ANNUAL REPORT 2015 SATELLITE TELEVISION HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) Stock Code : 02008 CONTENTS 1 Mission Statement 14 A Global Team 2 2015 Annual Highlights 22 The Chinese Gateway 4 Chairman’s Statement 24 Corporate Information 10 A Global Media Organisation 25 Management Discussion and Analysis 12 Global Outlook MISSION STATEMENT Pursuing the vision of being the “Chinese connection”, both among Chinese communities and between Chinese communities and the rest of the world, Phoenix seeks to provide Chinese everywhere with a continuous stream of Chinese- language programming, ranging from entertainment, talk shows and Asian and Western movies through to balanced, accurate and up-to-the-minute news and information about political and economic developments around the globe. By performing these functions, Phoenix fulfills its mission of bringing China closer to the world and the world closer to China. 31 Directors and Senior Management Profile 89 Independent Auditor’s Report 37 Corporate Governance Report 91 Consolidated Financial Statements 50 Corporate Social Responsibility Report 99 Notes to the Consolidated Financial Statements 55 Report of Directors 222 Financial Summary PHOENIX ANNUAL REPORT 2015 2 2015 Annual Highlights January 12 Phoenix Satellite Television worked together with the China Strategic Culture Promotion Association and the Shenzhen and Hong Kong Investment Alliance to hold the 2015 Shenzhen and Hong Kong Innovation Forum in Shenzhen. The Forum attracted over 400 government officials, commercial leaders and university scholars to attend and to discuss the opportunities for Hong Kong and Shenzhen to create a new wave of commerce with the international world on the innovation front. The Chairman of the Chinese Association of Hong Kong and Macau Studies, Mr. Chen Zuoer, the Secretary of the Shenzhen Municipal Committee, Mr. Wang Rong, and the Chairman of the Shenzhen Chamber of Investment, Mr. Hou Weigui, spoke at the opening ceremony or made major presentations during the Forum. Mr. Liu Changle J.P., the Chairman and Executive President of Phoenix Satellite Television and Senior Adviser to the China Strategic Culture Promotion Association made a major address to the Forum and also made the concluding address. March 17 The Hong Kong office of Sina Weibo held the “Weibo Ten Most Influential Awards Ceremony of 2014”, which identified the most influential enterprises, media groups and the most popular topics in Hong Kong. Phoenix relied on its active presence on Weibo, its power of communication, and overall coverage to once again win the award for being the number one of the “Top Ten Weibo Most Influential Hong Kong Media in 2014”. The Vice President for International Operations, Mr. Liu Qingdong, accepted the award. April 14 The New York Festivals World’s Best TV and Film 2015 Gala was held in Las Vegas. On this occasion, there were film and television companies from over 50 countries, and Phoenix Satellite Television’s “Somewhere Out There” won the Silver World Medal for Best Direction and Best Camerawork in the Music Video Category, and “Phoenix Afternoon Express” secured a Finalist Certificate in the News Promotion Category. Besides Phoenix, other television companies that won awards included America’s CNN and ESPN, the United Kingdom’s BBC and Hong Kong’s TVB, RTHK and Cable TV. ANNUAL REPORT 2015 PHOENIX 2015 Annual Highlights 3 21 September At the tenth “500 Strongest Brands in Asia” in 2015, which was organized by the World Brand Laboratory and the World Executive Group, Phoenix was named for the tenth time as one of the “500 Strongest Brands in Asia”, with a ranking that was eleven places higher than last year. Phoenix was also named as one of the four most influential television media brands in Asia. Phoenix Executive Vice President and Chief Financial Officer, Mr. Yeung Ka Keung, received the awards from Professor Stephen Woolgar of the Said Business School of Oxford University and Professor Ravi Dhar of the Yale School of Management. 17 October The final gala event of the 2015 Miss Chinese Cosmos Pageant was held in the International Circus City at the Chimelong International Ocean Resort in Hengqi, Zhuhai. The final twelve contestants held a question and answer session with the judges, and performed dances and other forms of entertainment. Miss Guo Yangzi from Shaanxi won the first prize, Miss Wu Weiting from Taiwan won the second prize, and Miss Li Luya from Guangdong won the third prize, and also won the Most Beautiful Woman on the Internet Award. During the Miss Chinese Cosmos contestants international travel program, the New Zealand contestant, Miss Jiang Ruijia, won the Miss Friendship Award at an event in Georgia. 8 November The President of Syria, Bashar al-Assad, met with the Chairman and Executive President of Phoenix Television, Mr. Liu Changle J.P., at the Presidential Palace in Damascus, and discussed the protection of the cultural heritage items in the war-torn regions of Syria and the Middle East and other issues including the process of reconstruction of the region after the conflict is over. 2 December At the 2015 Asian Television Awards event, which was held at Suntec City in Singapore, the Chairman and Executive President of Phoenix Television, Mr. Liu Changle J.P., received the Outstanding Contribution to Asian Television Award, which confirmed that he has made many contributions to the Asian television industry and is a leader in the media world. PHOENIX ANNUAL REPORT 2015 4 Chairman’s Statement The Group’s revenue and operating profit for the year ended 31 December 2015 were approximately HK$4,200,895,000 and HK$314,470,000 respectively, which represented a decrease of 9.0% and 65.1% respectively compared to the previous year. ANNUAL REPORT 2015 PHOENIX Chairman’s Statement 5 Financial Summary • Revenue for the year ended 31 December 2015 was approximately HK$4,200,895,000, which represented a decrease of 9.0% over the previous year. • Operating profit for the year ended 31 December 2015 was approximately HK$314,470,000, which represented a decrease of 65.1% over the previous year. • Profit attributable to owners of the Company was approximately HK$110,349,000, which represented a decrease of 83.4% over the previous year. • The board of directors of the Company (the “Board”) recommended a final dividend of 1 Hong Kong cent per ordinary share of the Company. Results The revenue of Phoenix Satellite Television Holdings Limited (the “Company”) and its subsidiaries (the “Group” or “Phoenix”) for the year ended 31 December 2015 was approximately HK$4,200,895,000 (year ended 31 December 2014: HK$4,618,365,000), which represented a decrease of 9.0% over the previous year. The decline in the demand for luxury goods in China has led to a decrease in the advertising income of the television broadcasting business. The operating costs have increased by 4.6% to approximately HK$3,886,425,000 (year ended 31 December 2014: HK$3,716,584,000). The upward movement in operating costs was mainly due to the expansion of the new media business and the depreciation of the Phoenix International Media Centre in Beijing. The operating profit of the Group for the year ended 31 December 2015 was approximately HK$314,470,000 (year ended 31 December 2014: HK$901,781,000), which represented a decrease of 65.1% compared to the previous year. Fair value gain of approximately HK$98,939,000 (year ended 31 December 2014: HK$175,777,000) was recognized for the investment properties in Beijing and London. The net exchange loss of the Group for the year ended 31 December 2015 was approximately HK$57,213,000 (net exchange loss for the year ended 31 December 2014: HK$14,325,000) resulting from the depreciation of the Renminbi. The profit attributable to owners of the Company was approximately HK$110,349,000 (year ended 31 December 2014: HK$663,710,000), which represented a decrease of 83.4% compared to the previous year. PHOENIX ANNUAL REPORT 2015 6 Chairman’s Statement The chart below summarises the performance of the Group for the year ended 31 December 2015 and the year ended 31 December 2014 respectively: Year ended 31 December 2015 2014 HK$’000 HK$’000 Television broadcasting 1,598,095 1,997,976 New media 1,920,708 1,989,680 Outdoor media 571,521 553,604 Real estate 14,650 3,713 Other businesses 95,921 73,392 Group’s total revenue 4,200,895 4,618,365 Operating costs (3,886,425) (3,716,584) Operating profit 314,470 901,781 Fair value gain on investment properties 98,939 175,777 Fair value (loss)/gain on derivative financial instruments (46,787) 37,801 Exchange loss, net (57,213) (14,325) Other income, net 19,841 81,974 Profit before share of results of joint ventures and associates, income tax and non-controlling interests 329,250 1,183,008 Share of results of joint ventures and associates (37,543) (21,226) Income tax expense (139,876) (251,322) Profit for the year 151,831 910,460 Non-controlling interests (41,482) (246,750) Profit attributable to owners of the Company 110,349 663,710 Basic earnings per share, Hong Kong cents 2.21 13.28 ANNUAL REPORT 2015 PHOENIX Chairman’s Statement 7 Business Overview and Prospects The Group has continued to face serious economic challenges that have been generated by the slow down in the Chinese economy, which in turn has been influenced by the downward movement of global economic trends. Chinese advertisers, who were a major source of revenue for the Group, have become more cautious in placing advertisements. In addition, the rapid growth of internet and new media platforms also posed challenges to the Group’s traditional television business.