excellence in management.

LIQUIDITY, FINANCIAL RESOURCES & CAPITAL STRUCTURE

The Group generally fi nances for its operations from cash fl ows generated internally and bank borrowings. As at 30 June 2013, the Group had net current assets of HK$2,549,437,000. Current assets comprised inventories of HK$2,297,369,000, trade receivables of HK$4,521,490,000, notes receivable of HK$12,691,000, prepayments, deposits and other receivables of HK$667,887,000, restricted bank deposits of HK$21,843,000, and cash and cash equivalents of HK$864,170,000. Current liabilities comprised trade and bills payables of HK$3,138,311,000, other payables and accruals of HK$974,044,000, interest-bearing bank borrowings of HK$1,585,882,000, tax payable of HK$61,122,000 and provisions for product warranties of HK$76,654,000.

The average receivable turnover for the Current Period was 388 days compared to 315 days for the Prior Period. The Group’s trading terms with its customers are mainly on credit. The credit period is generally for a period of three months and is extendable up to two years depending on the customer’s credit worthiness, except for those retention money generally receivable after fi nal certifi cation of products by customers, which would be performed six to twelve months after sale, or upon completion of the one to two years warranty periods granted to customers. The average payable turnover for the Current Period was 364 days compared to 288 days for the Prior Period. The average inventory turnover for the Current Period was 257 days compared to 239 days for the Prior Period.

As at 30 June 2013, the Group’s cash and bank balances were mainly denominated in Renminbi (“RMB”), Hong Kong dollars (“HK$”) and United States dollars (“US$”) while the Group’s bank borrowings were mainly denominated in US$ and HK$. The interest rates on the Group’s bank borrowings are principally on a fl oating basis at prevailing market rates.

Details of the Facility Agreement are set out in note 14 to these condensed consolidated interim

The Group’s revenue and expenses, assets and liabilities are mainly denominated in RMB, HK$ and US$. As the Group’s revenue is substantially denominated in RMB, the Board of the Company currently considers that the appreciation of RMB should have a mildly favorable impact on the Group’s business.

The Group’s gross gearing ratio, calculated as total interest-bearing debts (including bank borrowings and advances) over total assets, was 16.5% as at 30 June 2013 (31 December 2012: 15.4%).

MATERIAL ACQUISITIONS AND DISPOSALS

The Group has not conducted any material acquisitions and disposals of subsidiaries and associated companies during the Current Period.

CHARGE ON ASSETS

As at 30 June 2013, there was no charge on the Group’s assets (31 December 2012: Nil).

CONTINGENT LIABILITIES

As at 30 June 2013, the Group had contingent liabilities of HK$52,236,000 (31 December 2012: HK$39,072,000), which mainly included guarantees given to banks in respect of performance bonds.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2013, the Group had approximately 9,800 staff. The total staff costs, excluding capitalised R&D staff cost, for the Current Period were HK$474,118,000. The Group offers competitive remuneration schemes to its employees based on industry practices, legal requirements, as well as the employees’ and the Group’s performance. In addition, share options, awarded shares and discretionary bonuses are granted to eligible employees based on the employees’ performance, the Group’s results, and in accordance with the share option schemes and the share award scheme of the Company. Mandatory provident fund or staff pension schemes are also provided to relevant staff in Hong Kong, the PRC or elsewhere in accordance with relevant legal requirements. The Group also provides training to the staff to improve their skills and develop their respective expertise.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES OF THE COMPANY

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the Current Period.

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

During the Current Period, the Board of the Company reviewed daily governance of the Group in accordance with the code provisions (the “Code Provisions”) as set out in the Corporate Governance Code contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and considered that, during the Current Period, the Company regulated its operation and carried out appropriate governance in accordance with the Code Provisions. The Company has fully complied with the Code Provisions.

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as its own code of conduct for dealings in securities transactions of the Company by its Directors. Specifi c enquiries have been made to all Directors, and they have confi rmed their compliance with the required standard as set out in the Model Code during the Current Period.

AUDIT COMMITTEE

The Company has established the audit committee in accordance with the Listing Rules. The audit committee, together with the management, has reviewed the accounting principles, standards and methods adopted by the Company, and studied matters relating to auditing, internal controls and fi nancial reporting, including reviewed the unaudited accounts for the Current Period. The audit committee has given its consent to the accounting principles, standards and methods adopted by the Company for the unaudited condensed consolidated interim fi nancial statements for the Current Period.

PUBLICATION OF INTERIM REPORT

A copy of interim report containing all information required by relevant paragraphs of Appendix 16 to the Listing Rules will be despatched to shareholders and published on the offi cial website of Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company’s website (http://www.comba-telecom.com) in due course.

By order of the Board Comba Telecom Systems Holdings Limited Fok Tung Ling Chairman

Hong Kong, 23 August 2013

As at the date of this announcement, the Board comprises the following executive Directors: Mr. FOK Tung Ling, Mr. ZHANG Yue Jun, Mr. TONG Chak Wai, Wilson, Mr. WU Jiang Cheng, Mr. YAN Ji Ci, Mr. ZHENG Guo Bao, Mr. YEUNG Pui Sang, Simon and Mr. ZHANG Yuan Jian; and the following independent non-executive Directors: Mr. LIU Cai, Mr. LAU Siu Ki, Kevin, Mr. LIN Jin Tong and Mr. QIAN Ting Shuo.