Vision Values Holdings Ltd. — Proxy Solicitation & Information Statement 2006

Mar 7, 2006

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, 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 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 takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this 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)

VERY SUBSTANTIAL DISPOSAL AND VERY SUBSTANTIAL ACQUISITION

PROPOSED MERGER OF THE MOBILE TELECOMMUNICATIONS BUSINESSES OF HONG KONG CSL LIMITED AND NEW WORLD PCS LIMITED: (1) MERGER AGREEMENT; AND

(2) SHAREHOLDERS’ AGREEMENT RELATING TO TELSTRA CSL LIMITED

Joint financial advisers

A letter from the board of directors of New World Mobile Holdings Limited is set out on pages 6 to 18 of this circular.

A notice convening the extraordinary general meeting of New World Mobile Holdings Limited to be held at The Four Seasons Ballroom, 2/F, New World Renaissance Hotel, 22 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on Friday, 24 March 2006 at 11:00 a.m. is set out on pages 167 to 168 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 registrars 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.

7 March 2006

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the NWM Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I – Accountants’ report on the NWM Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix II – Additional financial information on the NWM Group . . . . . . . . . . . . . . . . . . . .	78
Appendix III – Accountants’ report on the Telstra CSL Group . . . . . . . . . . . . . . . . . . . . . . . . . .	90
Appendix IV – Additional financial information on the Telstra CSL Group. . . . . . . . . . . . . . .	133
Appendix V – Pro forma financial information on the Enlarged Group. . . . . . . . . . . . . . . . . .	141
Appendix VI – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	156
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	167

• i -

DEFINITIONS

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

“2G Services”	mobile wireless services and associated activities and businesses
	that utilise and implement second generation mobile wireless
	technologies to provide mobile wireless services in spectrum
	reserved or designated for use for that purpose
“3G Licence”	mobile carrier licence for the provision of 3G Services
“3G Services”	mobile wireless services and associated activities and businesses
	that utilise and implement third generation mobile wireless
	technologies to provide mobile wireless services in spectrum
	reserved or designated for use for that purpose
“Announcement”	the joint announcement dated 12 December 2005 issued by NWD
	and NWM in relation to, among other things, the Proposed Merger
“ARPU”	average revenue per user, a measure commonly adopted by Mobile
	Network Operators in determining the average revenue being
	received from users, based on the turnover from the relevant
	services divided by the number of users buying those services
“associate(s)”	has the same meaning as ascribed to it under the Listing Rules
“Business Day”	a day not being a Saturday, Sunday or public holiday in Hong
	Kong or Sydney, Australia
“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Completion”	completion of the Merger Agreement
“connected person”	has the same meaning as ascribed to it under the Listing Rules
“CSL”	Hong Kong CSL Limited, a company incorporated in Hong Kong
	with limited liability and an indirect wholly-owned subsidiary of
	Telstra
“Director(s)”	the director(s) of NWM
“EBITDA”	earnings before interest, tax, depreciation, and amortisation
“EGM”	an extraordinary general meeting of NWM to be convened at 11:00
	a.m. on Friday, 24 March 2006 to seek the NWM Shareholders’
	approval of the Merger Agreement and the transactions
	contemplated thereunder

• 1 -

DEFINITIONS

“Enlarged Group”	NWM and its subsidiaries immediately after Completion
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date”	22 February 2006, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information for inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Merged Group”	Telstra CSL and its subsidiaries immediately after Completion
“Merger Agreement”	the conditional merger agreement dated 8 December 2005 entered
	into between NWM, Telstra CSL and Telstra Holdings in relation
	to the Proposed Merger
“Mobile Businesses”	the mobile telecommunications businesses of NWPCS and CSL
	in Hong Kong respectively
“Mobile Network Operator(s)”	the existing mobile network operator(s) of 2G Services and/or 3G
	Services in 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
“NWCS”	New World CyberBase Solutions (BVI) Limited, a company
	incorporated in the British Virgin Islands with limited liability
	and a wholly-owned subsidiary of NWM
“NWCS Group”	NWCS and its subsidiaries
“NWD”	New World Development Company Limited, a company
	incorporated in Hong Kong with limited liability and the issued
	shares of which (stock code: 17) are listed on the Stock Exchange
“NWD Board”	the board of directors of NWD
“NWD Group”	NWD and its subsidiaries and member(s) of the NWD Group
	shall be construed accordingly
“NWD Shareholder(s)”	holder(s) of ordinary shares of HK$1.00 each in the issued share
	capital of NWD

• 2 -

DEFINITIONS

“NWM” or “Company”	New World Mobile Holdings Limited, a company incorporated in
	the Cayman Islands with limited liability, the issued shares of
	which (stock code: 862) are listed on the Stock Exchange, and a
	non wholly-owned subsidiary of NWD
“NWM Board”	the board of directors of NWM
“NWM Group”	NWM and its subsidiaries prior to Completion, including NWPCS,
	and member(s) of the NWM Group shall be construed accordingly
“NWM Share(s)”	ordinary share(s) of HK$1.00 each in the issued share capital of
	NWM
“NWM Shareholder(s)”	holder(s) of NWM Shares
“NWPCS”	New World PCS Limited, a company incorporated in Hong Kong
	with limited liability and a wholly-owned subsidiary of NWPCS
	Holdings
“NWPCS Disposal”	transfer of the entire issued share capital of NWPCS Holdings by
	NWM to Telstra CSL pursuant to the Merger Agreement
“NWPCS Group”	NWPCS Holdings and its subsidiaries prior to Completion
“NWPCS Holdings”	New World PCS Holdings Limited, a company incorporated in
	the Cayman Islands with limited liability, a wholly-owned
	subsidiary of NWM prior to Completion and the holding company
	of NWPCS
“NW SPV”	Upper Start Holdings Limited, a company incorporated in the
	British Virgin Islands with limited liability and a wholly-owned
	subsidiary of NWM
“NW SPV Group”	NW SPV and its subsidiaries, holding companies and fellow
	subsidiaries from time to time, excluding the Merged Group, and
	member(s) of the NW SPV Group shall be construed accordingly
“OFTA”	Office of the Telecommunications Authority of Hong Kong
“PPG”	Power Palace Group Limited, a company incorporated in the British
	Virgin Islands with limited liability and a wholly-owned subsidiary
	of NWD
“PRC”	the People’s Republic of China, which shall, for the purpose of
	this circular, exclude Hong Kong, Macau Special Administrative
	Region and Taiwan

• 3 -

DEFINITIONS

• “Proposed Merger” the proposed integration and merger of the Mobile Businesses in accordance with the Merger Agreement

• “Reverse Acquisition” the acquisition of the 100% interest in NWPCS Holdings pursuant to a conditional sale and purchase agreement dated 29 March 2004 entered into between New World Telephone Holdings Limited (as the vendor and being a wholly-owned subsidiary of NWD) and NWM (formerly known as “Asia Logistics Technologies Limited”, as the purchaser) for a consideration of HK$1,250 million, the completion of which took place on 6 July 2004

“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholders’ Agreement”	the shareholders’ agreement dated 8 December 2005 entered into
	among NWD, NWM, NW SPV, Telstra, Telstra Holdings, and
	Telstra CSL in relation to the Merged Group which will only take
	effect upon Completion
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Agreements”	the two subscription agreements dated 8 December 2005 entered
	into between (i) NWM, NWPCS Holdings and Telstra CSL; and
	(ii) Telstra Holdings, Telstra CSL and NWM, in relation to the
	subscription for shares in NWPCS Holdings and Telstra CSL
	respectively
“Telecommunications	the Telecommunications Ordinance (Chapter 106 of the Laws of
Ordinance”	Hong Kong)
“Telstra”	Telstra Corporation Limited, a company incorporated in Australia
	with limited liability, the issued shares of which are listed on the
	Australian Stock Exchange
“Telstra CSL”	Telstra CSL Limited, a company incorporated in Bermuda with
	limited liability, being the holding company of the Telstra CSL
	Group (prior to Completion) and an indirect wholly-owned
	subsidiary of Telstra
“Telstra CSL Acquisition”	subscription for new shares of Telstra CSL by NWM pursuant to
	the Merger Agreement
“Telstra CSL Group”	Telstra CSL and its subsidiaries prior to Completion
“Telstra Group”	Telstra and its subsidiaries, including CSL

• 4 -

DEFINITIONS

“Telstra Holdings”	Telstra Holdings (Bermuda) No. 2 Limited, a company incorporated
	in Bermuda with limited liability and a wholly-owned subsidiary
	of Telstra
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“US$”	United States dollar(s), the lawful currency of the United States
	of America
“%”	per cent

• 5 -

LETTER FROM THE NWM 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. Wei Chi Kuan, Kenny

Principal place of business in Hong Kong: 17th Floor Chevalier Commercial Centre 8 Wang Hoi Road Kowloon Bay Hong Kong

7 March 2006

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

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND VERY SUBSTANTIAL ACQUISITION

PROPOSED MERGER OF THE MOBILE TELECOMMUNICATIONS BUSINESSES OF HONG KONG CSL LIMITED AND NEW WORLD PCS LIMITED: (1) MERGER AGREEMENT; AND (2) SHAREHOLDERS’ AGREEMENT RELATING TO TELSTRA CSL LIMITED

INTRODUCTION

On 12 December 2005, the NWM Board announced that on 8 December 2005 (i) the Merger Agreement had been entered into between NWM, Telstra CSL and Telstra Holdings; and (ii) the Shareholders’ Agreement had been entered into between NWD, NWM, NW SPV, Telstra, Telstra Holdings and Telstra CSL to regulate the management and related operational issues of the Merged Group.

• 6 -

LETTER FROM THE NWM BOARD

The details of the Merger Agreement and the Shareholders’ Agreement were already set out in the Announcement. The purpose of this circular is to give you (i) further information regarding the Proposed Merger; (ii) the notice of the EGM; and (iii) other information required under the Listing Rules.

THE MERGER AGREEMENT

Date:

8 December 2005

Parties:

• (i) NWM;

• (ii) Telstra CSL; and

• (iii) Telstra Holdings.

To the best of the knowledge, information and belief of the NWM Board and having made all reasonable enquiries, Telstra CSL, Telstra Holdings and their respective ultimate beneficial owners are third parties independent of and not connected with NWM and its connected persons.

Principal terms:

Telstra CSL has agreed to issue and allot and NWM has agreed to procure NW SPV to subscribe for new shares in Telstra CSL, which will represent 23.6% of the enlarged issued share capital of Telstra CSL upon Completion, in exchange for the transfer of all of NWM’s interests in NWPCS Holdings to Telstra CSL and a cash payment of HK$244.024 million by NWM to Telstra CSL on the terms and conditions as set out in the Merger Agreement. The NWD Board advises that a shareholder’s loan will be advanced by NWD to NWM to enable NWM to satisfy the cash payment of HK$244.024 million upon Completion.

Upon Completion, the Merged Group will own and operate the Mobile Businesses and Telstra CSL will be owned as to 76.4% by Telstra Holdings and 23.6% by NW SPV.

As contemplated by the Merger Agreement, (i) NWM, NWPCS Holdings and Telstra CSL; and (ii) Telstra Holdings, Telstra CSL and NWM, have also entered into the Subscription Agreements whereby NWM will subscribe for new shares in NWPCS Holdings and Telstra Holdings will subscribe for new shares in Telstra CSL in each case in cash immediately prior to Completion, which will provide the NWPCS Group and the Telstra CSL Group respectively with funds (i) to retire all their outstanding debts as at the date of Completion; and (ii) for a certain level of negative working capital which will amount to approximately HK$0.7 billion as at the date of Completion. The subscription amount payable by NWM for new shares in NWPCS Holdings will be ascertained immediately prior to Completion. As at 31 December 2005, the amount of outstanding debts of the NWPCS Group was approximately HK$0.9 billion. The NWD Board has advised the NWM Board that a shareholder’s loan will be advanced by NWD to NWM to enable NWM to satisfy the payment of the subscription amount and the repayment of all outstanding debts owing by the NWPCS Group to third parties including the NWD Group. The amount of such shareholder’s loan will be determined immediately prior to Completion and it will be advanced on normal commercial terms, unsecured and will have no definite term of repayment.

• 7 -

LETTER FROM THE NWM BOARD

Conditions precedent:

Completion shall be conditional upon:

• (i) the NWM Shareholders approving the NWPCS Disposal and the Telstra CSL Acquisition under the Merger Agreement in accordance with the requirements of the Listing Rules;

• (ii) OFTA giving its written consent pursuant to section 7P(7) of the Telecommunications Ordinance to the proposed changes in relation to each of CSL and NWPCS which will occur for the purposes of section 7P(6) of the Telecommunications Ordinance if the transactions contemplated under the Merger Agreement are implemented;

• (iii) the Bermuda Monetary Authority giving its approval to the transactions contemplated under the Merger Agreement to the extent such approval is required pursuant to the Exchange Control Act 1972 and the Exchange Control Regulations 1973 (as amended) of Bermuda; and

• (iv) no material adverse change having occurred in relation to the NWPCS Group or the Telstra CSL Group between the execution of the Merger Agreement and Completion.

As at the Latest Practicable Date, the condition precedent set out in item (iii) has been fulfilled and the conditions precedent set out in items (i) and (ii) have not been fulfilled.

Termination rights and payments:

The Merger Agreement may be terminated by either NWM or Telstra CSL at any time before Completion (by notice given by one party to another) if:

• (a) the condition precedent set out in item (i) above is not satisfied by 31 March 2006, or any later date agreed in writing by NWM and Telstra CSL;

• (b) either of the conditions precedent set out in item (ii) or (iii) above is not satisfied by 30 June 2006, or any later date agreed in writing by NWM and Telstra CSL;

• (c) any consent or approval required under any of the conditions precedent set out in items (i) to (iii) above is not granted on terms reasonably acceptable to NWM or Telstra CSL; or

• (d) a material adverse change occurs in relation to the other group.

If the Merger Agreement is terminated, then, in addition to any other rights, powers or remedies provided by law:

• (i) each party is released from its obligations under the Merger Agreement other than in relation to certain clauses regarding break fee, confidential information and privacy and costs and stamp duty; and

• (ii) each party retains the rights it has against any other party in connection with any breach or claim that has arisen before termination.

• 8 -

LETTER FROM THE NWM BOARD

Break fee:

Subject to the terms of the Merger Agreement, NWM agrees to pay Telstra CSL the break fee of HK$15 million if the condition precedent set out in item (i) above is not satisfied by 31 March 2006, or any later date agreed in writing by NWM and Telstra CSL, and the Merger Agreement is terminated by either NWM or Telstra CSL.

Basis of the principal terms of the Merger Agreement:

The 23.6% interest to be held by NW SPV in Telstra CSL upon Completion was arrived at after arm’s length negotiations between the parties to the Merger Agreement and was based on, among other things, the EBITDA of the NWPCS Group and the Telstra CSL Group for the year ended 30 June 2005.

Completion:

Completion shall take place on the tenth Business Day after the satisfaction of the last of the conditions precedent to the Merger Agreement (but if that day is a Friday, then the next Business Day after that Friday) or such other date to be agreed in writing by NWM and Telstra CSL. The NWM Board expects that the Merger Agreement will be completed on or around 31 March 2006.

THE SHAREHOLDERS’ AGREEMENT

In contemplation of the Proposed Merger, NWD, NWM, NW SPV, Telstra, Telstra Holdings and Telstra CSL entered into the Shareholders’ Agreement to set out the respective rights and obligations of the shareholders of Telstra CSL in relation to the Merged Group. The Shareholders’ Agreement will only take effect upon and from Completion.

Date:

8 December 2005

Parties:

• (i) NWD;

• (ii) NWM;

• (iii) NW SPV;

• (iv) Telstra;

• (v) Telstra Holdings; and

• (vi) Telstra CSL.

• 9 -

LETTER FROM THE NWM BOARD

To the best of the knowledge, information and belief of the NWM Board and having made all reasonable enquiries, Telstra, Telstra Holdings, Telstra CSL and their respective ultimate beneficial owners are third parties independent of and not connected with NWM and its connected persons.

Principal business of the Merged Group:

Subject to the terms of the Shareholders’ Agreement, the principal business of the Merged Group shall not comprise any activities other than the following activities:

• (i) mobile wireless operations including operating and developing businesses providing 2G Services and 3G Services;

• (ii) operating and developing any other businesses carried on by any member of the Merged Group including, for avoidance of doubt, any member of the NWPCS Group as at the Completion Date;

• (iii) providing other telecommunications services;

• (iv) providing goods and other services commonly provided from time to time by operators of telecommunications businesses;

• (v) providing content and applications to users of the services described in (i) to (iv) above; and

• (vi) providing goods and services related to or incidental to the services set out in (i) to (v) above.

Board composition and management:

Pursuant to the terms of the Shareholders’ Agreement, (i) Telstra Holdings shall be entitled to appoint four directors of Telstra CSL; and (ii) NW SPV shall be entitled to appoint:

• (a) two directors if its interest in Telstra CSL is at least 15% but less than 50% and it is a member of the NWD Group (being NWD and its subsidiaries from time to time, excluding Telstra CSL and its subsidiaries from time to time);

• and regardless of whether it is a member of the NWD Group,

• (b) four directors if it has a 50% interest in Telstra CSL; and

• (c) five directors if it has an interest in Telstra CSL of more than 50%.

The chairman of Telstra CSL shall be a director nominated from time to time by Telstra Holdings so long as it has an interest of over 50% in Telstra CSL, otherwise the chairman shall be a director of Telstra CSL appointed by the board of Telstra CSL. The chairman will be entitled to chair at meetings of the board and of members of Telstra CSL and will not be entitled to a second or casting vote on any issue at any meeting of the board or members of Telstra CSL. Decisions of the board of Telstra CSL are to be made by a simple majority of votes, where the directors present and entitled to vote at the meeting are entitled to cast in aggregate the number of votes held by the relevant shareholder by whom they are appointed. The chief executive officer of the Merged Group will be appointed by the board of Telstra CSL.

• 10 -

LETTER FROM THE NWM BOARD

Dividend policy:

Subject to the terms of the Shareholders’ Agreement, Telstra CSL shall distribute dividends to the shareholders of Telstra CSL on an annual basis of an aggregate amount of not less than 60% of the consolidated operating profit after tax of the Merged Group for the relevant financial year before deducting any amount attributable to amortisation of goodwill or other intangibles. If the aggregate dividend paid in respect of any financial year is less than the abovementioned amount for that financial year, the target dividend amount for the following financial year shall be increased by the amount of the shortfall.

Restriction on disposal:

Pursuant to, but except for intra-group transfers or any permitted transfer under the terms of the Shareholders’ Agreement, NWM and Telstra shall not, unless otherwise agreed, transfer their interests in Telstra CSL for a period of 18 months from the date of Completion.

Non-competition:

Each of NWD, NWM and NW SPV has given an undertaking in the Shareholders’ Agreement that it shall not, and shall procure that each member of the NWD Group, the NWM Group or the NW SPV Group, as the case may be, shall not, during the term of the Shareholders’ Agreement and for a period of 18 months after it ceases to have any direct or indirect interest in Telstra CSL, engage or be in any capacity directly or indirectly involved in any operation and supply of mobile wireless service involving cellular handover (including 2G Services and 3G Services) in Hong Kong or infrastructure relating to such service, subject to certain exceptions as provided in the Shareholders’ Agreement.

NWD has further given an undertaking in the Shareholders’ Agreement that it must procure that any member of the NWD Group for so long as it remains a member, and use its best endeavours to procure that any of its members which ceases to be a member of the NWD Group, does not use the name “New World” or “新世界 ” in any manner related to any operation and supply of mobile wireless service carried on by it in Hong Kong or infrastructure relating to such service and does not use as its corporate name, words which includes “New World” or “新世界 ” together with the word “mobile” or other words which identify it as the provider of a mobile service or any other service which is provided as part of operation and supply of mobile wireless service or infrastructure relating to such service. Such undertaking will continue for so long as a member of the Merged Group continues to use the name “New World” or “新世界 ” in the provision of services by it and for a period of three years thereafter.

If NWD is unable to procure that any member of the NWD Group refrains from doing such act for reasons beyond NWD’s reasonable control, NWD will not be treated as being in breach of the above undertakings provided that it immediately divests itself of its interest in that member so that it ceases to be a member of the NWD Group.

The NWM Board considers that the remaining business of the NWM Group will not be affected by the giving of the abovementioned non-competition undertakings.

• 11 -

LETTER FROM THE NWM BOARD

INFORMATION ON THE NWM GROUP AND THE NWPCS GROUP

NWD is beneficially interested in approximately 58.04% of the issued share capital of NWM as at the Latest Practicable Date.

The NWM Group is principally engaged in offering superior mobile communications services including voice and value-added services tailored to the specific needs of individual customer groups via advanced mobile technology. The NWM Group acquired the NWCS Group in October 2005 to provide technology-related businesses including mobile Internet services and information technology outsourcing services. The NWM Group, through its wholly-owned subsidiary, NWPCS, operates the business of providing 2G Services in Hong Kong. The number of subscribers of the NWPCS Group as at 30 June 2005 amounted to over 1.3 million.

The audited consolidated results of the NWPCS Group for the two years ended 30 June 2005 were as follows:

	Year ended	Year ended
	30 June 2005	30 June 2004
	(HK$’ million)	(HK$’ million)
	(As restated)	(As restated)
Turnover	1,704.8	1,698.7
EBITDA	403.9	459.0
Net profit before tax	81.3	199.0
Net profit attributable to the shareholders	60.3	163.1

As at 31 October 2005, the audited consolidated net liabilities of the NWPCS Group amounted to approximately HK$74.8 million.

INFORMATION ON TELSTRA AND CSL PROVIDED BY TELSTRA

Telstra is Australia’s leading telecommunications and information services company which offers a full range of services and compete in all telecommunications markets throughout Australia, providing more than 10 million fixed lines and more than 8 million mobile subscribers in Australia. The Telstra Group through CSL operates the business of providing 2G Services and 3G Services in Hong Kong. The number of mobile telecommunications subscribers of the Telstra CSL Group as at 30 June 2005 amounted to approximately 1.3 million.

The audited consolidated results of the Telstra CSL Group for the three years ended 30 June 2005 and the four months ended 31 October 2005 are set out in the accountants’ report on the Telstra CSL Group in Appendix III to this circular. As at 31 October 2005, the audited consolidated net assets of the Telstra CSL Group amounted to approximately HK$2,273.9 million.

• 12 -

LETTER FROM THE NWM BOARD

REASONS FOR AND BENEFITS OF THE PROPOSED MERGER

The Hong Kong mobile telecommunications market has already one of the highest penetration rates of subscribers to mobile telecommunications services in the world. Based on statistics published by OFTA, mobile telecommunications subscribers in Hong Kong amounted to approximately 8.4 million as at 30 September 2005, representing a mobile penetration rate of over 100% of the Hong Kong population. The NWM Board has noted that the growth in the mobile telecommunications market in Hong Kong has slowed down since 2004, and expects that the number of mobile telecommunications subscribers will increase at a relatively modest rate given the already high penetration rates of subscribers in Hong Kong. As there are currently six Mobile Network Operators (four with both 2G and 3G licences, and two with 2G licences only) in Hong Kong serving a highly penetrated market, the NWM Board considers that the mobile telecommunications market in Hong Kong is highly competitive.

As stated in the annual report of NWM for the year ended 30 June 2005, it is the continuing strategy of NWPCS to (i) exercise various measures to control costs; and (ii) explore new revenue streams and business opportunities. The Proposed Merger is driven by the intense competition in the highly penetrated mobile telecommunications market in Hong Kong and the cost savings which it anticipated will be achieved through improved operational efficiency. The fact that both operators use a common network vendor will facilitate the rationalisation of the combined network platform in the future.

The NWM Board has noted that the Proposed Merger, if proceeds to Completion, would create the largest Mobile Network Operator in terms of number of subscribers in Hong Kong. The NWM Board considers that the Proposed Merger will provide an opportunity for integration of services of CSL and NWPCS. With the Proposed Merger, the NWM Board believes that the Merged Group will be well positioned in Hong Kong in terms of resources allocation and rationalisation of capital expenditure and operating expenses. It is anticipated that this will provide a strong foundation to accelerate the development and launch of new services and products in the areas which are expected to be the major growth drivers of the mobile telecommunications market in Hong Kong.

Based on the preliminary work conducted in the feasibility study for the Proposed Merger, it is estimated that the annual pre-tax operating cost savings for the Merged Group after integration of the networks and services of CSL and NWPCS will be mainly derived from network rationalisation, staff rationalisation and other reductions in cost including information technology and corporate expenses, and that the aggregate value of such annual pre-tax operating cost savings will be approximately HK$230 million. In addition, it is estimated that there will be annual capital expenditure savings of approximately HK$45 million. Net integration capital expenditure is estimated to be approximately HK$170 million predominantly on network infrastructure and information technology platforms.

The NWM Board is of the view that the entering into of the Merger Agreement and the Shareholders’ Agreement is in the interests of the NWM Group and the NWM Shareholders as a whole.

• 13 -

LETTER FROM THE NWM BOARD

The Merged Group will not be members of the NWD Group upon Completion. The NWD Board considers that as the remaining business of the NWD Group is entirely different from the business of the Merged Group, it will not be affected by the giving of the non-competition undertakings. The NWD Group intends to hold its interest in the Merged Group as long term investments.

Mr. Hubert Ng will be the chief executive officer of the Merged Group from Completion. Dr. Wai Fung Man, Norman will remain as an executive Director and the chief executive officer of NWM from Completion and he will be responsible for, among other things, monitoring NWM’s 23.6% interest in the Merged Group.

Mr. Hubert Ng, with more than 30 years in the technology industry, was appointed as the chief executive officer of CSL in February 2001. Mr. Ng has over 20 years of senior management telecommunications expertise in business planning and development, operations, sales and marketing. Mr. Ng was formerly the president of PCCW Mobility Services, and is the honorary adviser to the Internet & Telecom Association of Hong Kong, which promotes the further development of the local telecommunications industry. Mr. Ng has been appointed as a Council Member of the Hong Kong Trade Development Council in January 2004 and a member of the Digital 21 Strategy Advisory Committee by the Secretary for Commerce, Industry and Technology of Hong Kong in October 2004. Mr. Ng is also the chairman of ICT Services Advisory Committee and the Service Promotion Programme Committee, Hong Kong Trade Development Council.

IMPACTS OF THE PROPOSED MERGER ON NWM AND THE NWM SHAREHOLDERS

Simplified structure of the Mobile Businesses in the Proposed Merger:

(1) As at the Latest Practicable Date:

==> picture [300 x 288] intentionally omitted <==

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

NWD Telstra
(Note 1) (Note 2)
58.04% 100.00%
Telstra
NWM
Holdings
100.00% 100.00%
NWPCS Telstra CSL
Holdings (Note 3)
100.00% 100.00%
NWPCS CSL
----- End of picture text -----

• 14 -

LETTER FROM THE NWM BOARD

• (2) Immediately after Completion:

==> picture [264 x 456] intentionally omitted <==

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

NWD Telstra
(Note 1) (Note 2)
58.04% 100.00%
Telstra
NWM Holdings
100.00%
76.40%
NW SPV
23.60%
Telstra CSL
(Note 3)
100.00%
NWPCS
CSL
Holdings
100.00%
NWPCS
----- End of picture text -----

Notes:

1. As at the Latest Practicable Date, NWD was beneficially interested in 58.04% of the issued share capital of NWM by virtue of (i) the 55.84% interest in the issued share capital of NWM held by PPG; and (ii) the 2.20% interest in the issued share capital of NWM held by NWCBN.

NWCBN is the holder of the outstanding convertible note (issued on 2 November 2001) of NWM of face value of HK$28,286,000. PPG is the holder of the outstanding subscription note (issued on 6 July 2004) of NWM of face value of HK$1,200,000,000.

1. As at the Latest Practicable Date, Telstra was interested in 100% of the issued share capital of Telstra Holdings by virtue of the 100% interest in the issued share capital of Telstra Holdings held by Telstra Holdings Pty. Limited, a wholly-owned subsidiary of Telstra.

2. As at the Latest Practicable Date, Telstra CSL was interested in 100% of the issued share capital of CSL by virtue of the 100% interest in the issued share capital of CSL held by Bestclass Holdings Limited, a wholly-owned subsidiary of Telstra CSL.

3. 15 -

LETTER FROM THE NWM BOARD

Financial impacts on the NWM Group and the remaining business of the NWM Group:

As at the Latest Practicable Date, NWPCS was a wholly-owned subsidiary of NWPCS Holdings which was a wholly-owned subsidiary of NWM. Immediately after Completion, NWM, through NW SPV’s interest in Telstra CSL, will be interested in 23.6% of the Merged Group, which in turn will own and operate the Mobile Businesses upon Completion. The members of the NWPCS Group will cease to be subsidiaries of NWM upon Completion.

The total liabilities of the NWM Group (with the exclusion of the NWPCS Group) amounted to approximately HK$1,185.9 million as at 31 October 2005, which comprised, among other things, (i) the outstanding amount of a convertible bond of approximately HK$28.3 million; and (ii) the outstanding amount of a subscription note of approximately HK$1,146.8 million.

The NWM Board expects that, if Completion had taken place on 31 October 2005, the NWM Group would record (i) an unaudited gain on disposal of its 76.4% interest in NWPCS pursuant to the NWPCS Disposal of approximately HK$950 million; and (ii) an unaudited goodwill arising from the acquisition of a 23.6% interest in Telstra CSL pursuant to the Telstra CSL Acquisition of approximately HK$987 million. The NWM Board wishes to draw the attention of the NWM Shareholders that the abovementioned financial impacts are based on the pro forma financial information on the Enlarged Group as set out in Appendix V to this circular, and should not be taken as an indication of the future financial performance of the Enlarged Group.

Following Completion, the NWM Group will continue to (i) operate its technology-related businesses including mobile Internet services and information technology outsourcing services through the NWCS Group; and (ii) hold its 23.6% interest in the Merged Group through NW SPV’s interest in Telstra CSL.

DIFFERENCES BETWEEN THE ACCOUNTING POLICIES ADOPTED BY THE NWM GROUP AND THE TELSTRA CSL GROUP

The accountants’ report on the NWM Group and the Telstra CSL Group for the three years ended 30 June 2005 and the four months ended 31 October 2005 were set out in Appendix I and Appendix III to this circular respectively.

As a result of Completion, NWM would only be beneficially interested in 23.6% of the Merged Group, and it would not exercise any statutory control over the Merged Group before or after Completion. As the Merged Group (being Telstra CSL and its subsidiaries after Completion) will be the subsidiaries of Telstra after Completion, the NWM Board expects that the Merged Group will adopt the accounting policies of the Telstra Group following Completion. As such, there exist practical difficulties for NWM to request Telstra CSL to follow the accounting polices of NWM for the purpose of preparing the accountants’ report of the Telstra CSL.

In addition, being engaged by Telstra CSL rather than NWM as the reporting accountants of the Telstra CSL Group, Ernst & Young have performed its duties based on the instructions from Telstra CSL instead of NWM. As such, Ernst & Young have provided their opinions on the accountants’ report of the Telstra CSL Group which adopts the accounting policies of Telstra CSL. Furthermore, given that (i)

• 16 -

LETTER FROM THE NWM BOARD

Completion has not taken place prior to the despatch of this circular; and (ii) Telstra CSL has already appointed Ernst & Young as its statutory auditors, PricewaterhouseCoopers are not authorised to have access to the financial and other records of the Telstra CSL Group before Completion for the purposes of the accountants’ report of the Telstra CSL Group adopting NWM’s accounting policies.

In this regard, the NWM Board wishes to draw the attention of the NWM Shareholders that there would be certain differences between the accounting policies adopted in the accountants’ report on the NWM Group and that on the Telstra CSL Group as set out in this circular. The aforesaid differences could be summarised as follows:

In respect of the amortisation policy of goodwill

The NWM Group early adopted Hong Kong Financial Reporting Standard 3 (“HKFRS 3”) for the financial year ended 30 June 2005 and has performed impairment test on goodwill on an annual basis according to the accounting standard. The Telstra CSL Group did not previously decide to early adopt HKFRS 3 but has adopted the standard in the financial year ending 30 June 2006, upon the standard becoming effective, on a prospective basis as required under the standard. Prior to the adoption of HKFRS 3, Telstra CSL amortised goodwill on the straight-line basis.

In respect of the accounting treatment of revenue recognition

The NWM Group would capitalise handset subsidies and amortise such subsidies over the contract period to which the sales transaction relates. The Telstra CSL Group would expense handset subsidies with service contracts lasting less than two years in the periods which the sales transactions are completed and would defer only those handset subsidies with service contracts lasting two years or more and amortise such on a straight-line basis over the average duration of service contracts of customers.

In light of the above differences between the accounting policies adopted by the NWM Group and the Telstra CSL Group, NWM has applied to the Stock Exchange for a wavier in respect of the strict compliance with Rule 14.69(4)(a)(i) of the Listing Rules in respect of the preparation of the accountants’ report on the Telstra CSL Group using the accounting policies being materially consistent with those adopted by the NWM Group. The Stock Exchange has granted a waiver to NWM in respect of the strict compliance with Rule 14.69(4)(a)(i) of the Listing Rules.

In this connection, the NWM Board considers that, for the purpose of providing the NWM Shareholders with the financial information of the Telstra CSL Group which are consistent with the accounting policies adopted by NWM, it is preferable to present the restated financial information on the Telstra CSL Group using NWM’s accounting policies as set out in Appendix IV to this circular.

• 17 -

LETTER FROM THE NWM BOARD

GENERAL

The entering into of the Merger Agreement by NWM and the transactions contemplated thereunder constitute (i) a very substantial disposal for NWM under Chapter 14 of the Listing Rules by virtue of the NWPCS Disposal; and (ii) a very substantial acquisition for NWM under Chapter 14 of the Listing Rules by virtue of the Telstra CSL Acquisition. As such, Completion is subject to the approval by the NWM Shareholders at the EGM. To the best of the knowledge, information and belief of the NWM Board and having made all reasonable enquiries, none of the NWM Shareholders are required to abstain from voting on the proposed resolution approving the Merger Agreement and the transactions contemplated thereunder at the EGM.

EGM

Set out on pages 167 to 168 of this circular is a notice convening the EGM which will be held at The Four Seasons Ballroom, 2/F, New World Renaissance Hotel, 22 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on Friday, 24 March 2006 at 11:00 a.m. at which an ordinary resolution will be proposed to approve the Merger Agreement and the transactions contemplated thereunder which include the NWPCS Disposal and the Telstra CSL Acquisition.

The form of proxy for use by the NWM 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 NWM’s branch share registrars in Hong Kong, Abacus Share Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible, and 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.

RECOMMENDATION

The Directors consider that the terms of the Merger Agreement are fair and reasonable, and the entering into of the Merger Agreement is in the interests of NWM and the NWM Shareholders as a whole. The Directors therefore recommend the NWM Shareholders to vote in favour of the resolution to approve the Merger Agreement and the transactions contemplated thereunder at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

NWM Shareholders and potential investors in NWM should note that the Merger Agreement, which is subject to a number of conditions precedent, may or may not be completed. NWM Shareholders and potential investors are reminded to exercise caution when dealing in the securities of NWM.

Yours faithfully,

For and on behalf of the Board

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

Executive Director and Chief Executive Officer

• 18 -

ACCOUNTANTS’ REPORT ON THE NWM 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.

7 March 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 2002 and 2003, 30 June 2005 and 31 October 2005, and the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the years ended 30 June 2003, 2004 and 2005 and the four months ended 31 October 2004 and 2005 (the “Relevant Periods”) for inclusion in the circular of the Company dated 7 March 2006 (the “Circular”) in connection with the merger agreement (the “Merger Agreement”) dated 8 December 2005 entered among the Company, Telstra CSL Limited (“Telstra CSL”) and Telstra Holdings (Bermuda) No. 2 Limited (“Telstra Holdings”), pursuant to which the Company has agreed to procure Upper Start Holdings Limited (“NW SPV”), a wholly owned subsidiary of the Company, to subscribe for new shares in Telstra CSL, representing 23.6% of the enlarged share capital of Telstra CSL upon completion of the Merger Agreement, in exchange for the transfer of all of the Company’s interests in New World PCS Holdings Limited (“NWPCS”) to Telstra CSL and a cash payment of HK$244.024 million by the Company to Telstra CSL.

The Company was incorporated in the Cayman Islands on 25 May 1998 with limited liability. As at the date of this report, the Company had direct and indirect interests in the subsidiaries and associated companies as set out in notes 17 and 18 of Section II below, all of which are private companies. All companies comprising the Group have adopted 30 June as their financial year end date except for those as disclosed in notes 2 and 18 of Section II below.

We acted as the auditors of the Company for the years ended 31 December 2002 and 2003, for the eighteen months ended 30 June 2005. We also acted as the auditors of the Group for the years ended 30 June 2003, 2004 and 2005 other than those specified in notes 2 and 18 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 2003, 2004 and 2005 and the four months ended 31 October 2005 and of the Company as at 31 December 2002 and 2003, 30 June 2005 and 31 October 2005 (the “Financial Information”), and have carried out such additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

• 19 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

We have reviewed the financial information for the four months ended 31 October 2004 in accordance with SAS 700 “Engagement to review interim financial reports” issued by the HKICPA. A review consists principally of making enquiries of the Group management and applying analytical procedures to the Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information for the four months ended 31 October 2004.

The Financial Information as set out in Sections I to 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, or where appropriate, the unaudited management accounts, of the Group for the Relevant Periods, after making such adjustments as are appropriate.

The directors of the Company are responsible for preparing these financial statements which gives 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 responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination and review, 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 2002 and 2003, 30 June 2005 and 31 October 2005, and of the Group as at 30 June 2003, 2004 and 2005 and 31 October 2005 and of the consolidated results and cash flows of the Group for the years and periods then ended.

Moreover, on the basis of our review which does not constitute an audit, we are not aware of any material modifications that should be made to the financial information for the four months ended 31 October 2004.

• 20 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

I FINANCIAL INFORMATION

(a) Consolidated profit and loss statements

Year ended 30 June 30 June 30 June 2003 2004 2005 Note HK$’000 HK$’000 HK$’000 (As restated) (As restated) (As restated) Turnover 6 1,662,328 1,698,744 1,709,054 Cost of sales (701,949) (773,224) (866,113) Gross profit 960,379 925,520 842,941 Other income 128 115 635 Selling expenses (108,360) (104,506) (101,468) Administrative expenses (641,480) (614,796) (598,701) Operating profit 8 210,667 206,333 143,407 Finance costs 9 (9,724) (7,336) (65,287) Profit/(loss) before taxation 200,943 198,997 78,120 Taxation 13 (13,068) (35,866) (21,066) Profit/(loss) for the year/period 187,875 163,131 57,054 Attributable to: Equity holders of the parent 187,875 163,131 57,054 Minority interest – – – 187,875 163,131 57,054 Earnings/(loss) per share – Basic 14 HK$4.51 HK$3.92 HK$0.73 – Diluted 14 N/A N/A HK$0.09

Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 583,723 700,265 (297,963) (441,251) 285,760 259,014 164 533 (42,316) (41,930) (201,193) (192,457) 42,415 25,160 (25,648) (29,691) 16,767 (4,531) (5,611) (2,265) 11,156 (6,796) 11,156 (6,796) – – 11,156 (6,796) HK$0.14 (HK$0.08) HK$0.03 (HK$0.08)

• 21 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(b) Consolidated balance sheets

Group As at As at As at 30 June 30 June 30 June 2003 2004 2005 Note HK$’000 HK$’000 HK$’000 (As restated) (As restated) (As restated) ASSETS Non-current assets Fixed assets 16(a) 1,289,694 1,186,236 1,068,301 Investment properties 16(c) – – – Investments in associated companies 18 – – – Intangible assets 19 – – 65,964 Deferred taxation 20 224,353 188,487 167,472 Rental and other deposits 14,121 10,659 8,882 1,528,168 1,385,382 1,310,619 ------------ ------------ ------------ Current assets Inventories 21 11,520 29,657 38,024 Trade receivables 22 31,075 83,218 94,015 Prepayments and other receivables 10,466 11,285 42,112 Handset subsidies – 9,352 34,886 Rental and other deposits 36,840 33,380 39,421 Amounts due from fellow subsidiaries 23 7,137 3,098 29 Amount due from a related company 24 – – 813 Cash and bank balances 25 113,640 94,444 116,534 210,678 264,434 365,834 ------------ ------------ ------------ Total assets 1,738,846 1,649,816 1,676,453 ------------ ------------ ------------ EQUITY Capital and reserves attributable to the Group’s equity holders Share capital 28 1 1 300 Other reserves 29(a) 999 999 (88,051) Accumulated losses (1,042,958) (879,827) (822,773) Total deficit on shareholders’ fund (1,041,958) (878,827) (910,524)

As at 31 October 2005 HK$’000 1,024,350 3,900 – 72,959 165,207 7,900 1,274,316 ------------ 26,326 102,365 49,288 68,010 41,014 29 813 76,065 363,910 ------------ 1,638,226 ------------ 16,454 (83,205) (829,569) (896,320)

• 22 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

				Group
		As at	As at	As at	As at
		30 June	30 June	30 June	31 October
		2003	2004	2005	2005
	Notes	HK$’000	HK$’000	HK$’000	HK$’000
		_(As restated) _	_(As restated) _	(As restated)
LIABILITIES
Non-current liabilities
Non-current portion of
long-term liabilities	27	372,500	102,500	–	–
Amount due to the immediate
holding company	31	933,602	933,592	–	–
Loan from a fellow
subsidiary	31	–	–	877,500	877,500
Convertible bond	30	–	–	28,250	28,256
Subscription note	2	–	–	1,131,199	1,146,829
Asset retirement obligations	3(a)	5,348	5,908	6,529	6,758
Deferred income		–	–	–	2,646
		1,311,450	1,042,000	2,043,478	2,061,989
		------------	------------	------------	------------
Current liabilities
Trade payables	26	42,678	44,305	108,086	174,156
Accrued charges, other
payables, deposits received
and deferred income		298,603	314,265	320,935	293,547
Amount due to the ultimate
holding company	23 and 31	73	73	–	–
Amounts due to fellow
subsidiaries	23	–	–	11,132	4,317
Amounts due to other
related companies	24 and 36	–	–	846	537
Current portion of
long-term liabilities	27	270,000	270,000	102,500	–
Promissory note issued to
the immediate holding
company	31	858,000	858,000	–	–
		1,469,354	1,486,643	543,499	472,557
		------------	------------	------------	------------
Total liabilities		2,780,804	2,528,643	2,586,977	2,534,546
		------------	------------	------------	------------
Total equity and liabilities		1,738,846	1,649,816	1,676,453	1,638,226
		------------	------------	------------	------------
Net current liabilities		1,258,676	1,222,209	177,665	108,647
		------------	------------	------------	------------
Total assets less current
liabilities		269,492 ------------	163,173 ------------	1,132,954 ------------	1,165,669 ------------

• 23 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(c) Balance sheets

Company As at As at As at 31 December 31 December 30 June 2002 2003 2005 Note HK$’000 HK$’000 HK$’000 (As restated) (As restated) (As restated) ASSETS Non-current assets Fixed assets 16(b) 1,853 1,380 90 Investments in subsidiaries 17 251,806 137,312 1,521,385 253,659 138,692 1,521,475 -------------- -------------- -------------- Current assets Amount due from an associated company 161 161 – Amount due from a jointly controlled entity 230 203 – Amount due from a related company 24 – – 225 Prepayments, deposits and other receivables 5,837 103 74 Cash and bank balances 31,420 22,383 188 37,648 22,850 487 -------------- -------------- -------------- Total assets 291,307 161,542 1,521,962 -------------- -------------- -------------- EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 28 36,415 37,515 79,182 Other reserves 29(b) 442,719 452,101 119,297 (Accumulated losses)/ retained profits (233,842) (358,118) 162,354 Total equity 245,292 131,498 360,833 LIABILITIES Non-current liabilities Convertible bond 30 37,736 27,881 28,250 Subscription note 2 – – 1,131,199 37,736 27,881 1,159,449 -------------- -------------- -------------- Current liabilities Amount due to an associated company 496 12 – Amount due to a fellow subsidiary 23 376 376 563 Accrued charges and other payables 7,407 1,775 1,117 8,279 2,163 1,680 -------------- -------------- -------------- Total liabilities 46,015 30,044 1,161,129 -------------- -------------- -------------- Total equity and liabilities 291,307 161,542 1,521,962 -------------- -------------- -------------- Net current assets/(liabilities) 29,369 20,687 (1,193) -------------- -------------- -------------- Total assets less current liabilities 283,028 159,379 1,520,282 -------------- -------------- --------------

As at 31 October 2005 HK$’000 – 1,541,830 1,541,830 ------------- – – 225 24 2 251 ------------- 1,542,081 ------------- 95,336 124,143 145,526 365,005 28,256 1,146,829 1,175,085 ------------- – 428 1,563 1,991 ------------- 1,177,076 ------------- 1,542,081 ------------- (1,740) ------------- 1,540,090 -------------

• 24 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(d) Consolidated cash flow statements

Note Operating activities Net cash inflow generated from operations 33(a) Interest paid Hong Kong profits tax paid Net cash inflow from operating activities Investing activities Purchase of fixed assets Sales of fixed assets Acquisition of subsidiaries 33(b) Sales of other investments Sales of investment securities Interests received Net cash outflow from investing activities Net cash inflow before financing Financing activities Decrease in amounts due to immediate holding company and ultimate holding company Repayment of bank loan New loan payable Net cash outflow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year/period Cash and cash equivalents at the end of the year/period	30 June 2003 HK$’000 423,439 (9,216) – 414,223 -------------- (140,110) 62 – – – 128 (139,920) -------------- 274,303 -------------- (842,705) (135,000) 777,500 (200,205) -------------- 74,098 39,542 113,640	Year ended 30 June 2004 HK$’000 410,380 (6,776) – 403,604 -------------- (153,752) 847 – – – 115 (152,790) -------------- 250,814 -------------- (10) (270,000) – (270,010) -------------- (19,196) 113,640 94,444	30 June 2005 HK$’000 396,209 (13,983) (51) 382,175 -------------- (140,791) 5 45,630 900 3,609 635 (90,012) -------------- 292,163 -------------- (73) (270,000) – (270,073) -------------- 22,090 94,444 116,534	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 137,203 120,743 (5,003) (18,253) – – 132,200 102,490 -------------- -------------- (60,291) (51,974) – 299 45,630 9,896 900 – 3,609 – 164 533 (9,988) (41,246) -------------- -------------- 122,212 61,244 -------------- -------------- (73) – (90,000) (102,500) – – (90,073) (102,500) -------------- -------------- 32,139 (41,256) 94,444 116,534 126,583 75,278

• 25 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(e) Consolidated statements of changes in equity

At 1 July 2002, as previously stated Accretion and depreciation expenses arising from asset retirement obligations At 1 July 2002, as restated Profit for the year, as previously stated Accretion and depreciation expenses arising from asset retirement obligations Profit for the year, as restated At 30 June 2003, as restated At 30 June 2003, as previously stated Accretion and depreciation expenses arising from asset retirement obligations At 30 June 2003, as restated Profit for the year, as previously stated Accretion and depreciation expenses arising from asset retirement obligations Profit for the year, as restated At 30 June 2004, as restated At 30 June 2004, as previously stated Accretion and depreciation expenses arising from asset retirement obligations At 30 June 2004, as restated	Share capital HK$’000 1 – 1 – – – 1 1 – 1 – – – 1 1 – 1	Other Accumulated reserves losses HK$’000 HK$’000 999 (1,229,206) – (1,627) 999 (1,230,833) – 188,806 – (931) – 187,875 999 (1,042,958) 999 (1,040,400) – (2,558) 999 (1,042,958) – 164,114 – (983) – 163,131 999 (879,827) 999 (876,286) – (3,541) 999 (879,827)	Total HK$’000 (1,228,206) (1,627) (1,229,833) 188,806 (931) 187,875 (1,041,958) (1,039,400) (2,558) (1,041,958) 164,114 (983) 163,131 (878,827) (875,286) (3,541) (878,827)

• 26 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

At 30 June 2004, as restated Issue of shares_(Notes 28 and 29(a)) Arising from reverse acquisition(Note 2) Renewal of convertible bond(Note 3(a)) Issue of Subscription Note(Note 3(a)) Profit for the year, as previously stated Interest expenses on convertible bond and subscription note Accretion and depreciation expenses arising from asset retirement obligations Profit for the year, as restated At 30 June 2005, as restated At 30 June 2005, as previously stated Accretion and depreciation expenses arising from asset retirement obligations Interest expenses on convertible bond and subscription note Renewal of convertible bond(Note 3(a)) Issue of Subscription Note(Note 3(a)) At 30 June 2005, as restated Issue of shares(Note 28(g))_ Loss for the period At 31 October 2005	Share capital HK$’000 1 299 – – – – – – – 300 300 – – – – 300 16,154 – 16,454	Other Accumulated reserves losses HK$’000 HK$’000 999 (879,827) 913,793 – (1,115,538) – 40 – 112,655 – – 93,111 – (35,013) – (1,044) – 57,054 (88,051) (822,773) (200,746) (783,175) – (4,585) – (35,013) 40 – 112,655 – (88,051) (822,773) 4,846 – – (6,796) (83,205) (829,569)	Total HK$’000 (878,827) 914,092 (1,115,538) 40 112,655 93,111 (35,013) (1,044) 57,054 (910,524) (983,621) (4,585) (35,013) 40 112,655 (910,524) 21,000 (6,796) (896,320)

• 27 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

II NOTES TO THE FINANCIAL INFORMATION

1 General information

New World Mobile Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) is principally engaged in offering mobile telecommunications services including voice and data services tailored to the specific needs of individual customer groups via mobile technology and technology-related business including mobile Internet services and information technology outsourcing activities 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 has its primary listing on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

These consolidated financial statements are presented in thousand of Hong Kong Dollars (HK$’000), unless otherwise stated.

2 Basis of preparation

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

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 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 the 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 immediate 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 any 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.

Both the Subscription Shares and 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.

• 28 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

The fair value of the liability component, included in long-term borrowings, 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 (Note 29) net of deferred income taxes, if any.

The fair values of the liability component of the Subscription Note as at 30 June 2005 and 31 October 2005 approximated their carrying values respectively.

Interest expenses on the Subscription Note are calculated using the effective interest method by applying the effective interest rate of 4.10% 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 New World PCS Holdings Limited (“NWPCS Holdings”) and its subsidiaries (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 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;

• (viii) the comparative information shown in these consolidated financial statements is that of the NWPCS Group.

• 29 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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 comparative figures presented for the Company’s balance sheets are based on 31 December 2003 and 2002 audited financial statements of the Company.

3 Principal accounting policies

(a) Changes in accounting policies

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.

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
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 28	Investments in Associates
HKAS 32	Financial Instruments Disclosure and Presentation
HKAS 33	Earnings per Share
HKAS 39	Financial Instruments: Recognition and Measurement
HKAS 40	Investment properties
HKAS Int 15	Operating Leases – Incentives
HKFRS 2	Share-based Payments
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, 28, 33 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 statement and statement of changes in equity.

• HKASs 2, 7, 8, 10, 17, 23, 27, 28, 33 and HKAS-Int 15 had no material effect on the Group’s policies.

• 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 financial statements.

• HKAS 24 has affected the identification of related parties and certain other related-party disclosures.

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

• 30 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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. Furthermore, convertible bond and Subscription Note issued will be split into the liability and equity components at initial recognition by recognising the liability component at its fair value and attributing to the equity component the difference between the proceeds from the issue and the fair value of the liability component. The liability component is subsequently carried at amortised cost. The equity component is recognised in the reserve until the convertible bond or the Subscription Note is converted or redeemed. In prior years, the convertible bond and Subscription Note were recognised as liabilities only.

The adoption of revised HKAS 40 has resulted in a change in the accounting policy of which the changes in fair values are recorded in the profit and loss statement as part of other income. Prior to the adoption of the standard, the increases in fair value, if any, would be credited to the investment properties revaluation reserve. Decreases in fair value were first set off against increases on earlier valuations on a portfolio basis and thereafter expensed in the profit and loss statement.

The adoption of HKFRS 2 has resulted in a change in the accounting policy for share-based payments. Until 30 June 2005, the provision of share options to employees did not result in an expense in the profit and loss statements. Effective on 1 July 2005, the Group expenses the cost of share options in the profit and loss statement. As a transitional provision, the cost of share options granted after 7 November 2002 and had not yet vested on 1 July 2005 was expensed retrospectively in the profit and loss statement of the respective periods.

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.

• HKFRS 2 – only retrospective application for all equity instruments granted after 7 November 2002 and not vested at 1 July 2005.

The adoption of HKAS 16 resulted in:

Increase in fixed assets Increase in asset retirement obligations Increase in accumulated losses Decrease in profit attributable to equity holders/Increase in loss attributable to equity holders Decrease in earnings per share/Increase in loss per share (basic) Decrease in earnings per share/Increase in loss per share (diluted)	As at 30 June 2003 HK$’000 2,790 5,348 2,558 30 June 2003 HK$’000 931 HK$0.02 N/A	As at 30 June 2004 HK$’000 2,367 5,908 3,541 Year ended 30 June 2004 HK$’000 983 HK$0.01 N/A	As at As at 30 June 31 October 2005 2005 HK$’000 HK$’000 1,944 1,803 6,529 6,758 4,585 4,955 Four months ended 30 June 31 October 2005 2005 HK$’000 HK$’000 1,044 370 HK$0.01 HK$0.00 HK$0.00 HK$0.00	As at 31 October 2005 HK$’000 1,803
				6,758
				4,955
				HK$0.00
				HK$0.00

• 31 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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.

The adoption of HKASs 32 and 39 resulted in:

Decrease in goodwill Decrease in convertible bond Decrease in Subscription Note Increase in other reserves Increase in accumulated losses Decrease in profit attributable to equity holders/Increase in loss attributable to equity holders Decrease in profit per share/Increase in loss per share (basic) Decrease in profit per share (diluted)	As at 30 June 2003 HK$’000 – – – – – 30 June 2003 HK$’000 – – N/A	As at 30 June 2004 HK$’000 – – – – – Year ended 30 June 2004 HK$’000 – – N/A	As at As at 30 June 31 October 2005 2005 HK$’000 HK$’000 32 32 36 30 77,678 65,080 112,695 112,695 35,013 47,617 Four months ended 30 June 31 October 2005 2005 HK$’000 HK$’000 35,013 12,604 HK$0.45 HK$0.16 HK$0.00 HK$0.16	As at 31 October 2005 HK$’000 32
				30
				65,080
				112,695
				47,617
				HK$0.16
				HK$0.16

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 financial statements:

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

Pursuant to the HKFRS 3 Package, goodwill is tested annually for impairment and is not subject to amortisation. The Group had not incurred any goodwill before 1 July 2004 and so there was no effect on opening balances by the early adoption of the HKFRS 3 Package.

The adoption of the HKFRS 3 Package results in:

The adoption of the HKFRS 3 Package results in:
		Four
	Year ended	months ended
	30 June 2005	31 October 2005
	HK$’000	HK$’000
Decrease in administrative expenses	3,255	1,120
Increase in profit attributable to shareholders	3,255	1,120
Increase in basic earnings per share/(decrease
in basic loss per share)	HK$0.04	(HK$0.01)
Increase in diluted earnings/(loss) per share	HK$0.00	(HK$0.01)

• 32 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

	As at	As at
	30 June 2005	31 October 2005
	HK$’000	HK$’000
Increase in goodwill	3,255	4,375
Decrease in accumulated losses	3,255	4,375

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

(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 31 October 2005.

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 profit and loss 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.

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.

(ii) Associated companies

Associates 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 associates are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

• 33 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the profit and loss 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 associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

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

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

(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, jointly controlled entity and associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Prior to 30 June 2004, the Group does not have any goodwill.

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) 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 depreciation 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 recognized 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 statement during the financial period in which they are incurred.

• 34 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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 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.

(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 asset’s 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 profit and loss 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 for environmental restoration, restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely 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.

• 35 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(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.

(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

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 profit and loss 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.

• 36 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(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.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences is controlled by the Group 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 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 recognised based on the actual usage by customers. The portion of deferred revenue is included under liabilities as deferred income.

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

The Group derives revenue from the provision of value-added telecommunications services (“VAS”) and outsourcing services including software development and call centre services. The Group recognises its revenue net of applicable business taxes and other related taxes. Revenue from the provision of outsourcing services is recognised when services are rendered. Wireless VAS revenue is derived principally from providing mobile phone users with short messaging services, multimedia messaging services and wireless application protocol. These services are substantially billed on a monthly subscription basis or on 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.

• 37 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised either as cash is collected or on a cost-recovery basis as conditions warrant.

(m) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are expensed in the profit and loss statement on a straight-line basis over the period of the lease.

(n) Segmental 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.

(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 Hong Kong 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 profit and loss 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:

• (a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• 38 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

• (b) income and expenses for each profit and loss 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

• (c) 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 profit and loss statement as part of the gain or loss on sale.

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 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 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 bond. 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 2002 to 30 June 2005, the Group classified its investments in securities, other than subsidiaries, associates and jointly controlled entities, as investment securities and other investments.

Investment securities are stated at cost less any provision for impairment losses. The carrying amounts of individual investments are reviewed at each balance sheet date to assess whether the fair values have declined below the carrying amounts. When a decline other than temporary has occurred, the carrying amount of such securities will be reduced to its fair value. The impairment loss is recognised as an expense in the profit and loss statement. This impairment loss is written back to profit and loss statement when the circumstances and events that led to the write-downs or writeoffs cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.

Other investments are carried at fair value. At each balance sheet date, the net unrealised gains or losses arising from the changes in fair values of other investments are recognised in the profit and loss statement. Profits or losses on disposal of other investments, representing the difference between the net sales proceeds and the carrying amounts, are recognised in the profit and loss statement as they arise.

From 1 July 2005 onwards the Group does not hold any investments except for loans and receivables.

• 39 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(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 consolidated 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.

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 reviewed annually. 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 profit and loss statement during the financial period in which they are incurred.

Changes in fair values are recognised in the profit and loss statement.

If an investment property becomes owner-occupied, it is reclassified as fixed assets, 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 fixed assets 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 fixed assets 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 fixed assets under HKAS 16. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the profit and loss statement.

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

• 40 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(s) Licences

Licences are capitalised on the basis of the costs incurred to acquire and bring to use a specific licence. These costs are amortised over their estimated useful lives of 5 years on a straight-line basis. Other costs associated with the licences are recognised as an expense as incurred.

4 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

Prudent liquidity risk management implies maintaining sufficient cash and the availability of the funding through an adequate amount of committed credit facilities. Due to the dynamic 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

The nominal values 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.

• 41 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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 2006 had been lower than management’s estimates at 30 June 2005, 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.

(ii) Estimated useful 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 affected by the estimated useful lives the Group allocates to each type of fixed assets. Management performs annual reviews to assess the appropriateness of their estimated 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.

(iii) Asset retirement obligations

The Group evaluates and recognises, on a regular basis, the fair value of fixed assets retirement obligations which arises from future reinstatement of leased properties upon end of lease terms. To establish the fair value 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.

• 42 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(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. 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.

6 Turnover

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

Turnover Mobile communications services Sales of mobile handsets and accessories Information technology service Gross rental income from investment property Logistics services	30 June 2003 HK$’000 1,492,079 170,249 – – – 1,662,328	Year ended 30 June 2004 HK$’000 1,441,984 256,760 – – – 1,698,744	30 June 2005 HK$’000 1,318,337 386,456 – – 4,261 1,709,054	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 452,063 430,323 129,117 269,728 – 206 – 8 2,543 – 583,723 700,265	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 452,063 430,323 129,117 269,728 – 206 – 8 2,543 – 583,723 700,265
					700,265

7 Segment reporting

For the three years ended 30 June 2003, 2004 and 2005 and four months ended 31 October 2004 and 2005, more than 90% of the Group’s turnover and operating profit were attributable to its mobile telecommunications operations in Hong Kong. Accordingly, no analysis by either business or geographical segment is included.

• 43 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

8 Expenses by nature

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

Auditors’ remuneration Cost of inventories sold Depreciation of fixed assets Operating lease rentals for land and buildings Operating lease rentals for switching and office equipment Operating lease rentals for transmission sites Provision for bad and doubtful debts Staff costs, including directors’ emoluments_(Note 10) Finance costs Interest on secured long-term bank loan Interest on loan from a fellow subsidiary Interest on subscription note Interest on convertible bond Accretion expenses(Note (a))_	30 June 2003 HK$’000 (As restated) 500 160,531 230,135 58,780 17,948 188,319 17,003 204,136 30 June 2003 HK$’000 (As restated) 9,216 – – – 508 9,724	Year ended 30 June 2004 HK$’000 (As restated) 270 261,760 252,673 52,127 9 171,869 12,153 188,384 Year ended 30 June 2004 HK$’000 (As restated) 6,776 – – – 560 7,336	30 June 2005 HK$’000 (As restated) 1,182 388,882 259,258 47,441 – 158,059 11,494 171,065 30 June 2005 HK$’000 (As restated) 3,701 16,226 43,854 885 621 65,287	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 672 475 141,011 259,323 85,568 87,663 16,244 15,777 – – 57,297 57,544 3,534 3,477 60,341 53,728 Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 1,384 794 3,619 12,746 19,989 15,630 449 292 207 229 25,648 29,691	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 672 475 141,011 259,323 85,568 87,663 16,244 15,777 – – 57,297 57,544 3,534 3,477 60,341 53,728 Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 1,384 794 3,619 12,746 19,989 15,630 449 292 207 229 25,648 29,691
					29,691

9 Finance costs

Note (a)

Accretion expenses represented changes in the liability of an asset retirement obligation due to passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period.

• 44 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

10 Staff costs (including directors’ emoluments)

30 June 2003 HK$’000 Wages and salaries 168,863 Bonuses 11,514 Pension costs – defined contribution plans 8,553 Termination benefits 8,064 Medical insurance, staff welfare and other allowances 7,142 Less: Staff costs capitalised as fixed assets – 204,136	Year ended 30 June 2004 HK$’000 159,316 15,504 8,414 7,393 2,812 (5,055) 188,384	30 June 2005 HK$’000 152,179 14,444 3,627 4,062 4,089 (7,336) 171,065	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 52,715 46,034 5,264 5,044 3,096 1,576 1,586 2,300 1,364 853 (3,684) (2,079 60,341 53,728	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 52,715 46,034 5,264 5,044 3,096 1,576 1,586 2,300 1,364 853 (3,684) (2,079 60,341 53,728
				53,728

11 Directors’ and senior management’s emoluments

(a) Directors’ emoluments

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

Fees Other emoluments: Salaries and allowances Bonuses Pension costs – defined contribution plans Compensation for loss of office as director paid by: – the Company – the Company’s subsidiaries	30 June 2003 HK$’000 – – – – – – –	Year ended 30 June 2004 HK$’000 – – – – – – –	30 June 2005 HK$’000 – 3,000 3,672 150 – – 6,822	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) – – 1,000 1,000 2,353 2,963 50 75 – – – – 3,403 4,038	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) – – 1,000 1,000 2,353 2,963 50 75 – – – – 3,403 4,038
					4,038

• 45 -

ACCOUNTANTS’ REPORT ON THE NWM 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 Mr. Hui Chiu Chung, JP	Fees HK$’000 – – – – – – – – – – – –	Year ended 30 June 2003 Basic salaries Provident and fund allowance Bonuses contribution HK$’000 HK$’000 HK$’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Total HK$’000 – – – – – – – – – – –
			–

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 Mr. Hui Chiu Chung, JP	Fees HK$’000 – – – – – – – – – – – –	Year ended 30 June 2004 Basic salaries Provident and fund allowance Bonuses contribution HK$’000 HK$’000 HK$’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Total HK$’000 – – – – – – – – – – –
			–

• 46 -

ACCOUNTANTS’ REPORT ON THE NWM 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 Mr. Hui Chiu Chung, JP	Fees HK$’000 – – – – – – – – – – – –	Year ended 30 June 2005 Basic salaries Provident and fund allowance Bonuses contribution HK$’000 HK$’000 HK$’000 3,000 1,752 150 – 119 – – 49 – – 651 – – 649 – – 51 – – 50 – – 120 – – 119 – – 83 – – 29 – 3,000 3,672 150	Total HK$’000 4,902 119 49 651 649 51 50 120 119 83 29
			6,822

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 Mr. Hui Chiu Chung, JP	Four Fees HK$’000 – – – – – – – – – – – –	months ended Basic salaries and allowance HK$’000 1,000 – – – – – – – – – – 1,000	31 October 2004 (Unaudited) Provident fund Bonuses contribution Total HK$’000 HK$’000 HK$’000 1,720 50 2,770 39 – 39 16 – 16 218 – 218 216 – 216 18 – 18 17 – 17 40 – 40 38 – 38 31 – 31 – – – 2,353 50 3,403	31 October 2004 (Unaudited) Provident fund Bonuses contribution Total HK$’000 HK$’000 HK$’000 1,720 50 2,770 39 – 39 16 – 16 218 – 218 216 – 216 18 – 18 17 – 17 40 – 40 38 – 38 31 – 31 – – – 2,353 50 3,403
				3,403

• 47 -

ACCOUNTANTS’ REPORT ON THE NWM 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 Mr. Hui Chiu Chung, JP	Fees HK$’000 – – – – – – – – – – – –	Four months ended 31 October 2005 Basic salaries Provident and fund allowances Bonuses contribution HK$’000 HK$’000 HK$’000 1,000 2,318 75 – 40 – – 17 – – 217 – – 217 – – 17 – – 17 – – 40 – – 40 – – – – – 40 – 1,000 2,963 75	Total HK$’000 3,393 40 17 217 217 17 17 40 40 – 40
			4,038

No emoluments were paid to the directors of the Company during the years ended 30 June 2004 and 30 June 2003 as the Company was not yet consolidated into the NWPCS Group in the years ended 30 June 2004 and 30 June 2003 (Note 2).

None of the directors of the Company waived any emoluments during the Relevant Periods.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group include one, one, one, no and no director for the four months ended 31 October 2005, 2004 and the years ended 30 June 2005, 2004 and 2003, respectively, whose emoluments are reflected in the analyses presented above. The emoluments payable to the remaining four, four, four, five and five individuals for the four months ended 31 October 2005, 2004 and the years ended 30 June 2005, 2004 and 2003 are as follows:

Salaries and allowances Bonuses Pension costs – defined contribution plans	30 June 2003 HK$’000 9,612 2,857 498 12,967	Year ended 30 June 2004 HK$’000 9,624 3,108 499 13,231	30 June 2005 HK$’000 6,098 2,838 300 9,236	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 2,265 2,121 1,907 1,423 119 111 4,291 3,655	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 2,265 2,121 1,907 1,423 119 111 4,291 3,655
					3,655

• 48 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

The emoluments of the individuals fell within the following bands:

		Number of individuals	Number of individuals	Number of individuals
		Year ended		Four months ended
	30 June	30 June	30 June	31 October		31 October
	2003	2004	2005		2004	2005
				(Unaudited)
Emolument bands
Nil to HK$1,000,000	–	–	–		3	2
HK$1,000,001 to HK$1,500,000	–	–	–		1	2
HK$1,500,001 to HK$2,000,000	2	2	2		–	–
HK$2,000,001 to HK$2,500,000	1	2	1		–	–
HK$2,500,001 to HK$3,000,000	1	–	1		–	–
HK$3,000,001 to HK$3,500,000	–	–	–		–	–
HK$4,000,001 to HK$4,500,000	1	1	–		–	–
HK$4,500,001 to HK$5,000,000	–	–	–		–	–

12 Retirement benefits

The Group contributes to two defined contribution retirement schemes which include an Occupational Retirement Scheme (the “ORSO Scheme”) and a mandatory provident fund scheme (the “MPF Scheme”). 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.

The MPF Scheme has been established under Hong Kong Mandatory Provident Fund Scheme Ordinance in December 2000. The then existing employees of the Group in Hong Kong could elect to join the MPF Scheme, while all new employees joining the Group in Hong Kong from then onwards are required to join 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 aggregate employer’s contributions, net of forfeited contributions, which have been dealt with in the consolidated profit and loss statement during the Relevant Periods are as follows:

Gross scheme contributions Less: Forfeited contributions utilised to offset contributions for the year/period Net scheme contributions	30 June 2003 HK$’000 10,096 (1,543) 8,553	Year ended 30 June 2004 HK$’000 9,959 (1,545) 8,414	30 June 2005 HK$’000 4,420 (793) 3,627	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 6,625 3,806 (2,907) (2,707 3,718 1,099	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 6,625 3,806 (2,907) (2,707 3,718 1,099
					1,099

• 49 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

As at 31 October 2005, 30 June 2005, 2004 and 2003, forfeited contributions of HK$28,000, HK$212,000, HK$102,000 and HK$188,000 respectively were available to reduce future contributions. Contributions totalling nil, HK$1,082,000, HK$3,832,000 and HK$2,554,000 were payable by the Group as at 31 October 2005, 30 June 2005, 2004 and 2003 respectively.

13

Taxation

No provision for Hong Kong profits tax and overseas taxation has been made for the years/periods as the Group has sufficient tax losses brought forward to offset the estimated assessable profit for the four months ended 31 October 2005 and 31 October 2004 and each of the years ended 30 June 2005, 30 June 2004 and 30 June 2003.

The amount of taxation charged to the consolidated profit and loss statement for the Relevant Periods represents:

Current taxation: – Under provisions in prior years/periods Deferred taxation relating to the origination and reversal of temporary differences_(Note 20)_ Deferred taxation resulting from an increase in tax rate Taxation charge	30 June 2003 HK$’000 – 35,327 (22,259) 13,068	Year ended 30 June 2004 HK$’000 – 35,866 – 35,866	30 June 2005 HK$’000 51 21,015 – 21,066	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) – – 5,611 2,265 – – 5,611 2,265	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) – – 5,611 2,265 – – 5,611 2,265
					2,265

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:

30 June 2003 HK$’000 (As restated) Profit/(loss) before taxation 200,943 Calculated at a taxation rate of 17.5% Notional tax on profit before taxation 35,165 Income not subject to taxation (21) Expenses not deductible for taxation purposes 171 Increase in opening net deferred tax assets/liability from an increase in tax rate (22,259) Others 12 Taxation charge 13,068	Year ended 30 June 2004 HK$’000 (As restated) 198,997 17.5% 34,824 (20) 1,062 – – 35,866	30 June 2005 HK$’000 (As restated) 78,120 17.5% 13,671 (92) 7,487 – – 21,066	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 16,767 (4,531 17.5% 17.5% 2,934 (793 (22) (92 2,699 3,150 – – – – 5,611 2,265	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 16,767 (4,531 17.5% 17.5% 2,934 (793 (22) (92 2,699 3,150 – – – – 5,611 2,265
				17.5% (793 (92 3,150 – –
				2,265

• 50 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

14 Earnings/(loss) per share

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

Profit/(loss) attributable to shareholders for purpose of calculating basic earnings/(loss) per share (HK$’000) Increase in net profit for deemed conversion of potential ordinary shares (HK$’000) Adjusted profit for the purpose of calculating diluted earnings per share (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)_ Effect of dilutive potential ordinary shares Weighted average number of ordinary shares for the purpose of calculating diluted earnings per share	30 June 2003 (As restated) 187,875 – 187,875 41,666,666 – 41,666,666	Year ended 30 June 30 June 2004 2005 (As restated) (As restated) 163,131 57,054 – 44,739 163,131 101,793 41,666,666 78,668,311 – 1,009,169,010 41,666,666 1,087,837,321	Four months ended 31 October 31 October 2004 2005 (Unaudited) 11,156 (6,796) 20,438 15,923 31,594 9,127 77,352,196 80,626,876 973,273,770 1,023,730,015 1,050,625,966 1,104,356,891

Notes:

• (a) The weighted average number of ordinary shares for the purpose of calculating the earnings/(loss) per share has been adjusted retrospectively for the one hundred-to-one share consolidation of the Company which took place on 7 July 2004 (Note 28(f)).

• (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 Relevant Periods prescribed for the purposes of calculating the earnings/(loss) per share.

• (c) For the two years ended 30 June 2004 and 2003, no diluted earnings per share are presented as there were no potentially dilutive shares outstanding.

• (d) The diluted loss per share equals the basic loss per share for the four months ended 31 October 2005 as the exercise price of the outstanding share options granted by the Company was higher than the average market price of the share of the Company, and the conversion of the outstanding convertible bond and Subscription Note would have an anti-dilutive effect for the four months ended 31 October 2005.

15 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 post-acquisition loss of HK$16,828,000, loss of HK$77,087,000, profit of HK$108,528,000, nil profit/loss and nil profit/loss for the four months ended 31 October 2005, 2004 and years ended 30 June 2005, 2004 and 2003 respectively.

• 51 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

16 Fixed assets

(a) Group

Cost At 1 July 2002, as previously stated Asset retirement obligations At 1 July 2002, as restated Additions Transfer between classes Disposals At 30 June 2003 , as restated At 30 June 2003, as previously stated Asset retirement obligations At 30 June 2003 , as restated Additions Disposals At 30 June 2004 , as restated At 30 June 2004 , as previously stated Asset retirement obligations At 30 June 2004 , as restated Additions Acquisition of subsidiaries Disposals At 30 June 2005, as restated At 30 June 2005, as previously stated Asset retirement obligations At 30 June 2005, as restated Additions Acquisition of subsidiaries Reclassification Disposals At 31 October 2005	Computer equipment HK$’000 161,285 – 161,285 28,310 (15,838) (379) 173,378 173,378 – 173,378 34,417 (161) 207,634 207,634 – 207,634 8,017 1,231 (1,231) 215,651 215,651 – 215,651 3,936 2,117 (6,190) (188) 215,326	Furniture and Leasehold fittings improvements HK$’000 HK$’000 26,871 40,262 – 157 26,871 40,419 499 1,559 (59) 1,060 (6,209) (1,326) 21,102 41,712 21,102 41,555 – 157 21,102 41,712 634 3,886 (714) (4,631) 21,022 40,967 21,022 40,810 – 157 21,022 40,967 437 4,942 890 64 (1,051) (572) 21,298 45,401 21,298 45,244 – 157 21,298 45,401 151 1,623 229 295 – (10) (7) – 21,671 47,309	Motor vehicles HK$’000 1,944 – 1,944 – (46) – 1,898 1,898 – 1,898 118 (616) 1,400 1,400 – 1,400 394 680 (378) 2,096 2,096 – 2,096 – – – (495) 1,601	Testing equipment HK$’000 28,337 – 28,337 1,100 45 (1,296) 28,186 28,186 – 28,186 18 (29) 28,175 28,175 – 28,175 – – – 28,175 28,175 – 28,175 – – – – 28,175	Digital, switching and transmission system HK$’000 1,861,212 4,056 1,865,268 108,642 14,838 (2,260) 1,986,488 1,982,432 4,056 1,986,488 103,384 (5,912) 2,083,960 2,079,904 4,056 2,083,960 115,498 – (1,867) 2,197,591 2,193,535 4,056 2,197,591 43,185 – (3,649) (1,177) 2,235,950	Construction in progress HK$’000 – – – – – – – – – – 11,295 – 11,295 11,295 – 11,295 11,503 – – 22,798 22,798 – 22,798 3,079 – – – 25,877	Total HK$’000 2,119,911 4,213
							2,124,124 140,110 – (11,470)
							2,252,764 2,248,551 4,213
							2,252,764 153,752 (12,063)
							2,394,453 2,390,240 4,213
							2,394,453 140,791 2,865 (5,099)
							2,533,010 2,528,797 4,213
							2,533,010 51,974 2,641 (9,849) (1,867)
							2,575,909

• 52 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

Accumulated depreciation At 1 July 2002, as previously stated Asset retirement obligations At 1 July 2002, as restated Charge for the year, as previously stated Asset retirement obligations Charge for the year, as restated Disposals At 30 June 2003, as restated At 30 June 2003, as previously stated Asset retirement obligations At 30 June 2003, as restated Charge for the year, as previously stated Asset retirement obligations Charge for the year, as restated Disposals At 30 June 2004, as restated At 30 June 2004, as previously stated Asset retirement obligations At 30 June 2004, as restated Charge for the year, as previously stated Asset retirement obligations Charge for the year, as restated Disposals At 30 June 2005, as restated At 30 June 2005, as previously stated Asset retirement obligations At 30 June 2005, as restated Charge for the period Disposals At 31 October 2005 Net book value At 30 June 2003, as restated At 30 June 2004, as restated At 30 June 2005, as restated At 31 October 2005	Computer equipment HK$’000 72,073 – 72,073 25,181 – 25,181 (366) 96,888 96,888 – 96,888 26,666 – 26,666 (161) 123,393 123,393 – 123,393 27,524 – 27,524 (781) 150,136 150,136 – 150,136 8,192 (188) 158,140 76,490 84,241 65,515 57,186	Furniture and Leasehold fittings improvements HK$’000 HK$’000 19,319 12,289 – 70 19,319 12,359 2,112 7,778 – 17 2,112 7,795 (4,143) (965) 17,288 19,189 17,288 19,102 – 87 17,288 19,189 1,595 7,735 – 17 1,595 7,752 (636) (3,604) 18,247 23,337 18,247 23,233 – 104 18,247 23,337 1,529 7,858 – 17 1,529 7,875 (280) (398) 19,496 30,814 19,496 30,693 – 121 19,496 30,814 386 2,613 (6) – 19,876 33,427 3,814 22,523 2,775 17,630 1,802 14,587 1,795 13,882	Motor vehicles HK$’000 1,606 – 1,606 77 – 77 – 1,683 1,683 – 1,683 103 – 103 (616) 1,170 1,170 – 1,170 279 – 279 (377) 1,072 1,072 – 1,072 91 (495) 668 215 230 1,024 933	Testing equipment HK$’000 25,458 – 25,458 2,117 – 2,117 (1,278) 26,297 26,297 – 26,297 1,197 – 1,197 (29) 27,465 27,465 – 27,465 504 – 504 – 27,969 27,969 – 27,969 96 – 28,065 1,889 710 206 110	Digital, switching and transmission system HK$’000 608,997 930 609,927 192,447 406 192,853 (1,055) 801,725 800,389 1,336 801,725 214,954 406 215,360 (2,480) 1,014,605 1,012,863 1,742 1,014,605 221,141 406 221,547 (930) 1,235,222 1,233,074 2,148 1,235,222 76,285 (124) 1,311,383 1,184,763 1,069,355 962,369 924,567	Construction in progress HK$’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 11,295 22,798 25,877	Total HK$’000 739,742 1,000
							740,742 229,712 423
							230,135 (7,807)
							963,070 961,647 1,423
							963,070 252,250 423
							252,673 (7,526)
							1,208,217 1,206,371 1,846
							1,208,217 258,835 423
							259,258 (2,766)
							1,464,709 1,462,440 2,269
							1,464,709 87,663 (813)
							1,551,559
							1,289,694
							1,186,236
							1,068,301
							1,024,350

• 53 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(b) Company

Cost At 1 January 2002 Additions Disposals At 31 December 2002 Additions Disposals Written off At 31 December 2003 Disposals At 30 June 2005 Disposals Written off At 31 October 2005 Accumulated depreciation At 1 January 2002 Charge for the year At 31 December 2002 Charge for the year Disposals Written off At 31 December 2003 Charge for the period Disposals At 30 June 2005 Disposals At 31 October 2005 Net book value At 31 December 2002 At 31 December 2003 At 30 June 2005 At 31 October 2005	Computer equipment HK$’000 926 426 (11) 1,341 20 – – 1,361 (1,361) – – – – – 373 373 414 – – 787 414 (1,201) – – – 968 574 – –	Furniture and fittings HK$’000 – 799 (7) 792 313 – (205) 900 (900) – – – – – 117 117 177 – (38) 256 180 (436) – – – 675 644 – –	Motor vehicles HK$’000 – 242 – 242 234 (234) – 242 – 242 (242) – – – 32 32 64 (16) – 80 72 – 152 (152) – 210 162 90 –	Total HK$’000 926 1,467 (18) 2,375 567 (234) (205) 2,503 (2,261) 242 (242) – – – 522 522 655 (16) (38) 1,123 666 (1,637) 152 (152) – 1,853 1,380 90 –

• 54 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(c) Investment properties – Group At the beginning of the year/period Acquisition of a subsidiary At the end of the year/period	As at 30 June 2003 HK$’000 – – –	As at 30 June 2004 HK$’000 – – –	As at 30 June 2005 HK$’000 – – –	As at 31 October 2005 HK$’000 – 3,900
				3,900

The investment property of the Group is situated at Office Unit 1002 on 10th Floor, Block B, Jinyun Building, Xizhimen Bei Avenue, Haidian District, Beijing, the PRC. It is held on a mediumterm lease and its existing use is commercial.

It was revalued on an open market value basis on 8 July 2005 by RHL Appraisal Ltd., an independent qualified valuer.

17 Investments in subsidiaries

Company As at As at As at 31 December 31 December 30 June 2002 2003 2005 HK$’000 HK$’000 HK$’000 Unlisted investments, at cost_(note a) 10,939 10,939 1,262,670 Amounts due from subsidiaries(note b) 329,852 340,737 579,876 Amounts due to subsidiaries (note c)_ (2,085) (2,197) (2,203) 338,706 349,479 1,840,343 Less: Provision for impairment (86,900) (212,167) (318,958) 251,806 137,312 1,521,385	As at 31 October 2005 HK$’000 1,283,670 579,316 (2,198)
	1,860,788 (318,958)
	1,541,830

• 55 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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
	incorporation	issued share	held
Name	and operation	capital	indirectly	Principal activities
New World	Hong Kong	1,000,000 Ordinary	100%	Provision of mobile
PCS Limited		shares of HK$1		communications
		each		services and sales
				of mobile handsets
				and accessories
Jetco	Hong Kong	1,250,000 Ordinary	100%	Investment holding and
Technologies		shares of HK$1 each		property investment
Limited
上海易圖通	The People’s	Registered capital of	80%	Provision of Internet
信息技術	Republic of	Renminbi (“RMB”)		content services and
有限公司	China	10,000,000		telecommunication
	(the “PRC”)			value-added
				services in the PRC

• (b) The amounts due from subsidiaries are unsecured and interest-free. The Company has confirmed that it will not request for repayment of the amounts due from the subsidiaries, of HK$579,316,000 outstanding as at 31 October 2005, within the next twelve months from the date of this report.

• (c) The amounts due to subsidiaries are unsecured and interest-free. The subsidiaries have confirmed that they will not request for repayment of the amounts due to them, of HK$2,198,000 outstanding as at 31 October 2005, within the next twelve months from the date of this report.

18 Investments in associated companies

			Group
	As at	As at		As at	As at
	30 June	30 June		30 June	31 October
	2003	2004		2005	2005
	HK$’000	HK$’000		HK$’000	HK$’000
Share of net assets	–	–		–	–

• 56 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

Particulars of associated companies are as follows:

		Particulars of
	Place of	issued share
	incorporation/	capital/
	registration	registered	Interest
Name	and operation	capital	held	Principal activities
Han International	British Virgin	Ordinary shares	30%	Investment holding
Consulting	Islands	of US$5,000
Company
Limited
漢普管理諮詢	PRC	Registered	30%	Logistics technology
（中國）有限		capital of		business
公司		US$6,000,000

These associated companies’ financial year end date is 31 December, which is not coterminous with the Group.

19 Intangible assets

At 1 July 2002, 2003 and 2004 Acquisition of Logistics Group_(Notes 2 and 32) At 30 June 2005, as previously stated Split of equity component from convertible bond At 30 June 2005, as restated Acquisition of New World CyberBase Solutions (BVI) Limited (“NWCS”)(Note 32)_ At 31 October 2005	Goodwill HK$’000 – 65,996 65,996 (32) 65,964 5,525 71,489	Licences HK$’000 – – – – – 1,470 1,470	Total HK$’000 – 65,996
			65,996 (32)
			65,964 6,995
			72,959

For the purpose of the impairment assessment of goodwill, the Group is considered a cash generating unit. The recoverable amount of the cash generating unit has been determined based on the higher of its fair value less cost to sell, using an observable market price for the unit, and value-in-use calculation.

• 57 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

20 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 offset amounts are as follows:

Deferred tax assets: – Deferred tax assets to be recovered after more than twelve months – Deferred tax assets to be recovered within twelve months Deferred tax liabilities: – Deferred tax liabilities to be recovered after more than twelve months – Deferred tax liabilities to be recovered within twelve months	As at 30 June 2003 HK$’000 (340,909) (15,748) (356,657) 129,624 2,680 132,304	As at 30 June 2004 HK$’000 (249,715) (53,471) (303,186) 97,094 17,605 114,699	As at 30 June 2005 HK$’000 (222,292) (40,447) (262,739) 75,835 19,432 95,267	As at 31 October 2005 HK$’000 (220,463) (31,707) (252,170) 62,051 24,912 86,963

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

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

At the beginning of the year/period Deferred taxation charged to profit and loss statement_(Note 13)_ At the end of the year/period	As at 30 June 2003 HK$’000 237,421 (13,068) 224,353	As at 30 June 2004 HK$’000 224,353 (35,866) 188,487	As at 30 June 2005 HK$’000 188,487 (21,015) 167,472	As at 31 October 2005 HK$’000 167,472 (2,265) 165,207

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 carry-forwards can be utilised.

• 58 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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

Deferred tax assets At 1 July 2002 Charged to profit and loss statement At 30 June 2003 Charged to profit and loss statement At 30 June 2004 Charged to profit and loss statement At 30 June 2005 Charged to profit and loss statement At 31 October 2005 Deferred tax liabilities At 1 July 2002 Credited to profit and loss statement At 30 June 2003 Credited to profit and loss statement At 30 June 2004 Credited to profit and loss statement At 30 June 2005 Credited to profit and loss statement At 31 October 2005 Inventories As at 30 June 2003 HK$’000 Merchandise 11,520	Provision HK$’000 3,740 (267) 3,473 (804) 2,669 (593) 2,076 (110) 1,966 As at 30 June 2004 HK$’000 29,657	Group Tax losses Total HK$’000 HK$’000 368,665 372,405 (15,481) (15,748) 353,184 356,657 (52,667) (53,471) 300,517 303,186 (39,854) (40,447) 260,663 262,739 (10,459) (10,569) 250,204 252,170 Group accelerated tax depreciation HK$’000 134,984 (2,680) 132,304 (17,605) 114,699 (19,432) 95,267 (8,304) 86,963 As at As at 30 June 31 October 2005 2005 HK$’000 HK$’000 38,024 26,326

21 Inventories

• 59 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

22 Trade receivables

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

Current – 30 days 31 – 60 days 61 – 90 days Over 90 days Less: Provision for doubtful debts	As at 30 June 2003 HK$’000 16,810 10,976 4,236 18,903 50,925 (19,850) 31,075	As at 30 June 2004 HK$’000 60,066 14,015 4,776 19,614 98,471 (15,253) 83,218	As at 30 June 2005 HK$’000 71,091 13,455 9,469 11,866 105,881 (11,866) 94,015	As at 31 October 2005 HK$’000 71,887 15,476 6,547 19,689
				113,599 (11,234
				102,365

23 Amounts due from/(to) fellow subsidiaries and the ultimate holding company

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

24 Amounts due from/(to) related companies

The balances represented trade receivables and payables which are unsecured, interest-free and have no fixed terms of repayment.

Mr. To Hin Tsun, Gerald, a director of the Company, is a director of New World CyberBase Limited.

Dr. Cheng Kar Shun, Henry and Mr. Lo Lin Shing, Simon, the directors of the Company, are the directors of Cyber On-Air (Asia) Limited.

25 Cash and bank balances – Group

The analysis of cash and bank balances is as follows:

Balances with original maturities of three months or less_(note a) Balances with original maturities of more than three months(note b)_	As at 30 June 2003 HK$’000 113,640 – 113,640	As at 30 June 2004 HK$’000 94,444 – 94,444	As at 30 June 2005 HK$’000 116,534 – 116,534	As at 31 October 2005 HK$’000 75,278 787
				76,065

• 60 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

Notes:

• (a) Included in the balances are balances with the PRC banks totalling HK$4,859,000. HK$226,000, Nil and Nil which were denominated in RMB as at 31 October 2005 and 30 June 2005, 2004 and 2003 respectively. The remittance of these balances outside the PRC is subject to foreign exchange control rules and regulations of the PRC.

• (b) As at 31 October 2005, the court has taken action to freeze certain bank balances of certain subsidiaries of the Group in the amount of approximately RMB818,000 for claims filed against the subsidiaries whose directors have consulted the lawyers who considered that these claims were without merits.

26 Trade payables

The ageing analysis of the trade payables is as follows:

Current – 30 days 31 – 60 days 61 – 90 days Over 90 days Long-term liabilities Bank loan, secured Less: Amount repayable within one year shown under current liabilities	As at 30 June 2003 HK$’000 2,096 911 553 39,118 42,678 As at 30 June 2003 HK$’000 642,500 (270,000) 372,500	As at 30 June 2004 HK$’000 19,651 6,473 3,692 14,489 44,305 As at 30 June 2004 HK$’000 372,500 (270,000) 102,500	As at 30 June 2005 HK$’000 62,013 26,100 2,345 17,628 108,086 As at 30 June 2005 HK$’000 102,500 (102,500) –	As at 31 October 2005 HK$’000 56,866 44,836 32,285 40,169
				174,156
				As at 31 October 2005 HK$’000 – –
				–

27 Long-term liabilities

• 61 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

The bank loan was denominated in Hong Kong dollar and interest bearing at 0.65% above Hong Kong Interbank Offered Rate (“HIBOR”). It was secured by:

• (i) the cash and bank balance (“Charged Accounts”) as a continuing security for the repayment of the above secured bank loan. The Company procured that the aggregate balance of these Charged Accounts shall not at any time be less that the debt service requirement which was approximately HK$24,000,000 at 30 June 2005, 30 June 2004 and 30 June 2003 as a surety for the monthly repayment of the bank loan principal and interest; and

• (ii) the pledge of the entire issued share capital of a subsidiary of the Company.

The carrying value of the bank loan approximated its fair value at each year end.

On 31 October 2005, the Group repaid the remaining balance of HK$102.5 million.

28 Capital

At 1 July 2002, 30 June 2003 and 30 June 2004 Issue of shares_(note b) At 30 June 2005 Issue of shares(note g) At 31 October 2005 _Authorised: Ordinary shares of HK$0.01 each at 1 January 2002, 2003 and 2004 Creation of additional shares_(note e) Share consolidation(note f) Ordinary shares of HK$1.00 each at 30 June 2005 _Issued and fully paid: Ordinary shares of HK$0.01 each at 1 January 2002 Subscription for new shares_(note c) Shares issued for acquisition of Fusion Tech Holding Limited (“Fusion Tech”)(note d) Ordinary shares of HK$0.01 each at 1 January 2003 Issuance of new shares upon partial conversion of convertible bond(Note 30) Ordinary shares of HK$0.01 each at 1 January 2004 Issue of Subscription Shares(Note 2(a)) Share consolidation(note f) Ordinary shares of HK$1.00 each at 30 June 2005 Issue of shares(note g)_ Ordinary shares of HK$1.00 each at 31 October 2005	Company No. of shares 10,000,000,000 190,000,000,000 (198,000,000,000) 2,000,000,000 3,182,434,000 159,121,700 300,000,000 3,641,555,700 110,000,000 3,751,555,700 4,166,666,667 (7,839,040,144) 79,182,223 16,153,846 95,336,069	Company No. of shares 10,000,000,000 190,000,000,000 (198,000,000,000) 2,000,000,000 3,182,434,000 159,121,700 300,000,000 3,641,555,700 110,000,000 3,751,555,700 4,166,666,667 (7,839,040,144) 79,182,223 16,153,846 95,336,069	Group (note a) HK$’000 1 299
			300 16,154
			16,454
			HK$’000 100,000 1,900,000 –
			2,000,000
			31,824 1,591 3,000
			36,415 1,100
			37,515 41,667 –
			79,182 16,154
			95,336

• 62 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

Notes:

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

• (b) 298,911,000 shares were issued on 6 July 2004 by the legal subsidiary, NWPCS Holdings, for capitalisation of loan as mentioned in Note 31.

• (c) Pursuant to a subscription agreement dated 21 March 2002 made between Grade Win International Limited and the Company, 159,121,700 new ordinary shares of HK$0.01 each in the capital of the Company were issued on 10 May 2002 at a price of approximately HK$0.1332 per share. A sum of approximately HK$20,000,000, net of share issue expenses, was raised and used by the Group for general working capital purposes. The excess of the proceeds over the nominal value of the shares amounting to HK$19,604,000 was fully credited to the share premium account. These shares rank pari passu with the existing shares.

• (d) On 23 October 2002, 300,000,000 new ordinary shares at HK$0.01 each in the capital of the Company were issued at a price of HK$0.15 per share for the acquisition of 45.702% interest in Fusion Tech from Southern Victory Developments Limited. The excess of the proceeds over the nominal value of the shares amounting to HK$20,400,000 was fully credited to the share premium account. These shares rank pari passu with the existing shares.

• (e) 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.

• (f) 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.

• (g) 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 entired issued share capital of New World CyberBase Solutions (BVI) Limited (“NWCS”).

• (h) 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 Exchange (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 Company has no legal or contractual obligation to repurchase or settle the outstanding share options in cash.

• 63 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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 in its 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 for a share in respect of any option granted shall be a price determined by the board of directors in its 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.

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

1998 Share Option Scheme:

Exercise Exercise period price HK$ At 1 January 2002 15.8.2000 to 14.8.2003 0.284_(note 1) Granted 9.2.2002 to 8.2.2008 0.150(note 2) Lapsed 9.2.2002 to 8.2.2008 0.150(note 2) At 31 December 2002 Lapsed 15.8.2000 to 14.8.2003 0.284 9.2.2002 to 8.2.2008 0.150 At 31 December 2003 Adjusted(Note 3)_ 9.2.2002 to 8.2.2008 0.150 Lapsed 9.2.2002 to 8.2.2008 0.150 At 30 June 2005 and 31 October 2005	Number of options 114,000,000 50,300,000 (4,400,000) 159,900,000 (114,000,000) (900,000) 45,000,000 (44,352,000) (448,000) 200,000

Notes:

• (1) The price of Company’s shares at grant date of options was HK$0.38.

• (2) The price of the Company’s shares at grant date of options was HK$0.148.

• 64 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

• (3) The number as well as the exercise price of these share options were adjusted on 28 July 2004 as a result of the completion of the subscription agreement dated 29 March 2004 (Note 2) and the consolidation of the Company’s shares from every 100 issued or unissued ordinary shares of HK$0.01 each into 1 consolidated ordinary share of HK$1.00 each.

2002 Share Option Scheme:

Exercise period At 1 January 2002, 31 December 2002 and 31 December 2003 – Granted 28.1.2005 to 31.12.2010 8.4.2005 to 31.12.2010 At 30 June 2005 Lapsed 8.4.2005 to 31.12.2010 At 31 October 2005	Exercise price HK$ – 1.260 1.276 1.260	Number of Options – 2,916,000 78,000
		2,994,000 (78,000
		2,916,000

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

Exercise Exercise period price HK$ Directors 15.8.2000 to 14.8.2003 0.284 9.2.2002 to 8.2.2008 2.440 28.1.2005 to 31.12.2010 1.260 28.1.2005 to 31.12.2010 1.260	31 December 2002 Number of options 114,000,000 45,900,000 – – 159,900,000	31 December 2003 Number of options – 45,000,000 – – 45,000,000	30 June 2005 Number of options – 200,000 2,916,000 78,000 3,194,000	31 October 2005 Number of options – 200,000 2,838,000 78,000
				3,116,000

Under the exemption of HKFRS 2, all the options above have not been fair valued as they were fully vested prior to 1 July 2005, the date of the adoption of HKFRS 2.

All the outstanding options are exercisable during the respective exercise periods stated above.

• 65 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

29 Other reserves

(a) Group

Share premium Consolidation Convertible (Note 28(a)) reserve bond reserves HK$’000 HK$’000 HK$’000 At 1 July 2002, 2003 and 2004 999 – – Premium on issue of share_(Note 28(b)) 913,793 – – Arising from reverse acquisition(Note 2) – (1,115,538) – Renewal of convertible bond(Note 3(a)) – – 40 Issue of Subscription Note(Note 3(a)) – – 112,655 At 30 June 2005, as restated 914,792 (1,115,538) 112,695 At 30 June 2005, as previously stated 914,792 (1,115,538) – Renewal of convertible bond(Note 3(a)) – – 40 Issue of Subscription Note(Note 3(a)) – – 112,655 At 30 June 2005, as restated 914,792 (1,115,538) 112,695 Premium on issue of shares(Note 28(g))_ 4,846 – – At 31 October 2005 919,638 (1,115,538) 112,695

Total HK$’000 999 913,793 (1,115,538) 40 112,655 (88,051) (200,746) 40 112,655 (88,051) 4,846 (83,205)

• 66 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(b) Company

At 1 January 2002, as previously stated Equity component of convertible bond At 1 January 2002, as restated Premium on issue of shares Share issue expenses At 31 December 2002, as restated At 31 December 2002, as previously stated Equity component of convertible bond At 31 December 2002, as restated Partial conversion of convertible bond_(Note 30) At 31 December 2003, as restated At 31 December 2003, as previously stated Equity component of convertible bond At 31 December 2003, as restated Capital reduction(Note) Renewal of convertible bond Issue of Subscription Note At 30 June 2005, as restated At 30 June 2005, as previously stated Renewal of convertible bond Issue of Subscription Note At 30 June 2005, as restated Issue of shares(Note 28(g))_ At 31 October 2005	Share Convertible premium bond reserves HK$’000 HK$’000 401,584 – – 1,849 401,584 1,849 40,004 – (718) – 440,870 1,849 440,870 – – 1,849 440,870 1,849 9,900 (518) 450,770 1,331 450,770 – – 1,331 450,770 1,331 (444,168) – – (1,291) – 112,655 6,602 112,695 6,602 – – 40 – 112,655 6,602 112,695 4,846 – 11,448 112,695	Total HK$’000 401,584 1,849 403,433 40,004 (718) 442,719 440,870 1,849 442,719 9,382 452,101 450,770 1,331 452,101 (444,168) (1,291) 112,655 119,297 6,602 40 112,655 119,297 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.

• 67 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

30 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 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 has 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 28(f) respectively.

The fair values of the liability component and the equity conversion component were determined at issuance/ renewal of the bonds.

The fair value of the liability component, included in long-term borrowings, 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 (Note 29) net of deferred income taxes, if any.

The fair value of the liability component of the Convertible Bond as at 31 December 2002, 31 December 2003, 30 June 2005 and 31 October 2005 approximate their carrying values respectively.

Interest expenses on the Convertible Bond are calculated using the effective interest method by applying the effective interest rates of 4.72% per annum and 3.04% per annum before and after the renewal of the Convertible Bond respectively to the liability component.

31 Promissory note issued to the immediate holding company/amounts due to the immediate holding company and the ultimate holding company/loan from a fellow subsidiary – Group

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 28(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 will be repayable upon demand after 29 September 2005 and interest bearing at 0.65% above HIBOR per annum.

The fellow subsidiary has confirmed that it will not request for repayment of loan of HK$877,500,000 outstanding as at 31 October 2005 before 1 April 2007.

• 68 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

32 Business combinations

As mentioned in Note 2, NWPCS Holdings was deemed to have acquired the Logistics Group on 6 July 2004, and the allocation of the cost of acquisition of the Logistics Group is as follows:

Net assets acquired: Fixed assets Investment securities Trading securities Cash and bank balances Trade receivables and other current assets Accruals and other payables Convertible bond, as previously stated Fair value adjustments Convertible bond, as restated Consideration paid: Cash consideration Subscription Note issued Reverse acquisition adjustment_(Note 2)_ Deemed consideration Professional fee incurred for the acquisition Goodwill	HK$’000 28,286 (32)	HK$’000 2,865 1,520 800 97,361 7,340 (11,403) (28,254) 70,229 --------------- 50,000 1,200,000 (1,115,538) 134,462 1,731 136,193 --------------- 65,964

As a result of the acquisition of the Logistics Group, the NWPCS Group as part of the Group comprising the Company, a listed company on the Stock Exchange, 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 consideration.

The acquiree’s book value of net assets acquired at the date of acquisition approximated its fair value as disclosed above.

Turnover and post acquisition loss contributed by the business of the Logistics Group for the year ended 30 June 2005 were HK$4,261,000 and HK$47,092,000, respectively.

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, a wholly-owned subsidiary of NWC, and interest of NWC in the interestfree 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 issued price of HK$1.3 per share, representing a discount of approximately 1.2% to the 10-day 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.

• 69 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

The allocation of the cost of acquisition of NWCS and its subsidiaries (the “NWPCS Group”) is as follows:

Net assets acquired at fair value Investment properties Fixed assets Intangible assets Trade receivables and other current assets Cash and bank balances Accruals and other payables Cost of acquisition Purchase consideration Goodwill	HK$’000 3,900 2,641 1,470 4,719 10,683 (7,938) 15,475 ---------------- 21,000 ---------------- 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 acquiree’s book value of net assets acquired at the date of acquisition approximated its fair value as disclosed above.

Turnover and post acquisition loss contributed by the acquired business to the Group for the four months 31 October 2005 were HK$214,000 and HK$691,000 respectively.

Had the above acquisition been effected at the beginning of fiscal 2006, the revenue and the loss attributable to shareholders of the Group for the four months ended 31 October 2005 would be HK$6,573,000 and HK$5,477,000 respectively.

• 70 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

33 Notes to consolidated cash flow statements

(a) Reconciliation of profit/(loss) before taxation to net cash inflow generated from operations

30 June 2003 HK$’000 (As restated) Profit/(loss) before taxation 200,943 Depreciation 230,135 Loss on disposal of fixed assets 3,601 Gain on disposal of other investments – Gain on disposal of investment securities – Interest income (128) Interest expenses 9,724 Operating profit before working capital changes 444,275 (Increase)/decrease in inventories (1,485) Decrease/(increase) in trade receivables 14,299 Decrease/(Increase) in prepayments, other receivables and handset subsidies 2,002 Decrease/(increase) in rental and other deposits 12,491 (Increase)/decrease in amounts due from fellow subsidiaries and a related company (1,378) Decrease in amount due from an associated company – (Decrease)/increase in trade payables (21,987) Decrease in accrued charges, other payables, deposits received and deferred income (24,778) Net cash inflow generated from operations 423,439	Year ended 30 June 2004 HK$’000 (As restated) 198,997 252,673 3,690 – – (115) 7,336 462,581 (18,137) 8,965 (10,171) 6,922 4,039 – 1,637 (45,456) 410,380	30 June 2005 HK$’000 (As restated) 78,120 259,258 2,328 (100) (2,089) (635) 65,287 402,169 (8,367) (2,184) (51,023) (4,113) 6,486 – 63,781 (10,540) 396,209	Four months ended 31 October 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 16,767 (4,531) 85,568 87,663 – 755 (100) – (2,089) – (164) (533) 25,648 29,691 125,630 113,045 13,726 11,698 16,640 (5,336) (29,058) (38,595) (1,566) (611) 3,789 (2,745) 266 – 14,146 64,868 (6,370) (21,581) 137,203 120,743

• 71 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

(b) Net cash inflow from acquisition of subsidiaries

Cash and cash equivalents acquired Cash consideration paid Professional fee paid Contingent liabilities – Group Bank guarantees in lieu of deposits	30 June 2003 HK$’000 – – – – As at 30 June 2003 HK$’000 –	Year ended Four months ended 30 June 30 June 31 October 31 October 2004 2005 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) – 97,361 97,361 9,896 – (50,000) (50,000) – – (1,731) (1,731) – – 45,630 45,630 9,896 As at As at As at 30 June 30 June 31 October 2004 2005 2005 HK$’000 HK$’000 HK$’000 9,126 8,528 8,685

34 Contingent liabilities – Group

Directors anticipate that no material liabilities will arise from the above bank guarantees which arose in the ordinary course of business.

35 Commitments

(a) Capital commitments

Contracted but not provided for Authorised but not contracted for	As at 30 June 2003 HK$’000 84,571 – 84,571	Group As at As at 30 June 30 June 2004 2005 HK$’000 HK$’000 249,205 123,680 15,340 138,284 264,545 261,964	As at 31 October 2005 HK$’000 97,941 67,732
			165,673

• 72 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

• (b) Commitments under operating leases

• (i) 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	As at 30 June 2003 HK$’000 153,335 68,636 3,091 225,062	Group As at As at 30 June 30 June 2004 2005 HK$’000 HK$’000 136,842 167,406 60,878 98,298 6,524 12,458 204,244 278,162	As at 31 October 2005 HK$’000 158,562 106,845 31,214
			296,621

• (ii) The Group had total future aggregate minimum lease rental receivable under non-cancellable operating leases which expire as follows:

Land and buildings Within one year	As at 30 June 2003 HK$’000 – –	Group As at As at 30 June 30 June 2004 2005 HK$’000 HK$’000 – – – –	As at 31 October 2005 HK$’000 118
			118

• 73 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

36 Related party transactions

The Group is controlled by PPG (incorporated in the British Virgin Islands), which owns 55.84% of the Company’s shares. The remaining 44.16% of the shares are widely held. The ultimate parent of the Group is NWD (incorporated in Hong Kong).

The following transactions were carried out with related parties:

• (i) Sales of goods and services

			Year ended	Year ended		Four months	ended
		30 June		30 June	30 June	31 October	31 October
		2003		2004	2005	2004	2005
	Note	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000
Equipment rental income from
a fellow subsidiary	(a)	2,908		–	–	–	–
Reimbursement of rental expenses
from a fellow subsidiary	(b)	7,878		–	–	–	–
Service fee income from
fellow subsidiaries	(c)	2,756		958	2,566	1,783	1,583

Notes:

• (a) Equipment rental income was calculated by applying a fixed rate, as agreed by the parties involved, on the depreciation charge of the shared equipment.

• (b) Reimbursement of rental expenses was based on the occupancy of floor area of the parties involved.

• (c) Service fee was subject to the terms of the contracts entered by the parties involved.

• (ii) Purchase of goods and services

			Year ended		Four months	ended
		30 June	30 June	30 June	31 October	31 October
		2003	2004	2005	2004	2005
	Note	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Purchase of services from
fellow subsidiaries	(a)	(101,008)	(103,985)	(38,794)	(14,331)	(9,124)
Purchase of fixed assets from
– fellow subsidiaries	(a)	(697)	(697)	–	–	–
– a related company	(a)	–	–	(6,320)	(918)	(1,229)
Rental expenses to
fellow subsidiaries	(b)	(33,041)	(26,242)	(24,431)	(7,668)	(7,819)
Loan interest paid/payable to
a fellow subsidiary	(c)	–	–	(16,226)	(3,619)	(12,746)
Subscription note interest paid/
payable to PPG	(d)	–	–	(8,877)	(2,910)	(3,033)
Convertible bond interest paid/
payable to NWCBN	(e)	–	–	(849)	(286)	(286)
Reimbursement of office
administrative expenses and
fee charged from
a related company	(f)	–	(3,242)	(5,656)	(2,770)	(2,874)
Acquisition of interest in
NWCS from NWC	32	–	–	–	–	(21,000)

• 74 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

• (a) Purchases were conducted in the normal course of business which are subject to the contract terms as negotiated by the parties involved.

• (b) Rental expenses were charged a fixed monthly fee subject to the terms of the contract signed by the parties involved.

• (c) The interest was charged at 0.65% above HIBOR per annum.

• (d) Interest on the Subscription Note was charged at 0.75% per annum.

• (e) Interest on the Convertible Bond was charged at 3% per annum and was payable semiannually in arrears.

• (f) The reimbursement of office administrative expenses were charged on actual cost basis and the fee were calculated at 15% mark-up on actual incurred.

• (iii) Key management compensation

Management considers remuneration to all key management of the Group has already been disclosed on Note 11(b).

• (iv) Year-end/period-end balances arising from sales/purchases of goods/services

Note Receivables from fellow subsidiaries 23 Payables to other related companies 24	As at 30 June 2003 HK$’000 7,137 –	As at 30 June 2004 HK$’000 3,098 –	As at As at 30 June 31 October 2005 2005 HK$’000 HK$’000 29 29 846 537

III SUBSEQUENT EVENT

On 8 December 2005, the Company entered into the Merger Agreement with Telstra CSL Limited (“Telstra CSL”) and Telstra Holdings (Bermuda) No. 2 Limited, pursuant to which Telstra CSL has agreed to issue and allot and the Company has agreed to procure NW SPV to subscribe for new shares in Telstra CSL (the “Telstra CSL Acquisition”), which will represent 23.6% of the enlarged share capital of Telstra CSL upon completion, in exchange for the transfer of all of the Company’s interests in NWPCS Holdings to Telstra CSL (the “Disposal”) and a cash payment of HK$244.024 million by the Company to Telstra CSL. The transactions constitute a very substantial disposal and a very substantial acquisition under Chapter 14 of the Listing Rules. As such, the completion of the Merger Agreement (the “Completion”) is subject to, amongst others, the approval by the shareholders of the Company. Further, the Company has entered into the subscription agreements whereby the Company will subscribe for new shares in NWPCS Holdings in cash immediately prior to Completion, which will provide the NWPCS Group with funds (i) to retire their outstanding debts as at the date of Completion; and (ii) for a certain level of negative working capital as at the date of Completion. As at 31 October 2005, the amount of outstanding debts of the NWPCS Group was approximately HK$1.13 billion. The board of directors of NWD advises that a shareholder’s loan will be advanced by NWD to the Company to enable the Company to satisfy the payment of the subscription amount and the repayment of debt owing to NWD and its subsidiaries. The above-mentioned shareholder’s loan, if advanced by NWD to the Company, will be unsecured and has no definite term of repayment.

• 75 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

Upon Completion, the Company will account for the Telstra CSL Acquisition as an investment in an associate, and the NWPCS Group will cease to be subsidiaries of the Company upon Completion. Since the Merger Agreement is subject to Completion, the gain and loss arising from the Disposal, the purchase consideration for the Telstra CSL Acquisition and the resulting goodwill, if any, cannot be determined as at the date of this Report.

The turnover, results, cash flows and net assets of the NWPCS Group are as follows:

Turnover Other revenue Operating costs Operating profit Finance costs Profit/(loss) before taxation Taxation Profit/(loss) for the year Net operating cash inflow Net investing cash outflow Net financing cash outflow Total net cash inflow/ (outflow) Fixed assets Deferred taxation Rental and other deposits Current assets Total assets Current liabilities Non-current liabilities Total liabilities Net liabilities	30 June 2003 HK$’000 (As restated) 1,662,328 128 (1,451,789) 210,667 (9,724) 200,943 (13,068) 187,875 414,223 (139,920) (200,205) 74,098 As at 30 June 2003 HK$’000 (As restated) 1,289,694 224,353 14,121 210,678 1,738,846 (1,469,354) (1,311,450) (2,780,804) (1,041,958)	Year ended Four months ended 30 June 30 June 31 October 31 October 2004 2005 2004 2005 HK$’000 HK$’000 HK$’000 HK$’000 (As restated) (As restated) (Unaudited) 1,698,744 1,704,793 581,180 700,051 115 527 124 439 (1,492,526) (1,559,612) (538,626) (673,707) 206,333 145,708 42,678 26,783 (7,336) (64,402) (25,199) (29,399) 198,997 81,306 17,479 (2,616) (35,866) (21,015) (5,611) (2,265) 163,131 60,291 11,868 (4,881) 403,604 388,520 135,353 103,375 (152,790) (140,259) (60,167) (51,236) (270,010) (239,075) (55,755) (103,339) (19,196) 9,186 19,431 (51,200) As at As at As at 30 June 2004 30 June 2005 31 October 2005 HK$’000 HK$’000 HK$’000 (As restated) (As restated) 1,186,236 1,067,750 1,021,245 188,487 167,472 165,207 10,659 8,882 7,900 264,434 351,964 334,668 1,649,816 1,596,068 1,529,020 (1,486,643) (439,131) (461,773) (1,042,000) (1,242,527) (1,142,088) (2,528,643) (1,681,658) (1,603,861) (878,827) (85,590) (74,841)

• 76 -

ACCOUNTANTS’ REPORT ON THE NWM GROUP

APPENDIX I

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 2005. 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 2005.

Yours faithfully PricewaterhouseCoopers

Certified Public Accountants Hong Kong

• 77 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

(A) WORKING CAPITAL

The NWM Board is of the opinion that after taking into account the existing financing available to the Enlarged Group, the working capital requirements, the expected cash flows of the Enlarged Group, the Enlarged Group will, following Completion, have sufficient working capital for its present requirements for the next 12 months from the date of this circular in the absence of unforeseen material circumstances.

(B) MATERIAL ADVERSE CHANGES

The NWM Board confirms that there have not been any material adverse changes in the financial or trading position or prospects of the NWM Group since 31 October 2005, the date to which the last published audited accounts of the NWM Group were made up.

(C) INDEBTEDNESS

At the close of business on 31 December 2005 (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular), the NWM Group had outstanding borrowings of HK$2,120,340,000, comprising unsecured loans from a fellow subsidiary of HK$60,000,000 repayable within one year and HK$877,500,000 of which the fellow subsidiary has confirmed that it will not request for repayment before 1 April 2007, an unsecured convertible note to the immediately holding company of HK$1,154,856,000 and an unsecured convertible bond of HK$27,984,000 to a fellow subsidiary which are both repayable within a period of more than one year but not exceeding two years.

At the close of business on 31 December 2005, the NWM Group had aggregate contingent liabilities of HK$8,682,000, all of which was related to the issue of bank guarantees given in lieu of deposits.

Save as aforesaid or as otherwise mentioned herein and apart from intra-group liabilities and normal trade payables in the ordinary course of business, at the close of business on 31 December 2005, the NWM 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 NWM Group since 31 December 2005. Foreign currency amounts have, for the purpose of this indebtedness statement, been translated into Hong Kong dollars at the applicable rate of exchange ruling at the close of business on 31 December 2005.

• 78 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

(D) MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS OF THE NWM GROUP

Year ended 30 June 2003

As a result of the Reverse Acquisition, the financial information of the NWM Group for the years ended 30 June 2003 and 2002 represented that of the NWPCS Group.

Financial review

For the year ended 30 June 2003, the NWM Group’s consolidated turnover slightly increased by HK$43 million to HK$1,662 million (2001/02: HK$1,619 million). The turnover of the NWM Group was contributed by mobile communications services revenue and sales of handsets and accessories.

The gross margin increased to HK$960 million, an increase of HK$83 million from that for the year ended 30 June 2002 of HK$877 million. The operating expenses, excluding depreciation and amortisation charge (“OPEX”) amounted to HK$520 million, a decrease of HK$95 million as compared with HK$615 million for the previous year. The NWM Group’s EBITDA for the year ended 30 June 2003 increased to HK$441 million. (2001/02: HK$354 million).

Finance costs for the year ended 30 June 2003 decreased to HK$10 million. (2001/02: HK$39 million).

The NWM Group’s profit attributable to shareholders increased to HK$188 million (2001/ 02: HK$86 million).

Capital structure, liquidity and financial resources

The total borrowings of the NWM Group amounted to HK$2,435 million (30 June 2002: HK$2,634 million). The borrowings comprised a loan of HK$934 million from the immediate holding company, a promissory note of HK$858 million issued to the immediate holding company and bank loans of HK$643 million. These borrowings are denominated in Hong Kong dollars and are interest free, interest free and bearing interest at 0.65% above HIBOR per annum respectively.

As at 30 June 2003, the NWM Group’s cash and bank balances amounted to HK$114 million (30 June 2002: HK$40 million).

Capital expenditure of the NWM Group amounted to HK$140 million for the year (2001/02: HK$212 million).

The NWM Group adopts a conservative and balanced treasury policy. Any surplus funds placed as deposit with banks in Hong Kong are maintained in Hong Kong dollars.

• 79 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

The functional currency of the NWM Group is Hong Kong dollar. The NWM Group’s business transactions, monetary assets and liabilities are mainly denominated in Hong Kong dollar. The NWM Group does not therefore have any significant exposure to foreign currency gains and losses. It is the NWM Group’s treasury policy to manage its foreign currency exposure whenever its financial impact is material to the NWM Group. The NWM Group does not conduct any foreign currency speculative activities.

Employees and remuneration policy

As at 30 June 2003, the NWM Group had a total of 792 employees (30 June 2002: 795). The NWM Group’s emolument policy is to pay salaries that are competitive in the industry in a way that will be motivational, fair and equitable, and that are dependent on individual and company performance. Apart from salaries, the NWM Group also provides other fringe benefits to employees, which include provident fund schemes, medical insurance and bonus on performance basis.

Year ended 30 June 2004

As a result of the Reverse Acquisition, the financial information of the NWM Group for the years ended 30 June 2004 and 2003 represented that of the NWPCS Group.

Financial review

For the year ended 30 June 2004, the NWM Group’s consolidated turnover slightly increased by HK$37 million to HK$1,699 million (2002/03: HK$1,662 million). The turnover of the NWM Group was contributed by mobile communications services revenue and sales of handsets and accessories.

The gross margin dropped to HK$926 million, a decrease of HK$34 million from that for the year ended 30 June 2003 of HK$960 million. OPEX amounted to HK$467 million, a decrease of HK$53 million from HK$520 million for the previous year. The NWM Group’s EBITDA for the year ended 30 June 2004 increased to HK$459 million. (2002/03: HK$441 million).

Finance costs for the year ended 30 June 2004 decreased to HK$7 million. (2002/03: HK$10 million).

The NWM Group’s profit attributable to shareholders dropped to HK$163 million (2002/03: HK$188 million).

• 80 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

Capital structure, liquidity and financial resources

The total borrowings of the NWM Group amounted to HK$2,165 million (30 June 2003: HK$2,435 million). The borrowings comprised a loan of HK$934 million from the immediate holding company, a promissory note of HK$858 million issued to the immediate holding company and bank loans of HK$373 million. These borrowings are denominated in Hong Kong dollars and are interest free, interest free and bearing interest at 0.65% above HIBOR per annum respectively.

As at 30 June 2004, the NWM Group’s cash and bank balances amounted to HK$94 million (30 June 2003: HK$114 million).

Capital expenditure of the NWM Group amounted to HK$154 million for the year (2002/03: HK$140 million).

The NWM Group adopts a conservative and balanced treasury policy. Any surplus funds placed as deposit with banks in Hong Kong are maintained in Hong Kong dollars.

The functional currency of the NWM Group is Hong Kong dollar. The NWM Group’s business transactions, monetary assets and liabilities are mainly denominated in Hong Kong dollar. The NWM Group does not therefore have any significant exposure to foreign currency gains and losses. It is the NWM Group’s treasury policy to manage its foreign currency exposure whenever its financial impact is material to the NWM Group. The NWM Group does not conduct any foreign currency speculative activities.

Employees and remuneration policy

As at 30 June 2004, the NWM Group had a total of 706 employees (30 June 2003: 792). The NWM Group’s emolument policy is to pay salaries that are competitive in the industry in a way that will be motivational, fair and equitable, and that are dependent on individual and company performance. Apart from salaries, the NWM Group also provides other fringe benefits to employees, which include provident fund schemes, medical insurance and bonus on performance basis.

Year ended 30 June 2005

Change of financial year end

On 6 July 2004, NWM completed the Reverse Acquisition. Since then, the NWM Group has mainly been engaged in offering a host of quality mobile communications services in Hong Kong, including voice services and value-added services tailored to the specific needs of individual customer groups, via advanced mobile technologies.

• 81 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

The Reverse Acquisition constituted a reverse acquisition for accounting purposes and therefore the comparative financial information presented in these accounts represented that of the NWPCS Group, which had a financial year end date of 30 June.

In order to conform to the financial year end date of NWD and the NWPCS Group, NWM changed its financial year end date from 31 December to 30 June. Accordingly, the financial period of NWM under review in the Annual Report 2004/2005 of NWM covered the eighteen months from 1 January 2004 to 30 June 2005.

Financial review

For the year ended 30 June 2005, the NWM Group’s consolidated turnover slightly increased by HK$10 million to HK$1,709 million (2003/04: HK$1,699 million). The turnover of the NWM Group was mainly contributed by mobile communications services revenue and sales of handsets and accessories.

Mobile communications services revenue for the year ended 30 June 2005 amounted to HK$1,318 million (2003/04: HK$1,442 million), representing a 8.6% decrease. The decline was mainly attributable to aggressive price promotions offered by mobile service operators and severe competition on tariffs. As a result, the post-paid ARPU dropped from HK$180 in the year ended 30 June 2004 to HK$170 in the year ended 30 June 2005. However, the NWM Group continued to excel in customer servicing and providing mobile users with pioneering data services to maintain its competitiveness during the year. The NWM Group was successful in maintaining the churn rate at approximately 3.6% (2003/04: approximately 3.3%).

Revenue from sales of mobile handsets and accessories for the year ended 30 June 2005 was HK$386 million, representing a surge of approximately 50% as compared with HK$257 million for the year ended 30 June 2004. This was achieved by offering various “free handset” promotional offers and a wide range of handset models with advanced features to customers during the year.

The cost of goods sold and services provided was HK$866 million, representing an increase of HK$93 million as compared with the year ended 30 June 2004 (2003/04: HK$773 million). The increase was a direct result of a corresponding increase in handset sales.

The gross profit margin of the NWM Group was approximately 49% for the year ended 30 June 2005 (2003/04: approximately 54%). The decrease was mainly due to the relatively low gross profit margin of mobile handsets and accessories sales and the decline of ARPU.

Investments in trading securities and other investments were disposed of during the year ended 30 June 2005 resulting in gains on sales of investments of HK$2 million.

• 82 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

The NWM Group continues to enhance operating efficiency, resulting in a lower OPEX. The OPEX was reduced by approximately 5.6% to HK$441 million (2003/04: HK$467 million).

The NWM Group’s EBITDA for the year ended 30 June 2005 dropped to HK$403 million (2003/04: HK$459 million).

Finance costs for the year ended 30 June 2005 increased to HK$65 million (2003/04: HK$7 million). The increase was mainly due to the interest payments by the NWM Group in respect of a loan from a fellow subsidiary, the Subscription Note (as defined below) which arose as a result of the Reverse Acquisition and a convertible bond (“Convertible Bond”). Increase in HIBOR was also a substantial factor for the increase in finance costs.

As a result of the combined effects of the above, the NWM Group’s profit attributable to shareholders dropped to HK$57 million (2003/04: HK$163 million).

Capital structure, liquidity and financial resources

Prior to the completion of the Reverse Acquisition, the outstanding balances of the promissory note issued to and the amount due to the immediate holding company of NWM as at 30 June 2004 amounted to HK$858 million and HK$934 million respectively. An amount of HK$914 million of the aforesaid outstanding balances due to the immediate holding company of NWM was capitalised through the issuance of 298,911,000 ordinary shares by NWPCS Holdings on 6 July 2004. The remaining balance of amounts due to the immediately holding company of NWM of HK$878 million was repaid by a fresh loan from a fellow subsidiary of NWM.

For financing the Reverse Acquisition, NWM issued the convertible note in the principal amount of HK$1,200 million (the “Subscription Note”) and 41,666,666 new NWM Shares (the “Subscription Shares”) at HK$1.20 per NWM Share respectively, in July 2004. The liability component of the Subscription Note amounted to approximately to HK$1,131 million as at 30 June 2005.

Apart from the Subscription Note, the total borrowings of the NWM Group as at 30 June 2005 were HK$1,009 million (30 June 2004: HK$2,164 million). The total borrowings mainly comprised a loan from New World Finance Company Limited (“NWF”) of HK$878 million, the Convertible Bond of HK$28 million, and a bank loan of HK$103 million. All these borrowings are denominated in Hong Kong dollars and bear interest at HIBOR + 0.65%, 3% and HIBOR + 0.65%, respectively.

The loan from NWF is repayable on demand after 1 April 2007. The maturity date for the Convertible Bond is in November 2007. The bank loan was fully repaid in October 2005.

• 83 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

As most of the borrowings of the NWM Group including the Subscription Note as at 30 June 2005 are regarded as shareholders’ loans, the gearing ratio of the NWM Group calculated thereon is considered to be misleading and is not presented in this circular.

As at 30 June 2005, the NWM Group’s cash and bank balances amounted to HK$117 million (30 June 2004: HK$94 million).

The NWM Group’s net cash inflow from operations reduced by HK$14 million to HK$396 million (2003/04: HK$410 million).

As at 30 June 2005, none of the assets held by the NWM Group were pledged to other parties (30 June 2004: Nil).

Capital expenditure of the NWM Group amounted to HK$141 million for the year ended 30 June 2005 (2003/04: HK$154 million). Capital expenditure was mainly for ongoing enhancements in service quality, coverage of the mobile network, and purchase of hardware and software for multimedia services provision.

The NWM Group adopts a conservative and balanced treasury policy. Any surplus funds placed as deposit with banks in Hong Kong are maintained in Hong Kong dollars.

The functional currency of the NWM Group is Hong Kong dollars. The NWM Group’s business transactions, monetary assets and liabilities are mainly denominated in Hong Kong dollars. The NWM Group does not therefore have any significant exposure to foreign currency gains and losses. It is the NWM Group’s treasury policy to manage its foreign currency exposure whenever its financial impact is material to the NWM Group. The NWM Group does not conduct any foreign currency speculative activities.

As at 30 June 2005, the NWM Group had obtained bank guarantees in lieu of deposits of HK$9 million (30 June 2004: HK$9 million) in aggregate.

Employees and remuneration policy

As at 30 June 2005, the NWM Group had a total of 662 employees (30 June 2004: 706). The NWM Group’s remuneration policy is to pay salaries that are competitive in the industry in a way that will be motivational, fair and equitable, and that are dependent on individual and company performance. Apart from salaries, the NWM Group also provides other fringe benefits to employees, which include provident fund schemes, medical insurance and bonus on performance basis.

• 84 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

Four months ended 31 October 2005

Financial review

The NWM Group recorded a turnover of HK$700 million for the period, representing an increase of approximately 19.9% from HK$584 million for the same period in 2004. The NWM Group’s turnover was mainly contributed by mobile communications services revenue and sales of handsets and accessories.

Revenue from mobile communications services amounted to HK$430 million, representing a decrease of approximately 4.9% from HK$452 million in the same period last year. The ARPU remained the same as last year’s at HK$172. The NWM Group continued to focus on improving its networks and service quality while maintaining its competitiveness in the current price-driven market. The NWM Group succeeded in retaining its customers, reducing the churn rate from approximately 3.2% in the four months ended 31 October 2004 to approximately 3.0% in the four months ended 31 October 2005.

Revenue from sales of mobile handsets and accessories for the period surged to HK$270 million, representing slightly over two times the revenue of HK$129 million for the same period last year. The increase in revenue was attributed to various handset programs promotional offers and the provision of a wide selection of mobile handsets with advanced features.

The gross profit margin of the NWM Group reduced from approximately 49.0% for the last corresponding period to approximately 37.0%. This was mainly due to the relatively low gross profit margin of mobile handsets and accessories sales. The NWM Group’s gross profit of HK$259 million was approximately 9.4% lower than that for the corresponding period last year. This was mainly due to the decrease in revenue from mobile communications services.

The NWM Group continued to exercise tight cost control to maintain a lower OPEX. The OPEX declined by approximately 7.0% from HK$158 million for the same period last year to HK$147 million.

The NWM Group’s EBITDA dropped to HK$113 million from HK$128 million for the same period in 2004.

Finance costs increased to HK$30 million from HK$26 million for the corresponding period last year. The increase was mainly due to the increase in variable interest rates as a result of the increase in HIBOR slightly offset by the decrease in interest expenses on the Subscription Note and Convertible Bond arising from the adoption of HKAS 32.

• 85 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

As a result of the combined effects of the above, the NWM Group had a loss attributable to shareholders of HK$7 million, as compared to a profit of HK$11 million for the corresponding period of the previous year.

Capital structure, liquidity and financial resources

For financing the Reverse Acquisition, NWM has issued Subscription Shares and Subscription Note at considerations of HK$50 million and HK$1,200 million, respectively, in July 2004. The liability component of the Subscription Note amounted to HK$1,147 million as at 31 October 2005 (30 June 2005: HK$1,131 million).

Apart from the Subscription Note, the total borrowings of the NWM Group as at 31 October 2005 were HK$906 million (30 June 2005: HK$1,009 million). The total borrowings comprised a loan from NWF of HK$878 million and the Convertible Bond of HK$28 million. All these borrowings are denominated in Hong Kong dollars and bear interest at HIBOR + 0.65% and 3% respectively.

The loan from NWF is repayable on demand after 1 April 2007. The maturity date for the Convertible Bond is in November 2007.

As most of the borrowings of the NWM Group including the Subscription Note as at 31 October 2005 are regarded as shareholders’ loans, the gearing ratio of the Group calculated thereon is considered to be misleading and so not presented in this circular.

As at 31 October 2005, the NWM Group’s cash and bank balances amounted to HK$76 million (30 June 2005: HK$117 million).

The NWM Group’s net cash inflow generated from operations was reduced by HK$16 million to HK$121 million for the current period ended as compared to the same period last year.

Pursuant to the respective terms of the Subscription Note and the Convertible Bond, NWD may exercise its conversion rights to convert an aggregate amount of HK$1,175 million into new NWM Shares. The remaining borrowing of HK$878 million is repayable after 1 April 2007. It is expected that the NWM Group will generate cash flow from dividends from the investment in the Merged Group following Completion.

Capital expenditure of the NWM Group amounted to HK$52 million for the current period. This was mainly for ongoing enhancements in service quality, coverage of the mobile network, and purchase of hardware and software for the provision of multimedia services.

The NWM Group adopts a conservative and balanced treasury policy. Any surplus funds placed as deposit with banks in Hong Kong are maintained in Hong Kong dollars.

• 86 -

ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

APPENDIX II

The principal functional currency of the NWM Group is Hong Kong dollars. The Group’s business transactions, monetary assets and liabilities are mainly denominated in Hong Kong dollars. The NWM Group does not therefore have any significant exposure of foreign currency gains and losses. It is the NWM Group’s treasury policy to manage foreign currency gains and losses whenever its financial impact is material to the NWM Group. The NWM Group does not conduct any foreign currency speculative activities.

As at 31 October 2005, the NWM Group had obtained bank guarantees in lieu of deposits of HK$9 million in aggregate.

Acquisition of NWCS

On 21 October 2005, NWM acquired from New World CyberBase Limited the entire issued share capital of NWCS and was assigned the interests of New World CyberBase Limited in its shareholder’s loan owing from NWCS for an aggregate consideration of HK$21 million. The consideration was satisfied by the issue of 16,153,846 NWM Shares at an issue price of HK$1.3 each.

Employees and remuneration policy

As at 31 October 2005, the NWM Group had a total of 887 employees (30 June 2005: 662) The increase in the number of employees was attributable to the headcount of the NWCS Group acquired by the NWM Group in October 2005. The NWM Group’s emolument policy is to pay salaries that are competitive in the industry in a way that will be motivational, fair and equitable, and that are dependent on individual and company performance. Apart from salaries, the NWM Group also provides other fringe benefits to employees, which include provident fund schemes, medical insurance and bonus on performance basis.

(E) INFORMATION ON THE NWCS GROUP

Based on the unaudited management accounts of the NWCS Group prepared in accordance with the generally accepted accounting principles in Hong Kong, the unaudited consolidated loss both before and after taxation attributable to the NWCS Group for the year ended 31 March 2004 were HK$16.0 million, whereas the unaudited consolidated loss both before and after taxation attributable to the NWCS Group for the year ended 31 March 2005 were HK$20.7 million. As at 31 March 2005, the unaudited consolidated net deficit of the NWCS Group amounted to HK$265.4 million.

During the first six months of the fiscal year, the business of the NWCS Group focused on two streams: information technology-related (“IT”) business and property-related business. For IT business, the NWCS Group continued to build its strong foundation in China and leverage on the fast and exciting development of the telecommunication and Internet market. The NWCS Group saw the continuous growth in multimedia messaging services (“MMS”), wireless application protocol (“WAP”) and Internet. The NWCS Group continued to enrich the product portfolio leading up to the transition into the 3G market.

• 87 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

During the last six months of the fiscal year, the NWCS Group established a presence in two major areas: (i) digital music-related services in the mobile entertainment sector and (ii) “local” city directory search services.

The NWCS Group has successfully launched over 20 nationwide mobile entertainment MMS, WAP and short messaging services (“SMS”) products. These service offerings mainly focused on digital music segment for the wireless and on-line market in the PRC including ring-tone, color ring-back tone and side tone downloads.

In addition, the NWCS Group has expanded from its nationwide mapping mobile Internet service, www.chinaquest.com to offer a comprehensive local city search information services initially covering few major provinces. The service will allow customers to search for local city information and mapping direction via the Internet and mobile phone.

The NWCS Group has established seven operating offices in PRC, with 228 employees in the PRC in December 2005, including Beijing, Shanghai, Guangzhou, Nanjing, Xian, Chengdu, and Shenyang. The operations are spread over six regional areas focusing on sales operations of the assigned territory, while product management and research and development teams are stationed in Shanghai.

(F) FINANCIAL AND TRADING PROSPECTS

The Hong Kong mobile telecommunications market is one of the highest penetrated in the world with approximately 8.4 million mobile telecommunications subscribers as at 30 November 2005 and a mobile communications penetration rate (defined as the total number of mobile telecommunications subscribers as a percentage of the Hong Kong population) of approximately 121% as at October 2005. The Hong Kong mobile telecommunications market has been growing strongly over the past few years with the number of mobile telecommunications subscribers increasing from approximately 5.2 million as at 31 December 2000 to approximately 8.4 million as at 30 November 2005, representing a compounded annual growth rate of approximately 10%.

The Hong Kong mobile telecommunications market had 3.7 million pre-paid mobile telecommunications subscribers representing approximately 44% of the total Hong Kong mobile telecommunications subscriber base as at 30 November 2005. Following the issuance by OFTA of 3G mobile telecommunications licenses in October 2001, the Hong Kong mobile telecommunications market had attracted approximately 0.6 million 3G mobile telecommunications subscribers as at 30 November 2005. According to OFTA, the Hong Kong’s mobile telecommunications market had approximately 1.8 million 2.5G and 3G subscribers, representing approximately 22% of the total Hong Kong mobile telecommunications subscriber base as at 30 November 2005.

Mobile Number Portability (“MNP”) was introduced in Hong Kong on 1 March 1999. MNP allows mobile telecommunications subscribers to change mobile operators while retaining their mobile phone numbers. The objective in introducing MNP was to promote competition between the various Mobile Network Operators. As per statistics published by OFTA, as at 30 November 2005 there were approximately 8.4 million numbers ported since the introduction of MNP in Hong Kong, equating to an average of 102,365 portings per month.

• 88 -

APPENDIX II ADDITIONAL FINANCIAL INFORMATION ON THE NWM GROUP

The presence of Mobile Virtual Network Operators (“MVNO”) has also been a catalyst to intensify the already strong competition in the Hong Kong mobile telecommunications market. An MVNO provides mobile telecommunications services to customers through interconnection with and access to the radiocommunications infrastructure of a licensed Mobile Network Operator. As at 30 June 2005, MVNO licenses have been issued to seven service licensees. As at 30 November 2005, MVNO in Hong Kong had 509,488 mobile telecommunications subscribers on a combined basis.

The NWM Board has noted that the growth in the mobile telecommunications market in Hong Kong has slowed down since 2004, and expect that the number of mobile telecommunications subscribers will increase at a relatively modest rate given the currently already high penetration rates for subscribers in Hong Kong. Based on the aforesaid, the NWM Board considers that the mobile telecommunications market in Hong Kong is highly competitive.

• 89 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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

18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

7 March 2006

The Board of Directors

New World Mobile Holdings Limited

The Board of Directors

Telstra CSL Limited

Dear Sirs,

We set out below our report on the financial information regarding Telstra CSL Limited (“TCSL”) and its subsidiaries (hereinafter collectively referred to as the “TCSL Group”) for each of the three years ended 30 June 2003, 2004 and 2005, the four months ended 31 October 2005 (collectively, the “Relevant Periods”), and the four months ended 31 October 2004 (the “31 October 2004 Financial Information”), for inclusion in the circular (the “Circular”) dated 7 March 2006 issued by New World Mobile Holdings Limited (“NWM Holdings”), in connection with its proposed very substantial acquisition of a 23.6% equity interest in TCSL.

TCSL was incorporated in Bermuda with limited liability on 22 September 2000. The principal activity of TCSL is investment holding.

• 90 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

At the date of this report, TCSL has the following subsidiaries:

	Place of	Nominal value	Percentage of	Percentage of
	operations and	of issued	issued share capital		Principal
Name of subsidiary	incorporation	share capital	held by TCSL		activities
			Directly	Indirectly
Bestclass Holdings	Hong Kong/	US$50,000	100%	–	Investment holding
Limited	British Virgin
	Islands
Hong Kong CSL	Hong Kong	HK$2,031,043,443	–	100%	Provision of mobile
Limited					telecommunications
					services and
					products
Integrated Business	Hong Kong	HK$2	–	100%	Property investment
Systems Limited
One2Free	Hong Kong	HK$2	–	100%	Inactive
PersonalCom
Limited
CSL Limited	Hong Kong	HK$2	–	100%	Dormant

No audited financial statements have been prepared for TCSL and Bestclass Holdings Limited for the Relevant Periods as there is no statutory requirement for the entities to prepare audited financial statements. For the purpose of this report, we have carried out audit procedures as we considered necessary in respect of the management accounts of TCSL and Bestclass Holdings Limited for the Relevant Periods, prepared in accordance with accounting principles generally accepted in Hong Kong by the directors of TCSL and Bestclass Holdings Limited, respectively, in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The statutory consolidated financial statements of Hong Kong CSL Limited and its subsidiaries, including Integrated Business Systems Limited, One2Free PersonalCom Limited and CSL Limited, for each of the three years ended 30 June 2003, 2004 and 2005, which were prepared in accordance with accounting principles generally accepted in Hong Kong, were audited by us in accordance with HKSAs issued by the HKICPA.

For the purpose of this report, the directors of TCSL have prepared the consolidated financial statements of the TCSL Group for the Relevant Periods (the “Financial Information”) on the basis set out in Note 1 below. We have examined the Financial Information in accordance with HKSAs issued by the HKICPA, and have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

• 91 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

The Financial Information is the responsibility of the directors of TCSL. It is our responsibility to form an independent opinion on such information and to report our opinion to you.

For the purpose of this report, we have performed a review of the 31 October 2004 Financial Information, in accordance with Statement of Auditing Standards 700 “Engagements to review interim financial reports” issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope and provides a lower level of assurance than an audit and, accordingly, we do not express an audit opinion on the 31 October 2004 Financial Information.

Opinion in respect of the Relevant Periods

In our opinion, the Financial Information together with the notes thereto give, for the purpose of this report, a true and fair view of the state of affairs of TCSL and of the TCSL Group as at 30 June 2003, 2004 and 2005, and 31 October 2005, and of the results and cash flows of the TCSL Group for each of the Relevant Periods.

Review conclusion in respect of the 31 October 2004 Financial Information

On the basis of our review, for the purpose of this report, we are not aware of any material modification that should be made to the results and cash flows of the TCSL Group as set out in the 31 October 2004 Financial Information.

• 92 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

1. BASIS OF PRESENTATION

The Financial Information has been prepared on a going concern basis notwithstanding that TCSL and the TCSL Group recorded net current liabilities as at 31 October 2005 since TCSL’s ultimate holding company, Telstra Corporation Limited (“Telstra”), a company incorporated in Australia and listed on the Australian Stock Exchange, has agreed to provide adequate funds for TCSL and the TCSL Group to meet their liabilities as and when they fall due.

The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”, which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the HKICPA and accounting principles generally accepted in Hong Kong. They have been prepared under the historical cost convention.

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

Starting from the four months ended 31 October 2005, the TCSL Group has adopted, for the first time, a number of the relevant new and revised HKFRSs issued by the HKICPA that are effective for accounting periods beginning on or after 1 January 2005:

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 14	“Segment reporting”
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 33	“Earnings per share”
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 TCSL Group’s accounting policy for goodwill, as described further below, the adoption of the above new accounting standards has had no significant impact on the accounting policies of the TCSL Group.

• 93 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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.

Upon the adoption of HKFRS 3 and HKAS 36, goodwill arising on acquisitions is no longer amortised but subject to an annual impairment review (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 transitional provisions of HKFRS 3 have required the TCSL Group to eliminate at 1 July 2005 the carrying amount of accumulated amortisation of HK$2,393,528,000 with a corresponding adjustment to the cost of goodwill.

The effects of the above changes are summarised in Note 7(b). In accordance with the transitional provisions of HKFRS 3, comparative amounts have not been restated.

3. IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STARDARDS

The TCSL Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, to the Financial Information. 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 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”

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 TCSL Group’s objective, policies and processes for managing capital; quantitative data about what TCSL regards as capital; and compliance with any capital requirements and the consequences of any non-compliance.

HKFRS 7 will replace HKAS 32 and has modified the disclosure requirements of HKAS 32 relating to financial instruments. 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.

• 94 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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 TCSL Group. HK(IFRIC)-Int 6 shall be applied for annual periods beginning on or after 1 December 2005.

The TCSL Group is not yet in a position to state whether the adoption of the new and revised HKFRSs listed above would have any significant impact on the TCSL Group’s financial statements in the period of initial application.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The consolidated financial statements include the financial statements of TCSL and its subsidiaries for the Relevant Periods. All significant intercompany transactions and balances within the TCSL Group are eliminated on consolidation.

Subsidiaries

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

The results of subsidiaries are included in the TCSL’s income statement to the extent of dividends received and receivable. TCSL’s investment in a subsidiary is stated at cost less any impairment losses.

Joint ventures

A joint venture is an entity set up by contractual arrangement, whereby the TCSL Group and other parties undertake an economic activity. The joint venture operates as a separate entity in which the TCSL 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 TCSL 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 company 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 TCSL 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 TCSL Group’s interest in a jointly-controlled entity is stated in the consolidated balance sheet at the TCSL Group’s share of net assets under the equity method of accounting, less any impairment losses.

Goodwill

Goodwill arising on the acquisition of businesses represents the excess of the cost of the acquisition over the fair values of the identifiable net assets acquired as at the date of acquisition. Such goodwill is recognised in the TCSL Group’s balance sheet as an asset and is stated at cost and is subsequently measured 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.

• 95 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the TCSL 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 TCSL 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 TCSL Group at which the goodwill is monitored for internal management purposes.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cashgenerating 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 cashgenerating unit retained.

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

Intangible asset – mobile carrier licence for the provision of third generation (“3G”) telecommunications services (the “3G Licence”)

This comprises the one-time expenditures on acquiring the TCSL Group’s 3G telecommunications spectrum rights and the discounted value of the minimum annual spectrum utilisation fees payable in accordance with the 3G Licence together with the corresponding interest accrued prior to the commercial launch of 3G telecommunications services. Such expenditures are amortised on the straight-line basis over the period from the date of the commercial launch of 3G telecommunications services in December 2004 to the end of the period of validity of the 3G Licence on 21 October 2016.

After the commercial launch of 3G telecommunications services, interest accrued on the outstanding minimum annual spectrum utilisation fees 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, employee benefit assets, financial assets, goodwill and non-current assets/ disposal group classified as held for sale), 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.

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 pretax 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.

• 96 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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 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. The principal annual rates used for this purpose are as follows:

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

Note: Buildings situated on leasehold land, where the fair values of the leasehold interest in land and buildings cannot be measured separately at the inception of the lease.

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 fixed 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.

Revenue recognition

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

• (i) telecommunications revenue based on the usage of the TCSL Group’s network and facilities, when the services are 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 are delivered or services are rendered to customers;

• (ii) 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.

• 97 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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

The TCSL 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 Scheme”). 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 TCSL Group’s employer contributions vests fully, the ongoing contributions payable by the TCSL Group can be reduced by the relevant amount of the forfeited employer contributions.

For the DB Scheme, 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 TCSL 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 Scheme are charged to the income statement over the periods during which the employees provide the related service to the TCSL Group.

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, is recognised in the balance sheet within 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 Scheme or reductions in future contributions to the DB Scheme.

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

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

Related parties

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

• (a) directly, or indirectly through one or more intermediaries, the party (i) controls, is controlled by, or is under common control with, TCSL/the TCSL Group; (ii) has an interest in TCSL that gives it significant influence over TCSL/the TCSL Group; or (iii) has joint control over TCSL/the TCSL Group.

• 98 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

• (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 TCSL 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 significant 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 TCSL/the TCSL Group, or any entity that is a related party of TCSL/the TCSL Group.

Dividends

Final dividends proposed by the directors after the balance sheet date are classified as a separate allocation of retained profits within the equity section of the balance sheet. When final 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 TCSL’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.

Trade and other receivables

Trade and other receivables are financial assets initially recognised at fair value (original invoice amount) and subsequently at amortised cost using the effective interest method. Provision for impairment loss is made when there is objective evidence that the TCSL 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 TCSL Group assesses at each balance sheet date whether there is any objective evidence that a financial assets 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 receivables’ original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss.

The TCSL Group first assesses whether objective evidence of impairment exists individually for receivable balances that are individually significant, and individually or collectively for receivable balances that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed balance, whether significant or not, the balance is included in a group of balances with similar credit risk characteristics and that group of balances 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.

• 99 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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.

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 TCSL Group’s cash management are also included in cash and cash equivalents.

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

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.

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 the estimated selling prices less any estimated costs to be incurred for disposal.

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. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

• 100 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

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.

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 relate to the same taxable entity and the same taxation authority.

Foreign currency transactions

The Financial Information is presented in Hong Kong dollars, which is TCSL’s functional and presentation currency. Each entity in the TCSL 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 and 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.

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 TCSL Group is the lessor, assets leased by the TCSL 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 TCSL 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.

Deferred mobile telephone customer acquisition costs

The direct costs of acquiring new mobile telephone customers with service contracts lasting less than two years are expensed as and when incurred, and those lasting two years or more are deferred and amortised on the straight-line basis over the average subscription lives of the customers.

5. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

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

The 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, in relation to goodwill impairment and defined benefit retirement obligations have been included in Notes 7(b) and 7(m)(iv), respectively.

• 101 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

6. INCOME STATEMENT

The following is a summary of the consolidated income statements of the TCSL Group for the Relevant Periods.

Notes REVENUE (a) Operating costs Operating profit Amortisation of goodwill 7(b) Amortisation of an intangible asset 7(c) Other income and gains (a) PROFIT FROM OPERATING ACTIVITIES (b) Finance costs (c) Share of loss of a jointly-controlled entity 7(e) PROFIT BEFORE TAX Tax (e) NET PROFIT FOR THE YEAR/PERIOD ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT DIVIDENDS (f) Interim Proposed final	Year ended 30 June	Year ended 30 June	2005 HK$’000 4,301,939 (3,550,711) 751,228 (337,910) (30,261) 23,016 406,073 (60,547) (1,351) 344,175 (134,264) 209,911 – 245,474 245,474	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 1,405,450 1,426,862 (1,170,760) (1,172,773) 234,690 254,089 (112,637) – – (19,112) 2,043 21,769 124,096 256,746 (5,622) (32,550) – (561) 118,474 223,635 (37,841) (49,426) 80,633 174,209 – – – – – –
	2003 HK$’000 4,167,942 (3,311,468) 856,474 (337,910) – 336,962 855,526 – – 855,526 (208,461) 647,065 1,188,024 213,264 1,401,288	2004 HK$’000 4,020,770 (3,196,319) 824,451 (337,910) – 3,273 489,814 (15,738) – 474,076 (143,095) 330,981 – 26,120 26,120

• 102 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(a) Revenue, other income and gains

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 associated value-added services; and

• (ii) property rental income.

Revenue Telecommunications revenue Property rental income Other income and gains Gain on disposal of items of property, plant and equipment Interest income Exchange gains arising from the translation of the amount due from the ultimate holding company	Year ended 30 June	Year ended 30 June	2005 HK$’000 4,299,541 2,398 4,301,939 5,768 17,248 – 23,016	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 1,404,667 1,426,058 783 804 1,405,450 1,426,862 – 10,805 2,043 10,964 – – 2,043 21,769	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 1,404,667 1,426,058 783 804 1,405,450 1,426,862 – 10,805 2,043 10,964 – – 2,043 21,769
	2003 HK$’000 4,166,103 1,839 4,167,942 56,049 59,182 221,731 336,962	2004 HK$’000 4,018,628 2,142 4,020,770 6 3,267 – 3,273			2005 HK$’000 1,426,058 804
					1,426,862
					10,805 10,964 –
					21,769

• 103 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(b) Profit from operating activities

The TCSL 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 7(a) Employee benefit expenses (including directors’ remuneration_(note 6(d))): Wages and salaries Less: Amount capitalised in projects under construction Pension scheme contributions for the MPF Scheme and the DC Scheme Pension scheme costs for the DB Scheme _7(m)(i) Depreciation 7(a) Minimum lease payments under operating leases for land and buildings Auditors’ remuneration Impairment/(reversal of impairment) of trade receivables Other exchange losses/(gains), net Gain on disposal of items of property, plant and equipment Interest income	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 718,828 770,524 1,010,440 849,239 870,472 937,304 61,188 30,000 30,000 402,588 384,789 384,884 (51,220) (65,238) (67,259) 351,368 319,551 317,625 8,975 9,152 9,348 16,680 14,422 10,379 444,048 448,178 485,889 381,889 344,714 417,027 500 500 550 24,400 18,200 (30,700) 1,200 1,482 596 (56,049) (6) (5,768) (59,182) (3,267) (17,248)	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 718,828 770,524 1,010,440 849,239 870,472 937,304 61,188 30,000 30,000 402,588 384,789 384,884 (51,220) (65,238) (67,259) 351,368 319,551 317,625 8,975 9,152 9,348 16,680 14,422 10,379 444,048 448,178 485,889 381,889 344,714 417,027 500 500 550 24,400 18,200 (30,700) 1,200 1,482 596 (56,049) (6) (5,768) (59,182) (3,267) (17,248)	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 342,469 320,752 291,996 334,198 30,000 (19,017) 128,484 128,985 (23,840) (21,908) 104,644 107,077 3,141 3,245 3,459 2,703 149,869 185,111 112,371 112,166 167 183 3,600 3,600 296 (260) – (10,805) (2,043) (10,964)
	2003 HK$’000 718,828 849,239 61,188 402,588 (51,220) 351,368 8,975 16,680 444,048 381,889 500 24,400 1,200 (56,049) (59,182)	2004 HK$’000 770,524 870,472 30,000 384,789 (65,238) 319,551 9,152 14,422 448,178 344,714 500 18,200 1,482 (6) (3,267)	2004 HK$’000 (Unaudited) 342,469 291,996 30,000 128,484 (23,840) 104,644 3,141 3,459 149,869 112,371 167 3,600 296 – (2,043)

• 104 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(c) Finance costs

Interest on a loan from the ultimate holding company Interest on an amount due to the ultimate holding company Accretion expense – 3G Licence	TCSL Group Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 15,738 27,517 – – – – – 33,030 – 15,738 60,547	TCSL Group Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 15,738 27,517 – – – – – 33,030 – 15,738 60,547	Four months ended 31 October	Four months ended 31 October
	2003 HK$’000 – – – –	2004 HK$’000 15,738 – – 15,738	2004 HK$’000 (Unaudited) 5,622 – – 5,622	2005 HK$’000 11,086 503 20,961
				32,550

(d) Directors’ remuneration

Directors’ remuneration for the Relevant Periods is as follows:

TCSL Group

	TCSL Group	TCSL Group
Fees Others emoluments: Salaries, allowances and benefits in kind Pension scheme contributions	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 – – – – 2,188 5,416 – 187 367 – 2,375 5,783 – 2,375 5,783		Four months ended 31 October
	2003 HK$’000 – – – – –	2004 HK$’000 – 2,188 187 2,375 2,375	2004 HK$’000 (Unaudited) – 3,635 107 3,742 3,742	2005 HK$’000 –
				4,296 134
				4,430
				4,430

• 105 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(e) 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 Relevant Periods.

TCSL Group: Provision for the year/period Underprovision/(overprovision) in prior years/periods Deferred tax: Deferred tax assets_(Note 7(l)) Deferred tax liabilities(Note 7(l))_ Total tax charge for the year/period	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 175,721 142,684 91,268 15,362 (364) 46 (2,568) 135 135 19,946 640 42,815 208,461 143,095 134,264	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 175,721 142,684 91,268 15,362 (364) 46 (2,568) 135 135 19,946 640 42,815 208,461 143,095 134,264	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 45,069 43,081 – 9,509 46 1,121 (7,274) (4,285) 37,841 49,426
	2003 HK$’000 175,721 15,362 (2,568) 19,946 208,461	2004 HK$’000 142,684 (364) 135 640 143,095	2004 HK$’000 (Unaudited) 45,069 – 46 (7,274) 37,841

A reconciliation of the tax expense applicable to profit before tax using the statutory rate to the tax expense at the effective tax rate is as follows:

TCSL Group

Profit before tax Tax at the statutory tax rate Effect on opening deferred tax of increase in rate Adjustments in respect of current tax of previous years/periods Income not subject to tax Expenses not deductible for tax Others Tax charge at the effective rate			Year ended	30 June		% 17.5 – – (0.9) 18.7 3.7 39.0			Four months ended 31 October	Four months ended 31 October	% 17.5 – 4.3 (1.9 ) 0.9 1.3 22.1
	2003 HK$’000 855,526 149,717 16,759 15,362 (49,160 ) 66,790 8,993 208,461	% 17.5 2.0 1.8 (5.7 ) 7.8 1.0 24.4	2004 HK$’000 474,076 82,963 – (364) (572) 62,210 (1,142) 143,095	% 17.5 – – (0.1 ) 13.1 (0.3 ) 30.2	2005 HK$’000 344,175 60,231 – 46 (3,018 ) 64,325 12,680 134,264			2004 HK$’000 (Unaudited) 118,474 20,733 – – (358 ) 20,802 (3,336 ) 37,841	% 17.5 – – (0.3 ) 17.6 (2.8 ) 32.0	2005 HK$’000 223,635 39,136 – 9,509 (4,209 ) 2,103 2,887 49,426

There was no unprovided deferred tax during the Relevant Periods and as at 30 June 2003, 2004 and 2005, and 31 October 2005.

• 106 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(f) Dividends

Notes Interim (i) Final (ii)	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 1,188,024 – – 213,264 26,120 245,474 1,401,288 26,120 245,474	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 1,188,024 – – 213,264 26,120 245,474 1,401,288 26,120 245,474	Four months ended 31 October	Four months ended 31 October
	2003 HK$’000 1,188,024 213,264 1,401,288	2004 HK$’000 – 26,120 26,120	2004 HK$’000 (Unaudited) – – –	2005 HK$’000 – –
				–

Notes:

• (i) HK$2.376 per ordinary share

• (ii) HK$0.427, HK$0.052 and HK$0.491 per ordinary share for the years ended 30 June 2003, 2004 and 2005, respectively.

(g) Earnings per share

No earnings per share information is presented as its inclusion, for the purpose of this report, is not meaningful.

• 107 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

7. BALANCE SHEET

The following is a summary of the consolidated balance sheets of the TCSL Group as at the end of the Relevant Periods.

TCSL Group

TCSL Group
Notes NON-CURRENT ASSETS Property, plant and equipment (a) Goodwill (b) Intangible asset (c) Interest in a jointly-controlled entity (e) Deposits and prepayments Pension scheme asset (m) Deferred tax assets (l) Total non-current assets CURRENT ASSETS Inventories (f) Trade receivables (g) Deposits, prepayments and other receivables Due from the ultimate holding company (k) Cash and cash equivalents (h) Total current assets CURRENT LIABILITIES Trade payables (i) Other payables and accruals, customer deposits and deferred revenue (j) Due to a related company (k) Tax payable Due to the ultimate holding company (k) Loan from the ultimate holding company (k) Total current liabilities NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Loan from the ultimate holding company (k) Other liabilities Deferred tax liabilities (l) Total non-current liabilities Net assets EQUITY Issued capital (n) Reserves (o) Proposed final dividend 6(f) Total equity		30 June	2005 HK$’000 2,387,823 985,574 648,389 6,448 30,247 54,288 2,298 4,115,067 70,126 197,818 113,757 1,638,476 154,931 2,175,108 199,810 1,178,422 3,255 109,701 – 1,700,000 3,191,188 (1,016,080) 3,098,987 – 511,681 242,169 753,850 2,345,137 1,233,503 866,160 245,474 2,345,137		31 October 2005 HK$’000 2,403,523 985,574 629,277 5,887 31,525 58,169 1,177 4,115,132 35,752 183,165 118,388 – 128,475 465,780 151,866 1,136,261 830 162,291 135,266 – 1,586,514 (1,120,734) 2,994,398 – 482,642 237,884 720,526 2,273,872 1,233,503 1,040,369 – 2,273,872
	2003 HK$’000 2,179,682 1,661,394 589,256 – 49,111 37,556 2,568 4,519,567 23,183 116,570 116,181 555,054 269,096 1,080,084 176,041 750,829 4,127 237,055 – – 1,168,052 (87,968) 4,431,599 1,700,000 489,256 198,714 2,387,970 2,043,629 1,233,503 596,862 213,264 2,043,629	2004 HK$’000 2,173,987 1,323,484 649,834 – 49,975 44,509 2,433 4,244,222 63,922 160,358 98,917 1,077,600 148,139 1,548,936 221,139 845,831 8,496 157,158 – – 1,232,624 316,312 4,560,534 1,700,000 499,834 199,354 2,399,188 2,161,346 1,233,503 901,723 26,120 2,161,346

• 108 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

The below is a summary of the balance sheets of TCSL as at the end of the Relevant Periods.

Notes NON-CURRENT ASSET Investment in a subsidiary (d) CURRENT ASSETS Due from a subsidiary (d) Cash and cash equivalents Total current assets CURRENT LIABILITIES Other payables and accruals Due to a subsidiary (d) Due to the ultimate holding company Total current liabilities NET CURRENT LIABILITIES Net assets EQUITY Issued capital (n) Reserves (o) Proposed final dividend 6(f) Total equity		30 June	2005 HK$’000 4,695,600 4,093,905 – 4,093,905 – 4,104,876 – 4,104,876 (10,971) 4,684,629 1,233,503 3,205,652 245,474 4,684,629		31 October 2005 HK$’000 4,695,600 – – – – – 10,803 10,803 (10,803) 4,684,797 1,233,503 3,451,294 – 4,684,797
	2003 HK$’000 4,695,600 3,854,531 7 3,854,538 2,660 3,865,166 – 3,867,826 (13,288) 4,682,312 1,233,503 3,235,545 213,264 4,682,312	2004 HK$’000 4,695,600 4,067,785 7 4,067,792 – 4,078,591 – 4,078,591 (10,799) 4,684,801 1,233,503 3,425,178 26,120 4,684,801

• 109 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(a) Property, plant and equipment

Cost: At 1 July 2002 Additions Transfers Disposals At 30 June 2003 and 1 July 2003 Additions Transfers Disposals At 30 June 2004 and 1 July 2004 Additions Transfers Disposals At 30 June 2005 and 1 July 2005 Additions Transfers Disposals At 31 October 2005	Leasehold buildings HK$’000 131,332 – – – 131,332 16,043 – – 147,375 7,252 – – 154,627 – – (783) 153,844	Exchange equipment and other plant HK$’000 5,434,128 20,046 255,682 (472,408) 5,237,448 129,369 104,474 (18,470) 5,452,821 604,729 308,192 (992,509) 5,373,233 20,774 33,115 (17,339) 5,409,783	Furniture and fittings HK$’000 61,531 10,623 12,032 – 84,186 10,788 – (176) 94,798 7,465 3,765 (969) 105,059 733 1,248 (34) 107,006	Projects under construction HK$’000 152,964 239,554 (267,714) – 124,804 317,419 (104,474) – 337,749 111,667 (311,957) – 137,459 162,463 (34,363) – 265,559	Total HK$’000 5,779,955 270,223 – (472,408) 5,577,770 473,619 – (18,646) 6,032,743 731,113 – (993,478) 5,770,378 183,970 – (18,156) 5,936,192

• 110 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

Notes Accumulated depreciation and impairment: At 1 July 2002 Depreciation Impairment (i) Disposals At 30 June 2003 and 1 July 2003 Depreciation Impairment (ii) Disposals At 30 June 2004 and 1 July 2004 Depreciation Impairment (ii) Disposals At 30 June 2005 and 1 July 2005 Depreciation Disposals Reversal of impairment (iii) At 31 October 2005 Net book value: At 30 June 2003 At 30 June 2004 At 30 June 2005 At 31 October 2005	Leasehold buildings HK$’000 11,252 2,682 61,188 – 75,122 2,768 – – 77,890 3,105 – – 80,995 1,088 (192) (19,017) 62,874 56,210 69,485 73,632 90,970	Exchange equipment and other plant HK$’000 3,323,951 424,138 – (472,408) 3,275,681 427,754 30,000 (17,334) 3,716,101 467,102 30,000 (991,128) 3,222,075 178,867 (15,754) – 3,385,188 1,961,767 1,736,720 2,151,158 2,024,595	Furniture and fittings HK$’000 30,057 17,228 – – 47,285 17,656 – (176) 64,765 15,682 – (962) 79,485 5,156 (34) – 84,607 36,901 30,033 25,574 22,399	Projects under construction HK$’000 – – – – – – – – – – – – – – – – – 124,804 337,749 137,459 265,559	Total HK$’000 3,365,260 444,048 61,188 (472,408) 3,398,088 448,178 30,000 (17,510) 3,858,756 485,889 30,000 (992,090) 3,382,555 185,111 (15,980) (19,017) 3,532,669 2,179,682 2,173,987 2,387,823 2,403,523

• 111 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

Notes:

• (i) The impairment losses were provided for certain leasehold buildings as a result of the decline in the property market in Hong Kong. The impairment losses were determined by the directors based on the estimated market values of these properties.

• (ii) The impairment losses were provided for certain network equipment which were subject to replacement due to technical obsolescence. The impairment losses were determined by the directors based on the estimated recoverable values from the disposal of the equipment.

• (iii) 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 by lease term of the net book value of the leasehold buildings of the TCSL Group, which are all situated in Hong Kong, is as follows:

Long term leases Medium term leases		30 June	2005 HK$’000 18,555 55,077 73,632	31 October
	2003 HK$’000 21,956 34,254 56,210	2004 HK$’000 16,604 52,881 69,485		2005 HK$’000 15,279 75,691
				90,970

(b) Goodwill

Cost: At 1 July 2002 and 30 June 2003, 2004 and 2005 Elimination of accumulated amortisation upon adoption of HKFRS 3_(see Note 2) At 1 July 2005 and 31 October 2005 Accumulated amortisation: At 1 July 2002 Charge for the year At 30 June 2003 and 1 July 2003 Charge for the year At 30 June 2004 and 1 July 2004 Charge for the year At 30 June 2005 and 1 July 2005 Elimination of accumulated amortisation upon adoption of HKFRS 3(see Note 2)_ At 1 July 2005 and 31 October 2005	TCSL Group HK$’000 3,379,102 (2,393,528
	985,574
	1,379,798 337,910
	1,717,708 337,910
	2,055,618 337,910
	2,393,528 (2,393,528
	–

• 112 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

Net carrying amount: At 30 June 2003 At 30 June 2004 At 30 June 2005 At 31 October 2005	TCSL Group HK$’000 1,661,394
	1,323,484
	985,574
	985,574

Up to 30 June 2005 and prior to the adoption of HKFRS 3 (see Note 2), goodwill was amortised over its estimated useful life of 10 years.

Impairment testing of goodwill

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

The recoverable amount of the TCSL Group’s mobile telecommunications services business has been determined according to the value in use calculation using cash flow projections based on financial budgets approved by management covering a 10-year period. Assumptions have been made by management that the cash flows from the TCSL Group’s existing mobile telecommunications services will continue beyond at least the forecast period based on management’s experience in the industry with due consideration for market and technological changes. The discount rate applied to cash flow projections is 12%.

The annual growth rate used to extrapolate the cash flows for the TCSL Group’s mobile telecommunications services business during the 10-year period is between 4% and 13% 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.

• 113 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

c) Intangible asset

Cost: At 1 July 2002 Addition - accretion of interest At 30 June 2003 and 1 July 2003 Addition - accretion of interest At 30 June 2004 and 1 July 2004 Addition - accretion of interest At 30 June 2005, 1 July 2005 and 31 October 2005 Accumulated amortisation: At 1 July 2002, 30 June 2003, 1 July 2003, 30 June 2004 and 1 July 2004 Amortisation At 30 June 2005 and 1 July 2005 Amortisation At 31 October 2005 Net carrying amount: At 30 June 2003 At 30 June 2004 At 30 June 2005 At 31 October 2005	3G Licence HK$’000 529,813 59,443
	589,256 60,578
	649,834 28,816
	678,650
	– 30,261
	30,261 19,112
	49,373
	589,256
	649,834
	648,389
	629,277

The intangible asset is amortised on the straight-line basis over the period from the date of the commercial launch of 3G telecommunications services in December 2004 to the end of the period of validity of the 3G Licence on 21 October 2016.

• 114 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(d) Investment in a subsidiary

Unlisted shares, at cost	TCSL 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 4,695,600 4,695,600 4,695,600	31 October
		2005 HK$’000 4,695,600

Particulars of the subsidiaries of TCSL are as follows:

	Place of	Nominal value	Percentage of	Percentage of
	operations and	of issued	equity attributable		Principal
Name of subsidiary	incorporation	share capital	to TCSL		activities
			Directly	Indirectly
Bestclass Holdings	Hong Kong/	US$50,000	100%	–	Investment holding
Limited	British Virgin
	Islands
Hong Kong CSL	Hong Kong	HK$2,031,043,443	–	100%	Provision of mobile
Limited					telecommunications
					services and
					products
Integrated Business	Hong Kong	HK$2	–	100%	Property
Systems Limited					investment
One2Free PersonalCom	Hong Kong	HK$2	–	100%	Inactive
Limited
CSL Limited	Hong Kong	HK$2	–	100%	Dormant

The balances with subsidiaries included in TCSL’s current assets and current liabilities are unsecured, interest-free and have no fixed terms of repayment.

• 115 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(e) Interest in a jointly-controlled entity

The TCSL Group’s share of the assets and liabilities of a jointly-controlled entity during the Relevant Periods is as follows:

Current assets Non-current assets Current liabilities Net assets		30 June	2005 HK$’000 6,378 1,173 (1,103) 6,448	31 October
	2003 HK$’000 – – – –	2004 HK$’000 – – – –		2005 HK$’000 6,300 1,243 (1,656)
				5,887

The TCSL Group’s share of the revenue and expenses of a jointly-controlled entity during the Relevant Periods is as follows:

Revenue Other income Operating costs Loss for the year/period		30 June	2005 HK$’000 – 24 (1,375) (1,351)	31 October
	2003 HK$’000 – – – –	2004 HK$’000 – – – –		2005 HK$’000 829 59 (1,449)
				(561)

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

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

(f) Inventories

The inventories of the TCSL Group represented mobile handsets and accessories.

The carrying amounts of inventories carried at net realisable value were HK$23,183,000, HK$47,641,000, HK$37,484,000 and HK$31,569,000 as at 30 June 2003, 2004 and 2005, and 31 October 2005, respectively.

• 116 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(g) Trade receivables

The TCSL Group’s generally allows an average credit period of one month for customers. The TCSL Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. As the TCSL 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.

An aged analysis of the TCSL Group’s trade receivables as at 30 June 2003, 2004 and 2005, and 31 October 2005, based on the invoice date and net of provisions, is as follows:

Within 1 month 1 to 2 months (h) Cash and cash equivalents Cash and bank balances Time deposits		30 June	2005 HK$’000 195,858 1,960 197,818 2005 HK$’000 21,931 133,000 154,931	31 October
	2003 HK$’000 116,570 – 116,570	2004 HK$’000 160,358 – 160,358 30 June		2005 HK$’000 180,449 2,716
				183,165
				31 October
	2003 HK$’000 15,296 253,800 269,096	2004 HK$’000 148,139 – 148,139		2005 HK$’000 19,475 109,000
				128,475

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.

• 117 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(i) Trade payables

An aged analysis of the TCSL Group’s trade payables as at 30 June 2003, 2004 and 2005, and 31 October 2005, based on the invoice date, is as follows:

Within 1 month	30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 176,041 221,139 199,810	31 October
		2005 HK$’000 151,866

(j) Other payables and accruals, customer deposits and deferred revenue

Other payables and customer deposits are non-interest bearing. Other payables generally have terms of less than one year.

(k) Balances with affiliated companies

The amount due to a related company, a jointly-owned entity of the ultimate holding company, is unsecured, interest-free and is repayable within one month.

The amount due from the ultimate holding company is unsecured and has no fixed terms of repayment. The balance was originally denominated in Australian dollars and bore interest at Australian dollar 30-day Bank Bill Swap Rate per annum up to 25 June 2003 when the denominating currency was changed to Hong Kong dollars and the interest rate was changed to Hong Kong dollar Inter-Bank Offer Rate (“HIBOR”) per annum.

The loan from the ultimate holding company was unsecured, bore interest at the HIBOR plus 0.5% per annum and was fully repaid during the four months ended 31 October 2005.

As at 31 October 2005, except for an unsecured amount of HK$11 million which is interest-free and has no fixed terms of repayment, the amount due to the ultimate holding company is unsecured, bears interest at the HIBOR plus 0.25% and has no fixed terms of repayment.

• 118 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(l) Deferred tax

The movements in deferred tax liabilities and assets during the Relevant Periods are as follows:

Deferred tax liabilities

TCSL Group tax At 1 July 2002 Deferred tax charged/(credited) to the income statement_(Note 6(e)) Gross deferred tax liabilities at 30 June 2003 and 1 July 2003 Deferred tax charged/(credited) to the income statement(Note 6(e)) Gross deferred tax liabilities at 30 June 2004 and 1 July 2004 Deferred tax charged to the income statement(Note 6(e)) Gross deferred tax liabilities at 30 June 2005 and 1 July 2005 Deferred tax charged/(credited) to the income statement(Note 6(e))_ Gross deferred tax liabilities at 31 October 2005	Accelerated depreciation HK$’000 299,052 27,981 327,033 (19,410) 307,623 23,337 330,960 (3,733) 327,227	3G Licence spectrum utilisation fees HK$’000 (124,324) 7,497 (116,827) 19,351 (97,476) 8,498 (88,978) (3,345) (92,323)	Others HK$’000 4,040 (15,532) (11,492) 699 (10,793) 10,980 187 2,793 2,980	Total HK$’000 178,768 19,946
				198,714 640
				199,354 42,815
				242,169 (4,285)
				237,884

• 119 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

Deferred tax assets

TCSL Group

tax At 1 July 2002 Deferred tax credited to the income statement_(Note 6(e)) Gross deferred tax assets at 30 June 2003 and 1 July 2003 Deferred tax charged to the income statement(Note 6(e)) Gross deferred tax assets at 30 June 2004 and 1 July 2004 Deferred tax charged to the income statement(Note 6(e)) Gross deferred tax assets at 30 June 2005 and 1 July 2005 Deferred tax charged to the income statement(Note 6(e))_ Gross deferred tax assets at 31 October 2005	Decelerated depreciation HK$’000 – 2,568
	2,568 (135
	2,433 (135
	2,298 (1,121
	1,177

(m) Pension scheme asset

(i) The movements in the net asset of the DB Scheme in the consolidated balance sheet during the Relevant Periods are as follows:

Notes At beginning of year/period Net pension scheme costs recognised in the consolidated income statement 6(b), 7(m)(iii) Contributions paid to the DB Scheme At 30 June/31 October 7(m)(ii)	TCSL Group Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 11,303 37,556 44,509 (16,680) (14,422) (10,379) 42,933 21,375 20,158 37,556 44,509 54,288	TCSL Group Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 11,303 37,556 44,509 (16,680) (14,422) (10,379) 42,933 21,375 20,158 37,556 44,509 54,288	TCSL Group Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 11,303 37,556 44,509 (16,680) (14,422) (10,379) 42,933 21,375 20,158 37,556 44,509 54,288	Four months ended 31 October 2005 HK$’000 54,288 (2,703) 6,584 58,169
		2004 HK$’000 37,556 (14,422) 21,375 44,509	2005 HK$’000 44,509 (10,379) 20,158
			54,288

• 120 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

• (ii) The components of the net asset of the DB Scheme as at 30 June 2003, 2004 and 2005, and 31 October 2005 are as follows:

Note Present value of defined benefit obligation Fair value of scheme assets Net cumulative actuarial losses/(gains) Net pension scheme asset recognised 7(m)(i)		TCSL Group 30 June	2005 HK$’000 (442,631) 472,302 29,671 24,617 54,288	31 October 2005 HK$’000 (409,031) 480,976 71,945 (13,776) 58,169
	2003 HK$’000 (358,241) 344,264 (13,977) 51,533 37,556	2004 HK$’000 (366,517) 410,931 44,414 95 44,509

• (iii) The components of the net pension scheme cost recognised in the consolidated income statements for the Relevant Periods, together with the actual return on the DB Scheme assets for the Relevant Periods, are as follows:

Note Current service costs Interest cost on a defined benefit obligation Expected return on the DB Scheme assets Net cumulative actuarial losses recognised in the income statement 7(m)(i) Actual return on the DB Scheme assets		TCSL Group 30 June	2005 HK$’000 20,549 17,608 (27,778) – 10,379 53,231	31 October 2005 HK$’000 8,025 5,400 (10,722) – 2,703 10,342
	2003 HK$’000 19,848 19,267 (22,435) – 16,680 1,602	2004 HK$’000 21,426 15,625 (23,837) 1,208 14,422 60,455

• 121 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

• (iv) The principal actuarial assumptions used in determining the net asset of the DB Scheme as at 30 June 2003, 2004 and 2005, and 31 October 2005 are as follows:

Discount rate Expected rate of return on the DB Scheme assets Future salary increases: First year Second year Third year Fourth year onwards	30 June	31 October
	2003 2004 2005 % per annum % per annum % per annum 4.5 5.0 3.75 6.8 6.8 6.8 1.0 1.5 2.5 1.0 2.5 4.0 1.0 4.0 4.0 4.0 4.0 4.0	2005 % per annum 4.5 6.8 4.0 4.0 4.0 4.0

• (v) The actuarial valuations of the DB Scheme as at 30 June 2003, 2004 and 2005, and 31 October 2005 were 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 4 of this report.

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%.

(n) Share capital

Authorised: 500,000,000 ordinary shares of US$0.3163 each Issued and fully paid: 500,000,000 ordinary shares of US$0.3163 each			TCSL 30 June	2005 HK$’000 1,233,503 1,233,503	31 October
		2003 HK$’000 1,233,503 1,233,503	2004 HK$’000 1,233,503 1,233,503		2005 HK$’000 1,233,503
					1,233,503

• 122 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(o) Reserves

• (i) TCSL Group

The amounts of the TCSL Group’s reserves and the movements therein for the Relevant Periods are presented in the consolidated statements of changes in equity in Note 8 of this report.

(ii) TCSL

At 1 July 2002 Capital reduction (_Note (iii)_below) Net profit for the year Interim dividend Final 2003 dividend At 30 June 2003 and 1 July 2003 Final 2003 dividend declared Net profit for the year Final 2004 dividend At 30 June 2004 and 1 July 2004 Final 2004 dividend declared Net profit for the year Final 2005 dividend At 30 June 2005 and 1 July 2005 Final 2005 dividend declared Net profit for the period At 31 October 2005	Issued share capital HK$’000 3,900,000 (2,666,497) – – – 1,233,503 – – – 1,233,503 – – – 1,233,503 – – 1,233,503	Contributed surplus HK$’000 795,694 – – – – 795,694 – – – 795,694 – – – 795,694 – – 795,694	Retained profits/ (accumulated losses) HK$’000 (5,909) – 3,847,048 (1,188,024) (213,264) 2,439,851 – 215,753 (26,120) 2,629,484 – 25,948 (245,474) 2,409,958 – 245,642 2,655,600	Proposed final dividend HK$’000 – – – – 213,264 213,264 (213,264) – 26,120 26,120 (26,120) – 245,474 245,474 (245,474) – –	Total HK$’000 4,689,785 (2,666,497) 3,847,048 (1,188,024) – 4,682,312 (213,264) 215,753 – 4,684,801 (26,120) 25,948 – 4,684,629 (245,474) 245,642 4,684,797

• (iii) Pursuant to a resolution passed on 28 March 2003 and a resolution passed on 20 May 2003, the issued share capital of TCSL was reduced from US$500,000,000 divided into 500,000,000 ordinary shares of a nominal value of US$1.0000 each to US$410,256,410 divided into 500,000,000 ordinary shares of a nominal value of US$0.8205 each and from US$410,256,410 divided into 500,000,000 ordinary shares of a nominal value of US$0.8205 each to US$158,150,000 divided into 500,000,000 ordinary shares of a nominal value of US$0.3163 each.

• (iv) The contributed surplus balances of TCSL and the TCSL Group represent the difference between the consolidated shareholders’ funds of the subsidiaries acquired and the nominal value of TCSL’s shares issued in exchange therefor at the time of the group reorganisation completed in 2001 which resulted in the formation of the TCSL 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.

• 123 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

8. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

The following is a summary of the consolidated statements of changes in equity of the TCSL Group for the Relevant Periods.

Notes At 1 July 2002 Capital reduction 7(o)(iii) Net profit for the year Interim dividend 6(f) Final 2003 dividend 6(f) At 30 June 2003 and 1 July 2003 Final 2003 dividend declared Net profit for the year Final 2004 dividend 6(f) At 30 June 2004 and 1 July 2004 Final 2004 dividend declared Net profit for the year Final 2005 dividend 6(f) At 30 June 2005 and 1 July 2005 Final 2005 dividend declared Net profit for the period At 31 October 2005 At 1 July 2004 Final 2004 dividend declared Net profit for the period (unaudited) At 31 October 2004 (unaudited)	Issued share capital HK$’000 3,900,000 (2,666,497) – – – 1,233,503 – – – 1,233,503 – – – 1,233,503 – – 1,233,503 1,233,503 – – 1,233,503	Contributed surplus HK$’000 (Note 7(o)(iv)) 480,102 – – – – 480,102 – – – 480,102 – – – 480,102 – – 480,102 480,102 – – 480,102	Retained profits/ (accumulated losses) HK$’000 870,983 – 647,065 (1,188,024) (213,264) 116,760 – 330,981 (26,120) 421,621 – 209,911 (245,474) 386,058 – 174,209 560,267 421,621 – 80,633 502,254	Proposed final dividend HK$’000 – – – – 213,264 213,264 (213,264) – 26,120 26,120 (26,120) – 245,474 245,474 (245,474) – – 26,120 (26,120) – –	Total HK$’000 5,251,085 (2,666,497) 647,065 (1,188,024) – 2,043,629 (213,264) 330,981 – 2,161,346 (26,120) 209,911 – 2,345,137 (245,474) 174,209 2,273,872 2,161,346 (26,120) 80,633 2,215,859

• 124 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

9. CONSOLIDATED CASH FLOW STATEMENTS

The following is a summary of the consolidated cash flow statements of the TCSL Group for the Relevant Periods and the four months ended 31 October 2004.

Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Interest income 6(a), 6(b) Finance costs 6(c) Gain on disposal of items of property, plant and equipment 6(a), 6(b) Share of loss of a jointly-controlled entity Depreciation 7(a) Amortisation of goodwill 7(b) Amortisation of an intangible asset Impairment/(reversal of impairment) of items of property, plant and equipment 7(a) Operating profit before working capital changes Decrease/(increase) in inventories Decrease/(increase) in receivables prepayments and deposits (Decrease)/increase in payables and accruals Increase in pension scheme asset Increase/(decrease) in an amount due to a related company (Increase)/decrease in an amount due from the ultimate holding company Increase in an amount due to the ultimate holding company Cash generated from operations Interest received Finance costs paid Hong Kong profits tax paid Net cash inflow from operating activities	Year ended 30 June	Year ended 30 June	2005 HK$’000 344,175 (17,248) 60,547 (5,768) 1,351 485,889 337,910 30,261 30,000 1,267,117 (6,204) (32,572) 75,906 (9,779) (5,241) (560,876) – 728,351 17,248 (27,517) (138,771) 579,311	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 118,474 223,635 (2,043) (10,964) 5,622 32,550 – (10,805) – 561 149,869 185,111 112,637 – – 19,112 30,000 (19,017) 414,559 420,183 13,962 34,374 19,703 8,744 (70,662) (97,772) (3,389) (3,881) (584) (2,425) (119,481) 1,638,476 – 135,266 254,108 2,132,965 2,043 10,964 (5,622) (11,589) – – 250,529 2,132,340
	2003 HK$’000 855,526 (59,182) – (56,049) – 444,048 337,910 – 61,188 1,583,441 5,929 123,191 (148,900) (26,253) 310 (555,054) – 982,664 59,182 – (137,480) 904,366	2004 HK$’000 474,076 (3,267) 15,738 (6) – 448,178 337,910 – 30,000 1,302,629 (40,739) (27,388) (11,556) (6,953) 4,369 (522,546) – 697,816 3,267 (15,738) (222,217) 463,128

• 125 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

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 Payment of annual spectrum utilisation fees for the 3G Licence Proceeds from disposal of items of property, plant and equipment Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payment for capital reduction (Note (a)) Repayment of a loan from the ultimate holding company Dividends paid Net cash outflow from financing activities NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year/period CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 904,366 463,128 579,311 – – (7,799) (270,223) (321,963) (495,756) (50,000) (50,000) (50,000) 56,049 1,142 7,156 (264,174) (370,821) (546,399) (966,497) – – – – – (1,188,024) (213,264) (26,120) (2,154,521) (213,264) (26,120) (1,514,329) (120,957) 6,792 1,783,425 269,096 148,139 269,096 148,139 154,931 269,096 148,139 154,931	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 904,366 463,128 579,311 – – (7,799) (270,223) (321,963) (495,756) (50,000) (50,000) (50,000) 56,049 1,142 7,156 (264,174) (370,821) (546,399) (966,497) – – – – – (1,188,024) (213,264) (26,120) (2,154,521) (213,264) (26,120) (1,514,329) (120,957) 6,792 1,783,425 269,096 148,139 269,096 148,139 154,931 269,096 148,139 154,931	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 250,529 2,132,340 – – (159,256) (176,303) (50,000) (50,000) – 12,981 (209,256) (213,322) – – – (1,700,000) (26,120) (245,474) (26,120) (1,945,474) 15,153 (26,456) 148,139 154,931 163,292 128,475 163,292 128,475
	2003 HK$’000 904,366 – (270,223) (50,000) 56,049 (264,174) (966,497) – (1,188,024) (2,154,521) (1,514,329) 1,783,425 269,096 269,096	2004 HK$’000 463,128 – (321,963) (50,000) 1,142 (370,821) – – (213,264) (213,264) (120,957) 269,096 148,139 148,139	2004 HK$’000 (Unaudited) 250,529 – (159,256) (50,000) – (209,256) – – (26,120) (26,120) 15,153 148,139 163,292 163,292

• 126 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

(a) Major non-cash transaction

On 25 June 2003, the TCSL Group obtained an unsecured loan of HK$1,700,000,000 from the ultimate holding company to satisfy part of the payable to the immediate holding company of TCSL of HK$2,666,497,000 which arose from the capital reduction of TCSL as detailed in Note 7(o)(iii). The remaining payable balance was settled by cash.

10. SEGMENT INFORMATION

During the Relevant Periods, more than 90% of the TCSL Group’s revenue, operating profit and operating assets were attributable to the provision of mobile telecommunications services and products to customers in Hong Kong through its mobile systems and networks. Accordingly, no analysis of business and geographical segment information is presented.

11. COMMITMENTS

Capital commitments

As at 30 June 2003, 2004 and 2005, and 31 October 2005, the TCSL Group had the following capital commitments not provided for in the financial statements:

Contracted, but not provided for, property, plant and equipment Authorised, but not contracted for, property, plant and equipment Contracted, but not provided for, capital contributions payable to a jointly-controlled entity		TCSL Group 30 June			31 October
	2003 HK$’000 2,378 128,601 –	2004 HK$’000 57,600 597,237 –	2005 HK$’000 59,435 540,716 23,400		2005 HK$’000 37,317
					448,408
					23,400

In addition, the TCSL Group’s share of a jointly-controlled entity’s own capital commitments, which are not included in the above, as at 30 June 2003, 2004 and 2005, and 31 October 2005 was as follows:

Contracted, but not provided for, property, plant and equipment	TCSL Group 30 June	31 October
	2003 2004 2005 HK$’000 HK$’000 HK$’000 – – 3,960	2005 HK$’000 3,960

• 127 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

12. OPERATING LEASE ARRANGEMENTS

(i) As lessor

The TCSL 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 2003, 2004 and 2005, and 31 October 2005, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive		TCSL Group 30 June			31 October
	2003 HK$’000 660 261 921	2004 HK$’000 1,306 105 1,411	2005 HK$’000 1,121 484 1,605		2005 HK$’000 956 263
					1,219

(ii) As lessee

Certain properties of the TCSL Group are leased under operating lease arrangements. As at 30 June 2003, 2004 and 2005, and 31 October 2005, the TCSL Group had total future minimum lease payments under noncancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive After five years		TCSL Group 30 June			31 October
	2003 HK$’000 181,662 91,165 – 272,827	2004 HK$’000 231,373 171,750 420 403,543	2005 HK$’000 240,119 127,310 2,587 370,016		2005 HK$’000 233,641 134,793 1,964
					370,398

• 128 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

13. CONTINGENT LIABILITIES

As at 30 June 2003, 2004 and 2005, and 31 October 2005, the TCSL Group had the following 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 3G Licence awarded. The 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).

On 22 October 2002, the OFTA granted a one-year waiver in respect of the performance bond requirement, and accordingly, the revised performance bond issued in favour of the OFTA as at 30 June 2003 amounted to HK$200 million with a duration of four years. The performance bond was issued with an indemnity from Telstra.

As at 30 June 2004, with the two separate one-year waivers granted by the OFTA on 22 October 2002 and 30 August 2003, the performance bond issued in favour of the OFTA amounted to HK$150 million. The performance bond was issued with an indemnity from Telstra.

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

As at 31 October 2005, the performance bond issued in favour of the OFTA amounted to HK$351 million. The performance bond was issued with an indemnity from Telstra.

• (b) The TCSL Group had contingent liabilities amounting to HK$6,035,654, HK$5,232,000, HK$4,630,000 and HK$3,701,000 as at 30 June 2003, 2004 and 2005 and 31 October 2005, respectively, in respect of bank guarantees issued in favour of third parties.

• 129 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

14. RELATED PARTY TRANSACTIONS

• (a) In addition to the transactions and balances detailed elsewhere in the Financial Information, the TCSL Group had the following significant related party transactions during the Relevant Periods:

Notes Purchases of roaming services from a fellow subsidiary (i) Sales of roaming services to a fellow subsidiary (ii) Purchases of international call services from a fellow subsidiary (iii) Purchases of international call services from a related company (iv) Interest charged by the ultimate holding company (v) Interest income from the ultimate holding company (v)	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 3,658 4,823 9,384 (6,138) (8,489) (15,135) – – 29,913 58,396 75,716 46,163 – 15,738 27,517 (40,299) (2,561) (15,471)	Four months ended 31 October 2004 2005 HK$’000 HK$’000 (Unaudited) 2,028 2,953 (3,892) (6,985) – 26,303 28,318 4,167 5,622 11,589 (1,852) (9,400)

Notes:

• (i) The purchases of roaming services were charged by a fellow subsidiary on the basis of the usage of the network of the fellow subsidiary by the TCSL Group’s customers at rates specified on invoices.

• (ii) The sales of roaming services were charged against a fellow subsidiary on the basis of the usage of the TCSL Group’s network by the fellow subsidiary’s customers at rates specified on invoices.

• (iii) The international call services were provided by a fellow subsidiary. The services were charged against the Group on the basis of the TCSL Group’s usage at rates specified on invoices.

• (iv) The international call services were provided by a jointly-owned entity of Telstra. The services were charged against the TCSL Group on the basis of the TCSL Group’s usage at rates specified on invoices.

• (v) Details of the interest terms for the balances with the ultimate holding company are included in Note 7(k) of this report.

• 130 -

ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

APPENDIX III

(b) Compensation of the key management personnel of the TCSL Group

Short term employee benefits Post-employment benefits Total compensation paid to key management personnel		Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 25,730 27,765 20,194 1,916 1,496 1,185 27,646 29,261 21,379	Year ended 30 June 2003 2004 2005 HK$’000 HK$’000 HK$’000 25,730 27,765 20,194 1,916 1,496 1,185 27,646 29,261 21,379	Four months ended 31 October	Four months ended 31 October
		2003 HK$’000 25,730 1,916 27,646	2004 HK$’000 27,765 1,496 29,261	2004 HK$’000 (Unaudited) 8,853 395 9,248	2005 HK$’000 8,282 371
					8,653

15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The TCSL Group’s financial assets and liabilities are, in the normal course of business, exposed to currency exchange rate, interest rate and credit risks. The TCSL Group’s risk management strategy aims to minimise the adverse effects of financial risks on the financial performance of the TCSL 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 TCSL 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 TCSL Group manages this risk by initially seeking contracts effectively denominated in Hong Kong dollar where possible and economically favourable to do so. The TCSL Group will continue to monitor its foreign currency risk exposure and market conditions to determine if any hedging is required. The TCSL Group does not conduct any foreign currency speculative activities.

(b) Interest rate risk

The TCSL Group’s exposure to the risk of changes in market interest rates relates primarily to the TCSL Group’s interest-bearing balances with the ultimate holding company. As the TCSL Group has fully settled all the interest-bearing balances with its ultimate holding company subsequent to the balance sheet date and any further advances to or from the ultimate holding company are not expected to be significant in the near future, the TCSL Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

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

(c) Credit risk

The TCSL 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.

• 131 -

APPENDIX III ACCOUNTANTS’ REPORT ON THE TELSTRA CSL GROUP

16. SUBSEQUENT EVENT

On 8 December 2005, TCSL entered into an agreement with its immediate holding company, Telstra Holdings (Bermuda) No. 2 Limited, and NWM Holdings, pursuant to which TCSL has agreed to issue and allot and NWM Holdings has agreed to procure its wholly-owned subsidiary, Upper Start Holdings Limited, to subscribe for, new shares in TCSL, which will represent 23.6% of the enlarged share capital of TCSL upon completion, in exchange for the transfer of NWM Holdings’ 100% interest in New World PCS Holdings Limited (“NWPCS Holdings”) and a cash payment of HK$244.024 million by NWM Holdings to TCSL. NWPCS Holdings and its subsidiaries are principally engaged in the provision of mobile telecommunications services and products in Hong Kong under the brandname of New World Mobility.

As the completion of the above transactions is still subject to, amongst others, the approval by the shareholders of NWM Holdings, the financial effect thereof for the TCSL Group cannot be determined as at the date of this report.

17. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by TCSL or any of its subsidiaries in respect of any period subsequent to 31 October 2005.

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

• 132 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

(A) MANAGEMENT DISCUSSION AND ANALYSIS ON THE TELSTRA CSL GROUP

Financial Review

For the year ended 30 June 2005, the consolidated turnover of the Telstra CSL Group increased by approximately HK$281 million as compared with the prior corresponding period to approximately HK$4,302 million (2003/04: approximately HK$4,021 million) despite intense price competition. The increase was attributable to both increased handset sales and mobile service revenue. Handset sales rose mainly due to the launch of a variety of new models with advanced features. The growth in mobile services revenue was driven by the continued launch of innovative data services. In addition to launching its Integrated 3G network in December 2004, over the past three years the Telstra CSL Group had a number of Asian and World first launches, including the first Chinese language support for Blackberry. The Telstra CSL Group continues to promote 3G services through the deployment of pioneering technology, for example the launch of Asia’s first 3G video sharing service. For the four months ended 31 October 2005, consolidated turnover stood at approximately HK$1,427 million. Between 2002/03 and 2003/04, the consolidated turnover declined approximately HK$147 million as a result of severe competition on local voice tariffs partially offset by an increase in handset sales.

Over the three years ended 30 June 2005, the Telstra CSL Group has been successful in continuing to reduce the average churn rate from approximately 2.2% in 2002/03 to approximately 1.8% and 1.6% in 2003/04 and 2004/05 respectively. However, for the four months ended 31 October 2005, the equivalent churn rate stood at approximately 1.9% with the increase attributable to the severe competition on local voice tariffs.

The cost of goods sold and services provided was approximately HK$1,948 million for 2004/05, representing an increase of approximately HK$307 million as compared with last year (2003/04: approximately HK$1,641 million). This increase was a direct result of the corresponding increase in handset sales as well as higher disbursement charges. For the four months ended 31 October 2005, cost of goods sold and services rose by approximately 3% as compared with the previous corresponding period, mainly due to higher disbursement and network charges with handset costs declining. The increase of approximately HK$73 million between 2002/03 and 2003/04 was mainly due to increased handset costs.

The gross profit margin of the Telstra CSL Group was approximately 55% for 2004/05 and approximately 54% for the four months ended 31 October 2005. This compares to approximately 59% in 2003/04 and approximately 62% in 2002/03 with the decrease over the past three years mainly due to the relatively low gross profit margin on mobile handsets as well as declining local voice revenue.

For 2004/05, OPEX rose by approximately 1% to approximately HK$1,087 million (2003/ 04: approximately HK$1,077 million) which was mainly attributable to rising cell site rental. For the four months ended 31 October 2005, OPEX slightly decreased by approximately HK$5 million as compared with the previous corresponding period, Between 2002/03 and 2003/04, OPEX declined approximately HK$161 million largely due to staff, network, IT and CRM related savings.

• 133 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

As a result of the combined effects of the above, the Telstra CSL Group’s EBITDA for 2004/05 declined approximately 2% (or approximately HK$30 million) to approximately HK$1,273 million (2003/04: approximately HK$1,303 million). The 2004/05 net profit after tax declined by approximately 37% to approximately HK$210 million (2003/04: approximately HK$331 million) inclusive of depreciation, impairment and amortisation which increased approximately 8% yearon-year to approximately HK$884 million (2003/04: approximately HK$816 million), primarily as a result of depreciation of 3G equipment and amortisation of intangible assets. For the four months ended 31 October 2005, EBITDA increased by approximately HK$16 million to approximately HK$431 million.

EBITDA in 2003/04 declined by approximately HK$336 million to HK$1,303 million (2002/ 03: approximately HK$1,639 million). This was mainly due to a one-off gain in 2002/03 (approximately HK$278 million), being gain on disposal of assets of approximately HK$56 million and an exchange gain on treasury fund of approximately HK$222 million.

As the 3G Licence is used for the provision of 3G services of the Telstra CSL Group, the Telstra CSL Group only commenced to incur amortisation expense upon the commercial launch of such services in December 2004. As such, no amortisation of intangible assets was recorded for the two years ended 30 June 2003 and 30 June 2004 and the four months ended 31 October 2004.

Capital Structure, Liquidity and Financial Resources

The total borrowings of the Telstra CSL Group as at 30 June 2005 was approximately HK$1,700 million (30 June 2003 and 30 June 2004: approximately HK$1,700 million), comprising a shareholder loan from Telstra. This borrowing was denominated in Hong Kong dollars and the associated interest charge was HIBOR + 0.5%. This shareholder loan however was repaid at the end of August 2005 from the current account with Telstra.

As at 30 June 2005, the Telstra CSL Group’s cash and bank balances amounted to approximately HK$1,793 million (30 June 2004: approximately HK$1,226 million), including a current account with Telstra of approximately HK$1,638 million (30 June 2004: approximately HK$1,078 million) which earned interest at HIBOR. As at 31 October 2005, and after the repayment of the shareholder loan, cash and bank balances was approximately HK$128 million and the current account with Telstra was in overdraft of approximately HK$135 million of which approximately HK$124 million incurred interest at HIBOR + 0.25%. As at 30 June 2003, the Telstra CSL Group’s cash and bank balances were approximately HK$824 million.

For 2004/05, the Telstra CSL Group’s net cash inflow from operating activities (including surplus funds placed with Telstra) increased by approximately 16% to approximately HK$1,140 million (2003/04: approximately HK$986 million). Between 2002/03 and 2003/04 net cash inflow from operating activities declined by approximately HK$473 million, or approximately HK$251 million if one off exchange gains are excluded. For the four months ended 31 October 2005, net cash inflow from operating activities (excluding the funds drawn down from Telstra’s current account for repayment of the shareholder loan) was approximately HK$359 million, representing a decrease of approximately 3% as compared with the previous corresponding period.

• 134 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

As at 30 June 2005, none of the assets held by the Telstra CSL Group were pledged to other parties and this remained as at 31 October 2005 (30 June 2004: Nil; 30 June 2003: Nil).

Capital expenditure for the Telstra CSL Group amounted to approximately HK$731 million for 2004/05 (2003/04: approximately HK$474 million), with the increase largely attributable to the Integrated 3G network rollout. For the four months ended 31 October 2005, capital expenditure stood at approximately HK$184 million which was at a similar level to the previous corresponding period. For 2002/03, the capital expenditure for the Telstra CSL Group was approximately HK$270 million. The increase of capital expenditure between 2002/03 and 2003/04 was largely due to investment in Edge/3G network equipment.

The Telstra CSL Group adopts a conservative and balanced treasury policy. Any surplus funds placed are placed on deposit with banks in Hong Kong or with Telstra and are mainly maintained in Hong Kong dollars.

The functional currency of the Telstra CSL Group is the Hong Kong dollar. Telstra CSL Group’s business transactions, monetary assets and liabilities are mainly denominated in Hong Kong dollars. The Telstra CSL Group does not therefore have any significant exposure to foreign currency gains and losses. The Telstra CSL Group does not conduct any foreign currency speculative activities.

Employees and Remuneration Policy

As at 31 October 2005 and 30 June 2005, the Telstra CSL Group had a total of 1,134 and 1,139 employees respectively (30 June 2004: 1,167; 30 June 2003: 1,143). The Telstra CSL Group’s remuneration policy is to pay salaries which are competitive in the industry, in a way that will be motivational, fair and equitable, and that are dependent on individual and company performance. Apart from salaries, the Telstra CSL Group also provides other fringe benefits to employees, which include provident fund schemes, medical insurance and bonus on performance basis.

• 135 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

For the year ended 30 June	2003 2004 2005	Accounting Accounting Accounting	Accounting policies Accounting policies Accounting policies	Unadjusted policies adjustments Adjusted Unadjusted policies adjustments Adjusted Unadjusted policies adjustments Adjusted	financial adjustments on revenue financial financial adjustments on revenue financial financial adjustments on revenue financial	information on goodwill recognition information information on goodwill recognition information information on goodwill recognition information	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	TURNOVER 4,167,942 – (861) 4,167,081 4,020,770 – 413 4,021,183 4,301,939 – (1,054) 4,300,885	Operating costs (3,311,468) – 10,954 (3,300,514) (3,196,319) – (2,106) (3,198,425) (3,550,711) – 15,145 (3,535,566)	Operating profit 856,474 – 10,093 866,567 824,451 – (1,693) 822,758 751,228 – 14,091 765,319	Amortisation of goodwill (337,910) – – (337,910) (337,910) – – (337,910) (337,910) 337,910 – –	Amortisation of intangible assets – – – – – – – – (30,261) – – (30,261)	Other revenue 336,962 – – 336,962 3,273 – – 3,273 23,016 – – 23,016	PROFIT FROM	OPERATING ACTIVITIES 855,526 – 10,093 865,619 489,814 – (1,693) 488,121 406,073 337,910 14,091 758,074	Finance costs – – – – (15,738) – – (15,738) (60,547) – – (60,547)	Share of loss of a	jointly-controlled entity – – – – – – – – (1,351) – – (1,351)	PROFIT BEFORE TAX 855,526 – 10,093 865,619 474,076 – (1,693) 472,383 344,175 337,910 14,091 696,176	Tax (208,461) – (1,766) (210,227) (143,095) – 296 (142,799) (134,264) – (2,466) (136,730)	NET PROFIT FROM	ORDINARY ACTIVITIES	ATTRIBUTABLE TO	SHAREHOLDERS 647,065 – 8,327 655,392 330,981 – (1,397) 329,584 209,911 337,910 11,625 559,446			DIVIDENDS	Interim 1,188,024 – – 1,188,024 – – – – – – – –	Proposed final dividend 213,264 – – 213,264 26,120 – – 26,120 245,474 – – 245,474

• 136 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

			Accounting	Adjusted	financial	information	HK$’000	1,427,126	(1,174,315)	252,811	–	(19,112)	21,769	255,468	(32,550)	(561)	222,357	(49,202)			173,155				–	–	–
	2005	Accounting	policies	adjustments	on revenue	recognition	HK$’000	264	(1,542)	(1,278)	–	–	–	(1,278)	–	–	(1,278)	224			(1,054)				–	–	–
			Accounting	policies	adjustments	on goodwill	HK$’000	–	–	–	–	–	–	–	–	–	–	–			–				–	–	–
For the four months ended 31 October				Adjusted Unadjusted	financial financial	information information	HK$’000 HK$’000	1,404,756 1,426,862	(1,166,067) (1,172,773)	238,689 254,089	– –	– (19,112)	2,043 21,769	240,732 256,746	(5,622) (32,550)	– (561)	235,110 223,635	(38,541) (49,426)			196,569 174,209				– –	– –	– –
	2004	Accounting	policies	adjustments	on revenue	recognition	HK$’000	(694)	4,693	3,999	–	–	–	3,999	–	–	3,999	(700)			3,299				–	–	–
			Accounting	policies	adjustments	on goodwill	HK$’000	–	–	–	112,637	–	–	112,637	–	–	112,637	–			112,637				–	–	–
				Unadjusted	financial	information	HK$’000	1,405,450	(1,170,760)	234,690	(112,637)	–	2,043	124,096	(5,622)	–	118,474	(37,841)			80,633				–	–	–
								TURNOVER	Operating costs	Operating profit	Amortisation of goodwill	Amortisation of intangible assets	Other revenue	PROFIT FROM OPERATING ACTIVITIES	Finance costs	Share of loss of a jointly-controlled entity	PROFIT BEFORE TAX	Tax	NET PROFIT FROM ORDINARY	ACTIVITIES ATTRIBUTABLE TO	SHAREHOLDERS			DIVIDENDS	Interim	Proposed final dividend

• 137 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

				Adjusted	financial	information	HK$’000	4,453,042	488,231	(1,591,464)	(1,103,233)	3,349,809	(720,526)	2,629,283
As at 31 October	2005	Accounting	Accounting policies	policies adjustments	adjustments on revenue	on goodwill recognition	HK$’000 HK$’000	337,910 –	– 22,451	– (4,950)	– 17,501	337,910 17,501	– –	337,910 17,501
				Unadjusted	financial	information	HK$’000	4,115,132	465,780	(1,586,514)	(1,120,734)	2,994,398	(720,526)	2,273,872
				Adjusted	financial	information	HK$’000	4,452,977	2,199,101	(3,196,626)	(997,525)	3,455,452	(753,850)	2,701,602
		Accounting	policies	adjustments	on revenue	recognition	HK$’000	–	23,993	(5,438)	18,555	18,555	–	18,555
	2005		Accounting	policies	adjustments	on goodwill	HK$’000	337,910	–	–	–	337,910	–	337,910
				Unadjusted	financial	information	HK$’000	4,115,067	2,175,108	(3,191,188)	(1,016,080)	3,098,987	(753,850)	2,345,137
				Adjusted	financial	information	HK$’000	4,244,222	1,557,784	(1,234,542)	323,242	4,567,464	(2,399,188)	2,168,276
As at 30 June	2004	Accounting	Accounting policies	policies adjustments	adjustments on revenue	on goodwill recognition	HK$’000 HK$’000	– –	– 8,848	– (1,918)	– 6,930	– 6,930	– –	– 6,930
				Unadjusted	financial	information	HK$’000	4,244,222	1,548,936	(1,232,624)	316,312	4,560,534	(2,399,188)	2,161,346
				Adjusted	financial	information	HK$’000	4,519,567	1,091,038	(1,170,679)	(79,641)	4,439,926	(2,387,970)	2,051,956
		Accounting	policies	adjustments	on revenue	recognition	HK$’000	–	10,954	(2,627)	8,327	8,327	–	8,327
	2003		Accounting	policies	adjustments	on goodwill	HK$’000	–	–	–	–	–	–	–
				Unadjusted	financial	information	HK$’000	4,519,567	1,080,084	(1,168,052)	(87,968)	4,431,599	(2,387,970)	2,043,629
								Non-current assets	Current assets	Current liabilities	Net current (liabilities)/assets	Total assets less current liabilities	Non-current liabilities	Capital and reserves

• 138 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

Notes to the restated financial information of the Telstra CSL Group:

(i) Preparation

The restated financial information has been prepared by the NWM Group by applying the accounting policies of the NWM Group to the Telstra CSL Group’s financial information.

(ii) Accounting for revenue recognition

The NWM Group aggregates the total monetary value amount of a sales arrangement offering a handset as well as monthly service to the customer, i.e. the handset amount together with the total mobile service fee over the entire contract period, to reach a total sum which is the total consideration over such sales arrangement. Accordingly, a fair portion of this consideration is allocated to handset sales and mobile service fee. As a result of this allocation, some of the upfront handset prepayment out of the whole bundle consideration is recognised as service fee during the contract period. Handset subsidies are capitalised and amortised on a straight-line basis over the same contract period. The Telstra CSL Group expenses the handset subsidies unless the underlying service contracts last for two or more years, pursuant to which the handset subsidies are amortised on a straight-line basis over the average duration of service contracts of customers.

(iii) Accounting for goodwill

The NWM Group elected to adopt HKFRS 3 for the financial year ended 30 June 2005 and has performed the impairment test on goodwill on an annual basis according to the accounting standard. The Telstra CSL Group did not elect to adopt HKFRS 3 for the financial year ended 30 June 2005 but has adopted the standard for the financial year ending 30 June 2006, upon the standard becoming effective, on a prospective basis as required under the standard. Prior to the adoption of HKFRS 3, the Telstra CSL Group amortised goodwill on the straight-line basis.

(iv) Cash flows positions

The differences in accounting policies as set out in (ii), (iii) and (iv) above did not have any impact on the cash flow positions of the Telstra CSL Group. As such, no restated unaudited consolidated cash flow statements of the Telstra CSL Group were prepared in accordance with the accounting policies of the NWM Group for the purposes of this circular.

(v) Agreed-upon procedures performed by the auditors of NWM

The Directors acknowledge their sole responsibilities for preparing the restated financial information for inclusion in this circular. In preparing the restated financial information, the Directors have compared the accounting policies adopted by the NWM Group and Telstra CSL Group for the three years ended 30 June 2005 and four months ended 31 October 2004 and 2005, discussed with management of the Telstra CSL Group and instructed the auditors of NWM to carry out certain agreed-upon procedures on the restated financial information.

The said agreed-upon procedures do not constitute an assurance engagement pursuant to standards issued by the HKICPA and because of its nature, the auditors of NWM have not expressed any assurance on any of the items on the restated financial information or of the restated financial information as a whole, and have not determined whether the unaudited adjusted financial information of the Telstra CSL Group has been properly prepared on the bases consistent with the accounting policies of NWM. Moreover, since the said agreed-upon procedures were agreed between the Directors and the auditors of NWM, they should not be used or relied upon by any other parties for any purposes. Such procedures were not planned or conducted in contemplation of reliance by any third party or with respect to any specific transaction. Areas of possible interest to a third party are not specifically addressed and matters may exist that would be assessed differently by a third party. The said agreedupon procedures on the restated financial information are as follows:

• 139 -

APPENDIX IV ADDITIONAL FINANCIAL INFORMATION ON THE TELSTRA CSL GROUP

1. compared the “unadjusted financial information” to that stated in the accountants’ report of the Telstra CSL Group (the “CSL Accountants’ Report”), as included in the circular;

2. with respect to the amounts stated in the “accounting policy adjustments on goodwill” columns, compared the amortisation expenses to those stated in the CSL Accountants’ Report;

3. with respect to the amounts stated in the “accounting policy adjustments on revenue recognition” columns:–

4. (a) obtained from management of NWM the schedules (the “Schedules”) which state, in respect of the Telstra CSL Group, the adjustments (the “Adjustments”) on the capitalisation and amortisation amounts of handset subsidies and the related sales and cost of sales;

5. (b) checked the arithmetic accuracy of the calculations of the Adjustments based on the formulae used in the Schedules; and

6. (c) compared the Adjustments to the corresponding amounts stated in the “accounting policy adjustments on revenue recognition” columns.

7. checked the additions of the amounts stated in the “unaudited adjusted financial information” columns of the restated financial information.

8. 140 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

The pro forma financial information of the Enlarged Group has been prepared to illustrate the effect of the Proposed Merger on the financial position or results of the NWM Group and is prepared for illustrative purposes only, and because of its hypothetical nature, the pro forma financial information of the Enlarged Group may not give a true picture of the Enlarged Group’s financial position or results.

On 8 December 2005, NWM entered into the Merger Agreement, pursuant to which NWM has agreed to procure NW SPV to subscribe for new shares in Telstra CSL, which will represent 23.6% of the enlarged issued share capital of Telstra CSL upon Completion, in exchange for the transfer of NWM’s entire interests in NWPCS Holdings to Telstra CSL and a cash payment of HK$244.024 million by NWM to Telstra CSL. Pursuant to the Merger Agreement, NWM has also entered into the Subscription Agreements whereby NWM will subscribe for new shares in NWPCS Holdings in cash immediately prior to Completion to provide the NWPCS Group with funds to retire its outstanding debts and for a certain level of negative working capital as at the date of Completion. The subscription for new shares in Telstra CSL and NWPCS Holdings by NWM will be funded by shareholder’s loan to be advanced by NWD to NWM.

Upon Completion, NWM, through NW SPV’s interest in Telstra CSL, will be interested in 23.6% of the Merged Group. The NWPCS Group will also cease to be subsidiaries of NWM. The pro forma financial information has been prepared in accordance with Hong Kong Accounting Standard 28 “Investments in associates” (“HKAS 28”) and also Hong Kong Financial Reporting Standard 3 “Business Combination” (“HKFRS 3”) issued by the Hong Kong Institute of Certified Public Accountants which shall be effective for accounting periods beginning on or after 1 January 2005. HKAS 28 has no material effect on the Enlarged Group’s policy. The impact of HKFRS 3 on the pro forma financial information is goodwill arising from the Proposed Merger to be stated at cost less any impairment loss.

The following unaudited pro forma consolidated balance sheet of the Enlarged Group is prepared based on the audited financial statements of the NWM Group for the four months ended 31 October 2005 and the year ended 30 June 2005 extracted from the accountants’ report on the NWM Group set out in Appendix I to this circular and the financial information of the Telstra CSL Group for the four months ended 31 October 2005 and the year ended 30 June 2005 extracted from the Accountants’ report set out in Appendix III to this circular as if the Proposed Merger had taken place on 31 October 2005 and making certain adjustments to align the accounting policies of the Telstra CSL Group with the accounting policies of the NWM Group and pro forma adjustments as set out below.

The following unaudited pro forma consolidated profit and loss statements and consolidated cash flow statements of the Enlarged Group are prepared based on the audited financial statements of the NWM Group for the four months ended 31 October 2005 and the year ended 30 June 2005 extracted from the accountants’ report on the NWM Group set out in Appendix I to this circular and the financial information of the Telstra CSL Group for the four months ended 31 October 2005 and the year ended 30 June 2005 extracted from the Accountants’ report set out in Appendix III to this circular as if the Proposed Merger had taken place on 1 July 2004 and making certain adjustments to align the accounting policies of the Telstra CSL Group with the accounting policies of the NWM Group and pro forma adjustments as set out below.

• 141 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

1. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE ENLARGED GROUP

The following is an illustrative and pro forma consolidated balance sheet of the Enlarged Group which has been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Proposed Merger as if it had taken place on 31 October 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 position of the Enlarged Group had the Proposed Merger been completed as at 31 October 2005 or at any future dates.

ASSETS Non-current assets: Fixed assets Investment properties Intangible assets Investments in associated companies Deferred taxation Rental and other deposits Current assets: Inventories Trade receivables Prepayments and other receivables Handset subsidies Rental and other deposits Amounts due from fellow subsidiaries Amounts due from a related company Cash and bank balances Total assets	The NWM Group as at 31 October 2005 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2 Note 3 Note 4 Note 5 1,024,350 (1,021,245) 3,900 72,959 – 1,912,638 22,380 244,024 165,207 (165,207) 7,900 (7,900) 1,274,316 ------------- 26,326 (26,326) 102,365 (99,393) 49,288 (47,441) 68,010 (68,010) 41,014 (41,014) 29 (29) 813 76,065 202,729 (1,037,759) 1,037,759 363,910 ------------- 1,638,226 -------------	The Pro forma Enlarged Group as at 31 October 2005 HK$’000 3,105 3,900 72,959 2,179,042 – –
		2,259,006 ------------- – 2,972 1,847 – – – 813 278,794
		284,426 ------------- 2,543,432 -------------

• 142 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

The NWM Group as at 31 October 2005 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2 Note 3 Note 4 Note 5 LIABILITIES Non-current liabilities Amount due to the ultimate holding company – 1,281,783 Loan from a fellow subsidiary 877,500 (877,500) Convertible bond 28,256 – Subscription note 1,146,829 – Asset retirement obligations 6,758 (6,758) Deferred income 2,646 (2,646) 2,061,989 ------------- Current liabilities: Trade payables 174,156 (172,932) Accrued charges, other payables, deposits received and deferred income 293,547 (284,977) 22,380 Amounts due to fellow subsidiaries 4,317 (3,889) Amounts due to related companies 537 25 Current portion of long-term liabilities – Promissory note issued to the immediate holding company – 472,557 ------------- Total liabilities 2,534,546 ------------- Total equity and current liabilities 1,638,226 ------------- Net current (liabilities)/assets (108,647) ------------- Total assets less current liabilities 1,165,669 ------------- Capital 16,454 (300) Other reserves (83,205) (689,792) 690,092 (Accumulated losses)/retained profits (829,569) 764,933 184,787 (Deficit)/surplus on shareholders’ fund (896,320)

The Pro forma Enlarged Group as at 31 October 2005 HK$’000 1,281,783 – 28,256 1,146,829 – – 2,456,868 ------------- 1,224 30,950 428 562 – – 33,164 ------------- 2,490,032 ------------- 2,543,432 ------------- 251,262 ------------- 2,510,268 ------------- 16,154 (82,905) 120,151 53,400

• 143 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Notes to the unaudited pro forma consolidated balance sheet of the Enlarged Group

1. The balances have been extracted without adjustment from the accountants’ report of the NWM Group as at 31 October 2005 as set out in Appendix I to this circular.

2. The adjustment relates to the NWPCS Disposal pursuant to the Merger Agreement. For the purpose of pro forma consolidated balance sheet, the amounts of assets and liabilities of the NWPCS Group to be disposed of are based on the financial information of the NWPCS Group as at 31 October 2005 as set out in Appendix I to this circular.

3. The adjustment relates to the gain on the NWPCS Disposal assuming the NWPCS Disposal took place on 31 October 2005.

The gain on the NWPCS Disposal will be determined based on the difference in the fair value of 76.4% interest in NWPCS disposed of by the NWM Group over the net book value of the NWPCS Group disposed of as at Completion.

For the purpose of preparing the unaudited pro forma consolidated balance sheet of the Enlarged Group, the net book value of the NWPCS Group as at 31 October 2005 and the fair value of NWM’s shares as to 76.4% based on the closing market price as at 15 February 2006 adjusted for net debts of the NWM Group, excluding the fair value of the NWCS Group and taking into consideration the retirement of debt and extinguishment of certain level of negative working capital of the NWPCS Group, if any, are applied in the calculation of the gain on the NWPCS Disposal. Since the fair value of the NWM Shares at the date of the Completion may be substantially different from their fair value used in the preparation of the pro forma financial information, the final amounts of the gain on the NWPCS Disposal will be different from those amount presented above.

1. The adjustment relates to equity accounting of 23.6% interest in the Merged Group as associate of the Enlarged Group pursuant to the Telstra CSL Acquisition, which has taken into account the following:

2. a) The net asset value of the Telstra CSL Group is based on the restated financial information on Telstra CSL using accounting policies adopted by the NWM Group as at 31 October 2005 as set out in Appendix IV to this circular. The Directors consider that, save for the adjustments in relation to the “Accounting for revenue recognition” and “Accounting for goodwill” as detailed in notes (ii) and (iii) of the section B of Appendix IV to this circular, the pro forma financial information of the Enlarged Group has been properly compiled on the bases stated in this appendix and such basis is consistent with the accounting policies of the NWM Group.

3. b) The net asset value of the NWPCS Group as at 31 October 2005.

4. c) Fair value adjustment ascribed to the Telstra CSL Group relates to recognition of the intangible assets including the 3G Licence, customer base and trademarks, which has been assessed by an independent valuer on the Telstra CSL Group as at 31 October 2005. No fair value adjustment has been ascribed to the NWPCS Group.

5. d) Recognition of the goodwill arose from the Telstra CSL Acquisition amounts to approximately HK$987 million (see below for further details).

6. e) Issue of new shares by NWPCS Holdings to NWM amounted to HK$1,038 million (based on the amount of outstanding debts owed by the NWPCS Group as at 31 October 2005) pursuant to the Merger Agreement to render the NWPCS Group debt-free upon completion of the Merger Agreement by (i) retirement of outstanding debts at Completion and (ii) extinguishment of certain levels of negative working capital at Completion.

7. 144 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Under HKFRS, the NWM Group will apply the purchase method to account for the Telstra CSL Acquisition. In applying the purchase method, the share of identifiable assets and liabilities (including intangible assets and contingent liabilities) of the Telstra CSL Group will be recorded at the Completion date of the Telstra CSL Acquisition. Any goodwill or negative goodwill arising from the Telstra CSL Acquisition will be determined as the excess or deficit of the purchase consideration, i.e. the fair value of 76.4% interest in the NWPCS Group disposed of by the NWM Group plus cash consideration, over the NWM Group’s interest in the net fair value of the identifiable assets and liabilities of the Telstra CSL Group at Completion.

For the purpose of preparing the unaudited pro forma consolidated balance sheet of the Enlarged Group, the net fair value of the identifiable assets and liabilities of the Telstra CSL Group as at 31 October 2005 and the fair value of the NWM Shares as to 76.4% based on the closing market price as at 15 February 2006 are applied in the calculation of the estimated goodwill arising from the Telstra CSL Acquisition. Since the fair value of Telstra CSL Group at the date of Completion may be substantially different from their fair value used in the preparation of the pro forma financial information, the final amounts of the fair values of the assets and liabilities of Telstra CSL Group and intangible assets (including goodwill) will be different from those amounts applied in the calculation of the estimated goodwill.

1. The adjustment reflects the expenses directly attributable to the Proposed Merger of approximately HK$22 million.

2. The adjustment reflects a shareholder’s loan advanced by NWD to NWM as at 31 October 2005, for the purpose of satisfaction of the subscription of the NWPCS Holdings’s shares by NWM amounting to HK$1,038 million pursuant to one of the Subscription Agreements, and settlement of the cash consideration of HK$244 million pursuant to the Merger Agreement. The loan is unsecured and has no definite term of repayment.

3. No adjustment has been made to reflect any trading result or other transaction of NWM and Telstra CSL entered into subsequent to 31 October 2005.

4. 145 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

2. UNAUDITED PRO FORMA CONSOLIDATED PROFIT AND LOSS STATEMENTS OF THE ENLARGED GROUP

The following is an illustrative and pro forma consolidated profit and loss statements of the Enlarged Group which have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Proposed Merger as if it had taken place on 1 July 2004. 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 Enlarged Group had the Proposed Merger been completed as at 1 July 2004 or at any future dates.

Unaudited pro forma consolidated profit and loss statement for the year ended 30 June 2005

Turnover Cost of sales Gross profit Other revenue Selling expenses Administrative expenses Operating profit/(loss) Finance costs Gain on disposal of subsidiaries Share of profit of an associate Profit before taxation Taxation Profit for the year Attributable to: Equity holders of the parent

The NWM The Pro forma Group Enlarged for the Group year ended for the year 30 June ended 30 June 2005 Pro forma adjustments 2005 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2 Note 2 Note 3 Note 4 1,709,054 (1,704,793) 4,261 (866,113) 864,783 (1,330) 842,941 2,931 635 (527) 108 (101,468) 101,105 (363) (598,701) 593,724 (4,977) 143,407 (2,301) (65,287) 20,548 (73,253) (117,992) – 984,211 984,211 – 144,983 144,983 78,120 1,008,901 (21,066) 21,015 (51) 57,054 1,008,850 57,054 1,008,850

• 146 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma consolidated profit and loss statement for the four months ended 31 October 2005

	The NWM				The Pro forma	The Pro forma
	Group					Enlarged
	for the					Group
	four					for the four
	months				months ended
	ended 31					31 October
	October 2005	Pro	forma adjustments			2005
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
	Note 1	Note 2	Note 3	Note	4
Turnover	700,265	(700,051)				214
Cost of sales	(441,251) 440,908					(343)
Gross profit/(loss)	259,014					(129)
Other revenue	533	(439)				94
Selling expenses	(41,930) 41,901					(29)
Administrative expenses	(192,457) 190,898					(1,559)
Operating profit/(loss)	25,160					(1,623)
Finance costs	(29,691) 13,769			(24,418)		(40,340)
Share of profit of an associate	–		40,438			40,438
(Loss)/profit before taxation	(4,531)					(1,525)
Taxation	(2,265) 2,265					–
Loss for the period	(6,796)					(1,525)
Attributable to:
Equity holders of the parent	(6,796)					(1,525)

Notes to the unaudited pro forma consolidated profit and loss statements of the Enlarged Group

1. The amounts have been extracted without adjustment from the accountants’ report of the NWM Group for the year ended 30 June 2005 and four months ended 31 October 2005 as set out in Appendix I to this circular.

2. The adjustment relates to the NWPCS Disposal pursuant to the Merger Agreement. For the purpose of pro forma consolidated profit and loss statements, the results of the NWPCS Group to be disposed of are based on the financial information for the year ended 30 June 2005 and four months ended 31 October 2005 as set out in Appendix I to this circular.

The gain on the NWPCS Disposal will be determined based on the difference in the fair value of 76.4% interest in the NWPCS Group disposed of by the NWM Group over the net book value of 76.4% interest of the NWPCS Group disposed of as at Completion.

• 147 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

For the purpose of preparing the unaudited pro forma profit and loss statements of the Enlarged Group, the net book value of the NWPCS Group as at 1 July 2004 and the fair value of NWM Shares as to 76.4% based on the closing market price as at 22 July 2004 less the share of fair value attributable to the NWPCS Group adjusted for net debts of the NWM Group, after taking into consideration the retirement of debt and extinguishment of certain level of negative working capital of the NWPCS Group, if any, are applied in the calculation of the gain on the NWPCS Disposal. Since the fair value of the the NWPCS Group at the date of Completion may be substantially different from the fair value used in the preparation of the pro forma financial information, the final amount of the gain on the NWPCS Disposal will be different from those amounts presented above.

1. The adjustment relates to equity accounting of 23.6% interest in the Merged Group as associate of the Enlarged Group pursuant to the Telstra CSL Acquisition, which has taken into accounts the following:

2. a) The results of Telstra CSL Group are extracted from the restated financial information on Telstra CSL using accounting policies adopted by the NWM Group for the year ended 30 June 2005 and four months ended 31 October 2005 as set out in Appendix IV to this circular, and taking into account the add-back of net interest expenses payable to the ultimate holding company of Telstra CSL which would have been avoided assuming that the related intercompany loans had been extinguished upon Completion. The directors consider that, save for the adjustments in relation to the “Accounting for revenue recognition” and “Accounting for goodwill” as detailed in notes (ii) and (iii) of the section (B) of Appendix IV to this circular, the pro forma financial information of the Enlarged Group has been properly compiled on the bases stated in this appendix and such basis is consistent with the accounting policies of the NWM Group.

3. b) The results of the NWPCS Group are extracted from the accountants’ report of the Group for the year ended 30 June 2005 and four months ended 31 October 2005 as set out in Appendix I to this circular, adding back interest expenses incurred on debt of the NWPCS Group which would have been avoided assuming that such debt had been retired upon Completion.

4. c) Recognition of amortisation expenses of the intangible assets as detailed in note 3(c) of section 1 of this appendix.

5. The adjustment reflects interest expenses on shareholder’s loan advanced by NWD to NWM, for the purpose of satisfaction of the subscription for the NWPCS Holdings’s shares amounting to HK$1,335 million pursuant to one of the Subscription Agreements, and settlement of the cash consideration of HK$244 million pursuant to the Merger Agreement. The loan is unsecured and interest-bearing at 0.65% above HIBOR per annum, and has no definite term of repayment.

6. No adjustment has been made to reflect any trading result or other transaction of NWM and Telstra CSL entered into subsequent to 31 October 2005.

7. 148 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

3. UNAUDITED PRO FORMA CONSOLIDATED CASH FLOW STATEMENTS OF THE ENLARGED GROUP

The following is an illustrative and pro forma consolidated cash flow statements of the Enlarged Group which have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Proposed Merger as if it had taken place on 1 July 2004. 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 Enlarged Group had the Proposed Merger been completed as at 1 July 2004 or at any future dates.

Unaudited pro forma consolidated cash flow statement for the year ended 30 June 2005

					The Pro forma	The Pro forma
	The NWM					Enlarged
	Group					Group
	for the year					for the year
	ended 30				ended 30 June
	June 2005		Pro forma	adjustments		2005
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 1	Note 2	Note 3	Note 4	Note 5
Operating activities
Net cash inflow/
(outflow) generated
from operations	396,209	(401,029)				(4,820)
Interest paid	(13,983)	12,509			(73,253)	(74,727)
Hong Kong profits tax paid	(51)					(51)
Net cash inflow/
(outflow) from
operating activities	382,175					(79,598)
	-------------					-------------
Investing activities
Purchase of fixed assets	(140,791)	140,791				–
Sales of fixed assets	5	(5)				–
Acquisition of subsidiaries	45,630					45,630
Sales of other investments	900					900
Sales of investment securities	3,609					3,609
Interests received	635	(527)				108
NWPCS Disposal and Telstra CSL
acquisition	–		(220,470)			(220,470)
Net cash outflow from
investing activities	(90,012)					(170,223)
	-------------					-------------
Net cash inflow/(outflow)
before financing	292,163 -------------					(249,821) -------------

• 149 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma consolidated cash flow statement for the year ended 30 June 2005 (Continued)

					The Pro forma	The Pro forma
						Enlarged
	The NWM Group					Group
	for the year					for the year
	ended 30				ended 30 June
	June 2005		Pro forma	adjustments		2005
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 1	Note 2	Note 3	Note 4	Note 5
Financing activities
(Decrease)/increase in
amounts due to immediate
holding company and
ultimate holding company	(73)			1,578,719		1,578,646
Repayment of bank loan	(270,000)	270,000		(372,500)		(372,500)
Repayment of loan from
a fellow subsidiary	–			(877,500)		(877,500)
(Increase)/decrease in amount
due from the NWPCS Group	–	(30,925)	30,925			–
Net cash (outflow)/inflow
from financing activities	(270,073)					328,646
	-------------					-------------
Net increase in cash and
cash equivalents	22,090					78,825
Cash and cash equivalents
at the beginning of the year	94,444					94,444
Cash and cash equivalents
at the end of the year	116,534					173,269

• 150 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma consolidated cash flow statement for the four months ended 31 October 2005

						The Pro forma	The Pro forma
	The NWM						Enlarged
	Group						Group
	for the four						for the
	months						four months
	ended 31						ended 31
	October						October
	2005		Pro	forma adjustments			2005
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 1	Note 2	Note 3	Note 4	Note 5	Note 6
Operating activities
Net cash inflow/(outflow)
generated from operations	120,743	(121,207)					(464)
Interest paid	(18,253)	17,832					(421)
Net cash inflow/(outflow)
from operating activities	102,490						(885)
	-----------						-----------
Investing activities
Purchase of fixed assets	(51,974)	51,974					–
Sales of fixed assets	299	(299)					–
Acquisition of subsidiaries	9,896						9,896
Interests received	533	(439)					94
Dividend received	–					57,932	57,932
Net cash (outflow)/inflow
from investing activities	(41,246)						67,922
	-----------						-----------
Net cash inflow before financing	61,244						67,037
	-----------						-----------
Financing activities
Repayment of bank loan	(102,500)	102,500					–
Decrease/(increase) in amount
due from the NWPCS Group	–	839	(839)
Net cash outflow from
financing activities	(102,500) -------------						– -------------

• 151 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma consolidated cash flow statement for the four months ended 31 October 2005 (Continued)

						The	Pro forma
	The NWM						Enlarged
	Group						Group
	for the four						for the
	months					four months
	ended 31						ended 31
	October						October
	2005		Pro forma adjustments				2005
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 1	Note 2	Note 3	Note 4	Note 5	Note 6
Net (decrease)/increase in cash
and cash equivalents	(41,256)	51,200	(839)			57,932	67,037
Cash and cash equivalents at the
beginning of the period	116,534	(9,186)	(189,545)	328,719	(73,253)		173,269
Cash and cash equivalents at the
end of the period	75,278						240,306

Notes to the unaudited pro forma consolidated cash flow statements of the Enlarged Group

1. The amounts have been extracted without adjustment from the accountants’ report of the NWM Group for the year ended 30 June 2005 and four months ended 31 October 2005 as set out in Appendix I to this circular.

2. The adjustment reflects the NWPCS Disposal pursuant to the Merger Agreement. For the purpose of pro forma cash flow statements, the cash flows of the NWPCS Group to be disposed of are based on the financial information of the NWPCS Group for the year ended 30 June 2005 and four months ended 31 October 2005 as set out in Appendix I to this circular.

3. The adjustment reflects negative cash and bank balances of the NWPCS Group immediately prior to Completion, cash considerations of approximately HK$244 million net of expenses directly attributable to the Proposed Merger of approximately HK$22 million and the reversal of fund transfer between NWM and the NWPCS Group for the year ended 30 June 2005 and the four months ended 31 October 2005.

4. The adjustment reflects a shareholders’ loan advanced by NWD to NWM, and the retirement of debt of the NWPCS Group pursuant to the Merger Agreement, as detailed in note 4 of section 2 in this appendix.

5. 152 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

1. The adjustment reflects interest expenses on the shareholder’s loan advanced by NWD as detailed in note 4 above.

2. The adjustment reflects the receipt of the share of dividend from the Merged Group declared during the year ended 30 June 2005. For the purpose of the pro forma cash flow statement, the amount of dividend received are extracted from the accountants’ report of the Telstra CSL Group.

3. No adjustment has been made to reflect any trading result or other transaction of NWM and Telstra CSL entered into subsequent to 31 October 2005.

4. 153 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

4. LETTER FROM THE REPORTING ACCOUNTANTS OF NWM

The following is the text of a report received from the auditors and reporting accountants of NWM, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular. As there is no specific guidance for reporting on pro forma financial information issued by the Hong Kong Institute of Certified Public Accountants, this report is prepared with reference to the principles set out in the Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom.

The Directors

7 March 2006

New World Mobile Holdings Limited

Dear Sirs,

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 142 to 153 under the headings of “Unaudited Pro Forma Financial Information” in Appendix V of the Company’s circular dated 7 March 2006, in connection with the proposed merger (the “Proposed Merger”) of the mobile telecommunications businesses of Hong Kong CSL Limited and New World PCS Limited by the Company. 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 Proposed Merger might have affected the relevant financial information of the Group.

RESPONSIBILITIES

It is the responsibility solely of the Directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 13 of Appendix 1B and paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to the principles set out in Technical Release 18/98 “Pro Forma Financial Information – Guidance for the preparers under the Listing Rules” issued by the Institute of Chartered Accountants in England and Wales.

It is our responsibility to form an opinion, as required by paragraph 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.

• 154 -

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

BASIS OF OPINION

We conducted our work with reference to the principles set out in the Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the Directors of the Company.

Our work does not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information has been prepared on the bases set out on pages 142 to 153 for illustrative purpose only and, because of its hypothetical nature, it may not be indicative of:

• the financial position of the Group as at 31 October 2005 or any future date, or

• the results of the Group for the year ended 30 June 2005 and for the four months ended 31 October 2005 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 paragraph 4.29(1) of the Listing Rules.

Yours faithfully, PricewaterhouseCoopers

Certified Public Accountants Hong Kong

• 155 -

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 NWM Group. The Directors collectively and individually accept full responsibility for the accuracy of the information with regard to the NWM Group contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, 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 NWM and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of NWM in the shares, underlying shares or debentures of NWM and its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to NWM 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 NWM and the Stock Exchange, were as follows:–

Interests in NWM Shares

As at the Latest Practicable Date, none of the Directors had any interests in the NWM Shares. As at the Latest Practicable Date, the interests of the Directors in the shares of the associated corporations of NWM 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	1.70%
Mr. Doo Wai Hoi, William,JP	8,750,000	–	45,050,000 (2)	53,800,000	1.41%
Mr. Chow Yu Chun, Alexander	6,250,000	–	–	6,250,000	0.164%

• 156 -

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
NWD
(Ordinary shares of HK$1.00 each)
Dr. Cheng Kar Shun, Henry	–	300,000 (3)	–	300,000	0.008%
Mr. Kwong Che Keung, Gordon	30,000	–	–	30,000	0.008%
NWS Holdings Limited (“NWSH”)
(Ordinary shares of HK$1.00 each)
Dr. Cheng Kar Shun, Henry	3,179,199	587,000 (3)	8,000,000 (1)	11,766,199	0.62%
Mr. Doo Wai Hoi, William,JP	2,006,566	–	3,130,000 (2)	5,136,566	0.27%
Mr. Chow Yu Chun, Alexander	2,504,761	–	–	2,504,761	0.13%
Mr. Kwong Che Keung, Gordon	601,969	–	–	601,969	0.03%
Fung Seng Estate Development
(Shanghai) Co., Ltd.
(Registered capital in US$)
Mr. Doo Wai Hoi, William,JP	–	–	3,000,000 (4)	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 Ju Yi Real Estate
Development Co., Ltd.
(Registered capital in RMB)
Mr. Doo Wai Hoi, William,JP	–	–	105,000,000 (4)	105,000,000	30.00%

• 157 -

GENERAL INFORMATION

APPENDIX VI

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 NWM.

• (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 NWM.

• (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 .

Interests in underlying shares – share options

(i) NWM

As at the Latest Practicable Date, the following Directors had personal interest in options to subscribe for NWM Shares granted under the share option schemes of NWM:

Number of

	Number of
	share options
	as at the
	Latest
	Practicable	Date of	Exercise	Exercisable
Name of Director	Date	grant	Price	period
			HK$
Dr. Cheng Kar	780,000	28 January	1.260	28 January
Shun, Henry		2005		2005 to
				31 December
				2010
Mr. Doo Wai Hoi,	300,000	28 January	1.260	28 January
William,JP		2005		2005 to
				31 December
				2010
Dr. Wai Fung Man,	482,000	28 January	1.260	28 January
Norman		2005		2005 to
				31 December
				2010
Mr. To Hin Tsun,	482,000	28 January	1.260	28 January
Gerald		2005		2005 to
				31 December
				2010

• 158 -

GENERAL INFORMATION

APPENDIX VI

	Number of
	share options
	as at the
	Latest
	Practicable	Date of	Exercise	Exercisable
Name of Director	Date	grant	Price	period
			HK$
Mr. Chow Yu Chun,	482,000	28 January	1.260	28 January
Alexander		2005		2005 to
				31 December
				2010
Mr. Ho Hau Chong,	78,000	28 January	1.260	28 January
Norman		2005		2005 to
				31 December
				2010
Mr. Lo Lin Shing,	200,000	8 February	2.440	9 February
Simon		2002		2002 to
				8 February
				2008
	78,000	28 January	1.260	28 January
		2005		2005 to
				31 December
				2010
Mr. Hui Chiu	78,000	8 April	1.276	8 April
Chung,JP		2005		2005 to
				31 December
				2010
Mr. Kwong Che	78,000	28 January	1.260	28 January
Keung, Gordon		2005		2005 to
				31 December
				2010
Mr. Wei Chi Kuan,	78,000	28 January	1.260	28 January
Kenny		2005		2005 to
				31 December
				2010

• 159 -

GENERAL INFORMATION

APPENDIX VI

(ii) NWSH

Under the share option scheme of NWSH, a fellow subsidiary of NWM, 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$3.719
			Balance as
			at the
			Latest
	Date of	Exercisable	Practicable
Name of Director	grant	Period	Date
Mr. Chow Yu Chun,	21 July 2003	Note (1)	134,647
Alexander

Note:

(1) 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 NWM had any interests or short positions in the shares, underlying shares or debentures of NWM or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to NWM 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 NWM 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 NWM, the following persons (other than the Directors or chief executive of NWM) had an interest or short position in the NWM Shares or/and underlying NWM Shares which would fall to be disclosed to NWM under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who were,

• 160 -

GENERAL INFORMATION

APPENDIX VI

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 member of the NWM Group were as follows:

Interests in the NWM Shares and underlying NWM Shares

					Approximate
			Interests		percentage
			in physically		of issued
			settled unlisted		capital as at
		Interests in	equity		the Latest
Name	Capacity	NWM Shares	derivatives	Total	Practicable Date
NWCBN	Beneficial owner	2,100,000	23,185,245 (1)	25,285,245	26.52%
New World Telephone	Interest of a	2,100,000 (2)	23,185,245 (2)	25,285,245	26.52%
Holdings Limited	controlled
(“NWTHL”)	corporation
PPG	Beneficial owner	53,236,666	1,000,000,000 (3)	1,053,236,666	1,104.76%
NWD	Interest of	55,336,666 (4)	1,023,185,245 (4)	1,078,521,911	1,131.28%
	controlled
	corporations
Chow Tai Fook	Interest of a	55,336,666 (5)	1,023,185,245 (5)	1,078,521,911	1,131.28%
Enterprises Limited	controlled
(“CTF”)	corporation
Million Dollar	Beneficial Owner	16,153,846	–	16,153,846	16.94%
Trading Limited
New World	Interest of a	16,153,846 (6)	–	16,153,846	16.94%
CyberBase Limited	controlled
	corporation

Notes:

• (1) These 23,185,245 underlying NWM Shares represent the NWM 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 NWM Shares and underlying NWM Shares held by NWCBN.

• (3) These 1,000,000,000 underlying NWM Shares represent the NWM 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 NWM Shares and underlying NWM Shares held by PPG and in the NWM Shares and underlying NWM Shares deemed to be interested by NWTHL.

• 161 -

GENERAL INFORMATION

APPENDIX VI

• (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 NWM Shares and underlying NWM Shares.

• (6) 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 NWM Shares and underlying NWM Shares held by Million Dollar Trading Limited.

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 NWM) had, or was deemed or taken to have an interest or short position in the NWM Shares or/and underlying NWM Shares which would fall to be disclosed to NWM 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 NWM Group.

Save as stated above, as at 31 October 2005, in the register required to be kept 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 NWM.

(c) Other interests

• (1) None of the Directors was materially interested in any contract or arrangement entered into by any member of the NWM Group subsisting at the Latest Practicable Date, and which was significant in relation to the business of the NWM Group taken as a whole.

• (2) None of the Directors had since 31 October 2005, being the date to which the latest published audited financial statements of NWM 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 NWM Group, or are proposed to be acquired or disposed of by or leased to any member of the NWM Group.

3. MATERIAL LITIGATION

Neither NWM 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 NWM 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 NWM Group, other than those businesses where the Directors were appointed as directors to represent the interests of NWM and/or the NWM Group.

• 162 -

GENERAL INFORMATION

APPENDIX VI

5. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any service agreement with any member of the NWM Group nor were there any other service agreements proposed which would not expire or be determinable by the NWM Group within one year without payment of compensation (other than statutory compensation).

6. PROCEDURES FOR DEMANDING A POLL

Under the articles of association of NWM, 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

• (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 NWM Group) have been entered into by members of the NWM Group within the two years immediately preceding the date of this circular, and are or may be material:

• (a) the agreement dated 29 March 2004 entered into between NWM and New World Telephone Holdings Limited in relation to the Reverse Acquisition for a consideration of HK$1,250 million;

• (b) the subscription agreement dated 29 March 2004 entered into between PPG and NWM in relation to the subscription by PPG for 4,666,666 NWM Shares and the subscription note in the principal amount of HK$1,200 million;

• (c) the assignment dated 31 May 2004 entered into between NWD as the assignor and NWPCS as the assignee (the “Assignment”) pursuant to which NWD agreed to assign to NWPCS the trade marks as specified in the Assignment together with the goodwill of the business concerned in the goods and services, at a consideration of HK$10.00 for which the trade marks are registered and all rights therein subject to and upon the terms and conditions contained therein;

• 163 -

GENERAL INFORMATION

APPENDIX VI

• (d) the deed of novation and amendment dated 6 July 2004 entered into between NWPCS as borrower, NWD as existing guarantor, NWPCS Holdings as shareholder, NWM as new guarantor and Standard Chartered Bank (Hong Kong) Limited (“Standard Chartered Bank”) in relation to the release and discharge of NWD’s rights and obligations under the credit agreement dated 21 November 2002 (the “Credit Agreement”) and the undertaking by NWM to perform the obligations of NWD under the Credit Agreement;

• (e) the subordination deed dated 6 July 2004 entered into between NWPCS Holdings, New World Finance Company Limited (“New World Finance”) and Standard Chartered Bank in relation to the release and discharge of NWD’s rights and obligations under the Credit Agreement and the undertakings by NWM to perform, discharge and observe the terms of the Credit Agreement;

• (f) the loan agreement dated 6 July 2004 (the “2004 Loan Agreement”) entered into between 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$877,500,000 subject to and upon the terms and conditions contained therein;

• (g) the guarantee dated 6 July 2004 entered into between NWM as guarantor and New World Finance as lender pursuant to which NWM agreed to guarantee the performance by NWPCS of the obligations under the 2004 Loan Agreement subject to and upon the terms and conditions contained therein;

• (h) the agreement dated 12 September 2005 entered into between NWM and NWCB in relation to the sale and purchase of the entire issued share capital of NWCS at a consideration of HK$20,999,999 which was satisfied by the issue of 16,153,846 NWM Shares at an issue price of HK$1.3 per NWM Share by NWM to NWCB;

• (i) the deed of assignment of loan dated 21 October 2005 entered into between New World CyberBase Limited (“NWCB”) as assignor, NWM as assignee and NWCS in relation to the assignment of the interest-free 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;

• (j) the loan agreement dated 9 November 2005 entered into between 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;

• (k) the Merger Agreement;

• (l) the Shareholders’ Agreement; and

• (m) the Subscription Agreements.

• 164 -

GENERAL INFORMATION

APPENDIX VI

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
PricewaterhouseCoopers	Certified Public Accountants
Ernst & Young	Certified Public Accountants

PricewaterhouseCoopers and Ernst & Young have given and have not withdrawn their respective written consents to the issue of this circular with the inclusion of their reports and letters (if any), as the case may be, and references to their names in the form and context in which they respectively appear.

As at the Latest Practicable Date, each of PricewaterhouseCoopers and Ernst & Young:

• (a) was not interested, directly or indirectly, in any assets which have been acquired or disposed of by or leased to NWM since 31 October 2005, being the date to which the latest published audited accounts of NWM were made up; and

• (b) did not have any shareholding interest in any member of the NWM 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 NWM Group.

9. MISCELLANEOUS

• (a) The company secretary and the qualified accountant of NWM is Mr. Sien Yun Man CPA, ACS, ACIS.

• (b) The registered office of NWM 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 NWM in Hong Kong is at 17th Floor, Chevalier Commercial Centre, 8 Wang Hoi Road, Kowloon Bay, Hong Kong.

• (c) The branch share registrars and transfer office of NWM 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.

• 165 -

GENERAL INFORMATION

APPENDIX VI

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Iu, Lai & Li, Solicitors, at 20th Floor, Gloucester Tower, The Landmark, 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 NWM;

• (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 NWM for the year ended 30 June 2005;

• (e) the accountants’ report from PricewaterhouseCoopers on the NWM Group dated 7 March 2006, the text of which is set out in Appendix I to this circular;

• (f) the accountants’ report from Ernst & Young on the Telstra CSL Group dated 7 March 2006, the text of which is set out in Appendix III to this circular;

• (g) the letter from PricewaterhouseCoopers on the unaudited pro forma financial information of the Enlarged Group dated 7 March 2006, the text of which is set out in Appendix V to this circular; and

• (h) 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 NWM Group as set out in Appendix I to this circular and giving the reasons thereof.

• 166 -

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 The Four Seasons Ballroom, 2/F, New World Renaissance Hotel, 22 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on Friday, 24 March 2006 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as ordinary resolution of the Company.

ORDINARY RESOLUTION

“THAT:–

• (a) the entering into of the conditional merger agreement dated 8 December 2005 (the “Merger 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, Telstra CSL Limited (“Telstra CSL”) and Telstra Holdings (Bermuda) No. 2 Limited, whereby Telstra CSL has agreed to allot and issue and the Company has agreed to procure Upper Start Holdings Limited, a wholly-owned subsidiary of the Company, to subscribe for new shares in Telstra CSL, which will represent 23.6% of the enlarged issued share capital of Telstra CSL upon completion of the Merger Agreement, in exchange for (i) the transfer of the entire interests of the Company in New World PCS Holdings Limited, a wholly-owned subsidiary of the Company and the holding company of New World PCS Limited, to Telstra CSL; and (ii) a cash payment of HK$244.024 million by the Company to Telstra CSL upon the terms and subject to the conditions therein contained, be and is hereby approved, confirmed and ratified and the transactions contemplated under the Merger Agreement be and are hereby approved; and

• (b) any one director of the Company be and is hereby authorised to do all acts and things and execute all documents by hand or, in case of execution of documents under seal, to do so jointly with either the secretary or a second director of the Company or a person appointed by the board of directors of the Company, which in his or their opinion may be necessary, desirable or expedient to carry out or to give effect to any or all transactions contemplated under the Merger Agreement.”

By Order of the Board

New World Mobile Holdings Limited Sien Yun Man

Company Secretary

Hong Kong, 7 March 2006

• 167 -

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:

1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, in the event of a poll, 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.

2. 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.

3. 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 registrars 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.

4. 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 or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to have been revoked.

5. 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.

6. 168 -