FINANCIAL HIGHLIGHTS Revenue & Prot Attributable to 2015 2014 Change Equity Holders of the Company (Restated) Revenue (Continuing operations) Performance Prot Attributable to Equity Holders of the Company Earnings per share HK$3.04 HK$3.22 -5.6% 6,000 Dividends per share - Interim HK$0.60 HK$0.60 – 5,000 - Final HK$2.00 HK$2.00 – HK$2.60 HK$2.60 – 4,000 Special dividend per share – HK$2.30 3,000 HK$’mil HK$’mil HK$’ million HK$’ Revenue 2,000 - Hong Kong TV broadcasting 3,105 3,420 -9% - Hong Kong digital new media 1,000 business 170 196 -13% - Programme licensing and 0 distribution 951 1,085 -12% 2011 2012 2013 2014 2015 YEAR - Overseas pay TV operations 186 243 -24% - Channel operations 105 125 -16% Earnings & Dividends# Per Share - Other activities 129 75 72% Earnings per Share - Inter-segment elimination (191) (232) -18% Dividends# per Share 4,455 4,912 -9% 4.5 Total expenses* 3,439 3,335 3% 4 Profit attributable to equity holders 1,331 1,410 -6% 3.5 31 December 31 December 3 2015 2014 HK$’mil HK$’mil 2.5 HK$ Total assets 9,113 10,557 -14% 2 Total liabilities 1,277 1,853 -31% 1.5 Total equity 7,836 8,704 -10% 1 Number of issued shares 438,000,000 438,000,000 – 0.5 Ratios 0 Current ratio 8.8 5.0 2011 2012 2013 2014 2015 Gearing 3.0% 4.5% YEAR # excluding special dividend * excluding non-recurring expenses 2015 Revenue by Operating Segment 2015 Reportable Segment Prot* by Operating Segment % relating to 2014 are shown in brackets % relating to 2014 are shown in brackets Hong Kong TV Programme Hong Kong TV Programme broadcasting licensing and broadcasting licensing and 69% (69%) distribution 55% (58%) distribution 19% (19%) 41% (38%) Other activities 2% (1%) Overseas pay TV Hong Kong digital Hong Kong digital operations new media business Other activities 1% (0%) new media business Channel 4% (5%) 4% (4%) Channel Overseas pay TV 4% (4%) operations operations operations 2% (2%) 2% (2%) -3% (-2%) * before non-recurring expenses CONTENTS 2 CORPORATE INFORMATION 4 CHAIRMAN’S STATEMENT REVIEW OF OPERATIONS 7 Hong Kong TV Broadcasting 22 Hong Kong Digital New Media Business 25 Other Hong Kong Operations 29 Programme Licensing and Distribution 30 Overseas Pay TV Operations 32 CORPORATE SOCIAL RESPONSIBILITY 36 FINANCIAL REVIEW CORPORATE GOVERNANCE 46 Directors and Senior Management 52 Report of the Directors 63 Corporate Governance Report FINANCIAL INFORMATION 84 Five-Year Financial Review 85 Independent Auditor’s Report 86 Audited Financial Statements Television Broadcasts Limited Annual Report 2015 1 CORPORATE INFORMATION BOARD OF DIRECTORS NOMINATION COMMITTEE Dr. Raymond OR Ching Fai Chairman CHAIRMAN Anthony LEE Hsien Pin Dr. Charles CHAN Kwok Keung Dr. William LO Wing Yan EXECUTIVE DIRECTORS RISK COMMITTEE Mark LEE Po On Group Chief Executive Officer Dr. Raymond OR Ching Fai Chairman CHEONG Shin Keong General Manager Mark LEE Po On NON-EXECUTIVE DIRECTORS CHEONG Shin Keong Mona FONG Dr. William LO Wing Yan Jonathan Milton NELSON Professor Caroline WANG Chia-Ling Anthony LEE Hsien Pin CHEN Wen Chi SENIOR MANAGEMENT Thomas HUI To Mark LEE Po On Group Chief Executive Officer INDEPENDENT NON-EXECUTIVE DIRECTORS CHEONG Shin Keong General Manager Dr. Raymond OR Ching Fai SBS, JP Peter AU Wai Lam Assistant General Manager Dr. William LO Wing Yan JP Desmond CHAN Shu Hung Assistant General Manager Professor Caroline WANG Chia-Ling Felix TO Chi Hak Assistant General Manager Dr. Allan ZEMAN GBM, GBS, JP Adrian MAK Yau Kee Chief Financial Officer and Company Secretary ALTERNATE DIRECTORS Harvey CHANG Hsiao Wei REGISTERED OFFICE Alternate Director to Chen Wen Chi TVB City, 77 Chun Choi Street Jessica Huang POULEUR Tseung Kwan O Industrial Estate Alternate Director to Jonathan Milton Nelson Kowloon, Hong Kong BOARD COMMITTEES AUDITOR EXECUTIVE COMMITTEE PricewaterhouseCoopers Dr. Charles CHAN Kwok Keung Chairman 22/F, Prince’s Building Mark LEE Po On Central, Hong Kong CHEONG Shin Keong CHEN Wen Chi LEGAL ADVISER Thomas HUI To Stephenson Harwood AUDIT COMMITTEE 18/F, United Centre Dr. William LO Wing Yan Chairman 95 Queensway, Hong Kong Anthony LEE Hsien Pin Dr. Raymond OR Ching Fai REMUNERATION COMMITTEE Dr. Raymond OR Ching Fai Chairman Dr. Charles CHAN Kwok Keung Dr. William LO Wing Yan 2 Television Broadcasts Limited Annual Report 2015 PRINCIPAL BANKERS CORPORATE CALENDAR Shanghai Commercial Bank Limited The Bank of East Asia, Limited FIRST BOOK CLOSE PERIOD Bank of Communications Co., Ltd. 4 May 2016 to 25 May 2016, Bank of China (Hong Kong) Limited both days inclusive Standard Chartered Bank (Hong Kong) Limited ANNUAL GENERAL MEETING The Hongkong and Shanghai Banking Corporation 25 May 2016 Limited EX-DIVIDEND DATE OF 2015 FINAL DIVIDEND 27 May 2016 SHARE REGISTRARS AND TRANSFER OFFICE SECOND BOOK CLOSE PERIOD Computershare Hong Kong Investor Services Limited 31 May 2016 to 1 Jun 2016, Shops 1712-1716, 17th Floor both days inclusive Hopewell Centre PAYMENT OF 2015 FINAL DIVIDEND* 183 Queen’s Road East 10 June 2016* Wan Chai, Hong Kong * Subject to Shareholders’ approval at 2016 annual general meeting of the Company STOCK CODES Ordinary Shares The Stock Exchange of Hong Kong: 00511 Reuters: 0511.HK Bloomberg: 511 HK ADR Level 1 Programme: TVBCY AMERICAN DEPOSITARY RECEIPTS BNY Mellon Shareowner Services P.O. Box 30170 College Station TX 77842-3170 USA INVESTOR RELATIONS Email: [email protected] Fax: +852 2358 1337 WEBSITE www.corporate.tvb.com Television Broadcasts Limited Annual Report 2015 3 CHAIRMAN’S STATEMENT I wish to present my report to you as Chairman of Television Broadcasts Limited (“TVB”, “Group” or “Company”) for the year ended 31 December 2015. I reported in my report last August that the first half of the year was challenging for operators in the Hong Kong media industry and for our distribution business globally. These challenges continue in our operating environment and remain areas of attention for us. During 2015, we made a number of important steps to re-position ourselves for the future, namely the development of our over-the-top (“OTT”) platform for an early 2016 launch, and the divestment of our operating business in Taiwan. We are also working closely with our strategic shareholder, China Media Capital (“CMC”), to further excel TVB’s brand and expertise in our markets. We believe, despite some near term pressure, our new focus helps build shareholders’ value in the long term. DR. CHARLES CHAN KWOK KEUNG Chairman PERFORMANCE AND DIVIDENDS Overall, the Group reported a profit attributable to equity holders of HK$1,331 million for 2015, which represented a decrease of 6% over last year, and an earnings per share of HK$3.04 (2014: HK$3.22). As previously reported, the Group booked a gain of HK$1,396 million on disposal of our Taiwan Operations, but at the same time, recognised a number of non- recurring losses, including an impairment loss of HK$695 million against our interest in the Hong Kong pay TV associate, TVB Network Vision; an impairment loss on property of HK$88 million as a result of a Board’s decision to abort the construction of new production studios and related facilities in Hong Kong; and exchange losses on Renminbi fixed term deposits of HK$42 million. Our operating profit after excluding the exchange losses on Renminbi fixed term deposits and the impairment loss on property decreased 36% over last year, from HK$1,569 million to HK$1,006 million. This result was mainly due to the weaker performance of our Hong Kong advertising business, coupled with adverse performances from overseas. 4 Television Broadcasts Limited Annual Report 2015 Value creation for shareholder remains a priority of Through the two announced transactions, we had the Board, and we are committed to maintaining a sold our operating business in Taiwan TVBS. Although steady dividend even amidst tough times. This year, the contributions from Taiwan had served us well the Board has recommended a final dividend of in the past, the Company’s focus in future will lie in HK$2.00 per share. Together with HK$0.60 per share of strengthening our presence in Hong Kong, the PRC interim dividend paid, the total dividend for this year and other potential markets. This is in line with the of HK$2.60 per share (2014: HK$2.60 per share). This Group’s long term goal to focus on developing its matter will be put forward for shareholders’ approval at core businesses in Hong Kong, and to capture the vast the coming annual general meeting. We hope that this growth opportunities in the PRC and the digital new dividend policy clearly demonstrates our long-term media space. confidence in the business. Looking ahead, 2016 remains challenging, due to BUSINESS REVIEW AND OUTLOOK the weaker macroeconomic conditions resulting in a weak advertising market in Hong Kong. But, we are As further discussed in this report, the traditional hopeful that this down trend shall gradually improve media is facing intensifying competition from online in 2017. Production of quality programme content will and digital alternatives worldwide. Piracy is still serious, continue to be the cornerstone of our business. In this the Company will continue to carry out sustained summer, TVB will be the exclusive broadcaster of the anti-piracy efforts to protect our business interests. In Rio 2016 Olympic Games. We shall be using all of our 2015, our Hong Kong TV broadcasting and advertising platforms, terrestrial and OTT, to bring this important business under-performed last year by 42%, from and world-focused event to our viewers in Hong Kong.