Computer And Technologies Holdings Limited — Annual Report 2011

Mar 26, 2012

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.

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CHINA AEROSPACE INTERNATIONAL HOLDINGS LIMITED

中國航天國際控股有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 31)

ANNOUNCEMENT OF ANNUAL RESULTS 2011

The Board of Directors (the “Board”) of China Aerospace International Holdings Limited (the “Company”) is pleased to announce the audited results and financial statements of the Company and its subsidiaries (collectively the “Group”) for the financial year ended 31 December 2011.

SUMMARY OF RESULTS

The audited consolidated results of the Group for the year ended 31 December 2011 and the comparative figures of the same period in 2010 are as follows:

CONSOLIDATED INCOME STATEMENT

Notes Turnover 3 Cost of sales Gross profit Other income 4 Gain on disposal of a subsidiary Other gains and losses 4 Selling and distribution costs Administrative expenses Other expenses Fair value changes of investment properties Finance costs Share of results of jointly controlled entities Profit before taxation 5 Taxation 6 Profit for the year Attributable to: Owners of the Company Non-controlling interests Earnings per share - basic 7	2011 HK$'000 2,187,006 (1,742,759) 444,247 62,153 100,592 2,284 (51,610) (258,230) (22,043) 289,524 (1,104) (1,766) 564,047 (86,372) 477,675 404,772 72,903 477,675 HK13.12 cents	2010 HK$’000 1,879,745 (1,473,428)
		406,317 78,949 — 39,071 (45,356) (231,142) (17,681) 189,995 (747) 58
		419,464 (75,335)
		344,129
		292,478 51,651
		344,129
		HK9.69 cents

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2011

OR THE YEAR ENDED 31 DECEMBER 2011
	2011	2010
	HK$'000	HK$’000
Profit for the year	477,675	344,129
Other comprehensive income includes:
Available-for-sale investments
Fair value loss arising during the year	(60,801)	(20,972)
Reclassification adjustments for the cumulative gain
included in profit or loss upon disposal	(50,183)	—
	(110,984)	(20,972)
Exchange differences arising on translating foreign operations
Exchange gain arising during the year	133,885	111,503
Translation of jointly controlled entities	2,882	279
Reclassification adjustment for cumulative exchange
differences included in profit or loss upon disposal or
deregistration of foreign operations	2,797	2,921
	139,564	114,703
Property revaluation reserve
Increase in fair value of land and building transferred to	—	9,004
investment properties
Deferred tax liability arising on revaluation of properties	—	(1,893)
	—	7,111
Other comprehensive income for the year	28,580	100,842
Total comprehensive income for the year	506,255	444,971
Total comprehensive income attributable to:
Owners of the Company	406,235	369,008
Non-controlling interests	100,020	75,963
	506,255	444,971

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER

Notes Non-current assets Property, plant and equipment Prepaid lease payments Investment properties Goodwill Intangible asset Interests in associates Interests in jointly controlled entities Available-for-sale investments Prepayment for land development Land development expenditure Deposit paid for construction cost of investment properties under construction Deposit paid for acquisition of an intangible asset and property, plant and equipment Current assets Inventories 9 Prepaid lease payments Loans receivable Financial assets at fair value through profit or loss Taxation recoverable Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables 10 Amount due to an associate Taxation payable Bank borrowings Obligations under a finance lease Other loan Net current assets Total assets less current liabilities	2011 HK$'000 858,161 76,568 2,144,333 51,001 21,218 12,346 62,862 42,264 1,943 642,175 70,067 11,714 3,994,652 232,144 448,723 2,374 — 62,911 839 24,942 1,151,015 1,922,948 678,713 1,050 53,646 234,074 65 8,848 976,396 946,552 4,941,204	2010 HK$’000 649,696 45,746 1,713,848 — — — 61,746 173,040 148,053 77,767 — —
		2,869,896
		191,985 403,025 1,733 70,269 2,864 1,514 43,529 1,489,728
		2,204,647
		691,727 1,050 61,916 — 767 8,482
		763,942
		1,440,705
		4,310,601

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Non-current liabilities Obligations under a finance lease Capital and reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests	2011 HK$'000 46,913 274,433 — 321,346 4,619,858 308,502 3,617,415 3,925,917 693,941 4,619,858	2010 HK$’000 — 187,772 65
		187,837
		4,122,764
		308,502 3,242,030
		3,550,532 572,232
		4,122,764

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2011

1. BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance. The consolidated financial statements have been prepared on the historical cost basis, except for certain properties and financial instruments, which are measured at fair values.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

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3. SEGMENT INFORMATION

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For the year ended 31 December 2011

Hi-Tech Manufacturing Business Plastic products Liquid crystal display Printed circuit boards Intelligent chargers Industrial property investment New Material Business Polyimide films manufacturing Aerospace Service Property investment in Shenzhen Aerospace Science & Technology Plaza Land development in Hainan Launching Site Complex Zone Internet of Things Reportable segment total Elimination Other Business Unallocated corporate income Unallocated corporate expenses Gain on disposal of a subsidiary Recovery of loans receivable Reversal of impairment loss recognised in respect of loans receivable Share of results of jointly controlled entities Finance costs Profit before taxation	Turnover	Total turnover HK$'000 887,249 306,003 450,362 586,720 26,688 2,257,022 20,843 － － － － 2,277,865 (92,951) 2,092 2,187,006	Segment results HK$'000 59,803 12,391 90,997 39,286 **14,351 **
	External sales Inter-segment sales HK$'000 HK$'000 808,160 79,089 306,003 － 450,362 － 586,720 － 12,826 13,862 2,164,071 92,951 20,843 － － － － － － － － － 2,184,914 92,951 － (92,951) 2,092 － 2,187,006 －
			216,828
			(760)
			248,679 (12,152) (7,978)
			228,549
			444,617 － 17,536
			462,153 51,171 (77,627)
			435,697 100,592 29,010 1,618 (1,766) (1,104)
			564,047

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For the year ended 31 December 2010

Hi-Tech Manufacturing Business Plastic products Liquid crystal display Printed circuit boards Intelligent chargers Industrial property investment Aerospace Service Property investment in Shenzhen Aerospace Science & Technology Plaza Land development in Hainan Launching Site Complex Zone Reportable segment total Elimination Other Business Unallocated corporate income Unallocated corporate expenses Reversal of impairment loss recognised in respect of loans receivable Share of results of jointly controlled entities Finance costs Profit before taxation		Turnover	Total turnover HK$'000 730,518 343,391 395,616 476,919 24,899 1,971,343 － － － 1,971,343 (92,822) 1,224 1,879,745	Segment results HK$'000 65,310 11,717 95,116 35,348 8,340
	External sales HK$'000 650,770 343,391 395,616 476,919 11,825 1,878,521 － － － 1,878,521 － 1,224 1,879,745	Inter-segment sales HK$'000 79,748 － － － 13,074 92,822 － － － 92,822 (92,822) － －
				215,831
				177,080 (14,800)
				162,280
				378,111 － (2,170)
				375,941 66,750 (46,957)
				395,734 24,419 58 (747)
				419,464

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The Group's other income mainly comprises: Recovery of loans receivable (note a) Bank interest income Waiver of debts (note b) The Group's other gains and losses comprise: Reversal of impairment loss recognised in respect of loans receivable (note a) Net exchange gain (Allowance for) reversal of allowance for doubtful trade debts Loss on deregistration of a subsidiary Gain (loss) on disposal of property, plant and equipment Net loss from change in fair value of financial assets at fair value through profit or loss

2011 2010 HK$'000 HK$’000 29,010 － 16,308 11,082 － 31,063 1,618 24,419 6,804 11,186 (638) 8,256 － (2,921) 56 (1,421) (5,556) (448)

Notes:

• a. During the year, the Group recovered an amount of HK$117,657,000 from a borrower pursuant to a settlement deed entered into between a Company's subsidiary and the borrower on 14 September 2007 in respect of the Group's interest bearing loans receivables. The excess of HK$30,628,000, representing the amount recovered over the carrying amount of the loan receivable of HK$70,269,000 net of the transaction costs incurred relating to the debt collections, is recognised in profit or loss in the current year whereby amounts of HK$1,618,000 and HK$29,010,000 are recorded as reversal of impairment loss recognised in respect of loans receivable and recovery of loans receivable respectively. The recovery of loans receivable is mainly related to the additional amount recovered upon settlement net of transaction costs.

• b. Being derecognition of financial liabilities upon the fulfilment of repayment terms specified in a debt restructuring deed entered into with a bank in prior years.

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Profit before taxation has been arrived at after charging (crediting): Depreciation on - owned assets - assets held under a finance lease Amortisation of prepaid lease payments Amortisation of intangible asset (included in cost of sales) Auditors' remuneration - current year - (over)underprovision in prior year Minimum lease payments under operating leases in respect of land and buildings Research and development expenses (included in other expenses) Staff costs, including directors' remuneration Reversal of allowance for obsolete inventories (note) Cost of inventories charged to profit or loss Gross rental income Less: Direct operating expenses from investment properties that generated rental income during the year	2011 HK$'000 71,302 250 1,952 971 4,192 (25) 10,905 21,309 366,981 (1,241) 1,744,000 (14,918) 2,156 (12,762)	2010 HK$’000 62,806 250 1,081 － 3,999 47 8,230 17,681 314,578 (4,753) 1,476,906 (13,049) 1,275
		(11,774)

Note: Cost of sales includes reversal of allowance for obsolete inventories of HK$1,241,000 (2010: HK$4,753,000) which were used in the production of finished goods sold in the current year.

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6. TAXATION

The tax charge for the year comprises:

Current tax: Hong Kong Profits Tax PRC Enterprise Income Tax (Over)underprovision in prior years: Hong Kong Profits Tax PRC Enterprise Income Tax Deferred tax Current year	2011 HK$'000 14,111 9,372 23,483 107 (5,513) (5,406) 68,295 86,372	2010 HK$’000 15,032 13,436
		28,468
		254 －
		254
		46,613
		75,335

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.

Under the Law of the People's Republic of China on Enterprise Income Tax (the "EIT Law") and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards. For certain of the Company's subsidiaries situated in Shenzhen Special Economic Zone of the PRC, they were subject to a corporate income tax at a rate of 24% (2010: 22%) on its assessable profits arising in the PRC for the year, though the tax rate will gradually increase to 25% by 2012.

Overprovision in previous years mainly included tax refund from tax bureau to certain subsidiaries of the Company in the PRC for successfully claiming during the current year as High and New Technology Enterprise status since 2010. The income tax rate of these subsidiaries is thus reduced to 15%.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

7. EARNINGS PER SHARE

The calculation of basic earnings per share attributable to the owners of the Company for the year is based on the profit for the year attributable to owners of the Company of HK$404,772,000 (2010: HK$292,478,000) and on 3,085,022,000 shares in issue (2010: 3,017,412,000 weighted average number of shares in issue) during the year.

8. DIVIDENDS

Dividends recognised as distribution during the year: 2010 final, paid - HK1 cent (2010: 2009 final dividend of HK2 cents) per share	2011 HK$'000 30,850	2010 HK$’000 61,700

A final dividend of HK1 cent per share in respect of the year ended 31 December 2011 (2010: HK1 cent) has been proposed by the directors and is subject to approval by the shareholders in the annual general meeting.

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9. TRADE AND OTHER RECEIVABLES

Trade receivables Other receivables, deposits and prepayments	2011 HK$'000 420,616 (24,776) 395,840 52,883 448,723	2010 HK$’000 381,377 (24,242) 357,135 45,890
		403,025

The following is an aged analysis of trade receivables presented based on invoice date at the end of the reporting period:

Within 90 days Between 91 - 180 days	2011 HK$'000 368,256 27,584 395,840	2010 HK$’000 339,791 17,344
		357,135

Included in trade receivables is amount due from a non-controlling shareholder of a subsidiary of HK$9,827,000 (2010: nil) with a credit period of 90 days and the amount was past due at 31 December 2011.

The Group allows an average credit period of 90 days to its trade customers. Receivables are unsecured and interest-free. Before accepting any new customer, the Group will internally assess the credit quality of the potential customer and defines appropriate credit limits.

10. TRADE AND OTHER PAYABLES

Trade payables Accrued charges	2011 HK$'000 221,287 102,084 355,342 678,713	2010 HK$’000 264,729 98,082 328,916
		691,727

The following is an aged analysis of trade payables based on invoice date at the end of the reporting period:

Within 90 days Between 91 - 180 days Between 181 - 365 days Over 1 year	2011 HK$'000 207,316 2,755 681 10,535 221,287	2010 HK$’000 248,877 3,519 849 11,484
		264,729

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CHAIRMAN’S STATEMENT

RESULTS

For the year ended 31 December 2011, the Company and its subsidiaries reported a turnover of HK$2,187,006,000 (2010: HK$1,879,745,000), representing an increase of approximately 16.35% over last year. The profit attributable to shareholders was HK$404,772,000 (2010: HK$292,478,000), representing an increase of approximately 38.39%.

Despite the impact of the adverse effects caused by the European as well as American sovereign debt crises, the earthquake and tsunami calamities in Japan, the flood disaster in Thailand and the persistent high inflation, the sales income of the hi-tech manufacturing business of the Company had achieved a considerable growth when compared with last year. On the other hand, the benefit from the investment property under construction, the project of Shenzhen Aerospace Science & Technology Plaza, which continued to state at fair value, the disposal of non-core asset, and the recovery of a loan receivable had contributed profits to the Company. On the whole, the sales income of the Company had maintained a steady growth while a higher level of profit was achieved when comparing to that of last year. The Board of Directors has proposed the distribution of final dividend of HK1 cent per share for the shareholders in return.

BUSINESS REVIEW

According to the medium-term development plan, the Company will strive to become an overseas capital operation platform with leading edges for China Aerospace Science & Technology Corporation (“CASC”). The Company is actively carrying out various key businesses according to the plan, so as to ensure the persistent steady growth of the hi-tech manufacturing, and the gradual and orderly progress of the construction works of the two hi-tech property projects, namely, the Shenzhen Aerospace Science & Technology Plaza and the Complex Zone of the Launching Site in Hainan Province. In addition, through the acquisition of a polymide new material business and the establishment of a company for internet of things, the Company had made a significant initial move in terms of developing new businesses which are related to the strategic emerging industries under China’s “Twelfth Five-Year Plan”.

Hi-Tech Manufacturing

In 2011, the hi-tech manufacturing business of the Company had overcome the adverse factors including the soaring cost, the shortage of manpower resources and the appreciation of Renminbi. Pivoted on the timely technology advancement, the reinforcement of management and the enhancement of market development, the hi-tech manufacturing business had reached its record high in terms of both revenue and earnings, with a turnover of HK$2,164,071,000 (2010: HK$1,878,521,000), representing an increase of 15.20% over last year. The profit amounted to HK$216,828,000 (2010: HK$215,831,000), representing a slight growth when compared with last year.

During the year, the technology advancement of the hi-tech manufacturing business mainly focused on expanding productivity and upgrading environmental protection facilities. In order to promote meticulous management, the hi-tech manufacturing had implemented various effective measures to improve production workflow, recycle and re-use of waste and old materials, impose tight control on material costs, upgrade the product quality, control the inventory and accounts receivable, and so on. In market development, the hi-tech manufacturing had adopted the strategies of increasing sales contributed by existing clients, developing new clients, exploring new products and new markets, and obtained a satisfactory result.

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The Complex Zone of the Launching Site in Hainan Province

In 2011, the project implementation of the Complex Zone of the Launching Site in Hainan mainly involved expropriation of lands and establishment of resettlement zones. Currently, the compensation agreement on land expropriation had been signed with the local residents of over 80% of the land use area of the project. The master plan and the implementation plan of the construction works of the resettlement zones had been completed, with the temporary permit granted for the planning of the construction works in the resettlement zones. As for the Hainan Space Park, the initial design of the construction concept had been completed. On the other hand, according to the negotiation with the organizer of the Space Home Pavilion of the Shanghai World Expo, the permanent home for the Space Home Pavilion will be located in the Complex Zone of the Launching Site in Hainan Province. The design scheme for the relocation of the Space Home Pavilion had been completed.

Shenzhen Aerospace Science & Technology Plaza

In early 2011, Aerospace Science & Technology Finance Company Limited* (“航天科技財務有限責任公 司”), a subsidiary of CASC, formed a syndicate with the Bank of China and the Industrial and Commercial Bank of China in respect of the provision of a loan facility amounting to RMB1,500,000,000 to finance the construction of Shenzhen Aerospace Science & Technology Plaza. Amid the economic tightening environment, the syndicated loan has timely provided a proper financing arrangement for the project of Shenzhen Aerospace Science & Technology Plaza.

During the year, the adjusted design of the construction drawing for the project of Shenzhen Aerospace Science & Technology Plaza was completed. The construction permit for piling works and the planning permit for construction works were obtained as well. In August 2011, the construction progress was affected to a certain extent by the holding of the 26[th] Universiade Shenzhen in Shenzhen. At present, the progress of the piling works of the project had been expedited. In order to comply with the marketing work after completion of the project in future, a professional advisory team had been employed to conduct in-depth study with respect to the market position and preliminary market development of the project.

New Materials

Leveraging on China robustly promoting the seven strategic industries as part of its Twelfth Five-Year Plan and CASC striving for opportunities to further drive the aerospace technology applications business, the Company has initiated prudent maneuvers with regard to its business development. During the year, the Company completed the acquisition of a 55% stake in Shenzhen Rayitek Hi-tech Film Company Limited* (深圳瑞華泰薄膜科技有限公司) (“Shenzhen Rayitek”) as the first step in expanding into the promising polymer new material business.

Shenzhen Rayitek is a high-tech company specializes in research, manufacture and market polyimide films and related composite materials. Since its establishment in 2004, Shenzhen Rayitek has been committed to the research and development of polyimide new materials. Polyimide, being a special industrial material attributable to its excellent performance in terms of integrated extreme-heat-resistance and insulation resistance, has already been widely adopted in different areas such as aviation, aerospace, microelectronics, nanotechnology, liquid crystal display technology, separator material technology, and laser technology.

The polyimide film products of Shenzhen Rayitek are used as the insulating materials of high-end power and electrical equipment, the substrates of flexible printed circuit (FPC), tape automated bonding (TAB) and pressure-sensitive tape (PST), which are mainly applied in fields ranging from aviation, aerospace, microelectronic devices, electrical equipment, as well as information technology industry. In 2011, the production line of Shenzhen Rayitek had been put in operations and Shenzhen Rayitek's production technology was honored as the "State's High-tech Industrial Demonstrative Project" by the China National Development and Reform Commission.

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Internet of Things

In May 2011, the Company, by means of strategic cooperation with the international experts of internet of things, set up Digilink Systems Limited in Hong Kong, which in turn established Aerospace Digitnexus Information Technology (Shenzhen) Limited* (航天數聯信息技術（深圳）有限公司) (“Aerospace Digitnexus”) and that becomes the foundation of the Company in developing the business of internet of things. The major development of the relevant business is to develop the internet of things software platform, with the plan to provide large-scale enterprises and government departments with one-stop solution for internet of things in the fields of intelligent traffic, logistics and transportation, traffic safety control, and natural disasters monitoring.

Others

In March 2011, the Company disposed its entire interest in CASIL Satellite Holdings Limited with the aims to optimize its assets, improve its asset structure and overall financial position, and promote the development of its main businesses. The transaction generated a gain of approximately HK$100,592,000 for the Company.

In line with its future development plans, the Company has retained a professional human resources consulting company to conduct a research and analysis of the organizational structure of the Company, as well as the continued development and configuration of human resources, and to put forward recommendations for optimization. The Company had set up several new departments during the year, including Corporate Development Department, Asset Management Department, and Corporate Finance Department. The Company is of the view that the change of the organizational structure will effectively enhance the capability of the Company in formulating and management of strategies, asset management, monitoring investment projects, and financing management as well as investor relations. In addition, the Company had appointed a consultant to provide professional opinions regarding the establishment of the risk monitoring system, so as to reinforce its risk management.

PROSPECT

The US economy is unlikely to recover in the near future, the economy in Japan has shrunken after the earthquake and the European sovereign debt crises are still waiting to be resolved. As the economy of these three major markets remains weak from fatigue, the global economy is expected to progress slowly. It is inevitable to have adverse impact on the Company’s hi-tech manufacturing which is mainly export oriented. The businesses of the Company have been operated in difficult positions. It is expected that the hi-tech manufacturing will be affected by the adverse factors such as the rising production cost, the appreciation of Renminbi and the fluctuation in the foreign and local markets. The hi-tech manufacturing will continue to strengthen its management, cost and risk control, reinforce its technology advancement and enhance its foreign and local market development, while seeking to ensure a stable business and strive for new development.

In 2012, in light of the demand from the clients and the upgrade of new equipment, the businesses of plastic products and batteries are expected to have a steady development. The business of printed circuit boards will continue to focus on specialized and unique markets by making use of the technical strengths in high precision circuit boards, various kinds of gold-plated layers boards, soft-hard combined boards and embedded PCB for developing hi-tech and high value-added products. It is anticipated that the PCB business will have a steady growth. As to the business of intelligent chargers, it is expected that the new development and growth of lithium battery chargers, wireless charges and high power distributors will nullify the drop of the business of the chargers for nickel-metal hydride batteries. The LCD business will continue to focus in profit generation, with gradual adjustment and optimization of the clientele structure, while it will take the initiative to look for new market opportunities.

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The projects of the Complex Zone of the Launching Site in Hainan Province and Shenzhen Aerospace Science & Technology Plaza will be implemented as scheduled. The project of Complex Zone of the Launching Site in Hainan Province will stress on introducing strategic partners for joint development. Meanwhile, the Company will endeavor to complete the expropriation of the remaining lands for the project and commence the main construction of the resettlement zone. As for the Hainan Space Park, it is expected to obtain the administration permit for the project construction and complete the optimized design scheme of the theme park accordingly.

The project of Shenzhen Aerospace Science & Technology Plaza is planned to complete the relevant tender-invitation process in accordance with the progress of the works. At the same time, the project will move forward major implementation including construction and test of piling works, construction of the basement, earthwork backfilling, and construction of the main building on ground level. Proper cost control is made in line with the progress of the works as well. Moreover, the Company has coordinated, supervised and carried out the progress and quality control effectively for various works.

Because of inflation and the adjustment of policies in China, the businesses of hi-tech property may encounter greater pressure in terms of cost control and raising funds in short term. The Company will keep close watch on the fluctuation in cost prices and control strictly the short-term risks brought about by the relevant policies. However, it is believed that the Company will enjoy healthy development in the long run in respect of the hi-tech property projects which are mainly providing accommodation services for the two industrial bases in Shenzhen and Hainan.

As for the business of new materials, the annual production capacity of the high-performance polyimide films of Shenzhen Rayitek is heading for the target of about 350 tonnes step by step, with actual productivity subject to different product specifications. It is expected that Shenzhen Rayitek will seek to launch the new generation of polyimide films for the high-end flexible electronic substrates, and complete the research and development of the several polyimide films with special functions, and will also establish the next stage of business development. With the support of CASC, the Company has made the first move towards the goal of developing new organic polymer materials through the acquisition of Shenzhen Rayitek. It is believed that the relevant acquisition will generate synergistic benefits for the business of hi-tech manufacturing of the Company.

The business of internet of things has completed the establishment of its working team. The software platform is expected to be developed and launched as scheduled. In light of the market development, the business of internet of things will focus on intelligent traffic, logistics and transportation, traffic safety control and natural disasters monitoring. It aims to become the solution provider of internet of things for large-scale enterprises and government departments. Meanwhile, the business of internet of things will take the initiative to seek opportunities in other industries such as its application in warehousing and logistics, and seek to take part in the construction of the electronic platform for different levels of government affairs.

MANAGEMENT DISCUSSION AND ANALYSIS

Results performance

The audited turnover of the Company and the subsidiaries for the year ended 31 December 2011 was HK$2,187,006,000, representing an increase of approximately 16.35% as compared with that of HK$1,879,745,000 for 2010. The profit for the year was HK$477,675,000, representing an increase of 38.81% as compared with that of HK$344,129,000 for 2010.

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Profit attributable to shareholders of the Company and operating profit

Profit attributable to shareholders of the Company was HK$404,772,000, representing an increase of 38.39% as compared with that of HK$292,478,000 for 2010. The increase in profit was mainly due to the increase in the gain in the fair value of investment properties, the disposal of a non-core asset and the recovery of a loan receivable.

Based on the issued share capital of 3,085,022,000 shares during the year, the basic earnings per share was HK$0.1312, representing an increase of 35.40% as compared with that of HK$0.0969 for 2010, based on the weighted average issued share capital of 3,017,412,000 shares after being adjusted for the effect of placing of 514,118,000 shares in February 2010. The Board of Directors proposed the dividend of HK$0.01 per share (2010: HK$0.01 per share) for the year.

Results of core businesses

Core businesses of the Company and its subsidiaries are hi-tech manufacturing and aerospace services. The turnover of the hi-tech manufacturing of the Company is the main source of the Company’s turnover and contributes a significant profit and cashflow to the Company. This has enabled the Company to fulfill gradual development of the business of aerospace services and other new businesses in good order in recent years and shift to the strategic emerging industry, representing by hi-tech property, new material and internet of things, so as to achieve the Company’s new development target and minimize single business risks.

Hi-tech manufacturing

The turnover of the hi-tech manufacturing in 2011 was HK$2,164,071,000, representing an increase of 15.20% as compared with last year; the operating profit was HK$216,828,000, representing an increase of 0.46% as compared with last year.

The results of the hi-tech manufacturing are shown below:

Plastic Products Printed Circuit Boards Intelligent Chargers Liquid Crystal Display Industrial Property Investment Total	Turnover (HK$’000) Changes 2011 2010 (%) 808,160 650,770 24.19 450,362 395,616 13.84 586,720 476,919 23.02 306,003 343,391 (10.89) 12,826 11,825 8.47 2,164,071 1,878,521 15.20	Results (HK$’000) Changes 2011 2010 (%) 59,803 65,310 (8.43) 90,997 95,116 (4.33) 39,286 35,348 11.14 12,391 11,717 5.75 14,351 8,340 72.07 216,828 215,831 0.46

In 2011, upon the reinforcement of the relationship with major customers and the high growth in of battery products, the business of plastic products obtained a comparative ideal growth. The printed circuit boards business increased gradually in its products in its soft board and soft and hard board and that of value added in its products, and it has formed certain patent and intelligent properties through research and development of new techniques and new technical skills. Lithium battery charger becomes the growth momentum of the intelligent chargers business after years of cultivation. The liquid crystal display adjusted its customer structure and focuses to lower its business risks while developing the business.

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Business of Aerospace services

The Complex Zone of the Launching Site in Hainan Province

In 2011, Hainan Aerospace Investment Management Company Limited* (海南航天投資管理有限公司) (“Hainan Aerospace”) had completed most of the land expropriation, the preliminary preparation for the construction of resettlement zone, as well as the takeover, dismantlement and relocation of Space Home Pavilion. At present, the comprehensive development of the Complex Zone of the Launching Site in Hainan Province is in the stage of land expropriation and resettlement. Hainan Aerospace recorded a loss of HK$12,152,000 in 2011, which was mainly due to the payment of the cost of preparatory work, administrative expenses and professional fees, and exchange loss, etc.

Shenzhen Aerospace Science & Technology Plaza

Shenzhen Aerospace Science & Technology Plaza, an investment property under construction, measured at fair market value in accordance with the Hong Kong Accounting Standards, recorded a fair value gain of HK$256,257,000 in 2011. As of 31 December 2011, the property under construction and land use right of Shenzhen Aerospace Science & Technology Plaza was estimated at approximately RMB1,472,000,000.

In January 2011, Shenzhen Aerospace Technology Investment Company Limited* (深圳市航天高科投资 管理有限公司) (“Shenzhen Aerospace”) entered into a main contractor contract and a syndicated loan agreement of RMB1,500,000,000 for a period of 5 years. In 2011, the comprehensive construction project of Shenzhen Aerospace Science & Technology Plaza was launched and piling works had been commenced. Since the Universiade Shenzhen was held in Shenzhen, the construction works of Shenzhen Aerospace Science & Technology Plaza had come to a stop tentatively and slightly behind the schedule.

Establishment of New businesses

Pursuant to the Company’s business development plan, the Company has established two new businesses in 2011, namely, new materials and internet of things.

New Materials

The Company, through its subsidiary CASIL New Century Technology Development (Shenzhen) Company Limited (航科新世紀科技發展（深圳）有限公司) (“New Century”), acquired a 55% equity in Shenzhen Rayitek Hi-tech Film Company Limited (深圳瑞華泰薄膜科技有限公司) (“Shenzhen Rayitek”) in July 2011, as a starting point to enable the Company to develop polyimide films to enter the new polymer related businesses and as the platform to enter the industry of new materials. For details, please refer to the announcements of the Company published on 11 and 14 July 2011.

In 2011, Shenzhen Rayitek had been granted the certification of ISO9001 Quality Management System, ISO14000 Environment Management System and ISO18000 Health Management System. The safety material certification by Underwriters Laboratories Inc. in the United States of America and the test by European Union RoHS environmental protection material had been passed as well. Four months after completing the acquisition on 31 August 2011, the turnover of Shenzhen Rayitek was HK$20,843,000 and a loss of HK$760,000 was recorded.

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Internet of Things

The Company has set up a company focusing on internet of things, namely, Aerospace Digitnexus Information Technology (Shenzhen) Limited* (航天數聯信息技術（深圳）有限公司) (“Aerospace Digitnexus”) in Shenzhen in the first half of 2011, mainly engaging in the research and development of radio frequency identification (RFID), sensor technology, embedded software supporting platform technology, intelligent terminal technology for computer network and short data link satellite technology, system integration of internet of things comprising sensor, RFID, computer software and hardware, satellite application systems and other electronic products, and sales of self-developed software and products. Aerospace Digitnexus will concentrate on the field of system integration of internet of things and provide comprehensive and systematic solutions to meet customers’ demands.

In 2011, Aerospace Digitnexus recorded a loss of HK$7,978,000, mainly due to the payment for the cost of preliminary preparation, administrative and professional fees etc. In the second half of 2011, Aerospace Digitnexus secured substantial progress in the development of software. The research and development of the platform software has been in progress as scheduled. The software design and part of the module development, as well as the test for network access had been completed. The certification for ISO9001 Quality Management System had been obtained as well.

Assets

As at 31 December 2011, the audited total assets of the Company and the subsidiaries were HK$5,917,600,000, of which the non-current assets were HK$3,994,652,000, representing an increase of 39.19% as compared with that of HK$2,869,896,000 as at 31 December 2010. The current assets were HK$1,922,948,000, representing a decrease of 12.78% as compared with that of HK$2,204,647,000 as at 31 December 2010. The significant increase in non-current assets was mainly due to an increase in the fair value of the investment properties, the increase in the cost for land development of the Hainan project. The significant decrease in current assets was mainly due to an increase in the Hainan project leading to a decrease in liquidity. The equity attributable to shareholders of the Company was HK$3,925,917,000, representing an increase of 10.57% as compared with that of HK$3,550,532,000 as at 31 December 2010. Based on the issued share capital of 3,085,022,000 shares in the period, the net assets per share attributable to shareholders of the Company was HK$1.27.

As at 31 December 2011, a cash deposit of approximately HK$24,942,000 has been pledged to banks to obtain credit lines of facilities, and Shenzhen Aerospace has obtained a syndicated loan by securing the land use right at value of RMB1,472,000,000 to a syndicate comprising banks and a financial institution.

To optimize the assets of the Company, improve asset structure and overall financial position, and facilitate the development of each core business, the Company disposed of its entire equity in a subsidiary, CASIL Satellite Holdings Limited (“CASIL Satellite”), to its connected party China Great Wall Industry (Hong Kong) Corp. Limited at a consideration of HK$132,300,000 in March 2011. The main assets of CASIL Satellite are its equity in APT Satellite Holdings Limited (stock code: 1045). The disposal was completed in September 2011. Upon completion of the disposal, CASIL Satellite ceased to be a subsidiary of the Company. For details, please refer to the announcements of the Company published on 28 and 29 March 2011 respectively.

Liabilities

As at 31 December 2011, the total liabilities of the Company and the subsidiaries were HK$1,297,742,000 of which the non-current liabilities were HK$321,346,000, representing an increase of 71.08% as compared with that of HK$187,837,000 as at 31 December 2010, the current liabilities were HK$976,396,000, representing an increase of 27.81% as compared with that of HK$763,942,000 as at 31 December 2010. As at 31 December 2011, the Company and the subsidiaries had a bank loan of HK$280,987,000.

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Shenzhen Aerospace, a subsidiary of the Company, entered into a syndicated loan contract in January 2011 for RMB1,500,000,000 with a syndicate of financial institutions to pay the construction costs of the Shenzhen Aerospace Science & Technology Plaza. With the comprehensive commencement of the construction works, the construction costs will increase significantly. Shenzhen Aerospace will then drawdown the loan to pay the construction costs. Therefore, starting from 2012, the relevant bank debt will be gradually increased. On 31 December 2011, Shenzhen Aerospace has drawn down a loan of RMB20,000,000.

Operating expenses

The administrative expenses of the Company and the subsidiaries in 2011 were HK$258,230,000, representing an increase of 11.72% as compared with last year, mainly due to the increase in human resources expenses. The financial costs amounted to HK$7,496,000, of which HK$6,392,000 had been capitalized and recorded as the land development cost of the Hainan Project.

Contingent liabilities

As at 31 December 2011, the Company and the subsidiaries did not have any other material contingent liabilities.

Financial Ratios

	2011	2010
Gross Profit Margin	20.31%	21.62%
Return on Net Assets	10.34%	8.35%
Assets- Liabilities Ratio	21.93%	18.76%
Current Ratio	1.97	2.89
Quick Ratio	1.73	2.63

The existing financial ratios of the Company and the subsidiaries were in satisfactory level. This was resulted from the Company and the subsidiaries’ policies of continuous assets optimization, strengthened management and business development in recent years.

Liquidity

The source of funds of the Company and the subsidiaries mainly relies on internal resources and banking facilities. The free cash and bank balance as at 31 December 2011 amounted to HK$1,151,015,000, the majority of which were in Hong Kong Dollars and Renminbi.

The Company issued a total of 514,118,000 new shares to raise capital in February 2010, the net proceeds of which amounted to HK$560,000,000. The entire proceeds had been used for the intended purposes and the working capital.

Capital Expenditure and Investment Commitment

As at 31 December 2011, the capital commitments of the Company and the relevant subsidiaries contracted for but not provided in the consolidated financial statements was HK$1,138,840,000, mainly for the capital expenditure of the construction of Shenzhen Aerospace Science & Technology Plaza. With the comprehensive commencement of the construction of Shenzhen Aerospace Science & Technology Plaza in 2011, Shenzhen Aerospace will draw down the syndicated loan by stages to settle related construction costs.

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The participation in the land development project of the Complex Zone of the Launching Site in Hainan Province by the Company and its relevant subsidiaries have involved a commitment of RMB1,200,000,000, and as at 31 December 2011, RMB525,410,000 had been incurred or paid. The Company will invest in Hainan Aerospace by stages, while Hainan Aerospace will be responsible for implementing the land development project.

Financial Risks

The Company and the subsidiaries review the cash flow and financial position periodically and do not presently engage into any financial instruments or derivatives to hedge the exchange and the interest rate risks.

Human Resources and Remuneration Policies

The remuneration policy of the Company and the subsidiaries is based on the employee’s qualifications, experience and performance on the job, with reference to the current market situation. The Company and the subsidiaries shall continue to upgrade the level of human resources management, and strictly implement the performance-based appraisal system, in order to motivate employees to make continuous improvement in their individual performance and contributions to the Company.

The emoluments of the Directors are reviewed by the Remuneration Committee, with regard to the operating results of the Company, the individual performance and the comparable market information.

As at 31 December 2011, the Company and the subsidiaries have a total of approximately 6,390 employees based in the Mainland China and Hong Kong respectively.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

There had been no purchase, sale or redemption of the Company’s listed securities by the Company and its subsidiaries during the year.

CORPORATE GOVERNANCE

During 2011, the Company had complied with the provisions of the Code on Corporate Governance Practices of Appendix 14 of the Listing Rules.

The Company had adopted the Model Code for Securities Transactions by Directors of Listed Issuers, Appendix 10 of the Listing Rules, as the required standard for the Directors of the Company to trade the securities of the Company. Hence, the Company enquired all the Directors individually whether they had complied with Appendix 10 while trading the securities of the Company during 2011, and all the Directors replied that they had complied with the requirements of Appendix 10 during the year.

AUDIT COMMITTEE

In 2011, the Audit Committee of the Company has a membership comprising two Independent Non-Executive Directors, Mr Chow Chan Lum, Charles (Chairman) and Mr Luo Zhenbang and a Non-Executive Director, Mr Zhou Qingquan. The Audit Committee of the Company reviewed, discussed and approved this 2011 financial statements that had been audited by the auditor, Deloitte Touche Tohmatsu.

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REMUNERATION COMMITTEE

In 2011, the Remuneration Committee of the Company has a membership comprising three independent Non-Executive Directors, Mr Chow Chan Lum, Charles, Mr Luo Zhenbang and Mr Wang Junyan and two Non-Executive Directors, Dr Chan Ching Har, Eliza (Chairman) and Mr Chen Xuechuan. The functions of the Remuneration Committee are to study and recommend on the remuneration policy and to determine the remuneration of Directors and senior management.

DIVIDEND

The Board has recommended a final dividend of HK1 cent per share for the year ended 31 December 2011 (2010: HK1 cent) payable to the shareholders of the Company (“Shareholders”) whose names appear on the Register of Members of the Company on Monday, 18 June 2012.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held on Friday, 8 June 2012. Notice of which will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company in such manner as required under the Listing Rules.

CLOSURE OF REGISTER OF MEMBERS

To ensure Shareholders the right to attend and vote at the Annual General Meeting and to qualify to receive the distribution of final dividend, the Register of Members of the Company will be closed and details of which are as follows:

(1) To ensure Shareholders the right to attend and vote at the Annual General Meeting:

Latest time for lodging transfers of shares and related documents for registration : 4:30 p.m. on Tuesday, 5 June 2012 Closure of Register of Members : From Wednesday, 6 June 2012 to Friday, 8 June 2012 (both days inclusive) Record Date : Friday, 8 June 2012

• (2) To ensure Shareholders the right to qualify for the distribution of final dividend:

Latest time for lodging transfers of shares and related documents for registration : 4:30 p.m. on Wednesday, 13 June 2012 Closure of Register of Members : From Thursday, 14 June 2012 to Monday, 18 June 2012 (both days inclusive) Record Date : Monday, 18 June 2012

The Register of Members of the Company will be closed at the abovementioned periods. To ensure Shareholders the right to attend and vote at the Annual General Meeting and to qualify for the distribution of final dividend, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s share registrar, Tricor Standard Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong for registration. Subject to approval by the Shareholders at the Annual General Meeting, dividend warrants are expected to be despatched to Shareholders by post on or around Thursday, 12 July 2012.

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APPRECIATION

The Company hereby expresses its sincere gratitude to its shareholders, banks, business partners, people from various social communities, as well as all staff of the Company for their long-time support.

By order of the Board Li Hongjun Executive Director & President

Hong Kong, 26 March 2012

At the time of approving this Announcement, the Board of Directors of the Company comprises:

Executive Directors Non-Executive Directors Independent Non-Executive Directors Mr Li Hongjun (President) Mr Wu Yanhua (Chairman) Mr Chow Chan Lum, Charles Mr Jin Xuesheng Mr Wu Zhuo (Vice Chairman) Mr Luo Zhenbang Mr Chen Xuechuan Mr Wang Junyan Mr Shi Weiguo Dr Chan Ching Har, Eliza Mr Zhou Qingquan

• These PRC entities do not have English names, the English names set out herein are for identification purpose only.

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