Computer And Technologies Holdings Limited — Annual Report 2016

Mar 28, 2017

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 2016

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 2016.

SUMMARY OF RESULTS

The audited consolidated results of the Group for the year ended 31 December 2016 and the comparative figures of the same period in 2015 are as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 31 DECEMBER 2016

NOTES Turnover 3 Cost of sales Gross profit Other income 4 Other gains and losses 4 Selling and distribution expenses Administrative expenses Research and development expenses Fair value changes of investment properties Finance costs Share of results of associates Share of results of joint ventures Profit before taxation 5 Taxation 6 Profit for the year Profit attributable to: Owners of the Company Non-controlling interests Profit for the year	2016 HK$'000 3,087,848 (2,296,492) 791,356 53,632 (19,481) (57,925) (312,660) (63,089) 1,412,301 (53,440) 1,880 (29,909) 1,722,665 (519,413) 1,203,252 796,108 407,144 1,203,252	2015 HK$’000 2,765,720 (2,205,494)
		560,226 75,832 (109,238) (49,538) (307,166) (57,734) 2,622,170 (33,396) (51,117) (2,626)
		2,647,413 (1,021,090)
		1,626,323
		984,696 641,627
		1,626,323

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	NOTE	2016	2015
Earnings per share	7
Basic		HK25.81 cents	HK31.92 cents
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND		OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
		2016	2015
		HK$'000	HK$’000
Profit for the year		1,203,252	1,626,323
Other comprehensive income includes:
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translating foreign operations
- subsidiaries		(370,195)	(274,674)
- associates		(7,888)	(7,678)
- joint ventures		(41,618)	(40,677)
Reclassification adjustments for the cumulative exchange
differences upon deregistration of a foreign operation		1,138	－
Other comprehensive expense for the year		(418,563)	(323,029)
Total comprehensive income for the year		784,689	1,303,294
Total comprehensive income attributable to:
Owners of the Company		485,622	744,385
Non-controlling interests		299,067	558,909
		784,689	1,303,294

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2016

NOTES Non-current assets Property, plant and equipment Prepaid lease payments Investment properties Interests in associates Interests in joint ventures Deposit paid for property, plant and equipment Other long term assets Loan to a joint venture Current assets Inventories Trade and other receivables 9 Prepaid lease payments Amount due from a related party Financial assets at fair value through profit or loss Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables 10 Taxation payable Bank and other borrowings Other loan Net current assets Total assets less current liabilities Non-current liabilities Loan from a controlling shareholder Loan from a related party Deferred taxation		2016 HK$'000 953,527 94,711 8,492,873 126,285 712,103 22,766 33,108 27,778 10,463,151 262,021 873,050 4,234 16 25,675 6,158 1,150,271 2,321,425 1,545,965 58,347 31,111 7,963 1,643,386 678,039 11,141,190 555,556 565,667 2,044,833 3,166,056 7,975,134	2015 HK$’000 806,722 94,626 7,155,275 132,293 783,630 9,373 － －
			8,981,919
			243,604 647,547 3,849 14 17,169 36,035 2,045,506
			2,993,724
			1,093,748 51,909 1,340,260 8,462
			2,494,379
			499,345
			9,481,264
			590,319 － 1,687,683
			2,278,002
			7,203,262

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Capital and reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests	2016 HK$'000 1,154,511 5,035,647 6,190,158 1,784,976 7,975,134	2015 HK$’000 1,154,511 4,551,259
		5,705,770 1,497,492
		7,203,262

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

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 (Cap. 622) (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 AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS

Amendments to HKFRSs that are mandatorily effective for the current year

The Group has applied the following amendments to HKFRSs issued by the HKICPA for the first time in the current year:

Amendments to HKFRS 11	Accounting for acquisitions of interest in joint operations
Amendments to HKAS 1	Disclosure initiative
Amendments to HKAS 16 and	Clarification of acceptable methods of depreciation and
HKAS 38	amortisation
Amendments to HKAS 16 and	Agriculture: Bearer plants
HKAS 41
Amendments to HKFRS 10,	Investment entities: Applying the consolidation
HKFRS 12 and HKAS 28	exception
Amendments to HKFRSs	Annual improvements to HKFRSs 2012-2014 cycle

The application of the amendments to HKFRSs in the current year has had no material impact on the Group's financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

New and amendments to HKFRSs in issue but not yet effective

The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective:

HKFRS 9	Financial instruments1
HKFRS 15	Revenue from contracts with customers and the related
	Amendments1
HKFRS 16	Leases2
Amendments to HKFRS 2	Classification and measurement of share-based payment
	transactions1
Amendments to HKFRS 4	Applying HKFRS 9 "Financial instruments" with
	HKFRS 4 "Insurance contracts"1
Amendments to HKFRS 10	Sale and contribution of assets between an investor and
and HKAS 28	its associate or joint venture3
Amendments to HKAS 7	Disclosure initiative4
Amendments to HKAS 12	Recognition of deferred tax assets for unrealised losses4
Amendments to HKFRSs	Annual improvements to HKFRSs 2014-2016 cycle5

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• 1 Effective for annual periods beginning on or after 1 January 2018. 2 Effective for annual periods beginning on or after 1 January 2019. 3 Effective for annual periods beginning on or after a date to be determined. 4 Effective for annual periods beginning on or after 1 January 2017. 5 Effective for annual periods beginning on or after 1 January 2017 or 1 January 2018, as appropriate.

Except for the possibility that the application of HKFRS 9, HKFRS 15 and HKFRS 16 in the future may have a potential impact on the consolidated financial information of the Group, the Directors anticipate that the application of the other new and revised HKFRSs will have no material impact on the consolidated financial statements.

3. SEGMENT INFORMATION

The Group determines its operating segments based on the internal reports reviewed by the President, the chief operating decision maker ("CODM") of the Group, that are used to make strategic decisions. The management has identified 10 reportable and operating segments, namely Hi-Tech Manufacturing Business (including plastic products, liquid crystal display, printed circuit boards, intelligent chargers and the related industrial property investment), New Material Business (including polyimide films manufacturing), Aerospace Service (including the Shenzhen Aerospace Science & Technology Plaza of property investment project, the Hainan Launching Site Complex Zone of land development project, Internet of Things and Cross-border e-commerce) which represents the major industries in which the Group engaged.

Other business represents income and expenses relating to investment properties which cannot be allocated to other operating segments.

An analysis of the Group's turnover and results by reportable segments is as follows:

For the year ended 31 December 2016

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 Cross-border e-commerce Reportable segment total Elimination Other Business Unallocated corporate income Unallocated corporate expenses Gain on disposal of an associate Share of result of an associate Share of result of a joint venture Finance costs Loss on deregistration of a subsidiary Profit before taxation	Turnover	Total HK$'000 1,168,329 521,406 678,919 517,912 35,827 2,922,393 － 163,943 － 8,960 66,041 238,944 3,161,337 (78,712) 5,223 3,087,848	Segment results HK$'000 79,375 40,969 133,525 37,717 14,482
	External sales Inter-segment sales HK$'000 HK$'000 1,111,678 56,651 521,174 232 678,919 － 516,356 1,556 15,554 20,273 2,843,681 78,712 － － 163,943 － － － 8,960 － 66,041 － 238,944 － 3,082,625 78,712 － (78,712) 5,223 － 3,087,848 －
			306,068
			2,660
			1,523,913 (29,634) 5,619 1,515
			1,501,413
			1,810,141 － 5,341
			1,815,482 46,771 (83,958)
			1,778,295 3 (780) (275) (53,440) (1,138)
			1,722,665

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For the year ended 31 December 2015

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 Cross-border e-commerce Reportable segment total Elimination Other Business Unallocated corporate income Unallocated corporate expenses Gain on disposal of an associate Share of result of an associate Share of result of a joint venture Finance costs Impairment loss recognised in respect of available-for-sale investments Profit before taxation		Turnover	Total HK$'000 1,076,770 481,275 601,994 623,513 35,414 2,818,966 － － － 8,180 22,817 30,997 2,849,963 (87,172) 2,929 2,765,720	Segment results HK$'000 73,304 32,719 109,436 42,295 17,579
	External sales HK$'000 1,013,162 480,553 601,994 621,842 14,243 2,731,794 － － － 8,180 22,817 30,997 2,762,791 － 2,929 2,765,720	Inter-segment sales HK$'000 63,608 722 － 1,671 21,171 87,172 － － － － － － 87,172 (87,172) － －
				275,333
				(50,584)
				2,590,285 (3,624) (46,228) (595)
				2,539,838
				2,764,587 － 5,068
				2,769,655 65,119 (129,146)
				2,705,628 3,716 (533) 998 (33,396) (29,000)
				2,647,413

The President regularly reviews these segment information for the purpose of resources allocation and performance assessment. Thus, there is no change on the segment information reported to the President.

The accounting policies of the operating segments are the same as the Group's accounting policies. Segment results represents the profit earned by/loss from each segment without allocation of interest income, change in fair value of financial assets at fair value through profit or loss, share of result of an associate, share of result of a joint venture, interest expenses, gain on disposal of an associate, loss on deregistration of a subsidiary, impairment loss recognised in respect of available-for-sale investments and other corporate income and corporate expenses. This is the measure reported to the President for the purpose of resource allocation and performance assessment.

Inter-segment sales are charged at cost-plus basis.

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4. OTHER INCOME AND OTHER GAINS AND LOSSES

The Group's other income mainly comprises: Interest income The Group's other gains and losses mainly comprise: Net exchange loss Net gain (loss) from change in fair value of financial assets at fair value through profit or loss Reversal of allowance for (allowance for) doubtful trade debts Loss on disposal/written off of property, plant and equipment Gain on disposal of an associate Impairment loss recognised in respect of available-for-sale investments Loss on deregistration of a subsidiary 5. PROFIT BEFORE TAXATION Profit before taxation has been arrived at after charging (crediting): Amortisation of prepaid lease payments Amortisation of intangible assets (included in cost of sales) Auditors' remuneration - current year - (over) underprovision in prior years Cost of inventories charged to profit or loss including allowance for obsolete inventories of HK$421,000 (2015: HK$985,000) Depreciation of property, plant and equipment Minimum lease payments under operating leases in respect of land and buildings Impairment loss recognised in respect of intangible assets Research and development expenses Staff costs, including directors' remuneration Gross rental income Less: Direct operating expenses for investment properties that generated rental income during the year	2016 HK$'000 30,282 (22,079) 8,506 2,738 (7,491) 3 － (1,138) 2016 HK$'000 3,085 － 4,152 (368) 2,228,608 97,343 21,508 － 63,089 573,052 (164,435) 3,926 (160,509)	2015 HK$’000 60,805
		(51,318) (22,455) (8,828) (2,074) 3,716 (29,000) －
		2015 HK$'000 3,933 12,633 4,458 106 2,204,509 105,005 20,514 11,715 57,734 546,077 (17,172) 2,878
		(14,294)

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6. TAXATION

The tax charge (credit) for the year comprises: Current tax Hong Kong Profits Tax PRC Enterprise Income Tax Taxation in other jurisdiction Under(over)provision in prior years Hong Kong Profits Tax PRC Enterprise Income Tax Deferred tax charge	2016 HK$'000 21,600 14,530 2,034 38,164 (104) 622 518 480,731 519,413	2015 HK$'000 23,943 9,774 －
		33,717
		(491) －
		(491)
		987,864
		1,021,090

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%. Two subsidiaries (2015: one) of the Company operating in the PRC are eligible as High and New Technology Enterprise and the income tax rate of these subsidiaries is 15%.

Taxation arising in other jurisdiction, representing withholding tax on dividend income, is calculated at the rate prevailing in the relevant jurisdiction.

7. EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to owners of the Company is based on the following data:

Earnings Profit for the year attributable to owners of the Company for the purpose of basic earnings per share Number of shares Number of ordinary shares for the purpose of basic earnings per share	2016 HK$’000 796,108 2016 Number of shares 3,085,022,000	2015 HK$’000 984,696
		2015 Number of shares 3,085,022,000

No diluted earnings per share have been presented as there were no potential ordinary shares outstanding for both years.

8. DIVIDENDS

Dividends recognised as distribution during the year: 2015 final, paid - HK1 cent (2015: 2014 final dividend of HK1 cent) per share	2016 HK$'000 30,850	2015 HK$’000 30,850

A final dividend of HK2 cents per share in respect of the year ended 31 December 2016 (2015: 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 Less: Allowance for doubtful debts Other receivables, deposits and prepayments	2016 HK$'000 744,630 (26,509) 718,121 154,929 873,050	2015 HK$’000 608,347 (36,165)
		572,182 75,365
		647,547

Included in the Group's other receivables, deposits and prepayments at 31 December 2016 is current portion of other long term assets of HK$83,237,000 (2015: nil), value-added tax recoverable of HK$35,024,000 (2015: HK$21,203,000) and consideration receivable for disposal of investment properties of HK$6,375,000 (2015: HK$11,569,000).

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

Within 90 days Between 91 - 180 days Between 181 - 365 days	2016 HK$'000 687,412 30,377 332 718,121	2015 HK$’000 549,751 21,460 971
		572,182

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.

Management closely monitors the credit quality of trade and other receivables and considers the trade and other receivables that are neither past due nor impaired to be of a good credit quality. Included in the Group's trade receivable balance are debtors with aggregate carrying amount of HK$30,709,000 (2015: HK$22,431,000) which are past due at the end of the reporting period for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances. There are no balances included in other receivables which have been past due.

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10. TRADE AND OTHER PAYABLES

Trade payables Accrued charges Receipt in advance Other payables	2016 HK$'000 414,874 154,329 105,839 870,923 1,545,965	2015 HK$’000 314,815 154,771 130,605 493,557
		1,093,748

Other payables included an amount of HK$54,000,000 (2015: HK$54,000,000) received on behalf of China Aerospace Science & Technology Corporation and payables to contractors for investment properties of HK$540,031,000 (2015: HK$198,194,000).

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	2016 HK$'000 330,524 31,004 47,573 5,773 414,874	2015 HK$’000 240,803 14,232 48,450 11,330 314,815

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CHAIRMAN’S STATEMENT

OVERVIEW

The dampened growth of the global economy continued in 2016, the economic growth of both China and the U.S. were lower than the previous year. The U.S. experienced a sluggish economic recovery as it is being hindered by several problems including the weak productivity growth and its aging population; Europe is a beneficiary of low interest rate, weak exchange rate, quantitative easing and the diminished magnitude of financial austerity, and recorded a moderate growth in economy; with the accelerated pace of structural adjustment and evident effect of supply side reform in China, as well as the implementation of financial and monetary policies, the development of the economy remained steady; having affected by factors including the uncertainty in global economy, the volatility in global financial markets and the weak export trading, Hong Kong is expected to persist a low growth trend in its economy. The Company and its subsidiaries had fulfilled their full-year business targets better than expected, thanks to their efforts of hardworking and innovation to overcome all difficulties and challenges.

For the year ended 31 December 2016, the Company and its subsidiaries reported a turnover of HK$3,087,848,000 (2015: HK$2,765,720,000), representing an increase of 11.65% as compared with that of last year, whereas overall gross profit margin was 25.63% (2015: 20.26%). Owing to the fair value gain of investment properties, Shenzhen Aerospace Science & Technology Plaza, decreased substantially as compared to last year, the overall profit of the Company was reduced accordingly. In 2016, the Company recorded a profit of HK$1,203,252,000, representing a decrease of 26.01% as compared with that of HK$1,626,323,000 in 2015; profit attributable to shareholders was HK$796,108,000, representing a decrease of 19.15% as compared with that of HK$984,696,000 in 2015; earnings per share attributable to shareholders was HK25.81 cents (2015: HK31.92 cents). The Board recommended the payment of a dividend of HK2 cents per share for the year.

BUSINESS REVIEW

In 2016, the Company’s high-tech manufacturing business remained stable despite of its exposure to greater pressure in operations. Rental income of Shenzhen Aerospace Science & Technology Plaza was recorded for the first time upon its completion successfully. Hainan Aerospace Investment Management Company Limited*(海南航天投資管理有限公司) (“Hainan Aerospace”) decided to withdraw from the development project of the Complex Zone of the Launching Site in Hainan Province. The business of internet of things determined that cross-border e-commerce logistics as well as warehouse and logistics would be the two new major business development directions.

Hi-tech Manufacturing

In 2016, in the face of several adverse factors including complicated economic situation, the downturn of overseas consumption markets, the continued increase in the costs of raw materials and labour, and the decrease of orders from several major customers, the hi-tech manufacturing business underwent many challenges. However, through active market development, adjustment in cost structure and lowering the cost, the hi-tech manufacturing business managed to grow steadily. The turnover of the hi-tech manufacturing business for the year was HK$2,843,681,000 (2015: HK$2,731,794,000), representing an increase of 4.10% as compared with last year; the operating profit was HK$306,068,000 (2015: HK$275,333,000), representing an increase of 11.16% as compared with last year.

The business of the printed circuit board (“PCB”) business is the relative outperformer among the hi-tech manufacturing businesses. With the experience gained in technologies such as surface finishing, fine circuit, embedded devices and mix of rigid and flexible boards, the PCB business established a stronger competitiveness, and achieved a certain extent of outcome in market development in sectors like optoelectronics, camera, security and carrier. It had also completed the construction of factory expansion for high-density circuit board, and the first phase of equipment introduction and trial production. The liquid crystal display (“LCD”) business allocated its resources timely and appropriately in response to the request of major customers, and hence gained their trustworthiness. There was also achievement in the development of domestic market for the LCD business, and the business has successfully entered the market of electric meter.

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The plastic product business was being affected by the relocation of the production base by several Japanese customers, and their orders were reduced correspondingly. The task on developing the domestic market in mainland China is getting better, the overall market of the office equipment is relatively stable, while the plastic products from the newly developed high-end audio equipment and auto parts become new segments for business growth. The decrease in the number of orders from major customers, and the stricter policy requirements in environmental protection and consumption tax from the government are factors that led to the decline in the performance of the battery business. For the intelligent charger business, it is currently focusing on developing five main product categories, namely the charger, the lithium battery charger, the mobile power pack, the Ni-MH charger and the intelligent remote control, and is gradually developing from low-power battery products to medium-power in order to broaden the market. The lithium battery charger for electronic tools and electronic bikes will be the target products of the intelligent charger business. The product structure of the electroplating business expands from electro-digital products to auto parts products and home appliances products. The newly completed electroplating factory in Boluo, Huizhou will enhance and innovate the electroplating technology, which includes the enhancement for the simple external appearance technology to new industrial technology in the integration of externals appearance and function, and in the meantime, the factory develops diversified types of electroplating (such as the colour diversification of pearl nickel), and thus increase the market competitiveness significantly.

Shenzhen Aerospace Science & Technology Plaza

With the completion of Shenzhen Aerospace Science & Technology Plaza, the function of Shenzhen Aerospace Technology Investment Company Limited (深圳市航天高科投資管理有限公司) (“Shenzhen Aerospace”) was switched from project construction to operation management. In 2016, the construction and inspection of the Shenzhen Aerospace Science & Technology Plaza was completed, its property management company commenced the property management and services and achieved tenant leasing following its property management team recruitment. During the year, Shenzhen Aerospace borrowed an operating properties mortgage loan from a connected person, Aerospace Science & Technology Finance Company Limited (航天科 技財務有限責任公司), so as to repay the outstanding balance of the existing syndicate loan. The connected transaction was approved by independent shareholders of the Company at the extraordinary general meeting held in October 2016. Shenzhen Aerospace recorded rental and property management incomes for the first time upon the completion of Shenzhen Aerospace Science & Technology Plaza. Its income and operating profits, including fair value gain of investment properties, of HK$163,943,000 and HK$1,523,913,000 respectively, were recorded. Shenzhen Aerospace Science & Technology Plaza will provide a new source of income for the Company and that significantly strengthens the cashflow of the Company and its subsidiaries. As at the end of 2016, Shenzhen Aerospace Science & Technology Plaza was valued at approximately RMB7,345,000,000 (2015: RMB5,777,000,000).

The Complex Zone of the Launching Site in Hainan Province

With the effects brought by the changes on the austerity measures, the increase in demolition and relocation settlement standards and the developing costs increased substantially in recent years, causing the risks increased with respect to the development of the Complex Zone of the Launching Site in Hainan Province and the benefit on return diminishes gradually. After a careful study, Hainan Aerospace, a joint venture, had decided to withdraw from the development of the Complex Zone of the Launching Site in Hainan Province, and initiated a dialogue with the Provincial Government of Hainan and the Municipal Government of Wenchang, trying to have the funds injected, which will refer to the audited project costs, to be returned to Hainan Aerospace in the form of cash and assets. Hainan Aerospace will be in its best effort to reach an agreement with the Municipal Government of Wenchang.

Internet of Things and Cross-border E-commerce Logistics

In 2016, Aerospace Digitnexus Information Technology (Shenzhen) Limited (航天數聯信息技術（深圳）有限 公司) (“Aerospace Digitnexus”) determined that cross-border e-commerce logistics as well as warehouse and logistics would be the two major business development directions. In cooperation with the export parcel mail branch of China Post in Shenzhen, Aerospace Digitnexus established a cross-border channel, of which a customs clearance centre in Kaiping will act as the core to consummate the cross-border import service, providing efficient and convenient professional services including clearance, warehouse and logistics to cross-border e-commerce business. In April 2016, Kaiping Cross-border E-commerce Express Mail Clearance and Sorting Centre (開平市跨境電子商務快件清關分揀中心) (“Kaiping Clearance Centre”) commenced clearance services, providing the transshipment, clearance and delivery services of cross-border express mail for the

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customers. The clearance volume of Kaiping Clearance Centre increases steadily from 500 mails per day during the initial stage to the current daily peak volume of 11,000 mails, and that had handled the declaration and clearance for more than 800,000 express mails in 2016. It possesses the functions of business-to-consumer (B2C), consumer-to-consumer (C2C), business express mails and so forth, and has become the port in Southern China with the most comprehensive qualifications.

In reliance on the internet of things intelligent application platform, Aerospace Digitnexus performs the research and development, production and sales of related products, and provides system solutions that are mainly applied in sectors such as warehouse and logistics. In 2016, the sales from major customers had been increased beyond expectation, the turnover amounted to HK$75,001,000, representing an increase of 141.96% as compared with that of HK$30,997,000 for 2015. Aerospace Digitnexus achieved turning loss into profit, with a profit of HK$7,134,000 during the year (2015: a loss of HK$46,823,000).

PROSPECTS

Looking forward, an improvement in the global economic growth is expected in 2017, but the risk that may bring by uncertainties still exists. With initial observation, the policies implemented by the U.S. after President Donald Trump took office are all helpful in boosting the economic growth, whereas there are evident signs on the stabilization of China economy. The stable performance from the two large economies, China and the U.S., will support the global economic development, and the economy of Hong Kong will benefit from it. However, the economy of China is in the crucial stage of structural transition and upgrade, at the same time the global economy is being confined to low growth pattern, and factors including the rate hike in the U.S., the commencement of negotiation about the Brexit, the potential of the implementation of trade protectionism by the U.S. President Donald Trump, and the elections in France, Germany and Netherlands may bring uncertainties to the peripheral economic conditions. The Company will adhere to the principles of prudent operation and stringent risk control, at the same time proactively pushing forward the progress of various tasks.

In terms of hi-tech manufacturing, the plastic products business will strengthen the marketing magnitude in Hong Kong and China, enhance efforts in technological upgrade and maintain a strong competitiveness. The electroplating products business based in Boluo will promote to install new electroplating lines, widen product types and expand the production capacity. The wireless charging and large-power battery products are the target markets of the intelligent charger business, and the business will accelerate the research and development of core technologies of battery products, enhance the market competitiveness by catering to the satisfaction for the demand of the customers. For printed circuit board business, more resources will be allocated to production lines of high-density PCB, rigid PCB, flexible PCB and surface-mount technology, etc., and it will emphasis on developing the markets of package substrate, auto electronic board, camera module, optoelectronics application and security, in order to expand the market segments. The LCD business will optimize its customer structure, strive for more new customers, and develop the high-end communication and electric meter market.

The project inspection, settlement of accounts and final accounts will be completed by Shenzhen Aerospace in 2017. The quality of the property management services will also be enhanced. Shenzhen Aerospace will monitor the property leasing and will explore more sources for operating incomes.

Aerospace Digitnexus will proactively launch the clearance services for B2C, C2C and C types express mails, and will strive to reach the target for annual clearance volume of 1.5 million mails. At the same time, it will develop the import and export supervised warehouse and bonded warehouse business, and will ensure the smooth launching of projects including automated stereoscopic warehouse.

2017 is the crucial year on implementing the development planning of the 13th Five-Year Plan. The Company will achieve transformation and upgrade of hi-tech manufacturing through enhanced efforts in research and development and technological upgrade. The Company will enhance itself as the internationalization platform for China Aerospace Science & Technology Corporation (“China Aerospace”) to expand international businesses and initiate international cooperation while seeking new business opportunities, and will proactively identify and develop investment projects with promising prospects which are in line with the national strategic policy of emerging industries and capture China Aerospace’s resources advantages. With the great support from China Aerospace, the Company expects it would comprehensively push forward the progress of its projects, thereby maximizing the investment values of and returns to the shareholders.

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MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS PERFORMANCE

The audited turnover of the Company and the subsidiaries for the year ended 31 December 2016 was HK$3,087,848,000, representing an increase of 11.65% as compared with that of HK$2,765,720,000 for 2015. The profit of this year was HK$1,203,252,000, representing a decrease of 26.01% as compared with that of HK$1,626,323,000 for 2015.

PROFIT ATTRIBUTABLE TO THE OWNERS OF THE COMPANY

Profit attributable to the owners of the Company was HK$796,108,000, representing a decrease of 19.15% as compared with that of HK$984,696,000 for 2015.

The increase in turnover was mainly due to the improvement of performance in hi-tech manufacturing and cross-border e-commerce logistics, and the rental income and property management income of Shenzhen Aerospace Science & Technology Plaza was recorded for the first time. The decrease in profit attributable to the owners was mainly due to the substantial decrease in fair value gain of Shenzhen Aerospace Science & Technology Plaza upon its completion in June 2016.

Based on the issued share capital of 3,085,022,000 shares during the year, the basic earnings per share was HK25.81 cents, representing a decrease of 19.14% as compared with that of HK31.92 cents for 2015.

DIVIDENDS

The Board proposed the distribution of 2016 final dividend of HK2 cents per share in March 2017, subject to the approval by shareholders at the Annual General Meeting to be held on 31 May 2017. If approved, warrants of which will be dispatched to all shareholders on or about 28 June 2017.

The distribution of 2015 final dividend of HK1 cent per share was approved by shareholders at the Annual General Meeting in May 2016 and warrants of which were dispatched to all shareholders on 22 June 2016.

RESULTS OF CORE BUSINESSES

The core businesses of the Company and the subsidiaries are hi-tech manufacturing, internet of things and cross-border e-commerce logistics, and the operation of Shenzhen Aerospace Science & Technology Plaza. The turnover of the hi-tech manufacturing is the main source of the Company’s turnover and that contributes a significant profit and cash flow. This enables the Company to fulfill gradual development of new businesses, such as having turned the property construction of Shenzhen Aerospace Science & Technology Plaza into asset management, so as to achieve the Company’s new development target and minimize individual business risk.

Hi-tech manufacturing

In 2016, global macroeconomic downturn and sluggish demands both at home and abroad had resulted in continuous depreciation of various foreign currencies by major countries to promote export. Meanwhile, the manufacturing industry in the mainland China witnessed an obvious accelerated slowdown and continuous rise in labour costs, manufacturers therefore experienced excess capacities and extremely intense price competition. Under such circumstances, certain businesses under hi-tech manufacturing was also affected significantly with a decrease in orders or the need to offer discounts to retain customers, which led to a decrease in profits. Further, the technological development cannot follow the pace of market needs resulting from rapid market changes and cannot enhance the products’ quality on time. Some customers even shifted the manufacturing of OEM products back to their homelands or other regions, making market development extremely difficult.

During the year, hi-tech manufacturing strengthened investment in technology innovation and automation in production, having introduced advanced equipments and underwent business transformation. Within which, the construction of high precision PCB factory was completed. Besides, equipments were brought in and trial production was finished at the end of 2016, productivity is expected to be raised in 2017. The business of intelligent chargers developed medium power battery products while the business of plastic products renewed equipments and expanded the electroplating products in vehicle accessories and household appliances.

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The turnover of the hi-tech manufacturing businesses for the year ended 31 December 2016 was HK$2,843,681,000, representing an increase of 4.10% as compared with last year; the operating profit was HK$306,068,000, representing an increase of 11.16% as compared with last year. The results of the hi-tech manufacturing business are shown below:

	Turnover (HK$’000) 2016 2015 Changes （%）	Turnover (HK$’000) 2016 2015 Changes （%）	Operating Profit (HK$’000) 2016 2015 Changes （%）	Operating Profit (HK$’000) 2016 2015 Changes （%）
Plastic Products Printed Circuit Boards Intelligent Chargers Liquid Crystal Display Industrial Property Investment Total	1,111,678 678,919 516,356 521,174 15,554 2,843,681	1,013,162 9.72 601,994 12.78 621,842 (16.96) 480,553 8.45 14,243 9.20 2,731,794 4.10	79,375 133,525 37,717 40,969 14,482 306,068	73,304 8.28 109,436 22.01 42,295 (10.82) 32,719 25.21 17,579 (17.62) 275,333 11.16

Looking forward to 2017, the competition in the electronic information industry will remain intense. The hi-tech manufacturing strives to explore markets of high end products, continue to put effort in the research and development of new products and market development, raise automation in production, expand in scale and capacity of production, and in the meantime, strives to reduce inventory and receivables, establish and reach the target of market diversification soon so as to maintain stable business and sustained development, explore business by ways of merger and acquisition or cooperation etc., in order to ensure a continuous and stable growth of the hi-tech manufacturing.

The Complex Zone of the Launching Site in Hainan Province

In 2016, the loss of joint venture, Hainan Aerospace Investment Management Company Limited* (海南航天投 資管理有限公司) (“Hainan Aerospace”), attributable to the Company amounted to HK$29,634,000. Hainan Aerospace had decided to withdraw from the land development project of the Complex Zone of the Launching Site in Hainan Province as a result of, including but not limited to, the austerity measures, the changes in government compensation standard, the substantial increase in construction costs and so on in recent years which may bring to Hainan Aerospace a stability risk if the development of Hainan project is continued. Hainan Aerospace commenced to negotiate with the Provincial Government of Hainan and the Municipal Government of Wenchang. The consideration will refer to the audited project costs and will be settled by cash and assets, and the terms of which are subject to both parties’ confirmation. In 2017, Hainan Aerospace will continue to negotiate with the Provincial Government of Hainan and the Municipal Government of Wenchang, so as to strive for finalization of the agreement terms and to execute an agreement as early as possible. Detail of which please refer the Company’s announcement published on 8 March 2017.

On 1 July 2016, 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”), a wholly-owned subsidiary of the Company, entered into a loan agreement with Hainan Aerospace. Pursuant to which New Century will provide a loan, with a maturity on 30 June 2018, in the sum of RMB45,000,000 to Hainan Aerospace for its working capital. The outstanding balance of the loan was RMB25,000,000 as at 31 December 2016. Detail of which please refer the Company’s announcement published on 4 July 2016.

Shenzhen Aerospace Science & Technology Plaza

In 2016, Shenzhen Aerospace Technology Investment Company Limited (深圳市航天高科投資管理有限公司) (“Shenzhen Aerospace”) completed all the construction works of Shenzhen Aerospace Science & Technology Plaza, and started launching business promotion and leasing. Shenzhen Aerospace Technology Property Management Company Limited (深圳市航天高科物業管理有限公司), its wholly-owned subsidiary, had taken over and commenced the property management of Shenzhen Aerospace Science & Technology Plaza on 1 January 2016 and recorded a turnover of RMB15,306,000 and operating profits of RMB1,324,000. From 2017, the work of Shenzhen Aerospace has changed from property construction to asset management, and its rental income will contribute as a consistent and stable revenue and cash flow to the Company.

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On 30 August 2016, Shenzhen Aerospace entered into a Facility Agreement with Aerospace Science & Technology Finance Company Limited*(航天科技財務有限責任公司) (“Aerospace Finance”) in respect of a RMB1,300,000,000 facility for a period of 12 years and a provision of a portion of the Shenzhen Aerospace Science & Technology Plaza with a valuation amount of approximately RMB1,900,000,000 as mortgage. The connected transaction was approved by independent shareholders of the Company at the extraordinary general meeting held in October 2016. Details of which please refer to the announcements of the Company made on 30 August 2016 and 7 October 2016, and the circular made on 14 September 2016.

Shenzhen Aerospace recorded a fair value gain of investment property of HK$1,402,000,000 in 2016. As at 31 December 2016, Shenzhen Aerospace Science & Technology Plaza was valued at approximately RMB7,345,000,000.

Internet of Things and Cross-border E-commerce Logistics

In 2016, Aerospace Digitnexus Information Technology (Shenzhen) Limited* (航天數聯信息技術（深圳）有限 公司 ) (“Aerospace Digitnexus”) recorded a turnover of HK$75,001,000 and an operating profit of HK$7,134,000. During the year, except for continued to maintain and complete the prevailing projects of internet of things, Aerospace Digitnexus completed the establishment of a sorting and customs clearance centre in Kaiping and commenced its operations, and continued to develop an e-commerce logistics service platform. In 2017, Aerospace Digitnexus will continue to put effort in optimizing its product techniques, and doing well on the development in internet of things applications and cold-chain logistics warehouse management while integrating with mature products in the market and form market influence speedily in order to strive to realize profit as soon as possible.

The Company, through its direct wholly-owned subsidiary, Digilink Systems Limited, increased capital in its direct wholly-owned subsidiary, Aerospace Digitnexus, a sum of Hong Kong dollars in equivalent to RMB20,000,000, whereas Shenzhen Yuan Heng Fu Bang Investment Partnership Enterprise (Limited Partnership)* (深圳市元亨富邦投資合伙企業(有限合伙)) (“Yuan Heng Fu Bang”), an independent third party,

invested a sum of Hong Kong dollars in equivalent to RMB25,000,000 in Aerospace Digitnexus, and all the procedures are completed. The Company’s indirect interest in Aerospace Digitnexus is reduced from 100% to 72.128% and that of Yuan Heng Fu Bang is 27.872%. Detail of which please refer to the Company’s announcement published on 20 July 2016.

ASSETS

S
（HK$’000）	31 December 2016	31 December 2015	Changes(%)
Non-Current Assets	10,463,151	8,981,919	16.49
CurrentAssets	2,321,425	2,993,724	(22.46)
Total Assets	12,784,576	11,975,643	6.75

The increase in non-current assets was mainly due to an increase in the input of construction cost and the fair value of investment properties, whereas the decrease in current assets was mainly due to the payment to suppliers, and the principal repayment and interest payment of bank loans and so on, resulting in a decrease in bank deposits. The equity attributable to shareholders of the Company was HK$6,190,158,000, representing an increase of 8.49% as compared with that of HK$5,705,770,000 as at 31 December 2015. Based on the issued share capital of 3,085,022,000 shares during the year, the net assets per share attributable to shareholders of the Company was HK$2.01.

As at 31 December 2016, a cash deposit of the Company and the subsidiaries of HK$6,158,000 had been pledged to banks to obtain credit facilities. As to the mortgage of part of Shenzhen Aerospace Science & Technology Plaza at value of approximately RMB1,900,000,000 by Shenzhen Aerospace to Aerospace Finance, which will be performed once the application of property right certificates is completed.

LIABILITIES

ITIES
（HK$’000）	31 December 2016	31 December 2015	Changes(%)
Non-Current Liabilities	3,166,056	2,278,002	38.98
Current Liabilities	1,643,386	2,494,379	(34.12)
Total Liabilities	4,809,442	4,772,381	0.78

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Shenzhen Aerospace had entered into a loan of RMB1,300,000,000 with Aerospace Finance in 2016 for the repayment of a syndicated loan, and the outstanding loan amount was RMB509,100,000 as at 31 December 2016.

The increase in non-current liabilities was mainly due to the increase of deferred tax and the drawdown of a term loan, whereas the decrease in current liabilities was mainly due to the repayment of a syndicated loan. As at 31 December 2016, the Company and the subsidiaries had bank and other borrowings of HK$1,152,334,000.

OPERATING EXPENSES

The administrative expenses of the Company and the subsidiaries in 2016 were HK$312,660,000, representing an increase of 1.79% as compared with last year. The finance costs amounted to HK$87,638,000, of which HK$34,198,000 had been capitalized and recorded as the construction cost of Shenzhen Aerospace Science & Technology Plaza.

CONTINGENT LIABILITIES

As at 31 December 2016, the Company and the subsidiaries did not have any other material contingent liabilities.

FINANCIAL RATIOS

AL RATIOS
	2016	2015
Gross Profit Margin	25.63%	20.26%
Return on Net Assets	15.09%	22.58%
	31 December 2016	31 December 2015
Assets- Liabilities Ratio	37.62%	39.85%
Current Ratio	1.41	1.20
Quick Ratio	1.25	1.10

LIQUIDITY

The source of funds of the Company and the subsidiaries mainly relies on internal resources and banking facilities. As at 31 December 2016, the free cash and bank balance amounted to HK$1,150,271,000, the majority of which were in Hong Kong Dollars and Renminbi.

CAPITAL EXPENDITURE AND INVESTMENT COMMITMENT

As at 31 December 2016, the capital commitments of the Company and the relevant subsidiaries contracted for but not provided in the consolidated financial statements was HK$73,845,000, mainly for the acquisition of fixed assets.

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 will continue to upgrade the human resources management skills 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.

As at 31 December 2016, the Company and the subsidiaries had a total of approximately 6,600 employees based in the mainland 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.

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CORPORATE GOVERNANCE

During 2016, the Company had complied with the provisions of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 of the Listing Rules.

DIRECTORS’ AND EXECUTIVE’S INTERESTS IN SHARES

The Company had adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules as the required standard for the Directors of the Company to trade the securities of the Company. Having made specific enquiry to all the Directors of the Company and in accordance with information provided, all the Directors have complied with the provisions under the Model Code in 2016.

As at 31 December 2016, save for Mr Zhang Jianheng, Mr Mao Yijin and Mr Xu Liangwei, the Directors of the Company, are the officers of the substantial shareholder of the Company, China Aerospace Science & Technology Corporation and its subsidiaries, none of the directors, chief executives or their associates have any beneficial or non-beneficial interests or short positions in the share capital, warrants and options of the Company or its subsidiaries or any of its associated corporations which is required to be recorded in the Register of Directors’ Interests pursuant to Part XV of the Securities & Futures Ordinance or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers .

AUDIT COMMITTEE

In 2016, the Audit Committee of the Company comprises Mr Luo Zhenbang (Chairman) and Ms Leung Sau Fan, Sylvia, both being Independent Non-Executive Directors, and Mr Mao Yijin (appointed on 24 August 2016) and Mr Shi Weiguo (resigned on 24 August 2016), both being Non-Executive Directors. The major functions of the Audit Committee include serving as a focal point for communication between the Directors and external auditor, reviewing the Company’s financial information as well as overseeing the Company’s financial reporting system, risk management and internal control procedures.

The Audit Committee also reviewed, discussed and approved the financial statements for the year ended 31 December 2016.

REMUNERATION COMMITTEE

In 2016, the Remuneration Committee comprises Ms Leung Sau Fan, Sylvia (Chairman) and Mr Wang Xiaojun, both being Independent Non-Executive Directors, and Mr Xu Liangwei (appointed on 24 August 2016) and Mr Chen Xuechuan (resigned on 24 August 2016), both being Non-Executive Directors. The Remuneration Committee takes the role of advisory and proposes to the Board on the emoluments of the Directors and senior management with regard to the operating results of the Company, the individual performance and the comparable market information.

NOMINATION COMMITTEE

In 2016, the Nomination Committee comprises Mr Zhang Jianheng (Chairman), Mr Xu Liangwei (appointed on 24 August 2016) and Mr Chen Xuechuan (resigned on 24 August 2016), all being Non-Executive Directors, and Mr Luo Zhenbang, Ms Leung Sau Fan, Sylvia and Mr Wang Xiaojun, all being Independent Non-Executive Directors. Main functions of the Nomination Committee are to review the structure and size of the Board in order to implement the Company’s strategy.

DIVIDEND

The Board has recommended a final dividend of HK2 cents per share for the year ended 31 December 2016 (2015: HK1 cent) payable to the shareholders of the Company whose names appear on the Register of Members of the Company on Thursday, 8 June 2017.

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STATEMENT OF COMPLIANCE

The financial information relating to the years ended 31 December 2015 and 2016 included in the Announcement does not constitute the Company's statutory annual consolidated financial statements for those years but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Companies Ordinance (Cap. 622) is as follows:

The Company has delivered the financial statements for the year ended 31 December 2015 to the Hong Kong Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Companies Ordinance and will deliver the financial statements for the year ended 31 December 2016 to the Hong Kong Registrar of Companies in due course.

The Company’s auditor has reported on the financial statements of the Company and its subsidiaries for both years ended 31 December 2015 and 2016. The auditor’s reports were unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its reports; and did not contain a statement under sections 406(2), 407(2) or (3) of the Companies Ordinance.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held on Wednesday, 31 May 2017. Notice of which will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company and dispatched to the shareholders of 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 for 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 Wednesday, 24 May 2017
Closure of Register of Members	from Thursday, 25 May 2017 to Wednesday, 31 May 2017 (both days inclusive)
Record Date	Wednesday, 31 May 2017

(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 Monday, 5 June 2017
Closure of Register of Members	from Tuesday, 6 June 2017 to Thursday, 8 June 2017 (both days inclusive)
Record Date	Thursday, 8 June 2017

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 Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration on or before 4:30 p.m. on Wednesday, 24 May 2017 and Monday, 5 June 2017 respectively. Subject to approval by the shareholders at the Annual General Meeting, dividend warrants are expected to be despatched to the shareholders by post on or around Wednesday, 28 June 2017.

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APPRECIATION

On behalf of the Board, I would like to extend my highly praised respect and heartfelt gratitude to Mr Zhang Jianheng for his outstanding contributions to the Company’s development during his tenure of services as Chairman, and heartfelt gratitude to Mr Chen Xuechuan and Mr Shi Weiguo for their contributions to the Company during their tenure of services as Non-Executive Directors.

I also express my profound gratitude to my fellow Directors and all staff of the Company for their dedication, loyal services and invaluable contributions. Grateful thanks are also due to shareholders, bankers, business partners and members of the public who have supported the Company’s development all along.

By order of the Board, Gong Bo Hong Kong, 28 March 2017 Chairman

At the date of this Announcement,	the Board of Directors of the Company comprises:	the Board of Directors of the Company comprises:
		Independent Non-Executive
Executive Directors	Non-Executive Directors	Directors
Mr Li Hongjun_(President)_	Mr Gong Bo_(Chairman)_	Mr Luo Zhenbang
Mr Jin Xuesheng	Mr Mao Yijin	Ms Leung Sau Fan, Sylvia
	Mr Xu Liangwei	Mr Wang Xiaojun

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

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