FINANCIAL HIGHLIGHTS Turnover & Prot Attributable to 2012 2011 Change Equity Holders of the Company Turnover Prot Attributable to Equity Holders of the Company Performance Earnings per share HK$3.95 HK$3.55 11% 6,000 Dividends per share - Interim HK$0.60 HK$0.45 33% 5,000 - Final HK$2.00 HK$1.75 14% HK$2.60 HK$2.20 18% 4,000 HK$’mil HK$’mil 3,000 Turnover - Hong Kong TV broadcasting 3,167 2,987 6% HK$’ million HK$’ 2,000 - Programme licensing and distribution 940 903 4% 1,000 - Overseas satellite pay TV operations 389 389 – - Taiwan operations 834 834 – 0 2008 2009 2010 2011 2012 - Channel operations 116 122 -5% YEAR - Others activities 190 157 21% - Inter-segment elimination (188 ) (183 ) 3% Earnings & Dividends Per Share 5,448 5,209 5% Earnings per Share Dividends per Share 4.5 Total expenses (3,281 ) (2,968 ) 11% Share of results of associates - (58 ) n/a 4 Profit attributable to equity holders 1,730 1,556 11% 3.5 31 December 31 December 3 2012 2011 2.5 HK$’mil HK$’mil HK$ 2 Total assets 9,721 8,834 10% Total liabilities 1,834 1,741 5% 1.5 Total equity 7,887 7,093 11% 1 Number of issued shares 438,000,000 438,000,000 – 0.5 Ratios Current ratio 4.0 4.2 0 2008 2009 2010 2011 2012 Gearing 2.6% 3.1% YEAR 2012 Turnover by Operating Segment 2012 Reportable Segment Prot* by Operating Segment % relating to 2011 are shown in brackets % relating to 2011 are shown in brackets Programme Programme Hong Kong TV licensing and Hong Kong TV licensing and broadcasting distribution broadcasting distribution 58% (57%) 15% (15%) 54% (54%) 27% (26%) Overseas satellite pay TV operations Overseas satellite 7% (7%) pay TV operations Other Other Taiwan 4% (4%) activities activities Taiwan Channel operations Channel 3% (3%) 2% (2%) operations operations 15% (16%) operations 12% (12%) 2% (2%) 1% (2%) * excluding impairment loss on loan to and trade receivables from an associate CSONTENT 2 C orporate Information 4 C hairman’s Statement Review of Operations 8 Hong Kong TV Broadcasting 24 Digital Media Business 26 Other Hong Kong Operations 30 Programme Licensing and Distribution 31 Taiwan Operations 32 Overseas Satellite Pay TV Operations 34 C orporate Social Responsibility 36 Financial Review Corporate Governance 46 Directors and Senior Management 52 Report of the Directors 61 Corporate Governance Report Financial Information 80 Five-Year Financial Review 81 Independent Auditor’s Report 82 Audited Financial Statements COTE RPORA INFORMATION CHAIRMAN EMERITUS NOMINATION COMMITTEE (established on 21 March 2012) Sir Run Run SHAW GBM Dr. CHOW Yei Ching Chairman Anthony LEE Hsien Pin EXECUTIVE CHAIRMAN Edward CHENG Wai Sun Dr. Norman LEUNG Nai Pang GBS, LLD, JP SENIOR MANAGEMENT BOARD OF DIRECTORS Mark LEE Po On Group General Manager CHEONG Shin Keong General Manager EXECUTIVE DIRECTORS Peter AU Wai Lam Assistant General Manager Dr. Norman LEUNG Nai Pang Executive Chairman Desmond CHAN Shu Hung Assistant General Manager Mark LEE Po On Group General Manager Adrian MAK Yau Kee Chief Financial Officer and Company Secretary NON-EXECUTIVE DIRECTORS REGISTERED OFFICE Mona FONG (re-designated as a Non-executive Director on 1 April 2012) TVB City, 77 Chun Choi Street Kevin LO Chung Ping Tseung Kwan O Industrial Estate Dr. Charles CHAN Kwok Keung Kowloon, Hong Kong Cher WANG Hsiueh Hong Jonathan Milton NELSON AUDITOR Anthony LEE Hsien Pin (appointed on 3 February 2012) CHEN Wen Chi (appointed on 3 February 2012) PricewaterhouseCoopers 22/F, Prince’s Building INDEPENDENT NON-EXECUTIVE DIRECTORS Central, Hong Kong Dr. CHOW Yei Ching GBS Edward CHENG Wai Sun SBS, JP PRINCIPAL BANKERS Chien LEE Shanghai and Commercial Bank Limited Gordon SIU Kwing Chue GBS, JP The Bank of East Asia, Limited Raymond OR Ching Fai SBS, JP (appointed on 6 December 2012) The Hongkong and Shanghai Banking Corporation Limited ALTERNATE DIRECTORS Dr. Allan YAP Alternate Director to Dr. Charles Chan Kwok Keung SHARE REGISTRARS AND TRANSFER OFFICE Harvey CHANG Hsiao Wei Alternate Director to Computershare Hong Kong Investor Services Limited Cher Wang Hsiueh Hong (appointed on 3 February 2012) Rooms 1712-1716, 17th Floor SUN Tao Alternate Director to Jonathan Milton Nelson Hopewell Centre (appointed on 18 June 2012) 183 Queen’s Road East Wan Chai, Hong Kong BOARD COMMITTEES EXECUTIVE COMMITTEE AMERICAN DEPOSITARY RECEIPTS Dr. Norman LEUNG Nai Pang Chairman BNY Mellon Depositary Receipts Mark LEE Po On P.O. Box 43006 Mona FONG Providence, RI 02940-3006 Kevin LO Chung Ping USA Dr. Charles CHAN Kwok Keung (appointed on 21 March 2012) CHEN Wen Chi (appointed on 21 March 2012) STOCK CODES Ordinary Shares AUDIT COMMITTEE The Stock Exchange of Hong Kong: 00511 Gordon SIU Kwing Chue Chairman Reuters: 0511.HK Chien LEE Bloomberg: 511 HK Kevin LO Chung Ping ADR Level 1 Programme TVBCY R EMUNERATION COMMITTEE INVESTOR RELATIONS Chien LEE Chairman Edward CHENG Wai Sun email: [email protected] Gordon SIU Kwing Chue Fax: +852 23581337 Website: www.corporate.tvb.com 2 Television Broadcasts Limited Annual Report 2012 CHAIRMAN EMERITUS SIR RUN RUN SHAW GBM Television Broadcasts Limited Annual Report 2012 3 C HAIRMAN’S STATEMENT DR. NORMAN LEUNG NAI PANG GBS, LLD, JP Executive Chairman The Board of Directors of Television Broadcasts Limited (“Board”) is pleased to present the annual report and financial statements of the Group for the year ended 31 December 2012. RESULTS AND DIVIDENDS Despite multiple challenges affecting our operating environment during 2012, I am very pleased to report that the Group once again achieved a higher profit attributable to equity holders for the year. For the year ended 31 December 2012, the Group’s turnover increased by 5% from HK$5,209 million to HK$5,448 million, and the profit before income tax increased by 2% from HK$2,097 million to HK$2,139 million. The Group’s profit attributable to equity holders increased by 11% from HK$1,556 million to HK$1,730 million. This gives an earnings per share of HK$3.95 (2011: HK$3.55). Our financial position continues to be strong. At the year end, our total equity stood at HK$7,887 million (2011: HK$7,093 million). Our unpledged cash balance totalled HK$3,604 million (2011: HK$3,693 million) and the bank borrowing decreased to HK$205 million (2011: HK$221 million). As a result, Directors will recommend a final dividend of HK$2.00 per share at the forthcoming annual general meeting. Together with the interim dividend of HK$0.60 per share paid, this would make a total dividend of HK$2.60 per share for the full year ended 31 December 2012, and represents an increase of 18% over 2011, and a 66% payout to our current year’s profit. 4 Television Broadcasts Limited Annual Report 2012 45TH ANNIVERSARY On 19 November 2012, we celebrated our 45th anniversary in the broadcasting business. During these years, TVB has nurtured numerous celebrity performers and home-grown production talents, who continuously contribute to the success of today’s entertainment industry. I have to pay tribute to Mr. Hsiao-Wo Lee, a founder of the Company and Chairman of the Board from August 1965 to June 1980 and Sir Run Run Shaw, a founder of the Company and Executive Chairman/Chairman of the Board from July 1980 to December 2011 for their immense contributions to the Company. Their vision for the TV industry and their outstanding leadership over the past years had laid a solid foundation for our business today. TVB has evolved from a small team of several hundred staff at the beginning to an organisation with a total staff number in excess of 4,600. Today, we own our broadcasting network and transmit five digital free-to-air channels around Hong Kong. From a small base in Hong Kong, we are reaching out to hundreds of millions of Chinese households around the world, entertaining and keeping our viewers in touch with Hong Kong every day. Our road has, however, been full of challenges. We had to invest huge amounts in capital equipment for production and transmission. In Hong Kong, we persisted to produce programmes using our own talents, which again required substantial up-front investment, to meet the demand of the local audience. We also had to weather the impacts from the peaks and troughs of the economic cycles, resulting in painful down-sizing at critical times. Yet, if we look back into our history, we remain proud of our evolution and achievements. CHINAJ OINT VENTURE Mainland China, with a total population of over 1.3 billion, remains a key market for TVB, despite her tight regulatory controls over imports and production of programmes. Throughout the years, we have succeeded in exporting programmes, principally drama serials, into Mainland China, leveraging on our programme successes in Hong Kong and the popularity of our artistes. On 8 August 2012, we witnessed an important milestone in our business as a joint venture under the name of 上海翡翠東方傳播有限公司 (“TVBC”) between TVB, China Media Capital and Shanghai Media Group (“SMG”) was officially formed in Shanghai, with a shareholding of 55% by TVB and the balance by our mainland partners. Being the second largest media group in Mainland China with a comprehensive portfolio of media assets, SMG shares many common goals with us. Mr. Li Ruigang, former president of SMG, takes the reign as the executive chairman of this joint venture. We are very delighted to have forged this important relationship, in furtherance of our programme production, and licensing and distribution business in Mainland China.