Conviction Short Report On HK: 0633 China All Access by Triam Research

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THIS RESEARCH REPORT EXPRESSES SOLELY OUR OPINIONS. Use our research opinions at your own risk. This is not investment
advice nor should it be construed as such. You should do your own research and due diligence before making any investment decisions
with respect to the securities covered herein. We have a direct or indirect short position in CAAs stock (HK: 0633) and therefore stand to
realize gains in the event that the price of such instruments declines. Please refer to our full disclaimer below.
China All Access (HK: 0633): Evidence of financial manipulation,

undisclosed related party and poor fundamentals. We see a 93% downside
from current stock prices.
Ticker:
HK: 0633
Our Valuation:
HK$ 0.17
Price (as of 12
December 2016):
HK$ 2.30
Market Cap:
HK$ 4.48 billion
Daily Volume (65 Day
Average):
1.30 million shares
China All Access (Holdings) Limited (HK: 0633) (CAA or company) is Hong
Kong listed with a market cap of HK$ 4.48 billion. CAA has historically provided
satellite and wireless communication services to PRC provincial governments and
manufactured mobile devices. It has started to branch out into solar panels and
lending businesses in recent months.
FABRICATED REVENUES. In this report we present evidence based on public
information and field research, which, in our opinion demonstrates that CAA has
fabricated RMB 1 billion in core business revenues (36% of total revenues).
UNRELIABLE FINANCIAL STATEMENTS. KPMG resigned and HLB
Hodgson Impey Cheng Limited was appointed as the new auditor in October 2015.
There are inexplicable discrepancies between the 2015 annual results announcement
accepted by the auditor and the annual report published a month later. There were
significant discrepancies in the breakdown of assets and the income statement.
Additionally, how can anyone trust the financials when there is only one large
customer accounting for over 10% of CAA's revenues in the results announcement
but three more appear in the annual report, including two which together account for
34% of CAAs sales? Bizarrely, the largest customer in the results announcement
accounts for RMB 1,240 million of CAAs revenues but then only RMB 609 million
in the annual report. Such discrepancies were not seen in prior years with KPMG.
Float:
1.14 billion shares
(59%)
UNDISCLOSED RELATED PARTY. CAA has misrepresented Skycomm as an

independent third party. We present evidence that Skycomm is an undisclosed related
party and a key business partner, which we think is being used as an off-balance
sheet vehicle to manipulate CAAs financial performance, Enron style.
Industry:
Technology,
Conglomerate
RECORD CASH BURN DESPITE LARGE PROFITS. CAA has burnt RMB 1.6
billion in operating cash flow while reporting RMB 825 million in accounting profits
in the last three years, making its profits and earnings quality highly suspect. This
cash burn has continued to worsen and has recently led to several capital raises,
including through toxic financing instruments. Since 2013, CAAs shareholders have
been diluted by an astonishing 51% and we expect that this dilution will continue.
Financials:
RMB
millions
Revenue
Net Profit
OCF
Cash
Assets
Equity
6M, 30
June 2016
540
39
-115
76
6,114
3,190
FAKE ASSETS, MISAPPROPRIATION OF CASH? We believe CAAs balance

sheet looks like a house of cards with potentially fake assets forming 73% of assets
and 141% of shareholders equity coupled with incomprehensible cash outflows. We
challenge management to present proof that these assets exist and money has not
been siphoned off.
OFF-BALANCE SHEET DEBT. It appears that CAA held RMB 600 million of
debt off-balance sheet in 2014 and kept investors in the dark. Could there be more?
BLEAK FUTURE WITH MORE DILUTION. Core business operations are
deteriorating rapidly and CAAs growth plans in the solar industry are unrealistic and
poorly conceived. We believe that there is no light at the end of the tunnel and there
exists no reason to invest in this stock.
13 December 2016
STOCK MANIPULATION? We suspect trading manipulation in CAAs shares, as

the stock trades at a valuation detached from any reasonable link to fundamentals.
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The company recently announced a large drop in revenues and earnings without a
noticeable stock price revaluation. The price action here reminds us of Tech Pro
Technology (HK: 3823), whose stock collapsed by over 90% in a single day after
evidence of fraud and allegations of trading manipulation surfaced.
VALUATION. We think that CAA is an obvious fraud and the stock is worth just
HK$ 0.17, a downside of 93%.
We believe that the recent resignations of KPMG (auditor) and Mr. Pun Yan Chak
(independent director) were really to distance themselves from a fraudulent situation.
In our opinion, CAA will soon collapse under the weight of its ballooning liabilities
and cash burning operations, which are supported only with management hype and
highly suspect paper assets.
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Disclaimer
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You should assume that as of the publication date of this report, Triam Research, along with
or through our partners, affiliates, consultants, principals, employees, clients and/or investors
has a direct or indirect short position in stocks, bonds or other securities issued by China All
Access (Holdings) Ltd. (CAA or company) and/or their derivatives. Following the
publication of this report, the aforementioned individuals and entities may continue
transacting in the securities covered therein, and may be short, long or neutral at any time
regardless of this reports initial opinions.
Our report expresses our opinions, which we have based upon generally available
information, field research, inferences and deductions through our due diligence and
analytical process. To the best of our ability and belief, all information contained herein is
accurate and reliable, and has been obtained from public sources we believe to be accurate
and reliable, and who are not insiders or connected persons of the stock covered herein or
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Key Findings
We have spent considerable time and resources to gain a deep understanding of CAAs business and financial
performance. We have studied several years of the companys disclosures and have independently analyzed the
companys operations through public information sources and field investigation in forming our views and
beliefs.
Looking beyond the management hype, we believe that the company has manipulated its financial statements
and the business has extremely poor fundamentals. In our opinion, the stock is nearly worthless. Our findings
are summarized below and discussed in-depth in the following pages of this report.
1.
CAA has fabricated RMB 1 billion or 60% of its satellite and infocomm revenues.
CAA reported RMB 2.8 billion in continuing operations revenues for fiscal year 2015. Out of this, RMB
1.7 billion was reported as satellite and infocomm segment revenues which are booked in CAAs PRC
incorporated Noter subsidiaries. We obtained SAIC1 government filings in Mainland China for these
subsidiaries which reveal only RMB 665 million in revenues, not RMB 1.7 billion as claimed.
Our belief of fabricated revenues was also independently backed by interviews with former employees and
publicly available tender information, both of which indicate a much smaller underlying business than
claimed by the company.
2.
Investors cannot rely on the accounts audited by CAAs new auditor.

KPMG resigned as CAAs auditor on 20 October 2015 and was replaced by a small firm named HLB
Hodgson Impey Cheng Limited. We have found inexplicable differences between CAAs 2015 annual
results announcement and its 2015 annual report. Both disclosures refer to FY 2015 and were published
within a month of each other. The results announcement was accepted by HLB, the new auditor, and the
annual report was approved by them.
The results announcement clearly states that CAA had only one customer contributing to 10% or more of
total revenues. Inexplicably, in the annual report there are four such customers and the figures have been
materially restated, for example, the largest customer in the results announcement is shown in the annual
report with just 50% of its revenue contribution in the results announcement. The breakdown of various
assets and liabilities are different between the two financial statements, with some figures changing by
20%-50%. Various components in the income statement are also different. How could HLB not have
noticed such glaring discrepancies between the results announcement and the annual report? Neither CAA
nor HLB have clarified the matter since. There were no such discrepancies in prior years when KPMG was
the auditor.
In our opinion, such glaring discrepancies in the financial statements show that they are unreliable.
3.
Skycomm is an undisclosed related party and is being used to manipulate CAAs accounts and
mislead investors.
In its IPO prospectus, CAA stated that Skycomm, its main business partner, became an independent third
party after restructuring the business for IPO. However, latest SAIC filings show that CAAs Chairman and
largest shareholder, Mr. Chan Yuen Ming is currently the Vice Chairman of Guangdong Skycomm and the
Legal Representative of Shaanxi Skycomm, both of which are Skycomm subsidiaries. These PRC
government filings clearly demonstrate that Skycomm is a related party to CAA.
Interviews with former Skycomm employees revealed that CAAs chairman is considered to be the
ultimate boss by Skycomm personnel. We also learnt from these interviews that Mr. Ren Runqi, a
Skycomm shareholder and not a CAA employee, approves various CAA files. Our field investigation also
revealed that CAA and Skycomm share not just office space but also employees and other resources. This
1
SAIC stands for State Administration for Industry and Commerce (
) and filings are publicly available. Companies
operating in the PRC must file a Company Annual Inspection Report to renew their business licenses. This filing includes their Income
Statement, Balance Sheet and other details. Additional information is available at http://www.saic.gov.cn.
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again proves false representations by CAA that since 2008 they no longer share any general and
administration resources and facilities with Skycomm2.
We believe that CAA has maintained control of Skycomm to use it as an off-balance sheet vehicle to
manipulate CAAs accounts and inflate earnings, similar to Enron and Longtop Financial.
4.
Huge cash outflows and serial capital placements point to poor earnings power. A situation that
offers strong incentives to engage in earnings manipulation.
CAA has not generated any free cash flow on a cumulative basis since going public in 2009. Dividends,
investments and operations have been financed by frequent equity placements and increasing debt with
shareholders suffering a 51% dilution3 since 2013.
CAA has a serious cash flow problem. From 2013 to 2015, CAA purportedly generated total net profits of
RMB 825 million, but this compares to a staggering operating cash outflow of RMB 1.6 billion and free
cash outflow of RMB 1.9 billion. These heavy cash outflows coupled with fabrication of revenues raise
concerns on the quality of these earnings. If earnings are genuine, then they should translate into operating
cash inflows over time.
338
278
RMB Millions
208
2013
2014 Restated
2015 Restated
Net Profit
Operating Cash Flow
Free Cash Flow
-474
-511
-649
-601
-622
-667
Source: CAA annual reports.
This harmful situation continued in the first half of 2016 with CAA posting operating cash outflows of
RMB 115 million for the period. We believe that this dynamic of cash outflows matched with serial capital
raises will continue due to the companys poor underlying fundamentals.
Despite this poor financial condition, management regularly award themselves generous stock options and
remain well compensated. In contrast, shareholders have witnessed large dilution of their shareholding and
have been harmed by toxic financing instruments issued recently. In the end, shareholders are poorly served
by a company that cannot generate cash despite reporting significant accounting profits. If CAA cannot
generate one Yuan of free cash flow for shareholders after operating for seven years, will it ever do so?
5.
Highly questionable receivables and prepayments form 109% of 1H 2016 shareholders equity. Book
value appears heavily inflated.
We believe that fake assets could amount up to 73% of assets and 141% of shareholders equity as of 1H
2016. CAAs receivables are highly questionable with days sales outstanding doubling to 537 days in 1H
2016 from an already high level of days in FY 2015. Prepayments are disclosed with laughable
justification, when provided. Given fabricated revenues and the presence of undisclosed related parties, we
are convinced that some of these assets are overinflated or even completely fake with the cash being
misappropriated if it existed in the first place. Below is a list of just some of the potentially fake assets
discussed later.
a.
RMB 999 million in Trade Receivables (31% of 1H 2016 equity). Receivables at CAA have
worrying similarities with Hanergy (HK: 0566) and Real Nutriceutical (HK: 2010), both of which are
2009 prospectus, page 145.

Increase in share count between 1 January 2013 (1.22 billion shares) and 30 June 2016 (1.84 billion shares) as per CCASS issued shares.
Issued shares have gone up since 30 June 2016.
3
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recent stock market disasters. We question whether all the trade receivables are real, particularly noting
our suspicion of fabricated revenue. To determine the suspect amount, we apply a generous 200 day
DSO (comparable companies have DSO under 100 days) to the annualized 1H 2016 revenue, which
yields expected trade receivables of RMB 592 million for 2016. The difference between RMB 1.6
billion trade receivables on the Balance Sheet, including bills receivables, at 1H 2016 and our estimate
is RMB 999 million which we believe is highly suspicious and probably unrecoverable.
b.
RMB 180 million in building prepayment (6% of 1H 2016 equity). There is minimal disclosure
around CAAs large prepayment for a Hebei office building in 2015 and which remained on the
balance sheet in June 2016. It is also unclear if this is the full price of the building or just a partial
deposit. By our estimates, if it is at full price, such a building will accommodate CAAs entire
workforce of 1,120 people nationwide. CAA has been in Hebei since 2003 and presumably has
adequate office space already. Why was this building purchase with such a large prepayment suddenly
necessary? Why would the completion of the acquisition take so long?
Within a year of making this prepayment, CAA has raised RMB 520 million in fresh capital. One such
placement included personal guarantees from the chairman. A small 7% RMB 40 million non-bank
loan in June 2016 suggests tight liquidity conditions. Why would anyone make an unnecessary looking
prepayment and then go out and raise capital under personal guarantees? We could not find the
building or anyone who knew about this transaction in our field research. We are skeptical that this
transaction is real.
c.
RMB 1.1 billion in loans receivable (34% of 1H 2016 equity). CAA made direct loans backed by
goods for the first time, out of the blue, in the latter half of 2015. CAA has blamed the 2015
restructuring for revenue declines in its June 2016 interim report. Yet it lent out over a billion in direct
loans at the peak of this restructuring. Does this make any sense?
We could not verify that these loans exist. Borrowers are described with a similar profile to CAAs
Changfei subsidiary, yet they are willing to pay 3x of Changfeis borrowing rates! Why did CAA lend
out a large sum when it was itself borrowing elsewhere? Are these loans real or fabricated?
d.
RMB 798 million (25% of 1H 2016 equity) in weird prepayments for equipment and raw
materials. These prepayments are inexplicable. We find it bizarre that the company would have a
RMB 221 million as a non-current prepayment for machinery, meaning that the goods will not be
exchanged for over a year. CAAs operations do not require big-ticket complex equipment. It only had
gross machinery of RMB 108 million prior to its 2015 sale of its biggest manufacturing business. Why
would it need to prepay for double that amount of machinery when it is in process of exiting OEM
manufacturing?
CAA also has an additional RMB 124 million in deposits for raw materials made to an independent
third party in the 2016 interim report. The most opaque prepayment is a prepayment of RMB 453
million for which there is no disclosure at all. In total, CAA has handed over 25% of shareholders
equity, without collateral, to outsiders to perform activities that had been done internally since
inception. Does this make any sense? This arrangement is in contrast to industry practice on engaging
procurement agents who work on commission and dont handle money.
We think that these prepayments are likely to be fake assets covering for cash outflows to related
parties or to cover up low quality of earnings.
e.
6.
RMB 721 million (23% of 1H 2016 equity) payment for a potential equity investment. The 2015
annual report cash flow statement shows this payment but we have not found a corresponding asset on
the balance sheet but we believe it is likely to be on the balance sheet in one form or another. For
perspective, the Xingfei divesture for RMB 702 million was considered material enough to warrant an
EGM approval. Here we have a larger amount paid out with no explanation whatsoever. We cannot tell
if this is opacity or fraud we are looking at.
CAAs complicated restructuring reveals that they had RMB 596 million (19% of 2014 equity) in
undisclosed and off balance sheet debt in a shell company in 2014. Is there more?
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Zhisheng was setup by CAA in 2013 to hold 3.32% of Changfei and was later sold for RMB 1 to Beijing
Yuefeng in 2014 (parked, in effect). In October 2015, CAA increased its Changfei ownership to 100% by
buying Zhisheng, which now held 33.32% of Changfei, again for just RMB 1. Disclosure revealed that
Zhisheng was holding RMB 596 million in liabilities were then consolidated onto CAAs balance sheet.
Further research revealed these liabilities were likely incurred on CAAs behalf and engineered by CAA all
along. Debt amounting to 19% of 2014 equity was kept off balance sheet in a shell company and investors
kept in the dark for over a year, in our opinion. Are there more skeletons in the closet?
7.
CAAs core business is in a nosedive and its future prospects appear remarkably bleak.
CAAs core business is shrinking, the OEM business is low margin and struggling after the Xingfei
divestment and CAA is banking on unrealistic expectations from the solar power market. The company
reported just RMB 540 million of revenue in 1H 2016, a collapse of 56% over the prior year. This is worse
than it looks as core communication application solutions and services revenues had fallen by 62% yoy.
Pretax losses jumped to RMB 101 million, down 25x from the prior year! Operating cash outflow was
RMB 115 million.
a.
The PRC market appears to be shrinking for CAAs flagship satellite business.
Revenue from the Noter subsidiaries will form over 90% of CAAs revenue base when its
announced OEM spinoff is completed. Revenues in key Noter subsidiaries, Guangdong Noter and
Hebei Noter declined by 39% and 14% in 2015. Field interviews indicate that the addressable PRC
market is shrinking and that the revenue declines are structural. Management has buried the facts with
segment reclassification and opaque commentary.
CAAs revenue base will soon rely on a shrinking business after the OEM spinoff. We believe that this
explains the management hype on solar and the irrational move into direct lending, if this business is
even real.
b.
Lead Communications formed 34% of 2015 revenues but is worth a mere 3.5% of CAAs recent
market cap.
OEM manufacturing was responsible for RMB 1 billion in 2015 revenues, over 35% of total revenue
but made only RMB 1.1 million of profit in FY 2014. Out of this, Lead Communications accounted for
nearly 90% of this figure by our estimates.
CAA sold 25% in Leads holding company, Lide Group, for HK$ 40.4 million in January 2016 as
preparation for a spinoff listing in Hong Kong. This transaction valued 100% of Lead at a mere HK$
162 million. In addition, HK$ 198 million was the highest equity valuation for Lead observed in
strategic transactions on its shareholding between 2013 and 2015. CAA has revealed to the market
through these actions that Lead Communications, responsible for a third of its revenues, is worth a
miniscule 3%-4% of its recent market cap of HK$ 5 billion.
a.
CAAs solar business plans are more fiction than fact.

In May 2016, CAA acquired a 2009 patent and announced plans to enter solar panels manufacturing.
We believe that its chances of generating profits here are practically zero after consulting with solar
industry experts and researching CAAs business plan in-depth. We suspect that the real reason for
solar is to divert attention away from the imploding core business with exciting technology talk.
This is a solar daydream. CAAs technology falls under the category of concentrated photovoltaics
(CPV). CPV formed less than 0.5% of global solar installations in 2015. If CAA hits all its unrealistic
volume projections for five years, we estimate that it would post earnings of US$ 5-8 million, a paltry
amount given its current market cap. This result is after making many assumptions in CAAs favor.
We are skeptical that CAA can start production in the second half of this year4 when they have not
demonstrated a working prototype5 yet. We significantly discount projected earnings from this business
line.
4
5
2016 interim report, page 4.

Announcement dated 27 June 2015, page 9.
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8.
Manipulated stock prices?

We suspect trading manipulation in CAAs stock, similar to Tech Pro Technologies (HK: 3823) recently.
CAAs stock trades at valuation detached from any reasonable link to underlying fundamentals. The
company recently announced 1H 2016 results with an astonishing 62% revenue decline over the prior year
and a 25x increase in pretax losses the stock barely reacted. CAA undertook a major restructuring in 2015
and sold the subsidiary that accounted for over 60% of its total revenues the stock traded roughly flat
during the period. Share count increased by a record 51% between 2013 and 1H 2016 and the stock price
appears to be immune to such massive dilution. A recent 10% intraday drop in the morning session was
almost clinically zeroed out at the start of the afternoon session. Price based financial metrics give
extreme and illogical results. We notice that CAAs stock in recent times seems to trade just above the
exercise prices of its outstanding convertible bonds.
There are just too many coincidences like this indicate stock manipulation, in our opinion.
9.
Our valuation indicates a 93% downside from current stock prices.

As we demonstrate in this report, CAAs core operating business is presently deteriorating and its future
growth projects are far fetched (even delusional, in our opinion). Meanwhile, CAA has continued to burn
cash and has recently even started posting accounting losses as of 1H 2016. The company has continued to
raise debt and has diluted shareholders by 51% since 2013. We expect this capital-raising spree to continue
as the cash burn has not shown any signs of improving.
We suspect that the cash burn is possibly to drain non-existent cash from the balance sheet (fake cash
generated from fake earnings through accounting tricks, instead of true profits earned from cash paying
customers). We also suspect that the cash burn could be a means to misappropriate wealth from
shareholders to other parties.
We do not see the point of estimating the per share valuation of this dubious earnings stream which has not
translated into operating cash flow generation over the last 3-, 5- or 7-year basis. Even if such a valuation is
done, it would be subject to further downward pressure from the dilutive increases in share count that we
expect to see.
Hence we have valued the company on a 1x adjusted tangible book basis. Our adjustments account for
assets which appear to be either highly questionable (possibly fake), or be extremely difficult to recover
back into cash at their stated carrying values. Based on this approach, we value CAAs stock at HK$
0.17 per share, a 93% downside to the current stock price.
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1. Fabricated revenue.
CAA reported RMB 2.8 billion in continuing operations revenues in its 2015 annual report. We present
evidence below, based on the corresponding SAIC6 government filings in China, that the company has
overstated revenues by RMB 1 billion. This overstatement accounts for 60% of its reported communications
segment revenues and 36% of its total continuing operations revenues.
We further show that, due to the overstatement, CAA has an eye-popping 671% year-on-year revenue growth in
its infocomm services for 2015, which is unsupported by field research. Adjusting for this lower revenue reveals
an earnings profile dramatically smaller and of lower quality.
Revenue composition
The following is the segmental composition of CAAs continuing operations revenue for 2015.
Source: 2015 annual report, page 5.
6
SAIC stands for State Administration for Industry and Commerce (
). Companies operating in the PRC must file a
Company Annual Inspection Report to renew their business licenses. This filing includes their Income Statement, Balance Sheet and other
details. For additional information, visit http://www.saic.gov.cn.
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This chart has been summarized into the table below.
Revenue Contribution by Product Category
RMB Thousands
2014 R
Satellite Services
644,441
Infocomm Services
187,931
Satellite & Infocomm Services (Booked in Noter Entities) 832,372
2015
2014 R (%)
233,644
25.89%
1,448,196
7.55%
1,681,840
33.44%
Terminals Parts
OEM Manufacturing (Booked in Changfei Subsidiaries)
1,602,018
1,602,018
1,086,360
1,086,360
Investment Activities
54,761
74,186
2015 (%)
8.22%
50.95%
59.17%
YOY (%)
-64%
671%
102%
64.36%
64.36%
38.22%
38.22%
-32%
-32%
2.20%
2.61%
35%
Total Revenue: Continuing Operations

2,489,152 2,842,386
100.00%
Notes: 2014 R stands for 2014 Restated. Noter and Changfei7 entities are detailed in following sections.
100.00%
14%
As can be seen from the table above, satellite and infocomm revenues increase from RMB 832 million in 2014
to RMB 1,682 million in 2015. This growth was attributable to a hard-to-believe 671% year-on-year revenue
growth in infocomm services whilst satellite services revenue fell 64%.
CAAs satellite and infocomm businesses have been profiled in its 2009 prospectus and subsequent annual
reports as follows:
Satellite: CAA provides satellite communications services used for emergency communications and
surveillance. The clients are mainly provincial PRC government agencies. Revenues are comprised of new
projects (design, hardware, commissioning) and maintenance. Projects are won by bidding in govt. tenders.
Infocomm: CAA provides wireless communications services, mainly for local police. Clients are municipal
PRC governments and projects are won through tenders. Projects include providing hardware, software and
services for activities such as issuing parking tickets through handheld devices, and enabling police
communications through devices like walkie-talkies.
CAAs Noter subsidiaries house its satellite and infocomm businesses.

We have specifically identified the relevant Noter entities from 37 entities owned by CAA in 2015 on their
specific common characteristics. We can also definitively attribute all other CAA entities to other parts of
CAAs organization. Refer to appendix 1 for a full explanation.
We determined that there were a total of eight Noter subsidiaries as of 2015. CAA has described each as active
in the development and provision of communication equipment, application services, system operating
management, application upgrade and system maintenance.
7
After the 2015 restructuring, OEM revenues are from three subsidiaries of 100% owned Changfei. 100% owned Lead Communications,
57.5% owned Control Electromechanical. Control owns 100% of Wanyu. Changfei also owns minority stakes in three tiny OEM
associates, which generate immaterial revenues.
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Missing Revenue
Based on the SAIC filings for Noter subsidiaries below, we believe that RMB 1 billion of revenues in 2015
are fabricated.
RMB Thousands
2015 Annual Report Revenues (Filed in Hong Kong)
Satellite Services Revenues
Infocomm Services Revenues
Satellite & Infocomm Revenues (Booked in Noter Entities)
2014 R
2015
644,441
187,931
832,372
233,644
1,448,196
1,681,840
SAIC Revenues (Filed with in China by Noter Entities)

Hebei Noter
Beijing Noter
Guangdong Noter
Tianjin Hailantong (
Shanghai Noter
All Access (Shenzhen)
Hebei Haoguang
Huizhou All Access )
Noter Entities: Satellite & Infocomm Services
469,108
64,559
157,047
2,365
14,366
707,445
404,686
156,436
95,458
6,177
1,765
647
665,170
Missing Revenue
124,927
1,016,670
Source: SAIC filings and 2015 annual report. See appendix 2 for SAIC filings of the above entities. Some subsidiaries like Guangdong
Noter also have finance and other revenues. We have assumed that all Noter revenues above are from its satellite/infocomm business, an
assumption in favor of CAA.
Here is a recap of its claimed revenues.

RMB Thousands
Claimed 2015 Annual Report Revenues
Satellite & Infocomm Services (Booked in Noter Entities)
OEM Manufacturing (Booked in Changfei Subsidiaries)
Investment Activities
Continuing Operations Revenue
Discontinued Operations Revenue
Total Revenue: Continuing + Discontinued Operations
2014 R
2015
832,372
1,602,018
54,761
2,489,152
4,549,288
7,038,440
1,681,840
1,086,360
74,186
2,842,386
4,702,393
7,544,779
Missing Revenue
Annual Report less SAIC Revenues
124,927
1,016,670
Missing Revenue / Satellite & Infocomm Services Revenue

Missing Revenue / Continuing Operations Revenue
15%
5%
60%
36%
Source: SAIC filings and 2015 annual report.
Many China related frauds have been unmasked by comparing Chinese SAIC filings and Hong Kong annual
reports. Investors are aware that in cases of large discrepancies, SAIC financial statements are more reliable. In
CAAs case, revenues filed with SAIC in China were far lower than revenues claimed in its 2015 annual
report filed in Hong Kong.
Our interviews8 with former CAA employees also suggest that SAIC revenues are closer to reality. Below is an
interview excerpt with an ex employee of Hebei Noter:
In CAA group, the [satellite and infocomm] revenue contribution from Hebei Noter is the most, which
could take 60% share, as CAA started its business in Hebei. Hebei Noter won most of biddings with
RMB 300 million [in 2015] and around 100 projects in recent years.
8
We have interviewed several former CAA employees during our field research. Interview excerpts in this report are not direct quotes but
are translations of Chinese language conversations.
triamresearch.com
11
Triam Research
Note: These comments indicate that Hebei and other Noter entities together generated RMB 500
million in revenues. This figure is closer to the RMB 665 million in the 2015 SAIC filings than it is to
the RMB 1.7 billion claimed in the 2015 annual report.
Where did the revenue growth come from? PRC government tender awards for 2015
were only RMB 8 million compared with CAAs claimed infocomm revenue of RMB 1.4
billion
Of the total RMB 1.7 billion in 2015 revenues attributed to Noter, CAA had claimed RMB 1.4 billion in
infocomm services revenues. This represents a fantastic 671% year-on-year revenue growth for infocomm.
As described, the infocomm business mainly involves providing local police with wireless communications
services (
or Jingwutong). City and county governments award these contracts through tenders.
To verify this stupendous growth, we searched for tenders9 won by CAA in 2015 and interviewed various
former employees. In its 2015 interim report, CAA revealed in terms of geographical distribution, sales
remained focus in Hebei, Beijing and Sichuan.
We have found that CAA won only 7 tender that totaled RMB 8.4 million, which form less than 1% of the
claimed RMB 1.4 billion in infocomm revenues.
No. Award
Date
Province City
Purchasing
Department
Amount
Project Name
(RMB
Thousands)
29-May-15 Hebei
Province
Kuancheng
Traffic Police
Manchu County Brigade
120
16-Jun-15
Cangzhou City
200
3
4
Hebei
Province
11-Aug-15 Hebei
Province
9-Nov-15 Hebei
Province
9-Nov-15
1-Dec-15
4-Dec-15
Hebei
Province
Hebei
Province
Hebei
Province
Traffic Police
Detachment
Qianxi County Traffic Police
Brigade
Shijiazhuang
Traffic
City
Management
Bureau
Yutian County Traffic Police
Brigade
Tangshan City Traffic Police
Brigade
Gaobeidian City Traffic Police
Brigade
67
828
Autonomous County Procuratorate Business

Equipment, Land Bureau of Motorcycle and Traffic
Police Brigade Office Equipment Procurement
Public Security Police Detachment Police Equipment
Procurement Projects
Traffic Police Brigade 2014 Second Batch of Business
Equipment Purchase Project (Police Pass)
Traffic Management Bureau of Police - Procurement
Projects
67
Traffic Police Brigade Through The Terminal

Procurement Projects
6,861 Construction of Mobile Policing Platform of Public
Security Traffic Police Detachment
251 Traffic Police Brigade And Accessory Facilities 30,
Walkie-talkie 30 Procurement and Related Services
8,393
Source: PRC provincial governments. Refer to appendix 3 for a list of CAAs tender awards for 2014 and 2015.
Some notable observations related to infocomm:

1.
85% of the above tender awards amount is unlikely to be part of 2015 revenues. RMB 7.1 million or
85% of the above RMB 8.4 million was only awarded in December 2015. It is unlikely that CAA went from
winning the tender to full project commissioning within one month in order to recognize this amount as
revenues for 2015 because CAA recognizes revenues10 based on a percentage of completion method.
2.
Former employees do not know of the claimed infocomm volumes. The biggest project above is worth
RMB 6.9 million, involving hardware, software, bandwidth and other services to commission the
communication platform. Such a project would involve several employees during its execution. Our
interviews with former employees did not support the view that there were many infocomm projects in
2015 worth billions in revenue.
9
We have researched infocomm tender award notices at various PRC provinces and municipalities going back to 2014. We have extensively
covered the provinces highlighted for satellite and infocomm in CAA annual and interim report MD&A sections. We are confident that we
have found almost all, if not all, infocomm tenders won by CAA since 2014. Infocomm tender amount for 2015 that we have found this way
has been independently corroborated in interviews with former employees.
10
2015 annual report, page 103, revenue recognition policy.
triamresearch.com
12
Triam Research
Police communication solution is not our main business. The handheld devices look like phones,
which are standard terminals. CAA doesnt produce them by itself. The total revenue was around
RMB 8 million in 2015.
- Ex Marketing Manager, Hebei Noter.
Note: The above RMB 8.4 million in awarded tenders is close to the amount mentioned in this
interview.
Shanghai subsidiary doesnt have information communication service.
- Ex Executive Assistant, Shanghai All Access.
3.
Only Hebei Noter offers infocomm services. We were told of this in several interviews and it has also
been corroborated by our tender awards search. If the 2015 annual report claim of RMB 1.4 billion in
infocomm revenues are true, then Hebei Noters total revenues for the year should be more than this
amount because Hebei Noter includes infocomm and also satellite revenues. Instead, Hebei Noters SAIC
filings only show RMB 405 million total revenue in 2015.
4.
Claimed infocomm revenues lack credibility. To generate RMB 1.4 billion in infocomm revenues in
2015, CAA would need an additional 209 projects, each billed at RMB 6.9 million (the largest project that
we found). In 2014, infocomm revenues were only 13% of the claimed 2015 levels. CAAs claim of over a
RMB1 billion in new infocomm revenues lacks credibility.
5.
Maintenance revenues cannot make up this massive deficit. Infocomm revenues have two components,
new projects and maintenance revenues. New projects (tender to commissioning) are tender awards that
have been recognized as revenues based on a percentage of completion method. Maintenance revenues are
from upgrades and repairs of prior year projects.
We checked if this massive revenue growth could have come from maintenance contracts. CAA tender
awards for 2014 are similar in magnitude to its 2015 awards in magnitude, indicating that maintenance
revenues will not be in billions.
If by some fantastic set of events, there was indeed a 7x year-on-year infocomm growth in 2015, we should
have 1) found the relevant tender awards, 2) interviews would have told us about many projects under execution
and 3) CAA would have highlighted such positive developments in its filings, like it prominently highlighted a
USD 42 million satellite communications order from a Taiwanese customer in 2014.
If these mystery infocomm projects do exist and are worth billions in revenue, then why are the SAIC
revenues for all Noter entities only RMB 665 million, instead of RMB 1.5 billion claimed for satellite and
infocomm revenues in the annual report?
triamresearch.com
13
Triam Research
2. Investors cannot rely on financial statements audited by CAAs new

auditors.
KPMG resigns near the end of 2015
KPMG was CAAs auditor since its IPO. KPMG resigned on 20 October 2015 citing fee disagreements, a
reason historically that has also used by auditors to disassociate themselves from risky clients, in our
experience. CAA then appointed HLB Hodgson Impey Cheng Limited11 (HLB), a relatively small audit firm,
as their new auditor. CAA had first worked with HLB during the Changfei acquisition12 in 2012.
KPMG (auditor) resigning and Mr. Pun Yak Chak (independent director) retiring within a short period of each
other, and both before the 2015 annual report was signed off on, appears suspicious to us.
11
12
Announcement dated 20 October 2015.

Announcement dated 5 December 2012.
triamresearch.com
14
(Expressed in Renminbi unless otherwise indicated)

Revenue from customers (Note)
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
699,015
425,211
6,339,425
4,268,426
7,038,440
4,693,637
175,815
184,920
185,352
429,753
SEGMENT REPORTING (Continued)

Segment operating profit
244,833
Triam Research
361,167
Depreciation and amortisation
for the year in reported top customers

356
1,042
91,073
97,745
91,429
98,787
indicate
that financial
statements
are
(a) Discrepancies
Segment
results,
assets and liabilities
(Continued)
Impairment
of
unreliable
- property,
plant and segment information concerning segment operating profit, management is
In addition
to receiving
equipment
6,198results announcement
6,198and annual
report
When
KPMG
together
the financial
statements
in2014,assets
the
provided
withput
segment
information
concerning
revenue,
and liabilities
used
by the segments
information
matched.
the two disclosures
were the
- intangible
assetsFor example, reported
sales tothe largest
25,966customersbetween
25,966
in their operations.
same.Reportable segment assets
478,895
473,274
7,717,952
5,945,596
8,196,847
6,418,870
Reportable segment liabilities
96,025
39,203
5,465,849
4,014,821
5,561,874
4,054,024
satellite
2014 annual results announcement, Provision
agreedofby
KPMG: Provision of wireless data
communication application
Note: Revenue from customers
(including
related
parties)
solutions and other services
solutionsamounting
and services to 10 percent
Total or
more of the Groups revenue2014
is set out 2013
below.
2014
2013
2014
2013
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
Provision of satellite

Segment operating profit
Depreciation and amortisation for the year
Impairment of
property,
plant and
Customer
A equipment
intangible
assetsB
Customer
Reportable
segment
assets
Customer C
communication
699,015
Provision of wireless
425,211
data communication
6,339,425
4,268,426
application solutions
and other services
and services
7,038,440
4,693,637
Total
244,833
356
RMB000
175,815
184,920 2013185,352 2014429,753 2013 361,167
2014
1,042 RMB00091,073RMB00097,745RMB000 91,429
98,787
RMB000
RMB000

478,895
96,025
2,722,8856,1983,066,980
2,722,885 6,198
3,066,980
899,426 25,966 16,317
899,42625,966 16,317
473,274
7,717,952
5,945,596
8,196,847
6,418,870
785,130
241,593
785,130
241,593
39,203
5,465,849
4,014,821
5,561,874
4,054,024
2014
2013
Source: 2014 results announcement dated 31 March 2015, page 10.
Note: Revenue from customers (including related parties) amounting to 10 percent or more of the Groups
revenue is set out below. Further details of concentration of credit risk arising from these customers
2014
by KPMG:
areannual
set outreport,
in noteapproved
36(a).
Provision of satellite
Provision of wireless data
solutions and other services
solutions and services
Total
2014
2013
2014
2013
2014
2013
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
Customer A
2,722,885
3,066,980
2,722,885
3,066,980
Customer B
899,426
16,317
899,426
16,317
Customer C
785,130
241,593
785,130
241,593
10
Source: 2014 annual report published on 23 April 2015, page 106.
When HLB oversaw the financial statements preparation in 2015, the results announcement and annual report
showed large and shocking discrepancies. Such discrepancies cast doubt on the overall reliability of the
financial statements.
Customer As figures have been revised down by over 51% from RMB 1,240 million in the 2015 results
announcement to RMB 609 million in the annual report. How can the numbers change so dramatically
between two disclosures that are released within a month of each other?
Customer B from the 2015 results announcement has been re-labeled Customer D in the annual report.
This customer in the results announcement did not qualify as a 10% customer but suddenly does so in the
annual report with RMB 297 million.
triamresearch.com
15
communication
and services
112
Revenue
from customers
CHINA ALL ACCESS
(HOLDINGS)
LIMITED
(Note)
Investment
income
2014
2015
2014
2015
2014
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
2,768,211
2,434,482
74,175
54,670
2,842,386
2,489,152
39,934
48,713
Triam Research
New Customers B and C who were not in the results announcement suddenly appear in the annual report
with
nearly
RMB
attributed
to them, 74,175
nearly 34%
of revenue.
Did the
auditors suddenly discover
Segment
operating
profit1 billion
524,343
424,952
54,670
598,518
479,622
that
34% of
Depreciation
andrevenue was from two customers before releasing the annual report? Please recall that our
amortisation forfound
the
investigation
approximately RMB 1 billion in fabricated revenues, as demonstrated earlier.
NOTES TO THE FINANCIAL STATEMENTS

year
39,934
31 December 2015
Impairment
of otherwise indicated)
(Expressed in Renminbi
unless
6.
Total
2015
48,713
How- can
customer information be so different between the two announcements? To us its suggest that the
property, plant and
2015
financial
statements are
unreliable!
SEGMENT
REPORTING
(Continued)
equipment
11,379
6,198
11,379
6,198
= intangible assets
25,966
2015
annualresults,
results announcement,
agreed by
HLB:
(a)
Segment
assets and liabilities
(Continued)
25,966
The measure
usedfrom
for reporting
segment
profit related
is segment
operating
profit. to
Segment
operating
Note:
Revenue
customers
(including
parties)
amounting
10 percent
or
profit includes
profit
generated
thebelow:
segment and certain distribution costs and
more of the
the gross
Groups
revenue
is setbyout
administrative expenses directly attributable to the segment. Items that are not specifically
attributable to individual segments, such as unallocated other revenue,
other netofincome,
Provision
depreciation of certain communication equipment, amortisation of certain intangible assets, other
communication
corporate administrative expenses and share of profits less losses of associates, are excluded from
application
solutions
segment operating profit.
and services
In addition to receiving segment information concerning segment operating

profit, management
2015
2014is
provided with segment information concerning revenue, assets and liabilities
used
by
the
segments
RMB000
RMB000
in their operations.
1,240,404
Customer A
Customer B
1
899,426
Provision of
N/A 1
785,130
Investment activities
Total
2015
2014
2015
2014
2015
2014
The corresponding revenue
10 percent
of the RMB000
total
RMB000 did not
RMB000contribute
RMB000 over RMB000
RMB000
revenue of the Group.

2,768,211
2,434,482
74,175
54,670
2,842,386
2,489,152
Segment operating
524,34310 percent
424,952 or more
74,175to the Groups
54,670
598,518 for both
479,622
No profit
other customers contributed
revenue
Depreciation and
years.
amortisation for the year
38,486
47,386
38,486
47,386
Source:
annual results announcement
dated 30 March
Impairment 2015
of trade receivables
13,996
88,415 2016, page
15.
13,996
88,415
Impairment of
property, plant and equipment
11,379
6,198
11,379
6,198
Impairmentannual
of intangiblereport,
assets
25,966
25,966
2015
approved by HLB:
Note: Revenue from customers (including related parties) amounting to 10 percent or more of the Groups
revenue is set out below.
15
Customer A
Customer B
Customer C
Customer D
1
Provision of
2015
2014
RMB000
RMB000
608,532
565,304
396,205
297,421
480,204
N/A1
N/A1
785,130
The corresponding revenue contributed to less than 10 percent of the total revenue of
continuing operations.
Source: annual report, published on 27 April 2016, page 112.
triamresearch.com
16
Triam Research
2015 results announcement and annual report figures do not match: what are the
auditors doing?
We have to question the auditors when there are material differences between the 2015 annual results
announcement13 and the annual report14, which were published within a month of each other. Comparing the
two disclosures, we found several large discrepancies.
On the balance sheet, net assets remain the same but various line items are different. On the income statement,
net profits and taxes remain the same but intermediate results are different. These differences are summarized
below.
RMB Thousands
Assets
Deferred tax assets
Trade and other receivables
Current prepayments
Assets for disposal
Liabilities
Trade and other payables
Current convertible bonds
Income tax payable
Liabilities for disposal
Interest bearing borrowings
Non-current convertible bonds
Deferred tax liabilities
Income
Other revenue
Other net loss
Finance income
Expenses
Administrative expenses
Finance costs
Profits
Profit from continuing operations
2015 Results 2015 Annual Discrepency

Annoucement Report
20,157
2,654,298
403,000
3,289,183
11,098
2,655,058
376,143
3,318,504
45%
0%
7%
1%
1,533,593
413,843
150,532
2,325,839
202,913
836,831
21,211
1,390,804
265,887
170,926
2,544,685
177,780
912,709
16,135
9%
36%
14%
9%
12%
9%
24%
30,703
-25,681
202,224
12,547
-7,525
116,750
59%
71%
42%
-138,191
-308,041
-204,207
-156,551
48%
49%
430,012
363,996
15%
Source: Announcement dated 30 March 2015 and 2015 annual report.
CAA released its annual results announcement on 30 March 2016 and its 2015 annual report on 27 April 2016.
HLB signed off on both disclosures (they agreed with the figures in the results announcement). How can the
figures change so much within a month?
Why did the figures not change with KPMG (the old auditor) but differ so dramatically with HLB (the new
auditor)? It was the same company and had the same accounting issues in both years. If there was indeed a
legitimate reason, why has there been no clarification announcement on the matter by either the auditor or the
company? What were the auditors doing? We find their approval of both sets of figures to be highly
questionable.
13
14
Announcement dated 30 March 2016.

Published on 27 April 2016.
triamresearch.com
17
Triam Research
3. Skycomm is an undisclosed related party. It is controlled by CAAs

chairman and appears to be a vehicle to manipulate CAAs accounts.
Skycomm has been presented as an independent third party since CAAs IPO. We present evidence below that
Skycomm is an undisclosed related party currently controlled by CAAs chairman, Mr. Chan Yuen Ming. We
believe that it exists to serve as an off-balance sheet vehicle to manipulate CAAs accounts and extract cash.
Our field research reveals that CAA (Noter) and Skycomm operate as a single unit sharing office space,
employees and other resources. Interviews with former employees inform us that, CAAs chairman, Mr. Chan,
takes key decisions on behalf of Skycomm and that a Skycomm shareholder approves CAAs files and
contracts. Employees represent themselves to customers interchangeably as CAA or Skycomm. We could not
find any material business that Skycomm does outside of its partnership with CAA.
This Skycomm situation has strong resemblance to other stock market disasters like Enron, Longtop Financial
and Silverlake Axis. These had allegedly used undisclosed private entities to hide costs and liabilities from
investors. Longtop has been delisted and Silverlake trades at a fraction of its earlier valuation.
Our findings of fabricated revenues and undisclosed related parties raise questions on management credibility.
This is a serious issue for a company that has repeatedly tapped public markets for capital and has been
consistently bleeding cash. A loss of investor confidence could affect the companys access to capital markets
and lead to difficulties.
Skycomms background
Mr. Chan Yuen Ming incorporated Skycomm and served as its founding chairman in 2003. He restructured
Skycomm between 2006 and 2008 by carving out CAA from the old Skycomm. After the carve-out, he resigned
his position and sold his ownership in Skycomm to four employees in 2008, severing his formal links to the
entity.
CAA went public in 2009 with Chan as its chairman and largest shareholder. Skycomm was described as owned
by independent third parties in CAAs prospectus. Subsequent annual reports infer that Skycomm remains a
not related party.
We show below that currently Chan is the Vice Chairman of Guangdong Skycomm, the Legal Representative of
Shaanxi Skycomm, and controls Skycomm groups operations.
Skycomm is a related party to CAA, according to both the companys definition15 and Hong Kong
accounting standards16.
15
16
Source: 2015 annual report, page 106

Hong Kong Accounting Standard 24 Related Party Disclosures, revision dated November 24
triamresearch.com
18
There are risks associated with forward-looking statements
For the five

months ended
Certain facts and statistics contained in this prospectus have come from official government
For the year ended 31 December Triam
31 Research
May
publications whose reliability cannot be assumed or assured
2006
2007
2008
2009
RMB000
You should read the entire prospectusRMB000
carefully andRMB000
we strongly caution
you not toRMB000
place any
CAA
asserts that Skycomm is an Independent Third Party
reliance on any information contained in press articles or other media, including, in particular,
any
future development
plans, other
forward-looking
information
or
Turnover
attributable
to
our prospectus
Below
is anprojections,
excerpt fromvaluations,
CAAs
describing Skycomm
as owned
by independent
third parties,
and
information
about our
presenting
their relationship
asCompany.
an arms length business partnership.
application
services
provided
for our customers who used the
OUR
RELATIONSHIP
WITH
network
of SkyComm Group
SHAREHOLDERS
SKYCOMM
1,532
GROUP
1,668AND
OUR
1,419 CONTROLLING
1,415
Turnover attributable to our

application services provided
The business of our Group was initially founded and carried on by SkyComm Group. After the
for our customers
who aused
the legal entity from SkyComm Group, though we still co-operate
Reorganisation,
we became
separate
network
of other
with
SkyComm
Group on a number of aspects. Although SkyComm Group is currently owned by
telecommunication
network
Independent
Third Parties,
it was controlled by Mr. Chan, being one of the Controlling Shareholders
prior
to the Reorganisation until he sold his indirect
in, and resigned
from the directorship
operator
2,878 interests5,395
4,610
2,047
and management in, SkyComm Group. For details, please refer to the section headed Our
Relationship with SkyComm Group and our Controlling Shareholders in this prospectus.
Total
Source: Prospectus, page 14.
FINANCIAL INFORMATION
26
4,410
7,063
6,029
3,462
Notes to the Financial Statements
Co 3rd Sch 27
In addition, we have engaged SkyComm Group as our agent to conduct sales

and marketing
(Expressed in Renminbi)
Basis
of
Presentation
activities to certain clients or make the bids on behalf of us. We have formalised our
commercial arrangements with SkyComm Group by entering into the Long Term
The combined income statements, combined statements of comprehensive income, combined
Co-operation Agreement with SkyComm. For details, please refer to the paragraph
statements
of changes
in equity
and combined cash
flow statements of our Group as set out in the
MATERIAL RELATED
PARTY
TRANSACTIONS
(continued)
Long-Term
Agreement
below.
As at 31include
May 2009,
there was
no outstanding
Accountants Co-operation
Report in Appendix
I to this
prospectus
the results
of operations
of the
amount
duecomprising
from SkyComm
Group
of the contracts
by SkyComm
companies
our Group
for in
therespect
Track Record
Period (orentered
where into
the companies
were
(a) Name and relationship with related parties (continued)
incorporated/established
at our
a date
later than 1 January 2006, for the period from the date of
Group
as our agent with
customers.
incorporation/establishment
to 31 May 2009) as if the combined entity had been in existence
Source:
Prospectus page 144.
Notes:
throughout the Track Record Period.
(ii)
forChan
most
of Ming
our iscall
centre
application
solutions,
we co-operated
with
SkyComm
to
inaugural
2009
annual
report,Shareholders
it describes
as not Sector
a related
party.
NoneGroup
of theonannual
(i) InMrCAAs
Yuen
one
of the
Controlling
ofSkycomm
the Group. Creative
Limited
was incorporated
bid
and/or
negotiate
certain
centre
contract
as from
one-stop
application
reports
between
2010
andfor
2016
declare
Skycomm
asoutsourcing
aMrrelated
party,
asand
evident
their
absence
in the annual
18 Januar
y Record
2008
and
is wholly
owned
by Mr call
Chan
Yuen Ming.
Chan Yuen
Ming
Creative
Sector
Limited
are the
Trading
report
section
titled
Material
Related
Party
Transactions.
Controlling
Shareholders
of
the
Group.
solutions to our customers. We executed a tripartite agreement with SkyComm Group and
The following
tables present
our summary
financialour
information
for the
Record
Period
our customers
whereby
SkyComm
Group charge
customers
for Track
certain
Excluded
(ii)
Following Noters acquisition of cer tain assets and liabilities from Hebei SkyComm and Shanghai SkyComm on 30 June
which is extracted from the Accountants Report set out in Appendix I to this prospectus. This
Services
byrelated
SkyComm
Group
(including
operation
outsourced
call Shareholders
centres and
2006, these provided
entities were
par ties of
the Group
until 28 Februar
y 2008of
when
the Controlling
summary should be read in conjunction with our financial information included in the Accountants
disposed
of their interests
in SkyComm.
Accordingly, transactions
with these entities donetwork)
not constitute
par ty
data
transmission
services
on SkyComm
Groups communication
andrelated
we charge
Report set out in Appendix I to this prospectus, including the notes thereto. The combined financial
transactions
subsequent
to
28
Februar
y
2008.
Consequently,
these
entities
became
normal
business
par
tners
to
the
our
customers
the Related
Services
of overall
software
design
for
statements
of thefor
companies
comprising
the(including
Group haveprovision
been prepared
in accordance
with
HKFRSs.
Group.
product requirements and specifications, software programming and technical support,
(iii)

Following the disposal by Mr Chan of his interests in SkyComm on 28 February 2008. Mr Chan remained as the chairman
8 2008. Accordingly, transactions with Shanghai SkyComm

of the board of directors of Shanghai SkyComm until 9 December
are classified asisrelated
par ty transactionsRelated
until 9 December
Skycomm
an Undisclosed
Party2008. Since then, Shanghai SkyComm became a normal
business par tner of the Group.
1. CAAs Chairman, Mr. Chan Yuen Ming is Guangdong Skycomms Vice Chairman
Current SAIC records show that CAAs Chairman, Chan Yuen Ming, is also Guangdong Skycomms
CAA
144 and
Skycomm are related parties.
Vice Chairman. This demonstrates that
The screenshot below is from the official SAIC database. It shows that as of 26 September 2016, Guangdong
Skycomms Vice Chairman was Mr. Chan Yuen Ming. It also shows Guangdong Skycomm as being owned by
Skycomm Group.
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19
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File Ref.
Guangdong Skycomm
26 Sep 2016
Shareholder
Skycomm Group
File Ref.
Chan Yuen Ming, Vice Chairman
Source: SAIC
2. CAAs Chairman, Mr. Chan Yuen Ming is Shaanxi Skycomms Legal Representative
The latest SAIC record reveals that CAAs Chairman, Chan Yuen Ming, is Shaanxi Skycomms Legal
Representative. This also demonstrates that CAA and Skycomm are related parties.
This screenshot below is also from the official SAIC database. It shows that as of 30 September 2015, Mr. Chan
Yuen Ming was the Legal Representative of Shaanxi Skycomm. It also shows that Shaanxi Skycomm as being
owned by Skycomm Group.
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Shaanxi Skycomm
Legal Rep
Chan Yuen Ming
30 Sep 2015
Shareholder: Skycomm Group
Source: SAIC
17
Guangdong Skycomm and Shaanxi Skycomm are subsidiaries of the Skycomm group:
Guangdong Skycomm
Shaanxi Skycomm
Source: http://skycomm.cn/goujia.html
17
Shaanxi Skycomm is owned by Skycomm Group (Skycomm Network Communication Group Co., Ltd.
and Shaanxi Post (
).
SAIC filings dated 2003 show that Skycomm Communication Group Co., Ltd (
) and Skycomm Network
Communication Group Co., Ltd (
) are the two names for the same entity. See appendix 4 for the relevant
SAIC document.
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3. CAA and Skycomm have the same registered address in Beijing
Beijing CAAs registered address has been written as No. 22 Wanyuan Street (
22
2
).
Skycomms registered address has been written as No.22 of Wanyuan Street (
22
202
).
Beijing CAAs registered address:
Source: SAIC
Beijing Skycomms registered address:
Source: SAIC
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4. Site visit reveals CAA and Skycomm function together as a single operation
Our investigators visited the above address and found only CAAs signage at the location. However, the gate
guard said that Skycomm was located on the 2nd floor of building B. Former employees also said that they dont
between the
two SKYCOMM
names.
OURdistinguish
RELATIONSHIP
WITH
GROUP AND OUR CONTROLLING SHAREHOLDERS
If you are looking for Skycomm, go to Building B. Skycomm is in Building B.
system
installation
and22configuration,
and quality control and testing) separately. For each
Gate
guard of No.
Wanyuan Street
of the three years ended 31 December 2008 and the five months ended 31 May 2009, our
CAA and
Skycommtoemployees
use centre
the same
Office Administration
system
in Beijing.
turnover
attributable
provisioneven
of call
application
solutions and
services
(all of
Ex uses
Marketing
Manager,
CAA Beijing
which
SkyComm
Groups
communication network) amounted to approximately
RMB2.98 million, RMB2.92 million, RMB4.28 million and RMB1.78 million respectively,
representing
6%,
2%,and
2%Skycomm
and 4% work
of ourtogether.
total turnover.
Our that
customers
In Beijing,approximately
all employees of
CAA
We all know
we workare
for the
still
the
ultimate
users
of
our
call
centre
application
services
whilst
SkyComm
Group
is
our
same company, and dont care whether we use the name of CAA or Skycomm.
business
partner inManager,
relationCAA
to the
provision of call centre application services;
Ex Marketing
Beijing
(iii) our office in Shijiazhuang of Hebei Province and our sales office and the operation centre
of our ALL ACCESS platform in Beijing are leased from SkyComm Group. In respect of
the lease of our office in Shijiazhuang, the lease is for a period of three years commencing
from 1 July 2008 without any option to renew the lease. In respect of the lease of our sales
office and operation centre of our ALL ACCESS platform in Beijing, we have an option by
us to renew the lease on the same term (other than the option to renew and at the then
market rent subject to a cap of 120% of the existing rent) for another 10 years commencing
from the expiry of the initial term, unless terminated by us by giving a written notice of at
least three months. In respect of the lease of our operation centre and sales office in Beijing,
we have also been granted a purchase option pursuant to which we may, during the term of
the lease, request SkyComm to sell the office premises to us at its then fair market value.
So far as the Directors are aware of after making all reasonable enquiry, there are suitable
premises alternative to these premises available for lease from Independent Third Parties.
As advised by our property valuer, BMI Appraisals Limited, the rents payable by us under
the above tenancy agreements represent fair market rents.
(iv) we have granted a non-exclusive licence over the use of certain functions of our ALL
platform to SkyComm Group whereby SkyComm Group can have access to
Source: ACCESS
site visit.
certain functions of our ALL ACCESS platform to provide satellite/wireless data
In Beijing,
CAA and Skycomm
currently
are indistinguishable
from each
other. This
telecommunication
services
for ashare
termtheofsame
10 office
years and
commencing
from 1 January
2009,
subjecttotoCAAs
early claim
termination
in the manner
specified
in the licence agreement; and
is in contrast
of operational
separation
from Skycomm.
(v)
we used to share with SkyComm Group on general and administration resources and
facilities. Since 2008, all the general and administration resources have been segregated
from SkyComm Group and we no longer share any general and administration resources and
facilities with SkyComm.
Source: 2009 prospectus, page 145.
Long Term Co-operation Agreement
5.
Both
entities Group
have the
same
contact
phone
numbertelecommunication
As the
SkyComm
is one
of the
wireless
and satellite
and call centre

operators and licence holders for the provision of telecommunication, the related value-added and call
CAAs
recruitment
phone
andfor
Skycomms
number
its website are the
same, 010centreBeijing
services
in the
PRC, which
arenumber
required
use of thecontact
wireless
dataon
communication,
satellite
67872489.
communication and call centre application solutions provided by us, we have maintained close
working relationships with the SkyComm Group and another wireless and satellite telecommunication
operator. To reinforce our business collaboration with the SkyComm Group, our Group and SkyComm
entered into the Long Term Co-operation Agreement on 28 February 2008 (as supplemented by a
supplemental agreement dated 14 April 2009) pursuant to which for a period of five years until
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CAAs recruitment posting:
Source: http://www.chinahr.com/company/20-131085.html
Skycomms website:
Source: http://www.skycomm.cn/lianxi.html
We called this phone number, 010-67872489. Whether we asked for CAA or for Skycomm, the receptionist
referred us to the same forwarding number, 010-87123500.
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6. Interviews confirm that CAAs Chairman, Mr. Chan Yuen Ming controls both CAA
and Skycomm
Former employee, Skycomm Fujian:

Our boss is Mr. Chan Yuen Ming. When I joined Skycomm Fujian in 2013, all my colleagues in
Fujian Skycomm told me that Mr. Chan is our biggest boss, rather than Mr. Ren Runqi and Mr.
Yang Zhuping.
Note: Mr. Ren Runqi and Mr. Yang Zhuping are shareholders of Skycomm, as per the 2009 prospectus.
Mr. Chan signs his name as the final approval for files from Skycomms sales department.
Former employee, CAA Beijing:

Even though Mr. Ren Runqi is set to be one of the bosses of Skycomm, not CAAs management,
Mr. Chan will also pass some CAA files to Mr. Ren and authorizes him to decide and approve
some cases. But all important files of Skycomm must be delivered to Mr. Chan and he is actually
the ultimate decision maker.
Former employee, Shanghai All Access:

The Shanghai offices of CAA and Skycomm are close to each other. Most of employees are under
CAA, while they also attend projects with the bidding title of Skycomm. CAA and Skycomm are
brother companies, who belongs the same boss. I think 40% of the total revenue (RMB 22 million)
was contributed by projects obtained in the name of CAA, and the rest was contributed by projects won
by Skycomm.
Some clients have a long-term business relationship with Skycomm; they prefer to cooperate
with Skycomm than CAA. So some projects we obtained are in the name of Skycomm. Actually
CAA and Skycomm have independent financial accounting system. But I dont know how it works. At
least, from my experience, the group doesnt clearly separate sales team for biddings.
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4. Persistent and worsening cash burn alongside serial capital raisings.

CAAs cash generation record is terrible
CAA has a severe cash flow problem. As can be seen in the chart below, as CAAs net profits have grown its
operating cash flow (OCF) has severely declined. Large net profits have been matched by even larger cash
burn in the last three years, which raises serious suspicions over CAAs quality of earnings and the destination
of the cash outflows. The lack of operating cash flow generation has continued in 1H 2016, with an operating
cash burn of RMB 115 million the outflows are not stopping.
Reported Net Profit and Operating Cash Flow
RMB Millions
338
97
38
2009
153
205
82
2010
170
143
2011
80
2012
2013
2014 Restated
-511
Net Profits
278
208
2015 Restated
-474
-622
Operating Cash Flow
Source: annual reports.
CAA stands apart in its inability to convert accounting profits into operating cash inflows. Other companies in
satellite communications and OEM manufacturing routinely convert more than 100% of accounting profits into
operating cash inflow, as can be seen from the table below.
Ratio of Operating Cash Flow to Net Profit
Name
Ticker
2009
China All Access (Holdings)
APT Satellite Holdings
Asia Satellite Telecom Holdings
Truly International Holdings
Foxconn Technology
Varitronix International
633 HK
1045 HK
1135 HK
732 HK
FXCOF US
710 HK
0.4
1.7
1.3
NMF
3.0
0.1
2010
2011
2012
2013
2014
0.5
3.1
2.2
NMF
1.5
0.5
0.7
2.3
1.4
1.5
0.9
0.6
0.5
1.9
1.5
1.5
1.7
0.8
-1.5
1.8
1.6
1.3
2.1
1.5
-2.3
1.5
1.8
2.6
1.5
1.1
2015 Last 3 Years: Last 7 Years:

2013-2015 2009-2015
-2.2
-1.9
-0.9
1.6
1.6
1.9
2.0
1.8
1.7
2.8
2.1
2.1
1.7
1.7
1.7
0.9
1.1
1.1
Source: Annual reports for CAA and Morningstar data for other companies. From 2009 to 2015 for all companies.
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Serial Capital Raisings
As per the chart below, CAAs cash burn has been offset by repeated capital raising with the Company raising
RMB 1.2 billion through three large equity issues between 2013 and 2015.
RMB Billion
Cumulative Operating Cash
Flow
7 Years:
2009-2015
-1.3
-1.7
1.4
2.8
Cumulative Free Cash Flow
3 Years:
2013-2015
Cumulative Net Profit

-1.6
-1.9
Cumulative Capital Raises

0.8
2.2
Source: CAA annual reports. Capital raises are net of dividends and redemptions of convertible instruments.
CAA has also raised RMB 1.8 billion through issuance of convertible securities in the same period. Some of
these securities were seriously shareholder unfriendly (read: toxic) and we will discuss the most objectionable
financing below.
This cash hunger continues in 2016, with CAA raising over RMB 520 million in the first half of the year. We do
not expect the situation to change, as the underlying business fundamentals are poor and worsening.
August 2016. US$ 70 million convertible with personal guarantees given by the chairman and subscribed
by Prosper Talent Limited, a CCB entity.
July 2016. RMB 40 million through a 7%, 2-year loan from Hebei Offshore Listed Shares Investments
Fund Limited.
January 2016. HK$ 40.4 million through China Lide equity with a put option which effectively also makes
this a loan.
CAAs cash desperation results in a toxic death spiral financing

CAA issued two convertible notes to Asia Equity Value18 (AEV) via a private placement totaling HK$ 400
million in 2014. The first note for HK$ 230 million was issued on 27 June 2014 and the second one was for
HK$ 170 million issued a year later on 6 July 2015. These two notes were abruptly terminated on 24 June 2016
and replaced with a promissory note.
The notes had features of a toxic financing structure known as death spiral financing19. This kind of a
structure can materially dilute ordinary shareholders, cause large stock price declines and even trigger a
companys financial collapse. It is simply a form of wealth expropriation from all shareholders for the benefit of
a specific investor.
7. Evolution of the first AEV Note

1.
18
19
Shareholders as a whole witnessed substantial dilution. In its announcement dated 24 June 2014, CAA
said that if all note payments were made in shares at a conversion price of HK$ 3.35, then AEV would own
Announcement dated 23 June 2014.

For an overview of death spiral financing please see https://en.wikipedia.org/wiki/Death_spiral_financing
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a 9.4% equity stake in the company. With the latest conversion price being much lower at HK$ 2.17, the
implied stake was higher20 at 14.5%. This was a substantially higher dilution on CAAs old shareholders.
2.
2016 redemption amount has an embedded 20% return. CAA abruptly announced that it has early
terminated both AEV notes on 24 June 2016 (maybe after realizing that it was being taken to the cleaners,
two years later). CAA issued a promissory note for RMB 270 million to redeem the RMB 224 million in
outstanding principal on the notes on that date. This amount is to be paid off in installments by end of the
year with an 18% pa interest rate on any unpaid amounts21.
This redemption has an embedded 20% return to AEV (270 million / 224 million), and we know that AEV
had earned returns of more than 7.5% on earlier payments. In a nutshell, the AEV notes have cost CAA
between 20%-30% for the two-year period (the maturity was shorter on a duration basis). In contrast, CAA
has posted a much lower 6.5% return on invested capital22 in 2014 and 2015 (on fabricated financials that
we have pointed out). The two sets of numbers provide an idea of value destruction that the AEV note
inflicted on CAA shareholders.
3.
CAAs management has been more dilutive than a predatory financing structure. In totality, this AEV
notes dilution was actually just a small part of the overall dilution that CAA shareholders experienced in
that period. The above AEV dilution calculations assumed that there were no other dilutive share issues
done by CAA.
Between 27 June 2014 and 24 June 2016, CAA had issued23 387 million new shares, of which only 33
million shares was due to the AEV note (just 8.4% of the total new issuance). CAAs management had
diluted old shareholders 12x more from its other actions. In other words, CAAs management turned out
to have imposed more dilution on its shareholders than an abusive financing structure that has
caused regulators to crackdown!
Why should anyone invest in CAAs stock when management is imposing such large dilution on its own
shareholders?
This episode also speaks to management competence. CAA willingly entered into this predatory financing
arrangement that cost them 20% just to get out. The same management is now talking up its move into direct
lending that will get earn them a lower 12% if everything goes perfectly, they realize zero loan losses and also
by assuming zero operating expenses on this business and, as discussed later, this makes no sense!.
20
Change in dilution can be calculated as 9.4% (old dilution amount) HK 3.35 (old conversion price) HK$ 2.17 (new conversion price)
= 14.5%. A dilution effect that was 54% higher than earlier estimated by CAA.
21
Announcement dated 24 June 2016.
22
Data from Morningstar.
23
Source: CCASS issued share count on 27 June 2014 and 24 June 2016 reveals new 386,899,216 newly issued shares. Shares issued to
AEV are summarized in the 2015 annual report, page 154 and add up to 19,270,875 shares. 1H 2016 shares issued to were 13,248,848 per
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5. Inflated balance sheet. Highly suspicious paper assets amount to RMB

4.5 billion over 140% of shareholders equity.
CAAs balance sheet is stuffed with highly questionable paper assets receivables and
prepayments that come with opaque disclosure and laughable justification
Suspicious Assets
RMB
% of 1H
% of 1H
Thousands 2016 Equity 2016 Assets
1 Suspect Trade Receivables
998,769
31%
16%
2 Property Deposit
180,000
6%
3%
3 Equipment and Raw Materials Prepayment
124,400
4%
2%
4 Non-current Machinery Prepayment
221,013
7%
4%
5 Undisclosed Prepayment
452,934
14%
7%
6 "Potential Equity Investment"
720,628
23%
12%
7 Loans Receivable
1,083,472
34%
18%
8 Structured Deposits
500,000
16%
8%
9 Entrusted Loans
210,000
7%
3%
4,491,216
141%
73%
Source: 2016 interim report, 2015 annual report and other disclosures.
CAAs balance sheet is loaded with paper assets total receivables and prepayments amounted to 73% of
assets of continuing operations and 141% shareholders equity as of 1H 2016. The exposure was at a similar
level at end-2015. This is an extremely high level for any company.
We detail below several highly suspicious and possibly fake assets. We also question certain financial
investments (structured deposits of RMB 500 million and entrusted loans RMB 210 million). If all of them turn
out to be fabricated, then the entire shareholders equity would get wiped out.
8. CAAs Days Sales Outstanding metric looks terrible

CAA has a very worrying growth of its Days Sales Outstanding (DSO), which is a robust measure of earnings
and balance sheet quality. CAAs trade receivables from its continuing operations have risen dramatically since
2015: DSO was 265 days in 2015 and this spiked higher to 537 days in 1H 2016. Such high receivables are
reminiscent of Hanergy Thin Film (HK: 0566), which reported DSO of 400 days in 1H 2016 and has been
suspended from trading since May 2015. The quality of these receivables is also highly suspicious in light of the
fabricated revenue discussed earlier in the report.
As can be seen in the table below, CAAs DSOs are out of touch with those in the rest of the industry.
Days Sales Outstanding

Name
China All Access (Holdings)
APT Satellite Holdings
Asia Satellite Telecom Holdings
Foxconn Technology
Varitronix International
i-Cable Communications
Tencent Holdings
Ticker
633 HK
1045 HK
1135 HK
FXCOF US
710 HK
1097 HK
700 HK
2009
128
58
84
25
102
14
32
2010
159
45
80
27
80
11
27
2011
211
27
63
55
78
13
24
2012
669
30
77
59
79
15
18
2013
145
25
72
64
78
16
16
2014
92
25
58
53
81
17
17
2015
265
30
62
36
77
18
21
Source: Morningstar. Figures are in days.
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Notes to the Interim Financial Information (Continued)
For the
six months
ended
30 June
2016 RMB 540 million in revenue in 1H 2016 and yet there is a dramatic jump24 of
CAA
managed
to only
generate
(Expressed
RMB
unlessin
otherwise
indicated) due in over 6 months. This means that 62% of the revenue generated in
RMBin336
million
trade receivables
1H 2016 will not be converted to cash for over 6 months. This should be ringing alarm bells for investors on the
of both
the reported
revenue(Continued)
and the recoverability of these receivables, as both may simply not exist.
9. validity
Trade and
other
receivables
Ageing analysis
As of the end of the reporting period, the ageing analysis of trade receivables
(which are included in trade and other receivables), based on the invoice date (or
date of revenue recognition, if earlier) and net of allowance for doubtful debts, is
as follows:
Within 1 month
1 to 2 months
2 to 3 months
3 to 6 months
Over 6 months
Trade receivables, net of allowance
for doubtful debts
At
30 June
2016
(Unaudited)
RMB000
At
31 December
2015
(Audited)
RMB000
268,918
147,954
82,966
415,098
415,971
1,846,642
384,746
128,630
400,706
79,781
1,330,907
2,840,505
ANNUAL REPORT 2015
133
10. Source:
Discounted
bills
receivable
2016 interim
report,
page 46.
31 December 2015
21.
132
At 30 June 2016, the Group has discounted its bills receivable of approximately
In
light of the above we question whether all the trade receivables
arein real,
particularly
noting our
suspicion of
(Expressed
Renminbi
unless otherwise
indicated)
RMB58,544,000
(31 December
2015: the
RMB53,154,000)
to banks
and
approximately
fabricated
revenue.
To determine
suspect amount,
we apply
a generous 200 day DSO, comparable
RMB85,460,000
(31 December
RMB92,651,000)
to a third
companies
under 2015:
100
days,
to the annualized
1Hparty.
2016Accordingly,
revenue, which yields expected trade
TRADE have
ANDDSO
OTHER
RECEIVABLES
(Continued)
the advancesoffrom
banks
approximately
December
2015:
receivables
RMB
592 of
million
for 2016.RMB58,544,000
The difference(31between
RMB
1.6 billion trade receivables on the
RMB53,154,000)
and
a
third
party
of
approximately
RMB85,460,000
(31
December
Balance
Sheet,
including
bills
receivables,
at
1H
2016
and
our
estimate
is
RMB999 million which we believe is
Notes:
2015: RMB92,651,000)
byunrecoverable.
the Group as consideration for the discounted
highly
suspicious andreceived
probably
CHINA
ALL ACCESS
LIMITED
bills
at(HOLDINGS)
financial
year
end were recognised
liabilities.
(i) receivable
At 31 December
2015,
RMB500,000,000
(2014:as
RMB560,000,000)
of other receivables and deposits were
structured deposits in a commercial bank, with maturity periods of 12 months. The deposits could be
At 31 December 2015, the carrying amount of discontinued bills receivable
withdrawn
to maturity.
9.
RMB
180 prior
million
building prepayment (6% of 1H 2015 equity): Is this real?
of approximately RMB141,617,000 was reclassified to assets and liabilities of
disposal group as held for sale.
46
(ii)true At
31 December
other balance
receivables
from
disposal
associates
the remaining
balance
In
CAA
style, we 2015,
saw athe
sudden
sheet
entry
in itsof2015
annualrepresent
report, stating
that it has
paid RMB
180 million
deposit to purchase
a building
for a Hebei
with
further
disclosure.
amount was still
of consideration
for the disposal
of associates
to office
Mr. Zhu
Weino
Min.
A total
amount ofThis
approximately
31 December 2015
present
in inthe
1H 2016
interim
report
as of
30beJune
2016.
RMB29,600,000
(2014:
RMB36,029,000)
will
payable
by instalment till 2019.
(Expressed
Renminbi
unless
otherwise
indicated)
(iii)
At 31 December
of entrusted loans were provided by two of the subsidiaries
21.
TRADE
AND 2015,RMB200,000,000
OTHER RECEIVABLES
of the group to a third party through a commercial bank. RMB200,000,000 is due on 29 July 2016 and
2015 from the third party.
2014
23 December 2016 respectively. The Group does not hold any collateral over this balance
Note
RMB000
RMB000
(iv)
(v)
At 31 December 2014, RMB20,000,000 of entrusted loans were provided by a non-wholly owned subsidiary
Non-current
of the Group to a third party through a commercial bank. RMB10,000,000 is due on 3 July 2015 and
RMB10,000,000 is due on 15 July 2016. The Group does not hold any collateral over this balance from the third
Trade
54,234
party. receivables
Property deposit
(vi)
180,000
Entrusted
loans
10,000
On 15 August
2015, the Group entered into several agreements(iv)
with a third party pursuant
to which the
Group
Rental
3,008of
agreeddeposits
to entrust the third party to quote pricing and/or purchase equipment and 980
raw materials on behalf
Other
receivables
from
disposal terms.
of associates
(ii) the prepayment
21,400
the Group
based on
pre-defined
The third party will refund
without interest if 29,600
the predefined terms are not satisfied. At 31 December 2015, deposits for purchases of raw materials amounted to
RMB376,500,000. The Group does not hold any collateral over this balance from202,380
the third party.
96,842
(vi)
On 10 August 2015, the Group entered into an agreement with a third party to purchase building for Hebei
Current
Trade office.
receivables
in over 62015,
months
for 2015for
arepurchases
likely understated
in the
above calculation.
The 2015 figures have been affected by
At 31due
December
deposits
of building
amounted
to RMB180,000,000.
receivables that were reclassified as discontinued operations due to the Xingfei sale.
Trade receivables due from related parties
333,904
505,306
Other trade receivables
2,580,961
1,709,001
Less: Allowance for doubtful debts
21(b)
(74,360)
(91,878)
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2,840,505
2,122,429
Triam Research
Source: 2015 annual report, pages 132, 133.
We find the opacity stunning and the timing suspicious. All that we can tell from the disclosure is that this
transaction occurred on 10 August 2015.
We find it difficult to comprehend that any buyer would make a full advance payment for a building. If this
is instead a partial deposit and not a full payment, then why would CAA be acquiring a massive piece of
real estate?
This is a large amount for a property in the Hebei region. A building purchased for this amount in
Shijiazhuang, Hebei, can easily accommodate25 between 1,000 to 3,000 employees by our estimates. CAA
only employs 1,120 people26 all over China. Why does it need such a large building?
The deposit remains outstanding 11 months after it was first deposited, if the transaction is real why is it
taking so long to complete?
Why does CAA need to make such a large prepayment? In these tough Chinese property market conditions,
and given this ticket size, CAA can presumably dictate terms to property sellers.
Assuming the prepayment is valid, when will it gain possession, where is it located? Why has there been so
little disclosure? Eleven months had passed since the payment as at end June 2016, and instead possessing a
building, CAA was still sitting on a piece of paper.
Could it not have just rented office space and saved itself some capital, especially in a period of major
changes (Changfei restructuring, Xingfei sale, Lead spinoff, Solar business entry, direct loans business
entry)?
Shortly after making this large prepayment, CAA suspiciously went on a capital-raising spree in 2016 resulting
in multiple capital raises for over RMB 520 million. The small Hebei Loan and the China Lide sale terms both
suggest tight liquidity conditions. In light of this, we believe that this building deposit is either a fake asset
or is concealing a cash transfer to an undisclosed party and out of shareholders hands.
25
Shijiazhuang office prices are between RMB 10-16k/square meter for prime office space (West Avenue), RMB 8k/square meter for 2nd
tier locations. We have assumed a usage efficiency ratio at 70%, space for employee at 3-6 square meter/person.
26
Source: Bloomberg as of 30 June 2016.
triamresearch.com
31
For the six months

ended
30 June 2016
withdrawn prior
to maturity.
(Expressed in RMB unless otherwise indicated)
(ii)
At 31 December 2015, the other receivables from disposal of associates represent the remaining balance
of consideration for the disposal of associates to Mr. Zhu Wei Min. A total amount of approximately
Triam Research
RMB29,600,000 (2014: RMB36,029,000) will be payable by instalment till 2019.
9. Trade and other receivables (Continued)

(iii)
At 31 December 2015,RMB200,000,000 of entrusted loans were provided by two of the subsidiaries
(i)
On 10 August 2015, the Group entered into an agreement with a third party to
10.
RMB
million
equipment
raw materials
prepaymentis(4%
of291H
a
of the124
group
to a third
party throughand
a commercial
bank. RMB200,000,000
due on
July2016
2016 equity):
and
Notes:
highly
suspicious
cash drain
23 December
2016 respectively.
The Group does not hold any collateral over this balance from the third party.
In
report,
passingly
disclosed
that provided
they have
over owned
RMB subsidiary
377 million, or
(iv)the 2015
At 31 annual
December
2014,management
RMB20,000,000
of entrusted
loans were
by handed
a non-wholly
purchase
building
for
Hebei
office.
At 30
June
2016,
deposits
for
purchases
of2015
building
11% ofof
2015
unnamed
independent
third
party
is supposed
purchase
equipment
the equity,
Group totoaan
third
party through
a commercial
bank. who
RMB10,000,000
is to
due
on 3 July
and and raw
amounted
to
RMB180,000,000
(at
31
December
2015:
RMB180,000,000).
materials
for
the
group.
CAA
handed
over
this
money
without
any
collateral,
and
provided
no
disclosure
RMB10,000,000 is due on 15 July 2016. The Group does not hold any collateral over this balance from the third on why
this arrangement
was required or even appropriate.
party.
(ii)
(v)
At 30 June 2016, RMB10,000,000 (31 December 2015: RMB10,000,000) of entrusted
On 15 August 2015, the Group entered into several agreements with a third party pursuant to which the Group
loans was provided by a non-wholly owned subsidiary of the Group to a third party
agreed to entrust the third party to quote pricing and/or purchase equipment and raw materials on behalf of
through a commercial bank. RMB10,000,000 was due on 15 July 2016. The Group
the Group based on pre-defined terms. The third party will refund the prepayment without interest if the predoes not
hold
collateral
this balance
fromforthe
third party.
defined
terms
are any
not satisfied.
At 31over
December
2015, deposits
purchases
of raw materials amounted to
RMB376,500,000. The Group does not hold any collateral over this balance from the third party.
(iii)
At 30 June 2016, RMB200,000,000 (31 December 2015: RMB200,000,000) of entrusted

a
commercial
bank.toRMB200,000,000
are due on 29 July 2016 and 23 December 2016
This prepayment
is bizarre,
say the least.
respectively. The Group does not hold any collateral over this balance from the third
Is CAA
party.suddenly unable or unwilling to procure its own equipment and raw materials? What was the need
Source:
2015
annual report,
page
133.
(vi)
On 10
the
Group entered into an agreement with a third party to purchase building for Hebei
loansAugust
were 2015,
provided
by two of the subsidiaries of the group to a third party through
office. At 31 December 2015, deposits for purchases of building amounted to RMB180,000,000.
for this arrangement?
(iv)
At 30 June 2016, the other receivables from disposal of associates represent the
Using an agent for capex also doesnt make sense. At 2015 incurred capex levels, this prepayment works
balance
of consideration
for the disposal of associates to Mr. Zhu Wei Min.
outremaining
to equivalent
of 3 years
of capex.
A total amount of approximately RMB10,868,000 (31 December 2015: RMB29,600,000)

willdoes
be apayable
by instalment
2019.
Why
procurement
agent needtill
to be
paid upfront in hundreds of millions? Generally they are paid on
commission at invoicing time according to industry practice.
(v)
At 30 June 2016, RMB500,000,000 (31 December 2015: RMB500,000,000) of other
(vi)
On 15 August 2015, the Group entered into several agreements with a third party
pursuant to which the Group agreed to entrust the third party to quote pricing and/or
purchase equipment and raw materials on behalf of the Group based on pre-defined
terms. The third party will refund the prepayment without interest if the pre-defined
terms are not satisfied. At 30 June 2016, deposits for purchases of raw materials
amounted to RMB124,400,000 (31 December 2015: RMB376,500,000). The Group does
not hold any collateral over this balance from the third party.
To make matters even more suspicious, there is a follow on disclosure in the 2016 interim report. The
receivables
and
deposits
were
structured
deposits
in bought
a commercial
bank,
prepayment
amount had
fallen
by half at
30 June
2016. What
have they
for over RMB
250with
million
maturity
periods of 12agent,
months.
deposits
could be
withdrawn activity?
prior to maturity.
that required
a procurement
and The
outside
their internal
procurement
Source: 2016 interim report, page 45.
We remain unconvinced that this arrangement was required, appropriate or even real.
45
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32
Prepayment for potential equity investment

Prepayment for machinery
(i)
(ii)
221,013
227,432
557
221,013
227,989
Triam Research
Current
11.
RMB 221 million non-current machinery prepayment (7% of 1H 2016 equity): a
rollover of fake assets?
Prepayment for Hebei Guangdian
(iii)
213,163
136
471,023
Prepayment for material purchases
237,459
In
FY2014,
CAA
made LIMITED
a prepayment27 of RMB 227 million (7% of 2014
equity) for a 248,361
potential equity
CHINA
ALL ACCESS
(HOLDINGS)
Other prepayments
33,564
investment. The company later announced28 that the project was terminated and the money (allegedly)
refunded in 2015. This refund can be seen in the 2015 interim report29 cash flow statement but mysteriously
504,587
698,983
disappears in the 2015 annual report cash flow statement30. Such a disappearance is suspicious by itself.
NOTES
TO
THEof disposal
FINANCIAL
STATEMENTS
Reclassification
to assets
group
Then in FY2015, even more suspiciously, CAA reported another non-current prepayment of an unknown date of
for sales
(128,444)
31 held
December
2015 (Note 10)
nearly
the same
amount, RMB 221 million, to purchase machinery31.
376,143
22. PREPAYMENTS
Notes:
Note
(i)
2015
RMB000
698,983
2014
RMB000
On 29 August 2014, the Group entered into an investment memorandum and a supplemental memorandum
Non-current
with a nationwide mobile broadband network integrated service provider based in Shenzhen in relation to a
potential equity investment. At 31 December 2014, prepayment for this potential investment equity amounted
Prepayment
for potential
equity
(i) On 2 April 2015,
227,432
to USD37,168,000
(equivalent
toinvestment
approximately RMB227,432,000).
the Group entered
into a
Prepayment
machinery
(ii)
221,013 subsidiary in relation
557
termination for
agreement
with the nationwide mobile and its designated
wholly-owned
to the termination of the potential equity investment. The prepayment amount was refunded during the year
221,013
227,989
ended 31 December 2015.
During 2015, the Group entered into an agreement with a third party to purchase manufacturing machines.
Current
At 31 December 2015, prepayment for purchase of manufacturing machines amounted to approximately
RMB221,013,000.
Prepayment
for Hebei Guangdian
(iii)
213,163
471,023
237,459
Source:Other
2015 annual
report, page 136.
prepayments
33,564
248,361
(ii)
We question this large and obscure prepayment.
504,587
Reclassification
to assets
of disposal group business was fixed asset light. It is currently exiting the OEM
CAAs
traditional
satellite/infocomm
held for sales
10) of Xingfei and looking to spin-off Lead(128,444)
businesses
with(Note
the sale
Communications, its main
manufacturing
subsidiary.
376,143
698,983
698,983
This prepayment appears too large. It is nearly 3x of RMB 86 million in net PPE and 3x the capex
32
Notes:
commitment
of RMB 75 million at the end of 2015.
(i)
On 29 August 2014, the Group entered into an investment memorandum and a supplemental memorandum
with a nationwide mobile broadband network integrated service provider based in Shenzhen in relation to a
potential equity investment. At 31 December 2014, prepayment for this potential investment equity amounted
to USD37,168,000 (equivalent to approximately RMB227,432,000). On 2 April 2015, the Group entered into a
termination agreement with the nationwide mobile and its designated wholly-owned subsidiary in relation
to the termination of the potential equity investment. The prepayment amount was refunded during the year
ended 31 December 2015.
(ii)
During 2015, the Group entered into an agreement with a third party to purchase manufacturing machines.
At 31 December 2015, prepayment for purchase of manufacturing machines amounted to approximately
RMB221,013,000.
27
Announcement dated 29 August 2014.

Announcement dated 2 April 2015.
29
30
2015 annual report, page 78.
31
32
28
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33
Triam Research
The full amount remains outstanding as per the 2016 interim report. As a non-current asset, CAA is not
expecting
to recover
this amount for
at least a year.
What kindPosition
of machinery requires such a large
Condensed
Consolidated
Statement
of Financial
prepayment
and such long lead times?
At 30 June 2016
(Expressed in RMB)
Note
At
30 June
2016
(Unaudited)
RMB000
At
31 December
2015
(Audited)
RMB000
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Interest in associates
Prepayment for land leases
Other receivables
Prepayments
Condensed
Consolidated
Deferred tax assets
At 30 June 2016
(Expressed in RMB)
Statement
80,682
51,137
92,735
182
70,587
9
190,000
221,013
of Financial
Position
11,098
717,434
86,348
59,460
92,735
193
71,300
202,380
221,013
11,098
744,527
Current
Source:
2016assets
interim report, page 28.
At
At
30 June
31 December
Inventories
299,023
186,944
We suspect more financial manipulation here. With nearly the
same amount 2015
flowing out on termination of the
2016
9
2,295,865
2,655,058
2014 project, we suspect that this prepayment is made(Unaudited)
up and is being used
to either hide non-existent cash from
(Audited)
Prepayments
452,934
376,143
fake earnings or is a cover for passing cash toNote
undisclosed
related parties.RMB000
RMB000
Loans receivable
1,083,472
1,189,927
Discounted bills
receivable
10
144,004
4,188
Non-current
assets
Bills receivable
11
115,700
372,239
12.
RMBplant
453 million yet another prepayment with
no explanation
at all! (14% of 1H 2015
Property,
80,682
86,348
Restricted
cashand equipment
554,126
419,915
equity)
Intangible
assets
51,137
59,460
Bank deposits
with original maturities
Goodwill
92,735
92,735
over three months
1,093,000
1,093,000
InInterest
the 1Hin2016
interim report, the balance sheet contains an entry
for a prepayment
associates
182
193 of RMB 453 million without
Cash and cash equivalents
76,092
275,065
any
explanation
of
what
it
is
for.
The
2015
annual
report
contains
a
similar
RMB
471 million prepayment also
Prepayment for land leases
70,587
71,300
without explanation, which is bizarre considering how large
these
amounts
are.
6,114,216
6,572,479
Other receivables
9
190,000
202,380
Prepayments
221,013
221,013
Assets
of disposal
group
classified
We
believe
that these
assets
are likely fake because of the lack of disclosure and the inexplicable need for these
Deferred
tax
assets
11,098
11,098
as held for sale
3,318,504
prepayments.
717,434
6,114,216
744,527
9,890,983
Current assets
28
Inventories
Prepayments
Loans receivable
Discounted bills receivable
Bills receivable
Restricted cash
Bank deposits with original maturities
over three months
Assets of disposal group classified

as held for sale
Source: 2016 interim report, page 28.
10
11
299,023
2,295,865
452,934
1,083,472
144,004
115,700
554,126
186,944
2,655,058
376,143
1,189,927
4,188
372,239
419,915
1,093,000
76,092
1,093,000
275,065
6,114,216
6,572,479
3,318,504
6,114,216
9,890,983
28
triamresearch.com
34
78
Triam Research
CHINA ALL ACCESS (HOLDINGS) LIMITED
13. RMB 721 million potential equity investment (23% of 1H 2016 equity)
CONSOLIDATED STATEMENT OF CASH FLOWS
There was a mysterious outflow of RMB 721 million for a potential equity investment in 2015. The amount is
For the year ended 31 December 2015
large
at 21% of 2015 shareholders equity but there is no disclosure on this amount whatsoever.
Note
2015
RMB000
27
(574,390)
(281,275)
(3,478)
(44,418)
(192,599)
(622,286)
(473,874)
(73,763)
28,589
(8,624)
2,232
(720,628)
60,000
(162,155)
10,766
24,616
(204,000)
(227,432)
(560,000)
2014
RMB000
Operating activities
Cash used in operations
Tax paid:
Hong Kong profits tax paid
PRC income tax paid
Net cash used in operating activities
Investing activities
Payment for the purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of intangible assets
Net cash outflow in respect of the acquisition of subsidiaries
Net cash inflow in respect of the disposal of subsidiaries
Payment for potential equity investment
Investment in structured deposits
Withdrawal of structured deposits
Withdrawal of bank deposits with original maturities
over three months
Addition of bank deposits with original maturities
over three months
Interest received from structure deposits
Proceed from disposal of associates
Investment in an associate
Interest received from bank deposits
136
CHINA ALL ACCESS (HOLDINGS) LIMITED
Net cash used in investing activities
600,000
(790,000)
16,635
22,000
71,493
(303,000)
8,247
(2,255)
21,581
(1,392,066)
(793,632)
Strangely, when looking at the balance sheet and the corresponding notes, there is no reference at all to any
31 December 2015
payment
of potential equity investment in 2015. So if its not an equity investment, what is it?
22. PREPAYMENTS
Note
2015
RMB000
2014
RMB000
(i)
(ii)
221,013
227,432
557
221,013
227,989
471,023
33,564
213,163
237,459
248,361
504,587
698,983
Non-current
Prepayment for potential equity investment

Current
Prepayment for Hebei Guangdian
Other prepayments
(iii)
Reclassification to assets of disposal group

held for sales (Note 10)
triamresearch.com
(128,444)
376,143
698,983
35
ANNUAL REPORT 2015
77
Triam Research
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
We found an entry for a similar amount in the acquisition of non-controlling interests33, which are companies
where CAA has minority interests. We can see the RMB 39 million figure in 2014, which was the sale proceeds
For the year ended 31 December 2015
for the divesture of three associates to Mr. Zhu Wei Min34.
Attributable to equity shareholders of the Company

Capital
redemption Contributed
reserve
surplus
RMB000
RMB000
34(d)(ii)
34(d)(iii)
Noncontrolling
Total interests
RMB000
RMB000
Total
equity
RMB000
758,398
1,807,726
812,062
2,619,788
(2,249)
207,716
207,716
(2,249)
(13,741)
193,975
(2,249)
(2,249)
207,716
205,467
(13,741)
191,726
(26,465)
10,506
7,550
(7,550)
601,659
(26,465)
10,506
38,505
(75,235)
601,659
12,040
(64,729)
(103,676)
(103,676)
(31,271)
(31,271)
1,130,936
95
164,155
136,716
78,195
(18,286)
958,564
2,463,946
761,591
3,225,537
13,571
1,130,936
95
164,155
136,716
78,195
(18,286)
958,564
2,463,946
761,591
3,225,537
Profit for the year

Other comprehensive income
(38,153)
278,460
278,460
(38,153)
33,764
312,224
(38,153)
Total comprehensive income
(38,153)
278,460
240,307
33,764
274,071
1,906
(9)
419,176
(2,361)
(2,200)
86,994
49
(5,415)
191,406
16,883
(9)
5,415
(16,883)
(5)
(2,200)
86,994
421,131
(2,370)
191,406
(718,428)
147,056
(720,628)
234,050
421,131
(2,370)
191,406
34(b)
(67,097)
(67,097)
(67,097)
34(b)
(38,149)
(38,149)
(38,149)
15,468
1,442,505
104
164,155
424,433
78,200
(56,439)
1,225,542
3,293,968
223,983
3,517,951
Share
premium
RMB000
34(d)(i)
11,562
666,233
95
164,155
152,675
70,645
(16,037)
Profit for the year

Other comprehensive income
Total comprehensive income
2,009
599,650
34(b)
(103,676)
34(b)
(31,271)
Balance at 31 December 2014
13,571
Balance at 1 January 2015
Note
Balance at 1 January 2014
Capital
reserve
RMB000
34(d)(iv)
Statutory
general Translation
reserve
reserve
RMB000
RMB000
34(d)(v)
34(d)(vi)
Share
capital
RMB000
34(c)
Retained
profits
RMB000
Changes in equity for 2014:
Issuance of shares
Disposal of non-controlling interests
Acquisition of non-controlling interests
Appropriation of reserve
Dividends approved and paid in
respect of the previous year
Dividend declared and paid in
respect of the current year
Changes in equity for 2015:
Acquisition of non-controlling interests

Disposal of non-controlling interests
Issuance of shares
Repurchase of shares
Redemption of convertible bonds
Issue of new convertible bonds
Modification on term of convertible bonds
Appropriation of reserve
Dividend approved and paid in respect
of the previous year
Dividend declared and paid in respect
of the current year
Balance at 31 December 2015
The accompanying notes form an integral part of these consolidated financial statements.
33
34
CAA disclosures call such companies associates or non controlling interests interchangeably.
Please refer to 2014 and 2015 annual reports for details on disposal of associates to Zhu Wei Min.
triamresearch.com
36
Triam Research
This is where it gets interesting. CAA sets out its three significant transactions with non-controlling interests in
its annual report35 as below.
1.
RMB 20 million in consideration for Mr. Zhu Wei Min for the withdrawal of his 16.77% equity stake in
Lead Communications.
2.
RMB 55 million acquisition of a 6.58% interest in Changfei from Mr. Zhu and Ms. Liu Wei Li.
3.
RMB 1 (one Yuan) for the acquisition of Zhisheng, which held a 33.32% equity interest in Changfei. The
entity came with negative book value and contained liabilities of nearly RMB 600 million, and hence the
consideration was minimal. Even if CAA has paid off these liabilities36, which it claimed it wouldnt until
August 2016, then such a payment would be recorded as a reduction of liabilities and not a potential equity
investment in the financials. In any case, the amounts do not match.
As can be seen, none of these transactions amount to the RMB 721 million in cash out flow and this is highly
suspicious. We cannot find any information on this prepayment in the 2016 interim report. We are left with a
black hole of RMB 721 million cash out flow which should have a corresponding asset and so we assume it is
part of the asset base. Where did it go and to who?
14. RMB 1.1 billion in loans receivable (34% of 1H 2016 equity)

Investors learnt that CAA had lent out RMB 1.2 billion to unnamed borrowers for the first time in the 2015
annual report. This amount was updated to RMB 1.1 billion in the 2016 interim report. There is almost no
disclosure regarding these loans and we have been unable to verify these loans in our field research. This direct
lending exposure is material at 34% of shareholders equity.
Assuming that these assets exist as claimed, let us consider the following issues that throw up a number of red
flags.
2015 was a year marked by restructuring at CAA. This restructuring has been cited as the main reason for
large revenue declines37 in the first half of 2016. Surprisingly though, CAA managed to enter the direct
lending business for the first time and in size, at the peak of this restructuring in 2H 2015. Does this appear
realistic?
The performance of this lending business appears to be fantastic. CAA says it can lend at 2.5x-3x higher
interest rates than Chinese banks and with zero loan losses, provisioned or experienced. They lend to
borrowers who appear to have Changfeis profile, but at 3x Changfeis borrowing rates. For a brand new
lender and a self-proclaimed technology company, CAA seems to be beating China Construction Bank at
its own game. Does this sound too good to be true?
35
Source: 2015 annual report, pages 162, 163.

Announcement dated 9 October 2015, page 4. This was later changed to July 2016 in the circular dated 27 November 2015.
37
36
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37

Prepayments
Deferred tax assets
202,380
221,013
11,098
21
22
96,842
227,989
29,397
Triam Research
744,527
2,579,714
20
21
22
23
24
25
26
186,944
2,655,058
376,143
1,189,927
4,188
372,239
419,915
579,925
2,812,065
698,983
768,246
909,379
675,692
27
1,093,000
275,065
303,000
461,783
6,572,479
7,209,073
3,318,504
Current assets
Inventories
Prepayments
Loans receivable
Discounted bills receivable
For the six months
ended 30 June 2016
Bills receivable
(Expressed in
RMB cash
unless otherwise indicated)
Restricted
Bank deposits with original maturities
over three months
Notes to the Interim Financial Information (Continued)
3. Segment reporting (Continued)
(a) Information about profit or loss, assets and liabilities

Assets of disposal group classified as held for sale
10
9,890,983
Information regarding the Groups reportable segments
as provided7,209,073
to the
Groups
most
senior
Source:
2015 annual
report,
page 74. executive management for the purposes of resource
allocation and assessment of segment performance for the period is set
Finance
revenues have jumped 87x yoy as at 30 June 2016. This suggests that the made the loan just before the
out below:
year-end, are CAA just trying to keep cash off the balance sheet?
Provision of
Investment activities
Total
For six months ended 30 June
2016
(Unaudited)
RMB000
2015
(Unaudited)
RMB000
2016
(Unaudited)
RMB000
2015
(Unaudited)
RMB000
2016
(Unaudited)
RMB000
2015
(Unaudited)
RMB000
Revenue from customers (note)
460,986
1,226,349
79,070
905
540,056
1,227,254
Reportable segment profit
33,963
127,624
79,070
905
113,033
128,529
Source: 2016 interim report, page 36. Note: We will see below that this revenue in 1H 2016 comes close to RMB 1.2 billion x 1% per month
x 6 months.
At
At
At
At
At
At
CAA charges interest rates

of 1%31per
month, or roughly
annualized, which
are about
2.5x of
30 June
December
30 June 12%
31 December
30 June
31 December
Chinas recent prime lending rates. CAA only says that they have provided facilitating capital to supply
2016operations who
2015 have inventory
2016 collateral.
2015 CAAs own
2016Changfei group,
2015 which
stream suggesting industrial
38
is representative of the borrower profile here, had a cost of debt at 4.1% as of 30 June 2015. CAA only.
(Unaudited)
(Audited) (Unaudited)
(Audited) (Unaudited)
(Audited)
How did CAA find credit worthy borrowers for over a billion RMB, willing to pay nearly 3x of what its
RMB000
RMB000
RMB000
own subsidiary paid, andRMB000
willing to put
up inventory
collateral RMB000
for credit around
that time?RMB000
Lending is a capital-intensive business. How will CAA finance its loan book growth when it has not been
generating
cash
flow in its core
businesses
and it doesnt
have access
to low cost 5,587,889
deposits like
Reportable
segmentoperating
assets
4,289,055
3,614,623
2,095,270
1,973,266
6,384,325
banks do?
In the end, we do not think that CAA will generate economic profits in direct lending, assuming that these
1,591,787
3,316,269
217,009
143,330
1,808,796
3,459,599
assets are real. Even with optimistic assumptions, we find this lending business unattractive, especially for a
38
Announcement dated 26 November 2015.
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38
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self-proclaimed technology company. We think that if this loan book does not shrink soon, it is possible that
investors could experience large credit losses sooner or later, which could decimate shareholders equity.
15. Doubts on structured deposits (16% of 1H 2016 equity)

As demonstrated earlier, there are significant discrepancies between the 2015 annual results announcement and
the annual report. One of these disparities is in the interest income from RMB 500 million in structured
deposits. In the announcement the interest amounted to RMB 22 million but this was only RMB 17 million in
the annual report, a 23% difference. Interest received from a bank on a structured deposit should not be difficult
to ascertain. We find the difference puzzling and it raises questions on whether the RMB500 million in
structured deposits also exists or if these numbers are fabricated to balance the financial statements?
16. Entrusted Loans (7% of 1H 2016 equity)

CAA has RMB 210 million of entrusted loans to third parties via a bank in 2015 and in June 2016. As per the
2015 annual report, CAA were earning 12% interest on these loans which appears very low considering that
CAA have not taken any collateral for these loans which would be an industry standard. Logically, if the
borrower had collateral to give then the lender would be prudent to take it, which makes us suspect that CAA
has lent to companies with few assets. Without any collateral, CAA has risked significant capital for little
reward. Regardless of whether these assets are real or not, we would be surprised if they were repaid.
We challenge CAAs management

We dare CAAs management to produce definitive proof that each of the above assets are indeed real and there
has been no abuse of the money involved. We challenge them to release a clarification statement with definitive
evidence.
To come close to being credible, such a clarification statement should contain the following information and not
just empty trust me arguments from the management.
Announcement that is signed by the audit committee and independent directors.

Relevant documents. Payment confirmations, contract copies, title deeds, transaction records (invoices,
contract notes, etc.).
Details of audit committee oversight. Specifically with regard to the above assets, CAA should release the
audit trail of meeting records and time-stamped approvals to prove that there was proper governance.
Photographs. Showing the building and items procured by the independent third party.
Identities. Provide details and identities of the counterparties involved, so that investors can verify them to
be truly independent third parties.
More than anything, CAAs management should justify to investors why these highly unusual arrangements
were justified and prudent. Management has paid out cash worth over 100% of shareholders equity, in some
cases without collateral, through the above prepayments and receivables with seeming little benefit to
shareholders. We believe that these assets are either covering for non-existent cash or are being used to cover-up
the misappropriation of shareholder cash..
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6. Changfei restructuring reveals hidden liabilities.

CAA restructured Changfei, its OEM holding company, in 2015. This mainly involved selling Xingfei (the
largest business owned by Changfei) and concurrently increasing the CAAs ownership in Changfei from 51%
acquired in 2012 to 100% in 2015 by buying out other shareholders.
Related events reveal what appears to be a RMB104 million large backdoor payoff, to Xingfeis management
under the guise of incentivizing them.
Additionally, we believe that the Zhisheng acquisition reveals that CAA had engaged in financial manipulation
to hide nearly RMB 600 million in debt off its balance sheet and undisclosed to shareholders for nearly a year,
between December 2014 and October 2015.
The Xingfei asset flip and the RMB 104 million payoff to insiders
On 13 April 2015, CAA sold a 26% stake in Xingfei to Xingfeis management39 for RMB 234 million in order
to incentivize them and release development potential of Xingfei. Just four months later, 14 August 2015,
Xingfei was sold40 to Fujian Start (600734 CN) with the management team selling their stake for approximately
RMB 451 million (in cash and stock), a profit of RMB 217 million, an incredible 93% return in just four
months.
It is unclear to us why Xingfeis minority shareholders sold their holdings at a significantly higher premium
than CAA sold its stake. We do not believe that such a discount is justified if CAA is claiming it is because they
received an all cash deal. Applying CAAs selling price would mean a profit to Xingfeis management of RMB
104 million, a 44% return.
We would be highly surprised if the deal was not in the works already four months prior to the sale as
Fujian Start would have needed to conduct due diligence, negotiate a price with various shareholders and
get relevant approvals from its board. This asset flip appears to be a clear transfer of wealth from CAAs
shareholders to Xingfei insiders.
Keeping RMB 600 million in liabilities off-balance sheet

In October 2013, CAA incorporated41 Zhisheng, which was used to buy a 3.32% stake in Changfei for RMB
12.04 million42. Inexplicably, on 23 December 2014, CAA sold43 Zhisheng to an entity called Beijing Yuefeng
(read: parking lot) for RMB1 the lack of consideration is highly suspicious. On the same day it was sold to
Beijing Yuefeng, Zhisheng acquired a 30% stake in Changfei from CCBI, as we understand from ZTEs 2014
annual report44
Incredibly less than a year later, CAA bought back Zhisheng on 9 October 2015 for RMB1 but this time with a
33.32% stake in Changfei and liabilities of nearly RMB600 million45.
It is clear that Beijing Yuefeng did not make a commercial gain46 from these transactions. We believe, that it is
obvious that the whole round trip was likely engineered by CAA in order to keep the RMB 600 million off the
balance sheet until October 2015.
The events are self-explanatory in our opinion. CAAs management played a shell game and kept liabilities
worth a fifth of shareholders equity undisclosed from investors for nearly a year. This is also a clear example of
39
Announcement dated 13 April 2015.

Announcement dated 14 August 2015.
41
42
Announcement dated 23 December 2013.
43
Announcement dated 23 December 2013, 9 October 2015, 2013 annual report page 33, 2015 annual report pages 40, 65, 66, 163, 168,
169.
44
ZTE 2012 annual report, page 45 and ZTE 2014 annual report, page 71.
45
46
If it accrued any other backdoor benefits from the transaction, then we dont know about such gains.
40
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40
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financial manipulation by CAAs management in our opinion. We think that a similar manipulation is currently
being done through Skycomm.
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7. Core business is in a nosedive and CAAs future prospects appear

remarkably bleak.
CAA sold a large part of its profitable OEM business to Fujian Start (600734 CN) on 14 August 2015 with the
deal being completed on 18 May 2016. This leaves CAA with its core satellite and infocomm business, its
remaining OEM business and its investment business. With an eye to the future, CAA has been promoting its
HK$ 470 million investment in a solar patent.
We demonstrate in this section that CAAs restructuring is purely cosmetic and that its remaining operations are
in structural decline and its investments for the future are highly speculative over-hyped and doomed to failure.
Continuing operations are imploding

At end June 2016, operating revenues (satellite services, infocomm services and OEM manufacturing) had
collapsed 62% from the same period in 2015. Worse still, continuing operations ended the period with a loss of
RMB 114 million, a significant fall from a loss of RMB 11 million in the prior year.
As noted at the beginning of the report, we have found that CAA fabricated over RMB 1 billion of revenue
which we believe, based on discussion with former employees is likely to be fully related to the infocomm
segment. As demonstrated earlier, the infocomm segment has negligible revenues and if CAA needs to fabricate
revenues then its almost certain that the business is underperforming.
CAA is trying to spin off Lead Communications, which accounted for about 90% of its 2015 OEM revenues by
our estimates47. CAA has revealed that the business is worth a paltry HK$ 162 million through a recent
transaction (around 3.5% of CAAs recent market cap of HK$ 5 billion). In other words, CAA has told the
market that its OEM business, responsible for a third of its 2015 reported revenues, has a negligible
market value. What a damning confession!
17. Shrinking satellite services business and negligible infocomm revenues

CAAs own disclosures show that the satellite services segment is also floundering. As can be seen in the table
below, satellite revenue peaked in 2014 and then dropped 67% in 2015.

2009
2010
2011
2012
2013
2014
2015
RMB Thousands 1Y Growth 2Y Growth 3Y Growth

168,643
233,610
39%
319,877
37%
38%
356,956
12%
24%
28%
425,211
19%
15%
22%
699,015
64%
40%
30%
233,644
-67%
-26%
-13%
Source: CAA annual reports, MD&A sections48.
It is worth noting that the figures above may also be overstated, as CAA's management discussion in its annual
report appears to restate the breakdown of revenue from one year to the next. We set out a couple of examples
below:
The 2009 annual report mentioned RMB 168.64 million in satellite revenues for 2009; however, in the 2010
annual report satellite revenues for 2009 have been restated to RMB 153.16 million, a 9% reduction.
The 2014 annual report mentioned RMB 699.02 million in satellite revenues for 2014, however, in the 2015
annual report satellite revenues for 2014 were restated to RMB644.44 million, an 8% drop.
47
Based on the SAIC filings for Lead Communications, Huizhou Lead, Control Electromechanical and Wanyu. See appendix 5.
Note that 2014 revenues in this table are from the 2014 annual report. Restated 2014 satellite revenues in the 2015 annual report are
inexplicably 8% lower.
48
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Whilst we do not trust CAAs accounts, our on the ground investigation has also found a struggling business
based on interviews with former employees and the SAIC filings.
It is more and more difficult to promote satellite solution services in recent years. Tier 1 and tier
2 cities have purchased satellite communication system already; while tier 3 and tier 4 cities
dont have much budget for this. And the bidding price of most new projects is around RMB 0.7-0.8
million. We won 7-8 satellite services projects in 2015, with the total contract value of RMB 3
million.
- Interview excerpt with a former senior executive, Guangdong Noter.
part OEM
of the corporate
18.
businessreorganisation,
exit
on 24 December 2015, Lide Global, a wholly

owned subsidiary of China Lide, entered into an equity transfer agreement with
Chengfei
Investment
give effect
of theround
intra-group
transfer
of Chengfei
CAAs
remaining
OEMtobusiness
is centered
two main
subsidiaries,
Lead Communications49 and
50
51
Investments
100% equity interest
in has
Lead
Communications
Lide Global.
Control
Electromechanical
, which
a 100%
subsidiary,toWanyu
. CAAUpon
also owns non-controlling minority
52
stakes
in three
tinyrequisite
OEM businesses
businesses
are immaterial.
completion
of the
government. These
approval
and registration
procedures in the
PRC, Lead Communications will become an indirect wholly owned subsidiary of
As
partLide.
of its restructuring, CAA announced that it is looking to spin-off 53 of its display modules business
China
which would include Lead Communications. In January 2016, CAA sold 25% equity in Lide54 Group (Leads
55
holding
company)
for HK$ 40.4ofmillion,
valuing
group at 2015
HK$ up
162tomillion
Since the
date of incorporation
China Lide
on 11the
November
the date . CAA had to further sweeten
the
by giving the investor
a putand
option
right to sell have
his stake
at his discretion
within 15 months, with a
of deal
this announcement,
China Lide
its subsidiaries
not back
commenced
any
guaranteed
12%
per than
annum
on the of
initial
(we suspect
thatacquired
this may just be a cover for a loan). In
operation, and
other
the interest
equity interest
Leadamount
Communications
to be
announcing
thesaid
spin-off,
CAAreorganisation,
disclosed thatnone
Lead
a loss of RMB 18 million in 2013 and
pursuant to the
corporate
of Communications
China Lide and itsmade
subsidiaries
profit
of material
just RMB
1 million
in below
201456is. the
Both
valuation
and profitability
demonstrate
that CAAs OEMs
has any
assets.
Set out
netthe
profit
(both before
and after tax)
of
business
may
have
large
revenues
but
minimal
profitability.
This
is
not
something
that
should
make
Lead Communications for each of the two years ended 31 December 2014 according
shareholders
happy.
to the audited financial statements of Lead Communications:
For the year ended For the year ended
31 December 2013 31 December 2014
RMB million
RMB million
Net profit/(loss) before tax
Net profit/(loss) after tax
(20.64)
(17.89)
3.89
1.06
As at 31
December 2013
and4 31
December
Source:
Announcement
dated
January
2016.2014, the total net assets of Lead
Communications were about RMB237 million and RMB238 million, respectively.
To the best of the Directors knowledge, information and belief having made all
reasonable enquiry, the Investor is an investment holding company incorporated in
the British Virgin Islands and wholly owned by Mr. Zhang Yongdong (Mr. Zhang),
who is the chairman and the chief executive officer of Hawking Capital Management
Group Limited and the chairman of Oriential Enterprise Group Limited. He is also
the chairman and executive director of Mason Financial Holdings Limited, whose
shares are listed on the main board of the Stock Exchange (stock code: 273). He is
also the non-executive director of SMI Holdings Group Limited whose shares are
listed on the main board of the Stock Exchange (stock code: 198). Mr. Zhang has
extensive experience in investment, finance and management, corporate merger and
acquisition, direct investment and hedge funds.
49
Lead Communications
.
Control Electromechanical
6 .
51
Wanyu
.
52
Circular dated 27 November 2015, page 94.
53
Announcement dated 1 December 2015 and 2015 annual report.
54
Announcement dated 4 January 2016
55
Alternatively, this equity plus put option financing transaction can be seen as a 12-15 month, 12% p.a. interest rate loan. At approximately
3x PRC prime lending rates plus board participation, the deal also portrays Lead in a negative light.
56
Announcement dated 4 January 2016, page 6.
50
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43
capital base for future investment in high end technology driven business.
4.
Potential spinning off of business which has an independent value proposition

Our LCD display module business with a highly independent value proposition has been doing very well inTriam Research
raising its technical core competence. Its most recent project on intelligent production has obtained some
initiatives. In view of its special characteristics, we are considering to spin off the business in the capital
CAAs
other
OEM
subsidiary,
Control Electromechanical, of which it holds just 57.5% is in the
market for
its value
proposition
to be Shenzhen
better realized.
5.
precision moldings business. This business is not performing well as per the disclosure below. We also note
that
per its SAICbusiness
files, revenue
fell to RMB139
million
Restructuring
to rebuild
the whole
valuein 2015, a decrease of 39% from the prior year.
Our precision moldings business has been buffeted by a number of development challenges, including (1)
over-capacity; (2) ageing of its machinery and equipment; (3) price pressure; (4) order reduction; (5) long
outstanding receivables and (6) staffing and cost control issue, since 2014. To cope with these challenges,
we have carried out business restructuring through a number of measures. We have scaled down the
workforce and shut down some production lines to trim the production capacity. We have written off the
remaining values of all outdated machinery and equipment as well as some long outstanding receivables
and invested in advanced replacements. To counter the price pressure, we have broadened our market by
entering into some new sectors, like the virtual reality eyeglass products and intelligent home electronic
products. We will continue to explore other new market opportunities, such as mobile medical terminals,
mobile education terminals and unmanned aviation products.
Future prospects are overhyped and unrealistic

As the restructuring noise fades, these weaker fundamentals shown above will continue to flow through to
earnings, and the company is likely to hold little interest to stock market participants. Hence, we believe that
CAA has started to hype a patent that it has acquired in the solar industry.
On 29 January 2016, CAA announced a possible patent57 licensing transaction. On 12 May 2016, it announced
the agreement58, which involved a payment of HK$ 470 million in cash and shares and the appointment of Dr.
Danny (Hiu Yeung) Li, inventor, as CAAs CTO.
We show below that CAA has dramatically overstated the potential success of this technology, and has little
realistic chance of earning material profits. We also show that CAAs solar business projections are
outrageously exaggerated. We further note that the newly appointed CTO, described by CAA, as bringing
proprietary knowledge and expertise regarding the patents has no relevant solar commercialization
experience. His main activity for the past two decades was in designing and selling toy planes!
In its 2015 annual report and 2016 interim report, CAA has hyped its solar valuation and clearly states that this
investment is to be a substantial revenue growth driver:
A golden window of opportunity for the Group to enter the new energy market by offering revolutionary
new products for the solar energy industry at a substantially lower price and operating in a more
environmentally friendly way.59
The Group grasped on the new business opportunity to develop green optical products for application in
the solar energy sector, which is a growing energy source in the world. This lays a new cornerstone in the
Groups business evolution.60
By offering revolutionary new product for the solar energy sector at a substantially lower cost and
operating in a more efficient and environmentally-friendly way, the Group expects the new product using
the Patents will be well recognized by the market and potential customers which in turn capture good
market share in newly installed capacity in China and global market, and will become a substantial
revenue growth driver of the Group in the future.61
57
US Patent Number: 8,378,282 B2 filed on 14 December 2009 and granted on 19 February 2013. It is also registered in China as ZL 2009
1 0127987.2 and Taiwan as
I 406012 .
58
The registered patent owner is New Concept Aircraft (Zhuhai) Co., Ltd (Zuhai NCA), a PRC company. The inventor is Dr. Li. Prior to
the CAA licensing transaction; Zuhai NCA vested the patent rights to Dr. Li. Dr. Li then licensed it to CAA personally. Zhuhai NCA
appears to be a small firm controlled by Dr. Li and this roundabout licensing transaction appears unusual and could be a red flag.
59
2015 annual report, page 18
60
2016 interim report, page 4
61
2016 interim report, page 11
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This is hype, but reality is very different!
According to experts we have spoken with, CAAs patent is not a game changer and just evolutionary. As
per CAAs disclosure62, the patent is essentially for Concentrator Photovoltaic (CPV) module63. Additionally,
this patent is three years old and has not been commercialized before and we would be surprised if other solar
companies had not looked at this patent earlier. Our research has found newer patents64 in this area awarded to
prominent technology companies.
19. Prominent CPV companies have recently gone bankrupt

Since 2008, a 95% fall in polysilicon prices65 has made CPV seriously uncompetitive against conventional
crystalline silicon technologies and with global polysilicon production in overcapacity prices are expected to
stay low66.
Consequently, several prominent CPV firms have gone bankrupt since 2011, although it should be noted that
the CPV sector continues and could see a modest recovery in the coming years67. Nevertheless, CAAs patent
has not even been publicly demonstrated68 as a prototype let alone being proven to be commercially feasible.
With no industry experience, we find it hard to believe that CAA will prove to be successful where its more
experienced competitors have failed.
Soitec. One of the last CPV companies expected by industry observers to succeed. It went bankrupt in 2015
and had 75 MW projects on the ground when it collapsed.
SolFocus. Backed by the world-renowned Xerox PARC. Burnt through US$ 230 million in capital before
closing in 2012.
Amonix. US Department of Energy funded CPV startup with a founding team rich in industry experience.
Went bankrupt in 2012.
Green Volts. Had raised over US$ 100 million in capital and closed down in 2012.
Energy Innovations. Went bankrupt in 2012 despite being backed by prominent venture capitalists like
IdeaLab and Mohr Davidow.
Soliant. Burnt through US$ 33 million in capital. In 2011, Emcore acquired its assets for less than US$ 500
thousand.
Skyline Solar. Closed down in 2014.
20. Solar Business Plan appears highly exaggerated

We believe that CAAs business plan is seriously flawed for the following reasons:
1.
CAA says that is plans on selling low priced solar modules to penetrate the market, yet its business plan
assumes prices that are nearly 2x of current market prices, HK$ 3.1-3.5 (US$ 0.40-0.45) compared with
approximately69 US$ 0.23, however our expert believes that a further discount of 10%-20% will be taken as
CAA would be a new supplier. Using the current spot prices would possibly reduce the projects HK$ 475
million valuation by more than 50%.
62

This note is just for completeness. As with other CPV designs, CAAs involves a tracking system to position the solar panel for sunlight.
However, CAAs design is based on a dual axis design, whereas the industry trend is towards a single axis tracker. Single axis trackers are
simpler and significantly more reliable for marginally less yield during electricity production. Hence, it appears that commercializing
CAAs patent as a pure tracker would be difficult. The company has also not discussed this possibility.
64
Some examples of other patents that are roughly comparable to CAAs technology that we have found. Technical details can be different:
Patent: US9417375 B2, Assigned to: LG Electronics, Filed: 5 Jan 2015, Granted: 16 Aug 2016. 2) US9010316 B1 Assigned to: Wayne
Crobell, Sr., Filed: 14 Sep 2013, Granted: 21 Apr 2015.
65
October 2016 PV Supply Monthly Update, Bloomberg and https://en.wikipedia.org/wiki/Price_per_watt
66
Q3 2016 PV Market Outlook dated 1 September 2016, by Bloomberg.
67
Report titled Current Status of Concentrator Photovoltaic (CPV) Technology, February 2016, by Fraunhofer ISE, commissioned by the
US Department of Energy.
68
We know this because CAA needs to make a payment to Dr. Li upon a successful prototype demonstration, as per page 9 of its
announcement dated 24 June 2016. Such as payment has not been disclosed.
69
http://pv.energytrend.com/pricequotes.html. Note: Multi-Si (multicrystalline silicon) and Mono-Si (monocrystalline silicon) are more
generally called c-Si (crystalline silicon).
63
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45
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2.
3.
CAA have not commented whether they will pursue the niche CPV market or utility-scale mass market,
however, volume projects in either industry appear to be disjointed from reality.
a.
CPV Market According to IHS, global CPV installations will reach approximately 800 MW in 2020
with double digit growth (so 880 MW in 2021 or higher)70 but CAAs projected volumes for its 5th year
will be 235 MW71, over 25% of total market share within five years from a standing start and against a
backdrop of bankruptcies of established CPV firms highly unlikely in our opinion.
b.
Its projections in the utility-scale mass market would make them critically subscale in a commoditized
market characterized by price competition where incumbent firms compete on the basis of scale
economies and operating efficiency. Small players are struggling for survival. For example, China
Sunergy (CSUNY US), which today has 5x higher volumes than CAAs 5th year projections, is still
making losses, suffering from crushing debt and has received a delisting notice from Nasdaq.
c.
As per discussions with an expert, CAAs CPV technology would make them unfeasible for other solar
markets like rooftop installations.
CAA plans to outsource the manufacturing of their modules to OEM suppliers, however, these suppliers are
likely to have to invest in fresh capex to take orders from CAA
a.
We understand from an expert, that OEM suppliers are setup for simple bulk manufacture of c-Si
technologies and are unlikely to have existing facilities to manufacture CAAs complicated design. We
also understood that most OEMs are not interested in investing in CPV due to the limited annual
installation volumes expected.
b.
By expert estimates, CAAs technology would easily require US$ 0.20-0.50 per watt in capex,
suggesting a minimum total capex requirement of US$ 45 million72. Either CAA or its OEM supplier
would have to pay for this. For an OEM supplier to undertake this capex spend, CAA will likely have
to commit to much higher volumes which would mean that CAA would either have to capture nearly
100% of CPV market share or be able to compete successfully in the utility-scale market with leaders
like First Solar and ReneSola. We believe both scenarios are highly unlikely.
4.
CAAs business plan doesnt seem to have factored in entry barriers into the solar market. The experts we
spoke to felt that for CAA to gain external customers, they will first have to get technical certification by
independent engineering firms like DNV GL, which would take 12 to 18 months. After that, they will have
to market to developers which also takes time. Once a developer agrees to support the technology then the
project finance bankers would need to conduct their due diligence. In the meantime, CAA would need to be
marketing and getting orders from end customers. This is all achievable if the product is viable, however,
this is a process that would take at least a couple of years which is not sufficiently reflected in CAAs
projections.
5.
CAAs is projecting 31%-44% cost savings over conventional c-Si modules by using less silicon wafer in
its module production.
a.
Currently, we understand, silicon wafer73 accounts for 33%-40% of the final cost of a c-Si module, so
even if CAA produces its module with 50% less wafer, then the cost savings will be 20% or lower.
b.
CAAs new technology will have a production learning curve, and the cost of its more complex design
could offset the savings from using less silicon wafer.
c.
Meanwhile, c-Si production is becoming more efficient. New production processes like diamond wire
cutting are expected to bring down wafer wastage and result in lower module prices in the near future.
70
Announcement dated 27 June 2016, page 48

Announcement dated 27 June 2016, page 37
72
Estimated Capex: CAAs projected volumes are 235 MW in year 5. Current c-Si capex is about US$0.10 per watt. An expert we spoke to
said that given CAAs new design, the required capex will be between 2x-5x of c-Si capex. This suggests that the required capex will be
between US$ 47 million to US$ 118 million.
73
October 2016 PV Supply Monthly Update by, Bloomberg and Q3 2016 PV Market Outlook dated 1 September 2016, by Bloomberg.
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46
The cash portion of the Consideration is expected to be funded by the internal resources of the
Group.
Triam Research
Engagement of Dr. Li as chief technology officer
So CAAs costs savings on todays numbers might not be as attractive by the time it scales up. This is
Pursuant
to the
of the
Patent
Licence Agreement,
within three business days after the
especially
trueterms
for CAA
given
the technology
risk in its product.
Patent Licence Agreement becoming effective, Dr. Li shall enter into a service agreement with the
Company
forexperts
his engagement
chiefthought
technology
of that
the Company
to lower
facilitate
development
d. Our
stated thatasthey
it wasofficer
unlikely
CAA could
the the
production
costs by
20%-30%
of applications
and product prototypes for the Group based on his proprietary knowledge and expertise
regarding the Patents. The term of service shall commence from the date of signing of the service
agreement, and shall last until terminated by not less than three months notice in writing served by
CAAs solar expert has no experience in solar panels commercialization
either party to the other. As at the Latest Practicable Date, the Group and Dr. Li are still in the course SEHKQ
160513 Q5(ii)
of negotiating
the terms
of the
Service
Agreement,
and the monthly
Dr. Liindividual
under the
Dr.
Li is the newly
appointed
CTO
and the
patents inventor.
He will salary
becomepayable
the 2nd to
largest
Service Agreement
yetapproximately
to be decided 9%
andonce
agreed
parties.
at the Latest
shareholder
of CAA is
with
the between
licensingthe
payment
is As
completed.
CAA Practicable
says that his
expertise
crucial due
hisplan
proprietary
knowledge
expertiseofregarding
the Patents74.
Date, theisCompany
hadto no
to appoint
Dr. Li asand
a director
the Company.
Below is his career history as per the announcement, which shows that he has not been employed in a CTO type
SEHKQ
Biographical information of Dr. Li
capacity in a commercial solar company.
160513 Q5(i)
Dr. Li graduated in the University of Guangxi () with a bachelor degree in agriculture
in 1984. Subsequently, he has obtained a master degree and doctorate degree in aeroplane design and
applied mechanics from (Graduate School of Beihang University*) in
1990 and 1994 respectively, during which he was the co-inventor of Chinas first unmanned aerial
vehicle for surveillance purpose powered by solar energy with a patent registered in the PRC. Dr. Li
has more than 30 years of experience in scientific research and technological application covering
bionics, new energy, optical science, solar energy, telemetry, aero vehicles, etc. From September 1984
to July 1987, Dr. Li worked as the person-in-charge for the Forestry aeronautical telemetry technology
research institute in (Guangxi Forestry Survey Design Institute*). Starting from
March 1993, he has been a director and the chief technical officer of
(Lyon Aviation Engineering Equipment Co., Ltd*). Starting from May 1999, he has been a director and
the chief technical officer of (Zhuhai Lyon Aviation Engineering
Technology Co., Ltd*). From 2000 to 2002, Dr. Li invented the worlds first unmanned aerial vehicle
with compound wing powered by solar energy with a patent registered in the PRC. From 2003 to 2008,
Dr. Li proposed the light group field theory which has re-recognised the essence of light and its motion
LETTER
FROM
THEphysics,
BOARD
characteristics and is completely
different from
classical
quantum physics and other optical
theories, which formed the foundation for Dr. Lis invention of the Device in 2008. Starting from
SEHKQ
160526 Q6
January
2004,
he
has
been
a
director
and
the
chief
technical
officer
of
(New Concept Aircraft (Zhuhai) Co., Ltd.*). In 2008, Dr. Li
11 ) (a science periodical in China) in relation to
published a paper in Frontier Science*
(
the light group field theory.
Source: Announcement dated 27 June 2016.
Conditions precedent
Under the Patent Licence Agreement, the Patent Licence Agreement shall become effective upon
the satisfaction of the following conditions:
(1)
the Board (including the independent non-executive Directors) having approved the
transactions contemplated under the Patent Licence Agreement;
(2)
the approval by the Shareholders of the issue of the Consideration Shares being obtained
at the EGM; and
(3)
the Listing Committee of the Stock Exchange having granted the listing of, and permission
to deal in, the Consideration Shares.
No parties shall have the right to waive and/or vary any of the conditions as set out above. If any
of the conditions above is not fulfilled on or before 31 July 2016, the Patent Licence Agreement shall
74
not become effective and shall automatically be cancelled.
As at the Latest Practicable Date, only the condition set out in (1) above had been fulfilled.
triamresearch.com
Term of the Patent Licence Agreement
47
Triam Research
7. Manipulated stock prices?

We suspect trading manipulation in CAAs stock. It has traded roughly flat since the start of 2015 despite major
business and financial changes in the company. As we will highlight below, the stock appears to trade at a
valuation disconnected from underlying business fundamentals.
1.
CAA announced a disastrous interim result for 1H 2016. The stock barely reacted.
CAA announces a 62% drop in revenues and a 25x jump in pretax losess as of 30
June 2016. Stock hardly reacts.
3
2.8
2.6
2.4
Results announced
1-Aug-16
3-Aug-16
5-Aug-16
7-Aug-16
9-Aug-16
11-Aug-16
13-Aug-16
15-Aug-16
17-Aug-16
19-Aug-16
21-Aug-16
23-Aug-16
25-Aug-16
27-Aug-16
29-Aug-16
31-Aug-16
2-Sep-16
4-Sep-16
6-Sep-16
8-Sep-16
10-Sep-16
12-Sep-16
14-Sep-16
16-Sep-16
18-Sep-16
20-Sep-16
22-Sep-16
24-Sep-16
26-Sep-16
28-Sep-16
30-Sep-16
2.2
Source: Yahoo Finance.
2.
The price action on 29 July 2016 appeared suspicious to us. A 10% intraday decline in the morning session
was corrected at the start of the afternoon session. Just the right amount of volume appeared to zero out
the intraday decline. A second blip down soon got repaired quickly. Volumes disappeared again with the
quoted price going back near to opening levels.
Source: Google Finance.
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48
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3.
CAAs stock has traded roughly flat since the start of 2015, despite transformational changes in the
business and large increases in share count during latter half of 2015 and 2016.
Stock prices have been surprisingly flat through major fundamental changes in CAA
between 2015 and 2016.
4.00
3.50
3.00
2.50
1-Nov-16
1-Oct-16
1-Sep-16
1-Aug-16
1-Jul-16
1-Jun-16
1-Apr-16
1-May-16
1-Mar-16
1-Feb-16
1-Jan-16
1-Dec-15
1-Nov-15
1-Oct-15
1-Sep-15
1-Aug-15
1-Jul-15
1-Jun-15
1-Apr-15
1-May-15
1-Mar-15
1-Feb-15
1.50
1-Jan-15
2.00
Source: Yahoo Finance.
4.
Bloomberg recently computed the stocks historical beta to be between 0.5 and 0.7 based on various
timeframes and variables. In other words, the stock prices imply that CAAs stock is 30%-50% less risky
than the overall stock market! Does this make sense?
In the real world, we would be hard pressed to find a single investment professional who believes that this
cash burning, loss making company with footprints of financial manipulation represents less market
investment risk than a diversified portfolio comprised of fifty of Hong Kongs largest companies such as
Cheung Kong, HSBC, Cathay Pacific and Tencent.
Source: Bloomberg.
Our suspicions of stock manipulation are fueled by such extreme results from price based metrics and unrealistic
stock price action.
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49
Triam Research
8. Our valuation reveals a 93% downside to current stock prices.

All through this report we have presented evidence, which, in our opinion demonstrates that CAA has fabricated
revenues, has low quality of earnings and is suffering from a deterioration of its core operating business. CAA
has burnt RMB 1.9 billion of free cash flow from 2013 to 2015 and also continued this trend in 1H 2016. We
have also highlighted potentially fake assets which may be a cover for either non-existent cash or simply for
misappropriation of cash. We suspect that CAA has been using its undisclosed related party, Skycomm, to help
it book record accounting profits, drain out cash and hide debt.
In light of the above, either the company has very low quality of earnings which will come under more pressure
with continued dilution or any true profits that have been generated are being siphoned off. Either way, we
believe that this combination of deteriorating fundamentals and indications of poor governance makes earnings
from the operating business to be of very little value to shareholders.
As a result, we form our valuation on a tangible book value basis, adjusted for assets that we believe are not real
or not recoverable back into cash. We assume that the company will trade at 1x real tangible book value, which
is generous given the serious credibility issues with the management that we have highlighted. As per the table
below, we believe that the company is only worth HK$ 0.17, a downside of 93% from the current share price.
Particulars
Book value at 30 June 2016
Less:
Intangible assets
Goodwill
Other receivables
Prepayment for materials
Trade receivables (assuming DSO
200 days)
Deposit for raw materials

Entrusted loans
Performance guarantee deposit
RMB
Notes
Thousands
3,189,714
51,137
92,735
190,000
221,013
452,934
998,769
Deterioration of the business will lead to this being written-down.

Deterioration of the business will lead to this being written-down.
Includes questionable prepayment for Hebei property.
Questionable prepayment for machinery.
Questionable prepayment for materials - no disclosure.
Comparable companies have DSO under 100 days. We apply a
generous 200 day DSO to the annualized 1H 2016 revenue, which
yields Trade Receivables of RMB 592 million for 2016. The difference
between RMB 1.6 billion Trade Receivables already on the Balance
Sheet at 1H 2016 and this RMB 592 million is our estimate of
unrecoverable Trade Receivables on the balance sheet. If we assume
100 days DSO in-line with comparable companies, CAA's irrecoverable
Trade Recievables jumps 30% to RMB 1.3 billion using the same
calculations. We are being conservative in this estimate in CAA's favor.
124,400 Highly suspicious deposit.

210,000 These loans have no collateral which leads us to believe that they will
not be recovered. There were indications of a roll-over recently.
30,000 Deposited at Skycomm - the undisclosed related party.
Loan receivables at 50%
541,736 There is surprisingly very little disclosure on such a large asset. These
loans appear to be collateralized over goods but little details are
provided. Unlike a pool of loans at a bank, these might be hard to sell,
let alone recover back in cash. As such we give it a 50% haircut.
Adjusted Book Value

FX Conversion (from RMB to HK$)
Adjusted Book Value (HK$)
276,990
1.12
310,213
Shares outstanding
Expected price per share (HK$)
1,835,723
0.17
Current stock price

Downside
2.30
-93%
Source: company disclosures, our estimates, market data as of 12 December 2016 close.
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Appendix 1
Profile of Noter Entities.
Each Noter entity has been described in CAAs annual reports as active in development and provision of
communication equipment, application services system operating management, application upgrade and system
maintenance.
Of the group of 37 CAA subsidiaries, a total of 8 entities fit this Noter description. Six of these have Noter in
their name. The earliest (Hebei Noter) was incorporated in 2006 and the latest (Huizhou All Access) in 2014.
Two of the newest entities, Huizhou All Access (2014) and Hebei Haoguang (2013) did not have any revenues
for 2014 and 2015. There are no other subsidiaries involved in the Noter businesses of satellite and infocomm
services that we can identify.
We have also accounted for the remaining 29 subsidiaries in the chart below. The small real estate entity (2011
incorporated, with RMB 1 million in capital, 96% ownership) and a supply chain entity (2014 incorporated,
with RMB 5 million in capital and 100% ownership) are also not part of the Noter business from their
description.
37 CAA Entities
40
35
30
25
20
15
Supply chain management

1
11
4
Xingfei disposal group

OEM Manufacturing
12
10
5
Real estate development
Non Operational Holding

Companies
Noter Entities
Source: 2015 annual report, pages 164-168.
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Triam Research
Appendix 2
SAIC filings for Noter entities.
Hebei Noter Communication Technology Co., Ltd.
2013
2013
/
91130100791397787R
0311-86685582
60
050011
2250
2009
1014

2250
2009
1014
130100000434397
153329.68
83366.64
69963.04
49751.4
49751.4
16491.73
13998.99
3286.04
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159
52
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2014
2014
/
91130100791397787R
0311-86685578
60
050011
2250
2009
1014

2250
2009
1014
130100000434397
167787.35
96415.72
71371.63
46910.75
46910.75
14912.62
12636.75
2470.5
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164
53
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2015
2015
/
91130100791397787R
0311-86683897
wenjing@chinaallaccess.com
60
050011

2250
2009
1014
2250
200910
14
/
130100000434397
181124.42
110403.6
70720.82
40468.62
40468.62
16578.09
13987.88
4403.19
154
Source: SAIC
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Beijing All Access Noter Communication Technology Co., Ltd.
2013
2013
/
110000450115135
010-87123696
100176
22 2
gaoqiuling@chinaallaccess.com

3000
2009-10-21
3000
2009-10-21
34164
21139
5260
145
5260
123
149
13025
2014
2014
/
110000450115135
010-87123696
100176
22 2

3000
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2009-10-21
3000
2009-10-21
55
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32380.92
21611.18
6455.91
573.68
6424.91
487.63
254
10769.74
2015
2015
/
91110302692304928G
010-87123696
100176
22 2

3000
2009-10-21
3000
2009-10-21
43608.77
15643.64
15641.54
463.92
23844.87
2641.4
2245.19
19763.9
Source: SAIC
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Shanghai All Access Noter Communication Technology Co., Ltd.
2013
2013
/ 91310000698760764Y
021-33927568
200135
1403 1109
huangxinjuan_1984@163co
m
1500.000000
2011 5 31
1500.000000
2011 5 31
10629.9846
1393.44563
210.840774
-408.825649
210.840774
-408.825649
5.77417
9236.538971
2014
2014
/ 91310000698760764Y
021-33927568
200135
1403 1109
huangxinjuan_1984@163.co
m
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1500.000000
2011 5 31
1500.000000
2011 5 31
9702.200913
9194.059738
1436.607524
-42.479233
1436.607524
-42.479233
14.944424
508.141175
2015
2015
/ 91310000698760764Y
021-33927568
200135
1403 1109
huangxinjuan_1984@163.co
m
1500.000000
2011 5 31
1500.000000
2011 5 31
9569.168276
8869.893909
176.520784
-324.165829
176.520784
-324.165829
352.562925
699.274367
Source: SAIC
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Guangdong All Access Noter Communication Technology Co., Ltd.
2013
2014
2015
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59
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Source: SAIC
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Tianjin Hailantong Technology Co., Ltd.
2013
2013
120000400123188
13521247297
300467
482 335
243886422@qq.com

6500.3
6500.3
130100000434397
7542
6710
541
137
541
103
8.6
832
2014
2014
120000400123188
13521247297
300467
482 335
243886422@qq.com
130100000434397
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6742.42
6710.2
236.53
0.18
236.53
0.13
41.06
32.22
2015
2015
120000400123188
010-87123697
300467
482 335
243886422@qq.com

1000
1000
130100000434397
7030
6865
617.7
206.44
617.7
154.83
11.27
165
Source: SAIC
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Hebei Haoguang Communication Technology Limited
2013
2014
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63
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2015
Source: SAIC
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64
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All Access Communication Technology (Shenzhen) Limited
)
2013
2014
2015
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65
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Source: SAIC
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66
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Huizhou All Access Communication Technology Co., Ltd.
2014
2015
Source: SAIC
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Appendix 3
Infocomm tenders won by CAA in 2014 and 2015.
(Awarded to Hebei Noter)
2014
No.
1
15-May-14
RMB Thousands
89
8-Jul-14
638
3-Sep-14
498
10-Oct-14
101
24-Nov-14
5,151
12-Dec-14
1,300
17-Dec-14
2,900
18-Dec-14
1,421
30-Dec-14
66
Total
2015
No.
1
29-May-15
2014
12,163
RMB Thousands
120
16-Jun-15
200
11-Aug-15
67
2
014
9-Nov-15
67
1-Dec-15
6,861
4-Dec-15
251
30
30
9-Nov-15
828
Total
8,393
Source: Various PRC govt. departments.
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Appendix 4
SAIC file documenting Skycomm holding companys name.
Source: SAIC
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Appendix 5
SAIC filings for current Changfei entities.
By end 2015, Changfei was 100% owned by CAA and comprised mainly of the following subsidiaries82:
100% stake in Lead Communications, which made mobile display panels. Lead had a 100% subsidiary
called Huizhou Lead Communications, which was shut down in 2014 according to SAIC filings.
57.5% stake in Control Electromechanical, a precision moldings manufacturer of mobile phone shells and
casings. Control had a 100% subsidiary called Wanyu.
Minority stakes in three small associates, with CAAs share in their net assets at RMB 2.2 million.
Lead Communications Company Limited

)
(
2014
82
See circular dated 27 November 2015 and 2015 annual report for additional details.
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2015
Huizhou Lead Communications Company Limited
2014
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Shenzhen Control Electromechanical Company Limited
)
2014
2015
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73
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Shenzhen Wanyu Technology Company
)
2014
2015
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74

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China All Access (HK: 0633): Evidence of financial manipulation,

UNDISCLOSED RELATED PARTY. CAA has misrepresented Skycomm as an

FAKE ASSETS, MISAPPROPRIATION OF CASH? We believe CAAs balance

STOCK MANIPULATION? We suspect trading manipulation in CAAs shares, as

Investors cannot rely on the accounts audited by CAAs new auditor.

Source: CAA annual reports.

2009 prospectus, page 145.

CAAs solar business plans are more fiction than fact.

2016 interim report, page 4.

Manipulated stock prices?

Our valuation indicates a 93% downside from current stock prices.

Source: 2015 annual report, page 5.

Total Revenue: Continuing Operations

CAAs Noter subsidiaries house its satellite and infocomm businesses.

SAIC Revenues (Filed with in China by Noter Entities)

Here is a recap of its claimed revenues.

Missing Revenue / Satellite & Infocomm Services Revenue

Source: SAIC filings and 2015 annual report.

Autonomous County Procuratorate Business

Traffic Police Brigade Through The Terminal

Some notable observations related to infocomm:

2. Investors cannot rely on financial statements audited by CAAs new

Announcement dated 20 October 2015.

(Expressed in Renminbi unless otherwise indicated)

SEGMENT REPORTING (Continued)

Depreciation and amortisation

for the year in reported top customers

Reportable segment liabilities

Revenue from customers (Note)

and other services

Source: 2014 results announcement dated 31 March 2015, page 10.

Provision of wireless data

solutions and other services

solutions and services

NOTES TO THE FINANCIAL STATEMENTS

In addition to receiving segment information concerning segment operating

Revenue from customers (Note)

Source: annual report, published on 27 April 2016, page 112.

2015 Results 2015 Annual Discrepency

Source: Announcement dated 30 March 2015 and 2015 annual report.

Announcement dated 30 March 2016.

3. Skycomm is an undisclosed related party. It is controlled by CAAs

Source: 2015 annual report, page 106

There are risks associated with forward-looking statements

For the five

for our customers who used the

Turnover attributable to our

Source: Prospectus, page 14.

Notes to the Financial Statements

In addition, we have engaged SkyComm Group as our agent to conduct sales

Source: 2009 annual report, page 97.

8 2008. Accordingly, transactions with Shanghai SkyComm

Chan Yuen Ming, Vice Chairman

Chan Yuen Ming

Shareholder: Skycomm Group

Beijing Skycomms registered address:

Source: 2009 prospectus, page 145.

Long Term Co-operation Agreement

and call centre

Former employee, Skycomm Fujian:

Former employee, CAA Beijing:

Former employee, Shanghai All Access: