09:27     CHINA AEROSPACE<00031>&CASIL TELECOM<01185>-J.Ann&Resume(6)         

    Based on the unaudited consolidated management accounts of the CASTEL     
    Group for the 6 months ended 30 June 2004, its consolidated profit        
    before and after tax and minority interests amounted to HK$4,556,000      
    and HK$2,343,000 respectively; and its consolidated net asset value as    
    at 30 June 2004 amounted to HK$177,629,000. Based on the audited          
    consolidated accounts of the CASTEL Group for the year ended 31           
    December 2003, its consolidated profit before and after tax amounted to   
    HK$26,000 and HK$2,217,000 respectively. Based on the audited             
    consolidated accounts of the CASTEL Group for the year ended 31           
    December 2002, its consolidated loss before and after tax amounted to     
    HK$406,000 and HK$208,000 respectively.                                   
                                                                              
    As a result of the disposal, it is expected that CASIL will make an       
    exceptional gain of approximately HK$65,290,000 for the year ending 31    
    December 2005 (subject to final audit of the consolidated profit of       
    CASIL to be performed by the auditors), representing the difference       
    between the consideration for such disposal of HK$143,758,081 and the     
    unaudited carrying value of approximately HK$78,468,000 (assuming that    
    such value will be the same as that as at 30 June 2004) (the audited      
    carrying value as at 31 December 2003 was HK$66,184,000).                 
                                                                              
    Reasons for and benefits of the Group Reorganisation                      
                                                                              
    Following the placing of new CASTEL Shares by CASTEL in September 2003    
    and March 2004 respectively, CASIL's beneficial interest in CASTEL        
    diluted from approximately 51.22% to 48.98% and eventually                
    approximately 44.17% respectively. As CASTEL has ceased to be a           
    subsidiary and has become an indirect associated company of CASIL, it     
    is believed that the proposed Group Reorganisation will be beneficial     
    to both the CASIL Group and the CASTEL Group for the following reasons:   
                                                                              
    (a)  given that CASTEL Group has been part of the CASIL Group, upon       
    completion of the Sale and Purchase Agreement, it will allow a clearer    
    delineation of the respective business focuses of the CASIL Group and     
    the CASTEL Group as they will become separate listed groups and that      
    both the CASIL Group and the CASTEL Group will focus on their             
    respective business after the Group Reorganisation;                       
                                                                              
    (b)  it will allow the respective management teams of the CASIL Group     
    and the CASTEL Group to focus their time and resources on their           
    respective distinct lines of businesses, thereby enhancing efficiency     
    in operations and decision-making processes;                              
                                                                              
    (c)  CASIL will have the opportunity to realise its investment in         
    CASTEL through the disposal of Astrotech, thereby improving the           
    financial position of the CASIL Group; and                                
                                                                              
    (d)  CASTEL will be directly controlled (through CALT) by its ultimate    
    controlling shareholder, CASC, thus establishing a more unique image in   
    the market.                                                               
                                                                              
    It is the current intention of CALT that the board composition and the    
    business of CASTEL will remain unchanged. The proposed transaction        
    contemplated under the Sale and Purchase Agreement will not have any      
    material adverse impact on the business or financial operation of         
    CASTEL.                                                                   
                                                                              
    Implications of the Group Reorganisation under the Listing Rules and      
    the Takeovers Code                                                        
                                                                              
    As CALT is wholly-owned by CASC, the ultimate controlling shareholder     
    of CASIL, the entering into of the Sale and Purchase Agreement between    
    CASIL and CALT constitutes a connected transaction for CASIL under the    
    Listing Rules and is subject to, among other things, the approval of      
    the Independent Shareholders by way of poll at the Extraordinary          
    General Meeting. The six wholly-owned subsidiaries of CASC, namely,       
    Jetcote Investments Limited, Burhill Company Limited, Sin King            
    Enterprises Company Limited, Jet Square Developments International        
    Limited, Star River Assets Limited and Full Power International Limited   
    (which together hold approximately 41.86% equity interest in CASIL),      
    and their respective associates (as defined under the Listing Rules)      
    shall abstain from voting at the Extraordinary General Meeting. The       
    entering into of the Sale and Purchase Agreement also constitutes a       
    discloseable transaction for CASIL under the Listing Rules.               
                                                                              
    An independent board committee of CASIL will be formed to advise the      
    Independent Shareholders in respect of the terms of the Sale and          
    Purchase Agreement (including the non-competition and non-disclosure      
    undertakings) and the recommendation of voting. An independent            
    financial adviser will also be appointed to advise the independent        
    board committee and the Independent Shareholders of CASIL in respect      
    thereof.