Contents Contents 02 Corporate Information 04 Chairman’s Statement 06 Management Discussion and Analysis 08 Biographies of Directors 11 Corporate Governance Report 27 Report of the Directors 36 Independent Auditor’s Report 39 Consolidated Statement of Profit or Loss and Other Comprehensive Income 41 Consolidated Statement of Financial Position 43 Consolidated Statement of Changes in Equity 44 Consolidated Statement of Cash Flows 46 Notes to the Consolidated Financial Statements 144 Financial Summary 2018 年報 Annual Report 01 Corporate Information Corporate Information BOARD OF DIRECTORS AUTHORISED REPRESENTATIVES Executive Directors Mr. KONG Dalu (ceased on 9 March 2018) Ms. YAO Qinyi Mr. WU Chien-Chiang (Chairman) Mr. LI Kai (appointed on 9 March 2018) Ms. YAO Qinyi Mr. LI Kai (appointed on 9 March 2018) COMPANY SECRETARY Mr. KONG Dalu (resigned on 9 March 2018) Mr. YUAN Xin Ms. MUI Ngar May (resigned on 11 February 2018) (resigned on 9 March 2018) Ms. LAI Wai Ha of Akron Advisory Limited, Mr. HUANG Zhengchao external service provider (resigned on 13 February 2018) (appointed on 11 February 2018 and resigned on 8 June 2018) Independent Non-executive Directors Ms. LO Wai Sum (appointed on 8 June 2018 and resigned on 3 September 2018) Mr. RAO Yong Mr. YUEN Kwok Kuen Mr. LIU Xianbo (appointed on 3 September 2018) Mr. ZHAO Xuebo AUDITOR BOARD COMMITTEES BDO Limited Audit Committee Certified Public Accountants 25th Floor, Wing On Centre Mr. RAO Yong (Chairman) 111 Connaught Road Central Mr. LIU Xianbo Hong Kong Mr. ZHAO Xuebo Remuneration Committee Mr. RAO Yong (Chairman) Mr. LIU Xianbo Mr. ZHAO Xuebo Nomination Committee Mr. LIU Xianbo (Chairman) Mr. RAO Yong Mr. ZHAO Xuebo 02 星美文化旅遊集團控股有限公司 SMI Culture & Travel Group Holdings Limited Corporate Information REGISTERED OFFICE PRINCIPAL BANKERS Clarendon House The Hongkong and Shanghai Banking 2 Church Street Corporation Limited Hamilton HM11 Wing Lung Bank Limited Bermuda DBS Bank (HK) Limited HEAD OFFICE AND PRINCIPAL PLACE LEGAL ADVISERS OF BUSINESS As to Hong Kong Law Suite A1, 9th Floor, Vivien Teu & Co LLP One Capital Place, Loong & Yeung No.18 Luard Road, Wanchai, Hong Kong As to PRC Law Duan & Duan PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE As to Bermuda Law Conyers Dill & Pearman Conyers Corporate Services (Bermuda) Limited Clarendon House STOCK CODE 2 Church Street Hamilton HM11 2366 Bermuda WEBSITE HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE http://www.smiculture2366.com Union Registrars Limited Suites 3301-04, 33/F., Two Chinachem Exchange Square 338 King’s Road North Point Hong Kong 2018 年報 Annual Report 03 Chairman’s Statement Chairman’s Statement Dear Shareholders, On behalf of the board (the “Board”) of directors of SMI Culture & Travel Group Holdings Limited (the “Company” or “SMI”), I would like to present to you the audited consolidated financial statements of the Company and its subsidiaries (together referred to as the “Group”) for the year ended 31 December 2018. The Group is principally engaged in the investment in the production and distribution of films, investment in the production and distribution of television dramas and creation, production and distribution of new media contents, production and distribution of online and film advertisements, agency operation for films, directors, scriptwriters and artists, tourism and online ticketing platform operation. INDUSTRY REVIEW In 2018, the Chinese film and television market continued to develop rapidly. According to the statistics of National Film Bureau, box office revenue of the country during the year was RMB60.976 billion, representing a year-on-year increase of 9.06%. The total number of people watching movies was about 1.716 billion, representing an increase of 5.93% over the same period last year. A total of 404 films were released while domestic films accounted for 62.15% of total box office revenue. There were 16 films with box office revenue over RMB1 billion, including 9 domestic films. There were 82 films with box office revenue over RMB100 million, including 44 domestic films. Looking at 2018, domestically produced films led in box office receipts which climbed sharply from 2017. The operation of ticketing platform illustrates the conviction we have in its power in driving consumers to cinemas, as well as the overall consumer-entertainment market in China. BUSINESS OUTLOOK The Board considers that the potential of cultural entertainment and tourism consumption in the domestic market will continue to be substantial in the future. It believes that given the rich resources and the Group’s proven management ability, future business performance and competitiveness are poised for further growth, thereby generating considerable investment returns to Shareholders. Overall, our past achievements will better enable us to capitalize on the exciting years ahead -- starting with our optimistic outlook for 2019. 04 星美文化旅遊集團控股有限公司 SMI Culture & Travel Group Holdings Limited Chairman’s Statement APPRECIATION Besides, my sincerest gratitude is extended to the management and staff for their dedicated efforts, and to the business partners and shareholders for their staunch support. They have made it possible for the Group to overcome hardship and achieve outstanding performance. Lastly, I would like to wish the Group continuing success in the future. On behalf of the Board SMI Culture & Travel Group Holdings Limited WU Chien-Chiang Chairman of the Board of Directors 29 March 2019 2018 年報 Annual Report 05 Management Discussion and Analysis Management Discussion and Analysis BUSINESS REVIEW REVIEW OF OPERATIONS Television program related business During the financial year ended 31 December 2018, the Group recorded a turnover of approximately During the year, we continued to recognize the HK$65.3 million (2017: approximately HK$134.9 income from several fictions editing/publishing rights. million). Loss for the financial year was approximately HK$497.3 million (2017: loss of approximately HK$133.9 million), administrative expenses was Film investment approximately HK$23.7 million (2017: approximately HK$34.6 million), impairment loss for intangible ’ The Group s business development benefited from assets was approximately HK$13.3 million (2017: the prosperity of the Chinese film and television approximately HK$9.3 million), no provision for market. In 2018, the Group continued to focus on inventories was made (2017: provision for inventories film and television investment, the performance of the was approximately HK$9.8 million), finance costs was Group’s main business is expected to continue to approximately HK$122.4 million (2017: approximately develop. During the year, we sold a movie publishing HK$71.7 million), fair value gain of the embedded right of “Ghost Eyes” and recognized other movie derivatives was approximately HK$14.6 million (2017: income. gain of approximately HK$29.0 million) and income tax expense was approximately HK$0.9 million (2017: Meanwhile, the investment of the 48-episode TV approximately HK$14.4 million). series “Forging Knife 2” was launched in February LIQUIDITY AND FINANCIAL 2018 and post-production was completed in May RESOURCES 2018. It is expected to be broadcasted in 2019. In terms of overall liquidity and financial resources, Ticketing system and IT technical service as at 31 December 2018, the Group’s cash level stood at HK$1.7 million (2017: HK$6.1 million). The Since the acquisition of the business which was balances are mainly denominated in Hong Kong engaged in operation of ticketing platform and Dollar and Renminbi. provision of IT technical service in 2017, with the ascending trend of box office, based on the total Gearing ratio (expressed as a percentage of the movie tickets sold for the year ended December Group’s total borrowings net of pledged deposits 31, 2018, revenue from our overall online ticketing over total equity) was approximately 213.7% as at 31 business increased significantly. December 2018 (2017: approximately 75.3%). BORROWING STRUCTURE As at 31 December 2018, the total borrowings of the Group amounted to HK$562,798,000 (31 December 2017: HK$572,123,000). Particulars of loan notes, convertible loan notes and embedded derivatives and debentures of the Group as at 31 December 2018 are set out in notes 26-28 to the consolidated financial statements. 06 星美文化旅遊集團控股有限公司 SMI Culture & Travel Group Holdings Limited Management Discussion and Analysis MORTGAGES AND CHARGES PROSPECTS As at 31 December 2018, the Group had no Since the beginning of 2018, China’s economy was significant mortgages and charges. driven from high-speed growth stage to high-quality development stage, the cultural and entertainment EXPOSURE TO FOREIGN EXCHANGE industry will enter a new era, seeking for the balance RISK between outward expansion and scale increment is required. But it should be noted that competition will There have been no significant changes in the intensify and the Group’s development path will be Group’s policy in terms of exchange rate exposure. full of challenge. Around production, distribution and Transactions of the Group are mainly denominated promotion of movies infrastructure, the Group has in either Hong Kong Dollar or Renminbi. However, made a new investment in the beginning of 2019, the management monitors closely the exposures and include but not limit to movie, TV drama, online drama will consider hedging the exposures should the need & various types of short video content production & arise. incubation, focus on premium items development, fine art trendy, high quality, competitive content EVENTS AFTER THE REPORTING DATE development. There is no significant event took place subsequent to In 2019, the Group will invest at least not less than 3 the end of the reporting period. movies, not less than 200 episodes TV series & online drama. Regarding the business development and EMPLOYEES AND REMUNERATION operation, we committed that as best as we can, the POLICIES Group will keep at profitable operation. Meanwhile, with utilization of the Group’s own advantage, As at 31 December 2018, the Group had a total staff strengthen the development of oversea market and of 23 (2017: 36).