##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 20-F





(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

OR

For the transition period from
                     to



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

Commission file number 333-11014





i-CABLE COMMUNICATIONS LIMITED

(Exact name of Registrant as specified in its charter)





N/A

(Translation of Registrants name into English)

HONG KONG

(Jurisdiction of
incorporation or organization)

Cable TV Tower

9 Hoi Shing Road

Tsuen Wan, Hong Kong

(Address of principal executive offices)





Securities registered or to be
registered pursuant to Section 12(b) of the Act.

None

(Title of Class)

Securities registered or to be registered pursuant to
Section 12(g) of the Act.

American Depositary Shares, each representing 20 Ordinary Shares, par value HK$1.00 per share

Ordinary Shares, par value HK$1.00 per share*

(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.

None

(Title of Class)





Indicate the number of
outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares 2,016,792,400

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.     ̈  Yes    þ  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.     ̈  Yes    þ  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    þ  Yes     ̈  No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      ̈            Accelerated filer    þ            Non-accelerated filer     ̈

Indicate by check mark which financial statement item the registrant has elected to follow.      ̈  Item 17    þ  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ̈  Yes    þ  No

(APPLICABLE ONLY TO
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     ̈  Yes     ̈  No



|* | Not for trading purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------









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TABLE OF CONTENTS



|                           |  |          |  |                                                         |  |   
|-------------------------- |  | -------- |  | ------------------------------------------------------- |  | --
|CERTAIN DEFINED TERMS      |  | 3       
|                           | 
|FORWARD-LOOKING STATEMENTS |  | 4       
|                           | 
|PART I                     |  | 5       
|                           |  |          | 
|                           |  | ITEM 1.  |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS   |  | 5 
|                           |  |          | 
|                           |  | ITEM 2.  |  | OFFER STATISTICS AND EXPECTED TIMETABLE                 |  | 5 
|                           |  |          | 
|                           |  | ITEM 3.  |  | KEY INFORMATION                                         |  | 5 
|                           |  | A.       |  | Selected Financial Data                                 |  | 5 
|                           |  | B.       |  | Capitalization and Indebtedness                         |  | 8 
|                           |  | C.       |  | Reasons for the Offer and Use of Proceeds               |  | 8 
|                           |  | D.       |  | Risk Factors                                            |  | 9 
|                           |  |          | 
|                           |  | ITEM 4.  |  | INFORMATION ON THE COMPANY                              |  | 16
|                           |  | A.       |  | History and Development of the Company                  |  | 16
|                           |  | B.       |  | Business Overview                                       |  | 16
|                           |  | C.       |  | Organizational Structure                                |  | 26
|                           |  | D.       |  | Property, Plant and Equipment                           |  | 27
|                           |  |          | 
|                           |  | ITEM 5.  |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS            |  | 27
|                           |  | A.       |  | Operating Results                                       |  | 27
|                           |  | B.       |  | Liquidity and Capital Resources                         |  | 35
|                           |  | C.       |  | Research and Development, Patents and Licenses, etc.    |  | 37
|                           |  | D.       |  | Trend Information                                       |  | 37
|                           |  | E.       |  | Off-balance Sheet Arrangements                          |  | 39
|                           |  | F.       |  | Tabular Disclosure of Contractual Obligations           |  | 39
|                           |  | G.       |  | Recent Hong Kong GAAP and U.S. GAAP Pronouncements      |  | 39
|                           |  |          | 
|                           |  | ITEM 6.  |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES              |  | 40
|                           |  | A.       |  | Directors and Senior Management                         |  | 40
|                           |  | B.       |  | Compensation                                            |  | 43
|                           |  | C.       |  | Board Practices                                         |  | 44
|                           |  | D.       |  | Employees                                               |  | 45
|                           |  | E.       |  | Share ownership                                         |  | 45
|                           |  |          | 
|                           |  | ITEM 7.  |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS       |  | 46
|                           |  | A.       |  | Major Shareholders                                      |  | 46
|                           |  | B.       |  | Related Party Transactions                              |  | 47
|                           |  | C.       |  | Interests of Experts and Counsel                        |  | 48
|                           |  |          | 
|                           |  | ITEM 8.  |  | FINANCIAL INFORMATION                                   |  | 48
|                           |  | A.       |  | Consolidated Statements and Other Financial Information |  | 48
|                           |  | B.       |  | Significant Changes                                     |  | 49
|                           |  |          | 
|                           |  | ITEM 9.  |  | THE OFFER AND LISTING                                   |  | 49
|                           |  | A.       |  | Offer and Listing Details                               |  | 49
|                           |  | B.       |  | Plan of Distribution                                    |  | 50
|                           |  | C.       |  | Markets                                                 |  | 50
|                           |  | D.       |  | Selling Shareholders                                    |  | 50
|                           |  | E.       |  | Dilution                                                |  | 51
|                           |  | F.       |  | Expense of the Issue                                    |  | 51
|                           |  |          | 
|                           |  | ITEM 10. |  | ADDITIONAL INFORMATION                                  |  | 51
|                           |  | A.       |  | Share Capital                                           |  | 51
|                           |  | B.       |  | Memorandum and Articles of Association                  |  | 51



1



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##### Table of Contents

|        |  |           |  |                                                                              |  |   
|------- |  | --------- |  | ---------------------------------------------------------------------------- |  | --
|        |  | C.        |  | Material Contracts                                                           |  | 55
|        |  | D.        |  | Exchange Controls                                                            |  | 55
|        |  | E.        |  | Taxation                                                                     |  | 55
|        |  | F.        |  | Dividends and paying agents                                                  |  | 60
|        |  | G.        |  | Statement by experts                                                         |  | 60
|        |  | H.        |  | Documents on display                                                         |  | 60
|        |  | I.        |  | Subsidiary Information                                                       |  | 60
|        |  |           | 
|        |  | ITEM 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 60
|        |  |           | 
|        |  | ITEM 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 60
|        | 
|PART II |  | 61       
|        |  |           | 
|        |  | ITEM 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 61
|        |  |           | 
|        |  | ITEM 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 61
|        |  |           | 
|        |  | ITEM 15.  |  | CONTROLS AND PROCEDURES                                                      |  | 61
|        |  |           | 
|        |  | ITEM 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  | 63
|        |  |           | 
|        |  | ITEM 16B. |  | CODE OF ETHICS                                                               |  | 63
|        |  |           | 
|        |  | ITEM 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  | 63
|        |  |           | 
|        |  | ITEM 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |  | 64
|        |  |           | 
|        |  | ITEM 16E. |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.      |  | 64
|        |  |           | 
|        |  | ITEM 17.  |  | FINANCIAL STATEMENTS                                                         |  | 64
|        |  |           | 
|        |  | ITEM 18.  |  | FINANCIAL STATEMENTS                                                         |  | 64
|        |  |           | 
|        |  | ITEM 19.  |  | EXHIBITS                                                                     |  | 64



2



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CERTAIN DEFINED TERMS

References to China or PRC or Mainland China herein are references to the Peoples Republic of China, excluding,
for the purpose this prospectus only, Hong Kong. References to Hong Kong are references to The Hong Kong Special Administrative Region of the PRC. References to United States or U.S. are to the United States of
America. All references to the Government herein are references to the government of Hong Kong.

All references herein to
we, us, our, i-CABLE, the Group and the Company are references to i-CABLE Communications Limited and its consolidated subsidiaries. Unless the context otherwise requires:



| |  |  | Ad On Media refers to Ad On Media Limited, our 70.0%-owned subsidiary formerly named Teamwork Zhuoran Advertising Limited until April 3, 2007;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | HKC refers to Hong Kong Cable Television Limited, our wholly-owned subsidiary;
| | - |  | --------------------------------------------------------------------------------



| |  |  | iNOL refers to i-CABLE Network Operations Limited, our wholly-owned subsidiary formerly named i-CABLE WebServe Limited until December 19, 2006;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sundream Motion Pictures refers to Sundream Motion Pictures Limited, our wholly-owned subsidiary;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Sundream Stars refers to Sundream Stars Limited (formerly known as Sundream Music Limited), our wholly-owned subsidiary;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Wharf refers to The Wharf (Holdings) Limited, our parent company;
| | - |  | -------------------------------------------------------------------



| |  |  | the Wharf Group refers to Wharf and its consolidated subsidiaries; and
| | - |  | ------------------------------------------------------------------------



| |  |  | Wharf T&T refers to Wharf T&T Limited, a wholly-owned subsidiary of Wharf.
| | - |  | ----------------------------------------------------------------------------

References in this annual report to HK dollars and HK$ are to Hong Kong dollars, the lawful currency of Hong Kong; and references
to U.S. dollars, $ and US$ are to United States dollars, the lawful currency of the United States. Certain figures (including percentages) have been rounded for convenience, and therefore actual sums, quotients,
percentages and ratios may differ. Unless otherwise indicated, our financial information has been presented in Hong Kong dollars in accordance with Hong Kong GAAP, and is presented on a consolidated basis.

Solely for the convenience of the reader, certain Hong Kong dollar amounts have been translated into U.S. dollars at specified rates. Unless otherwise
indicated, any amounts translated from Hong Kong dollars to U.S. dollars in this annual report have been translated at the rate of US$1.00 = HK$7.7984, the noon buying rate in The City of New York for cable transfers of Hong Kong dollars per US$1.00
as certified for customs purposes by the Federal Reserve Bank of New York (Hong Kong Dollar Noon Buying Rate) at December 31, 2007. As of June 10, 2008, the Hong Kong Dollar Noon Buying Rate was US$1.00 = HK$7.8093. Based on an
agreement between the Hong Kong Government and Hong Kong banknote issuing banks, the Hong Kong dollar to U.S. dollar exchange rate is stabilized at approximately US$1.00 = HK$7.80. No representation is made that the Hong Kong dollar or U.S. dollar
amounts shown herein could have been or could be converted into U.S. dollars or Hong Kong dollars, as the case may be, at any particular rate or at all. See Item 3Key InformationExchange Rate Information for further
information regarding rates of exchange between Hong Kong dollars and U.S. dollars.



3



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FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 20-F, including those statements contained under the captions Item 4Information on the
Company and Item 5Operating and Financial Review and Prospects that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) and within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements can be
generally identified by the use of terms such as believes, expects, may, will, would, could, plans, projects or anticipates, the negatives of
such terms, or comparable terms. In addition to the statements contained in this Form 20-F, we (or our directors or executive officers authorized to speak on our behalf) from time to time may make forward-looking statements, orally or in writing,
regarding i-CABLE (including its subsidiaries) and its business, including in press releases, oral presentations, filings under the Securities Act, the Exchange Act or securities laws of other countries, and filings with Nasdaq, The Stock Exchange
of Hong Kong Limited (the HKSE) or other stock exchanges.

Such forward-looking statements represent our judgment or
expectations regarding the future, and are subject to risks and uncertainties that may cause actual events and our future results to be materially different than expected by us or indicated by such statements. Such risks and uncertainties include in
particular (but are not limited to) the risks and uncertainties related to: economic and political circumstances in Hong Kong; international net settlement rates; the regulatory structure in Hong Kong, including without limitation Government
policies with respect to exclusivity, competition, interconnection and tariffs and license fees; the development and implementation of new technologies; the availability of suitable programming content; and competition affecting our services and
products. No assurance can be given that the results anticipated by us, or indicated by any such forward-looking statements, will be achieved.



4



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##### Table of Contents

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not
applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY
INFORMATION

A. Selected Financial Data

The following tables contain selected consolidated financial and operating data as of and for the years ended December 31, 2003, 2004, 2005, 2006 and 2007. The statement of operations data for the years ended
December 31, 2005, 2006 and 2007 and balance sheet data as of December 31, 2006 and 2007 have been derived from our consolidated financial statements audited by KPMG and are included in this annual report. The statement of operations data
for the years ended December 31, 2003 and 2004 and balance sheet data as of December 31, 2003, 2004 and 2005 have been derived from our audited historical consolidated financial statements but are not included in this annual report.

Our consolidated financial statements have been prepared in accordance with all applicable individual Hong Kong Financial Reporting
Standards (HKFRS), Hong Kong Accounting Standards (HKAS) and Interpretations to the HKFRS and the HKAS issued by the Hong Kong Institute of Certified Public Accountants (collectively, Hong Kong GAAP or HK
GAAP). For a detailed discussion of the significant differences between Hong Kong GAAP and United States generally accepted accounting principles (U.S. GAAP) as they relate to i-CABLE, see note 40 to our consolidated financial
statements included in this annual report.

When you read the selected consolidated financial data, it is important that you read along
with it the consolidated financial statements and related notes, as well as Item 5Operating and Financial Review and Prospects also included in this annual report.

Solely for the convenience of the reader, the selected financial data for the year ended and as of December 31, 2007 have been translated into U.S.
dollars at the rate of exchange of US$1 = HK$7.7984, the Hong Kong Dollar Noon Buying Rate at December 31, 2007.



5



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##### Table of Contents

SELECTED STATEMENT OF OPERATIONS DATA



|                                     |  |                                                     |   |  |        |   |  |        |   |  |        |   |  |        |   |  |      |  
|------------------------------------ |  | --------------------------------------------------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ---- | -
|                                     |  | Year ended December 31,                             |  
|                                     |  | 2003                                                |   |  | 2004   |   |  | 2005   |   |  | 2006   |   |  | 2007   |   |  | 2007 |  
|                                     |  | HK$                                                 |   |  | HK$    |   |  | HK$    |   |  | HK$    |   |  | HK$    |   |  | US$  |  
|                                     |  | (in millions except for per share and per ADS data) |  
|Hong Kong GAAP                       |  |                                                     |   |  |        |   |  |        |   |  |        |   |  |        |   |  |      |  
|Revenues                             |  | 2,143                                               |   |  | 2,372  |   |  | 2,441  |   |  | 2,547  |   |  | 2,304  |   |  | 295  |  
|Operating expenses                   |  | (1,892                                              | ) |  | (2,076 | ) |  | (2,161 | ) |  | (2,349 | ) |  | (2,126 | ) |  | (273 | )
|                                     |  |                                                     |   |  |        |   |  |        |   |  |        |   |  |        |   |  |      |  
|Profit from operations               |  | 251                                                 |   |  | 296    |   |  | 280    |   |  | 198    |   |  | 178    |   |  | 22   |  
|Interest income                      |  | 8                                                   |   |  |       |   |  | 3      |   |  | 12     |   |  | 21     |   |  | 3    |  
|Finance costs                        |  | (16                                                 | ) |  |       |   |  |       |   |  |       |   |  |       |   |  |     |  
|Non-operating income/(expense)       |  | (10                                                 | ) |  | 1      |   |  | 1      |   |  |       |   |  | 2      |   |  |     |  
|Impairment loss on investment        |  |                                                    |   |  |       |   |  | (2     | ) |  |       |   |  | (2     | ) |  |     |  
|Income tax (expense)/credit          |  | (13                                                 | ) |  | 43     |   |  | 245    |   |  | (29    | ) |  | (16    | ) |  | (2   | )
|                                     |  |                                                     |   |  |        |   |  |        |   |  |        |   |  |        |   |  |      |  
|Net profit                           |  | 220                                                 |   |  | 340    |   |  | 527    |   |  | 181    |   |  | 183    |   |  | 23   |  
|                                     |  |                                                     |   |  |        |   |  |        |   |  |        |   |  |        |   |  |      |  
|Basic and diluted earnings per share |  | 0.11                                                |   |  | 0.17   |   |  | 0.26   |   |  | 0.09   |   |  | 0.09   |   |  | 0.01 |  
|Basic and diluted earnings per ADS   |  | 2.18                                                |   |  | 3.36   |   |  | 5.22   |   |  | 1.79   |   |  | 1.80   |   |  | 0.23 |  
|Dividend per share (cents)           |  | 5.50                                                |   |  | 7.50   |   |  | 8.50   |   |  | 8.50   |   |  | 8.50   |   |  | 1.09 |  
|U.S. GAAP                            |  |                                                     |   |  |        |   |  |        |   |  |        |   |  |        |   |  |      |  
|Net profit                           |  | 128                                                 |   |  | 248    |   |  | 495    |   |  | 190    |   |  | 190    |   |  | 24   |  
|Basic and diluted earnings per share |  | 0.06                                                |   |  | 0.12   |   |  | 0.25   |   |  | 0.09   |   |  | 0.09   |   |  | 0.01 |  
|Basic and diluted earnings per ADS   |  | 1.27                                                |   |  | 2.46   |   |  | 4.90   |   |  | 1.88   |   |  | 1.88   |   |  | 0.24 |  
|Dividend per share (cents)           |  | 5.50                                                |   |  | 7.50   |   |  | 8.50   |   |  | 8.50   |   |  | 8.50   |   |  | 1.09 |  

SELECTED BALANCE SHEET DATA



|                                        |  |                    |  |       |  |       |  |       |  |       |  |     
|--------------------------------------- |  | ------------------ |  | ----- |  | ----- |  | ----- |  | ----- |  | ----
|                                        |  | As of December 31,
|                                        |  | 2003               |  | 2004  |  | 2005  |  | 2006  |  | 2007  |  | 2007
|                                        |  | HK$                |  | HK$   |  | HK$   |  | HK$   |  | HK$   |  | US$ 
|                                        |  | (in millions)     
|Hong Kong GAAP                          |  |                    |  |       |  |       |  |       |  |       |  |     
|Cash and cash equivalents(1)            |  | 29                 |  | 115   |  | 352   |  | 586   |  | 642   |  | 82  
|Property, plant and equipment, net      |  | 2,170              |  | 2,051 |  | 1,838 |  | 1,591 |  | 1,391 |  | 178 
|Total assets                            |  | 2,603              |  | 2,689 |  | 3,029 |  | 3,023 |  | 2,935 |  | 376 
|Amount due to immediate holding company |  |                   |  |      |  |      |  | 1     |  | 3     |  |    
|Total liabilities                       |  | 918                |  | 806   |  | 781   |  | 761   |  | 664   |  | 85  
|Total shareholders equity              |  | 1,685              |  | 1,883 |  | 2,248 |  | 2,262 |  | 2,271 |  | 290 
|U.S. GAAP                               |  |                    |  |       |  |       |  |       |  |       |  |     
|Cash and cash equivalents               |  | 29                 |  | 115   |  | 352   |  | 586   |  | 642   |  | 82  
|Shareholders equity                    |  | 1,824              |  | 1,931 |  | 2,263 |  | 2,282 |  | 2,298 |  | 295 



|(1) | Under Hong Kong GAAP and U.S. GAAP, cash and cash equivalents in the balance sheet are defined as:
|--- | --------------------------------------------------------------------------------------------------



| |  |  | CashCash at bank and on hand and deposits with any bank or other financial institution. Cash includes cash on hand and deposits denominated in foreign
currencies.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash equivalentsShort-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk
of changes in value, having been within three months of maturity at acquisition. For the purposes of the cash flow statement, cash equivalents would also include bank overdrafts that are repayable on demand and form an integral part of our cash
management.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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##### Table of Contents

OTHER SELECTED FINANCIAL DATA



|                                     |  |                    |   |  |      |   |  |      |   |  |      |   |  |      |  |     
|------------------------------------ |  | ------------------ | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- |  | ----
|                                     |  | As of December 31,
|                                     |  | 2003               |   |  | 2004 |   |  | 2005 |   |  | 2006 |   |  | 2007 |  | 2007
|                                     |  | HK$                |   |  | HK$  |   |  | HK$  |   |  | HK$  |   |  | HK$  |  | US$ 
|                                     |  | (in millions)     
|Hong Kong GAAP                       |  |                    |   |  |      |   |  |      |   |  |      |   |  |      |  |     
|Adjusted EBITDA(1)                   |  | 789                |   |  | 828  |   |  | 760  |   |  | 627  |   |  | 545  |  | 70  
|Depreciation                         |  | 539                |   |  | 532  |   |  | 481  |   |  | 428  |   |  | 367  |  | 47  
|Capital expenditures(2)              |  | 363                |   |  | 459  |   |  | 286  |   |  | 238  |   |  | 203  |  | 26  
|Cash flows from operating activities |  | 720                |   |  | 777  |   |  | 784  |   |  | 789  |   |  | 615  |  | 79  
|Cash flows from investing activities |  | 49                 |   |  | (549 | ) |  | (385 | ) |  | (383 | ) |  | 381  |  | 49  
|Cash flows from financing activities |  | (747               | ) |  | (141 | ) |  | (161 | ) |  | (172 | ) |  | 179  |  | 23  
|U.S. GAAP                            |  |                    |   |  |      |   |  |      |   |  |      |   |  |      |  |     
|Cash flows from operating activities |  | 720                |   |  | 777  |   |  | 784  |   |  | 789  |   |  | 615  |  | 79  
|Cash flows from investing activities |  | 49                 |   |  | (549 | ) |  | (385 | ) |  | (383 | ) |  | 381  |  | 49  
|Cash flows from financing activities |  | (747               | ) |  | (141 | ) |  | (161 | ) |  | (172 | ) |  | 179  |  | 23  



|(1) | We have defined adjusted EBITDA to mean earnings before interest income, finance costs, non-operating income/expenses, provision for income tax, depreciation of property, plant and
equipment but after amortization of programming rights and impairment loss on investment as computed under Hong Kong GAAP. Adjusted EBITDA is not a standard measure under either Hong Kong GAAP or U.S. GAAP. You should not consider our definition of
adjusted EBITDA in isolation or as an indicator of operating performance, liquidity or any other standard measure under either Hong Kong GAAP or U.S. GAAP. We believe net profit is the most directly comparable financial measure for adjusted EBITDA
as an indicator of our operating performance. For our managements explanation of how we define EBITDA and why we use it, see Item 5Operating and Financial Review and ProspectsOperating ResultsNon-GAAP Financial
Measures.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Capital expenditures relate to acquisitions of property, plant and equipment only.
|--- | ----------------------------------------------------------------------------------

SELECTED OPERATING DATA



|                                 |  |                                           |   |  |           |   |  |           |   |  |           |   |  |           |  
|-------------------------------- |  | ----------------------------------------- | - |  | --------- | - |  | --------- | - |  | --------- | - |  | --------- | -
|                                 |  | As of and for the year ended December 31, |  
|                                 |  | 2003                                      |   |  | 2004      |   |  | 2005      |   |  | 2006      |   |  | 2007      |  
|Homes passed(1)                  |  | 2,010,000                                 |   |  | 2,070,000 |   |  | 2,117,000 |   |  | 2,155,000 |   |  | 2,168,000 |  
|Fiber homes passed(2)            |  | 1,942,000                                 |   |  | 1,990,000 |   |  | 2,032,000 |   |  | 2,072,000 |   |  | 2,084,000 |  
|Total pay-TV subscribers(3)      |  | 656,000                                   |   |  | 702,000   |   |  | 738,000   |   |  | 786,000   |   |  | 882,000   |  
|Pay-TV subscriber penetration    |  | 33                                        | % |  | 34        | % |  | 35        | % |  | 36        | % |  | 41        | %
|Broadband-ready homes passed(4)  |  | 1,900,000                                 |   |  | 1,963,000 |   |  | 2,010,000 |   |  | 2,046,000 |   |  | 2,056,000 |  
|Broadband subscribers(5)         |  | 258,000                                   |   |  | 291,000   |   |  | 320,000   |   |  | 328,000   |   |  | 306,000   |  
|Broadband subscriber penetration |  | 14                                        | % |  | 15        | % |  | 16        | % |  | 16        | % |  | 15        | %



|(1) | One residential household ready for pay-TV connection represents one home passed. For hotels and service apartments, each serviceable unit counts as one home passed. For commercial
and institutional accounts, each account counts as one home passed.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Fiber homes passed represents the number of homes passed that are connected to the fiber coaxial cable network.
|--- | ---------------------------------------------------------------------------------------------------------------

|(3) | One pay-TV billing account represents one pay-TV subscriber, except for hotels, service apartments and communal service accounts, for which one serviceable unit represents one
subscriber. In the case of commercial and institutional customers, such as hospitals and schools, one account represents one subscriber, regardless of the number of TV outlets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Broadband-ready homes passed represent the number of residential homes passed that are able to subscribe to our broadband service. For hotels, service apartments and commercial and
institutional accounts, one signal point counts as one home passed.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | One broadband service billing account represents one broadband subscriber, except for hotels and service apartments, for which one personal computer port represents one subscriber.
In the case of a commercial customer, one billing account represents one subscriber, regardless of the number of personal computer ports.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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EXCHANGE RATES

The Hong Kong dollar is freely convertible into other currencies (including the U.S. dollar). Since October 17, 1983, the Hong Kong dollar has been linked to the U.S. dollar at the rate of HK$7.80 per US$1.00.
The central element in the arrangements which give effect to the link is an agreement between the Hong Kong Government and the three Hong Kong banknote issuing banks: The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank and
the Bank of China. Under this agreement, the Hong Kong Government Exchange Fund issues certificates of its indebtedness to the banknote issuing banks to cover the issuances of banknotes. When the banknotes are withdrawn from circulation, the
banknote issuing banks surrender the certificates of indebtedness to the Hong Kong Government Exchange Fund and are paid the equivalent U.S. dollars at the fixed rate.

Under the 1984 Joint Declaration between The Peoples Republic of China, or PRC, and the United Kingdom, the Hong Kong dollar would continue to circulate and remain freely convertible after July 1, 1997,
when Hong Kong became a Special Administrative Region of the PRC. However, no assurance can be given that the Hong Kong Government, or any successor SAR government will maintain the link of HK$7.80 per US$1.00.

The following table sets forth the Hong Kong Dollar Noon Buying Rate as at and for the periods indicated.



|                                  |  |                   |  |            |  |        |  |       
|--------------------------------- |  | ----------------- |  | ---------- |  | ------ |  | ------
|                                  |  | Noon buying rate 
|Period                            |  | End               |  | Average(1) |  | High   |  | Low   
|                                  |  | (HK$ per US$1.00)
|2003                              |  | 7.7640            |  | 7.7864     |  | 7.8001 |  | 7.7085
|2004                              |  | 7.7723            |  | 7.7899     |  | 7.8010 |  | 7.7632
|2005                              |  | 7.7533            |  | 7.7732     |  | 7.7999 |  | 7.7514
|2006                              |  | 7.7771            |  | 7.7685     |  | 7.7928 |  | 7.7506
|2007                              |  | 7.7984            |  | 7.8008     |  | 7.8289 |  | 7.7497
|December 2007                     |  | 7.7984            |  | 7.7983     |  | 7.8073 |  | 7.7879
|January 2008                      |  | 7.7961            |  | 7.8044     |  | 7.8107 |  | 7.7961
|February 2008                     |  | 7.7807            |  | 7.7963     |  | 7.8012 |  | 7.7807
|March 2008                        |  | 7.7819            |  | 7.7813     |  | 7.7897 |  | 7.7642
|April 2008                        |  | 7.7950            |  | 7.7910     |  | 7.7963 |  | 7.7863
|May 2008                          |  | 7.8041            |  | 7.7988     |  | 7.8060 |  | 7.7931
|June 2008 (through June 10, 2008) |  | 7.8093            |  | 7.8073     |  | 7.8095 |  | 7.8037



|(1) | Determined by averaging the Hong Kong Dollar Noon Buying Rates on the last business day of each month during the relevant annual period and averaging the Hong Kong Dollar Noon
Buying Rates for each business day during the relevant monthly period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of June 10, 2008, the Hong Kong Dollar Noon
Buying rate was US$1.00 = HK$7.8093.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for
the Offer and Use of Proceeds

Not applicable.



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D. Risk Factors

As i-CABLE is subject to various changing regulatory, competitive, economic, political and social risks and conditions, investment in our ordinary
shares or ADSs involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained in this annual report, before you decide whether to buy our ordinary shares or
ADSs.

We have effectuated the delisting of our ADSs from Nasdaq and may terminate the registration of our securities with the
U.S. Securities and Exchange Commission in the future and this may adversely affect our share price.

On May 15, 2007, we
announced that our board of directors has approved the delisting of our ADSs from Nasdaq. The delisting was sought due to limited trading volume of the ADSs and the time and cost of maintaining a listing in the United States. On May 29, 2007,
we filed with the U.S. Securities and Exchange Commission a Form 25 to effectuate the delisting from Nasdaq as from June 8, 2007. Since the delisting, our ADRs have been traded in the over-the-counter markets, and the Bank of New York Mellon
has continued to act as our ADR depositary pursuant to the existing Deposit Agreement. We have not arranged for the listing of our ADSs or ordinary shares on another national securities exchange in the United States. We plan to maintain our ADR
program in the United States, but the liquidity of our ADSs may be adversely affected by their delisting from Nasdaq. Further, where circumstances permit, we may terminate our registration as a reporting company under the U.S. Securities Exchange
Act. Deregistration will eliminate our obligation to file annual reports on Form 20-F and current reports on Form 6-K. Accordingly, in the event of a deregistration, ADR holders may receive less details concerning our principal shareholders,
directors and executive officers, compensation paid to our executives, audited financial statements and certain relationships in related transactions between related parties, which under certain circumstances could better enable the ADR holders to
assess our financial operations and policies. The delisting of our ADSs from Nasdaq and the possible termination of our registration as a reporting company under the U.S. Securities Exchange Act may have a negative impact on the price of our ADSs
and ordinary shares.

Any significant change in our ability to pay dividends or our dividend policy may adversely affect the market
price of our ordinary shares and ADSs.

Although we have declared and paid dividends in respect of the years ended December 31,
2003, 2004, 2005, 2006 and 2007, there can be no assurance that we will declare and pay dividends in the future or that we will maintain our current dividend policy. Any significant change in our ability to pay a dividend or our dividend policy may
adversely affect the market price of our ordinary shares and ADSs.

We reported net losses in previous years and we may incur net
losses in the future.

We reported net losses for each year from 1993 when we began our pay-TV operation until 1999. As of
December 31, 2007, our accumulated losses were HK$4,606 million. Although we have recorded net profits for each year since 2000, we cannot assure you that we will remain profitable. Our ability to maintain profitability will depend on the
strength of our existing business and the competitiveness of our existing and new products and services, our program acquisition costs which are being driven up by competition, as well as general market conditions. If we incur net losses in the
future, our financing needs may increase, we may not be able to pay dividends in the future and the market price of our ordinary shares and/or ADSs may be adversely affected.

We may need to incur substantial capital expenditures to keep pace with technological developments or our customers demand for new products
and services. This may adversely affect our financial condition.

The markets for pay-TV, Internet access services and related
services are characterized by rapidly changing technology, industry standards, subscriber needs and new products and services. The emerging nature of these products and services and their rapid evolution will require us to continually improve the
performance, features and reliability of our network, Internet content and consumer services, especially in response to our competitors offerings. We do not intend to conduct our own research and development of new technologies.



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We may not be successful in responding quickly, cost effectively or sufficiently to these developments.
In addition, services or technologies developed by competitors may render our services or technologies undesirable or obsolete. Some of our competitors offer broadband Internet access service with bandwidth advantage over our broadband Internet
access service in the residential market. Furthermore, changing our services in response to market demand may require the adoption of new technologies that could render many of our assets less competitive or obsolete. Even if we respond successfully
to technological advances and emerging industry standards, the adoption and integration of new technology may require substantial capital expenditures. This may adversely affect our financial condition. We may not be successful in modifying our
network infrastructure in a timely and cost-effective manner. In addition, our new products and services may contain design flaws or other defects that could have a material adverse effect on our business and operating results.

Illegal viewing activities may affect our pay-TV subscriber growth and subscription revenue.

Our pay-TV business is dependent upon subscription revenue. We are aware that some viewers in Hong Kong use unauthorized pay-TV decoders to receive our
pay-TV service illegally. Although we have migrated our transmissions from analog to digital platforms in order to better control and limit illegal viewing activities, manufacturers or vendors of unauthorized pay-TV decoders have so far been able to
repeatedly overcome our various digital encryption methods. Such illegal activities have continued and we are aware that pirated digital set-top-boxes are available in the market. In addition, Internet video streaming on peer to peer platform has
surfaced as another form of illegal viewing. We have been deploying countermeasures to combat these activities. If we fail to deploy appropriate and timely countermeasures in response to these activities, illegal viewing activities may grow. Such
illegal viewing activities will adversely affect the growth of our pay-TV subscriber base and our subscription revenue.

The loss of
key employees, including senior management, and our failure to recruit qualified personnel as needed could weaken our strategic, technological and operational expertise, delay the introduction of new products and services and lower the quality of
our services.

We may not be able to attract and retain key employees, including our senior management. Our key employees may be
recruited by our competitors. This could hinder the introduction of new products and services as planned. Our operations could suffer with the loss of any member of our senior management team or any key employee. Our success also depends on our
ability to attract and retain qualified personnel for strategic planning, programming and enhanced services, including Internet, marketing and network operations. The competition for qualified personnel in the Internet services and pay-TV industry
may increase in the future, making it difficult for us to attract and retain qualified personnel in the Internet services and pay-TV industry.

Our programming costs are substantial and may increase, which could reduce our margins if we are unable to pass on any such increase to our subscribers.

The growth and revenues for our pay-TV services depend on our ability to produce or purchase programming that is affordable to our subscribers. The cost
of some of our acquired programming has increased in the past and may increase substantially in the future if competition in the pay-TV and TV services markets intensifies. If we are not able to pass on programming cost increases to our subscribers,
our revenues, cash flow and operating margins may be reduced.

In particular, we broadcast various sports events on our pay-TV platform. We
currently have the exclusive right to broadcast in Hong Kong some major European soccer events such as the Spanish and German soccer leagues and the prestigious U.S. PGA Golf Tour. We have also secured broadcasting rights for the 2010 FIFA World
Cup, the 2010 Winter Olympics and the 2012 Summer Olympics. We intend to continue to acquire new rights to other sports programming. However, the acquisition costs for the exclusive right to broadcast these sports events are substantial and may
increase significantly in the future.



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We may not be able to acquire or retain the right to broadcast certain content.

Our pay-TV service includes broadcasting of content that we acquire from third parties, which may not be available at all times on terms acceptable to
us, or at all. In particular, we intend to retain or acquire the exclusive right to broadcast various soccer and other sports events in Hong Kong. However, the right to broadcast such events is highly competitive. For instance, the English Premier
League had been the most popular soccer event on our platform until our exclusive right to broadcast the English Premier League in Hong Kong expired in May 2007. Due to the high costs of the telecasting rights for the three seasons spanning from
August 2007 through May 2010, we were not able to renew our right to broadcast the English Premier League, and the event is exclusively carried by our key competitor, PCCW Limited (PCCW). We cannot assure you that we will be able to
maintain our right to broadcast in Hong Kong certain content on an exclusive basis, or at all. In the event that our right to broadcast certain content is terminated, we may be unable to acquire or produce substitute content to offset the effect of
the loss of the right to broadcast certain content on our pay-TV platform. In the event that we retain certain content on terms and conditions significantly different from prior agreements, our programming costs and/or pay-TV subscription revenues
may be adversely affected. Any loss of content or inability to obtain the rights to provide suitable content could adversely affect the quality of our pay-TV service, and our pay-TV revenue may be adversely affected as a result. Even if we are able
to acquire the right to broadcast certain content, the acquisition costs may be so high that our profitability will be adversely affected.

New digital pay-TV and high definition channels may add to our programming costs and may adversely affect our profitability.

Digital broadcasting allows the compression of pay-TV signals, which increases our effective channel capacity. We intend to utilize this additional capacity by increasing the number of pay-TV channels offered on our digital platform. We now
offer 103 channels with 69 channels in our basic package. During 2007, a total of five new channels were added to our digital platform. The channels were either included in the basic package or were part of our mini packages. We may need to launch
new channels in high definition TV format in response to the changes of market conditions. We incur significant costs for producing or acquiring content for these channels. If we are unable to pass on these costs to our pay-TV subscribers, our
profitability may be adversely affected.

Demand for our broadband Internet access service may continue to decline.

Despite an increase of 40% in the operating profit in our broadband Internet access service, or broadband service, to HK$180
million in 2007 from HK$129 million in 2006, our broadband Internet subscriber base decreased by 7% to 306,000 in 2007 from 328,000 in 2006, and the revenues in the broadband sector decreased by 1% to HK$588 million in 2007 from HK$596 million in
2006. This is mainly because we are under pressure as our competitors roll out higher bandwidth services, while the overall residential broadband market has flattened out.

The demand for our broadband Internet access service may continue to decline and adversely affect our revenues. Critical issues concerning the use of the
Internet, including security, reliability, cost, ease of access and quality of service, are likely to continue to affect future demand for our broadband service. The competitive pressures to provide low-cost broadband access may impact our ability
to charge subscription fees at favorable rates. If the demand for our broadband access service continues to decline, our revenues in the broadband sector may decrease and we may be unable to charge subscription fees at rates that would permit us to
maintain or increase the profitability of our broadband business.



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The competition we face from other TV broadcasters and Internet service providers may adversely
affect our business, results of operations and financial condition.

New technologies and services introduced by our competitors may
lead to a decrease in the number of subscribers and a decline in our market share in the pay-TV market or in the market of Internet access and related services. Our pay-TV or broadband revenue may decrease as a result of increased competition
arising from the following:



| |  |  | The markets for pay-TV, Internet access and related services in Hong Kong have become more competitive as operators continue to roll out bundled voice, data and TV
service. In early 2004, PCCW began to roll out bundled packages with aggressive marketing and pricing strategies. In response, we rolled out a bundled pay-TV and broadband package in May 2004 and pay-TV and broadband packages that are bundled with
local VoIP service in 2005. The VoIP service is provided by Wharf T&T, one of our affiliates, and enables subscribers to make and receive calls using traditional telephone handsets connected to a voice-enabled cable modem. In June 2005, PCCW
completed the acquisition of a mobile phone service provider. Since the acquisition, PCCW has marketed voice, data or TV services that are bundled with the mobile phone service. Since we do not presently operate any mobile phone service, we are not
able to provide any pay TV or broadband service that are bundled with mobile phone service without cooperating with a local mobile phone service provider. Our competitors may in the future become even more aggressive in pricing their services. This
may lead us to further reduce our prices for similar services, causing our revenue to decline. This high level of competition may also result in a loss of our subscribers and may significantly increase our programming costs, resulting in a decrease
in our cash flow and operating margin.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On December 31, 2007, Hong Kongs free-to-air networks, Asia Television Limited and Television Broadcasts Limited, commonly known as ATV and TVB, launched
their digital terrestrial TV, or DTT, service to cover selected geographical areas. ATV and TVB are expected to expand their coverage to cover at least 75% of population by the end of 2008. Subject to further market and technical studies, the
Government aims to switch off analog broadcasting by 2012. ATV and TVBs DTT services include a hybrid digital service of HDTV and multi-channel broadcasting. The addition of free-to-air DTT TV channels in Hong Kong may adversely affect our
pay-TV business.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Two pay-TV services were launched during the third quarter of 2003. They are operated by the incumbent telecommunications service provider, PCCW, and another
telecommunications service provider, Hong Kong Broadband Network. In February 2004, Galaxy Satellite Broadcasting Limited launched its pay-TV service (currently named TVB Pay Vision and 29% owned by TVB, the dominant free-to-air TV operator in Hong
Kong). TVB Pay Vision is also included in the PCCW offering. These pay-TV service providers may cause us to lose market share and encounter pricing pressure in the future.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As operators compete aggressively in rates and services, we may need to incur additional programming and marketing costs as well as to lower our rates to
retain existing subscribers and attract new ones.

The opening up of our network to other service providers may negatively affect our
revenues and profitability.

Under our fixed telecommunication network services license, we are required to open up our network to
other telecommunication and TV service providers through interconnection arrangements. Although other service providers have been providing services via their own networks and the pressure of competition to open up our network is not significant,
the opening up of our network to other service providers may lead to increased competition which may negatively affect our subscriber base, revenues and operating profit.



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We may encounter pricing pressure and experience an adverse impact on our subscriber base for
broadband Internet access service as a result of competition from alternative Internet access platforms.

The Hong Kong Government
is creating a regulatory regime that will accelerate the introduction of new broadband and wireless platforms in Hong Kong. The development of these alternative Internet access platforms, such as third-generation mobile phone services, satellite
interactive services, and local wireless fixed network services may intensify competition. As a result, we may encounter pricing pressure and experience an adverse impact on our subscriber base for our broadband Internet access service.

Any small percentage change in our revenue may significantly affect our consolidated earnings.

In 2007, our total operating expenses accounted for 92% of our total operating revenues. A high proportion of our operating expenses are fixed and do not
vary in proportion to the number of our subscribers. Any small percentage change in our revenue may significantly affect our consolidated earnings.

Our network system may fail or shut down, which may adversely affect the quality of our pay-TV or Internet services.

Our network is vulnerable to damage or cessation of operations from fire, earthquakes, severe storms, power loss, telecommunications failures, network software flaws, transmission cable cuts and other catastrophic events. We may experience
failures or shutdowns relating to individual points of presence or even catastrophic failure of our entire network. Any failure of our network, our servers, or any link in the delivery chain, whether from operational disruption, natural disaster or
otherwise, may result in an interruption in our operations. Our network may also be vulnerable to computer viruses, break-ins and similar disruptive problems caused by our subscribers or other Internet users. Computer viruses, break-ins or other
problems could lead to interruption, delay or cessation in service to our subscribers; compromised security of confidential information stored in the computer systems of our subscribers; and costly litigation. Our insurance coverage may not cover
such losses or, even if such losses are covered by our insurance, may not be sufficient to cover all losses arising from such events.

The
success of our pay-TV and broadband Internet access service depends on our ability to maintain high-quality transmission with minimal service disruptions or interference. This will be critical to our ability to attract and retain subscribers. Any
failure to maintain a consistent level of high-quality service could harm our reputation and have a material effect on our business, operating results and financial condition.

Our strategy to diversify into new fields that complement our pay-TV business may not be successful.

Revenue from our pay-TV service represented 77%, 74% and 69% of our total revenues in 2005, 2006 and 2007, respectively. We are seeking to diversify the
business of the Group by investing in new products and services. We cannot assure you that this strategy will be successful for the following reasons:



| |  |  | In April 2003, we launched a satellite channel servicing primarily hotels that are rated at or above three stars, foreign compounds, and other selected areas in
Mainland China. Our target market is highly competitive. The channel has incurred losses since its launch and is expected to continue to incur losses in the near term. In addition, any adverse development in the economic, political or legal
environment in Mainland China could have a negative effect on the operations and financial condition of this channel.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2005, we established Sundream Motion Pictures to engage in film production. Sundream Motion Pictures has so far released or distributed 12 movies. Although
our movies have won various awards, we are new to the film production industry and will have to seek qualified personnel from external sources to be successful. We may not be able to attract personnel with appropriate expertise or experience in the
film industry. The financial performance of Sundream Motion Pictures may vary significantly across different financial periods as our production may fluctuate in terms of quantity as well as quality. There is no assurance that this subsidiary will
become profitable or that it will not cause volatility in our consolidated earnings.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | In April 2006, we acquired a 70% stake in Ad On Media, an advertising agency having an exclusive advertising agreement with a PRC magazine called Sanlian Life
Weekly. We have launched several publications in the PRC as part of our cross-media strategies. There is no assurance that these businesses will become profitable and may cause volatility in our consolidated earnings.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In July 2007, we established Sundream Music Limited (subsequently renamed as Sundream Stars Limited) to engage in the production of concerts in Hong Kong and the
PRC and to generate music contents for our pay-TV service and our movie business. Sundream Stars may not be profitable in its initial years of operation or may cause volatility in our consolidated earnings.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we are unsuccessful in developing these segments to complement our pay-TV business, there may be further decreases in profitability and volume in our
pay-TV service If this decline in profitability continues, without offsetting increases in revenues from other services, our business and results of operation will be materially and adversely affected.

Our failure to maintain the adequacy to our internal controls in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of
2002 could subject us to regulatory actions and may adversely affect our stock price and our ability to raise additional capital.

Beginning with the fiscal year ended December 31, 2006, Section 404 requires us to perform an evaluation of our internal controls over financial reporting and file annual management assessments of their effectiveness with the U.S.
Securities and Exchange Commission. The management assessment to be filed is required to include a certification of our internal controls by our Chief Executive Officer and Chief Financial Officer. In addition, our independent registered public
accounting firm is required to issue an attestation report on our internal controls over financial reporting as of December 31, 2007.

Although our management has concluded that our internal control over our financial reporting for the fiscal year ended December 31, 2007 was effective and our independent registered public accounting firm has issued an attestation
report to the foregoing effect, we may discover other deficiencies in the course of our future evaluation of our internal control over our financial reporting and may be unable to rectify such deficiencies in a timely manner. Moreover, even if our
management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may still be unable to issue an attestation report concluding that our internal control over financial reporting
is effective. If we fail to maintain the adequacy of our internal control over financial reporting, we may not be able to conclude that we have effective internal control over financial reporting on an ongoing basis, in accordance with the
Sarbanes-Oxley Act. Moreover, effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud. As a result, our failure to achieve and maintain effective internal control over financial
reporting could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, adversely affect the price of our ADSs and ordinary shares and our ability to raise additional capital.

There may be political risks associated with doing business in Hong Kong

A significant part of our facilities and operations are currently located in Hong Kong. Hong Kong is a Special Administrative Region of the Peoples
Republic of China, with its own executive, judicial and legislative branches. Hong Kong enjoys a high degree of autonomy from China under the principle of one country, two systems. However, we can give no assurance that Hong Kong will
continue to enjoy the same level of autonomy from China. Any intervention by the Government of China in the affairs of Hong Kong, in breach of the one country, two systems principle, may adversely affect our revenues and our share
prices.

The state of Hong Kongs economy may affect our profitability.

As we are principally engaged in the provision of pay-TV and broadband services in Hong Kong, our financial position and the results of our operations
will be affected by the conditions of the pay-TV and Internet



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access markets in Hong Kong, which may in turn be influenced by the general state of Hong Kongs economy, changes in Hong Kongs regulatory
environment, and changes in demand and usage habits of Hong Kong consumers. We have limited control over any of these factors. The Hong Kong economy has experienced considerable volatility during the late 1990s and from 2000 to 2003, and there can
be no assurance that it will not experience volatility in the future. Any downturn in Hong Kongs economy could adversely affect our business operations.

We may be liable for information disseminated over our Internet services network, which could increase our costs or cause us to discontinue certain services or content offerings.

We may be required to spend substantial resources or discontinue certain services or content offerings as a result of liability under Hong Kong law for
dissemination of information, which could have a material adverse effect on our business, operating results and financial condition. Hong Kong law relating to liability of Internet service providers for information carried on or disseminated through
their networks is new and untested. The imposition of potential liability upon Internet service providers, such as liability for defamatory speech or copyright infringement, for materials carried on or disseminated over a network may cause us to
adopt measures that may reduce our exposure to such liability. We do not carry errors and omissions insurance which, under certain circumstances, could mitigate any damages incurred by us.

Rights of shareholders under Hong Kong law may not provide expected levels of protection for shareholders.

Our corporate affairs are governed by our constitutive documents and by the laws of Hong Kong. The rights of our shareholders and the fiduciary
responsibilities of our directors under Hong Kong law are not as clearly established as under statutes or judicial precedent in existence in certain jurisdictions in the United States. Therefore, our public shareholders may have more difficulty in
protecting their interests in the face of actions by our management, directors or our controlling shareholders than would shareholders of a corporation incorporated in some jurisdictions in the United States.

Certain judgments obtained against us by our shareholders may not be enforceable in Hong Kong.

We are a Hong Kong based company and most of our assets are located outside the United States. Substantially all of our current operations are conducted
in Hong Kong. In addition, most of our directors and officers are nationals and residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it
may be difficult for you to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of Hong Kong would recognize or enforce judgments of United States courts obtained against
us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, there is uncertainty as to whether Hong Kong courts would be competent to hear original actions brought in Hong
Kong against us or such persons predicated upon the securities laws of the United States or any state.

Forward-looking statements
reflect current expectations and may not be correct.

This document contains various forward-looking statements, including
statements regarding our expectations and projections for future operating performance and business prospects. The words believe, expect, anticipate, estimate, project and similar words
identify forward-looking statements. In addition, all statements other than statements of historical facts included herein are forward-looking statements. These statements are forward-looking and reflect our current expectations. Although we believe
that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are subject to a number of risks and uncertainties, including changes in the
economic and political environments in Hong Kong. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the reference to these risks.



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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

i-CABLE was incorporated under the name Pologreat Limited on May 21, 1999 as a limited liability company under the Companies Ordinance of Hong Kong. We changed our name to i-CABLE Communications Limited with
effect from August 27, 1999. Our principal place of business is located at Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, Hong Kong. Our telephone number is (852) 2112-6868. Our registered office is located at 16th Floor, Ocean Centre,
Harbour City, Canton Road, Kowloon, Hong Kong. The telephone number for our registered office is (852) 2118-8118.

Our agent for
service of process in the United States is CT Corporation System, which is currently located at 111 Eighth Avenue, 13th Floor, New York, New York 10011.

B. Business Overview

We are one of the leading providers of pay-TV, Internet and multimedia
services in Hong Kong. We launched our pay-TV service in October 1993. We are one of the largest producers of TV programming in Hong Kong. As of December 31, 2007, we had approximately 882,000 pay-TV subscribers, representing an approximately
12% increase over the previous year. As of December 31, 2007, we offered 103 channels on our network, consisting of 69 basic channels, 30 non-basic channels and four pay-per-view channels.

Our Internet and multimedia service consists of our broadband, media content supply and IP Point wholesale services. We launched our broadband service in
March 2000. Based on the statistics provided by the Office of the Telecommunications Authority and our competitors results announcements, we are the second largest residential broadband Internet access service provider in Hong Kong in terms of
number of subscribers. As of December 31, 2007, we had approximately 306,000 broadband subscribers, representing an approximately 7% decrease over the previous year. As of December 31, 2007, our in-building coaxial network passed over
approximately 2,168,000 homes. Within this total, approximately 2,084,000 homes were connected to our fiber optic cable network, out of which approximately 2,056,000 households were broadband-ready (i.e., these households were able to
subscribe to our broadband service).

We are seeking to diversify the business of the Group by investing in new products and services. As
part of this strategy, we established Sundream Motion Pictures in March 2005, acquired a 70% equity interest in Ad On Media in April 2006, and established Sundream Music Limited (subsequently renamed as Sundream Stars Limited) in July 2007. We have
launched several publications in the PRC as part of our cross-media strategies. These publications are distributed across major cities in the PRC with the objective of exploiting advertising revenue by leveraging our content capability.

Business Strategy

Our goal is to become Hong
Kongs leading provider of integrated multimedia communications services, encompassing video, data and voice services. We have also started to expand into markets outside of Hong Kong, particularly in Mainland China. Our strategy is to:

Expand our pay-TV subscriber base through programming differentiation. We will seek to continue to provide innovative TV programs
targeting local audiences to maintain our market position in news, sports and movies. Our investment in Chinese-language programming has been instrumental to our success to date since most of Hong Kongs population speaks Cantonese as their
primary language. To complement our local programming, we will continue to broadcast sport events and major international channels such as CNN International and BBC World. As of December 31, 2007, we carried 103 program channels on our digital
platform. Some of the channels are included in our basic package, while some are available as part of our mini packages. Our channel offerings allow customers to subscribe to any one of our mini packages, without



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subscribing to our basic package. This packaging flexibility enables us to offer pay-TV services at a lower subscription fee to enhance our pay-TV
penetration. We will continue to invest in programming to maintain service differentiation, and to evaluate new genres and programs so that we can offer more packages to existing and new subscribers. We also plan to continue to increase our
subscriber number by marketing through direct sales, promotions and advertising. We believe that there is an opportunity to further increase our subscriber number as the market for pay-TV services in Hong Kong develops.

Pursue penetration of our broadband Internet access service. In March 2000, we launched our broadband Internet access service based on cable modem
technology. Based on the statistics provided by the Office of the Telecommunications Authority and our competitors results announcements,we are the second largest residential broadband Internet access service provider in Hong Kong in
terms of number of subscribers. We intend to grow our broadband business through active bundling of our pay-TV and broadband services with local VoIP service provided by Wharf T&T.

Expand beyond pay-TV and broadband Internet platforms. We are one of Hong Kongs largest producers and suppliers of media content and sell
our media content to a number of local and overseas third party broadcasters. Since late 2003, we have been supplying content to the mobile phone industry. We are the exclusive sales agent and the sole content supplier for the Newsline
Express, an audio-visual system that broadcasts news, entertainment and commercials on commuter trains operated by Mass Transit Railway (MTR) Corporation (formerly by Kowloon-Canton Railway Corporation). In the past few years, we
made progress in extending our distribution networks with overseas broadcasters and licensing our programs to various broadcasters in the United States, Canada, South East Asia and New Zealand.

Capture cross-media opportunities. In April 2006, we acquired a 70% stake in Ad On Media, an advertising agency having an exclusive agreement with
a PRC magazine called Sanlian Life Weekly. We will continue to seek business opportunities in publication advertising in the PRC market as part of our cross-media strategies. We have started to produce movies and our productions to date have not
only brought satisfactory box office receipts, but have also won recognitions both in Hong Kong and overseas.

Products and Services

The following table shows the breakdown of our total consolidated operating revenues for each of the periods indicated and the percentage contribution of
each revenue component to our total operating revenues:



|                          |  |                                  |   |      |     |      |       |   |  |     |  |       |   |  |     |  
|------------------------- |  | -------------------------------- | - | ---- | --- | ---- | ----- | - |  | --- |  | ----- | - |  | --- | -
|                          |  | For the year ended December 31,  |  
|                          |  | 2005                             |   | 2006 |     | 2007 |      
|                          |  | HK$                              |   |      | %   |      | HK$   |   |  | %   |  | HK$   |   |  | %   |  
|                          |  | (in millions except percentages) |  
|Pay-TV                    |  | 1,884                            |   |      | 77  |      | 1,895 |   |  | 74  |  | 1,595 |   |  | 69  |  
|Internet and multimedia   |  | 558                              |   |      | 23  |      | 596   |   |  | 23  |  | 588   |   |  | 26  |  
|Corporate                 |  | 14                               |   |      |    |      | 74    |   |  | 3   |  | 150   |   |  | 6   |  
|Inter-segment elimination |  | (15                              | ) |      |    |      | (18   | ) |  |    |  | (29   | ) |  | (1  | )
|                          |  |                                  |   |      |     |      |       |   |  |     |  |       |   |  |     |  
|Total operating revenues  |  | 2,441                            |   |      | 100 |      | 2,547 |   |  | 100 |  | 2,304 |   |  | 100 |  
|                          |  |                                  |   |      |     |      |       |   |  |     |  |       |   |  |     |  

Pay-TV Service

We are one of the largest producers of TV programming in Hong Kong. Our strategy has been to achieve pay-TV penetration through local content production and packaging, consisting primarily of news, movies, exclusive
sports programming and general entertainment. As there are limited Cantonese language programming alternatives, we produce our own programming and repackage licensed programming to suit local preferences. We also offer special programming in other
languages catering to viewers from different cultural and ethnic groups in Hong Kong.



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Our programming channels are available for subscription as part of our basic package or one of our
mini-packages. Our basic package consists of 69 channels. We also offer various mini packages to allow customers to subscribe at a lower subscription fee to enhance our pay-TV penetration, and to cater to ethnic minority groups, sports fans and
viewers with special interests. News, sports and movies have remained the mainstay of our programming platform. The following summarizes the major programs included in our basic package:



| |  |  | News. We offer four Cantonese news channels: Finance Information, News, Top News and Live News. Finance Information (formerly known as News 1) focuses on
financial news during trading days and current affairs and documentary programmes during weekends and public holidays. News (formerly known as News 2) features our round-the-clock professional newscast with half-hourly updates. Top News continues to
broadcast non-stop news with updates every eight to ten minutes. Live News features important press conferences, Hong Kong legislative council meetings and live breaking news. We have the right to broadcast international news channels such as CNN
International, CNN Headline News, BBC World, Bloomberg Television, Al Jazeera English and CNBC Asia. We believe subscribers are attracted to the convenience and quality of our 24-hour news programming.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Movies. In January 2006, we restructured our movie channels to form a new movie platform. As of December 31, 2007, we offered six movie channels: Movie
1, Movie 2, HMC 1, HMC 2, MGM and TCM. Movie 1 is dedicated to top Hong Kong movies, while Movie 2 offers highly-acclaimed Asian and international movies. We currently offer two channels under the brand of HMC, or Hollywood Movie Channel, with
popular Hollywood titles. In addition, classic movies are featured on MGM and TCM. Through our movie channels on basic and mini packages, we offer a variety of popular Hollywood titles, local blockbusters and special packages catering to our
subscribers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sports. Exclusive and live coverage of sports events has played an important role in attracting new subscribers. Soccer is a popular sport in Hong Kong. We
carry the Spanish Primera Liga, the Italian Serie A and the German Bundesliga to cater to the different interests of soccer fans. We will carry the prestigious UEFA Championships League and the UEFA Cup tournaments for three seasons from the 2009
soccer season onwards. We had the exclusive right to broadcast in Hong Kong the 2006 FIFA World Cup and the U.S. PGA Golf Tour from 2007 onwards. Furthermore, we have been given the exclusive right to broadcast in Hong Kong the 2010 FIFA World Cup
in South Africa, the 2010 Winter Olympics in Vancouver and the 2012 Summer Olympics in London. We carry major international sports competitions such as NBA basketball, volleyball, table tennis and swimming events. Additionally, our Channel 18
provides comprehensive live coverage of all horse races of the Hong Kong Jockey Club.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Others.We also carry a number of acclaimed documentary channels such as Discovery Channel and National Geographic Channel. Our entertainment platform
consists of a mix of international, regional and self-produced channels. In the summer of 2003, we launched Entertainment News Channel, a channel providing, for the first time in Hong Kong, round-the-clock show business news as well as programs on
lifestyle and fashion trends in Hong Kong, the region and the world.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2007, we launched Cable No. 1 Channel
featuring programming content of mass appeal. The channel is available to the public for a nominal fee. Our goal is to generate additional advertising revenue by broadening our distribution network to include a larger number of households in Hong
Kong.

In addition, we offer four pay-per-view channels. Pay-per-view channels contain adult programs and live sports events for additional
fees.

Internet and Multimedia Service

Our Internet and multimedia service consists of three areas:



| |  |  | Broadband Internet Access. We are Hong Kongs second largest residential broadband service provider in terms of number of subscribers. We introduced our
broadband Internet access service utilizing cable modem technology under the i-CABLE brand name in March 2000. We charge broadband Internet access subscribers flat fees for unlimited usage.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Supply of Internet And Multimedia Content.We believe we are one of the leading video suppliers to mobile operators in Hong Kong. By leveraging our content
library production and output, we have enhanced our Chinese language Internet portal to showcase the multimedia capabilities of our broadband Internet access service. To differentiate from other Internet services providers, we offer our TV content
on our websites as well as develop new content and applications with content providers. During 2006, we secured Internet transmission rights for important sports events such as the U.S. PGA Golf Tour, the U.S. Tennis Open and the Rugby World Cup
2006 and worked with mobile phone operators on the introduction of mobile versions of stock market news and other market information. During 2007, we launched a new online service called i-CABLE IPTV, to widen the video attraction of our
portal. In addition, we have been appointed as Hong Kongs official New Media Broadcaster of the 2008 Beijing Olympics with the exclusive right to broadcast the Olympics through Internet and mobile platforms. We intend to deliver at
least four channels via the i-CABLE Official Olympics platform (http://2008.i-cable.com). The service will be provided for free to the public from May 5, 2008, including the Olympic Games period starting August 8, 2008.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wholesale of IP Points. We provide Internet Protocol Network point-of-presence, or IP Point, service to Wharf T&T, an affiliate of ours. With these IP
Points, Wharf T&T provides local VoIP service to the residential market, utilizing our hybrid fiber coaxial, or HFC, cable network for core and last-mile signal transmission. The local VoIP service enables subscribers to make and receive calls
using traditional telephone handsets connected to a voice-enabled cable modem. As of December 31, 2007, we provided approximately 159,000 IP Points to Wharf T&T, representing an approximately 5% increase over the previous year.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Others

We
are seeking to diversify the business of the Group by investing in new products and services, including the following.



| |  |  | Sundream Stars.We established Sundream Music Limited (currently named Sundream Stars Limited) in July 2007. Sundream Stars develops new talent
for the music industry, provides programming to our pay-TV platform and caters to the needs of our movie business. It takes advantage of our production and artist training expertise, multiple media platforms and the vast Greater China market
potential. A talent quest organized by Sundream Stars in 2007 was attended by over 1,000 high quality aspirants and by top-notched musicians as guest performers and judges. The success of this debut event helped to establish our presence in the
local music scene. Sundream Stars also invests in and produces concerts in Hong Kong and the PRC and has staged two major concerts in Beijing featuring top Hong Kong and Chinese artists in early 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Publications.We acquired a 70% stake in Ad On Media, an advertising agency with an exclusive advertising agreement to a PRC magazine called Sanlian Life
Weekly in April 2006. We have launched several publications in the PRC as part of our cross-media strategies. These publications are distributed across major cities in the PRC with the objective of exploiting advertising revenue by leveraging our
content capability.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sundream Motion Pictures.We established Sundream Motion Pictures in March 2005. Sundream Motion Pictures has
released or distributed 12 movies. These movies have won various awards, including the Most Recommended Film of the Year and the Best Film, respectively for Eye in the Sky and A Battle of Wits, in Hong Kong. Eye in the Sky further won the Best New
Director and the Best New Actor awards in the 27thHong Kong Film Awards.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales and Marketing

We use a variety of marketing
methods to attract and retain subscribers. Our marketing strategy is to:



| |  |  | achieve high brand awareness;
| | - |  | -----------------------------



| |  |  | feature live and exclusive sports, popular general entertainment and convenient quality news;
| | - |  | ---------------------------------------------------------------------------------------------



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| |  |  | develop and retain a team of well-trained sales representatives;
| | - |  | ----------------------------------------------------------------



| |  |  | integrate our direct sales, advertising, inbound and outbound-telemarketing and other sales channels to optimize subscriber acquisition opportunities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expand into niche markets by offering different programming packages which target subscribers with different price sensitivities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | offer packages bundling our pay-TV service with local VoIP service provided by Wharf T&T to attract new subscribers and promote customer loyalty; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | promote customer loyalty by offering subscriber benefit programs.
| | - |  | -----------------------------------------------------------------

Network Architecture

Our distribution network can be divided into two sections: fiber optic trunk
lines, or backbone, and in-building coaxial networks.

We initially broadcast through a microwave system. The microwave system carries
scrambled TV signals which travel through fiber optic cables from the cable TV head-end to transmission sites on hilltops and eventually into the subscribers home.

We have converted the majority of the trunk transmission from microwave to fiber optic cable. The increased capacity and reliability of fiber optic cable can be utilized to expand the number and quality of services
delivered to the subscribers premises. A portion of our network trunks is laid along the infrastructure of the MTR Corporation, operator of the subway system in Hong Kong. The subway underground infrastructure provides a stable and protective
network environment and facilitates the maintenance of our fiber optic trunk transmission. The in-building coaxial networks, which provide last mile access to the subscribers, remain unchanged except for the installation of the return path modules
to existing amplifiers.

Cable TV System

Cable TV consists of a broadband network transmitting multiple channels of videos, images, sound and data between a central facility and a subscribers TV over fiber optic and coaxial cable. Our cable TV system consists of three major
parts: a head-end, a distribution network, and a home terminal. At the head-end, signals from live studios, video cassette playback machines and servers, and satellites are received, processed, amplified and then sent through a distribution network,
which consists of trunk lines, feeder cables and drop cables. Drop cables carry signals into a subscribers premises and, ultimately, to TV receivers in the home terminal.

Most of our subscribers live in high-rise apartment buildings that have been wired with in-building coaxial networks. We have been allocated 20 frequency
channels by the Telecommunications Authority for TV services. With compression technology, the 20 frequency channels will enable us to broadcast over 100 program channels.

To expand our service to remote areas and outlying islands not previously covered by our fiber network, we launched a 20- channel satellite service in
2004, comprising our flagship channels in news, sports and entertainment.

Broadband Internet Access System

Our HFC cable network is two-way capable. It has the capacity to support additional advanced services by placing telecommunications and
data-communications equipment at network nodes to interface with facilities of various Internet service providers, value-added service providers, content providers, network carriers and broadcasters. We use our HFC cable network to provide broadband
Internet access service. In order to provide such services, we need to install cable modem head-ends to route the Internet data traffic through our digital transport network.

To better serve our expanding customer base, we have been allocated two additional frequency channels by the Telecommunications Authority for broadband
services.



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Wholesale of IP Points

We currently provide IP Point connection service to Wharf T&T. Through these IP Points, Wharf T&T provides local VoIP service to the residential market, utilizing our HFC cable network for core and last-mile
signal transmission.

Customer Service and Technical Support

We believe providing a high level of customer service and technical support to our subscribers is integral to our customers satisfaction. In order to achieve this, we operate a 24-hour customer service hotline.
We continually seek to staff our customer service department with qualified personnel to provide solutions to potential customer questions or related matters. We also continue to invest in equipment and technology to enhance operational efficiency.
Most of our customer service representatives have in-depth knowledge of our pay-TV and Internet and multimedia services.

Subscribers can
pay through a direct-debit service that automatically deducts the monthly payment from a subscribers designated bank account or credit card account, by telephone, at payment points such as local banks or automated teller machines, or by mail.

We provide our subscribers with complete technical support, including installation, maintenance and service calls and disconnection of our
services. We monitor key statistics, such as average time for completion of installation, in order to identify any potential areas for improvement.

Research and Development

We do not conduct any research and development activities for new technologies.

Intellectual Property

We have registered certain
trademarks, including our brand name, logo, and certain advertising features, as well as trademarks in connection with our pay-TV services with the Hong Kong Trade Marks Registry, the independent authority responsible for registration of trademarks
in Hong Kong. In addition, we have registered some of our trademarks in the PRC, Taiwan and Macau.

Insurance

We have insurance with reputable insurance providers to cover risks incurred in the ordinary course of business, including general liability, property
coverage and workers compensation insurance in amounts typical of similar operators in the cable industry. We believe our insurance coverage is adequate and there have not been any significant insurance claims during the past three years.

Regulations

Regulations on TV Broadcasting

Overview

We conduct our pay-TV business through our subsidiary HKC. HKC is a licensed subscription TV broadcaster and is subject to the provisions of the Broadcasting Ordinance, the Broadcasting Authority Ordinance, the Telecommunications Ordinance
and its license and related regulations, codes of practice, guidelines and directions of the Broadcasting Authority. The provisions are administered by the Broadcasting Authority (a statutory body established under the Broadcasting Authority
Ordinance) and the Telecommunications Authority. The Broadcasting Authority prescribes rules concerning the content and scope of TV programming, supervises all services provided by TV broadcasters and makes recommendations to the Chief



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Executive-in-Council on applications for broadcasting licenses, as well as on the renewal, suspension and revocation of licenses. The Chief
Executive-in-Council issues domestic pay TV program service licenses which grant the right to provide domestic pay TV program services. HKCs domestic pay TV program service license sets forth the terms and conditions for providing its pay-TV
service, including the length and the scope of its programming.

License

HKC provides its pay-TV services under its subscription TV broadcasting license (the Subscription TV License) which has been deemed to be a
domestic pay TV program service license issued under the Broadcasting Ordinance. The Subscription TV License came into effect on June 1, 1993 and was valid for a period of 12 years until May 31, 2005.

HKCs Subscription TV License was renewed on June 1, 2003 and amended on September 14, 2004. A further renewal was granted for 12 years
from June 1, 2005 with key terms no less favorable than HKCs previous license. HKCs Subscription TV License was subsequently renamed the Domestic Pay TV Program Service License. Separately, in June 2005 HKCs FTNS license was
converted to a fixed carrier license to include the transmission of HKCs TV service under the current regulatory regime, which requires the transmission part of HKCs TV license to be subject to the Telecommunications Ordinance.

The Broadcasting Authority may require HKC to refrain from broadcasting all or part of certain programs, advertisements or other material
where this would result in material breaches of the terms and conditions of the license or violations of applicable law, regulations or public policy.

We also hold a non-domestic TV program service license for the uplink of a satellite channel through our subsidiary, i-CABLE Satellite Television Limited, which was granted by the Broadcasting Authority on
October 18, 2001 for a period of 12 years until October 17, 2013. In addition, China International Television Corporation has granted us limited landing right for reception in hotels and selected compounds in the PRC mainland.

Restrictions on Ownership and Control

The Broadcasting Ordinance provides that the majority of directors and majority of principal officers of TV broadcasters such as HKC must be persons who are ordinarily resident in Hong Kong. Persons are considered
ordinarily resident in Hong Kong if they reside in Hong Kong for at least 180 days in any calendar year or at least 300 days in any two consecutive calendar years, and have been so resident for at least one continuous period of seven years. The
broadcaster must also be incorporated in Hong Kong. Directors ordinarily resident in Hong Kong must also form the majority of the quorum at its board meetings. Following the enactment of the Broadcasting Ordinance, there are no foreign ownership
controls over HKC. In other words, HKCs shareholders may be non-residents of Hong Kong or foreign corporations.

The Broadcasting
Ordinance restricts cross-media ownership by barring the following entities from holding a domestic pay or free TV program service license or exercising control of such licensees unless approval from the Chief Executive-in-Council is obtained:



| |  |  | advertising agents;
| | - |  | -------------------



| |  |  | companies which are themselves licensees under the Broadcasting Ordinance;
| | - |  | --------------------------------------------------------------------------



| |  |  | sound broadcasting licensees under the Telecommunications Ordinance;
| | - |  | --------------------------------------------------------------------



| |  |  | proprietors of Hong Kong newspapers; and
| | - |  | ----------------------------------------



| |  |  | directors, principal officers, shareholders holding more than a 15% beneficial interest and any associates of the foregoing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



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The Broadcasting Authority is also empowered to obtain information as to HKCs past and present
shareholders.

HKC is prohibited from transferring any part of its Domestic Pay TV Program Service License to another company.

Programming

HKC is
required to broadcast announcements of public interest and publicity material relating to the Broadcasting Authority but is not otherwise obligated to broadcast a minimum number of channels. The maximum number of channels is set by frequency
availability and such number of channels that we may use in any in-building coaxial cable distribution system cannot exceed 20 unless it is otherwise approved by the Telecommunications Authority. Each channel, except for pay-per-view channels, must
broadcast for not less than five hours per day. We believe we have satisfied these programming requirements.

Regulatory Developments

The Hong Kong Government has adopted the policy of liberalizing the TV broadcasting market, including the pay-TV market, with the
aim of increasing competition. The Hong Kong Government awarded four new pay-TV licenses in late 2000. Three of these operators have since surrendered their licenses to the Hong Kong Government. The remaining operator, Galaxy Satellite Broadcasting
Limited, 29% of which is owned by Hong Kongs dominant free-to-air TV operator TVB before TVB restructured its interest therein in January 2008 by reducing its voting control to less than 15%, launched its pay-TV service in February 2004 and
was renamed TVB Pay Vision Ltd. in 2006. Two new pay-TV services were launched in 2003 and 2004 respectively. They were operated by the incumbent telecommunications service provider, PCCW Media Limited, and another telecommunications service
provider, Hong Kong Broadband Network Limited, respectively.

The Hong Kong Government announced in July 2004 the implementation framework
for digital terrestrial TV, or DTT. The existing two terrestrial TV broadcasters, ATV and TVB launched DTT at the end of 2007 and are required to expand coverage to at least 75% of Hong Kong in 2008. Subject to further market and technical studies,
the Hong Kong Government aims to switch off analogue broadcasting in 2012.

The Hong Kong Government launched a public consultation on the
proposed creation of a unified carrier license (UCL) under the Telecommunications Ordinance in December 2007 as a single licensing vehicle for fixed, mobile and/or converged services in its consultation paper entitled
Consultation Paper on the Creation of a Unified Carrier License under the Telecommunications Ordinance. Separately, the Telecommunications Authority conducted a public consultation on the detailed licensing framework for the UCL
in a consultation paper entitled Licensing Framework for Unified Carrier License. The Telecommunications (Carrier Licenses) (Amendment) Regulation 2008 (the Regulation) was published in the Government Gazette on
May 16, 2008 after the two consultations concluded. Following the discussion by the Legislative Council on May 21, 2008, the Regulation will become effective on August 1, 2008, by virtue of which either the UCL will replace our
existing fixed carrier license upon its expiry (in January 2015), subject to the approval of extension of operation of our existing license, or we may apply to convert our unexpired fixed carrier license to a UCL at any earlier time. As for the
validity period of the UCL, there will be a 15-year validity period without automatic renewal upon expiry while for conversion of our existing carrier license without any change in the scope of services, the UCL to be issued to us will have a
validity period the same as the unexpired term of our original carrier license. A fixed annual fee of HK$1million is payable where the licensee is authorised to provide fixed local and/or mobile services, or a lesser amount of HK$100,000 where the
licensee provides fixed external services and/or mobile services other than land mobile services only. There will also be a subscriber based fee component of HK$8 per customer connection payable per annum. Another annual fee of HK$3 for each
subscriber number allocated to us will be payable, regardless of whether the number has been assigned to end customers or not.

The Hong
Kong Government has consulted the industry on proposals to set up a unified regulator by merging the Broadcasting Authority and Telecommunications Authority for co-ordinated regulation of a



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converging electronic communications sector, encompassing broadcasting, telecommunications and information technology. There has been no further development
on this issue after the public consultation concluded on June 2, 2006.

The Hong Kong Government is also consulting the industry on
proposals with respect to point-to-multipoint mobile TV services in Hong Kong and is seeking the industrys views on two options: either to license and regulate mobile TV as a new category of television program service under the Broadcasting
Ordinance or to regulate mobile TV by general laws as is currently the case, but require the industry to implement a code of practice for self-regulation. Subject to the comments to be received in the consultation exercise, the Telecommunications
Authority aims to auction the relevant frequency spectrum in early 2009.

Regulations on Telecommunications

Overview

The
Telecommunications Ordinance regulates the operation of telecommunications in Hong Kong. The Telecommunications Authority is the statutory body responsible for regulating and administering the Telecommunications Ordinance. The Telecommunications
Authority is empowered to issue licenses of the types set out in the Telecommunications Regulations. The Telecommunications Authority is also empowered to require a licensee to comply with the conditions of its license and the Telecommunications
Ordinance. The Telecommunications Authority may suspend or revoke licenses for non-compliance and the Chief Executive in Council may cancel or suspend a license at any time if he considers that the public interest so requires.

The Telecommunications Ordinance was amended when the Telecommunications (Amendment) Ordinance 2000, or the Amended Ordinance, came into effect on
June 16, 2000. The general effect of the Amended Ordinance is to enhance competition safeguards, improve interconnection and access arrangements to telecommunications services, streamline licensing procedures and provide the Telecommunications
Authority with powers over certain technical areas such as radio spectrum management. The competitive safeguards, which include provisions to deal with anti-competitive practices, the abuse of a dominant position, misleading and deceptive conduct,
and discrimination, are administered and enforced by the Telecommunications Authority and represent the first occasion on which competition law principles have been included in legislation in Hong Kong. The Amended Ordinance also significantly
increased penalties for breach of license conditions. In addition, under the Telecommunication (Amendment) (No. 2) Regulations 1999, the scope of services received and distributed by satellite master antenna TV systems (SMATV) has been
extended to cover subscription satellite TV services licensed in Hong Kong and, from January 1, 2000, telecommunications messages intended for users of the satellite system. In addition, the Telecommunications Authority issued five wireless
fixed telecommunication network services (FTNS) licenses in 2000. As of April 9, 2008, a total of 43 FTNS licenses, consisting of wireline-based FTNS, local wireless FTNS, FTNS for distribution of domestic free tv programme service,
satellite-based external FTNS and cable based external FTNS, have been issued.

Licenses

In general, under the Telecommunications Ordinance, a person who establishes and maintains a means of telecommunications in Hong Kong requires a license
to do so.

In order to provide Internet access and services, a public non-exclusive telecommunications services (PNETS) license
is required to be obtained from the Telecommunications Authority. iNOL is a wholly-owned subsidiary of the Company and holds a PNETS license to operate our Internet business. The Telecommunications Authority may cancel or suspend the PNETS license
at any time for up to 12 months for contravention of any provision of the Telecommunications Ordinance or any condition of the PNETS license. The Internet and online content businesses of iNOL have been transferred to HKC with effect from
January 1, 2007 and HKC operates the Internet business under its fixed carrier license.



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HKC previously held a FTNS license by which it was authorized to provide broadband services utilizing the
HFC part of its subscription TV network. The FTNS license was converted to a fixed carrier license in June 2005 to include the transmission of TV services in line with the current telecommunications regulatory regime with terms no less favorable
than the previous license. The license is valid until January 2015. The fixed carrier license removes the restriction contained in HKCs previous license that its telecommunications services must be provided via the HFC network we built for the
delivery of pay-TV services, and we therefore now have greater flexibility in the introduction of service enhancements or new telecommunications services.

The Telecommunications Authority initially assigned to us one pair of frequency channels on the in-building coaxial network (one upstream channel and one downstream channel) for the operation of our cable modem
broadband Internet service. An additional frequency was granted to us in May 2005 to cope with demands on traffic with the expansion of our customer base.

Regulatory Developments

In January 2002, the Telecommunications Authority announced its
policy on the implementation of the full liberalization of the local FTNS market in Hong Kong from January 1, 2003 which followed the liberalization policy announced in May 1999 to license the operation of additional wireline-based fixed
networks when the moratorium on issuing new local FTNS licenses ended on December 31, 2002. Since January 1, 2003, the local and external FTNS market has been fully liberalized and there is no pre-set limit for number of licenses for the
operation of local wireline-based fixed networks. In January 2003, three new local wireline-based FTNS licenses were granted, including two that were granted to local wireless FTNS licensees by modifying their licenses to include the operation of
local wireline-based FTNS. As of April 9, 2008, there were ten local wireline-based FTNS licensees.

In July 2004, a new provision of
the Telecommunications Ordinance came into force. This anti-competition provision specifically regulates the conduct of all carrier licensees (in particular merger and acquisition transactions) in the Hong Kong telecommunications industry by giving
the Telecommunications Authority the power to review the conduct and transactions concerning carrier licensees and to take appropriate actions if it determines that the transaction would, or is likely to, prevent or substantially lessen competition
in a telecommunications market. The Telecommunications Authority has the power under this provision to conduct an investigation into any transaction giving rise to concern. It might consent to the transaction (unconditionally or subject to any
conditions it deems appropriate) or reject the transaction outright. The decision of the Telecommunications Authority will take account of whether the transaction will adversely affect the public interest and benefit. This provision may have an
adverse effect on our ability to grow our business through mergers and acquisitions.

In addition, the Telecommunications Authority has
issued two guidelines on interconnection, namely, Guideline on Interconnection between In-Building Coaxial Cable Distribution Systems and Guideline on Availability and Provisioning of Blockwiring for Type II
Interconnection on April 22, 2005 and July 28, 2005 respectively addressing the issues on interconnection between, or to, in-building coaxial cable distribution systems and blockwiring systems in a building or buildings within
the same property development.

The Telecommunications Authority has consulted the industry on the provision of broadband wireless access
(BWA) services in Hong Kong, in December 2004, August 2005 and May 2007 respectively. It is proposed that the BWA frequency spectrum, namely, the 2.3-2.4 GHz band and the 2.50  2.69 GHz band will be allocated by auction and
two pieces of subsidiary legislation under the Telecommunications Ordinance will be legislated subject to negative vetting by the Legislative Council. It is planned that the auction will be conducted in the fourth quarter of 2008.

As mentioned in the section above entitled Regulatory Developments in the section Regulations on TV Broadcasting,
the Telecommunications (Carrier Licenses) (Amendment) Regulation 2008 will become effective on August 1, 2008 whereby a single class of UCL will replace the existing fixed and mobile carrier service license either upon its expiry in January
2015 or upon our earlier application for conversion of the same.



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C. Organizational Structure

The chart below represents i-CABLEs organizational structure as of December 31, 2007.All companies were established under the laws of
Hong Kong, except for (i) Apex Victory Limited, i-CABLE China Limited, i-CABLE Enterprises Limited, i-CABLE Sports (BVI) Limited, i-CABLE International Distribution (BVI) Limited and i-CABLE Capital Limited (formerly i-CABLE Ventures Limited),
which were established under the laws of the British Virgin Islands; and (ii) Guangzhou Kuan Xun Customer Services Company Limited, Guangzhou Dong Liang Cai Movie and Television Technology Consultation Company Limited, Ad On Media Limited,
Movie Ad On Media Limited and i-CABLE Media Consultancy (Beijing) Limited, which were established under the laws of the PRC. All of our subsidiaries are 100% owned unless otherwise specified and are consolidated in our financial statements.

LOGO



|(1) | Teamwork Zhouran Advertising Limited until renamed to Ad On Media Limited on April 3, 2007.
|--- | -------------------------------------------------------------------------------------------



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|(2) | Sundream Music Limited commenced business operations on July 31, 2007 until renamed to Sundream Stars Limited on June 16, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(3) | 100% issued shares of the company were transferred from Cable Network Communications Limited to i-CABLE Media Limited on August 6, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(4) | i-CABLE Ventures Limited until renamed to i-CABLE Capital Limited on July 4, 2007.
|--- | ----------------------------------------------------------------------------------

|(5) | The Group subscribed 30% of the share capital of the company on September 30, 2007.
|--- | -----------------------------------------------------------------------------------

D. Property, Plant and Equipment

We own most of our cable systems
distribution networks and lease some fiber links for our microwave network. We have licenses to use the signal reception sites that house our antenna towers and head-ends and microwave complexes. We have entered into an agreement with Wharf T&T
for the shared use and maintenance of some of the ducts that house our network. We lease office space from Wharf in Tsuen Wan, Hong Kong, for our principal executive offices and programming production studios. The physical components of our network
require maintenance and periodic rebuilding to keep pace with technological advances. We believe that our properties, both owned and leased, are in good condition and are legally and physically suitable and adequate for our business operations as
presently conducted and as proposed to be conducted.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements included elsewhere in this annual
report. The financial information presented below has been extracted from the financial statements of the Company and its subsidiaries as prepared in accordance with Hong Kong GAAP. A reconciliation of our net profit and shareholders equity as
prepared in accordance with U.S. GAAP is also separately provided in note [40] to our Consolidated Financial Statements. Unless otherwise indicated, all financial information in this annual report is presented in Hong Kong dollars as of
December 31, 2007. The U.S. dollar translations provided in this annual report are, unless otherwise indicated, calculated at the Hong Kong Dollar Noon Buying Rate at December 31, 2007, which was HK$7.7984 per US$1.00. No representation is
made that Hong Kong dollar amounts could have been, or could be, converted into United States dollars at that rate or at any other particular rate on December 31, 2007 or any other date. Sums may not add due to rounding.

A. Operating Results

Overview

We are one of the leading providers of pay-TV, Internet and multimedia services in Hong Kong. For the year ended December 31,
2007, we generated 69% of our revenues from our pay-TV service, with the remainder mainly derived from our Internet and multimedia service.

A significant portion of the revenue from our pay-TV service in recent years has been derived from subscription and advertising revenues. We launched our pay-TV service in Hong Kong in October 1993. As of December 31, 2007, our
in-building coaxial network passed over approximately 2,168,000 homes, of which 2,084,000 have been connected to our fiber optic cable network. As of December 31, 2007, we had approximately 882,000 pay-TV subscribers, representing an
approximately 12% increase over the previous year.

A significant portion of the revenue from our Internet and multimedia service in recent
years has been derived from broadband subscription revenue. We began to offer broadband Internet access service through our HFC cable network in March 2000. As of December 31, 2007, we had approximately 306,000 broadband Internet subscribers.
As part of our Internet and multimedia service, we provide wholesale service of IP Points to Wharf T&T and charge a service fee that is determined based on the number of IP Points provided. Through these IP Points, Wharf T&T provides local
VoIP service to the residential market by utilizing our HFC cable network for core and last-mile signal transmission. As of December 31, 2007, approximately 159,000 IP Points were provided to Wharf T&T by us.



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Our business activities are conducted primarily in Hong Kong. For each of the years 2005, 2006 and 2007,
less than 10% of our revenues were derived from activities conducted outside Hong Kong.

We are seeking to diversify the business of the
Group by investing in new products and services. As part of this strategy, we established Sundream Motion Pictures in March 2005, acquired a 70% equity interest in Ad On Media in April 2006, and established Sundream Music Limited (subsequently
renamed as Sundream Stars Limited) in July 2007. We have launched several publications in the PRC as part of our cross-media strategies. These publications are distributed across major cities in the PRC with the objective of exploiting advertising
revenue by leveraging our content capability. The results of operations of these subsidiaries were consolidated into our financial statements as from their respective dates of acquisition or incorporation, as the case may be. None of these
subsidiaries have had a material effect on our financial condition or results of operations.

Principal Components of Our Income Statement

Service Revenues

Our
service revenues consist primarily of the following:



| |  |  | Revenue from pay-TV service. Subscription fees charged to our pay-TV customers for basic, mini package and pay-per-view services account for a significant
portion of our pay-TV revenues. We also generate revenue from the provision of installation and other support services. We derive additional pay-TV revenues from advertising income, program-guide sales and, satellite TV systems services.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenue from Internet and multimedia service. A significant portion of the revenue from our Internet and multimedia service is derived from broadband service.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating Expenses

Our operating expenses consist primarily of the following:



| |  |  | Programming costs.Programming costs are costs incurred for the acquisition, production and broadcasting of programming, and the amortization of programming
rights and represent the largest component of our operating costs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Network and other operating expenses. Network and other operating expenses include our network maintenance and operating costs for the expanding network,
telecommunication expenses for Internet services, other technical support costs as well as our customer service and billing costs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Selling, general and administrative expenses.Selling, general and administrative expenses include expenses incurred for marketing, sales and administration,
information systems support and other corporate support services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Depreciation. Depreciation includes the depreciation of property, plant and equipment.
| | - |  | --------------------------------------------------------------------------------------

Non-GAAP Financial Measures

We use a financial
measure that we defined as adjusted EBITDA to provide additional information about our operating performance. Adjusted EBITDA refers to our earnings before the following items:



| |  |  | interest income;
| | - |  | ----------------



| |  |  | finance costs;
| | - |  | --------------



| |  |  | non-operating income/expenses;
| | - |  | ------------------------------



| |  |  | provision for income tax;
| | - |  | -------------------------



| |  |  | depreciation of property, plant and equipment but after amortization of programming rights; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | impairment loss on investments.
| | - |  | -------------------------------



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Adjusted EBITDA is not a standard measure under either Hong Kong GAAP or U.S. GAAP. However, we believe
the investor community commonly uses this type of financial measure to assess the operating performance of companies in our market sector.

As a measure of our operating performance, we believe that the most directly comparable Hong Kong GAAP and U.S. GAAP measure to adjusted EBITDA is net profit. We operate in a capital intensive industry. We use adjusted EBITDA in addition to
net income because net income includes many accounting items associated with capital expenditures, such as depreciation of property, plant and equipment. These accounting items may vary between companies depending on the method of accounting adopted
by a company. By minimizing differences in capital expenditures and the associated depreciation expenses as well as reported tax positions, adjusted EBITDA provides further information about our operating performance and an additional measure for
comparing our operating performance with other companies results.

The following table reconciles our net income under Hong Kong GAAP
to our definition of adjusted EBITDA for the periods indicated:



|                                |  |                         |   |  |      |   |  |      |   |  |      |   |  |      |  
|------------------------------- |  | ----------------------- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                |  | Year ended December 31, |  
|                                |  | 2003                    |   |  | 2004 |   |  | 2005 |   |  | 2006 |   |  | 2007 |  
|                                |  | (HK$ in millions)       |  
|Adjusted EBITDA                 |  | 789                     |   |  | 828  |   |  | 760  |   |  | 627  |   |  | 545  |  
|Adjustments:                    |  |                         |   |  |      |   |  |      |   |  |      |   |  |      |  
|Interest income                 |  | 8                       |   |  |     |   |  | 3    |   |  | 12   |   |  | 21   |  
|Finance costs                   |  | (16                     | ) |  |     |   |  |     |   |  |     |   |  |     |  
|Non-operating income/(expenses) |  | (10                     | ) |  | 1    |   |  | 1    |   |  | (1   | ) |  | 2    |  
|Income tax (expense)/credit     |  | (13                     | ) |  | 43   |   |  | 245  |   |  | (29  | ) |  | (16  | )
|Impairment loss on investment   |  |                        |   |  |     |   |  | (2   | ) |  |     |   |  | (2   | )
|Depreciation                    |  | (539                    | ) |  | (532 | ) |  | (481 | ) |  | (428 | ) |  | (367 | )
|Net profit                      |  | 220                     |   |  | 340  |   |  | 527  |   |  | 181  |   |  | 183  |  

You should not consider our definition of adjusted EBITDA in isolation or construe it as an
alternative to net income or as an indicator of operating performance or any other standard measure under Hong Kong GAAP or U.S. GAAP. Our definition of adjusted EBITDA does not account for taxes and other non-operating cash expenses. Our adjusted
EBITDA measures may not be comparable to similarly titled measures used by other companies.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with Hong Kong GAAP. Our significant accounting policies are summarized in Note 2 to the
accompanying consolidated financial statements. The preparation of these financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Our management evaluates their estimates and assumptions at each balance sheet date. Actual results may differ from these
estimates under different assumptions or conditions.

We believe that revenue recognition, deferred tax assets, useful lives of long-lived
assets, impairment provisions for property, plant and equipment, program library, unlisted equity securities and goodwill (U.S. GAAP only) and write-down of receivables and inventories to net realizable value involve accounting policies which are
most affected by managements use of judgment and estimates. Please see note [36] to our consolidated financial statements for a discussion of judgment and estimates used in these areas.



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Revenue recognition

Revenue is recognized in the statement of operations provided it is probable that economic benefits will flow to us and revenues and costs, if applicable,
can be measured reliably. Provision of pay-TV services, Internet broadband access services, and IP Point wholesale services is recognized at the time when the services are provided. Installation fees are recognized upon completion of the related
installation work to the extent of direct selling costs. Where packaged service fees comprise a number of elements and the fees can be allocated on a reasonable basis into elements of subscription service and installation service, revenue is
recognized in accordance with the accounting policies set out in Notes 2(l)(i) and 2(l)(ii). Where packaged service fees cannot be allocated into individual elements, the fees are deferred and recognized evenly over the term of the service period.

Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. The
carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such
reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Management considers that
a key source of estimation uncertainty lies in the recognition of deferred tax assets from unused tax losses. As explained in Note 2(n), all deferred tax assets to the extent that it is probable that future taxable profits will be available against
which they can be utilized, are recognized. It is possible that adverse changes to the operating environment or our corporate organization structure could cause a future write-down of the deferred tax assets recognized.

Property, plant and equipment

Property, plant and equipment are stated in the balance sheet at cost, less accumulated depreciation and impairment losses (see Note 2(t)). The cost of self-constructed items of property, plant and equipment includes materials, labour, the
initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of overheads and borrowing costs (see Note 2(m)). Depreciation is calculated on a
straight-line basis to write off the cost less their estimated residual value, if any, of the equipment required to support a fully operating network and cable TV system at rates determined by the estimated useful lives of the assets ranging from
five to 20 years, estimated at the time such assets are acquired and based on historical experience with similar assets, also taking into account the anticipated technological or industrial changes in order to determine the amount of depreciation
expense to be recorded during any reporting period.

If these changes were to occur more rapidly than anticipated or in a different form
from what was anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods.

Under certain circumstances, we may have an obligation to dismantle part of our network upon request by concerned parties. Owing to the absence of such
history and lack of sufficient information to estimate the fair



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value of the asset retirement obligation because the settlement date or the range of potential settlement dates have not been specified by others and
information is not available to apply an expected present value technique, no reliable estimates can be reasonably made in respect of such potential obligation.

Programming library

Programming library consists of presentation rights for commissioned
programs and acquired programs for showing on our TV channels, and commissioned programs and films for licensing purposes. Presentation rights are stated in the balance sheet at cost less accumulated amortization (where the estimated useful life is
other than indefinite) and any impairment losses (see Note 2(t)). Amortization is charged to the statement of operations on an accelerated basis over the license period or over the estimated number of future showings. Subsequent expenditure on
programs after initial acquisition is recognized as an expense when incurred.

Commissioned programs and films for licensing purposes
comprise direct production costs and production overheads, and are stated at the lower of amortized cost or net realizable value. Costs are amortized on an individual program/film basis in the ratio of the current years gross revenues to
managements forecast of the total ultimate gross revenues from all sources.

Live programs consist of third party feed programs and
are charged to the statement of operations upon telecast of the programs. Payments made in advance or in arrears of program cost recognition are recorded as prepayments or accruals, as appropriate.

Net realizable value of commissioned programs and films are estimated based on their projected future revenue to be derived from all applicable
territories and windows less cost to sell, taking into account historical performances of films and programs with comparable budgets, casts, or other relevant qualities. If revenue actually generated were to fall short of our forecasts, or there are
changes in total projected ultimate gross revenues or ultimate participation costs, amortization may need to be adjusted, or impairment provision may need to be made to estimate the carrying value of individual program or film to its realizable
amount.

Impairment Provisions

At each balance sheet date, we review internal and external sources of information to identify indications that the Companys property, plant and equipment, inventories, loans and receivables, film library,
goodwill, and investment in unlisted equity instruments may be impaired or an impairment loss previously recognized no longer exists or may have decreased. If such an indication exists, the relevant assets recoverable amount is estimated with
appropriate accounting adjustment of the carrying amount of an asset to its recoverable amount.

The sources utilized to identify
indications of impairment are often subjective in nature and require us to make judgments and apply assumptions including the future utilization value of such asset, the cash flows to be generated, appropriate market discount rates and the projected
market and regulatory conditions. Changes in any of these assumptions could result in a material change to future estimates of the recoverable value of any asset.



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Results of Operations

The following table summarizes our results of operations under Hong Kong GAAP for the years ended December 31, 2005, 2006 and 2007:



|                                             |  |                         |   |  |        |   |  |        |  
|-------------------------------------------- |  | ----------------------- | - |  | ------ | - |  | ------ | -
|                                             |  | Year ended December 31, |  
|                                             |  | 2005                    |   |  | 2006   |   |  | 2007   |  
|                                             |  | (HK$ in millions)       |  
|Service revenues                             |  | 2,441                   |   |  | 2,547  |   |  | 2,304  |  
|                                             |  |                         |   |  |        |   |  |        |  
|Operating expenses                           |  |                         |   |  |        |   |  |        |  
|Programming costs                            |  | (864                    | ) |  | (1,005 | ) |  | (950   | )
|Network and other operating expenses         |  | (398                    | ) |  | (451   | ) |  | (419   | )
|Selling, general and administrative expenses |  | (419                    | ) |  | (465   | ) |  | (390   | )
|Depreciation                                 |  | (480                    | ) |  | (428   | ) |  | (367   | )
|                                             |  |                         |   |  |        |   |  |        |  
|Total operating expenses                     |  | (2,161                  | ) |  | (2,349 | ) |  | (2,126 | )
|                                             |  |                         |   |  |        |   |  |        |  
|Profit from operations                       |  | 280                     |   |  | 198    |   |  | 178    |  
|Non-operating income/(expenses)              |  | 1                       |   |  |       |   |  | 2      |  
|Interest income                              |  | 3                       |   |  | 12     |   |  | 21     |  
|Impairment loss on investment                |  | (2                      | ) |  |       |   |  | (2     | )
|Finance costs                                |  |                        |   |  |       |   |  |       |  
|                                             |  |                         |   |  |        |   |  |        |  
|Profit before taxation                       |  | 282                     |   |  | 210    |   |  | 199    |  
|Income tax (expense)/credit                  |  | 245                     |   |  | (29    | ) |  | (16    | )
|                                             |  |                         |   |  |        |   |  |        |  
|Net profit                                   |  | 527                     |   |  | 181    |   |  | 183    |  
|                                             |  |                         |   |  |        |   |  |        |  

2007 Compared to 2006

Service Revenues

Our service revenues in 2007 decreased by HK$244 million, or 10%, to
HK$2,304 million from HK$2,548 million in 2006. Service revenues from our pay-TV business in 2007 decreased by HK$300.1 million, or 15.8%, to HK$1,595 million from HK$1,895 million in 2006. The decrease reflected decreases in subscription and to a
lesser extent in advertising revenues. The decrease in subscription revenues was primarily due to the lower-yield mini packages, the effects of which were partially offset by an increase in our pay-TV subscriber base to 882,000 in 2007 from 786,000
in 2006. Service revenues from our Internet-related services in 2007 decreased slightly by HK$8 million, or 1%, to HK$588 million from HK$596 million in 2006. The decrease was primarily due to the decrease in our broadband subscriber base to 306,000
in 2007 from 328,000 in 2006. Service revenues from our Internet-related services accounted for 26% of our total service revenues in 2007 as compared to 23% during the previous year.

Operating Expenses

Our
operating expenses including depreciation decreased by HK$223 million, or 10%, to HK$2,126 million in 2007 from HK$2,349 million in 2006, with the following breakdown:

Programming Costs.Programming costs decreased by HK$55 million, or 6%, to HK$950 million in 2007 from HK$1,005 million in 2006, primarily due to the carriage of FIFA World Cup in 2006 and the absence of
English Premier League in the second half of 2007.

Network and Other Operating Expenses.Network and other operating expenses
decreased by HK$32 million, or 7%, to HK$419 million in 2007 from HK$451 million in 2006, primarily due to the network staff reorganization to increase operating efficiency in the second half of 2006.



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Selling, General and Administrative Expenses.Selling, general and administrative expenses
decreased by HK$75 million, or 16%, to HK$390 million in 2007 from HK$465 million in 2006, due primarily to lower expenditures on advertising.

Depreciation.Depreciation expenses decreased by HK$62 million, or 14% to HK$367 million in 2007 from HK$428 million in 2006, primarily due to lower depreciation charges on network assets and customer premises equipment following the
expiry of their depreciation cycles.

Operating Profit

We recognized an operating profit of HK$178 million in 2007, representing a HK$21 million, or 10%, decrease compared to HK$199 million in 2006.

Interest Income and Net Finance Costs

Interest income increased to HK$21 million in 2007 from HK$12 million in 2006, mainly due to an increase in interest income from deposits with banks and financial institutions. Net finance costs increased by 157% to
HK$18,000 in 2007 from HK$7,000 in 2006 mainly due to a fair value gain on forward foreign exchange contracts in 2006, whereas there was no similar gain in 2007. The effect of this was partially offset by a decrease in finance charges on obligations
under finance leases in 2007.

Income tax expenses

Income tax expenses decreased by HK$12 million, or 42%, to HK$17 million in 2007 from HK$29 million in 2006, due to lower utilization level of deferred
tax assets arising from tax losses previously recognized in 2007.

Net Profit

We recorded a net profit after taxation of HK$183 million in 2007, representing an increase of HK$2 million, or 1%, from HK$181 million in 2006. Basic and
diluted earnings per share for 2007 were 9.0 Hong Kong cents, same as the basic and diluted earnings per share in 2006.

2006 Compared to 2005

Service Revenues

Our service revenues in 2006 increased by HK$107 million, or 4%, to HK$2,548 million from HK$2,441 million in 2005. Service revenues from our pay-TV business in 2006 increased slightly by HK$11 million, or 0.6%, to HK$1,895 million from
HK$1,884 million in 2005. The increase in service revenue was primarily due to an increase in airtime sales revenue. Further, there was a net increase of subscribers to 48,000 in 2006 from 36,000 in 2005. Service revenues from our Internet-related
services in 2006 increased by HK$38 million, or 7%, to HK$596 million from HK$558 million during the previous year due to a 2% growth in broadband subscribers and a 40% increase in VoIP lines in service. Net increase in broadband subscribers,
however, decreased to 7,000 in 2006 from 29,000 in 2005. Service revenues attributable to our Internet-related services accounted for 23% of our total service revenues in 2006, representing a 1% increase as compared to 23% during the previous year.



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Operating Expenses

Our operating expenses including depreciation increased by HK$188 million, or 9%, to HK$2,349 million in 2006 from HK$2,161 million in 2005, with the
following breakdown:

Programming Costs.Programming costs increased by 16% to HK$1,005 million in 2006 from HK$864 million in 2005,
primarily due to the carriage of 2006 FIFA World Cup, the addition of HMC2 and other programming enhancements of our movies platform and the production costs of films released by Sundream Motion Pictures during the year.

Network and Other Operating Expenses.Network and other operating expenses increased 13% to HK$451 million in 2006 from HK$398 million in 2005,
primarily due to increase in customer fulfillment costs, as well as the cost of sales and reorganization costs of HK$11 million pertaining to network team reorganization to increase operating efficiency during the year.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased by 11% to HK$465 million in 2006 from HK$419
million in 2005 due primarily to higher marketing and sales spending.

Depreciation.Depreciation expenses decreased by 11% to
HK$428 million in 2006 from HK$480 million in 2005 due mainly to lower depreciation charges in cable modems, leasehold improvement and network assets following the expiry of their depreciation cycle.

Operating Profit

We
recognized an operating profit of HK$198 million in 2006, representing a HK$81 million, or 29%, decrease compared to HK$280 million in 2005.

Interest Income and Net Finance Costs

Interest income increased to HK$12 million in 2006 from HK$3 million in 2005,
mainly due to an increase in interest income from deposits with banks and financial institutions. Net finance costs decreased by 95% to HK$7,000 in 2006 from HK$134,000 in 2005 mainly due to repayment of bank loans and overdrafts from prior years.

Provision for income tax

Income tax of HK$29 million in 2006 included a net reversal of HK$28 million of deferred tax expense for the year compared to a deferred tax credit of HK$305 million in 2005 from recognition of tax losses previously
not recognized.

Net Profit

We recorded a net profit after taxation of HK$181 million in 2006, representing a decrease of HK$346 million, or 66%, from HK$527 million in 2005. Basic and diluted earnings per share for 2006 were 9.0 Hong Kong cents
as compared to basic and diluted earnings per share of 28.8 Hong Kong cents in 2005.

Differences between Hong Kong GAAP and U.S. GAAP

Our consolidated financial statements are prepared in accordance with Hong Kong GAAP which differs in certain significant respects from U.S. GAAP.

The description of the significant differences between Hong Kong GAAP and U.S. GAAP as they relate to i-CABLE, including the offset of
goodwill against reserves, the reversal of impairment write down, installation



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fees, costs and subscription fees, and share option compensation expense, is provided in Note [40] to our consolidated financial statements. A reconciliation
of net profit for the three years ended December 31, 2005, 2006 and 2007 and shareholders equity as of December 31, 2006 and 2007 under Hong Kong GAAP to the comparable amounts determined under U.S. GAAP is also provided in Note [40]
to our consolidated financial statements.

Net profit and total shareholders equity under Hong Kong GAAP as compared to the amounts
determined under U.S. GAAP is set forth below:



|                            |  |                                            |  |       |  |      
|--------------------------- |  | ------------------------------------------ |  | ----- |  | -----
|                            |  | As of and for the years ended December 31,
|                            |  | 2005                                       |  | 2006  |  | 2007 
|                            |  | (HK$ in millions)                         
|Net profit:                 |  |                                            |  |       |  |      
|Hong Kong GAAP              |  | 527                                        |  | 181   |  | 183  
|U.S. GAAP                   |  | 495                                        |  | 190   |  | 190  
|                            |  |                                            | 
|Total Shareholders equity: |  |                                            |  |       |  |      
|Hong Kong GAAP              |  | 2,248                                      |  | 2,262 |  | 2,271
|U.S. GAAP                   |  | 2,263                                      |  | 2,282 |  | 2,298

B. Liquidity and Capital Resources

During the first few years of our business, we financed our operations and capital expenditure requirements primarily through a shareholders loan
from Wharf, cash flows from operations, proceeds from the issuance of convertible bonds and proceeds from our initial public offering. In October 2002, we redeemed prior to maturity HK$1,500 million out of HK$1,800 million outstanding balance of our
fixed rate convertible bonds. The balance of the convertible bonds amounting to HK$300 million was fully redeemed upon their maturity in November 2003. These fixed rate convertible bonds were held by a subsidiary of Wharf. We also repaid all of our
bank borrowings in 2003.

As of December 31, 2007 we had cash and cash equivalents of HK$642 million, current assets of HK$834 million
and current liabilities of HK$532 million. Our current ratio was 1.57.

During 2007, net cash generated from operating activities amounted
to HK$615 million, a decrease of HK$174 million or 22% from HK$789 million in 2006, mainly due to increased deposits and prepayment for program acquisition and program right. Cash used in investing activities in 2007 totaled HK$381 million, compared
to cash used in investing activities of HK$383 million in 2006, mainly on acquisition of property, plant and equipment and programming library. Cash used in financing activities in 2007 totaled HK$179 million, compared to cash used in financing
activities of HK$172 million, mainly due to repurchase of our own shares. We believe that cash generated from our operations and funds available from external sources, together with our current cash and cash equivalents, will be sufficient to cover
our operating and capital expenditures for the next 12 months.



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The following table sets forth a summary of our statements of cash flows under Hong Kong GAAP for the
years ended December 31, 2005, 2006 and 2007:



|                                           |  |                                           |   |  |      |   |  |      |  
|------------------------------------------ |  | ----------------------------------------- | - |  | ---- | - |  | ---- | -
|                                           |  | As of and for the year ended December 31, |  
|                                           |  | 2005                                      |   |  | 2006 |   |  | 2007 |  
|                                           |  | (HK$ in millions)                         |  
|Net cash inflow from operating activities  |  | 784                                       |   |  | 789  |   |  | 616  |  
|Net cash outflow from investing activities |  | (385                                      | ) |  | (383 | ) |  | (381 | )
|Net cash outflow from financing activities |  | (162                                      | ) |  | (172 | ) |  | (179 | )
|                                           |  |                                           |   |  |      |   |  |      |  
|Net increase in cash and cash equivalents  |  | 237                                       |   |  | 234  |   |  | 56   |  
|                                           |  |                                           |   |  |      |   |  |      |  

We have established treasury and funding policies, guidelines and control procedures which are
designed to ensure that we maintain an optimal level of liquidity to support current and future business requirements and to meet our liabilities when due.

We expect that our principal liquidity requirements for 2008 will include our expected capital expenditure primarily through cash flow from operations.

If the primary sources of funding are inadequate to meet our liquidity requirements and borrowing commitments, or if we pursue new projects, we may need
to raise capital in the future. Depending on our capital requirements, market conditions and other factors, we may raise additional funds through debt or equity offerings or through the sale of assets. We have arranged short term bank credit
facilities of approximately HK$199 million to meet any future cash outflow. In the event that such financing cannot be obtained, we may have to scale back our business expansion plans.

Capital Expenditures

Our capital expenditures in 2007 decreased by HK$35 million, or 15%, to HK$203
million from HK$238 million in 2006. Capital expenditures in 2007 consisted primarily of investments in network upgrade and expansion, computer systems and leasehold buildings, as well as in TV production facilities. Investments on these items are
expected to constitute our major capital expenditures in 2008. In order to provide much-enhanced anti-piracy features and flexibility of introducing new services, such as high definition TV and interactive services, we have entered into a sale and
purchase agreement in connection with our plan to purchase a new conditional access system and next generation set-top box in May 2008. The amount to be invested by us in this project has not been finalized. Please refer to Note [35] (c) to our
consolidated financial statements for the year ended December 31, 2007 for greater details.

Investments in our programming library in 2007
decreased by HK$12 million or 9% to HK$128 million from HK$140 million in 2006.

Contractual Obligations and Commitments

The following table summarizes our material contractual obligations and commitments as of December 31, 2007:



|                                  |  |       |  |           |  |                     |  |      
|--------------------------------- |  | ----- |  | --------- |  | ------------------- |  | -----
|                                  |  | 2008  |  | 2009-2011 |  | 2012 and thereafter |  | Total
|Operating leases                  |  | 17.2  |  | 24.0      |  | 51.8                |  | 93.0 
|Capital commitments               |  |       |  |           |  |                     |  |      
|Authorized and contracted for     |  | 21.2  |  |          |  |                    |  | 21.2 
|Programming and other commitments |  |       |  |           |  |                     |  |      
|Authorized and contracted for     |  | 701.4 |  |          |  |                    |  | 701.4
|                                  |  |       |  |           |  |                     |  |      
|                                  |  | 739.8 |  | 24.0      |  | 51.8                |  | 815.6
|                                  |  |       |  |           |  |                     |  |      



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We have operating leases for our premises and certain office equipment, some of which have future minimum
non-cancelable lease payments and do not allow for early termination by us without cause. As of December 31, 2007, our minimum lease payment commitments under such operating leases totaled HK$93 million.

As of December 31, 2007, our contractual commitments in respect of plant, equipment, investment in prospective subsidiary and associate, leasehold
improvements and programming rights and services amounted to HK$723 million. We expect to meet these commitments from our current cash on hand and additional cash to be generated from future operations.

C. Research and Development, Patents and Licenses, etc.

We did not engage in any research and development activities during 2005, 2006 and 2007.

D.
Trend Information

Pay-TV Services

Since the launch of our pay-TV service in October 1993, our pay-TV subscriber base has increased annually. During 2007, our total pay-TV subscriber base increased by approximately 12% to approximately 882,000. In the future, we plan to
increase our pay-TV subscriber base by marketing through direct sales, promotions, and advertising. Although our pay-TV subscribers have continued to grow, the market for pay-TV in Hong Kong is increasingly competitive. This high level of
competition may reduce our pay-TV revenue, resulting in a decrease in our cash flow and operating margin. The number of our pay-TV subscribers may increase at a slower pace or even decrease in 2008 with intensifying competition. See Item
3Key InformationRisk FactorsThe competition we face from other TV broadcasters and Internet service providers may cause us to lose market share.

In 2005, we established three content production subsidiaries, namely i-CABLE News Limited, i-CABLE Sports Limited and i- CABLE Entertainment Limited, through which we operate our news, sports and entertainment
production, respectively. We believe the changes will give our various program production units greater flexibility in managing their resources, exploiting their assets and exploring new markets in their respective fields, which would in turn make
our production capabilities more efficient and market driven. During the year, we changed the line-up of our news and movie channels. See Item 4.B Business OverviewProgrammingPay-TV Services.

We are aware that some viewers in Hong Kong use unauthorized pay-TV decoders to receive our pay-TV service illegally. Although we have substantially
completed migrating our transmission from analog to digital platforms in order to limit the extent of piracy, illegal viewing activities have continued and we are aware that pirated digital set-top-boxes are available in the market. Despite the
deployment of anti-piracy measures, we expect manufacturers or vendors of unauthorized pay-TV decoders to attempt to overcome our digital encryption methods. In addition, Internet video streaming on peer-to-peer platform has surfaced as another form
of illegal viewing. If we fail to deploy appropriate and timely countermeasures in response to such activities, illegal viewing activities may grow. Such illegal viewing activities will adversely affect the growth of our pay-TV subscriber base and
our subscription revenue. See Item 3Key InformationRisk FactorsIllegal viewing activities may affect our pay-TV subscriber growth and subscription revenue.

The English Premier League had been the most popular soccer event on our platform until our exclusive right to broadcast this sports event in Hong Kong
expired in May 2007. Due to the high costs of the telecasting rights for the next three seasons spanning from August 2007 through May 2010, we were not able to renew the contract for the English Premier League. Our pay-TV revenue may be
significantly and adversely affected as a result.



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Broadband Access Service

Although our broadband subscribers decreased by approximately 7% to 306,000 in 2007, we intend to increase our broadband subscriber base by marketing through direct sales, promotions, advertising, and offering
competitive prices. The growth of our broadband subscriber base may be contingent on the growth in the demand for broadband services in Hong Kong, although critical issues concerning the increased use of the Internet may adversely affect future
demand for our broadband Internet access service. See Item 3Key InformationRisk FactorsDemand for our broadband Internet access service may continue to decline.

The market for Internet access and related services in Hong Kong is highly competitive and has almost saturated. This high level of competition may
reduce our market share and broadband revenue, resulting in a decrease in our cash flow and operating margin. From 2005, the offer of bundled services, i.e., voice, data and pay-TV services had enabled us to reach out to new customers. As a result,
an operating profit of HK$78 million, HK$129 million and HK$180 million was achieved for 2005, 2006 and 2007, respectively, reversing operating loss in previous years. However, we believe broadband services have become a commodity product that is
highly sensitive to price. Competition in the segment, especially competitors high bandwidth services, will continue to exert pressure on our income and market share. We will continue to enhance our service quality and introduce more
value-added services to expand our market share in the broadband segment. See Item 3Key InformationRisks FactorsThe competition we face from other TV broadcasters and Internet service providers may cause us to lose market
share.

Some of our competitors offer broadband Internet access service with bandwidth advantage over our broadband Internet access
service in the residential market. We may need to incur substantial capital expenditures to keep pace with our competitors technological developments. See Item 3Key InformationRisks FactorsWe may need to incur
substantial capital expenditures to keep pace with technological developments or our customers demand for new products and services. This may adversely affect our financial condition.

IP Point Wholesale Service

We currently provide IP
Point wholesale service to Wharf T&T and charge a service fee that is determined based on the number of IP Points provided. See Item 7Major Shareholders and transactionsRelated Party Transactions. With these IP Points,
Wharf T&T provides local VoIP service to the residential market, utilizing our HFC cable network for core and last-mile signal transmission. As of December 31, 2007, we provided approximately 159,000 IP Points to Wharf T&T.

Media Content Supply Service

We seek to continue
to launch new and enhanced Internet and telecommunications services by capitalizing on our HFC cable network, local content production expertise, as well as our brand name, marketing and customer service infrastructure. In 2006, we secured Internet
transmission rights for important sports events such as the U.S. PGA Golf Tour, the U.S. Tennis Open and the Rugby World Cup 2006. In 2007, we introduced a new online service i-CABLE IPTV, to widen the video attraction of our portal. In
2008, we intend to deliver the Olympic games through at least four channels via the i-CABLE Official Olympics platform. With our capacity to offer live digital content as well as the abundance of digital content in our library, we are seeking to
increase our supply of media content to other service operators, such as 3G mobile service operators.

At the same time, we are supplying
our programming service to other media. We are the exclusive sales agent and the sole content supplier for the Newsline Express, an audio-visual system which broadcasts news and commercials on MTR trains.



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Satellite TV Service in Mainland China

In April 2003,we launched a satellite channel servicing hotels rated at or above three stars, foreign compounds and other selected areas in the
PRC. The channel features live and updated reporting of events in the entertainment world. The channel started to generate advertising revenue in 2006, but our target market is highly competitive and the channel is expected to continue to incur
losses and may not become profitable for the foreseeable future. See Item 3Key InformationRisk FactorsWe are diversifying our business into new market and new areas. These new ventures may cause volatility in our consolidated
earnings and may not become profitable.

Film and Music Production

Sundream Stars (formerly known as Sundream Music Limited) and Sundream Motion Pictures are our wholly-owned subsidiaries engaging in the music and film
production. However, these subsidiaries may cause volatility in our earnings and may not be profitable. See Item 3Key InformationRisk FactorsOur strategy of entering into new ventures to complement our pay-TV business may not
be successful.



| |  |  | Sundream Stars.We established Sundream Music Limited (currently named Sundream Stars Limited) in July 2007. Sundream Stars develops new talent
for the music industry, supports the programming on our pay-TV platform and caters to the needs of our movie business. It takes advantage of our production and artist training expertise, multiple media platforms and the vast Greater China market
potential. A talent quest organized by Sundream Stars in 2007 was attended by over 1,000 high quality aspirants and by several top-notched musicians as guest performers and judges. The success of this debut event helped to establish our presence in
the local music scene. Sundream Stars also invests in and produces concerts in Hong Kong and the PRC and has staged two major concerts in Beijing featuring top Hong Kong and Chinese artists in early 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sundream Motion Pictures.We established Sundream Motion Pictures in March 2005. Sundream Motion Pictures has
released or distributed 12 movies. These movies have won various awards, including the Most Recommended Film of the Year and Best Film, respectively for Eye in the Sky and A Battle of Wits. Eye in the Sky also won the Best New Director and Best New
Actor Awards in the 27thHong Kong Film Awards.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Publishing

In 2006, we acquired a 70% stake in Ad On Media, an advertising agency having an
exclusive advertising agreement with a PRC magazine called Sanlian Life Weekly. We have launched several publications in the PRC as part of our cross-media strategies. These new businesses may cause volatility in our earnings and may not be
profitable. See Item 3Key InformationRisk FactorsOur strategy of entering into new ventures to complement our pay-TV business may not be successful.

E. Off-balance Sheet Arrangements

We have not entered into any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that is material to investors.

F. Tabular Disclosure of Contractual Obligations

See Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesCapital ResourcesContractual
Obligations and Commitments.

G. Recent Hong Kong GAAP and U.S. GAAP Pronouncements

Please see Note [37] and Note [40] to our consolidated financial statements for the year ended December 31, 2007 for a discussion of the impact of
recent Hong Kong and U.S. GAAP accounting pronouncements respectively, on our results of operations.



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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

Our directors and senior management are as follows



|                                                               |  |     |  |                                                                                                                                                              
|-------------------------------------------------------------- |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                                                           |  | Age |  | Positions                                                                                                                                                    
|Mr. Stephen T. H. Ng                                           |  | 55  |  | Chairman and Chief Executive Officer                                                                                                                         
|Dr. Dennis T. L. Sun, BBS, JP                                  |  | 57  |  | Independent Non-executive Director                                                                                                                           
|Sir Gordon Y. S. Wu, GBS, KCMG, FICE (retired on May 23, 2008) |  | 72  |  | Independent Non-executive Director                                                                                                                           
|Mr. Anthony K. K. Yeung, JP                                    |  | 62  |  | Independent Non-executive Director                                                                                                                           
|Mr. Peter S. O. Mak                                            |  | 59  |  | Non-executive Director                                                                                                                                       
|Mr. William J. H. Kwan                                         |  | 44  |  | Director and Chief Financial Officer                                                                                                                         
|Mr. Patrick Y. W. Wu                                           |  | 55  |  | Independent Non-executive Director                                                                                                                           
|Mr. Vincent T. Y. Lam                                          |  | 57  |  | Executive Director, i-CABLE Network Limited                                                                                                                  
|Mr. Benjamin W. S. Tong                                        |  | 58  |  | Executive Director, Hong Kong Cable Television Limited                                                                                                       
|Mr. Siuming Y. M. Tsui                                         |  | 54  |  | Executive Director, i-CABLE Entertainment Limited; Chief Operating Officer, i-CABLE Satellite Television Limited; President, Sundream Motion Pictures Limited
|Mr. Ronald Y. C. Chiu                                          |  | 55  |  | Executive Director, i-CABLE News Limited and i-CABLE Sports Limited                                                                                          
|Mr. Garmen K. Y. Chan                                          |  | 54  |  | Vice President, External Affairs                                                                                                                             
|Mr. Felix W. K. Yip                                            |  | 49  |  | Vice President, Human Resources & Administration                                                                                                             
|Mr. Simon K. K. Yu                                             |  | 53  |  | Vice President, i-CABLE Network Operations Limited                                                                                                           
|Mr. Samuel C. C. Tsang                                         |  | 51  |  | General Manager, Hong Kong Cable Enterprises Limited                                                                                                         
|Mr. David C. T. Wong                                           |  | 54  |  | Vice President, i-CABLE Enterprises Limited                                                                                                                  

Directors

Stephen T. H. Ng. Mr. Ng became Chairman of the Company in August 2001. He has been a Director, President and Chief Executive Officer
since 1999 and formerly was the Deputy Chairman of the Company. He is also the deputy chairman and managing director of Wharf, the Companys holding company, the deputy chairman of Wheelock and Company Limited (Wheelock), a director
of Joyce Boutique Holdings Limited and became its chairman since 2007, the chairman of Modern Terminals Limited, and the chairman and chief executive officer of Wharf T&T. He serves as a member of the General Committee of the Hong Kong General
Chamber of Commerce.

William J. H. Kwan.Mr. Kwan was appointed a Director of the Company in February 2007.
Mr. Kwan joined HKC in January 1994 and has been DirectorCorporate Development of HKC since 2002. He was appointed Chief Financial Officer effective from January 1, 2006.

Peter S. O. Mak.Mr. Mak has been a Director of the Company since August 2006. He is an executive director of Wharf,
responsible for overseeing the corporate management functions including corporate planning, investor relations, legal, group accounts, audit and insurance of Wharf. He is also a director of Modern Terminals Limited, which is a major subsidiary of
Wharf, a director of Wharf T&T, and certain other subsidiaries of Wharf. Prior to joining Wharf, Mr. Mak held directorship in CITIC Pacific Limited, a Hang Seng Index constituent company. His experience includes managing large-scale capital
and infrastructure portfolios, real estate investments, shipping and leasing. Mr. Mak holds a Bachelor of Arts degree from The University of Hong Kong.

Dennis T. L. Sun, BBS, JP. Dr. Sun has been an independent Non-executive Director of the Company since 2001. He also serves as a member and the chairman of the Companys Related Party
Transactions Committee and a member of the Audit Committee and Compensation Committee. He is the chairman and managing director



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of publicly listed China Hong Kong Photo Products Holdings Limited. Furthermore, he is the deputy chairman of the Hong Kong Management Association and a
council member of The City University of Hong Kong. He was also the vice patron of the Community Chest of Hong Kong from 1999 to 2007. He is the honorary chairman of the Hong Kong Photo Marketing Association, the life honorary advisor of the
Photographic Society of Hong Kong and the founding member of the China Charity Foundation. He was awarded the Bronze Bauhinia Star in 1999 and appointed as a Justice of the Peace in 2002.

Dr. Sun holds a Bachelors degree in Pharmacy from University of Oklahoma, USA and a degree of Doctor of Philosophy in Business Administration
from Southern California University for Professional Studies.

Gordon Y. S. Wu, GBS, KCMG, FICE. Sir Gordon Wu has been an
independent Non-executive Director of the Company since 2001. He is the chairman as well as the founder of publicly listed Hopewell Holdings Limited. He is also the chairman of publicly-listed Hopewell Highway Infrastructure Limited. He is active in
civic and community services, and has received many awards and honors which include, inter alia, membership of Chinese Peoples Political Consultative Conference, The Peoples Republic of China since 1983, and Great Pearl River
Delta Business Council since 2004.

Sir Gordon is also a stalwart supporter of his alma mater Princeton University, USA where he earned his
Bachelor of Science in Engineering degree in 1958. He received Honorary Doctorate Degrees from Hong Kong Polytechnic University, University of Strathclyde, UK and University of Edinburgh, UK. He is a Fellow of The Institution of Civil Engineers and
Honorary Fellow of Australian Society of Certified Practising Accountants. He has been appointed the Honorary Consul of The Republic of Croatia in the Hong Kong SAR. He was awarded the Gold Bauhinia Star in 2004. Sir Gordon retired from the Board
with effect from the conclusion of the Companys Annual General Meeting held on May 23, 2008 due to personal reasons, particularly because he considered his present personal and other business commitments have made it no longer appropriate
for him to continue to serve on the Board.

Patrick Y. W. Wu,Mr. Wu was appointed as an independent Non-executive
Director of the Company in May 2007. He also serves as a member of the Companys Audit Committee and Related Party Transactions Committee. Mr. Wu is a vice president of American Appraisal Associates, Inc. (AAA) and the
president and managing director of American Appraisal China Limited, AAAs key operation in Asia. Mr. Wu has worked both in industry as a senior executive with extensive management experience and in private practice as a lawyer. Prior to
joining AAA, he was a partner of an international law firm with particular responsibility for China trade advice. Mr. Wu was educated in Hong Kong and United Kingdom. He graduated from the University of London in 1974 with a Bachelors
Degree in Science, and obtained his Master of Business Administration Degree from the Cass Business School, City University in London in 1976. Mr. Wu is also an active member of various professional organizations, chambers of commerce and the
business community in Hong Kong.

Anthony K. K. Yeung, JP. Mr. Yeung has been an independent Non-executive Director of
the Company since 2004. He also serves as a member and the chairman of the Companys Audit Committee and Compensation Committee and a member of the Related Party Transactions Committee. He is the chairman of K. K. Yeung Management Consultants
Ltd. and Wall Street Resources Ltd. Furthermore, he is a managing partner of K. K. Yeung Partnership, Certified Public Accountants (Practising). Mr. Yeung is also appointed as chairman of CityU Professional Services Limited.

Mr. Yeung is a Practising Certified Public Accountant in Hong Kong and senior member of the accountancy professions, i.e. Fellow, Chartered
Institute of Management Accountants; Fellow, Chartered Association of Certified Accountants; Fellow, Chartered Institute of Secretaries and Administrators; Fellow, Hong Kong Institute of Certified Public Accountants and Taxation Institute of Hong
Kong.

Mr. Yeung is the vice chairman of the Hong Kong General Chamber of Commerce and the chairman of the Management Consultancies
Association of Hong Kong.



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Mr. Yeung is also a council member of the Hong Kong Trade Development Council.

Furthermore, Mr. Yeung is a member of the Rehabilitation Advisory Committee, the Professional Services Development Assistance Scheme Vetting
Committee and the Manpower Development Committee appointed by the Chief Executive of the Government of the HKSAR. Mr. Yeung is also a member of the Trade and Industry Advisory Board appointed by the Secretary for Commerce, Industry and
Technology and a member of the Innovation and Technology Fund General Support Programme Vetting Committee appointed by the Secretary for Commerce, Industry and Technology.

Mr. Yeung is the chairman of the Trade and Industry Department Customer Liaison Group for Small and Medium Enterprises appointed by the
Director-General of Trade and Industry.

Mr. Yeung is also a member of the Election Committee of the Government of the HKSAR.

In January 2005, Mr. Yeung was conferred Grade of Knight of the Crown by King Albert II of Belgium.

Senior Management

Stephen T. H. Ng.
See Directors above.

William J. H. Kwan. See Directors above.

Ronald Y. C. Chiu. Mr. Chiu joined Wharf Communications in 1991 as a member of the pre-license consultant team. When HKC was awarded
the license in June 1993, Mr. Chiu was appointed Assistant News Controller and was instrumental in the launch of the first 24-hour Cantonese language news channel in the world. Mr. Chiu was promoted to News Controller in 1994 and appointed
as Vice President, News & Sports in 2002. He became an executive director of i-CABLE News Limited and i-CABLE Sports Limited in September 2005. Mr. Chiu is now responsible for operating channels of the Sports and News platform. Prior
to joining HKC, Mr. Chiu held various senior news positions in the TV industry. His experience spans from reporting, editing, news anchoring, to planning and execution of news coverage as well as management of news operation.

Vincent T. Y. Lam. Mr. Lam joined Wharf Communications in 1992 as Vice PresidentPlanning. In 1995, Mr. Lam was appointed
chief operating officer of i-CABLE Network Limited (iNL) responsible for the rollout and deployment of cable network infrastructure in Hong Kong. In 2006, Mr. Lam became an executive director of iNL and HKC, responsible for
strategic development and engineering, including technologies, services and regulatory development. Mr. Lam has over 20 years of experience in the telecommunications industry in the United States and Asia. Prior to joining Wharf Communications,
Mr. Lam was general manager of business development in Asia for U.S. West International.

Benjamin W. S. Tong.
Mr. Tong joined HKC in 1995 to manage the Marketing and Sales Department in the Cable Operations Division. He was appointed Cable Multimedia Services Director in August 1999 to lead the development of the Groups high-speed Internet access
service. He became an executive director of HKC in 2006 to take overall charge of the companys Pay-TV and Broadband subscription services. Mr. Tong has over 20 years of marketing and sales experience in Hong Kong, Mainland China and
Taiwan. Prior to joining HKC, Mr. Tong was marketing and sales director in Taiwan for American Express.

Siuming Y. M.
Tsui. Mr. Tsui joined HKC in July 2001 as Chief Operating Officer of i-CABLE Satellite Television Limited to develop satellite TV business and program production in Mainland China. Mr. Tsui was an executive director, Programming
Services of HKC from 2002 to 2005. He became an executive director of i-CABLE Entertainment Limited in September 2005. Mr. Tsui was principally responsible for program development, production, distribution and transmission of channels of our
entertainment platform. Mr. Tsui has extensive managerial and production experience in the media industry. Prior to joining HKC, he was chief executive officer of Sun TV Cyberworks Holdings Limited, senior vice president for Asia Television
Limited and chief executive officer of Emperor Movie Group Limited.



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Samuel C. C. Tsang. Mr. Tsang joined Wharf Communications in 1992 as marketing
consultant to bid for the cable TV license in Hong Kong. In 1995, he was appointed Enterprises Director to take charge of international program licensing and advertising sales for the station. He became chief operating officer of Hong Kong Cable
Enterprises Limited (HKCE) when it was set up in 2000 to take over advertising sales of HKC. He became General Manager of both HKCE and Hong Kong Cable News Express Limited on March 1, 2005. Mr. Tsang has extensive experience
in media and marketing, specializing in new business establishment in Mainland China and Hong Kong.

Simon K. K. Yu.
Mr. Yu joined the Wharf Group in 1987 and has held various administration and audit positions in the Wharf Group. He was appointed corporate controller-operations of Wharf Communications in 1992, responsible for operations, accounting, finance,
control, administration and personnel. In 1996, Mr. Yu was appointed Administration and Audit Director of HKC. He became Vice Presidenti-CABLE Network Operations Limited (formerly known as i-CABLE WebServe Limited) in 2006 to take charge
of operations of the companys HFC & MMDS networks.

Garmen K. Y. Chan. Mr. Chan joined HKC in 1995 as
external affairs director. He is responsible for formulating and implementing regulatory and external affairs strategies and action plans for the Group. Mr. Chan came from a diverse media background in Hong Kong, having held key positions in
English newspapers and local TV stations. Mr. Chan was a media consultant prior to joining HKC.

David C. T. Wong.
Mr. Wong joined the Group in May 2004 as Vice President of i-CABLE Enterprises Limited. He is responsible for formulating and implementing strategies for the Group in opening up cross-media business opportunities. Mr. Wong has over 20
years of journalistic experience and held various senior editorial and managerial positions in the Sing Tao Newspapers Group. Prior to joining the Group, Mr. Wong was Director-General of the Hong Kong Press Councila self-regulatory body
to promote professional ethics of the newspaper industry.

Felix W. K. Yip. Mr. Yip joined the Group in February 2005 as
Vice PresidentHuman Resources, Administration and Audit. He has a successful track record in Human Resources and Administration. He started his professional career with the Dairy Farm Group of companies. He next spent ten years in various
positions with San Miguel Brewing International Limited, where he last held the position of General ManagerHuman Resources & Administration, China Business Operations.

B. Compensation

During 2007, an aggregate amount of HK$35.7 million in
compensation was paid to our directors and officers as a group by us and by the Wharf Group on our behalf. We also provide fringe benefits and other compensation arrangements to a number of our directors and officers.

Retirement Scheme and Mandatory Provident Fund

The
principal retirement scheme that we operate is a defined contribution retirement scheme for our employees, established under a trust deed. Some of our fellow subsidiaries also participate in the scheme.

The scheme is funded by contributions from employees and employers. The employees and employers contribute respectively to the scheme sums, which
represent percentages of the employees salaries as defined under the trust deed. Forfeited contributions may be utilized by the employers to reduce contributions.

Our principal retirement scheme is closed to new employees joining after October 1, 2000 while existing members of the scheme can continue to accrue future benefits.



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Employees joining after October 1, 2000 participate in the Mandatory Provident Fund
(MPF) with terms as stipulated by the MPF Authority in Hong Kong. We will also provide voluntary top-up benefits to employees receiving a monthly basic salary exceeding HK$20,000 which is the relevant income cap as stipulated by the MPF
Ordinance.

Our retirement scheme costs before capitalization and charged to the statement of operations during the year ended
December 31, 2007 amounted to HK$17,000,277 (HK$19,025,015 in 2006) which were incurred after utilization of forfeitures to reduce our contributions of HK$2,150,574 (HK$2,022,123 in 2006).

The total employers cost in respect of our retirement scheme, including the cost related to the MPF which is not operated by us, charged to
statement of operations during the year ended December 31, 2007 amounted to HK$39,992,442 (HK$33,436,633 in 2006).

C.
Board Practices

Our directors during the financial year were Mr. Stephen T. H. Ng, Mr. William J. H. Kwan
(appointed on February 1, 2007), Mr. F. K. Hu (retired on May 17, 2007), Mr. Peter S. O. Mak, Dr. Dennis T. L. Sun, Sir Gordon Y. S. Wu (retired on May 23, 2008), Mr. Patrick Y. W. Wu, and
Mr. Anthony K. K. Yeung.

Mr. F. K. Hu retired from the Board at the Annual General Meeting held on May 17. Mr. Hu
received from the Company until his retirement on May 17, 2007 a Directors fee and an Audit Committee Members fee at such rates as from time to time approved by the Companys directors, currently being HK$60,000 and HK$20,000
per annum respectively. He has no service contract with the Company and therefore he receives no emolument from the Company other than the abovementioned Directors fee and Audit Committee Members fee.

We do not have service contracts with any of our directors that provide for benefits upon termination of employment.

Audit Committee

As of December 31, 2007, our
audit committee was composed of three independent non-executive directors: Mr. Anthony K. K. Yeung (Chairman), Dr. Dennis T. L. Sun (Deputy Chairman), and Mr. Patrick Y. W. Wu (appointed on May 17, 2007).
Mr. Fa-Kuang Hu retired on May 17, 2007 due to personal reasons. Mr. Anthony K. K. Yeung was appointed by the board of directors as Chairman of the Audit Committee effective from May 17, 2007. Mr. Yeung is a
financial expert within the meaning of the Sarbanes-Oxley Act of 2002. Under our audit committee charter, members of our audit committee must be independent, the audit committee must meet at least twice a year and must have at least
three members. The audit committees responsibilities include the appointment of our external auditors and a review of our accounting policies and practices. The committee has the authority to obtain advice and assistance from the Company and
its management or any outside legal expert or other advisor.

Compensation Committee

As of December 31, 2007, our compensation committee was composed of Mr. Anthony K. K. Yeung (Chairman) and Dr. Dennis Sun (Deputy
Chairman). Mr. Fa-Kuang Hu retired on May 17, 2007 due to personal reasons. Mr. Anthony K. K. Yeung was appointed by the board of directors as Chairman of the Compensation Committee effective from May 17, 2007. Our
compensation committee must have at least two members, who are appointed by our board of directors among our non-executive directors. The chairman and a majority of the members of the committee must be independent from us. The quorum for a
compensation committee meeting is two members. Decisions are made by a majority of votes of the members present, and in the case of an equality of votes, the chairman of the committee shall have a second or casting vote. A resolution in writing
signed by all



44



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of the committee members is treated as if it had been passed at a meeting of the committee. The committee has the authority to obtain advice and assistance
from the Company and its management or any outside legal expert or other advisor. The compensation committees responsibilities include the following:



| |  |  | approve compensation and benefits for directors and senior executives;
| | - |  | ----------------------------------------------------------------------



| |  |  | decide the terms of the employee share option scheme; and
| | - |  | ---------------------------------------------------------



| |  |  | review compensation-related or other issues as requested by our board of directors.
| | - |  | -----------------------------------------------------------------------------------

D. Employees

As of December 31, 2007 we had 2,907 full-time employees,
classified by function as follows:



|                                        |  |      
|--------------------------------------- |  | -----
|TV operations                           |  | 890  
|Network and technical operations        |  | 727  
|Sales and marketing                     |  | 494  
|Customer service and support operations |  | 475  
|Internet access and content operations  |  | 48   
|Administration, finance and others      |  | 273  
|                                        |  |      
|Total                                   |  | 2,907
|                                        |  |      

We believe our relations with our employees are good.

E. Share ownership

At
December 31, 2007, Mr. Stephen T. H. Ng owned 1,065,005 of our ordinary shares. Except as disclosed in the previous sentence, none of our directors serving as of December 31, 2007 owned any of our ordinary shares at
December 31, 2007.

Employee Share Option Scheme

We operate an employee share option scheme pursuant to which our board of directors may, at their discretion, award any full time employee of any member of us, including executive directors of any of our subsidiaries,
to take up options to subscribe for ordinary shares up to a maximum aggregate number of ordinary shares equal to 10% of our total issued share capital. The price for an ordinary share payable by a participant upon the exercise of an option will be
determined by our board of directors in their discretion from time to time, except that with effect from September 1, 2001, the minimum exercise price must be at least the higher of:



| |  |  | the closing price of the shares as stated in the Hong Kong Stock Exchanges daily quotations sheet on the date of grant, which must be a business day; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the average closing price of the shares as stated in the Hong Kong Stock Exchanges daily quotations sheets for the five business days immediately preceding
the date of grant.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The period during which an option may be exercised will be determined by the Directors at their
discretion, except that no option may be exercised later than 10 years after it has been granted. The employee share option scheme commenced on November 2, 1999 and will remain in force for a period of 10 years from such date.

Under our employee share option scheme, certain options to subscribe for our ordinary shares were granted to our executive(s)/employee(s) at various
subscription prices. They include the options granted to Mr. Stephen T. H. Ng and Mr. William J. H. Kwan to subscribe for 1,500,000 and 260,000 ordinary shares respectively. The consideration for the granting of such options to
them was HK$10 per option. The option rights are exercisable during the period from April 1, 2001 to December 31, 2009 at a subscription price of HK$10.49 per share.



45



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##### Table of Contents

No employee share options were granted during the year ended December 31, 2007. See Note 27 to our
consolidated financial statements.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of
June 10, 2008, we had 2,012,340,400 ordinary shares outstanding. The following table contains information with respect to the ownership of our ordinary shares, as of June 10, 2008, by each person known to us to own, directly or indirectly,
5% or more of our ordinary shares. We are not aware of any arrangement that may at a subsequent date result in a change of control of our company. There are no differences in the voting rights among any of the major shareholders.



|                                                    |  |                          |  |         |  
|--------------------------------------------------- |  | ------------------------ |  | ------- | -
|                                                    |  | Ordinary shares owned(2) | 
|Name(1)                                             |  | Number                   |  | Percent |  
|(i) Wharf Communications Limited                    |  | 1,480,505,171            |  | 73.41   | %
|(ii) The Wharf (Holdings) Limited                   |  | 1,480,505,171            |  | 73.41   | %
|(iii) WF Investment Partners Limited                |  | 1,480,505,171            |  | 73.41   | %
|(iv) Wheelock and Company Limited                   |  | 1,481,442,626            |  | 73.46   | %
|(v) HSBC Trustee (Guernsey) Limited                 |  | 1,481,442,626            |  | 73.46   | %
|(vi) Matthews International Capital Management, LLC |  | 141,739,000              |  | 7.03    | %
|(vii) Marathon Asset Management Limited             |  | 121,332,000              |  | 6.02    | %



|(1) | For the avoidance of doubt and double counting, it should be noted that duplication occurs in respect of the shareholdings stated against (i) to (v) above to the extent
that the shareholding stated against party (i) above was entirely duplicated or included in that against party (ii) above, with the same duplication of the shareholdings in respect of (ii) in (iii), (iii) in (iv) and
(iv) in (v).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | All the interests stated above represented long positions and as of December 31, 2007, there were no short position interests recorded in the register.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

The Directors consider the parent and the ultimate controlling party as of December 31, 2007 to be Wharf Communications
Limited and Wheelock and Company Limited, respectively, both of which are incorporated in Hong Kong.



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B. Related Party Transactions



|(I) | Set out below is information in relation to certain continuing connected transactions (the Connected Transactions) between the Company and/or its
subsidiaries (collectively, the Group) and other members of the Wharf Group, which were substantially disclosed in an announcement of the Company dated July 11, 2007, a copy of which were filed under Form 6-K:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                            |  |                                                        
|------------------------------------------------------------------------------------------- |  | -------------------------------------------------------
|Description of the Connected Transactions                                                   |  | Amount paid/receivedfor the year endedDecember 31, 2007
|                                                                                            |  | (HK$ in millions)                                      
|(a)    Master Tenancy Agreement (Note 1)                                                    |  |                                                        
|Amount paid by the Group                                                                    |  | 34.4                                                   
|                                                                                            | 
|(b)    Licenses granted to the Wharf Group to occupy premises(License Agreements)(Note
2) |  |                                                        
|Amount received by the Group                                                                |  | 4.1                                                    
|                                                                                            | 
|(c)    Master Services Agreement (Note 3)                                                   |  |                                                        
|1. Amount received by the Group                                                             |  | 48.9                                                   
|2. Amount paid by the Group                                                                 |  | 43.9                                                   
|                                                                                            | 
|(d)    Management services provided by the Wharf Group(Note 4)                              |  |                                                        
|Amount paid by the Group                                                                    |  | 13.2                                                   
|                                                                                            | 
|(e)    Sales and Servicing Agency                                                           |  |                                                        
|1. Amount received by the Group                                                             |  | 17.1                                                   
|2. Amount paid by the Group                                                                 |  | 8.6                                                    



Notes:



|1. | The relevant properties covered under the Master Tenancy Agreement are as follows:-
|-- | -----------------------------------------------------------------------------------



| | 1(i). | Factories 1-4 on G/F, 4/F to 12/F (inclusive), portions of 1/F, 2/F and roof top, units 1-7 on 40/F and various units on 13/F, 15/F, 24/F, 25/F and 28/F of Cable TV Tower, 9 Hoi
Shing Road, Tsuen Wan, Hong Kong (Cable TV Tower).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1(ii). | Various car parking and lorry-parking spaces in Cable TV Tower
| | ------ | --------------------------------------------------------------



| | 2. | Workshop No. E13, 11/F, Block E of Tsing Yi Industrial Centre Phase II, Nos. 1-33 Cheung Tat Road, Tsing Yi, New Territories, Hong Kong.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Unit D, 6/F and storeroom D, 10/F of Kowloon Godown, Nos. 1-3 Kai Hing Road, Kowloon Bay, Kowloon, Hong Kong.
| | -- | -------------------------------------------------------------------------------------------------------------



| | 4. | Unit 1215 on 12/F of Grandtech Centre, Shatin, New Territories, Hong Kong.
| | -- | --------------------------------------------------------------------------



| | 5. | Portion of 11/F of World Tech Centre, Kwun Tong, Kowloon, Hong Kong.
| | -- | --------------------------------------------------------------------



| | 6. | Various car parking spaces at Cable TV Tower (South) situated at Chai Wan Kok Street, Tsuen Wan, Hong Kong.
| | -- | -----------------------------------------------------------------------------------------------------------



|2. | The relevant properties covered under the License Agreements are as follows:-
|-- | -----------------------------------------------------------------------------



| | 1. | The northern portion of the 12/F of Cable TV Tower
| | -- | --------------------------------------------------



| | 2. | Parts of 9/F and 12/F of Cable TV Tower
| | -- | ---------------------------------------



|3. | The services provided from and to the Wharf Group include the network operations, telecommunication services and computer services.
|-- | -----------------------------------------------------------------------------------------------------------------------------------



|4. | The services provided by the Wharf Group include corporate secretarial services, treasury services, provision of management personnel and other general corporate services.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47



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##### Table of Contents

The above transactions are subject to various annual cap amounts previously disclosed in the
abovementioned announcement of the Company. The purposes of entering into the Connected Transactions are for the continued operation and growth of the Groups business, for the generation of recurrent rental revenue to the Group and/or for
maintaining the revenue stream for the Group.

(II) Confirmation from the Directors Etc.

The Directors, including the independent non-executive Directors, of the Company have reviewed the Connected Transactions and have confirmed that the
Connected Transactions were entered into:



| | (a) | by the Group in the ordinary and usual course of its business;
| | --- | --------------------------------------------------------------



| | (b) | either on normal commercial terms or if there are not sufficient comparable transactions, on terms that are no less favorable than those available to or from (as appropriate)
independent third parties; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | in accordance with the relevant agreements governing such Connected Transactions on terms that are fair and reasonable and in the interests of the Shareholders of the Company as a
whole.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, the auditors of the Company have advised the following:



| | 1. | the Connected Transactions had been approved by the Companys board of directors;
| | -- | ---------------------------------------------------------------------------------



| | 2. | the Connected Transactions, including those that involve provisions of goods or services by the Group, are in accordance with the pricing policies of the Group, where applicable;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | the Connected Transactions were entered into in accordance with the terms of the related agreements governing the Connected Transactions; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | the relevant cap amounts have not been exceeded during the year ended December 31, 2007.
| | -- | ----------------------------------------------------------------------------------------

C. Interests of Experts and Counsel

Not applicable.

ITEM 
8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Financial Statements

See Item 19(a) for a list
of financial statements filed under Item 18.

Legal Proceedings

A litigation was lodged by the Secretary of Justice on behalf of the Hong Kong Government against HKC for the settlement of subscription royalty of HK$1.2 million which remained outstanding, and interest accrued on
the said outstanding amount. The outstanding subscription royalty of HK$1.2 million arose from a dispute between the Government and HKC over the interpretation of the calculation basis of HKCs subscription royalty payable for year 2000. If HKC
is found to be liable, HKCs liability for the amount claimed plus interest accrued up to December 31, 2007 may amount up to HK$1.5 million.

By a judgment dated February 6, 2007, the claim was dismissed and HKC was awarded costs of the case. The Government appealed against the said decision but was dismissed by the Court of Appeal by judgment dated
March 14, 2008. HKC was again awarded costs of the said appeal. The Government did not appeal the Court of Appeals decision and HKC is recovering the costs.



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Dividend Policy

Annual dividends, if any, on our outstanding ordinary shares and ADSs will be declared by and subject to the discretion of our board of directors and must be approved at a general meeting of shareholders. In addition,
our board of directors may from time to time pay to the shareholders such interim dividends as appear to our board of directors to be justified. We may pay dividends to shareholders in the future; however, such payments will depend upon a number of
factors, including our results of operations, earnings, capital requirements and surplus, general financial conditions, contractual restrictions and other factors considered relevant by our board of directors.

B. Significant Changes

Not
applicable.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

The principal trading market for our ordinary
shares is the Stock Exchange of Hong Kong Limited, or the HKSE. Our ADSs were quoted on the Nasdaq Global Market under the symbol ICAB from November 24, 1999 to June 7, 2007. From June 8, 2007 onwards, our ADSs are traded
in the over-the-counter markets under the symbol ICABY. Each ADS represents 20 ordinary shares.

On May 15, 2007, we
announced that our board of directors has approved the delisting of our ADSs from Nasdaq. We plan to maintain our ADR program in the United States, but, where circumstances permit, may terminate the registration of our securities.

On May 29, 2007, we filed a Form 25 with the SEC to effect the delisting as from June 8, 2007. Following the delisting, the ADRs continue to be
traded in the over-the-counter markets, and the Bank of New York Mellon continues to act as our ADR depositary pursuant to the existing Deposit Agreement. We have not arranged for the listing of our ADSs or ordinary shares on another national
securities exchange in the United States.



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On June 10, 2008, the last reported sale price of our ADSs in the over-the-counter markets was
US$2.95. The table below sets forth, for the periods indicated, the highest and lowest closing price for our ordinary shares on the HKSE and our ADSs on the Nasdaq Global Market or in the over-the-counter markets (as applicable). The closing price
for the ordinary shares on the HKSE and the ADSs in the over-the-counter markets on December 31, 2007 was HK$1.59 per ordinary share and US$3.95 per ADS, respectively. The table is based on information made available by commercial financial
information services and is believed to be reliable.



|                                  |  |                 |  |       |  |      |  |     
|--------------------------------- |  | --------------- |  | ----- |  | ---- |  | ----
|                                  |  | Ordinary Shares |  | ADSs 
|                                  |  | High            |  | Low   |  | High |  | Low 
|                                  |  | (HK$)           |  | (US$)
|Fiscal Year:                      |  |                 |  |       |  |      |  |     
|2003                              |  | 2.88            |  | 1.66  |  | 7.25 |  | 4.20
|2004                              |  | 3.18            |  | 2.45  |  | 8.00 |  | 4.80
|2005                              |  | 3.03            |  | 1.83  |  | 7.68 |  | 4.57
|2006                              |  | 2.03            |  | 1.49  |  | 5.53 |  | 3.50
|2007                              |  | 1.92            |  | 1.50  |  | 5.21 |  | 3.75
|Fiscal 2005:                      |  |                 |  |       |  |      |  |     
|First Quarter                     |  | 2.90            |  | 2.78  |  | 7.25 |  | 6.60
|Second Quarter                    |  | 3.03            |  | 2.58  |  | 7.68 |  | 6.37
|Third Quarter                     |  | 2.58            |  | 2.13  |  | 7.08 |  | 5.48
|Fourth Quarter                    |  | 2.30            |  | 1.83  |  | 5.99 |  | 4.57
|Fiscal 2006:                      |  |                 |  |       |  |      |  |     
|First Quarter                     |  | 2.03            |  | 1.75  |  | 5.53 |  | 4.50
|Second Quarter                    |  | 1.85            |  | 1.64  |  | 4.88 |  | 4.01
|Third Quarter                     |  | 1.75            |  | 1.49  |  | 4.88 |  | 3.60
|Fourth Quarter                    |  | 1.82            |  | 1.49  |  | 4.52 |  | 3.50
|Fiscal 2007:                      |  |                 |  |       |  |      |  |     
|First Quarter                     |  | 1.83            |  | 1.61  |  | 5.03 |  | 3.89
|Second Quarter                    |  | 1.92            |  | 1.62  |  | 5.21 |  | 4.00
|Third Quarter                     |  | 1.74            |  | 1.50  |  | 4.30 |  | 3.75
|Fourth Quarter                    |  | 1.78            |  | 1.55  |  | 4.35 |  | 3.85
|Previous Six Months:              |  |                 |  |       |  |      |  |     
|December 2007                     |  | 1.60            |  | 1.55  |  | 4.10 |  | 3.85
|January 2008                      |  | 1.61            |  | 1.40  |  | 4.07 |  | 3.50
|February 2008                     |  | 1.53            |  | 1.42  |  | 3.90 |  | 3.55
|March 2008                        |  | 1.45            |  | 1.13  |  | 3.77 |  | 2.90
|April 2008                        |  | 1.29            |  | 1.17  |  | 3.26 |  | 2.94
|May 2008                          |  | 1.27            |  | 1.14  |  | 3.26 |  | 2.92
|June 2008 (through June 10, 2008) |  | 1.19            |  | 1.17  |  | 3.05 |  | 2.95

B. Plan of Distribution

Not applicable.

C. Markets

Our ADSs are traded in the over-the-counter markets under the symbol ICABY, and our ordinary shares are listed on the HKSE
under the stock code 1097.

D. Selling Shareholders

Not applicable.



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##### Table of Contents

E. Dilution

Not applicable.

F. Expense of the Issue

Not applicable.

ITEM 10.
ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

We are a Hong Kong company and our affairs are governed by our memorandum and articles of association and Hong Kong law. The following are summaries of
material provisions of our memorandum and articles of association and Hong Kong law as they relate to the material terms of our ordinary shares.

Certificates representing the ordinary shares are issued in registered form. Under the laws of Hong Kong, shareholders who are not residents of Hong Kong may hold, vote and transfer their ordinary shares in the same manner as Hong Kong
residents. There are no conversion or redemption rights of the ordinary shares.

Voting Rights

We are required to hold an annual general meeting of shareholders within 15 months from the date of our last annual general meeting. We may also hold
other general meetings of shareholders, which are called extraordinary general meetings, from time to time. Our board of directors may convene an extraordinary general meeting at will or, under section 113 of the Companies Ordinance of Hong Kong,
upon request of our shareholders and in default an extraordinary general meeting may be convened by the requesting shareholders. Our annual general meeting and any general meeting of i-CABLE called for the passing of a special resolution requires at
least 21 days notice, and any other meeting of i-CABLE requires at least 14 days notice. The notice must specify the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business.
According to our articles of association, the quorum for a general meeting is two shareholders present in person or by proxy. We believe this is consistent with the practice of companies incorporated in Hong Kong.

A corporation that is a shareholder will be deemed to be present in person by its duly authorized representative or by proxy. If within five minutes from
the time appointed for the meeting a quorum is not present, the meeting, if convened upon request of shareholders, will be dissolved. In any other case, the meeting will stand adjourned to such other day not being less than 14 nor more than 28 days
thereafter and at such time and place as may be decided by the chairman of the meeting. At an adjourned meeting, one shareholder present in person or by proxy will be a quorum.

Subject to any special rights, privileges or restrictions as to voting for the time being attached to any class or classes of shares, at any general
meeting every shareholder who is present in person has one vote on a show of hands, and on a poll every shareholder present in person or by proxy has one vote for every ordinary share held by such shareholder.

If at any time our capital is divided into different classes of shares, all or any of the special rights attached to any class may, subject to the
provisions of the Companies Ordinance, be varied or abrogated either with the consent in writing by at least three-fourths of the holders of the issued shares of that class or with the sanction of a special resolution passed at a separate general
meeting of the holders of the shares of that class. At such



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separate general meetings, the provisions of our articles of association relating to general meetings apply with an additional requirement that the necessary
quorum be not less than one-third of the issued shares of that class, and that any holder of shares of the class present may demand a poll.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and the content of proxy statements.

Dividends

No dividend is payable except out of our profits or other distributable reserves.

Subject to the rights of persons, if any, entitled to shares with special rights as to dividends, all dividends are declared and paid according to the
amounts paid up on the shares in respect whereof the dividend is paid, but no amount paid up on a share in advance of calls is for this purpose treated as paid up on the share. All dividends will be apportioned and paid equally according to the
amounts paid up on the shares during any portion or portions of the period in respect of which the dividends are paid. Our board of directors may deduct from any dividend or other monies payable to our shareholders all sums of money, if any,
presently payable to us by such shareholder on account of calls, installments or otherwise.

In respect of any dividend that our board of
directors or our shareholders in general meeting have resolved be paid or declared, our board of directors may further propose either:



| |  |  | that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid provided that the shareholders are at the same time
accorded the right to elect to receive such dividend, or part thereof, as the case may be, in cash in lieu of such allotment, or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that the shareholder entitled to such dividend be entitled to elect to receive an allotment of shares credited as fully paid in lieu of the whole or such part of
the dividend as the board may think fit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any dividend unclaimed after a period of six years from the date of declaration
of such dividend will be forfeited and will revert to us.

Liquidation

If we are to be liquidated, the liquidator may, with the approval of our shareholders and any other approval required by the Companies Ordinance, divide among our shareholders in cash or in kind the whole or any part
of our assets and may vest the whole or any part of such assets in trustees upon such trusts for the benefit of the shareholders as the liquidator, with the approval of the shareholders, thinks fit, provided that a shareholder will not be compelled
to accept any shares or other assets that would subject such shareholder to liability.

Registration and Transfers

Any shareholder may transfer all or any of his fully paid shares by an instrument of transfer in the usual common form or in any other form that the board
of directors may approve, subject to such of the requirements of our memorandum and articles of association as may be applicable. Such requirements may include:



| |  |  | lodging the instrument of transfer with us accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may
reasonably require to show the right of the transferor to make the transfer; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limiting the number of joint holders to whom the share is to be transferred to four, in the case of a transfer to joint holders.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

The instrument of transfer of a share will be signed by or on behalf of the transferor and, in the case of partly paid shares, the transferee, and the
transferor will be deemed to remain the holder of the share until the name of the transferee is entered in the register. All instruments of transfer, when registered, may be retained by us.



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We may charge a fee not exceeding HK$2, or such higher amount as the Hong Kong Stock Exchange may approve
for the time being, for registering any transfer or other document relating to or affecting the title to any of our shares, or for otherwise making any entry in the register of members relating to any of our shares.

Our board of directors will cause to be kept a register of shareholders on which various particulars required by the Companies Ordinance are entered. We
are entitled under the provisions of the Companies Ordinance, by giving notice in an advertisement in a newspaper circulating generally in Hong Kong, to close our register of shareholders for a period not exceeding 30 days in each year. The period
of 30 days may be extended up to 60 days in a year by an ordinary resolution at a general meeting of our shareholders.

Changes in Share Capital

Our shareholders may from time to time by ordinary resolution increase our capital by such sum to be divided into shares of such amounts as
the resolution will prescribe.

Subject to the Companies Ordinance, our shareholders may, by resolution, increase the capital, direct that
the new shares or any of them will be offered in the first instance to all the holders for the time being of shares of any class or classes in proportion to their shareholdings or may make any other provisions as to the issue of the new shares. The
new shares will be subject to all the provisions of our memorandum and articles of association with reference to lien, the payment of calls, forfeiture, transfer, transmission and otherwise.

Our shareholders may from time to time by ordinary resolution:



| |  |  | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | sub-divide all or part of our shares into shares of smaller amount than is fixed by our articles of association;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | cancel any shares that at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its
authorized share capital by the amount of the shares so cancelled; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our shareholders may, from time to time by
special resolution, reduce our issued share capital or any capital redemption reserve fund or any share premium account or other undistributable reserve in any manner, subject to any condition prescribed by law.

Where any difficulty arises in regard to any such consolidation and division, our board of directors may issue fractional certificates or arrange for the
sale of the fractional shares and distribution of the net proceeds equally among the shareholders. For this purpose, our board of directors may authorize the transfer of fractional shares to or in accordance with the directions of the purchaser.

Pre-emptive Rights

The Companies
Ordinance provides that our directors may not, without prior shareholder approval, allot shares to existing shareholders other than in proportion to their respective shareholding. Each year we obtain a general mandate from shareholders authorizing
our directors to allot and issue and otherwise dispose of ordinary shares up to the level permitted by the listing rules of the Hong Kong Stock Exchange without requiring such specific approval.

Acquisition of Own Shares

Subject to the provisions
of the Companies Ordinance and other applicable laws or regulations and to any special rights conferred on the holder of any class of our shares, we may acquire our own shares. On acquisition, such shares will be cancelled. Under the listing rules
of the Hong Kong Stock Exchange, restrictions are imposed



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on companies listed in Hong Kong, which accordingly apply to us, on the acquisition by such a company of its own shares, including (i) a requirement for
prior approval, either by way of a general mandate or by specific approval in relation to a particular transaction, by the shareholders in general meeting, (ii) limitations on purchases in the market over a particular period, and
(iii) reporting requirements.

Miscellaneous

Share certificates registered in the names of two or more persons are deliverable to any one of them named in our share register, and if two or more such persons tender a vote, the vote of the person whose name first
appears in the share register will be accepted to the exclusion of any other. In the case of joint holders, dividends that are declared will be paid to whichever of such persons is named first in the share register, and notices will be given to any
one of them named in the share register.

Certain Rights of Our Shareholders

In the event that a duty owed by our directors may have been breached, shareholders holding in excess of 10% of our share capital may request our
directors to convene a general meeting. At such general meeting, shareholders present may pass an ordinary resolution to remove a director or directors and to elect replacement directors. Our shareholders may petition the courts for an appropriate
order of the courts on the grounds of conduct by the directors that is oppressive or prejudicial to some part of the shareholders, including the shareholder bringing the action. Hong Kong law allows a derivative action to be brought by our
shareholders where it is alleged that our directors have committed a fraud on our minority shareholders.

Certain Powers of Our Directors

Our Articles of Association give our board of directors the power to borrow and raise funds, including issuing securities. Our board of
directors may also mortgage or charge all or any part of the Companys undertaking, property and assets and uncalled capital.

Our
Articles of Association limit a directors power to vote on transactions in which he or she is materially interested. Subject to exceptions described below, a director of the Company shall not vote on any contract, arrangement or proposal in
which the director knows he/she or any of his or her associates is materially interested. For this purpose, material interest is presumed if a company, in which the director and his or her associates in aggregate own five percent or more of its
shares or voting rights, is materially interested in the transaction. A director of the Company may, however, vote on the following matters:



| |  |  | any contract, arrangement or proposal to give security or indemnity to the director or his or her associates for money lent or obligations undertaken by such
director or his or her associates at the request of or for the benefit of the Company or its subsidiaries;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any contract, arrangement or proposal to give security or indemnity to the director or his or her associates for debts of the Company or its subsidiaries for which
such director or his or her associates assumed responsibility by giving security or indemnity;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any contract, arrangement or proposal concerning offering of securities by the Company (or any company which the Company may promote or be interested in purchasing)
for which the director or his or her associates participate in the underwriting;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any contract, arrangement or proposal in which the director or his or her associates are interested only by virtue of their interest in the securities of the
Company;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any contract, arrangement or proposal concerning any other company in which the director or his or her associates own less than five percent of such companys
shares or voting rights;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any contract, arrangement or proposal concerning employee benefits that do not provide privileges to directors of the Company or their associates, including
employee share schemes and retirement, death or disability benefits schemes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Indemnification

Our directors and officers are indemnified by i-CABLE against all liabilities incurred by such directors and officers in defending any proceedings, whether civil or criminal, in which judgment is given in their favor,
or in which they are acquitted, or in connection with any application under the Companies Ordinance in which relief from liability is granted to them by the court.

Inspection of Books and Records

Except when the register of members is closed, the register and the index of names of our
shareholders are open to any shareholder for inspection without charge during business hours. However, no shareholder, other than our officers, has any right to inspect any of our accounting records except as conferred by law or authorized by our
directors.

Transfer Agent

We have
appointed Tengis Limited as the transfer agent and registrar for our ordinary shares.

C. Material Contracts

None.

D. Exchange Controls

Under existing Hong Kong law, (i) there are no foreign exchange controls or other laws, decrees or regulations that affect the
remittance of dividends or other payments on the Companys outstanding ordinary shares to U.S. residents and (ii) there are no limitations on the rights of non-resident or foreign owners to hold the Companys ordinary shares.

E. Taxation

This summary is based on the Inland Revenue Ordinance, Stamp Duty Ordinance and Estate Duty Ordinance, their subsidiary legislation, and judicial and administrative interpretations thereof, all as in effect on the date hereof and all of
which are subject to change, possibly retroactively.

Tax on Dividends

No tax is payable in Hong Kong by way of withholding or otherwise in respect of dividends on the ordinary shares.

Profits Tax

No tax is imposed in Hong Kong in respect of capital gains from the sale of the ordinary shares and ADSs as
long as they are held as capital assets. Trading gains from the sale of assets by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will
be chargeable to Hong Kong profits tax which is currently imposed at the rate of 17.5% on corporations and at the rate of 16% on unincorporated businesses or individuals. Gains or losses from sales of shares listed on the HKSE will be considered to
be derived from or arise in Hong Kong.

Gains or losses from the sales of ADSs may be considered to be derived from or arise in Hong Kong
where either the contracts of purchase and sale are effectuated in Hong Kong. In determining whether a contract is effectuated in Hong Kong, the IRD considers all steps leading up to and including the signing and execution of the purchase and sales
contracts. Liability for Hong Kong profits tax would thus arise in respect of trading gains



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from sales of ordinary shares realized by persons carrying on a business of trading or dealing in securities in Hong Kong. Liability for Hong Kong profits
tax would also arise in respect of trading gains from sales of ADSs realized by persons carrying on a business of trading or dealing in securities in Hong Kong where the contracts of purchase and sale were effectuated in Hong Kong.

Stamp Duty

Hong Kong stamp duty, currently charged
at the rate of HK$1.00 per HK$1,000 or part thereof on the higher of the consideration for or the value of the ordinary shares, will be payable by the purchaser on every purchase and by the seller on every sale of ordinary shares. For example, a
total of HK$2.00 per HK$1,000 or part thereof is currently payable on a typical sale and purchase transaction involving ordinary shares. In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of ordinary shares. The
withdrawal of ordinary shares upon the surrender of ADSs, and the issuance of ADSs upon the deposit of ordinary shares, will also attract stamp duty at the rate described above for sale and purchase transactions unless the withdrawal or deposit of
ADSs does not result in a change in the beneficial interest of the ordinary shares under Hong Kong law. The issuance of ADSs by the depositary upon the deposit of ordinary shares issued directly by i-CABLE to the depositary or for the account of the
depositary does not attract stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside Hong Kong where the transfer does not result in a requirement to register such transfer of ADSs in Hong Kong or a change in the beneficial
interest of the ordinary shares under Hong Kong law.

If stamp duty is not paid on or before the due date, a penalty of up to 10 times the
duty payable may be imposed.

Estate Duty

In November 2005, the Revenue (Abolition of Estate Duty) Ordinance was enacted, to abolish estate duty. Under this law, estates of persons who pass away on or after February 11, 2006 will not be subject to estate duty.

Tax Treaties

No double tax treaty exists between the
United States and Hong Kong apart from a treaty to avoid double taxation on shipping income.

United States

Certain U.S. Federal Income Tax Considerations

The following is a summary of certain United States federal income tax considerations that are anticipated to be material to the purchase, ownership, and disposition of our shares or ADSs by U.S. Holders, as defined
below. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the Code), its legislative history, existing and proposed U.S. Treasury regulations, published rulings and court decisions, all as in effect on the date
hereof. These laws are all subject to change or different interpretation, possibly on a retroactive basis. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of
their individual investment circumstances, such as investors subject to special tax rules including: partnerships, financial institutions, insurance companies, broker-dealers, tax-exempt organizations, and, except as described below, non-U.S.
Holders, or to persons that will hold our shares or ADSs as part of a straddle, hedge, conversion, or constructive sale transaction for United States federal income tax purposes or that have a functional currency other than the United States dollar,
all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any foreign, state, or local tax considerations. This summary assumes that investors will hold our shares or
ADSs as capital assets (generally, property held for investment) under the United States Internal Revenue Code.



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Each prospective investor is urged to consult its own tax advisor regarding the United States federal,
state, local, and foreign income and other tax considerations of the purchase, ownership, and disposition of our shares or ADSs.

For
purposes of this summary, a U.S. Holder is a beneficial owner of shares or ADSs that is for United States federal income tax purposes:



| |  |  | an individual who is a citizen or resident of the United States;
| | - |  | ----------------------------------------------------------------



| |  |  | a corporation, or other entity that is taxable as a corporation, created in or organized under the laws of the United States or any State or political subdivision
thereof;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | a trust the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a trust that was in existence on August 20, 1996, was treated as a United States person, for United States federal income tax purposes, on the previous day,
and elected to continue to be so treated.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For United States federal income tax purposes, income earned through a foreign
or domestic partnership or other foreign or domestic entity treated as a partnership is attributed to its owners. Accordingly, if a partnership or other such entity holds our shares or ADSs, the tax treatment will generally depend on the status of
the partner or other owner and the activities of the partnership or other flow-through entity.

A beneficial owner of our shares or ADSs
that is not a U.S. Holder is referred to herein as a Non-U.S. Holder.

A foreign corporation will be treated as a passive
foreign investment company or PFIC, for United States federal income tax purposes, if 75% or more of its gross income consists of certain types of passive income or 50% or more of its assets are passive for any year.
Based on our current and projected income, assets, and activities, we presently believe that we are not a PFIC in the current year and do not anticipate becoming a PFIC in the future. This is, however, a factual determination made on an annual
basis. Because the classification of certain of our assets for United States federal income tax purposes is uncertain, the PFIC rules are subject to administrative interpretation, and the relevant facts may change in the future, however, no
assurance can be given that we are not or will not be treated as a PFIC. The discussion below under U.S. Holders-Dividends and U.S. Holders-Sale or Other Disposition of Shares or ADSs, assumes that we will not be subject to
treatment as a PFIC for United States federal income tax purposes. If we were currently or were to become a PFIC, U.S. Holders would be subject to special rules and a variety of potentially adverse tax consequences under the Code. See PFIC
Considerations below.

U.S. Holders

For United States federal income tax purposes, a U.S. Holder of an ADS will be treated as the owner of the proportionate interest of the shares held by the depositary that is represented by an ADS and evidenced by
such ADS. Accordingly, no gain or loss will be recognized upon the exchange of an ADS for the holders proportionate interest in the shares. A U.S. Holders tax basis in the withdrawn shares will be the same as the tax basis in the ADS
surrendered therefore, and the holding period in the withdrawn shares will include the period during which the holder held the surrendered ADS.

Dividend

Any cash distributions paid by us out of our earnings and profits, as determined under United States
federal income tax principles, will be subject to tax as ordinary dividend income and will be includible in the gross



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income of a U.S. Holder upon actual or constructive receipt. Cash distributions paid by us in excess of our earnings and profits will be treated first as a
tax-free return of capital to the extent of the U.S. Holders adjusted tax basis in our shares or ADSs, and thereafter as gain from the sale or exchange of a capital asset. Dividends paid in Hong Kong dollars will be includible in income in a
United States dollar amount based on the United States dollar to Hong Kong dollar exchange rate prevailing at the time of receipt of such dividends by the depositary, in the case of ADSs, or by the U.S. Holder, in the case of shares held directly by
such U.S. Holder. U.S. Holders should consult their own tax advisors regarding the United States federal income tax treatment of any foreign currency gain or loss recognized on the subsequent conversion of Hong Kong dollars received as dividends to
United States dollars. Dividends received on shares or ADSs will not be eligible for the dividends received deduction allowed to corporations.

Under current law, qualified dividend income received by an individual after December 31, 2002 and before January 1, 2011 is subject to United States federal income tax rates lower than those applicable to ordinary
income. The top federal income tax rate on such qualifying dividends received by an individual is 15%, or 5% for those individuals whose incomes fall in the 10- or 15- percent brackets. Based upon our existing and anticipated future operations and
current assets, we believe that we are a qualified foreign corporation and that our dividends paid to U.S. Holders who are individuals will be eligible to be treated as qualified dividend income, provided that such Holders
satisfy applicable holding period requirements with respect to the ADSs and other application requirements. Dividends paid by foreign corporations that are classified as PFICs are not qualified dividend income. See PFIC
Considerations below.

Dividends received on shares or ADSs generally will be treated, for United States federal income tax purposes,
as income from non-U.S. sources. Such non-U.S. source income generally will constitute passive category income, or in certain cases general category income, for taxable years beginning after December 31, 2006, which are
treated separately from other types of income for purposes of computing the foreign tax credit. A U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes
imposed on dividends received on shares or ADSs. U.S. Holders who do not elect to claim a foreign tax credit for federal income tax withheld may instead claim a deduction, for United States federal income tax purposes, in respect of such
withholdings, but only for a year in which the U.S. Holder elects to do so for all creditable foreign income taxes.

In addition, the
United States Treasury has expressed concerns that parties to whom depositary shares are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits by the holders of ADSs. Accordingly, the analysis of the
creditability of foreign withholding taxes could be affected by future actions that may be taken by the United States Treasury.

Sale
or Other Disposition of Shares or ADSs

A U.S. Holder will recognize capital gain or loss upon the sale or other disposition of
shares or ADSs in an amount equal to the difference between the amount realized upon the disposition and the U.S. Holders adjusted tax basis in such shares or ADSs, as each is determined in U.S. dollars. Any such capital gain or loss will be
long-term if the shares or ADSs have been held for more than one year and will generally be United States source gain or loss. The claim of a deduction in respect of a capital loss, for United States federal income tax purposes, may be subject to
limitations. If a U.S. Holder receives Hong Kong dollars for any such disposition, such U.S. Holder should consult its own tax advisor regarding the United States federal income tax treatment of any foreign currency gain or loss recognized on the
subsequent conversion of the Hong Kong dollars to United States dollars.

Pursuant to recently-enacted legislation, a penalty in the amount
of $10,000 in the case of a natural person and $50,000 in any other case is imposed on any taxpayer that fails to timely disclose its participation in a reportable transaction (as defined in Section 6011 of the Code). A taxpayer
that has participated in a reportable transaction during the tax year must attach a disclosure statement to its United States federal income tax return. A reportable transaction includes a transaction generating a loss under
Code Section 165 in excess



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of certain specified amounts (which amounts vary depending on several factors, including the status of the taxpayer as an individual, trust, partnership or
corporation). Investment in shares and ADSs could be treated as a reportable transaction that must be disclosed on a U.S. Holders United States federal income tax return if the investment results in the taxpayer claiming a foreign
currency loss on such tax return equal to or greater than the specified amount (e.g., $50,000 in the case of a taxpayer that is an individual or trust). U.S. Holders are urged to consult their own tax advisors regarding the circumstances in which an
investment in shares or ADSs may result in a reportable transaction that is required to be disclosed.

PFIC
Considerations

If we were to be classified as a PFIC for any taxable year, a U.S. Holder would be subject to special rules
generally intended to reduce or eliminate any benefits from the deferral of United States federal income tax that a U.S. Holder could derive from investing in a foreign company that does not distribute all of its earnings on a current basis. In such
event, a U.S. Holder of the shares or ADSs may be subject to tax at ordinary income tax rates on (i) any gain recognized on the sales of the shares or ADSs and (ii) any excess distribution paid on the shares or ADSs (generally,
a distribution in excess of 125% of the average annual distributions paid by us in the three preceding taxable years). In addition, a U.S. Holder may be subject to an interest charge on such gain or excess distribution. Prospective investors are
urged to consult their own tax advisors regarding the potential tax consequences to them if we are or do become a PFIC, as well as certain elections that may be available to them to mitigate such consequences.

Non-U.S. Holders

An
investment in shares or ADSs by a Non-U.S. Holder will not give rise to any United States federal income tax consequences unless:



| |  |  | the dividends received or gain recognized on the sale of the shares or ADSs by such person is treated as effectively connected with the conduct of a trade or
business by such person in the United States as determined under United States federal income tax law, and the dividends are attributable to a permanent establishment (or in the case of an individual, a fixed place of business) that you maintain in
the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. holder. If you are a corporate
non-U.S. Holder, effectively connected dividends may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or a lower rate if you are eligible for the benefits of an income tax treaty that
provides for a lower rate, or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the case of gains recognized on a sale of shares or ADSs by an individual, such individual is present in the United States for 183 days or more and certain other
conditions are met. The non-U.S. Holder will be subject to United States federal income tax at a rate of 30% on the amount by which the U.S.-source capital gains exceed non-U.S.-source capital losses.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to dividends on or the proceeds received on the sale, exchange or redemption of shares or ADSs paid within the United States (and, in certain cases, outside
the United States) to U.S. Holders other than certain exempt recipients, such as corporations, and backup withholding tax at the rate of 28% may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (or
otherwise establishes, in the manner provided by law, an exemption from backup withholding) or to report dividends required to be shown on the U.S. Holders United States Federal income tax returns.

Backup withholding is not an additional income tax, and the amount of any backup withholding from a payment to a U.S. Holder will be allowed as credit
against the U.S. Holders United States Federal income tax liability provided that the appropriate returns are filed.



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A non-U.S. Holder generally may eliminate the requirement for information reporting and backup
withholding by providing certification of its foreign status to the payer, under penalties of perjury, on IRS Form W-8BEN.

F.
Dividends and paying agents

Not applicable.

G. Statement by experts

Not applicable.

H. Documents on display

We
file annual reports with and furnish other information to the SEC as may be applicable from time to time. You may read and copy any documents filed or furnished by i-CABLE at the SECs public reference room in Washington, D.C. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference room.

I. Subsidiary Information

Not applicable.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We are exposed to foreign exchange and interest-rate risk primarily associated with underlying assets and/or liabilities.

Foreign Currency
Risk

The functional currency for our operations is the HK dollar. We have incurred and expect to continue to incur expenses and
liabilities in U.S. dollars, primarily because our licensed programming costs are in U.S. dollars. There have been no material operating trends or effects on our liquidity as a result of fluctuations in currency exchange rates. To date, the Hong
Kong Government has continued to support a linkage of the value of the HK dollar to the U.S. dollar at approximately HK$7.80 to US$1.00.

Interest Rate
Risk

As of December 31, 2007, we had cash and cash equivalents of HK$642 million. The interest income derived from these cash and
cash equivalents is determined with reference to market interest rates.

Inflation

In 2005, 2006 and 2007, Hong Kong experienced inflation at the rate of 1.1%, 2.0% and 2.0%, respectively.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------

Not applicable.



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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF

PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

(a) We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rules 13a-14(c) of the Securities Exchange Act of 1934, as amended) as of December 31, 2007. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are effective in all material respects to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is made known to them by others within i-CABLE and its
subsidiaries and is recorded, processed, summarized and reported as and when required.

(b) Our Companys management is responsible
for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with HKFRS and the required reconciliation to U.S. GAAP. Our internal control over
financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with HKFRS and the required reconciliation to U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and
directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
internal control effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of the end of 2007, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the
framework established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management has determined that our internal control over
financial reporting as of December 31, 2007 was effective.



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Our independent registered public accounting firm, KPMG, has issued an audit report on the effectiveness
of our internal control over financial reporting as of December 31, 2007, which is included below.

Report of Independent Registered Public
Accounting Firm

The Board of Directors and Shareholders of

i-CABLE Communications Limited:

We have
audited i-CABLE Communications Limited and its subsidiaries (the Group) internal control over financial reporting as of December 31, 2007, based on criteria established inInternal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Groups management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the effectiveness of the Groups internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based
on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Group as of December 31, 2007 and 2006, and the
related consolidated statements of operations, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated June 27, 2008 expressed an unqualified opinion on those
consolidated financial statements.

/s/ KPMG

HONG KONG,
CHINA

June 27, 2008



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(c) During 2007, no change to our internal control over financial reporting occurred that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Mr. Anthony K. K. Yeung, JP, who was
appointed as an Independent Non-executive Director as well as audit committee member of the Company in September 2004, qualifies as an audit committee financial expert as defined in Section 407 of the Sarbanes-Oxley Act of 2002.

ITEM 16B. CODE OF ETHICS

We adopted a Code of Ethics that applied to our Chief Executive Officer and senior financial officers in 2003. We amended the Code of Ethics to comply with the Sarbanes-Oxley Act of 2002 in 2005 and further amended the Code of Ethics in
March 2007. We have never granted a waiver for non-compliance with the policies and procedures set forth in the code of ethics for any employee of our company or any of our subsidiaries.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees to the Independent Auditor

The board of directors engaged KPMG (KPMG) to perform an annual audit of the Companys financial statements. The
following table presents fees for professional audit services rendered by KPMG for the audit of the Companys annual consolidated financial statements for 2006 and 2007, and fees billed for other services rendered by KPMG in each of those
years.



|                      |  |                    |  |      
|--------------------- |  | ------------------ |  | -----
|                      |  | 2006               |  | 2007 
|                      |  | (HK$ in thousands)
|Audit fees            |  | 3,137              |  | 5,404
|Audit-related fees(1) |  |                   |  |     
|Tax fees(2)           |  |                   |  |     
|All other fees        |  |                   |  |     
|                      |  |                    |  |      
|Total fees            |  | 3,137              |  | 5,404
|                      |  |                    |  |      



|(1) | Audit related fees consist of fees for issuance of agreed upon procedures reports not required by statute or regulation.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(2) | Tax fees consist of fees for tax compliance services.
|--- | -----------------------------------------------------

Pre-Approval of
Services Provided by KPMG

The Audit Committee has adopted policies and procedures for pre-approving all non-audit work performed by
KPMG after January 1, 2003. Specifically, the policies and procedures prohibit KPMG from performing any services for the Company or its subsidiaries without the prior approval of the Audit Committee.

All of the services provided by KPMG in 2007 were approved by the Audit Committee pursuant to the approval policies described above, and none of such
services were approved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation S-X, which waives the general requirement for pre-approval in certain circumstances.

Nasdaq listing requirements require listed companies to be audited by an independent public accountant that either: (a) has received an external
quality control review by an independent public accountant (peer review) that determines whether the auditors system of quality control is in place and operating effectively and whether established policies and procedures and
applicable auditing standards are being followed or (b) is enrolled in a peer review program and has within 18 months received a peer review that meets guidelines acceptable to Nasdaq. Among other things, the peer review should be comparable to
the peer review standards of the American



63



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Institute of Certified Public Accountants and the peer review program should be subject to oversight by an independent body comparable to the Public Company
Accounting Oversight Board (the PCAOB).

While there is no peer review requirement in Hong Kong, the companys independent
registered public accounting firm, KPMG, are registered with the PCAOB and also with the Hong Kong Institute of Certified Public Accountants, the regulatory body of Hong Kong public accountants, and are subject to their oversight and inspection
reviews.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED

PURCHASERS.

Not applicable.

ITEM 17.
FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of responding to this Item.

ITEM 18. FINANCIAL STATEMENTS

See Item 19(a) for a list of financial statements filed under Item 18.

ITEM 19. EXHIBITS



|                                                                                                        |  |     
|------------------------------------------------------------------------------------------------------- |  | ----
|(a)    List of Financial Statements                                                                     |  |     
|                                                                                                        |  | Page
|Report of Independent Registered Public Accounting Firm                                                 |  | F-1 
|Consolidated Statements of Operations for the three years ended December 31, 2005, 2006 and 2007        |  | F-2 
|Consolidated Balance Sheets as of December 31, 2006 and 2007                                            |  | F-3 
|Consolidated Statements of Changes in Equity for the three years ended December 31, 2005, 2006 and
2007 |  | F-4 
|Consolidated Statements of Cash Flows for the three years ended December 31, 2005, 2006 and 2007        |  | F-7 
|Notes to Consolidated Financial Statements                                                              |  | F-8 



|(b) | List of Exhibits
|--- | ----------------



|             |  |                                                                                                              
|------------ |  | -------------------------------------------------------------------------------------------------------------
|Exhibit 8.1  |  | List of Subsidiaries                                                                                         
|Exhibit 12.1 |  | Certification by the Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
|Exhibit 12.2 |  | Certification by the Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
|Exhibit 13.1 |  | Certification by the Chief Executive Officer and Chief Financial Officer required by 18 U.S.C.ss.1350        

Also incorporated by reference to this annual report are the following: (a) the exhibits
(other than Exhibit 3.2) to the amended registration statement on Form F-1 (File No. 333-11014) filed with the Commission on November 1, 1999; (b) Exhibit 1.1Articles of Association, as amendedto the annual report on
Form 20-F for the year ended December 31, 2003; and (c) Exhibit 11.1Code of Ethics, as amendedto the annual report on Form 20-F for the year ended December 31, 2006.



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



i-CABLE Communications LimitedBy:

/s/    WILLIAM J. H.
KWANName:

William J. H. KwanTitle:

Chief Financial Officer


Date: June 30, 2008



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

i-CABLE Communications Limited:

We have audited the accompanying consolidated balance sheets of i-CABLE Communications Limited and its subsidiaries (the
Group) as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2007, all expressed in Hong Kong
dollars. These consolidated financial statements are the responsibility of the Groups management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and auditing standards
generally accepted in Hong Kong. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of i-CABLE Communications Limited and its subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in Hong Kong.

Accounting principles generally accepted in Hong Kong vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is
presented in Note 40 to the consolidated financial statements.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of the Groups internal control over financial reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June 27, 2008 expressed an unqualified opinion on the effectiveness of the Groups internal control over financial reporting.

/s/    KPMG

HONG KONG, CHINA

June 27, 2008



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i-CABLE Communications Limited

Consolidated Statements of Operations

For the year ended December 31



|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|---------------------------------------------------------------------- |  | ---- |  | ----------------------------------------------------- | --------- | - | ---- | --- | ---------- | ---- |  | --- | --------- | -
|                                                                       |  | Note |  | 2005                                                  |           |   | 2006 |     |            | 2007 | 
|                                                                       |  |      |  | HK$                                                   |           |   | HK$  |     |            | HK$  | 
|                                                                       |  |      |  | (in thousands, except for per share and per ADS data) |          
|                                                                       |  |      |  |                                                      
|Service revenues                                                       |  | 4,5  |  |                                                       | 2,440,732 |   |      |     | 2,547,595  |      |  |     | 2,303,884 |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Programming costs                                                      |  |      |  |                                                       | (863,714  | ) |      |     | (1,005,273 | )    |  |     | (950,375  | )
|Network and other operating expenses                                   |  |      |  |                                                       | (397,550  | ) |      |     | (450,889   | )    |  |     | (419,439  | )
|Selling, general and administrative expenses                           |  |      |  |                                                       | (419,328  | ) |      |     | (464,855   | )    |  |     | (389,567  | )
|Depreciation                                                           |  | 6    |  |                                                       | (480,589  | ) |      |     | (428,121   | )    |  |     | (366,522  | )
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Profit from operations                                                 |  | 5    |  |                                                       | 279,551   |   |      |     | 198,457    |      |  |     | 177,981   |  
|Interest income                                                        |  | 6    |  |                                                       | 3,335     |   |      |     | 11,640     |      |  |     | 20,566    |  
|Finance costs, net                                                     |  | 6    |  |                                                       | (134      | ) |      |     | (7         | )    |  |     | (18       | )
|Non-operating income/(expenses)                                        |  | 7    |  |                                                       | 804       |   |      |     | (322       | )    |  |     | 2,311     |  
|Impairment loss on investment                                          |  | 6    |  |                                                       | (1,500    | ) |      |     |           |      |  |     | (1,600    | )
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Profit before taxation                                                 |  | 6    |  |                                                       | 282,056   |   |      |     | 209,768    |      |  |     | 199,240   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Provision for income tax                                               |  | 8(a) |  |                                                       |           |   |      |     |            |      |  |     |           |  
|- current income tax (expense)/credit                                  |  |      |  |                                                       | 333       |   |      |     | (297       | )    |  |     | (490      | )
|- deferred income tax (expense)/credit                                 |  |      |  |                                                       | 244,743   |   |      |     | (28,352    | )    |  |     | (16,156   | )
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|                                                                       |  |      |  |                                                       | 245,076   |   |      |     | (28,649    | )    |  |     | (16,646   | )
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Net profit                                                             |  |      |  |                                                       | 527,132   |   |      |     | 181,119    |      |  |     | 182,594   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Attributable to:                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Equity shareholders of the Company                                     |  |      |  |                                                       | 527,132   |   |      |     | 182,115    |      |  |     | 181,852   |  
|Minority interests                                                     |  |      |  |                                                       |          |   |      |     | (996       | )    |  |     | 742       |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Net profit                                                             |  |      |  |                                                       | 527,132   |   |      |     | 181,119    |      |  |     | 182,594   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Earnings per share                                                     |  | 10   |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Basic                                                                  |  |      |  | HK$                                                   | 0.26      |   |      | HK$ | 0.09       |      |  | HK$ | 0.09      |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Diluted                                                                |  |      |  | HK$                                                   | 0.26      |   |      | HK$ | 0.09       |      |  | HK$ | 0.09      |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Weighted-average shares outstanding for earnings per share (thousands) |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Basic                                                                  |  |      |  |                                                       | 2,019,234 |   |      |     | 2,019,234  |      |  |     | 2,018,965 |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Diluted                                                                |  |      |  |                                                       | 2,019,234 |   |      |     | 2,019,234  |      |  |     | 2,018,965 |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Earnings per ADS                                                       |  | 10   |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Basic                                                                  |  |      |  | HK$                                                   | 5.22      |   |      | HK$ | 1.79       |      |  | HK$ | 1.80      |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Diluted                                                                |  |      |  | HK$                                                   | 5.22      |   |      | HK$ | 1.79       |      |  | HK$ | 1.80      |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|ADS outstanding for earnings per ADS (thousands)                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Basic                                                                  |  |      |  |                                                       | 100,962   |   |      |     | 100,962    |      |  |     | 100,948   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Diluted                                                                |  |      |  |                                                       | 100,962   |   |      |     | 100,962    |      |  |     | 100,948   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Dividends attributable to the year                                     |  | 9    |  |                                                       |           |   |      |     |            |      |  |     |           |  
|Interim dividend declared during the year                              |  |      |  |                                                       | 70,673    |   |      |     | 70,673     |      |  |     | 70,673    |  
|Final dividend proposed after the balance sheet date                   |  |      |  |                                                       | 100,962   |   |      |     | 100,962    |      |  |     | 100,840   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  
|                                                                       |  |      |  |                                                       | 171,635   |   |      |     | 171,635    |      |  |     | 171,513   |  
|                                                                       |  |      |  |                                                       |           |   |      |     |            |      |  |     |           |  

See accompanying notes to the consolidated financial statements which are an integral part of these
statements.



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##### Table of Contents

i-CABLE Communications Limited

Consolidated Balance Sheets

As the
year end of December 31



|                                                                |  |       |  |           |  |          
|--------------------------------------------------------------- |  | ----- |  | --------- |  | ---------
|                                                                |  | Note  |  | 2006      |  | 2007     
|                                                                |  |       |  | HK$000   |  | HK$000  
|ASSETS                                                          |  |       |  |           |  |          
|Current assets                                                  |  |       |  |           |  |          
|Inventories                                                     |  | 11    |  | 1,111     |  | 6,351    
|Accounts receivable from trade debtors, net                     |  | 12    |  | 85,585    |  | 81,847   
|Deposits, prepayments and other receivables                     |  | 12    |  | 64,445    |  | 100,407  
|Amounts due from fellow subsidiaries                            |  | 13    |  | 56,361    |  | 3,765    
|Cash and cash equivalents                                       |  | 14    |  | 586,197   |  | 642,049  
|                                                                |  |       |  |           |  |          
|Total current assets                                            |  |       |  | 793,699   |  | 834,419  
|                                                                |  |       | 
|Property, plant and equipment                                   |  | 15    |  | 1,591,353 |  | 1,391,222
|Programming library                                             |  | 16    |  | 185,702   |  | 183,317  
|Other intangible assets                                         |  | 17    |  | 12,775    |  | 8,390    
|Interest in associate                                           |  | 18    |  |          |  | 58,500   
|Deferred tax assets                                             |  | 25(b) |  | 388,266   |  | 354,166  
|Other non-current assets                                        |  | 19    |  | 51,079    |  | 104,983  
|                                                                |  |       |  |           |  |          
|TOTAL ASSETS                                                    |  |       |  | 3,022,874 |  | 2,934,997
|                                                                |  |       |  |           |  |          
|LIABILITIES AND SHAREHOLDERS EQUITY                            |  |       |  |           |  |          
|Current liabilities                                             |  |       |  |           |  |          
|Amounts due to trade creditors                                  |  | 20    |  | 42,675    |  | 35,040   
|Accrued expenses and other payables                             |  | 20    |  | 395,698   |  | 329,263  
|Receipts in advance and customers deposits                     |  | 20    |  | 107,527   |  | 106,917  
|Obligations under finance leases                                |  | 23    |  | 705       |  | 72       
|Current taxation                                                |  | 25(a) |  | 49        |  | 347      
|Amounts due to fellow subsidiaries                              |  | 21    |  | 43,735    |  | 57,418   
|Amount due to immediate holding company                         |  | 22    |  | 989       |  | 3,029    
|                                                                |  |       |  |           |  |          
|Total current liabilities                                       |  |       |  | 591,378   |  | 532,086  
|                                                                |  |       | 
|Deferred tax liabilities                                        |  | 25(b) |  | 115,061   |  | 97,117   
|Obligations under finance leases                                |  | 23    |  | 72        |  |         
|Other non-current liabilities                                   |  | 24    |  | 53,970    |  | 34,553   
|                                                                |  |       |  |           |  |          
|TOTAL LIABILITIES                                               |  |       |  | 760,481   |  | 663,756  
|                                                                |  |       |  |           |  |          
|Shareholders equity                                            |  |       |  |           |  |          
|Share capital                                                   |  | 26    |  | 2,019,234 |  | 2,016,792
|Reserves                                                        |  | 26    |  | 239,719   |  | 249,975  
|                                                                |  |       |  |           |  |          
|Total equity attributable to equity shareholders of the Company |  |       |  | 2,258,953 |  | 2,266,767
|Minority interests                                              |  |       |  | 3,440     |  | 4,474    
|                                                                |  |       |  |           |  |          
|TOTAL SHAREHOLDERS EQUITY                                      |  |       |  | 2,262,393 |  | 2,271,241
|                                                                |  |       |  |           |  |          
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                      |  |       |  | 3,022,874 |  | 2,934,997
|                                                                |  |       |  |           |  |          

See accompanying notes to the consolidated financial statements which are an integral part of these
statements.



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##### Table of Contents

i-CABLE Communications Limited

Consolidated Statement of Changes in Equity



|                                                          |  |           |  |                                                    |  |              |  |                       |  |                 |   |  |                |   |  |               |   |  |           |   |  |                   |  |             |  
|--------------------------------------------------------- |  | --------- |  | -------------------------------------------------- |  | ------------ |  | --------------------- |  | --------------- | - |  | -------------- | - |  | ------------- | - |  | --------- | - |  | ----------------- |  | ----------- | -
|                                                          |  |           |  | Attributable to equity shareholders of the Company |  |              |  |                       |  |                
|Group                                                     |  | Note      |  | Sharecapital                                       |  | Sharepremium |  | Specialcapitalreserve |  | Exchangereserve |   |  | Revenuereserve |   |  | Totalreserves |   |  | Total     |   |  | Minorityinterests |  | Totalequity |  
|                                                          |  |           |  | HK$000                                            |  | HK$000      |  | HK$000               |  | HK$000         |   |  | HK$000        |   |  | HK$000       |   |  | HK$000   |   |  | HK$000           |  | HK$000     |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Balance at January 1, 2005*                               |  |           |  | 2,019,234                                          |  | 4,838,365    |  | 3,345                 |  |                |   |  | (4,977,983     | ) |  | (136,273      | ) |  | 1,882,961 |   |  |                  |  | 1,882,961   |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Transfer from the statement of operations                 |  |           |  |                                                   |  |             |  |                      |  |                |   |  | 527,132        |   |  | 527,132       |   |  | 527,132   |   |  |                  |  | 527,132     |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Dividend approved in respect of the previous year         |  | 9(b)      |  |                                                   |  |             |  |                      |  |                |   |  | (90,866        | ) |  | (90,866       | ) |  | (90,866   | ) |  |                  |  | (90,866     | )
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Dividend declared in respect of the current year          |  | 9(a)      |  |                                                   |  |             |  |                      |  |                |   |  | (70,673        | ) |  | (70,673       | ) |  | (70,673   | ) |  |                  |  | (70,673     | )
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Translation of foreign subsidiaries financial statements |  |           |  |                                                   |  |             |  |                      |  | (187            | ) |  |               |   |  | (187          | ) |  | (187      | ) |  |                  |  | (187        | )
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Transfer to special capital reserve                       |  | 26(b)(ii) |  |                                                   |  |             |  | 4,579                 |  |                |   |  | (4,579         | ) |  |              |   |  |          |   |  |                  |  |            |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                 |   |  |                |   |  |               |   |  |           |   |  |                   |  |             |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Balance at December 31, 2005*                             |  |           |  | 2,019,234                                          |  | 4,838,365    |  | 7,924                 |  | (187            | ) |  | (4,616,969     | ) |  | 229,133       |   |  | 2,248,367 |   |  |                  |  | 2,248,367   |  



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##### Table of Contents

i-CABLE Communications Limited

Consolidated Statement of Changes in Equity



|                                                          |  |           |  |                                                    |  |              |  |                       |  |                 |   |  |                |   |  |               |   |  |           |   |  |                   |   |  |             |  
|--------------------------------------------------------- |  | --------- |  | -------------------------------------------------- |  | ------------ |  | --------------------- |  | --------------- | - |  | -------------- | - |  | ------------- | - |  | --------- | - |  | ----------------- | - |  | ----------- | -
|                                                          |  |           |  | Attributable to equity shareholders of the Company |  |              |  |                       |  |                 |  
|Group                                                     |  | Note      |  | Sharecapital                                       |  | Sharepremium |  | Specialcapitalreserve |  | Exchangereserve |   |  | Revenuereserve |   |  | Totalreserves |   |  | Total     |   |  | Minorityinterests |   |  | Totalequity |  
|                                                          |  |           |  | HK$000                                            |  | HK$000      |  | HK$000               |  | HK$000         |   |  | HK$000        |   |  | HK$000       |   |  | HK$000   |   |  | HK$000           |   |  | HK$000     |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Balance at January 1, 2006*                               |  |           |  | 2,019,234                                          |  | 4,838,365    |  | 7,924                 |  | (187            | ) |  | (4,616,969     | ) |  | 229,133       |   |  | 2,248,367 |   |  |                  |   |  | 2,248,367   |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Transfer from the statement of operations                 |  |           |  |                                                   |  |             |  |                      |  |                |   |  | 182,115        |   |  | 182,115       |   |  | 182,115   |   |  | (996              | ) |  | 181,119     |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Dividend approved in respect of the previous year         |  | 9(b)      |  |                                                   |  |             |  |                      |  |                |   |  | (100,962       | ) |  | (100,962      | ) |  | (100,962  | ) |  |                  |   |  | (100,962    | )
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Dividend declared in respect of the current year          |  | 9(a)      |  |                                                   |  |             |  |                      |  |                |   |  | (70,673        | ) |  | (70,673       | ) |  | (70,673   | ) |  |                  |   |  | (70,673     | )
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Translation of foreign subsidiaries financial statements |  |           |  |                                                   |  |             |  |                      |  | 106             |   |  |               |   |  | 106           |   |  | 106       |   |  | 51                |   |  | 157         |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Acquisition of subsidiary                                 |  | 32        |  |                                                   |  |             |  |                      |  |                |   |  |               |   |  |              |   |  |          |   |  | 4,385             |   |  | 4,385       |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Transfer to special capital reserve                       |  | 26(b)(ii) |  |                                                   |  |             |  | 5,847                 |  |                |   |  | (5,847         | ) |  |              |   |  |          |   |  |                  |   |  |            |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                 |   |  |                |   |  |               |   |  |           |   |  |                   |   |  |             |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                
|Balance at December 31, 2006*                             |  |           |  | 2,019,234                                          |  | 4,838,365    |  | 13,771                |  | (81             | ) |  | (4,612,336     | ) |  | 239,719       |   |  | 2,258,953 |   |  | 3,440             |   |  | 2,262,393   |  
|                                                          |  |           |  |                                                    |  |              |  |                       |  |                 |   |  |                |   |  |               |   |  |           |   |  |                   |   |  |             |  



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##### Table of Contents

i-CABLE Communications Limited

Consolidated Statement of Changes in Equity



|                                                          |  |           |  |                                                    |   |  |              |  |                       |  |                 |   |  |                          |  |                   |  |                |   |  |              |   |  |               |   |  |           |   |  |                   |  |             |  
|--------------------------------------------------------- |  | --------- |  | -------------------------------------------------- | - |  | ------------ |  | --------------------- |  | --------------- | - |  | ------------------------ |  | ----------------- |  | -------------- | - |  | ------------ | - |  | ------------- | - |  | --------- | - |  | ----------------- |  | ----------- | -
|                                                          |  |           |  | Attributable to equity shareholders of the Company |   |  |              |  |                       | 
|Group                                                     |  | Note      |  | Sharecapital                                       |   |  | Sharepremium |  | Specialcapitalreserve |  | Exchangereserve |   |  | Capitalredemptionreserve |  | Fairvaluereserves |  | Revenuereserve |   |  | OtherReserve |   |  | Totalreserves |   |  | Total     |   |  | Minorityinterests |  | Totalequity |  
|                                                          |  |           |  | HK$000                                            |   |  | HK$000      |  | HK$000               |  | HK$000         |   |  | HK$000                  |  | HK$000           |  | HK$000        |   |  | HK$000      |   |  | HK$000       |   |  | HK$000   |   |  | HK$000           |  | HK$000     |  
|Balance at January 1, 2007*                               |  |           |  | 2,019,234                                          |   |  | 4,838,365    |  | 13,771                |  | (81             | ) |  |                         |  |                  |  | (4,612,336     | ) |  |             |   |  | 239,719       |   |  | 2,258,953 |   |  | 3,440             |  | 2,262,393   |  
|Transfer from the statement of operations                 |  |           |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  |                  |  | 181,852        |   |  |             |   |  | 181,852       |   |  | 181,852   |   |  | 742               |  | 182,594     |  
|Dividend approved in respect of the previous year         |  | 9(b)      |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  |                  |  | (100,962       | ) |  |             |   |  | (100,962      | ) |  | (100,962  | ) |  |                  |  | (100,962    | )
|Dividend declared in respect of the current year          |  | 9(a)      |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  |                  |  | (70,673        | ) |  |             |   |  | (70,673       | ) |  | (70,673   | ) |  |                  |  | (70,673     | )
|Translation of foreign subsidiaries financial statements |  |           |  |                                                   |   |  |             |  |                      |  | 1,223           |   |  |                         |  |                  |  |               |   |  |             |   |  | 1,223         |   |  | 1,223     |   |  | 163               |  | 1,386       |  
|Change in fair value of available-for-sale securities     |  |           |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  | 2,883             |  |               |   |  |             |   |  | 2,883         |   |  | 2,883     |   |  |                  |  | 2,883       |  
|Equity attributable to minority interest                  |  |           |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  |                  |  |               |   |  |             |   |  |              |   |  |          |   |  | 129               |  | 129         |  
|Share repurchased and cancelled                           |  |           |  | (2,442                                             | ) |  |             |  |                      |  |                |   |  | 2,442                    |  |                  |  | (3,880         | ) |  |             |   |  | (1,438        | ) |  | (3,880    | ) |  |                  |  | (3,880      | )
|Share repurchased                                         |  |           |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  |                  |  |               |   |  | (2,594       | ) |  | (2,594        | ) |  | (2,594    | ) |  |                  |  | (2,594      | )
|Share repurchase expenses                                 |  |           |  |                                                   |   |  |             |  |                      |  |                |   |  |                         |  |                  |  | (26            | ) |  | (9           | ) |  | (35           | ) |  | (35       | ) |  |                  |  | (35         | )
|Transfer to special capital reserve                       |  | 26(b)(ii) |  |                                                   |   |  |             |  | 96                    |  |                |   |  |                         |  |                  |  | (96            | ) |  |             |   |  |              |   |  |          |   |  |                  |  |            |  
|                                                          |  |           |  |                                                    |   |  |              |  |                       |  |                 |   |  |                          |  |                   |  |                |   |  |              |   |  |               |   |  |           |   |  |                   |  |             |  
|Balance at December 31, 2007*                             |  |           |  | 2,016,792                                          |   |  | 4,838,365    |  | 13,867                |  | 1,142           |   |  | 2,442                    |  | 2,883             |  | (4,606,121     | ) |  | (2,603       | ) |  | 249,975       |   |  | 2,266,767 |   |  | 4,474             |  | 2,271,241   |  
|                                                          |  |           |  |                                                    |   |  |              |  |                       |  |                 |   |  |                          |  |                   |  |                |   |  |              |   |  |               |   |  |           |   |  |                   |  |             |  



|* | Included in the Groups revenue reserve is positive goodwill written off against reserves in prior years amounting to HK$197,785,000.
|- | -------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements which are an integral part of these statements.



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##### Table of Contents

i-CABLE Communications Limited

Consolidated Statements of Cash Flows



|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|------------------------------------------------------------------ |  | ---- |  | ---------------------- | - |  | -------- | - |  | -------- | -
|                                                                   |  |      |  | Year ended December 31 |  
|                                                                   |  | Note |  | 2005                   |   |  | 2006     |   |  | 2007     |  
|                                                                   |  |      |  | HK$000                |   |  | HK$000  |   |  | HK$000  |  
|Operating activities                                               |  |      |  |                        |   |  |          |   |  |          |  
|Profit before taxation                                             |  |      |  | 282,056                |   |  | 209,768  |   |  | 199,240  |  
|                                                                   |  |      |  |                       
|Adjustments for:                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Finance costs, net                                                 |  |      |  | 134                    |   |  | 7        |   |  | 18       |  
|Interest income                                                    |  |      |  | (3,335                 | ) |  | (11,640  | ) |  | (20,566  | )
|Dividend received from investment in equity securities             |  |      |  | (3,833                 | ) |  | (1,872   | ) |  | (1,365   | )
|Depreciation                                                       |  |      |  | 480,589                |   |  | 428,121  |   |  | 366,522  |  
|Amortization of programming library                                |  |      |  | 79,624                 |   |  | 101,117  |   |  | 132,600  |  
|Amortization of other intangible assets                            |  |      |  |                       |   |  | 2,923    |   |  | 4,385    |  
|Impairment loss on investment in equity securities                 |  |      |  | 1,500                  |   |  |         |   |  | 1,600    |  
|Impairment loss on property, plant and equipment                   |  |      |  | 6,585                  |   |  | 11,641   |   |  | 3,247    |  
|Net (gain)/loss on disposal of property, plant and equipment       |  |      |  | (804                   | ) |  | 322      |   |  | (2,311   | )
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Operating profit before changes in working capital                 |  |      |  | 842,516                |   |  | 740,387  |   |  | 683,370  |  
|Decrease in inventories                                            |  |      |  | 10,383                 |   |  | 9,399    |   |  | 278      |  
|Decrease/(increase) in accounts receivable from trade debtors      |  |      |  | (35,105                | ) |  | 7,388    |   |  | 4,791    |  
|(Increase)/decrease in deposits, prepayments and other receivables |  |      |  | (33,001                | ) |  | 53,383   |   |  | (89,053  | )
|Decrease/(increase) in amounts due from fellow subsidiaries        |  |      |  | (11,253                | ) |  | (51,086  | ) |  | 48,916   |  
|Decrease in amounts due to trade creditors                         |  |      |  | (15,995                | ) |  | (19,697  | ) |  | (7,370   | )
|(Decrease)/increase in accrued expenses and other payables         |  |      |  | 29,623                 |   |  | 29,764   |   |  | (42,846  | )
|(Decrease)/increase in receipts in advance and customers deposits |  |      |  | (3,371                 | ) |  | 1,631    |   |  | (16,871  | )
|Increase in amounts due to fellow subsidiaries                     |  |      |  | 8,364                  |   |  | 5,850    |   |  | 11,632   |  
|Net change in amount due to immediate holding company              |  |      |  | 403                    |   |  | 906      |   |  | 2,040    |  
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Cash generated from operations                                     |  |      |  | 792,564                |   |  | 777,925  |   |  | 594,887  |  
|Interest received                                                  |  |      |  | 3,213                  |   |  | 11,467   |   |  | 20,692   |  
|Interest paid                                                      |  |      |  | (134                   | ) |  | (1       | ) |  | (1       | )
|Hong Kong profits tax paid                                         |  |      |  | (11,586                | ) |  | (75      | ) |  |         |  
|Overseas tax paid                                                  |  |      |  | (126                   | ) |  | (225     | ) |  | (193     | )
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Net cash generated from operating activities                       |  |      |  | 783,931                |   |  | 789,091  |   |  | 615,385  |  
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Investing activities                                               |  |      |  |                        |   |  |          |   |  |          |  
|Purchase of property, plant and equipment                          |  |      |  | (286,002               | ) |  | (238,449 | ) |  | (203,328 | )
|Additions to programming library                                   |  |      |  | (104,976               | ) |  | (140,225 | ) |  | (128,048 | )
|Acquisition of associate                                           |  | 18   |  |                       |   |  |         |   |  | (58,500  | )
|Acquisition of subsidiary                                          |  | 32   |  |                       |   |  | (7,477   | ) |  |         |  
|Dividend income received from investment in equity securities      |  |      |  | 3,833                  |   |  | 1,872    |   |  | 1,365    |  
|Proceeds from sales of property, plant and equipment               |  |      |  | 1,889                  |   |  | 1,543    |   |  | 7,478    |  
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Net cash used in investing activities                              |  |      |  | (385,256               | ) |  | (382,736 | ) |  | (381,033 | )
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Financing activities                                               |  |      |  |                        |   |  |          |   |  |          |  
|Capital element of finance lease rentals paid                      |  |      |  |                       |   |  | (242     | ) |  | (705     | )
|Payment for repurchase of shares                                   |  |      |  |                       |   |  |         |   |  | (6,509   | )
|Issue of shares to minority interest                               |  |      |  |                       |   |  |         |   |  | 129      |  
|Interest element of finance lease rentals paid                     |  |      |  |                       |   |  | (36      | ) |  | (17      | )
|Dividends paid                                                     |  |      |  | (161,476               | ) |  | (171,571 | ) |  | (171,581 | )
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Net cash used in financing activities                              |  |      |  | (161,476               | ) |  | (171,849 | ) |  | (178,683 | )
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Net increase in cash and cash equivalents                          |  |      |  | 237,199                |   |  | 234,506  |   |  | 55,669   |  
|Effect of foreign exchange rate changes                            |  |      |  | (320                   | ) |  | (201     | ) |  | 183      |  
|Cash and cash equivalents at January 1                             |  |      |  | 115,013                |   |  | 351,892  |   |  | 586,197  |  
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  
|Cash and cash equivalents at December 31                           |  | 14   |  | 351,892                |   |  | 586,197  |   |  | 642,049  |  
|                                                                   |  |      |  |                        |   |  |          |   |  |          |  

See accompanying notes to the consolidated financial statements which are an integral part of these
statements.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements

For the year ended December 31, 2007

1. Basis of presentation

The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (HKFRSs)
which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants
(HKICPA) (HK GAAP). Information relating to the nature and effect of significant differences between HK GAAP and accounting principles generally accepted in the United States (US GAAP) are set out in Note 40.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting
period of the Group. Note 3 provides information on the changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected
in these financial statements.

2. Significant accounting policies

(a) Statement of compliance

These financial statements have been prepared in accordance with HK GAAP. A
summary of the significant accounting policies adopted by the Group is set out below.

(b) Basis of preparation of the financial statements

The measurement basis used in the preparation of the financial statements is the historical cost basis except that financial statements classified as
available-for-sales (see Note 2(s)) are stated at their fair value as explained in the accounting policies set out below.

The preparation
of financial statements in conformity with HK GAAP requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.

Judgements made by management in the application of HKGAAP that have significant effect
on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 36.

(c) Basis of
consolidation

The consolidated financial statements include the financial statements of i-CABLE Communications Limited (the
Company) and all its subsidiaries (collectively, the Group) made up to December 31 each year.



| | (i) | Subsidiaries and controlled entities
| | --- | ------------------------------------

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting
rights that presently are exercisable are taken into account.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



An investment in a subsidiary is consolidated into the consolidated financial
statements from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealized profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial
statements. Unrealized losses resulting from intra-group transactions are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment.

Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company,
whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of
those interests that meets the definition of a financial liability. Minority interests are presented in the consolidated balance sheet within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests
in the results of the Group are presented on the face of the consolidated statements of operations as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.

Where losses applicable to the minority interests exceed the minoritys interest in the equity of a subsidiary, the excess, and any
further losses applicable to the minority interests, are charged against the Groups interest except to the extent that the minority interests has a binding obligation to, and is able to, make additional investment to cover the losses. If the
subsidiary subsequently reports profits, the Groups interest is allocated all such profits until the minority interests share of losses previously absorbed by the Group has been recovered.

Loans from holders of minority interests and other contractual obligations towards these holders are presented as financial liabilities in
the consolidated balance sheet in accordance with the policy described in Notes 2(u) depending on the nature of the liability.



| | (ii) | Associates
| | ---- | ----------

An associate is an entity in
which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the consolidated financial statements under the equity method and is initially recorded
at cost and adjusted thereafter for the post acquisition change in the Groups share of the associates net assets. The consolidated statements of operations includes the Groups share of the post-acquisition, post-tax results of the
associates for the year, including any impairment loss on goodwill relating to the investment in associates recognized for the year (see Notes 2(c)(iii) and (t)).

When the Groups share of losses exceeds its interest in the associate, the Groups interest is reduced to nil and recognition
of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Groups interest in the associate is the carrying amount of
the investment under the equity method together with the Groups long-term interests that in substance form part of the Groups net investment in the associate.

Unrealized profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the
Groups interest in the associate, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in profit or loss.

In the Companys balance sheet, its investments in associates are stated at cost less impairment losses (see Note 2(t)).



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | (iii) | Goodwill
| | ----- | --------

Goodwill represents the excess
of the cost of a business combination over the Groups interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities.

Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for
impairment (see Note 2(t)).

Any excess of the Groups interest in the net fair value of the acquirees
identifiable assets, liabilities and contingent liabilities over the cost of a business combination is recognized immediately in the statement of operations.

On disposal of a cash-generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the
profit or loss on disposal.

(d) Jointly controlled assets

Jointly controlled assets are assets of a joint venture over which the Group has joint control with other venturers in accordance with contractual arrangements and through the joint control of which the Group has
control over its share of future economic benefits earned from the assets.

The Groups share of jointly controlled assets and any
liabilities incurred jointly with other venturers are recognized in the balance sheets and classified according to their nature. Liabilities and expenses incurred directly in respect of its interests in jointly controlled assets are accounted for on
an accrual basis. Income from the sale or use of the Groups share of the output of the jointly controlled assets, together with its share of any expenses incurred by the joint ventures, are recognized in statement of operations when it is
probable that the economic benefits associated with the transactions will flow to or from the Group.

(e) Property, plant and equipment and depreciation

Property, plant and equipment are stated in the balance sheet at cost, less accumulated depreciation and impairment losses (see Note 2(t)).
The cost of self-constructed items of property, plant and equipment includes materials, labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an
appropriate proportion of overheads and borrowing costs (see Note 2(m)).

Gains or losses arising from the retirement or disposal of an
item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in the statement of operations on the date of retirement or disposal.

Depreciation is calculated on a straight-line basis to write off the cost less their estimated residual value, if any, of the equipment required to
support a fully operating network and cable television system at rates determined by the estimated useful lives of the assets ranging from 5 to 20 years, adjusted by the appropriate pre-maturity fraction during the pre-maturity period, which began
with the first earned subscriber revenue on October 31, 1993 and was to continue until the earlier of the attainment of a predetermined subscriber level and December 31, 1996. The pre-maturity period ended on November 30, 1996, when
the predetermined subscriber level was attained. Depreciation is calculated on a straight-line basis to write off the costs, less the estimated residual value, if any, of other assets at rates determined by the estimated useful lives ranging from 2
to 40 years.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The principal annual depreciation rates used are as follows:



|                                                                  |  |                                                                                               
|----------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|Network, decoders, cable modems and television production systems |  | 5% to 50%                                                                                     
|Furniture, fixtures, other equipment and motor vehicles           |  | 10% to 33.33%                                                                                 
|Buildings situated on leasehold land*                             |  | Higher of 2.5% or percentage to amortize the asset cost over the unexpired term of land leases
|Leasehold improvements                                            |  | 8.33%                                                                                         

Where parts of an item of property, plant and equipment have different useful lives, the cost of
the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

Under certain circumstances, the Group may have an obligation to dismantle part of its network upon request by concerned parties. Owing to the absence of
such history and lack of sufficient information to estimate the fair value of the asset retirement obligation because the settlement date or the range of potential settlement dates has not been specified by others and information is not available to
apply an expected present value technique, no reliable estimate can be reasonably made in respect of such potential obligation.

(f) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement
conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the
arrangement takes the legal form of a lease.



| | (i) | Classification of assets leased to the Group
| | --- | --------------------------------------------

Assets that are held by Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and
rewards of ownership to the Group are classified as operating leases.



| | (ii) | Assets acquired under finance leases
| | ---- | ------------------------------------

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and
equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or,
where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in Note 2(e). Impairment losses are accounted for in accordance with the accounting policy as set out in Note 2(t). Finance charges implicit in the
lease payments are charged to the statement of operations over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are
charged to the statement of operations in the accounting period in which they are incurred.



|* | This represents units in industrial and commercial buildings which the Directors consider impracticable to split the cost into land and buildings.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | (iii) | Operating lease charges
| | ----- | -----------------------

Where the Group
has the use of assets held under operating leases, payments made under the leases are charged to the statement of operations in equal installments over the accounting periods covered by the lease term, except where an alternative basis is more
representative of the pattern of benefits to be derived from the leased asset. Lease incentives received or granted are recognized in the statement of operations as an integral part of the aggregate net lease payments made.

(g) Programming costs



| | (i) | Programming library
| | --- | -------------------

Programming library
consists of presentation rights for commissioned programs and acquired programs for showing on the Groups television channels, and commissioned programs and films for licensing purposes.

Presentation rights are stated in the balance sheet at cost less accumulated amortization (where the estimated useful life is other than
indefinite) and any impairment losses (see Note 2(t)). Amortization is charged to the statement of operations on an accelerated basis over the license period or over the estimated number of future showings. Subsequent expenditure on programs after
initial acquisition is recognized as an expense when incurred.

Commissioned programs and films for licensing purposes
comprise direct production costs and production overheads, and are stated at the lower of amortized cost or net realizable value. Costs are amortized on an individual program/film basis in the ratio of the current years gross revenues to
managements forecast of the total ultimate gross revenues from all sources.



| | (ii) | Live programs
| | ---- | -------------

Live programs consist of
third party feed programs and are charged to the statement of operations upon telecast of the programs. Payments made in advance or in arrears of program cost recognition are recorded as prepayments or accruals, as appropriate.



| | (iii) | In-house developed programs
| | ----- | ---------------------------

In-house
developed programs consist primarily of news, documentary and general entertainment programs with short lead-time from production to telecast. The costs of in-house developed programs are accordingly recognized as expenses in the period in which
they are incurred.



| | (iv) | Film rights and perpetual film rights
| | ---- | -------------------------------------

Film rights generated by the Group or perpetual film rights acquired by the Group are stated at cost less accumulated amortization (where the estimated useful life is other than indefinite) and impairment losses (see Note 2(t)). Costs less
provision for impairment losses represent the carrying value transferred from films in progress upon completion or the purchase price of the perpetual film rights, and are amortized at rates calculated to write off the costs in proportion to the
expected revenues from exhibition, the reproduction and distribution of audio visual products, the licensing of video rights and other broadcast rights following their release. Such rates are subject to annual review by the directors.



| | (v) | Films in progress
| | --- | -----------------

Films in progress are
stated at cost less any provision for impairment losses (see Note 2(t)). Costs include all direct costs associated with the production of films. Provisions are made for costs which are in



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



excess of the expected future revenue generated by these films. The balance of film production costs payable at year-end is disclosed as commitments. Costs
of films are transferred to film rights upon completion.

(h) Other intangible assets (other than goodwill)

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

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the
cash-generating unit level. Such intangible assets are not amortized. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change
in the useful life assessment from indefinite to finite is accounted for on a prospective basis.



| | (i) | Club debentures
| | --- | ---------------

The Groups club
debentures are stated at cost less any impairment losses (see Note 2(t)), on an individual basis.



| | (ii) | Advertising rights
| | ---- | ------------------

The Groups
advertising rights are stated at cost less any accumulated amortization and impairment losses (see Note 2(t)) and are amortized using the straight-line basis over the estimated useful life of 2.7 years.

(i) Inventories

Inventories are stated at the lower of cost
and net realizable value. Cost is calculated on the weighted average basis and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realizable value is
determined by the Group based on the expected replacement cost of the inventories net of provision for obsolescence.

(j) Trade and other receivables

Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost less allowance for impairment of
doubtful debts (See Note 2(t)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less
allowance for impairment of doubtful debts (see Note 2(t)).

(k) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits with banks and other financial institutions, and short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form
an integral part of the Groups cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flow. None of the Groups cash and cash equivalents are restricted as to
withdrawal.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(l) Revenue recognition

Revenue is recognized in the statement of operations provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably as follows:



| | (i) | Income from the provision of subscription television services, Internet access services, and Internet Protocol Point wholesale services is recognized at the time when the services
are provided.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Installation fees are recognized upon completion of the related installation work to the extent of direct selling costs.
| | ---- | ------------------------------------------------------------------------------------------------------------------------



| | (iii) | Where packaged service fees comprise a number of elements and the fees can be allocated on a reasonable basis into elements of subscription service and installation service, revenue
is recognized in accordance with the accounting policies set out in Notes 2(l)(i) and (ii). Where packaged service fees cannot be allocated into individual elements, the fees are deferred and recognized evenly over the term of the service period.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Advertising income net of agency deductions is recognized on telecast of the advertisement. When an advertising contract covers a specified period, the related income is recognized
evenly over the contract period.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Revenue from theatrical distribution are recognized when the films are exhibited.
| | --- | ---------------------------------------------------------------------------------



| | (vi) | Revenue from distribution of films is recognized upon delivery of the master tapes to the customers.
| | ---- | ----------------------------------------------------------------------------------------------------



| | (vii) | Income from licensing TV rights is recognized in full upon delivery of the programs concerned in accordance with the terms of the license contracts, and is stated net of withholding
tax.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | Magazine advertising income is recognized upon the publication of the edition in which the  advertisement is placed.
| | ------ | --------------------------------------------------------------------------------------------------------------------



| | (ix) | Sales of magazines are recognized when the magazines are delivered and the title has passed.
| | ---- | --------------------------------------------------------------------------------------------



| | (x) | Rental income receivable under operating leases is recognized in the statement of operations in equal instalments over the periods covered by the lease term, except where an
alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognized in the statement of operations as an integral part of the aggregate net lease payments
receivables. Contingent rentals are recognized as income in the accounting period in which they are earned.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xi) | Dividend income from unlisted investments is recognized when the shareholders right to receive payment is established.
| | ---- | -----------------------------------------------------------------------------------------------------------------------



| | (xii) | Interest income is recognized as it accrues using the effective interest method.
| | ----- | --------------------------------------------------------------------------------

(m) Borrowing costs

Borrowing costs are expensed in the statement of operations in the period in which they are incurred, except
to the extent that they are capitalized as being directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use.

The capitalization of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing
costs are being incurred and activities that are necessary to prepare the asset for its intended use are in progress. Capitalization of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying
asset for its intended use are interrupted or complete.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(n) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in the statement of operations.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable
temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that
future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will
arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the
deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the
recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or
periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are
those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and
temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future,
or in the case of deductible differences, unless it is probable that they will reverse in the future and taxable profit will be available against which the temporary difference can be utilized.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and
liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized.
Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax
balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the
Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:



| |  |  | in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| |  |  | in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | the same taxable entity; or
| | - |  | ---------------------------



| |  |  | different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered,
intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(o)
Advertising costs

Advertising costs are expensed as incurred. Advertising costs amounted to HK$42,236,230, HK$61,774,415 and HK$38,130,904
for each of the years ended December 31, 2005, 2006 and 2007, respectively.

(p) Foreign currency translation

The reporting currency of the Groups operations is the Hong Kong dollar.

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and
liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognized in the statement of operations.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates
ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the
dates of the transactions. Balance sheet items, including goodwill arising on consolidation of foreign operations acquired on or after January 1, 2005, are translated into Hong Kong dollars at the foreign exchange rates ruling at the balance
sheet date. The resulting exchange differences are recognized directly in a separate component of equity. Goodwill arising on consolidation of a foreign operation acquired before January 1, 2005 is translated at the foreign exchange rate that
applied at the date of acquisition of the foreign operation.

On disposal of a foreign operation, the cumulative amount of the exchange
differences recognized in equity which relate to that foreign operation is included in the calculation of the profit or loss on disposal.

(q) Retirement
benefits

The principal retirement scheme operated by the Group is a defined contribution retirement scheme which has been closed to new
employees joining after October 1, 2000 while existing members of the scheme can continue to accrue future benefits. Employees joining after October 1, 2000 will participate in the Mandatory Provident Fund (MPF) with terms as
stipulated by the MPF Authority. Assets of both schemes are maintained independently from those of the Group. Contributions to the retirement schemes are charged to the statement of operations as and when incurred. Retirement contributions incurred
by the Group for the years ended December 31, 2005, 2006 and 2007 amounted to HK$31,870,567, HK$33,436,633 and HK$30,992,442 respectively.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(r) Related parties

For the purposes of these financial statements, a party is considered to be related to the Group if :



| | (i) | the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and
operating policy decisions, or has joint control over the Group;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | the Group and the party are subject to common control;
| | ---- | ------------------------------------------------------



| | (iii) | the party is an associate of the Group or a joint venture in which the Group is a venturer;
| | ----- | -------------------------------------------------------------------------------------------



| | (iv) | the party is a member of key management personnel of the Group or the Groups parent, or a close family member of such an individual, or is an entity under the control, joint
control or significant influence of such individuals;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is related party of the Group.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings
with the entity.

(s) Investments in equity securities

The Groups policies for investments in equity securities, other than investments in subsidiaries, are as follows:

Investments in equity securities that do not have quoted market price in an active market and whose fair value cannot be reliably measured are recognized in the balance sheet at cost less impairment losses (see Note 2(t)).

Other investments in securities are classified as available-for-sale securities and are initially recognized at fair value plus transaction costs. At
each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognized directly in equity, except foreign exchange gains and losses which are recognized directly in profit or loss. Dividend income from these
investments is recognized in accordance with the policy set out in Note 2(l)(xi) and where these investments are interest-bearing, interest calculated using the effective interest method is recognized in profit or loss in accordance with the policy
set out in Note 2(l)(xii). When these investments are derecognized or impaired (see Note 2(t)), the cumulative gain or loss previously recognized directly in equity is recognized in the statement of operations.

Investments are recognized on the date the Group commits to purchase the investments. Investments are derecognized when:



| | (i) | the contractual rights to the cash flows from the investment securities expire; or
| | --- | ----------------------------------------------------------------------------------



| | (ii) | the Group transfers the contractual rights to receive the cash flows of the investment securities.
| | ---- | --------------------------------------------------------------------------------------------------



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(t) Impairment of assets



| | (i) | Impairment of investments in equity securities and other receivables
| | --- | --------------------------------------------------------------------

Investments in equity securities (other than investments in subsidiaries and associates: see Note 2(c)(i) and (ii)) and other current and non-current receivables that are stated at cost or amortized cost are reviewed
at each balance sheet date to determine whether there is objective evidence of impairment.

Objective evidence of impairment
includes observable data that comes to the attention of the Group about one or more of the following loss events:



| |  |  | significant financial difficulty of the debtor;
| | - |  | -----------------------------------------------



| |  |  | a breach of contract, such as a default or delinquency in interest or principal payments;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | it becoming probable that the debtor will enter bankruptcy or other financial reorganization;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
| | - |  | -------------------------------------------------------------------------------------------------------------

If any such evidence exists, any impairment loss is determined and recognized as follows:



| |  |  | For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the
estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For trade and other current receivables and other financial assets carried at amortized cost, the impairment loss is measured as the difference between the
assets carrying amount and the present value of estimated future cash flows, discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where
the effect of discounting is material.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If in a subsequent period the amount of an impairment loss decreases and the
decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through the statement of operations. A reversal of an impairment loss shall not result in the assets carrying
amount exceeding that which would have been determined had no impairment loss been recognized in prior years.



| |  |  | For available-for-sale securities, the cumulative loss that has been recognized directly in equity is removed from equity and is recognized in the statement of
operations. The amount of the cumulative loss that is recognized in the statement of operations is the difference between the acquisition cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that
asset previously recognized in the statement of operations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impairment losses recognized in the statement of operations
in respect of available-for-sale equity securities are not reversed through the statement of operations. Any subsequent increase in the fair value of such assets is recognized directly in equity.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognized in respect of trade
debtors included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly
and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and
subsequent recoveries of amounts previously written off directly are recognized in the statement of operations.



| | (ii) | Impairment of other assets
| | ---- | --------------------------

Internal and
external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, except in the case of goodwill, any impairment loss previously recognized no longer exists or may have
decreased:



| |  |  | property, plant and equipment;
| | - |  | ------------------------------



| |  |  | investments in subsidiaries and associates;
| | - |  | -------------------------------------------



| |  |  | programming library; and
| | - |  | ------------------------



| |  |  | other intangible assets.
| | - |  | ------------------------

If any such indication exists, the assets recoverable amount is estimated. In addition, for goodwill, intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount
is estimated annually whether or not there is any indication of impairment.



| |  |  | Calculation of recoverable amount
| | - |  | ---------------------------------

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of
assets that generates cash inflows independently (i.e. a cash-generating unit).



| |  |  | Recognition of impairment losses
| | - |  | --------------------------------

An
impairment loss is recognized in the statement of operations whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units
are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that
the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.



| |  |  | Reversals of impairment losses
| | - |  | ------------------------------

In
respect of assets other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the assets carrying amount that would have been determined had no impairment loss been recognized in
prior years. Reversals of impairment losses are credited to the statement of operations in the year in which the reversals are recognized.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | (iii) | Interim financial reporting and impairment
| | ----- | ------------------------------------------

Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with HKAS 34, Interim financial reporting, in respect of the first
six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (see Notes 2(t)(i) and (ii)).

Impairment losses recognized in an interim period in respect of unquoted equity securities carried at cost are not reversed in a
subsequent period. This is the case even if no loss, or a smaller loss, would have been recognized had the impairment been assessed only at the end of the financial year to which the interim period relates.

(u) Trade and other payables

Trade and other payables are
initially recognized at fair value. Except for financial guarantee liabilities measured in accordance with Note 2(w)(i), trade and other payables are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in
which case they are stated at cost.

(v) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing services (business segment), or in providing services within a particular economic environment (geographical segment), which is
subject to risks and rewards that are different from those of other segments.

Segment revenue, expenses, results, assets and liabilities
include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions
are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group entities within a single segment.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be
used for more than one period.

Unallocated items mainly comprise non-domestic television service and film and program licensing business,
financial and corporate assets, tax balances and corporate and financing expenses.

(w) Financial guarantees issued, provisions and contingent liabilities



| | (i) | Financial guarantees issued
| | --- | ---------------------------

Financial
guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails to make payment
when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of
the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognized as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the
guarantee, the consideration is recognized in accordance with the Groups policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognized in the statement of operations on
initial recognition of any deferred income.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The amount of the guarantee initially recognized as deferred income is amortized in
the statement of operations over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognized in accordance with Note 2(w)(iii) if and when (i) it becomes probable that the holder of the guarantee
will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognized, less
accumulated amortization.



| | (ii) | Contingent liabilities acquired in business combinations
| | ---- | --------------------------------------------------------

Contingent liabilities acquired as part of a business combination are initially recognized at fair value, provided the fair value can be reliably measured. After their initial recognition at fair value, such
contingent liabilities are recognized at the higher of the amount initially recognized, less accumulated amortization where appropriate, and the amount that would be determined in accordance with Note 2(w)(iii). Contingent liabilities acquired in a
business combination that cannot be reliably fair valued are disclosed in accordance with Note 2(w)(iii).



| | (iii) | Other provisions and contingent liabilities
| | ----- | -------------------------------------------

Provisions are recognized for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to
settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation
is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also
disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(x) Employee benefits



| | (i) | Short term employee benefits and contributions to defined contribution retirement plans
| | --- | ---------------------------------------------------------------------------------------

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits
are accrued in the year in which the associated services are rendered by employees of the Group, except to the extent that they are included in the cost of property, plant and equipment not yet recognized as an expense.



| | (ii) | Share-based payments
| | ---- | --------------------

The fair value of
share options granted after November 7, 2002 to employees is recognized as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using an option-pricing model, taking into
account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the share options, the total estimated fair value of the share options is spread
over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the
number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognized in prior years is charged/credited to the statement of operations for the year of the review, unless the original employee expenses
qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognized as an



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



expense is adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture
is only due to not achieving vesting conditions that relate to the market price of the Companys shares. The equity amount is recognized in the capital reserve until either the option is exercised (when it is transferred to the share premium
account) or the option expires (when it is released directly to the revenue reserve).

To the extent that any modifications
to the terms and conditions on which the existing share options were granted, including cancellations and settlements, the effects of any such modifications that increase the total fair value of the share-based payment arrangements or are otherwise
beneficial to the employees, will be recognized in accordance with the provisions of HKFRS 2.

(y) Derivative financial instruments

Derivative financial instruments are recognized initially at fair value. At each balance sheet date the fair value is remeasured. The gain or loss on
remeasurement to fair value is charged immediately to the statement of operations, except where the derivatives qualify for cash flow hedge accounting or hedge the net investment in a foreign operation, in which case recognition of any resultant
gain or loss depends on the nature of the item being hedged (see Note 2(z)).

(z) Hedging



| | (i) | Cash flow hedges
| | --- | ----------------

Where a derivative
financial instrument is designated as a hedge of the variability in cash flows of a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk of a committed future transaction, the effective portion of any
gain or loss on remeasurement of the derivative financial instrument to fair value is recognized directly in equity. The ineffective portion of any gain or loss is recognized immediately in the statement of operations.

If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the
associated gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability.

If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gain or loss is removed from equity and recognized in the statement of
operations in the same period or periods during which the asset acquired or liability assumed affects profit or loss (such as when interest income or expense is recognized).

For cash flow hedges, other than those covered by the preceding two policy statements, the associated gain or loss is removed from equity
and recognized in the statement of operations in the same period or periods during which the hedged forecast transaction affects profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or
loss at that point remains in equity and is recognized in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealized gain or loss recognized in equity is
recognized immediately in the statement of operations.



| | (ii) | Hedge of net investments in foreign operations
| | ---- | ----------------------------------------------

The portion of the gain or loss on remeasurement to fair value of an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognized directly in equity



F-22



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



until the disposal of the foreign operation, at which time the cumulative gain or loss recognized directly in equity is recognized in the statement of
operations. The ineffective portion is recognized immediately in the statement of operations.

3. Changes in accounting policies

The HKICPA has issued a number of new and revised HKFRSs and interpretations that are first effective or available for early adoption for the current
accounting period of the Group.

There have been no significant changes to the accounting policies applied in these financial statements
for the years presented as a result of these developments. However, as a result of the adoption of HKFRS 7, Financial instruments: Disclosures and the amendment to HKAS 1, Presentation of financial statements: Capital disclosures, there have been
some additional disclosures provided as follows:

As a result of the adoption of HKFRS 7, the financial statements included expanded
disclosure about the significance of the Groups financial instruments and the nature and extent of risks arising from those instruments, compared with the information previously required to be disclosed by HKAS 32, Financial instruments:
Disclosure and presentation. These disclosures are provided throughout these financial statements, in particular in Note 29.

The amendment
to HKAS 1 introduces additional disclosure requirements to provide information about the level of capital and the Groups objectives, policies and processes for managing capital. These new disclosures are set out in Note 26(c).

Both HKFRS 7 and the amendment to HKAS 1 do not have any material impact on the classification, recognition and measurement of the amounts recognized in
the financial statements.

The Group has not applied any new standard or interpretation that is not yet effective for the current
accounting period (see Note 37).

4. Service revenues

The principal activity of the Company is investment holding. The principal activities of the Company s subsidiaries are set out in Note 28 to the consolidated financial statements.

The Group is an integrated multimedia communications services provider. It owns and operates broadband telecommunications networks in Hong Kong, over
which it provides Pay TV and Broadband services and also to a lesser extent, produces video, film and multimedia content.

Service revenues
comprise principally subscription and related fees for Pay television and Internet access services, Internet Protocol Point wholesale service income and also includes advertising income net of agency deductions, channel service and distribution
fees, program licensing income, film exhibition and distribution income, network maintenance income, and other related income.

5. Segment information

The Pay television segment includes operations related to the Pay television subscription business, advertising, channel carriage,
television relay service, programme licensing, network maintenance, and miscellaneous Pay television related businesses.



F-23



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The Internet and multimedia segment includes operations related to Broadband and dial-up Internet
access services, portal subscription, mobile content licensing, Voice Over Internet Protocol interconnection as well as other Internet access related businesses.

The Groups operating activities are primarily undertaken in one geographical area, Hong Kong.

The
Companys reportable segments are strategic business units. The Company evaluates segment performance based on a number of factors, of which the primary financial measures are business segment revenues and operating income/loss.



|                                 |  |                 |   |  |                |   |  |           |   |  |          |   |  |          |   |  |          |  
|-------------------------------- |  | --------------- | - |  | -------------- | - |  | --------- | - |  | -------- | - |  | -------- | - |  | -------- | -
|                                 |  | Segment revenue |   |  | Segment result |  
|                                 |  | 2005            |   |  | 2006           |   |  | 2007      |   |  | 2005     |   |  | 2006     |   |  | 2007     |  
|                                 |  | HK$000         |   |  | HK$000        |   |  | HK$000   |   |  | HK$000  |   |  | HK$000  |   |  | HK$000  |  
|                                 |  |                 |   |  |                |  
|Pay television                   |  | 1,884,379       |   |  | 1,895,221      |   |  | 1,595,114 |   |  | 336,797  |   |  | 248,224  |   |  | 178,606  |  
|Internet and multimedia          |  | 558,084         |   |  | 596,013        |   |  | 587,784   |   |  | 77,676   |   |  | 128,961  |   |  | 180,479  |  
|Unallocated                      |  | 13,311          |   |  | 74,167         |   |  | 150,171   |   |  | (134,922 | ) |  | (178,437 | ) |  | (176,578 | )
|Inter-segment elimination        |  | (15,042         | ) |  | (17,806        | ) |  | (29,185   | ) |  |         |   |  | (291     | ) |  | (4,526   | )
|                                 |  |                 |   |  |                |   |  |           |   |  |          |   |  |          |   |  |          |  
|                                 |  | 2,440,732       |   |  | 2,547,595      |   |  | 2,303,884 |   |  |          |   |  |          |   |  |          |  
|                                 |  |                 |   |  |                |   |  |           |   |  |          |   |  |          |   |  |          |  
|Profit from operations           |  |                 |   |  |                |   |  |           |   |  | 279,551  |   |  | 198,457  |   |  | 177,981  |  
|Interest income                  |  |                 |   |  |                |   |  |           |   |  | 3,335    |   |  | 11,640   |   |  | 20,566   |  
|Finance costs, net               |  |                 |   |  |                |   |  |           |   |  | (134     | ) |  | (7       | ) |  | (18      | )
|Impairment loss on investment    |  |                 |   |  |                |   |  |           |   |  | (1,500   | ) |  |         |   |  | (1,600   | )
|Non-operating income/ (expenses) |  |                 |   |  |                |   |  |           |   |  | 804      |   |  | (322     | ) |  | 2,311    |  
|Income tax (expense)/benefit     |  |                 |   |  |                |   |  |           |   |  | 245,076  |   |  | (28,649  | ) |  | (16,646  | )
|                                 |  |                 |   |  |                |   |  |           |   |  |          |   |  |          |   |  |          |  
|Net Profit                       |  |                 |   |  |                |   |  |           |   |  | 527,132  |   |  | 181,119  |   |  | 182,594  |  
|                                 |  |                 |   |  |                |   |  |           |   |  |          |   |  |          |   |  |          |  



|                                        |  |                |  |                     |  |         |  |        
|--------------------------------------- |  | -------------- |  | ------------------- |  | ------- |  | -------
|                                        |  |               
|                                        |  | Segment assets |  | Segment liabilities
|                                        |  | 2006           |  | 2007                |  | 2006    |  | 2007   
|                                        |  | HK$000        |  | HK$000             |  | HK$000 |  | HK$000
|                                        |  |                |  |                    
|Pay television                          |  | 1,242,902      |  | 1,160,268           |  | 383,812 |  | 353,595
|Internet and multimedia                 |  | 631,237        |  | 509,099             |  | 132,665 |  | 129,123
|                                        |  |                |  |                     |  |         |  |        
|                                        |  | 1,874,139      |  | 1,669,367           |  | 516,477 |  | 482,718
|Unallocated assets / liabilities        |  | 1,148,735      |  | 1,265,630           |  | 244,004 |  | 181,038
|                                        |  |                |  |                     |  |         |  |        
|Consolidated total assets / liabilities |  | 3,022,874      |  | 2,934,997           |  | 760,481 |  | 663,756
|                                        |  |                |  |                     |  |         |  |        

Other information on expenditure



|                        |  |                                           |  |                                 |  |         |  |        
|----------------------- |  | ----------------------------------------- |  | ------------------------------- |  | ------- |  | -------
|                        |  | Additions to property,plant and equipment |  | Additions toprogramming library
|                        |  | 2006                                      |  | 2007                            |  | 2006    |  | 2007   
|                        |  | HK$000                                   |  | HK$000                         |  | HK$000 |  | HK$000
|                        |  |                                           |  |                                
|Pay television          |  | 129,343                                   |  | 62,040                          |  | 108,719 |  | 97,372 
|Internet and multimedia |  | 63,802                                    |  | 68,175                          |  |        |  |       
|Unallocated             |  | 7,070                                     |  | 44,662                          |  | 35,244  |  | 32,843 
|                        |  |                                           |  |                                 |  |         |  |        
|                        |  | 200,215                                   |  | 174,877                         |  | 143,963 |  | 130,215
|                        |  |                                           |  |                                 |  |         |  |        



F-24



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|                        |  |              |  |              |  |         |  |         |  |         |  |        
|----------------------- |  | ------------ |  | ------------ |  | ------- |  | ------- |  | ------- |  | -------
|                        |  | Depreciation |  | Amortization
|                        |  | 2005         |  | 2006         |  | 2007    |  | 2005    |  | 2006    |  | 2007   
|                        |  | HK$000      |  | HK$000      |  | HK$000 |  | HK$000 |  | HK$000 |  | HK$000
|                        |  |              |  |              |  |        
|Pay television          |  | 259,977      |  | 235,516      |  | 220,269 |  | 73,549  |  | 84,394  |  | 97,430 
|Internet and multimedia |  | 214,479      |  | 188,223      |  | 141,702 |  |        |  |        |  |       
|                        |  |              |  |              |  |         |  |         |  |         |  |        
|                        |  | 474,456      |  | 423,739      |  | 361,971 |  | 73,549  |  | 84,394  |  | 97,430 
|Unallocated             |  | 6,133        |  | 4,382        |  | 4,551   |  | 6,075   |  | 19,646  |  | 39,555 
|                        |  |              |  |              |  |         |  |         |  |         |  |        
|                        |  | 480,589      |  | 428,121      |  | 366,522 |  | 79,624  |  | 104,040 |  | 136,985
|                        |  |              |  |              |  |         |  |         |  |         |  |        



|                        |  |                                                 |  |         |  |        
|----------------------- |  | ----------------------------------------------- |  | ------- |  | -------
|                        |  | Impairment loss on property,plant and equipment
|                        |  | 2005                                            |  | 2006    |  | 2007   
|                        |  | HK$000                                         |  | HK$000 |  | HK$000
|                        |  |                                                 | 
|Pay television          |  | 4,353                                           |  | 6,617   |  | 2,071  
|Internet and multimedia |  | 2,232                                           |  | 1,459   |  | 1,176  
|Unallocated             |  |                                                |  | 3,565   |  |       
|                        |  |                                                 |  |         |  |        
|                        |  | 6,585                                           |  | 11,641  |  | 3,247  
|                        |  |                                                 |  |         |  |        

Geographical segments

No geographical segment information is shown as, during the periods presented, less than 10% of the Groups segment revenue, segment result and segment assets are derived from activities conducted outside
Hong Kong.

6. Profit before taxation

Profit before taxation is stated after charging/(crediting):



|                                                                                  |  |         |   |  |         |   |  |         |  
|--------------------------------------------------------------------------------- |  | ------- | - |  | ------- | - |  | ------- | -
|                                                                                  |  | 2005    |   |  | 2006    |   |  | 2007    |  
|                                                                                  |  | HK$000 |   |  | HK$000 |   |  | HK$000 |  
|Interest income                                                                   |  |         |   |  |         |   |  |         |  
|                                                                                  |  |         |  
|Interest income from deposits with banks and other financial institutions         |  | (3,307  | ) |  | (11,470 | ) |  | (19,974 | )
|Other interest income                                                             |  | (28     | ) |  | (170    | ) |  | (592    | )
|                                                                                  |  |         |   |  |         |   |  |         |  
|                                                                                  |  | (3,335  | ) |  | (11,640 | ) |  | (20,566 | )
|                                                                                  |  |         |   |  |         |   |  |         |  
|Finance costs, net                                                                |  |         |   |  |         |   |  |         |  
|                                                                                  |  |         |  
|Finance charges on obligations under finance leases                               |  |        |   |  | 36      |   |  | 17      |  
|Interest expenses on bank loans and overdrafts wholly repayable within five years |  | 134     |   |  | 1       |   |  | 1       |  
|Fair value gain on forward foreign exchange contracts                             |  |        |   |  | (30     | ) |  |        |  
|                                                                                  |  |         |   |  |         |   |  |         |  
|                                                                                  |  | 134     |   |  | 7       |   |  | 18      |  
|                                                                                  |  |         |   |  |         |   |  |         |  



F-25



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|                                                                                 |  |         |   |  |         |   |  |         |  
|-------------------------------------------------------------------------------- |  | ------- | - |  | ------- | - |  | ------- | -
|                                                                                 |  | 2005    |   |  | 2006    |   |  | 2007    |  
|                                                                                 |  | HK$000 |   |  | HK$000 |   |  | HK$000 |  
|Other items                                                                      |  |         |   |  |         |   |  |         |  
|                                                                                 |  |         |  
|Depreciation                                                                     |  |         |   |  |         |   |  |         |  
|- assets held for use under operating leases                                     |  | 48,704  |   |  | 39,492  |   |  | 29,915  |  
|- other assets                                                                   |  | 431,885 |   |  | 388,629 |   |  | 336,607 |  
|Amortization of programming library*                                             |  | 79,624  |   |  | 101,117 |   |  | 132,600 |  
|Amortization of other intangible assets**                                        |  |        |   |  | 2,923   |   |  | 4,385   |  
|Cost of inventories used                                                         |  | 18,499  |   |  | 12,999  |   |  | 8,753   |  
|Rentals payable under operating leases in respect of land and buildings          |  | 43,790  |   |  | 48,976  |   |  | 52,967  |  
|Contributions to defined contribution retirement plans, net of capitalized costs |  | 28,423  |   |  | 30,541  |   |  | 28,985  |  
|Impairment losses                                                                |  |         |   |  |         |   |  |         |  
|- trade and other receivables                                                    |  | 14,889  |   |  | 14,401  |   |  | 9,908   |  
|- property, plant and equipment***                                               |  | 6,585   |   |  | 11,641  |   |  | 3,247   |  
|- investment in equity securities                                                |  | 1,500   |   |  |        |   |  | 1,600   |  
|Dividend income from investment in equity securities                             |  | (3,833  | ) |  | (1,872  | ) |  | (1,365  | )
|Net foreign exchange loss/(gain)****                                             |  | (1,416  | ) |  | (1,997  | ) |  | 323     |  
|Rentals receivable under operating leases in respect of                          |  |         |   |  |         |   |  |         |  
|- subleased land and buildings                                                   |  | (4,822  | ) |  | (5,633  | ) |  | (6,100  | )
|- owned plant and machinery                                                      |  | (99,498 | ) |  | (95,339 | ) |  | (80,531 | )
|                                                                                 |  |         |   |  |         |   |  |         |  



|* | Amortization of programming library is included within programming costs in the consolidated results of the Group.
|- | ------------------------------------------------------------------------------------------------------------------

|** | Amortization of intangible assets is included within network and other operating expenses in the consolidated results of the Group.
|-- | -----------------------------------------------------------------------------------------------------------------------------------

|*** | Impairment losses of property, plant and equipment were mainly related to certain of our property, plant and equipment becoming impaired due to technology and market changes.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**** | Net foreign exchange loss of approximately HK$19,000 and HK$304,000 are included within programming costs and selling, general and administrative expenses in the consolidated
results of the Group, respectively.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating expenses are analyzed by nature in compliance with HKAS 1,
Presentation of Financial Statements as follows:



|                              |  |           |  |           |  |          
|----------------------------- |  | --------- |  | --------- |  | ---------
|                              |  | 2005      |  | 2006      |  | 2007     
|                              |  | HK$000   |  | HK$000   |  | HK$000  
|Depreciation and amortization |  | 560,213   |  | 532,161   |  | 503,507  
|Staff costs                   |  | 716,751   |  | 769,770   |  | 692,467  
|Other operating expenses      |  | 884,217   |  | 1,047,207 |  | 929,929  
|                              |  |           |  |           |  |          
|Total operating costs         |  | 2,161,181 |  | 2,349,138 |  | 2,125,903
|                              |  |           |  |           |  |          

7. Non-operating income/(expenses)

This comprises:



|                                                             |  |         |  |         |   |  |        
|------------------------------------------------------------ |  | ------- |  | ------- | - |  | -------
|                                                             |  | 2005    |  | 2006    |   |  | 2007   
|                                                             |  | HK$000 |  | HK$000 |   |  | HK$000
|Net gain/(loss) on disposal of property, plant and equipment |  | 804     |  | (322    | ) |  | 2,311  
|                                                             |  |         |  |         |   |  |        



F-26



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



8. Income tax in the consolidated statement of operations

(a) Income tax in the consolidated statement of operations represents:



|                                                                 |  |         |   |  |         |   |  |         |  
|---------------------------------------------------------------- |  | ------- | - |  | ------- | - |  | ------- | -
|                                                                 |  | 2005    |   |  | 2006    |   |  | 2007    |  
|                                                                 |  | HK$000 |   |  | HK$000 |   |  | HK$000 |  
|Current taxProvision for Hong Kong Profits Tax                  |  |         |   |  |         |   |  |         |  
|Tax for the year                                                 |  |        |   |  | (75     | ) |  |        |  
|                                                                 |  |         |   |  |         |   |  |         |  
|Current taxOverseas                                             |  |         |   |  |         |   |  |         |  
|Tax for the year                                                 |  | (153    | ) |  | (222    | ) |  | (490    | )
|Under provision in respect of prior year                         |  | (2      | ) |  |        |   |  |        |  
|                                                                 |  |         |   |  |         |   |  |         |  
|                                                                 |  | (155    | ) |  | (222    | ) |  | (490    | )
|                                                                 |  |         |   |  |         |   |  |         |  
|Over provision for Hong Kong Profits Tax on leasing partnerships |  | 488     |   |  |        |   |  |        |  
|                                                                 |  |         |   |  |         |   |  |         |  
|Deferred taxHong Kong                                           |  |         |   |  |         |   |  |         |  
|Recognition of prior years tax losses                           |  | 205,004 |   |  |        |   |  |        |  
|Utilization of prior years tax losses recognized                |  |        |   |  | (64,150 | ) |  | (49,790 | )
|Reversal of temporary differences                                |  | 39,739  |   |  | 35,798  |   |  | 33,634  |  
|                                                                 |  |         |   |  |         |   |  |         |  
|                                                                 |  | 244,743 |   |  | (28,352 | ) |  | (16,156 | )
|                                                                 |  |         |   |  |         |   |  |         |  
|Income tax (expense)/credit                                      |  | 245,076 |   |  | (28,649 | ) |  | (16,646 | )
|                                                                 |  |         |   |  |         |   |  |         |  

All but an insignificant portion of profit before taxation is from Hong Kong sources.

The provision for Hong Kong profits tax is calculated at 17.5% (2005 and 2006: 17.5%) of the estimated assessable profits for the year. Taxation for
the overseas subsidiaries is charged at the appropriate current rate of taxation ruling in the relevant countries.

In August, 2005, the
Group reached a settlement agreement with the Inland Revenue Department on a tax dispute concerning a leveraged leasing arrangement which expired in September, 2003. Of the HK$17,000,000 provision made during 2004, HK$488,000 was reversed during
2005 to bring the net provision balance to HK$16,512,000, representing the Groups share of the final settlement amount, net of the amount indemnified by Wharf Communications Limited as tax liability pertaining to events occurring up to the
Groups Initial Public Offering on November 1, 1999. The balance was fully settled as at December 31, 2005.



F-27



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The differences between the profits tax rate in Hong Kong and the Groups effective tax rate
were as follows for the years ended December 31, 2005, 2006 and 2007:



|                                                                |  |       |   |  |       |   |  |       |  
|--------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                |  | 2005  |   |  | 2006  |   |  | 2007  |  
|                                                                |  | %     |   |  | %     |   |  | %     |  
|Hong Kong Profits Tax rate                                      |  | 17.5  |   |  | 17.5  |   |  | 17.5  |  
|Tax effect of non-deductible expenses                           |  | 0.2   |   |  | 0.5   |   |  | 0.7   |  
|Tax effect of non-taxable revenue                               |  | (0.8  | ) |  | (1.1  | ) |  | (2.3  | )
|Differential tax rate on subsidiaries income                   |  |      |   |  | (0.5  | ) |  | 0.8   |  
|Tax effect of unused tax losses not recognized                  |  | 3.7   |   |  | 11.2  |   |  | 9.4   |  
|Utilization of unrecognized tax losses of previous years        |  | (26.9 | ) |  | (13.9 | ) |  | (18.8 | )
|Tax effect of profits tax provision on leasing partnerships     |  | (0.1  | ) |  |      |   |  |      |  
|Tax effect of previously unrecognized tax losses now recognized |  | (80.5 | ) |  |      |   |  |      |  
|Other difference                                                |  |      |   |  |      |   |  | 1.1   |  
|                                                                |  |       |   |  |       |   |  |       |  
|Average effective tax rate                                      |  | (86.9 | ) |  | 13.7  |   |  | 8.4   |  
|                                                                |  |       |   |  |       |   |  |       |  

9. Dividends attributable to the year

(a) Dividends payable attributable to the year



|                                                                                                                             |  |         |  |         |  |        
|---------------------------------------------------------------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|                                                                                                                             |  | 2005    |  | 2006    |  | 2007   
|                                                                                                                             |  | HK$000 |  | HK$000 |  | HK$000
|Interim dividend declared and paid of 3.5 cents per share (2005: 3.5 cents per share; 2006: 3.5 cents per share)             |  | 70,673  |  | 70,673  |  | 70,673 
|Final dividend proposed after the balance sheet date of 5 cents per share (2005: 5 cents per share; 2006: 5 cents per share) |  | 100,962 |  | 100,962 |  | 100,840
|                                                                                                                             |  |         |  |         |  |        
|                                                                                                                             |  | 171,635 |  | 171,635 |  | 171,513
|                                                                                                                             |  |         |  |         |  |        

The final dividend proposed after the balance sheet date has not been recognized as a liability at
the balance sheet date.

(b) Dividends payable attributable to the previous financial year, approved and paid during the year



|                                                                                                                                                                       |  |         |  |         |  |        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|                                                                                                                                                                       |  | 2005    |  | 2006    |  | 2007   
|                                                                                                                                                                       |  | HK$000 |  | HK$000 |  | HK$000
|Final dividend in respect of the previous financial year, approved and paid during the year, of 5 cents per share (2005: 4.5 cents per share;
2006: 5 cents per share) |  | 90,866  |  | 100,962 |  | 100,840
|                                                                                                                                                                       |  |         |  |         |  |        

10. Earnings per share

(a) Basic earnings per share

The calculation of basic earnings per share is based on the profit attributable to equity
shareholders of the Company of HK$527,132,000, HK$182,115,000 and HK$181,852,000 and for each of the years ended December 31, 2005, 2006 and 2007 respectively and the weighted average of 2,019,234,400, 2,019,234,400 and 2,018,965,236 ordinary
shares outstanding for each respective year.



F-28



---

##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | (i) | Weighted average number of ordinary shares
| | --- | ------------------------------------------



|                                                          |  |               |  |               |  |               |  
|--------------------------------------------------------- |  | ------------- |  | ------------- |  | ------------- | -
|                                                          |  | 2005          |  | 2006          |  | 2007          |  
|Issued ordinary shares at January 1                       |  | 2,019,234,400 |  | 2,019,234,400 |  | 2,019,234,400 |  
|Effect of shares repurchased                              |  |              |  |              |  | (269,164      | )
|                                                          |  |               |  |               |  |               |  
|Weighted average number of ordinary shares at December 31 |  | 2,019,234,400 |  | 2,019,234,400 |  | 2,018,965,236 |  
|                                                          |  |               |  |               |  |               |  

(b) Diluted earnings per share

The calculation of diluted earnings per share is based on the profit attributable to equity shareholders of the Company of HK$527,132,000, HK$182,115,000 and HK$181,852,000 for each of the years ended
December 31, 2005, 2006 and 2007 respectively and the weighted average of 2,019,234,400, 2,019,234,400 and 2,018,965,236 ordinary shares outstanding for each respective year after adjusting for the effects of all dilutive potential ordinary
shares.

All of the Companys share options did not have intrinsic value throughout 2005, 2006 and 2007. Accordingly this has no
dilutive effect on the calculation of diluted earnings per share in all periods presented.

Basic and diluted earnings per ADS is
calculated on the same basis based on 20 ordinary shares per ADS.

11. Inventories



|                                 |  |         |   |  |        
|-------------------------------- |  | ------- | - |  | -------
|                                 |  | 2006    |   |  | 2007   
|                                 |  | HK$000 |   |  | HK$000
|Spare parts and consumables      |  | 1,198   |   |  | 6,351  
|Less: Provision for obsolescence |  | (87     | ) |  |       
|                                 |  |         |   |  |        
|                                 |  | 1,111   |   |  | 6,351  
|                                 |  |         |   |  |        

12. Trade and other receivables

Trade and other receivables comprise:



|                                            |  |         |  |        
|------------------------------------------- |  | ------- |  | -------
|                                            |  | 2006    |  | 2007   
|                                            |  | HK$000 |  | HK$000
|Accounts receivable from trade debtors, net |  | 85,585  |  | 81,847 
|Deposits, prepayments and other receivables |  | 64,445  |  | 100,407
|                                            |  |         |  |        
|                                            |  | 150,030 |  | 182,254
|                                            |  |         |  |        



F-29



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|(a) | An ageing analysis of accounts receivable from trade debtors (net of allowance for doubtful debts) is set out as follows:
|--- | -------------------------------------------------------------------------------------------------------------------------



|              |  |         |  |        
|------------- |  | ------- |  | -------
|              |  | 2006    |  | 2007   
|              |  | HK$000 |  | HK$000
|0 to 30 days  |  | 24,819  |  | 19,131 
|31 to 60 days |  | 24,428  |  | 23,763 
|61 to 90 days |  | 16,869  |  | 17,255 
|Over 90 days  |  | 19,469  |  | 21,698 
|              |  |         |  |        
|              |  | 85,585  |  | 81,847 
|              |  |         |  |        

The Groups credit policy is set out in Note 29(a).



|(b) | Impairment losses in respect of accounts receivable from trade debtors are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote,
in which case the impairment loss is written off against accounts receivable from trade debtors directly (see Note 1(t)(i)).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The movement in the allowance for doubtful debts during the year, including both specific and collective loss components, is as follows:



|                             |  |         |   |  |         |   |  |         |  
|---------------------------- |  | ------- | - |  | ------- | - |  | ------- | -
|                             |  | 2005    |   |  | 2006    |   |  | 2007    |  
|                             |  | HK$000 |   |  | HK$000 |   |  | HK$000 |  
|Balance at beginning of year |  | 19,534  |   |  | 17,434  |   |  | 21,558  |  
|Provision for the year       |  | 14,889  |   |  | 14,401  |   |  | 9,817   |  
|Written off                  |  | (16,989 | ) |  | (10,465 | ) |  | (14,497 | )
|Bad debt recovered           |  |        |   |  | 188     |   |  | 346     |  
|                             |  |         |   |  |         |   |  |         |  
|Balance at end of year       |  | 17,434  |   |  | 21,558  |   |  | 17,224  |  
|                             |  |         |   |  |         |   |  |         |  



|(c)(i) | 34% of the gross trade receivables relate to the Pay television and Internet access subscription businesses. There is no significant concentration of credit risk with respect to
these trade receivables as the customer bases are widely dispersed in different sectors. The Group has given a credit term of 30 days to these customers. Impairment provisions in respect of receivables arising from these subscription businesses are
recognized once the receivable is more than 90 days overdue.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | Apart from the trade receivables stated in Note 12(c)(i) above, the remaining trade receivables are mainly from advertising and program distribution businesses. The ageing analysis
of accounts receivable from trade debtors that are neither individually nor collectively considered to be impaired are as follows:
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                           |  |         |  |        
|-------------------------- |  | ------- |  | -------
|                           |  | 2006    |  | 2007   
|                           |  | HK$000 |  | HK$000
|Not yet due                |  | 11,056  |  | 10,951 
|                           |  |         |  |        
|Less than 1 month past due |  | 19,802  |  | 17,719 
|1 to 3 months past due     |  | 22,419  |  | 15,403 
|3 to 6 months past due     |  | 4,668   |  | 6,156  
|Over 6 months past due     |  | 200     |  | 24     
|                           |  |         |  |        
|                           |  | 47,089  |  | 39,302 
|                           |  |         |  |        
|                           |  | 58,145  |  | 50,253 
|                           |  |         |  |        



F-30



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



Receivables that were not impaired relate to a wide range of customers, that the Group had continuing
business relationship and have a good track record with the Group. Impairments are recognized based on the credit history of the customers, and are made on balances overdue for a period of 90 to 150 days. Based on past experience, management
believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these
balances.

13. Amounts due from fellow subsidiaries

The amounts due from fellow subsidiaries are unsecured, interest free and repayable on demand, and are arisen in the ordinary course of business (See Note 34).

14. Cash and cash equivalents



|                                                     |  |         |  |        
|---------------------------------------------------- |  | ------- |  | -------
|                                                     |  | 2006    |  | 2007   
|                                                     |  | HK$000 |  | HK$000
|Deposits with banks and other financial institutions |  | 560,165 |  | 501,267
|Cash at bank and in hand                             |  | 26,032  |  | 140,782
|                                                     |  |         |  |        
|                                                     |  | 586,197 |  | 642,049
|                                                     |  |         |  |        



F-31



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



15. Property, plant and equipment



|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|------------------------------- |  | ---------------------------------------------------------- | --------- |  | -------------------------------------------------- | - | ---------- | ---------------------------------------- |  | --------------------- |  | ------- | ----- | ------- | - |  | --------- | -
|                                |  | Network,decoders,cablemodemsandtelevisionproductionsystems |           |  | Furniture,fixtures,otherequipmentand motorvehicles |   |            | Leasehold land and buildings inHong Kong |  | Leaseholdimprovements |  |         | Total |        
|                                |  |                                                            | Longlease |  | Mediumlease                                        |   | Shortlease |                                          | 
|                                |  | HK$000                                                    |           |  | HK$000                                            |   |            | HK$000                                  |  | HK$000               |  | HK$000 |       | HK$000 |   |  | HK$000   |  
|Cost                            |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|                                |  |                                                            |           |  |                                                    |   |           
|At January 1, 2006              |  | 5,358,174                                                  |           |  | 575,432                                            |   |            | 3,306                                    |  | 2,673                 |  | 70      |       | 295,186 |   |  | 6,234,841 |  
|Additions                       |  | 137,378                                                    |           |  | 35,974                                             |   |            | 8,119                                    |  | 15,516                |  |        |       | 3,228   |   |  | 200,215   |  
|Disposals                       |  | (153,726                                                   | )         |  | (3,128                                             | ) |            |                                         |  |                      |  |        |       | (1,416  | ) |  | (158,270  | )
|Reclassification to inventories |  | (9,397                                                     | )         |  |                                                   |   |            |                                         |  |                      |  |        |       |        |   |  | (9,397    | )
|Exchange reserve                |  |                                                           |           |  | 522                                                |   |            |                                         |  |                      |  |        |       | 104     |   |  | 626       |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At December 31, 2006            |  | 5,332,429                                                  |           |  | 608,800                                            |   |            | 11,425                                   |  | 18,189                |  | 70      |       | 297,102 |   |  | 6,268,015 |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At January 1, 2007              |  | 5,332,429                                                  |           |  | 608,800                                            |   |            | 11,425                                   |  | 18,189                |  | 70      |       | 297,102 |   |  | 6,268,015 |  
|Additions                       |  | 101,558                                                    |           |  | 38,372                                             |   |            |                                         |  | 24,285                |  |        |       | 10,662  |   |  | 174,877   |  
|Disposals                       |  | (136,064                                                   | )         |  | (6,161                                             | ) |            |                                         |  |                      |  |        |       | (2,630  | ) |  | (144,855  | )
|Reclassification to inventories |  | (1,062                                                     | )         |  |                                                   |   |            |                                         |  |                      |  |        |       |        |   |  | (1,062    | )
|Exchange reserve                |  | 1                                                          |           |  | 779                                                |   |            |                                         |  | 434                   |  |        |       | 247     |   |  | 1,461     |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At December 31, 2007            |  | 5,296,862                                                  |           |  | 641,790                                            |   |            | 11,425                                   |  | 42,908                |  | 70      |       | 305,381 |   |  | 6,298,436 |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|Accumulated depreciation        |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|                                |  |                                                            |           |  |                                                    |   |           
|At January 1, 2006              |  | 3,699,443                                                  |           |  | 468,076                                            |   |            | 1,293                                    |  | 348                   |  | 70      |       | 227,275 |   |  | 4,396,505 |  
|Charge for the year             |  | 378,206                                                    |           |  | 39,016                                             |   |            | 246                                      |  | 260                   |  |        |       | 10,393  |   |  | 428,121   |  
|Impairment loss                 |  | 6,843                                                      |           |  | 934                                                |   |            |                                         |  |                      |  |        |       | 3,864   |   |  | 11,641    |  
|Written back on disposals       |  | (152,204                                                   | )         |  | (2,901                                             | ) |            |                                         |  |                      |  |        |       | (1,300  | ) |  | (156,405  | )
|Reclassification to inventories |  | (3,510                                                     | )         |  |                                                   |   |            |                                         |  |                      |  |        |       |        |   |  | (3,510    | )
|Exchange reserve                |  |                                                           |           |  | 286                                                |   |            |                                         |  |                      |  |        |       | 24      |   |  | 310       |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At December 31, 2006            |  | 3,928,778                                                  |           |  | 505,411                                            |   |            | 1,539                                    |  | 608                   |  | 70      |       | 240,256 |   |  | 4,676,662 |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At January 1, 2007              |  | 3,928,778                                                  |           |  | 505,411                                            |   |            | 1,539                                    |  | 608                   |  | 70      |       | 240,256 |   |  | 4,676,662 |  
|Charge for the year             |  | 320,247                                                    |           |  | 36,458                                             |   |            | 281                                      |  | 993                   |  |        |       | 8,543   |   |  | 366,522   |  
|Impairment loss                 |  | 2,925                                                      |           |  | 322                                                |   |            |                                         |  |                      |  |        |       |        |   |  | 3,247     |  
|Written back on disposals       |  | (131,024                                                   | )         |  | (6,034                                             | ) |            |                                         |  |                      |  |        |       | (2,630  | ) |  | (139,688  | )
|Reclassification to inventories |  | (186                                                       | )         |  |                                                   |   |            |                                         |  |                      |  |        |       |        |   |  | (186      | )
|Exchange reserve                |  |                                                           |           |  | 606                                                |   |            |                                         |  | 10                    |  |        |       | 41      |   |  | 657       |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At December 31, 2007            |  | 4,120,740                                                  |           |  | 536,763                                            |   |            | 1,820                                    |  | 1,611                 |  | 70      |       | 246,210 |   |  | 4,907,214 |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|Net book value                  |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|                                |  |                                                            |           |  |                                                    |   |           
|At December 31, 2007            |  | 1,176,122                                                  |           |  | 105,027                                            |   |            | 9,605                                    |  | 41,297                |  |        |       | 59,171  |   |  | 1,391,222 |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  
|At December 31, 2006            |  | 1,403,651                                                  |           |  | 103,389                                            |   |            | 9,886                                    |  | 17,581                |  |        |       | 56,846  |   |  | 1,591,353 |  
|                                |  |                                                            |           |  |                                                    |   |            |                                          |  |                       |  |         |       |         |   |  |           |  



F-32



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



Impairment loss results from loss recognized on abandonment of lost or damaged property, plant and
equipment. In 2007, of the total impairment loss, HK$2,925,000 (2006: HK$6,843,000) was made for decoders and cable modems which had become obsolete during normal usage or were leased to subscribers in the ordinary course of the Pay television
subscription and Broadband Internet access businesses, and had not been returned after the services were terminated.

As at
December 31, 2007, the gross carrying amounts of property, plant and equipment of the Group held for use in operating leases were HK$171,115,000 (2006: HK$230,545,000) and the related accumulated depreciation was HK$125,869,000 (2006: HK$
140,953,000).

(a) Property, plant and equipment held under finance leases

The Group leases certain equipment under finance leases expiring in 2008. At the end of the lease term the Group has the option to purchase the leased equipment at a price deemed to be a bargain purchase option. None
of the leases includes contingent rentals. During the previous year, additions to property, plant and equipment of the Group financed by finance leases were HK$1,018,000. At the balance sheet date, the net book value of network, decoders, cable
modems and television production systems held under finance leases of the Group was HK$594,000 (2006: HK$848,000).

16. Programming library



|                         |  |                     |  |          |   |  |         |  
|------------------------ |  | ------------------- |  | -------- | - |  | ------- | -
|                         |  | Internallydeveloped |  | Acquired |   |  | Total   |  
|                         |  | HK$000             |  | HK$000  |   |  | HK$000 |  
|Cost                     |  |                     |  |          |   |  |         |  
|                         |  |                     | 
|At January 1, 2006       |  | 34,684              |  | 356,655  |   |  | 391,339 |  
|Additions                |  | 5,541               |  | 138,422  |   |  | 143,963 |  
|Written off              |  |                    |  | (70,137  | ) |  | (70,137 | )
|                         |  |                     |  |          |   |  |         |  
|At December 31, 2006     |  | 40,225              |  | 424,940  |   |  | 465,165 |  
|                         |  |                     |  |          |   |  |         |  
|At January 1, 2007       |  | 40.225              |  | 424,940  |   |  | 465,165 |  
|Additions                |  | 10,701              |  | 119,514  |   |  | 130,215 |  
|Written off              |  |                    |  | (66,871  | ) |  | (66,871 | )
|                         |  |                     |  |          |   |  |         |  
|At December 31, 2007     |  | 50,926              |  | 477,583  |   |  | 528,509 |  
|                         |  |                     |  |          |   |  |         |  
|Accumulated amortization |  |                     |  |          |   |  |         |  
|                         |  |                     | 
|At January 1, 2006       |  | 10,108              |  | 238,375  |   |  | 248,483 |  
|Charge for the year      |  | 9,639               |  | 91,478   |   |  | 101,117 |  
|Written off              |  |                    |  | (70,137  | ) |  | (70,137 | )
|                         |  |                     |  |          |   |  |         |  
|At December 31, 2006     |  | 19,747              |  | 259,716  |   |  | 279,463 |  
|                         |  |                     |  |          |   |  |         |  
|At January 1, 2007       |  | 19,747              |  | 259,716  |   |  | 279,463 |  
|Charge for the year      |  | 13,542              |  | 119,058  |   |  | 132,600 |  
|Written off              |  |                    |  | (66,871  | ) |  | (66,871 | )
|                         |  |                     |  |          |   |  |         |  
|At December 31, 2007     |  | 33,289              |  | 311,903  |   |  | 345,192 |  
|                         |  |                     |  |          |   |  |         |  
|Net book value           |  |                     |  |          |   |  |         |  
|                         |  |                     | 
|At December 31, 2007     |  | 17,637              |  | 165,680  |   |  | 183,317 |  
|                         |  |                     |  |          |   |  |         |  
|At December 31, 2006     |  | 20,478              |  | 165,224  |   |  | 185,702 |  
|                         |  |                     |  |          |   |  |         |  



F-33



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



17. Other intangible assets



|                                                           |  |                |  |                   |   |  |         |  
|---------------------------------------------------------- |  | -------------- |  | ----------------- | - |  | ------- | -
|                                                           |  | Clubdebentures |  | Advertisingrights |   |  | Total   |  
|                                                           |  | HK$000        |  | HK$000           |   |  | HK$000 |  
|Cost                                                       |  |                |  |                   |   |  |         |  
|                                                           |  |                | 
|At January 1, 2006                                         |  | 4,006          |  |                  |   |  | 4,006   |  
|Relating to a subsidiary acquired (Note 32)                |  |               |  | 11,692            |   |  | 11,692  |  
|                                                           |  |                |  |                   |   |  |         |  
|At December 31, 2006, January 1, 2007 and December 31,2007 |  | 4,006          |  | 11,692            |   |  | 15,698  |  
|                                                           |  |                |  |                   |   |  |         |  
|Accumulated amortization                                   |  |                |  |                   |   |  |         |  
|                                                           |  |                | 
|At January 1, 2006                                         |  |               |  |                  |   |  |        |  
|Charge for the year                                        |  |               |  | (2,923            | ) |  | (2,923  | )
|                                                           |  |                |  |                   |   |  |         |  
|At December 31, 2006 and January 1, 2007                   |  |               |  | (2,923            | ) |  | (2,923  | )
|Charge for the year                                        |  |               |  | (4,385            | ) |  | (4,385  | )
|                                                           |  |                |  |                   |   |  |         |  
|At December 31, 2007                                       |  |               |  | (7,308            | ) |  | (7,308  | )
|                                                           |  |                |  |                   |   |  |         |  
|Net book value                                             |  |                |  |                   |   |  |         |  
|                                                           |  |                | 
|At December 31, 2007                                       |  | 4,006          |  | 4,384             |   |  | 8,390   |  
|                                                           |  |                |  |                   |   |  |         |  
|At December 31, 2006                                       |  | 4,006          |  | 8,769             |   |  | 12,775  |  
|                                                           |  |                |  |                   |   |  |         |  

18. Interest in associate



|                    |  |         |  |        
|------------------- |  | ------- |  | -------
|                    |  | 2006    |  | 2007   
|                    |  | HK$000 |  | HK$000
|Share of net assets |  |        |  | 58,500 
|                    |  |         |  |        

The Group acquired 30% of the share capital of TWC Asian Film Investco LLC on September 20,
2007 for a cash consideration of HK$58,500,000.

Details of the Groups interest in associate are as follows:



|                            |  |                          |  |                                 |  |                     |  |                                          |  |                               |  
|--------------------------- |  | ------------------------ |  | ------------------------------- |  | ------------------- |  | ---------------------------------------- |  | ----------------------------- | -
|Name of associate           |  | Form ofbusinessstructure |  | Place ofincorporation/operation |  | Principalactivities |  | Particulars of issuedand paid up capital |  | Proportionofownershipinterest |  
|                            |  |                          |  |                                 | 
|TWC Asian Film Investco LLC |  | Incorporated             |  | State of Delaware,USA           |  | Investmentholding   |  | Capital contributionUS$25,000,000        |  | 30                            | %

The associate was inactive during the year ended December 31, 2007.



F-34



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



19. Other non-current assets



|                                                                     |  |         |  |        
|-------------------------------------------------------------------- |  | ------- |  | -------
|                                                                     |  | 2006    |  | 2007   
|                                                                     |  | HK$000 |  | HK$000
|Unlisted equity securities, at cost                                  |  | 8,225   |  | 2,725  
|Available-for-sale equity securities listed on London Stock Exchange |  |        |  | 6,783  
|Inventories (spare parts)                                            |  | 7,726   |  | 3,084  
|Deposits, prepayments and other receivables                          |  | 27,734  |  | 81,317 
|Amounts due from fellow subsidiaries                                 |  | 7,394   |  | 11,074 
|                                                                     |  |         |  |        
|                                                                     |  | 51,079  |  | 104,983
|                                                                     |  |         |  |        

As at December 31, 2007, the market value of listed securities was HK$6,783,000 and the fair
value of individually impaired unlisted equity securities was HK$2,719,000.

20. Trade and other payables

Trade and other payables comprise:



|                                            |  |         |  |        
|------------------------------------------- |  | ------- |  | -------
|                                            |  | 2006    |  | 2007   
|                                            |  | HK$000 |  | HK$000
|Amounts due to trade creditors              |  | 42,675  |  | 35,040 
|Accrued expenses and other payables         |  | 395,698 |  | 329,263
|Receipts in advance and customers deposits |  | 107,527 |  | 106,917
|                                            |  |         |  |        
|                                            |  | 545,900 |  | 471,220
|                                            |  |         |  |        

An ageing analysis of amounts due to trade creditors is set out as follows:



|              |  |         |  |        
|------------- |  | ------- |  | -------
|              |  | 2006    |  | 2007   
|              |  | HK$000 |  | HK$000
|0 to 30 days  |  | 3,806   |  | 2,603  
|31 to 60 days |  | 3,916   |  | 6,844  
|61 to 90 days |  | 6,537   |  | 3,895  
|Over 90 days  |  | 28,416  |  | 21,698 
|              |  |         |  |        
|              |  | 42,675  |  | 35,040 
|              |  |         |  |        

21. Amounts due to fellow subsidiaries

The amounts due to fellow subsidiaries are unsecured, interest free, and repayable on demand, and are arisen in the ordinary course of business (see Note
34).

22. Amount due to immediate holding company

The amount due to immediate holding company is unsecured, interest free, and has no fixed terms of repayment, and is arisen in the ordinary course of business (see Note 34). The average balances due to the immediate
holding company during the years ended December 31, 2006 and 2007 are HK$118,000 and HK$1,803,000 respectively.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



23. Obligations under finance leases



|                                     |  |                                         |  |                           |      |  |                                         |  |                           |  
|------------------------------------ |  | --------------------------------------- |  | ------------------------- | ---- |  | --------------------------------------- |  | ------------------------- | -
|                                     |  | 2006                                    |  |                           | 2007 | 
|                                     |  | Presentvalue of theminimumleasepayments |  | Totalminimumleasepayments |      |  | Presentvalue of theminimumleasepayments |  | Totalminimumleasepayments |  
|                                     |  | HK$000                                 |  | HK$000                   |      |  | HK$000                                 |  | HK$000                   |  
|Within one year                      |  | 705                                     |  | 723                       |      |  | 72                                      |  | 73                        |  
|After one year but within two years  |  | 72                                      |  | 73                        |      |  |                                        |  |                          |  
|                                     |  |                                         |  |                           |      |  |                                         |  |                           |  
|                                     |  | 777                                     |  | 796                       |      |  | 72                                      |  | 73                        |  
|                                     |  |                                         |  |                           |      |  |                                         |  |                           |  
|Less: total future interest expenses |  |                                         |  | (19                       | )    |  |                                         |  | (1                        | )
|                                     |  |                                         |  |                           |      |  |                                         |  |                           |  
|Present value of lease obligations   |  |                                         |  | 777                       |      |  |                                         |  | 72                        |  
|                                     |  |                                         |  |                           |      |  |                                         |  |                           |  

24. Other non-current liabilities



|                                            |  |         |  |        
|------------------------------------------- |  | ------- |  | -------
|                                            |  | 2006    |  | 2007   
|                                            |  | HK$000 |  | HK$000
|Accrued expenses and other payables         |  | 9,248   |  | 8,068  
|Receipts in advance and customers deposits |  | 42,671  |  | 26,485 
|Amount due to a fellow subsidiary           |  | 2,051   |  |       
|                                            |  |         |  |        
|                                            |  | 53,970  |  | 34,553 
|                                            |  |         |  |        

25. Income tax in the balance sheet

(a) Current taxation in the balance sheet represents:



|                  |  |         |  |        
|----------------- |  | ------- |  | -------
|                  |  | 2006    |  | 2007   
|                  |  | HK$000 |  | HK$000
|Overseas taxation |  | 49      |  | 347    
|                  |  |         |  |        



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(b) Deferred tax assets and liabilities recognized:

The components of deferred tax (assets)/liabilities recognized in the consolidated balance sheet and the movements during the year are as follows:



|                                                                       |  |                                                       |   |  |            |   |  |                           |   |  |          |  
|---------------------------------------------------------------------- |  | ----------------------------------------------------- | - |  | ---------- | - |  | ------------------------- | - |  | -------- | -
|Deferred tax arising from:                                             |  | Depreciationallowancesin excess ofrelateddepreciation |   |  | Tax losses |   |  | Othertemporarydifferences |   |  | Total    |  
|                                                                       |  | HK$000                                               |   |  | HK$000    |   |  | HK$000                   |   |  | HK$000  |  
|At January 1, 2006                                                     |  | 199,136                                               |   |  | (504,201   | ) |  |                          |   |  | (305,065 | )
|Addition through acquisition of subsidiary                             |  |                                                      |   |  |           |   |  | 3,508                     |   |  | 3,508    |  
|Charged/(credited) to consolidated statement of operations (Note 8(a)) |  | (34,921                                               | ) |  | 64,150     |   |  | (877                      | ) |  | 28,352   |  
|                                                                       |  |                                                       |   |  |            |   |  |                           |   |  |          |  
|At December 31, 2006 and January 1, 2007                               |  | 164,215                                               |   |  | (440,051   | ) |  | 2,631                     |   |  | (273,205 | )
|                                                                       |  |                                                       |   | 
|Charged/(credited) to consolidated statement of operations (Note 8(a)) |  | (35,218                                               | ) |  | 49,790     |   |  | 1,584                     |   |  | 16,156   |  
|                                                                       |  |                                                       |   |  |            |   |  |                           |   |  |          |  
|At December 31, 2007                                                   |  | 128,997                                               |   |  | (390,261   | ) |  | 4,215                     |   |  | (257,049 | )
|                                                                       |  |                                                       |   |  |            |   |  |                           |   |  |          |  



|                                                             |  |          |   |  |          |  
|------------------------------------------------------------ |  | -------- | - |  | -------- | -
|                                                             |  | 2006     |   |  | 2007     |  
|                                                             |  | HK$000  |   |  | HK$000  |  
|Net deferred tax assets recognized on the balance sheet      |  | (388,266 | ) |  | (354,166 | )
|Net deferred tax liabilities recognized on the balance sheet |  | 115,061  |   |  | 97,117   |  
|                                                             |  |          |   |  |          |  
|                                                             |  | (273,205 | ) |  | (257,049 | )
|                                                             |  |          |   |  |          |  

(c) Deferred tax assets not recognized:

The Group has not recognized deferred tax assets in respect of the following:



|                                              |  |         |  |        
|--------------------------------------------- |  | ------- |  | -------
|                                              |  | 2006    |  | 2007   
|                                              |  | HK$000 |  | HK$000
|Future benefit of tax losses                  |  | 423,498 |  | 412,313
|Provision for obsolete inventories            |  | 13      |  |       
|Impairment loss for bad and doubtful accounts |  | 1,022   |  | 17     
|                                              |  |         |  |        
|                                              |  | 424,533 |  | 412,330
|                                              |  |         |  |        



F-37



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



26. Capital and reserves

(a) Authorized and issued share capital



|                                 |  |              |  |           |  |              |   |  |           |  
|-------------------------------- |  | ------------ |  | --------- |  | ------------ | - |  | --------- | -
|                                 |  | 2006         |  | 2007      | 
|                                 |  | No. ofshares |  |           |  | No. ofshares |   |  |           |  
|                                 |  | (000)       |  | HK$000   |  | (000)       |   |  | HK$000   |  
|Authorized                       |  |              |  |           |  |              |   |  |           |  
|Ordinary shares of HK$1 each     |  | 8,000,000    |  | 8,000,000 |  | 8,000,000    |   |  | 8,000,000 |  
|                                 |  |              |  |           |  |              |   |  |           |  
|Issued and fully paid            |  |              |  |           |  |              |   |  |           |  
|At January 1                     |  | 2,019,234    |  | 2,019,234 |  | 2,019,234    |   |  | 2,019,234 |  
|Shares repurchased and cancelled |  |             |  |          |  | (2,442       | ) |  | (2,442    | )
|                                 |  |              |  |           |  |              |   |  |           |  
|At December 31                   |  | 2,019,234    |  | 2,019,234 |  | 2,016,792    |   |  | 2,016,792 |  
|                                 |  |              |  |           |  |              |   |  |           |  

The holders of ordinary shares are entitled to receive dividends as declared from time to time and
are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Companys residual assets.



| | (i) | Purchase of own shares
| | --- | ----------------------

During the year,
the Company repurchased and cancelled its own ordinary shares on The Stock Exchange of Hong Kong Limited as follows:



|              |  |                            |  |                             |  |                            |  |                    
|------------- |  | -------------------------- |  | --------------------------- |  | -------------------------- |  | -------------------
|Month/year    |  | Number ofsharesrepurchased |  | Highest pricepaid per share |  | Lowest pricepaid per share |  | Aggregateprice paid
|              |  |                            |  | HK$                         |  | HK$                        |  | HK$000            
|November 2007 |  | 1,249,000                  |  | 1.64                        |  | 1.57                       |  | 2,010              
|December 2007 |  | 1,193,000                  |  | 1.60                        |  | 1.56                       |  | 1,896              
|              |  |                            |  |                             |  |                            |  |                    
|              |  |                            |  |                             |  |                            |  | 3,906              
|              |  |                            |  |                             |  |                            |  |                    

The repurchased shares were cancelled and accordingly the issued share capital of
the Company was reduced by the nominal value of these shares. Pursuant to Section 49H of the Hong Kong Companies Ordinance, an amount equivalent to the par value of the shares cancelled of $2,442,000 was transferred from revenue reserve to the
capital redemption reserve. The premium paid and the expenses incurred on the repurchase of the shares of approximately $1,438,000 and $26,000, respectively, were charged to revenue reserve.

(b) Nature and purpose of reserves



| | (i) | Share premium and capital redemption reserve
| | --- | --------------------------------------------

The application of the share premium account and capital redemption reserve account is governed by Section 48B of the Hong Kong Companies Ordinance.



| | (ii) | Special capital reserve
| | ---- | -----------------------

The special
capital reserve is non-distributable and it should be applied for the same purpose as the share premium account. In 2004, the issued share capital of a subsidiary under the Group was reduced



F-38



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(Capital Reduction) and the credit arising from the Capital Reduction was applied to eliminate the accumulated losses standing in the statement
of operations of that subsidiary as at September 30, 2004.

An undertaking was given to the Court by the subsidiary in
connection with the Capital Reduction (the Undertaking). Pursuant to the Undertaking, any future recoveries or reversals of provisions in respect of: 1) assets owned or held under finance and operating leases against which charges
to depreciation were made as at September 30, 2004; and 2) provisions made by the subsidiary in respect of certain assets held by the subsidiary as at September 30, 2004; collectively the relevant assets (relevant assets)
to the extent that such recoveries exceed the written down amounts of the relevant assets, up to an aggregate amount of HK$1,958,524,266, will be credited to a special capital reserve. While any debt or liability of, or claim against, the
subsidiary at the date of the Capital Reduction remains outstanding and the person entitled to the benefit thereof has not agreed otherwise, the special capital reserve shall not be treated as realized profits. The subsidiary shall be at
liberty to apply the special capital reserve for the same purposes as a share premium account may be applied.

The amount to
be credited to the special capital reserve is subject to a limit (Limit), which was HK$1,958,524,266 as at the date of the capital reduction. The Limit may be reduced by the amount of any increase in the issued share capital or in
the share premium account of the subsidiary resulting from an issue of shares for cash or other consideration or upon a capitalization of distributable reserves. The subsidiary shall be at liberty to transfer the amount so reduced to the
general reserves of the subsidiary and the same shall become available for distribution. The Limit may also be reduced after the disposal or other realization of any of the relevant assets by the amount of the charge to depreciation or
provision made in relation to such asset as at September 30, 2004 less such amount as is credited to the special capital reserve as a result of such disposal or realization.

In the event that the amount standing to the credit of the special capital reserve exceeds the Limit, the subsidiary shall be at liberty
to transfer the amount of any such excess to the general reserves of the subsidiary, which shall become available for distribution.

As at December 31, 2007, the Limit of the special capital reserve, as reduced by HK$8,077,849 (2006: HK$516,824,140) related to recoveries and reversals of provisions of the relevant assets, was HK$924,672,784 (2006: HK$932,750,633),
and the amount standing to the credit of the special capital reserve was HK$13,866,990 (2006: HK$13,771,309).

The Capital
Reduction has no impact on the consolidated revenue reserve.



| | (iii) | Exchange reserve
| | ----- | ----------------

The exchange reserve
comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in Note 2(p).



| | (iv) | Fair value reserve
| | ---- | ------------------

The fair value reserve
comprises the cumulative net change in the fair value of available-for-sale securities held at the balance sheet date and is dealt with in accordance with the accounting policies in Notes 2(s) and (t).



| | (v) | Other reserve
| | --- | -------------

The other reserve comprises
aggregate price of shares repurchased but not yet cancelled as at December 31, 2007.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(c) Capital management

The Groups primary objectives when managing capital are to safeguard the Groups ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other
stakeholders, and to support the Groups stability and growth, by pricing products and services commensurately with the level of risk.

The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholders return, taking into consideration the future of the Group and capital efficiency, prevailing and projected
profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.

The Group
manages it capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new
shares. The Group is debt-free and no changes were made in the objectives, policies or processes during the years ended December 31, 2007 and December 31, 2006.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

27. Equity
settled share-based transactions

Pursuant to the Companys share option scheme, the Board of Directors is authorized to grant
options to eligible employees to subscribe for ordinary shares of the Company at prices as determined by the Board of Directors in accordance with the terms of the scheme.

(a) The number and weighted average exercise prices of share options are as follows:



|                                             |  |                  |   |      |                                            |  |                  |   |  |                                           
|-------------------------------------------- |  | ---------------- | - | ---- | ------------------------------------------ |  | ---------------- | - |  | ------------------------------------------
|                                             |  | 2006             |   | 2007
|                                             |  | Number ofoptions |   |      | Weighted-averageexercise priceper shareHK$ |  | Number ofoptions |   |  | Weighted-averageexercise priceper shareHK$
|At January 1                                 |  | 15,160,000       |   |      | 10.49                                      |  | 12,100,000       |   |  | 10.49                                     
|Lapsed- Forfeited                            |  | (3,060,000       | ) |      | 10.49                                      |  | (680,000         | ) |  | 10.49                                     
|                                             |  |                  |  
|                                             |  |                  |   |      |                                            |  |                  |   |  |                                           
|At December 31                               |  | 12,100,000       |   |      | 10.49                                      |  | 11,420,000       |   |  | 10.49                                     
|                                             |  |                  |   |      |                                            |  |                  |   |  |                                           
|Options vested and exercisable atDecember 31 |  | 7,260,000        |   |      | 10.49                                      |  | 6,852,000        |   |  | 10.49                                     
|                                             |  |                  |   |      |                                            |  |                  |   |  |                                           

(b) Terms of unexpired and unexercised share options at balance sheet date:



|                 |  |                                    |  |               |       |            |            |            |           
|---------------- |  | ---------------------------------- |  | ------------- | ----- | ---------- | ---------- | ---------- | ----------
|Date granted     |  | Exercise period                    |  | Exerciseprice |       | 2006Number |            | 2007Number
|                 |  |                                    | 
|February 8, 2000 |  | April 1, 2001 to December 31, 2009 |  | HK$           | 10.49 |            | 12,100,000 |            | 11,420,000
|                 |  |                                    |  |               |       |            |            |            |           

Each option entitles the holder to subscribe for one ordinary share in the Company.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



At December 31, 2007, the weighted average remaining contractual life of unexpired share options
was 1.2 years (2006: 1.8 years).

(c) No share options were granted or exercised during 2006 and 2007.

28. Particulars of subsidiaries

(a) The subsidiaries which
principally affected the results, assets or liabilities of the Company at December 31, 2007 were as follows:

All of these controlled
subsidiaries are defined under Note 2(c)(i) and have been consolidated into the group financial statements.



|                                     |  |                                  |  |                                            |  |                                               |  |                                 |  |    
|------------------------------------ |  | -------------------------------- |  | ------------------------------------------ |  | --------------------------------------------- |  | ------------------------------- |  | ---
|Name of company                      |  | Place ofincorporation /operation |  | Principal activities                       |  | Particulars of issued capital, all fully paid |  | Proportion ofownership interest
|                                     |  |                                  |  | Directly                                   |  | Indirectly                                   
|Apex Victory Limited                 |  | British Virgin Islands           |  | Program licensing                          |  | 500 ordinary shares of US$1 each              |  | 100                             |  |   
|Cable Network Communications Limited |  | Hong Kong                        |  | Investment holding                         |  | 100 ordinary shares of HK$1 each              |  | 100                             |  |   
|                                     |  |                                  |  |                                            |  | 2 non-voting deferred shares of HK$1 each     |  |                                |  |   
|Hong Kong Cable Enterprises Limited  |  | Hong Kong                        |  | Advertising airtime and program licensing  |  | 2 ordinary shares of HK$1 each                |  |                                |  | 100
|Hong Kong Cable News Express Limited |  | Hong Kong                        |  | Advertising airtime                        |  | 2 ordinary shares of HK$10 each               |  |                                |  | 100
|Hong Kong Cable Television Limited   |  | Hong Kong                        |  | Pay television and internet and multimedia |  | 750,000,000 ordinary shares of HK$1 each      |  |                                |  | 100
|i-CABLE Entertainment Limited        |  | Hong Kong                        |  | Program production and channel operation   |  | 10,000,000 ordinary shares of HK$1 each       |  |                                |  | 100
|i-CABLE Network Limited              |  | Hong Kong                        |  | Network operation                          |  | 100 ordinary shares of HK$1 each              |  |                                |  | 100
|                                     |  |                                  |  |                                            |  | 2 non-voting deferred shares of HK$1 each     |  |                                |  |   
|i-CABLE News Limited                 |  | Hong Kong                        |  | Program production and channel operation   |  | 10,000,000 ordinary shares of HK$1 each       |  |                                |  | 100
|i-CABLE Satellite Television Limited |  | Hong Kong                        |  | Non-domestic television services           |  | 2 ordinary shares of HK$1 each                |  |                                |  | 100
|i-CABLE Sports Limited               |  | Hong Kong                        |  | Program production and channel operation   |  | 10,000,000 ordinary shares of HK$1 each       |  |                                |  | 100
|i-CABLE Network Operations Limited   |  | Hong Kong                        |  | Network operation                          |  | 500,000 ordinary shares of HK$1 each          |  |                                |  | 100



F-41



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|                                                                  |  |                                   |  |                              |  |                                               |  |                                 |  |    
|----------------------------------------------------------------- |  | --------------------------------- |  | ---------------------------- |  | --------------------------------------------- |  | ------------------------------- |  | ---
|Name of company                                                   |  | Place ofincorporation / operation |  | Principal activities         |  | Particulars of issued capital, all fully paid |  | Proportion of ownershipinterest
|                                                                  |  |                                   |  | Directly                     |  | Indirectly                                   
|Rediffusion SatelliteServices Limited                             |  | Hong Kong                         |  | Satellite television systems |  | 1,000 ordinary shares of HK$10
each           |  |                                |  | 100
|Sundream MotionPictures Limited                                   |  | Hong Kong                         |  | Film production              |  | 10,000,000 ordinary shares of HK$1 each       |  |                                |  | 100
|Ad On Media Limited*(Formerly TeamworkZhuoran AdvertisingLimited) |  | The Peoples Republic of China    |  | Advertising publication      |  | RMB8,000,000                                  |  |                                |  | 70 
|Guangzhou Kuan XunCustomer ServicesCompany Limited **             |  | The Peoples Republic of China    |  | Technical services           |  | HK$26,000,000***                              |  |                                |  | 100



|* | This entity is registered as a sino-foreign joint venture company under PRC law.
|- | --------------------------------------------------------------------------------

|** | English translation of Chinese name. This entity is registered as wholly foreign owned enterprises under PRC law.
|-- | -----------------------------------------------------------------------------------------------------------------

|*** | Further injection of HK$25,000,000 was made by the Group during the year ended December 31, 2007.
|--- | -------------------------------------------------------------------------------------------------

29. Financial risk management objectives and policies

Exposure to credit, liquidity, interest rate
and currency risks arises in the normal course of the Groups businesses. These risks are limited by the Groups financial management policies and practices described below:

(a) Credit risk

The Groups credit risk is primarily attributable to trade and other receivables.
Management has a defined credit policy in place with general credit terms ranging from 0 to 90 days. The exposure to credit risks is monitored on an ongoing basis. The Group has no significant concentrations of credit risk from customers.
Subscription revenue from customers is settled mainly in cash or via major credit cards.

(b) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit
facilities. The Groups objective is to maintain a balance between the continuity of funding and the flexibility through use of bank overdrafts and bank loans. In addition, banking facilities have been put in place for contingency purposes.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The following table details the remaining contractual maturities at the balance sheet date of the
Groups non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates) and the earliest date the Group can be required to pay:



|                                            |  |                |  |                                       |  |                          |  |                                    |  |                |  |                                       |  |                          |  |                                   
|------------------------------------------- |  | -------------- |  | ------------------------------------- |  | ------------------------ |  | ---------------------------------- |  | -------------- |  | ------------------------------------- |  | ------------------------ |  | ----------------------------------
|                                            |  | 2006           |  | 2007                                 
|                                            |  | Carryingamount |  | Totalcontractualundiscountedcash flow |  | Within 1year oron demand |  | Morethan 1year butless than2 years |  | Carryingamount |  | Totalcontractualundiscountedcash flow |  | Within 1year oron demand |  | Morethan 1year butless than2 years
|                                            |  |                |  |                                       |  |                          | 
|                                            |  | HK$000        |  | HK$000                               |  | HK$000                  |  | HK$000                            |  | HK$000        |  | HK$000                               |  | HK$000                  |  | HK$000                           
|Obligations under finance leases            |  | 777            |  | 796                                   |  | 723                      |  | 73                                 |  | 72             |  | 73                                    |  | 73                       |  |                                  
|Amounts due to trade creditors              |  | 42,675         |  | 42,675                                |  | 42,675                   |  |                                   |  | 35,040         |  | 35,040                                |  | 35,040                   |  |                                  
|Accrued expenses and other payables         |  | 404,946        |  | 404,946                               |  | 395,698                  |  | 9,248                              |  | 337,331        |  | 337,331                               |  | 329,263                  |  | 8,068                             
|Receipts in advance and customers deposits |  | 150,198        |  | 150,198                               |  | 107,527                  |  | 42,671                             |  | 133,402        |  | 133,402                               |  | 106,917                  |  | 26,485                            
|                                            |  |                |  |                                       |  |                          |  |                                    |  |                |  |                                       |  |                          |  |                                   
|                                            |  | 598,596        |  | 598,615                               |  | 546,623                  |  | 51,992                             |  | 505,845        |  | 505,846                               |  | 471,293                  |  | 34,553                            
|                                            |  |                |  |                                       |  |                          |  |                                    |  |                |  |                                       |  |                          |  |                                   

(c) Interest rate risk

At December 31, 2007, the Group had short-term deposits with bank and other financial institutions amounted to HK$501,267,000 (2006: HK$560,165,000), with original maturities of two days at market interest rates.
Apart from the foregoing, the Group has no other significant income-generating financial assets or interest-bearing financial liabilities. The Groups revenue, expenses and cash flows are substantially independent of changes in market interest
rates.

Effective interest rates and repricing analysis

In respect of income-earning financial assets, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice:



|                          |      |                        |      |                         |      |      |      |     
|------------------------- | ---- | ---------------------- | ---- | ----------------------- | ---- | ---- | ---- | ----
|Interest rate risk        |      | One year or less Total |      | Effective interest rate
|                          | 2006 |                        | 2007 |                         | 2006 |      | 2007
|                          |      | HK$000                |      | HK$000                 |      | %    |      | %   
|Floating rate:            |      |                        |      |                         |      |      |      |     
|Cash and cash equivalents |      | 26,032                 |      | 140,782                 |      | 0.59 |      | 0.71
|                          |      |                        |      |                         |      |      |      |     
|Fixed rate:               |      |                        |      |                         |      |      |      |     
|Cash and cash equivalents |      | 560,165                |      | 501,267                 |      | 3.77 |      | 3.43
|                          |      |                        |      |                         |      |      |      |     

At December 31, 2007, it is estimated that a general increase/decrease of 100 basis points in
interest rates, with all other variables held constant, would increase/decrease the Groups profit after tax and revenue reserve by approximately HK$6,420,000 (2006: HK$5,862,000).



F-43



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The sensitivity analysis above has been determined assuming that the change in interest rates had
occurred at the balance sheet date and had been applied to the exposure to interest rate risk for cash and cash equivalents in existence at that date. The 100 basis point increase or decrease represents managements assessment of a reasonably
possible change in interest rates over the period until next annual balance sheet date. The analysis is performed on the same basis for 2006.

(d) Foreign
currency risk



| | (i) | Forecast transactions
| | --- | ---------------------

The Group is
exposed to foreign currency risk primarily through programs acquisition activities whereby a substantial portion of our programming costs on overseas content is settled in United States dollars. In view of the continued support from the Hong Kong
SAR Government to maintain the peg of the Hong Kong dollar to the United States dollar, management does not expect that there will be any significant currency risk associated with programming cost commitments denominated in United States dollars.
Management also enters into forward exchange contracts from time to time to hedge forecast transactions. At December 31, 2007, the Group has no outstanding foreign exchange contracts hedging forecast transactions (2006: HK$101 million). The
fair value of the contract was HK$30,000 at December 31, 2006 and included as other receivables in the financial statements (see Note 12).



| | (ii) | Recognized assets and liabilities
| | ---- | ---------------------------------

In
respect of trade and other receivables and payables held in currencies other than the functional currency of the operations to which they relate, the Group manages the net exposure by buying or selling foreign currencies at spot rates where
necessary to address short-term imbalances.

(iii) Exposure to currency risk

The following table details the Groups exposure at the balance sheet date to currency risk arising from forecast transactions or
recognized assets or liabilities denominated in currencies other than the functional currency of the entity to which they relate.



|                                                        |  |          |   |  |                        |   |  |                     |   |  |          |   |  |        |   |  |                       |  
|------------------------------------------------------- |  | -------- | - |  | ---------------------- | - |  | ------------------- | - |  | -------- | - |  | ------ | - |  | --------------------- | -
|                                                        |  | 2006     |   |  | 2007                   |  
|                                                        |  | Renminbi |   |  | British Pound Sterling |   |  | UnitedStatesDollars |   |  | Renminbi |   |  | Euros  |   |  | United States Dollars |  
|                                                        |  | 000     |   |  | 000                   |   |  | 000                |   |  | 000     |   |  | 000   |   |  | 000                  |  
|Trade and other receivables                             |  | 817      |   |  | 27                     |   |  | 2,199               |   |  | 8,345    |   |  | 721    |   |  | 12,380                |  
|Cash and cash equivalents                               |  | 9,532    |   |  |                       |   |  | 508                 |   |  | 27,545   |   |  |       |   |  | 273                   |  
|Trade and other payables                                |  | (395     | ) |  | (154                   | ) |  | (9,914              | ) |  | (1,032   | ) |  |       |   |  | (7,480                | )
|                                                        |  |          |   |  |                        |   |  |                     |   |  |          |   |  |        |   |  |                       |  
|Exposure arising from recognized assets and liabilities |  | 9,954    |   |  | (127                   | ) |  | (7,207              | ) |  | 34,858   |   |  | 721    |   |  | 5,173                 |  
|Highly probable forecast purchases                      |  |         |   |  |                       |   |  | (47,216             | ) |  |         |   |  | (4,398 | ) |  | (70,414               | )
|                                                        |  |          |   |  |                        |   |  |                     |   |  |          |   |  |        |   |  |                       |  
|Overall net exposure                                    |  | 9,954    |   |  | (127                   | ) |  | (54,423             | ) |  | 34,858   |   |  | (3,677 | ) |  | (65,241               | )
|                                                        |  |          |   |  |                        |   |  |                     |   |  |          |   |  |        |   |  |                       |  



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | (iv) | Sensitivity analysis
| | ---- | --------------------

The following table
indicates the approximate change in the Groups profit after tax (and revenue reserve) in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the balance sheet date. The
sensitivity analysis includes balances between group companies where the denomination of the balances is in a currency other than the functional currencies of the lender or the borrower.



|                       |  |                                            |   |  |                                            |   |  |                                            |   |  |                                           
|---------------------- |  | ------------------------------------------ | - |  | ------------------------------------------ | - |  | ------------------------------------------ | - |  | ------------------------------------------
|                       |  | 2006                                       |   |  | 2007                                      
|                       |  | Increase/(decrease)in foreignexchangerates |   |  | Effect onprofit aftertax andrevenuereserve |   |  | Increase/(decrease)in foreignexchangerates |   |  | Effect onprofit aftertax andrevenuereserve
|                       |  |                                            |   |  | HK$000                                    |   |  |                                            |   |  | HK$000                                   
|Renminbi               |  | 5                                          | % |  | 411                                        |   |  | 5                                          | % |  | 1,510                                     
|Euros                  |  | N/A                                        |   |  | N/A                                        |   |  | 5                                          | % |  | 322                                       
|British Pound Sterling |  | 5                                          | % |  | (80                                        | ) |  | N/A                                        |   |  | N/A                                       
|                       |  |                                            |   |  |                                            |   |  |                                            |   |  |                                           

The sensitivity analysis has been determined assuming that the change in foreign
exchange rates has occurred at the balance sheet date and had been applied to each of the Group entities exposure to currency risk for financial instruments in existence at that date, and that all other variables, in particular interest rates,
remain constant.

The stated changes represent managements assessment of reasonably possible changes in foreign
exchange rates over the period until the next annual balance sheet date. In this respect, it is assumed that the pegged rate between the Hong Kong dollar and the United States dollar would be materially unaffected by any changes in movement in value
of the United States dollar against other currencies. Results of the analysis as presented in the above table represent an aggregation of the effects on each of the Group entities profit after tax measured in the respective functional
currencies, translated into Hong Kong dollars at the exchange rate ruling at the balance sheet date for presentation purposes. The analysis is performed on the same basis for 2006.

30. Fair value of financial instruments

All financial instruments are carried at amounts not
materially different from their fair values as at December 31, 2007 and 2006.

31. Jointly controlled assets

At December 31, 2007, the aggregate amounts of assets and liabilities recognized in the financial statements relating to the Groups interests
in jointly controlled assets are as follows:



|                                    |  |         |  |        
|----------------------------------- |  | ------- |  | -------
|                                    |  | 2006    |  | 2007   
|                                    |  | HK$000 |  | HK$000
|Assets:                             |  |         |  |        
|Programming library                 |  | 14,857  |  | 2,591  
|Trade and other receivables         |  | 9,089   |  | 650    
|Cash and cash equivalents           |  | 2       |  |       
|                                    |  |         |  |        
|                                    |  | 23,948  |  | 3,241  
|                                    |  |         |  |        
|Liabilities:                        |  |         |  |        
|Accrued expenses and other payables |  | 926     |  |       
|                                    |  |         |  |        



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



32. Acquisition of a subsidiary

On April 30, 2006, the Group acquired 70% interest in Ad On Media Limited (Formerly Teamwork Zhuoran Advertising Limited) of approximately HK$10,232,000, satisfied in cash.



|                                                            |  |         |  
|----------------------------------------------------------- |  | ------- | -
|                                                            |  | 2006    |  
|                                                            |  | HK$000 |  
|Net assets acquired:                                        |  |         |  
|Accounts receivable from trade debtors                      |  | 8,249   |  
|Deposits, prepayments and other receivables                 |  | 5,087   |  
|Intangible asset (Advertising rights, see note 17)          |  | 11,692  |  
|Cash and cash equivalents                                   |  | 2,755   |  
|Accrued expenses and other payables                         |  | (9,113  | )
|Receipts in advance and customers deposits                 |  | (545    | )
|Deferred tax liability                                      |  | (3,508  | )
|                                                            |  |         |  
|Net assets acquired                                         |  | 14,617  |  
|Amount of net assets attributable to minority shareholders  |  | (4,385  | )
|                                                            |  |         |  
|Total purchase price paid, satisfied in cash                |  | 10,232  |  
|Less: cash of the subsidiary acquired                       |  | (2,755  | )
|                                                            |  |         |  
|Net cash outflow in respect of the purchase of a subsidiary |  | 7,477   |  
|                                                            |  |         |  

The results of operations of Ad On Media Limited are consolidated and included in the financial
statements of the Group from April 30, 2006 onward. This acquisition was not a material business combination as measured by either the purchase price, total assets or profit before and after taxation to the Groups financial condition and
results of operations.

33. Commitments and contingencies

Commitments outstanding as at December 31, 2007 not provided for in the financial statements were as follows:



|                                                                             |  |         |  |        
|---------------------------------------------------------------------------- |  | ------- |  | -------
|                                                                             |  | 2006    |  | 2007   
|                                                                             |  | HK$000 |  | HK$000
|Capital commitments                                                          |  |         |  |        
|(i) Property, plant and equipment                                            |  |         |  |        
|- Authorized and contracted for                                              |  | 12,782  |  | 18,580 
|- Authorized but not contracted for                                          |  | 121,278 |  | 57,431 
|                                                                             |  |         |  |        
|                                                                             |  | 134,060 |  | 76,011 
|                                                                             |  |         |  |        
|(ii) Acquisition of equity interests in prospective subsidiary and associate |  |         |  |        
|- Authorized and contracted for                                              |  | 2,405   |  | 2,575  
|- Authorized but not contracted for                                          |  |        |  |       
|                                                                             |  |         |  |        
|                                                                             |  | 2,405   |  | 2,575  
|                                                                             |  |         |  |        
|                                                                             |  | 136,465 |  | 78,586 
|                                                                             |  |         |  |        



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|                                       |  |         |  |        
|-------------------------------------- |  | ------- |  | -------
|                                       |  | 2006    |  | 2007   
|                                       |  | HK$000 |  | HK$000
|Programming and other commitments      |  |         |  |        
|- Authorized and contracted for        |  | 421,934 |  | 701,412
|- Authorized but not contracted for    |  | 57,436  |  | 77,264 
|                                       |  |         |  |        
|                                       |  | 479,370 |  | 778,676
|                                       |  |         |  |        
|Operating lease commitments            |  |         |  |        
|- Within one year                      |  | 41,195  |  | 38,541 
|- After one year but within five years |  | 39,723  |  | 28,798 
|- After five years                     |  | 51,434  |  | 47,213 
|                                       |  |         |  |        
|                                       |  | 132,352 |  | 114,552
|                                       |  |         |  |        
|                                       |  | 748,187 |  | 971,814
|                                       |  |         |  |        

(a) Operating leasing arrangements

The Group leases a number of premises under operating leases for use as office premises, car parks, warehouses, district centres, remote camera sites, multipoint microwave distribution system transmission sites and
hub sites. The terms of the leases vary and may be renewable on a monthly basis or run for an initial period of two to fifteen years, with an option to renew the lease after that date at which time all terms are renegotiated. Lease payments are
usually adjusted every two to three years to reflect market rentals. None of the leases includes contingent rentals.

Some of the leased
properties have been sublet by the Group under operating leases. The terms of the subleases vary and may be renewable on a monthly basis or run for an initial period of three years, with an option to renew the lease after that date at which time all
terms are renegotiated.

The Group leases out cable modem equipment and decoders to subscribers under operating leases which are renewable
on a monthly basis. None of the leases includes contingent rentals.

(b) Operating leases

Future minimum lease payments, in respect of land and buildings, as of December 31, 2007 under non-cancellable operating leases having initial or
remaining lease terms of more than one year are as follows:



|                              |  |         |  |        
|----------------------------- |  | ------- |  | -------
|                              |  | 2006    |  | 2007   
|                              |  | HK$000 |  | HK$000
|Year ending December 31, 2007 |  | 39,439  |  |       
|Year ending December 31, 2008 |  | 25,962  |  | 17,143 
|Year ending December 31, 2009 |  | 4,587   |  | 14,032 
|Year ending December 31, 2010 |  | 4,587   |  | 5,346  
|Year ending December 31, 2011 |  | 4,587   |  | 4,629  
|Year ending December 31, 2012 |  | 4,587   |  | 4,629  
|Thereafter                    |  | 46,847  |  | 47,213 
|                              |  |         |  |        
|                              |  | 130,596 |  | 92,992 
|                              |  |         |  |        



F-47



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



Total rental expenses for each of the years ended December 31, 2005, 2006 and 2007 were
HK$43,790,000 HK$48,976,000 and HK$ 52,967,000 respectively.

(c) Future operating lease income



| | (i) | The total future minimum sublease payments receivable under non-cancellable subleases at December 31, 2006 and 2007 amounted to HK$8,695,000 and HK$1,378,000 respectively.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The total future minimum lease payments receivable in respect of cable modem equipment, decoders and other equipment under non-cancellable operating leases are as follows:
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                     |  |         |  |        
|------------------------------------ |  | ------- |  | -------
|                                     |  | 2006    |  | 2007   
|                                     |  | HK$000 |  | HK$000
|Within one year                      |  | 7,886   |  | 7,005  
|After one year but within five years |  |        |  | 1,199  
|                                     |  |         |  |        
|                                     |  | 7,886   |  | 8,204  
|                                     |  |         |  |        

(d) License agreements

The Group is required to pay license fees to the Government of the Hong Kong Special Administrative Region (SAR) each year for the provision of certain services. At December 31, 2007, these comprise
mainly:



| | (i) | an annual fixed domestic pay television program service license of HK$1,371,000 plus a fee of HK$4 for every subscriber to the domestic pay television program service provided under
the license;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | an annual fixed telecommunication network services (FTNS) license fee of HK$1,000,000 plus a fee of HK$700 for every 100 customer connections and spectrum utilization
annual fee based on a variable fee for every 1 kHz or part thereof of spectrum assigned;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | an annual fixed carrier restricted license fee of HK$100,000 plus a fee of HK$700 for every 100 customer connections and spectrum utilization annual fee based on a variable fee for
every 1 kHz or part thereof of spectrum assigned; and
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | a satellite master antenna television (SMATV) annual license fee of HK$750 plus outlet fee of HK$700 for every 100 outlet points or part thereof.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------

The total amounts of license fees paid to the Hong Kong SAR Government for the years ended December 31, 2005, 2006 and
2007 were HK$17,975,427, HK$13,114,127 and HK$10,680,729 respectively.

The Group has also entered into program license agreements with
content providers and has commitments to pay amounts under such license agreements, which have been negotiated on normal commercial terms. The related program costs are recognized in the period in which they are incurred and accounted for in
accordance with Note 2(g).

(e) Contingent liabilities

As of December 31, 2007, there were contingent liabilities in respect of the following:



| | (i) | The Company has undertaken to provide financial support to certain of its subsidiaries in order to enable them to continue to operate as going concerns.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | (ii) | Guarantees, indemnities and letters of awareness to banks totaling HK$199 million (2006: HK$616 million) in respect of overdraft and guarantee facilities given by those banks
to the subsidiaries. Of this amount, at December 31, 2007, HK$167 million (2006: HK$107 million) was utilized by the subsidiaries.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As at the balance sheet date, the Company has issued four separate guarantees to a bank in respect of banking facilities granted to four wholly owned subsidiaries. At December 31, 2007, the directors do not
consider it probable that a claim will be made against the Company under any of the guarantees. The maximum liability of the Company at the balance sheet date under the guarantees issued is the facilities drawn down by the wholly owned subsidiaries
of HK$160 million. The Company has not recognized any deferred income in respect of the guarantees as their fair values cannot be reliably measured and the transaction price was HK$nil.

34. Material related party transactions

In addition to the transactions and balances disclosed
elsewhere in these financial statements, the Group entered into the following material related party transactions during the year ended December 31, 2007:



|                                                                                    |  |         |   |  |         |   |  |         |  
|----------------------------------------------------------------------------------- |  | ------- | - |  | ------- | - |  | ------- | -
|                                                                                    |  | 2005    |   |  | 2006    |   |  | 2007    |  
|                                                                                    |  | HK$000 |   |  | HK$000 |   |  | HK$000 |  
|Rentals payable and related management fees on land and buildings (Note(i))         |  | 36,141  |   |  | 40,118  |   |  | 40,100  |  
|Rentals receivable on land and buildings (Note(ii))                                 |  | (4,464  | ) |  | (5,065  | ) |  | (4,958  | )
|Network repairs and maintenance services charge (Note (iii))                        |  | (21,783 | ) |  | (22,484 | ) |  | (5,267  | )
|Management fees (Note(iv))                                                          |  | 12,630  |   |  | 12,430  |   |  | 13,170  |  
|Computer services (Note (v))                                                        |  | 17,814  |   |  | 16,598  |   |  | 10,030  |  
|Leased line and PNETS charges and international bandwidth access charges(Note (vi)) |  | 21,756  |   |  | 21,684  |   |  | 28,023  |  
|Project management fees (Note (vii))                                                |  | (6,079  | ) |  | (3,421  | ) |  |        |  
|Internet Protocol Point wholesale services charge (Note (viii))                     |  | (21,294 | ) |  | (39,490 | ) |  | (42,870 | )
|Agency fees (Note (ix))                                                             |  | (14,185 | ) |  | (24,723 | ) |  | (17,068 | )
|                                                                                    |  |         |   |  |         |   |  |         |  



Notes:



|(i) | These represent rentals and related management fees paid to fellow subsidiaries in respect of office premises, car parks, warehouses, district centres and hub sites. As at
December 31, 2007, related rental deposits amounted to HK$8,872,000 (2006: HK$8,583,000).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | This represents rental received from a fellow subsidiary in respect of the lease of office premises.
|---- | ----------------------------------------------------------------------------------------------------



|(iii) | This represents service charges to a fellow subsidiary in relation to the operation, repair and maintenance of ducts, cables and ancillary equipment.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) | This represents costs incurred by a fellow subsidiary on the Groups behalf which were recharged to the Group.
|---- | --------------------------------------------------------------------------------------------------------------



|(v) | This represents service charges paid to a fellow subsidiary for computer system maintenance and consulting services provided.
|--- | -----------------------------------------------------------------------------------------------------------------------------



|(vi) | These represent service fees paid to a fellow subsidiary in respect of the leasing of datalines, Public Non-Exclusive Telecommunications (PNETS) charges
and international bandwidth access charges incurred.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|(vii) | This represents fees received from a fellow subsidiary for the provision of project management services.
|----- | --------------------------------------------------------------------------------------------------------



|(viii) | This represents service charges to a fellow subsidiary in relation to the Internet Protocol Point wholesale services.
|------ | ---------------------------------------------------------------------------------------------------------------------



|(ix) | This represents service charges to a fellow subsidiary in relation to the agency services.
|---- | ------------------------------------------------------------------------------------------

Included in Note 15 were additions to property, plant and equipment totaling HK$61,000 constructed by a fellow subsidiary on behalf of the Group during
the year ended December 31, 2006. No such transaction was carried out during the year ended December 31, 2007.

The immediate
holding company of the Group has issued deeds of indemnity in respect of certain taxation and costs arising in respect of the period prior to November 1, 1999. The Group is not charged for these indemnities. See Note 8 for the tax liability
concerning a leveraged leasing arrangement indemnified by Wharf Communications Limited.

Key management personnel remuneration

Remuneration for key management personnel is as follows:



|                             |  |         |  |        
|---------------------------- |  | ------- |  | -------
|                             |  | 2006    |  | 2007   
|                             |  | HK$000 |  | HK$000
|Short-term employee benefits |  | 34,132  |  | 32,816 
|Post-employment benefits     |  | 1,367   |  | 1,275  
|                             |  |         |  |        
|                             |  | 35,499  |  | 34,091 
|                             |  |         |  |        

Total remuneration is included in staff costs (See Note 6).

35. Non-adjusting post balance sheet event



|(a) | After the balance sheet date the Directors proposed a final dividend. Further details are disclosed in Note 9.
|--- | --------------------------------------------------------------------------------------------------------------



|(b) | On February 27, 2008, the Financial Secretary of the Hong Kong SAR Government announced his annual Budget which proposes a cut in the profits tax rate from 17.5% to 16.5% with
effect from the fiscal year 2008-2009 and a one-off reduction of 75% of the tax payable for the 2007-2008 assessment subject to a ceiling of HK$25,000. In accordance with the Groups accounting policy set out in Note 1(n), no adjustments have
been made to these financial statements as a result of this announcement.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Directors estimate that these proposed changes
will result in a decrease in the opening balances of the Groups deferred tax liabilities and deferred tax assets at January 1, 2008 by HK$5 million and HK$20 million respectively.

These opening balance adjustments to deferred tax balances at January 1, 2008 will be recognized as an increase in the Groups income tax
expense of HK$15 million. It is impracticable to further estimate the impact on the future financial statements of the change in tax rate.



|(c) | On May 9, 2008, the Group has entered into a Sale and Purchase Agreement to purchase a new conditional access system and next generation set-top box, which
will not only provide much-enhanced anti-piracy features, but also provide flexibility of introducing new services, such as High-Definition Television and interactive services. The existing set-top boxes will be gradually replaced. The proposed
deployment plan has yet to be approved and is subject to the results from the field test and pilot launch. The Directors
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| | estimate that these proposed changes will result in a change to the financial position and results for the years ending December 31, 2008 and 2009. As
at December 31, 2007, the net book value of the existing set-top boxes was HK$107 million with expected annual depreciation expense of approximately HK$41 million and HK$36 million for the years ending December 31, 2008 and 2009,
respectively. It is impracticable to further estimate the impact of the future financial statements of the proposed change.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36.
Accounting estimates and judgements

Management considers the key source of estimation uncertainty lies in the recognition of deferred
tax assets from unused tax losses. As explained in Note 2(n), all deferred tax assets to the extent that it is probable that future taxable profits will be available against which they can be utilized, are recognized. It is possible that adverse
changes to the operating environment or the Groups organization structure could cause a future write-down of the deferred tax assets recognized.

Apart from deferred tax assets, management also makes estimates and assumptions that affect the reported amounts of other assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and
liabilities. Notes 2(e), 2(g)(i), 2(g)(iv), 2(h), 2(i), 2(j), 2(t), and Note 30 contain information about the assumptions and risk factors relating to useful lives of property, plant and equipment, net realizable value of commissioned programs and
films, impairment provisions for property, plant and equipment, other intangible assets, inventories, loans and receivables, and unlisted equity instruments.

The useful lives of property, plant and equipment are estimated at the time such assets are acquired and are based on historical experience with similar assets, also taking into account the anticipated technological
or industrial changes in order to determine the amount of depreciation expense to be recorded during any reporting period. If these changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives
assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods.

Net
realizable value of commissioned programs and films are estimated based on the projected future revenue to be derived from all applicable territories and windows less cost to sell, taking into account historical performances of films and programs
with comparable budgets, casts, or other relevant qualities. Impairment provisions are made for carrying costs that are in excess of the expected future revenue to be generated by these programs and films. Films in progress are stated at cost less
any impairment provisions, taking into account the project status, and estimated realizable value. If revenue actually generated were to fall short of forecasts, or there are changes in total projected ultimate gross revenues, amortization may need
to be increased, or impairment provision may need to be made to reduce the carrying value of individual program or film to its realizable amount.

Property, plant and equipment, inventories, and various financial instruments including loans and receivables, equity instruments and other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate
that their carrying amounts may exceed the realizable value. If any such indication exists, the assets realizable value is estimated and an impairment loss is recognized.

The value of property, plant and equipment and inventories and other intangible assets in use represent the amount that these assets are expected to
generate based on reasonable and supportable assumptions. The value of loans and receivables are calculated based on estimated future cash flows. The fair value of unquoted equity instruments are estimated based on a combination of valuation
techniques including use of recent arms length



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



market transactions of the underlying securities and references to the fund managers estimated fair value as adjusted for specific circumstances of the
investment including recent fund raising results and financial outlook.

Actual results may differ from these estimates under different
assumptions or conditions.

37. Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended
December 31, 2007

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new
standards and interpretations which are not yet effective for the year ended December 31, 2007 and which have not been adopted in these financial statements:

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that
the adoption of them is unlikely to have a significant impact on the Groups results of operations and financial position.

In
addition, the following developments may result in new or amended disclosures in the financial statements:



|                                                               |  |                                                      
|-------------------------------------------------------------- |  | -----------------------------------------------------
|                                                               |  | Effective for accountingperiods beginning on or after
|HK (IFRIC) 11, HKFRS 2  Group and treasury share transactions |  | March 1, 2007                                        
|HK (IFRIC) 13, Customer loyalty programmes                     |  | July 1, 2008                                         
|HKFRS 8, Operating segments                                    |  | January 1, 2009                                      
|Revised HKAS 1, Presentation of financial statements           |  | January 1, 2009                                      
|Revised HKAS 23, Borrowing costs                               |  | January 1, 2009                                      

38. Parent and ultimate controlling party

The Directors consider the parent and the ultimate controlling party at December 31, 2007 to be Wharf Communications Limited and Wheelock and Company
Limited, respectively, both of which are incorporated in Hong Kong. Wheelock and Company Limited produces financial statements available for public use.

39. Comparative figures

As a result of adopting HKFRS 7, Financial instruments: Disclosures, and the amendment to HKAS 1,
Presentation of financial statements: Capital disclosures, certain comparative figures have been adjusted to conform with changes in disclosures in the current year and to show separately comparative amounts in respect of items disclosed for the
first time in 2007. Further details of these developments are disclosed in Note 3.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



40. Significant differences between HK GAAP and US GAAP

The Groups accounting policies conform with HK GAAP, which differ in certain significant respects from US GAAP. Information relating to the nature
and effect of such differences is presented below.

(a) Deferred pre-maturity and franchise costs

Under HK GAAP, all pre-maturity costs incurred during the pre-maturity period of the Groups cable television operations and all pre-operating costs
incurred before the launch of the Groups cable television operations on October 31, 1993 are recognized as an expense in the period in which they are incurred.

Under US GAAP, certain pre-maturity and franchise costs are deferred and amortized on a straight-line basis over the remaining term of the initial subscription television broadcasting license which expired on
May 31, 2005. On June 1, 2005, the Groups franchise was renewed for a further period of 12 years until May 31, 2017. The pre-maturity period began with the first earned subscriber revenue on October 31, 1993 and was to
continue until the earlier of the attainment of a predetermined subscriber level and December 31, 1996. The pre-maturity period ended on November 30, 1996 when the predetermined subscriber level was attained. For US GAAP purposes, an
adjustment has been made to reflect the amortization of certain pre-maturity and franchise costs that have been written off under HK GAAP that were allowed to be capitalized under US GAAP.

Management has evaluated the amortization periods of pre-maturity and franchise costs and determined that no events or circumstances warrant a revision
to the estimates of useful lives. The aggregate amortization expense was HK$37,360,000 and HK$89,686,000 for the years ended December 31, 2005 and 2004 respectively. All deferred pre-maturity and franchise costs were fully amortized as at
December 31, 2005.

(b) Goodwill

Goodwill arising on consolidation represents the excess of the cost of the acquisition over the Groups share of the fair value of the identifiable assets and liabilities acquired.

Under HK GAAP, goodwill is accounted for as follows:

Prior to January 1, 2005:



| |  |  | For acquisitions before January 1, 2001, positive goodwill was eliminated against reserves and was reduced by impairment losses;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | For acquisitions on or after January 1, 2001, positive goodwill was amortized to earnings on a straight-line basis over its estimated useful life. Goodwill was
stated in the consolidated balance sheet at cost less any accumulated amortization and any impairment losses;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Group did not make any acquisitions from January 1, 2001 to January 1, 2005 that gave rise to positive goodwill subject to amortization.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

With effect from January 1, 2005:



| |  |  | The Group no longer amortizes positive goodwill on new acquisitions but tests it at least annually for impairment;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | As the Groups positive goodwill had previously been taken to reserves, such goodwill was not restated in the consolidated balance sheet;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



| |  |  | In addition, no attributable amount of positive goodwill previously taken to reserves is included in the calculation of profit or loss on the disposal or impairment
of the acquired business or under any other circumstances.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under US GAAP, prior to January 1, 2002, goodwill
arising from the application of the purchase method of accounting was capitalized and amortized on a straight-line basis over its estimated useful life of 12 years from the relevant acquisition date. Upon the adoption of Statement of Financial
Accounting Standard (SFAS) 142, Goodwill and Other Intangible Assets with effect from January 1, 2002, goodwill is assigned to the relevant reporting units and a transitional impairment test was conducted by reference to
the carrying value of each reporting unit and their respective fair value at January 1, 2002. Thereafter, goodwill is no longer subject to amortization, but the recorded value is subject to an annual assessment for impairment. An impairment
loss is recorded if the recorded goodwill exceeds its implied fair value. All reporting units to which goodwill is assigned are tested for impairment and no impairment loss was identified as of and for each of the periods presented.

The US GAAP adjustments represent the cumulative effect of amortization under HK GAAP for the period from January 1, 2002 to December 31,
2004. It has no impact on the results of operations for the periods presented.

(c) Deferred taxation

Under HK GAAP, Statement of Standard Accounting Practice 12 (revised) (SSAP 12 (revised)) was effective for all accounting periods beginning
on or after January 1, 2003. SSAP 12 (revised) was superseded by Hong Kong Accounting Standard 12 (HKAS 12) for all accounting periods beginning on or after January 1, 2005. Both SSAP 12 (revised) and HKAS 12 are modeled on
International Accounting Standards 12 which, in all material respects as they are relevant to the Group, is similar to SFAS 109, Accounting for income taxes. Both SSAP 12 (revised) and HKAS 12 require full recognition of all deferred tax
liabilities and deferred tax assets to the extent there is sufficient future taxable profit against which the asset can be utilized.

Under
US GAAP, a provision is made for all deferred taxes as they arise, and a valuation allowance is provided against deferred tax assets when realization of such amounts does not meet the criterion of more likely than not. A valuation
allowance on deferred tax assets is recorded if it is more likely than not that some portion or all of the deferred tax assets will not be realized through recovery of taxes previously paid and/or future taxable income. The valuation allowance is
subject to ongoing adjustments based on changes in circumstances that affect the Groups assessment of the realizability of the deferred tax assets. The Company has considered the scheduled reversal of deferred tax assets to the extent such
assets can be realized through future reversals of existing taxable temporary differences and projected future taxable income in making this assessment.



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



The following table shows the principal items included in deferred tax assets and liabilities under
US GAAP:



|                                        |  |          |   |  |          |  
|--------------------------------------- |  | -------- | - |  | -------- | -
|                                        |  | 2006     |   |  | 2007     |  
|                                        |  | HK$000  |   |  | HK$000  |  
|Deferred tax assets:                    |  |          |   |  |          |  
|Operating loss carryforwards            |  | 898,978  |   |  | 834,918  |  
|Inventories                             |  | 13       |   |  |         |  
|Accounts receivable from trade debtors  |  | 1,022    |   |  | 17       |  
|Installation fees and subscription fees |  | 1,832    |   |  | 1,822    |  
|                                        |  |          |   |  |          |  
|Total gross deferred tax assets         |  | 901,845  |   |  | 836,757  |  
|Less: Valuation allowance               |  | (430,663 | ) |  | (449,611 | )
|                                        |  |          |   |  |          |  
|                                        |  | 471,182  |   |  | 387,146  |  
|                                        |  |          |   |  |          |  
|Deferred tax liabilities:               |  |          |   |  |          |  
|Intangible assets                       |  | (1,842   | ) |  | (921     | )
|Other temporary differences             |  |         |   |  | (2,900   | )
|Property, plant and equipment           |  | (195,346 | ) |  | (125,882 | )
|                                        |  |          |   |  |          |  
|Total gross deferred tax liabilities    |  | (197,188 | ) |  | (129,703 | )
|                                        |  |          |   |  |          |  
|Net deferred tax assets                 |  | 273,994  |   |  | 257,443  |  
|                                        |  |          |   |  |          |  
|Net current deferred tax assets         |  | 2,854    |   |  | 1,839    |  
|Net non-current deferred tax assets     |  | 271,140  |   |  | 255,604  |  

Under US GAAP, classification of deferred tax items as either current or non-current are
presented based on related asset or liability giving rise to the temporary difference. Under HK GAAP, all deferred tax items are presented as non-current, even though it may be expected that a portion of the balance will reverse within 12 months of
the reporting date. The presentation difference between US GAAP and HK GAAP has no material impact in our consolidated balance sheet. .

During 2005, additional deferred tax assets for tax losses were recognized primarily as a result of revised projection on future taxable income of a subsidiary, as the management believed that tax loss of which previously not recognized,
can be utilized, based upon the level of historical taxable income and management judgment of positive business outlook. This change in judgment about the realizability of the deferred tax assets in future years has given rise to reductions of
HK$171.1 million and HK$212.3 million to the relevant subsidiarys balance of valuation allowance at the beginning of 2004 and 2005, respectively. At December 31, 2007, the Group had operating loss carryforwards of HK$ 4,776.5 million
which do not expire.

The valuation allowance at January 1, 2005 was HK$720.8 million. The valuation allowance decreased by HK$281.6
million and HK$8.5 million during 2005 and 2006 respectively, and increased by HK$ 18.9 million during 2007. The decrease in valuation allowance during 2006 was mainly due to the utilization of tax losses not recognized in prior years, whereas
the increase in valuation allowance during 2007 was mainly due to the additional current year tax losses not recognized in certain entities based on the criterion of more likely than not.

The Group adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. There is no material impact on the
adoption of FIN 48. The Group classifies interest and/or penalties related to unrecognized tax benefits as a component of income tax provisions. As of January 1, 2007 and for the year ended December 31, 2007, the Group had no material
unrecognized tax benefits and thus, no interest and penalties



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



related to unrecognized tax benefits were recorded. The Group does not anticipate any significant increases or decreases to its liability for unrecognized
tax benefits within the next twelve months. The income tax returns of the Company and its subsidiaries in Hong Kong are open to examination by the Hong Kong income tax authorities for the tax years beginning in 1999/2000.

The application of FIN 48, Accounting for Uncertainty in Income Taxes, has no material effect on the Groups financial statements as prepared under
Hong Kong GAAP.

(d) Installation fees, installation costs and subscription fees

Under HK GAAP, installation fees relating to the broadband Internet access services are recognized upon completion of the installation to the extent that
they do not exceed the direct selling costs incurred. The incremental direct costs (excluding selling costs) incurred that are associated with the installation are capitalized and amortized over the estimated customer service period.

Under US GAAP, installation fees relating to the broadband Internet access services and the related incremental direct costs (excluding selling
costs) up to, but not exceeding, the amount of the installation revenue, are deferred and recognized on a straight-line basis over the estimated customer service period, which is four years as of December 31, 2006, with respect to customers
under monthly service contracts, or over the contract period, with respect to customers under 12 to 24 month service contracts. The excess of incremental direct costs (excluding selling costs) over the related installation fees, to the extent that
they are recoverable from future contractual revenues, are deferred and amortized over the contract period.

The US GAAP adjustments
for installation costs represent reversal of incremental direct costs for the year capitalized under HK GAAP not permitted to be capitalized under US GAAP to the extent that they were not recoverable from future contractual revenues, net of the
current years amortization of previously deferred incremental direct costs over the estimated customer service period or the contract period, as appropriate.

Under HK GAAP, where packaged service fees comprise a number of elements and the fees can be allocated on a reasonable basis into separate elements, revenue is recognized in accordance with the accounting policies
applicable for the respective elements. Where packaged service fees cannot be allocated into individual elements, the fees are deferred and recognized over the term of the service period.

Under US GAAP, consideration received for components of enforceable contracts involving multiple element arrangements are accounted for as separate
units only if the individual components meet all the criteria for separation accounting, and the arrangement consideration can be allocated to the individual components based on the fair value of the respective components. Otherwise, the entire
arrangement consideration is accounted for as one single unit, and is deferred and recognized over the contract period. Installation fees in certain multiple element arrangements did not meet all the criteria for separation accounting. Accordingly,
revenue that was separated and recorded as installation fees upon the completion of the installation under HK GAAP was reversed, giving rise to a corresponding increase in subscription fees to be recognized over the term of the contract.

The US GAAP adjustments for installation fees represent the reversal of installation fees recognized under HK GAAP at the time of installation
which do not meet all the criteria for separation provision of EITF 00-21 Revenue Arrangements with Multiple Deliverables. Accordingly, such installation fees are recognized over the estimated customer service period or the contract
period, as appropriate, under US GAAP. The adjustment also



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



includes the current years amortization of installation fees deferred under US GAAP in previous years over the contract period. The US GAAP
adjustments for subscription fees represent the portion of current years amortization of considerations received in the current and/or prior years from multiple element arrangements not meeting all criteria for separation accounting which are
considered subscription fees under US GAAP rather than installation fees under HK GAAP.

(e) Share option scheme

Under the Companys share option scheme, the Company may grant options to employees to purchase the ordinary shares of the Company for up to
10 per cent of the issued share capital of the Company from time to time, excluding for this purpose shares issued pursuant to the exercise of options granted under the share option scheme.

During the year ended December 31, 2000, options to purchase a total of 22,910,000 ordinary shares at exercise price of HK$10.49 per share were
granted by the Company to eligible employees. 20 per cent of the options was to vest on or after April 1, 2001, 40 per cent on or after the date on which it is announced that the Companys audited consolidated revenue in the
preceding financial year has exceeded HK$2,300 million and the remaining 40 per cent on or after the date on which it is announced that the Companys audited consolidated revenue in the preceding financial year has exceeded HK$3,900
million. The options, to the extent not exercised, will expire on December 31, 2009.

During the year ended December 31, 2001,
options to purchase a total of 50,034,000 ordinary shares at exercise price of HK$3.30 per share were granted by the Company to eligible employees. These options were granted with the exercise price lower than the market price of the Companys
stock at the time of grant. Of the options granted, options to purchase a total of 34,813,000 ordinary shares (the former series) vested on or after July 1, 2002 (50%) and April 1, 2003 (50%) respectively while the
remaining options (the latter series) vested on or after July 1, 2002 (30%), July 1, 2003 (30%) and July 1, 2004 (40%) respectively. To the extent not exercised, the options expired on December 31, 2003 for
the former series and expired on December 31, 2005 for the latter series.

During the year ended December 31, 2002, options to
purchase a total of 380,000 ordinary shares at exercise price of HK$3.30 per share were granted by the Company to an eligible employee. On the grant date, the exercise price exceeded the market price of the Companys stock. 50 per cent of
the options vested on or after January 1, 2004 and 50 per cent vested on or after January 1, 2005. To the extent not exercised, the options expired on December 31, 2005.

Movement of the Companys share options is as follows:



|                           |  |                  |   |      |                                        |      |                  |   |  |                                        |  |                  |   |  |                                       
|-------------------------- |  | ---------------- | - | ---- | -------------------------------------- | ---- | ---------------- | - |  | -------------------------------------- |  | ---------------- | - |  | --------------------------------------
|                           |  | 2005             |   | 2006 |                                        | 2007
|                           |  | Number ofoptions |   |      | Weighted-averageexerciseprice pershare |      | Number ofoptions |   |  | Weighted-averageexerciseprice pershare |  | Number ofoptions |   |  | Weighted-averageexerciseprice pershare
|                           |  |                  |   |      | HK$                                    |      |                  |   |  | HK$                                    |  |                  |   |  | HK$                                   
|Outstanding at January 1   |  | 27,711,600       |   |      | 7.36                                   |      | 15,160,000       |   |  | 10.49                                  |  | 12,100,000       |   |  | 10.49                                 
|Forfeited                  |  | (962,000         | ) |      | 6.89                                   |      | (3,060,000       | ) |  | 10.49                                  |  | (680,000         | ) |  | 10.49                                 
|Expired                    |  | (11,589,600      | ) |      | 3.30                                   |      |                 |   |  |                                       |  |                 |   |  |                                      
|                           |  |                  |   |      |                                        |      |                  |   |  |                                        |  |                  |   |  |                                       
|Outstanding at December 31 |  | 15,160,000       |   |      | 10.49                                  |      | 12,100,000       |   |  | 10.49                                  |  | 11,420,000       |   |  | 10.49                                 
|                           |  |                  |   |      |                                        |      |                  |   |  |                                        |  |                  |   |  |                                       
|Exercisable at December 31 |  | 9,096,000        |   |      | 10.49                                  |      | 7,260,000        |   |  | 10.49                                  |  | 6,852,000        |   |  | 10.49                                 
|                           |  |                  |   |      |                                        |      |                  |   |  |                                        |  |                  |   |  |                                       



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



Information in respect of the Companys share options outstanding at December 31, 2006 is
as follows:



|                                            |  |      |            |      |     |            |  |     |           
|------------------------------------------- |  | ---- | ---------- | ---- | --- | ---------- |  | --- | ----------
|Options standing at December 31,            |  | 2005 |            | 2006 |     | 2007      
|Number of options                           |  |      | 15,160,000 |      |     | 12,100,000 |  |     | 11,420,000
|Range of exercise prices per share          |  | HK$  | 10.49      |      | HK$ | 10.49      |  | HK$ | 10.49     
|Weighted average exercise price             |  | HK$  | 10.49      |      | HK$ | 10.49      |  | HK$ | 10.49     
|Weighted average remaining contractual life |  |      | 2.4 years  |      |     | 1.8 years  |  |     | 1.2 years 

Prior to January 1, 2005, under HK GAAP, no accounting entry was made upon the granting of
share options to employees.

With effect from January 1, 2005, under HK GAAP, the Group recognizes (i) the fair value of share
options granted on or after November 7, 2002 as an expense with a corresponding increase in a capital reserve within equity; and (ii) any modifications to the terms and conditions of share options existing as of January 1, 2005 that
will increase the total fair value or are beneficial to the employees as expenses.

As the Groups existing share options were granted
to employees on or before November 7, 2002 and there have not been any modifications to the terms or conditions of such grants since January 1, 2005, no share option related compensation expense was recorded in the HK GAAP financial
statements in each of the periods presented.

Prior to January 1, 2006, under US GAAP, the Group applies the intrinsic
value-based method for share options prescribed by Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations to account for its fixed plan stock options.
Under this method, compensation expense is recognized and amortized over the vesting period of the options concerned to the extent that the fair value of the equity instruments exceeds the exercise price of the options granted at a defined
measurement date. The measurement date is the first date on which both the number of shares that an individual employee is entitled to receive and the exercise price are known. Other than options granted to employees during the year ended
December 31, 2000 which require the achievement of specific hurdles by the Company prior to their vesting and accordingly, were accounted for utilizing variable plan accounting, all other options granted by the Company were accounted for
utilizing fixed plan accounting under US GAAP. No compensation expense in respect of these options was recognized as the fair value of the Companys shares has been less than the exercise price.

Effective January 1, 2006, the Group adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment (SFAS 123 (R)), which establishes accounting for equity instruments exchanged for services.

Under the provisions of SFAS 123 (R), share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employees requisite service period (generally the
vesting period of the equity grant). The Group elected to adopt the modified prospective transition method as provided by SFAS 123 (R) and, accordingly, financial statement amounts for the prior periods presented in this report have not been
restated to reflect the fair value method of expensing share-based compensation.



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



Had the Company determined compensation cost based on the fair value model at the grant date for its
stock options under SFAS 123 Accounting for Stock-Based Compensation, the Companys pro forma net profit and basic and diluted earnings per share and per ADS would have been as follows:



|                                                                            |  |                                                |  
|--------------------------------------------------------------------------- |  | ---------------------------------------------- | -
|                                                                            |  | 2005                                           |  
|                                                                            |  | HK$000                                        |  
|                                                                            |  | (in thousands,except pershare and perADS data) |  
|Net profit as reportedUS GAAP                                              |  | 494,580                                        |  
|Add: Compensation cost recognized based on intrinsic value method           |  |                                               |  
|Less: (Compensation cost)/reversal of compensation cost based on fair value |  | (589                                           | )
|                                                                            |  |                                                |  
|Pro forma net profit                                                        |  | 493,991                                        |  
|                                                                            |  |                                                |  
|Basic earnings per share                                                    |  |                                                |  
|- as reported                                                               |  | 25 cents                                       |  
|- pro forma                                                                 |  | 25 cents                                       |  
|                                                                            |  |                                                |  
|Diluted earnings per share                                                  |  |                                                |  
|- as reported                                                               |  | 25 cents                                       |  
|- pro forma                                                                 |  | 25 cents                                       |  
|                                                                            |  |                                                |  
|Basic earnings per ADS*                                                     |  |                                                |  
|- as reported                                                               |  | 490 cents                                      |  
|- pro forma                                                                 |  | 489 cents                                      |  
|                                                                            |  |                                                |  
|Diluted earnings per ADS*                                                   |  |                                                |  
|- as reported                                                               |  | 490 cents                                      |  
|- pro forma                                                                 |  | 489 cents                                      |  
|                                                                            |  |                                                |  



|* | 1 ADS represents 20 ordinary shares
|- | -----------------------------------

During the year
ended December 31, 2004, the management of the Company did not expect the performance criterion of achieving HK$3,900 million of audited consolidated revenue would be attainable for the final 40 per cent of the stock options granted during
the year ended December 31, 2000 to vest before they expire on December 31, 2009. Hence, the cumulative pro-forma compensation cost based on the fair value model in respect of such stock options up to December 31, 2003 was reversed
during 2004. As 60% of the Groups stock options were fully vested in or before 2005 and it is not probable that the remaining 40% is expected to meet the vesting condition as aforementioned, no compensation cost is recognized under SFAS 123
(R) for the year ended December 31, 2006 and 2007.

(f) Acquisition of Teamwork Zhuoran Advertising Limited

The Group acquired 70% interest in Teamwork Zhuoran Advertising Limited (renamed to Ad On Media Limited on April 3, 2007) for a total cash
consideration of approximately HK$10,232,000 on April 30, 2006, and as a result, Teamwork Zhuoran Advertising Limited became a non-wholly owned subsidiary of the Company. The acquisition was accounted for as a business combination in accordance
with HKFRS 3. Under HK GAAP, minority interest of Teamwork Zhuoran Advertising Limited at acquisition is stated at the minoritys share of the fair value of the acquired identifiable assets, liabilities and contingent liabilities.



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



Under US GAAP, minority interest is stated at pre-acquisition carrying value of identifiable
assets and liabilities acquired. The Groups share of identifiable assets and liabilities of Teamwork Zhuoran Advertising Limited acquired in relation to intangible assets and deferred tax liabilities are adjusted to the fair value at the date
of acquisition.

The US GAAP adjustments represent the effect of fair value of net asset acquired by the minority interest.

As at December 31, 2007, the minority interest was HK$4,474,000 (2006: HK$3,440,000) and HK$2,019,000 (2006: HK$985,000) under HK GAAP
and US GAAP respectively. The carrying values of the adjusted net assets were HK$18,004,000 (2006: HK$11,467,000) under HK GAAP and HK$17,083,000 (2006: HK$9,625,000) under US GAAP respectively.

(g) Presentation of minority interests

Upon the adoption of
HKAS 1 Presentation of Financial Statements on January 1, 2005, minority interests are required to be included in the determination of the Groups net profit or loss and total equity.

Under US GAAP, minority interests are deducted in the determination of the Groups net income or loss and excluded from the Groups total
equity.

(h) Recent accounting pronouncements

SFAS No. 141R

In November 2007, the FASB issued SFAS No. 141R, which continues to require that all business
combinations be accounted for by applying the acquisition method. Under the acquisition method, the acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, and any contingent consideration and contractual
contingencies, as a whole, at their fair value as of the acquisition date. Under SFAS No. 141R, all transaction costs are expensed as incurred. SFAS No. 141R rescinds EITF 93-7. Under EITF 93-7, the effect of any subsequent adjustments to
uncertain tax positions were generally applied to goodwill, except for post-acquisition interest on uncertain tax positions, which was recognized as an adjustment to income tax expense. Under SFAS No. 141R, all subsequent adjustments to these
uncertain tax positions that otherwise would have impacted goodwill will be recognized in the income statement. The guidance in SFAS No. 141R will be applied prospectively to business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning after December 15, 2008.

SFAS No. 157

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. SFAS No. 157 is effective for financial assets and liabilities in fiscal years beginning after November 15, 2007 and for
non-financial assets and liabilities in fiscal years beginning after March 15, 2008. We do not expect the adoption of SFAS No. 157 to have a material impact on our consolidated financial statements.

In February of 2008, the FASB issued FASB Staff Position 157-2, which delays the effective date of SFAS 157 for non-financial assets and liabilities,
which are not measured at fair value on a recurring basis (at least annually) until fiscal years beginning after November 15, 2008. The Company is currently assessing the impact of adopting SFAS 157 for non-financial assets and liabilities on
our consolidated financial statements.



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



SFAS No. 159

In February 2007, FASB issued SFAS No. 159, which provides the option to report certain financial assets and liabilities at fair value, with the
intent to mitigate volatility in financial reporting that can occur when related assets and liabilities are recorded on different bases. SFAS No. 159 amends FASB Statement No. 95, Statement of Cash Flows (SFAS
No. 95) and FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS No. 115). SFAS No. 159 specifies that cash flows from trading securities, including
securities for which an entity has elected the fair value option, should be classified in the statement of cash flows based on the nature of and purpose for which the securities were acquired. Before this amendment, SFAS No. 95 and SFAS
No. 115 specified that cash flows from trading securities must be classified as cash flows from operating activities. This statement is effective for us beginning January 1, 2008. We do not expect any of the other provisions of SFAS
No. 159 to have a material impact on our consolidated financial statements.

SFAS No. 160

In November 2007, the FASB issued SFAS No. 160, Accounting and Reporting of Non-controlling Interest (SFAS No. 160).
SFAS No. 160 requires that a non-controlling interest (previously referred to as a minority interest) be separately reported in the equity section of the consolidated entitys balance sheet. SFAS No. 160 also established
accounting and reporting standards for: (i) ownership interests in subsidiaries held by parties other than the parent, (ii) the amount of consolidated net income attributable to the parent and to the non-controlling ownership interest and
(iv) the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS No. 160 is effective for us beginning January 1, 2009. We are currently assessing the potential impact that the adoption
of SFAS No. 160 will have on our consolidated financial statements.

(i) Classification of items in the statement of operations

Under HK GAAP, profit or loss on disposal of long-lived assets is disclosed as a separate item after profit from operations in the consolidated statement
of operations as management considers that any such profit or loss is incidental to the core operations of the Group.

Under US GAAP,
profit or loss on disposal of long-lived assets is included in the determination of profit from operations in the consolidated statement of operations.



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i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



(j) Summary of significant differences between HK GAAP and US GAAP

The effect on net profit attributable to equity shareholders of significant differences between HK GAAP and US GAAP is as follows:



|                                          |  |      |   |  |                                                     |   |  |           |  |           |  
|----------------------------------------- |  | ---- | - |  | --------------------------------------------------- | - |  | --------- |  | --------- | -
|                                          |  |      |   |  | Year ended December 31,                             |  
|                                          |  | Note |   |  | 2005                                                |   |  | 2006      |  | 2007      |  
|                                          |  |      |   |  | HK$000                                             |   |  | HK$000   |  | HK$000   |  
|                                          |  |      |   |  | (in thousands except for per share andper ADS data) |  
|Net profit under HK GAAP                  |  |      |   |  | 527,132                                             |   |  | 182,115   |  | 181,852   |  
|Adjustments:                              |  |      |   |  |                                                     |   |  |           |  |           |  
|Deferred pre-maturity and franchise costs |  | (a   | ) |  | (37,360                                             | ) |  |          |  |          |  
|Installation costs                        |  | (d   | ) |  | 3,001                                               |   |  | 6,299     |  | 6,764     |  
|Installation fees                         |  | (d   | ) |  | 372                                                 |   |  | 632       |  | (78       | )
|Subscription fees                         |  | (d   | ) |  | 1,435                                               |   |  | 538       |  | 134       |  
|Share option scheme                       |  | (e   | ) |  |                                                    |   |  |          |  |          |  
|Acquisition of Ad On Media Limited        |  | (f   | ) |  |                                                    |   |  | 614       |  | 921       |  
|                                          |  |      |   |  |                                                     |   |  |           |  |           |  
|Net profit under US GAAP                  |  |      |   |  | 494,580                                             |   |  | 190,198   |  | 189,593   |  
|                                          |  |      |   |  |                                                     |   |  |           |  |           |  
|Earnings per share under US GAAP          |  |      |   |  |                                                     |   |  |           |  |           |  
|- Basic                                   |  |      |   |  | 25 cents                                            |   |  | 9 cents   |  | 9 cents   |  
|                                          |  |      |   |  |                                                     |   |  |           |  |           |  
|- Diluted                                 |  |      |   |  | 25 cents                                            |   |  | 9 cents   |  | 9 cents   |  
|                                          |  |      |   |  |                                                     |   |  |           |  |           |  
|Earnings per ADS under US GAAP*           |  |      |   |  |                                                     |   |  |           |  |           |  
|- Basic                                   |  |      |   |  | 490 cents                                           |   |  | 188 cents |  | 188 cents |  
|                                          |  |      |   |  |                                                     |   |  |           |  |           |  
|- Diluted                                 |  |      |   |  | 490 cents                                           |   |  | 188 cents |  | 188 cents |  
|                                          |  |      |   |  |                                                     |   |  |           |  |           |  



|* | 1 ADS represents 20 ordinary shares
|- | -----------------------------------

The effect on
shareholders equity of significant differences between HK GAAP and US GAAP is as follows:



|                                             |  |      |   |  |                 |   |  |           |  
|-------------------------------------------- |  | ---- | - |  | --------------- | - |  | --------- | -
|                                             |  |      |   |  | At December 31, |  
|                                             |  | Note |   |  | 2006            |   |  | 2007      |  
|                                             |  |      |   |  | HK$000         |   |  | HK$000   |  
|Shareholders equity under HK GAAP           |  |      |   |  | 2,262,393       |   |  | 2,271,241 |  
|Adjustments:                                 |  |      |   |  |                 |   |  |           |  
|Goodwill, net of amortization                |  | (b   | ) |  | 57,491          |   |  | 57,491    |  
|Installation costs                           |  | (d   | ) |  | (24,562         | ) |  | (17,798   | )
|Installation fees                            |  | (d   | ) |  | (32,491         | ) |  | (32,569   | )
|Subscription fees                            |  | (d   | ) |  | 22,022          |   |  | 22,156    |  
|Acquisition of Ad On Media Limited           |  | (f   | ) |  | 614             |   |  | 1,535     |  
|Minority interests as reported under HK GAAP |  | (g   | ) |  | (3,440          | ) |  | (4,474    | )
|                                             |  |      |   |  |                 |   |  |           |  
|Shareholders equity under US GAAP           |  |      |   |  | 2,282,027       |   |  | 2,297,582 |  
|                                             |  |      |   |  |                 |   |  |           |  



F-62



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##### Table of Contents

i-CABLE Communications Limited

Notes to Consolidated Financial Statements (continued)

For the year ended
December 31, 2007



|(k) | Condensed consolidated statements of shareholders equity and comprehensive income under US GAAP for the following years:
|--- | -------------------------------------------------------------------------------------------------------------------------



|                                                          |  |                    |   |  |                         
|--------------------------------------------------------- |  | ------------------ | - |  | ------------------------
|                                                          |  | Shareholdersequity |   |  | Totalcomprehensiveincome
|                                                          |  | HK$000            |   |  | HK$000                 
|Balance at January 1, 2006                                |  | 2,263,358          |   |  |                         
|Transfer from the statement of operations                 |  | 190,198            |   |  | 190,198                 
|Dividend approved in respect of the previous year         |  | (100,962           | ) |  |                        
|Dividend declared in respect of the current year          |  | (70,673            | ) |  |                        
|Transfer to special capital reserve                       |  |                   |   |  |                        
|Translation of foreign subsidiaries financial statements |  | 106                |   |  | 106                     
|                                                          |  |                    |   |  |                         
|Total comprehensive income                                |  |                    |   |  | 190,304                 
|                                                          |  |                    |   |  |                         
|                                                          |  |                    |   |  |                         
|Balance at December 31, 2006                              |  | 2,282,027          |   |  |                         
|                                                          |  |                    |   |  |                         
|Balance at January 1, 2007                                |  | 2,282,027          |   |  |                         
|Transfer from the statement of operations                 |  | 189,593            |   |  | 189,593                 
|Dividend approved in respect of the previous year         |  | (100,962           | ) |  |                        
|Dividend declared in respect of the current year          |  | (70,673            | ) |  |                        
|Share repurchased and cancelled                           |  | (3,880             | ) |  |                        
|Share repurchased                                         |  | (2,594             | ) |  |                        
|Share repurchase costs                                    |  | (35                | ) |  |                        
|Change in fair value of available-for-sale securities     |  | 2,883              |   |  | 2,883                   
|Transfer to special capital reserve                       |  |                   |   |  |                        
|Translation of foreign subsidiaries financial statements |  | 1,223              |   |  | 1,223                   
|                                                          |  |                    |   |  |                         
|Total comprehensive income                                |  |                    |   |  | 193,699                 
|                                                          |  |                    |   |  |                         
|                                                          |  |                    |   |  |                         
|Balance at December 31, 2007                              |  | 2,297,582          |   |  |                         
|                                                          |  |                    |   |  |                         



F-63