Hi-tech Manufacturing

In 2008, the turnover of hi-tech manufacturing business of the Company recorded a historic high of HK$1,683,081,000 (2007: HK$1,655,785,000), representing an increase of approximately 1.65% as compared with last year. The hi-tech manufacturing business also recorded a historic high profit of HK$182,611,000, representing an increase of approximately 13.17% as compared with HK$161,365,000 in last year. Despite the rapid deterioration of market condition in the fourth quarter, and being affected by the fierce market competition and the impacts of continuous soaring costs of labour, raw materials and energy, the hi-tech manufacturing business recorded a growth in profit for the year mainly due to the adoption of measures on strictly strengthening cost control.

In recent years, the hi-tech manufacturing business, through continuous reinforcing management capability, technology improvement and research and development as its major operating strategies, has been improved in every aspect and, hence, products and services were able to better satisfy the needs of clients, thereby maintaining the competitive strengths in fierce market competition. During the year, the hi-tech manufacturing business, with main products comprising plastic injection, intelligent chargers, liquid crystal display and printed circuit boards, maintained steady growth in total sales. Among them, plastic products and printed circuit boards achieved relatively satisfactory results, with turnover increasing by 8.97% and 21.05% respectively as compared with last year and operating profit increasing by 16.47% and 22.93% respectively.

Since its recognition by the National Development and Reform Commission as a “State Civilian Aerospace Industry Base of Shanghai” last year, the Shanghai Aerospace Technology Industrial Park (the “Park”), located at Pujiang Town, Minhang District, Shanghai, has been under construction with good progress. Following the commencement of the Park’s first project, namely the production of composite material of Shanghai Composite High-Tech Development Company Limited in December 2008, four new projects namely Shanghai Shenzhou New Energy Development Company Limited (上海神舟新能源發展有限公司), Shanghai Aerospace Wanyuan Rare Earth Machinery Research & Development Centre (上海航天萬源稀土電機研發中心), Shanghai Aerospace Wanyuan Rare Earth Machinery Company Limited (上海航天萬源稀土電機有限公司) and Space Propellers Academy of Shanghai (上海空間推進研究所) were introduced to the Park and groundbreaking ceremonies were held accordingly. This signified that the planning and construction of the one square kilometre of the Park had basically been completed.

With a view to the commencement of construction, operation and management of the “Aerospace International Centre”, CASIL New Century Technology Development (Shenzhen) Company Limited, a wholly-owned subsidiary of the Company, together with Aerospace Technology Investment Holdings Limited and Shenzhen Science & Technology Institute jointly established the Shenzhen Aerospace Hi-Tech Investment Management Company Limited (“Shenzhen Aerospace”). Shenzhen Aerospace was incorporated in January 2008 and subsequently won a public bid to acquire the land use right of a parcel of commercial office usage land of 10,458.44 square metres situated at Nanshan Houhai Centre District at a consideration of RMB495,000,000 in March 2008. This parcel of land will become the construction site of the “Aerospace International Centre”.

According to the Shenzhen’s municipal planning, Nanshan Houhai Centre District is planned as an urban city centre hub circumvented by harbour sea view in a modernized style, comprising financial and business offices, commercial services, and public facilities. It is believed that under the promotion of the Shenzhen Municipal Government in accordance with the planning of the district and the inauguration of Hong Kong-Shenzhen Western Corridor, Nanshan Houhai Centre District will become a popular area for Shenzhen’s commercial property market.

With full support of China Aerospace Science & Technology Corporation (“CASC”), the substantial shareholder of the Company, and the Shenzhen Municipal Government, the foundation stone laying ceremony for the “Aerospace International Centre” was held in October 2008, representing the upcoming emergence of a landmark architecture featuring state-of-the-art aerospace technology with a gross floor area of approximately 150,000 square metres in Shenzhen Bay, Shenzhen. The “Aerospace International Centre” will serve as CASC’s head management centre, research and development centre and centre of international economic and technology cooperation in the Pearl River Delta.

Research and analysis with respect to market positioning of the “Aerospace International Centre” had been conducted, and the “Aerospace International Centre” was preliminarily determined its market positioning and operation development direction to be a complex development featuring high-end office buildings, apartmentoffice buildings and commercial spaces. During the year, Shenzhen Aerospace organized various expert assessment meetings and invited domestic and international experts to form consultant teams to provide professional opinions for the construction and design planning of the “Aerospace International Centre”. By the end of last year, the construction and design planning of the “Aerospace International Centre” was established, which could facilitate the progress to the next stage of construction work.

The new generation of aerospace launching site is planned to be built in Wenchang City, Hainan Province. Locating adjacent to the new aerospace launching site, the Complex Zone of the Launching Site has a planned area of approximately 4 million square metres (6,100 mu), and has a coastline of about 4 kilometres along the east coast of Hainan. Planned construction includes an aerospace technology services district, an aerospace theme park, a commercial resort district, as well as a residential complex zone etc.

CASIL Hainan Holdings Limited (“CASIL Hainan”), an indirect wholly-owned subsidiary of the Company, was granted the capacity of principal developer through a public bid and entered into the Agreement of the Land Development Project of the Complex Zone of the Launching Site, Hainan Province with the Wenchang Government, Hainan Province in August 2008 with a total investment of RMB1.2 billion, representing a leap forward for the construction of the Complex Zone of the Launching Site in Hainan Province.

At the same time, Hainan Aerospace Development Investment Company Limited (海南航天投資管理有限公司) (“Hainan Aerospace”) was jointly established, on the shareholding of 65% and 35% respectively, by CASIL Hainan and Aerospace Times Properties Development Limited, a subsidiary of CASC, to organise and implement project construction and land development of the Complex Zone. In October 2008, at the extraordinary general meeting of the Company, each of the Land Development Agreement, the Promoters’ Agreement and the Implementation Agreement was voted upon and approved by the shareholders and the independent shareholders respectively. The master plan of the Complex Zone was then approved by the Hainan Government and Hainan Aerospace was established and incorporated in November 2008.