Preliminary Offering Circular

IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES

IMPORTANT: You must read the following before continuing. The following applies to the preliminary offering circular following this page (the ‘‘Offering Circular’’), and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES AND THE GUARANTEE (THE ‘‘SECURITIES’’) HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your representation: The Offering Circular is being sent at your request and by accepting the e-mail and accessing the Offering Circular, you shall be deemed to have represented to us that you are not a U.S. person, the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States and that you consent to delivery of such Offering Circular by electronic transmission. You are reminded that the Offering Circular has been delivered to you on the basis that you are a person into whose possession the Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver the Offering Circular to any other person. The materials relating to the offering of securities to which the Offering Circular relates do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer (as defined in the Offering Circular) in such jurisdiction. The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of Credit Suisse (Hong Kong) Limited and Merrill Lynch International (together, the ‘‘Joint Lead Managers’’) or any person who controls any of the Joint Lead Managers, or any director, officer, employee or agent of any of the Joint Lead Managers, or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and the hard copy version available to you on request from the Joint Lead Managers. Preliminary Offering Circular dated 23 September 2016 Subject to completion Confidential TVB Finance Limited (incorporated in the Cayman Islands with limited liability) U.S.$[•][•] per cent. Guaranteed Notes Due 2021 irrevocably and unconditionally guaranteed by hall be made or received, and no agreement nary Offering Circular is not an offer to sell (incorporated in Hong Kong with limited liability) (Stock Code: 00511)

ISSUE PRICE: [•] per cent.

The [•] per cent. Guaranteed Notes due [•](the‘‘Notes’’) in the aggregate principal amount of U.S.$[•] to be issued by TVB Finance Limited (the ‘‘Issuer’’) will be irrevocably and unconditionally guaranteed (the ‘‘Guarantee’’) by Television Broadcasts Limited (the ‘‘Company’’ or the ‘‘Guarantor’’). The Notes will bear interest from [•] 2016 at the rate set forth above, payable semi-annually in arrear on [•]and[•] of each year (commencing on [•] 2017). The Notes mature on [•]. The Notes are not redeemable prior to maturity, except that the Notes may be redeemed, in whole but not in part, in the event of certain developments affecting taxation at 100 per cent. of their principal amount plus accrued interest, as described in this Offering Circular. The Notes will constitute direct, general, unconditional, unsubordinated and (subject to the negative pledge set out in the Terms and Conditions of the Notes) unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured unsubordinated obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. The Guarantee will constitute direct, general, unconditional, unsubordinated and (subject to the negative pledge set out in the Terms and Conditions of the Notes) unsecured obligations of the Guarantor which will at all times rank at least pari passu with all other present and future unsecured and unsubordinated obligations of the Guarantor, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. Application will be made to The Stock Exchange of Hong Kong Limited (the ‘‘Hong Kong Stock Exchange’’) for the listing of the Notes by way of debt issues to professional investors only (as defined in Chapter 37 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange and in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)) (together ‘‘Professional Investors’’). This Offering Circular is for distribution to Professional Investors only. Investors should not purchase the Notes in the primary or secondary markets unless they are Professional Investors and understand the risks involved. The Notes are only suitable for Professional Investors. The Hong Kong Stock Exchange has not reviewed the contents of this Offering Circular, other than to ensure that the prescribed form disclaimer and responsibility statements, and a statement limiting distribution of this Offering Circular to Professional Investors only have been reproduced in this Offering Circular. Listing of the Notes on the Hong Kong Stock Exchange is not to be risdiction where such offer or sale is not permitted. No offertaken or invitation s as an indication of the commercial merits or credit quality of the Notes or the Issuer and the Guarantor or the quality of disclosure in this Offering Circular. Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this Offering Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Offering Circular. This document includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the Issuer and the Guarantor. The Issuer and the Guarantor accept full responsibility for the accuracy of the information contained in this document and confirm, having made reasonable enquiries, that to

ing Circular, to purchase or subscribe for any securities. the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

ffering Circular is subject to completion and amendment in the final Offering Circular. This Prelimi Investing in the Notes involves risks. Please see ‘‘Risk Factors’’ beginning on page 11. The Notes and the Guarantee have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) and, subject to certain exceptions, may not be offered or sold within the U.S.. For a description of these and certain to buy any securities in any ju further restrictions on offers and sales of the Notes and the distribution of this Offering Circular, see ‘‘Subscription and Sale’’. The Notes will initially be represented by beneficial interests in a global certificate (the ‘‘Global Certificate’’) in registered form, which will be registered in the name of a nominee of, and shall be deposited on or about [•] 2016 (the ‘‘Issue Date’’) with, a common depositary for Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’). Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream. Except as described herein, certificates for Notes will not be issued in exchange for beneficial interests in the Global Certificate.

Joint Bookrunners and Joint Lead Managers

BofA Merrill Lynch Credit Suisse

[•] 2016 shall be made, on the basis of this Preliminary Offer The information contained in this Preliminary O any securities nor is it soliciting an offer The Issuer and the Guarantor are responsible for the accuracy and completeness of the information in this Offering Circular and the Issuer and the Guarantor represent and warrant that the information in this Offering Circular is accurate and complete in all material respects in accordance with the facts and does not omit anything likely to affect the accuracy and completeness of such information in any material respect, provided that for the information provided by third-party sources contained herein, the Issuer and the Guarantor accept responsibility for accurately reproducing such information but accept no further or other responsibility in respect of such information.

Investors should only rely on the information contained in this Offering Circular. The information contained in this Offering Circular is given only as at the date of this Offering Circular. The business, financial condition, results of operations and prospects of the Issuer and the Guarantor may have changed since that date.

This Offering Circular is based on information provided by the Issuer and the Guarantor and by other sources that they believe are reliable. No assurance can be given that such information from other sources is accurate or complete.

THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY NOTE OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER, THE GUARANTOR OR THEIR RESPECTIVE SUBSIDIARIES OR THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS AT ANY DATE SUBSEQUENT TO THE DATE HEREOF.

The distribution of this Offering Circular and the offering of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer, the Guarantor, Credit Suisse (Hong Kong) Limited and Merrill Lynch International (together, the ‘‘Joint Lead Managers’’) to inform themselves about and to observe any such restrictions. No action is being taken to permit a public offering of the Notes or the distribution of this Offering Circular in any jurisdiction where action would be required for such purposes. There are restrictions on the offer and sale of the Notes, and the circulation of documents relating thereto, in certain jurisdictions including the United States, the United Kingdom, Hong Kong, Singapore, Japan and the Cayman Islands and to persons connected therewith. For a description of certain further restrictions on offers, sales and resales of the Notes and distribution of this Offering Circular, see ‘‘Subscription and Sale’’.

This Offering Circular has been prepared by the Issuer and the Guarantor solely for use in connection with the offering of the Notes related thereto and described herein. The Issuer, the Guarantor and each of the Joint Lead Managers reserve the right to reject any offer to purchase the Notes offered hereby in the primary market, in whole or in part, for any reason.

Each person receiving this Offering Circular acknowledges that (i) such person has been afforded an opportunity to request from the Issuer and the Guarantor and to review, and has received, all additional information considered by it to be necessary to verify the accuracy of, or to supplement, the information contained herein, (ii) such person has not relied on the Joint Lead Managers or any person affiliated with them in connection with any investigation of the accuracy of such information or its investment decision, and (iii) no person has been authorised to give any information or to make any representation concerning the Issuer, the Guarantor or the Notes (other than as contained herein and information given by duly authorised officers and employees of the Issuer and the Guarantor in connection with investors’ examination of the Issuer and the Guarantor and the terms of the offering of the Notes) and, if given or

i made, any such other information or representation should not be relied upon as having been authorised by the Issuer, the Guarantor, the Joint Lead Managers, The Hongkong and Shanghai Banking Corporation Limited as trustee (the ‘‘Trustee’’) or the Agents (as defined in the Terms and Conditions of the Notes).

In making an investment decision, investors must rely on their own examination of the Issuer and the Guarantor and the terms of the offering, including the merits and risks involved. See ‘‘Risk Factors’’ for a discussion of certain factors to be considered in connection with an investment in the Notes. The Notes have not been recommended by the Issuer, the Guarantor, the Joint Lead Managers, the Trustee or the Agents.

No representation or warranty, expressed or implied, is made by the Joint Lead Managers, the Trustee, the Agents or any of their respective affiliates or agents as to the accuracy or completeness of the information set forth herein, and nothing contained in this Offering Circular is, or shall be relied upon as, a promise or representation, whether as to the past or the future. The Joint Lead Managers, the Trustee and the Agents and their respective affiliates and agents have not independently verified any of such information and assumes no responsibility for its accuracy or completeness. To the fullest extent permitted by law, none of the Joint Lead Managers, the Trustee or any Agent or any of their respective affiliates or agents accepts any responsibility for the contents of this Offering Circular or for any statements made or purported to be made by any such person or on its behalf in connection with the Issuer, the Group, the Guarantor, the issue and offering of the Notes or the Guarantee. Each of the Joint Lead Managers, the Trustee and the Agents and their respective affiliates and agents accordingly disclaims all and any liability whether arising in tort or contract or otherwise which it might otherwise have in respect of this Offering Circular or any such statements.

IN CONNECTION WITH THIS OFFERING, [•](THE‘‘STABILISING MANAGER’’)ORANY PERSON ACTING FOR THE STABILISING MANAGER MAY, SUBJECT TO ALL APPLICABLE LAWS, OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED PERIOD AFTER THE ISSUE DATE. HOWEVER, THERE IS NO OBLIGATION ON THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISING MANAGER) TO DO THIS. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD.

ii SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements under ‘‘Risk Factors’’, ‘‘Business of the Group’’ and elsewhere in this Offering Circular constitute ‘‘forward-looking statements’’. The words including ‘‘believe’’, ‘‘expect’’, ‘‘plan’’, ‘‘anticipate’’, ‘‘schedule’’, ‘‘estimate’’ and similar words or expressions identify forward-looking statements. In addition, all statements other than statements of historical facts included in this Offering Circular, including, but without limitation, those regarding the financial position, business strategy, prospects, capital expenditure and investment plans of the Group and the plans and objectives of the Group’s management for its future operations (including development plans and objectives relating to the Group’s operations), are forward looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results or performance of the Group to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the Group will operate in the future. Each of the Issuer and the Guarantor expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change of events, conditions or circumstances, on which any such statements were based. This Offering Circular discloses, under ‘‘Risk Factors’’ and elsewhere, important factors that could cause actual results to differ materially from the expectations of the Issuer or the Guarantor. All subsequent written and forward-looking statements attributable to the Issuer or the Guarantor or persons acting on behalf of the Issuer or the Guarantor are expressly qualified in their entirety by such cautionary statements.

CERTAIN DEFINED TERMS AND CONVENTIONS

In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to ‘‘Hong Kong’’ are to the Hong Kong Special Administrative Region of the People’s Republic of China, all references to the ‘‘PRC’’ are to the People’s Republic of China, excluding Taiwan, Hong Kong and Macau, all references to ‘‘U.S.’’ and the ‘‘USA’’ are to the United States of America, all references to ‘‘H.K. dollars’’, ‘‘Hong Kong dollars’’, ‘‘HK$’’ or ‘‘cents’’ aretoHongKongdollarsandcentsandall references to ‘‘U.S. dollars’’ or ‘‘U.S.$’’ are to the lawful currency of the U.S.. Such translations should not be construed as representations that the Hong Kong dollar or U.S. dollar amounts referred to herein could have been, or could be, converted into any other currency at that or any other rate or at all. See ‘‘Exchange Rates’’.

Any discrepancies in the tables included herein between the listed amounts and the totals thereof are due to rounding.

iii GLOSSARY

In this Offering Circular, unless the context indicates otherwise, the following terms have the respective meanings set out below:

‘‘audience share’’ the percentage of ratings of particular channel(s) over the total ratings of the base channels for a particular period. The base channels comprise all of the TV channels in Hong Kong, including all free TV channels, all pay TV channels and other TV channels capable of being received in Hong Kong, such as satellite channels

‘‘Broadcasting the Broadcasting Ordinance (Cap. 562 of the laws of Hong Kong), as Ordinance’’ amended or supplemented from time to time

‘‘CCTV’’ China Central Television

‘‘CMC’’ China Media Capital

‘‘Communications the Communications Authority of Hong Kong Authority’’

‘‘consolidated rating’’ the aggregate of television ratings, online live rating and online catch-up rating

‘‘DISH Network’’ DISH Network Corporation, an American direct-broadcast satellite provider

‘‘DTT’’ digital terrestrial television

‘‘Fantastic TV’’ Fantastic Television Limited, an affiliate of i-Cable

‘‘financial year’’ the financial year ended or ending 31 December

‘‘free-to-air’’ or ‘‘FTA’’ broadcast television channels that are free at the point of consumption. This category includes publicly funded channels (e.g. financed by the licence fee) and channels that are financed by advertising only or by a mixture of public funding and advertising revenues. It excludes any form of subscription or pay-per-view TV

‘‘free-to-air television a Domestic Free Television Programme Service Licence granted by the service licence’’ Chief Executive in Council of Hong Kong

‘‘Group’’ the Company and its subsidiaries

‘‘HKTVE’’ HK Television Entertainment Company Limited, an affiliate of PCCW

‘‘i-Cable’’ i-Cable Communications Limited

‘‘ISP’’ internet service provider

‘‘Liann Yee Group’’ Liann Yee Production Co., Ltd. and its subsidiaries

‘‘MEASAT’’ MEASAT Broadcast Network Systems Sdn Bhd

iv ‘‘Nielsen’’ The Nielsen Company. Since 2013, Nielsen has been appointed as the accredited ratings measurement service company for the Hong Kong television industry

‘‘online live rating’’ an aggregate live rating generated from live channel broadcasts via web and mobile apps platforms. Data is sourced from Nielsen SiteCensus and conversion is based on a TV rating formula supported by a certified document issued by Nielsen dated 24 July 2013. In 2016, one online live rating represents 64,910 viewers, the same measure as for television ratings

‘‘online catch-up rating’’ an aggregate catch-up rating of web and mobile apps platforms. Data is sourced from Nielsen SiteCensus and conversion is based on a TV rating formula supported by a certified document issued by Nielsen dated 24 July 2013. In 2016, one online catch-up rating represents 64,910 viewers, the same as for television ratings

‘‘OTT’’ over-the-top, the term used for the delivery of film and TV content via the Internet

‘‘PCCW’’ PCCW Limited

‘‘RTHK’’ Radio Television Hong Kong, a public service broadcaster operated and funded by the Hong Kong government

‘‘StarHub’’ StarHub Cable Vision Limited

‘‘Telecommunications the Telecommunications Ordinance (Cap. 106 of the laws of Hong Kong), Ordinance’’ as amended or supplemented from time to time

‘‘television ratings’’ or a measure of the size of the audience expressed as a percentage of the ‘‘TVRs’’ total TV population. For 2016, the total TV population in Hong Kong comprises 6,491,000 viewers, and therefore, one TVR represents 64,910 viewers in 2016 (1% of the total TV population). The ratings data source is Nielsen Television Audience Measurement

‘‘terrestrial television’’ a type of television broadcasting which uses radio signals (analogue and digital) for transmission and television antennas and tuners for reception (as differentiated from cable television and satellite television)

‘‘TVB’’ the Company

‘‘TVB Channels’’ five digital terrestrial TV channels, namely Jade, J2, Pearl, iNews and J5 (previously named HD Jade) broadcast by the Group

‘‘TVBC’’ 上海翡翠東方傳播有限公司

‘‘VOD’’ video on demand

‘‘Warner Bros.’’ Warner Bros. Entertainment Inc.

‘‘weekday prime time’’ 7 p.m. to midnight

‘‘Young Lion’’ Young Lion Holdings Limited

v TABLE OF CONTENTS

Page

SUMMARY ...... 1

THEOFFERING ...... 4

SELECTED FINANCIAL INFORMATION ...... 7

RISKFACTORS ...... 11

TERMSANDCONDITIONSOFTHENOTES ...... 26

THEGLOBALCERTIFICATE ...... 41

EXCHANGE RATES ...... 43

DESCRIPTIONOFTHEISSUER ...... 44

CAPITALISATIONANDEXTERNALINDEBTEDNESS ...... 45

BUSINESSOFTHEGROUP ...... 46

DIRECTORS AND SENIOR MANAGEMENT ...... 72

USEOFPROCEEDS ...... 76

TAXATION ...... 77

SUBSCRIPTIONANDSALE ...... 79

RATINGS ...... 83

GENERALINFORMATION ...... 84

INDEXTOCONSOLIDATEDFINANCIALSTATEMENTS ...... F-1

vi SUMMARY

The summary below is only intended to provide a limited overview of information described in more detail elsewhere in this Offering Circular. As it is a summary, it does not contain all the information that may be important to investors and terms defined elsewhere in this Offering Circular shall have the same meanings when used in this summary. Prospective investors should therefore read this Offering Circular in its entirety. The summary is also qualified in its entirety by the audited financial statements of the Guarantor and the notes thereto (the ‘‘Audited Financial Information’’) appearing elsewhere in this Offering Circular.

Overview Television Broadcasts Limited was incorporated in Hong Kong in 1965 and commenced business in 1967 as the first wireless commercial television station in Hong Kong. The Group is now the leading TV broadcaster in Hong Kong with the Group’s terrestrial channels having an average audience share of all free and pay TV channels in Hong Kong during weekday prime time for the six months ended 30 June 2016 of 83% (as measured by Nielsen), engaging with over 3 million viewers daily in Hong Kong during prime time. The Group provides 24-hour entertainment channels and news service to over 7 million Hong Kong viewers, and operates an international licensing and distribution business. The Group owns five free-to-air channels in Hong Kong – Jade, J2, iNews, Pearl and J5 (formerly HD Jade) as well as 14 TVB branded thematic channels.

The Group is one of the largest commercial Chinese programme producers in the world, and one of the few broadcasters in the world which operates a vertically integrated business model, encompassing production, broadcasting and distribution. Over the years, TVB has developed a production pipeline which generates an annual output of over 670 hours of dramas and over 19,000 hours of news, variety, travelogue and current affairs programmes. It also possesses a content library comprising over 92,000 hours of self-produced programme content and about 42,000 hours of news footage, accumulated over the past 48 years of operation. Moreover, the Group engages in movie production and investment through its associated company, Shaw Brothers Holdings Limited (HK stock code: 00953) and an investment company, Flagship Entertainment Group.

The Group’s headquarters, TVB City, has a total building area of over 110,000 square metres, which includes administration offices, outdoor shooting locations and production studios. Its well-equipped and fully digitised production facilities enables the Group to produce quality high definition television services. As at 30 June 2016, the Group had over 4,200 staff, including approximately 700 artistes.

HK-TVB Limited, the former holding company of the Group was listed on the Hong Kong Stock Exchange in 1984. Following a group reorganisation, the Company became the listed parent company (HK stock code: 00511) of the Group in 1988.

Recent Developments Taiwan Disposal In 2016, the Group disposed of its remaining 47% interest in Liann Yee Group, marking a complete exit from its operations in Taiwan. The disposal was undertaken through two transactions which were completed on 6 May 2015 and 10 March 2016 respectively. Upon completion of the disposal, the Group discontinued its Taiwan operations, which involved operations of production and broadcast of programmes in Taiwan through Liann Yee Group. Further, on 29 July 2016, the Group entered into an agreement to dispose of its property located in Neihu District of Taipei City.

1 Australia. The Group intends to continue to expand its OTT service, through the TVB Anywhere brand, to distribute dramas and other programmes to audiences beyond these markets. The Group will use a portion of the net proceeds from the offering of the Notes to fund the expansion of its digital new media business.

As with any expansion into new and developing market segments, there are risks involved for the Group. For further details see the risk entitled "The group may not be successful in its efforts to grow and further monetise it’s digital media platforms’’.

Business operations The Group’s business operations includes the following segments:

• Hong Kong TV Broadcasting – broadcasting of television programmes on terrestrial television platform, broadcasting of commercials on terrestrial and pay TV platforms and production of programmes in Hong Kong and Macau

• Hong Kong digital new media – provision of content to mobile devices and website business portals in Hong Kong and Macau

• Programme licensing and distribution – distribution of television programmes and channels to telecast, video and new media operators in Malaysia, Singapore, the PRC, Canada and Vietnam

• Overseas pay TV operations – provision of pay television services to subscribers in the USA, Europe and Australia

• Channel operations – compilation and distribution of television channels in the PRC, Malaysia, Singapore and other countries

• Other activities – magazine publications, music entertainment and other related services

The Group generated 68.8% of its total revenue in Hong Kong for the six months ended 30 June 2016, with the balance from the rest of the world through its licensing and subscription businesses. For the years ended 31 December 2014 and 2015 and for the six months ended 30 June 2016, the Group’s revenue amounted to HK$4,912 million, HK$4,455 million and HK$1,964 million, respectively and for the years ended 31 December 2014 and 2015 and for the six months ended 30 June 2016, its profit amounted to HK$1,420 million, HK$1,318 million and HK$320 million respectively. The Group has fully repaid its bank borrowing during the six months ended 30 June 2016 and, as of 30 June 2016, had no debt outstanding.

Competitive strengths The Group believes that its competitive strengths outlined below distinguish it from its competitors and are important to its success and future development:

• an iconic brand with long history and a leading market position in the Hong Kong television broadcasting industry;

• a vertically integrated business with a substantial library of Chinese content programming and a strong international distribution platform;

2 • premium advertising revenue due to substantial market reach and strong relationships with advertisers and advertising agencies;

• high barriers to entry in the free-to-air television market;

• an established player in Hong Kong’s expanding digital new media sector; and

• an experienced board and management team with a successful track record.

Strategies The Group has adopted the following specific business strategies:

• to maintain a leading share in Hong Kong’s television advertising market and increase its market share in Hong Kong’s overall advertising market;

• ongoing focus to invest in high quality content for Hong Kong and overseas markets;

• to increase its global footprint;

• to expand and enhance the Group’s digital media service offerings; and

• to enhance the Group’s overall technology platform and infrastructure.

3 THE OFFERING

The following is a brief summary of the terms of the offering of the Notes. For a more complete description of the terms of the Notes, see ‘‘Terms and Conditions of the Notes’’ in this Offering Circular. Terms used but not defined herein have the meanings set forth in ‘‘Terms and Conditions of the Notes’’.

Issuer TVB Finance Limited.

Guarantor Television Broadcasts Limited.

Notes Offered U.S.$[•] aggregate principal amount of [•] per cent. Guaranteed Notes due [•](the‘‘Notes’’).

Guarantee Payment of all sums from time to time payable in respect of the Notes and the Trust Deed is irrevocably and unconditionally guaranteed by the Guarantor.

Issue Price [•] per cent.

Maturity Date [•] 2021.

Interest Payment Dates [•]and[•] each year, commencing on [•] 2017.

Interest The Notes will bear interest from [•] 2016 at the rate of [•] per cent. per annum, payable semi-annually in arrear.

Status of the Notes The Notes constitute direct, general, unconditional, unsubordinated and (subject to Condition 4) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4, at all times rank at least equally with all their respective other present and future unsecured and unsubordinated obligations.

Status of the Guarantee The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Trust Deed and the Notes. Its obligations in the Guarantee are contained in the Trust Deed. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.

Negative Pledge The Notes will contain a negative pledge provision as further described in Condition 4 of the Terms and Conditions of the Notes.

Events of Default The Notes will contain certain events of default, including a cross default provision as further described in Condition 9 of the Terms and Conditions of the Notes.

4 Additional Amounts In the event that certain Cayman Islands or Hong Kong taxes are payable in respect of payments under the Notes or the Guarantee, the Issuer or the Guarantor, as the case may be, will, subject to certain exceptions, pay such additional amounts as will result, after deduction or withholding of such taxes, in the receipt by the Noteholders of the amounts as would have been received by them had no such deduction or withholding been required. See ‘‘Terms and Conditions of the Notes – Taxation’’.

Redemption for Tax The Notes are not redeemable prior to maturity except that the Notes may Reasons be redeemed at any time at the option of the Issuer, in whole but not in part, at 100 per cent. of the principal amount thereof, plus interest accrued but unpaid to the date fixed for redemption, in the event, as a result of certain developments affecting taxation described herein, either the Issuer or the Guarantor is, or would be, obligated to pay additional amounts in respect of the Notes or Guarantee. See ‘‘Terms and Conditions of the Notes – Redemption and Purchase – Redemption for Taxation Reasons’’.

Further Issues The Issuer may, from time to time, without the consent of the holders of the Notes, create and issue further notes having the benefit of a guarantee from the Guarantor and the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them). Additional notes issued in this manner will be consolidated and form a single series with the then outstanding Notes.

Governing Law The Notes and the Trust Deed and all non-contractual obligations arising out of or in connection with them are governed by English law.

Denomination, Form The Notes will be registered and issued in the denomination of and Registration U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof.

Clearing Systems The Notes will be represented by beneficial interests in the Global Certificate, which will be registered in the name of a nominee of, and deposited on the Closing Date with, a common depositary for Euroclear and Clearstream. Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through records maintained by, Euroclear and Clearstream. Except as described herein, individual certificates evidencing the Notes will not be issued in exchange for beneficial interests in the Global Certificate.

Clearance and Settlement The Notes have been accepted for clearance through Euroclear and Clearstream under the following codes:

ISIN: XS1495978329.

Common Code: 149597832.

Listing Application will be made to the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Notes by way of debt issues to Professional Investors only. A confirmation of the eligibility for the listing of the Notes has been received from the Hong Kong Stock Exchange.

5 Ratings The Notes are not expected to be rated. A rating is not a recommendation to buy, sell or hold any Notes and may be subject to suspension, change or withdrawal at any time by the assigning rating agency.

Trustee The Hongkong and Shanghai Banking Corporation Limited.

Principal Paying Agent The Hongkong and Shanghai Banking Corporation Limited. and Transfer Agent

Registrar The Hongkong and Shanghai Banking Corporation Limited.

Use of Proceeds The net proceeds of the offering of the Notes, after deducting fees, commissions and expenses, are estimated to be approximately U.S.$[•] million. The Group will use the net proceeds to fund the expansion of its digital new media business and other capital expenditures, to make strategic investments and for its general corporate purposes.

6 SELECTED FINANCIAL INFORMATION

The following tables set forth the summary of consolidated financial information of the Company as at and for the periods indicated. The selected financial information presented below as at 31 December 2014 and 31 December 2015 and for each year ended 31 December 2014 and 31 December 2015 has been extracted from the Company’s audited consolidated financial statements for the year ended 31 December 2015 and should be read in conjunction with the audited consolidated financial statements of the Company, including the notes thereto, reproduced elsewhere in this Offering Circular. The selected financial information presented below as at 30 June 2015 and 30 June 2016 and for each of the six months ended 30 June 2015 and 30 June 2016 has been extracted from the Company’s unaudited condensed consolidated interim financial information for the six months ended 30 June 2016, reproduced elsewhere in this Offering Circular. Such unaudited condensed consolidated interim financial information has been reviewed by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, in accordance with Hong Kong Standard on Review Engagements 2410, ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the Hong Kong Institute of Certified Public Accountants.

7 Consolidated Statements of Financial Position (in HK$ million) Audited Unaudited As at 31 December As at 30 June 2014 2015 2015 2016 ASSETS Non-current assets Property, plant and equipment ...... 3,068 1,687 1,755 1,693 Investmentproperties...... 10 684 739 102 Landuserights...... 66 60 65 58 Intangibleassets...... 116 27 – 36 Interestsinjointventures...... 45 30 1,211 23 Interestsinassociates...... 531 ––156 Available-for-salefinancialassets...... – 47 – 47 Held-to-maturity financial assets ...... –––307 Deferredincometaxassets...... 24 37 17 16 Loanandreceivables...... – 143 – 120 Prepayments...... 40 56 52 31 Totalnon-currentassets...... 3,900 2,771 3,839 2,589 Current Assets Programmes,filmrightsandmovies...... 762 740 819 777 Stocks...... 11 12 12 48 Trade and other receivables, prepayments and deposits . . . 2,539 1,867 1,667 1,714 Taxrecoverable...... 5 19 5 47 Loantoajointventure...... ––51 – Restrictedcash...... 9 2 9 2 Bank deposits maturing after three months ...... 135 691 902 85 Cashandcashequivalents...... 3,196 2,126 1,954 2,493 Non-currentassetheldforsale...... – 885 – 590 Totalcurrentassets...... 6,657 6,342 5,419 5,756 Total assets ...... 10,557 9,113 9,258 8,345

EQUITY Equity attributable to equity holders of the Company Sharecapital...... 664 664 664 664 Reserves...... 7,861 7,016 7,189 6,476 8,525 7,680 7,853 7,140 Non-controlling interests...... 179 156 172 172 Total equity...... 8,704 7,836 8,025 7,312

LIABILITIES Non-current liabilities Borrowings...... 294 235 401 – Deferredincometaxliabilities...... 181 322 171 290 Retirementbenefitobligations...... 35 ––– Totalnon-currentliabilities...... 510 557 572 290 Current liabilities Trade and other payables and accruals ...... 793 686 599 732 Borrowings...... 98 ––– Current income tax liabilities ...... 452 34 62 11 Total current liabilities...... 1,343 720 661 743 Total liabilities...... 1,853 1,277 1,233 1,033 Total equity and liabilities ...... 10,557 9,113 9,258 8,345

8 Consolidated Income Statements (in HK$ million) Audited Unaudited For the year ended For the six months ended 31 December 30 June 2014 2015 2015 2016 Continuing operations Revenue...... 4,912 4,455 2,031 1,964 Costofsales...... (2,016) (2,009) (905) (962) Grossprofit...... 2,896 2,446 1,126 1,002

Otherrevenues...... 75 75 39 40 Selling, distribution and transmission costs ...... (556) (577) (270) (265) Generalandadministrativeexpenses...... (763) (853) (396) (451) Otherlosses,net...... (83) (85) (35) – 1,569 1,006 464 326

Exchange losses on Renminibi fixed term deposits ...... (4) (42) –– Impairmentlossonproperty...... – (88) –– Operatingprofit...... 1,565 876 464 326

Financecosts...... (3) (6) (4) (1) Shareof(losses)/profitsofjointventures...... (7) (15) 7 (3) Shareoflossesofassociates...... (72) (33) (33) (4) Impairment loss on loan to and amounts due from anassociate...... – (695) (654) (15) Profit/(loss) before income tax...... 1,483 127 (220) 303 Incometaxexpense...... (221) (144) (65) (54) Profit/(loss) for the year/period from continuing operations . . 1,262 (17) (285) 249

Discontinued operations Profit for the year/period from discontinued operations . . . . . 158 103 83 – Tax on dividend distributed prior to completion of disposal. . – (53) (53) – Gain on disposal of discontinued operations ...... – 1,396 1,396 – Gainondisposalofajointventure...... –––78 Deferredtaxinrelationtogainfromdisposal...... – (111) –– Deferredtaxondisposalofajointventure...... –––(7) 158 1,335 1,426 71 Profitfortheyear/period...... 1,420 1,318 1,141 320

Profit/(loss) attributable to: Equity holders of the Company – Continuingoperations...... 1,252 (4) (278) 231 – Discontinuedoperations...... 158 1,335 1,426 71 1,410 1,331 1,148 302 Non-controlling interests – Continuingoperations...... 10 (13) (7) 18 1,420 1,318 1,141 320

Earnings/(loss) per share (basic and diluted) for profit/(loss) attributable to equity holders of the Company during the year/period – Continuingoperations...... HK$2.86 HK$(0.01) HK$(0.64) HK$0.53 – Discontinuedoperations...... HK$0.36 HK$3.05 HK$3.26 HK$0.16 HK$3.22 HK$3.04 HK$2.62 HK$0.69

9 Consolidated Statements of Comprehensive Income (in HK$ million) Audited Unaudited For the year ended For the six months ended 31 December 30 June 2014 2015 2015 2016 Profit for the year/period ...... 1,420 1,318 1,141 320 Other comprehensive income: Item that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligations recognised directly in other comprehensive income ...... 2 ––– Tax effect of remeasurement of defined benefit obligations recognised directly in other comprehensive income ...... –––– 2 ––– Item that may be reclassified to profit or loss: Currency translation differences – Group...... (87) (48) 54 30 – Jointventures...... –––– Reclassification adjustment to profit or loss on disposal/liquidation of subsidiaries...... 25 7 8 – Reclassification adjustment to profit or loss ondisposalofajointventure...... –––1 (62) (41) 62 31 Other comprehensive income for the year/period, net of tax . . (60) (41) 62 31

Total comprehensive income for the year/period...... 1,360 1,277 1,203 351 Total comprehensive income for the year/period attributable to: Equity holders of the Company – Continuingoperations...... 1,211 (62) (243) 264 – Discontinuedoperations...... 139 1,362 1,453 71 1,350 1,300 1,210 335 Non-controlling interests – Continuingoperations...... 10 (23) (7) 16 Total comprehensive income for the year/period...... 1,360 1,277 1,203 351

10 RISK FACTORS

Any investment in the Notes is subject to a number of risks. Prior to investing in the Notes, prospective investors should carefully consider risk factors associated with any investment in the Notes, the business of the Issuer, the Guarantor and the Group and the industry in which the Group operates together with all other information contained in this Offering Circular, including, in particular the risk factors described below. Words and expressions defined in the ‘‘Terms and Conditions of the Notes’’ below or elsewhere in this Offering Circular have the same meanings in this section.

The following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the Notes and should be used as guidance only. Additional risks and uncertainties relating to the Issuer, the Guarantor or the Group that are not currently known to the Issuer, the Guarantor or the Group or that the Issuer, the Guarantor or the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the business, prospects, results of operations and/or financial position of the Issuer, the Guarantor or the Group and, if any such risk should occur, the price of the Notes may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Notes is suitable for them in light of the information in this Offering Circular and their personal circumstances.

RISKS RELATING TO THE GROUP’SBUSINESS

The Group generates a substantial majority of its revenue from advertising. The loss of advertisers, or further reduction in spending by advertisers with the Group, could materially and adversely affect the Group’s business, financial condition and results of operations.

The substantial majority of the Group’s revenue is currently generated from third parties advertising on its television channels, internet platform, mobile applications and in its TVB Weekly publication. As is common in the advertising industry, advertisers typically do not have advertising commitments with the Group for more than one year and many of the advertisers spend only a portion of their overall advertising budget with the Group. In addition, advertisers may view some of the Group’s products, such as advertising on the internet platform and mobile applications, as experimental. Advertisers may not continue to do business with the Group, or they may reduce the prices they are willing to pay to advertise with the Group, if it does not present advertisements and other commercial content in an effective manner or if they do not believe that their investment in advertising with the Group will generate a competitive return relative to other advertising alternatives. In particular, the Group’s revenue from Hong Kong TV broadcasting for the six months ended 30 June 2016 was HK$1,216 million representing an 11% decline year-on-year.

The Group’s advertising revenue could be adversely affected by a number of other factors, including:

• loss of advertising market share to the Group’s competitors;

• the Group’s inability to control the advertising agency fees to a reasonable level;

• a reduction in total advertising spending due to declining retail sales in Hong Kong;

• a decrease in the total amount of advertising through the medium of television;

• changes in the way advertising is priced;

11 • a significant decrease in FTA television viewership, thereby affecting the size of the reachable audience for advertisers;

• the Group’s inability to create new products that sustain or increase the value of its advertising spots and other commercial content;

• the Group’s inability to produce quality drama serials that achieve the necessary TVRs and viewership levels;

• a decreasing popularity of the Group’s programming relative to its competitors;

• the activities of the Group’s competitors, including increased competition from other forms of advertising-based mediums, such as other FTA television and pay television operators, internet content providers and digital media platforms;

• the impact of macroeconomic conditions on the Group’s advertising customers and on the advertising industry in general;

• decreases in user engagement, including time spent viewing the Group’s channels or on its internet platform, mobile applications or OTT service;

• increased viewing of programmes broadcast on the Group’s channels through unauthorised websites and platforms where the Group does not currently generate revenue;

• adverse legal developments relating to advertising, including legislative and regulatory developments;

• the impact of new technologies that could affect the Group’sviewership;and

• adverse media reports or other negative publicity involving the Group or other companies in the industries in which the Group operate.

The occurrence of any of the above could materially and adversely impact the Group’s business, financial condition and results of operations.

The Group relies on advertisers in certain industries for a significant portion of its advertising revenue.

The Group has historically derived a significant portion of its advertising revenue from certain industries. Such industries include fast-moving consumer goods (such as milk powder, pharmaceutical and healthcare products, and personal care and beauty products), restaurants, supermarkets, banking and financial services, travel agents and watches and jewellery. If any of these industries experience disruptions or other difficulties as a whole, it may reduce the amount of advertising spots purchased by multiple advertisers within a single industry. In addition, if any of the Group’s top individual advertisers seek other forms of advertising or other advertising platforms or modify their advertising or marketing strategies in other ways, it may reduce the amount of advertising spots purchased by such advertisers. Any decision on the part of any of the above advertisers to reduce the amount of advertising spots they purchase from the Group on its television channels for any reason could require the Group to adjust the prices for its advertising spots and/or incur additional expenses to acquire new advertisers, and any of the above could materially and adversely impact the Group’s business, financial condition and results of operations.

12 The Group faces competition from other broadcasters and from providers of different advertising- based mediums.

Competition for advertising revenue in Hong Kong is highly intensive, with a number of media operators competing for audience share and advertising revenue through a broad range of media platforms, including free and pay television, newspapers, magazines, radio, websites, online video and social media platforms, cinema, outdoor advertising and other platforms. This competition has intensified as a result of advancements in digital and internet-based technologies. Additionally, other forms of advertising may be perceived as having further reach than television advertising.

The Group is primarily reliant on generating advertising revenue from broadcasting activities on its television channels. The Group also derives a portion of its revenue from advertising on its internet platform and mobile applications. In attracting advertising revenue, television channels compete primarily on the basis of TVRs, the type of target audience, programming content and advertising rates. With the continued development of alternative forms of media, particularly digital media, the Group may face significant competitive pressure with regard to its TVRs as viewers may divert their time towards alternative media platforms in order to access programming content, thereby increasing competition from such platforms for advertising revenue. The continued growth of digital media and the actions of other competitors in the industries in which the Group operates may make it difficult for it to grow or maintain the Group’s advertising revenue, which in turn may have a material and adverse effect on its profitability. These actions could include, for example, the development of new programming content, online venues or print publications that may be able to compete with the Group’s offerings. In addition, adverse TVRs or poor content performance could materially and adversely impact the Group’s ability to generate advertising revenue.

In addition, changes in existing competition laws, including the Competition Ordinance (Cap. 619 of the laws of Hong Kong) which came into full force in December 2015, modifications or changes to the portions of the Broadcasting Ordinance or Telecommunications Ordinance that regulate competition, or the granting of additional free-to-air television service licences to new market entrants could also result in additional competition for advertising revenue or increased pressure on advertising rates, which could have a material and adverse effect on its business, financial condition and results of operations.

A failure to capitalise effectively on the growth in the online advertising industry could materially and adversely affect the Group’s revenue and financial performance.

In recent years, advertisers have been spending an increased proportion of their overall advertising budgets on online advertising relative to advertising spend on traditional broadcast media. This trend is expected to continue and accordingly the Group’s growth prospects depend, to an extent, on the growth of, and its market share of, the online advertising industry in Hong Kong.

While its digital new media platforms are currently well supported by many new and recurring advertisers, there is a risk that advertisers may diversify their advertising budget into competing media platforms with unique positioning in terms of reach and the ability to provide more targeted advertisements to potential consumer segments or they may choose to advertise only with online businesses having the largest share of global users in order to streamline advertising across multiple platforms and to minimise advertising costs.

13 In addition, the online advertising industry is characterised by constant innovation and low barriers to entry, which can result in the creation of new websites, applications or trends with limited or no notice, which may result in changes in consumer behaviour and lead to a fragmentation of the online advertising industry and a reduction in the level of demand by online advertisers for the Group’s advertising spots.

A failure by the Group to adequately invest in new technologies and media platforms and to continue to produce successful online content that is attractive to potential consumers could lead to a decline in the Group’s overall advertising revenue, which in turn could materially and adversely affect the Group’s business, financial condition and results of operation.

Failure by the Group to enter into and renew licencing agreements for its self-produced content or disputes with licensees could materially and adversely affect the Group’srevenue. For the financial years 2014 and 2015 and for the six months ended 30 June 2016, the proportion of the Group’s overall revenue generated by the Group’s licencing and distribution business segment was 19.3%, 18.6% and 24.1% respectively. This revenue is generated primarily from licences fees under fixed term agreements entered into with broadcasters in international markets and in particular in Malaysia, Singapore and the PRC.

In Malaysia, the Group grants licences to MEASAT which operates the Astro platforms. The Group recently renewed its four-year contract with MEASAT which became effective from February 2016. In Singapore, the Group has granted a licence to StarHub as the key Chinese programme supplier for StarHub’s subscribers. The Group has extended the contract with StarHub for one year commencing June 2016. In the PRC, the Group’sbusinessisoperatedby上海翡翠東方傳播有限公司 (‘‘TVBC’’), a joint venture among the Company, CMC, Shanghai Media Group, and Gravity Corporation, in which the Company holds a 55% equity interest. TVBC enters into licencing contracts with broadcasters and online distribution platforms such as Youku Tudou Inc., BesTV through IPTV, Tencent, Whaley, and MangoTV.

There can be no assurance that the Group will be able to renew or replace maturing contracts on equivalent terms. In addition, disputes with licensees may lead to the termination of the relevant licencing arrangements and/or the withholding of licence fees by the licensee. For example, in 2015 the Group experienced a fall in revenue due to a dispute with a licensee in the PRC arising from the unauthorised use of the Group’s content.

A failure to renew or replace existing licences and distribution contracts or future disputes with licensees and distributors could lead to a decline in the Group’s overall revenue from its licensing and distribution activities, which in turn could materially and adversely affect the Group’s business, financial condition and results of operation.

The Group’s success and profitability are dependent upon viewer preferences and audience acceptance of the programmes produced and broadcast by the Group, which is difficult to predict.

Television broadcasting is a business that is inherently susceptible to volatility, as the revenue derived from the advertising during the broadcasting of programmes and the licensing of rights to the associated intellectual property depends primarily upon viewer preferences and acceptance by the public, which is difficult to predict and is constantly evolving and changing. As such, the content and program produced by the Group must consistently appeal to prevailing consumer tastes and to frequently changing audience preferences. In particular, the quality of the Group’sdramaprogrammesisofcritical importance for the retention of viewers. The commercial success of a television programme also depends

14 upon the quality and acceptance of other competing programmes released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which are difficult to predict.

TVRs are also key factors that are weighed when determining the advertising rates that the Group receives. Poor TVRs can lead to a reduction in pricing and advertising spending. Should a programme fail to achieve desirable TVRs or compete effectively with its competitors’ programmes, the Group may need to broadcast replacement programmes at short notice. There can be no assurance that any replacement programming on the Group’s television channels will generate the anticipated level of revenue or TVRs. The success of the Group’s internet platform, mobile applications, OTT service and TVB Weekly publication are similarly dependent on audience acceptance of its programmes and materials offered and are subject to similar risks.

In addition, it is not yet known what effect new market entrants in the FTA market in April 2016 (ViuTV) and by May 2017 (Fantastic TV) will have on the TVRs for the Group’s programmes.

As a result of its strong viewership numbers to date, the Group currently enjoys premium pricing power with regard to the sale of advertising spots on its television channels. Any meaningful decrease in viewership numbers could result in reduced pricing power, which could require the Group to adjust its prices for advertising spots, and as a result, could materially and adversely impact its business, financial condition and results of operations.

Failure on the Group’s part to obtain broadcasting rights, licences or distribution agreements in a timely manner or at all, or failure to renew such rights, licences and agreements related to popular programmes could materially and adversely affect its revenue.

Revenue from the Group’s television broadcasting activities, internet platform and mobile applications are partially dependent on its continued ability to anticipate and adapt to changes in consumer tastes and behaviour in a timely manner. Besides the programmes produced by the Group locally, the Group also obtains programmes from third parties based upon programmes rights of varying durations. Competition for popular programmes that are licenced from third parties is intense, and the Group may be outbid by its competitors for the rights to new, popular programmes or in connection with the renewal of popular programming currently licenced by the Group. Even if it is able to obtain broadcasting rights, licences or distribution agreements at favourable prices, the Group’s advertising revenue may be adversely affected if the related programmes have already been viewed by a large quantity of the audience through other mediums before the Group is able to broadcast them. Any of the foregoing may materially and adversely affect the Group’s business, financial condition and results of operations.

Increased programming and content costs may materially and adversely affect the Group’s profits.

The Group incurs costs with respect to the production and acquisition of programmes and content, as well as for marketing and distribution. Whether such costs can be controlled at a reasonable level depends on a number of factors including availability of artistes and appropriately qualified employees, competition from other market players and the general economic condition. Such factors are outside of the Group’s control. In particular, the emergence and increasing popularity of new media and competition from other television operators may reduce the Group’s ability to attract creative talent to contribute to its local production or to obtain content from content providers at reasonable rates. An increase in any of these costs may lead to decreased profitability and could materially and adversely affect the Group’s business, financial condition and results of operations.

15 The Group’s business depends on using and protecting certain acquired intellectual property rights and on not infringing upon the intellectual property rights of others.

The Group relies on certain intellectual property, such as patents, copyrights, trademarks and trade secrets, as well as licences and other agreements with other third parties, to use various technologies, conduct the Group’s operations, broadcast its programmes and sell its products and services. Legal challenges to the Group’s intellectual property rights and claims of intellectual property infringement by third parties may require that the Group enter into royalty or licensing agreements on unfavourable terms, incur significant enforcement costs or substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question or from the continuation of its businesses as currently conducted. The Group may need to change its business practices if any of these events occur, which may limit its ability to compete effectively and could have an adverse effect on its results of operations. Even if the Group believes that any such challenges or claims are without merit, such challenges or claims are likely to be costly to defend and divert management’s attention and resources away from usual business operations. Moreover, if the Group is unable to obtain or continue to obtain licences from its vendors and other third parties on reasonable terms, the Group’s businesses could be adversely affected, which could materially and adversely affect the Group’s business, financial condition and results of operations.

Piracy of the Group’s programmes and other content, including digital piracy, may materially and adversely impact revenue received from the broadcasting of its programming.

Piracy of television dramas and other copyrighted material is prevalent in many parts of the world and is made easier by the availability of digital copies of content and technological advances allowing conversion of such programmes and other content into digital formats which facilitate the creation, transmission and sharing of high quality unauthorised copies of the Group’s programmes and other content. Recent technological advances, which facilitate the streaming of video content via the internet to television screens and other devices, may also increase piracy. The proliferation of unauthorised copies of programmes may have an adverse effect on the Group’s businesses and profitability as these unauthorised actions reduce the revenue that the Group potentially could receive from the legitimate sale and distribution of such products and negatively affect the TVRs of the Group’sprogrammeswhich could impact its advertising rates and revenue.

In addition, while legal protections exist, piracy and technological tools with which to carry it out continue to escalate, evolve and present challenges for enforcement. The potential limitations of legal protections or the failure of development of legal rights to enhance enforcement efforts to combat piracy could make it more difficult for the Group to adequately protect the programmes and content that it distributes, which could negatively impact its value and further increase the Group’s enforcement costs. Any increase in such enforcement costs could have a material and adverse effect on the Group’s business, financial condition and results of operations.

The Hong Kong government may grant new domestic free television programme service licences.

The Group’s operations in Hong Kong are subject to a free-to-air television service licence granted by the Chief Executive in Council. In addition to the Group, two free-to-air television service licences were granted to HKTVE, an affiliate of PCCW, on 1 April 2015, and Fantastic TV, an affiliate of i-Cable, on 31 May 2016. PCCW (under the name ViuTV) commenced broadcasting on 6 April 2016. i-Cable (under the name Fantastic TV) is expected to start broadcasting by May 2017. The Hong Kong government’s own public service broadcaster, RTHK, currently broadcasts three FTA television channels. In 2015, the Communications Authority received an application for a free-to-air television service licence from Hong Kong Television Network Limited and from Forever Top (Asia) Limited. On

16 6 May 2016, Phoenix Hong Kong Television Limited (a subsidiary of Phoenix Satellite Television Holdings Limited (HK stock code: 02008)) submitted an application to the Communications Authority for a free-to-air television service licence with digital terrestrial transmission. The Chief Executive in Council has indicated that the Hong Kong market cannot support more than four FTA players. There is no assurance that additional licences will not be granted, or that the Hong Kong government will not revise its evaluation of the Hong Kong market. Any granting by the Hong Kong government of such licence(s) to any new market entrant, together with the commencement of the FTA broadcasting operations of i-Cable and PCCW, could:

• result in a decrease in the Group’s market share of the Hong Kong FTA television market;

• require the Group to decrease its advertising fees in order to compete effectively; and

• drive up the costs to employ artistes for programme production or to acquire the rights to broadcast popular domestic and international programmes. The occurrence of any of the above could have a material and adverse effect on the Group’s business, financial condition and results of operation.

The Group must respond to rapid changes in technology, content creation, services and standards in order to remain competitive.

Video, telecommunications and data services technologies used in the entertainment industry are changing rapidly, as are the digital distribution models for magazines. Advances in technologies or alternative methods of product delivery or storage, or certain changes in consumer behaviour driven by these or other technologies and methods of delivery and storage, could have a negative effect on the Group’s businesses. Examples of the foregoing include:

• the convergence of television broadcasts and online and mobile delivery of programming to televisions;

• video-on-demand platforms;

• tablets;

• new video and electronic magazine formats;

• user-generated content sites;

• internet and mobile distribution of video content via streaming and downloading; and

• place-shifting of content from the home to portable devices on which content is viewable outside the home.

For example, devices that allow users to view television programmes on a time-delayed basis; technologies that enable users to fast-forward or skip traditional commercial advertisements; systems that allow users to access copyrighted materials over the internet through antennas and other devices; and portable digital devices and systems that enable users to store or make portable copies of programming, may cause changes in consumer behaviour that could affect the attractiveness of its offerings to advertisers and materially and adversely affect the Group’s revenue.

17 Moreover, cable providers who offer paid subscription services are developing new techniques that allow them to enrich their offerings of channels and programmes of increasingly higher picture quality (e.g. 4K) on their existing equipment to highly targeted audiences, reducing the cost of creating channels and potentially leading to the division of the television marketplace into more specialised niche audiences. These increased television viewing options increase competition for viewers and competitors targeting programming to certain audience demographics may gain certain advantages over the Group for television advertising and subscription revenue.

Anticipating and adapting to changes in technology in a timely manner and capitalising on new sources of revenue from these changes will affect the Group’s ability to continue to increase its revenue. Failure on the Group’s part to do so could have a material and adverse effect on its business, financial condition and results of operations.

The Group’s business, financial condition and results of operations could be materially and adversely affected by the failure or destruction of its network and information systems and other technology that it depends upon to broadcast the programmes on its channels.

Network and information systems and other technologies are important to the Group’s business activities. While the Group has taken efforts to upgrade its information systems in the past, any network and information systems-related events, such as computer hackings, viruses, or other destructive or disruptive software, process breakdowns or malicious or other activities and natural or other disasters could result in a disruption of its services and operations or improper disclosure of personal data or confidential information, and consequently could damage the Group’s reputation and require it to expend resources to remedy any such breaches.

Furthermore, the Group uses various types of transmitter facilities to transmit its broadcasts to viewers. Since 2007, the Group has made substantial investment to build up the DTT network comprising a total of 29 transmission stations. Each of the Group’s television channels uses studio and transmitter facilities that are subject to damage or destruction. Failure to restore such facilities in a timely manner, and in particular, failure to repair any disruption or restore any damaged equipment at the Group’s transmitting stations, could have a material adverse effect on its reputation and ability to meet customers’,viewers’, subscribers’ and advertisers’ demands.

The occurrence of any of the above network or information systems-related events, security breaches or natural or other disasters could have a material adverse effect on the Group’s business, financial condition and results of operations.

The Group may not be successful in its efforts to grow and further monetise its digital media platforms.

The Group currently monetises its digital media platforms in several ways, including advertisements on its internet platform and mobile applications, as well as subscription and advertising revenue from its myTV SUPER OTT and mobile application. These platforms currently generate revenue for the Group. However, if:

• these platforms fail to continue to grow or maintain their user base and existing engagement levels; or

• if the Group fails to continue to introduce new services that attract and engage new users; or

• advertisers reduce their advertising on the Group’s internet platform or mobile applications; or

18 • the Group fails to maintain good relationships with advertisers or attract new advertisers, the Group’s business, financial condition and results of operations could be materially and adversely affected.

User growth and engagement on mobile devices and on the Group’s internet platform depend upon effective operation with mobile operating systems, networks and standards.

The Group is dependent on the interoperability of its mobile applications and internet platform with popular mobile and desktop operating systems that the Group does not control, such as Android, iOS, Windows and OSX. Any changes in such systems that negatively impact its products’ functionality or give preferential treatment to competitive products, websites or platforms could adversely affect usage of the Group’s mobile products and visitor traffic on its internet platform. There is no guarantee that popular mobile devices and/or desktop operating systems will continue to support the Group’s mobile applications and/or internet platform, or that mobile device and desktop computer users will continue to use the Group’s mobile applications and/or access its internet platform more frequently than competing websites and platforms.

In addition, in order to deliver high quality products and websites, it is important that the Group’s products and websites are compatible with a range of technologies, systems, networks and standards that the Group does not control. The Group may not be successful in maintaining existing relationships or developing new relationships with key participants in the mobile and computer industry or in developing products that operate effectively with these technologies, systems, networks, or standards. In the event that it is more difficult for users to access and use the Group’s mobile applications and internet platform on their mobile or desktop devices, or if users choose not to access or use the Group’s mobile applications or visit its internet platform on their mobile or desktop devices or use mobile or other products that do not offer access to its mobile applications and/or internet platform, the Group’suser growth and user engagement may decline. This could in turn impact the Group’s advertising and subscription generated revenue. The occurrence of such events could materially and adversely affect the Group’s business, financial condition and results of operations.

The Group’s new technology-based products and services, and changes to existing technology- based products and services, could fail to attract or retain customers or generate revenue.

The Group’s ability to retain, increase and engage its user, subscriber and viewer base and to increase its revenue will depend heavily on its ability to create successful new technology-based products, both independently and in conjunction with third parties. The Group may introduce significant changes to its existing products or develop and introduce new products, including using technologies with which the Group has little or no prior development or operating experience. If new or enhanced products fail to engage users, viewers, subscribers or advertisers, the Group may fail to attract or retain users, subscribers and/or viewers or to generate sufficient value to justify its investments, and the Group’s business may be materially and adversely affected. If the Group is not successful in new approaches to monetisation, it may not be able to maintain or grow its revenue as anticipated or recover any associated development costs, and the Group’s business, financial condition and results of operations could be materially and adversely affected.

The Group’s operating results are subject to seasonal variations and other factors.

The Group’s business has experienced, and is expected to continue to experience, seasonality due to, among other things, seasonal advertising patterns and seasonal influences on people’sviewingand reading habits. In addition, revenue generated from advertising on the Group’s television channels is

19 subject to cyclical advertising patterns and changes in viewership levels. Such advertising revenue is generally higher in the fourth quarter of each year, due in part to increases in consumer advertising in the period leading up to and including the holiday season and the Group’s anniversary specials. The Group’s revenue from advertising on its television channels and operating costs and expenses are also cyclical as a result of its periodic broadcasts of special events such as the Olympics, the World Cup and popular drama serials. Although the Group has implemented measures to address both the seasonal fluctuations of its businesses and the cyclical fluctuations resulting from the occurrence of certain special events, comparisons of results of operations between different periods within a single financial year may not be meaningful and should not be relied upon as indicators of the Group’s performance.

The loss of key personnel as well as other entertainment personalities retained by the Group’s content suppliers could disrupt its business operations and materially and adversely affect its revenue.

The Group’s business depends upon the continued efforts, abilities and expertise of key employees. The unique combination of skills and experience of its executive officers and senior management may be difficult to replace, and the loss of its executive officers and senior management could have a material adverse effect on the Group, including its ability to execute the Group’s business strategy.

In addition, programmes produced by the Group often employ notable entertainment personalities with certain loyal audiences and key creative personnel whose contribution are vital to the content of programmes. Entertainment personalities and creative personnel, including highly regarded directors, actors and other talent, can be material factors that impact the rating of programmes and which influences the ability of the Group to sell advertising. There can be no assurance that these entertainment personalities and creative personnel will remain with the Group. If the Group fails to retain existing, or attract new, entertainment personalities and creative personnel, or if such entertainment personalities cannot maintain their existing audiences, the Group’s business, financial condition and results of operation could be materially and adversely affected.

Labour disputes or other disputes involving members of the Group may harm its reputation and divert its resources.

The Group engages the services of different types of employees across its businesses. If the Group is unable to renew expiring agreements with such individuals, or if such individuals feel that they are not being compensated adequately, it is possible that such individuals could take action in the form of strikes or work stoppages or make statements to the public which could harm the Group’s reputation and/or otherwise affect its business operations.

In addition, certain actions and disputes involving former members of the Group with regard to the treatment and remuneration of employees has, in the past, brought into question the Group’s and its management and employment practices. Although such individuals might have resigned from their positions and the Group has complied, and will continue to comply, with applicable labour and employment laws in Hong Kong, there can be no guarantee that claims against the Group or its management by former, current or future employees or others will not be made in the future. Such alleged claims or actions could divert the Group’s management’s attention and its resources, which could adversely affect the Group’s business. In addition, any labour related disputes could negatively impact the Group’s reputation or result in increased expenses to the Group in order to retain certain key employees. The occurrence of any of the above could have an adverse effect on the Group’s business, financial condition and results of operations.

20 The success of the Group’s investments in the movie industry will depend on the commercial success of the movies produced, which is unpredictable The Group engages in movie production and investment through its associated company, Shaw Brothers Holdings Limited and an investment company, Flagship Entertainment Group. Going forward the Group plans to mobilise its production and talent resources in conjunction with its investments in Shaw Brothers Holdings Limited and the Flagship Entertainment Group to further participate in the Chinese movie sector. Operating in the movie industry involves a substantial degree of risk. Movie production involves significant up front costs which may not be recovered with the public release of the movie. As with television programme content, each movie is an individual artistic work, and unpredictable audience reactions primarily determine commercial success. Generally, the popularity of the movies produced in conjunction with our associated companies depends on many factors, including the critical acclaim they receive, the format of their initial release, for example, theatrical or direct-to-video, the actors and other key talent, their genre and their specific subject matter. The commercial success also depends upon the quality and acceptance of movies that our competitors release into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which may change. The future effects of these factors cannot be predicted with certainty and any of these factors could have a material adverse effect on the value of our investments.

In addition, given a movie’s performance in ancillary markets, such as home video and pay and free television, is often directly related to its box office performance or television ratings, poor box office results or poor television ratings may negatively affect future revenue streams.. There can be no assurance that the movies in which we or our associated companies are involved will obtain favourable reviews or ratings or that such movies will perform well at the box office or in ancillary markets The failure to achieve any of the foregoing could have a material adverse effect on the value of our investments and in turn on the Group’s business, financial condition and results of operations.

OTHER REGULATORY RISKS

The Group’s operations are subject to a range of laws and regulations.

The FTA television broadcasting and distribution industry in Hong Kong is highly regulated and governed by many ordinances, including the Broadcasting Ordinance, the Telecommunications Ordinance (Cap. 106 of the laws of Hong Kong) and the Communications Authority Ordinance (Cap. 616 of the laws of Hong Kong). These ordinances are enforced and administered by various entities, including the Communications Authority. Such laws and ordinances govern numerous aspects of the Group’s broadcasting business. For example, the Group must comply with extensive regulations and policies with regard to the ownership and operation of its television channels, the content broadcast on its channels, as well as indirect advertising, such as product placement and product integration.

The Hong Kong government may review or modify any of these laws, regulations or ordinances in the future. The timing or outcome of any review or modifications to existing laws, regulations or ordinances as well as the impact of such reviews or modifications on the Group’s broadcasting properties, cannot be predicted. Such changes could affect media ownership and other laws and regulations which could impact the competitive landscape in ways that could increase the competition faced by the Group. In addition, advertising rules could be modified in such a way that the Group’s means of delivering advertising messages, together with the permitted amount of time for such advertising, may be adversely affected, which in turn could impact its advertising revenue. Changes in or new interpretations of laws

21 and regulations governing the internet, including those affecting data privacy, may also have an adverse impact on the Group’s internet platform and the revenue generated from advertising and subscription services on its various websites and mobile applications.

While the Group has made and continues to make significant effort to comply with all existing laws and regulations and to adapt to any changes in such laws or regulations (or their interpretation), the Group cannot guarantee that any future review or modification or change in interpretation will not impact the Group. Any impact resulting from such changes in the structure and regulation of the industries in which the Group operates in Hong Kong and elsewhere could materially and adversely affect its business, financial condition and results of operations.

Enforcement or enhancement of indecency and other programme content rules against the television broadcasting industry in Hong Kong could have a material adverse effect on the Group’s business, financial condition and results of operations.

The content of the programmes broadcast on the Group’s television channels is governed by a code of practice issued by the Communications Authority pursuant to the Broadcasting Ordinance. Such laws prohibit the broadcast of obscene material and indecent or profane material on free television channels in Hong Kong. The determination of whether content is indecent is inherently subjective and, as such, it can be difficult to predict whether particular content could violate indecency standards. The difficulty in predicting whether individual programmes, words or phrases may violate the code of practice enforced by the Communications Authority adds significant uncertainty to the Group’s ability to comply with the rules. Violation of the indecency rules could have significant legal and reputational consequences.

In addition, there may be efforts from within the countries in which the Group operates to increase enforcement of, or otherwise expand, existing indecency laws and regulations. Any successful increase in enforcement or any expansion of such laws and regulations could result in the Group being subject to additional laws and regulation. This may also require the Group to alter the content it produces and airs and impact its subscription and viewership levels, which could materially and adversely affect the Group’s business, financial condition and results of operations.

Restrictions on product placement and other forms of indirect advertising are inherently subjective.

The Group is subject to the guidelines promulgated by the Communications Authority. Such guidelines include limitations and restrictions on product placement and other forms of indirect advertising. The Communications Authority has stated that no undue prominence may be given in any programme to a product, service, trademark, brand name or logo of a commercial nature or a person identified with the above so that the effect of such reference amounts to advertising. They have also stated that any such references must be limited to what can clearly be justified by the editorial requirements of the programme itself, or of an incidental nature. Determining whether or not product placement or indirect advertising satisfies such conditions is inherently subjective. As a result, there can be no assurance that the programmes broadcast on the Group’s channels will comply with such restrictions. Any broadcasting on the Group’s part of programmes deemed to be in violation of such restrictions and limitations could have adverse financial and regulatory consequences, and in turn could materially and adversely affect the Group’s business, financial condition and results of operations.

22 RISKS RELATING TO CONDUCTING BUSINESS IN HONG KONG

Macroeconomic conditions in Hong Kong and throughout the world may materially and adversely affect the Group’s business and customers.

The Group is generally affected by conditions in the global financial markets and the macroeconomic environments of Hong Kong and elsewhere in the world. Downturns in these markets lead to reduced advertising revenue and lower consumer spending for the Group’s subscription services and publications, particularly where customers (including advertisers, subscribers, licensees and other consumers of the Group’s content offerings and services) reduce their demand for the Group’sproductsandservices.The Group is unable to predict the onset, duration or severity of weakened economic conditions in Hong Kong and elsewhere in the world. Any such downturns or conditions could materially and adversely impact the Group’s business, financial condition and results of operations.

The Group’s business, financial condition and results of operations may be materially and adversely affected by a recurrence of SARS, bird flu, swine flu or other similar outbreaks including a possible outbreak of Ebola or Zika virus in Hong Kong, the PRC or certain other countries.

There were media reports in 2009 regarding an outbreak of the influenza A/H1N1 virus or ‘‘swine flu’’ in the USA, Mexico and other countries. On 11 June 2009 the World Health Organisation raised its global pandemic alert to phase 6 after considering data confirming the outbreak. The occurrence or reoccurrence of a swine flu or other outbreak (such as any recurrence of Severe Acute Respiratory Syndrome (SARS), Ebola, Zika virus, influenza A(H1N1) and avian flu (including H5N1 and H7N9)) in Hong Kong, the PRC or elsewhere in the world, may result in material disruptions to the Group and its advertisers’ operations, and could significantly disrupt its business and operations or cause a material economic downturn. Any such disruption or economic downturn could lead to reduced advertising revenue and therefore materially and adversely affect the Group’s business, financial condition and results of operations.

RISKS RELATING TO THE NOTES

The Notes may not be a suitable investment for all investors. Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

• have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Offering Circular;

• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio;

• have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes;

• understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and

23 • be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor’s overall investment portfolio.

Additionally, the investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent:

• the Notes are legal investments for it;

• the Notes can be used as collateral for various types of borrowing; and

• other restrictions apply to its purchase of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.

The Trustee may request the holders of the Notes to provide an indemnity and/or security and/or prefunding to its satisfaction. In certain circumstances, including without limitation the giving of notice to the Issuer pursuant to Condition 9 of the Terms and Conditions of the Notes and the taking of enforcement steps pursuant to Condition 13 of the Terms and Conditions of the Notes, the Trustee may, at its sole discretion, request the holders of the Notes to provide an indemnity and/or security and/or pre-funding to its satisfaction before it takes actions on behalf of the holders of the Notes. The Trustee shall not be obliged to take any such actions if not indemnified and/or secured and/or pre-funded to its satisfaction. Negotiating and agreeing to an indemnity and/or security and/or pre-funding can be a lengthy process and may impact on when such actions can be taken. The Trustee may not be able to take actions, notwithstanding the provision of an indemnity or security or pre-funding to it, in breach of the terms of the Trust Deed and in such circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by the agreements and the applicable law, it will be for the holders of the Notes to take such actions directly.

Modifications and waivers may be made in respect of the Terms and Conditions of the Notes and the Trust Deed by the Trustee or less than all of the holders of the Notes.

The Trust Deed contains provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including those Noteholders who did not attend and vote at the relevant meeting and those Noteholders who voted in a manner contrary to the majority.

The Terms and Conditions of the Notes also provide that the Trustee may, without the consent of Noteholders, agree to any modification of the Trust Deed, the Terms and Conditions of the Notes and/or the Agency Agreement which in the opinion of the Trustee will not be materially prejudicial to the interests of Noteholders and to any modification of the Trust Deed, the Terms and Conditions and/or the Agency Agreement of the Notes which in the opinion of the Trustee is of a formal, minor or technical nature or is to correct a manifest error or is to comply with any mandatory provision of law.

24 In addition, the Trustee may, without the consent of the Noteholders, authorise or waive any proposed breach or breach of the Trust Deed, the Terms and Conditions of the Notes and/or the Agency Agreement (other than a proposed breach, or a breach relating to the subject of certain reserved matters) if, in the opinion of the Trustee, the interests of the Noteholders will not be materially prejudiced thereby.

A trading market for the Notes may not develop. No public market exists for the Notes. Application will be made to the Hong Kong Stock Exchange for the listing of the Notes on the Hong Kong Stock Exchange; however, the offering and settlement of the Notes is not conditioned on obtaining a listing. No assurances can be given as to whether the Notes will be, or will remain, listed on the Hong Kong Stock Exchange or whether a trading market for the Notes will develop or as to the liquidity of any such trading market. If the Notes fail to or cease to be listed on the Hong Kong Stock Exchange, certain investors may not invest in, or continue to hold or invest in, the Notes. If any of the Notes are traded after their initial issue, they may trade at a discount or premium from their initial offering price, depending on prevailing interest rates, the market for similar securities and the market for the Notes and other factors, including general economic conditions and the Group’s financial condition, performance and prospects. No assurance can be given as to the future price level of the Notes after their initial issue.

The Notes may be sold to a limited number of investors and liquidity of the Notes may be adversely affected if a significant portion of the Notes are bought by limited investors.

Insolvency laws of the Cayman Islands may differ from the insolvency laws of other jurisdictions with which holders of the Notes are familiar. The insolvency laws of the Cayman Islands and other local insolvency laws may differ from the insolvency laws of other jurisdictions with which the holders of the Notes are familiar. Since the Issuer is incorporated under the laws of the Cayman Islands, any insolvency proceedings relating to the Issuer, regardless of where they were brought, would likely involve Cayman Islands insolvency laws, the procedural and substantive provisions of which may differ from comparable provisions of insolvency laws in other jurisdictions. In addition, the Guarantor is incorporated in Hong Kong and the insolvency laws of Hong Kong may also differ from the laws of other jurisdictions with which the holders of the Notes are familiar.

Claims by holders of the Notes are structurally subordinated to the Guarantor’s subsidiaries. The Issuer is a special purpose vehicle and its ability to make payments in respect of the Notes depends largely upon the repayment of principal and interest by other members of the Group; the ability of the Guarantor to make payments under the Guarantee depends largely upon the receipt of dividends and distributions, interest payments or advances from its subsidiaries and associates. The ability of the members of the Group to make such repayments to the Issuer or to pay such amounts to the Guarantor may be subject to the profitability of the Group and applicable laws. Payments by other members of the Group to the Issuer are structurally subordinated to all existing and future liabilities and obligations of the Guarantor’s subsidiaries. Claims of creditors of such subsidiaries will have priority as to the assets of such subsidiaries over the Guarantor and their creditors, including the Issuer.

25 TERMS AND CONDITIONS OF THE NOTES

The following other than the words in italics is the text of the terms and conditions of the Notes which will appear on the reverse of each of the definitive certificates evidencing the Notes:

TheissueoftheU.S.$[•][•] per cent. Guaranteed Notes due 2021 (the ‘‘Notes’’, which expression includes any further notes issued pursuant to Condition 15 and forming a single series therewith) was authorised by a resolution of the Board of Directors of TVB Finance Limited (the ‘‘Issuer’’) dated 22 September 2016 and the guarantee of the Notes was authorised by a resolution of the Board of Directors of Television Broadcasts Limited (the ‘‘Guarantor’’) dated 22 September 2016. The Notes are constituted by a trust deed dated [CLOSING DATE] 2016 between the Issuer, the Guarantor and The Hongkong and Shanghai Banking Corporation Limited (the ‘‘Trustee’’ which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Notes (the ‘‘Trust Deed’’). These terms and conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Notes. The Notes are the subject of an agency agreement dated [CLOSING DATE] 2016 relating to the Notes between the Issuer, the Guarantor, the Trustee and The Hongkong and Shanghai Banking Corporation Limited as the registrar (the ‘‘Registrar’’), as the initial principal paying agent (the ‘‘Principal Paying Agent’’) and as transfer agent (the ‘‘Transfer Agent’’) and any other agents named in it (the ‘‘Agency Agreement’’).

Copies of the Trust Deed and the Agency Agreement are available for inspection during usual business hours at the principal office of the Trustee (which at the date of issue of the Notes is at Level 30, HSBC Main Building, 1 Queen’s Road Central, Hong Kong) and at the specified office of the Principal Paying Agent. ‘‘Agents’’ means the Principal Paying Agent, the Registrar, the Transfer Agent and any other agent or agents appointed from time to time with respect to the Notes. The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those applicable to them of the Agency Agreement.

All capitalised terms that are not defined in these terms and conditions (the ‘‘Conditions’’) will have the meanings given to them in the Trust Deed.

1 Form, Specified Denomination and Title The Notes are issued in the specified denomination of U.S.$200,000 and higher integral multiples of U.S.$1,000.

The Notes are represented by registered certificates (‘‘Certificates’’) and, save as provided in Condition 2(a), each Certificate shall represent the entire holding of Notes by the same holder.

Title to the Notes shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the ‘‘Register’’). Except as ordered by a court of competent jurisdiction or as required by law, the holder (as defined below) of any Note shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on the Certificate representing it or the theft or loss of such Certificate and no person shall be liable for so treating the holder.

In these Conditions, ‘‘Noteholder’’ and ‘‘holder’’ means the person in whose name a Note is registered.

26 Upon issue, the Notes will be represented by a global certificate (the ‘‘Global Certificate’’) registered in the name of a nominee of, and deposited with, a common depositary for Euroclear Bank SA/NV and Clearstream Banking S.A. (the ‘‘Clearing System’’). The Conditions are modified by certain provisions contained in the Global Certificate. See ‘‘Summary of Provisions Relating to the Notes in Global Form’’.

Except in the limited circumstances described in the Global Certificate, owners of interests in Notes represented by the Global Certificate will not be entitled to receive definitive Certificates in respect of their individual holdings of Notes. The Notes are not issuable in bearer form.

2 Transfers of Notes (a) Transfer: A holding of Notes may, subject to Condition 2(e), be transferred in whole or in part upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate(s) representing such Notes to be transferred, together with the form of transfer endorsed on such Certificate(s) (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer), duly completed and executed and any other evidence as the Registrar or the Transfer Agent may require. In the case of a transfer of part only of a holding of Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. In the case of a transfer of Notes to a person who is already a holder of Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. All transfers of Notes and entries on the Register will be made in accordance with the detailed regulations concerning transfers of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee, and by the Registrar, with the prior written approval of the Trustee. A copy of the current regulations will be made available by the Registrar to any Noteholder upon request.

Transfers of interests in the Notes evidenced by the Global Certificate will be effected in accordance with the rules of the relevant Clearing Systems.

(b) Exercise of Options in Respect of Notes: In the case of an exercise of an Issuer’sor Noteholders’ option in respect of a holding of Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent.

(c) Delivery of New Certificates: Each new Certificate to be issued pursuant to Conditions 2(a) or 2(b) shall be available for delivery within five business days of receipt of a duly completed form of transfer and surrender of the existing Certificate(s). Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent or the Registrar (as the case may be) the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 2(c), ‘‘business day’’

27 means a day, other than a Saturday or Sunday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be).

(d) Transfer or Exercise Free of Charge: Certificates, on transfer, or exercise of an option, shall be issued and registered without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require).

(e) Closed Periods: No Noteholder may require the transfer of a Note to be registered:

(i) during the period of 15 days ending on (and including) the due date for redemption of that Note;

(ii) after any such Note has been called for redemption; or

(iii) during the period of seven days ending on (and including) any Record Date.

3 Guarantee and Status (a) Guarantee: The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Trust Deed and the Notes. Its obligations in that respect (the ‘‘Guarantee’’) are contained in the Trust Deed. The obligations of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.

(b) Status: The Notes constitute direct, general, unconditional, unsubordinated and (subject to Condition 4) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4, at all times rank at least equally with all their respective other present and future unsecured and unsubordinated obligations.

4 Negative Pledge So long as any Note remains outstanding (as defined in the Trust Deed) neither the Issuer nor the Guarantor will, and will ensure that none of its Subsidiaries will, create, or have outstanding, any mortgage, charge, lien, pledge or other security interest, upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness or to secure any guarantee or indemnity in respect of any Relevant Indebtedness, without at the same time or prior thereto according to the Notes the same security as is created or subsisting to secure any such Relevant Indebtedness, guarantee or indemnity or such other security as either:

(a) the Trustee shall in its absolute discretion deem not materially less beneficial to the interest of the Noteholders; or

(b) shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders.

28 In this Condition 4:

‘‘Relevant Indebtedness’’ means any indebtedness which is in the form of, or represented or evidenced by, bonds, notes, debentures, loan stock or other securities which for the time being are, or are intended to be or capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market (which for the avoidance of doubt does not include bi-lateral loans, syndicated loans or club deal loans); and

‘‘Subsidiary’’ means any entity whose financial statements at any time are required by law or in accordance with generally accepted accounting principles to be fully consolidated with those of the Issuer or the Guarantor.

5 Interest The Notes bear interest on their outstanding principal amount from and including [CLOSING DATE]2016attherateof[•] per cent. per annum, payable semi-annually in arrear in equal instalments of U.S.$[•] per Calculation Amount (as defined below) on [•]and[•] in each year (each an ‘‘Interest Payment Date’’).

Each Note will cease to bear interest from the due date for redemption unless, upon surrender of the Certificate representing such Note, payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of:

(a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder; and

(b) the day seven days after the Trustee or the Principal Paying Agent has notified Noteholders of receipt of all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions).

If interest is required to be paid in respect of a Note on a date other than an Interest Payment Date, the relevant day-count fraction will be determined on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.

Interest in respect of any Note shall be calculated per U.S.$[•] in principal amount of the Notes (the ‘‘Calculation Amount’’). The amount of interest payable per Calculation Amount for any period shall be equal to the product of the rate of interest specified above, the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).

6 Redemption and Purchase (a) Final Redemption:

Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on [MATURITY DATE] 2021. The Notes may not be redeemed at the option of the Issuer other than in accordance with this Condition 6.

29 (b) Redemption for Taxation Reasons:

The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their principal amount, (together with interest accrued but unpaid to thedatefixedforredemption),if:

(i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that it (or, if the Guarantee were called, the Guarantor) has or will become obliged to pay Additional Tax Amounts as provided or referred to in Condition 8 as a result of any change in, or amendment to, the laws or regulations of the Cayman Islands (in the case of a payment by the Issuer) or Hong Kong (in the case of a payment by the Guarantor) or, in each case, any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after [SIGNING DATE] 2016; and

(ii) such obligation cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer (or the Guarantor, as the case may be) would be obliged to pay such Additional Tax Amounts were a payment in respect of the Notes (or the Guarantee, as the case may be) then due. Prior to the publication of any notice of redemption pursuant to this Condition 6(b), the Issuer shall deliver to the Trustee (A) a certificate signed by an Authorised Signatory of the Issuer (or of the Guarantor, as the case may be) stating that the obligation referred to in (i) above cannot be avoided by the Issuer (or the Guarantor, as the case may be) taking reasonable measures available to it and (B) an opinion of an independent legal or tax advisor of recognised standing that the Issuer (or the Guarantor, as the case may be) has or will become obliged to pay Additional Tax Amounts as a result of such change or amendment or any such change in the application or official interpretation (as the case may be) and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above, in which event the same shall be conclusive and binding on the Noteholders.

(c) Purchase: The Issuer and the Guarantor and their respective Subsidiaries (as defined in Condition 4) may at any time purchase Notes in the open market or otherwise at any price. The Notes so purchased may be resold at any time but, while held by or on behalf of the Issuer, the Guarantor or any such Subsidiary, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of, among other things, calculating quorums at meetings of the Noteholders or for the purposes of Condition 12(a).

(d) Cancellation: All Certificates representing Notes purchased by or on behalf of the Issuer, the Guarantor or any of their respective Subsidiaries may, at the discretion of the Issuer, the Guarantor or such Subsidiary (as the case may be) be surrendered for cancellation to the Registrar and, if so surrendered, all such Notes shall be cancelled forthwith. Any Certificates so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer in respect of any such Notes shall be discharged.

30 7Payments (a) Method of Payment:

(i) Payments of principal shall be made (subject to surrender of the relevant Certificates at the specified office of any Transfer Agent or of the Registrar if no further payment falls to be made in respect of the Notes represented by such Certificates) in the manner provided in Condition 7(a)(ii) below.

(ii) Interest on each Note shall be paid to the person shown on the Register at the close of business on the Clearing System Business Day before the due date for payment thereof (the ‘‘Record Date’’). Payments of interest on each Note shall be made in U.S. dollars by cheque drawn on a bank and mailed to the holder (or to the first named of joint holders) of such Note at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a bank.

So long as the Global Certificate is held on behalf of Euroclear and Clearstream or any other clearing system, each payment in respect of the Global Certificate will be made to the person shown as the holder in the Register at the close of business of the relevant clearing system on the Clearing System Business Day before the due date for such payments, where ‘‘Clearing System Business Day’’ means a weekday (Monday to Friday, inclusive) except 25 December and 1 January.

(iii) If the amount of principal being paid upon surrender of the relevant Certificate is less than the outstanding principal amount of such Certificate, the Registrar will annotate the Register with the amount of principal so paid and will (if so requested by the Issuer or a Noteholder) issue a new Certificate with a principal amount equal to the remaining unpaid outstanding principal amount. If the amount of interest being paid is less than the amount then due, the Registrar will annotate the Register with the amount of interest so paid.

(b) Payments subject to Fiscal Laws: All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives in the place of payment.

(c) Payment Initiation: Where payment is to be made by transfer to an account in U.S. dollars, payment instructions (for value the due date, or if that is not a Payment Business Day, for value the first following day which is a Payment Business Day) will be initiated on the due date for payment (or, if that date is not a Payment Business Day, on the first following day which is a Payment Business Day) or, in the case of payments of principal where the relevant Certificate has not been surrendered at the specified office of any Transfer Agent or of the Registrar, on a Payment Business Day on which the Principal Paying Agent is open for business and on which the relevant Certificate is surrendered.

(d) AppointmentofAgents:The Principal Paying Agent, the Registrar, and the Transfer Agent initially appointed by the Issuer and their respective specified offices are listed below. The Principal Paying Agent, the Registrar, and the Transfer Agent act solely as agents of the Issueranddonotassumeanyobligationorrelationshipofagencyortrustfororwithany Noteholder. The Issuer reserves the right at any time with the approval of the Trustee to vary

31 or terminate the appointment of the Principal Paying Agent, the Registrar, or any Transfer Agent and to appoint additional or other Transfer Agents, provided that the Issuer shall at all times maintain:

(i) a Principal Paying Agent;

(ii) a Registrar with a specified office outside the United Kingdom;

(iii) a Transfer Agent; and

(iv) such other agents as may be required by any other stock exchange on which the Notes may be listed,

in each case, as approved by the Trustee.

Notice of any such change or any change of any specified office shall promptly be given to the Noteholders.

(e) Delay in Payment: Noteholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due on a Note if the due date is not a Payment Business Day, if the Noteholder is late in surrendering or cannot surrender its Certificate (if required to do so) or if a cheque mailed in accordance with Condition 7(a)(ii) arrives after the due date for payment.

(f) Non-Payment Business Days: If any date for payment in respect of any Note is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this Condition 7, ‘‘Payment Business Day’’ means a day (other than a Saturday or Sunday) on which banks and foreign exchange markets are open for business in the place in which the specified office of the Registrar is located and where payment is to be made by transfer to an account maintained with a bank in the relevant currency, on which foreign exchange transactions may be carried on in the relevant currency in the principal financial centre of the country of such currency.

8 Taxation All payments of principal and interest by or on behalf of the Issuer or the Guarantor in respect of the Notes or under the Guarantee shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Cayman Islands (in the case of the Issuer) or Hong Kong (in the case of the Guarantor) or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In such event, the Issuer or, as the case may be, the Guarantor shall pay such additional amounts (‘‘Additional Tax Amounts’’) as will result in receipt by the Noteholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no Additional Tax Amounts shall be payable in respect of any Note:

(a) Other connection: to a holder (or to a third party on behalf of a holder) who is liable to such taxes, duties, assessments or governmental charges in respect of such Note by reason of his having some connection with the Cayman Islands or, in the case of payments made by the Guarantor, Hong Kong, other than the mere holding of the Note; or

32 (b) Surrender more than 30 days after the Relevant Date: in respect of which the Certificate representing it is presented for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such Additional Tax Amounts on surrendering the Certificate representing such Note for payment on the last day of such period of 30 days.

In this Condition 8, ‘‘Relevant Date’’ in respect of any Note means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Noteholders that, upon further surrender of the Certificate representing such Note being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon such surrender.

Neither the Trustee nor any Agent shall be responsible for paying any tax, duty, charges, withholding or other payment referred to in this Condition 8 or for determining whether such amounts are payable or the amount thereof, and none of them shall be responsible or liable for any failure by the Issuer, the Guarantor, any Noteholder or any third party to:

(i) pay such tax, duty, charges, withholding or other payment in any jurisdiction; or

(ii) provide any notice or information to the Trustee or any Agent that would permit, enable or facilitate the payment of any principal, premium (if any), interest or other amount under or in respect of the Notes without deduction or withholding for or on account of any tax, duty, charge, withholding or other payment imposed by or in any jurisdiction.

9 Events of Default If any of the following events (‘‘Events of Default’’) occurs and is continuing the Trustee at its discretion may, and if so requested by holders of at least 25 per cent. in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (provided in any such case that the Trustee shall have been indemnified and/or secured and/or pre-funded to its satisfaction), give notice to the Issuer that the Notes are, and they shall immediately become, due and payable at 100 per cent. of their principal amount together (if applicable) with accrued interest:

(a) Non-Payment: the Issuer and the Guarantor each fail to pay the principal of or any interest on any of the Notes when due and, in the case of interest, such failure continues for a period of 3 business days; or

(b) Breach of Other Obligations: the Issuer or the Guarantor does not perform or comply with any one or more of its other obligations under the Notes or the Trust Deed or under the Guarantee, which default is in the opinion of the Trustee incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not remedied within 45 days after notice of such default shall have been given to the Issuer or the Guarantor by the Trustee; or

(i) any other present or future indebtedness of the Issuer or the Guarantor or any of their respective Subsidiaries (as defined in Condition 4) for or in respect of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described); or

33 (ii) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period; or

(iii) the Issuer or the Guarantor or any of their respective Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised,

provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 9(c) have occurred equals or exceeds U.S.$10,000,000 or its equivalent; or

(d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out on or against a substantial part of the property, assets or revenues of the Issuer or the Guarantor or any Principal Subsidiary and is not discharged or stayed within 45 days; or

(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Issuer or the Guarantor or any Principal Subsidiary becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person); or

(f) Insolvency: the Issuer or the Guarantor or Principal Subsidiary is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of all or a material part of (or of a particular type of) its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any part of (or of a particular type of) the debts of the Issuer, the Guarantor or any Principal Subsidiary; or

(g) Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution of the Issuer or the Guarantor or any Principal Subsidiary, or the Issuer or the Guarantor ceases or threatens to cease to carry on all or substantially all of its business or operations, except:

(i) where, in the case of a Principal Subsidiary, such cessation or threat to cease to carry on all or substantially all of its business or operations is not reasonably expected to have a material adverse effect on the Issuer, the Guarantor or their ability to perform their respective obligations under the Notes and the Trust Deed; or

(ii) for a solvent winding up of a Principal Subsidiary; or

(iii) for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation:

(A)ontermsapprovedbytheTrusteeactingonanExtraordinaryResolutionofthe Noteholders; or

(B) in the case of a Principal Subsidiary, whereby the undertaking and assets of the Principal Subsidiary are transferred to or otherwise vested in the Issuer or the Guarantor (as the case may be) or another of their respective Subsidiaries; or

34 (h) Ownership: the Issuer ceases to be wholly-owned and controlled by the Guarantor; or

(i) Illegality: it is or will become unlawful for the Issuer or the Guarantor to perform or comply with any one or more of its obligations under any of the Notes or the Trust Deed; or

(j) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of Conditions 9(a) to 9(i) (both inclusive); or

(k) Guarantee: the Guarantee is not (or is claimed by the Guarantor not to be) in full force and effect.

In this Condition 9, ‘‘Principal Subsidiary’’ means any Subsidiary of the Guarantor from time to time:

(I) whose revenue or (in the case of a Subsidiary which itself has Subsidiaries) consolidated revenue, as shown by its latest audited income statement are at least 5 per cent. of the consolidated revenue as shown by the latest audited consolidated income statement of the Guarantor and its Subsidiaries; or

(II) whose gross profit or (in the case of a Subsidiary which itself has Subsidiaries) consolidated gross profit, as shown by its latest audited income statement are at least 5 per cent. of the consolidated gross profit as shown by the latest audited consolidated income statement of the Guarantor and its Subsidiaries including, for the avoidance of doubt, the Guarantor and its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of jointly controlled entities and after adjustments for minority interests; or

(III) whose gross assets or (in the case of a Subsidiary which itself has Subsidiaries) consolidated gross assets, as shown by its latest audited balance sheet are at least 5 per cent. of the amount which equals the amount included in the consolidated gross assets of the Guarantor and its Subsidiaries as shown by the latest audited consolidated balance sheet of the Guarantor and its Subsidiaries including, for the avoidance of doubt, the investment of the Guarantor in each Subsidiary whose accounts are not consolidated with the consolidated audited accounts of the Issuer and after adjustment for minority interests; or

(IV) to which is transferred the whole or substantially the whole of the assets of a Subsidiary which immediately prior to such transfer was a Principal Subsidiary, provided that the Principal Subsidiary which so transfers its assets shall forthwith upon such transfer cease to be a Principal Subsidiary and the Subsidiary to which the assets are so transferred shall become a Principal Subsidiary at the date on which the first available audited accounts (consolidated, if appropriate) of the Guarantor prepared as of a date later than such transfer are issued, unless such Subsidiary would continue to be a Principal Subsidiary on the basis of such accounts by virtue of the provisions of paragraphs (I), (II) or (III) above of this definition,

35 provided that, in relation to paragraphs (I), (II) or (III) above of this definition:

(1) in the case of a corporation or other business entity becoming a Subsidiary after the end of the financial period to which the latest consolidated audited accounts of the Guarantor relate, the reference to the then latest consolidated audited accounts of the Guarantor for the purposes of the calculation above shall, until consolidated audited accounts of the Guarantor for the financial period in which the relevant corporation or other business entity becomes a Subsidiary are issued be deemed to be a reference to the then latest consolidated audited accounts of the Guarantor adjusted to consolidate the latest audited accounts (consolidated in the case of a Subsidiary which itself has Subsidiaries) of such Subsidiary in such accounts;

(2) if at any relevant time in relation to the Guarantor or any Subsidiary which itself has Subsidiaries no consolidated accounts are prepared and audited, revenue, gross profit or gross assets of the Guarantor and/or any such Subsidiary shall be determined on the basis of pro forma consolidated accounts prepared for this purpose by the Issuer; and

(3) if at any relevant time in relation to any Subsidiary, no accounts are audited, its revenue, gross profit or gross assets (consolidated, if appropriate) shall be determined on the basis of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiary prepared for this purpose by the Issuer.

A certificate signed by an Authorised Signatory of the Guarantor stating that, in his/her opinion, a Subsidiary is or is not, or was or was not, a Principal Subsidiary shall, in the absence of manifest error, be conclusive and binding on all parties. The certificate shall, if there is a dispute as to whether any Subsidiary of the Guarantor is or is not a Principal Subsidiary be accompanied by a report by an internationally recognised firm of accountants addressed to the Guarantor as to proper extraction of the figures used by the Guarantor in determining the Principal Subsidiaries of the Guarantor and mathematical accuracy of the calculation.

The Trustee and the Agents shall not be required to take any steps to ascertain whether an Event of Default or any event or circumstance which could, with the giving of notice, lapse of time, the issuing of a certificate and/or fulfilment of any other requirement provided for in Condition 9 become an Event of Default has occurred and shall not be responsible or liable to the Noteholders, the Issuer, the Guarantor or any other person for any loss arising from any failure to do so.

10 Prescription Claims against the Issuer for payment in respect of the Notes shall be prescribed and become void unless made within 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.

11 Replacement of Certificates If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations or other relevant regulatory authority regulations, at the specified office of the Registrar or such other Transfer Agent as may from time to time be designated by the Issuer for that purpose and notice of whose designation is given to Noteholders, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in light of prevailing market practice). Mutilated or defaced Certificates must be surrendered before replacements will be issued.

36 12 Meetings of Noteholders, Modification, Waiver and Substitution (a) Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of Noteholders to consider matters affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by the Trustee if requested in writing by Noteholders holding not less than 10 per cent. in principal amount of the Notes for the time being outstanding and subject to the Trustee being indemnified and/or secured and/or pre-funded to its satisfaction against all costs and expense. The quorum for any meeting convened to consider an Extraordinary Resolution will be two or more persons holding or representing more than 50 per cent. in aggregate principal amount of the Notes for the time being outstanding, or at any adjourned meeting two or more persons being or representing Noteholders whatever the principal amount of the Notes held or represented, unless the business of such meeting includes consideration of proposals, inter alia:

(i) to modify the maturity of the Notes or the dates on which interest is payable in respect of the Notes;

(ii) to reduce or cancel the principal amount of, or interest on, the Notes;

(iii) to change the currency of payment of the Notes;

(iv) to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass an Extraordinary Resolution; or

(v) to modify or cancel the Guarantee,

in which case the necessary quorum will be two or more persons holding or representing not less than 75 per cent., or at any adjourned meeting not less than 25 per cent., in principal amount of the Notes for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Noteholders (whether or not they were present at the meeting at which such resolution was passed).

The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of not less than 90 per cent. in principal amount of the Notes for the time being outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders.

(b) Modification of the Trust Deed: The Trustee may (but shall not be obliged to) agree, without the consent of the Noteholders, to:

(i) any modification of any of these Conditions or any of the provisions of the Trust Deed, that is in the opinion of the Trustee of a formal, minor or technical nature or is made to correct a manifest error or to comply with any mandatory provision of law; and

(ii) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of these Conditions or any of the provisions of the Trust Deed that is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders.

37 Any such modification, authorisation or waiver shall be binding on the Noteholders and, unless the Trustee otherwise agrees, such modification shall be notified by the Issuer to the Noteholders as soon as practicable.

(c) Substitution: The Trust Deed contains provisions permitting (but not obliging) the Trustee to agree, subject to such amendment of the Trust Deed and such other conditions as the Trustee may require, but without the consent of the Noteholders, to the substitution of any other company in place of the Issuer or the Guarantor, or of any previous substituted company, as principal debtor or guarantor under the Trust Deed and the Notes. In the case of such a substitution the Trustee may agree, without the consent of the Noteholders, to a change of the law governing the Notes and/or the Trust Deed provided that such change would not in the opinion of the Trustee be materially prejudicial to the interests of the Noteholders.

(d) Entitlement of the Trustee: In connection with the exercise of its functions, powers and discretions (including but not limited to those referred to in this Condition 12) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders and the Trustee shall not be entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer or the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders.

13 Enforcement At any time after the Notes become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed and the Notes and/or the Guarantee, but it need not take any such proceedings unless:

(a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholders holding at least 25 per cent. in principal amount of the Notes outstanding; and

(b) it shall have been indemnified and/or secured and/or pre-funded to its satisfaction.

No Noteholder may proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.

14 Indemnification of the Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer, the Guarantor and any entity related to the Issuer or the Guarantor without accounting for any profit.

The Trustee may rely without liability to Noteholders, the Issuer, the Guarantor or any other person on any report, confirmation, certificate or information from or on any advice or opinion of any legal counsel, accountants, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto entered into by the Trustee or any other person or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such report, confirmation, certificate, information, advice or opinion, in which event such report, confirmation, certificate, information, advice or opinion shall be binding on the Issuer, the Guarantor and the Noteholders.

38 Whenever the Trustee is required or entitled by the terms of the Trust Deed, the Agency Agreement or these Conditions to exercise any discretion or power, take any action, make any decision or give any direction, the Trustee is entitled, prior to exercising any such discretion or power, taking any such action, making any such decision or giving any such direction, to seek directions from the Noteholders by way of Extraordinary Resolution, and the Trustee shall not be responsible for any loss or liability incurred by the Issuer, the Guarantor, the Noteholders or any other person as a result of any delay in it exercising such discretion or power, taking such action, making such decision or giving such direction as a result of seeking such direction from the Noteholders or in the event that no direction is given to the Trustee by the Noteholders.

None of the Trustee or any of the Agents shall be responsible for the performance by the Issuer, the Guarantor or any other person appointed by the Issuer and/or the Guarantor in relation to the Notes of the duties and obligations on their part expressed in respect of the same and, unless it has written notice from the Issuer or the Guarantor to the contrary, the Trustee and each Agent shall be entitled to assume that the same are being duly performed. None of the Trustee or any Agent shall be liable to any Noteholder, the Issuer, the Guarantor or any other person for any action taken by the Trustee or such Agent in accordance with the instructions of the Noteholders. The Trustee shall be entitled to rely on any direction, request or resolution of Noteholders given by Noteholders holding the requisite principal amount of Notes outstanding or passed at a meeting of Noteholders convened and held in accordance with the Trust Deed. Neither the Trustee nor any of the Agents shall be under any obligation to ascertain whether any Event of Default or Potential Event of Default (as defined in the Trust Deed) has occurred or to monitor compliance by the Issuer or the Guarantor with the provisions of the Trust Deed, the Agency Agreement or these Conditions. Neither the Trustee nor any of the Agents shall be responsible for calculating or verifying the calculations of any amount payable under any notice of redemption and shall not be liable to the Noteholders or any other person for not doing so.

15 Further Issues The Issuer may from time to time without the consent of the Noteholders create and issue further notes having the benefit of a guarantee from the Guarantor and the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding Notes. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition 15 and forming a single series with the Notes. Any further securities forming a single series with the outstanding Notes constituted by the Trust Deed or any deed supplemental to it shall be constituted by a deed supplemental to the Trust Deed.

16 Notices Notices to the holders of Notes shall be mailed to them at their respective addresses in the Register anddeemedtohavebeengivenonthefourthweekday(beingadayotherthanaSaturdayora Sunday) after the date of mailing. The Issuer shall also ensure that notices are duly published in a manner that complies with the rules and regulations of any stock exchange or other relevant authority on which the Notes are for the time being listed. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made.

39 So long as the Notes are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear or Clearstream or any Alternative Clearing System (as defined in the Trust Deed), notices to Noteholders shall be given by delivery of the relevant notice to Euroclear or Clearstream or the Alternative Clearing System, for communication by it to entitled accountholders in substitution for notification as required by the Conditions, and such notice shall be deemed to be received by the Noteholders on the date of delivery of such notice to Euroclear or Clearstream or the Alternative Clearing System.

17 Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

18 Governing Law and Jurisdiction (a) Governing Law: The Trust Deed and the Notes and any non-contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with, English law.

(b) Jurisdiction: The courts of England are to have jurisdiction to settle any disputes that may arise out of or in connection with the Notes or the Guarantee and accordingly any legal action or proceedings arising out of or in connection with any Notes (‘‘Proceedings’’)may be brought in such courts. Each of the Issuer and the Guarantor has in the Trust Deed irrevocably submitted to the jurisdiction of such courts.

(c) Agent for Service of Process: Each of the Issuer and the Guarantor has irrevocably appointed in the Trust Deed an agent in England to receive service of process in any Proceedings in England based on any of the Notes or the Guarantee.

40 THE GLOBAL CERTIFICATE

The Global Certificate contains provisions which apply to the Notes in respect of which the Global Certificate is issued, some of which modify the effect of the terms and conditions of the Notes (the ‘‘Conditions’’ or the ‘‘Terms and Conditions’’) set out in this Offering Circular. Terms defined in the Conditions have the same meaning in the paragraphs below. The following is a summary of those provisions:

The Notes will be represented by a Global Certificate which will be registered in the name of HSBC Nominees (Hong Kong) Limited as nominee for, and deposited with, a common depositary for Euroclear and Clearstream.

Under the Global Certificate, the Issuer, for value received, promises to pay such principal sum to the holder of the Notes represented by the Global Certificate (subject to surrender of the Global Certificate if no further payment falls to be made in respect of such Notes) on [•]oronsuchearlierdateordatesas the same may become payable in accordance with the Conditions, and to pay interest on such principal sum in arrear on the dates and at the rate specified in the Conditions, together with any additional amounts payable in accordance with the Conditions, all subject to and in accordance with the Conditions.

The Global Certificate will become exchangeable in whole, but not in part, for individual note certificates (‘‘Individual Note Certificates’’) if the Notes represented by the Global Certificate are held on behalf of Euroclear or Clearstream or any other clearing system (an ‘‘Alternative Clearing System’’) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so.

In such circumstances, the Issuer will cause sufficient Individual Note Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant holders of the Notes. A person with an interest in the Notes in respect of which the Global Certificate is issued must provide the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such exchange and a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Individual Note Certificates. Such exchange will be effected in accordance with the provisions of the Agency Agreement and the regulations concerning the transfer and registration of Notes scheduled thereto and, in particular, shall be effected without charge to any holder or the Trustee, but against such indemnity and/or security as the Registrar may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such exchange.

In addition, the Global Certificate will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the Global Certificate. The following is a summary of certain of those provisions:

Record date So long as the Global Certificate is held on behalf of Euroclear, Clearstream or any Alternative Clearing System, each payment in respect of the Global Certificate will be made to the person shown as the holder in the Register at the close of business (of the relevant clearing system) on the Clearing System Business Day before the due date for such payments, where ‘‘Clearing System Business Day’’ means a weekday (Monday to Friday, inclusive) except 25 December and 1 January.

41 Trustee’sPowers In considering the interests of the Noteholders whilst the Global Certificate is registered in the name of a nominee for a clearing system, the Trustee may, to the extent it considers it appropriate to do so in the circumstances, but without being obliged to do so:

(a) have regard to any information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of the Notes; and

(b) consider such interests on the basis that such accountholders were the holder of the Notes in respect of which such Global Certificate is issued.

Notices So long as the Global Certificate is held on behalf of Euroclear, Clearstream or an Alternative Clearing System, notices to holders of the Notes represented by the Global Certificate may be given by delivery of the relevant notice to Euroclear, Clearstream or (as the case may be) such Alternative Clearing System for communication by it to entitled accountholders in substitution for notification as required by the Conditions. Such notice shall be deemed to have been given on the date of delivery to such clearing system.

Issuer’sRedemption The option of the Issuer provided for in Condition 6(b) shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by the Conditions.

Transfers Transfers of interests in the Notes will be effected through the records of Euroclear and Clearstream (or any Alternative Clearing System) and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream (or any Alternative Clearing System) and their respective direct and indirect participants.

Cancellation Cancellation of any Notes by the Issuer following its redemption or purchase by the Issuer will be effected by reduction in the principal amount of the Notes in the register of the Noteholders.

Meetings For the purposes of any meeting of Noteholders, the holder of the Notes represented by the Global Certificate shall (unless the Global Certificate represents only one Note) be treated as two persons for the purposes of any quorum requirements of a meeting of Noteholders and as being entitled to one vote in respect of each U.S.$1,000 of the Notes.

Determination of entitlement The Global Certificate is evidence of entitlement only and is not a document of title. Entitlements are determined by the Register and only the holder thereof is entitled to payment in respect of the Global Certificate.

42 EXCHANGE RATES

The Hong Kong dollar is freely convertible into other currencies (including the U.S. dollar). Since 17 October 1983, the Hong Kong dollar has been pegged to the U.S. dollar at the rate of HK$7.80 to U.S.$1.00. The central element in the arrangement which gave effect to this peg is that, by agreement between the Hong Kong government and the three Hong Kong banks that issue Hong Kong dollar banknotes, The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank and Bank of China (Hong Kong) Limited, certificates of indebtedness (which are issued by the Hong Kong government Exchange Fund to the banknote issuing banks to be held as cover for their banknote issue) are issued and redeemed only against payment in U.S. dollars, at the fixed exchange rate of U.S.$1.00 to HK$7.80. When banknotes are withdrawn from circulation, the banknote issuing banks surrender the certificates of indebtedness to the Hong Kong government Exchange Fund and are paid the equivalent amount of U.S. dollars at the fixed rate of exchange.

The market exchange rate of the Hong Kong dollar against the U.S. dollar continued to be determined by the forces of supply and demand in the foreign exchange market. In light of the fixed rate for the issue of Hong Kong currency in the form of banknotes, as described above, the market exchange rate has not deviated significantly from the level of HK$7.80 to U.S.$1.00 since 17 October 1983. In May 2005, the Hong Kong Monetary Authority broadened the 22-year old trading band from the original rate of HK$7.80 per U.S. dollar to a rate range of HK$7.75 to HK$7.85 per U.S. dollar.

The Hong Kong government has stated its intention to maintain the link at that rate, and it, acting through the Hong Kong Monetary Authority, has a number of means by which it may act to maintain exchange rate stability. Under the Basic Law, the Hong Kong dollar will continue to circulate and remain freely convertible. The Hong Kong government has also stated that it has no intention of imposing exchange controls in Hong Kong and that the Hong Kong dollar will remain freely convertible into other currencies, including the U.S. dollar. However, no assurance can be given that the Hong Kong government will maintain the link within the range of HK$7.75 to HK$7.85 per U.S. dollar or at all, or will not in the future impose exchange controls. Exchange rates between the Hong Kong dollar and other currencies are influenced by the exchange rate between the U.S. dollar and such currencies.

The following table sets forth the average, high, low and period-end exchange rates between the Hong Kong dollar and the U.S. dollar (in HK$ per U.S.$1.00) at the noon buying rate in New York City for cable transfers in foreign currencies for the periods indicated (the Noon Buying Rate).

Hong Kong Dollars/U.S. Dollars Noon Buying Rate Low Average(1) High Period End 2012 ...... 7.7493 7.7569 7.7699 7.7507 2013 ...... 7.7503 7.7565 7.7654 7.7539 2014 ...... 7.7495 7.7545 7.7669 7.7531 2015 ...... 7.7495 7.7524 7.7686 7.7507 2016 (as at 30 June 2016)...... 7.7505 7.7671 7.8270 7.7591

Note:

(1) Determined by averaging the rates on each business day during the relevant period.

43 DESCRIPTION OF THE ISSUER

The Issuer TVB Finance Limited, a wholly owned subsidiary of the Company, was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on 13 September 2016. Its registered office is located at the offices of Codan Trust Company (Cayman) Limited at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

The Issuer, whose primary purpose is to act as a financing subsidiary of the Guarantor, will remain a wholly-owned subsidiary of the Guarantor as long as the Notes issued by it are outstanding. The Issuer has no material assets.

The sole director of the Issuer is Mr Mark LEE Po On whose business address for the purposes of this directorship of the Issuer is c/o TVB City, 77 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong. Further information on the particulars and experience of Mr Lee is set forth below in ‘‘Directors and Senior Management’’.

The Memorandum of Association of the Issuer (a copy of which is available as described under ‘‘General Information’’) states, amongst other things, that the objects for which the Issuer is established are unrestricted, and that the Issuer shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided in section 27(2) of the Companies Law, Cap 22. (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and in view of the fact that the Issuer is an exempted company that the Issuer will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Issuer carried on outside the Cayman Islands.

The authorised share capital of the Issuer is HK$390,000, divided into 390,000 shares of a par value of HK$1.00 each, of which one share is issued and outstanding and has been fully paid.

No part of the equity securities of the Issuer is listed or dealt on any stock exchange and no listing or permission to deal in such securities is being or is proposed to be sought. As of the date of this Offering Circular, the Issuer does not have any debt outstanding.

As at the date of this Offering Circular, the Issuer has no subsidiaries. The Issuer has not audited or published, and does not propose to audit or publish, any of its accounts. Under the laws of the Cayman Islands, the Issuer must cause proper books of account to be kept with respect to:

• all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

• all sales and purchases of goods by the company; and

• the assets and liabilities of the company.

Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions. As a matter of the law of the Cayman Islands, an exempted company must make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law of the Cayman Islands. If the Issuer publishes any of its accounts, such published accounts of the Issuer will, in the event that and for as long as the Notes are listed on the Hong Kong Stock Exchange and the rules of the Hong Kong Stock Exchange so require (or for as long as the Notes are listed on another stock exchange and its rules so require), be made available free of charge at the offices of the Principal Paying Agent.

44 CAPITALISATION AND EXTERNAL INDEBTEDNESS

Capitalisation and External Indebtedness of the Guarantor The following table sets forth on an actual basis of the consolidated capitalisation and external indebtedness of the Guarantor as at 30 June 2016, and as adjusted to give effect to the offering of the Notes (before deducting the underwriting fees and commissions and other estimated transaction expenses payable) as if the issuance of the Notes had occurred on 30 June 2016.

You should read this information together with ‘‘Use of Proceeds’’, ‘‘Selected Financial Information’’, ‘‘Business of the Group’’ and the financial statements and related notes included elsewhere in this Offering Circular.

Unaudited As at 30 June 2016 Actual As adjusted HK$ million HK$ million Borrowings – current portion ...... –– Borrowings – non-current portion Notes to be issued (1) ...... – [•] Total Equity ...... 7,312 7,312 Total Capitalisation (2) ...... 7,312 [•]

(1) Notes to be issued represent the aggregate principal amount of US$[•] million of the Notes, without taking into account, and before deduction of underwriting fees, commissions and other estimated transaction expenses payable. Proceeds from this offering have been translated at a rate of HK$7.7591 to US$1 as at 30 June 2016.

(2) Total capitalisation includes total borrowings plus total equity.

Other than as disclosed above, there has been no material change in the consolidated capitalisation and external indebtedness of the Guarantor since 30 June 2016.

45 BUSINESS OF THE GROUP

OVERVIEW

Having commenced business in 1967 as the first wireless commercial television station in Hong Kong, the Group is now the leading TV broadcaster in Hong Kong with the Group’s terrestrial channels having an average audience share of all free and pay TV channels in Hong Kong during weekday prime time for the six months ended 30 June 2016 of 83% (as measured by Nielsen), engaging with over 3 million viewers daily in Hong Kong during prime time. The Group provides 24-hour entertainment channels and news service to over 7 million Hong Kong viewers, and operates an international licensing and distribution business.

The Group’s major business activities include Hong Kong TV broadcasting, digital new media business, programme licensing and distribution, overseas pay TV operations, channel operations, together with other activities such as music entertainment, magazine publication and other related services. The Group owns five free-to-air channels in Hong Kong – Jade, J2, iNews, Pearl and J5 (formerly HD Jade) (the ‘‘TVB Channels’’) as well as 14 TVB branded thematic channels.

The Group is one of the largest commercial Chinese programme producers in the world, and one of the few broadcasters in the world which operates a vertically integrated business model, encompassing production, broadcasting and distribution. In recognition of its high quality production, the Group has regularly received international awards for its programmes (including Asian Television Awards, New York Festivals International Television and Film Awards, PromaxBDA Global Excellence Promotion, Marketing and Design Awards and the RTDNA Edward R. Murrow Awards). Over the years, TVB has developed a production pipeline which generates an annual output of over 670 hours of dramas and over 19,000 hours of news, variety, travelogue and current affairs programmes. It also possesses a content library comprising over 92,000 hours of self-produced programme content and about 42,000 hours of news footage, accumulated over the past 48 years of operation. Moreover, the Group engages in movie production and investment through its associated company, Shaw Brothers Holdings Limited (HK stock code: 00953) and an investment company, Flagship Entertainment Group.

46 Recent Developments Taiwan Disposal In 2016, the Group disposed of its remaining 47% interest in Liann Yee Group, marking a complete exit from its operations in Taiwan. The disposal was undertaken through two transactions which were completed on 6 May 2015 and 10 March 2016 respectively. Upon completion of the disposal, the Group discontinued its Taiwan operations, which involved operations of production and broadcast of programmes in Taiwan through Liann Yee Group. Further, on 29 July 2016, the Group entered into an agreement to dispose of its property located in Neihu District of Taipei City.

Digital New Media expansion In recent years, the Group has been expanding its digital new media business and, as a result, internet and mobile advertising revenue has increased as a proportion of total advertising revenue. In 2016, the Group has continued to invest in this business and has recently launched an enhanced OTT service in September 2016, under the brand name of TVB Anywhere, in Canada, the United Kingdom and Australia. The Group intends to continue to expand its OTT service, through the TVB Anywhere brand, to distribute dramas and other programmes to audiences beyond these markets. The Group will use a portion of the net proceeds from the offering of the Notes to fund the expansion of its digital new media business.

47 CORPORATE STRUCTURE

The following simplified structure chart reflects the corporate structure of the Group, including the principal subsidiaries of the Company, as of the date of this Offering Circular:

Television Broadcasts Limited (Hong Kong) (Listed on the Main Board of Hong Kong Stock Exchange, Stock Code: 00511)

(Note approx.12% 5.1% effective effective interest interest 2 55% 100% 100% 100% 100% 73.68% 100% 1) (Note ) The Voice Shaw Brothers 上海翡翠東方 TVBO Production TVBI Company TVB Investment TVB.COM TVB Publications Flagship Entertainment Holdings Limited 傳播有限公司 Limited Limited Limited Limited Limited (Listed on the Main Entertainment Group Limited (PRC) (Bermuda) (Hong Kong) (Bermuda) (Hong Kong) (Hong Kong) Board of Hong Kong Stock Exchange Group (Hong Kong) Stock Code: 00953)

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% TVB Satellite TV TVB Satellite TVB (Overseas) TVBO Facilities TVB Video (UK) TVB (Europe) TVB Anywhere TVB Facilities TVB Macau TVB Satellite TVB (Australia) TVB Holdings

48 Entertainment Broadcasting Holdings Limited Limited Limited Limited Limited Limited Company Limited Platform Inc. Pty. Ltd. (USA) Inc. (British Virgin Islands) (Bermuda) (United Kingdom) (Hong Kong) (Hong Kong) (Hong Kong) (Macau) (United State) (Australia) Limited Limited (United States) (Bermuda) (Hong Kong)

100%

Remarks: TVB (USA) Inc. (United States) Direct owned subsidiary

Indirect owned subsidiary

Associated company/Investment company

Notes

1 an effective 12% interest in Hong Kong-listed Shaw Brothers Holdings Limited through a joint venture held by CMC and TVB

2 an effective 5.1% interest by TVB in Flagship Entertainment Group, a mega movie investment platform formed by Warner Bros., CMC and TVB HISTORY AND DEVELOPMENT The following are a number of key events which have occurred in the development of the Group:

1965 The Company was incorporated on 26 July 1965.

1967 The Company was granted a broadcasting licence by the Governor in Council of Hong Kong in September 1967 and commenced broadcasting on 19 November 1967 as the first wireless commercial television station in Hong Kong. Two programme services, one in Chinese and the other in English, were provided on separate channels – Jade and Pearl, respectively – through the terrestrial spectrum.

1976 TVBI Company Limited, the Group’s international operating arm, was established to develop programme-licensing, video rental business and the operation of cable and satellite television channels in overseas markets.

1980 Sir Run Run Shaw, G.B.M., one of the founders of the Group, became Chairman of the Board of Directors of the Company.

1981 The Group adopted a programming strategy of broadcasting 2.5 hours of drama serials on Jade during weekday prime time, which has helped promote viewership momentum and hype for its drama serials.

1984 HK-TVB Limited, the former holding company of the Group, was publicly listed in Hong Kong in January 1984. The Company was at that time one of its subsidiary companies.

1988 Following a group reorganisation, the Company became the listed parent company of the Group on 23 November 1988.

2003 The Group was relocated from Clear Water Bay to TVB City, the current headquarters located within Tseung Kwan O Industrial Estate, Kowloon, Hong Kong. Constructed and equipped at a cost of over HK$2 billion, TVB City has a total building area of over 110,000 square metres, comprising administration offices, outdoor shooting locations, and production studios.

2004 The Guangdong Landing Rights Agreement was signed, permitting the Group to collect a licence fee for the distribution of Jade and Pearl channels in the Guangdong Province, the PRC.

2006 TVB co-produced for the first time a major drama serial Drive of Life (a sixty episode drama serial) with CCTV. This drama serial was broadcast on CCTV channel in the PRC and TVB’s Jade channel in Hong Kong during prime time in 2007.

2007 Digital terrestrial television broadcasting was launched in Hong Kong on 31 December 2007, and HD Jade became the Group’s first-ever 24-hour high definition channel.

49 2011 An investor group, comprising Dr Charles Chan Kwok Keung, Madam Cher Wang Hsiueh Hong and Providence Equity Partners LLC, acting through Young Lion, acquired the entire 26% shareholding controlled by Sir Run Run Shaw through Shaw Brothers (Hong Kong) Limited in the Company.

The Group launched myTV, its first mobile application. Other mobile applications were launched in the following years such as TVB News in 2012 and TVB Finance and TVB Zone in 2013.

2012 Sir Run Run Shaw retired as Chairman and was honoured with the title Chairman Emeritus on 1 January 2012. Dr. Norman Leung Nai Pang became Executive Chairman of the Board of Directors of the Company on the same day.

The Group began upgrading the transmission of channels to high definition format (1920 x 1080i), starting with iNews and Pearl.

The Company formed a joint venture company, TVBC with CMC and Shanghai Media Group with the Company holding 55% in the joint venture.

2013 The Group upgraded J2 and Jade channels to high definition format (1920 x 1080i). All five digital channels were broadcast in high definition format.

2015 Dr Charles Chan Kwok Keung became Chairman of the Company upon the retirement of Dr Norman Leung Nai Pang on 1 January 2015.

The Group disposed of its 53% equity interest in Liann Yee Group (Taiwan operations).

The Communications Authority approved a change of shareholding structure for Young Lion, and a company controlled by Mr Li Ruigang became a new member of Young Lion.

The Company’s free-to-air television service licence was renewed for a further 12 years to 30 November 2027.

The Company partnered with CMC and Warner Bros. in a new movie investment platform, Flagship Entertainment Group, to develop and produce a slate of Chinese- language films, including global tent poles for distribution in the PRC and internationally.

2016 The Group disposed of its remaining 47% interest in Liann Yee Group, marking a complete exit from its operations in Taiwan, and a property interest in a building in Neihu, Taipei.

The Group launched its OTT service, myTV SUPER, in Hong Kong on 18 April 2016. Since launch and up to 20 September 2016, the number of myTV SUPER users had exceeded 700,000.

Providence Equity Partners LLC ceased to be a member of Young Lion.

The Group launched an enhanced OTT service, under the brand name of TVB Anywhere, in Canada, the United Kingdom and Australia.

50 COMPETITIVE STRENGTHS The Group believes that its competitive strengths outlined below distinguish it from its competitors and are important to its success and future development:

Iconic brand with long history and a leading market position in the Hong Kong television broadcasting industry Having operated in the television broadcasting industry for over 48 years, the Group is one of the most experienced television broadcasters and producers of programming in Hong Kong. As a result, the Group possesses a strong understanding of the viewing preferences of Hong Kong’s diverse population. The brand ‘‘TVB’’ represents quality television entertainment and news services in Hong Kong. The Group’s ability to identify suitable content that resonates with the audience is evidenced by its ability to successfully cultivate and maintain a loyal viewer following and successful viewership track record over the years through numerous acclaimed drama serials and variety programmes. The Group’s self-produced programme content has regularly received recognition at international award ceremonies including the Asian Television Awards, the New York Festivals International Television and Film Awards, the PromaxBDA Global Excellence Promotion, Marketing and Design Awards and the RTDNA Edward R. Murrow Awards.

The Group is the leading television broadcaster by audience share (as measured by Nielsen) in the free television market in Hong Kong. During the years 2014 and 2015 and the six months ended 30 June 2016, the average audience share of the Group’s terrestrial channels (Jade, J2, iNews, Pearl and J5 (previously named HD Jade)) against all free and pay TV channels in Hong Kong during the weekday prime time was 81%, 82% and 83%, respectively. The Group currently broadcasts terrestrially five television channels, namely Jade (channel 81), J2 (channel 82), Pearl (channel 83), iNews (channel 84) and J5 (channel 85), under a free-to-air television service licence.

Vertically integrated business with a substantial library of Chinese content programming and a strong international distribution platform The Group is one of only a few broadcasters in the world which operates a vertically integrated business model, encompassing production, broadcasting and distribution. The Group has invested significantly in production facilities and talent development which have enabled it to become the market leader in the content production industry in Hong Kong and one of the world’s largest commercial Chinese language programme producers. Over the years, the Group has developed a production pipeline which generates an annual output of over 670 hours of dramas and over 19,000 hours of news, variety, travelogue and current affairs programmes.

The Group’s programme content library is the largest Cantonese language content library, and one of the largest libraries of Chinese language (both Cantonese and Mandarin) content, in the world. This library includes over 92,000 hours of self-produced programme content and about 42,000 hours of news footage, accumulated over the past 48 years of operation, and provides the Group with substantial recurring revenue through licensing and distribution.

In order to leverage strong demand for the Group’s self-produced content from Chinese speaking communities around the world, especially in countries such as Malaysia and Singapore, the Group has developed a strong international distribution platform and is now one of the largest commercial distributors of Chinese language content in the world. The Group has adopted different distribution models in different jurisdictions in order to maximise the audience for its content. The Group has long- standing relationships with pay TV operators such as MEASAT in Malaysia which operates the Astro platform, and StarHub in Singapore. In the PRC, the Group has since 2004 a Landing Rights arrangement with Guangdong broadcasters to distribute Jade and Pearl channels within the province. In addition, the Company’s subsidiary TVBC has contracted with Youku Tudou Inc. together with

51 numerous other digital new media operators, such as BesTV through IPTV, Tencent, Whaley and Mango TV, for online distribution of the Group’s programmes in the PRC, further broadening the Group’s distribution platform. As a result, the Group has achieved resilient cashflows from its programme licensing and distribution business segment with revenue for such segment for the financial years 2014 and 2015 and for the six months ended 30 June 2016 amounting to HK$947 million, HK$828 million and HK$473 million, respectively.

Premium advertising revenue due to substantial market reach and strong relationships with advertisers and advertising agencies The Group maintains well-established long-term relationships with many top-tier advertisers and major advertising agents in several different industries. In particular the Group works closely with the Association of Accredited Advertising Agencies of Hong Kong (‘‘4As’’) in promoting advertising related services available from TVB including advertising production and event management services. The Group would normally enter into tri-partite agreements for advertising services with an advertiser and a member of 4As as the advertiser’s agent. Where advertisers are not represented by agents, the Group would contract directly with the advertiser. Major buyers of advertising airtime on the Group’schannels include fast-moving consumer goods (such as milk powder, pharmaceutical and health products, personal care and beauty products), restaurants and supermarkets. Banks and finance companies, travel agents and watch and jewellery retailers have also been top spenders in recent years. Television plays a critical role in many marketing campaigns, as it is recognised as a highly effective medium that raises brand and product awareness by combining both audio and visual effects, and is also one of the few media outlets with a mass market reach.

With the Group’s consistent leading audience share in the television market, its advertising customers (many of which are committed buyers of television airtime) have developed confidence in the ability of the Group to deliver consistently high TVRs and audience share. They are, therefore, willing to pay the Group a higher advertising pricing premium when compared with the Group’s competitors.

High barriers to entry in the free-to-air television market The Group enjoys a high level of brand loyalty among Hong Kong viewers built up through consistent delivery of high-quality television programmes over the past four decades. As TVRs and ‘‘reach’’ (as measured by the percentage of audience share) are the dominating factors that advertisers would consider when selecting broadcasters, the Group’s loyal viewership and long-standing dominance in audience share pose a challenge to other industry players.

Besides the Company, PCCW, i-Cable and RTHK are the other providers of free-to-air television services in Hong Kong. PCCW (under the name ViuTV) commenced broadcasting on 6 April 2016. i- Cable (under the name Fantastic TV) has been granted a free-to-air licence by the Hong Kong government, and is expected to start broadcasting by May 2017. RTHK currently broadcasts three FTA television channels. In 2015, the Communications Authority received an application for a free-to-air television service licence from Hong Kong Television Network Limited and from Forever Top (Asia) Limited. On 6 May 2016, Phoenix Hong Kong Television Limited (a subsidiary of Phoenix Satellite Television Holdings Limited (HK stock code: 02008)) submitted an application to the Communications Authority for a free-to-air television service licence with digital terrestrial transmission. The Hong Kong government has indicated that it does not believe that the Hong Kong market can support more than four free-to-air television broadcasters. In addition, substantial upfront investment and significant lead time of at least several years will be required for new entrants to:

• establish the necessary broadcasting infrastructure;

52 • meet the requirements for a domestic free television service licence;

• establish content production capabilities or relationships with production houses to produce or source quality programmes;

• establish distribution networks;

• cultivate a loyal viewership base; and

• build competitive relationships with advertisers.

A well-established and leading player in Hong Kong’s expanding digital new media sector The Group is a well-established and leading player in the fast growing Hong Kong internet and online video market. The Group’s investments in digital media such as its internet portal website, various mobile applications and its OTT service have provided additional means through which the Group generates revenue from multimedia content. Having first launched its mobile applications in 2013, the Group launched its OTT service, myTV SUPER, in April 2016 marking a significant leap forward in the Group’s new media business. The Group has entered into arrangements with two major ISPs in Hong Kong, namely Hong Kong Broadband Network Limited and Hutchison Global Communications Limited, under which myTV SUPER can be provided as part of bundles with other services provided by such ISPs, and for which the Group receives committed fees. By leveraging the existing infrastructure and customer base of the ISPs, the Group has been able to quickly penetrate the Hong Kong market, with users of myTV SUPER having exceeded 700,000 by 20 September 2016. The Group is on target to achieve 1.4 million myTV SUPER users in Hong Kong by November 2017.

Over the last few years, internet and mobile advertising revenue has steadily increased as a proportion of total advertising revenue across all media. As a result of TVB’s strong brand awareness, the Group’s digital new media segment has experienced encouraging growth following the launch of myTV SUPER service, with segment revenue experiencing a growth rate of 16% for the six months ended 30 June 2016 compared to the same period in 2015.

On 15 September 2016, the Group launched an enhanced OTT service, under the brand name of TVB Anywhere, in Canada, the United Kingdom and Australia.

Experienced board and management team with a successful track record Each member of the Group’s senior management team has extensive experience in his or her area of expertise, such as television programming and production, broadcasting, advertising, finance, human resources management and communications. The Chairman, Dr Charles Chan has over 30 years of international corporate management experience in the construction and property sectors and in strategic investments. Members of the Group’s management team have substantial experience working in the industry, have established strong and stable relationships and have in-depth industry knowledge, all of which are critical to the Group’s success in capitalising on market opportunities, formulating sound business strategies in conjunction with prudent financial management, assessing and managing risks, implementing management plans and increasing the Group’s overall profit. The Group Chief Executive Officer, Mr. Mark Lee has over 20 years of senior management experience in the television industry and the General Manager, Mr Cheong Shin Keong has extensive experience in the advertising and marketing industry and is responsible for both advertising sales and the development of the Group’s digital new media business.

53 Over the years, the Group’s management has cultivated a company-wide TVRs-centric culture and has successfully sustained the Group’s business through the continuous introduction and development of artistes, directors and producers and other talent. As a result, the Group has been consistently able to maintain its high audience share numbers in the television market in Hong Kong.

The Group’s management team is also focused on maintaining its leading market position through technological innovation, including effectively deploying digital and mobile technologies to maintain the relevance of television as an effective medium and by being an early adopter in Hong Kong of new technologies such as digital broadcasting and high definition format. The Group is committed to using innovative strategies and solutions to face future challenges in this rapidly evolving industry, with an aim to create value in the long term.

BUSINESS STRATEGIES

The Group has adopted the following specific business strategies:

Maintain a leading share in Hong Kong’s television advertising market and increase market share in Hong Kong’s overall advertising market The Group intends to maintain its leading television advertising market share and further increase its share in the overall advertising market (which includes not only television advertising but also advertising through other media such as print, billboards, radio and online). The Group aims to grow advertising revenue by continuing to provide advertisers with a total advertising solution for their products and services. The Group offers different advertising packages and rate cards which are channel- specific and time-specific and, in addition to traditional broadcasts of commercials at programme breaks, the Group also offers advertisers title sponsorships and product placements opportunities.

The Group regularly reviews its rate cards and advertising packages and may, in the future, develop additional advertising packages and services to meet the changing needs of its diverse customer base. The Group will continue to seek to capitalise on opportunities to further optimise pricing strategies and offer additional advertising packages to advertisers as the viewership and ratings of these channels continue to grow. Through offering packages with a wide range of price points across different but complementary channels, the Group aims to introduce smaller advertisers to television advertising, and thereby increase its share in the overall advertising market in Hong Kong. This will in turn expand its customer base beyond traditional top-spending advertisers and further increase its advertising revenues.

Ongoing focus to invest in high quality content for Hong Kong and overseas markets The Group will continue to leverage its extensive experience and significant production resources (comprising production facilities, artiste pool and in-house production team) in order to produce high quality programmes for Hong Kong and Chinese-speaking communities around the world. This focus and investment in content production will enable the Group to maintain high viewership levels in order to maximise advertising and licensing revenues.

The Group believes that the popularity of its programmes amongst the Hong Kong audience has primarily been due to its deep rooted understanding of customer preferences from many years of operating in the industry and its ability to produce content which is relevant to the mass market. The Group continues to incorporate contemporary trends, social issues and popular culture in its programmes as appropriate, and will work closely with broadcasters who commission programmes from it to gather feedback on viewers’ preferences to boost viewership ratings.

54 The Group also plans to mobilise its production and talent resources in conjunction with its investments in Shaw Brothers Holdings Limited and the Flagship Entertainment Group to further participate in the Chinese movie sector.

Increase global footprint The Group’s vision is to build a truly global Chinese content-based platform leveraging the widely recognised TVB brand.

To capitalise on its local creative and administrative manpower and its content production and distribution resources in the relevant markets, the Group intends to carry out additional co-production efforts with other leading content producers and business partners across Asia, including Singapore, Malaysia and the PRC in order to produce quality programmes relevant to those markets and further expand the Group’s presence in these markets. For example, the Group strategically co-operates with major digital new media companies in the PRC including Tencent and iQiyi in order to produce a number of drama series. The Group has recently announced the expansion of its OTT service, through the TVB Anywhere brand to distribute, at a low cost, its content to a global audience, initially targeting markets such as Europe, Canada and Australia.

Expand and enhance the digital media service offerings The Group’s digital new media strategy has three key elements:

• to supplement traditional television viewing by providing target viewers with easier and broader access to the Group’s programmes;

• to enhance the traditional television viewing experience by deploying technology. Going forward, the Group intends to focus its investment to further expand its service offerings of OTT services and related mobile applications allowing subscribers to view their preferred content on any device, anytime, anywhere; and

• the Group intends to launch a social media platform during the course of 2017 as its third platform of services. This social media platform will carry TVB’s self-produced short format content and artiste-produced content with a view to generating incremental viewership in addition to the Group’s existing channels and new media platforms.

With the recent successful launch of the myTV SUPER service in Hong Kong, the Group announced in September 2016 a plan to extend a similar OTT service to the overseas Chinese-speaking communities beyond Europe and Australia under the TVB Anywhere brand.

Enhance overall technology platform and infrastructure Technological advancements have enabled the Group to deliver content through a wide variety of digital devices and cater for all types of viewing habits. The Group intends to stay at the forefront of these technologies, which comprise a myriad of internet and mobile platforms such as smartphones, tablets, desktop computers and internet-connected televisions, while continuing to lead the market in terms of traditional broadcasting capabilities.

In addition to the smart viewing feature which the Group plans to introduce for its mobile applications, the Group intends to expand its technological capabilities by investing in open internet technologies and its video infrastructure to improve content delivery. Specifically, the Group plans to increase:

• the number of live event channels;

55 • concurrent streaming capacity;

• the video quality of the content streamed to mobile devices; and

• the number of videos available for online viewing in its ever-expanding video repository to include Mandarin and English content as well as non-dramas.

The Group therefore intends to continue to build servers to expand processing capacity and explore the use of cloud technology to manage its content more efficiently and cost-effectively. The Group will also continue to re-master selected titles available in its video database to provide mobile viewers with improved experience and increased options.

DESCRIPTION OF THE GROUP’SBUSINESSES

The Group’s business operations includes the following segments:

• Hong Kong digital new media – provision of content to mobile devices and website business portals in Hong Kong and Macau

• Programme licensing and – distribution of television programmes and channels to distribution telecast, video and new media operators in Malaysia, Singapore, the PRC, Canada and Vietnam

• Overseas pay TV operations – provision of pay television services to subscribers in the USA, Europe and Australia

• Channel operations – compilation and distribution of television channels in the PRC, Malaysia, Singapore and other countries

• Other activities – magazine publications, music entertainment and other related services

56 The following table sets out a breakdown of the Group’s total revenue by business segment for the periods indicated. In this Offering Circular, the revenue of each segment refers to the revenue from external customers only. The total revenue does not include revenue of operations which were discontinued (see below, ‘‘Discontinued Taiwan Operations’’):

Audited Unaudited For the year ended 31 December For the six months ended 30 June 2014 2015 2015 2016 Revenue % of total Revenue % of total Revenue| % of total Revenue % of total Business segments HK$ million Revenue HK$ million Revenue HK$ million Revenue HK$ million Revenue Hong Kong TV broadcasting...... 3,365 68.5 3,059 68.7 1,365 67.2 1,216 61.9 Hong Kong digital new media business . . . . . 192 3.9 166 3.7 71 3.5 82 4.2 Programme licensing and distribution ...... 947 19.3 828 18.6 416 20.5 473 24.1 Overseas pay TV operations ...... 232 4.7 186 4.2 93 4.6 84 4.3 Channel operations ...... 107 2.2 99 2.2 52 2.5 43 2.2 Otheractivities...... 69 1.4 117 2.6 34 1.7 66 3.3 Total...... 4,912 4,455 2,031 1,964

Hong Kong is the dominant market of the Group, generating 68.8% of the Group’s revenue for the six months ended 30 June 2016. The following table sets out a breakdown of the Group’s total revenue by geographical location for the periods indicated:

Audited Unaudited For the year ended 31 December For the six months ended 30 June 2014 2015 2015 2016 Revenue % of total Revenue % of total Revenue % of total Revenue % of total Geographical locations HK$ million Revenue HK$ million Revenue HK$ million Revenue HK$ million Revenue Hong Kong ...... 3,625 73.8 3,325 74.6 1,465 72.1 1,351 68.8 Malaysia & Singapore ...... 555 11.3 549 12.3 271 13.3 266 13.5 PRC...... 383 7.8 271 6.1 147 7.2 196 10.0 USA&Canada...... 168 3.4 145 3.3 71 3.5 66 3.4 Australia...... 90 1.9 62 1.4 31 1.5 26 1.3 Europe...... 30 0.6 9 0.2 5 0.3 6 0.3 Vietnam...... 30 0.6 48 1.1 24 1.2 24 1.2 Other countries ...... 31 0.6 46 1.0 17 0.9 29 1.5 Total...... 4,912 4,455 2,031 1,964

Hong Kong TV broadcasting Hong Kong TV broadcasting is the Group’s core business, accounting for approximately 61.9% of the Group’s revenue for the six months ended 30 June 2016. This segment involves free-to-air TV broadcasting through terrestrial TV network and programme production in Hong Kong. The Group’s revenue in this segment is generated from advertising sales.

The Group’s revenue for its Hong Kong TV broadcasting segment was HK$3,365 million and HK$3,059 million for the financial years 2014 and 2015, respectively, and HK$1,365 million and HK$1,216 million for the six months ended 30 June 2015 and 30 June 2016, respectively.

Terrestrial TV channels The Group has been the leading player in the free TV market in Hong Kong since it was first launched. During the financial years ended 31 December 2014 and 2015 and the six months ended 30 June 2016, the average audience share of the TVB Channels against all free and pay TV channels in Hong Kong during the weekday prime time amounted to 81%, 82% and 83%, respectively.

57 Under a free-to-air television service licence granted by the Chief Executive in Council of Hong Kong, the Group broadcasts five digital terrestrial TV channels, namely Jade, J2, Pearl, iNews and J5 (previously named HD Jade) using the allocated digital TV spectrum, and two analogue terrestrial TV channels (Jade and Pearl) using the allocated TV analogue spectrum. The five TVB Channels provide 24-hour programmes, including entertainment, news and information to viewers in Hong Kong.

The current free-to-air television service licence held by the Group expires in 2027. Further, The Hong Kong government has confirmed that the analogue TV spectrum will have to be switched off by 2020 with all viewers having to migrate to digital TV. Since 2007, the Group has made substantial investment to expand its digital terrestrial television network. In June 2016, the penetration rate of digital terrestrial TV among Hong Kong households had reached 94%.

Each of the TVB Channels is designed to have distinct features and target different audiences. Such strategy helps the Group market its airtime to advertisers.

Jade Jade is the Group’s flagship service and the most popular television channel in Hong Kong in terms of average audience share, according to Nielsen. By offering Cantonese programmes often backed by well- known celebrities and media personalities, Jade provides viewers with both locally produced and Asian dramas, variety and enrichment content that caters to local tastes and preferences. In 2014, 2015 and the first half of 2016, Jade achieved an average rating of 22 TVRs (representing a 69% audience share), 21 TVRs (69% audience share) and 22 TVRs (70% audience share) during weekday prime time, respectively.

Leveraging on its experience in commissioning or sourcing the best of locally-produced or Asian programmes, Jade aims to select programmes that are able to cater to local tastes and preferences. The prime time drama serials that Jade has broadcast have been consistently well-received by both viewers and critics.

The Group believes that its programming strategy of broadcasting 2.5 hours of drama serials on Jade during weekday prime time, has helped deliver consistently high ratings for the channel. Jade airs a new episode of each of these drama serials every weekday. While such a scheduling pattern for drama is not typical in other countries, the Group believes that the drama programming schedule on Jade caters for the unique characteristics and expectations of Hong Kong television viewers. Viewers who follow any of these drama serials typically tune in on Jade every weekday, or use the Group’s websites, mobile service or OTT service for online catch-up. This, in turn, has maintained the consistently high ratings of Jade (in terms of both traditional television viewing and online viewing) and promoted viewership momentum and hype for its drama serials.

Jade also constantly explores ways of improving its programming schedule. In 2015, Jade extended the broadcasting schedule for second line drama (being dramas broadcast from 9.30pm to 10.30pm in Hong Kong daily) from five to seven days a week, with the aim to maximise viewers’ attention and rating potentials of its top quality drama series.

58 The top-rated drama titles in 2014, 2015 and the first half of 2016 achieved an average consolidated TVRs of 30. In 2014, Line Walker, a crime-thriller drama serials of five undercover police completing missions in the endanger triad world successfully aroused audience interests, scoring a consolidated ratingof30.5TVRs.Ghost of Relativity, a romantic comedy became the top-rated drama in 2015, achieving an average consolidated rating of 29.2 TVRs. Short End of the Stick, a light-hearted serial depicting four eunuchs was the best rated drama in the first half of 2016, gaining a consolidated rating of 30.5 TVRs.

Jade also offers a wide selection of non-drama programmes, and has endeavoured to introduce new programme formats and innovative features, notably a number of travelogues adventuring into some of the world’s least-visited destinations, and new interactive game shows with the aim to strengthen our audiences’ engagement. This helps the channel attract more viewers during the late weekday prime time and weekend prime time slots.

The Conquerors, debuted in 2014, was a new-format game show to promote the pursuit of happiness. The Million Dollar Minute, first aired in 2015, is an innovative live quiz show that engages with the viewing audience via the Group’s mobile app TVB fun. Sunday Stage Fight, first aired in 2016, provides a platform for talented TVB artistes to showcase their acting skills.

Travelogues and food and health-themed programmes continue to generate consistent viewership. Some popular travelogues include Not Far But Away, Exploring the Democratic People’s Republic of Korea (unveiling the little-known daily livelihood of its residents and attractions) and Big Big World II (visiting some of the world’s least-visited corners, such as the Falkland Island, Liechtenstein, the Cayman Islands and Venezuela).

Popular home-cooking series (including Good Cheap Eats and Eating Well with Madam Wong)and health-themed series (such as Am I Healthy? Hungry for Health? and Health Is a Lifestyle)havealso attractedstrongaudienceviewershipinrecentyears.

J2 J2 is Hong Kong’s first television channel that targets the ‘‘adultescent’’ viewing population (being young adults and middle-aged persons whose clothes, interests and activities are typically associated with youth culture), and is the second most popular television channel among viewers aged from 15 to 39 after Jade. In 2014, 2015 and in the first half of 2016, J2 achieved an average rating of 1.9 TVRs (representing a 7% audience share), 2.0 TVRs (7% audience share) and 1.9 TVRs (7% audience share) during prime time, respectively.

The Group has sought to establish the image of J2 as innovative by offering a diversified programme mix. Programming on J2 currently comprises:

• locally produced non-drama programmes;

• a selected mix of popular Asian drama serials, anime, travelogues and reality shows; and

• live broadcasts of local and international events which appeal to younger viewers.

59 Similar to other TVB Channels, local productions remain the focus of J2’s offering. In 2014, J2 introduced new programmes like Go! Yama Girl for local hiking fans and Organised Dining for viewers interested in the city’s best eateries. In 2015, J2 strategically rearranged its schedule to air self-produced programmes from 9.30 p.m. to 11.00 p.m. on weekdays to rejuvenate the late nights with high quality in-house productions with up-to-date themes and a good mix of young talent. Three locally produced non-drama programmes are regarded as J2’s signature programmes, each appealing to different sub- groups within J2’s target audience:

• Big Boys Club, a long-running casual talk show covering men’s topics;

• All Things Girl, an infotainment programme bringing updates to viewers on latest fashion, celebrity hairstyles and beauty tips; and

• Own Sweet Home, a home improvement and interior design show tailored to smaller homes.

Along with locally produced non-dramas, J2 broadcasts other programmes, such as Fun Abroad,a travelogue programme aired on Saturday nights, Play With Your Food, a food programme inviting guests to the super-size meal challenge and amusing the audience with the joy of eating, and Pop-up Kitchen, which featured pop-up food making challenges. J2 also introduces international music events to the local audience, including 2015 Mnet Asian Music Awards, Music Bank in Mexico and MTV EMA 2015.

Popular sports events is also part of J2’s offerings. In 2015, the 2018 FIFA World Cup Russia™ Asia Qualifiers attracted the highest viewership on the channel’s history. During 2016, evening horse-racing coverage and the broadcast of Mark Six draws were introduced on J2. iNews iNews is the first and only free-to-air channel that offers news service to viewers in Hong Kong 24 hours a day. Before its launch, all available 24-hour news channels were on pay television platforms. Since its launch on 1 January 2009, iNews has since become Hong Kong’s most watched 24-hour news channel on a consistent basis. In 2014 and 2015 and in the first half of 2016, iNews achieved an average rating of 1.4 TVRs (representing a 5% audience share), 1.3 TVRs (representing a 4% audience share), and 1.4 TVRs (5% audience share) during prime time, respectively. iNews has been broadcasting in full high definition since June 2012, and was the first news channel in Hong Kong to be broadcast in full high definition. It was also the first news channel to innovatively provide viewers with three simultaneous news broadcasts on the same screen, allowing viewers to choose their desired news stories by switching between different audio tracks. The live newscasts are further enriched with scrolling data bars at the bottom providing instant news headlines and stock price updates.

Programming on iNews consists of live newscasts every half hour, supplemented with short feature programmes and longer interview or talk shows. The channel operations team maintains constant communication with the production team of iNews to provide them with feedback and suggestions from research among viewers, with a view to maintain the high viewership of the channel and to continue to attract sponsorships from advertisers. iNews strives to achieve the optimal amount of featured programmes (as opposed to regular news reporting) and frequency of repeating news stories, and adjusts its programme schedules based on viewership statistics and programming experience.

60 Pearl Pearl portrays its image as an upmarket and stylish channel. It is an English channel uniquely positioned to carry major blockbuster movies, dramas and documentaries, as well as news and news related information. It is by far the leading English-language free-to-air channel in Hong Kong, with the top rated English programmes aired on local English terrestrial television channels in Hong Kong.

In 2014, 2015 and in the first half of 2016, Pearl achieved an average rating of 1.3 TVRS (representing a 5% audience share), 1.3 TVRs (4% audience share) and 1.1 TVRs (4% audience share), during prime time, respectively. In contrast with all other television channels in Hong Kong, Pearl has historically achieved higher TVRs during weekend prime time than weekdays due to its broadcast of popular international movies during weekend prime time slots.

A wide variety of high-quality English-language programmes have helped Pearl achieve significant success, particularly in attracting internationally-minded and expatriate viewers. Pearl allows viewers to watch a popular selection of English language programming across a range of genres including movies, drama series, lifestyle programmes, reality shows and documentaries acquired from different parts of the world. Examples of the best performing programmes aired on Pearl in the past two and a half years include Harry Potter and the Deathly Hallows™ Part 1 and Part 2 (movie), Marvel’s the Avengers The Flash (drama serial), The School That Turned Chinese (documentary) and Frozen (animation movie).

Pearl also offers a variety of local productions including the environmental series Adventures to the Edge, the hit show Tycoon Talk which features successful local entrepreneurs, the lifestyle programme Dolce Vita and the talk show Straight Talk. Further, a number for world-class local sports events are broadcast on Pearl. In recent years, examples have included the Hong Kong Masters,theHong Kong Squash Open,andtheHong Kong Tennis Open. In 2016, Pearl together with Jade and J5 offered more than 500 hours of programmes covering the 2016 Rio Olympics Games.

Pearl’s international programme mix and the big-budget high quality programmes it broadcasts have created an environment in which international luxury goods and services companies can showcase their products. To further position Pearl as an attractive channel for such advertisers to market their brands and products, Pearl also provides live coverage of glamorous and upmarket international events, such as The Academy Awards,theHong Kong Sevens,theSnow Polo World Cup and the Hong Kong Squash Open.

J5 Originally named HD Jade, the channel had a long-standing simulcast arrangements with Jade during prime time, and offered self-produced and imported programmes during the non-simulcast hours. The channel was renamed as J5 and 22 February 2016. Along with the renaming, the channel introduced new programme schedules for the purpose of further diversifying its audience groups. J5 also ceased its simulcast arrangement with Jade and has become a standalone channel focusing on wealth and knowledge-based programmes. J5 targets the audience group seeking up-to-date information on the markets, with particular focuses on the financial and the property markets.

In 2014, and 2015, HD Jade achieved an average rating of 8.2 TVRs (representing a 28% audience share) and 8.3 TVRs (29% audience share) during prime time, respectively. Following the end of simulcast arrangements with Jade, the average rating of J5 in the first half of 2016 was 3.1 TVRs (11% audience share) during prime time.

61 Since the launch of J5, a series of station-produced financial programmes namely Property Market, Economic GPS, Property Magazine, Road to Wealth and Insiders Tips attained good ratings. Lifestyle programmes such as Nice Wheels and The CEO Diner, together with acquired variety shows China Star and Love Journey, also helped the channel cultivate a core group of viewers. In addition to self- produced programmes, J5 also telecast acquired documentaries, dramas, movies and variety programmes to provide high quality content to views with different interests.

Programme production Programme production is a part of an integrated operation of the Hong Kong TV broadcasting segment. With over 40 years of experience in Chinese language content production, the Group is the market leader in the content production industry in Hong Kong and is one of the largest commercial Chinese language programme producers in the world.

The Group produces Chinese-language TV drama series covering a variety of themes. The dramas shown during the year of 2015 included dramas with supernatural themes, period dramas, sitcoms, and time- travelling stories. The Group also produces non-drama programmes including travelogues, health-themed programmes, food programmes, music shows, game shows and talk shows. It also produces news reports and current affairs programmes.

Well-designed and sizeable outdoor filming sites and indoor studios are key resources of the Group’s production, Located outside the Kowloon city area, TVB City, the Group’s headquarters, has a total building area of over 110,000 square metres, comprising an administration building, a news centre, drama and variety show studios, as well as two outdoor shooting locations, featuring a variety of production settings. Modelled on locations of ancient Beijing, one of the outdoor shooting locations is an old Chinese town which consists of imperial garden, noble mansion, courtyard, temple, teahouse, city wall and gate tower, and market streets and residences which can be adapted for shooting Chinese period dramas. Alongside the old Chinese town set is another production set consisting of old street scenes created with reference to locations in Hong Kong and the PRC at the turn of the century. This production facility comprises a number of permanent settings including a church, buildings with ancient facets, markets and courtyards, all of which may be adjusted to accommodate different shooting scenes. With an aim to further enhance its facilities for higher quality period dramas, the Group also built a set for a Jiangnan-style canal town in 2015. Further construction of production sets is in progress.

In addition to shooting within the TVB City area, the Group’s production crew and artistes frequently travel around Hong Kong and to other locations around the globe for on-location shooting of travelogues, documentaries and wine and food themed programmes.

TVB is supported by a substantial production team comprising approximately 1,700 producers, directors, screenwriters, costume designers, prop and set designers, lighting and camera, crews, photographers, hairdressers, make-up artists, post-production editors and many other supporting personnel. With a high production output each year, the Group is one of the few television programme producers in the world to maintain its own artiste pool. TVB has nurtured many popular artistes over the years (including Chow YunFat,AndyLauTakWah,TonyLeungChiuWai,LizaWangMingChuenandmanyothers),with many achieving international success and recognition, including amongst Chinese communities around the world. Currently, TVB has over 700 artistes under contract. These artistes perform, over their periods of service, primarily for the Group’s programmes and have become ‘‘icons’’ of TVB. The Group also provides training and performance opportunities for these artistes and enables them to develop their talent and performance careers. Over the years, the Group has continued successfully to identify new talent through beauty pageants and talent contests as well as hiring directly from performing art schools, in order to sustain the development of the television industry.

62 The programmes produced by the Group are broadcast in Hong Kong across the five TVB Channels, via the digital media platforms, and to markets including Malaysia, Singapore, the PRC, USA, Europe and Australia through the Group’s programme licensing and distribution business or through its overseas pay TV business.

TV Advertising The Group’s key advertisers have historically included fast-moving consumer goods (such as milk powder, pharmaceutical and healthcare products and personal care products), restaurants and supermarkets. Banks and finance companies, travel agents and watch and jewellery retailers have also been top spenders in recent years. As Hong Kong has continued to see demand for these products from both local and PRC consumers, advertisers of these product categories have invested strongly in brand advertising. As a result, the Group continues to market television advertising as an effective medium for branding.

By offering different advertising packages and separating weekday and weekend advertising charges, the Group is able to address the diverse needs of various advertisers and their advertising agents and thereby attract repeat business from them. In addition, the Group also sells advertising space on its internet platform and mobile applications, and cross-sell and bundle offerings from these platforms with its traditional channels.

The majority of the Group’s advertising spots, particularly those on Jade, J5 and Pearl, are priced through a market-based bidding system, under which advertising spots can be purchased at set rate levels announced each year. Advertisers can purchase a spot already bought by another advertiser at the next higher rate level. Such a pricing structure provides the Group with the flexibility to rapidly respond to any surges in demand for a particular advertising spot and to maximise profitability. To cater for advertisers with lower budgets, some advertising spots in the new channels, J2 and iNews, are priced on a fixed-rate basis but allow limited rescheduling at the Group’s discretion. The Group also enters into agreements with a large number of advertising agencies and advertisers on a yearly basis to offer them rate discounts in return for the advertisers’ commitment to a minimum amount of advertising spending for the upcoming year.

The Group also launches specific advertising and sales campaigns in connection with popular sport events to be broadcast on its channels. Such campaigns have included the 2014 FIFA World Cup campaign ‘‘FIFA Fever’’ and the 2016 Rio Olympics campaign ‘‘Olympics’’. The broadcast of these world’s major sport events also enabled the Group to gain extra business from advertisers who wished to run advertising campaigns in association with the world’s largest sporting events.

Since the start of 2014, the overall advertising market in Hong Kong has been adversely affected by declining retail sales and reduced tourist arrivals from the PRC. As a result of the Group’s leading position in the TV market, the Group believes that its advertising revenue has been less affected by the downward trend as compared to other media. In 2014, the Group’s advertising revenue increased by 1% on a year-on-year basis with additional income derived from the World Cup. In 2015 and first half of 2015, the Group’s advertising revenue from its terrestrial channels declined 9% and 12%, respectively, on a year-on-year basis.

The most notable advertising spending decreases were from the sectors of skin care and supermarkets while milk powder spending declines in 2015 have stabilised in the first half of 2016. There has also been considerable growth in advertising spending from online travel agents, mobile applications and online property agents.

63 Hong Kong digital new media business The Group’s Hong Kong digital new media business segment accounts for approximately 4.2% of the Group’s revenue for the six months ended 30 June 2016. The business comprises delivery of video content through its website, applications on mobile devices, and OTT service. The Group’s revenue in this segment is generated from selling advertising and charging subscription fees.

The Group’s revenue from its Hong Kong digital new media business segment was HK$192 million and HK$166 million for the financial years 2014 and 2015, respectively, and HK$71 million and HK$82 million for the six months ended 30 June 2015 and 30 June 2016, respectively.

TVB.com Internet Platform TVB.com is the Group’s official website and has been in operation since 1997. The website is well- supported by many new and recurring advertisers, such as electronics companies, banks, cosmetic and pharmaceutical companies.

In 2008, the Group launched the web service myTV on the website, allowing users to catch up on the latest programmes broadcast on Jade, J5 (then named HD Jade), Pearl and J2 channels. myTV has since then become the core feature of tvb.com. In addition, three free channels (namely iNews, HD Jade and J2) were available for live viewing. Event channels are also occasionally set up for casting special programmes live.

In January 2014, tvb.com launched the GOTV web service, which provides subscribers with paid VOD streaming service, and GOTV reported a total of more than 116,000 paid subscribers as at 31 December 2015.

In 2015, the Group also revamped its myTV services to boost viewership by offering additional live streaming for Jade and an upgrade of the interface, with add-on contents and user-friendly search functions receiving positive feedback from users. The revamp also enables cross-border access to the website and the mobile applications between Hong Kong and Macau. In addition, a new subscription- based VOD service has been integrated into myTV to boost video consumption.

Mobile Platform The Group’s mobile platform consists of mobile applications available for free to users of smartphones, tablets and other similar internet-connected devices. As at 30 June 2016, the mobile applications operated by the Group (other than from the mobile application of myTV SUPER) included myTV, TVB fun, GOTV, TVB News, TVB Finance, TVB Zone, TVB Enews, myEPG and tvb.com Weibo. The applications target different segment of viewers who are seeking programmes and documentaries; news; entertainment news; and finance related news and content. myTV myTV is the Group’s flagship mobile application. It is the mobile version of the myTV service available on the tvb.com internet portal.

TVB fun TVB fun functions as an interactive second-screen mobile application which allows viewers to vote, express opinions and participate in lucky draws and games, enhancing the traditional television viewing experience of users.

64 GOTV As with the GOTV web service, the GOTV mobile application provides subscribers with on-demand access to a library of drama serials which the Group has broadcast in the past 40 years.

TVB News Users of the TVB News mobile application can access the latest local, international, financial and sports news in the form of text and video clips. Live-streaming of the iNews channel and special events of public interest are also offered through the TVB News mobile application.

TVB Finance The TVB Finance mobile application offers the latest financial news and in-depth coverage by professional analysts.

The portfolio of the Group’s mobile applications also includes TVB Zone which allows users to access an online version of its magazine TVB Weekly, myEPG which provides users with programme schedules and synopses, TVB Enews which provides entertainment news updates, and tvb.com Weibo which is a mobile version of the tvb.com Artistes Weibo web service, a platform for artistes to share their behind- the-scene photos, videos and news with their fans.

OTT Service On 18 April 2016, the Group launched myTV SUPER, an OTT service offered through both TVB branded set-top boxes and a mobile application. By subscribing to the service, viewers are able to enjoy a large selection of linear channels and programmes on demand, offering 19,000 hours of TVB and acquired programmes.

The myTV SUPER service offers three unique selling points:

• it is the largest offering of locally produced content, consisting of more than 11,000 hours of programmes from the Group’s library and catch-up of current offerings in addition to many exclusive first-run local dramas and variety programmes;

• the service offers a vast selection of popular Asian dramas from Japan, Korea, the PRC, and Taiwan; and

• it is the only broadcasting service in the region that offers all of the Group’s five free-to-air and 14 branded thematic TV channels, together with over 21 acquired channels, under one single platform.

To facilitate consumer viewing convenience, myTV SUPER also incorporates a three-hour instant rewind capability into all TVB-branded linear TV channels.

The service of myTV SUPER can be bundled with broadband packages from two major ISPs in Hong Kong, namely Hong Kong Broadband Network Limited, and 3Home Broadband run by Hutchison Global Communications Limited. The set-top boxes are also distributed at retail electronic appliance stores in Hong Kong, such as Fortress and Broadway.

During the Rio 2016 Olympic Games, myTV SUPER offered more than 2,000 hours of Olympic events via live streaming and VOD. This was the first time in the history of Olympic Games that so much live and VOD content were made available at high-definition (HD) quality in Hong Kong, including over 100 hours in ultra-high definition (4K).

65 As an effort to promote myTV SUPER, the Group now offers GOTV users a free service upgrade to enjoy myTV SUPER service for at least 6 months or until the end of the users’ GOTV contract, whichever is longer.

Since launch and up to 20 September 2016, the number of myTV SUPER users had exceeded 700,000. The Group plans to achieve at least 1.4 million users of myTV SUPER by November 2017.

Programme licensing and distribution The Group’s programme licensing and distribution segment accounted for approximately 24.1% of the Group’s revenue for the six months ended 30 June 2016. The business comprises the distribution of TVB’s programmes outside of Hong Kong through telecast, video and new media licensing. The Group’s revenue in this segment is generated primarily from licensing fees.

The Group’s revenue from its programme licensing and distribution segment was HK$947 million and HK$828 million for the financial years 2014 and 2015, respectively, and HK$416 million and HK$473 million for the six months ended 30 June 2015 and 30 June 2016, respectively.

The key markets for the Group under this business segment include Malaysia, Singapore and the PRC.

Malaysia and Singapore In Malaysia, the Group grants licences to MEASAT which operates the Astro platforms. The Group recently renewed its four-year contract with MEASAT which became effective from February 2016. Under the master licensing agreement with MEASAT, the Group supplies programmes and channels to MEASAT’s Astro platforms and receives a licence fee and a share of subscription revenue. To attract new subscribers, the Group has also developed a TVB channel package called ‘‘Jade Pack’’ targeting the Malaysian audience.

In Singapore, the Group grants licence to StarHub as the key Chinese programme supplier for StarHub’s subscribers. Under a number of master licensing agreements, the Group provides a fixed number of programmes and a fixed number of channels to StarHub for mobile and broadband distribution and for broadcasting through its pay television platform in Singapore in return for fixed license fees. The Group has extended the contract with StarHub for one year commencing June 2016.

The PRC In the PRC, the Group’s business is operated by TVBC, a joint venture among the Company, CMC, Shanghai Media Group, and Gravity Corporation, in which the Company holds a 55% equity interest. Due to programming cutbacks by satellite TV stations and stricter controls imposed by the State Administration of Press, Publication, Radio, Film and Television (‘‘SAPPRFT’’)onimporteddramas, the telecast licensing business on a nationwide basis remained unsatisfactory. Licensing revenue from the Guangdong region has been steady due to the stable demand for Cantonese dramas.

In addition, TVBC has renewed its content licensing contract for three years with Youku Tudou Inc., which has been an important online distribution platform of TVB programmes in the PRC. TVBC has also signed distribution agreements with other major new media players, such as BesTV through IPTV, Tencent, Whaley, and MangoTV.

Other Markets Beyond the key markets of Malaysia, Singapore and the PRC, the Group also operates in Vietnam and Cambodia.

66 In Vietnam, the Group operates a drama channel on the country’s largest cable network, Saigontourist Cable Television Company Limited and is starting to build its VOD business. In Cambodia, the Group has signed a multi-year contract with a local terrestrial television station, PNN, for a daily two-hour broadcast time-belt, with broadcasts having started in April 2016.

Overseas pay TV operations The Group’s overseas pay TV operations segment accounts for approximately 4.3% of the Group’s revenue for the six months ended 30 June 2016. The business comprises providing TVB produced or acquired content as a service pack to subscribed viewers through satellite TV, cable TV or OTT services in the USA, Australia and Europe. The Group’s revenue in this segment is generated primarily from selling advertising and charging subscription fees.

The Group’s revenue from its overseas pay TV operations segment was HK$232 million and HK$186 million for the financial years 2014 and 2015, respectively, and HK$93 million and HK$84 million for the six months ended 30 June 2015 and 30 June 2016, respectively.

The USA The Group’s programmes are being carried by DISH Network in the USA. The Group also releases TVB contents on multiple platforms, including Viki, Hulu, and YouTube to tap into the growth in advertising revenue in digital new media.

The Group joined the anti-piracy alliance led by DISH Network and successfully obtained an injunction against an illegal OTT syndication which was one of the most active pirates of TVB content. As a result, viewers of illegal contents have gradually been migrating back to the Group’sservice.

Europe In May 2014, the Group introduced TVB Anywhere in Europe and closed down its previous satellite business. TVB Anywhere is an integrated service offering not only live channels but also value added functionalities, including seven-day programme catch up, electronic programme guide, video-on-demand as well as viewing through mobile devices. The Group has seen a net growth in subscribers and a significantly improved profitability in Europe since the introduction of TVB Anywhere, with many ex- subscribers of its satellite pay TV service returning to this OTT service.

Australia In February 2015, the Group launched TVB Anywhere to gradually replace the direct-to-home satellite pay TV service in Australia. The Group also introduced a new format of advertisements to advertisers on VOD service, which attracted the interest of potential advertisers.

On 15 September 2016, the Group launched an enhanced OTT service, under the brand name of TVB Anywhere, in Canada, the United Kingdom and Australia. The Group intends to continue to expand its OTT service, through the TVB Anywhere brand, to distribute dramas and other programmes to audiences beyond these markets.

Channel operations The Group’s channel operations segment accounts for approximately 2.2% of the Group’s revenue for the six months ended 30 June 2016. The business comprises the distribution and operation of two satellite channels, TVB8 and Xing He channels. The Group’s revenue in this segment is generated primarily from selling advertising and charging licence fees.

67 The Group’s revenue from its channel operations segment was HK$107 million and HK$99 million for the financial years 2014 and 2015, respectively, and HK$52 million and HK$43 million for the six months ended 30 June 2015 and 30 June 2016, respectively.

TVB8 is a general entertainment channel, while Xing He is a 24-hour drama channel, with both being broadcast in Mandarin. The two channels are distributed through satellites to the PRC, and as part of TVB’s offerings to MEASAT, StarHub and Telekom Malaysia Berhad DBA.

The Group has sought to increase interest from a younger generation from overseas markets in TVB8 by holding a number of events such as the International Chinese New Talent Singing Championship and utilising online platforms to hold promotional activities of such events.

Other activities The Group operates a number of other businesses, including music entertainment business, magazine publications and other related services. These other activities account for approximately 3.3% of the Group’s revenue for the six months ended 30 June 2016.

The Group’s music entertainment business is operated under Voice Entertainment Group Limited, a wholly-owned subsidiary of the Company, and involves artistes’ sound recordings, music production, music copyright management, music publishing and artiste management.

The Group also publishes a weekly magazine named TVB Weekly which is distributed in Hong Kong. The magazine carries an overall programme guide for all TV channels in Hong Kong, and news and promotional articles relating to the Group’s programmes and artistes.

The Group’s revenue from other activities was HK$69 million and HK$117 million for the financial years 2014 and 2015, respectively, and HK$34 million and HK$66 million for the six months ended 30 June 2015 and 30 June 2016, respectively.

INVESTMENT IN MOVIE BUSINESS

The Group has also made a number of investments in the move business to capitalise on the growth in the global film market. These investments include an effective 12% interest in Hong Kong-listed Shaw Brothers Holdings Limited (HK stock code: 00953) through a joint venture held by CMC and the Company, and an effective 5.1% interest in Flagship Entertainment Group, a mega movie investment platform formed by Warner Bros., CMC and the Company. TVB plans to mobilise its production and talent resources through these two platforms to further participate in the development of the Chinese movie sector.

OTHER OPERATIONS

Hong Kong Pay TV Business TVB Network Vision Limited is an associate of the Group which engages in pay TV business in Hong Kong. Services from TVB Network Vision Limited are being distributed through satellite and cable through set-top boxes to homes in Hong Kong. The subscribers of TVB Network Vision Limited are decreasing as its subscribers are being gradually migrated to myTV SUPER.

Through its holding company TVB Pay Vision Holdings Limited, TVB has 90% economic interest in TVB Network Vision Limited but 15% of the voting rights. On this basis, the results of TVB Network Vision Limited are equity accounted for in the Group’s financial results.

68 Discontinued Taiwan Operations Pursuant to two disposal agreements dated 29 January 2015 and 4 January 2016, the Group disposed all of its interest in Liann Yee Group. The two transactions were completed on 6 May 2015 and 10 March 2016 respectively. Upon completion of the disposal, the Group discontinued its Taiwan operations, which involved operations of production and broadcast of programmes in Taiwan through Liann Yee Group. Further, on 29 July 2016, the Group entered into an agreement to dispose of its property located in Neihu District of Taipei City.

The Group will continue to hold its remaining property located at Bade Road, Zhongzheng District of Taipei City until a suitable opportunity to dispose of the property arises. The Group also continues to engage in the licensing of TVB content in Taiwan to channel operators, including Liann Yee Group, as part of its programme licensing and distribution business segment.

EMPLOYEES

The Group employs over 4,200 full-time employees, including contract artistes and staff in overseas subsidiaries. This figure excludes directors and freelance workers.

In terms of remuneration of employees, different pay schemes apply to contract artistes, sales and non- sales personnel in Hong Kong. Contract artistes are paid either on a per-show basis or by a package of shows basis. Sales personnel are remunerated on commission based schemes. Non-sales personnel are remunerated on a monthly salaries basis. Further, approximately 4% of the Group’semployeeswere employed in overseas subsidiaries, and were paid on scales and systems relevant to the respective localities and legislations.

Training and Development The Group regards its employees as one of its most important assets, and has therefore committed to providing them with ample training and development opportunities for their career development and self-enrichment. From time to time, the Group organises in-house or with vocational institutions, seminars, courses and workshops on subjects of technical interest, such as industrial safety, management skills and other related studies. The Group also sponsors external training programmes that employees may enroll at their own initiative.

During the year 2015, the Group has implemented a number of initiatives targeting the training and the development of internal staff for TV production in the areas of design and construction of settings for production, make-up and costume design, with a view to ensure that the necessary skills sets are appropriately retained and developed within the Group’s business.

Employee relations In order to achieve a spirit of loyalty from its employees, for decades, the Group has continued to recognise its employees’ achievements and contributions to the Group. In 2015, 12 staff were recognised for their outstanding performance under the Outstanding Employee Award Scheme.

The Group places importance on its collaborative approach to employee relations and always strive to maintain an open dialogue with the staff to understand their needs. To facilitate staff communication with the management team, the Group has set up an ombudsman scheme to address staff suggestions, opinions and grievances more efficiently and effectively. The Group also publishes a monthly newsletter to inform its employees of the latest happenings around the Group and help cultivate a sense of belonging among the staff. The Group’s Benefit and Staff Relations Section organised sports and recreational activities, outings and interest classes for the Group’s employees.

69 Anti-bribery Policy The Company is classified as a public body under the Prevention of Bribery Ordinance (Chapter 201 of the Laws of Hong Kong). Accordingly, the Group’s employees (whether full-time or part-time) are subject to the provisions in the ordinance regarding, in particular, acceptance of advantages. The Group has promulgated purchasing policy and procedures prohibiting solicitation of any advantage by employees from contractors, suppliers or any person in connection with its business. The Group also issues circulars from time to time to remind staff and suppliers of its anticorruption policy.

COMPETITION

Competition for advertising revenue in Hong Kong is highly competitive, with a number of media operators competing through a broad range of media platforms, including free and pay television, newspapers, magazines, radio, websites, social media platforms, cinema, outdoor advertising and other platforms. This competition has intensified as a result of advancements in digital and internet-based technologies. In 2015, the Communications Authority received an application for a free-to-air television service licence from Hong Kong Television Network Limited and from Forever Top (Asia) Limited. On 6 May 2016, Phoenix Hong Kong Television Limited (a subsidiary of Phoenix Satellite Television Holdings Limited (HK stock code: 02008)) submitted an application to the Communications Authority for a free-to-air television service licence with digital terrestrial transmission.

In terms of the Hong Kong TV broadcasting business, other than the Company, PCCW, i-Cable and RTHK are the other three providers of free-to-air television services in Hong Kong. ViuTV (under the PCCW group) entered the Hong Kong free-to-air TV market on 6 April 2016. Fantastic TV (under the i- Cable group) is anticipated to start operation latest by May 2017. RTHK currently broadcasts three FTA television channels.

There are a number of local factors that make it difficult for new players to enter the market in Hong Kong. These include the significant upfront investment needed to build a competitive and efficient customer service infrastructure to attract and retain advertisers and viewers and the requirement to obtain a domestic free television programme service licence which is granted by the Chief Executive in Council of Hong Kong. To obtain and continue to possess such a licence, applicants must adhere to extensive regulations and policies with regard to the ownership and operation of their FTA television channels. Substantial investment and lead time are also required for new entrants to establish content production capabilities to produce, or build relationships with production houses to source, quality programmes.

Notwithstanding the foregoing, the Chief Executive in Council may grant additional domestic free television programme service licences to third parties in the future, which may require the Group to increase both its efforts and costs in order to effectively compete for advertisers and viewers.

In relation to Hong Kong digital new media services, there has been a significant uptake in the number of competitors in Hong Kong, particularly in recent years as high-speed broadband services and powerful mobile devices become more accessible. International social media platforms and video-sharing websites have been the main competitors for advertising revenue. Certain media groups and pay- television operators in Hong Kong have also launched their own web portals and mobile applications to deliver news content and video programmes on-demand. In addition, piracy remains to be an issue and has exacerbated by the proliferation of video portals from the PRC.

During 2015, an OTT service provider (LeEco) and an online operator (Netflix) have commenced services in Hong Kong, offering more programme choices for viewers, along with the many portals and applications carrying video and news content.

70 In relation to programme licensing and distribution as well as overseas pay TV operations, the Group’s business continues to be adversely affected by piracy, including unauthorised Internet downloading and the growing influx of illegal OTT boxes carrying TVB’s programmes.

OBLIGATIONS UNDER TELEVISION BROADCASTING LICENCE

The Group operates under the terms of free-to-air television licence granted by the Hong Kong government which runs for a period of twelve years to 30 November 2027. Under the renewed licence conditions, the Group is required to:

• make a programming and capital investment of HK$6,336 million in total for the six-year period from 2016 to 2021;

• provide at least 12,000 hours of local productions each year;

• provide an additional four hours per week of positive programmes (including current affairs programmes, documentaries, arts and culture programmes and programmes for young persons) on the Group’s digital channels; and

• provide independent local productions on an incremental basis from 20 hours per year in 2016 to 60 hours per year by 2020.

In addition, the Group is granted more flexibility to schedule the broadcast of RTHK programmes and an additional 5 per cent. non-designated language allowance for the English channel. In accordance with the standard procedure, the renewed licence of the Group will be subject to a mid-term review in 2021.

LEGAL PROCEEDINGS

Litigation, Claims and Arbitration The Group is involved in legal proceedings from time to time which arise in the ordinary course of its business, including the Group’s sustained efforts against piracy to protect its business interests.

On 22 August 2016, the Group applied for judicial review at the High Court of Hong Kong against the Communications Authority’s ruling on indirect advertising, arising from the consumption of branded fried chicken during the programme TV Awards Presentation 2015, which was handed down on 24 May 2016. The Group contended that the Communications Authority’s ruling was irrational, unreasonable and contravened the Bill of Rights of Hong Kong.

In August 2016, a default judgment with a permanent injunction order was granted by a USA court against the manufacturer, distributor and several retailers of TV Pad, a pirate TV box, in a joint civil suit by a subsidiary of TVB, CCTV and DISH Network. The defendants were ordered to pay several millions U.S. dollars as compensation and costs to the plaintiffs.

As at the date of this Offering Circular, and save as disclosed above, no member of the Group was engaged in any litigation, claim or arbitration of material importance, nor to the best of the Directors’ knowledge is any litigation, claim or arbitration pending or threatened against any member of the Group that would have a material adverse effect on the Group’s financial condition, results of operations or prospects.

71 DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

The Board of Directors of the Company consists of 11 members of which four are Independent Non- executive Directors and five are Non-executive Directors.

The Directors of the Company as at the date of this Offering Circular are set out below:

Name Age Position DrCharlesCHANKwokKeung...... 61 ChairmanandNon-executiveDirector MarkLEEPoOn...... 60 ExecutiveDirectorandGroupChiefExecutiveOfficer CHEONGShinKeong...... 60 ExecutiveDirector MonaFONG...... 82 Non-executiveDirector AnthonyLEEHsienPin...... 59 Non-executiveDirector CHENWenChi...... 60 Non-executiveDirector ThomasHUITo...... 44 Non-executiveDirector Dr Raymond OR Ching Fai SBS, JP ...... 66 Independent Non-executive Director DrWilliamLOWingYanJP...... 55 IndependentNon-executiveDirector Professor Caroline WANG Chia-Ling ...... 64 Independent Non-executive Director Dr Allan ZEMAN GBM, GBS, JP ...... 68 Independent Non-executive Director

Dr Charles CHAN Kwok Keung, aged 61, was appointed as a Non-executive Director of the Company on 1 April 2011. Dr Chan serves as the Chairman of the Board and the chairman of the Executive Committee since January 2015 and as a member of the Remuneration Committee since February 2015. Dr Chan has over 30 years of international corporate management experience in the construction and the property sectors, as well as in strategic investments. He is the chairman and executive director of ITC Corporation Limited, a company listed on the Hong Kong Stock Exchange. Dr Chan holds an Honorary Degree of Doctor of Laws and a Bachelor’s Degree in Civil Engineering. Dr Chan is a director of both Young Lion and Shaw Brothers Limited, which are shareholders of the Company.

Mark LEE Po On, aged 60, joined the Company on 1 February 2007. Mr Lee was appointed as the Group General Manager in September 2009 and was re-titled as the Group Chief Executive Officer in January 2015. He was appointed as Executive Director in March 2010. Mr Lee also serves as a member of the Executive Committee and the Risk Committee. In addition, he holds directorships in a number of the subsidiaries of the Company. Mr Lee is a non-executive director/independent director of Hanwell Holdings Limited and a non-executive director and independent director of Tat Seng Packing Group Limited, both of which are listed on the Singapore Exchange Limited. Before joining the Group and during the period from late 1987 to January 2007, Mr Lee worked as an executive director of a listed consortium engaged in real estate, hotel, media, entertainment and retail business in Hong Kong and overseas. During 1992 to 1996, Mr Lee also took up the position of executive director and CEO of Asia Television Limited which was a former affiliate of the consortium. During the early period from 1977 to 1987, Mr Lee worked with KPMG, an international accounting firm, in various offices including Hong Kong, Los Angeles and Shanghai. Mr Lee is a fellow member of the Institute of Chartered Accountants in England and Wales and also a member of the Hong Kong Institute of Certified Public Accountants.

CHEONG Shin Keong, aged 60, was appointed as an Executive Director of the Company on 1 January 2015. Mr Cheong serves as a member of the Executive Committee and the Risk Committee. In addition, he holds directorships in a number of the subsidiaries of the Company. Mr Cheong joined the Company as Controller, Marketing & Sales in March 1989 and assumed the duties of General Manager in April 2004. He is responsible for marketing and sales function under Hong Kong TV broadcasting, as well as Hong Kong digital media business. Mr Cheong has extensive experience in the advertising and marketing industry and contributes actively to the professional development of marketing in Hong Kong

72 through leading marketing industry bodies. He is a Fellow and Executive Committee Member of the Hong Kong Management Association as well as a Fellow and Hong Kong Regional Board President of the Chartered Institute of Marketing.

Mona FONG, aged 82, also known as Lee Mong Lan and wife of the late Sir Run Run Shaw, has been a Director of the Company since October 1988. She was appointed as Deputy Chairperson on 25 October 2000, as Acting Managing Director and Managing Director on 31 May 2006 and 1 January 2009 respectively. Ms Fong retired as Deputy Chairperson and Managing Director of the Company on 31 March 2012 and was re-designated as a Non-executive Director of the Company with effect from 1 April 2012. Ms Fong is the chairperson and managing director of the Shaw group of companies. She is also the chairperson of The Shaw Foundation Hong Kong Limited, The Shaw Prize Foundation Limited and The Sir Run Run Shaw Charitable Trust and a member of the Board of Trustees of Shaw College of The Chinese University of Hong Kong.

Anthony LEE Hsien Pin, aged 59, was appointed as a Non-executive Director of the Company on 3 February 2012. Mr Lee was an Alternate Director to Mrs Christina Lee Look Ngan Kwan, his mother, a former Non-executive Director of the Company, between 3 September 2002 and 3 February 2012. Mr Lee serves as a member of the Audit Committee and the Nomination Committee. Mr Lee is a director of Hysan Development Company Limited, a company listed on the Main Board of the Hong Kong Stock Exchange, and a director of Lee Hysan Estate Company, Limited. He is also a director and a substantial shareholder of Australian listed Beyond International Limited. Mr Lee received a Bachelor of Arts Degree from Princeton University and a Master of Business Administration Degree from The Chinese University of Hong Kong.

CHEN Wen Chi, aged 60, was appointed as a Non-executive Director of the Company on 3 February 2012. Mr Chen was appointed as Alternate Director to his wife, Ms Cher Wang Hsiueh Hong, a former Non-executive Director of the Company, between 13 May 2011 and 3 February 2012. He serves as a member of the Executive Committee and holds directorships in certain subsidiaries of the Group. Mr Chen is a director of HTC Corp., as well as the chairman of VIA Technologies, Inc., Xander International Corp. and Chander Electronics Corp., all of which are listed on the Taiwan Stock Exchange Corporation. Mr Chen also holds seats on several industry advisory bodies, and has been a member of the World Economic Forum for over ten years. He holds an MSEE degree from National Taiwan University and an MSCS degree from the California Institute of Technology. Mr Chen is a director of both Young Lion and Shaw Brothers Limited, which are shareholders of the Company.

Thomas HUI To, aged 44, was appointed as a Non-executive Director of the Company on 23 April 2015. He serves as a member of the Executive Committee. Mr Hui is the managing director of Gravity Corporation, a company which focuses on investing and operating in the media sector in Greater China. Prior to joining Gravity Corporation, Mr Hui was an independent non-executive director and the chairman of the audit committee and a member of the remuneration committee of KingSoft Corporation Limited, a leading Chinese internet based software developer, distributor and service provider which is listed on the Main Board of the Hong Kong Stock Exchange. Before that, Mr Hui was the president, chief operation officer and an executive director of GigaMedia Limited, a company listed on the NASDAQ stock market. Prior to that, Mr Hui also was a non-executive director of JC Entertainment Corporation, a Korean online game company listed on the KOSDAQ stock market. He was an executive director in the investment banking division of Goldman Sachs (Asia) L.L.C., Hong Kong, and an investment banker at Merrill Lynch & Co. as well as serving as a management consultant at McKinsey & Company. Mr Hui holds a Master Degree of Engineering in Electrical Engineering from Cornell University and a Bachelor Degree of Science in Electrical Engineering from the University of Wisconsin, Madison. Mr Hui is a director of both Young Lion and Shaw Brothers Limited, which are shareholders of the Company.

73 Dr Raymond OR Ching Fai SBS, JP, aged 66, was appointed as an Independent Non-executive Director of the Company on 6 December 2012. He serves as the chairman of the Remuneration Committee and, the Nomination Committee and the Risk Committee, as well as a member of the Audit Committee. Dr Or is the chairman, an executive director and the chief executive officer of China Strategic Holdings Limited, a vice chairman and an independent non-executive director of G-Resources Group Limited, the chairman and an independent non-executive director of Esprit Holdings Limited, and an independent non-executive director of Chow Tai Fook Jewellery Group Limited, Industrial and Commercial Bank of China Limited, and Regina Miracle International (Holdings) Limited, all of which are listed on the Main Board of the Hong Kong Stock Exchange. Dr Or is also a non-executive director and deputy chairman of Aquis Entertainment Limited, a company listed on the Australian Securities Exchange. Dr Or has rich experiences in insurance, banking and financial services industries. He was formerly the general manager and a director of The Hongkong and Shanghai Banking Corporation Limited, the chairman of HSBC Insurance Limited, the chief executive and vice chairman of Hang Seng Bank Limited, and the chairman of Hang Seng Insurance Company Limited and Hang Seng Bank (China) Limited. He was also the chairman of the Hong Kong Association of Banks. Dr Or graduated from the University of Hong Kong with a Bachelor’s degree in Economics and Psychology. He was awarded a Silver Bauhinia Star from the Hong Kong Special Administrative Region and Honorary University Fellow from the University of Hong Kong in 2009, and is a Justice of the Peace.

Dr William LO Wing Yan JP, aged 55, was appointed as an Independent Non-executive Director of the Company on 11 February 2015. Dr Lo serves as the chairman of the Audit Committee, a member of the Remuneration Committee, the Nomination Committee and the Risk Committee. Dr Lo is the vice chairman of Lovable International Holdings Limited which owns one of the largest toys and children products distribution networks in China. Dr Lo serves as an independent nonexecutive director of CSI Properties Limited, SITC International Holdings Company Limited, Jingrui Holdings Limited and Ronshine China Holdings Limited, all of which are listed on the Hong Kong Stock Exchange. Dr Lo is also an independent non-executive director of Nam Tai Property Inc. which is listed on the New York Stock Exchange. Dr Lo is an experienced executive in the TMT (technology, media and telecommunications) and the consumer sectors. He started his career in McKinsey & Company Inc. as a management consultant and held senior positions in China Unicom, Hongkong Telecom, Citibank HK, I.T Limited and South China Media Group in the past. Dr Lo graduated from Cambridge University with a M.Phil. Degree in Pharmacology and a Ph.D. Degree in Molecular Neuroscience. Dr Lo is the founding governor of the Charles K. Kao Foundation for Alzheimer’s Disease and the ISF Academy as well as the present chairman of Junior Achievement HK.

Professor Caroline WANG Chia-Ling, aged 64, was appointed as an Independent Non-executive Director of the Company on 1 April 2015. She serves as a member of the Audit Committee and the Risk Committee. Professor Wang is Professor of Business Practice at Business School of The Hong Kong University of Science and Technology (‘‘HKUST’’). She was appointed as Adjunct Professor at HKUST in 2003 when she was the highest ranked Asian women executive at IBM globally. She had over 25 years of experiences with IBM in the US and across Asia Pacific. Among the various management roles she held while based in the US, Japan, and Greater China, Professor Wang had been Vice President of Marketing as well as Vice President of Business Transformation and Information Technology. Professor Wang was awarded a Master’s Degree of Science from Harvard University and a Master’sDegreeof Arts from University of Wisconsin, Milwaukee.

74 Dr Allan ZEMAN GBM, GBS, JP, aged 68, was appointed as Independent Non-executive Director of the Company on 1 April 2015. He serves as a member of the Nomination Committee. Dr Zeman is the chairman of Lan Kwai Fong group in Hong Kong. Dr Zeman serves as an independent non-executive director of Wynn Macau Limited, Pacific Century Premium Developments Limited, Sino Land Company Limited, Tsim Sha Tsui Properties Limited, Global Brands Group Holding Limited, all of which are listed on the Main Board of the Hong Kong Stock Exchange. Dr Zeman was the chairman of Hong Kong Ocean Park from July 2003 to June 2014, he is now the honorary advisor to Hong Kong Ocean Park. Dr Zeman serves as the board of director of the Alibaba Entrepreneurs Fund, a member of the board of West Kowloon Cultural District Authority, and is the chairman of its Performing Arts Committee. He is also a board member of the Airport Authority of Hong Kong, the appointed member of the Economic Development Commission of Hong Kong, a member of the General Committee of the Hong Kong General Chamber of Commerce, a governor of the board of governors of Our Hong Kong Foundation and a representative of Hong Kong China to the APEC Business Advisory Council (ABAC). Dr Zeman is also a member of the board of governors of The Canadian Chamber of Commerce in Hong Kong, a member of the Asian Advisory Board of the Richard Ivey School of Business, The University of Western Ontario and the vice patron of the Hong Kong Community Chest. Dr Zeman is a holder of Honorary Doctorate of Laws Degree from The University of Western Ontario, Canada. In 2012, he was awarded Honorary Doctorate Degrees of Business Administration from City University of Hong Kong and HKUST.

SENIOR MANAGEMENT

Desmond CHAN Shu Hung, aged 48, Deputy General Manager (Legal & International Operations) of the Company. Mr Chan joined TVB as General Counsel in May 2010. He was appointed as Assistant General Manager in December 2012 and promoted to his current position in July 2016. Mr Chan holds directorships in a number of the subsidiaries of the Company. Mr Chan has had extensive experience in television and telecommunications industries. He worked at Asia Television Limited from 1994 to 1999, and i-Cable from 1999 to 2010. Mr Chan received Master of Laws degrees from City University of Hong Kong, Renmin University of China and University of Strathclyde of United Kingdom respectively. He is a solicitor of Hong Kong Special Administrative Region (not currently in private practice).

Felix TO Chi Hak, aged 52, Deputy General Manager (Programme & Production) of the Company. Mr To served in TVB Network Vision Limited, an associate of the Company, as CEO between 2012 and 2014, and joined TVB as Programme Controller and Assistant to Group CEO in January 2015. He was appointed as Assistant General Manager in October 2015 and promoted to his current position in July 2016. Mr To has had extensive experience in the media industry in Hong Kong, ranging from newspapers, publishing, advertising, radio, to pay and free TV. Before joining TVB, he was in various management positions overseeing production and programming in Asia Television Limited between 1996 and 1999; i-Cable between 2002 and 2005; and now TV between 2008 and 2012.

Adrian MAK Yau Kee, aged 56, joined TVB as Chief Financial Officer and Company Secretary in November 2004. Mr Mak holds directorships in a number of the subsidiaries of the Company. Prior to his current positions, Mr Mak was CFO of Global Digital Creations Holdings Limited, a company listed on the Growth Enterprise Market of the Hong Kong Stock Exchange, between 2001 and 2003, and CFO of CyberCity Holdings Limited between 2000 and 2001. Between 1992 and 2000, Mr Mak served as an associate director in the Corporate Finance Division at the Hong Kong Securities and Futures Commission. Between 1983 and 1992, Mr Mak worked at various offices of KPMG (Hong Kong, London and Birmingham offices). He is a fellow member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Institute of Chartered Accountants in England and Wales.

75 USE OF PROCEEDS

The net proceeds from the offering of the Notes, after deducting fees, commissions and expenses are estimated to be approximately U.S.$[•] million. The Group will use the net proceeds to fund the expansion of its digital new media business and other capital expenditures, to make strategic investments and for its general corporate purposes.

76 TAXATION

The following summary of certain tax consequences of the purchase, ownership and disposition of the Notes is based upon applicable laws, regulations, rulings and decisions in effect as at the date of this Offering Circular, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Persons considering the purchase of the Notes should consult their own tax advisers concerning the tax consequences of the purchase, ownership and disposition of the Notes.

Prospective investors should consult their professional advisers on the possible tax consequences of buying, holding or selling any Notes under the laws of their country of citizenship, residence or domicile.

Cayman Islands The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Issuer levied by the Government of the Cayman Islands save for certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties.

Hong Kong Withholding tax No withholding tax in Hong Kong is payable on payments of principal or interest in respect of the Notes.

Profits tax Hong Kong profits tax is charged on every person carrying on a trade, profession or business in Hong Kong in respect of assessable profits arising in or derived from Hong Kong from such trade, profession or business.

Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the ‘‘Inland Revenue Ordinance’’) as it is currently applied, Hong Kong profits tax may be charged on revenue profits arising on the sale, disposal or redemption of the Notes where such sale, disposal or redemption is or forms part of a trade, profession or business carried on in Hong Kong.

Interest on the Notes will be subject to Hong Kong profits tax where such interest has a Hong Kong source, and is received by or accrues to:

(a) a financial institution (as defined in the Inland Revenue Ordinance) and arises through or from the carrying on by the financial institution of its business in Hong Kong, notwithstanding that the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; or

(b) a corporation carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong; or

77 (c) a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong and such interest is in respect of the funds of the trade, profession or business.

Stamp duty No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Note.

United States Foreign Account Tax Compliance Act Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a ‘‘foreign financial institution’’ may be required to withhold on certain payments it makes (‘‘foreign passthru payments’’) to persons that fail to meet certain certification, reporting, or related requirements. The issuer may be a foreign financial institution for these purposes. A number of jurisdictions (including Hong Kong) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA (‘‘IGAs’’), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, such withholding would not apply prior to 1 January 2019 and Notes issued on or prior to the date that is six months after the date on which final regulations defining ‘‘foreign passthru payments’’ are filed with the U.S. Federal Register generally would be ‘‘grandfathered’’ for purposes of FATCA withholding unless materially modified after such date (including by reason of a substitution of the issuer). However, if additional notes (as described under ‘‘Terms and Conditions – Further Issues’’) that are not distinguishable from previously issued Notes are issued after the expiration of the grandfathering period and are subject to withholding under FATCA, then withholding agents may treat all Notes, including the Notes offered prior to the expiration of the grandfathering period, as subject to withholding under FATCA. Holders should consult their own tax advisors regarding how these rules may apply to their investment in the Notes.

78 SUBSCRIPTION AND SALE

The Issuer and the Guarantor have entered into a subscription agreement with Credit Suisse (Hong Kong) Limited and Merrill Lynch International (together, the ‘‘Joint Lead Managers’’ and each a ‘‘Joint Lead Manager’’), pursuant to which and subject to certain conditions contained therein, the Issuer agreed to sell to the Joint Lead Managers, and each of the Joint Lead Managers, agreed to subscribe for the aggregate principal amount of the Notes, and the Guarantor agreed, unconditionally and irrevocably, jointly and severally, to guarantee the Notes.

The Subscription Agreement provides that each of the Issuer and the Guarantor will indemnify the Joint Lead Managers against certain liabilities in connection with the offer and sale of the Notes. The Subscription Agreement provides that the obligations of the Joint Lead Managers are subject to certain conditions precedent, and entitles the Joint Lead Managers to terminate it in certain circumstances prior to payment being made to the Issuer.

The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Notes is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult with their own legal advisers as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised.

The Joint Lead Managers and certain of their respective affiliates may have performed certain investment banking and advisory services for the Guarantor and/or their respective affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for the Guarantor and/or their respective affiliates in the ordinary course of their business.

The Joint Lead Managers and certain of their respective affiliates may purchase the Notes and be allocated Notes for asset management and/or proprietary purposes and not with a view to distribution.

Each of the Joint Lead Managers or certain of their respective affiliates may purchase the Notes for its own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to the Notes and/or other securities of the Issuer or the Guarantor or their respective subsidiaries or associates at the same time as the offer and sale of the Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of the Notes to which this Offering Circular relates (notwithstanding that such selected counterparties may also be purchasers of the Notes). Furthermore, investors in the Notes may include entities affiliated with the Group.

General No action has been or will be taken in any jurisdiction by the Joint Lead Managers, the Issuer or the Guarantor that would, or is intended to, permit a public offering of the Notes, or the possession or distribution of this Offering Circular or any amendment or supplement thereto or any offering or publicity material relating to the Notes, in any country or jurisdiction where action for that purpose is required.

79 Accordingly, the Notes should not be offered or sold, directly or indirectly, and neither this Offering Circular nor any other offering material, circular, prospectus, form of application or advertisement in connection with the Notes should be distributed or published in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations and will not impose any obligations on the Issuer, the Guarantor and the Joint Lead Managers.

If a jurisdiction requires that the offering be made by a licensed broker or dealer and any Joint Lead Manager or any affiliate of the Joint Lead Managers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Joint Lead Manager or such affiliate on behalf of the Issuer in such jurisdiction.

United States The Notes and the Guarantee have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. The Notes and the Guarantee are being offered and sold outside of the United States in reliance on Regulation S.

In addition, until 40 days after the commencement of the offering of the Notes and the Guarantee, an offer or sale of Notes and the Guarantee within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the Securities Act.

United Kingdom Each of the Joint Lead Managers has represented and agreed that:

(i) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or each of the Guarantor; and

(ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Hong Kong Each of the Joint Lead Managers has represented and agreed that:

(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than: (a) to ‘‘professional investors’’ as defined in the SFO and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance; and

(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the SFO and any rules made thereunder.

80 PRC Each of the Joint Lead Managers has represented and agreed that the Notes are not being offered or sold, and may not be offered or sold, directly or indirectly, in the People’s Republic of China (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by the securities laws of the People’s Republic of China.

Singapore Each of the Joint Lead Managers has acknowledged that this Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Joint Lead Managers has represented and agreed that it has not offered or sold any Notes or caused such Notes to be made the subject of an invitation for subscription or purchase, and will not offer or sell such Notes or cause such Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of such Notes, whether directly or indirectly, to persons in Singapore other than:

(i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’);

(ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or

(iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interests (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person as defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

81 (5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments), (Shares and Debentures) Regulations 2005 of Singapore.

Japan The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as amended) (the ‘‘Financial Instruments and Exchange Act’’)and, accordingly, each of the Joint Lead Managers has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.

Cayman Islands Each of the Joint Lead Managers has represented and agreed that it has not made and will not make any invitation to the public in the Cayman Islands to subscribe for the Notes and that it has not offered or sold, and will not offer or sell, any Notes in the Cayman Islands.

82 RATINGS

The Notes are not expected to be rated. A rating is not a recommendation to buy, sell or hold any Notes and may be subject to suspension, change or withdrawal at any time by the assigning rating agency.

83 GENERAL INFORMATION

1 Clearing Systems The Notes have been accepted for clearance through Euroclear and Clearstream under Common Code number 149597832. The International Securities Identification Number for the Notes is XS1495978329.

2ListingofNotes Application will be made to the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Notes by way of debt issues to Professional Investors only and such permission is expected to become effective on or about [•] 2016. A confirmation of the eligibility for the listing of the Notes has been received from the Hong Kong Stock Exchange.

3Authorisations The Issuer has obtained all necessary consents, approvals and authorisations in connection with the issue of and performance of its obligations under the Notes. The issue of the Notes was authorised by resolutions of the Board of Directors of the Issuer dated 22 September 2016. The Guarantor has obtained all necessary consents, approvals and authorisations in connection with the provision of the Guarantee and performance of their obligations under the Guarantee. The provision of the Guarantee was authorised by resolutions of the Board of Directors of the Guarantor dated 22 September 2016.

4 No Material Adverse Change There has been no material adverse change in the financial or trading position or prospect of the Issuer since its date of incorporation and the Group since 30 June 2016.

5 Litigation Neither the Issuer nor the Group is involved in any litigation or arbitration proceedings which are material in the context of the Notes nor is the Issuer or the Guarantor aware that any such proceedings are pending or threatened.

6 Available Documents The audited consolidated financial statements of the Company for the year ended 31 December 2015, as well as the Trust Deed, the Agency Agreement and the Memorandum and Articles of Association of the Issuer will be available for inspection, at the specified office of the Guarantor at TVB City, 77 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong during normal business hours, so long as any of the Notes are outstanding.

7Auditor The audited consolidated financial statements of the Company for the years ended 31 December 2015, which are reproduced in this Offering Circular, have been audited by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, as stated in their report reproduced herein. PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, is the independent auditor of the Company.

84 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

References to page numbers in the following financial statements refer to the original page numbers of the financial statements in the applicable annual or interim report and cross-references to page numbers are to such original page numbering.

Unaudited Condensed Consolidated Financial Information of the Guarantor as at and for the six months ended 30 June 2016 Page

ReportonReviewofCondensedConsolidatedInterimFinancialInformation ...... F-2

Condensed Consolidated Statement of Financial Position ...... F-3

CondensedConsolidatedIncomeStatement ...... F-5

CondensedConsolidatedStatementofComprehensiveIncome ...... F-7

CondensedConsolidatedStatementofChangesinEquity ...... F-8

CondensedConsolidatedStatementofCashFlows ...... F-9

NotestotheCondensedConsolidatedInterimFinancialInformation ...... F-10

Audited Consolidated Financial Statements of the Guarantor as at and for the year ended 31 December 2015 Page

Independent Auditor’sReport ...... F-28

ConsolidatedStatementofFinancialPosition ...... F-29

ConsolidatedIncomeStatement ...... F-31

ConsolidatedStatementofComprehensiveIncome...... F-33

ConsolidatedStatementofChangesinEquity ...... F-34

ConsolidatedStatementofCashFlows ...... F-35

NotestotheConsolidatedFinancialStatements ...... F-36

F-1 REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

TO THE BOARD OF DIRECTORS OF TELEVISION BROADCASTS LIMITED (incorporated in Hong Kong with limited liability)

INTRODUCTION We have reviewed the interim financial information set out on pages 20 to 44, which comprises the condensed consolidated statement of financial position of Television Broadcasts Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2016 and the related condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 24 August 2016

Television Broadcasts Limited Interim Report 2016 45

F-2 FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016

30 June 31 December 2016 2015 Note Unaudited Audited HK$’000 HK$’000

ASSETS Non-current assets Property, plant and equipment 7 1,692,565 1,687,364 Investment properties 7 102,147 684,309 Land use rights 7 57,902 59,948 Intangible assets 7 35,716 26,976 Interests in joint ventures 23,242 29,633 Interests in associates 8 156,241 – Available-for-sale financial assets 47,436 47,436 Held-to-maturity financial assets 9 306,552 – Deferred income tax assets 16,277 37,299 Loan and receivables 120,429 142,505 Prepayments 10 30,646 55,529

Total non-current assets 2,589,153 2,770,999

Current assets Programmes, film rights and movies 776,771 739,655 Stocks 47,785 12,449 Trade and other receivables, prepayments and deposits 10 1,714,108 1,866,517 Tax recoverable 46,806 19,642 Restricted cash 1,873 1,825 Bank deposits maturing after three months 85,112 691,387 Cash and cash equivalents 2,492,894 2,125,975 Non-current asset held for sale 19(a) 590,012 884,854

Total current assets 5,755,361 6,342,304

Total assets 8,344,514 9,113,303

EQUITY Equity attributable to equity holders of the Company Share capital 11 664,044 664,044 Other reserves 12 13,587 (22,905) Retained earnings 6,462,170 7,039,291

7,139,801 7,680,430 Non-controlling interests 171,803 155,743

Total equity 7,311,604 7,836,173

LIABILITIES Non-current liabilities Borrowings – 234,850 Deferred income tax liabilities 289,686 321,776

Total non-current liabilities 289,686 556,626

20 Television Broadcasts Limited Interim Report 2016

F-3 30 June 31 December 2016 2015 Note Unaudited Audited HK$’000 HK$’000

Current liabilities Trade and other payables and accruals 13 731,632 686,197 Current income tax liabilities 11,592 34,307

Total current liabilities 743,224 720,504

Total liabilities 1,032,910 1,277,130

Total equity and liabilities 8,344,514 9,113,303

The notes on pages 27 to 44 form an integral part of this condensed consolidated financial information.

Television Broadcasts Limited Interim Report 2016 21

F-4 FINANCIAL INFORMATION

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2016

Unaudited Six months ended 30 June Note 2016 2015 HK$’000 HK$’000

Continuing operations Revenue 6 1,963,809 2,030,706 Cost of sales (961,400) (904,466)

Gross profit 1,002,409 1,126,240 Other revenues 14 39,510 38,563 Selling, distribution and transmission costs (265,363) (270,325) General and administrative expenses (450,836) (395,648) Other gains/(losses), net 313 (35,043)

Operating profit 326,033 463,787 Finance costs (947) (3,484) Share of (losses)/profits of: Joint ventures (3,087) 6,735 Associates (4,126) (32,766) Impairment loss on loan to and amounts due from an associate (14,575) (654,106)

Profit/(loss) before income tax 15 303,298 (219,834) Income tax expense 16 (54,301) (65,005)

Profit/(loss) for the period from continuing operations 248,997 (284,839)

Discontinued operations Gain on disposal of a joint venture 19(b) 78,028 – Deferred tax on disposal of a joint venture (7,272) – Profit for the period from discontinued operations 19(b) – 83,152 Tax on dividend distributed prior to completion of disposal 19(b) – (52,726) Gain on disposal of discontinued operations 19(b) – 1,395,770

70,756 1,426,196

Profit for the period 319,753 1,141,357

22 Television Broadcasts Limited Interim Report 2016

F-5 …… Unaudited Six months ended 30 June Note 2016 2015 HK$’000 HK$’000

Profit/(loss) attributable to: Equity holders of the Company – Continuing operations 230,970 (278,158) – Discontinued operations 70,756 1,426,196

301,726 1,148,038

Non-controlling interests – Continuing operations 18,027 (6,681)

319,753 1,141,357

Earnings/(loss) per share (basic and diluted) for profit/(loss) attributable to equity holders of the Company during the period – Continuing operations 17 HK$0.53 (HK$0.64) – Discontinued operations 17 HK$0.16 HK$3.26

HK$0.69 HK$2.62

The notes on pages 27 to 44 form an integral part of this condensed consolidated financial information.

Television Broadcasts Limited Interim Report 2016 23

F-6 FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2016

Unaudited Six months ended 30 June 2016 2015 HK$’000 HK$’000

Profit for the period 319,753 1,141,357

Other comprehensive income: Item that may be reclassified to profit or loss: Currency translation differences 30,367 53,882 Reclassification adjustment to profit or loss on disposal of a joint venture 1,311 – Reclassification adjustment to profit or loss on disposal of subsidiaries – 7,531

Other comprehensive income for the period, net of tax 31,678 61,413

Total comprehensive income for the period 351,431 1,202,770

Total comprehensive income for the period attributable to: Equity holders of the Company – Continuing operations 264,615 (243,001) – Discontinued operations 70,756 1,452,401

335,371 1,209,400

Non-controlling interests – Continuing operations 16,060 (6,630)

Total comprehensive income for the period 351,431 1,202,770

The notes on pages 27 to 44 form an integral part of this condensed consolidated financial information.

24 Television Broadcasts Limited Interim Report 2016

F-7 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2016

Unaudited

Attributable to equity holders of the Company

Non- Share Other Retained controlling Total Note capital reserves earnings Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Balance at 1 January 2015 664,044 159,241 7,702,134 8,525,419 178,927 8,704,346

Comprehensive income: Profit for the period – – 1,148,038 1,148,038 (6,681) 1,141,357 Other comprehensive income: Currency translation differences – Group – 53,767 – 53,767 51 53,818 – Joint ventures – 64 – 64 – 64 Reclassification adjustment to profit or loss on disposal of subsidiaries – 7,531 – 7,531 – 7,531

Total comprehensive income, net of tax, for the period ended 30 June 2015 – 61,362 1,148,038 1,209,400 (6,630) 1,202,770

Transactions with owners: Transferred to legal reserve 12 – 3,882 (3,882) – – – Disposal of subsidiaries 12 – (156,016) 156,016 – – – 2014 final and special dividends paid 18 – – (1,883,400) (1,883,400) – (1,883,400)

Total contributions by and distributions to owners – (152,134) (1,731,266) (1,883,400) – (1,883,400) Loss previously in reserve released to profit or loss on disposal of subsidiaries – 1,055 – 1,055 – 1,055

Total transactions with owners – (151,079) (1,731,266) (1,882,345) – (1,882,345)

Balance at 30 June 2015 664,044 69,524 7,118,906 7,852,474 172,297 8,024,771

Balance at 1 January 2016 664,044 (22,905) 7,039,291 7,680,430 155,743 7,836,173

Comprehensive income: Profit for the period – – 301,726 301,726 18,027 319,753 Other comprehensive income: Currency translation differences – Group – 31,739 – 31,739 (1,967) 29,772 – Joint ventures – 228 – 228 – 228 – Associates – 367 – 367 – 367 Reclassification adjustment to profit or loss on disposal of a joint venture – 1,311 – 1,311 – 1,311

Total comprehensive income, net of tax, for the period ended 30 June 2016 – 33,645 301,726 335,371 16,060 351,431

Transactions with owners: Transferred to legal reserve 12 – 2,847 (2,847) – – – 2015 final dividends paid 18 – – (876,000) (876,000) – (876,000)

Total transactions with owners – 2,847 (878,847) (876,000) – (876,000)

Balance at 30 June 2016 664,044 13,587 6,462,170 7,139,801 171,803 7,311,604

The notes on pages 27 to 44 form an integral part of this condensed consolidated financial information.

Television Broadcasts Limited Interim Report 2016 25

F-8 FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2016

Unaudited Six months ended 30 June Note 2016 2015 HK$’000 HK$’000

Cash flows from operating activities Cash generated from operations 20 590,527 682,986 Interest paid (1,020) (3,718) Hong Kong tax paid (86,527) (36,990) Overseas tax paid (35,863) (63,958)

Net cash generated from operating activities 467,117 578,320

Cash flows from investing activities Purchases of property, plant and equipment and investment properties (127,993) (123,089) Purchases of intangible assets (8,740) – Investments in an associate (140,000) – Fund advanced to an associate (20,000) – Loan repayment from a joint venture 2,966 – Loan repayment from a former joint venture 23,647 – Decrease/(increase) in bank deposits maturing after three months 606,275 (768,136) Net cash inflow from disposal of subsidiaries – 978,642 Proceeds from disposal of a joint venture 1,020,503 – Expenses incurred on disposal of a joint venture (55,933) – Purchases of held-to-maturity financial assets (304,711) – Proceeds from sale of property, plant and equipment 975 539 Interest received 21,189 32,921

Net cash generated from investing activities 1,018,178 120,877

Cash flows from financing activities Proceeds from bank loans – 398,960 Repayments of bank loans (237,967) (398,960) Repayment of a loan due to a joint venture – (63,190) Increase in restricted cash (48) (6) Dividends paid to equity holders of the Company (876,000) (1,883,400)

Net cash used in financing activities (1,114,015) (1,946,596)

Net increase/(decrease) in cash and cash equivalents 371,280 (1,247,399) Cash and cash equivalents at 1 January 2,125,975 3,195,869 Effect of foreign exchange rate changes (4,361) 6,014

Cash and cash equivalents at 30 June 2,492,894 1,954,484

The notes on pages 27 to 44 form an integral part of this condensed consolidated financial information.

26 Television Broadcasts Limited Interim Report 2016

F-9 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

1 GENERAL INFORMATION

Television Broadcasts Limited (“Company”) and its subsidiaries are collectively referred to as the Group in the condensed consolidated financial information. The principal activities of the Company are terrestrial television broadcasting, together with programme production and other television-related activities.

The Company is a limited liability company incorporated and listed in Hong Kong. Its registered office is at TVB City, 77 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong.

This condensed consolidated financial information is presented in Hong Kong dollars, unless otherwise stated. This condensed consolidated financial information was approved for issue on 24 August 2016.

The financial information relating to the year ended 31 December 2015 that is included in the condensed consolidated interim financial information for the six months ended 30 June 2016 as comparative information does not constitute the Company’s statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows:

The Company has delivered the financial statements for the year ended 31 December 2015 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (Cap. 622).

The Company’s auditor has reported on those financial statements. The auditor’s report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance (Cap. 622).

This interim financial information has not been audited, but has been reviewed by the Audit Committee of the Board, and by PricewaterhouseCoopers, our Auditor, in accordance with the Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

2 BASIS OF PREPARATION

This unaudited condensed consolidated financial information for the six months ended 30 June 2016 has been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the HKICPA. The unaudited condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which were prepared in accordance with Hong Kong Financial Reporting Standards.

Television Broadcasts Limited Interim Report 2016 27

F-10 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

3 ACCOUNTING POLICIES

Except as described below, the accounting policies applied and methods of computation used in the preparation of these interim accounts are consistent with those used in the 2015 annual financial statements.

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available for sale. Held-to-maturity financial assets are included in non- current assets, except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets.

New or revised standards, amendments to standards and interpretations effective for the financial year ending 31 December 2016 are not expected to have a material impact on the Group.

The Group has not early adopted new or revised standards, amendments to standards and interpretations that have been issued but are not yet effective for the accounting period ending 31 December 2016. The Group is in the process of making an assessment of the likely impact of these new or revised standards, amendments to standards and interpretations to the Group’s results and financial position in the period of initial application.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

4 ESTIMATES

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.

5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

5.1 Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk.

The interim condensed consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2015.

There have been no changes in any risk management policies since the year end.

28 Television Broadcasts Limited Interim Report 2016

F-11 5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)

5.2 Fair value estimation Financial instruments that are measured in the condensed consolidated statement of financial position at fair value are analysed by below valuation method. The different levels have been defined as follows:

(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

(b) Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and

(c) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

As at 30 June 2016 and 31 December 2015, the fair value measurement of the Group’s available-for-sale financial assets is classified in level 3.

There was no transfer between categories during the period.

6 SEGMENT INFORMATION The Group Chief Executive Officer is the Group’s chief operating decision maker. The Group reports its operating segments based on the internal reports reviewed by the Group Chief Executive Officer for the purposes of allocating resources to the segments and assessing their performance.

The Group has six reportable segments as follows:

(a) Hong Kong TV broadcasting – broadcasting of television programmes on Terrestrial TV platform, broadcasting of commercials on terrestrial and pay TV platforms and production of programmes

(b) Hong Kong digital new media business – provision of OTT service, and provision of contents to mobile devices and website portals

(c) Programme licensing and distribution – distribution of television programmes and channels to telecast, video and new media operators

(d) Overseas pay TV operations – provision of pay television services to subscribers in USA, Europe and Australia

(e) Channel operations – compilation and distribution of television channels in Mainland China, Malaysia, Singapore and other countries

(f) Other activities – magazine publications, music entertainment, property investment and other related services

The segments are managed separately according to the nature of products and services provided. Segment performance is evaluated based on operating results which in certain respects, as explained in the table below, is measured differently from the profit before income tax in the condensed consolidated financial information.

Revenue comprises advertising income net of agency deductions, licensing income, subscription income, as well as other income from sales of decoders, sales of magazines, programmes/commercial production income, management fee income, facility rental income and other service fee income.

The Group’s inter-segment transactions mainly consist of licensing of programmes and film rights and provision of services. Licensing of programmes and film rights were entered into at similar terms as that contracted with third parties. The services provided are charged on a cost plus basis or at similar terms as that contracted with third parties.

Television Broadcasts Limited Interim Report 2016 29

F-12 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

6 SEGMENT INFORMATION (continued) An analysis of the Group’s revenue and results for the period by operating segment is as follows:

Hong Kong Programme Hong Kong digital licensing Overseas TV new media and pay TV Channel Other broadcasting business distribution operations operations activities Elimination Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Continuing operations Six months ended 30 June 2016 Revenue External customers 1,215,813 81,728 472,998 84,286 42,528 66,456 – 1,963,809 Inter-segment 18,898 1,828 59,233 – 2,974 8,607 (91,540) –

Total 1,234,711 83,556 532,231 84,286 45,502 75,063 (91,540) 1,963,809

Reportable segment profit/(loss) 40,328 (18,303) 286,944 (18,299) 2,290 17,551 – 310,511

Interest income 14,011 108 2,180 24 – 1,640 – 17,963 Finance costs – – – – – (947) – (947) Depreciation and amortisation (126,145) (12,391) (3,576) (1,902) (395) (10,645) – (155,054)

Additions to non-current assets# 99,121 27,090 9,432 295 6 789 – 136,733

Six months ended 30 June 2015 Revenue External customers 1,364,398 70,403 416,085 93,269 52,277 34,274 – 2,030,706 Inter-segment 21,214 1,876 66,612 17 2,947 7,812 (100,478) –

Total 1,385,612 72,279 482,697 93,286 55,224 42,086 (100,478) 2,030,706

Reportable segment profit/(loss) before impairment loss 240,244 13,008 222,681 (21,237) 12,853 (7,246) – 460,303 Impairment loss on loan to and trade receivables from an associate (654,106) – – – – – – (654,106)

Reportable segment (loss)/profit after impairment loss (413,862) 13,008 222,681 (21,237) 12,853 (7,246) – (193,803)

Interest income 25,319 368 5,023 179 – 1,059 – 31,948 Finance costs – – – – – (3,484) – (3,484) Depreciation and amortisation (119,578) (6,852) (3,086) (2,490) (79) (7,220) – (139,305)

Additions to non-current assets# 93,328 9,611 6,531 556 3,820 313 – 114,159

# Non-current assets comprise property, plant and equipment, investment properties, and land use rights and intangible assets (including prepayments related to capital expenditure, if any).

30 Television Broadcasts Limited Interim Report 2016

F-13 6 SEGMENT INFORMATION (continued) A reconciliation of reportable segment profit/(loss) to profit/(loss) before income tax is provided as follows:

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Reportable segment profit/(loss) 310,511 (193,803) Share of (losses)/profits of joint ventures (3,087) 6,735 Share of losses of associates (4,126) (32,766)

Profit/(loss) before income tax 303,298 (219,834)

An analysis of the Group’s revenue from external customers for the period by geographical location is as follows:

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Hong Kong 1,350,525 1,464,494 Malaysia and Singapore 265,583 270,950 Mainland China 195,955 147,155 USA and Canada 66,100 71,358 Australia 26,226 31,428 Vietnam 23,876 23,950 Europe 5,635 4,564 Other countries 29,909 16,807

1,963,809 2,030,706

Television Broadcasts Limited Interim Report 2016 31

F-14 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

7 CAPITAL EXPENDITURE

Intangible assets

Software Property, development plant and Investment Land use Goodwill cost equipment properties rights HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 As at 1 January 2015 115,643 – 3,068,165 10,202 66,378 Additions – – 111,254 – – Disposals – – (433) – – Transfer – – (728,586) 728,586 – Disposal of subsidiaries (116,719) – (569,983) – – Depreciation and amortisation (Note 15) – – (151,584) (4,439) (1,636) Exchange differences 1,076 – 26,026 5,244 15

As at 30 June 2015 – – 1,754,859 739,593 64,757

As at 1 January 2016 – 26,976 1,687,364 684,309 59,948 Additions – 8,740 152,431 445 – Disposals – – (1,774) – – Transfer to non-current asset held for sale (Note 19(a)) – – – (590,012) – Depreciation and amortisation (Note 15) – – (145,418) (8,091) (1,545) Exchange differences – – (38) 15,496 (501)

As at 30 June 2016 – 35,716 1,692,565 102,147 57,902

At 31 December 2015, investment properties with net book value of HK$583,701,000 were pledged to secure a bank loan granted to a subsidiary of the Group.

32 Television Broadcasts Limited Interim Report 2016

F-15 8 INTERESTS IN ASSOCIATES

30 June 31 December 2016 2015 HK$’000 HK$’000

Investment costs (note) 876,813 736,813 Fund advanced to an associate 20,000 – Less: accumulated share of losses (740,572) (736,813)

156,241 –

Loan to an associate 719,212 719,212 Interest receivable from an associate 25,114 23,234

744,326 742,446

Less: share of losses in excess of investment costs (151,035) (151,035) Less: provision for impairment loss (593,291) (591,411)

156,241 –

Note:

During the period, the Group has invested HK$140,000,000 in an associate holding an investment in Shaw Brothers Holdings Limited, a Hong Kong listed company engaging in, inter-alia, movie and entertainment related businesses.

9 HELD-TO-MATURITY FINANCIAL ASSETS

30 June 31 December 2016 2015 HK$’000 HK$’000

Bond securities at amortised costs: Unlisted 21,434 – Listed in Hong Kong 159,804 – Listed in other countries 125,314 –

306,552 –

The interests of the bond securities are ranging from 3.55% to 6.375% per annum and the maturity dates are ranging from 18 January 2018 to 18 August 2025. They are denominated in Hong Kong dollars and US dollars.

Television Broadcasts Limited Interim Report 2016 33

F-16 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

10 TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS

30 June 31 December 2016 2015 HK$’000 HK$’000

Non-current Prepayments related to capital expenditure 30,646 55,529

Current Trade receivables from: Joint ventures 145 1,655 Associates 628,789 615,251 Related parties 38,533 47,162 Third parties (note) 1,130,712 1,381,240

1,798,179 2,045,308 Less: provision for impairment loss on receivables from: Associates (627,826) (615,131) Third parties (116,848) (104,622) Amounts due from associates – 131 Other receivables, prepayments and deposits 660,603 540,831

1,714,108 1,866,517

1,744,754 1,922,046

Note:

The Group operates a controlled credit policy and allows an average credit period of forty to sixty days to the majority of the Group’s customers who satisfy the credit evaluation of the Group. Cash on delivery, advance payments or bank guarantees are required from other customers of the Group.

At 30 June 2016 and 31 December 2015, the ageing of trade receivables based on invoice date including trading balances due from joint ventures, associates and related parties was as follows:

30 June 31 December 2016 2015 HK$’000 HK$’000

Current 401,890 478,583 1-2 months 256,573 333,377 2-3 months 174,088 193,230 3-4 months 116,175 179,911 4-5 months 32,875 94,878 Over 5 months 816,578 765,329

1,798,179 2,045,308

34 Television Broadcasts Limited Interim Report 2016

F-17 11 SHARE CAPITAL

Number of Share shares capital (thousands) HK$’000

Ordinary shares, issued and fully paid: At 1 January 2015 and 30 June 2015 and 1 January 2016 and 30 June 2016 438,000 664,044

12 OTHER RESERVES

General Capital Legal Translation reserve reserve reserve reserve Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Balance at 1 January 2015 70,000 (191) 187,936 (98,504) 159,241 Currency translation differences: – Group – – – 53,767 53,767 – Joint ventures – – – 64 64 Transferred from retained earnings – – 3,882 – 3,882 Reclassification adjustment to profit or loss on disposal of subsidiaries – – – 7,531 7,531 Disposal of subsidiaries – (864) (155,152) – (156,016) Loss previously in reserve released to profit or loss on disposal of subsidiaries – 1,055 – – 1,055

Balance at 30 June 2015 70,000 – 36,666 (37,142) 69,524

Balance at 1 January 2016 70,000 – 36,666 (129,571) (22,905) Currency translation differences: – Group – – – 31,739 31,739 – Joint ventures – – – 228 228 – Associates – – – 367 367 Transferred from retained earnings – – 2,847 – 2,847 Reclassification adjustment to profit or loss on disposal of a joint venture – – – 1,311 1,311

Balance at 30 June 2016 70,000 – 39,513 (95,926) 13,587

Television Broadcasts Limited Interim Report 2016 35

F-18 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

13 TRADE AND OTHER PAYABLES AND ACCRUALS

30 June 31 December 2016 2015 HK$’000 HK$’000

Trade payables to: Joint ventures – 5,123 Associates 2,970 7,205 Related parties 8,197 5,243 Third parties 78,144 131,995

89,311 149,566 Receipts in advance, deferred income and customers’ deposits 237,250 121,221 Provision for employee benefits and other expenses 127,922 163,906 Accruals and other payables 277,149 251,504

731,632 686,197

At 30 June 2016 and 31 December 2015, the ageing of trade payables based on invoice date including trading balances due to joint ventures, associates and related parties was as follows:

30 June 31 December 2016 2015 HK$’000 HK$’000

Current 61,869 117,911 1-2 months 20,792 17,853 2-3 months 3,744 7,180 3-4 months 683 1,718 4-5 months 73 1,211 Over 5 months 2,150 3,693

89,311 149,566

36 Television Broadcasts Limited Interim Report 2016

F-19 14 OTHER REVENUES

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Interest income 17,963 31,948 Others 21,547 6,615

39,510 38,563

15 PROFIT/(LOSS) BEFORE INCOME TAX

The following items have been charged to the profit/(loss) before income tax during the period:

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Continuing operations Depreciation (Note 7) 153,509 137,669 Amortisation of land use rights (Note 7) 1,545 1,636 Costs of programmes and film rights 713,450 657,523 Costs of other stocks 11,704 11,841 Net exchange (gains)/losses (313) 35,043

Discontinued operations Depreciation (Note 7) – 18,354 Costs of programmes and film rights – 35,251 Costs of other stocks – 4,073

Television Broadcasts Limited Interim Report 2016 37

F-20 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

16 INCOME TAX EXPENSE

Hong Kong and overseas profits taxes have been provided at the rate of 16.5% (2015: 16.5%) and at the rates of taxation prevailing in the countries in which the Group operates respectively. Income tax expense is recognised based on the best estimate of the weighted average annual income tax rate expected for the full financial year.

The amount of income tax charged to the condensed consolidated income statement represents:

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Current income tax: – Hong Kong 39,060 75,518 – Overseas 33,233 8,181 – Under/(over) provisions in prior periods 218 (8,603)

Deferred income tax: – Origination and reversal of temporary differences (18,210) (10,091)

54,301 65,005

17 EARNINGS/(LOSS) PER SHARE

The earnings/(loss) per share is calculated based on the Group’s profit/(loss) attributable to equity holders of the Company and 438,000,000 ordinary shares in issue throughout the six months ended 30 June 2016 and 2015. No fully diluted earnings per share is presented as there were no potentially dilutive shares outstanding.

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Profit/(loss) attributable to equity holders of the Company – Continuing operations 230,970 (278,158) – Discontinued operations 70,756 1,426,196

301,726 1,148,038

18 DIVIDENDS

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Interim dividend, declared after the end of the reporting period, of HK$0.60 (2015: HK$0.60) per ordinary share 262,800 262,800

A final dividend of HK$2.00 per ordinary share for the year ended 31 December 2015 amounting to HK$876,000,000 was approved by shareholders on 25 May 2016 and paid on 10 June 2016.

38 Television Broadcasts Limited Interim Report 2016

F-21 19 NON-CURRENT ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS

(a) Non-current asset held for sale As more fully explained in the Group’s announcement dated 29 July 2016, certain investment properties have been disposed of subsequent to the end of the reporting period. Accordingly, the carrying value of the investment properties amounting to HK$590,012,000 has been reclassified as “Non-current asset held for sale” in the condensed consolidated statement of financial position to reflect the Group’s intention of disposing the asset at the end of the reporting period.

On 6 May 2015, the Group disposed of 53% equity interest in Liann Yee Production Co., Ltd. and its subsidiaries (“Liann Yee Group”) (“First Disposal”). Post completion of the First Disposal, the Group entered into an agreement on 4 January 2016, pursuant to which the Group agreed to dispose of the remaining 47% equity interest in Liann Yee Group (“Second Disposal”). Accordingly, the carrying value of the remaining 47% interest in Liann Yee Group of HK$884,854,000 was reclassified as “Non-current asset held for sale” in the condensed consolidated statement of financial position as at 31 December 2015.

(b) Analysis of the results of discontinued operations The results of the Liann Yee Group for the six months ended 30 June 2015 together with related gain on the First Disposal was presented as discontinued operations in the condensed consolidated income statement as analysed below:

Six months ended 30 June 2015 HK$’000 Revenue 276,081 Cost of sales (134,684)

Gross profit 141,397 Other revenues 2,890 Selling, distribution and transmission costs (29,831) General and administrative expenses (31,202) Other losses, net (468) Finance costs (1,896)

Profit before income tax 80,890 Income tax credit 2,262

Profit after income tax 83,152 Tax on dividend distributed prior to completion of disposal of 53% equity interest (52,726) Gain on disposal of subsidiaries 1,395,770

Profit for the period from discontinued operations 1,426,196

Profit attributable to: – Equity holders of the Company 1,426,196

On 10 March 2016, upon the completion of the Second Disposal, a disposal gain of HK$78,028,000 was recorded based on the consideration received of HK$1,020,503,000 less the carrying value of Liann Yee Group and transaction costs related to the disposal.

Television Broadcasts Limited Interim Report 2016 39

F-22 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

19 NON-CURRENT ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS (continued)

Six months ended 30 June 2015 HK$’000 Net cash inflow from operating activities 121,736 Net cash inflow from investing activities 1,183,480 Net cash outflow from financing activities (553,086)

Net cash inflow from discontinued operations 752,130

20 NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Reconciliation of profit before income tax to cash generated from operations:

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Profit before income tax including discontinued operations 381,326 1,256,826 Adjustments for: Depreciation and amortisation 155,054 157,659 Defined benefit plans – (277) Provision for impairment loss on loan to an associate – 499,803 Provision for impairment loss on trade and other receivables 45,572 155,324 Reversal of provision for impairment loss on trade receivables (18,811) – Share of losses of associates 4,126 32,766 Share of losses/(profits) of joint ventures 3,087 (6,735) Gain on disposal of subsidiaries – (1,395,770) Gain on disposal of a joint venture (78,028) – Expenses incurred on disposal of subsidiaries – (32,380) Gain on disposal of property, plant and equipment 799 (106) Interest income (17,963) (32,810) Finance costs 947 3,723 Exchange differences 19,085 25,638

495,194 663,661 Increase in programmes, film rights, movies and stocks (72,452) (84,474) Decrease in trade and other receivables, prepayments and deposits 122,277 163,210 Increase/(decrease) in trade and other payables and accruals 45,508 (59,411)

Cash generated from operations 590,527 682,986

40 Television Broadcasts Limited Interim Report 2016

F-23 21 FINANCIAL GUARANTEES

The amounts of financial guarantees are as follows:

30 June 31 December 2016 2015 HK$’000 HK$’000

Guarantees for banking facilities granted to an investee company 7,798 7,263

22 CAPITAL COMMITMENTS

The amounts of commitments for property, plant and equipment are as follows:

30 June 31 December 2016 2015 HK$’000 HK$’000

Contracted but not provided for 183,382 166,297

23 OBLIGATIONS UNDER TELEVISION BROADCASTING LICENCE

The Company operates under the terms of a domestic free television programme service licence granted by the Government of the HKSAR (“Government”) which runs for a period of twelve years to 30 November 2027. Under the renewed licence conditions, the Company is required to (i) make a programming and capital investment of HK$6,336 million in total for the six-year period from 2016 to 2021; (ii) provide at least 12,000 hours of local productions each year; (iii) provide an additional four hours per week of positive programmes (including current affairs programmes, documentaries, arts and culture programmes and programmes for young persons) on the Company’s digital channels; (iv) provide independent local productions on an incremental basis from 20 hours per year in 2016 to 60 hours per year by 2020. In addition, the Company is granted more flexibility to schedule the broadcast of RTHK programmes and an additional 5% non-designated language allowance for the English channel. In accordance with the standard procedure, the renewed licence of the Company will be subject to a mid-term review in 2021.

Television Broadcasts Limited Interim Report 2016 41

F-24 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

24 SIGNIFICANT RELATED PARTY TRANSACTIONS

(a) Transactions with related parties The following is a summary of significant related party transactions during the period carried out by the Group in the normal course of its business:

Six months ended 30 June Note 2016 2015 HK$’000 HK$’000

Sales of services: Joint ventures Rental income (i) 5,240 4,278 Technical and facilities services fees (i) 1,480 968

Associate Programmes and channel licensing fees (ii) 361 29,606 Technical and operational service fees (ii) 6,120 6,120 Rental income and related charges (ii) 3,999 3,999 Service fee income (ii) 4,365 – Others (ii) 858 1,047

Other related party Programmes and channel licensing fees (iii) 99,080 123,773 Advertising consultancy fees (iii) 11,631 13,506

133,134 183,297

Purchases of services: Joint venture Programmes and channel licensing fees (i) (12,736) (10,315)

Associate Playback and uplink service fees (ii) (15,276) (15,359) Graphic service fees (ii) – (1,250) Others (ii) (2,187) (328)

Other related party Project management fees (iv) – (1,621)

(30,199) (28,873)

Notes:

(i) The fees were received from/(paid to) Liann Yee Production Co., Ltd. (“Liann Yee”), a joint venture of the Group since 6 May 2015 upon the Group’s disposal of 53% equity interest in Liann Yee. Liann Yee ceased to be a joint venture upon the completion of the disposal on the remaining 47% equity interest on 10 March 2016.

(ii) The fees were received from/(paid to) TVB Network Vision Limited (“TVB Network Vision”), an associate of the Group.

42 Television Broadcasts Limited Interim Report 2016

F-25 24 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(a) Transactions with related parties (continued) Notes:

(iii) The fees were received from MEASAT Broadcast Network Systems Sdn. Bhd., a fellow subsidiary of the non-controlling shareholder of non wholly-owned subsidiaries of the Company.

(iv) The fees were paid to ITC Properties Management Limited. The entity is controlled by a person who has significant influence over the Company, and a close member of that person’s family.

The Company supplies channel contents to TVB Network Vision in exchange of its advertising revenue attributable to the relevant channels.

The fees received from/(paid to) related parties are based upon mutually agreed terms and conditions.

(b) Key management compensation

Six months ended 30 June 2016 2015 HK$’000 HK$’000

Salaries and other short-term employee benefits 11,247 10,183

30 June 31 December 2016 2015 HK$’000 HK$’000

Fund advanced to joint ventures Beginning of the period/year 54,398 41,981 Fund advanced – 13,044 Exchange differences (153) (627)

End of the period/year 54,245 54,398

Loan to joint ventures Beginning of the period/year 145,798 16,696 Transfer to loan and receivables (note (i)) (142,505) – Loan provided – 300,902 Interest charged – 3,735 Loan repayment (2,966) (155,863) Interest received (338) (2,488) Exchange differences 11 (17,184)

End of the period/year – 145,798

Television Broadcasts Limited Interim Report 2016 43

F-26 FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION

24 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

30 June 31 December 2016 2015 HK$’000 HK$’000

Loan to an associate (note (ii)) Beginning of the period/year 742,446 738,872 Interest charged 1,880 3,574

End of the period/year 744,326 742,446

Fund advanced to an associate Beginning of the period/year – – Fund advanced 20,000 –

End of the period/year 20,000 –

Notes:

(i) The amount represented loan to and interest receivables from Liann Yee Group.

(ii) The loan to the associate carries interest at the rate of 1-month HIBOR plus 0.25% per annum. At 30 June 2016, a provision for impairment loss of the loan to an associate of HK$593,291,000 (31 December 2015: HK$591,411,000) had been made (Note 8).

25 EVENT SUBSEQUENT TO THE END OF THE REPORTING PERIOD

Subsequent to the end of the reporting period, on 29 July 2016, the Group entered into an agreement, pursuant to which the Group agreed to dispose of Neihu building in Taiwan (“Disposal”) at a consideration of NT$4,000,000,000 (representing approximately HK$961,200,000). The Group will realise a gain from the Disposal of approximately NT$1,153,236,000 (equivalent to approximately HK$277,123,000) before provision for deferred tax liabilities in relation to the withholding tax on the distributable profits attributable to the Disposal in the sum of approximately NT$230,647,000 (equivalent to approximately HK$55,425,000). This building has been classified as “Non-current asset held for sale” in the condensed consolidated statement of financial position.

44 Television Broadcasts Limited Interim Report 2016

F-27 INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF TELEVISION BROADCASTS LIMITED (incorporated in Hong Kong with limited liability) We have audited the consolidated financial statements of Television Broadcasts Limited (the “Company”) and its subsidiaries set out on pages 86 to 159, which comprise the consolidated statement of financial position as at 31 December 2015, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and its subsidiaries as at 31 December 2015, and of their financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the Hong Kong Companies Ordinance.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 23 March 2016

Television Broadcasts Limited Annual Report 2015 85

F-28 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2015

Note 2015 2014 HK$’000 HK$’000

ASSETS Non-current assets Property, plant and equipment 6 1,687,364 3,068,165 Investment properties 7 684,309 10,202 Land use rights 8 59,948 66,378 Intangible assets 9 26,976 115,643 Interests in joint ventures 10 29,633 44,909 Interests in associates 11 – 530,786 Available-for-sale financial assets 12 47,436 3 Deferred income tax assets 22 37,299 23,529 Loan and receivables 13 142,505 – Prepayments 15 55,529 39,893

Total non-current assets 2,770,999 3,899,508

Current assets Programmes, film rights and movies 739,655 761,863 Stocks 14 12,449 10,674 Trade and other receivables, prepayments and deposits 15 1,866,517 2,538,940 Tax recoverable 19,642 5,074 Restricted cash 16 1,825 9,039 Bank deposits maturing after three months 17 691,387 135,676 Cash and cash equivalents 17 2,125,975 3,195,869 Non-current asset held for sale 30(a) 884,854 –

Total current assets 6,342,304 6,657,135

Total assets 9,113,303 10,556,643

EQUITY Equity attributable to equity holders of the Company Share capital 18 664,044 664,044 Other reserves 19 (22,905) 159,241 Retained earnings 7,039,291 7,702,134

7,680,430 8,525,419 Non-controlling interests 155,743 178,927

Total equity 7,836,173 8,704,346

LIABILITIES Non-current liabilities Borrowings 21 234,850 293,700 Deferred income tax liabilities 22 321,776 181,080 Retirement benefit obligations 23 – 34,628

Total non-current liabilities 556,626 509,408

86 Television Broadcasts Limited Annual Report 2015

F-29 Note 2015 2014 HK$’000 HK$’000

Current liabilities Trade and other payables and accruals 20 686,197 793,019 Current income tax liabilities 34,307 451,970 Borrowings 21 – 97,900

Total current liabilities 720,504 1,342,889

Total liabilities 1,277,130 1,852,297

Total equity and liabilities 9,113,303 10,556,643

The consolidated financial statements on pages 86 to 159 were approved by the Board of Directors on 23 March 2016 and were signed on its behalf.

Charles Chan Kwok Keung Mark Lee Po On Director Director

The notes on pages 93 to 159 are an integral part of these consolidated financial statements.

Television Broadcasts Limited Annual Report 2015 87

F-30 CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2015

Note 2015 2014 HK$’000 HK$’000 (Restated)

Continuing operations

Revenue 5 4,454,725 4,912,061

Cost of sales (2,009,187) (2,016,098)

Gross profit 2,445,538 2,895,963

Other revenues 5 75,330 75,251

Selling, distribution and transmission costs (576,754) (555,883)

General and administrative expenses (853,477) (763,254)

Other losses, net 27 (84,657) (83,436)

1,005,980 1,568,641

Exchange losses on Renminbi fixed term deposits (42,136) (4,109)

Impairment loss on property 6(d) (87,955) –

Operating profit 875,889 1,564,532

Finance costs 28 (6,441) (2,763)

Share of losses of joint ventures (15,143) (7,134)

Share of losses of associates (32,766) (72,382)

Impairment loss on loan to and amount due from an associate (695,099) –

Profit before income tax 24 126,440 1,482,253

Income tax expense 29 (143,952) (220,935)

(Loss)/profit for the year from continuing operations (17,512) 1,261,318

Discontinued operations Profit for the year from discontinued operations 103,136 158,277 Tax on dividend distributed prior to completion of disposal (52,726) – Gain on disposal of discontinued operations 1,395,770 – Deferred tax in relation to gain from disposal (110,676) –

30 1,335,504 158,277

Profit for the year 1,317,992 1,419,595

88 Television Broadcasts Limited Annual Report 2015

F-31 Note 2015 2014 HK$’000 HK$’000 (Restated)

Profit/(loss) attributable to: Equity holders of the Company – Continuing operations (4,281) 1,251,355 – Discontinued operations 1,335,504 158,277

1,331,223 1,409,632

Non-controlling interests – Continuing operations (13,231) 9,963

1,317,992 1,419,595

Earnings/(loss) per share (basic and diluted) for profit/(loss) attributable to equity holders of the Company during the year – Continuing operations 31 HK$(0.01) HK$2.86 – Discontinued operations 31 HK$3.05 HK$0.36

HK$3.04 HK$3.22

The notes on pages 93 to 159 are an integral part of these consolidated financial statements.

Television Broadcasts Limited Annual Report 2015 89

F-32 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2015

Note 2015 2014 HK$’000 HK$’000 (Restated)

Profit for the year 1,317,992 1,419,595

Other comprehensive income: Item that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligations recognised directly in other comprehensive income – 2,071 Tax effect of remeasurement of defined benefit obligations recognised directly in other comprehensive income 22 – (352)

– 1,719

Item that may be reclassified to profit or loss: Currency translation differences – Group (48,517) (87,264) – Joint ventures (34) (35) Reclassification adjustment to profit or loss on disposal/liquidation of subsidiaries 7,531 25,436

(41,020) (61,863)

Other comprehensive income for the year, net of tax (41,020) (60,144)

Total comprehensive income for the year 1,276,972 1,359,451

Total comprehensive income attributable to: Equity holders of the Company – Continuing operations (61,553) 1,210,299 – Discontinued operations 1,361,709 139,201

1,300,156 1,349,500 Non-controlling interests – Continuing operations (23,184) 9,951

Total comprehensive income for the year 1,276,972 1,359,451

The notes on pages 93 to 159 are an integral part of these consolidated financial statements.

90 Television Broadcasts Limited Annual Report 2015

F-33 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015

Attributable to equity holders of the Company

Non- Share Other Retained controlling Total Note Capital reserves earnings Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Balance at 1 January 2014 21,900 843,254 7,449,565 8,314,719 112,108 8,426,827 Comprehensive income: Profit for the year – – 1,409,632 1,409,632 9,963 1,419,595 Other comprehensive income: Remeasurement of defined benefit obligations – – 1,719 1,719 – 1,719 Currency translation differences – Group – (87,252) – (87,252) (12) (87,264) – Joint ventures – (35) – (35) – (35) Reclassification adjustment to profit or loss on liquidation of subsidiaries – 25,436 – 25,436 – 25,436 Total comprehensive income, net of tax – (61,851) 1,411,351 1,349,500 9,951 1,359,451 Transactions with owners: Transition to no-par value regime on 3 March 2014 18 642,144 (642,144) – – – – Transferred to legal reserve 19 – 19,982 (19,982) – – – 2013 final dividend paid – – (876,000) (876,000) – (876,000) 2014 interim dividend paid – – (262,800) (262,800) – (262,800) Capital injection by non-controlling interests – – – – 56,868 56,868 Total transactions with owners 642,144 (622,162) (1,158,782) (1,138,800) 56,868 (1,081,932)

Balance at 31 December 2014 664,044 159,241 7,702,134 8,525,419 178,927 8,704,346 Balance at 1 January 2015 664,044 159,241 7,702,134 8,525,419 178,927 8,704,346 Comprehensive income: Profit for the year – – 1,331,223 1,331,223 (13,231) 1,317,992 Other comprehensive income: Currency translation differences – Group – (38,564) – (38,564) (9,953) (48,517) – Joint ventures – (34) – (34) – (34) Reclassification adjustment to profit or loss on disposal of subsidiaries – 7,531 – 7,531 – 7,531 Total comprehensive income, net of tax – (31,067) 1,331,223 1,300,156 (23,184) 1,276,972 Transactions with owners: Transferred to legal reserve 19 – 3,882 (3,882) – – – Disposal of subsidiaries – (156,016) 156,016 – – – 2014 final dividend and special dividend paid – – (1,883,400) (1,883,400) – (1,883,400) 2015 interim dividend paid – – (262,800) (262,800) – (262,800) Total contributions by and distributions to owners – (152,134) (1,994,066) (2,146,200) – (2,146,200) Loss previously in reserve released to profit or loss on disposal of subsidiaries – 1,055 – 1,055 – 1,055 Total transactions with owners – (151,079) (1,994,066) (2,145,145) – (2,145,145)

Balance at 31 December 2015 664,044 (22,905) 7,039,291 7,680,430 155,743 7,836,173

The notes on pages 93 to 159 are an integral part of these consolidated financial statements.

Television Broadcasts Limited Annual Report 2015 91

F-34 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2015

Note 2015 2014 HK$’000 HK$’000

Cash flows from operating activities Cash generated from operations 33(a) 1,411,260 1,648,358 Interest paid (6,721) (4,164) Hong Kong tax paid (150,396) (193,445) Overseas tax paid (68,598) (122,225)

Net cash generated from operating activities 1,185,545 1,328,524

Cash flows from investing activities Purchases of property, plant and equipment (305,227) (393,825) Purchases of intangible assets (26,976) – Purchases of an available-for-sale financial asset (47,433) – Investment in a joint venture – (6,311) Loan to a joint venture – (15,778) Fund advanced to a joint venture (13,044) (15,750) Loan repayments received from joint ventures 155,863 – (Increase)/decrease in bank deposits maturing after three months (557,968) 155,369 Redemptions of held-to-maturity financial assets – 381,582 Net cash inflow from disposal of subsidiaries 30(d) 978,642 – Expenses incurred on disposal of subsidiaries 30(d) (32,380) – Liquidation of subsidiaries (net of cash and cash equivalents) 33(b) – (2,371) Proceeds from sale of property, plant and equipment 3,419 3,222 Interest received 51,013 60,115

Net cash generated from investing activities 205,909 166,253

Cash flows from financing activities Capital injection by non-controlling interests – 56,868 Proceeds from bank loan 398,960 398,200 Repayments of bank loans (545,270) (252,357) Repayment of loan due to a joint venture (63,190) – Decrease in restricted cash 6,763 42,112 Dividends paid to equity holders of the Company (2,146,200) (1,138,800)

Net cash used in financing activities (2,348,937) (893,977)

Net (decrease)/increase in cash and cash equivalents (957,483) 600,800 Cash and cash equivalents at 1 January 3,195,869 2,609,393 Effect of foreign exchange rate changes (112,411) (14,324)

Cash and cash equivalents at 31 December 2,125,975 3,195,869

The notes on pages 93 to 159 are an integral part of these consolidated financial statements.

92 Television Broadcasts Limited Annual Report 2015

F-35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION Television Broadcasts Limited (the “Company”) and its subsidiaries are collectively referred to as the Group in the consolidated financial statements. The principal activities of the Company are terrestrial television broadcasting, together with programme production and other television-related activities. The principal activities of the principal subsidiaries are detailed in Note 41.

The Company is a limited liability company incorporated and listed in Hong Kong. Its registered office is at TVB City, 77 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong.

These consolidated financial statements are presented in Hong Kong dollars, unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 23 March 2016.

KEY EVENTS On 6 May 2015, the Group completed the disposal of its 53% equity interest in Liann Yee Production Co., Ltd. and its subsidiaries (“Liann Yee Group”) for a cash consideration of NT$4,695,000,000 (approximately HK$1,182,144,000). A disposal gain of HK$1,395,770,000, which was made up of a gain on disposal of the 53% equity interest of HK$851,621,000 and a gain on the retained equity interest of 47% of HK$544,149,000, was recognised during the year. Details of this disposal were set out in Note 30 to the consolidated financial statements.

Subsequent to the year-end date on 4 January 2016, the Group, entered into a conditional Disposal Agreement, pursuant to which the Group agreed to conditionally sell the remaining 47% equity interest in Liann Yee Group, for a cash consideration of NT$4,343,490,566 (representing approximately HK$1,017,450,000) (“Second Disposal”). Upon completion of the Second Disposal in 2016, the Group will cease to hold any equity interest in Liann Yee Group.

From 6 May 2015, Liann Yee Group has ceased to be a subsidiary and has become a joint venture of the Group. The Group has adopted equity accounting in respect of the retained 47% interest in Liann Yee Group thereafter. With respect to the completion of the sale of the 53% equity interest and the plan for the subsequent sale of the remaining 47% interest, Liann Yee Group’s profit for the year was presented as discontinued operations in the consolidated financial statements for the year ended 31 December 2015 and last year’s comparatives were restated accordingly.

By the adoption of equity accounting from 6 May 2015, Liann Yee Group’s assets and liabilities had not been included in the Group’s consolidated statement of financial position as at 31 December 2015. Accordingly, the carrying value of the retained 47% equity interest in Liann Yee Group and the shareholder loan granted to Liann Yee Group were shown as “Non-current asset held for sale” and “Loan and receivables” respectively in the consolidated financial statements.

After the above disposals, the Group continues to hold certain properties in Neihu and on Bade Road, Taipei. The Group leased back certain portion of the properties to Liann Yee Group on normal commercial terms. Accordingly, these properties were included as “Investment properties” in the Group’s consolidated statement of financial position.

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basis and principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRS”). They have been prepared under the historical cost convention, except that some financial assets are stated at their fair values as explained in Note 2.11.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4.

Television Broadcasts Limited Annual Report 2015 93

F-36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of preparation (continued)

(a) New and amended standards adopted by the Group The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2015:

Amendment to HKAS 19 on contributions from employees or third parties to defined benefit plans. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period. The amendment allows contributions that are linked to service, and do not vary with the length of employee service, to be deducted from the cost of benefits earned in the period that the service is provided. Contributions that are linked to service, and vary according to the length of employee service, must be spread over the service period using the same attribution method that is applied to the benefits.

Amendments from annual improvements to HKFRSs – 2010-2012 Cycle, on HKFRS 8, “Operating segments”, HKAS 16, “Property, plant and equipment” and HKAS 38, “Intangible assets” and HKAS 24, “Related party disclosures”.

Amendments from annual improvements to HKFRSs – 2011-2013 Cycle, on HKFRS 3, “Business combinations”, HKFRS 13, “Fair value measurement” and HKAS 40, “Investment property”.

The adoption of the improvements made in the 2010-2012 Cycle has required additional disclosures in the segment note. Other than that, the remaining amendments are not material to the Group.

(b) New Hong Kong Companies Ordinance (Cap. 622) In addition, the requirement of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance (Cap. 622) come into operation during the financial year, as a result, there are changes to presentation and disclosures of certain information in the consolidated financial statements.

(c) Relevant new/revised standards that are not yet effective and have not been early adopted by the Group The following relevant new/revised standards have been published and are mandatory for the first time for the Group’s accounting period beginning on or after 1 January 2016 or later periods, but the Group has not early adopted them:

HKFRS 9 Financial instruments HKFRS 15 Revenue from contracts with customers Amendment to HKAS 1 Disclosure initiative Amendments to HKAS 16 Clarification of acceptable methods of depreciation and and HKAS 38 amortisation Amendment to HKAS 27 Equity method in separate financial statements Amendments to HKFRS 10 Sale or contribution of assets between an investor and its and HKAS 28 associate or joint venture Amendments to HKFRS 10, Investment entities: applying the consolidation exception HKFRS 12 and HKAS 28 Amendment to HKFRS 11 Accounting for acquisitions of interests in joint operations Annual improvements to HKFRS 2012-2014 Cycle

The Group is in the process of making an assessment of the impact of these relevant standards and amendments to the Group’s results and financial position in the period of initial application.

94 Television Broadcasts Limited Annual Report 2015

F-37 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Consolidation The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to 31 December.

(a) Subsidiaries A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition- related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interests in the acquiree either at fair value or at the non-controlling interests proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the aggregate fair value of the identifiable net assets acquired is recorded as goodwill (Note 2.8(a)). If the consideration is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated income statement.

All significant inter-company transactions and balances within the Group are eliminated on consolidation. The financial statements of subsidiaries have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(b) Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group that do not result in loss of control. For purchases or disposals of interests from non-controlling interests, the difference between any consideration paid/received and the relevant share acquired/ disposed of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Associates An associate is an entity over which the Group has significant influence but not control, generally accompanying a holding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to the consolidated income statement where appropriate.

Television Broadcasts Limited Annual Report 2015 95

F-38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.2 Consolidation (continued) (c) Associates (continued) The Group’s share of post-acquisition profits or losses is recognised in the consolidated income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interests in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.

Gains or losses on dilution of equity interest in associates are recognised in the consolidated income statement.

In the Company’s statement of financial position, the interests in associates are stated at cost less provision for impairment losses (Note 2.9). The results of the associates are accounted for by the Company on the basis of dividends received and receivable.

(d) Disposal of subsidiaries and associates When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in the consolidated income statement. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset, as appropriate. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the consolidated income statement.

(e) Joint arrangements Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equal or exceed its interest in joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s statement of financial position, the interests in joint ventures are stated at cost less provision for impairment losses (Note 2.9). The results of the joint ventures are accounted for by the Company on the basis of dividends received and receivable.

Investment in joint operations are accounted for such that each joint operator recognises its assets (including its share of any assets jointly held), its liabilities (including its share of any liabilities incurred jointly), its revenue (including its share of revenue from the sale of the output by the joint operation) and its expenses (including its share of any expenses incurred jointly).

96 Television Broadcasts Limited Annual Report 2015

F-39 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3 Segment reporting The Group reports its operating segments based on the internal reports reviewed by the chief operating decision maker for the purposes of allocating resources to the segment and assessing its performance.

2.4 Foreign currency translation

(a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and the Group’s presentation currency.

(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement.

(c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

(iii) all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowing, are taken to other comprehensive income. When a foreign operation is partially disposed of which results in loss of control or sold, exchange differences that were recorded in equity are recognised in the consolidated income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after 1 January 2005 are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(d) Disposal of foreign operation On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operations, a disposal involving loss of joint control over a joint venture that includes a foreign operations, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the currency translation differences accumulated in equity in respect of that operation attributable to the owners of the company are reclassified to consolidated income statement.

Television Broadcasts Limited Annual Report 2015 97

F-40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.5 Property, plant and equipment Leasehold land classified as finance leases and all other property, plant and equipment, comprising freehold land and buildings, leasehold improvements, studio, broadcasting and transmitting equipment, furniture and fixtures and motor vehicles, are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged in the income statement during the financial period in which they are incurred.

Freehold land is not depreciated. Amortisation of leasehold land classified as finance leases commences from the time when the land interest becomes available for its intended use. Amortisation on leasehold land classified as finance leases and depreciation on other property, plant and equipment are calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Leasehold land classified as finance leases Shorter of remaining lease term or useful life Buildings 2.5% – 5% Leasehold improvements Over the unexpired term of the lease Studio, broadcasting and transmitting equipment 10% – 20% Furniture, fixtures and equipment 5% – 25% Motor vehicles 25%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the consolidated income statement.

2.6 Investment properties Investment properties are defined as properties held to earn rentals or capital appreciation or both. The Group has applied the cost model to its investment property. The investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. The cost of investment property comprises its purchase price and any directly attributable expenditure. Depreciation is calculated using a straight-line method to allocate the depreciable amounts over the estimated useful lives of 20 to 25 years, or remaining lease term, whichever is shorter. The residual values and useful lives of investment properties are reviewed, and adjusted as appropriate, at the end of each reporting period. The effects of any revision are included in the consolidated income statement when the changes arise.

2.7 Land use rights The upfront prepayments made for land use rights are expensed in the consolidated income statement on a straight-line basis over the period of the rights.

98 Television Broadcasts Limited Annual Report 2015

F-41 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Intangible assets

(a) Goodwill Goodwill represents the excess of the cost of an acquisition of a subsidiary or an associate over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is recognised separately in the consolidated statement of financial position (Note 2.2(a)). Goodwill on acquisitions of associates is included in interests in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. The determination of gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to the operating segment.

(b) Software development costs Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

t *UJTUFDIOJDBMMZGFBTJCMFUPDPNQMFUFUIFTPGUXBSFQSPEVDUTPUIBUJUXJMMCFBWBJMBCMFGPSVTF

t .BOBHFNFOUJOUFOETUPDPNQMFUFUIFTPGUXBSFQSPEVDUBOEVTFPSTFMMJU

t 5IFSFJTBOBCJMJUZUPVTFPSTFMMUIFTPGUXBSFQSPEVDU

t *UDBOCFEFNPOTUSBUFEIPXUIFTPGUXBSFQSPEVDUXJMMHFOFSBUFQSPCBCMFGVUVSFFDPOPNJDCFOFGJUT

t "EFRVBUFUFDIOJDBM GJOBODJBMBOEPUIFSSFTPVSDFTUPDPNQMFUFUIFEFWFMPQNFOUBOEUPVTFPSTFMM the software product are available; and

t 5IFFYQFOEJUVSFBUUSJCVUBCMFUPUIFTPGUXBSFQSPEVDUEVSJOHJUTEFWFMPQNFOUDBOCFSFMJBCMZ measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives.

Television Broadcasts Limited Annual Report 2015 99

F-42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.9 Impairment of investments in subsidiaries, associates, joint ventures and other non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Group determines at each reporting date whether there is any objective evidence that these investments and other non-financial assets are impaired. An impairment loss is recognised in the income statement for the amount by which an asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffer impairment are reviewed for possible reversal of the impairment at each reporting date.

2.10 Non-current assets held for sale and discontinued operations Non-current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. The non-current assets (except for certain assets as explained below), are stated at the lower of carrying amount and fair value less costs to sell. Deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries and associates) and investment properties, which are classified as held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 2.

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographic area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area operations, or is a subsidiary acquired exclusively with a view to resale.

When an operation is classified as discontinued, a single amount is presented in the consolidated income statement, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets constituting the discontinued operation.

2.11 Financial assets

Classification The Group classifies its financial assets in the following categories: loans and receivables and available-for- sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” (Note 2.15), “funds advanced/loan to joint ventures”, “loan to an associate”, “bank deposits” and “cash and cash equivalents” (Note 2.16) in the statement of financial position.

(b) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period.

100 Television Broadcasts Limited Annual Report 2015

F-43 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.11 Financial assets (continued)

Recognition and measurement Regular way purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Changes in the fair value of non-monetary securities classified as available-for-sale are recognised in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the consolidated income statement as gains or losses from investment securities.

Available-for-sale financial assets that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are carried at cost less accumulated impairment.

Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

Derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

2.12 Impairment of financial assets

(a) Loans and receivables The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

A provision for impairment of the Group’s trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the provision is recognised in the consolidated income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivable. Subsequent recoveries of amounts previously written off are credited in the consolidated income statement.

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F-44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.12 Impairment of financial assets (continued)

(b) Assets classified as available-for-sale The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for- sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the consolidated income statement – is removed from equity and recognised in the consolidated income statement. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement.

2.13 Programmes, film rights and movies Programmes, film rights and movies are stated at cost less amounts expensed and any provision considered necessary by management.

(a) Programme cost Programme cost comprises direct expenditure and an appropriate proportion of production overheads. The cost of programmes is apportioned between the domestic terrestrial market and the overseas licensing and distribution market. In the case of the former, the cost is expensed on first transmission, and in the latter, the cost is expensed on first distribution to licensees. The cost of programmes for satellite channels is expensed in accordance with a formula computed to amortise the cost over a maximum of three transmissions.

(b) Film rights Film rights are expensed in accordance with a formula computed to amortise the cost over the contracted number of transmissions.

(c) Movies The cost of movie stocks includes all direct production costs which comprise cost of services, facilities and raw materials consumed in the creation of a film. Movie stocks are stated at cost less accumulated amortisation and accumulated impairment losses.

2.14 Stocks Stocks, comprising decoders, tapes, computer hard discs, video compact discs, digital video discs and consumable supplies, are stated at the lower of cost and net realisable value. The cost of video compact discs and digital video discs is calculated on a weighted average basis whereas the cost of other stocks is calculated on a first in first out basis. Net realisable value is determined on the basis of anticipated sale proceeds less estimated selling expenses.

2.15 Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.16 Cash and cash equivalents Cash and cash equivalents includes cash at bank and on hand, deposits held at call with banks, cash investments with a maturity of three months or less from the date of investment, and bank overdrafts.

102 Television Broadcasts Limited Annual Report 2015

F-45 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.17 Share capital Ordinary shares are classified as equity.

2.18 Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.19 Borrowings The Group’s borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

2.20 Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its subsidiaries, associates and joint ventures operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Taxation rates enacted or substantively enacted by the end of the reporting period are used to determine deferred income tax.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on interests in subsidiaries, associates and joint ventures, except for deferred income tax liabilities where the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.

2.21 Employee benefits

(a) Employee leave entitlements Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.

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F-46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.21 Employee benefits (continued)

(b) Pension obligations The Group operates a number of defined benefit and defined contribution plans throughout the world, the assets of which are generally held in separate trustee – administered funds.

All permanent staff, temporary staff and full time artistes signed in individual names (excluding singers and serial artistes), whose employment period reaches 60 days or more (collectively referred to as “eligible members”) and who are located in Hong Kong are entitled to participate in the Mandatory Provident Fund Scheme (“MPF Scheme”). The contributions to the MPF Scheme made by the Group for permanent staff who joined prior to 1 June 2003 comprise mandatory contributions and voluntary contributions. The mandatory contribution is calculated at 5% of the individual’s “relevant income” with a maximum amount of HK$1,500 per month and the voluntary contribution is calculated at 10% of individual’s basic salary less the mandatory contribution. The Group’s contribution for permanent staff who joined after 1 June 2003, full time artistes and temporary staff is 5% of individual’s “relevant income” with a maximum amount of HK$1,500 per month. “Relevant income” includes salaries, wages, paid leave, fees, commissions, bonuses, gratuities, and allowances (excluding housing allowance/benefits, any redeemed payment and long service payment).

The retirement schemes which cover employees located in overseas locations are defined contribution schemes at various funding rates that are in accordance with the local practice and regulations.

The contributions to defined contribution schemes are recognised as employee benefit expense when they are due.

Employees located in Taiwan were members of a defined benefit retirement scheme prior to 1 July 2005. Following the promulgation of a new pension ordinance on 1 July 2005, the employees located in Taiwan were entitled to elect to remain as the sole members of the defined benefit retirement scheme or to become members of both the defined benefit retirement scheme and a defined contribution retirement scheme. By electing for the latter, the service lives of employees under the defined benefit retirement scheme were frozen at 30 June 2005. All employees joining on or after 1 July 2005 have to join the defined contribution retirement scheme.

The liability recognised in the consolidated statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high- quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

The current service cost of the defined benefit plan, recognised in the consolidated income statement in employee benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation results from employee service in the current year, benefit changes, curtailments and settlements.

Past-service costs are recognised immediately as expenses in the consolidated income statement.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the consolidated income statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

(c) Bonus plans The Group recognises a liability and an expense for bonuses when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of such obligation can be made.

104 Television Broadcasts Limited Annual Report 2015

F-47 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.22 Provisions Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as an interest expense.

2.23 Financial guarantees Financial guarantees are initially recognised in the accounts at fair value on the date the guarantee was given. Subsequent to initial recognition, the liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise the fee income earned in the consolidated income statement on a straight-line basis over the life of the guarantee, and the best estimate of the expenditure required to settle any financial obligation arising at the period-end date. Any increase in the liability relating to guarantees is taken to the consolidated income statement.

2.24 Revenue recognition Advertising income net of agency deductions is recognised (i) when the advertisements are telecast on television, delivered through internet and mobile platforms or published in a magazine; or (ii) ratably over the contractual display period of the contract when the advertisements are placed on the Group’s website and mobile platforms.

Income from licensing of programme rights is recognised evenly over the contract period or upon delivery of the programmes concerned in accordance with the terms of the contracts. Income from licensing of content to mobile devices and website portals is recognised when the services are rendered and when the right to receive payment is established. Distribution income from video sell through is recognised upon delivery of the video.

Subscription income from the operation of pay television networks is recognised on a straight-line basis over the contract period which generally coincides with when the services are rendered. Unearned subscription fees received from subscribers are recorded as subscriptions received in advance under trade and other payables and accruals in the statement of financial position.

Income from sales of decoders and sales of magazines is recognised on delivery of products. Income from other services, which includes programmes/commercial production income, management fee income, facility rental income and other service fee income, is recognised when the services are rendered.

Dividend income is recognised when the right to receive payment is established.

Interest income is recognised on a time proportion basis using the effective interest method.

Television Broadcasts Limited Annual Report 2015 105

F-48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.25 Leases

(a) Operating leases (as lessee) Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.

(b) Operating leases (as lessor) Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease. Initial direct costs, if any, incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

(c) Finance leases (as lessee) Leases of land where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased land and the present value of the minimum lease payment.

2.26 Related parties A related party is a person or entity that is related to the Group.

(a) A person or a close member of that person’s family is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of the parent of the Group.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

106 Television Broadcasts Limited Annual Report 2015

F-49 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.26 Related parties (continued) Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

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2.27 Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders or Directors, where appropriate.

3 FINANCIAL RISK MANAGEMENT

Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

(a) Market risk

(i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations that are in a currency that is not the entity’s functional currency.

The Group has certain investments in foreign operations, the net assets of which are exposed to foreign currency risk.

The Group manages this risk by seeking contracts effectively denominated in HK dollars and/or US dollars where possible and economically favourable. The Group currently does not have a foreign currency hedging policy but manages its exposure through closely monitoring the movement of the foreign currency rates and will consider entering into foreign exchange forward contracts to reduce the exposure if required. The Group does not conduct any speculative foreign currency activities.

The following table summarises the change in the Group’s profit after taxation in response to reasonably possible changes in foreign exchange rates on currencies to which the Group has exposure at the end of the reporting period and assuming all other variables remain constant. Such exposure relates to the portion of loan, trade receivables, bank deposits, cash and bank balances and trade payables.

Television Broadcasts Limited Annual Report 2015 107

F-50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (continued)

Financial risk factors (continued)

(a) Market risk (continued)

(i) Foreign exchange risk (continued)

2015 2014

Increase/ Increase/ Changes (decrease) Changes (decrease) in foreign in profit in foreign in profit Foreign currency against exchange after exchange after Hong Kong dollars rates taxation rates taxation % HK$’000 % HK$’000

Renminbi 7% 37,797 1% 9,694 (7%) (37,797) (1%) (9,694)

Malaysian Ringgit 22% 8,053 6% 1,895 (22%) (8,053) (6%) (1,895)

New Taiwan dollars 4% 5,706 5% (3) (4%) (5,706) (5%) 3

(ii) Interest rate risk The Group’s principal interest bearing assets are a loan to a joint venture, cash balances and bank deposits. The tenor of the bank deposits is usually less than one year. The Group actively manages cash balances and deposits by comparing quotations from banks, with a view to selecting terms which are most favourable to the Group.

The Group’s interest rate risk also arises from floating interest rate bank borrowings.

Sensitivity analysis has been conducted on the loan to a joint venture, bank deposits and bank borrowings. If interest rates had been 100 basis-points higher/lower with all other variables held constant, the Group’s profit after taxation for the year would have increased/decreased by HK$1,127,000 (2014: nil) and HK$25,167,000 (2014: HK$26,659,000) in respect of the loan to a joint venture and bank deposits respectively and the Group’s profit after taxation would have decreased/increased by HK$1,949,000 (2014: HK$3,250,000) in respect of bank borrowings.

(b) Credit risk The Group’s credit risk is primarily attributable to its funds advanced/loan to a joint venture, credit sales, bank balances and bank deposits. The Group has implemented policies to assess the credit worthiness of customers, and to conduct credit reviews and monitoring procedures that include a formal collection process. The credit risk on credit sales is not material as major customers are reputable advertising agencies with no recent history of default. The credit risk on trade receivables is not considered significant given the majority of credit sales relate to reputable advertising agencies. In addition, the Group reviews the recoverable amount of each individual trade debtor, associate and joint venture at the end of each reporting period to ensure that impairment has adequately been provided for doubtful debts. The credit risk on bank balances is limited as the banks are of acceptable credit ratings.

108 Television Broadcasts Limited Annual Report 2015

F-51 3 FINANCIAL RISK MANAGEMENT (continued)

(c) Liquidity risk The Group employs cash flow forecasting to manage liquidity risk by forecasting the amount of cash required (including working capital, loan repayments, dividend payments and potential new investments) and by maintaining sufficient cash and adequate undrawn banking facilities to ensure our funding requirements are met.

The Group’s financial liabilities include trade payables, other payables, accruals and bank borrowings. The trade payables and other payables are generally on credit terms of one to three months after the invoice date. For accruals, there are generally no specified contractual maturities and amounts owing are paid upon the counterparty’s formal notification, of which should be within 12 months from the end of the reporting period. The bank loans are secured by land and buildings and are repayable as set out in Note 21.

The table below analyses the Group’s non-derivative financial liabilities based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including future interest payments).

2015 2014

Trade and Trade and other other payables payables and and Borrowings accruals Borrowings accruals HK$’000 HK$’000 HK$’000 HK$’000

Within 1 year 3,898 564,976 103,632 668,316 Between 1 and 2 years 14,568 – 15,069 – Between 2 and 5 years 64,827 – 187,698 – Over 5 years 184,580 – 109,682 –

267,873 564,976 416,081 668,316

Capital management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total capital. Total debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated statement of financial position). Total capital is calculated as total equity, as shown in the consolidated statement of financial position.

Television Broadcasts Limited Annual Report 2015 109

F-52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 FINANCIAL RISK MANAGEMENT (continued)

Capital management (continued) The gearing ratios at 31 December 2015 and 2014 were as follows:

2015 2014 HK$’000 HK$’000

Total borrowings 234,850 391,600 Total equity 7,836,173 8,704,346

Gearing ratio 3.0% 4.5%

Fair value estimation Financial instruments that are measured in the statement of financial position at fair value are analysed by below valuation method. The different methods have been defined as follows:

(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

(c) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

As at 31 December 2015 and 2014, the fair value measurement of the Group’s available-for-sale financial assets is included in level 3 (Note 12).

There was no transfer between categories during the year.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually re-evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that may have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Trade receivables The aged debt profile of trade receivables is reviewed on a regular basis to ensure that the trade receivables are collectible and follow up actions are promptly carried out if the agreed credit periods have been exceeded. However, from time to time, the Group may experience delays in collection. Where recoverability of trade receivables is called into doubt, specific provisions for bad and doubtful debts are made based on credit status of the customers, the aged analysis of the trade receivables and write-off history. Certain receivables may be initially identified as collectible, yet subsequently become uncollectible and result in a subsequent write-off of the related receivable to the consolidated income statement. Changes in the collectability of trade receivables for which provisions are not made could affect the results of operations.

110 Television Broadcasts Limited Annual Report 2015

F-53 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

(b) Loan to and amount due from associates The Group reviews its loan to and amount due from associates to assess impairment at least half yearly. The impairment losses of loan to and amount due from associates are measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

TVB Network Vision Limited (“TVB Network Vision”), an associate engaging in Hong Kong pay TV business, has been offering content from TVB and other providers from different regions with programme genre ranging from drama serials, variety programmes to sports. However, due to rampant Internet piracy activities exacerbated by technological advancement around the world, the content which TVB Network Vision has planned to bring to its viewers through conventional subscription service is widely available in the market, causing significant shortfall in its revenue targets. In addition, the operation of high cost pay TV business (provision of pay TV service using satellite transmission and third party platform cooperation) has increasingly become difficult.

In view of TVB Network Vision’s continuous losses sustained and the unfavourable operating environment for traditional pay TV business, future cash inflow of TVB Network Vision will be significantly reduced. TVB Network Vision will not proceed to launch the over-the-top platform in 2016, as previously envisaged in their business plan as disclosed in our 2014 annual financial statements. As such, impairment losses of HK$501,594,000 (Note 11) and HK$193,505,000 (Note 15) against the loan to and amount due from TVB Network Vision, with a total impairment loss of HK$695,099,000, were made in the consolidated financial statements for the year ended 31 December 2015. After making this impairment loss, the total net interests in TVB Pay Vision Holdings Limited (“TVBPVH”, the holding company of TVB Network Vision) as of 31 December 2015, which represented the total cost of investment, a long-term loan and amount due less the accumulated share of losses and impairment, had been fully impaired.

(c) Useful lives of property, plant and equipment and investment properties In accordance with HKAS 16 and HKAS 40, the Group estimates the useful lives of property, plant and equipment and investment properties in order to determine the amount of depreciation expenses to be recorded. The useful lives are estimated at the time the asset is acquired based on historical experience, the expected usage, wear and tear of the assets, as well as technical obsolescence arising from changes in the market demands or service output of the assets. The Group also performs annual reviews on whether the assumptions made on useful lives continue to be valid. Such reviews take into account the technological changes, prospective economic utilisation and physical condition of the assets concerned.

(d) Deferred income tax assets Deferred income tax assets are recognised for all temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available in the future against which the temporary differences, the carry forward of unused tax credits and unused tax losses could be utilised. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the end of the reporting period and which are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Where the actual or expected tax positions in future are different from the original estimate, such difference will impact the recognition of deferred income tax assets and income tax charge in the period in which such estimate has been changed.

Television Broadcasts Limited Annual Report 2015 111

F-54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 REVENUE, OTHER REVENUES AND SEGMENT INFORMATION The Group is principally engaged in terrestrial television broadcasting with programme production, Hong Kong digital new media business, programme licensing and distribution, overseas pay TV operations, channel operations and other activities.

Other revenues comprise mainly interest income.

The amount of each significant category of revenue recognised during the year is as follows:

2015 2014 HK$’000 HK$’000 (Restated)

Revenue Advertising income, net of agency deductions 3,062,946 3,440,338 Licensing income 906,919 966,480 Subscription income 125,565 165,310 Others 421,944 404,186

4,517,374 4,976,314 Less: withholding tax (62,649) (64,253)

4,454,725 4,912,061

Other revenues Interest income 54,512 62,158 Others 20,818 13,093

75,330 75,251

4,530,055 4,987,312

The Group Chief Executive Officer is the Group’s chief operating decision maker. The Group reports its operating segments based on the internal reports reviewed by the Group Chief Executive Officer for the purposes of allocating resources to the segments and assessing their performance. The Group determined to separately report “Hong Kong digital new media business” as a reportable operating segment due to the increasing importance of the business. As such, the comparative figures have been adjusted to conform with the reclassification.

112 Television Broadcasts Limited Annual Report 2015

F-55 5 REVENUE, OTHER REVENUES AND SEGMENT INFORMATION (continued) The Group has six reportable segments as follows:

(a) Hong Kong TV broadcasting – broadcasting of television programmes on terrestrial TV platform, broadcasting of commercials on terrestrial and pay TV platforms and production of programmes

(b) Hong Kong digital new media business – provision of contents to mobile devices and website portals

(c) Programme licensing and distribution – distribution of television programmes and channels to telecast, video and new media operators

(d) Overseas pay TV operations – provision of pay television services to subscribers in USA, Europe and Australia

(e) Channel operations – compilation and distribution of television channels in Mainland China, Malaysia, Singapore and other countries

(f) Other activities – magazine publications, music entertainment, property investment and other related services

The segment information reported below does not include any amounts related to the operations of Liann Yee Group, which are described in Note 30.

The Group’s inter-segment transactions mainly consist of licensing of programmes and film rights and provision of services. Licensing of programmes and film rights were entered into at similar terms as that contracted with third parties. The services provided were charged on a cost plus basis or at similar terms as that contracted with third parties.

Television Broadcasts Limited Annual Report 2015 113

F-56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 REVENUE, OTHER REVENUES AND SEGMENT INFORMATION (continued) An analysis of the Group’s revenue and results for the year by operating segments is as follows:

Hong Kong Programme Hong Kong digital new licensing Overseas TV media and pay TV Channel Other broadcasting business distribution operations operations activities Elimination Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Continuing operations For the year ended 31 December 2015 Revenue External customers 3,059,037 166,384 828,214 185,597 98,738 116,755 – 4,454,725 Inter-segment 46,219 3,728 122,849 284 5,809 12,422 (191,311) –

Total 3,105,256 170,112 951,063 185,881 104,547 129,177 (191,311) 4,454,725

Reportable segment profit before non-recurring expenses 551,142 41,340 410,354 (30,661) 17,309 11,055 (1,000) 999,539 Exchange losses on Renminbi fixed term deposits (42,136) – – – – – – (42,136) Impairment loss on property (Note 6(d)) (87,955) – – – – – – (87,955) Impairment loss on loan to and amount due from an associate (Note 11 and 15) (695,099) – – – – – – (695,099)

Reportable segment profit after non-recurring expenses (274,048) 41,340 410,354 (30,661) 17,309 11,055 (1,000) 174,349

Interest income 42,509 634 9,286 209 – 1,874 – 54,512 Finance costs – – – – – (6,441) – (6,441) Depreciation and amortisation (235,673) (15,234) (6,561) (4,503) (509) (18,794) – (281,274)

Additions to non-current assets* 264,610 42,081 9,736 778 4,626 1,441 – 323,272

For the year ended 31 December 2014 (restated) Revenue External customers 3,364,989 191,864 947,677 232,014 106,752 68,765 – 4,912,061 Inter-segment 55,426 3,720 137,204 11,207 18,290 6,162 (232,009) –

Total 3,420,415 195,584 1,084,881 243,221 125,042 74,927 (232,009) 4,912,061

Reportable segment profit excluding gain/(loss) on liquidation of subsidiaries 947,066 66,223 617,645 (27,202) 32,412 (2,669) – 1,633,475 Add/(less): gain/(loss) on liquidation of subsidiaries – – 993 (72,699) – – – (71,706)

Reportable segment profit including gain/(loss) on liquidation of subsidiaries 947,066 66,223 618,638 (99,901) 32,412 (2,669) – 1,561,769

Interest income 53,635 1,083 4,884 108 – 2,448 – 62,158 Finance costs (2,749) – – – – (14) – (2,763) Depreciation and amortisation (232,054) (11,230) (4,789) (6,533) (201) (5,101) – (259,908)

Additions to non-current assets* 272,364 17,834 17,983 4,688 113 8,114 – 321,096

* Non-current assets comprise intangible assets, property, plant and equipment, investment properties and land use rights (including prepayments related to capital expenditure if any).

114 Television Broadcasts Limited Annual Report 2015

F-57 5 REVENUE, OTHER REVENUES AND SEGMENT INFORMATION (continued) A reconciliation of reportable segment profit is provided as follows:

2015 2014 HK$’000 HK$’000 (Restated)

Reportable segment profit 174,349 1,561,769 Share of losses of joint ventures (15,143) (7,134) Share of losses of associates (32,766) (72,382)

Profit before income tax and discontinued operations 126,440 1,482,253

No single customer accounted for 10% or more of the total revenue for the years ended 31 December 2015 and 2014.

An analysis of the Group’s revenue from external customers for the year by geographical location is as follows:

2015 2014 HK$’000 HK$’000 (Restated)

Hong Kong 3,324,864 3,625,004 Malaysia and Singapore 548,504 555,188 Mainland China 270,993 383,283 USA and Canada 144,885 168,015 Australia 62,425 89,972 Vietnam 47,825 29,666 Europe 9,200 30,173 Other countries 46,029 30,760

4,454,725 4,912,061

An analysis of the Group’s non-current assets, other than financial instruments and deferred income tax assets, by geographical location is as follows:

2015 2014 HK$’000 HK$’000

Hong Kong 1,765,755 2,342,919 Taiwan 817,876 1,397,342 Mainland China 80,251 108,346 USA and Canada 18,616 20,606 Australia 3,086 5,844 Other countries 680 919

2,686,264 3,875,976

Television Broadcasts Limited Annual Report 2015 115

F-58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 PROPERTY, PLANT AND EQUIPMENT

Studio, broadcasting Furniture, and fixtures Construction Land and Leasehold transmitting and Motor in progress buildings improvements equipment equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost At 1 January 2014 41,408 2,492,401 34,831 2,704,344 826,917 51,350 6,151,251 Exchange differences (592) (70,511) (421) (30,387) (2,668) (751) (105,330) Additions 21,957 9,173 5,259 235,215 73,548 8,780 353,932 Disposals – (317) (2,140) (97,147) (11,839) (1,178) (112,621) Liquidation of subsidiaries (Note 33(b)) – – (1,702) (4,079) (5,182) (537) (11,500) Transferred from investment properties (Note 7(b)) – 2,869 – – – – 2,869

At 31 December 2014 62,773 2,433,615 35,827 2,807,946 880,776 57,664 6,278,601

At 1 January 2015 62,773 2,433,615 35,827 2,807,946 880,776 57,664 6,278,601 Exchange differences 340 23,566 (505) 11,113 (149) 199 34,564 Additions 21,394 3,568 1,743 141,597 112,285 9,004 289,591 Disposals – – (195) (118,500) (13,831) (3,530) (136,056) Disposal of subsidiaries (Note 30(d)) (14,204) (411,611) (2,077) (535,264) (35,610) (13,661) (1,012,427) Transferred to investment properties (Note 7(a)) – (840,977) – – – – (840,977) Transferred to disposal assets (Note 6(d)) (70,303) (46,632) – – – – (116,935)

At 31 December 2015 – 1,161,529 34,793 2,306,892 943,471 49,676 4,496,361

Accumulated depreciation and impairment At 1 January 2014 – 555,382 30,235 1,898,583 524,179 37,820 3,046,199 Exchange differences – (5,950) (350) (22,642) (1,935) (557) (31,434) Charge for the year – 61,996 2,510 191,613 52,654 4,646 313,419 Written back on disposals – (298) (1,786) (94,466) (11,299) (1,168) (109,017) Liquidation of subsidiaries (Note 33(b)) – – (358) (3,599) (4,456) (538) (8,951) Transferred from investment properties (Note 7(b)) – 220 – – – – 220

At 31 December 2014 – 611,350 30,251 1,969,489 559,143 40,203 3,210,436

At 1 January 2015 – 611,350 30,251 1,969,489 559,143 40,203 3,210,436 Exchange differences – 1,733 (384) 8,460 (247) 104 9,666 Charge for the year – 48,683 2,681 170,157 56,822 5,355 283,698 Written back on disposals – – (162) (115,985) (11,739) (3,530) (131,416) Disposal of subsidiaries (Note 30(d)) – (1,684) (1,078) (406,575) (24,321) (8,786) (442,444) Transferred to investment properties (Note 7(a)) – (112,391) – – – – (112,391) Transferred to disposal assets (Note 6(d)) – (8,552) – – – – (8,552)

At 31 December 2015 – 539,139 31,308 1,625,546 579,658 33,346 2,808,997

Net book value At 31 December 2015 – 622,390 3,485 681,346 363,813 16,330 1,687,364

At 31 December 2014 62,773 1,822,265 5,576 838,457 321,633 17,461 3,068,165

116 Television Broadcasts Limited Annual Report 2015

F-59 6 PROPERTY, PLANT AND EQUIPMENT (continued) Notes:

(a) No depreciation was provided for studio, broadcasting and transmitting equipment with cost of HK$2,564,000 (2014: HK$15,046,000) as they were not ready in use at the year end.

(b) Last year, land and buildings with net book value of HK$720,072,000 were pledged to secure loans and banking facilities granted to a subsidiary of the Group.

2015 2014 HK$’000 HK$’000

Leases of between 10 to 50 years 142,740 183,507 Leases of over 50 years 5,179 5,344

147,919 188,851

(d) Construction in progress as at 31 December 2015 comprised a building being constructed in Hong Kong. Due to the recent change in the strategic business development, the Group decided to cease the development of the construction of a facility nearby Tseung Kwan O Industrial Estate. Subsequent to the year end, the related sites have been surrendered to Hong Kong Science and Technology Parks Corporation on 5 February 2016. An impairment loss of HK$87,955,000 (representing net book value of the related sites less the refundable amount of HK$20,428,000) was provided at 31 December 2015.

Television Broadcasts Limited Annual Report 2015 117

F-60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7 INVESTMENT PROPERTIES

HK$’000

Cost At 1 January 2014 15,320 Transferred to property, plant and equipment (note (b)) (2,869) Exchange differences (42)

At 31 December 2014 12,409

At 1 January 2015 12,409 Transferred from property, plant and equipment (note (a)) 840,977 Exchange differences (48,806)

At 31 December 2015 804,580

Accumulated depreciation At 1 January 2014 1,725 Charge for the year 704 Transferred to property, plant and equipment (note (b)) (220) Exchange differences (2)

At 31 December 2014 2,207

At 1 January 2015 2,207 Charge for the year 12,710 Transferred from property, plant and equipment (note (a)) 112,391 Exchange differences (7,037)

At 31 December 2015 120,271

Net book value At 31 December 2015 684,309

At 31 December 2014 10,202

Fair values At 31 December 2015 (note (d)) 1,156,529

At 31 December 2014 12,004

Notes:

(a) During the year, properties previously held by Liann Yee Group were transferred to another subsidiary of the Group as investment properties as described in “Key Events” in Note 1.

(b) In 2014, certain properties with net book value of HK$2,649,000 were reclassified as property, plant and equipment (Note 6) due to a change in usage.

(c) At 31 December 2015, land and building with net book value of HK$583,701,000 (2014: nil) were pledged to secure a bank loan granted to a subsidiary of the Group.

118 Television Broadcasts Limited Annual Report 2015

F-61 7 INVESTMENT PROPERTIES (continued) Notes:

(d) The Group’s investment properties were valued at 31 December 2015 and 2014 by independent professionally qualified valuers who hold a recognised relevant professional qualification and have recent relevant experience of the investment properties valued. The valuations were determined using the direct comparison approach with reference to the comparable properties in close proximity and investment approach with reference to current market rental, where appropriate. The most significant inputs into these valuation approaches are unit price and unit rent per square foot or square metre. The current use of investment properties equates to the highest and best use. As at 31 December 2015 and 2014, the fair value measurement of the investment properties is included in level 3.

8 LAND USE RIGHTS The Group’s interests in land use rights represent prepaid operating lease payments and their net book values are analysed as follows:

2015 2014 HK$’000 HK$’000

At 1 January 66,378 69,834 Amortisation (Note 24) (3,220) (3,266) Exchange differences (3,210) (190)

At 31 December 59,948 66,378

9 INTANGIBLE ASSETS

Software development Goodwill cost Total HK$’000 HK$’000 HK$’000

At 1 January 2014 Cost 177,624 – 177,624 Accumulated impairment (5,894) – (5,894)

Net book amount 171,730 – 171,730

Year ended 31 December 2014 Opening net book amount 171,730 – 171,730 Goodwill written off (Note 33(b)) (49,448) – (49,448) Exchange differences (6,639) – (6,639)

Closing net book amount 115,643 – 115,643

At 31 December 2014 Cost 121,537 – 121,537 Accumulated impairment (5,894) – (5,894)

Net book amount 115,643 – 115,643

Television Broadcasts Limited Annual Report 2015 119

F-62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9 INTANGIBLE ASSETS (continued)

Software development Goodwill cost Total HK$’000 HK$’000 HK$’000

Year ended 31 December 2015 Opening net book amount 115,643 – 115,643 Additions – 26,976 26,976 Exchange differences 1,076 – 1,076 Goodwill written off (Note 30(d)) (116,719) – (116,719)

Closing net book amount – 26,976 26,976

At 31 December 2015 Cost – 26,976 26,976 Accumulated impairment – – –

Net book amount – 26,976 26,976

As explained in Note 30, the Group disposed 53% equity interest in Liann Yee Group, and accordingly goodwill amounted to HK$116,719,000 was written off in 2015.

10 INTERESTS IN JOINT VENTURES

2015 2014 HK$’000 HK$’000

Investment cost 5,912 6,351 Less: accumulated share of losses (5,912) (6,351)

– – Funds advanced to joint ventures (note (a)) 54,398 41,981 Loan to a joint venture (note (b)) 2,956 15,877 Interest receivable from a joint venture 337 819

57,691 58,677 Less: share of losses in excess of investment costs (28,058) (13,768)

29,633 44,909

120 Television Broadcasts Limited Annual Report 2015

F-63 10 INTERESTS IN JOINT VENTURES (continued)

2015 2014 HK$’000 HK$’000

At 1 January 44,909 13,281 Add: investment costs (note (e)) 907,829 6,351 Add: loan to a joint venture 300,902 15,877 Add: fund advanced to a joint venture 13,044 15,750 Less: loan repayments (155,863) – Add: interest receivables from joint ventures 3,735 819 Less: interest received (2,488) – Share of losses for the year – continuing operations (15,143) (7,134) Share of profits for the year – discontinued operations 35,922 – Share of other comprehensive income for the year (34) (35) Exchange differences (75,821) – Transferred to non-current asset held for sale (note (d)) (884,854) – Transferred to loan and receivables (Note 13) (142,505) –

At 31 December 29,633 44,909

Notes:

(a) The Group has advanced in aggregate HK$12,417,000 (2014: nil) to上海翡翠珍宝文化傳媒有限公司 (“上海翡翠珍宝”) for daily operations and HK$41,981,000 (2014: HK$41,981,000) to Concept Legend Limited (“Concept Legend”) for movie production. The funds advanced are unsecured, interest free and have no fixed term of repayment.

(b) The Group has provided a loan of RMB12,525,000 (HK$15,877,000) to上海翡翠珍宝 for its daily operations in 2014. The loan is unsecured, interest bearing at 6% and has no fixed term of repayment. After the repayment of RMB10,020,000 in 2015, the loan balance at 31 December 2015 was RMB2,505,000 (HK$2,956,000).

(c) As at 31 December 2015, the carrying amounts of the loan and advances approximated their fair values. The fair values are based on discounted cash flows and are included in level 2 fair value hierarchy.

(d) As described in Key Event in Note 1, Liann Yee Group became a joint venture of the Group from 6 May 2015 after the completion of the disposal of 53% equity interest in Liann Yee Group. Because of the plan for the subsequent sale of the remaining 47% interest, the carrying value of the 47% interest was transferred to “Non-current asset held for sale” (Note 30(a)).

(e) The amount in 2015 represented the fair value of the retained 47% interest in Liann Yee Group recognised as interests in joint ventures upon the disposal of 53% interest in Liann Yee Group (Note 30(d)).

Television Broadcasts Limited Annual Report 2015 121

F-64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10 INTERESTS IN JOINT VENTURES (continued) Details of the joint ventures are listed below:

Place of Percentage of incorporation Particulars of ownership Name and operation Principal activities issued shares held interest

Concept Legend Limited Hong Kong Production of films and Ordinary shares of 50% television programmes HK$1 each

# 上海翡翠珍宝文化傳媒 The People’s Provision of advertising Registered capital of 50.1% 有限公司 Republic of China and management services RMB10,000,000

# Liann Yee Production Taiwan Production of television Ordinary shares of 47% Co., Ltd. (note (d)) programmes, channel NT$10 each operations and advertising

# Joint ventures held indirectly by the Company

All joint ventures are private companies and there are no quoted market prices available for their shares. They are all accounted for using the equity method.

There are no contingent liabilities relating to the Group’s interest in the joint ventures. Last year, the Group has provided financial guarantee amounted to HK$13,336,000 for securing payments due by上海翡翠珍宝.

The joint ventures are strategic for the Group’s investments in the Hong Kong movie market and the China advertising market.

122 Television Broadcasts Limited Annual Report 2015

F-65 10 INTERESTS IN JOINT VENTURES (continued) Summarised statements of financial position of the joint ventures and reconciliations to the carrying amount of the Group’s share of net liabilities of the joint ventures:

As at 31 December 2015 As at 31 December 2014 Concept 上海 Concept 上海 Legend 翡翠珍宝 Total Legend 翡翠珍宝 Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Assets Cash and cash equivalents 26,305 1,069 27,374 24,952 17,122 42,074 Other current assets (excluding cash and cash equivalents) 36,462 13,137 49,599 59,544 26,078 85,622

Total current assets 62,767 14,206 76,973 84,496 43,200 127,696 Total non-current assets – 86 86 – 6,115 6,115

62,767 14,292 77,059 84,496 49,315 133,811

Liabilities Current financial liabilities (excluding trade payables) (79,462) – (79,462) (107,243) – (107,243) Other current liabilities (including trade payables) (8,001) (44,027) (52,028) (1,449) (36,025) (37,474)

Total current liabilities (87,463) (44,027) (131,490) (108,692) (36,025) (144,717) Total non-current financial liabilities – (3,272) (3,272) – (16,624) (16,624)

(87,463) (47,299) (134,762) (108,692) (52,649) (161,341)

Net liabilities (24,696) (33,007) (57,703) (24,196) (3,334) (27,530)

Interest in joint ventures (50%; 50.1%) (12,348) (16,537) (28,885) (12,098) (1,670) (13,768) Less: unrecognised share of losses of joint ventures – 827 827 – – –

Carrying value* (12,348) (15,710) (28,058) (12,098) (1,670) (13,768)

* excluding fund advanced, loan and interest receivable

Television Broadcasts Limited Annual Report 2015 123

F-66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10 INTERESTS IN JOINT VENTURES (continued) Summarised consolidated statements of comprehensive income:

For the year ended For the year ended 31 December 2015 31 December 2014 Concept 上海 Concept 上海 Legend 翡翠珍宝 Total Legend 翡翠珍宝 Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue 42,850 53,046 95,896 2,003 57,994 59,997 Depreciation – (316) (316) – (190) (190) (Loss)/profit from operations (500) (26,235) (26,735) 1,703 (21,253) (19,550) Income tax (expense)/credit – (5,228) (5,228) – 5,313 5,313 Post-tax (loss)/profit for the year (500) (31,463) (31,963) 1,703 (15,940) (14,237) Other comprehensive income Currency translation differences – 1,560 1,560 – (70) (70) Total comprehensive income (500) (29,903) (30,403) 1,703 (16,010) (14,307) Dividends received from joint ventures – – – – – –

11 INTERESTS IN ASSOCIATES

2015 2014 HK$’000 HK$’000

Investment costs 736,813 736,813 Less: accumulated share of losses (736,813) (736,813)

– – Loan to an associate (note (a)) 719,212 719,212 Interest receivable from an associate 23,234 19,660

742,446 738,872 Less: share of losses in excess of investment costs (151,035) (118,269) Less: provision for impairment loss (note (b)) (591,411) (89,817)

– 530,786

Notes:

(a) The loan to an associate carries interest at the rate of 1-month HIBOR plus 0.25%. The loan was repayable by 7 installments from 2016 to 2022.

(b) In addition to the loan described in (a), the Group has an amount due from associates of HK$615,251,000 (2014: HK$537,177,000) as disclosed in Note 15. The Group periodically reviews the aggregate exposures to associates (note (a) and Note 15) to assess whether there is any potential impairment.

During the year, additional impairment losses of HK$501,594,000 and HK$193,505,000 (Note 15) against the loan to and amount due from TVB Network Vision, with a total impairment loss of HK$695,099,000, were made. After making this impairment loss, the total net interests in TVBPVH as of 31 December 2015, which represented the total cost of investment, a long-term loan and amount due less the accumulated share of losses and impairment, had been fully impaired.

124 Television Broadcasts Limited Annual Report 2015

F-67 11 INTERESTS IN ASSOCIATES (continued) Details of the material associates are as follows:

Place of incorporation Particulars of Percentage of Name and operation Principal activities issued shares held ownership interest

TVB Pay Vision Holdings Limited Hong Kong Investment holding Ordinary shares of *15% HK$1 each

Non-voting preferred *100% shares of HK$1 each

# TVB Network Vision Limited Hong Kong Domestic pay television Ordinary shares of *90% programme service HK$1 each

# An associate held indirectly by the Company

* The Group’s equity interest was 90% and its voting interest remained at 15% as at 31 December 2015. The Group has the right of first refusal to acquire additional interests in the associate before the remaining shareholder may enter into a transaction of shares transfer with other parties.

All associates are private companies and there are no quoted market prices available for their shares. They are all accounted for using the equity method.

There are no contingent liabilities relating to the Group’s interest in the associates. The Group has confirmed its intention to continue providing the financial support to TVBPVH group to meet its obligations and liabilities as and when they fall due.

The associates are strategic for the Group’s investment in Hong Kong pay TV market.

Television Broadcasts Limited Annual Report 2015 125

F-68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11 INTERESTS IN ASSOCIATES (continued) Summarised statement of financial position of TVBPVH group and reconciliation to the carrying amount of the Group’s share of net liabilities of TVBPVH group:

As at As at 31 December 31 December 2015 2014 HK$’000 HK$’000

Assets Cash and cash equivalents 92,777 73,773 Other current assets (excluding cash and cash equivalents) 49,310 60,703

Total current assets 142,087 134,476 Total non-current assets 100,112 116,655

242,199 251,131

Liabilities Current financial liabilities (excluding trade payables) (50,000) – Other current liabilities (including trade payables) (651,592) (598,757)

Total current liabilities (701,592) (598,757) Total non-current financial liabilities (692,446) (738,872)

(1,394,038) (1,337,629)

Net liabilities (1,151,839) (1,086,498)

Interest in associates (90%) (1,036,655) (977,848) Less: unrecognised share of losses of associates 26,041 –

(1,010,614) (977,848) Goodwill 859,579 859,579

Carrying value* (151,035) (118,269)

* excluding loan and interest receivable, and impairment provision

126 Television Broadcasts Limited Annual Report 2015

F-69 11 INTERESTS IN ASSOCIATES (continued) Summarised consolidated statement of comprehensive income:

For the year For the year ended 31 ended 31 December 2015 December 2014 HK$’000 HK$’000

Revenue 225,010 268,860 Depreciation (15,222) (13,883) Loss from operations (65,341) (80,425) Post-tax loss for the year (65,341) (80,425) Other comprehensive income – – Total comprehensive income (65,341) (80,425) Dividends received from associate – –

The Group does not recognise further losses and total comprehensive income for its other immaterial associate for the years ended 31 December 2015 and 2014 because the Group’s share of losses in this immaterial associate has accumulated up to its interest in the associate. The Group has shared cumulative losses of HK$1,225,000 of this immaterial associate.

12 AVAILABLE-FOR-SALE FINANCIAL ASSETS

2015 2014 HK$’000 HK$’000

At 1 January 3 3 Additions 47,433 –

At 31 December 47,436 3

Details of material available-for-sale financial assets are as follows:

Particular Percentage of Place of Place of Principal of issued ownership Name incorporation operation activities shares held interest

CMC Flagship Limited Cayman Islands Cayman Islands Investment Ordinary shares of 10% holding US$1 each

This available-for-sale financial asset is denominated in US dollars.

Television Broadcasts Limited Annual Report 2015 127

F-70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13 LOAN AND RECEIVABLES The amount comprised loan to and interest receivables from Liann Yee Group of HK$140,910,000 and HK$1,595,000 respectively. The loan to Liann Yee Group is unsecured, interest bearing at the rate of the aggregate of the Taipei Interbank Offered Rate and 0.425% and is agreed to be repaid by 6 equal installments from 2016 to 2021. However, by exercising the option of voluntary prepayment of the loan, three installments of the loan were early repaid by Liann Yee Group in 2015. The loan and receivables are denominated in New Taiwan dollars. As at 31 December 2015, the carrying amounts of the loan and receivables approximated their fair values. The fair values are based on discounted cash flows and are included in level 2 fair value hierarchy.

14 STOCKS At 31 December 2015 and 2014, all stocks were stated at the lower of cost and net realisable value.

15 TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS

2015 2014 HK$’000 HK$’000

Non-current Prepayments related to capital expenditure 55,529 39,893

Current Trade receivables from: Joint ventures (Note 37(c)) 1,655 – Associates (Note 37(c)) 615,251 537,177 Related parties (Note 37(c)) 47,162 42,691 Third parties (note) 1,381,240 1,550,881

2,045,308 2,130,749 Less: provision for impairment loss on receivables from: Associates (Note 4(b)) (615,131) (421,626) Third parties (104,622) (72,754) Amounts due from associates 131 – Amounts due from joint ventures – 2,256 Other receivables, prepayments and deposits 540,831 478,243 Tax reserve certificates – 422,072

1,866,517 2,538,940

1,922,046 2,578,833

Note:

128 Television Broadcasts Limited Annual Report 2015

F-71 15 TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS (continued) At 31 December 2015, the ageing of trade receivables based on invoice date including trading balances due from joint ventures, associates and related parties was as follows:

2015 2014 HK$’000 HK$’000

Current 478,583 563,503 1-2 months 333,377 341,718 2-3 months 193,230 251,162 3-4 months 179,911 203,377 4-5 months 94,878 83,649 Over 5 months 765,329 687,340

2,045,308 2,130,749

The percentages of amounts of trade receivables (before impairment loss) are denominated in the following currencies:

2015 2014 % %

Hong Kong dollars 83 79 US dollars 6 6 New Taiwan dollars – 8 Malaysian Ringgit 2 2 Renminbi 8 4 Other currencies 1 1

100 100

As at 31 December 2015, trade receivables past due but not impaired were aged as follows:

2015 2014 HK$’000 HK$’000

Up to 5 months 626,892 596,687 Over 5 months to 1 year 63,726 149,608 Over 1 year 15,613 45,919

706,231 792,214

Receivables that were past due but not impaired relate to customers that have a good trade record with the Group. Management believes that no impairment allowance is necessary for these balances.

Television Broadcasts Limited Annual Report 2015 129

F-72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15 TRADE AND OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS (continued) As at 31 December 2015, trade receivables which were impaired were aged as follows:

2015 2014 HK$’000 HK$’000

Up to 5 months 33,763 2,567 Over 5 months to 1 year 89,984 8,306 Over 1 year 596,006 483,507

719,753 494,380

Movements on the provision for impairment of trade receivables are as follows:

2015 2014 HK$’000 HK$’000

At 1 January 494,380 521,067 Provision for impairment loss – Associates 193,505 – – Third parties 36,490 7,173 Reversal of provision for impairment loss – Third parties (3,690) (33,134) Receivables written off as uncollectible (538) (375) Disposal/liquidation of subsidiaries (134) (211) Exchange differences (260) (140)

At 31 December 719,753 494,380

The carrying amounts of trade and other receivables, prepayments and deposits approximate their fair values.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security.

16 RESTRICTED CASH

2015 2014 HK$’000 HK$’000

Pledged bank deposits and cash kept at banks 1,825 9,039

The current year restricted cash was used to secure banking and credit facilities granted to certain subsidiaries of the Group. Last year restricted cash was used to secure banking and credit facilities granted to certain subsidiaries of the Group, and to secure bank loans granted to the Company.

The carrying amount of restricted cash approximates its fair value.

130 Television Broadcasts Limited Annual Report 2015

F-73 17 BANK DEPOSITS MATURING AFTER THREE MONTHS AND CASH AND CASH EQUIVALENTS

2015 2014 HK$’000 HK$’000

Bank deposits maturing after three months 691,387 135,676

Cash at bank and on hand 264,440 587,398 Short-term bank deposits 1,861,535 2,608,471

Cash and cash equivalents 2,125,975 3,195,869

2,817,362 3,331,545

Note:

The maximum exposure to credit risk on bank balances is represented by the carrying amount in the statement of financial position. The carrying amounts of the bank deposits maturing after three months and cash and cash equivalents approximate their fair values.

Bank deposits maturing after three months and cash and cash equivalents are denominated in the following currencies:

2015 2014 HK$’000 HK$’000

Hong Kong dollars 1,050,555 803,581 US dollars 988,546 789,971 Renminbi 740,447 1,353,652 New Taiwan dollars 26,287 341,097 Other currencies 11,527 43,244

2,817,362 3,331,545

18 SHARE CAPITAL

Number of shares Share capital (thousands) HK$’000

Ordinary shares, issued and fully paid: At 1 January 2014 438,000 21,900 Transition to no-par value regime on 3 March 2014 (note) – 642,144

At 31 December 2014 and 1 January 2015 and 31 December 2015 438,000 664,044

Note:

In accordance with the transitional provisions set out in section 37 of Schedule 11 to Hong Kong Companies Ordinance (Cap. 622), on 3 March 2014, any amount standing to the credit of the share premium and capital redemption reserve accounts have become part of the Company’s share capital (Note 19).

Television Broadcasts Limited Annual Report 2015 131

F-74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19 OTHER RESERVES

Capital Share redemption General Capital Legal Translation premium reserve reserve reserve reserve reserve Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balance at 1 January 2014 602,026 40,118 70,000 (191) 167,954 (36,653) 843,254 Transition to no-par value regime on 3 March 2014 (Note 18) (602,026) (40,118) – – – – (642,144) Transferred from retained earnings – – – – 19,982 – 19,982 Currency translation differences: – Group – – – – – (87,252) (87,252) – Joint ventures – – – – – (35) (35) Reclassification adjustment to profit or loss on liquidation of subsidiaries – – – – – 25,436 25,436

Balance at 31 December 2014 – – 70,000 (191) 187,936 (98,504) 159,241

Balance at 1 January 2015 – – 70,000 (191) 187,936 (98,504) 159,241 Transferred from retained earnings – – – – 3,882 – 3,882 Currency translation differences: – Group – – – – – (38,564) (38,564) – Joint ventures – – – – – (34) (34) Reclassification adjustment to profit or loss on disposal of subsidiaries – – – – – 7,531 7,531 Disposal of subsidiaries – – – (864) (155,152) – (156,016) Loss previously in reserve released to profit or loss on disposal of subsidiaries – – – 1,055 – – 1,055

Balance at 31 December 2015 – – 70,000 – 36,666 (129,571) (22,905)

Capital reserve – in accordance with the local regulations of a subsidiary in Taiwan, the subsidiary is required to transfer the gain on deemed disposal of its associate to the capital reserve which can only be used to cover operating losses; the effects of all transactions with non-controlling interests are dealt with in accordance with the accounting policies set out in Note 2.2(b).

Legal reserve – in accordance with the local laws in Taiwan, Taiwan subsidiaries are required to set aside 10% of annual net income less any accumulated deficit as legal reserve until such reserve reaches 100% of those subsidiaries’ share capital; in accordance with the local laws in the PRC, the PRC subsidiaries are required to set aside 10% of annual net income less any accumulated deficit as legal reserve until such reserve reaches 50% of those subsidiaries’ registered capital. The application of the legal reserve is restricted to covering operating losses and conversion into share capital/ registered capital.

Translation reserve – the translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in Note 2.4.

132 Television Broadcasts Limited Annual Report 2015

F-75 20 TRADE AND OTHER PAYABLES AND ACCRUALS

2015 2014 HK$’000 HK$’000

Trade payables to: Joint ventures (Note 37(c)) 5,123 – Associates (Note 37(c)) 7,205 – Related parties (Note 37(c)) 5,243 6,007 Third parties 131,995 134,075

149,566 140,082 Amount due to a joint venture – 1 Receipts in advance, deferred income and customers’ deposits 121,221 124,703 Provision for employee benefits and other expenses 163,906 276,631 Accruals and other payables 251,504 251,602

686,197 793,019

At 31 December 2015, the ageing of trade payables based on invoice date including trading balances due to joint ventures, associates and related parties was as follows:

2015 2014 HK$’000 HK$’000

Current 117,911 109,530 1-2 months 17,853 25,054 2-3 months 7,180 3,497 3-4 months 1,718 690 4-5 months 1,211 176 Over 5 months 3,693 1,135

149,566 140,082

The percentages of amounts of trade payables are denominated in the following currencies:

2015 2014 % %

Hong Kong dollars 41 30 US dollars 29 14 New Taiwan dollars – 19 Renminbi 24 32 Malaysian Ringgit – 4 Other currencies 6 1

100 100

The carrying amounts of trade and other payables and accruals approximate their fair values.

Television Broadcasts Limited Annual Report 2015 133

F-76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21 BORROWINGS

2015 2014 HK$’000 HK$’000

Non-current Long-term bank loan, secured 234,850 293,700

Current Short-term bank loans, secured – 97,900

Total bank borrowings 234,850 391,600

At 31 December 2015, bank borrowings were repayable as follows:

2015 2014 HK$’000 HK$’000

Within 1 year – 97,900 Between 1 and 2 years 10,538 9,790 Between 2 and 5 years 54,196 176,220 Over 5 years 170,116 107,690

234,850 391,600

The long-term bank loan is secured by land and buildings with a net book value of HK$583,701,000 (2014: HK$623,435,000).

The short-term bank loan as at 31 December 2014 was secured by land and buildings with a net book value of HK$96,637,000. The short-term bank loan was fully repaid in 2015.

The effective interest rate of the floating rated long-term bank loan at the end of the reporting period was 1.67% (2014: 1.82%). The effective interest rate of the short-term bank loans of fixed rate as at 31 December 2014 was 2.02%.

The carrying amount of the Group’s long-term bank loan approximates its fair value, as the impact of discounting is not significant. The fair value is based on cash flow discounted using a rate based on the borrowing rate of 1.66% (2014: 1.80%). The borrowing is included in level 2 fair value hierarchy.

The carrying amounts of the Group’s borrowings are denominated in New Taiwan dollars.

134 Television Broadcasts Limited Annual Report 2015

F-77 22 DEFERRED INCOME TAX Deferred income tax assets and deferred income tax liabilities on the statement of financial position are analysed as follows:

2015 2014 HK$’000 HK$’000

Net deferred income tax assets recognised on the statement of financial position (37,299) (23,529) Net deferred income tax liabilities recognised on the statement of financial position 321,776 181,080

284,477 157,551

The movements in the deferred income tax liabilities/(assets) account are as follows:

2015 2014 HK$’000 HK$’000

At 1 January 157,551 162,312 Exchange differences 1,012 717 Recognised in the income statement (note) 119,270 (5,673) Recognised in other comprehensive income – 352 Disposal of subsidiaries (Note 30(d)) 6,644 – Liquidation of subsidiaries (Note 33(b)) – (157)

At 31 December 284,477 157,551

Note:

The amount recognised in 2015 included deferred income tax expenses of HK$135,386,000 recorded under discontinued operations.

Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through the future taxable profits is probable. At 31 December 2015, the Group has unrecognised tax losses of HK$163,091,000 (2014: HK$148,629,000) to carry forward against future taxable income. These tax losses will expire as follows:

2015 2014 HK$’000 HK$’000

After the fifth year 2,930 2,313 No expiry date 160,161 146,316

At 31 December 163,091 148,629

Television Broadcasts Limited Annual Report 2015 135

F-78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22 DEFERRED INCOME TAX (continued) The movements in deferred income tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year are as follows:

Deferred income tax liabilities

Accelerated tax depreciation Others Total HK$’000 HK$’000 HK$’000

At 1 January 2014 114,085 83,859 197,944 Recognised in the income statement 8,201 (9,987) (1,786) Liquidation of subsidiaries (157) – (157) Exchange differences 90 1 91

At 31 December 2014 122,219 73,873 196,092 Recognised in the income statement 8,774 126,909 135,683 Exchange differences 96 – 96

At 31 December 2015 131,089 200,782 331,871

Deferred income tax assets

Retirement benefit obligations Tax losses Others Total HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2014 6,891 – 28,741 35,632 Recognised in the income statement (792) 70 4,609 3,887 Recognised in other comprehensive income (352) – – (352) Exchange differences (327) – (299) (626)

At 31 December 2014 5,420 70 33,051 38,541 Recognised in the income statement – 10,856 5,557 16,413 Disposal of subsidiaries (5,552) – (1,092) (6,644) Exchange differences 132 – (1,048) (916)

At 31 December 2015 – 10,926 36,468 47,394

136 Television Broadcasts Limited Annual Report 2015

F-79 23 RETIREMENT BENEFIT OBLIGATIONS

2015 2014 HK$’000 HK$’000

Obligations on: Pensions – defined contribution plans (note (a)) 7,186 9,091 Pensions – defined benefit plans (note (b)) – 34,628

7,186 43,719

Notes:

(a) Pensions – defined contribution plans No forfeited contribution was utilised during the years 2014 and 2015.

Contributions totalling HK$7,186,000 (2014: HK$9,091,000) were payable to the fund at the year end and are included in other payables and accruals.

(b) Pensions – defined benefit plans Upon the disposal of the 53% equity interest in Liann Yee Group, the obligation in relation to the defined benefit retirement scheme providing benefits to eligible employees located in Taiwan under local regulations was not included in the Group’s consolidated statement of financial position as at 31 December 2015.

Television Broadcasts Limited Annual Report 2015 137

F-80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24 PROFIT BEFORE INCOME TAX The following items have been charged/(credited) to the profit before income tax during the year:

2015 2014 HK$’000 HK$’000 (Restated)

Continuing operations Net exchange losses (including exchange losses on Renminbi fixed term deposits) 126,793 15,839 Gross rental income from investment properties (21,436) (2,424) Direct operating expenses arising from investment properties 2,994 502 Loss on disposals of property, plant and equipment 1,178 568 Auditors’ remuneration – Audit services 4,479 4,290 – Non-audit service fees 2,802 6,278 Cost of programmes, film rights and stocks 1,538,823 1,575,434 Depreciation (Note 6 and 7) 278,054 256,642 Amortisation of land use rights (Note 8) 3,220 3,266 Operating leases – Equipment and transponders 15,227 15,226 – Land and buildings 32,742 35,266 Employee benefit expense (excluding directors’ emoluments) (Note 26(a)) 1,509,976 1,511,590

Discontinued operations Cost of programmes, film rights and stocks 39,324 144,141 Depreciation (Note 6 and 7) 18,354 57,481 Employee benefit expense (excluding directors’ emoluments) (Note 26(a)) 87,668 264,496

138 Television Broadcasts Limited Annual Report 2015

F-81 25 BENEFITS AND INTERESTS OF DIRECTORS

(a) Directors’ emoluments The remunerations of all Directors and the chief executive for the year ended 31 December 2015 and 2014 are set out below:

2015

Salaries, leave pay and other Discretionary Pension Name of Director Fees benefit bonuses Gratuity contributions Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Mark Lee Po On (note (i)) 220 5,833 2,700 – 549 9,302 Cheong Shin Keong 220 4,754 1,606 – 441 7,021 Mona Fong 301 – – – – 301 Dr. Charles Chan Kwok Keung 750 – – – – 750 Cher Wang Hsiueh Hong (note (ii)) 68 – – – – 68 Jonathan Milton Nelson 220 – – – – 220 Anthony Lee Hsien Pin 395 – – – – 395 Chen Wen Chi 370 – – – – 370 Dr. Chow Yei Ching, GBS (note (iii)) 47 – – – – 47 Raymond Or Ching Fai, SBS, JP 504 – – – – 504 William Lo Wing Yan 465 – – – – 465 Professor Caroline Wang Chia-Ling 187 – – – – 187 Dr. Allan Zeman 166 – – – – 166 Thomas Hui To 246 – – – – 246

4,159 10,587 4,306 – 990 20,042

2014

Salaries, leave pay and other Discretionary Pension Name of Director Fees benefit bonuses Gratuity contributions Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Dr. Norman Leung Nai Pang, GBS, LLD, JP 200 6,925 3,600 6,400 672 17,797 Mark Lee Po On 200 5,229 3,000 – 523 8,952 Mona Fong 350 – – – – 350 Kevin Lo Chung Ping 171 – – – – 171 Dr. Charles Chan Kwok Keung 350 – – – – 350 Cher Wang Hsiueh Hong 200 – – – – 200 Jonathan Milton Nelson 200 – – – – 200 Anthony Lee Hsien Pin 320 – – – – 320 Chen Wen Chi 350 – – – – 350 Dr. Chow Yei Ching, GBS 260 – – – – 260 Edward Cheng Wai Sun, SBS, JP 300 – – – – 300 Chien Lee 137 – – – – 137 Gordon Siu Kwing Chue, GBS, JP 400 – – – – 400 Raymond Or Ching Fai, SBS, JP 376 – – – – 376

3,814 12,154 6,600 6,400 1,195 30,163

Television Broadcasts Limited Annual Report 2015 139

F-82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25 BENEFITS AND INTERESTS OF DIRECTORS (continued)

(a) Directors’ emoluments (continued) Notes:

(i) Mr. Mark Lee Po On assumed the functions of the chief executive of the Company during the year, and was re-titled as the Group Chief Executive Officer with effect from 1 January 2015.

(ii) Cher Wang Hsiueh Hong resigned on 23 April 2015.

(iii) Dr. Chow Yei Ching resigned on 1 March 2015.

(b) No significant transactions, arrangements and contracts in relation to the Group’s business to which the Company was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

26 EMPLOYEE BENEFIT EXPENSE

(a) Employee benefit expense

2015 2014 HK$’000 HK$’000

Continuing operations Wages and salaries 1,421,054 1,423,448 Pension costs – defined contribution plans 88,922 88,142

1,509,976 1,511,590

Discontinued operations Wages and salaries 82,746 251,290 Pension costs – defined contribution plans 4,057 12,137 Pension costs – defined benefit plans 865 1,069

87,668 264,496

(b) Five highest paid individuals The five individuals whose emoluments were the highest in the Group for the year include two (2014: two) Directors whose emoluments are reflected in the analysis presented in Note 25(a) above. The emoluments payable to the remaining three (2014: three) individuals during the year are as follows:

2015 2014 HK$’000 HK$’000

Salaries and leave pay 9,864 11,411 Bonuses 2,340 3,498 Pension contributions 384 709

12,588 15,618

140 Television Broadcasts Limited Annual Report 2015

F-83 26 EMPLOYEE BENEFIT EXPENSE (continued)

(b) Five highest paid individuals (continued) The aggregate emoluments paid to the three individuals are further analysed into the following bands:

Number of individuals Emolument bands in each band 2015 2014

HK$3,500,001 – HK$4,000,000 2 1 HK$5,000,001 – HK$5,500,000 1 1 HK$6,500,001 – HK$7,000,000 – 1

3 3

(c) Senior management’s emoluments Details of emoluments (excluding directors’ fees, if any) paid to members of senior management fell within the following bands:

*Number of individuals Emolument bands in each band 2015 2014

HK$1,000,001 – HK$1,500,000 1# – HK$2,000,001 – HK$2,500,000 – 1 HK$2,500,001 – HK$3,000,000 1 1 HK$3,000,001 – HK$3,500,000 2 – HK$3,500,001 – HK$4,000,000 – 1 HK$6,500,001 – HK$7,000,000 1 1 HK$8,500,001 – HK$9,000,000 – 1 HK$9,000,001 – HK$10,000,000 1 –

6 5

* included two (2014: one) Directors of the Company

# one employee joined senior management with effect from 1 October 2015

Television Broadcasts Limited Annual Report 2015 141

F-84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27 OTHER LOSSES, NET

2015 2014 HK$’000 HK$’000 (Restated)

Net loss on liquidation of subsidiaries (Note 33(b)) – (71,706) Net exchange losses (note) (84,657) (11,730)

(84,657) (83,436)

Note: The amount excluded exchange losses on Renminbi fixed term deposits of HK$42,136,000 (2014: HK$4,109,000).

28 FINANCE COSTS

2015 2014 HK$’000 HK$’000 (Restated)

Interest on bank borrowings 6,441 2,763

29 INCOME TAX EXPENSE Hong Kong profits tax has been provided at the rate of 16.5% (2014: 16.5%) on the estimated assessable profit for the year. Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the Group operates.

The amount of income tax charged to the consolidated income statement represents:

2015 2014 HK$’000 HK$’000 (Restated)

Current income tax: – Hong Kong 146,010 214,786 – Overseas 18,149 29,014 – Over provisions in prior years (4,091) (16,417)

Total current income tax 160,068 227,383

Deferred income tax: – Origination and reversal of temporary differences (16,116) (6,456) – Effect of decrease in tax rate – 8

Total deferred income tax (Note 22) (16,116) (6,448)

143,952 220,935

142 Television Broadcasts Limited Annual Report 2015

F-85 29 INCOME TAX EXPENSE (continued) The income tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the taxation rate of the place where the Company operates as follows:

2015 2014 HK$’000 HK$’000 (Restated)

Profit before income tax 126,440 1,482,253

Calculated at a taxation rate of 16.5% (2014: 16.5%) 20,863 244,572 Effect of different taxation rates in other countries 4,526 3,092 Tax effect on the share of results of associates and joint ventures 9,171 13,799 Income not subject to taxation (44,890) (44,879) Expenses not deductible for taxation purposes 178,677 28,506 Tax losses not recognised 4,115 12,218 Utilisation of previously unrecognised tax losses (375) (580) Tax credit allowance (16,689) (14,686) Withholding tax on overseas dividend (8,305) (3,525) Allowance for previous non-deductible expenses – (1,938) Remeasurement of deferred tax due to change in tax rate – 8 Others 950 765 Over provisions in prior years (4,091) (16,417)

143,952 220,935

30 NON-CURRENT ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS As more fully explained in Note 1 in respect of the disposal of Liann Yee Group, the results of Taiwan operations together with the related gain on disposal have been presented as discontinued operations in the consolidated financial statements.

(a) Non-current asset held for sale Following the subsequent disposal of the remaining interest in Liann Yee Group as more fully explained in Note 1, the carrying value of the retained 47% equity interest in Liann Yee Group amounted to HK$884,854,000 has been reclassified as “Non-current asset held for sale” in the consolidated financial statements.

Television Broadcasts Limited Annual Report 2015 143

F-86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30 NON-CURRENT ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS (continued)

(b) Analysis of the results of the discontinued operations:

2015 2014 HK$’000 HK$’000

Revenue 276,081 866,402 Cost of sales (134,684) (441,929)

Gross profit 141,397 424,473 Other revenues 2,890 5,958 Selling, distribution and transmission costs (29,831) (101,102) General and administrative expenses (31,202) (75,646) Other (losses)/gains, net (468) 1,187 Finance costs (1,896) (771)

Profit before income tax 80,890 254,099 Income tax credit/(expense) 2,262 (58,870)

Profit after income tax 83,152 195,229 Share of profit of 47% equity interest as a joint venture from 6 May 2015 35,922 – Tax expenses on undistributed profit (15,938) (36,952)

Profit for the year from discontinued operations 103,136 158,277 Tax on dividend distributed prior to completion of disposal of 53% equity interest (52,726) – Gain on disposal of subsidiaries (note (i)) 1,395,770 – Deferred tax in relation to gain from disposal (note (ii)) (110,676) –

1,335,504 158,277

Profit attributable to: – Equity holders of the Company 1,335,504 158,277

Notes:

(i) Totally a disposal gain of HK$1,395,770,000, represented by a gain on disposal of the equity interest of HK$851,621,000 and a gain on retained interest of HK$544,149,000, was recognised.

(ii) In view of a plan to repatriate the proceeds from the Second Disposal from Taiwan to Hong Kong in the form of dividend upon its completion, a deferred tax provision of HK$110,676,000 had been made in the consolidated financial statements for the year ended 31 December 2015.

144 Television Broadcasts Limited Annual Report 2015

F-87 30 NON-CURRENT ASSET HELD FOR SALE AND DISCONTINUED OPERATIONS (continued)

2015 2014 HK$’000 HK$’000

Net cash inflow/(outflow) from operating activities 154,116 (276,355) Net cash inflow/(outflow) from investing activities 1,151,100 (342,759) Net cash (outflow)/inflow from financing activities (553,086) 818,063

Net cash inflow from discontinued operations 752,130 198,949

(d) Disposal of subsidiaries

HK$’000

Net assets disposed: Property, plant and equipment 569,983 Deferred income tax assets 6,644 Loan to a subsidiary of the Group 63,190 Programmes and film rights 25,107 Stocks 508 Trade and other receivables, prepayments and deposits 192,388 Restricted cash 451 Bank deposits maturing after three months 2,257 Cash and cash equivalents 203,502 Loan from a subsidiary of the Group (300,902) Trade and other payables and accruals (140,126) Current income tax liabilities (51,286) Retirement benefit obligations (35,198)

536,518 Goodwill (Note 9) 116,719 Capital reserve 1,055 Exchange loss transferred from translation reserve 7,531 Expenses incurred on disposal 32,380

694,203

Cash consideration 1,182,144 Fair value of retained interests (Note 10) 907,829

2,089,973

Gain on disposal of subsidiaries 1,395,770

Analysis of net cash flow on disposal: Cash consideration received 1,182,144 Cash and cash equivalents disposed of (203,502)

Net cash inflow from disposal of subsidiaries 978,642

Television Broadcasts Limited Annual Report 2015 145

F-88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31 EARNINGS/(LOSS) PER SHARE Earnings/(loss) per share is calculated based on the Group’s profit attributable to equity holders of HK$1,331,223,000 (2014: HK$1,409,632,000) and 438,000,000 shares in issue throughout the years ended 31 December 2015 and 2014. No fully diluted earnings per share is presented as there were no potentially dilutive shares outstanding.

2015 2014 HK$’000 HK$’000 (Restated)

Profit/(loss) attributable to equity holders of the Company – Continuing operations (4,281) 1,251,355 – Discontinued operations 1,335,504 158,277

1,331,223 1,409,632

32 DIVIDENDS

2015 2014 HK$’000 HK$’000

Interim dividend paid of HK$0.60 (2014: HK$0.60) per ordinary share 262,800 262,800 Proposed final dividend of HK$2.00 (2014: HK$2.00) per ordinary share 876,000 876,000 Special dividend, nil declared (2014: HK$2.30 per ordinary share) – 1,007,400

1,138,800 2,146,200

At a meeting held on 23 March 2016, the Directors recommended a final dividend of HK$2.00 per ordinary share. The proposed dividend is not reflected as a dividend payable in these financial statements, but will be reflected as an appropriation of retained earnings for the year ending 31 December 2016.

146 Television Broadcasts Limited Annual Report 2015

F-89 33 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Reconciliation of profit before income tax including discontinued operations to cash generated from operations:

2015 2014 HK$’000 HK$’000

Profit before income tax 1,639,022 1,736,352 Adjustments for: Depreciation and amortisation 299,628 317,389 Defined benefit plans (277) (2,675) Provision for impairment loss on loan to an associate 501,594 – Provision for impairment loss on trade receivables 229,995 7,173 Reversal of provision for impairment loss on trade receivables (3,690) (33,134) Provision for impairment loss of property 87,955 – Share of (profits)/losses of joint ventures (20,779) 7,134 Share of losses of associates 32,766 72,382 Gain on disposal of subsidiaries (1,395,770) – Net loss on liquidation of subsidiaries (note (b)) – 71,706 Loss on disposal of property, plant and equipment 1,221 382 Interest income (55,374) (63,261) Finance costs 6,679 3,534 Exchange differences 150,139 (255)

1,473,109 2,116,727 Increase in programmes, film rights, movies and stocks (5,182) (300,251) Increase in trade and other receivables, prepayments and deposits (84,409) (36,278) Decrease/(increase) in trade and other payables and accruals 27,742 (131,840)

Cash generated from operations 1,411,260 1,648,358

(b) Net loss on liquidation of subsidiaries The Group discontinued the operation of certain indirect wholly-owned subsidiaries of the Company incorporated in France, the United Kingdom, the Cayman Islands and Hong Kong through liquidations under the procedures prescribed under the laws of the relevant country of operation. A total loss of HK$72,699,000 was recognised in 2014.

A 51% indirectly owned subsidiary of the Company incorporated in Malaysia, which was previously put into liquidation in 2002 was officially liquidated in 2014. A gain of HK$993,000 was recognised.

Television Broadcasts Limited Annual Report 2015 147

F-90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

33 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(b) Net loss on liquidation of subsidiaries (continued) Details of net loss on liquidation of subsidiaries are summarised as follows:

2014 HK$’000

Net assets disposed: Property, plant and equipment 2,549 Programme and film rights 307 Stocks 1,309 Trade and other receivables, prepayments and deposits 3,927 Cash and cash equivalents 2,371 Trade and other payables and accruals (13,326) Current income tax liabilities (158) Deferred income tax liabilities (157)

(3,178) Goodwill (Note 9) 49,448 Exchange loss transferred from translation reserve (Note 19) 25,436

Net loss on liquidation of subsidiaries 71,706

Analysis of net outflow of cash and cash equivalents in respect of the liquidation of subsidiaries: Cash and cash equivalents (2,371)

34 FINANCIAL GUARANTEES The amounts of financial guarantees are as follows:

2015 2014 HK$’000 HK$’000

Guarantees for banking facilities granted to: An investee company 7,263 8,691 A joint venture – 13,336

7,263 22,027

The Directors have assessed the fair value of the above and consider that they are not material to the Group. Therefore, no financial liability has been recognised in the statement of financial position.

148 Television Broadcasts Limited Annual Report 2015

F-91 35 COMMITMENTS

(a) Capital commitments The amounts of commitments for property, plant and equipment are as follows:

2015 2014 HK$’000 HK$’000

Contracted but not provided for 166,297 100,044

(b) Contractual programme rights commitments The amounts of commitments for programme rights are as follows:

2015 2014 HK$’000 HK$’000

Programme rights commitments 181,961 310,015

(c) Operating lease commitments as lessee The amounts of future aggregate minimum lease payments under non-cancellable operating leases which fall due are as follows:

2015 2014 HK$’000 HK$’000

Land and buildings – not later than one year 11,037 29,027 – later than one year and not later than five years 6,486 13,615

17,523 42,642

Equipment and transponders – not later than one year 13,078 23,278 – later than one year and not later than five years 16,672 43,621

29,750 66,899

47,273 109,541

The Group leases various premises and buildings for the use as offices and studios under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

The Group also leases various plant and machinery under non-cancellable operating lease agreements.

The lease expenditure expensed in the consolidated income statement during the year is disclosed in Note 24.

Television Broadcasts Limited Annual Report 2015 149

F-92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

35 COMMITMENTS (continued)

(d) Operating lease commitments as lessor At 31 December 2015, the Group had contracted with its tenants for future aggregate minimum lease payments under non-cancellable operating leases as follows:

2015 2014 HK$’000 HK$’000

Land and buildings – not later than one year 9,699 8,460 – later than one year and not later than five years 17,819 23,996

27,518 32,456

36 OBLIGATIONS UNDER TELEVISION BROADCASTING LICENCE The Company operates under the terms of a domestic free television programme service licence granted by the Government of the HKSAR (“Government”) which runs for a period of twelve years to 30 November 2015.

On 12 May 2015, the Government announced that the Company’s application for renewal of the domestic free television programme service licence for a period of 12 years from 1 December 2015 to 30 November 2027 has been approved. Under the renewed licence conditions, the Company is required to (i) make a programming and capital investment of HK$6,336 million in total for the six-year period from 2016 to 2021; (ii) provide at least 12,000 hours of local productions each year; (iii) provide an additional four hours per week of positive programmes (including current affairs programmes, documentaries, arts and culture programmes and programmes for young persons) on the Company’s digital channels; (iv) provide independent local productions on an incremental basis from 20 hours per year in 2016 to 60 hours per year by 2020. In addition, the Company is granted more flexibility to schedule the broadcast of RTHK programmes and an additional 5% non-designated language allowance for the English channel. In accordance with the standard procedure, the renewed licence of the Company will be subject to a mid-term review in 2021.

150 Television Broadcasts Limited Annual Report 2015

F-93 37 SIGNIFICANT RELATED PARTY TRANSACTIONS

(a) Transactions with related parties The following is a summary of significant related party transactions during the year carried out by the Group in the normal course of its business:

Note 2015 2014 HK$’000 HK$’000

Sales of services: Joint ventures Rental income (i) 18,380 – Technical and facilities services fees (i) 5,372 – * Movie production charges (ii) 891 3,485

Associates Programmes/channel licensing fees (iii) 57,894 63,848 Broadcasting and transmission service fees (iii) 12,240 12,240 Rental income and related charges (iii) 7,999 7,999 Advertising and subscription income (iii) 126 3,701 Others (iii) 2,906 2,987

Other related parties * Programmes/channel licensing fees (iv) – 57,941 * Programmes/channel licensing fees (iv) 229,907# 220,736# * Advertising consultancy fees (iv) 29,720# 33,807#

365,435 406,744

Purchases of services: Joint ventures Programmes licensing fees (i) (42,979) – Others (i) (1,062) –

Associates Playback and uplink service fees (iii) (30,741) (31,154) Graphic service fees (iii) (1,250) (3,000) Others (iii) (2,825) (2,294)

Other related parties * Project management fees (v) (3,332) (4,320)

(82,189) (40,768)

* These are regarded as connected transactions or continuing connected transactions as defined under Main Board Listing Rules.

# The transaction is not subject to the reporting, announcement and independent shareholders’ approval requirement due to the application of the insignificant subsidiary exemption. The transaction is a connected transaction only because it involves a person who is a connected person by virtue of its relationship with the Company’s insignificant subsidiary.

Television Broadcasts Limited Annual Report 2015 151

F-94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

37 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

(a) Transactions with related parties (continued) Notes:

(i) The fees were received from/(paid to) Liann Yee Production Co., Ltd., a joint venture of the Group since 6 May 2015.

(ii) The fees were received from Concept Legend Limited, a joint venture of the Group.

(iii) The fees were received from/(paid to) TVB Network Vision, an associate of the Company.

(iv) The fees were received from MEASAT Broadcast Network Systems Sdn. Bhd., a fellow subsidiary of the non- controlling shareholder of non wholly-owned subsidiaries of the Company.

(v) The fees were paid to ITC Properties Management Limited, an entity jointly controlled by a person who has significant influence over the Company and a close member of that person’s family.

(vi) The disclosure requirements in accordance with Chapter 14A of the Main Board Listing Rules have been properly complied with.

The Company supplies channel contents to TVB Network Vision in exchange of the advertising revenue attributable to the relevant channels.

The fees received/(paid to) related parties are based upon mutually agreed terms and conditions.

(b) Key management compensation

2015 2014 HK$’000 HK$’000

Salaries and other short-term employee benefits 25,895 41,959

2015 2014 HK$’000 HK$’000

Receivables from joint ventures 1,655 – Receivables from associates (note) 615,251 537,177 Receivables from other related parties 47,162 42,691

664,068 579,868

152 Television Broadcasts Limited Annual Report 2015

F-95 37 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)

2015 2014 HK$’000 HK$’000

Payables to joint ventures 5,123 – Payables to associates 7,205 – Payables to other related parties 5,243 6,007

17,571 6,007

Note:

At 31 December 2015, a provision for impairment loss of amount due from associates of HK$615,131,000 (2014: HK$421,626,000) had been provided (Note 15).

(d) Fund advanced/loan to related parties

2015 2014 HK$’000 HK$’000

Fund advanced to joint ventures Beginning of the year 41,981 26,231 Fund advanced 13,044 15,750 Exchange differences (627) –

End of the year 54,398 41,981

Loan to joint ventures Beginning of the year 16,696 – Loan provided 300,902 15,778 Interest charged 3,735 816 Loan repayment (155,863) – Interest received (2,488) – Exchange differences (17,184) 102

End of the year* 145,798 16,696

Loan to an associate Beginning of the year 738,872 735,419 Interest charged 3,574 3,453

End of the year 742,446 738,872

* including loan to and interest receivables from Liann Yee Group of HK$142,505,000 (Note 13)

At 31 December 2015, a full provision for impairment loss of the loan to an associate had been made (Note 11).

Television Broadcasts Limited Annual Report 2015 153

F-96 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

38 EVENT SUBSEQUENT TO THE YEAR END On 4 January 2016, the Group entered into a conditional Disposal Agreement to conditionally sell the remaining 47% equity interest in Liann Yee Group. The transaction was completed on 10 March 2016.

39 STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY

Statement of financial position of the Company

2015 2014 HK$’000 HK$’000

ASSETS Non-current assets Property, plant and equipment 1,552,870 1,678,757 Land use rights 17,406 17,821 Intangible assets 26,976 – Interests in subsidiaries 339,002 1,016,795 Interests in joint ventures 29,031 29,031 Interests in associates – 530,786 Prepayments 35,528 39,893

Total non-current assets 2,000,813 3,313,083

Current assets Programmes and film rights 675,677 667,250 Stocks 4,196 4,161 Trade and other receivables, prepayments and deposits 1,444,884 1,492,881 Tax recoverable 10,588 – Bank deposits maturing after three months 617,733 133,473 Cash and cash equivalents 1,421,876 1,865,006

Total current assets 4,174,954 4,162,771

Total assets 6,175,767 7,475,854

EQUITY Equity attributable to equity holders of the Company Share capital 664,044 664,044 Other reserves 70,000 70,000 Retained earnings 4,604,441 6,111,289

Total equity 5,338,485 6,845,333

LIABILITIES Non-current liabilities Deferred income tax liabilities 111,580 112,320

Total non-current liabilities 111,580 112,320

154 Television Broadcasts Limited Annual Report 2015

F-97 39 STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY (continued)

Statement of financial position of the Company (continued)

2015 2014 HK$’000 HK$’000

Current liabilities Trade and other payables and accruals 725,702 489,314 Current income tax liabilities – 28,887

Total current liabilities 725,702 518,201

Total liabilities 837,282 630,521

Total equity and liabilities 6,175,767 7,475,854

The statement of financial position of the Company was approved by the Board of Directors on 23 March 2016 and was signed on its behalf.

Charles Chan Kwok Keung Mark Lee Po On Director Director

Television Broadcasts Limited Annual Report 2015 155

F-98 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

39 STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY (continued)

Reserve movement of the Company

Capital Share redemption General premium reserve reserve Total HK$’000 HK$’000 HK$’000 HK$’000

Balance at 1 January 2014 602,026 40,118 70,000 712,144 Transition to no-par value regime on 3 March 2014 (Note 18) (602,026) (40,118) – (642,144)

Balance at 31 December 2014 – – 70,000 70,000

Balance at 1 January 2015 and 31 December 2015 – – 70,000 70,000

40 APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements were approved by the Board of Directors on 23 March 2016.

156 Television Broadcasts Limited Annual Report 2015

F-99 41 PARTICULARS OF PRINCIPAL SUBSIDIARIES

Incorporated in Hong Kong

Issued and fully Attributable interest (%) Number of paid up to the to the Name shares share capital Group Company Principal activities note (d)

Long Wisdom Limited 2 HK$2 100 100 Properties holding

Shaw Brothers Pictures Limited 20 HK$20 100 100 Production of motion pictures for theatrical release and distribution and artiste management

TVBI Company Limited 200,000 HK$2,000,000 100 100 Programme licensing

The Voice Entertainment Group Limited 1 HK$1 100 100 Production, licensing and sales of sound recordings

The Voice Music Publishing Limited 1 HK$1 100 100 Publishing and licensing of musical works

Zenith Digital Creation Limited 1 HK$1 100 100 Computer graphics/ animations production

Art Limited 10,000 HK$10,000 73.68 – Film licensing and distribution

FC Movie Company Limited 1 HK$1 100 – Production of motion pictures for theatrical release and distribution

Tailor Made Production Limited 10 HK$10 100 – Production of motion pictures, TV Programmes and artiste management

TVB (Europe) Limited 50,000 HK$500,000 100 – Provision of subscription television programmes

TVB Facilities Limited 10,000 HK$10,000 100 – Provision of services for programme productions

TVB Publications Limited 20,000,000 HK$20,000,000 73.68 – Magazine publications

TVB Publishing Holding Limited (note (c)) 90,000,000 HK$199,710,000 73.68 – Investment holding

TVB Satellite Broadcasting Limited 2 HK$2 100 – Provision of programming and channel services

TVB Satellite TV (HK) Limited 2 HK$2 100 – Provision of pay television programmes

TVB.COM Limited 2 HK$2 100 – Internet web portal

Television Broadcasts Limited Annual Report 2015 157

F-100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

41 PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued)

Incorporated in other countries

Issued and fully paid up share capital/ Attributable interest (%) Place of Number of registered to the to the Name incorporation shares capital Group Company Principal activities note (d)

Television Broadcasts Airtime The People’s Not applicable HK$500,000 100 100 Provision of agency Sales (Guangzhou) Limited Republic of China services on design, (note (a)) production and exhibition of advertisements

TVB Investment Limited Bermuda 20,000 US$20,000 100 100 Investment holding

TVB Satellite TV Holdings Limited (note (b)) Bermuda 12,000 US$12,000 100 100 Investment holding

TVBO Production Limited Bermuda 12,000 US$12,000 100 100 Owner of film rights and programme licensing

廣東采星坊演藝諮詢服務有限公司 The People’s Not applicable RMB10,000,000 100 100 Provision of (note (a)) Republic of China consultancy, management and agency services to artistes

上海翡翠東方傳播有限公司 The People’s Not applicable RMB200,000,000 55 55 Provision of agency (note (a)) Republic of China services on advertisements, television programmes, film rights and management services

Condor Entertainment B.V. (note (b)) The Netherlands 400 EUR18,400 100 – Investment holding

Countless Entertainment (Taiwan) Taiwan 1,000,000 NT$10,000,000 100 – Investment holding Company Ltd. and programme licensing

聯意投資股份有限公司 Taiwan 75,000,000 NT$750,000,000 100 – Investment holding

Liann Yee Asset Co., Ltd. Taiwan 74,760,700 NT$747,607,000 100 – Property investment

TVB (Australia) Pty. Ltd. Australia 5,500,000 A$5,500,000 100 – Provision of satellite and subscription television programmes

TVB Holdings (USA) Inc. (note (a)) USA 10,000 US$6,010,000 100 – Investment holding and programme licensing and distribution

158 Television Broadcasts Limited Annual Report 2015

F-101 41 PARTICULARS OF PRINCIPAL SUBSIDIARIES (continued)

Incorporated in other countries (continued)

Issued and fully paid up share capital/ Attributable interest (%) Place of Number of registered to the to the Name incorporation shares capital Group Company Principal activities note (d)

TVB Macau Company Limited Macau Not applicable MOP25,000 100 – Provision of services for programme productions

TVB (Overseas) Holdings Limited (note (a)) British Virgin Islands 50,000 US$50,000 55 – Programme licensing

TVB Satellite Platform, Inc. (note (a)) USA 300,000 US$3,000,000 100 – Provision of satellite and subscription television programmes

TVB Satellite TV Entertainment Limited Bermuda 12,000 US$12,000 100 – Provision of satellite and subscription television programmes

TVB (USA) Inc. (note (a)) USA 1,000 US$10,000 100 – Provision of satellite and subscription television programmes

TVB Video (UK) Limited United Kingdom 1,000 GBP1,000 100 – Programme licensing

TVBO Facilities Limited Bermuda 12,000 US$12,000 100 – Provision of services for programme productions

Notes:

None of the subsidiaries have issued any loan capital. Except for TVBO Facilities Limited and TVBO Production Limited which operate worldwide, all subsidiaries operate principally in their place of incorporation.

There is no significant contractual arrangement with the non-controlling interests.

(a) The accounts of these subsidiaries, which do not materially affect the results of the Group, have been audited by firms other than PricewaterhouseCoopers.

(b) The accounts of these subsidiaries are not audited.

(c) On 30 November 2001, TVB Publishing Holding Limited issued a total of 9,000,000 ordinary shares at HK$8.60 per share to its non-controlling shareholders as unpaid shares. These shares will not be entitled to voting and dividends rights until they are fully paid. 4,500,000 ordinary shares were fully paid up in 2003 and the remaining 4,500,000 ordinary shares were still unpaid as at 31 December 2015.

(d) Represented ordinary share capital, unless otherwise stated.

(e) All principal subsidiaries are limited liability companies.

Television Broadcasts Limited Annual Report 2015 159

F-102 ISSUER

TVB Finance Limited Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands

GUARANTOR

Television Broadcasts Limited TVB City 77 Chun Choi Street Tseung Kwan O Industrial Estate Kowloon, Hong Kong

AUDITOR OF THE GUARANTOR

PricewaterhouseCoopers Certified Public Accountants 22nd Floor Prince’sBuilding Central Hong Kong

TRUSTEE

The Hongkong and Shanghai Banking Corporation Limited Level 30 HSBC Main Building 1 Queens Road Central Hong Kong

PRINCIPAL PAYING AGENT, TRANSFER AGENT AND REGISTRAR

The Hongkong and Shanghai Banking Corporation Limited Level 30 HSBC Main Building 1Queen’s Road Central Hong Kong

LEGAL ADVISERS

To the Issuer as to To the Guarantor as to English law Cayman Islands law and Hong Kong law

CONYERS Dill & Pearman Freshfields Bruckhaus Deringer Cricket Square 11th Floor, Two Exchange Square Hutchins Drive Central Hong Kong PO Box 2681 Grand Cayman KY 1-1111 Cayman Islands

To the Joint Lead Managers and the Trustee as to English law

Linklaters 10th Floor, Alexandra House Chater Road Central, Hong Kong