THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in New World Mobile Holdings Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, 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 circular.

==> picture [61 x 35] intentionally omitted <==

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 862)

SPECIAL DEALS, VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

(I) PROPOSED DISPOSAL OF THE ENTIRE ISSUED SHARE CAPITAL OF, AND LOAN TO, UPPER START HOLDINGS LIMITED; AND (II) PROPOSED SPECIAL DIVIDEND

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

CIMB-GK Securities (HK) Limited

A letter from the board of directors of New World Mobile Holdings Limited is set out on pages 8 to 20 of this circular. A letter from CIMB-GK Securities (HK) Limited containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 33 of this circular. The letter of recommendation from the Independent Board Committee to the Independent Shareholders is set out on page 21 of this circular.

A notice convening the extraordinary general meeting of New World Mobile Holdings Limited to be held at Meeting Rooms 606 and 607, Hong Kong Convention and Exhibition Centre, 1 Harbour Road, Wanchai, Hong Kong on Wednesday, 3 January 2007 at 10:00 a.m. is set out on pages 180 to 182 of this circular. A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of New World Mobile Holdings Limited in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so desire.

The Special Dividend will be made subject to (i) the Disposal Completion; (ii) compliance with section 146 of the articles of association of the Company; and (iii) the sufficiency of the distributable reserves of the Company as at the Disposal Completion Date. The amount of the Special Dividend will be reduced if the Company does not have sufficient distributable reserves available for distribution. The Shareholders and potential investors of the Company are advised to exercise extreme caution when dealing in the Shares.

15 December 2006

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from CIMB-GK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix I – Accountants’ report on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Appendix II – Additional financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . .	95
Appendix III – Financial information on the CSL NWM Group . . . . . . . . . . . . . . . . . . . . . . . . .	99
Appendix IV – Financial information on the NWPCS Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
Appendix V – Pro forma financial information on the Remaining Group . . . . . . . . . . . . . . . .	160
Appendix VI – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	169
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	180

DEFINITIONS

In this circular, unless the content otherwise requires, the following expressions have the following meanings:

“Acquisition”	the acquisition of the Sale Shares by the Offeror on and subject to
	the terms and conditions of the Acquisition Agreement
“Acquisition Agreement”	the conditional sale and purchase agreement dated 22 November
	2006 entered into among NWD, the Offeror and Mr. Lo in respect
	of the sale and purchase of the Sale Shares
“Acquisition Completion”	completion of the Acquisition in accordance with the terms and
	conditions of the Acquisition Agreement
“acting in concert”	has the meaning ascribed thereto under the Takeovers Code
“Announcement”	the announcement dated 22 November 2006 jointly issued by the
	Company and the Offeror in relation to, among other things, the
	proposed Disposal, the proposed Special Dividend, the Special
	Deals and the proposed Acquisition
“associate(s)”	has the meaning ascribed thereto under the Listing Rules
“Board”	board of the Directors
“Cash Consideration”	the remaining balance of the Consideration which shall be paid
	by NWD in cash upon the Disposal Completion after the Set-off
“CIMB-GK”	CIMB-GK Securities (HK) Limited, a licensed corporation under
	the SFO to carry on Types 1 (dealing in securities), 4 (advising on
	securities) and 6 (advising on corporate finance) regulated activities
	under the SFO, being the independent financial adviser to the
	Independent Board Committee and the Independent Shareholders
	in respect of the respective terms of the S&P Agreement (including
	the Special Deals) and the Special Dividend
“Company”	New World Mobile Holdings Limited (stock code: 862), an
	exempted company incorporated in the Cayman Islands with
	limited liability and the issued shares of which are listed on the
	Stock Exchange
“connected person(s)”	has the meaning ascribed thereto under the Listing Rules
“Consideration”	the consideration of HK$2,500 million payable by NWD to the
	Company under the S&P Agreement

DEFINITIONS

“Convertible Bond”	a convertible bond of an outstanding principal amount of
	HK$28,286,000 issued by the Company to NWCBN due 1
	November 2007, which is convertible into new Shares at a
	conversion price of HK$1.22 per Share (subject to adjustment) as
	at the Latest Practicable Date
“CSL NWM”	CSL New World Mobility Limited (formerly known as Telstra
	CSL Limited), a company incorporated in Bermuda with limited
	liability and owned as to 23.6% by the Company through Upper
	Start and as to 76.4% by Telstra Corporation Limited (the issued
	shares of which are listed on the Australian Stock Exchange)
	through one of its wholly-owned subsidiaries
“CSL NWM Group”	CSL NWM and its subsidiaries
“Director(s)”	director(s) of the Company
“Disposal”	the disposal of the entire issued share capital of Upper Start and
	the assignment of the Sale Loan by the Company to NWD on and
	subject to the terms and conditions of the S&P Agreement
“Disposal Completion”	completion of the Disposal in accordance with the terms and
	conditions of the S&P Agreement
“Disposal Completion Date”	the date on which Disposal Completion shall take place, being the
	third business day after all the conditions precedent to the S&P
	Agreement have been satisfied or waived (as the case may be) or
	such other date as NWD and the Company may agree in writing
“Disposal Long Stop Date”	28 February 2007 or such other date as the parties to the S&P
	Agreement may agree in writing
“EBITDA”	earnings before interest, taxation, depreciation, amortisation and
	impairment (or reversal of provision) of property, plant and
	equipment
“EGM”	an extraordinary general meeting of the Company to be convened
	at 10:00 a.m. on Wednesday, 3 January 2007 to consider and, if
	thought fit, approve the S&P Agreement (including the Special
	Deals) and the Special Dividend
“Executive”	the Executive Director of the Corporate Finance Division of the
	SFC or any delegate of the Executive Director

DEFINITIONS

“Existing Loans”	loans advanced by New World Finance to the Company with an
	aggregate outstanding principal amount of approximately
	HK$1,066.8 million as at the Latest Practicable Date
“Group”	the Company and its subsidiaries
“HIBOR”	Hong Kong Interbank Offer Rate
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“Independent Board Committee”	an independent committee of the Board, which comprises Mr.
	Kwong Che Keung, Gordon and Mr. Hui Chiu Chung,JP,
	established by the Company to advise the Independent
	Shareholders in respect of the terms of the S&P Agreement
	(including the Special Deals) and the Special Dividend
“Independent Shareholders”	being the Shareholders other than NWD, its associates,
	parties acting in concert with NWD as well as the Offeror, New
	World CyberBase Limited, their respective associates and parties
	acting in concert with any of them, and persons who are involved
	or interested in the Special Deals
“Latest Practicable Date”	12 December 2006, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information for
	inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Mr. Lo”	Mr. Lo Lin Shing, Simon, the sole beneficial owner of the Offeror
	and a non-executive Director
“Mr. To”	Mr. To Hin Tsun, Gerald, an executive Director
“New World Finance”	New World Finance Company Limited, a company incorporated
	in Hong Kong with limited liability and a direct wholly-owned
	subsidiary of NWD which holds a money lenders licence under
	the Money Lenders Ordinance (Chapter 163 of the Laws of Hong
	Kong)
“NWCBN”	New World CyberBase Nominee Limited, a company incorporated
	in the British Virgin Islands with limited liability and an indirect
	wholly-owned subsidiary of NWD

DEFINITIONS

“NWD”	New World Development Company Limited (stock code: 17), a
	company incorporated in Hong Kong with limited liability and
	the issued shares of which are listed on the Stock Exchange
“NWD Group”	NWD and its subsidiaries (excluding the Group)
“NWPCS Group”	New World PCS Holdings Limited, a company incorporated in
	the Cayman Islands with limited liability and a wholly-owned
	subsidiary of CSL NWM, and its subsidiaries, which has become
	part of the CSL NWM Group since 31 March 2006
“Offeror”	Moral Glory International Limited, a company incorporated in the
	British Virgin Islands with limited liability and beneficially wholly-
	owned by Mr. Lo
“Overseas Shareholders”	Qualifying Shareholders whose addresses on the Record Date as
	stated in the register of members of the Company are outside
	Hong Kong
“PPG”	Power Palace Group Limited, a company incorporated in the British
	Virgin Islands with limited liability and a direct wholly-owned
	subsidiary of NWD
“PRC”	the People’s Republic of China, which, solely for the purpose of
	this circular, excludes Hong Kong, the Macau Special
	Administrative Region and Taiwan
“Qualifying Shareholder(s)”	Shareholder(s) whose name(s) appear(s) on the register
	of members of the Company at the close of business on the Record
	Date
“Record Date”	3 January 2007, being the record date to determine entitlements
	of the Shareholders to the Special Dividend
“Remaining Group”	the Company and its subsidiaries immediately after the Disposal
	Completion and the Special Dividend
“S&P Agreement”	the conditional sale and purchase agreement dated 22 November
	2006 entered into between the Company and NWD in relation to
	the sale and purchase of the entire issued share capital of Upper
	Start and assignment of the Sale Loan
“Sale Loan”	the entire amount of the interest free shareholder’s loan owing
	from Upper Start to the Company as at the Disposal Completion
	Date, the amount of which as at the Latest Practicable Date was
	approximately HK$2,431 million

DEFINITIONS

“Sale Shares”	55,336,666 Shares, representing approximately 56.64% of the
	entire issued share capital of the Company and beneficially owned
	by the NWD Group as at the Latest Practicable Date
“Set-off”	the partial payment of the Consideration by way of set-off against
	the aggregate amount owing under the Subscription Note, the
	Convertible Bond and the Existing Loans as at the Disposal
	Completion Date pursuant to the S&P Agreement
“SFC”	Securities and Futures Commission of Hong Kong
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of HK$1.00 each in the issued share capital of
	the Company
“Share Offer”	the possible unconditional mandatory general cash offer to be
	made by Taifook Securities Company Limited on behalf of the
	Offeror for all the issued Shares not already owned or agreed to
	be acquired by the Offeror and parties acting in concert with it
	upon the Acquisition Completion at HK$0.65 per Share.
“Shareholder(s)”	holder(s) of the Shares
“Special Deals”	the Disposal and the Set-off, each of which constitutes a special
	deal for the Company under Rule 25 of the Takeovers Code
“Special Dividend”	subject to, among other things, and following the Disposal
	Completion, the proposed declaration of cash dividend of HK$1.20
	per Share (subject to finalisation) by the Company to the
	Qualifying Shareholders on a pro rata basis
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Note”	a convertible note of an outstanding principal amount of HK$1,200
	million issued by the Company to PPG due on 5 July 2007, which
	is convertible into new Shares at a conversion price of HK$1.20
	per Share (subject to adjustment) as at the Latest Practicable Date
“Takeovers Code”	The Hong Kong Code on Takeovers and Mergers
“Technology Business”	the provision of technology-related services including mobile
	Internet-related services in the PRC by the Group

DEFINITIONS

“Upper Start”	Upper Start Holdings Limited, a company incorporated in the
	British Virgin Islands with limited liability and a wholly-owned
	subsidiary of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollars, the lawful currency of the United States of
	America
“%”	per cent.

EXPECTED TIMETABLE

The following timetable is subject to changes, depending on, among other things, the date on which the Disposal Completion is to take place:

Last day of dealings in the Shares on a cum-dividend basis

in relation to the Special Dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 22 December 2006

Commencement of dealings in the Shares on an ex-dividend basis

in relation to the Special Dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 27 December 2006

Latest time for lodging transfer of the Shares

for entitlements to the Special Dividend . . . . . . . . . . . . . . . . 4:00 p.m. on Thursday, 28 December 2006

entitlements to the Special Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 29 December 2006 to

Wednesday, 3 January 2007 (both dates inclusive)

Latest time for lodging forms of proxy for the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday, 1 January 2007

Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 3 January 2007

EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Wednesday, 3 January 2007

Disposal Completion Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 4 January 2007

Publication of announcement in relation to, among other things, the Disposal Completion and the final amount of

the Special Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 5 January 2007

Cheques in respect of the Special Dividend are expected

to be posted to the Qualifying Shareholders on or before . . . . . . . . . . . . . . . Thursday, 11 January 2007

Notes:

It should be noted that the Shares will be dealt with on ex-dividend basis in relation to the Special Dividend from Wednesday, 27 December 2006 and that dealings in the Shares on ex-dividend basis in relation to the Special Dividend may take place whilst the conditions precedent to the S&P Agreement remain unfulfilled. Shareholders or any other persons dealing in the Shares before the day on which all conditions precedent to the S&P Agreement are fulfilled will accordingly bear the risk that the S&P Agreement (and hence the Special Dividend) may not become unconditional or may not proceed. Any Shareholders or other persons contemplating dealing in the Shares during the abovementioned period who are in doubt of their position are advised to consult their professional advisers.
All time refers to Hong Kong time. Dates and times specified in this circular are indicative only and are subject to change in accordance with the agreement between the Company and NWD. The Company will notify the Shareholders of any changes to the expected timetable above as and when appropriate.
7 -

LETTER FROM THE BOARD

==> picture [61 x 35] intentionally omitted <==

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 862)

Directors:

Executive Directors:

Dr. Cheng Kar Shun, Henry (Chairman) Mr. Doo Wai Hoi, William, JP (Vice Chairman) Dr. Wai Fung Man, Norman (Chief Executive Officer) Mr. To Hin Tsun, Gerald Mr. Chow Yu Chun, Alexander

Registered office:

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

Non-executive Directors:

Mr. Ho Hau Chong, Norman Mr. Lo Lin Shing, Simon

Independent non-executive Directors:

Mr. Hui Chiu Chung, JP Mr. Kwong Che Keung, Gordon

Mr. Tsui Hing Chuen, William, JP

Principal place of business

in Hong Kong:

17th Floor Chevalier Commercial Centre 8 Wang Hoi Road Kowloon Bay Hong Kong

15 December 2006

To the Shareholders and, for information purposes only, the holders of the outstanding share options of the Company

Dear Sir or Madam,

SPECIAL DEALS, VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

INTRODUCTION

On 22 November 2006, the Company and the Offeror jointly announced, among other things, that:

(i) the Company and NWD entered into the S&P Agreement, pursuant to which the Company had conditionally agreed to sell, and NWD has conditionally agreed to purchase or procure the purchase of, the entire issued share capital of Upper Start and the Sale Loan, at the Consideration of HK$2,500 million;
8 -

LETTER FROM THE BOARD

(ii) subject to (a) the Disposal Completion; (b) compliance with section 146 of the articles of association of the Company which provides that dividend shall only be declared or payable out of profits and reserves of the Company lawfully available for distribution; and (c) the sufficiency of the distributable reserves of the Company as at the Disposal Completion Date, the Board intends to distribute the Special Dividend of HK$1.20 per Share (subject to finalisation) to the Qualifying Shareholders. The Special Dividend will be financed by the Cash Consideration; and
(iii) the Offeror entered into the Acquisition Agreement with NWD, pursuant to which the Offeror has conditionally agreed to purchase, and NWD has conditionally agreed to procure the sale of, subject to, among other things, the Disposal Completion, the Sale Shares at HK$0.65 per Sale Share. The Sale Shares, being 55,336,666 Shares, represented approximately 56.64% of the voting rights of the Company as at the Latest Practicable Date.

Upon the Acquisition Completion, the Offeror and parties acting in concert with it will own an aggregate of 71,428,512 Shares, representing approximately 73.11% of the voting rights of the Company. Accordingly, pursuant to Rule 26.1 of the Takeovers Code, the Offeror will be required to make an unconditional mandatory general cash offer for all the issued Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it. The Share Offer will be made at HK$0.65 per Share which is equal to the amount payable for each Sale Share. Details of the terms of the Share Offer and the information of the Offeror have been set out in the Announcement.

The purpose of this circular is to provide you with, among other things, (i) further details of the S&P Agreement (including the Special Deals) and the Special Dividend; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the S&P Agreement (including the Special Deals) and the Special Dividend; (iii) a letter of advice from CIMB-GK to the Independent Board Committee and the Independent Shareholders in relation to the terms of the S&P Agreement (including the Special Deals) and the Special Dividend; (iv) the accountants’ report on the Group; (v) the financial information on the CSL NWM Group for the year ended 30 June 2006; (vi) the financial information on the NWPCS Group for the nine months ended 31 March 2006; (vii) the unaudited pro forma financial information on the Remaining Group; (viii) the expected timetable in respect of the EGM, the Disposal Completion and the Special Dividend; and (ix) a notice of the EGM.

LETTER FROM THE BOARD

THE S&P AGREEMENT

Date:

22 November 2006

Parties:

(i) the Company as the vendor; and
(ii) NWD as the purchaser.

As at the Latest Practicable Date, the NWD Group was beneficially interested in approximately 56.64% of the issued share capital of the Company. As such, NWD is a connected person of the Company under the Listing Rules.

Assets to be disposed:

Pursuant to the terms and conditions of the S&P Agreement:

(i) the Company has conditionally agreed to sell the entire issued share capital of Upper Start to NWD or its nominee and NWD has conditionally agreed to purchase, or procure the purchase of, the same free from all encumbrances and together with all rights and benefits at any time accruing thereto including all rights to any dividend or other distributions declared, made or paid on or after the Disposal Completion; and
(ii) the Company has conditionally agreed to sell and assign and NWD has conditionally agreed to purchase and accept, or procure the purchase and acceptance of, the assignment of all rights, title, benefits and interests of and in the Sale Loan free from all encumbrances and together with all rights attaching thereto on or after the Disposal Completion.

Upper Start was incorporated in the British Virgin Islands with limited liability and was a whollyowned subsidiary of the Company as at the Latest Practicable Date. The sole asset of Upper Start is its 23.6% interest in the issued share capital of CSL NWM. The remaining 76.4% interest in the issued share capital of CSL NWM is beneficially owned by Telstra Corporation Limited, the issued shares of which are listed on the Australian Stock Exchange.

10 -

LETTER FROM THE BOARD

Consideration:

Pursuant to the S&P Agreement, the Consideration is HK$2,500 million.

The Consideration was arrived at after arm’s length negotiations between the parties to the S&P Agreement after taking into account, among other things, (i) the fact that the 23.6% interest in the issued share capital of CSL NWM is only a minority interest in the CSL NWM Group; and (ii) the aggregate amount of the audited EBITDA of the NWPCS Group for the nine months ended 31 March 2006 and the audited EBITDA of the CSL NWM Group for the year ended 30 June 2006 amounting to approximately HK$1,649 million (Note) .

Note: CSL NWM acquired the entire interest in the NWPCS Group on 31 March 2006. Since then, the CSL NWM Group has consolidated the results of the NWPCS Group and accordingly, the audited consolidated financial statements of the CSL NWM Group for the year ended 30 June 2006 included the results of the NWPCS Group for the period from 1 April 2006 to 30 June 2006. The audited EBITDA of the NWPCS Group and the audited EBITDA of the CSL NWM Group were extracted from the audited consolidated financial statements of the NWPCS Group for the nine months ended 31 March 2006 (the text of which is set out in Appendix IV to this circular) and the audited consolidated financial statements of the CSL NWM Group for the year ended 30 June 2006 (the text of which is set out in Appendix III to this circular) respectively.

The Consideration shall be satisfied by NWD in the following manner:

(i) a sum equivalent to the aggregate amount owing under the Subscription Note, the Convertible Bond and the Existing Loans as at the Disposal Completion Date shall be paid upon the Disposal Completion by way of setting off against the aggregate amount owing under the Subscription Note, the Convertible Bond and the Existing Loans as at the Disposal Completion Date; and
(ii) the Cash Consideration shall be paid upon the Disposal Completion.

Based on the aggregate amount owing under the Subscription Note (owing by the Company to PPG), the Convertible Bond (owing by the Company to NWCBN) and the Existing Loans (owing by the Company to New World Finance) of approximately HK$2,326.8 million (including total principal balance of approximately HK$2,295.1 million and total accrued interest of approximately HK$31.7 million) as at the Latest Practicable Date, the Cash Consideration is estimated to be approximately HK$173.2 million. The actual amount of the Cash Consideration, however, is to be determined with reference to the aforesaid aggregate amount of borrowings as at the Disposal Completion Date.

11 -

LETTER FROM THE BOARD

Conditions precedent:

The Disposal Completion is subject to the fulfillment of the following conditions precedent:

(i) the passing of an ordinary resolution by the Shareholders (other than those who are required to abstain from voting under the Listing Rules and the Takeovers Code) at the EGM approving (1) the entering into of the S&P Agreement and the performance of the transactions contemplated thereunder by the Company in accordance with the requirements under applicable laws, rules and regulations; and (2) the Special Dividend;
(ii) the grant by the Executive of his consent to the Special Deals as required pursuant to the Takeovers Code;
(iii) all necessary governmental and regulatory (including the Stock Exchange and the SFC) approvals or consents (or waivers) required by NWD and the Company or any of them for the consummation of the transactions contemplated thereunder having been obtained; and
(iv) all necessary third party approvals or consents (or waivers) required by NWD and the Company or any of them for the consummation of the transactions contemplated thereunder having been obtained.

All the above conditions precedent cannot be waived. The Company shall use its reasonable endeavours to procure the holding of the EGM for the purpose of fulfilling the condition precedent (i) by the Disposal Long Stop Date and to ensure that the conditions precedent (ii), (iii) and (iv) (insofar as the Company is concerned) shall be fulfilled by the Disposal Long Stop Date. NWD shall ensure that the conditions precedent (iii) and (iv) (insofar as NWD is concerned) shall be fulfilled by the Disposal Long Stop Date. It is expected that the conditions precedent (iii) and (iv) will be satisfied upon fulfillment of the conditions precedent (i) and (ii).

If any of the conditions precedent under the S&P Agreement has not been fulfilled by the Disposal Long Stop Date, either parties to the S&P Agreement shall be entitled to rescind the S&P Agreement by giving written notice to the other whereupon the provisions of the S&P Agreement shall from such date have no further force and effect and no parties to the S&P Agreement shall have any liability under them (without prejudice to the rights of the parties to the S&P Agreement in respect of any antecedent breaches).

Completion:

Subject to the fulfillment of the conditions precedent to the S&P Agreement, the Disposal Completion shall take place on the Disposal Completion Date.

The Disposal Completion is expected to take place in January 2007.

12 -

LETTER FROM THE BOARD

Use of proceeds from the Disposal:

Subject to the Disposal Completion, part of the Cash Consideration of approximately HK$173.2 million (subject to adjustment) will be declared and distributed in the form of the Special Dividend to the Qualifying Shareholders, details of which are set out in the section headed “The Special Dividend” below. The remaining balance of the Cash Consideration will be used as general working capital of the Remaining Group.

THE SPECIAL DIVIDEND

Subject to (i) the Disposal Completion; (ii) compliance with section 146 of the articles of association of the Company which provides that dividend shall only be declared or payable out of profits and reserves of the Company lawfully available for distribution; and (iii) the sufficiency of the distributable reserves of the Company as at the Disposal Completion Date, the Board intends to declare and distribute the Special Dividend of HK$1.20 per Share (subject to finalisation) to the Qualifying Shareholders. The Special Dividend will be financed by the Cash Consideration. Based on 97,692,069 Shares in issue as at the Latest Practicable Date and the Special Dividend of HK$1.20 per Share (subject to finalisation), the total amount of the Special Dividend will be approximately HK$117.2 million.

As referred to in the annual report of the Company for the year ended 30 June 2006, the distributable reserves of the Company amounted to approximately HK$140.9 million. The Board considers that the Company would have sufficient distributable reserves for the Special Dividend immediately after the Disposal Completion, after taking into account (i) the Company’s distributable reserves of approximately HK$140.9 million as at 30 June 2006 as extracted from the annual report of the Company for the year ended 30 June 2006; (ii) the gain on the Disposal to be recognised by the Company; and (iii) the dividend income to be received by the Company from Upper Start before the Disposal Completion Date.

Further announcement(s) in relation to the final amount of the cash payment to be declared and payable by the Company pursuant to the Special Dividend will be made by the Company as and when appropriate.

ACTIONS TO BE TAKEN BY SHAREHOLDERS

In order to qualify for the Special Dividend, the names of the Qualifying Shareholders must appear on the register of members of the Company at the close of business on the Record Date. The register of members of the Company will be closed from Friday, 29 December 2006 to Wednesday, 3 January 2007 (both days inclusive), during which period no transfer of Shares will be effected. In order to qualify for the Special Dividend, all relevant Share certificates (together with the accompanying documents of transfer, if required) must be lodged with the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:00 p.m. on Thursday, 28 December 2006.

13 -

LETTER FROM THE BOARD

The cheques in respect of the Special Dividend will be despatched by Abacus Share Registrars Limited to the addresses of the Qualifying Shareholders (including the Overseas Shareholders) by ordinary mail at their own risk on or before Thursday, 11 January 2007. Shareholders are reminded to update their particulars with the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong during normal office hours from 9:00 a.m. to 4:00 p.m. from Monday to Friday as soon as practicable, but in any event no later than 4:00 p.m. on Wednesday, 3 January 2007.

The Special Dividend will only be made to the Qualifying Shareholders. It is the responsibility of the Overseas Shareholders who receive the cash payment under the Special Dividend to satisfy themselves as to the full observance of the laws of any relevant jurisdictions in connection therewith, including but without limitation to the obtaining of any governmental, exchange control or other consents which may be required to comply with necessary formalities or legal requirements. The Overseas Shareholders will be responsible for the payment of any taxes by whomsoever payable due in respect of such jurisdictions.

The Qualifying Shareholders’ entitlements to the Special Dividend are calculated in proportion to the number of Shares held by them whose names appear on the register of members of the Company at the close of business on the Record Date. The Qualifying Shareholders with their Shares held by a nominee company should note that the Board will regard the nominee company as a single Qualifying Shareholder according to the register of members of the Company. Accordingly, the Qualifying Shareholders (including the beneficial owners of the Shares) should note that the aforesaid arrangement in relation to the Special Dividend will not be extended by the Company to the beneficial owners of the Shares individually.

The Qualifying Shareholders with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) prior to the close of business on the Record Date. For the Qualifying Shareholders whose Shares are held by their nominee(s) and would like to have their names registered on the register of members of the Company, they must lodge the relevant transfer of Shares with the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable, but in any event no later than 4:00 p.m. on Thursday, 28 December 2006.

No assurance is given by the Board that the Disposal Completion will take place on or before Thursday, 4 January 2007 or at all. Shareholders will be informed of any changes to the expected timetable by press announcement(s).

INFORMATION ON THE NWD GROUP, THE GROUP, UPPER START AND THE CSL NWM GROUP

NWD is a company incorporated in Hong Kong with limited liability and its issued shares are listed on the Stock Exchange. The NWD Group is a conglomerate with core businesses including property, infrastructure, services, department stores, hotels and telecommunications in Hong Kong, Macau and the PRC.

14 -

LETTER FROM THE BOARD

The Company is an exempted company incorporated in the Cayman Islands with limited liability and the issued Shares are listed on the Stock Exchange. The principal business of the Group as at the Latest Practicable Date comprised (i) the Technology Business; and (ii) the ownership of the 23.6% interest in the issued share capital of CSL NWM.

Upper Start is a wholly-owned subsidiary of the Company whose principal activity is the holding of the 23.6% interest in the issued share capital of CSL NWM.

The CSL NWM Group is a major mobile telecommunications network operator providing mobile wireless services and associated activities by using mobile wireless technologies to provide mobile wireless services in spectrum reserved or designated for use for that purpose under the brands of “One2Free” and “1010” as well as “New World Mobility” following the acquisition of the NWPCS Group by the CSL NWM Group on 31 March 2006. Set out below is the summary of the financial information of the CSL NWM Group for the two years ended 30 June 2006 based on the audited consolidated financial statements of the CSL NWM Group for the year ended 30 June 2006:

	For the year ended 30 June	For the year ended 30 June
	2005	2006
	(Audited)	(Audited)
	HK$’000	HK$’000
Profit before taxation	344,175	619,845
Profit after taxation	209,911	483,095

The audited financial statements of the CSL NWM Group for the year ended 30 June 2006 are set out in Appendix III to this circular.

CORPORATE CHARTS

The following charts illustrate the simplified corporate and shareholding structures of the Group and the CSL NWM Group (i) as at the Latest Practicable Date; (ii) immediately after the Disposal Completion but before the Acquisition Completion; and (iii) immediately after the Disposal Completion and the Acquisition Completion but before the Share Offer:

15 -

LETTER FROM THE BOARD

(i) As at the Latest Practicable Date:

==> picture [407 x 263] intentionally omitted <==

----- Start of picture text -----

New World CyberBase
NWD Directors Public Shareholders
Limited
16.47% 56.64% 2.33% 24.56%
The Company
100.00%
Technology Business
Upper Start
23.60%
CSL NWM
----- End of picture text -----

(ii) Immediately after the Disposal Completion but before the Acquisition Completion:

==> picture [454 x 169] intentionally omitted <==

----- Start of picture text -----

New World CyberBase
NWD Directors Public Shareholders
Limited
16.47% 2.33% 24.56%
100.00% 56.64%
Upper Start The Company
23.60%
CSL NWM Technology Business
----- End of picture text -----

16 -

LETTER FROM THE BOARD

(iii) Immediately after the Disposal Completion and the Acquisition Completion but before the Share Offer:

==> picture [451 x 147] intentionally omitted <==

----- Start of picture text -----

New World CyberBase Directors
NWD The Offeror Public Shareholders
Limited (excluding Mr. Lo)
100.00% 16.47% 2.33% 24.56%
56.64%
Upper Start
The Company
23.60%
CSL NWM
Technology Business
----- End of picture text -----

REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE S&P AGREEMENT AND THE SPECIAL DIVIDEND

As a result of the Disposal, the Group is expected to record an unaudited gain of approximately HK$352 million based on (i) the Consideration of HK$2,500 million; and (ii) the audited net book value of the Company’s 23.6% interest (through Upper Start) in the issued share capital of CSL NWM of approximately HK$2,143 million as at 30 June 2006, assuming the Disposal had taken place on 30 June 2006. The actual gain on the Disposal, however, is to be determined with reference to the net book value of the Company’s 23.6% interest (through Upper Start) in the issued share capital of CSL NWM as at the Disposal Completion Date. In addition, as the amortised costs included in the carrying amounts of the Subscription Note and the Convertible Bond as at 30 June 2006 have to be increased to the amount of principals repayable when early redemptions are made upon the Disposal Completion, it is expected that a net decrease in the consolidated equity of the Group of approximately HK$40 million will be recognised upon the Disposal Completion, which would otherwise be recognised in the consolidated equity of the Group over a longer financial period from 1 July 2006 to their respective maturity dates if the Subscription Note and the Convertible Bond are redeemed or repaid on their respective maturity dates. The actual amount of the net decrease in the consolidated equity of the Group as a result of the early redemption of the Subscription Note and the Convertible Bond is, however, to be determined with reference to the carrying amounts of the Subscription Note and the Convertible Bond as at the Disposal Completion Date.

Set out below are the details of the major borrowings of the Group as at the Latest Practicable Date, being the Subscription Note, the Convertible Bond and the Existing Loans:

				Approximate
				outstanding principal
	Annual		balances as at the Latest
Major borrowings	interest rate	Maturity		Practicable Date
				HK$’ million
The Subscription Note	0.75%	July 2007		1,200.0
The Convertible Bond	3.00%	November 2007		28.3
The Existing Loans	0.65% above	August to September	2007	1,066.8
	three-month
	HIBOR
Total				2,295.1

17 -

LETTER FROM THE BOARD

The Board considers that the Disposal will enable the Group to discharge the Subscription Note, the Convertible Bond and the Existing Loans before they are due for repayment. Based on the annual report of the Company for the year ended 30 June 2006, the Group had incurred significant interest expenses of approximately HK$93.4 million, of which approximately HK$46.8 million, HK$0.9 million and HK$45.7 million respectively were attributable to the Subscription Note, the Convertible Bond and the Existing Loans for the year ended 30 June 2006 respectively. Among the aforesaid interest expenses of approximately HK$93.4 million, approximately HK$55.6 million were the actual interest expenses payable to the holders or lender of the Subscription Note, the Convertible Bond and the Existing Loans and approximately HK$37.8 million were required to be recorded in the consolidated financial statements of the Group in accordance with Hong Kong Accounting Standard 32.

Based on the existing carrying amounts of the Subscription Note, the Convertible Bond and the Existing Loans, their average aggregate monthly interest expenses are estimated to be approximately HK$8.4 million for the year ending 30 June 2007. Among the aforesaid estimated monthly interest expenses of approximately HK$8.4 million, approximately HK$5.2 million will be the actual interest expenses payable to the holders or lender of the Subscription Note, the Convertible Bond and the Existing Loans and approximately HK$3.2 million will be required to be recorded in the consolidated financial statements of the Group in accordance with Hong Kong Accounting Standard 32. Accordingly, the Disposal will enable the Remaining Group to reduce significant interest expenses which would otherwise have to be paid on the aforesaid borrowings.

Since 2001, the Company has not declared any dividend to the Shareholders. It is the Board’s intention to declare and distribute, subject to, among other things, the Disposal Completion and the availability of the Company’s distributable reserves, the Special Dividend. The Cash Consideration of approximately HK$173.2 million (subject to adjustment) will be used for the Special Dividend and as general working capital of the Remaining Group. As such, the entering into of the S&P Agreement provides the Shareholders an opportunity to have return from their investment in the Company in the form of the Special Dividend.

In view of the above and having considered (i) the terms of the S&P Agreement; (ii) the expected unaudited gain to be recorded by the Group as a result of the Disposal; (iii) the full discharge of the Subscription Note, the Convertible Bond and the Existing Loans; and (iv) the use of the Cash Consideration for the purpose of, among other things, the Special Dividend, the Board is of the view that the terms of the S&P Agreement are fair and reasonable and in the interests of the Group and the Independent Shareholders as a whole.

COMPLIANCE WITH RULE 13.24 OF THE LISTING RULES FOLLOWING THE DISPOSAL COMPLETION

After the Disposal Completion, the Remaining Group’s principal business will be the Technology Business. The Board is aware of the Company’s continuing obligations to comply with the requirements of Rule 13.24 of the Listing Rules as a result of the Disposal Completion.

The Technology Business currently employs about 120 employees with operations in Beijing, Shanghai and Guangzhou of the PRC and marketing offices in Shenyang, Nanjing, Chengdu and Xian of the PRC. As referred to in the annual report of the Company for the year ended 30 June 2006, the turnover of the Technology Business for the period from 22 October 2005 (date of acquisition of the Technology Business by the Group) to 30 June 2006 amounted to approximately HK$16.5 million. In view of the above, the Board considers that after the Disposal Completion, the Company will be able to continue to comply with the requirements of Rule 13.24 of the Listing Rules.

18 -

LETTER FROM THE BOARD

GENERAL

Each of the Disposal and the Set-off constitutes a special deal for the Company under Rule 25 of the Takeovers Code, and therefore requires the consent of the Executive and such consent, if granted, will be conditional upon the approval by the Independent Shareholders voting by poll at the EGM. The Disposal also constitutes a very substantial disposal for the Company under Chapter 14 of the Listing Rules. As the NWD Group was beneficially interested in approximately 56.64% of the issued share capital of the Company as at the Latest Practicable Date, NWD is a connected person of the Company and the Disposal also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As such, the Disposal is subject to the approval by the Independent Shareholders at the EGM by poll. NWD, its associates and parties acting in concert with NWD as well as the Offeror, New World CyberBase Limited, their respective associates and parties acting in concert with any of them, and persons who are involved or interested in the Special Deals shall abstain from voting on the proposed resolutions approving the S&P Agreement (including the Special Deals) and the Special Dividend at the EGM.

The Special Dividend will also be put forward to the Independent Shareholders for approval by poll at the EGM.

The Independent Board Committee has been established by the Company to advise the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend. As at the Latest Practicable Date, (i) Mr. Lo, a non-executive Director, was the beneficial owner and the sole director of the Offeror; (ii) Mr. Ho Hau Chong, Norman, a non-executive Director, would be re-designated as an executive Director upon the Acquisition Completion; and (iii) Mr. Tsui Hing Chuen, William, JP , an independent non-executive Director, is also an independent non-executive director of New World CyberBase Limited, which in turn is a party presumed to be acting in concert with the Offeror. As such, the abovementioned non-executive Directors and independent non-executive Director are considered not eligible to constitute the Independent Board Committee to advise the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend. Accordingly, Mr. Kwong Che Keung, Gordon and Mr. Hui Chiu Chung, JP , being the independent non-executive Directors, have been invited to constitute the Independent Board Committee to provide recommendation to the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend. CIMB-GK has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend. Such appointment has been approved by the Independent Board Committee.

EGM

Set out on pages 180 to 182 of this circular is a notice convening the EGM which will be held at Meeting Rooms 606 and 607, Hong Kong Convention and Exhibition Centre, 1 Harbour Road, Wanchai, Hong Kong on Wednesday, 3 January 2007 at 10:00 a.m. at which ordinary resolutions will be proposed to approve the S&P Agreement (including the Special Deals) and the Special Dividend.

19 -

LETTER FROM THE BOARD

The Board recommends the Independent Shareholders to vote in favour of the ordinary resolutions in respect of the S&P Agreement (including the Special Deals) and the Special Dividend to be proposed at the EGM. The recommendation of the Independent Board Committee to the Independent Shareholders and the advice of CIMB-GK to the Independent Board Committee and the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend are set out on pages 22 to 33 of this circular.

The form of proxy for use by the Independent Shareholders at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of a form of proxy shall not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so desire.

ADDITIONAL INFORMATION

Your attention is also drawn to the letter of advice from CIMB-GK to the Independent Board Committee and the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend, the letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend as well as the information set out in the appendices to this circular.

Yours faithfully, By Order of the Board of

New World Mobile Holdings Limited Dr. Wai Fung Man, Norman

Executive Director and Chief Executive Officer

20 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [61 x 35] intentionally omitted <==

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 862)

15 December 2006

To the Independent Shareholders

Dear Sir or Madam,

SPECIAL DEALS, VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

We refer to the circular dated 15 December 2006 issued by New World Mobile Holdings Limited (the “Circular”) of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular, unless the context otherwise requires. We have been appointed by the Board as the Independent Board Committee to give you recommendation in respect of the S&P Agreement (including the Special Deals) and the Special Dividend.

We wish to draw your attention to the letter from the Board as set out on pages 8 to 20 of the Circular which provides, among other things, information relating to the S&P Agreement (including the Special Deals) and the Special Dividend, and the letter from CIMB-GK as set out on pages 22 to 33 of the Circular which contains its advice to us and to you in relation to the S&P Agreement (including the Special Deals) and the Special Dividend.

Having considered the terms of the S&P Agreement (including the Special Deals) and the Special Dividend and taken into account the advice of CIMB-GK, we consider that the terms of the S&P Agreement (including the Special Deals) and the Special Dividend are in the interests of the Group and the Independent Shareholders as a whole and are fair and reasonable so far as the Group and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the S&P Agreement (including the Special Deals) and the Special Dividend.

Yours faithfully,

Independent Board Committee

Kwong Che Keung, Gordon Hui Chiu Chung, JP

Independent non-executive Directors

21 -

LETTER FROM CIMB-GK

The following is the text of a letter of advice from CIMB-GK to the Independent Board Committee and the Independent Shareholders dated 15 December 2006 in relation to the terms of the S&P Agreement (including the Special Deals) and the Special Dividend prepared for the purpose of incorporation in this circular:

CIMB-GK Securities (HK) Limited

25/F., Central Tower 28 Queen’s Road Central Hong Kong

15 December 2006

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

(I) PROPOSED DISPOSAL OF THE ENTIRE ISSUED SHARE CAPITAL OF, AND LOAN TO, UPPER START HOLDINGS LIMITED BY NEW WORLD MOBILE HOLDINGS LIMITED TO NEW WORLD DEVELOPMENT COMPANY LIMITED;
(II) PROPOSED SPECIAL DIVIDEND OF NEW WORLD MOBILE HOLDINGS LIMITED; AND
(III) SPECIAL DEALS IN RELATION TO THE DISPOSAL AND THE SET-OFF

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee in relation to the S&P Agreement (including the Special Deals) and the Special Dividend, details of which are contained in a circular (the “Circular”) to the Shareholders dated 15 December 2006, of which this letter forms part. Expressions used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

As at the Latest Practicable Date, (i) Mr. Lo, a non-executive Director, was the beneficial owner and the sole director of the Offeror; (ii) Mr. Ho Hau Chong, Norman, a non-executive Director, would be re-designated as an executive Director upon the Acquisition Completion; (iii) Mr. Tsui Hing Chuen, William, JP , an independent non-executive Director, is also an independent non-executive director of New World CyberBase Limited, which in turn is a party presumed to be acting in concert with the Offeror. As such, the abovementioned non-executive Directors and independent non-executive Director are considered not eligible to constitute the Independent Board Committee to advise the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend. Accordingly, Mr. Kwong Che Keung, Gordon and Mr. Hui Chiu Chung, JP , being the independent non-

22 -

LETTER FROM CIMB-GK

executive Directors, have been invited to constitute the Independent Board Committee to provide recommendation to the Independent Shareholders in respect of the terms of the S&P Agreement (including the Special Deals) and the Special Dividend.

The Disposal constitutes a very substantial disposal for the Company under Chapter 14 of the Listing Rules. As the NWD Group was beneficially interested in approximately 56.64% of the issued share capital of the Company as at the Latest Practicable Date, NWD is a connected person of the Company and the Disposal also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As such, the Disposal is subject to the approval by the Independent Shareholders at the EGM by poll. The Special Dividend will also be put forward to the Independent Shareholders for approval at the EGM by poll.

NWD, its associates and parties acting in concert with NWD as well as the Offeror, New World CyberBase Limited, their respective associates and parties acting in concert with any of them, and persons who are involved or interested in the Special Deals shall abstain from voting on the proposed resolutions approving the S&P Agreement (including the Special Deals) and the Special Dividend at the EGM.

In formulating our recommendation, we have relied on the information and facts provided by the Directors and contained or referred to in the Circular. The Directors have declared in a responsibility statement set out in Appendix VI to the Circular that they collectively and individually accept full responsibility for the accuracy of the information contained in the Circular. We have assumed that the information and representations provided to us or contained or referred to in the Circular were true and accurate at the time they were made and continue to be so up to the date of the EGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have also been advised by the Directors and believe that no material facts have been omitted from the Circular.

We consider that we have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our recommendation. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or the prospects of the NWD Group, the Group, the CSL NWM Group or any of their respective associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion regarding the terms of the S&P Agreement (including the Special Deals) and the Special Dividend, we have considered the following principal factors and reasons:

23 -

LETTER FROM CIMB-GK

1. Background

On 22 November 2006, the Company and NWD entered into the S&P Agreement, pursuant to which the Company has conditionally agreed to sell, and NWD has conditionally agreed to purchase, the entire issued share capital of Upper Start and the Sale Loan. Pursuant to the S&P Agreement, the Consideration is HK$2,500 million. The sole asset of Upper Start is its 23.6% interest in the issued share capital of CSL NWM.

2. Principal businesses of the Group, the CSL NWM Group and the NWD Group

The Company is incorporated in the Cayman Islands with limited liability and its issued shares are listed on the Stock Exchange. The principal business of the Group comprises (i) the Technology Business, namely the technology-related business including mobile Internet-related services in the PRC; and (ii) the ownership of a 23.60% interest in the issued share capital of CSL NWM.

The CSL NWM Group is a major mobile telecommunications network operator providing mobile wireless services and associated activities in Hong Kong by using mobile wireless technologies to provide mobile wireless services in spectrum reserved or designated for use for that purpose under the brands of “One2Free” and “1010” as well as “New World Mobility” following the acquisition of the NWPCS Group by the CSL NWM Group on 31 March 2006.

NWD is a company incorporated in Hong Kong with limited liability and the issued shares of which are listed on the Stock Exchange. The NWD Group is a conglomerate with core businesses including property, infrastructure, services, department stores, hotels and telecommunications in Hong Kong, Macau and the PRC.

3. Information on the CSL NWM Group

i) Future prospect of the CSL NWM Group

Following the acquisition of the NWPCS Group by the CSL NWM Group on 31 March 2006, the CSL NWM Group became the largest network service provider in Hong Kong with over 2.6 million subscribers, with 3 brands namely “One2Free”, “1010” and “New World Mobility”. The CSL NWM Group has retained its three brandings as each brand targets different market segments. “One2Free” and “1010” remains Hong Kong’s premium provider of mobile voice and data services whilst New World Mobility targets value conscious customers with a low cost business model.

Based on the information from the Office for the Telecommunications Authority (“OFTA”), mobile subscriber cellular penetration rate was approximately 131.4% in August 2006, indicating that the number of cellular subscribers in Hong Kong has already exceeded its population, making it one of the most highly penetrated cellular markets in the world. Whilst this is in part due to multiple subscription accounts and temporary prepaid accounts of international visitors, the potential future subscriber growth in Hong Kong could be limited in view of the forgoing. The high penetration rate coupled with the presence of five 2G network service providers and four licensed 3G network service providers makes the Hong Kong cellular market extremely competitive.

24 -

LETTER FROM CIMB-GK

The table below sets out certain information relating to the mobile telecommunication industry in Hong Kong:

Total mobile network operators (October 2006)	5
Licensed 3G network service providers	4
Total mobile subscribers (August 2006)	9,192,588
Mobile subscriber penetration rate (August 2006)	131.4%

Source: OFTA website

To gain market share, mobile operators in Hong Kong have for a number of years been engaged in price competition by offering heavy handset subsidies and aggressive price promotions. While such aggressive pricing strategies lead to increased voice traffic, there is an overall decrease in average revenue per subscriber per month (“ARPU”) which affects the long-term profitability of the industry. Given the high penetration rate of the local mobile telecommunications industry, competition for market share among mobile operators and hence price competition is expected to continue and this could exert pressure on the future financial performance of the CSL NWM Group.

ii) Financial performance

Set out below is the summary of the financial information of the CSL NWM Group, the NWPCS Group and the aggregated results of CSL NWM Group and NWPCS Group (the “Combined Group”) based on the audited consolidated financial statements of the CSL NWM Group for the year ended 30 June 2006 (“FY 2006”) and the NWPCS Group for the nine months ended 31 March 2006:

	CSL NWM Group	CSL NWM Group	NWPCS	Group	The Combined Group	The Combined Group
HK$’000
				For the
			For the	nine months
	For	the year	year ended	ended	For the year
	ended 30 June		30 June	31 March	ended 30 June
	2005	2006	2005	2006	2005	2006
		(Note)
Turnover	4,301,939	4,815,013	1,662,873	1,402,827	5,964,812	6,217,840
Operating profit	751,228	749,533	78,256	61,422	829,484	810,955
Operating profit margin	17.46%	15.57%	4.71%	4.38%	13.91%	13.04%
EBITDA	1,271,534	1,389,493	335,920	259,409	1,607,454	1,648,902
Profit for the year
attributable to
equity holders of
the parent	209,911	483,095	36,693	22,229	246,604	505,324

Note: As CSL NWM acquired the entire interest in the NWPCS Group on 31 March 2006, results for the CSL NWM Group for the year ended 30 June 2006 included the results of the NWPCS Group for the period from 1 April 2006 to 30 June 2006.

25 -

LETTER FROM CIMB-GK

Turnover of the Combined Group increased by approximately 4% to approximately HK$6,218 million in FY 2006 as compared to the year ended 30 June 2005 (“FY 2005”). For the CSL NMW Group, revenue growth was driven by rising data, international voice, and prepaid revenues offset by a decline in local voice revenues after sustained pressure on prices. For the NWPCS Group, the growth was mainly attributed to the increase in sales of mobile handsets and accessories, slightly offset by the drop in the post-paid ARPU. The drop in ARPU was mainly due to the aggressive price promotions offered by mobile services operators and severe competition on tariff.

The operating profit margin for the Combined Group decreased slightly from approximately 13.9% in FY 2005 to 13.0% in FY 2006 mainly due to increase in depreciation expenses associated with the roll out of the 3G network. The Combined Group also incurred more costs in FY 2006 due to the increase in subsidies as part of heightened promotional activity to drive sales and higher offshore out payments associated with higher international voice revenue.

As compared to FY 2005, EBITDA of the Combined Group remained stable in FY 2006. Net profit of the Combined Group increased significantly in FY 2006, mainly due to the impact of the new and revised Hong Kong Financial Reporting Standards (“HKFRS”). The adoption of HKFRS 3 and Hong Kong Accounting Standard 36 since 1 July 2005 has resulted in the Group ceasing goodwill amortization and commencing testing for impairment at the cash-generating unit level annually. The effects include a decrease in amortization of goodwill of the CSL NWM Group by approximately HK$338 million for FY 2006.

As noted from the above, the operating margin of the Combined Group is dropping due to fierce competition and substantial investment in the 3G network. With the drop in operating profit, net profit deteriorated from approximately HK$585 million (after adding back the amortization of goodwill of approximately HK$338 million as described above) for FY 2005 to approximately HK$505 million for FY 2006.

4. Reasons for and benefits of entering into of the S&P Agreement

As noted from the letter from the Board of the Circular (“Letter from the Board”), after considering the following principal factors, the Board considers that the terms of the S&P Agreement are fair and reasonable and in the interests of the Group and the Independent Shareholders as a whole:

As a result of the Disposal, the Group is expected to record an unaudited gain of approximately HK$352 million, based on (i) the Consideration of HK$2,500 million; and (ii) the audited net book value of the Company’s 23.6% interest (through Upper Start) in the issued share capital of CSL NWM of approximately HK$2,143 million as at 30 June 2006, assuming the Disposal had taken place on 30 June 2006. The actual gain on the Disposal, however, is to be determined with reference to the net book value of the Company’s 23.6% interest (through Upper Start) in the issued share capital of CSL NWM as at the Disposal Completion Date. In addition, a net decrease in the consolidated equity of the Group of approximately HK$40 million (subject to the carrying amounts of the Subscription Note and the Convertible Bond as at the Disposal Completion Date) will be recognised upon Disposal Completion, which would otherwise be recognised in the consolidated equity of the Group over a longer financial period from 1 July 2006 to their respective maturity dates if the Subscription Note and the Convertible Bond are redeemed or repaid on their respective maturity dates.
26 -

LETTER FROM CIMB-GK

The Disposal will enable the Group to discharge the Subscription Note, the Convertible Bond and the Existing Loans before they are due for repayment. Based on the existing carrying amounts of the Subscription Note, the Convertible Bond and the Existing Loans, their average aggregate monthly interest expenses are estimated to be approximately HK$8.4 million for the year ending 30 June 2007. Out of HK$8.4 million, approximately HK$5.2 million will be the actual interest expenses payable to the holders of the Subscription Note, the Convertible Bond and the Existing Loans and approximately HK$3.2 million will be required to be recorded in accordance with Hong Kong Accounting Standard 32, which will have no effect on the actual cash flow of the Group. Accordingly, the Disposal will enable the Remaining Group to eliminate substantially all of its debt obligations and to save significant amounts on interest expenses relating to the aforesaid borrowings following the Disposal Completion.
Based on the aggregate amount owing under the Subscription Note, the Convertible Bond and the Existing Loans as at the Latest Practicable Date, Cash Consideration of approximately HK$173.2 million (subject to adjustment) will be used for the Special Dividend and as general working capital of the Remaining Group.

In addition to the above financial benefits, as shown in the section headed “3. Information on the CSL NWM Group” above, the CSL NWM Group is operating in a highly competitive market in which profitability will be under pressure as a result of aggressive price promotions by other operators and substantial investment in network costs. We consider that the Disposal provides an opportunity for the Company to realize its investments in the local mobile telecommunication sector which penetration rate is already among the highest in the world. Having taken into account the above factors, we concur with the views of the Board that the entering into of the S&P Agreement is in the interests of the Group and the Independent Shareholders as a whole.

5. Consideration

Pursuant to the S&P Agreement, the Consideration is HK$2,500 million. We note that the Consideration was arrived at after arm’s length negotiations between NWD and the Company taking into account, among other things, (i) the Company only has a minority interest in the CSL NWM Group; and (ii) the aggregate amount of the audited EBITDA of the CSL NWM Group for the year ended 30 June 2006 and the audited EBITDA of the NWPCS Group for the nine months ended 31 March 2006, amounting to approximately HK$1,649 million.

For the purpose of assessing the fairness and reasonableness of the Consideration, we have, to the best of our knowledge, identified 7 companies that largely provide mobile communication services in developed Asian markets (the “Comparables”) and compared the valuation of multiples implied by the Comparables to the valuation of multiples implied by the Consideration. Based on the nature of business and the availability of the financial information to the public, we have identified only two locally listed telecommunication companies (Sunday and SmarTone), with principal market in Hong Kong which are considered to be comparable to the CSL NWM Group. Hutchison is excluded from the Comparables as it has business in other relatively less mature and low-penetration countries such as India and Thailand. With only two Comparables in Hong Kong, we consider it is appropriate to include the identified telecommunication companies that operate in Taiwan, South Korea and Singapore, as these companies

27 -

LETTER FROM CIMB-GK

are also operating in the developed Asian market with high penetration rates. In particular, we note from the public domain that the telecommunication industries in Hong Kong, Taiwan, South Korea and Singapore have high penetration rates ranging from approximately 80% to over 130%. Accordingly, for comparison purpose, we consider appropriate to make reference of the identified telecommunication companies that operate in these developed Asian markets. However, with the material difference in the market economy of and operating environment in Japan compared with other Asia economies, companies that largely provide mobile communication services in Japan are excluded from the Comparables.

We would like to emphasis that our analysis does not take into account differences in local regulations, operating environments, tax treatments, accounting policies and standards, nor does it take into account the unique characteristics of the different companies.

In our assessment of the Consideration, we have considered the following valuation multiples:

Price earning ratio (“PER”);
Enterprise Value (“EV”) to EBITDA (“EV/EBITDA”); and
Price to book multiple (“P/B”)

The valuation multiples for the Comparables have been computed on a historical basis, using the financial data obtained from their respective latest available annual reports and based on their respective closing prices as at the Latest Practicable Date. The valuation multiples for the CSL NWM Group have been computed based on the Consideration, the audited consolidated balance sheet of the CSL NWM Group as at 30 June 2006, the audited consolidated income statement of the CSL NWM Group for FY 2006 and the audited consolidated profit and loss account of the NWPCS Group for the nine months ended 31 March 2006.

Table (1) Trading comparables

		Market			P/B	P/B
		Capitalisation			(including	(excluding
Comparables	Country	(HK$’ million)(1)	PER(2)	EV/EBITDA(3)	(goodwill)(4)	(goodwill)(5)
Sunday	Hong Kong	1,943	N/A(6)	30.55	3.79	3.79
SmarTone	Hong Kong	4,447	63.58	3.81	1.30	1.30
Far EasTone	Taiwan	34,472	9.79	7.81	1.97	2.30
Taiwan Mobile	Taiwan	37,696	9.59	5.79	1.81	1.96
KTF	South Korea	49,077	9.61	3.88	1.39	1.39
SK Telecom	South Korea	148,788	8.56	4.81	2.14	2.74
MobileOne	Singapore	10,530	12.87	6.51	4.50	4.50
Average			19.00	5.44(7)	2.41	2.57
The CSL NWM Group			20.96	6.19	1.95	3.85

Source: Bloomberg and annual reports

28 -

LETTER FROM CIMB-GK

Notes:

(1) Based on the market capitalisation in the respective original currency, and adjusted to HK$ based on the exchange rates as quoted on Bloomberg on the Latest Practicable Date.
(2) PERs are calculated based on the respective closing share prices as at the Latest Practicable Date in the case of the Comparables, and the full value of the CSL NWM Group as indicated by the Consideration in the case of the CSL NWM Group, divided by the respective basic earnings per share as disclosed in their latest annual reports, in the case of the Comparables, and the audited consolidated net profit of the CSL NWM Group for FY 2006 plus the audited consolidated net profit of the NWPCS Group for the nine months ended 31 March 2006, in the case of the CSL NWM Group.
(3) EV/EBITDA is calculated based on the market capitalisation (using the respective share prices as at the Latest Practicable Date), plus debt and minority interests less cash and cash equivalents, in the case of the Comparables, and the full value of the CSL NWM Group as indicated by the Consideration less net cash (cash and cash equivalents minus interest-bearing loans) in the case of the CSL NWM Group, divided by the respective EBITDAs based on their latest annual reports, in the case of the Comparables, and the audited consolidated EBITDA of the CSL NWM Group for FY 2006 plus the audited consolidated EBITDA of the NWPCS Group for the nine months ended 31 March 2006, in the case of the CSL NWM Group.
(4) P/B (including goodwill) is calculated based on the respective closing share prices as at the Latest Practicable Date in the case of the Comparables, and the Consideration per share in the case of the CSL NWM Group, divided by the respective book values (including goodwill) per share as at their latest annual reports.
(5) P/B (excluding goodwill) is calculated based on the respective closing share prices as at the Latest Practicable Date in the case of the Comparables, and the Consideration per share in the case of the CSL NWM Group, divided by the respective book values (minus goodwill) per share as at their latest annual reports.
(6) Sunday incurred a loss for the 12-month period ended 31 December 2005.
(7) The EV/EBITDA of Sunday is exceptionally high as it recorded a loss for the year ended 31 December 2005 and hence a relatively low EBITDA. Accordingly, Sunday is excluded from the calculation of the average of the Comparables.

As illustrated in the above table, both the PER and EV/EBITDA of the CSL NWM Group are slightly above the respective average PER and EV/EBITDA of the Comparables.

The P/B (including goodwill) of the CSL NWM Group is within the range but lower than the average P/B (including goodwill) of the Comparables. We note that the CSL NWM Group recorded a goodwill amounted to approximately HK$1,709 million after the acquisition of the NWPCS Group by CSL NWM on 31 March 2006 (“CSL Acquisition”), which significantly lowered the P/B of the CSL NWM Group. We consider it would provide a better comparison to exclude the goodwill in the calculation of P/B of the CSL NWM Group and the Comparables. By excluding the goodwill, the P/B of the CSL NWM Group will increase to approximately 3.85 times and is higher than the average P/B of the Comparables excluding their goodwill of approximately 2.57 times.

Based on the above analysis, we are of the view that the Consideration for the Disposal is fair and reasonable and in the interests of Independent Shareholders as a whole.

29 -

LETTER FROM CIMB-GK

6. Special Dividend

Subject to the Disposal Completion, based on the Special Dividend of HK$1.20 per Share and 97,692,069 Shares in issue as at the Latest Practicable Date, approximately HK$117.2 million of the Cash Consideration will be declared and distributed in the form of Special Dividend to the Qualifying Shareholders.

As noted from the Letter from the Board, the Board considers that the Company would have sufficient distributable reserves for the Special Dividend immediately after the Disposal Completion, after taking into account (i) the Company’s distributable reserves of approximately HK$140.9 million as at 30 June 2006 as extracted from the annual report of the Company for the year ended 30 June 2006; (ii) the gain on the Disposal to be recognised by the Company; and (iii) the dividend income to be received by the Company from Upper Start before the Disposal Completion Date.

We note that since 2001, the Company has not declared any dividend to the Shareholders. It is the Board’s intention to declare and distribute, subject to, among other things, the Disposal Completion and the availability of the Company’s distributable reserves, the Special Dividend.

We also note that upon completion of the Disposal, the Remaining Group will remain principally engaged in the Technology Business which includes the provision of mobile Internet-related services and information technology outsourcing value-added services. As advised by the Company, upon the Disposal Completion, the Company has no concrete new plans or projects for the Remaining Group. Pursuant to the Agreement, the Offeror has conditionally agreed to acquire, and NWD has conditionally agreed to procure the disposal of the Sale Shares, being 55,336,666 Shares, representing approximately 56.64% of the voting rights of the Company as at the Latest Practicable Date. As stated in the Letter from the Board, the Offeror intends to continue the principal business of the Remaining Group after the Acquisition Completion. Meanwhile, the Offeror will conduct a review on the business operations and financial position of the Remaining Group for the purpose of formulating business plans and strategies for the future business development of the Remaining Group. However, no concrete plans will be materialized prior to the Acquisition Completion. As advised by the Company, the operating model of the Technology Business will remain substantially unchanged upon the Disposal Completion. As advised by the Board, the Technology Business is an information technology related business which is not capital intensive and which human resources are its most important assets. The Technology Business currently employes about 120 employees with operations in Beijing, Shanghai and Guangzhou of the PRC and marketing offices in Sheyang, Nanjing, Chengdu and Xian of the PRC. As advised by the Company, the remaining balance of the Cash Consideration is sufficient for the working capital requirement of the Remaining Group. We also note that the estimated amount of Special Dividend of approximately HK$117.2 million represents a majority amount of the Company’s distributable reserves. As such, the distribution of Special Dividend provides the Shareholders an opportunity to realise part of their investment in the Company in the form of a cash dividend.

Based on the above, we are of the view that distribution of the Special Dividend is in the interests of the Independent Shareholders as a whole.

30 -

LETTER FROM CIMB-GK

7. The Set-off

The Set-off constitutes a special deal for the Company under Rule 25 of the Takeovers Code. The Set-off represents early repayment of the Subscription Note, the Convertible Bond and the Existing Loans. As noted from the Letter from the Board, the Subscription Note, the Convertible Bond and the Existing Loans will mature in July 2007, November 2007 and August to September 2007 respectively, which will only be a few months from the expected Disposal Completion date of around January 2007.

As mentioned above, the Company has no concrete new plans or projects for the Remaining Group and therefore, has no immediate intended use of the Consideration. As advised by the Company, the remaining balance of the Cash Consideration is sufficient for the working capital requirement of the Remaining Group. Based on the existing carrying amounts of the Subscription Note, the Convertible Bond and the Existing Loans, their actual average aggregate monthly interest payable involving actual cash outflow is estimated to be approximately HK$5.2 million for the year ending 30 June 2007. Accordingly, interest payable involving actual cash outflow would be saved by the Group upon Disposal Completion.

As stated in the Letter from the Board and as mentioned in the section headed “Reasons for and benefits of entering into of the S&P Agreement” above, as a result of the early redemption of the Subscription Note and the Convertible Bond, it is expected that a net decrease in the consolidated equity of approximately HK$40 million (subject to the carrying amounts of the Subscription Note and the Convertible Bond as at the Disposal Completion Date) will be recognised by the Group upon Disposal Completion. If the Subscription Note and the Convertible Bond are redeemed or repaid on their respective maturity dates, such amount would be recognised in the consolidated equity of the Group over a longer financial period from 1 July 2006 to their respective maturity dates. However, as advised by the Company, such decrease in equity will have no actual impact on the cash flow of the Group.

Based on the above analysis, we are of the view that the Set-off is in the interests of the Company and the Independent Shareholders as a whole.

8. Financial Effects

Earnings

Upon Disposal Completion, the Group will cease to equity account for the results of the CSL NWM Group. Based on the unaudited pro forma financial statements of the Remaining Group as set out in Appendix V to the Circular, upon the Disposal Completion, the Group is expected to record an unaudited gain of approximately HK$352 million assuming the Disposal had taken place on 30 June 2006. The actual gain on the Disposal, however, is to be determined with reference to the net book value of the Company’s 23.6% interest (through Upper Start) in the issued share capital of CSL NWM as at the Disposal Completion Date. We also note from the Letter from the Board that, a net decrease in the consolidated equity of the Group of approximately HK$40 million (subject to the carrying amounts of the Subscription Note and the Convertible Bond as at the Disposal Completion Date) will be recognised upon Disposal Completion.

31 -

LETTER FROM CIMB-GK

In addition, based on the existing carrying amounts of the Subscription Note, the Convertible Bond and the Existing Loans, their average aggregate monthly interest expenses are estimated to be approximately HK$8.4 million for the year ending 30 June 2007. Upon Disposal Completion, such interest expenses would no longer be charged to the profit and loss account by the Group.

Net asset value

As stated above, upon Disposal Completion, the Group is expected to record an unaudited gain of approximately HK$352 million. As a result, the net asset value of the Group would be enhanced and improved from a net deficit position as at 30 June 2006 to a net asset position upon Disposal Completion.

Gearing

After the Set-off arrangement, the Remaining Group would have repaid the full amount of the Subscription Note, the Convertible Bond and the Existing Loans and the Remaining Group will not have any material interest bearing debt.

Working capital

Taking into the Cash Consideration and the Special Dividend (estimated to be HK$117.2 million), the Disposal will lead to an increase in cash of approximately HK$57.6 million before legal and professional cost which will be used as general working capital of the Remaining Group. Accordingly, the Disposal would have no material adverse impact on the working capital of Remaining Group.

9. The Share Offer

On 22 November 2006, the Offeror entered into the Acquisition Agreement with NWD, pursuant to which the Offeror has conditionally agreed to purchase, and NWD has conditionally agreed to procure the sale of, subject to, among other things, the Disposal Completion, the Sale Shares. The Sale Shares, being 55,336,666 Shares, represented approximately 56.64% of the voting rights of the Company as at the Latest Practicable Date.

Based on HK$0.65 per Share, the consideration payable for the Sale Shares is approximately HK$36.0 million, which will be payable in cash upon the Acquisition Completion.

Upon the Acquisition Completion, the Offeror and parties acting in concert with it will own an aggregate of 71,428,512 Shares, representing approximately 73.11% of the voting rights of the Company as at the Latest Practicable Date. Under Rule 26.1 of the Takeovers Code, the Offeror is required to make an unconditional mandatory cash offer for all the Shares not already owned or agreed to be acquired by the Offeror and parties acting in concert with it. The Share Offer will be made at HK$0.65 per Share.

Acquisition Completion is subject to the fulfillment of a number of conditions, including the Disposal Completion. However, the Disposal is not conditional on the Acquisition Completion or the Share Offer. In other words, with or without the Acquisition or the Share Offer, the Disposal will proceed.

32 -

LETTER FROM CIMB-GK

RECOMMENDATION

Having considered the principal factors and reasons referred to the above, we would draw your attention to the following key factors:

The CSL NWM Group operates in a highly competitive mobile telecommunications sector in Hong Kong and its operating margins and profitability have been affected by the increase in competition and the costs incurred in relation to the roll out of the 3G services.
The Company only has a 23.6% minority interest in the CSL NWM Group and the Disposal would allow the Company to realise its investment in the CSL NMW Group.
As a result of the Disposal, the Group is expected to record an unaudited gain of approximately HK$352 million (subject to adjustment).
The Disposal and the Set-Off will enable the Group to discharge the Subscription Note, the Convertible Bond and the Existing Loans. Based on the existing principal balances of the Subscription Note, the Convertible Bond and the Existing Loans, their actual average aggregate monthly interest payable involving actual cash outflow are estimated to be approximately HK$5.2 million for the year ending 30 June 2007. Accordingly, interest payable involving actual cash outflow would be saved by the Group upon Disposal Completion.
The Cash Consideration of approximately HK$173.2 million (subject to adjustment) will be used for the Special Dividend and as general working capital of the Remaining Group. The Special Dividend will effectively enable the Shareholders to realise part of their investments in the Company which has not paid any dividends to its Shareholders since 2001.
The valuation multiples implied by the Consideration are comparable to those of the Comparables.

Having taken into consideration the principal factors and reasons referred to above, we are of the opinion that the Disposal, the Special Dividend and the Special Deals are fair and reasonable and in the interests of the Company and the Shareholders as a whole and that the terms of the S&P Agreement are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote for the ordinary resolutions to be proposed at the EGM to approve the S&P Agreement (including the Special Deals) and the Special Dividend.

Yours faithfully, For and on behalf of CIMB-GK Securities (HK) Limited

Alex Lau

Executive Vice President

Flavia Hung

Senior Vice President

33 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the auditors and reporting accountants, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong.

PricewaterhouseCoopers 22nd Floor, Prince’s Building Central, Hong Kong l h ( )

15 December 2006

The Directors

New World Mobile Holdings Limited

Dear Sirs,

We set out below our report on the financial information relating to New World Mobile Holdings Limited (the “Company”) as at 31 December 2003, 30 June 2005 and 30 June 2006, and the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the years ended 30 June 2004, 2005 and 2006 (the “Relevant Periods”) for inclusion in the circular of the Company dated 15 December 2006 (the “Circular”) in connection with the proposed disposal of the entire issued share capital of, and loan to, Upper Start Holdings Limited by the Company to New World Development Company Limited, the controlling shareholder of the Group (the “Disposal”).

The Company was incorporated in the Cayman Islands on 25 May 1998 with limited liability. As at the date of this report, the Company has direct and indirect interests in the subsidiaries and associated companies as set out in notes 20 and 21 respectively of Section II below, all of which are private companies. All companies now comprising the Group have adopted 30 June as their financial year end date, except for those companies incorporated in the People’s Republic of China which adopt 31 December as their financial year end, and those as disclosed in note 21 of Section II below.

We acted as auditors of the Company for the year ended 31 December 2003, for the eighteen months ended 30 June 2005 and for the year ended 30 June 2006. We also acted as the auditors of the Group for the three years ended 30 June 2004, 2005 and 2006, other than those specified in note 21 of Section II below.

For the purpose of this report, we have examined the financial information of the Group for each of the three years ended 30 June 2004, 2005 and 2006 and of the Company as at 31 December 2003, 30 June 2005 and 30 June 2006 (the “Financial Information”), and have carried out such additional procedures as are necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The Financial Information as set out in Sections I and IV has been prepared in accordance with accounting principles generally accepted in Hong Kong and accounting standards issued by the HKICPA, based on the audited financial statements of the Group for the Relevant Periods, after making such adjustments as are appropriate.

34 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The directors of the Company are responsible for preparing these financial statements which give a true and fair view. In preparing these financial statements, it is fundamental that appropriate accounting policies are selected and applied consistently.

The directors of the Company are also responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination on the Financial Information and to report our opinion.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of the Company as at 31 December 2003, 30 June 2005 and 30 June 2006, and of the Group as at 30 June 2004, 2005 and 2006 and of the consolidated results and cash flows of the Group for the years then ended.

35 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

I FINANCIAL INFORMATION

(a) CONSOLIDATED INCOME STATEMENTS

			Year ended
		30 June 2004	30 June 2005	30 June 2006
	Note	HK$’000	HK$’000		HK$’000
		As restated
Continuing operations:
Turnover	6	–	4,261		16,515
Cost of sales	11	–	(1,330)		(4,842)
Gross profit		–	2,931		11,673
Other income	9	–	108		823
Other net gains/(losses)	10	–	942		(65,436)
Selling expenses	11	–	(290)		(9,775)
Administrative expenses	11	–	(5,993)		(35,797)
Operating loss		–	(2,302)		(98,512)
Finance costs	12	–	(44,739)		(62,786)
Share of results of associated
companies	21	–	–		27,731
Loss before taxation		–	(47,041)		(133,567)
Taxation	16	–	(51)		–
Loss from continuing operations		–	(47,092)		(133,567)
Discontinued operations:
Profit from discontinued operations	8	111,177	36,693		1,045,209
Profit/(loss) attributable to
shareholders		111,177	(10,399)		911,642

Basis earnings/(loss) per share
– Continuing operations	17	–	(HK$0.60)		(HK$1.48)
– Discontinued operations	17	HK$2.67	HK$0.47		HK$11.56
		HK$2.67	(HK$0.13)		HK$10.08

Diluted earnings/(loss) per share	17	N/A	N/A		N/A

36 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) CONSOLIDATED BALANCE SHEETS

Note
ASSETS
Non-current assets
Property, plant and equipment
19
Investments in associated
companies
21
Intangible assets
22
Deferred taxation
23
Rental and other deposits
Current assets
Inventories
24
Trade receivables
25
Prepayments, deposits, and
other receivables
Rental and other deposits
Amounts due from fellow
subsidiaries
Amount due from an associated
company
27
Amount due from a related
company
28
Cash and bank balances
29
Total assets
EQUITY
Capital and reserves attributable to
the Company’s equity holders
Share capital
31
Other reserves
32
Accumulated losses
Deficit on shareholders’ funds

Group
As at
As at
As at
30 June 2004
30 June 2005
30 June 2006
HK$’000
HK$’000
HK$’000
As restated
1,186,236
1,068,301
6,183
–
–
2,142,737
–
65,964
–
188,487
167,472
–
10,659
8,882
–
1,385,382
1,310,619
2,148,920
-------------
-------------
-------------
29,657
38,024
–
83,218
94,015
4,266
11,285
42,112
1,368
33,380
39,421
–
3,098
29
–
–
–
113,328
–
813
813
94,444
116,534
27,691
255,082
330,948
147,466
-------------
-------------
-------------
1,640,464
1,641,567
2,296,386
1
300
16,154
999
(88,051)
(82,905)
(931,781)
(942,180)
(30,538)
(930,781)
(1,029,931)
(97,289)

37 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Note LIABILITIES Non-current liabilities Amount due to the immediate holding company 33 Loans from a fellow subsidiary 33 Promissory note issued to a fellow subsidiary 33 Non-current portion of long-term liabilities Convertible bond 34 Subscription note 2 Asset retirement obligations Current liabilities Trade payables 30 Accrued charges, other payables, deposits received and deferred income Amount due to the ultimate holding company Amounts due to fellow subsidiaries 26 Amount due to an associated company 27 Amount due to a related company Promissory note issued to the immediate holding company 33 Current portion of long-term liabilities Total liabilities Total equity and liabilities Net current (liabilities)/assets Total assets less current liabilities	Group	Group
	As at As at As at 30 June 2004 30 June 2005 30 June 2006 HK$’000 HK$’000 HK$’000 As restated 933,592 – – – 877,500 278,024 – – 886,749 102,500 – – – 28,250 28,261 – 1,131,199 1,178,008 5,908 6,529 – 1,042,000 2,043,478 2,371,042 ------------- ------------- ------------- 44,305 108,086 809 356,867 405,456 15,779 73 – – – 11,132 420 – – 5,625 – 846 – 858,000 – – 270,000 102,500 – 1,529,245 628,020 22,633 ------------- ------------- ------------- 2,571,245 2,671,498 2,393,675 ------------- ------------- ------------- 1,640,464 1,641,567 2,296,386 (1,274,163) (297,072) 124,833 111,219 1,013,547 2,273,753
		2,371,042 ------------- 809 15,779 – 420 5,625 – – –
		22,633 -------------
		2,393,675 -------------
		2,296,386

		124,833

		2,273,753

38 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(c) BALANCE SHEETS

	Company
As at 31 December 2003 HK$’000 1,380 137,312 138,692 ------------- 161 203 – 103 22,383 22,850 ------------- 161,542 37,515 452,101 (358,118) 131,498	As at 30 June 2005 HK$’000 90 1,521,385 1,521,475 ------------- – – 225 74 188 487 ------------- 1,521,962 79,182 119,297 162,354 360,833	As at 30 June 2006 HK$’000 – 2,497,576
		2,497,576 ------------- 113,328 – 225 87 10,564
		124,204 -------------
		2,621,780

		95,336 124,143 16,781
		236,260

39 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

	Company
As at 31 December 2003 HK$’000 – – 27,881 – 27,881 ------------- 12 376 1,775 2,163 ------------- 30,044 ------------- 161,542 20,687 159,379	As at 30 June 2005 HK$’000 – – 28,250 1,131,199 1,159,449 ------------- – 563 1,117 1,680 ------------- 1,161,129 ------------- 1,521,962 (1,193) 1,520,282	As at 30 June 2006 HK$’000 278,024 886,749 28,261 1,178,008
		2,371,042 ------------- 5,625 420 8,433
		14,478 -------------
		2,385,520 -------------
		2,621,780

		109,726

		2,607,302

40 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(d) CONSOLIDATED CASH FLOW STATEMENTS

Note Operating activities Cash used in continuing operations 35 Interest paid Hong Kong profits tax paid Net cash used in continuing operations Net cash generated from discontinued operations Net cash generated from operating activities Investing activities Purchase of property, plant and equipment Acquisition of subsidiaries 36(a) Disposal of subsidiaries 37 Acquisition of associated companies 36(b) Dividend received from an associated company 21 Sales of other investments Sales of investment securities Interest received Net cash generated from/(used in) continuing operations Net cash used in discontinued operations Net cash used in investing activities Financing activities Increase in loans from a fellow subsidiary Repayment of bank loan and amount due to the ultimate holding company of discontinued operations Net cash generated from/(used in) financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents as at the beginning of the year Cash and cash equivalents as at the end of the year Analysis of cash and cash equivalents: Cash and bank balances Less: Restricted bank balances 29	30 June 2004 HK$’000 As restated – – – – 403,605 403,605 ------------- – – – – – – – – – (152,790) (152,790) ------------- – (270,010) (270,010) ------------- (19,195) 113,639 94,444 94,444 – 94,444	Year ended 30 June 2005 HK$’000 (4,822) (1,473) (51) (6,346) 388,521 382,175 ------------- – 45,630 – – – 900 3,609 108 50,247 (140,259) (90,012) ------------- – (270,073) (270,073) ------------- 22,090 94,444 116,534 116,534 – 116,534	30 June 2006 HK$’000 (26,304) (16,108) – (42,412) 131,421 89,009 ------------- (86) 9,896 384 (276,384) 7,523 – – 823 (257,844) (96,302) (354,146) ------------- 278,024 (102,500) 175,524 ------------- (89,613) 116,534 26,921 27,691 (770) 26,921

41 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(e) CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Share capital HK$’000 At 30 June 2003 1 Profit for the year, as previously stated – Effect of change in accounting policy of handset subsidies_(Note 3a) – Profit for the year, as restated – At 30 June 2004, as restated 1 At 30 June 2004, as previously stated 1 Effect of change in accounting policy of handset subsidies(Note 3(a)) – At 30 June 2004, as restated 1 Issue of shares(Notes 31 and 32(a)) 299 Arising from Reverse Acquisition(Note 2) – Renewal of convertible bond – Issue of subscription note – Loss for the year – At 30 June 2005 300 At 30 June 2005 300 Issue of shares(Note 31 and 32(a)) 16,154 Disposal of subsidiaries(Note 31(a))_ (300) Profit for the year – At 30 June 2006 16,154	Share capital HK$’000 1	Other reserves HK$’000 999	Accumulated losses HK$’000 (1,042,958)	Total HK$’000 (1,041,958)
	– –	– –	163,131 (51,954)	163,131 (51,954)
		– 999 999 – 999 913,793 (1,115,538) 40 112,655 – (88,051) (88,051) 4,846 300 – (82,905)	111,177 (931,781) (879,827) (51,954) (931,781) – – – – (10,399) (942,180) (942,180) – – 911,642 (30,538)	111,177 (930,781) (878,827) (51,954) (930,781) 914,092 (1,115,538) 40 112,655 (10,399) (1,029,931) (1,029,931) 21,000 – 911,642 (97,289)

42 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

II NOTES TO THE FINANCIAL STATEMENTS

1 General information

On 31 March 2006, New World Mobile Holdings Limited (the “Company”) disposed of its entire interests in New World PCS Holdings Limited (“NWPCS Holdings”) and its subsidiaries (hereinafter collectively referred to as the “NWPCS Group”) in exchange for the acquisition of 23.6% interests of the issued share capital of CSL New World Mobility Limited (“CSL NWM”) and its subsidiaries (hereinafter collectively referred to as the “CSL NWM Group” which represents the enlarged group combining Telstra CSL Limited and NWPCS Group).

Before 31 March 2006, the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) was principally engaged in offering mobile telecommunications services including voice and data services tailored to the specific needs of individual customer groups via mobile technology in Hong Kong and technology-related business including mobile Internet services in The People’s Republic of China (the “PRC”). After 31 March 2006, the Group is principally engaged in technology related business including mobile Internet services in Mainland China and holds 23.6% interest in the CSL NWM Group which offer mobile communications services in Hong Kong.

The Company is a limited liability company incorporated in the Cayman Islands. The address of its registered office is P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies.

The Company’s issued shares are listed on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

2 Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 5.

On 29 March 2004, the Company, formerly known as Asia Logistics Technologies Limited (“ALT”), entered into a conditional subscription agreement (the “Subscription Agreement”) with Power Palace Group Limited (“PPG”), a wholly-owned subsidiary of New World Development Company Limited (“NWD”), pursuant to which PPG agreed to subscribe for:

(a) 4,166,666,667 shares of newly issued ordinary share of the Company (the “Subscription Shares”, equivalent to 41,666,666 consolidated shares after the share consolidation of the Company on 7 July 2004) at an issue price of HK$0.012 per Subscription Share, representing the closing price of the last trading day of the ALT shares prior to suspension; and
(b) a convertible note (the “Subscription Note”) of a principal amount of HK$1,200,000,000, unless previously converted, will be repaid by the Company upon its maturity on the business day immediately preceding the third anniversary of the date of its issue. It bears a coupon from its date of issue at the rate of 0.75% per annum and, at the discretion of the holder, can be converted, in whole or in part thereof, into ordinary shares of the Company at an initial conversion price of HK$0.012 per share, subject to adjustment. The conversion price was subsequently adjusted to HK$1.20 per share after the share consolidation of the Company on 7 July 2004.
43 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Both the Subscription Shares and the Subscription Note were issued on 6 July 2004.

The fair values of the liability component and the equity component of the Subscription Note were determined at issuance of the Subscription Note.

The fair value of the liability component, included in non-current liabilities, was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount, representing the value of equity component, is included in shareholders’ equity in other reserves net of deferred income taxes, if any.

The fair value of the liability component of the Subscription Note as at 30 June 2005 and 30 June 2006 approximated its carrying value respectively.

Interest expenses on the Subscription Note are calculated using the effective interest method by applying the effective interest rate of 4.1% per annum to the liability component.

On 29 March 2004, the Company entered into a conditional sale and purchase agreement (the “S&P Agreement”) with New World Telephone Holdings Limited (“NWTHL”), a wholly-owned subsidiary of NWD, pursuant to which the Company agreed to purchase the 100% equity interest of the NWPCS Group from NWTHL at an aggregate cash consideration of HK$1,250,000,000. This transaction (the “Reverse Acquisition”) was completed on 6 July 2004 (the “Completion Date”).

Under the generally accepted accounting principles in Hong Kong, the Reverse Acquisition, after taking into account the issuance of Subscription Shares, should constitute a reverse acquisition from accounting perspective since NWD has become the controlling shareholder of the Company after the Reverse Acquisition. For accounting purposes, NWPCS Holdings is regarded as the acquirer while the Company and its subsidiaries before the Reverse Acquisition (collectively, the “Logistics Group”) are deemed to have been acquired by NWPCS Holdings. As a result, these consolidated financial statements have been prepared as a continuation of the consolidated financial statements of the NWPCS Group which has a financial year end date of 30 June, and accordingly:

(i) the assets and liabilities of the Logistics Group are recognised and recorded at the Completion Date at their fair values (the “Net Fair Value”);
(ii) the assets and liabilities of the NWPCS Group are recognised and recorded at the Completion Date at their historical carrying values prior to the Reverse Acquisition;
(iii) the purchase consideration is deemed to have been incurred by NWPCS Holdings for the Reverse Acquisition and is determined by the total fair value of all the issued shares of the Company at the Completion Date (the “Deemed Consideration”);
(iv) the goodwill arising from the Reverse Acquisition is determined by the surplus of the Deemed Consideration over the Net Fair Value;
(v) the capital and reserves of the Logistics Group upon the Completion Date are eliminated as the preacquisition reserves;
(vi) the consolidated issued equity of the Group as shown in the consolidated balance sheet represents the issued share capital and share premium balances of NWPCS Holdings upon the Completion Date, plus all the post-acquisition changes in the issued share capital and share premium of the Company, if any. On the other hand, the number and type of issued shares presented represent the actual equity structure of the Company;
(vii) the difference between the actual consideration paid by the Company for the Reverse Acquisition and the Deemed Consideration is transferred to a consolidation reserve of the Group; and
44 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(viii) the information for the year ended 30 June 2004 in these consolidated financial statements is that of the NWPCS Group.

In order to have a coterminous financial year end date with NWD and the NWPCS Group, the Board has resolved on 10 December 2004 that the financial year end date of the Company be changed from 31 December to 30 June. Accordingly, the Company’s balance sheets are based on 31 December 2003, 30 June 2005 and 30 June 2006 audited financial statements of the Company.

3 Principal accounting policies

(a) Changes in accounting policies

(i) New accounting standards

Certain new standards, amendments and interpretations to published standards that are mandatory for accounting periods beginning on or after 1 January 2006 or later periods but which the Group has not yet adopted, are as follows:

Effective for the year ending 30 June 2007

HKAS 19 Amendment	Employee benefits – Actuarial gains and losses, group
	plans and disclosures
HKAS 21 Amendment	Net investment in a foreign operation
HKAS 39 Amendment	Cash flow hedge accounting of forecast intragroup
	transactions
HKAS 39 Amendment	The fair value option
HKAS 39 and HKFRS 4	Financial instruments: Recognition and measurement and
Amendments	insurance contracts – Financial guarantee contracts
HKFRS 6	Exploration for and evaluation of mineral resources
HKFRS 1 and 6	First-time adoption of Hong Kong Financial Reporting
Amendment	Standards and exploration for and evaluation of mineral
	resources
HKFRS-Int 4	Determining whether an arrangement contains a lease
HKFRS-Int 5	Rights to interests arising from decommissioning, restoration
	and environmental rehabilitation funds
HK (IFRIC)-Int 6	Liabilities arising from participating in a specific market
	– waste electrical and electronic equipment
HK (IFRIC)-Int 7	Applying the restatement approach under HKAS 29 Financial
	Reporting in Hyperinflationary Economies
HK (IFRIC)-Int 8	Scope of HKFRS 2
HK (IFRIC)-Int 9	Reassessment of embedded derivatives

Effective for the year ending 30 June 2008

HKAS 1 Amendment	Capital disclosures
HKFRS 7	Financial instruments: disclosures
HK (IFRIC)-Int 10	Interim reporting and impairment

HKAS 1 Amendment introduces disclosures about the level of an entity’s capital and how it manages capital. HKFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.

45 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

HK (IFRIC)-Int 10 prohibits the impairment losses recognised in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at a subsequent balance sheet date.

HKAS 19 Amendment, HKAS 39 Amendment regarding cash flow hedge accounting of intragroup transactions, HKFRS 6, HKFRS 1 and 6 Amendment, HKFRS-Int 5, HK (IFRIC)-Int 6 and HK (IFRIC)-Int 7 are not relevant to the Group’s operations. Except as stated above, the Group expects that the adoption of the other amendments and interpretations listed above will not have any significant impact on the Group’s financial statement in the period of initial application.

(ii) Changes in accounting policies in respect of handset subsidies

In prior years, when handset and mobile subscription services were sold at a package with handset subsidies offered to customers, consideration would be allocated to handset sales and mobile subscription services using the relative fair value model. Accordingly, the portion allocated to handset sales was recognised as sales upon delivery of goods, and the remaining amount allocated to mobile subscription services was amortised on a straight-line basis over the contract period. Handset subsidies were capitalised and amortised on a straight-line basis over the same contract period.

During the year ended 30 June 2006, the Group changed its accounting policy to expense handset subsidies as incurred. The directors consider that the new accounting policy involves less subjective judgement and estimates. The financial impact has been restated retrospectively in the year ended 30 June 2004. There was no financial impact for the year ended 30 June 2003 or before.

The effect of the change resulted in:

Decrease in turnover of discontinued operations Increase in cost of sales of discontinued operations Decrease in profit for the year Decrease in basic earnings per share Decrease in handset subsidies Increase in accrued charges, other payables, deposits received and deferred income Decrease in net assets Increase in accumulated losses	Year ended 30 June 2004 HK$’000 (42,602) (9,352) (51,954) HK$1.25 As at 30 June 2004 HK$’000 (9,352) (42,602) (51,954) (51,954)

46 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) Group accounting

(i) Consolidation

The consolidated financial statements of the Group include the financial statements of the Company and all its direct and indirect subsidiaries made up to 30 June.

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair values of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The gain or loss on the disposal of subsidiaries represents the difference between the proceeds of the sale and the Group’s share of their net assets.

In the Company’s balance sheet the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(ii) Associated companies

Associated companies are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associated companies are accounted for by the equity method of accounting and are initially recognised at cost. The group’s investments in associated companies includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The group’s share of its associated companies’ post acquisition profits or losses is recognised in the income statement, and its share of post acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company.

47 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associated companies have been changed where necessary to ensure consistency with the policies adopted by the Group.

(iii) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary or associated company at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associated companies is included in investments in associated companies and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(c) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Property, plant and equipment are depreciated at rates sufficient to write off their cost less accumulated impairment losses over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Computer equipment	20%
Furniture and fittings	20%
Leasehold improvements	shorter of the lease term or 20%
Motor vehicles	20%
Testing equipment	33.33%
Digital, switching and transmission system	10% – 20%

Building situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 50 years after the date of completion.

No depreciation is provided for any part of the construction in progress.

Historical costs of property, plant and equipment include expenditures that are directly attributable to the construction or acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the income statement during the financial period in which they are incurred.

The gain or loss on disposal of a property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the income statement.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

48 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(d) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation, which are at least tested annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

(e) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, calculated on the weighted average basis, comprises all direct costs of purchase. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(f) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the assets’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

(g) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks.

(h) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

(i) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of

leave.

49 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(ii) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to eligible employees in Hong Kong, the assets of which are held in separate trustee administered funds. The Group’s contribution to the defined contribution retirement schemes are expensed as incurred and are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions.

For employees in the Mainland China, the Group contributes to retirement schemes managed by local municipal authorities in the Mainland China based on a percentage of the relevant employee’s monthly salaries. The Group’s contributions under such schemes are charged to the income statement as incurred while the relevant local municipal authorities undertake to assume the retirement benefit obligations of all existing and future retired employees of the Group in the Mainland China.

(iii) Bonus

Provisions for bonus due wholly within twelve months after balance sheet date are recognised when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

(iv) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(v) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

(j) Deferred taxation

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Taxation rates enacted or substantially enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

50 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associated companies, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

(k) Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

(l) Revenue recognition

Mobile communications services revenue was recognised when the service was rendered and was based on the usage of the digital mobile radio telecommunication network and facilities. Mobile communications services revenue in respect of standard service plans billed in advance at year end was deferred and recognised when the service was rendered. Revenue received in advance for the provision of mobile communications services using prepaid cards was deferred and amortised based on the actual usage by customers. The portion of deferred revenue was included under current liabilities as deferred income.

Revenue from sales of mobile handsets and accessories was recognised when goods were delivered and title had passed.

The Group derives technology related services revenue from the provision of value-added telecommunications services (“VAS”). Wireless VAS revenue is derived principally from providing mobile phones users with short messaging services, multimedia messaging services and wireless application protocol. These services are substantially billed on a monthly subscription basis or a per message basis (“Service Fees”). These services are predominately delivered through the platforms of various subsidiaries of China Mobile Communications Corporation and they also collect the Service Fees on behalf of the Group.

Operating lease rental income is recognised on a straight-line basis over the period of the leases.

Revenue from the provision of logistics technology services and logistics management services is recognised when services are rendered.

Interest income is recognised on a time proportion basis using the effective interest method.

(m) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the income statement on a straight-line basis over the lease periods.

51 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(n) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. Segment assets exclude deferred taxation, goodwill, operating assets of the investment holding companies in the Group, amount due from an associated company arising from disposal of subsidiaries, and cash and bank balances. Segment liabilities exclude operating liabilities of investment holding companies in the Group or borrowings.

(o) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency”). The consolidated financial statements are presented in HK dollars, which is the Company’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Translation differences on non-monetary items, such as equity instruments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation difference on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity.

(iii) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(1) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(2) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
(3) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

52 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(p) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(q) Investments

From 1 January 2003 to 30 June 2005, the Group classified its investments in securities, other than subsidiaries, associates and jointly controlled entities, as non-trading securities and trading securities. Investment securities were stated at cost less any provision for impairment losses. The carrying amounts of individual investments were reviewed at each balance sheet date to assess whether the fair values had declined below the carrying amounts. When a decline other than temporary had occurred, the carrying amount of such securities would be reduced to its fair value. The impairment loss was recognised as an expense in the income statement. This impairment loss was written back to income statement when the circumstances and events that led to the write-downs or write-offs ceased to exist and there was persuasive evidence that the new circumstances and events would persist for the foreseeable future.

From 1 July 2005 onwards, the Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired.

(r) Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the Group, is classified as investment property.

Investment property comprises land held under operating leases and buildings held under finance leases.

Land held under operating leases are classified and accounted for as investment property when the rest of the definition of investment property is met. The operating lease is accounted for as if it were a finance lease.

Investment property is measured initially at its cost, including related transaction costs.

53 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations are performed in accordance with the guidance issued by the International Valuation Standards Committee. These valuations are reviewed annually by external valuers. Investment property that is being redeveloped for continuing use as investment property, or for which the market has become less active, continues to be measured at fair value.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.

The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. Some of those outflows are recognised as a liability, including finance lease liabilities in respect of land classified as investment property; others, including contingent rent payments, are not recognised in the financial statements.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the income statement during the financial period in which they are incurred.

Changes in fair values are recognised in the income statement.

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes. Property that is being constructed or developed for future use as investment property is classified as property, plant and equipment and stated at cost until construction or development is complete, at which time it is reclassified and subsequently accounted for as investment property.

If an item of property, plant and equipment becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is recognised in equity as a revaluation of property, plant and equipment under HKAS 16. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statement.

Investment property held for sale without redevelopment is classified within non-current assets held for sale under HKFRS 5.

(s) Licences

Licences are capitalised on the basis of the costs incurred to acquire and bring to us a specific licence. Licences have a definite useful life and are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of licences over their estimated useful lives. Other costs associated with the licences are recognised as expenses as incurred.

(a) Financial risk factors

The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, cash flow and fair value interest rate risks and foreign exchange risk.

The Group’s risk management program seeks to minimise the potential adverse effects of financial risks on the Group’s performance.

4 Financial risk management

54 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(i) Credit risk

The Group has policies in place to ensure that provision of services are made to customers with an appropriate credit history.

(ii) Liquidity risk

The Group monitors current and expected liquidity requirements to ensure sufficient cash and adequate amount of committed credit facilities are maintained.

(iii) Cash flow and fair value interest rate risks

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flow are substantially independent of changes in market interest rates.

The Group’s interest-rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

(iv) Foreign exchange risk

The Group mainly operates in the Mainland China and Hong Kong with most of the transactions settled in Hong Kong dollars and Renminbi (“RMB”). The Group’s assets and liabilities, and transactions arising from its operations that are exposed to foreign exchange risk are primarily with respect to RMB. The Group has not used any forward contracts or currency borrowings to hedge its exposure as foreign exchange risk is considered minimal.

(b) Fair value estimation

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial assets and liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

5 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

(i) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 3(d). The recoverable amounts of cash generating units have been determined based on the higher of their fair values less costs and their value-in-use calculations. These value-in-use calculations require the use of estimates. If the revised estimated gross margin at 30 June 2007 had been lower than management’s estimates at 30 June 2006, the Group may need to reduce the carrying value of goodwill. If the revised estimated pre-tax discount rate applied to the discounted cash flows had been higher than management’s estimates, the Group may need to reduce the carrying value of goodwill. Further, if the actual gross margin had been higher or the pre-tax discounted rate lower than management’s estimates, the Group would not be able to reverse any impairment losses that arose on goodwill.

55 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(ii) Estimated useful lives and impairment of property, plant and equipment

For the years ended 30 June 2004 and 30 June 2005, property, plant and equipment used in the network of the NWPCS Group were long-lived but might be subject to technical obsolescence. The annual depreciation charges were affected by the estimated useful lives the Group allocated to each type of property, plant and equipment. Management performed annual reviews to assess the appropriateness of their estimated useful lives. Such reviews took into account the technological changes, prospective economic utilisation and physical condition of the assets concerned. Management also regularly reviewed whether there were any indications of impairment and would recognise an impairment loss if the carrying amount of an asset was lower than its recoverable amount which was the greater of its net selling price or its value in use. In determining the value in use, management assessed the present value of the estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Estimates and judgements were applied in determining these future cash flows and the discount rate. Management estimated the future cash flows based on certain assumptions, such as the market competition and development and the expected growth in subscribers and average revenue per subscriber.

(iii) Asset retirement obligations

The Group evaluated and recognised, on a regular basis, the fair value of assets retirement obligations of the NWPCS Group which arose from future reinstatement of leased properties upon end of lease terms. To establish the fair value of the asset retirement obligations, estimates and judgement were applied in determining these future cash flows and the discount rate. Management estimated the future cash flows based on certain assumptions, such as the types of leased properties, probability of renewal of lease terms and restoration costs. The discount rate used was referenced to the Group’s historical weighted average cost of capital.

(iv) Deferred tax

The Group provides for deferred taxation in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax assets are only recognised to the extent that it is probable future taxation profits will be available against which the unused tax losses or unused tax credits can be utilised, and significant judgement is required in determining whether it is probable.

6 Turnover

The Group is principally engaged in the provision of mobile communications services, the sales of mobile handsets and accessories and the provision of technology related services. The Group has ceased the provision of mobile communications services and the sale of mobile handsets and accessories following the disposal of subsidiaries set out in Note 37. Revenues from the provision of mobile communications services and the sales of mobile handsets and accessories recognised the years ended 30 June 2004 and 2005 and during the year up to the date of disposal of the subsidiaries are set out in Note 8. Revenues from continuing operations recognised during the years are as follows:

Technology related services Gross rental income from an investment property Logistics services	30 June 2004 HK$’000 As restated – – – –	30 June 2005 HK$’000 – – 4,261 4,261	30 June 2006 HK$’000 16,381 134 –
			16,515

56 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

7 Segment reporting

(a) For the year ended 30 June 2004, more than 90% of the Group’s turnover and operating profit were attributable to the discontinued mobile telecommunications operations of the NWPCS Group in Hong Kong. Accordingly, no analysis by either business or geographical segment is presented.
(b) Primary reporting format – business segments

For the year ended 30 June 2006, the business segments include:

technology related services; and
mobile communications services.

The segment results for the year ended 30 June 2006 are as follows:

Turnover Segment results Other income Other net (losses)/gains Other net losses – unallocated Unallocated corporate expenses Operating (loss)/profit Finance costs Share of results of associated companies (Loss)/profit before taxation Taxation (Loss)/profit for the year Depreciation Unallocated depreciation Capital expenditures (Impairment loss)/reversal of impairment loss of – intangible assets arising from the acquisition of the NWCS Group (Note 36(a)) – intangible assets (goodwill arising from Reverse Acquisition) – investments in associated companies – trade receivables	Continuing Technology Mobile related communications services services HK$’000 HK$’000 16,515 – (14,759) – (6,995) – – 27,731 (867) – 86 – (6,995) – (215) –	Total HK$’000 16,515 (14,759) 823 (6,995) (58,441) (19,140) (98,512) (62,786) 27,731 (133,567) – (133,567) (867) (129) (996) 86 (6,995) (65,964) 7,523 (215) (65,651)	Discontinued Mobile communications services (Note 8) HK$’000 1,402,827 60,706 716 1,022,979 – – 1,084,401 (34,319) – 1,050,082 (4,873) 1,045,209 (198,703) – (198,703) 97,354 – – – (8,706) (8,706)

57 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The turnover and operating loss before finance costs derived from the Group’s operation in logistics services constituted less than 10% of the Group’s turnover and operating loss before finance costs, therefore, the logistics services business segment ceased to be a reportable segment for the year ended 30 June 2006.

The segment results for the year ended 30 June 2005 are as follows:

Turnover Segment results Other income Other gains Unallocated corporate expenses Operating (loss)/profit Finance costs (Loss)/profit before taxation Taxation (Loss)/profit for the year Depreciation Unallocated depreciation Capital expenditures	Continuing	Continuing	Discontinued Mobile communications services (Note 8) HK$’000 1,662,873 77,729 527 – – 78,256 (20,548) 57,708 (21,015) 36,693 (258,191) – (258,191) 140,791
	Logistics services HK$’000 4,261 (1,246) (722) –	Total HK$’000 4,261 (1,246) 108 2,189 (3,353) (2,302) (44,739) (47,041) (51) (47,092) (722) (345) (1,067) –

58 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) The segment assets and liabilities as at 30 June 2006 are as follows:

Technology Mobile related communications services services HK$’000 HK$’000 Segment assets 11,292 – Investments in associated companies – 2,142,737 Intangible assets – – Unallocated assets Total assets Segment liabilities 6,458 – Unallocated liabilities Total liabilities	Total HK$’000 11,292 2,142,737 – 142,357
	2,296,386

	6,458 2,387,217
	2,393,675

The assets of the Group’s operations in logistics services constituted less than 10% of the total assets of the Group’s as at 30 June 2006, therefore, the logistics services business segment ceased to be a reportable segment.

The segment assets and liabilities as at 30 June 2005 are as follows:

Mobile communications Logistics services services HK$’000 HK$’000 Segment assets 1,290,080 1,129 Investments in associated companies – – Intangible assets 65,964 – Unallocated assets Total assets Segment liabilities 522,764 189 Unallocated liabilities Total liabilities	Total HK$’000 1,291,209 – 65,964 284,394
	1,641,567

	522,953 2,148,545
	2,671,498

As a result of the adoption of HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the presentation of the consolidated income statement and consolidated cash flow statement has been changed retrospectively for the year ended 30 June 2004.

59 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(c) The Group’s business segments are operating in two main geographical areas:

Hong Kong	:	Mobile communications	Mobile communications	services, which are classified as discontinued	services, which are classified as discontinued	services, which are classified as discontinued	services, which are classified as discontinued	services, which are classified as discontinued
		operations, and technology related services; and
Mainland China	:	Technology related	services.
						Segment assets
						As at		As at
						30 June 2005		30 June 2006
						HK$’000		HK$’000
Hong Kong						1,290,643		207
Mainland China						566		11,085
						1,291,209		11,292

		Turnover				Capital expenditure
		30 June 2005	30	June 2006		30 June 2005		30 June 2006
		HK$’000		HK$’000		HK$’000		HK$’000
Hong Kong – continuing		4,261			–		–	–
Hong Kong – discontinued		1,662,873		1,402,827		140,791		97,354
Mainland China		–			16,515		–	86
		1,667,134		1,419,342		140,791		97,440

8 Discontinued operations

During the year ended 30 June 2006, the Group entered into a merger agreement and amendment agreements pursuant to which the Group disposed of its entire interests in the NWPCS Group to Telstra CSL Limited which has changed its name to CSL NWM and made a cash payment of HK$244,024,000 in exchange for the acquisition of 23.6% of the issued share capital of the CSL NWM Group representing the enlarged group combining Telstra CSL Limited and the NWPCS Group, and an amount due from CSL NWM, the associated company, of HK$113,328,000 (the “Merger Transaction”). The Merger Transaction was approved by the shareholders of the Company at the Extraordinary General Meeting on 24 March 2006 and completed on 31 March 2006. Hence, the NWPCS Group ceased to be subsidiaries of the Group and became part of the CSL NWM Group, being the associated companies of the Group after the Merger Transaction.

The consolidated income statement and consolidated cash flow statement have been represented for the year ended 30 June 2004 in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

60 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

An analysis of the results and cash flows of the discontinued operations is as follows:

Turnover Cost of sales Gross profit Other revenue Other charge Selling expenses Administrative expenses Operating profit Finance costs Gain on disposal of subsidiaries Profit before tax Taxation Profit from discontinued operations 9 Other income Bank interest income 10 Other net gains/(losses) Loss on disposal of property, plant and equipment Gains on disposal of other investments Gain on disposal of investment securities Impairment loss on intangible assets Reversal of impairment on investments in associated companies_(Note 21_)	Year ended 30 June 2004 HK$’000 As restated 1,656,142 (782,576) 873,566 115 (3,690) (104,506) (611,106) 154,379 (7,336) – 147,043 (35,866) 111,177 30 June 2004 HK$’000 As restated – 30 June 2004 HK$’000 As restated – – – – – –	Nine months Year ended ended 30 June 2005 31 March 2006 HK$’000 HK$’000 1,662,873 1,402,827 (890,316) (836,095) 772,557 566,732 527 716 (1,081) (545) (101,178) (85,313) (592,569) (420,168) 78,256 61,422 (20,548) (34,319) – 1,022,979 57,708 1,050,082 (21,015) (4,873) 36,693 1,045,209 Year ended 30 June 2005 30 June 2006 HK$’000 HK$’000 108 823 Year ended 30 June 2005 30 June 2006 HK$’000 HK$’000 (1,247) – 100 – 2,089 – – (72,959) – 7,523 942 (65,436)

61 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

11 Expenses by nature

Expenses included in cost of sales, selling and administrative expenses are analysed as follows:

Auditors’ remuneration – Over provision in prior years for principal auditors – Current year provision for principal auditors – Current year provision for non-principal auditors Less: Current year provision for principal auditors included in discontinued operations Current year provision for non-principal auditors included in discontinued operations Depreciation of property, plant and equipment Net exchange losses Operating lease rentals for land and buildings Provision for impairment of trade receivables Staff costs, including directors’ emoluments_(Note 13) Finance costs Interest on loans from a fellow subsidiary Interest on promissory note issued to a fellow subsidiary Interest on convertible bond(Note 34) Interest on Subscription Note(Note 2)_	30 June 2004 HK$’000 As restated – – 270 270 – (270) – – – – – – 30 June 2004 HK$’000 As restated – – – – –	Year ended 30 June 2005 HK$’000 – 1,182 – 1,182 (598) – 584 1,067 13 – – 4,257 Year ended 30 June 2005 HK$’000 – – 885 43,854 44,739	30 June 2006 HK$’000 (190) 1,100 1,185 2,095 (400) (348) 1,347 996 384 1,021 215 20,213 30 June 2006 HK$’000 3,618 11,499 860 46,809 62,786

12 Finance costs

62 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

13 Staff costs (including directors’ emoluments)

Wages and salaries Bonuses Pension costs – defined contribution plans Termination benefits	30 June 2004 HK$’000 As restated – – – – –	Year ended 30 June 2005 HK$’000 1,864 1,200 – 1,193 4,257	30 June 2006 HK$’000 12,182 6,165 1,866 –
			20,213

14 Directors’ and senior management’s emoluments

(a) Directors’ emoluments

The aggregate amounts of emoluments paid and payable to directors of the Company during the years are as follows:

Fees Other emoluments: Salaries and allowances Bonuses Pension costs – defined contribution plans	30 June 2004 HK$’000 – – – – –	Year ended 30 June 2005 HK$’000 770 3,000 2,902 150 6,822	30 June 2006 HK$’000 780 3,000 6,505 225
			10,510

No emoluments were paid to the directors of the Company during the year ended 30 June 2004 as the Company was not yet consolidated into the NWPCS Group in the year ended 30 June 2004.

For the year ended 30 June 2006, directors’ emoluments of HK$5,786,000 (2005: HK$1,970,000) was included in staff costs of loss from continuing operations which was included in note 13 presented above while the remaining HK$4,724,000 (2005: HK$4,852,000) was included in profit from discontinued operations.

63 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Details of the emoluments paid and payable to the directors of the Company are as follows:

Name of Director Executive Directors Dr. Wai Fung Man, Norman Dr. Cheng Kar Shun, Henry Mr. Doo Wai Hoi, William,JP Mr. To Hin Tsun, Gerald Mr. Chow Yu Chun, Alexander Non-Executive Directors Mr. Lo Lin Shing, Simon Mr. Ho Hau Chong, Norman Independent Non-Executive Directors Mr. Wei Chi Kuan, Kenny Mr. Kwong Che Keung, Gordon Mr. Cheng Ming Fun, Paul_JP_ (Note) Mr. Hui Chiu Chung,JP	Fees HK$’000 50 119 49 51 49 51 50 120 119 83 29	Year ended 30 June 2005 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 1,702 150 – – – – – – – 600 – – 600 – – – – – – – – – – – – – – – – – – – 3,000 2,902 150	Year ended 30 June 2005 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 1,702 150 – – – – – – – 600 – – 600 – – – – – – – – – – – – – – – – – – – 3,000 2,902 150	Year ended 30 June 2005 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 1,702 150 – – – – – – – 600 – – 600 – – – – – – – – – – – – – – – – – – – 3,000 2,902 150	Total HK$’000 4,902 119 49 651 649 51 50 120 119 83 29
	770	3,000	2,902	150	6,822

Note:

Mr. Cheng Ming Fun, Paul, JP resigned as director of the Company on 6 April 2005.

64 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Name of Director Executive Directors Dr. Wai Fung Man, Norman Dr. Cheng Kar Shun, Henry Mr. Doo Wai Hoi, William,JP Mr. To Hin Tsun, Gerald Mr. Chow Yu Chun, Alexander Non-Executive Directors Mr. Lo Lin Shing, Simon Mr. Ho Hau Chong, Norman Independent Non-Executive Directors Mr. Wei Chi Kuan, Kenny_(Note) Mr. Kwong Che Keung, Gordon Mr. Hui Chiu Chung,_JP	Fees HK$’000 50 120 50 50 50 50 50 120 120 120	Year ended 30 June 2006 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 5,305 225 – – – – – – – 600 – – 600 – – – – – – – – – – – – – – – – 3,000 6,505 225	Year ended 30 June 2006 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 5,305 225 – – – – – – – 600 – – 600 – – – – – – – – – – – – – – – – 3,000 6,505 225	Year ended 30 June 2006 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 5,305 225 – – – – – – – 600 – – 600 – – – – – – – – – – – – – – – – 3,000 6,505 225	Total HK$’000 8,580 120 50 650 650 50 50 120 120 120
	780	3,000	6,505	225	10,510

Note:

Mr. Wei Chi Kuan, Kenny resigned on 8 September 2006.

None of the directors of the Company waived any emoluments during the years ended 30 June 2005 and 2006.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group include one, one and no director whose emoluments are reflected in the analysis presented above for the years ended 30 June 2006, 2005 and 2004 respectively. The emoluments payable to the remaining four, four and five individuals during the years ended 30 June 2006, 2005 and 2004 respectively are as follows:

Salaries and allowances Bonuses Pension costs – defined contribution plans	30 June 2004 HK$’000 9,624 3,108 499 13,231	Year ended 30 June 2005 HK$’000 6,098 2,838 300 9,236	30 June 2006 HK$’000 4,636 2,188 281
			7,105

65 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The emoluments of the individuals fell within the following bands:

Emolument bands HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000 HK$2,000,001 to HK$2,500,000 HK$2,500,001 to HK$3,000,000 HK$3,000,001 to HK$3,500,000 HK$3,500,001 to HK$4,000,000 HK$4,000,001 to HK$4,500,000	Number of individuals	Number of individuals	Number of individuals
	30 June 2004 – 2 2 – – – 1	30 June 2005 – 2 1 1 – – –	30 June 2006 2 1 1 – – – –

15 Retirement benefits

During the years ended 30 June 2004 and 2005 and the nine months ended 31 March 2006, the Group contributed to an Occupational Retirement Scheme (the “ORSO Scheme”) for employees in Hong Kong. Under the ORSO Scheme, the employees are required to contribute 5% of their monthly salaries, while the Group’s contributions are calculated at a range from 5% to 10% of the monthly salaries of employees. The employees are entitled to 100% of the employer’s contributions after 10 years of completed service, or at a reduced scale after completion of 3 to 9 years of service. Contributions to the ORSO Scheme are reduced by contributions forfeited by those employees who leave the ORSO Scheme prior to vesting fully in the Group’s contributions. Since 1 April 2006, the Group ceased to contribute to the ORSO Scheme as all existing employees under the ORSO scheme had selected to change to a mandatory provident fund scheme (the “MPF Scheme”) established by the Company under Hong Kong Mandatory Provident Fund Scheme Ordinance for employees in Hong Kong.

Under the MPF Scheme, the employees are required to contribute 5% of each individual’s relevant income with a maximum amount of HK$1,000 per month as a mandatory contribution, while the Group’s contribution are calculated at a range from 5% to 10% of each individual’s relevant income. Employer’s mandatory contributions are 100% vested in the employees as soon as they are paid to the MPF Scheme. Employees may also elect to contribute more than the minimum as a voluntary contribution.

The Group also contributes to employee pension schemes established by municipal government in respect of certain subsidiaries in the PRC for employees in the PRC.

The aggregate employer’s contributions, net of forfeited contributions, which have been dealt with in the consolidated income statement during the years are as follows:

Gross scheme contributions Less: Forfeited contributions utilised to offset contributions for the year Net scheme contributions Less: Amount included in discontinued operations Net scheme contributions of continuing operations	30 June 2004 HK$’000 9,959 (1,545) 8,414 (8,414) –	Year ended 30 June 2005 HK$’000 4,420 (793) 3,627 (3,627) –	30 June 2006 HK$’000 6,272 (643
			5,629 (3,763
			1,866

66 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

As at 30 June 2006, 2005 and 2004, forfeited contributions of HK$nil, HK$212,000 and HK$102,000 were available to reduce future contributions. Contributions of HK$nil, HK$1,082,000 and HK$3,832,000 were payable by the Group as at 30 June 2006, 2005 and 2004.

16 Taxation

Hong Kong profits tax has been calculated at 17.5% for the years ended 30 June 2006, 2005 and 2004. Taxation on profits in the PRC has been calculated on the estimated assessable profits at tax rates ranging from 15% to 33% for the year ended 30 June 2006 (2005 and 2004: Nil).

No provision for Hong Kong profits tax and overseas taxation has been made for the years as the Company and a number of its subsidiaries have no assessable profit for the years ended 30 June 2006, 2005 and 2004 and certain subsidiaries have sufficient tax losses brought forward to offset their estimated assessable profit for the years.

The amount of taxation charged to the consolidated income statement for the years represents:

Current taxation: – Under provisions in prior years Taxation charge	30 June 2004 HK$’000 As restated – –	Year ended 30 June 2005 HK$’000 51 51	30 June 2006 HK$’000 –
			–

The taxation on the Group’s operating loss before share of results of associated companies and discontinued operations differs from the theoretical amount that would arise using the taxation rate prevailing in the country in which the Group operates as follows:

Loss before taxation and share of results of associated companies Calculated at a taxation rate of Notional tax credit on loss before taxation Effect of different taxation rates in other countries Income not subject to taxation Expenses not deductible for taxation purpose Tax losses not recognised Under provisions in prior years Taxation charge	30 June 2004 HK$’000 As restated – 17.5% – – – – – – –	Year ended 30 June 2005 HK$’000 (47,041) 17.5% (8,232) – – 8,232 – 51 51	30 June 2006 HK$’000 (161,298)
			17.5% (28,227) (2,195) (321) 22,840 7,903 –
			–

67 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

17 Earnings/(loss) per share

The calculations of basic earnings/(loss) per share based on the share capital of the Company are as follows:

Loss for continuing operations attributable to shareholders (HK$’000) Profit from discontinued operations attributable to shareholders (HK$’000) Profit/(loss) attributable to shareholders (HK$’000) Number of shares_(Note a) Weighted average number of ordinary shares for the purpose of calculating basic earnings/(loss) per share(Note b)_	30 June 2004 HK$’000 As restated – 111,177 111,177 41,666,666	Year ended 30 June 2005 HK$’000 (47,092) 36,693 (10,399) 78,668,311	30 June 2006 HK$’000 (133,567) 1,045,209 911,642 90,379,272

Notes:

(a) The weighted average number of ordinary shares for the purpose of calculating the earnings/(loss) per share have been adjusted retrospectively for the one hundred-to-one share consolidation of the Company which took place on 7 July 2004 (Note 31(d)).
(b) Under the reverse acquisition method of accounting, the 4,166,666,667 Subscription Shares issued by the Company to PPG to effect the Reverse Acquisition described in Note 2 are deemed to be in issue throughout the years ended 30 June 2005 and 2004 for the purpose of calculating the basic earnings/(loss) per share.
(c) No diluted earnings/(loss) per share are presented for the years ended 30 June 2006, 2005 and 2004 as the conversion of convertible bond and subscription note would not have dilutive effect on the loss from continuing operations.

18 Profit/(loss) attributable to shareholders

The profit/(loss) attributable to shareholders is dealt with in the financial statements of the Company to the extent of loss of HK$145,573,000, profit of HK$108,528,000 and nil profit/loss for the years ended 30 June 2006, 2005 and 2004 respectively.

68 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

19 Property, plant and equipment

(a) Group

Group
Cost or valuation At 1 July 2003 Additions Disposals At 30 June 2004 At 1 July 2004 Additions Acquisition of subsidiaries Disposals At 30 June 2005 At 1 July 2005 Additions Acquisition of subsidiaries Disposal of subsidiaries Reclassification Disposals At 30 June 2006 Accumulated depreciation At 1 July 2003 Charge for the year Disposals At 30 June 2004 At 1 July 2004 Charge for the year Disposals At 30 June 2005 Charge for the year Disposals Disposal of subsidiaries Reclassification At 30 June 2006 Net book value At 30 June 2004 At 30 June 2005 At 30 June 2006	Investment properties HK$’000 – – – – – – – – – – – 3,900 – (3,900) – – – – – – – – – – – – – – – – – –	Leasehold buildings HK$’000 – – – – – – – – – – – – – 3,900 – 3,900 – – – – – – – – 25 – – – 25 – – 3,875	Computer equipment HK$’000 173,378 34,417 (161) 207,634 207,634 8,017 1,231 (1,231) 215,651 215,651 4,177 2,118 (216,333) (743) (2,674) 2,196 96,888 26,666 (161) 123,393 123,393 27,524 (781) 150,136 18,778 (2,654) (165,616) (38) 606 84,241 65,515 1,590	Furniture Leasehold and fittings improvements HK$’000 HK$’000 21,102 41,712 634 3,886 (714) (4,631) 21,022 40,967 21,022 40,967 437 4,942 890 64 (1,051) (572) 21,298 45,401 21,298 45,401 171 1,997 232 114 (21,374) (47,328) (46) (30) (41) (39) 240 115 17,288 19,189 1,595 7,752 (636) (3,604) 18,247 23,337 18,247 23,337 1,529 7,875 (280) (398) 19,496 30,814 862 6,102 (40) (20) (20,256) (36,798) 38 – 100 98 2,775 17,630 1,802 14,587 140 17	Motor vehicles HK$’000 1,898 118 (616) 1,400 1,400 394 680 (378) 2,096 2,096 – 177 (920) – (495) 858 1,683 103 (616) 1,170 1,170 279 (377) 1,072 276 (495) (556) – 297 230 1,024 561	Digital, switching and Testing transmission equipment system HK$’000 HK$’000 28,186 1,986,488 18 103,384 (29) (5,912) 28,175 2,083,960 28,175 2,083,960 – 115,498 – – – (1,867) 28,175 2,197,591 28,175 2,197,591 – 82,307 – – (28,175) (2,278,842) – 16 – (1,072) – – 26,297 801,725 1,197 215,360 (29) (2,480) 27,465 1,014,605 27,465 1,014,605 504 221,547 – (930) 27,969 1,235,222 150 173,506 – (231) (28,119) (1,408,497) – – – – 710 1,069,355 206 962,369 – –	Construction in progress HK$’000 – 11,295 – 11,295 11,295 11,503 – – 22,798 22,798 8,788 – (32,389) 803 – – – – – – – – – – – – – – – 11,295 22,798 –	Total HK$’000 2,252,764 153,752 (12,063)
								2,394,453 2,394,453 140,791 2,865 (5,099)
								2,533,010 2,533,010 97,440 6,541 (2,625,361) – (4,321)
								7,309

								963,070 252,673 (7,526)
								1,208,217 1,208,217 259,258 (2,766)
								1,464,709 199,699 (3,440) (1,659,842) –
								1,126

								1,186,236

								1,068,301

								6,183

Note: The leasehold buildings are situated on leasehold land in Mainland China held on a medium term lease.

69 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) Company

Cost At 1 January 2003 Additions Disposals Written off At 31 December 2003 Disposals At 30 June 2005 Disposals At 30 June 2006 Accumulated depreciation At 1 January 2003 Charge for the year Disposals Written off At 31 December 2003 Charge for the period Disposals At 30 June 2005 Charge for the year Disposals At 30 June 2006 Net book value At 31 December 2003 At 30 June 2005 At 30 June 2006	Computer equipment HK$’000 1,341 20 – – 1,361 (1,361) – – – -------------- 373 414 – – 787 414 (1,201) – – – – -------------- 574 – –	Furniture and fixtures HK$’000 792 313 – (205) 900 (900) – – – -------------- 117 177 – (38) 256 180 (436) – – – – -------------- 644 – –	Motor vehicle HK$’000 242 234 (234) – 242 – 242 (242) – -------------- 32 64 (16) – 80 72 – 152 – (152) – -------------- 162 90 –	Total HK$’000 2,375 567 (234) (205) 2,503 (2,261) 242 (242) – -------------- 522 655 (16) (38) 1,123 666 (1,637) 152 – (152) – -------------- 1,380 90 –

70 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

20 Investments in subsidiaries

Unlisted investments, at costs_(Note a) Amounts due from subsidiaries(Note b)_ Less: Provision for impairment		Company	As at 30 June 2006 HK$’000 31,939 2,753,071 2,785,010 (287,434) 2,497,576
	As at 31 December 2003 HK$’000 10,939 338,540 349,479 (212,167) 137,312	As at 30 June 2005 HK$’000 1,262,670 577,673 1,840,343 (318,958) 1,521,385

Notes:

(a) Particulars of the principal subsidiaries of the Company as at the date of this report are as follows:

	Place of	Particulars of	Interest	held
	incorporation	issued share	by the	by the
Name	and operation	capital	Company	Group		Principal activities
New World CyberBase	British Virgin	1 Ordinary share	100%		–	Investment holding
Solutions (BVI) Limited	Islands	of US$1 each
Upper Start Holdings Limited	British Virgin	1 Ordinary share	100%		–	Investment holding
	Islands	of US$1 each
Jetco Technologies Limited	Hong Kong	1,250,000	–	100%		Investment holding and
		Ordinary shares				property
		of HK$1 each				investment
上海易圖通信息技術	The PRC	Registered	–	80%		Provision of
有限公司*		capital of				Internet content
		RMB10,000,000				services and
						telecommunication
						value-added services
						in the PRC

This company has adopted 31 December as its financial year end date as required by the PRC statutory reporting requirement.
(b) The amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment.
71 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

21 Investments in associated companies

Beginning of the year Acquisition of associated companies_(Note 36(b)) Share of results of associated companies – Profit before taxation – Taxation Reversal of impairment loss(Note b) Dividend income(Note b)_		Group	30 June 2006 HK$’000 – 2,115,006 34,952 (7,221) 27,731 7,523 (7,523) 2,142,737
	30 June 2004 HK$’000 – – – – – – – –	30 June 2005 HK$’000 – – – – – – – –

Investments in associated companies as at 30 June 2006 include goodwill of HK$1,007,935,000.

(a) Particulars of the principal associated companies as at 30 June 2006 are as follows:

Place of

	Place of
	incorporation/	Particulars of	Interest
	and	issued share	held	Principal
Name	operation	capital	indirectly	activities
CSL New World	Bermuda	655,886,331	23.6%	Investment holding
Mobility Limited		shares of
		US$0.3163
		each
Hong Kong CSL Limited	Hong Kong	Nominal value of	23.6%	Provision of mobile
		HK$2,031,043,443		telecommunications
				services and products
New World PCS Holdings	Cayman Islands/	Nominal value of	23.6%	Investment holding
Limited	Hong Kong	HK$1,112,039,279
New World PCS Limited	Hong Kong	Nominal value	23.6%	Provision of mobile
		of HK$887,749,279		communications services
				and products

72 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) During the year ended 30 June 2006, the Group received dividend income of HK$7,523,000 from an associated company, Han International Consulting Company Limited, in which the Company held 30% interest of its issued share capital. Full provision for investment in this associated company was made in previous years. Hence, the provision for impairment of the investment in the associated company was reversed by HK$7,523,000. The associated company was subsequently dissolved in January 2006.
(c) Summary financial information on associated companies, which was extracted from the consolidated financial statements of the CSL NWM Group audited by another auditors, Ernst & Young, after making appropriate fair value adjustments, is set out below:

	Three months
	ended
	30 June 2006
	HK$’000
Revenue for the period	1,539,662

Post acquisition profit for the period	117,505

	As at
	30 June 2006
	HK$’000
Non-current assets	6,708,649
Current assets	982,712
Non-current liabilities	(860,479)
Current liabilities	(2,022,404)
	4,808,478

(d) Following the disposal of a wholly owned subsidiary, Upper Start Holdings Limited, the Group’s investments in associated companies set out in (a) above will be disposed of. These companies will cease to be the associated companies of the Group, and hence their results and net assets will not be consolidated in the consolidated financial statements of the Group after the completion of the disposal. Details are set out in Section III headed “Subsequent Event” of the report.
73 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

22 Intangible assets

	Group
Licence HK$’000 – – – 1,470 1,470 – 1,470 1,470 – – –	Goodwill HK$’000 – 65,964 65,964 5,525 71,489 – 71,489 71,489 – 65,964 –	Total HK$’000 – 65,964
		65,964 6,995
		72,959

		– 72,959
		72,959

		–

		65,964

		–

Note:

(a) The impairment loss was provided for the licence for the operation of a music website.

As at 30 June 2006, the carrying amounts of the assets of the respective business unit exceed the recoverable amount of the respective business unit, which is determined based on value-in-use calculation using cash flow projections covering a 5-year period based on annual revenue growth rate ranging from 0% to 20% and a discount rate of 5%. Hence, impairment loss of HK$71,489,000 was provided for the goodwill during the year ended 30 June 2006.

74 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

23 Deferred taxation

Deferred taxation are calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5%.

The movement on the deferred tax assets account is as follows:

At beginning of the year Deferred taxation charged to income statement_(Note 8)_ Disposal of subsidiaries At end of the year	30 June 2004 HK$’000 224,353 (35,866) – 188,487	30 June 2005 HK$’000 188,487 (21,015) – 167,472	30 June 2006 HK$’000 167,472 (4,873) (162,599) –

Deferred income tax assets are recognised for tax losses carry forwards to the extent that realisation of the related tax benefit through the future taxable profits is probable.

As at 30 June 2006, 2005 and 2004, the Group has unrecognised tax losses of HK$257,767,000, HK$58,759,000 and HK$nil respectively to carry forward against future taxable income subject to the agreement by the relevant tax authorities. Except for tax losses of HK$90,091,000, HK$nil and HK$nil as at 30 June 2006, 2005 and 2004 expiring within 5 years, the remaining balance has no expiry date.

As at 30 June 2006, 30 June 2005 and 31 December 2003, the Company has unrecognised tax losses of HK$68,084,000, HK$49,194,000 and HK$46,047,000 respectively to carry forward against future taxable income subject to the agreement by the relevant tax authority. The unrecognised tax losses have no expiry date.

The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year are as follows:

Deferred tax assets At 1 July 2003 Charged to income statement At 30 June 2004 Charged to income statement At 30 June 2005 Charged to income statement Disposal of subsidiaries At 30 June 2006		Group	Total HK$’000 356,657 (53,471) 303,186 (40,447) 262,739 (22,470) (240,269) –
	Provision HK$’000 3,473 (804) 2,669 (593) 2,076 (24) (2,052) –	Tax losses HK$’000 353,184 (52,667) 300,517 (39,854) 260,663 (22,446) (238,217) –

75 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Deferred tax liabilities At 1 July 2003 Credited to income statement At 30 June 2004 Credited to income statement At 30 June 2005 Credited to income statement Disposal of subsidiaries At 30 June 2006 24 Inventories Merchandise 25 Trade receivables Trade receivables Less: Provision for impairment of trade receivables Trade receivables – net		Group	Group Accelerated tax depreciation HK$’000 132,304 (17,605) 114,699 (19,432) 95,267 (17,597) (77,670) – As at 30 June 2006 HK$’000 – As at 30 June 2006 HK$’000 10,629 (6,363) 4,266
	As at 30 June 2004 HK$’000 29,657	As at 30 June 2005 HK$’000 38,024 Group
	As at 30 June 2004 HK$’000 98,471 (15,253) 83,218	As at 30 June 2005 HK$’000 105,881 (11,866) 94,015

76 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The Group allows an average credit period of thirty to sixty days to its subscribers and other customers. The ageing analysis of trade receivables is as follows:

1 – 30 days 31 – 60 days 61 – 90 days Over 90 days		Group
	As at 30 June 2004 HK$’000 60,066 14,015 4,776 4,361 83,218	As at 30 June 2005 HK$’000 71,091 13,455 9,469 – 94,015	As at 30 June 2006 HK$’000 2,483 1,648 112 23
			4,266

26 Amounts due to fellow subsidiaries

The balances are unsecured, interest free and have no fixed terms of repayment.

27 Amounts due from/to associated companies

The balances are unsecured, interest free and have no fixed terms of repayment.

The amount due from an associated company as of 30 June 2006 represented sales consideration for the disposal of subsidiaries (Note 37).

The amount due to an associated company as at 30 June 2006 was reclassified from amount due from a subsidiary when the subsidiary was disposed of (Note 37) and became an associated company after the Merger Transaction (Note 8). The balance represents payments made by the then subsidiary on behalf of the Group.

28 Amount due from a related company

The balance represents expenses for sharing of offices to be reimbursed by a related company, New World CyberBase Limited. It is unsecured, interest free and repayable on demand.

Mr. To Hin Tsun, Gerald, a director of the Company, is a director of New World CyberBase Limited. Mr Lo Lin Shing, a non-executive director of the Company, is the substantial shareholder of New World CyberBase Limited.

77 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

29 Cash and bank balances

Balance with original maturities of three months or less (Note a) Restricted bank balances_(Note b)_		Group
	As at 30 June 2004 HK$’000 94,444 – 94,444	As at 30 June 2005 HK$’000 116,534 – 116,534	As at 30 June 2006 HK$’000 26,921 770
			27,691

Notes:

(a) Included in the cash and bank balances of the Group are balances with the PRC banks totalling HK$804,000, HK$226,000 and HK$nil which were denominated in RMB as at 30 June 2006, 2005 and 2004 respectively. The remittance of these balances outside the PRC is subject to foreign exchange control rules and regulations of the PRC.
(b) Bank balances denominated in RMB of certain subsidiaries of the Group in the amount of approximately HK$770,000, HK$nil and HK$nil as at 30 June 2006, 2005 and 2004 respectively have been frozen under PRC court order in relation to claims filed against the subsidiaries. Lawyers considered these claims were without merits, therefore, no disclosure of contingent liability is considered necessary.

30 Trade payables

The ageing analysis of the trade payables is as follows:

1 – 30 days 31 – 60 days 61 – 90 days Over 90 days		Group
	As at 30 June 2004 HK$’000 19,651 6,473 3,692 14,489 44,305	As at 30 June 2005 HK$’000 62,013 26,100 2,345 17,628 108,086	As at 30 June 2006 HK$’000 80 120 172 437
			809

78 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

31 Share capital

At 1 July 2003 and 2004
Issue of shares_(Note b)
At 30 June 2005
Issue of shares(Note e)
Disposal of subsidiaries(Note a)
At 30 June 2005
_Authorised:
Ordinary shares of HK$0.01 each at 1 January 2003 and 2004
Creation of additional shares_(Note c)
Share consolidation(Note d)
Ordinary shares of HK$1.00 each at 30 June 2005 and 2006
_Issued and fully paid:
Ordinary shares of HK$0.01 each at 1 January 2003
Issued of new shares upon partial conversion of
convertible bond_(Note 34)
Ordinary shares of HK$0.01 each at 1 January 2004
Issue of Subscription Shares(Note 2(a))
Share consolidation(Note d)
Ordinary shares of HK$1.00 each at 30 June 2005
Issue of shares(Note e)_
Ordinary shares of HK$1.00 each at 30 June 2006

Group
(Note a)
HK$’000
1
299
300
16,154
(300)
16,154
Company
No. of shares
HK$’000
10,000,000,000
100,000
190,000,000,000
1,900,000
(198,000,000,000)
–
2,000,000,000
2,000,000
3,641,555,700
36,415
110,000,000
1,100
3,751,555,700
37,515
4,166,666,667
41,667
(7,839,040,144)
–
79,182,223
79,182
16,153,846
16,154
95,336,069
95,336

No. of shares
10,000,000,000
190,000,000,000
(198,000,000,000)
2,000,000,000
3,641,555,700
110,000,000
3,751,555,700
4,166,666,667
(7,839,040,144)
79,182,223
16,153,846
95,336,069

Notes:

(a) Before the disposal of the NWPCS Group on 31 March 2006, due to the use of reverse acquisition basis of accounting, the amount of share capital and share premium in the consolidated balance sheet represents the amount of issued shares of the legal subsidiary, NWPCS Holdings prior to the Reverse Acquisition and shares issued by the Company after the Reverse Acquisition. After the disposal of the NWPCS Group on 31 March 2006, the amount of share capital and share premium in the consolidated balance sheet represented that of the Company issued after the Reverse Acquisition after transferring the amount of share capital and share premium of NWPCS Holdings prior to the Reverse Acquisition to the consolidation reserve of the Group.

The equity structure (i.e. the number and types of shares) reflects the equity structure of the legal parent, the Company.

79 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) 298,911,000 shares were issued on 6 July 2004 by the legal subsidiary, NWPCS Holdings, for capitalisation of loans.
(c) On 6 July 2004, the authorised share capital of the Company was increased from HK$100,000,000 to HK$2,000,000,000 by the creation of additional 190,000,000,000 ordinary shares of HK$0.01 each.
(d) On 7 July 2004, every 100 issued or unissued ordinary share of HK$0.01 each of the Company was consolidated into one consolidated ordinary share of HK$1.00 each.
(e) On 21 October 2005, 16,153,846 ordinary shares of HK$1.00 each of the Company were issued at HK$1.3 each to New World CyberBase Limited (“NWC”) for acquisition of the entire issued share capital of New World CyberBase Solutions (BVI) Limited (“NWCS”) (Note 36(a)).
(f) Share option schemes

At an extraordinary general meeting of the Company held on 28 May 2002, the shareholders of the Company approved the termination of the share option scheme adopted by the Company on 11 September 1998 (the “1998 Share Option Scheme”) and the adoption of a new share option scheme (the “2002 Share Option Scheme”) in compliance with the requirements of the Rules Governing the Listing of Securities on the Stock Exchanges (the “Listing Rules”). Upon termination of the 1998 Share Option Scheme, no further options could be granted under the 1998 Share Option Scheme. However, the outstanding share options granted thereunder would continue to be valid and exercisable in accordance with the provisions of the 1998 Share Option Scheme.

The 2002 Share Option Scheme is valid and effective for a period of 10 years commencing on 28 May 2002. The total number of shares issued and to be issued upon exercise of the options granted to each participant (including both exercised and outstanding options) in any 12-month period must not exceed 1% of the shares in issue from time to time unless separately approved by the shareholders in general meeting.

An option may be exercised in accordance with the terms of the 2002 Share Option Scheme at any time during the period as the board of directors at their absolute discretion determine and in any event such period shall not be more than 10 years from the date upon which the offer of the option is made to the grantee. The directors may, if consider appropriate, determine the minimum period for which an option must be held before it can be exercised.

Upon acceptance of the offer for an option, the grantee shall pay HK$1.00 as consideration for the grant. The subscription price of a share in respect of any option granted shall be determined by the board of directors at their absolute discretion but shall be at least the highest of (i) the closing price of the shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant; (ii) the average closing price of the shares as stated in the Stock Exchange’s daily quotations sheets for the 5 business days immediately preceding the date of grant; and (iii) the nominal value of a share.

80 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(i) Movements in the share options are as follows:

1998 Share Option Scheme:

	Exercise	Exercise	Number of
	period	price	options
		HK$
At 1 January 2003			159,900,000
Lapsed	15.8.2000	0.284	(114,000,000)
	to 14.8.2003
	9.2.2002 to
	8.2.2008	0.150	(900,000)
		(Note b)
At 31 December 2003			45,000,000
Adjusted_(Note a)_			(44,352,000)
Lapsed			(448,000)
At 30 June 2005 and 30 June 2006			200,000

Note:

(a) The number and the exercise price of these share options were adjusted on 28 July 2004 as a result of the completion of the Subscription Agreement (Note 2) and the consolidation of the Company’s shares (Note 31(d)).
(b) Exercise price has been adjusted from HK$0.150 to HK$2.440.

2002 Share Option Scheme:

Exercise Exercise period price HK$ At 1 January 2003 and 31 December 2003 – – Granted 28.1.2005 to 31.12.2010 1,260 8.4.2005 to 31.12.2010 1.276 At 30 June 2005 Lapsed 28.1.2005 to 31.12.2010 1.260 At 30 June 2006	Number of options – 2,916,000 78,000 2,994,000 (78,000) 2,916,000

81 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(ii) Share options outstanding at the end of the year have the following terms:

Exercise period Exercise price HK$ 9.2.2002 to 8.2.2008 2.440 28.1.2005 to 31.12.2010 1.260 8.4.2005 to 31.12.2010 1.276	As at 31 December 2003 Number of options 45,000,000 – – 45,000,000	As at 30 June 2005 Number of options 200,000 2,916,000 78,000 3,194,000	As at 30 June 2006 Number of options 200,000 2,838,000 78,000
			3,116,000

32 Other reserves

(a) Group

At 1 July 2003 and 2004 Premium on issue of shares_(Note 31(b)) Arising from Reverse Acquisition (Note 2 and 36(c)) Renewal of convertible bond Issue of subscription note At 30 June 2005 At 1 July 2005 Premium on issue of shares(Note 31(e)) Disposal of subsidiaries(Note 31(a))_ At 30 June 2006	Share Consolidation premium reserve (Note 31(a)) (Note 2) HK$’000 HK$’000 999 – 913,793 – – (1,115,538) – – – – 914,792 (1,115,538) 914,792 (1,115,538) 4,846 – (914,792) 915,092 4,846 (200,446)	Convertible bond reserve HK$’000 – – – 40 112,655 112,695 112,695 – – 112,695	Total HK$’000 999 913,793 (1,115,538 40 112,655
			(88,051
			(88,051 4,846 300
			(82,905

82 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) Company

At 1 January 2003 Partial conversion of convertible bond_(Note 34) At 31 December 2003 At 1 January 2004(Note) Capital reduction(Note) Renewal of convertible bond Issue of subscription note At 30 June 2005 At 1 July 2005 Premium on issue of shares(Note 31(e))_ At 30 June 2006	Share Convertible premium bond reserve HK$’000 HK$’000 440,870 1,849 9,900 (518) 450,770 1,331 450,770 1,331 (444,168) – – (1,291) – 112,655 6,602 112,695 6,602 112,695 4,846 – 11,448 112,695	Total HK$’000 442,719 9,382 452,101 452,101 (444,168) (1,291) 112,655 119,297 119,297 4,846 124,143

Note: Pursuant to a special resolution passed at the extraordinary general meeting held on 25 June 2004, the amount outstanding to the credit of the share premium of the Company of HK$450,770,000 was applied first to set off the accumulated losses of the Company as at 31 December 2003, and then to effect the distribution of special dividend. The remaining balance, if any, is to be applied as the directors of the Company may consider appropriate, subject to the compliance with the laws of the Cayman Islands.

33 Promissory note issued to and loans from a fellow subsidiary – Group and Company

Pursuant to the S&P Agreement (Note 2), if the total of the bank loan and amounts due to immediate holding company and ultimate holding company (collectively, the “Aggregate Liabilities”) by the NWPCS Group on the business day prior to the completion of the Reverse Acquisition exceeds HK$1,250 million, the exceeding amount due to immediate holding company and ultimate holding company would be capitalised so that the Aggregate Liabilities at the Completion Date would not exceed HK$1,250 million.

As such, prior to the completion of the Reverse Acquisition, an amount of approximately HK$914,092,000 due to the then immediate holding company by the NWPCS Group was capitalised through the issuance of 298,911,000 shares of ordinary shares on 6 July 2004 (Note 31(b)). The remaining balance of amounts due to the then immediate holding company and ultimate holding company of HK$877,500,000 was repaid by a fresh loan from a fellow subsidiary which was repayable upon demand after 29 September 2005 and interest bearing at 0.65% above HIBOR per annum.

On 30 March 2006, the loan from a fellow subsidiary of HK$877,500,000 and accrued interest of HK$9,249,000 of the NWPCS Group was capitalised through the issuance of shares of NWPCS Holdings to the Company to extinguish debts of the NWPCS Group prior to the completion of the Merger Transaction (Note 8). On 30 March 2006, the aforesaid loan and accrued interest was replaced by a promissory note (the “Promissory Note”) issued to the fellow subsidiary by the Company in an amount of HK$886,749,000. The Promissory Note is unsecured, repayable upon demand after eighteen months from the date of issue and bears interest at 0.65% above HIBOR per annum payable every three months in arrears. The effective interest rate of the Promissory Note was 5.1% per annum (2005: 1.9% for the loan of HK$877,500,000 from a fellow subsidiary).

83 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

On 31 March 2006, a new loan of HK$244,024,000 was drawn from the fellow subsidiary and is repayable upon demand after eighteen months from 31 March 2006. On 6 June 2006, an additional loan of HK$34,000,000 was drawn from the fellow subsidiary and is repayable upon demand after 28 August 2007. Both loans are unsecured and bear interest at 0.65% above HIBOR per annum payable every three months in arrears. The effective interest rate of the loans was 5.1% and 5.2% per annum respectively.

The carrying amounts of the Promissory Note issued to and loans from the fellow subsidiary approximated their fair values.

34 Convertible bond – Group and Company

On 2 November 2001, a convertible bond (the “Convertible Bond”) of HK$39,286,000 (the “Principal Amount”) was issued by the Company in favour of New World CyberBase Nominee Limited (“NWCBN”), a fellow subsidiary. It bears a flat-rate interest at 3% per annum accrued on a day-to-day basis on the outstanding Principal Amount of the Convertible Bond which is payable semi-annually in arrears. The effective interest rate of the Convertible Bond was 3.1% per annum (2005: 3.1%). The original maturity date of the Convertible Bond was on 1 November 2004.

In December 2003, a portion of the Principal Amount of the Convertible Bond of HK$11,000,000 was converted into 110,000,000 ordinary shares of HK$0.01 each of the Company at the conversion price of HK$0.10 per share.

In November 2004, the Company agreed with NWCBN to extend the maturity date of the Convertible Bond to 1 November 2007.

The conversion price of the remaining portion of the Convertible Bond was adjusted to HK$1.22 per ordinary share after the completion of the Reverse Acquisition and share consolidation as detailed in Notes 2 and 31(d) respectively.

The carrying amount of the liability portion of the Convertible Bond approximated its fair value.

84 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

35 Notes to consolidated cash flow statements

Reconciliation of loss before taxation to cash used in operations:

Loss before taxation Share of results of associated companies Depreciation Loss on disposal of property, plant and equipment Gain on disposal of other investments Gain on disposal of investment securities Interest income Interest expenses Impairment loss on intangible assets Reversal of impairment of investments in associated companies_(Note 21)_ Changes in working capital (Increase)/decrease in trade receivables Decrease in prepayments, deposits, other receivables, rental and other deposits Decrease in amounts due to fellow subsidiaries and a related company Decrease in trade payables Increase/(decrease) in accrued charges, other payables, deposits received and deferred income Decrease in restricted bank balances Cash used in operations	30 June 2004 HK$’000 As restated – – – – – – – – – – – – – – – – –	30 June 2005 HK$’000 (47,041) – 1,067 1,247 (100) (2,089) (108) 44,739 – – 8,613 5,335 (581) – (15,904) – (4,822)	30 June 2006 HK$’000 (133,567) (27,731) 996 – – – (823) 62,786 72,959 (7,523) (1,252) 490 (48) (393) 7,785 17 (26,304)

36 Business combinations

(a) Acquisition of NWCS Group on 21 October 2005

On 12 September 2005, the Company entered into a conditional sale and purchase agreement with NWC. Pursuant to the agreement, the Company agreed to acquire, and NWC agreed to dispose of, the entire issued share capital of NWCS and its subsidiaries (collectively, the “NWCS Group”), and the interest of NWC in the interest-free shareholder’s loan due from NWCS for an aggregate consideration of HK$21 million. The consideration was satisfied by the issue of 16,153,846 ordinary shares of HK$1.00 each by the Company at an issue price of HK$1.3 per share, representing a discount of approximately 1.2% to the 10day average closing price of the Company’s share of approximately HK$1.316 per share for the last 10 consecutive trading days up to and including 12 September 2005 as quoted on the Stock Exchange. The acquisition was completed on 21 October 2005. The acquired business contributed revenues of HK$16,515,000 and net loss of HK$21,465,000 to the Group for the period from 22 October 2005 to 30 June 2006. If the acquisition had occurred on 1 July 2005, the contribution to the Group’s revenue and net loss would have been HK$22,874,000 and HK$26,251,000 respectively.

85 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Details of net assets acquired and goodwill are as follows:

Purchase consideration: Shares issued_(Note 31(e)) Less: Fair values of net assets acquired – shown as below Goodwill(Note 22)_	HK$’000 21,000 (15,475)
	5,525

With the acquisition of the NWCS Group, the Group’s capability to develop value-added mobile products and services and competitiveness in the mobile telecommunication industry are enhanced. In light of the growing demand for mobile Internet services in the PRC, the acquisition will also enable the Group to capitalise on the mobile Internet service market in the PRC. The goodwill is attributable to the aforesaid factors.

The fair values of the assets and liabilities of the NWCS Group at the date of acquisition are as follows:

Property, plant and equipment Intangible asset Trade receivables and other current assets Cash and cash equivalents Restricted bank balances Accruals and other payables Fair values of net assets acquired	HK$’000 6,541 1,470 4,719 9,896 787 (7,938)
	15,475

The carrying amounts of the assets and liabilities of the NWCS Group approximated their fair values at the date of acquisition.

Cash and cash equivalents acquired Restricted bank balances Cash inflow on acquisition	HK$’000 9,896 787
	10,683

86 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) Acquisition of CSL NWM Group on 31 March 2006

As mentioned in Note 8, the Group completed the acquisition of 23.6% of the CSL NWM Group on 31 March 2006. As a consequence, the CSL NWM Group has become associated companies of the Group. Since the acquisition, the CSL NWM Group contributed HK$27,731,000 to the Group’s share of results of associated companies for the three months ended 30 June 2006. If the acquisition had occurred on 1 July 2005, the contribution to the Group’s share of results of associated companies would have been HK$117,682,000.

Details of net assets acquired and goodwill are as follows:

Purchase consideration:
Carrying amounts of 23.6% of net assets of the NWPCS
Group at the date of disposal_(Note 37)
Fair value of 76.4% of net assets of the NWPCS Group at the date of disposal
Amount due from an associated company
Sales consideration of disposal of the NWPCS Group(Note 37)
Cash consideration
Professional fee incurred for the acquisition
Total purchase consideration
Less: Fair values of share of net assets acquired – shown as below
Goodwill(Note 21)_

HK$’000
219,237
1,732,713
(113,328)
1,838,622
244,024
32,360
2,115,006
(1,107,071)
1,007,935

The fair values and carrying amounts of the share of assets and liabilities of the CSL NWM Group at the date of acquisition are as follows:

Non-current assets Current assets Non-current liabilities Current liabilities Net assets of the CSL NWM Group Share of 23.6% of the net assets	Fair values HK$’000 6,736,856 600,566 (838,348) (1,808,097) 4,690,977 1,107,071	Carrying amounts (Note) HK$’000 7,512,480 598,743 (959,348) (1,808,097) 5,343,778 1,261,132

Note: The carrying amounts were extracted from the financial statements of the CSL NWM Group as at 31 March 2006 audited by another auditors.

87 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Cash consideration Professional fee paid for the acquisition Cash outflow on acquisition	HK$’000 244,024 32,360
	276,384

(c) Acquisition of Logistics Group on 6 July 2004

As mentioned in Note 2, NWPCS Holdings was deemed to have acquired the Logistics Group on 6 July 2004. The acquired business contributed revenues of HK$4,261,000 and net loss of HK$47,092,000 for the period from 6 July 2004 to 30 June 2005.

Details of net assets acquired and goodwill are as follows:

Purchase consideration Cash consideration Subscription Note issued_(Note 2) Reverse Acquisition adjustment(Note 2(vii) and 32(a)) Deemed consideration Professional fee incurred for the acquisition Total purchase consideration Less: Fair values of net assets acquired at the date of acquisition – shown as below Goodwill(Note 22)_	HK$’000 50,000 1,200,000 (1,115,538)
	134,462 1,731
	136,193 (70,229)
	65,964

As a result of the acquisition of the Logistics Group, the NWPCS Group became part of a listed group and would be able to provide investors, research analysts and rating agencies with greater clarity on its mobile telecommunications business and financial positions arousing greater interest from investors focused on mobile telecommunications business. The goodwill is attributable to the aforesaid considerations.

The fair values of the assets and liabilities of the Logistics Group at the date of acquisition are as follows:

Property, plant and equipment Investment securities Other investments Cash and bank balances Trade receivables and other current assets Accruals and other payables Convertible bond	HK$’000 2,865 1,520 800 97,361 7,340 (11,403) (28,254)
	70,229

88 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The carrying amounts of the assets and liabilities of the Logistics Group approximated their fair values at the date of acquisition.

Cash and cash equivalents acquired Purchase consideration settled in cash Professional fee paid Net cash inflow on acquisition	HK$’000 97,361 (50,000) (1,731) 45,630

37 Disposal of subsidiaries

As mentioned in Note 8, the Group disposed of its interests in the NWPCS Group on 31 March 2006.

Details of net assets disposed of and gain on the disposal are as follows:

Sales consideration:
Investments in associated companies
Amount due from an associated company_(Note 27)_
Total sales consideration
Net book values of net assets disposed of
Gain on disposal of subsidiaries
The assets and liabilities disposed of at the date of disposal are as follows:
Property, plant and equipment
Deferred taxation
Rental and other deposits
Amount due from the immediate holding company
Amount due from fellow subsidiaries
Inventories
Trade receivables
Prepayment, other receivables, rental and other deposits
Bank overdraft
Trade payables
Other payables and accruals
Amount due to a related company
Asset retirement obligations

HK$’000
1,838,622
113,328
1,951,950
(928,971)
1,022,979
965,519
162,599
5,949
5,625
1,784
25,594
107,035
69,949
(384)
(73,251)
(334,709)
(40)
(6,699)
928,971

89 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

38 Contingent liabilities

Bank guarantees in lieu of deposits		Group
	As at 30 June 2004 HK$’000 9,126	As at 30 June 2005 HK$’000 8,528	As at 30 June 2006 HK$’000 –

39 Commitments

(a) Capital Commitments

Contracted but not provided for Authorised but not contracted for		Group
	As at 30 June 2004 HK$’000 249,205 15,340 264,545	As at 30 June 2005 HK$’000 123,680 138,284 261,964	As at 30 June 2006 HK$’000 – –
			–

(b) Commitments under operating leases

At 30 June 2006, the Group had total future aggregate minimum lease payments under non-cancellable operating leases which expire as follows:

Land and buildings Within one year In the second to fifth year inclusive After the fifth year		Group
	As at 30 June 2004 HK$’000 136,842 60,878 6,524 204,244	As at 30 June 2005 HK$’000 167,406 98,298 12,458 278,162	As at 30 June 2006 HK$’000 873 368 –
			1,241

90 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

40 Related party transactions

(a) The continuing and discontinued operations of the Group undertook the following material transactions with related parties, which were carried out in the normal course of the business, during the year:

Note Purchases from fellow subsidiaries (a) Purchases of property, plant and equipment from: (b) – fellow subsidiaries – a related company Service fee income from fellow subsidiaries (c) Rental expenses paid/payable to fellow subsidiaries (d) Loan interest paid/payable to a fellow subsidiary (e) Interest paid/payable for the promissory note issued to a fellow subsidiary (e) Interest paid/payable for the subscription note to an immediate holding company (f) Interest paid/payable for the convertible bond to a fellow subsidiary (g) Reimbursement of office administrative expenses and fee charged from a related company (h)	30 June 2004 HK$’000 (103,985) (697) – 958 (26,242) – – – – (3,242)	30 June 2005 HK$’000 (38,794) – (6,320) 2,566 (24,431) (16,226) – (8,877) (849) (5,656)	30 June 2006 HK$’000 (25,853) – (1,615) 3,443 (14,469) (34,190) (11,499) (9,000) (849) (6,636)

Notes:

(a) Purchases were conducted in the normal course of business which are subject to the contract terms as negotiated by the parties involved.
(b) Purchases were conducted in the normal course of business which are subject to the contract terms as negotiated by the parties involved. Certain directors of the Company are also directors of the related company.
(c) Service fee was subject to the terms of the contracts entered by the parties involved.
(d) Rental expenses were charged at a fixed monthly fee subject to the terms of the contract signed by the parties involved.
(e) The interest was charged at 0.65% above HIBOR per annum.
(f) Interest charged by PPG, the subscription note holder and the immediate holding company of the Company, was charged at 0.75% per annum.
(g) Interest charged by NWCBN, the convertible bond holder and a fellow subsidiary, was charged at 3% per annum and was payable semi-annually in arrears.
(h) The reimbursement of office administrative expenses were charged on actual cost basis at a mark-up of 15%.
91 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

(b) Key management compensation of the continuing and discontinued operations of the Group during the year is as follows:

Salaries and other short-term employee benefits Post-employment benefits	30 June 2004 HK$’000 12,732 499 13,231	30 June 2005 HK$’000 15,608 450 16,058	30 June 2006 HK$’000 17,747 506
			18,253

III SUBSEQUENT EVENT

On 6 July 2004, the Group acquired from NWTHL the entire equity interest in the NWPCS Group at an aggregate cash consideration of HK$1,250,000,000 (see Note 2 of this report and the circular issued by the Company dated 2 June 2004 for details).

On 31 March 2006, the Group acquired the 23.6% interest in the CSL NWM Group in exchange for the Company’s entire equity interest in the NWPCS Group to the CSL NWM Group, a cash payment of HK$244,024,000 and an amount due from CSL NWM of HK$113,328,000. The Group then injected the 23.6% interest in the CSL NWM Group into Upper Start Holdings Limited (“Upper Start”), which is wholly owned by the Company and was incorporated in the British Virgin Islands with limited liability on 18 October 2005 (see Note 8 of this report and the circular issued by the Company dated 7 March 2006 for details).

On 22 November 2006, the Company and NWD entered into the conditional sale and purchase agreement (the “Agreement”) in relation to the sale and purchase of the entire issued share capital of Upper Start, pursuant to which the Company has conditionally agreed to sell, and NWD has conditionally agreed to purchase or procure the purchases of the entire issued share capital of Upper Start and the entire amount of the interest free shareholder’s loan owing from Upper Start to the Company (collectively referred to as the “Disposal”). Pursuant to the Agreement, the consideration is HK$2,500 million (the “Consideration”). Accordingly, the Disposal represents the disposal of the 23.6% interest in the CSL NWM Group.

Subject to (i) the completion of the Disposal in accordance with the terms and conditions of the Agreement (the “Disposal Completion”); (ii) compliance with the articles of association of the Company; and (iii) the sufficiency of the distributable reserves of the Company as at the date of the Disposal Completion, the Board intends to declare cash dividend of HK$1.2 per Company’s share (the “Special Dividend”), subject to finalisation, to the qualifying shareholders of the Company. The Special Dividend will be financed by the Consideration.

Based on 97,692,069 shares of the Company in issue as at the date of this report and the Special Dividend of HK$1.20 per share (subject to finalisation), the total amount of the Special Dividend will be approximately HK$117.2 million.

92 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

The financial information of Upper Start (as adjusted for the attributable interest to the Group), which constitutes a discontinuing operation as pursuant to Rule 4.06A of the Listing Rules, are as follows:

Consolidated results

	From
	18 October
	2005 (date of
	incorporation)
	to 30 June
	2006
	HK$’000
Turnover	–
Administrative expenses	–
Profit before taxation	–
Share of results of associated companies	27,731
Profit before and after taxation	27,731
Retained profits brought forward	–
Retained profits carried forward	27,731

Consolidated cash flow

	From
	18 October
	2005 (date of
	incorporation)
	to 30 June
	2006
	HK$’000
Cash flow from operating activities	–
Cash flow from investing activities	–
Cash flow from financing activities	–
Total net cash flow	–

93 -

ACCOUNTANTS’ REPORT ON THE GROUP

APPENDIX I

Consolidated assets and liabilities

ASSETS Non-current assets Investment in associated companies Total assets LIABILITIES Current liabilities Total liabilities Net current assets Net assets attributable to the Group Total assets less current liabilities	As at 30 June 2006 HK$’000 2,142,737
	2,142,737

	–
	–

	–

	2,142,737

	2,142,737

IV SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for the Company or its subsidiaries in respect of any period subsequent to 30 June 2006. In addition, no dividend or distribution has been declared, made or paid by the Company or its subsidiaries in respect of any period subsequent to 30 June 2006.

Yours faithfully PricewaterhouseCoopers Certified Public Accountants Hong Kong

94 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

(A) WORKING CAPITAL

The Board is of the opinion that after taking into account the internal resources of the Remaining Group and in the absence of unforeseen material circumstances, the Remaining Group will, following the Disposal Completion and the declaration and payment of the Special Dividend, have sufficient working capital for its present requirements for the next 12 months from the date of this circular.

(B) MATERIAL CHANGES SINCE 30 JUNE 2006

Save as disclosed below, the Board is not aware of any material changes in the financial or trading position or outlook of the Group since 30 June 2006, the date to which the latest published audited accounts of the Group were made up:

(i) on 22 November 2006, the Company and NWD entered into the S&P Agreement, pursuant to which the Company has conditionally agreed to sell, and NWD has conditionally agreed to purchase, or procure the purchase of, the entire issued share capital of Upper Start and the Sale Loan; and
(ii) subject to (a) the Disposal Completion; (b) compliance with section 146 of the articles of association of the Company which provides that dividend shall only be declared or payable out of profits and reserves of the Company lawfully available for distribution; and (c) the sufficiency of the distributable reserves of the Company as at the Disposal Completion Date, the Board intends to declare the Special Dividend of HK$1.20 per Share (subject to finalisation) to the Qualifying Shareholders. The Special Dividend will be financed by the Cash Consideration.

(C) INDEBTEDNESS

At the close of business on 31 October 2006 (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular), an aggregate amount of approximately HK$2,294,842,000 was owing by the Group, which comprised an amount owing under unsecured loans from a fellow subsidiary of approximately HK$181,216,000 repayable within one year, an amount owing under an unsecured promissory note of approximately HK$890,646,000 repayable within one year, an amount owing under an unsecured subscription note issued to the immediate holding company of approximately HK$1,194,285,000 repayable within one year, and an amount owing under an unsecured convertible bond issued to a fellow subsidiary of approximately HK$28,695,000 repayable within a period of more than one year but not exceeding two years.

Save as the aforesaid and apart from intra-group liabilities, normal trade payables, accrued charges, other payables, deposits received and deferred income in the ordinary course of business, at the close of business on 31 October 2006, the Group did not have any outstanding indebtedness, any loan capital, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits or hire purchase or finance lease commitments, guarantees or other material contingent liabilities.

The Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31 October 2006.

95 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

(D) THE INFORMATION ON THE REMAINING GROUP

The Remaining Group will be principally engaged in the Technology Business, being the provision of technology-related services in the PRC which include mobile Internet-related services.

The major mobile Internet-related services provided by the Technology Business comprise city information service, mobile entertainment, game and interactive media services. The services provide content with a combination of text, sounds and images to Multimedia Messaging Service capable handsets. Content includes music, photos, games and other entertainment services.

The interactive mobile entertainment website platform, www.ijcool.com launched by the Technology Business provides the cross platform forum for mobile users to enjoy interactive entertainment through a mobile Internet environment. The Technology Business, through this website, has established alliance relationship with over 800 popular web portals, online advertising agents, music and multimedia websites in the PRC covering 50 million Internet users. The Technology Business has also provided new services in two major areas: (i) digital music related services in mobile entertainment sector; and (ii) “local” city directory search services.

The operations bases of the Technology Business are in Beijing, Shanghai and Guangzhou, the PRC, with four marketing offices in Shenyang, Nanjing, Chengdu and Xian, the PRC. Whilst the offices in Beijing, Shanghai and Guangzhou, the PRC are set up for the purposes of call center business, mobile Internet corporate support and mobile Internet respectively, the above four marketing offices are set up for the liaison with local offices of the PRC customers. The Technology Business currently employs around 120 employees in the PRC.

The business model of the Technology Business will remain substantially unchanged upon the Disposal Completion. The Technology Business requires working capital for its operations and business development, which mainly include salaries, marketing and promotional expenses, purchases of contents for provision of services, audit fees, rental and general office expenses as well as utilities expenses. The Directors consider that, after taking into account, among other things, the customer base and the business development of the Remaining Group, the remaining balance of the Cash Consideration is sufficient for the working capital requirements of the Remaining Group for the next 12 months from the date of this circular.

(E) MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

The following management and discussion of the Remaining Group refers to the unaudited pro forma financial information on the Remaining Group as set out in Appendix V to this circular which have been prepared on the basis as set out in Appendix V to this circular for the purpose of illustrating the effect of the Disposal as if it had taken place on 30 June 2006 for unaudited pro forma consolidated balance sheet, and on 1 July 2005 for the unaudited pro forma consolidated income statement and unaudited pro forma consolidated cash flow statement respectively. The letter from the reporting accountants on the unaudited pro forma financial information was set out in Appendix V to this circular.

96 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

For the year ended 30 June 2006

Business review

The Remaining Group recorded an unaudited operating loss of approximately HK$98.5 million for the year ended 30 June 2006, excluding the estimated gain on Disposal of approximately HK$379,994,000. The principal business of the Remaining Group for the year was the Technology Business.

The loss for the year ended 30 June 2006 comprised audited impairment losses on intangible assets of approximately HK$73.0 million. Such impairment losses were provided for (i) an audited goodwill of approximately HK$66.0 million arising from the reverse acquisition of the Company and its subsidiaries by the NWPCS Group in July 2004 (being the acquisition of the NWPCS Group by the Company from the NWD Group involving the issue of 41,666,666 Shares and the Subscription Note to PPG) which was re-allocated to the Group’s remaining operations in the Technology Business; (ii) an audited goodwill of approximately HK$5.5 million arising from the acquisition of New World CyberBase Solutions (BVI) Limited and its subsidiaries by the Company; and (iii) an audited licence fee of approximately HK$1.5 million. The Remaining Group recorded an audited turnover of approximately HK$16.5 million for the year ended 30 June 2006 from the Technology Business for the post-acquisition period from 22 October 2005 to 30 June 2006, as compared with approximately HK$4.3 million derived from the provision of logistics services in the year ended 30 June 2005. Wireless application protocol (“WAP”) services have become the key growth driver contributing to improvement in turnover. On 30 June 2006, there were more than 270,000 monthly subscribers, over 90% of whom are subscribers for multimedia messaging services (“MMS”) and WAP services. Product development teams in Shanghai and Guangzhou have developed more than 100 new MMS, WAP and short messaging services.

Capital structure, liquidity and financial resources

As at 30 June 2006, the Remaining Group did not have any borrowings.

The key operations of the Remaining Group are located in Hong Kong and the PRC. Therefore, the assets and liabilities of the Remaining Group are mainly denominated in either HK$ or RMB. Since no significant exposure to foreign currency gains and losses are expected, the Remaining Group does not conduct any foreign currency hedging activities.

Employees and remuneration policy

As at 30 June 2006, the Remaining Group had a total of 143 employees. The Remaining Group’s remuneration policy is to pay salaries competitive in the industry, in a way that is motivational, fair and equitable. The salaries are also dependent on the performance of individuals of the Remaining Group. Apart from salaries, the Remaining Group also provides other fringe benefits to employees, which include provident fund schemes, medical insurance and bonus on performance basis.

(F) FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

Following the Disposal Completion, the Remaining Group will continue to operate the Technology Business.

97 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE GROUP

The Ministry of Information Industry of the PRC expected the number of mobile phone users to reach 440 million at the end of 2006. Judging from the trend of growth of mobile phone users, there will be ample room for the growth in the value-added services provided by the Remaining Group.

In July 2006, a major mobile operator partner implemented new control policies for value-added service providers. It is expected that the improvement of the mobile Internet business will be slowed down due to the implementation of these new measures. The Remaining Group will re-align the strategic imperatives of the business to minimise the impact while capturing the growth opportunities in the explosive market potential in the long-term.

The Remaining Group is determined to carry on its expansion into the mobile Internet services area, with a focus on music and city infotainment services. In the music sector, the Remaining Group will continue its effort in building a platform for local music talents to create and publicise their works. Currently, a platform has been created for enjoying pop music as well as new local music. In addition to forming partnership with international record labels, building alliances with music industry players is essential to the Remaining Group’s business expansion. Therefore, the Remaining Group has established strategic alliances with over 15 local record labels. Continuous alliance formation will be an important component to the success of the Remaining Group in the coming years.

In 2006, the Remaining Group has re-launched ChinaQuest.com, a web-based city infotainment service, with a powerful search engine. The partnership with China Telecom’s yellow page has not only enabled the Remaining Group to increase the spectrum of services, but also contributed to the enrichment of the city information content. Currently, the Remaining Group has rolled out city information content services in 12 cities. In 2007, the Remaining Group will expand the city infotainment service in these cities and into other untapped markets.

In 2006, the Remaining Group has strengthened its mobile Internet platform. Building on this foundation, the Remaining Group will seek to secure greater market share in 2007. One of the key strategic directions for the provision of services in 2007 is to increase user interactivities by implementing Web 2.0 applications in both the Internet and WAP services.

98 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

The following is the text of the audited financial statements of the CSL NWM Group for the year ended 30 June 2006:

CONSOLIDATED INCOME STATEMENT

Year ended 30 June 2006

Notes REVENUE 8 Operating costs Operating profit Amortisation of goodwill 16 Amortisation of intangible assets 17 Other income and gain 8 PROFIT FROM OPERATING ACTIVITIES 9 Finance costs 10 Share of loss of a jointly-controlled entity 19 PROFIT BEFORE TAX Tax 12 PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT DIVIDENDS 14 Interim Proposed final	2006 HK$’000 4,815,013 (4,065,480) 749,533 – (82,241) 34,951 702,243 (81,665) (733) 619,845 (136,750) 483,095 344,764 73,000 417,764	2005 HK$’000 4,301,939 (3,550,711) 751,228 (337,910) (30,261) 23,016 406,073 (60,547) (1,351) 344,175 (134,264) 209,911 – 245,474 245,474

99 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

CONSOLIDATED BALANCE SHEET

30 June 2006 Notes NON-CURRENT ASSETS Property, plant and equipment 15 Goodwill 16 Intangible assets 17 Interest in a jointly-controlled entity 19 Deposits, prepayments and other receivables Pension scheme asset 26 Deferred tax assets 25 Total non-current assets CURRENT ASSETS Inventories 20 Trade receivables 21 Deposits, prepayments and other receivables Due from related companies 1 Due from the ultimate holding company 1 Cash and cash equivalents 22 Total current assets CURRENT LIABILITIES Trade payables 23 Other payables and accruals, customer deposits and deferred revenue 24 Due to related companies 1 Dividend payable Tax payable Due to the immediate holding company 1 Loan from the ultimate holding company 1 Total current liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Other liabilities Deferred tax liabilities 25 Total non-current liabilities Net assets EQUITY Issued capital 27 Reserves Proposed final dividend 14 Total equity	2006 HK$’000 3,287,866 2,694,466 1,254,995 5,715 38,346 65,810 121,323 7,468,521 115,630 299,724 169,824 9,935 – 387,578 982,691 256,222 1,482,655 114,412 5,806 155,043 8,265 – 2,022,403 (1,039,712) 6,428,809 742,685 240,400 983,085 5,445,724 1,618,096 3,754,628 73,000 5,445,724	2005 HK$’000 2,387,823 985,574 648,389 6,448 30,247 54,288 2,298 4,115,067 70,126 197,818 113,757 – 1,638,476 154,931 2,175,108 199,810 1,178,422 3,255 – 109,701 – 1,700,000 3,191,188 (1,016,080) 3,098,987 511,681 242,169 753,850 2,345,137 1,233,503 866,160 245,474 2,345,137

100 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 June 2006

Notes At 1 July 2004 Final 2004 dividend declared Net profit for the year Proposed final 2005 dividend 14 At 30 June 2005 and 1 July 2005 Final 2005 dividend declared 14 Issue of shares 27 Net profit for the year Interim 2006 dividend 14 Proposed final 2006 dividend 14 At 30 June 2006	Issued share capital HK$’000 1,233,503 – – – 1,233,503 – 384,593 – – – 1,618,096	Share premium Contributed account surplus HK$’000 HK$’000 – 480,102 – – – – – – – 480,102 – – 2,823,137 – – – – – – – 2,823,137 480,102	Retained profits HK$’000 421,621 – 209,911 (245,474) 386,058 – – 483,095 (344,764) (73,000) 451,389	Proposed final dividend HK$’000 26,120 (26,120) – 245,474 245,474 (245,474) – – – 73,000 73,000	Total HK$’000 2,161,346 (26,120) 209,911 – 2,345,137 (245,474) 3,207,730 483,095 (344,764) – 5,445,724

101 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

CONSOLIDATED CASH FLOW STATEMENT

Year ended 30 June 2006

Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Interest income 8 Finance costs 10 Gain on disposal of items of property, plant and equipment 8 Share of loss of a jointly-controlled entity 19 Depreciation 15 Amortisation of goodwill 16 Amortisation of intangible assets 17 Impairment/(reversal of impairment) of items of property, plant and equipment 15 Operating profit before working capital changes Increase in inventories Decrease/(increase) in receivables, prepayments and deposits Increase in amounts due from related companies Increase/(decrease) in payables, accruals and other liabilities Increase in pension scheme asset Decrease in amounts due to related companies Decrease/(increase) in an amount due from the ultimate holding company Increase in an amount due to the immediate holding company Cash generated from operations Interest received Interest paid Hong Kong profits tax paid Net cash inflow from operating activities	2006 HK$’000 619,845 (14,773) 81,665 (20,178) 733 639,532 – 82,241 (19,017) 1,370,048 (21,733) 16,861 (2,526) (4,955) (11,522) (2,211) 1,638,476 10,971 2,993,409 14,773 (11,799) (93,316) 2,903,067	2005 HK$’000 344,175 (17,248) 60,547 (5,768) 1,351 485,889 337,910 30,261 30,000 1,267,117 (6,204) (32,572) – 75,906 (9,779) (5,241) (560,876) – 728,351 17,248 (27,517) (138,771) 579,311

102 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

CONSOLIDATED CASH FLOW STATEMENT (Continued)

Year ended 30 June 2006

Note Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Investment in a jointly-controlled entity Purchases of items of property, plant and equipment Acquisition of a subsidiary 29 Payment of annual spectrum utilisation fees for a telecommunication licence Proceeds from disposal of items of property, plant and equipment Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of a loan from the ultimate holding company Dividends paid Net cash outflow from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Time deposits with original maturity of less than three months	2006 HK$’000 2,903,067 – (611,603) 243,641 (50,000) 31,974 (385,988) (1,700,000) (584,432) (2,284,432) 232,647 154,931 387,578 56,476 331,102 387,578	2005 HK$’000 579,311 (7,799) (495,756) – (50,000) 7,156 (546,399) – (26,120) (26,120) 6,792 148,139 154,931 21,931 133,000 154,931

103 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

BALANCE SHEET

30 June 2006

Notes NON-CURRENT ASSETS Investments in subsidiaries 18 CURRENT ASSET Due from a subsidiary 18 CURRENT LIABILITIES Due to a subsidiary 18 Due to the immediate holding company 1 Due to a related company 1 Dividend payable Total current liabilities NET CURRENT LIABILITIES Net assets EQUITY Issued capital 27 Reserves 28 (ii) Proposed final dividend 14 Total equity	2006 HK$’000 7,769,928 5,806 – 8,265 113,328 5,806 127,399 (121,593) 7,648,335 1,618,096 5,957,239 73,000 7,648,335	2005 HK$’000 4,695,600 4,093,905 4,104,876 – – – 4,104,876 (10,971) 4,684,629 1,233,503 3,205,652 245,474 4,684,629

104 -

APPENDIX III FINANCIAL INFORMATION ON THE CSL NWM GROUP

NOTES TO FINANCIAL STATEMENTS

30 June 2006

1. CORPORATE INFORMATION AND AFFILIATION

CSL New World Mobility Limited (formerly known as Telstra CSL Limited) is a limited liability company incorporated in Bermuda. The principal place of business of the Company is located at Units 501-8, Cyberport 3, 100 Cyberport Road, Hong Kong.

During the year, the Group was principally engaged in the provision of mobile telecommunications services and products to customers in Hong Kong through its mobile systems and networks.

The Company is a subsidiary of Telstra Holdings (Bermuda) No. 2 Limited, a company incorporated in Bermuda. In the opinion of the directors, the ultimate holding company of the Company is Telstra Corporation Limited (“Telstra”), a company incorporated and listed in Australia.

Pursuant to an agreement dated 8 December 2005 and entered into between the Company, New World Mobile Holdings Limited (“NWM Holdings”, a company listed on the Main Board of The Stock Exchange of Hong Kong Limited) and Telstra Holdings (Bermuda) No. 2 Limited, and the corresponding amendment agreements (collectively, the “Merger Agreements”), the Company issued and allotted, and Upper Start Holdings Limited, a wholly-owned subsidiary of NWM Holdings, subscribed for new shares in the Company, which represented 23.6% of the enlarged share capital of the Company, in exchange for the transfer of 100% interest in New World PCS Holdings Limited (“NWPCS Holdings”) and a payment of HK$244.024 million by way of a promissory note by NWM Holdings to the Company on 31 March 2006, followed by a remittance of HK$113.328 million by the Company to NWM Holdings subsequent to the balance sheet date.

NWPCS Holdings and its subsidiaries (collectively, the “NWPCSH Group”) are principally engaged in the provision of mobile telecommunications services and products in Hong Kong under the brandname of New World Mobility. Further details related to the Company’s acquisition of the 100% interest in NWPCSH Group are included in note 29 to the financial statements.

The amount due from the ultimate holding company as at 30 June 2005 was unsecured, bore interest at the Hong Kong Dollar Inter-Bank Offer Rate (“HIBOR”) per annum and was fully repaid in the current year. The loan from the ultimate holding company as at 30 June 2005 was unsecured, bore interest at the HIBOR plus 0.5% per annum and was fully repaid in the current year.

The amount due to the immediate holding company is unsecured, interest-free, and has no fixed terms of repayment.

The amounts due to related companies are unsecured and interest-free. Except for an amount due to a jointly-owned entity of the ultimate holding company, which is repayable within one month, all other balances with related companies have no fixed terms of repayment.

The carrying amounts of all balances with affiliates approximate to their fair values.

105 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

2. FUNDAMENTAL ACCOUNTING CONCEPT

These financial statements have been prepared under the going concern concept notwithstanding both the Company and the Group recorded net current liabilities at 30 June 2006 since Telstra and NWM Holdings have agreed to provide adequate funds to enable the Company and the Group to meet their liabilities as and when they fall due.

The financial support from Telstra and NWM Holdings will be in proportion to their effective indirect interests in the Group of 76.4% and 23.6%, respectively.

3. BASIS OF PRESENTATION

The financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations (“HK-Ints”)) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirement of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for the measurement of pension scheme asset as further explained and disclosed in note 6 to the financial statements. These financial statements are presented in Hong Kong dollars (“HK$”) and all values are rounded to the nearest thousand (HK$’000), except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of Company and its subsidiaries for the year ended 30 June 2006. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The acquisition of a subsidiary during the year has been accounted for using the purchase method of accounting. This method involves allocating the cost of business combinations to the fair value of the assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

106 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

4. IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

The following new and revised HKFRSs affect the Company and the Group and are adopted for the first time for the current year’s financial statements:

HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after the Balance Sheet Date HKAS 12 Income Taxes HKAS 16 Property, Plant and Equipment HKAS 17 Leases HKAS 18 Revenue HKAS 19 Employee Benefits HKAS 21 The Effects of Changes in Foreign Exchange Rates HKAS 23 Borrowing Costs HKAS 24 Related Party Disclosures HKAS 27 Consolidated and Separate Financial Statements HKAS 31 Interests in Joint Ventures HKAS 32 Financial Instruments: Disclosure and Presentation HKAS 36 Impairment of Assets HKAS 37 Provisions, Contingent Liabilities and Contingent Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKFRS 2 Share-based Payment HKFRS 3 Business Combinations

Except for the adoption of HKFRS 3 and HKAS 36 which impacts the Group’s accounting policy for goodwill, as described further below, the adoption of the above new accounting standards has had no material impact on the accounting policies of the Group and the Company and the methods of computation in the Group’s and the Company’s financial statements.

HKFRS 3 “Business Combinations” and HKAS 36 “Impairment of Assets”

Prior to 1 July 2005, goodwill arising on acquisitions was capitalised and amortised on the straight-line basis over its estimated useful life and was subject to impairment testing when there was any indication of impairment.

The adoption of HKFRS 3 and HKAS 36 has resulted in the Group ceasing goodwill amortisation and commencing testing for impairment at the cash-generating unit level annually (or more frequently if events or changes in circumstances indicate that the carrying value may be impaired). Any impairment loss recognised for goodwill is not reversed in a subsequent period.

The effects of the adoption of HKFRS 3 and HKAS 36 include the decrease in amortisation of goodwill for the year by HK$337,910,000 and the transitional provisions of HKFRS 3 have required the Group to eliminate at 1 July 2005 the carrying amount of accumulated amortisation of HK$2,393,528,000 with a corresponding adjustment to reduce the cost of goodwill. The effects of the above changes are summarised in note 16 to the financial statements.

107 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

5. IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements. Unless otherwise stated, these HKFRSs are effective for annual periods beginning on or after 1 January 2006:

HKAS 1 Amendment	Capital Disclosures
HKAS 19 Amendment	Actuarial gains and Losses, Group Plans and Disclosures
HKAS 21 Amendment	Net Investment in a Foreign Operation
HKAS 39 Amendment	Cash Flow Hedge Accounting of Forecast Intragroup Transactions
HKAS 39 Amendment	The Fair Value Option
HKAS 39 & HKFRS 4	Financial Guarantee Contracts
Amendments
HKFRSs 1 & 6 Amendments	First-time Adoption of Hong Kong Financial Reporting Standards
	and Exploration for and Evaluation of Mineral Resources
HKFRS 6	Exploration for and Evaluation of Mineral Resources
HKFRS 7	Financial Instruments: Disclosures
HK(IFRIC)-Int 4	Determining whether an Arrangement contains a Lease
HK(IFRIC)-Int 5	Rights to Interests arising from Decommissioning, Restoration
	and Environmental Rehabilitation Funds
HK(IFRIC)-Int 6	Liabilities arising from Participating in a Specific Market – Waste
	Electrical and Electronic Equipment
HK(IFRIC)-Int 7	Applying the Restatement Approach under HKAS 29_Financial_
	Reporting in Hyperinflationary Economies

The HKAS 1 Amendment shall be applied for annual periods beginning on or after 1 January 2007. The revised standard will affect the disclosures about qualitative information about the Group’s objective, policies and processes for managing capital; quantitative data about what the Company regards as capital; and compliance with any capital requirements and the consequences of any non-compliance.

HKFRS 7 requires disclosures relating to financial instruments and incorporates many of the disclosure requirements of HKAS 32. This HKFRS shall be applied for annual periods beginning on or after 1 January 2007.

In accordance with the amendments to HKAS 39 regarding financial guarantee contracts, financial guarantee contracts are initially recognised at fair value and are subsequently measured at the higher of (i) the amount determined in accordance with HKAS 37 and (ii) the amount initially recognised, less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18.

The HKAS 19 Amendment, HKAS 39 Amendment regarding cash flow hedge accounting of forecast intragroup transactions, HKFRSs 1 and 6 Amendments, HKFRS 6, HK(IFRIC)-Int 5 and HK(IFRIC)-Int 6 do not apply to the activities of the Group. HK(IFRIC)-Int 7 shall be applied for annual periods beginning on or after 1 March 2006.

Except as stated above, the Group expects that the adoption of the other pronouncements listed above will not have any significant impact on the Group’s financial statements in the period of initial application.

108 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

A subsidiary is a entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s investments in subsidiaries are stated at cost less any impairment losses.

Joint ventures

A joint venture is an entity set up by contractual arrangement, whereby the Group and other parties undertake an economic activity. The joint venture operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture entity and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture is treated as a jointly-controlled entity if the Group does not have unilateral control, but has joint control, directly or indirectly, over the joint venture.

Jointly-controlled entity

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The Group’s share of the post-acquisition results and reserves of a jointly-controlled entity is included in the consolidated income statement and consolidated reserves, respectively. The Group’s interest in a jointly-controlled entity is stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

Goodwill

Goodwill arising on the acquisition of businesses and subsidiaries represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets acquired, and liabilities and contingent liabilities assumed as at the date of acquisition. Such goodwill is recognised in the Group’s balance sheet as an asset, initially measured at cost and subsequently at cost less any accumulated impairment losses.

The carrying amount of goodwill is reviewed for impairment annually and more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes.

109 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of cash-generating unit retained.

An impairment loss recognised for goodwill is not reversed in a subsequent period.

Intangible assets (other than goodwill)

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment review whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each balance sheet date.

Customer base

A customer base has a finite useful life of 5 years and is stated at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method.

Trademark

A trademark has a finite useful life of 15 years and is stated at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method.

Mobile carrier licences

These comprise one-time expenditures on acquiring telecommunications spectrum rights and the discounted value of the minimum annual spectrum utilisation fees payable in accordance with the respective licences together with the corresponding interest accrued prior to the commercial launch of telecommunications services of the relevant technology. Expenditures are amortised on the straight-line basis over the period from the date of the commercial launch of the telecommunications services of the relevant technology to the end of the period of validity of the respective licences.

After the commercial launch of the telecommunications services of the relevant technology, interest accrued on the outstanding minimum annual spectrum utilisation fees payable are recognised as finance costs directly in the income statement. Any variable annual spectrum utilisation fees payable in addition to the minimum annual fees are recognised directly in the income statement.

Impairment of assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, deferred tax assets, pension scheme assets, financial assets and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

110 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in prior years. A reversal of such impairment loss is credited to the income statement in the period in which it arises.

Property, plant and equipment and depreciation

Property, plant and equipment, other than projects under construction, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life.

Leasehold land and buildings_(Note)_	Over the shorter of 50 years and the terms of
	the leases
Exchange equipment and other plant	2 – 10 years
Furniture and fittings	2 – 10 years

Note: These represent buildings situated on leasehold land where the fair values of the leasehold interests in land and buildings elements cannot be separated reliably at the inception of the respective leases.

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Projects under construction are stated at cost less any impairment losses and are not depreciated. Certain costs relating to projects under construction are capitalised and included in the costs of assets, which include attributable staff costs, materials and overheads. Projects under construction are reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

111 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(i) telecommunications revenue, based on the usage of the Group’s network and facilities, when the services have been rendered. Telecommunications revenue for services provided for fixed periods is recognised on the straight-line basis over the respective periods. Other telecommunications revenue is recognised when products have been delivered or services have been rendered to customers;
(ii) property rental income, on a time proportion basis over the lease terms; and
(iii) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

Employee benefits

Paid leave carried forward

An accrual is made at the balance sheet date for the expected future cost of paid annual leave provided to employees which remains untaken as at the balance sheet date and is permitted to be carried forward and utilised by the respective employees.

Pension schemes

The Group operates defined contribution Mandatory Provident Fund retirement benefits schemes (the “MPF Schemes”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Schemes. Contributions made to the MPF Schemes are based on a percentage of the employees’ basic salaries and are charged to the income statement as they become payable and vest fully with the employees.

The Group also operates a separate retirement benefits scheme under the Occupational Retirement Schemes Ordinance (the “ORSO Scheme”), for those employees who are eligible to participate. The ORSO Scheme comprises a defined contribution section (the “DC Scheme”) and three defined benefit sections (the “DB Schemes”). The DC Scheme operates in a similar way to the MPF Scheme, except when an employee leaves the scheme before his/her interest in the Group’s employer contributions vests fully, the ongoing contributions payable by the Group can be reduced by the relevant amount of the forfeited employer contributions.

For the DB Schemes, an actuarial estimate is made annually by a professionally qualified independent actuary, using the projected unit credit actuarial valuation method, of the present value of future defined benefit obligation as at the balance sheet date (the “Scheme Obligation”). The net of actuarial gains and losses is initially recorded in the balance sheet and is subsequently recognised in the income statement only to the extent that the amount exceeds 10% of the higher of the Scheme Obligation and the fair value of assets contributed by the Group (the “Scheme Assets”) at the beginning of the period. Such “excess” is recognised in the income statement over the expected average remaining service lives of the employees. The expected costs of providing pensions under the DB Schemes are charged to the income statement over the periods during which the employees provide the related service to the Group.

112 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

The net of the Scheme Obligation and the fair value of the Scheme Assets at the balance sheet date, together with the actuarial gains and losses remaining in the balance sheet at that date, are recognised in the balance sheet as non-current assets or non-current liabilities, as appropriate. If the net amount results in an asset, the amount of the asset is limited to the net total of any net cumulative actuarial losses and past service costs remaining in the balance sheet, and the present value of any future refunds from the DB Schemes or reductions in future contributions to the DB Schemes.

The amounts of the contributions payable by the Group to the DB Schemes are determined by the actuary using the attained age funding actuarial valuation method.

All assets of the Group’s pension schemes are held separately from the assets of the Group in independently administered funds.

Related parties

A party is considered to be related to the Group if:

(a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;
(b) the party is an associate;
(c) the party is a jointly-controlled entity;
(d) the party is a member of the key management personnel of the Group or its parent;
(e) the party is a close member of the family of any individual referred to in (a) or (d);
(f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) and (e); or
(g) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profits within the equity section of the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends have been declared and approved by the shareholders in a general meeting, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because the Company’s memorandum and articles of association grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

113 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Trade and other receivables

Trade and other receivables are financial assets initially recognised at fair value (original invoice amounts) and subsequently at amortised cost using the effective interest method. Provision for impairment loss is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.

Impairment of financial assets carried at amortised cost

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

If there is objective evidence that an impairment loss on receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Derecognition of financial assets (applicable to the year ended 30 June 2006)

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

the rights to receive cash flows from the asset have expired;
the Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay in full without material delay to a third party under a “pass-through” arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

114 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value; where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Mobile telephone customer acquisition costs

The direct costs of acquiring new mobile telephone customers, which comprise the loss on the sale of mobile phones and accessories, are charged to the income statement as incurred.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash at banks and on hand, demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired. Bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are also included in cash and cash equivalents.

For the purpose of the balance sheets, cash and cash equivalents comprise cash at banks and on hand, including term deposits, which are not restricted as to use.

Derecognition of financial liabilities (applicable to the year ended 30 June 2006)

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in net profit or loss when the liabilities are derecognised as well as through the amortisation process.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement.

115 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to make the sale.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are provided in full on all taxable temporary differences while deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

A deferred tax asset is also recognised for the carryforward of unused tax losses, to the extent that it is probable that taxable profit will be available against which the carryforward of the unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes related to the same taxable entity and the same taxation authority.

Foreign currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the date of transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the balance sheet date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

116 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms.

7. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

In the process of applying the Group’s accounting policies, management has made certain judgements, estimates and assumptions that have significant effects on the amounts recognised in the financial statements.

The key estimates and associated assumptions related to goodwill impairment, defined benefits retirement obligations and business combination have been included in notes 16, 26(iv) and 29, respectively.

Other key estimates and associated assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are summarised as follows:

(a) Estimated useful economic lives and impairment of network exchange equipment and other plant

Network exchange equipment and other plant are long-lived but may be subject to technological obsolescence. The annual depreciation charges are affected by the estimated economic useful lives allocated to each item of these assets. Management performs annual review to assess the appropriateness of their estimated economic useful lives. Such reviews take into account of the technological changes, prospective economic utilisation and physical condition of the assets concerned. Management also regularly reviews whether there are any indications of impairment and an impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount which is the higher of the asset’s net selling price and value in use. In assessing value in use, management assesses the present value of the estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Estimates and judgements are applied in determining these future cash flows and the discount rate. Management estimates the future cash flows based on certain assumptions, including changes in technology and customers’ needs over the types of mobile telecommunications services.

(b) Deferred tax

Deferred tax liabilities are provided in full on all taxable temporary differences whereas deferred tax assets of certain entities of the Group are only recognised to the extent that it is probable that future taxable profits will be available therefrom and against which the deductible taxable differences or unused tax losses or credits belonging to the corresponding entities can be utilised. Estimates and judgements are involved in determining the probability and the extent of such future profits.

117 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

8. REVENUE, OTHER INCOME AND GAIN

Revenue is stated on a gross basis before allocations to other telecommunications operators and comprises the following:

(i) telecommunications revenue from the sale of mobile equipment and accessories, airtime and service charges for the use of the digital mobile radio telephone networks and the associated value-added services; and
(ii) property rental income.

An analysis of revenue, other income and gain is as follow:

Revenue Telecommunications revenue Property rental income Other income and gain Gain on disposal of items of property, plant and equipment Interest income	2006 HK$’000 4,812,845 2,168 4,815,013 20,178 14,773 34,951	2005 HK$’000 4,299,541 2,398
		4,301,939

		5,768 17,248
		23,016

118 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

9. PROFIT FROM OPERATING ACTIVITIES

The Group’s profit from operating activities is arrived at after charging/(crediting):

Notes Included in operating costs: Cost of inventories sold Cost of services provided Impairment/(reversal of impairment) of items of property, plant and equipment 15 Employee benefits expenses (including directors’ remuneration_(note 11)): Wages and salaries Less: Amount capitalised in projects under construction Pension scheme contributions for the MPF Schemes and the DC Scheme Net Pension scheme costs for the DB Scheme _26 Depreciation 15 Minimum lease payments under operating leases for land and buildings Auditors’ remuneration Impairment/(reversal of impairment) of trade receivables Other exchange losses, net	2006 HK$’000 1,193,244 1,057,956 (19,017) 434,853 (67,305) 367,548 11,583 8,108 639,532 398,195 1,694 15,493 155	2005 HK$’000 1,010,440 937,304 30,000 384,884 (67,259)
		317,625
		9,348 10,379 485,889 417,027 550 (30,700) 596

10. FINANCE COSTS

Interest on a loan from the ultimate holding company Interest on an amount due to the ultimate holding company Accretion of interest on other liabilities	Group	Group
	2006 HK$’000 11,086 713 69,866 81,665	2005 HK$’000 27,517 – 33,030
		60,547

119 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

11. DIRECTORS’ REMUNERATION

Fees Other emoluments: Salaries, allowances and benefits in kind Pension scheme contributions	Group	Group
	2006 HK$’000 – 5,859 301 6,160	2005 HK$’000 – 5,416 367
		5,783

12. TAX

Hong Kong profits tax has been provided at the rate of 17.5% on the estimated assessable profits arising in Hong Kong during the year.

Group: Provision for the year Underprovision in prior periods Deferred tax: Deferred tax assets_(note 25) Deferred tax liabilities(note 25)_ Total tax charge for the year	2006 HK$’000 123,608 15,050 (139) (1,769) 136,750	2005 HK$’000 91,268 46 135 42,815
		134,264

A reconciliation of the tax expense applicable to profit before tax using the statutory rate to the tax expense at the effective tax rate, and a reconciliation of the applicable rate to the effective rate, are as follows:

Profit before tax Tax at the statutory tax rate Adjustments in respect of current tax of previous periods Income not subject to tax Expenses not deductible for tax Others Tax expense at the effective rate	2006 HK$’000 % 619,845 108,473 17.5 15,050 2.4 (3,668) (0.6) 15,579 2.5 1,316 0.3 136,750 22.1	2005 HK$’000 % 344,175 60,231 17.5 46 – (3,018) (0.9 64,325 18.7 12,680 3.7 134,264 39.0	2005 HK$’000 % 344,175 60,231 17.5 46 – (3,018) (0.9 64,325 18.7 12,680 3.7 134,264 39.0
			39.0

There was no significant unprovided deferred tax as at the balance sheet date and during the year.

120 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

13. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

The net profit from ordinary activities attributable to equity holders of the parent for the year dealt with in the financial statements of the Company was HK$346,214,000 (2005: HK$25,948,000) (note 28(ii)).

14. DIVIDENDS

First interim dividend – HK$0.1899 per ordinary share (2005: Nil) Second interim dividend – HK$0.4880 per ordinary share (2005: Nil) Third interim dividend – HK$0.0116 per ordinary share (2005: Nil) Proposed final – HK$0.1113 per ordinary share (2005: HK$0.4909 per ordinary share)	Group	Group
	2006 HK$’000 94,934 244,024 5,806 73,000 417,764	2005 HK$’000 – – – 245,474
		245,474

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

121 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

15. PROPERTY, PLANT AND EQUIPMENT

Group

Notes Cost: At 1 July 2004 Additions Transfers Disposals At 30 June 2005 and 1 July 2005 Additions Acquisition of subsidiaries 29 Transfers Disposals At 30 June 2006 Accumulated depreciation and impairment: At 1 July 2004 Depreciation Impairment (i) Disposals At 30 June 2005 and 1 July 2005 Depreciation Reversal of impairment (ii) Disposals At 30 June 2006 Net book value: At 30 June 2006 At 30 June 2005	Leasehold land and buildings HK$’000 147,375 7,252 – – 154,627 – – – (30,064) 124,563 77,890 3,105 – – 80,995 2,833 (19,017) (20,630) 44,181 80,382 73,632	Exchange equipment and other plant HK$’000 5,452,821 604,729 308,192 (992,509) 5,373,233 33,962 921,116 542,357 (536,454) 6,334,214 3,716,101 467,102 30,000 (991,128) 3,222,075 614,342 – (534,092) 3,302,325 3,031,889 2,151,158	Projects Furniture under and fittings construction HK$’000 HK$’000 94,798 337,749 7,465 111,667 3,765 (311,957) (969) – 105,059 137,459 4,497 528,376 12,014 32,389 17,295 (559,652) (38,314) – 100,551 138,572 64,765 – 15,682 – – – (962) – 79,485 – 22,357 – – – (38,314) – 63,528 – 37,023 138,572 25,574 137,459	Total HK$’000 6,032,743 731,113 – (993,478) 5,770,378 566,835 965,519 – (604,832) 6,697,900 3,858,756 485,889 30,000 (992,090) 3,382,555 639,532 (19,017) (593,036) 3,410,034 3,287,866 2,387,823

122 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Notes:

(i) The impairment losses were provided for certain network equipment which were subject to replacement due to technical obsolescence. The impairment losses were determined by directors based on the estimated recoverable values from the disposal of the equipment.
(ii) The impairment losses recognised in prior periods for certain leasehold buildings were reversed as a result of the increase in the recoverable amounts of the properties following the recovery of the property market in Hong Kong. The reversal of impairment losses was determined by the directors based on the estimated market values of these properties.

An analysis of the net book value of the leasehold land and buildings of the Group by lease term, which are all situated in Hong Kong, is as follows:

Long term leases Medium term leases Short term leases	Group	Group
	2006 HK$’000 12,082 68,126 174 80,382	2005 HK$’000 18,555 55,077 –
		73,632

16. GOODWILL

Group

Cost: At 1 July 2004, 30 June 2005 and 1 July 2005 Elimination of accumulated amortisation upon adoption of HKFRS 3_(note 4) Acquisition of subsidiaries(note 29) At 30 June 2006 Accumulated amortisation: At 1 July 2004 Charge for the year At 30 June 2005 and 1 July 2005 Elimination of accumulated amortisation upon adoption of HKFRS 3(note 4)_ At 1 July 2005 and 30 June 2006 Net carrying amount: At 30 June 2006 At 30 June 2005 and 1 July 2005	HK$’000 3,379,102 (2,393,528) 1,708,892
	2,694,466
	2,055,618 337,910
	2,393,528 (2,393,528)
	–
	2,694,466

	985,574

123 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Up to 30 June 2005 and prior to the adoption of HKFRS 3 (note 4), goodwill was amortised over its estimated useful life of 10 years.

Impairment testing of goodwill

Goodwill relates to the Group’s provision of mobile telecommunications services.

For the purpose of impairment testing of goodwill, the recoverable amounts of the Group’s mobile telecommunications services businesses to which goodwill is allocated have been determined according to the value-in-use calculation using cash flow projections based on financial forecasts approved by management covering a 5-year period including a terminal value with 2% terminal growth rate. Assumptions have been made by management that the cash flows from the Group’s existing mobile telecommunications services will continue at least the forecast period based on management’s experience in the industry with due considerations for market and technological changes. The discount rates applied to the cash flow projections range from 11.14% to 12.50%.

The annual revenue growth rates used to extrapolate the cash flows for the Group’s mobile telecommunications services business during the forecast period is between 4% and 9% based on the forecast development of the mobile telecommunications market in Hong Kong and taking into account the changes in technology and customers’ needs over the types of mobile telecommunications services.

17. INTANGIBLE ASSETS

Cost: At 1 July 2004 Addition At 30 June 2005 and 1 July 2005 Addition Acquisition of subsidiaries_(note 29)_ At 30 June 2006 Accumulated amortisation: At 1 July 2004 Amortisation At 30 June 2005 and 1 July 2005 Amortisation At 30 June 2006 Net carrying amount: At 30 June 2006 At 30 June 2005	Customer base HK$’000 – – – – 367,000 367,000 – – – 18,350 18,350 348,650 –	Trademark HK$’000 – – – – 115,000 115,000 – – – 1,916 1,916 113,084 –	Mobile carrier licences HK$’000 649,834 28,816 678,650 85,847 121,000 885,497 – 30,261 30,261 61,975 92,236 793,261 648,389	Total HK$’000 649,834 28,816
				678,650 85,847 603,000
				1,367,497
				– 30,261
				30,261 82,241
				112,502
				1,254,995

				648,389

124 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

18. INVESTMENTS IN SUBSIDIARIES

HK$’000	HK$’000
7,769,928	4,695,600

		HK$’000 HK$’000	HK$’000 HK$’000
Unlisted shares, at cost 7,769,928 4,695,600 Particulars of the subsidiaries of the Company are as follows: Place of Nominal value Percentage of incorporation and of issued equity attributable Principal Name of subsidiary operation share capital to the Company activities Direct Indirect Bestclass Holdings Limited British Virgin US$50,000 100 – Investment holding Islands/ Hong Kong Hong Kong CSL Limited Hong Kong HK$2,031,043,443 – 100 Provision of mobile telecommunications services and products Integrated Business Systems Hong Kong HK$2 – 100 Property investment Limited One2Free PersonalCom Hong Kong HK$2 – 100 Inactive Limited CSL Limited Hong Kong HK$2 – 100 Dormant New World PCS Holdings Cayman Islands/ HK$1,112,039,279 100 – Investment holding Limited Hong Kong New World PCS Limited Hong Kong HK$887,749,279 – 100 Provision of mobile telecommunications services and products New World 3G Limited Hong Kong HK$1 – 100 Dormant New World Mobility Limited Hong Kong HK$2 – 100 Dormant		7,769,928	4,695,600

On 31 March 2006, the Group acquired a 100% interest in the NWPCSH Group from NWM Holdings. Further details of this acquisition are included in notes 1 and 29 to the financial statements.

The balances with subsidiaries included in the Company’s current assets and current liabilities are unsecured, interest-free and have no fixed terms of repayment. The carrying amounts of the balances with subsidiaries approximate to their fair values.

125 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

19. INTEREST IN A JOINTLY-CONTROLLED ENTITY

Unlisted shares, at cost Share of net assets	2006 HK$’000 – 5,715 5,715	2005 HK$’000 – 6,448
		6,448

Particulars of the jointly-controlled entity of the Group are as follows:

		Place of		Percentage of
	Business	incorporation	Ownership	Voting	Profit	Principal
Name	structure	and operations	interest	power	sharing	activities
Bridge Mobile	Corporate	Republic of	12.5	12.5	12.5	Services development
Pte Ltd.		Singapore				for an alliance of
						mobile telecommunications
						service operators

The Group’s share of the assets and liabilities of the jointly-controlled entity as at balance sheet date is as follows:

Current assets Non-current assets Current liabilities Net assets	2006 HK$’000 6,097 1,701 (2,083) 5,715	2005 HK$’000 6,378 1,173 (1,103)
		6,448

The Group’s share of results of the jointly-controlled entity during the year is as follows:

Revenue Other income Operating costs Loss for the year	2006 HK$’000 2,816 205 (3,754) (733)	2005 HK$’000 – 24 (1,375)
		(1,351)

126 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

20. INVENTORIES

As at 30 June 2006 and 30 June 2005, the inventories of the Group represented mobile handsets and accessories.

21. TRADE RECEIVABLES

The Group generally allows an average credit period of one month for customers. The Group seeks to maintain strict control over its outstanding receivables and has credit control departments to minimise the credit risk. Overdue balances are reviewed regularly by senior management. As the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-bearing.

The carrying amounts of the trade receivables approximate to their fair values.

22. CASH AND CASH EQUIVALENTS

Cash and bank balances Fixed deposits	2006 HK$’000 56,476 331,102 387,578	2005 HK$’000 21,931 133,000
		154,931

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are due within one month and earn interest at the respective short term time deposit rates. The carrying amounts of the cash and cash equivalents approximate to their fair values.

23. TRADE PAYABLES

Trade payables are non-interest-bearing and are normally settled within one month. The carrying amounts of trade payables approximate to their fair values.

24. OTHER PAYABLES AND ACCRUALS, CUSTOMER DEPOSITS AND DEFERRED REVENUE

Included in the balance are customer deposits and other payables which are non-interest-bearing and generally have terms of less than one year. The carrying amounts of customer deposits and other payables approximate to their fair values.

127 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

25. DEFERRED TAX

The movements in deferred tax liabilities and assets of the Group are as follows:

Deferred tax liabilities

Accelerated tax depreciation Others HK$’000 HK$’000 Gross deferred tax liabilities at 1 July 2004 307,623 (108,269) Deferred tax charged to the income statement_(note 12) 23,337 19,478 Gross deferred tax liabilities at 30 June 2005 and 1 July 2005 330,960 (88,791) Deferred tax charged/(credited) to the income statement(note 12) (4,929) 3,160 Gross deferred tax liabilities at 30 June 2006 326,031 (85,631) Deferred tax assets Loss available for offset Accelerated against future tax taxable profits depreciation Others _HK$’000 HK$’000 HK$’000 Gross deferred tax assets at 1 July 2004 – – 2,433 Deferred tax charged to the income statement_(note 12) – – (135) Gross deferred tax assets at 30 June 2005 and 1 July 2005 – – 2,298 Acquisition of subsidiaries(note29) 238,217 (77,671) (41,660) Deferred tax (charged)/credited to the income statement(note 12)_ (7,356) 5,050 2,445 Gross deferred tax assets at 30 June 2006 230,861 (72,621) (36,917)		Total HK$’000 199,354 42,815 242,169 (1,769) 240,400 Total HK$’000 2,433 (135) 2,298 118,886 139 121,323

As at 30 June 2006, a subsidiary of the Group acquired during the year had tax losses arising in Hong Kong of HK$1,319,208,000. Such losses are available indefinitely for offsetting against future taxable profits of the subsidiary. Deferred tax assets have been recognised in respect of these losses to the extent that it is probable that taxable profit will be available against which the carryforward of the unused tax losses can be utilised.

128 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

26. PENSION SCHEME ASSET

(i) The movements in the net asset of the DB Scheme are as follows:

Notes At beginning of year Net pension scheme costs recognised in the consolidated income statement 9, 26(iii) Contributions paid to the DB Scheme At 30 June 26(ii)	2006 HK$’000 54,288 (8,108) 19,630 65,810	2005 HK$’000 44,509 (10,379) 20,158 54,288

(ii) The components of the net asset of the DB Scheme as at the balance sheet date are as follows:

Notes Present value of defined benefit obligation Fair value of scheme assets Net cumulative actuarial losses/(gains) Net pension scheme asset recognised 26(i)	2006 HK$’000 (406,166) 544,196 138,030 (72,220) 65,810	2005 HK$’000 (442,631) 472,302 29,671 24,617 54,288

(iii) The components of the net pension scheme cost recognised for the year, together with the actual return on the DB Scheme assets, are as follows:

Notes Current service costs Interest cost on a defined benefits obligation Expected return on the DB Scheme assets 26(i) Actual return on the DB Scheme assets	2006 HK$’000 24,076 16,199 (32,167) 8,108 68,828	2005 HK$’000 20,549 17,608 (27,778) 10,379 53,231

129 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

(iv) The principal actuarial assumptions used in determining the net asset of the DB Scheme as at the balance sheet date are as follows:

	2006	2005
	% per annum	% per annum
Discount rate	5.0	3.8
Expected rate of return on the DB Scheme assets	6.8	6.8
Future salary increase rate:
First year	4.0	2.5
Second year	4.0	4.0
Third year	4.0	4.0
Fourth year onwards	4.0	4.0

(v) The actuarial valuation of the DB Scheme as at 30 June 2006 was performed by Ms. Elaine Hwang of Watson Wyatt Hong Kong Limited (“Watson Wyatt”), a fellow of the Faculty of Actuaries of the United Kingdom, using the valuation method detailed under the heading “Employee benefits: Pension schemes” in note 6 to the financial statements.

According to the latest actuarial valuation carried out at 30 June 2003 by Watson Wyatt using the attained age funding actuarial valuation method to value the pension scheme obligation under the Occupational Retirement Schemes Ordinance, the level of funding of the pension scheme was 100%.

27. SHARE CAPITAL

Authorised: 655,886,331 (30 June 2005: 500,000,000) ordinary shares of US$0.3163 each Issued and fully paid up: 655,886,331 (30 June 2005: 500,000,000) ordinary shares of US$0.3163 each	2006 HK$’000 1,618,096 1,618,096	2005 HK$’000 1,233,503

		1,233,503

Pursuant to an ordinary resolution passed on 30 March 2006, the authorised share capital of the Company was increased from HK$1,233,503,000 to HK$1,618,096,000 by the creation of 155,886,331 additional shares of US$0.3163 each, ranking pari passu in all respects with the existing share capital of the Company.

On 30 March 2006, 1,097,157 ordinary shares of US$0.3163 each were issued at par to its existing shareholders. The purpose of the issuance was to rationalise the shareholding structure of the Company prior to the completion of the Merger Agreements.

On 31 March 2006, 154,789,174 ordinary shares of US$0.3163 each, which represented 23.6% of the enlarged share capital of the Company, were issued to Upper Start Holdings Limited, a subsidiary of NWM Holdings, and credited as fully paid with a fair value of HK$3,205,024,000 for the purpose of the completion of the Merger Agreements.

130 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

28. RESERVES

(i) The Group

The amounts of the Group’s reserves and the movements therein for the year are presented in the consolidated statement of changes in equity on page 5 of the financial statements.

(ii) The Company

Note At 1 July 2004 Net profit for the year Proposed final 2005 dividend At 30 June 2005 and 1 July 2005 Issue of shares 27 Net profit for the year Interim 2006 dividend Proposed final 2006 dividend At 30 June 2006	Share premium Contributed account surplus HK$’000 HK$’000 – 795,694 – – – – – 795,694 2,823,137 – – – – – – – 2,823,137 795,694	Retained profits HK$’000 2,629,484 25,948 (245,474) 2,409,958 – 346,214 (344,764) (73,000) 2,338,408	Total HK$’000 3,425,178 25,948 (245,474) 3,205,652 2,823,137 346,214 (344,764) (73,000) 5,957,239

(iii) The contributed surplus balances of the Company and the Group represent the difference between the consolidated shareholder’s fund of the subsidiaries acquired and the nominal value of the Group’s shares issued in exchange therefor at the time of the group reorganisation completed in 2001 which resulted in the formation of Group.

Under the Bermuda Companies Act 1981 (as amended), a company may make distributions to its members out of the contributed surplus in certain circumstances.

131 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

29. BUSINESS COMBINATION

On 31 March 2006, the Group acquired a 100% interest in the NWPCSH Group from NWM Holdings. Pursuant to the Merger Agreements, the Company issued and allotted, and Upper Start Holdings Limited, a whollyowned subsidiary of NWM Holdings, subscribed for new shares in the Company, which represented 23.6% of the enlarged share capital of the Company, in exchange for the transfer of 100% interest in NWPCS Holdings and a payment of HK$244.024 million by way of a promissory note by NWM Holdings to the Company on 31 March 2006, followed by a remittance of HK$113.328 million by the Company to NWM Holdings subsequent to the balance sheet date.

The fair values of the identifiable assets and liabilities of the NWPCSH Group as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were as follows:

Notes Property, plant and equipment 15 Intangible assets 17 Cash and bank balances Trade receivables Inventories Amount due from related companies Amount due to a related company Prepayments and other receivables Payables and accruals Other liabilities Deferred tax assets 25 Goodwill on acquisition 16 Satisfied by: Fair value of the Company’s shares issued Cash and cash equivalents payable Less: Cash and cash equivalents received	Fair value recognised on acquisition HK$’000 965,519 603,000 (383) 107,035 23,771 7,409 (40) 75,898 (407,960) (127,699) 118,886 1,365,436 1,708,892 3,074,328 3,205,024 113,328 (244,024) 3,074,328	Carrying amount HK$’000 965,519 – (383) 107,035 25,594 7,409 (40) 75,898 (407,960) (6,699) 162,598 928,971

132 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

An analysis of the net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

Cash received Cash and bank balances acquired Net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries	HK$’000 244,024 (383) 243,641

Since the acquisition, the NWPCSH Group contributed HK$387,056,000 and HK$6,495,000 to the Group’s consolidated revenue and net profit for the year ended 30 June 2006, respectively.

Had the combination taken place at the beginning of the year, the revenue from continuing operations of the Group and the profit of the Group for the year would have been HK$6,216,246,000 and HK$443,717,000, respectively.

In the absence of a quoted market price for the shares of the Company, the Group determined the fair value of the issued shares using cash flow projections for the enlarged group based on forecasts approved by management covering the period from 1 April 2006 to 30 June 2015 including a terminal value with 1.75% terminal growth rate. Assumptions have been made by management that the cash flows from the enlarged group’s mobile telecommunications services will continue at least the forecast period based on management’s experience in the industry with due considerations for market and technological changes, and long term synergies expected to arise from the acquisition.

The discount rate applied to cash flow projections is 9.99% and the annual revenue growth rate used to extrapolate the cash flows during the forecast period is between 1% and 6% based on the forecasted development of the mobile telecommunications market in Hong Kong, taking into account the changes in technology and customers’ needs over the types of mobile telecommunications services.

The Group has also considered public information from a variety of sources for analysis of the fair value of the issued shares as determined using cash flow projections, including the capitalisation of earnings of companies also involved in the provision of mobile telecommunications services and similar business combination transactions.

30. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

Major non-cash transactions

(a) During the current year, the Group capitalised a newly granted telecommunications spectrum right as an intangible asset. The total capitalised value of the telecommunication spectrum right, which is determined by the discounted value of the minimum annual spectrum utilisation fees payable in accordance with the respective licence, is HK$85,847,000.
(b) On 30 March 2006, the Company issued 1,097,157 additional shares, ranking pari passu, of US$0.3163 each to Telstra Holding (Bermuda) No. 2 Ltd. (“THB”), the Company’s immediate holding company at par (note 27). The amount was settled by the issuance of a promissory note by THB.
133 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

31. CONTINGENT LIABILITIES

(a) On 22 October 2001, the Group arranged a bank to provide a performance bond to the Office of the Telecommunications Authority of Hong Kong (the “OFTA”) in respect of the mobile carrier licence awarded for the provision of third generation telecommunications service (the “3G Licence”). The 3G Licence requires the performance bond to remain in force for five years (or until the expiry of the 3G Licence, if shorter) and to equal the minimum annual fees payable to the OFTA for the forthcoming five years (or until the expiry of the 3G Licence, if shorter).

As at 30 June 2006, the performance bond issued in favour of the OFTA amounted to HK$351 million (30 June 2005: HK$311 million). The performance bond was issued with an indemnity from Telstra.

(b) The Group had contingent liabilities amounting to HK$13,445,068 as at 30 June 2006 (30 June 2005: HK$4,630,000) in respect of bank guarantees issued in favour of third parties.

32. OPERATING LEASE ARRANGEMENTS

(i) As lessor

The Group leases certain of its leasehold buildings under operating lease arrangements, with leases negotiated for terms ranging from one to two years. The terms of leases also require the tenants to pay security deposits.

At 30 June 2006, the Group had total future minimum lease receivables under noncancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive	2006 HK$’000 1,400 245 1,645	2005 HK$’000 1,121 484
		1,605

(ii) As lessee

The Group leases certain properties under operating lease arrangements. As at 30 June 2006, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive After five years	2006 HK$’000 386,653 227,480 4,883 619,016	2005 HK$’000 240,119 127,310 2,587
		370,016

134 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

33. COMMITMENTS

In addition to the operating lease commitment detailed in note 32(ii) above, the Group had the following capital commitments not provided for in the financial statements at the balance sheet date:

Contracted, but not provided for, purchases of items of property, plant and equipment Authorised, but not contracted for, purchases of items of property, plant and equipment Contracted, but not provided for, capital contributions payable to a jointly-controlled entity	2006 HK$’000 119,478 390,159 23,400	2005 HK$’000 59,435

		540,716

		23,400

In addition, the Group’s share of a jointly-controlled entity’s own capital commitments, which are not included above, as at the balance sheet date was as follows:

Contracted, but not provided for, purchases of property, plant and equipment	2006 HK$’000 –	2005 HK$’000 3,960

34. RELATED PARTY TRANSACTIONS

(a) In addition to the transactions and balances detailed elsewhere in these financial statements, the Group had the following significant related party transactions during the year:

Notes Transactions with Telstra Purchases of roaming services (i) Sale of roaming services (ii) Purchases of international call services (iii) Interest charges (iv) Interest income (iv) Transactions with related companies Purchases of international call services (v) Purchases of items of property, plant and equipment (vi) Recharge of office administrative expenses (vii) Rental charges (viii) Purchases of products (ix) Service fee income (x)	2006 HK$’000 8,834 (21,775) 78,455 11,799 (10,021) 12,591 216 2,533 7,749 4,954 (1,004)	2005 HK$’000 9,384 (15,135 29,913 27,517 (15,471 46,163 – – – – –

135 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

Notes:

(i) The purchases of roaming services were charged by Telstra on the basis of the usage of Telstra’s network by the Group’s customers at rates specified on invoices.
(ii) The roaming services were charged against Telstra on the basis of the usage of the Group’s network by Telstra’s customers at rates specified on invoices.
(iii) The international call services were charged against the Group on the basis of the Group’s usage at rates specified on invoices.
(iv) Details of the interest terms for the balances with Telstra are included in note 1 to the financial statements.
(v) The international call services were provided by a jointly-owned entity of Telstra. The services were charged against the Group on the basis of the Group’s usage at rates specified on invoices.
(vi) Purchases of items of property, plant and equipment were conducted in the normal course of business and subject to the contract terms agreed between the parties which have certain common directors.
(vii) The recharge of office administrative expenses between the parties which have certain common directors was based on the actual costs plus 15% mark-up.
(viii) Rental costs were charged at fixed monthly fees according to the terms of the contract agreed between the parties involved.
(ix) Purchases were conducted in the normal course of business and subject to the contract terms agreed between the parties involved.
(x) Service fee income was based on the terms of the contracts agreed between the parties involved.
(b) Compensation of the key management personnel of the Group for the year

Short term employee benefits Post-employment benefits Total compensation paid to key management personnel	2006 HK$’000 20,192 1,225 21,417	2005 HK$’000 20,194 1,185
		21,379

136 -

FINANCIAL INFORMATION ON THE CSL NWM GROUP

APPENDIX III

35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s financial assets and liabilities are, in the normal course of business, exposed to foreign currency risk, interest rate risk and credit risk. The Group’s risk management strategy aims to minimise the adverse effects of financial risks on the financial performance of the Group. Financial instruments, if any, are only used to hedge underlying commercial exposures and are not held or sold for speculative purposes.

(a) Foreign currency risk

The Group incurs foreign currency risk on transactions for receipts and payments for international telecommunications traffic settled in foreign currencies and other purchase transactions priced in foreign currencies.

The Group manages this risk by initially seeking contracts effectively denominated in Hong Kong dollar where possible and economically favourable to do so. The Group will continue to monitor its foreign currency risk exposure and market conditions to determine if any hedging is required. The Group does not conduct any foreign currency speculative activities.

(b) Interest rate risk

As the Group has fully settled all the interest-bearing balances with its ultimate holding company in the current year and any further advances to or from the ultimate holding company are not expected to be significant in the near future, the Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

The Group has cash balances placed with reputable banks which generate interest income for the Group. The Group manages its interest rate risks by placing such balances on varying maturities and interest rate terms.

(c) Credit risk

The Group’s credit risk is mitigated by its combination of cash and credit sales. For credit sales, the Group has no significant concentration of credit risk due to its diverse customer base. Credit risk is managed by formulating a credit policy for credit checks, credit reviews and monitoring procedures that include a formal collection process.

36. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 24 August

137 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

The following is extracted from the audited consolidated financial statements of the NWPCS Group as at and for the nine months ended 31 March 2006. These consolidated financial statements are qualified by the NWPCS Group’s auditors in respect of the omission of comparative figures as at and for the nine months ended 31 March 2005.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE NINE MONTHS ENDED 31 MARCH 2006

		Nine months ended
		31 March 2006
	Note	HK$’000
Turnover	5	1,402,827
Cost of sales	6	(836,095)
Gross profit		566,732
Interest income		716
Selling expenses	6	(85,313)
Administrative expenses	6	(420,713)
Operating profit		61,422
Finance costs	7	(34,319)
Profit before taxation		27,103
Taxation	10	(4,874)
Profit attributable to shareholders		22,229

138 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

CONSOLIDATED BALANCE SHEET

AS AT 31 MARCH 2006

Note
Non-current assets
Fixed assets
11
Deferred taxation
12
Rental and other deposits
Current assets
Inventories
13
Trade receivables
Prepayments and other receivables
Rental and other deposits
Amount due from immediate holding company
14
Amounts due from fellow subsidiaries
14
Current liabilities
Bank overdrafts
Trade payables
Accrued charges, other payables, deposits
received and deferred income
Amount due to a related company
14
Net current liabilities
Total assets less current liabilities
Representing:
Share capital
16
Accumulated losses
Other reserves
Shareholders’ funds
Non-current liabilities
Asset retirement obligations

Group
As at
31 March 2006
HK$’000
965,519
162,598
5,949
1,134,066
--------------------
25,594
107,035
31,252
38,697
5,625
1,784
209,987
--------------------
383
73,251
334,709
40
408,383
--------------------
(198,396)
--------------------
935,670
1,112,039
(872,860)
689,792
928,971
6,699
935,670

139 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

CONSOLIDATED CASH FLOW STATEMENT

FOR THE NINE MONTHS ENDED 31 MARCH 2006

		Nine months ended
		31 March 2006
	Note	HK$’000
Operating activities
Net cash inflow generated from operations	17	124,322
Interest paid		(29,534)
Net cash inflow from operating activities		94,788
		--------------------
Investing activities
Purchase of fixed assets		(97,354)
Sales of fixed assets		337
Interests received		716
Net cash outflow from investing activities		(96,301)
		--------------------
Net cash outflow before financing		(1,513)
		--------------------
Financing activities
Repayment of bank loan		(102,500)
Net cash outflow from financing activities		(102,500)
		--------------------
Net decrease in cash and cash equivalents		(104,013)
Cash and cash equivalents at 1 July 2005		103,630
Cash and cash equivalents at 31 March 2006		(383)
Analysis of balances of cash and cash equivalents:
Bank overdrafts		(383)
		(383)

140 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED 31 MARCH 2006

At 1 July 2005, as previously stated Initial adoption of HKAS 16 – accretion and depreciation expenses arising from asset retirement obligations (Note 2) Change in accounting policy for handset subsidies and prepayment_(Note 2)_ At 1 July 2005, as restated Profit for the period Issue of shares At 31 March 2006	Share capital HK$’000 300 – – 300 – 1,111,739 1,112,039	Other reserves HK$’000 689,792 – – 689,792 – – 689,792	Accumulated losses HK$’000 (771,097) (4,585) (119,407) (895,089) 22,229 – (872,860)	Total HK$’000 (81,005) (4,585) (119,407) (204,997) 22,229 1,111,739 928,971

141 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

NOTES TO THE ACCOUNTS

1 General information

New World PCS Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) is principally engaged in offering superior mobile telecommunications services including voice and data services tailored to the specific needs of individual customer groups via advanced mobile technology and technology related business including mobile internet-related services and information technology outsourcing activities in Hong Kong.

The Company is a limited liability company incorporated in Cayman Islands. The address of its registered office is Ugland House, P.O. Box 309, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies.

2 Principal accounting policies

(a) Basis of preparation

On 8 December 2005, New World Mobile Holdings Limited (“NWMHL”), Telstra CSL Limited (“Telstra CSL”) and Telstra Holdings (Bermuda) No. 2 Limited (“Telstra SPV”) entered into an agreement (“Merger Agreement”) pursuant to which Telstra CSL has agreed to issue and allot and NWMHL has agreed to procure its subsidiary to subscribe for new shares in Telstra CSL in exchange for the transfer of all of NWMHL’s interests in the Group to Telstra CSL and a cash payment by NWMHL to Telstra CSL. An amendment agreement (“Amendment Agreement”) was entered into on 30 March 2006 further to the Merger Agreement. The transaction was completed on 31 March 2006. The accounts have been prepared at the completion date required under the Merger Agreement.

The accounts have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) except that the amounts do not contain comparative information as required by Hong Kong Accounting Standard 1 “Presentation of Financial Statements”. The consolidated accounts have been prepared under the historical cost convention.

At 31 March 2006, the Group had net current liabilities of HK$198,396,000, NWMHL and Telstra Corporation Limited have expressed its intention to provide financial support to the Group so as to enable it to meet its liabilities as and when they fall due end continue its operation for the foreseeable future. Consequently, the directors have prepared the accounts on a going concern basis.

The preparation of accounts in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated accounts, are disclosed in Note 4.

The Hong Kong Institute of Certified Public Accountants (“HKICPA”) has issued a number of new and revised standards and interpretations of HKFRS (collectively “new HKFRSs”) below which are effective for accounting periods beginning on or after 1 January 2005.

(i) From 1 July 2005, the Group adopted the HKFRSs below, which are relevant to its operations. HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after the Balance Sheet Date

142 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

HKAS 16	Property, Plant and Equipment
HKAS 17	Leases
HKAS 21	The Effects of Changes in Foreign Exchange rates
HKAS 23	Borrowing Costs
HKAS 24	Related Party Disclosures
HKAS 27	Consolidated and Separate Financial Statements
HKAS 32	Financial Instruments Disclosure and Presentation
HKAS 37	Provisions, Contingent Liabilities and Contingent Assets
HKAS 39	Financial Instruments: Recognition and Measurement
HKAS-Int 15	Operating Leases – Incentives
HKFRS 5	Non-current Assets Held for Sale and Discontinued Operations

The adoption of HKASs 1, 2, 7, 8, 10, 17, 21, 23, 24, 27, 37 and HKAS-Int 15 did not result in substantial changes to the Group’s accounting policies. In summary:

HKAS 1 has affected certain presentation in the balance sheet, profit and loss account and statement of changes in equity.
HKASs 2, 7, 8, 10, 17, 23, 27, 37 and HKAS-Int 15 had no material effect on the Group’s policies.
The adoption of HKASs 32 and 39 has resulted in a change in the accounting policy relating to the classification of financial assets at fair value through profit or loss and available-for-sale financial assets.
HKAS 21 had no material effect on the Group’s policy. The functional currency of each of the consolidated entities has been re-evaluated based on the guidance to the revised standard. All the Group entities have the same functional currency as the presentation currency for respective entity accounts.
HKAS 24 has affected the identification of related parties and certain other relatedparty disclosures.

The adoption of HKAS 16 has resulted in a change in accounting policy of which the costs of fixed assets include the estimated obligations which arise from future reinstatement of leased properties.

All changes in the accounting policies have been made in accordance with the transitional provisions in the respective standards, whenever applicable. All standards adopted by the Group require retrospective application other than:

HKAS 39 – does not permit to recognise, derecognise and measure financial assets and liabilities in accordance with this standard on a retrospective basis. The Group applied the previous SSAP 24 “Accounting for investments in securities” to investments in securities for information prior to 1 July 2005. The adjustments required for the accounting differences between SSAP 24 and HKAS 39 are determined and recognised at 1 July 2005.
143 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

The adoption of HKAS 16 resulted in:

Increase in fixed assets Increase in accumulated losses Increase in asset retirement obligations Decrease in profit attributable to shareholders	As at 31 March 2006 HK$’000 1,535

	5,164

	6,699

	Nine months ended 31 March 2006 HK$’000 579

In prior years, the costs of such asset retirement obligations were not recognised as part of the underlying fixed assets at the time when the fixed assets were acquired.

(ii) On 1 July 2004, the Group early adopted the following new HKFRSs (the “HKFRS 3 Package”), which were effective for accounting periods beginning on or after 1 January 2005, in the accounts:

HKFRS 3	–	Business Combinations
HKAS 36	–	Impairment of Assets
HKAS 38	–	Intangible Assets

The early adoption of the HKFRS 3 Package does not have any significant impacts on the accounting policies of the Group.

(iii) In prior years, when handset and mobile subscription services were sold at a package with handset subsidies offered to customers, consideration would be allocated to handset sales and mobile subscription service using the relative fair value model. Accordingly, the portion allocated to handset sales was recognised as sales upon delivery of goods, and the remaining amount allocated to mobile subscription services was amortised on a straight line basis over the contract period. Handset subsidies were capitalised and amortised on a straight-line basis over the same contract period.

On 31 March 2006, the Group changed its accounting policy, pursuant to which handset subsidies are expensed as incurred. The directors consider that the new accounting policy involves less subjective judgement and estimates.

144 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

The change in accounting policy resulted in:

		As at
		31 March 2006
		HK$’000
Decrease in prepayments and other receivable		51,400
Increase in accrued charges, other payables,
deposits received and deferred income		81,194
Increase in accumulated losses		132,594

	Nine months ended
		31 March 2006
		HK$’000
Decrease in profit attributable to shareholders		13,187

(b) Group accounting

The consolidated accounts of the Group include the accounts of the Company and all its direct and indirect subsidiaries made up to 31 March 2006.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit and loss account.

In the Company’s balance sheet the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted by the Company on the basis of dividend received and receivable.

145 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

(c) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses.

Fixed assets are depreciated at rates sufficient to write off their cost less accumulated impairment losses over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Computer equipment 20% Furniture and fittings 20% Leasehold improvements shorter of the lease term or 20% Motor vehicles 20% Testing equipment 33.33% Digital, switching and transmission system 10% – 20%

No deprecation is provided for any part of the construction in progress.

Historical costs of fixed assets include expenditures that are directly attributable to the construction or acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the profit and loss account during the financial period in which they are incurred.

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

(d) Inventories

(e) Trade receivables

Provision is made against trade receivables to the extent they are considered to be doubtful. Trade receivables in the balance sheet are stated net of such provision.

(f) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks.

146 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

(g) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

(h) Employee benefits

(i) Employee leave entitlements

Employee entitlements to sick leave and maternity leave are not recognised until the time of

leave.

(ii) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to eligible employees, the assets of which are held in separate trustee administered funds. The Group’s contribution to the defined contribution retirement schemes are expensed as incurred and are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions.

(iii) Bonus

(i) Deferred taxation

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantially enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

147 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

(j) Contingent liabilities

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

(k) Revenue recognition

Mobile communications services revenue is recognised when the service is rendered and is based on the usage of the digital mobile radio telecommunication network and facilities. Mobile communications services revenue in respect of standard service plans billed in advance at year end is deferred and recognised when the service is rendered. Revenue received in advance for the provision of mobile communications services using prepaid cards is deferred and amortised based on the actual usage by customers.

Revenue from sales of mobile handsets and accessories is recognised when goods are delivered and title has passed.

Interest income is recognised on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

(l) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.

(m) Borrowing

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss account over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

148 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

3 Financial risk management

(a) Financial risk factors

The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and cash flow and fair value interest rate risks.

The Group’s risk management program seeks to minimise the potential adverse effects of financial risks on the Group’s performance.

(i) Credit risk

The Group has no significant concentration of credit risk. It has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history, in cash or via major credit cards. The Group has policies that limit the amount of credit exposure to any customers.

(ii) Liquidity risk

The Group monitors current and expected liquidity requirements to ensure sufficient cash and adequate amount of committed credit facilities are maintained. Due to the nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available.

(iii) Cash flow and fair value interest rate risks

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flow are substantially independent of changes in market interest rates.

The Group’s interest-rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

(b) Fair value estimation

4 Critical accounting estimates and assumptions

(i) Estimated useful economic lives and impairment of fixed assets

Fixed assets used in the network are long-lived but may be subject to technical obsolescence. The annual depreciation charges are sensitive to the estimated economic useful lives the Group allocates to each type of fixed assets. Management performs annual reviews to assess the appropriateness of their estimated

149 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

economic useful lives. Such reviews take into account the technological changes, prospective economic utilisation and physical condition of the assets concerned. Management also regularly reviews whether there are any indications of impairment and will recognise an impairment loss if the carrying amount of an asset is lower than its recoverable amount which is the greater of its net selling price or its value in use. In determining the value in use, management assess the present value of the estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Estimates and judgements are applied in determining these future cash flows and the discount rate. Management estimates the future cash flows based on certain assumptions, such as the market competition and development and the expected growth in subscribers and average revenue per subscriber.

(ii) Asset retirement obligations

The Group evaluates and recognises, on a regular basis, the fair value of fixed assets and obligations which arise from future reinstatement of leased properties upon end of lease terms. To establish the fair values of the asset retirement obligations, estimates and judgement are applied in determining these future cash flows and the discount rate. Management estimates the future cash flows based on certain assumptions, such as the types of leased properties, probability of renewal of lease terms and restoration costs. The discount rate used is referenced to the Group’s historical weighted average cost of capital.

(iii) Deferred tax

The Group provides for deferred taxation in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated accounts. Deferred tax assets are only recognised to the extent that it is probable future taxation profits will be available against which the unused tax losses or unused tax credits can be utilised, and significant judgement is required in determining whether it is probable. If the group is not able to generate sufficient future taxation profits to utilise the temporary differences, a provision for the deferred tax asset would need to be made.

5 Turnover

The Group principally engages in the provision of mobile communications services and the sales of mobile handsets and accessories. Revenues recognised during the period are as follow:

	Nine months ended
	31 March 2006
	HK$’000
Turnover
Mobile communications services	971,494
Sales of mobile handsets and accessories	431,333
	1,402,827

150 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

6 Expenses by nature

Expenses included in cost of sales, selling expenses and administrative expenses are analysed as follows:

Nine months ended 31 March 2006 HK$’000

Crediting Net exchange gains Charging Auditors’ remuneration Cost of inventories sold Depreciation of fixed assets Loss on disposal of fixed assets Operating lease rentals for land and buildings Operating lease rentals for transmission sites Provision for bad and doubtful debts Staff costs, including directors’ emoluments_(Note 8)_	1,597

	748 299,360 198,703 545 35,898 130,492 8,706 103,938

7 Finance costs

	Nine months ended
	31 March 2006
	HK$’000
Interest on secured long-term bank loan	794
Interest on loan from a fellow subsidiary_(Note 15)_	30,572
Interest on other borrowings	2,464
Accretion expenses_(Note)_	489
	34,319

Note:

Accretion expenses represented changes in the liabilities of an asset retirement obligation due to passage of time by applying an interest method of allocation to the account of the liability at the beginning of the period.

151 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

8 Staff costs (including directors’ emoluments)

	Nine months ended
	31 March 2006
	HK$’000
Wages and salaries	93,446
Bonuses	6,708
Pension costs – defined contribution plans	3,763
Termination benefits	1,234
Medical insurance, staff welfare and other allowances	2,100
Less: staff costs capitalised as fixed assets	(3,313)
	103,938

9 Directors’ emoluments (equivalent to key management compensation)

No directors’ emoluments were paid or payable to directors of the Company during the period.

10 Taxation

Hong Kong profits tax has been provided at the rate of 17.5% on the estimated assessable profit for the period. The Group has sufficient tax losses brought forward to offset the estimated assessable profit for the period.

The amount of taxation charged to the consolidated profit and loss account for the period represents:

	Nine months ended
	31 March 2006
	HK$’000
Deferred taxation relating to the origination and reversal
of temporary differences_(Note 12)_	4,874

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the taxation rate of the home country of the companies as follows:

	Nine months ended
	31 March 2006
	HK$’000
Profit before taxation	27,103
Calculated at a taxation rate of	17.5%
Notional tax on profit before taxation	4,743
Income not subject to taxation	(111)
Expenses not deductible for taxation purpose	157
Others	85
Taxation charge	4,874

152 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

11 Fixed assets

Group

Computer equipment HK$’000 At 1 July 2005 Cost as previously reported 215,651 Asset retirement obligations – Cost, as restated 215,651 Accumulated depreciation, as previously reported 150,135 Asset retirement obligations – Accumulated depreciation, as restated 150,135 Net book amount 65,516 During the nine months ended 31 March 2006 Opening net book amount 65,516 Additions 4,100 Transfer between classes (744) Charge for the period 18,134 Disposals (22) Closing net book amount 50,716 At 31 March 2006 Cost 216,332 Accumulated depreciation 165,616 Net book amount 50,716	Furniture and fittings HK$’000 21,298 – 21,298 19,495 – 19,495 1,803 1,803 163 (46) 800 (1) 1,119 21,374 20,255 1,119	Leasehold improvements HK$’000 45,243 157 45,400 30,694 121 30,815 14,585 14,585 1,997 (30) 6,004 (18) 10,530 47,328 36,798 10,530	Motor vehicles HK$’000 1,417 – 1,417 944 – 944 473 473 – – 108 – 365 922 557 365	Testing equipment HK$’000 28,175 – 28,175 27,969 – 27,969 206 206 – – 151 – 55 28,175 28,120 55	Digital, switching and transmission system HK$’000 2,193,535 4,056 2,197,591 1,233,074 2,148 1,235,222 962,369 962,369 82,307 16 173,506 (841) 870,345 2,278,842 1,408,497 870,345	Construction in progress HK$’000 22,798 – 22,798 – – – 22,798 22,798 8,787 804 – – 32,389 32,389 – 32,389	Total HK$’000 2,528,117 4,213
							2,532,330 1,462,311 2,269
							1,464,580
							1,067,750

							1,067,750 97,354 – 198,703 (882)
							965,519

							2,625,362 1,659,843
							965,519

153 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

12 Deferred taxation

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts offset are as follows:

Deferred income tax assets: – Deferred income tax assets to be recovered after more than 12 months – Deferred tax assets to be recovered within 12 months Deferred income tax liabilities: – Deferred income tax assets to be recovered after more than 12 months – Deferred income tax liabilities to be recovered within 12 months	Group
	As at 31 March 2006 HK$’000 210,309 29,960
	240,269

	54,210 23,461
	77,671

Deferred taxation are calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5%.

The movement on the deferred tax assets account is as follows:

At the beginning of the period Deferred taxation charged to profit and loss account_(Note 10)_ At the end of the period	As at 31 March 2006 HK$’000 167,472 (4,874)
	162,598

154 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

Deferred income tax assets are recognised for tax losses carry forwards to the extent that realisation of the related tax benefit through the future taxable profits is probable. There is no limitation in Hong Kong on the year in which the Group’s tax losses carried forward can be utilised.

The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the period are as follows:

Deferred tax assets At 30 June 2005 Charged to profit and loss account At 31 March 2006 Deferred tax liabilities At 30 June 2005 Credited to profit and loss account At 31 March 2006 13 Inventories Merchandise	Provision HK$’000 2,076 (24) 2,052	Group
		Tax losses HK$’000 260,663 (22,446) 238,217		Total HK$’000 262,739 (22,470) 240,269 Group Accelerated tax depreciation HK$’000 95,267 (17,596) 77,671 Group As at 31 March 2006 HK$’000 25,594

14 Amounts due from/(to) fellow subsidiaries, immediate holding company and a related company – Group

The balances are unsecured, interest free and repayable on demand.

The carrying amounts due from/(to) fellow subsidiaries, immediate holding company and a related company approximate their fair values.

155 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

15 Loan from a fellow subsidiary

On 29 March 2004 a sale and purchase agreement (the “S&P Agreement”) was entered into between New World Telephone Holdings Limited (“NWTHL”), a wholly-owned subsidiary of New World Development Company Limited, and the Company’s immediate holding company, New World Mobile Holdings Limited (“NWMHL”), pursuant to which NWMHL agreed to purchase the 100% equity interest of the Company and its subsidiaries (the “Group”) from NWTHL at an aggregate cash consideration of HK$1,250,000,000. This transaction (the “Acquisition”) was completed on 6 July 2004 (the “Completion Date”).

Pursuant to the S&P Agreement, if the total of the bank loan and amounts due to immediate holding company and ultimate holding company (collectively, the “Aggregate Liabilities”) by the Group on the business day prior to the completion of the Acquisition exceeds HK$1,250,000,000, the exceeding amount due to immediate holding company and ultimate holding company would be capitalised so that the Aggregate Liabilities at the Completion Date would not exceed HK$1,250,000,000.

As such, prior to the completion of the Acquisition, an amount of approximately HK$914,092,000 due to the then immediate holding company by the Group was capitalised through the issuance of 298,911,000 shares of ordinary shares on 6 July 2004. The remaining balance of amounts due to the then immediate holding company and ultimate holding company of HK$877,500,000 was repaid by a fresh loan from a fellow subsidiary which will be repayable upon demand after 29 September 2005 and interest bearing at 0.65% above HIBOR per annum.

On 30 March 2006, the loan from the fellow subsidiary was capitalised through the issuance of 886,749,279,000 shares of ordinary shares and was repaid by a fresh promissory note issued by NWMHL endorsed in favour of New World PCS Limited, a wholly-owned subsidiary of the Company, to the fellow subsidiary.

16 Share capital

	Authorised
Non-voting redeemable convertible preference shares of HK$0.001 each No. of shares HK$’000 200,000 – – – 200,000 –	Ordinary shares HK$0.001 each No. of shares HK$’000 300,000,000 300 1,499,700,000,000 1,499,700 1,500,000,000,000 1,500,000	Total HK$’000 300

		1,499,700
		1,500,000

156 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

At 1 July 2005 Issue of shares_(Note b)_ At 31 March 2006	Issued and fully paid ordinary shares HK$0.001 each	Issued and fully paid ordinary shares HK$0.001 each
	No. of shares 300,000,000 1,111,739,279,000 1,112,039,279,000	HK$’000 300 1,111,739
		1,112,039

Notes:

a) 1,499,700,000,000 shares were created on 22 February 2006 by a sole ordinary shareholder’s resolution.
b) On 30 March 2006, 886,749,279,000 and 224,990,000,000 shares were issued for the capitalisation of loan from a fellow subsidiary and an amount due to the immediate holding company respectively.

17 Notes to consolidated cash flow statement

Reconciliation of profit before taxation to net cash inflow generated from operations:

	Nine months ended
	31 March 2006
	HK$’000
Profit before taxation	27,103
Depreciation	198,703
Loss on disposal of fixed assets	545
Interest income	(716)
Interest expenses	34,319
Operating profit before working capital changes	259,954
Decrease in inventories	12,430
Increase in trade receivables	(13,020)
Decrease in prepayments and other receivables	10,707
Decrease in rental and other deposits	3,657
Increase in amounts due from fellow subsidiaries	(1,755)
Decrease in trade payables	(37,299)
Decrease in amounts due to immediate holding
company, fellow subsidiaries and a related company	(40,592)
Decrease in accrued charges, other payables, deposits
received and deferred income	(69,441)
Decrease in asset retirement obligations	(319)
Net cash inflow generated from operations	124,322

157 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

18 Contingent liabilities

Bank guarantees in lieu of deposits	Group
	As at 31 March 2006 HK$’000 8,590

Directors anticipate that no material liabilities will arise from the above bank and other guarantees which arose in the ordinary course of business.

19 Commitments

(a) Capital Commitments

Contracted but not provided for Authorised but not contracted for	Group
	As at 31 March 2006 HK$’000 55,703 32,318
	88,021

(b) Commitments under operating leases

At 31 March 2006, the Group had total future aggregate minimum lease payments under noncancellable operating leases which expire as follows:

Land and buildings Within one year In the second to fifth year inclusive After the fifth year	Group
	As at 31 March 2006 HK$’000 138,064 85,846 15,337
	239,247

158 -

FINANCIAL INFORMATION ON THE NWPCS GROUP

APPENDIX IV

20 Related party transactions

The Group is controlled by NWMHL, a company incorporated in Cayman Islands and listed on The Stock Exchange of Hong Kong Limited, which owns 100% of the Company’s shares. The ultimate parent of the Group is New World Development Company Limited, a company incorporated in Hong Kong and listed on The Stock Exchange of Hong Kong Limited.

(i) The Group undertook the following material transactions with related parties, which were carried out in the normal course of the business, during the period:

		Nine months ended
		31 March 2006
	Note	HK$’000
Purchase from fellow subsidiaries	(a)	(29,649)
Purchase of fixed assets from a related company	(b)	(1,615)
Service fee income from a fellow subsidiary	(c)	3,208
Rental expenses paid/payable to fellow subsidiaries	(d)	(15,584)
Loan interest paid/payable to a fellow subsidiary	(e)	(30,572)
Reimbursement of office administrative expenses and
fee charged from a related company	(f)	(9,970)

Notes:

(a) Purchases were conducted in the normal course of business which are subject to the contract terms as negotiated by the parties involved.
(b) Purchases were conducted in the normal course of business which are subject to the contract terms as negotiated by the parties involved. Certain directors of the Company are also directors of the related company.
(c) Service fee was subject to the terms of the contracts entered by the parties involved.
(d) Rental expenses were charged at a fixed monthly fee subject to the terms of the contract signed by the parties involved.
(e) The interest was charged at 0.65% above HIBOR per annum.
(f) The reimbursement of office administrative expenses were charged on actual cost basis and the fee were calculated at 15% mark-up on actual costs incurred.

21 Approval of the accounts

The accounts were approved by the board of directors on 24 August 2006.

159 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

1. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE REMAINING GROUP AS AT 30 JUNE 2006

The following is a pro forma consolidated balance sheet of the Remaining Group which has been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Disposal as if it had taken place on 30 June 2006. This pro forma financial information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial results of the Remaining Group had the Disposal been completed as at 30 June 2006 or at any future dates.

ASSETS
Non-current assets
Property, plant and equipment
Investments in associated companies
Intangible assets
Current assets
Trade receivables
Prepayments, deposits and other receivables
Amount due from an associated company
Amount due from a related company
Cash and bank balances
Total assets
EQUITY
Capital and reserves attributable to the
Company’s equity holders
Share capital
Other reserves
(Accumulated losses)/retained profits

Unaudited
pro forma
Audited
consolidated
consolidated
balances of
balances of the
the Remaining
Group
Pro forma adjustments
Group
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Note 1
Note 2
Note 3
Note 4
6,183
6,183
2,142,737
(2,142,737)
–
–
–
2,148,920
6,183
4,266
4,266
1,368
1,368
113,328
113,328
813
813
27,691
83,644
111,335
147,466
231,110
2,296,386
237,293
16,154
16,154
(82,905)
(53,185)
(59,510)
(195,600)
(30,538)
365,554
59,510
(114,403)
280,123
(97,289)
100,677

160 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

Audited consolidated balances of the Group Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2 Note 3 Note 4 LIABILITIES Non-current liabilities Loans from a fellow subsidiary 278,024 (278,024) Promissory note issued to a fellow subsidiary 886,749 (886,749) Convertible bond 28,261 (28,261) Subscription note 1,178,008 (1,178,008) 2,371,042 Current liabilities Trade payables 809 Accrued charges, other payables, deposits received and deferred income 15,779 Amounts due to fellow subsidiaries 420 (420) Amount due to an associated company 5,625 Dividend payable 114,403 22,633 Total liabilities 2,393,675 Total equity and liabilities 2,296,386 Net current assets 124,833 Total assets less current liabilities 2,273,753	Unaudited pro forma consolidated balance of the Remaining Group HK$’000 – – – –
	–
	809 15,779 – 5,625 114,403
	136,616
	136,616

	237,293

	94,494

	100,677

161 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

Notes:

The amounts have been extracted without adjustment from the accountants’ report on the Group as set out in Appendix I to this circular.
The adjustments have been made to record (a) a gain of approximately HK$13,291,000 in the consolidated income statement and a decrease of approximately HK$53,185,000 in convertible bond reserve in other reserves on extinguishment of the Subscription Note and the Convertible Bond before their respective original maturity dates in accordance with Hong Kong Accounting Standard 32 Financial Instruments – Disclosure and Presentation, (b) a gain on the Disposal of approximately HK$352,263,000, and (c) net cash inflows of approximately HK$83,644,000 being the sales proceeds from the Disposal of HK$2,500,000,000 from NWD after set-off of the aggregate amount of approximately HK$2,411,356,000 owing by NWM to PPG under the Subscription Note, NWCBN under the Convertible Bond and amounts due to fellow subsidiaries and NWF under the promissory note issued to a fellow subsidiary, loans from a fellow subsidiary and amounts due to fellow subsidiaries, and payment of professional fee incurred for the Disposal.

The financial impact of the extinguishment of the Subscription Note and the Convertible Bond before their respective original maturity dates is arrived based on an assumption that at the date of the extinguishment, the Company could have issued non-convertible debt with similar term bearing a coupon interest rate of 5.21% per annum and 5.20% per annum for the Subscription Note and the Convertible Bond respectively.

The adjustments have been made to transfer the remaining balance in convertible bond reserve in other reserves to accumulated losses due to the extinguishment of the Subscription Note and the Convertible Bond.
The adjustment represents declaration of the Special Dividend to be financed by the Cash Consideration. Based on 95,336,069 Shares in issue as at 30 June 2006 and the Special dividend of HK$1.20 per Share, the total amount of the Special Dividend will be approximately HK$114.4 million.
Save for the Disposal, no adjustment has been made to reflect any other results of transactions of the Group entered into subsequent to 30 June 2006.
162 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

2. UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT OF THE REMAINING GROUP FOR THE YEAR ENDED 30 JUNE 2006

The following is an illustrative and pro forma consolidated income statement of the Remaining Group which have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Disposal as if it had taken place on 1 July 2005. This pro forma financial information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial results of the Remaining Group had the Disposal been completed as at 1 July 2005 or at any future dates.

Audited
consolidated
amounts of the
Group
Pro forma adjustments
HK$’000
HK$’000
HK$’000
Note 1
Note 2
Note 3
Continuing operations:
Turnover
16,515
Cost of sales
(4,842)
Gross profit
11,673
Other income
823
Other net losses
(65,436)
Selling expenses
(9,775)
Administrative expenses
(35,797)
Operating loss
(98,512)
Finance costs
(62,786)
60,526
Share of results of associated companies
27,731
(27,731)
Gain on disposal of
associated companies
–
379,994
(Loss)/profit before taxation
(133,567)
Taxation
–
Loss from continuing operations
(133,567)
Discontinued operations:
Profit from discontinued operations
1,045,209
(1,045,209)
Profit attributable to shareholders
911,642

Unaudited
pro forma
consolidated
amounts
of the
Remaining
Group
HK$’000
16,515
(4,842)
11,673
823
(65,436)
(9,775)
(35,797)
(98,512)
(2,260)
–
379,994
279,222
–
279,222
–
279,222

163 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

Notes:

The amounts have been extracted without adjustment from the accountants’ report on the Group as set out in Appendix I to the circular.
The adjustments have been made to (a) the reverse interest expenses of approximately HK$62,786,000 for the year ended 30 June 2006 on the Subscription Note, the Convertible Bond, the promissory note issued to a fellow subsidiary and loans from a fellow subsidiary which would have been avoided assuming they have been redeemed or fully repaid on 1 July 2005; (b) recognise a net loss of approximately HK$2,260,000 on extinguishment of the Subscription Note and Convertible Bond before their respective original maturity dates in accordance with Hong Kong Accounting Standard 32 Financial Instruments – Disclosure and Presentation; and (c) the reverse share of results of the CSL NWM Group, the associated companies, for the three months ended 30 June 2006 and profit from discontinued operations as it is assumed the Disposal had taken place on 1 July 2005.

The financial impact of the extinguishment of the Subscription Note and the Convertible Bond before their respective original maturity dates is arrived based on an assumption that at the date of the extinguishment, the Company could have issued non-convertible debt with similar term bearing a coupon interest rate of 4.00% per annum and 4.02% per annum for the Subscription Note and the Convertible Bond respectively.

The adjustment represents the gain on the Disposal as if the Disposal Completion had taken place on 1 July 2005.
Save for the Disposal, no adjustment has been made to reflect any other results of transactions of the Group entered into subsequent to 30 June 2006.
164 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

3. UNAUDITED PRO FORMA CONSOLIDATED CASH FLOW STATEMENT OF THE REMAINING GROUP FOR THE YEAR ENDED 30 JUNE 2006

The following is an illustrative and pro forma consolidated cash flow statement of the Remaining Group which have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Disposal as if it had taken place on 1 July 2005. This pro forma financial information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial results of the Remaining Group had the Disposal been completed as at 1 July 2005 or at any future dates.

Operating activities Cash used in continuing operations Interest paid Dividend paid Net cash used in continuing operations Net cash generated from discontinued operations Net cash generated from/(used in) operating activities Investing activities Purchase of property, plant and equipment Acquisition of subsidiaries Disposal of subsidiaries Acquisition of associated companies Disposal of associated companies Dividend received from an associated company Interest received Net cash (used in)/generated from continuing operations Net cash used in discontinued operations Net cash (used in)/generated from investing activities	Audited consolidated amounts of the Group Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2 Note 3 Note 4 Note 5 (26,304) (16,108) 6,668 – (114,403) (42,412) 131,421 (131,421) 89,009 (86) 9,896 384 (276,384) – 2,495,000 7,523 823 (257,844) (96,302) 96,302 (354,146)	Unaudited pro forma consolidated amounts of the Remaining Group HK$’000 (26,304) (9,440) (114,403) (150,147) – (150,147) (86) 9,896 384 (276,384) 2,495,000 7,523 823 2,237,156 – 2,237,156

165 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

Financing activities Increase in loans from a fellow subsidiary Repayment of loans from fellow subsidiary, promissory note issued to a fellow subsidiary, subscription note and convertible bond Net cash used in repayment of bank loan and amount due to the ultimate holding company of discontinued operations Net cash generated from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year	Audited consolidated amounts of the Group Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2 Note 3 Note 4 Note 5 278,024 (2,393,059) (102,500) 102,500 175,524 (89,613) 116,534 26,921	Unaudited pro forma consolidated amounts of the Remaining Group HK$’000 278,024 (2,393,059) – (2,115,035) (28,026) 116,534 88,508

Notes:

The amounts have been extracted without adjustment from the accountants’ report on the Group as set out in Appendix I to the circular.
The adjustments have been made to reverse cash flows of the NWPCS Group for the nine months from 1 July 2005 to 31 March 2006 (date of actual disposal of the NWPCS Group) as if the disposal of the NWPCS Group had taken place on 1 July 2005.
The adjustment has been made to reverse interest paid for interest expenses during the year ended 30 June 2006 as if the repayment of the relevant loans, the promissory note and the Convertible Bond had been made on 1 July 2005.
The adjustments have been made to record cash inflow generated from the Consideration of HK$2,500,000,000 from NWD after payment of professional fee for the Disposal, and cash outflow for the repayment of all amounts owing to PPG under the Subscription Note, NWCBN under the Convertible Bond and New World Finance under the promissory note and loans from a fellow subsidiary by way of set-off against the Consideration from NWD.
The adjustment represents payment of the Special Dividend to be financed by the Cash Consideration. Based on 95,336,069 Shares in issue as at 30 June 2006 and the Special dividend of HK$1.20 per Share, the total amount of the Special Dividend will be approximately HK$114.4 million.
Save for the Disposal, no adjustment has been made to reflect any other results of transactions of the Group entered into subsequent to 30 June 2006.
166 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

4. REPORT FROM THE REPORTING ACCOUNTANTS

The following is the text of a report received from the Company’s auditors and reporting accountants, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

PricewaterhouseCoopers 22nd Floor, Prince’s Building Central, Hong Kong l h ( )

REPORT FROM ACCOUNTANTS ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF NEW WORLD MOBILE HOLDINGS LIMITED

We report on the unaudited pro forma financial information of New World Mobile Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out on pages 160 to 166 under the heading of “Unaudited Pro Forma Financial Information” (the “Unaudited Pro Forma Financial Information”) in Appendix V to the Company’s circular dated 15 December 2006, in connection with the proposed very substantial disposal of the entire issued share capital of, and loan to Upper Start Holdings Limited (the “Transaction”) by the Company (the “Circular”). The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Transaction might have affected the relevant financial information of the Group. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 160 to 166 of the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY AND REPORTING ACCOUNTANTS

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

167 -

PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX V

BASIS OF OPINION

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the audited consolidated balance sheet as at 30 June 2006, and income and cash flows statements of the Group for the year ended 30 June 2006 with the accountants’ report as set out in Appendix I to this Circular, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Group as at 30 June 2006 or any future date, or
the results and cash flows of the Group for the year ended 30 June 2006 or any future periods.

OPINION

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to rule 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants Hong Kong, 15 December 2006

168 -

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors’ interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

(i) the Company

As at the Latest Practicable Date, the interests of the Directors in the Shares were as follows:

					Approximate
					percentage
					of issued
					capital as
		Number of Shares			at the Latest
	Personal	Family	Corporate		Practicable
Name	interests	interests	interests	Total	Date
Dr. Cheng Kar Shun, Henry	780,000	–	–	780,000	0.80%
Mr. Doo Wai Hoi, William,JP	300,000	–	–	300,000	0.31%
Dr. Wai Fung Man, Norman	482,000	–	–	482,000	0.49%
Mr. Chow Yu Chun, Alexander	482,000	–	–	482,000	0.49%
Mr. Ho Hau Chong, Norman	78,000	–	–	78,000	0.08%
Mr. Kwong Che Keung, Gordon	78,000	–	–	78,000	0.08%
Mr. Hui Chiu Chung,JP	78,000	–	–	78,000	0.08%
Mr. Lo	–	–	55,336,666 (1)	55,336,666	56.64%

Note:

(1) Pursuant to the Acquisition Agreement, 55,336,666 Shares were agreed to be conditionally acquired by the Offeror, which is beneficially wholly-owned by Mr. Lo, from NWD. As such, Mr. Lo is deemed to be interested in these Shares.

169 -

GENERAL INFORMATION

APPENDIX VI

(ii) the associated corporations of the Company

As at the Latest Practicable Date, the interests of the Directors in the shares of the associated corporations of the Company were as follows:

							Approximate
							percentage
							of issued/
							registered
							capital as at
		Number of shares/amount		of registered capital			the Latest
	Personal	Family		Corporate			Practicable
	interests	interests		interests		Total	Date
New World China Land Limited (“NWCL”)
(Ordinary shares of HK$0.10 each)
Dr. Cheng Kar Shun, Henry	12,500,000	–		52,271,200	(1)	64,771,200	1.69%
Mr. Doo Wai Hoi, William,JP	8,750,000	–		65,050,000	(2)	73,800,000	1.93%
Mr. Chow Yu Chun, Alexander	6,550,000	–		–		6,550,000	0.17%
NWD
(Ordinary shares of HK$1.00 each)
Dr. Cheng Kar Shun, Henry	–	300,000	(3)	–		300,000	0.01%
Mr. Kwong Che Keung, Gordon	30,000	–		–		30,000	0.00%
NWS Holdings Limited (“NWSH”)
(Ordinary shares of HK$1.00 each)
Dr. Cheng Kar Shun, Henry	9,179,199	587,000	(3)	8,000,000	(1)	17,766,199	0.90%
Mr. Chow Yu Chun, Alexander	2,026,645	–		–		2,026,645	0.10%
Mr. Doo Wai Hoi, William,JP	8,006,566	–		3,130,000	(2)	11,136,566	0.56%
Mr. Kwong Che Keung, Gordon	601,969	–		–		601,969	0.03%
Fung Seng Estate Development
(Shanghai) Co., Ltd.
(Registered capital in US$)
Mr. Doo Wai Hoi, William,JP	–	–		US$3,000,000	(4)	US$3,000,000	30.00%
Master Services Limited
(Ordinary shares of US$0.01 each)
Mr. Chow Yu Chun, Alexander	16,335	–		–		16,335	1.63%
Ramada Property Ltd.
(Ordinary shares of US$1.00 each)
Mr. Doo Wai Hoi, William,JP	–	–		200	(2)	200	20.00%
Shanghai Juyi Real Estate
Development Co., Ltd.
(Registered capital in RMB)
Mr. Doo Wai Hoi, William,JP	–	–		RMB229,500,000	(4)	RMB229,500,000	30.00%
Faith Yard Property Limited
(Ordinary shares of US$1.00 each)
Mr. Doo Wai Hoi, William,JP	–	–		1		1	50.00%
				(Note 5)

170 -

GENERAL INFORMATION

APPENDIX VI

					Approximate
					percentage
					of issued/
					registered
					capital as at
		Number of shares/amount of registered capital			the Latest
	Personal	Family	Corporate		Practicable
	interests	interests	interests	Total	Date
Fortune Star Worldwide Limited
(Ordinary shares of US$1.00 each)
Mr. Doo Wai Hoi, William,JP	–	–	60	60	60.00%
			(Note 5)
Grand Make International Limited
(Ordinary shares of US$1.00 each)
Mr. Doo Wai Hoi, William,JP	–	–	15	15	15.00%
			(Note 5)
Shanghai Trio Property
Development Co. Ltd.
(Registered capital in US$)
Mr. Doo Wai Hoi, William,JP	–	–	US$28,350,000	US$28,350,000	52.50%
			(Note 6)
Zhaoqing New World Property
Development Limited
(Registered capital in US$)
Mr. Doo Wai Hoi, William,JP	–	–	8,250,000	8,250,000	60.00%
			(Note 7)
Zhaoqing New World Property
Management Limited
(Registered capital in HK$)
Mr. Doo Wai Hoi, William,JP	–	–	300,000	300,000	60.00%
			(Note 7)

Notes:

(1) These shares are beneficially owned by a company wholly-owned by Dr. Cheng Kar Shun, Henry, an executive Director and the chairman of the Company.
(2) These shares are beneficially owned by companies wholly-owned by Mr. Doo Wai Hoi, William, JP , an executive Director and the vice chairman of the Company.
(3) These shares are held by the spouse of Dr. Cheng Kar Shun, Henry.
(4) These represent the participating interests held by a company wholly-owned by Mr. Doo Wai Hoi, William, JP .
(5) These shares are beneficially owned by companies wholly-owned by Mr. Doo Wai Hoi, William, JP .
171 -

GENERAL INFORMATION

APPENDIX VI

(6) These include 50% direct interests and 2.5% participating interests in the registered capital of Shanghai Trio Property Development Co. Ltd. being held by companies wholly-owned by Mr. Doo Wai Hoi, William, JP .
(7) Mr. Doo Wai Hoi, William, JP , is deemed to be interested in the registered capitals of these companies by value of his interest in Fortune Star Worldwide Limited of which Mr. Doo Wai Hoi, William, JP , owns an indirect interest of 60%.

Interests in underlying shares – share options

(i) the Company

As at the Latest Practicable Date, the following Directors had personal interest in share options to subscribe for the Shares granted under the share option schemes of the Company:

	Number of
	share options
	as at the
	Latest
	Practicable		Date of	Exercise	Exercisable
Name of Director	Date		grant	price	period
				HK$
Mr. To	482,000(1)	28 January		1.260	28 January
			2005		2005 to
					31 December
					2010
Mr. Lo	200,000(2)	8	February	2.440	9 February
			2002		2002 to
					8 February
					2008
	78,000(2)	28 January		1.260	28 January
			2005		2005 to
					31 December
					2010

Notes:

(1) Mr. To has agreed with the Company in writing that he will not exercise his share options from 22 November 2006 until the Acquisition Completion Date and, subject to the Acquisition Completion, his 482,000 share options will be cancelled.
(2) Mr. Lo has undertaken in writing not to exercise his share options from 22 November 2006 up to the close of the Share Offer.
172 -

GENERAL INFORMATION

APPENDIX VI

(ii) NWSH

Under the share option scheme of NWSH, a fellow subsidiary of the Company, the following Directors were granted share options to subscribe for shares in NWSH:

		Number of share options	Number of share options
		with exercise price
		per share of HK$3.711
			Balance as
			at the
			Latest
	Date of	Exercisable	Practicable
Name of Director	grant	period	Date
Mr. Chow Yu Chun,	21 July 2003	Note	134,944
Alexander

Note:

This is divided into two tranches exercisable from 21 July 2004 and 21 July 2005 respectively to 20 July 2008, both dates inclusive.

As at the Latest Practicable Date, save as disclosed above, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules to be notified to the Company and the Stock Exchange.

(b) Persons who have interests or short positions which are discloseable under Divisions 2 and 3 of Part XV of the SFO

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had an interest or short position in the Shares or/and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share

173 -

GENERAL INFORMATION

APPENDIX VI

capital carrying rights to vote in all circumstances at general meetings of any other member of the Group were as follows:

Interests in the Shares and underlying Shares

					Approximate
			Interests		percentage
			in physically		of issued
			settled unlisted		capital as at
		Interests in	equity		the Latest
Name	Capacity	the Shares	derivatives	Total	Practicable Date
NWCBN	Beneficial owner	2,100,000	23,185,245 (1)	25,285,245	25.88%
New World Telephone	Interest of a controlled	2,100,000 (2)	23,185,245 (2)	25,285,245	25.88%
Holdings Limited	corporation
(“NWTHL”)
PPG	Beneficial owner	53,236,666	1,000,000,000 (3)	1,053,236,666	1,078.12%
NWD	Interest of controlled	55,336,666 (4)	1,023,185,245 (4)	1,078,521,911	1,104.00%
	corporations
Chow Tai Fook	Interest of a controlled	55,336,666 (5)	1,023,185,245 (5)	1,078,521,911	1,104.00%
Enterprises Limited	corporation
(“CTF”)
Centennial Success	Interest of a controlled	55,336,666 (6)	1,023,185,245 (6)	1,078,521,911	1,104.00%
Limited (“CSL”)	corporation
Cheng Yu Tung Family	Interest of a controlled	55,336,666 (7)	1,023,185,245 (7)	1,078,521,911	1,104.00%
(Holdings) Limited	corporation
(“CYTFH”)
Million Dollar	Beneficial owner	16,091,846	–	16,091,846	16.47%
Trading Limited
New World	Interest of a controlled	16,091,846 (8)	–	16,091,846	16.47%
CyberBase Limited	corporation
The Offeror	Beneficial owner	55,336,666 (9)	–	55,336,666	56.64%
Mr. Lo	Interest of a controlled	55,336,666 (9)	–	55,336,666	56.64%
	corporation
Mr. Lo	Beneficial owner	–	278,000 (10)	278,000	0.28%

Notes:

(1) These 23,185,245 underlying Shares represent the Shares which may be issued upon the exercise of any of the conversion rights attaching to the Convertible Bond.
(2) NWCBN is a wholly-owned subsidiary of NWTHL. Accordingly, NWTHL is deemed to be interested in the Shares and underlying Shares held by NWCBN.
174 -

GENERAL INFORMATION

APPENDIX VI

(3) These 1,000,000,000 underlying Shares represent the Shares which may be issued upon the exercise of any of the conversion rights attaching to the Subscription Note.
(4) Each of PPG and NWTHL is a wholly-owned subsidiary of NWD. Accordingly, NWD is deemed to have an interest in the Shares and underlying Shares held by PPG and in the Shares and underlying Shares deemed to be interested by NWTHL.
(5) CTF and its subsidiaries have interests in more than one-third of the issued shares of NWD and CTF is accordingly deemed to have an interest in the Shares and underlying Shares.
(6) CSL holds 100% direct interest in CTF and CSL is accordingly deemed to have an interest in the Shares and underlying Shares.
(7) CYTFH holds 51% direct interest in CSL and CYTFH is accordingly deemed to have an interest in the Shares and underlying Shares.
(8) Million Dollar Trading Limited is a wholly-owned subsidiary of New World CyberBase Limited. Accordingly, New World CyberBase Limited is deemed to be interested in the Shares and underlying Shares held by Million Dollar Trading Limited.
(9) Pursuant to the Acquisition Agreement, 55,336,666 Shares have been conditionally acquired by the Offeror, which is beneficially wholly-owned by Mr. Lo, from NWD. As such, Mr. Lo is deemed to be interested in these Shares.
(10) These 278,000 underlying Shares represent the Shares which may be issued upon the exercise of 278,000 share options granted to Mr. Lo pursuant to the share option schemes of the Company. Mr. Lo has undertaken in writing not to exercise his share options from 22 November 2006 to the close of the Share Offer.

As at the Latest Practicable Date, save as disclosed above, so far as was known to the Directors, no other person (other than the Directors or chief executive of the Company) had, or was deemed or taken to have an interest or short position in the Shares or/and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group.

Save as stated above, as at the Latest Practicable Date, according to the register of interests required to be kept by the Company under Section 336 of the SFO, no other persons were recorded to hold any long or short positions in the shares or underlying shares of the equity derivatives of the Company.

(c) Other interests

(1) As at the Latest Practicable Date, Dr. Cheng Kar Shun, Henry was the managing director of NWD, which is a party to (i) the shareholders’ agreement dated 8 December 2005 entered into among NWD, the Company, Upper Start, Telstra Corporation Limited, Telstra Holdings (Bermuda) No. 2 Limited and CSL NWM In relation to the CSL NWM Group, details of which are set out in the paragraph headed “Material contracts” in this Appendix; and (ii) the S&P Agreement, details of which are set out
175 -

GENERAL INFORMATION

APPENDIX VI

in “Letter from the Board” of this circular. Mr. Doo Wai Hoi, William, JP is the brother-in-law of Dr. Cheng Kar Shun, Henry. Save for Dr. Cheng Kar Shun, Henry and Mr. Doo Wai Hoi, William, JP , none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date, and which was significant in relation to the business of the Group taken as a whole.

(2) Save for Dr. Cheng Kar Shun, Henry and Mr. Doo Wai Hoi, William, JP , none of the Directors had since 30 June 2006, being the date to which the latest published audited financial statements of the Company were made up, any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

3. MATERIAL LITIGATION

Neither the Company nor any of its subsidiaries was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against the Company or any of its subsidiaries as at the Latest Practicable Date.

4. COMPETING INTERESTS

As at the Latest Practicable Date, to the best knowledge of the Directors, none of the Directors and their respective associates were considered to have any interests in businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group, other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or the Group.

5. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any service agreement with any member of the Group nor were there any other service agreements proposed which would not expire or be determinable by the Group within one year without payment of compensation (other than statutory compensation).

6. PROCEDURES FOR DEMANDING A POLL

Under the articles of association of the Company, poll may be demanded in respect of any resolution put to the vote at the EGM (or any adjourned meeting thereof) by:–

(a) the chairman of the meeting; or
(b) at least five members present in person or by proxy and entitled to vote at the meeting; or
(c) any member or members present in person or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or
176 -

GENERAL INFORMATION

APPENDIX VI

(d) any member or members present in person or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

7. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business of the Group) have been entered into by the members of the Group within the two years immediately preceding the date of this circular, and are or may be material:

(a) the agreement dated 12 September 2005 entered into between the Company and New World CyberBase Limited (“NWCB”) in relation to the sale and purchase of the entire issued share capital of New World CyberBase Solutions (BVI) Limited (“NWCS”) at a consideration of HK$20,999,999 which was satisfied by the issue of 16,153,846 Shares at an issue price of HK$1.30 per Share by the Company to NWCB;
(b) the deed of assignment of loan dated 21 October 2005 entered into between NWCB as assignor, the Company as assignee and NWCS in relation to the assignment of the interestfree shareholder’s loan owed from NWCS to NWCB and its subsidiaries, at a consideration of HK$1.00, subject to and upon the terms and conditions contained therein;
(c) the loan agreement dated 9 November 2005 entered into between New World PCS Limited (“NWPCS”) as borrower and New World Finance as lender pursuant to which New World Finance agreed to make available to NWPCS a loan facility of up to HK$60,000,000 subject to and upon the terms and conditions contained therein;
(d) the merger agreement dated 8 December 2005 (the “Merger Agreement”) entered into between the Company, CSL NWM and Telstra Holdings (Bermuda) No. 2 Limited (“Telstra Holdings”) in relation to CSL NWM;
(e) the shareholders’ agreement dated 8 December 2005 entered into among NWD, the Company, Upper Start, Telstra Corporation Limited (“Telstra Corporation”), Telstra Holdings and CSL NWM to set out the respective rights and obligations of the shareholders of CSL NWM in relation to the CSL NWM Group, including but without limitation to its principal business, board composition, management as well as dividend policy;
(f) the two subscription agreements dated 8 December 2005 entered into between (i) the Company, New World PCS Holdings Limited (“NWPCS Holdings”) and CSL NWM; and (ii) Telstra Holdings, CSL NWM and the Company, in relation to the subscription for shares in NWPCS Holdings and CSL NWM respectively, at such amount of consideration so as to discharge all outstanding debts due by NWPCS Holdings and CSL NWM respectively and to give effect to certain adjustments under the Merger Agreement;
(g) the loan agreement dated 27 March 2006 entered into between New World Finance as lender and the Company as borrower for the advancement of a loan of HK$244,024,000.00 which outstanding principal amount as at the Latest Practicable Date was HK$116,046,976.94;
(h) the loan agreement dated 30 March 2006 entered into between New World Finance as lender, the Company as borrower and pursuant to which New World Finance agreed to make available to the Company a loan facility of up to HK$900,000,000 which outstanding principal amount as at the Latest Practicable Date was HK$886,749,279;
177 -

GENERAL INFORMATION

APPENDIX VI

(i) the amendment agreement dated 30 March 2006 entered into between CSL NWM, Telstra Holdings, Telstra Corporation, NWD, Upper Start and the Company in relation to the Merger Agreement;
(j) the loan agreement dated 29 May 2006 entered into between the Company as borrower and New World Finance as lender pursuant to which New World Finance agreed to make available to the Company a loan facility of up to HK$70,000,000 which outstanding principal amount as at the Latest Practicable Date was HK$64,000,000;
(k) the amendment agreement dated 25 August 2006 entered into between CSL NWM, Telstra Holdings, Telstra Corporation, Upper Start, NWPCS Holdings and the Company in relation to the Merger Agreement; and
(l) the S&P Agreement.

8. EXPERTS

The following are the qualifications of the professional advisers who have given opinions or advice which are contained in this circular:

Names

Qualifications

CIMB-GK Securities (HK) Limited Licensed by the SFC for carrying out Types 1 (dealing in securities), 4 (advising on securities) and 6 (advising on corporate finance) regulated activities under the SFO

PricewaterhouseCoopers Certified Public Accountants

Each of CIMB-GK and PricewaterhouseCoopers has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its reports and letters (if any), as the case may be, and references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, each of CIMB-GK and PricewaterhouseCoopers:

(a) was not interested, directly or indirectly, in any assets which have been acquired or disposed of by or leased to the Company since 30 June 2006, being the date to which the latest published audited accounts of the Company were made up; and
(b) did not have any shareholding interest in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

9. MISCELLANEOUS

(a) The company secretary and the qualified accountant of the Company is Mr. Sien Yun Man CPA, ACS, ACIS.
178 -

GENERAL INFORMATION

APPENDIX VI

(b) The registered office of the Company is at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies and the principal place of business of the Company in Hong Kong is at 17th Floor, Chevalier Commercial Centre, 8 Wang Hoi Road, Kowloon Bay, Hong Kong.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) The English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Iu, Lai & Li, Solicitors for the Company, at 20th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong during normal business hours on any business day from the date of this circular up to and including the date of the EGM and at the EGM:

(a) the memorandum and articles of association of the Company;
(b) the material contracts referred to under the paragraph headed “Material contracts” in this Appendix;
(c) the letters of consent referred to in paragraph headed “Experts” in this Appendix;
(d) the annual report of the Company for each of the two years ended 30 June 2006;
(e) the letter from CIMB-GK to the Independent Board Committee and the Independent Shareholders dated 15 December 2006, the text of which is set out on pages 22 to 33 of this circular;
(f) the letter from the Independent Board Committee to the Independent Shareholders dated 15 December 2006, the text of which is set out on page 21 of this circular;
(g) the accountants’ report on the Group from PricewaterhouseCoopers dated 15 December 2006, the text of which is set out in Appendix I to this circular and the written statement signed by PricewaterhouseCoopers setting out the adjustments made by them in arriving at the figures shown in the accountants’ report on the Group;
(h) the letter from PricewaterhouseCoopers on the unaudited pro forma financial information of the Remaining Group dated 15 December 2006, the text of which is set out in Appendix V to this circular;
(i) the audited financial statements of the CSL NWM Group for the year ended 30 June 2006; and
(j) the audited financial statements of the NWPCS Group for the nine months ended 31 March 2006.
179 -

NOTICE OF THE EGM

==> picture [61 x 35] intentionally omitted <==

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 862)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the members of New World Mobile Holdings Limited (the “Company”) will be held at Meeting Rooms 606 and 607, Hong Kong Convention and Exhibition Centre, 1 Harbour Road, Wanchai, Hong Kong on Wednesday, 3 January 2007 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolutions as ordinary resolutions of the Company.

ORDINARY RESOLUTIONS

“THAT:–
(a) the entering into of the conditional agreement for sale and purchase dated 22 November 2006 (the “S&P Agreement”), a copy of which has been produced to the meeting marked “A” and initialled by the Chairman of the meeting for the purpose of identification, between the Company as vendor and New World Development Company Limited (the “Purchaser”) as purchaser, whereby the Company has agreed to sell and assign, and the Purchaser has agreed to purchase and accept the assignment of, or procure the purchase and acceptance of the assignment of, the entire issued share capital of Upper Start Holdings Limited (“Upper Start”) beneficially owned by the Company, and the loans owing by Upper Start to the Company, at an aggregate consideration of HK$2,500 million (the “Consideration”), upon the terms and subject to the conditions therein contained, be and is hereby approved, confirmed and ratified and the transactions contemplated under the S&P Agreement, including but not limited to the partial payment of the Consideration by the Purchaser by way of set off against the aggregate amount owing by the Company to the Purchaser’s subsidiaries under (i) a subscription note of HK$1,200 million due 5 July 2007 issued by the Company to a wholly-owned subsidiary of the Purchaser; (ii) the convertible bond of HK$28,286,000 due 1 November 2007 issued by the Company to a wholly-owned subsidiary of the Purchaser; and (iii) three loan agreements dated 27 March 2006, 30 March 2006 and 29 May 2006 respectively between the Company as borrower and a wholly-owned subsidiary of the Purchaser as lender, be and are hereby approved, confirmed and adopted; and
180 -

NOTICE OF THE EGM

(b) any one director of the Company be and is hereby authorised for and on behalf of the Company to do all acts and things and execute and deliver all documents whether under the common seal of the Company or otherwise as may be necessary, desirable or expedient to carry out or to give effect to any or all transactions contemplated under the S&P Agreement.”
“THAT:–
(a) subject to (i) completion of the S&P Agreement (as defined in the ordinary resolution numbered 1 set out in the notice of this meeting of which this resolution forms part); (ii) compliance with section 146 of the articles of association of the Company; and (iii) sufficiency of distributable reserves of the Company as at the date of completion of the S&P Agreement, a special dividend in respect of part of the cash portion of the Consideration (as defined in the ordinary resolution numbered 1 set out in the notice of this meeting of which this resolution forms part) receivable by the Company pursuant to the S&P Agreement as recommended by the board of directors of the Company be declared and paid to the shareholders of the Company whose names appear on the register of members of the Company at the close of business on a record date to be designated by the board of directors of the Company; and
(b) any one director of the Company be and is hereby authorised for and on behalf of the Company to do all acts and things and execute and deliver all documents whether under the common seal of the Company or otherwise as may be necessary, desirable or expedient to give effect to the foregoings.”

By Order of the Board New World Mobile Holdings Limited Sien Yun Man Company Secretary

Hong Kong, 15 December 2006

181 -

NOTICE OF THE EGM

Registered office:	Principal place of business
P.O. Box 309	in Hong Kong:
Ugland House	17th Floor
South Church Street	Chevalier Commercial Centre
George Town	8 Wang Hoi Road
Grand Cayman	Kowloon Bay
Cayman Islands	Kowloon
British West Indies	Hong Kong

Notes:

A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his/her/its stead. In the case of a recognised clearing house, it may authorise such other person(s) as it thinks fit to act as its representative(s) at the meeting and vote in its stead. A proxy need not be a member of the Company.
A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting in person, you are urged to complete and return the form of proxy in accordance with the instructions printed thereon.
To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be deposited at the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Completion and return of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting or any adjournment thereof and, in such event, the instrument appointing a proxy shall be deemed to have been revoked.
Where there are joint holders of any share of the Company, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such holders are present at the meeting personally or by proxy, then the holder whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any share stands shall for this purpose be deemed joint holders thereof.
The register of members of the Company will be closed from Friday, 29 December 2006 to Wednesday, 3 January 2007 (both days inclusive), during which period no transfer of shares will be effected. In order to qualify to vote at the EGM, all relevant share certificates (together with the accompanying documents of transfer, if required) must be lodged with the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:00 p.m. on Thursday, 28 December 2006.
182 -

AI assistant

Vision Values Holdings Ltd. — Proxy Solicitation & Information Statement 2006

49521_rns_2006-12-18_86fe1b1e-1d58-4099-8434-fd1a4700e5e1.pdf

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

CIMB-GK Securities (HK) Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

Directors:

Registered office:

Principal place of business

SPECIAL DEALS, VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

INTRODUCTION

THE S&P AGREEMENT

Date:

Parties:

Assets to be disposed:

Consideration:

Conditions precedent:

Completion:

Use of proceeds from the Disposal:

THE SPECIAL DIVIDEND

ACTIONS TO BE TAKEN BY SHAREHOLDERS

INFORMATION ON THE NWD GROUP, THE GROUP, UPPER START AND THE CSL NWM GROUP

CORPORATE CHARTS

(i) As at the Latest Practicable Date:

(ii) Immediately after the Disposal Completion but before the Acquisition Completion:

(iii) Immediately after the Disposal Completion and the Acquisition Completion but before the Share Offer:

REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE S&P AGREEMENT AND THE SPECIAL DIVIDEND

LETTER FROM THE BOARD

COMPLIANCE WITH RULE 13.24 OF THE LISTING RULES FOLLOWING THE DISPOSAL COMPLETION

GENERAL

EGM

ADDITIONAL INFORMATION

NEW WORLD MOBILE HOLDINGS LIMITED 新世界移動控股有限公司

SPECIAL DEALS, VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

Yours faithfully,

Independent Board Committee

CIMB-GK Securities (HK) Limited

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background

2. Principal businesses of the Group, the CSL NWM Group and the NWD Group

3. Information on the CSL NWM Group

Source: OFTA website

ii) Financial performance

LETTER FROM CIMB-GK

4. Reasons for and benefits of entering into of the S&P Agreement

5. Consideration

LETTER FROM CIMB-GK

Table (1) Trading comparables

6. Special Dividend

7. The Set-off

8. Financial Effects

Earnings

Net asset value

Gearing

Working capital

9. The Share Offer

RECOMMENDATION

Yours faithfully, For and on behalf of CIMB-GK Securities (HK) Limited

I FINANCIAL INFORMATION

(a) CONSOLIDATED INCOME STATEMENTS

(b) CONSOLIDATED BALANCE SHEETS

(c) BALANCE SHEETS

(d) CONSOLIDATED CASH FLOW STATEMENTS

(e) CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

II NOTES TO THE FINANCIAL STATEMENTS

1 General information

2 Basis of preparation

3 Principal accounting policies

(a) Changes in accounting policies

(ii) Changes in accounting policies in respect of handset subsidies

(b) Group accounting

(i) Consolidation

(ii) Associated companies

Vision Values Holdings Ltd. Proxy Solicitation & Information Statement 2006