TOM Group Limited — Annual Report 2011

Mar 26, 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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(Stock Code: 2383)

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2011

CHAIRMAN’S STATEMENT

I am pleased to announce the results of TOM Group Limited (“TOM” or the “Company”) and its subsidiaries (collectively referred to as the “TOM Group” or the “Group”) for the financial year ended 31 December 2011.

The Group posted revenues of HK$2,326 million. Loss attributable to shareholders was HK$498 million and loss per share was 12.80 HK cents. Excluding a one-off non-cash goodwill impairment of wireless value-added services (WVAS) and traditional portal operations totalling HK$421 million and write back of consideration payable on acquisition of a subsidiary in prior years of HK$154 million, operating loss for the reporting period was HK$191 million. The impairment charge reflects the Group’s migration from content-based portal to technology-based platform, and a decline in the overall valuation of the WVAS industry.

The Internet Group posted revenues of HK$727 million while segment loss amounted to HK$58 million. During the period, the Internet Group completed the first phase investment in the building of cloud-based infrastructure and unveiled user-centric music and games services which were well-received by users.

The e-Commerce Group showed growth momentum during the period and encouraging early results. The gross merchandise value (GMV) of goods sold reached RMB240 million, and average value per transaction stood above industry average at over RMB280. The progress of the Ule joint-venture is encouraging and the management believes this business can become one of the key revenue drivers for the Group in coming years.

The Publishing Group posted satisfactory results for the period. During the period, this Group continued to pursue and invest in new e-publishing initiatives. Segment revenues and profit grew by 11% and 2% respectively as compared to the previous year. The Group remains a market leader in digital and printed publishing in the Chinese-language.

* for identification purpose

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During the period, the Group has launched nearly 300 applications on various e-reading devices while its flagship magazine Business Weekly posted 15% growth in advertising income despite the softening in Taiwan’s advertising market.

Regulatory constraints that limited the financial progress of the Television and Entertainment Group last year have eased somewhat this year. CETV increased distribution of its interactive entertainment contents over online and mobile platforms and its proprietary iPhone, iPad and Android applications. Cité Publishing in Taiwan has recently been awarded the right to operate a satellite channel, CETV will work closely with Cité with respect to programme production for this channel and plans to broadcast these jointly produced programmes in its channel in China.

The Outdoor Media Group (OMG) continued to upgrade its media assets and posted a 20% increase in revenues during the period under review. Occupancy rate of media assets stood at 74%.

Going forward, TOM Group will remain focused on financial and operating disciplines, and continue its commitment in product and service innovation especially in the areas of e-commerce, e-publishing and other digital initiatives. Barring economic uncertainty and regulatory changes, the management is confident that the current initiatives will lead to a restoration of sustainable growth for the Group in future years.

I would like to take this opportunity to thank the management and all the staff of TOM Group for their hard work and dedication over the year.

Frank Sixt Chairman

Hong Kong, 26 March 2012

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MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCIAL HIGHLIGHTS

	For the year ended	31 December
	2011	2010
	HK$’000	HK$’000
Revenue	2,326,360	2,464,227
Operating loss#before one-off items	(191,394)	(81,487)
One-off items*	(267,184)	(11,514)
Loss attributable to equity holders of the Company	(498,270)	(167,952)
Loss per share (HK cents)	(12.80)	(4.31)

• One-off items included provision for impairment of goodwill and other assets (2011: HK$421,201,000; 2010: HK$11,514,000) and write back of consideration payable on a prior year’s acquisition (2011: HK$154,017,000; 2010: Nil)

Including share of results of associated companies and jointly controlled entities

BUSINESS AND OPERATION REVIEW

In response to the arising opportunities alongside industry and technology evolvement, the Group has invested in its e-commerce, mobile Internet and e-publishing businesses, and acquired new growth drivers in the last few years.

E-Commerce - KPI performances indicate momentum of growth, joining domestic and overseas partners to tap expansion

E-Commerce is a fast-developing business initiative for TOM Group. Ule (www.ule.com.cn), a joint-venture between TOM Group and China Post, is a scalable e-shopping platform addressing both online and offline service bases of e-commerce in the Mainland.

During the year, Ule strengthened its online and offline services and reported measurable growth in a number of operating key performance indicators (KPIs). As at end of 2011, Ule recorded gross merchandise value (GMV) of RMB240 million, nearly 3-time growth as compared to the first half of the year. Average value per transaction doubled the industry average at more than RMB280. In its first year of operation, Ule has acquired more than a million of users, and offered offline shoppers with sales services for nearly 80,000 products over more than 50,000 counters. Repeated buyer rate stood high at 25%.

Going forward, Ule will deepen its collaboration with China Post, and launch a co-brand debit card together with the Postal Savings Bank. In March 2012, Ule entered into a memorandum of understanding with Bestv New Media Co. Ltd. (BesTV) under Shanghai Media Group. Both parties intended to bring together BesTV’s strengths and resources across IPTV, Internet TV, mobile TV and TV payment systems, as well as Ule’s edge in e-commerce, mobile Internet and logistics, for the establishment and operation of a unique, innovative interactive sales and marketing platform. Moving into a global e-commerce platform, Ule collaborated with the New Zealand Post Office to launch a beta version of its international site, which offers milk powder products imported from New Zealand.

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Mobile Internet - launch popular games and music applications

The Internet Group maintained revenue level at over HK$700 million amid the rapid development of smartphones, which fades the traditional wireless value-added services. During the year, the Internet Group invested in the development and launch of cross-device and cross-platform mobile Internet products, and saw encouraging early results. The Group collaborated with 15 game developers, including Glu Mobile Inc, to launch about 60 games, which saw over 50% month-on-month growth of user base. Music SNS “637.fm”, an interactive platform for music companies, artists and their fans, met users in the 4[th] quarter. The application has to-date attracted 10 music labels and tens of artists, whereas the user base has grown by over 60% month-on-month. It is believed that the growth momentum of such user bases will remain strong. Going forward, TOM will roll out more innovative applications with a view to further grow the user base.

- Publishing digital publishing booms, nearly 300 applications coupled by surging downloads

The Publishing Group reported 11% growth in revenue as compared to the previous year. The Group’s flagship magazine Business Weekly saw 15% year-on-year growth in advertising income, whilst KPI performances of various digital publishing initiatives also stepped up. To date, the Publishing Group has doubled its e-reading offerings as compared to the first half of 2011. Among the nearly-300 applications on iPhone, iPad and Android platforms, over 80% are paid. Gross downloads surged by over 2 times as compared to the first half of 2011, to nearly 3 million. The synergy between traditional and e-publishing pushed forward growth in both businesses.

The Publishing Group pursued cross-region strategy, and extended its footprint in digital publishing business in the Chinese-language markets worldwide via collaboration with overseas publishers. The Publishing Group formed a joint-venture with Japanese publisher Kodansha during the year. The Publishing Group also explored cross-strait opportunities in collaboration with local partners. In March 2012, Cité in Taiwan was awarded the right to operate a satellite channel. Building on its leadership in traditional media and wealth of premium content, Cité will leverage on TOM Group’s TV and entertainment resources to tap cross-platform business.

The Publishing Group enjoyed another year of wide recognition by industry peers. In the 5[th] Golden Tripod Awards for Digital Publications, the Bella application (jointly launched by Cité and Far Eastone), Comic Star website and Gurubear interactive pictorial were awarded “Best ValueAdded Service Award”, “Best Innovation Publisher of the Year Award” and “2011 the Taiwan Best Digital Content Products Award” respectively. On the other hand, Lovely, Lovely, Lovely won the “Award For Best Girl Comic” and “Award For Best Readers’ Choice” in the 2[nd] Golden Comic Awards, whereas Make a Wish! DA XI won the “Award For Best Girl Comic” in the 8[th] Golden Dragon Award Original Animation & Comic Competition. Business Weekly was widely recognized with numerous awards including “Award for Excellence in Business Reporting” and “Award for Excellence in Feature Writing” in the SOPA 2011 Awards for Editorial Excellence, the “Best Financial Magazine Award” in the 35[th] Golden Tripod Award. It also won the 15[th] New Report Award for Cross Strait and Mainland Affairs, and the First Place for Feature Report in the 10[th] Excellent Journalism Award. The End of the River, Volume Ⅱ was awarded the 35[th] Golden Tripod Award (Fiction), whereas La Vie magazine won the “Best Lifestyle Magazine Award”. Three healthcare publications, namely Grande O Piccolo , Breastfeeding: The best bet for babies and Pregnancy won the 2011 Health Books Recommend Award.

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Television & Entertainment - strengthened content and e-distribution

The Television & Entertainment Group strived to strengthen programme and e-distribution of content. It collaborated with imgo.tv (www.imgo.tv) under Hunan TV to deliver its self-production online, via IPTV and mobile clients of imgo.tv. Moving into the future, CETV will continue tapping new technology such as high-definition broadcasts to address the market appetite.

CETV strived to further extend its domestic and overseas clientele during the year. The CETV Top 10 Asian Star Awards made its debut event in Dalian with the support by the Dalian Travel & Tourism Bureau and Haichang Group. Besides self-produced programs that were sponsored by renowned brands, CETV also presented the best popular Asian dramas from Taiwan and Korea.

Outdoor Media - digitization of media assets

TOM Outdoor Media Group (OMG) pursued upgrade of media assets. Through the launch of LED panels, revenue grew by 20% as compared with the previous year. OMG was widely recognized for its professional excellence. On the 8[th] China Media Conference held in 2011, OMG was recognized as one of the top-10 outdoor media providers. OMG was also named a top outdoor media brand in various media industry conferences in China.

FINANCIAL REVIEW

TOM Group reports its results in five business segments namely Internet Group, E-Commerce Group, Publishing Group, Outdoor Media Group and Television & Entertainment Group.

Revenue

The Group’s revenue for the year ended 31 December 2011 amounted to HK$2,326 million, a decrease of 5.6% compared to HK$2,464 million last year.

Segmental Results

The Internet Group reported gross revenues of HK$727 million, 29.5% lower than last year’s HK$1,032 million. Segment loss was HK$58 million, compared to segment profit of HK$18 million in 2010.

The E-Commerce Group reported segment loss of HK$55 million, 70.2% higher than last year’s HK$32 million.

Gross revenues of the Publishing Group increased by 11.0% to HK$1,052 million from last year’s HK$947 million. Segment profit increased by 1.9% to HK$103 million from HK$101 million in 2010.

Gross revenues of the Outdoor Media Group increased by 20.3% to HK$331 million from last year’s HK$275 million. Segment loss decreased by 2.8% to HK$21 million from HK$22 million in 2010.

Gross revenues of the Television & Entertainment Group increased by 4.0% to HK$217 million from last year’s HK$209 million. Segment loss was HK$82 million, a 29.1% increase from HK$63 million in 2010.

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Operating Loss

The Group’s operating loss for the year amounted to HK$459 million, compared to last year’s HK$93 million. Excluding the financial impacts from non-recurring write back of consideration payable on a prior year’s acquisition of HK$154 million and provision for impairment of goodwill of HK$421 million in 2011 (2010: provision for impairment of goodwill and other assets of HK$12 million), the operating loss was HK$191 million, compared to operating loss of HK$81 million in 2010.

The provision for impairment of goodwill made in 2011 was relating to the Internet Group. The provision was made as a result of the decline in operating environment and overall lower industry valuations of the Group’s wireless value-added services and traditional portal operation in Mainland China.

Loss Attributable to Equity Holders of the Company

The Group’s loss attributable to equity holders of the Company was HK$498 million, compared to HK$168 million in 2010.

Liquidity and Financial Resources

As at 31 December 2011, TOM Group had bank and cash balances, excluding pledged deposits, of approximately HK$962 million. A total of HK$2,929 million financing facilities were available, of which HK$2,132 million had been utilised as at 31 December 2011, to finance the Group’s capital expenditures and for working capital purposes.

Total borrowings of TOM Group amounted to approximately HK$2,132 million as at 31 December 2011. This included long-term bank loans of approximately HK$2,014 million and short-term bank loans of approximately HK$118 million. The gearing ratio (Debts/(Debts + Equity)) of TOM Group was 59% as at 31 December 2011, compared to 51% as at 31 December 2010.

As at 31 December 2011, the Group had net current assets of approximately HK$645 million, 14% higher than balance of approximately HK$565 million as at 31 December 2010.

As at 31 December 2011, the current ratio (Current assets/Current liabilities) of TOM Group was 1.50, compared to 1.39 as at 31 December 2010.

During the year, the Company had entered into facility agreements and supplemental deeds with several independent financial institutions for providing an aggregate amount of HK$2,200 million term and revolving loan facilities for a period of three years to refinance the existing indebtedness and finance the working capital requirements of the Group.

In 2011, net cash outflow used in operating activities amounted to HK$20 million. Net cash outflow used in investing activities was HK$293 million, mainly included capital expenditures of HK$232 million, settlement of consideration payable on a prior year’s acquisition of HK$55 million and advance to jointly controlled entities of HK$33 million, partially offset by dividend received of HK$16 million and proceeds from disposal of available-for-sale financial assets of HK$15 million. During the year, the net cash inflow from financing activities amounted to HK$153 million, mainly included drawdown of bank loans, net of repayment, of HK$186 million, partially offset by payment of loan arrangement fee of HK$19 million and dividends paid to non-controlling interests of HK$14 million.

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Charges on Group Assets

As at 31 December 2011, the Group had restricted cash amounting to HK$4 million, being bank deposits mainly pledged in favour of certain publishing distributors in Taiwan as retainer fee for potential sales return.

Foreign Exchange Exposure

In general, it is the Group’s policy for each operating entity to borrow in local currencies, where necessary to minimise currency risk.

Contingent Liabilities

From 2008 to 2011, a subsidiary of the Group in Taiwan received revised income tax assessments for the years ended 31 December 2004 to 2009 from the local tax authority, disallowing the deduction of amortisation of intangible assets amounting to approximately NT$820 million (approximately HK$210 million) in total in deriving the assessable profits of the subsidiary. This gave rise to a potential additional income tax liability to the Group of approximately NT$205 million (approximately HK$53 million). The subsidiary duly filed the petitions/appeals to the tax authority and requested for re-examination on the deductibility of the amortisation charge. In 2010, the petitions for 2004 and 2005 revised tax assessments were turned down by the tax authority and the subsidiary appealed to the Court in Taiwan. In November 2010 and June 2011, the subsidiary won the 2004 and 2005 tax appeals respectively. In January and August 2011, the tax authority filed the final appeals to the Court for the 2004 and 2005 tax assessments respectively. In February and March 2012, the Court decided to revert the 2004 and 2005 tax assessments back for re-trial, on the opinion that appropriate laws and regulations have not been applied in drawing the conclusion of the original judgement for the 2004 and 2005 tax assessments.

Management has discussed the cases with its external tax representative. Based on the consultation, management considers that the amortisation of intangible assets should be tax deductible under the tax rules in Taiwan, management is confident of a favourable outcome of the tax appeals/petitions and considers no provision is necessary at this stage.

Should the tax appeals and petitions by the subsidiary be turned down finally, the subsidiary’s income tax assessments for each of the years from 2010 to 2011 would likely be revised on a similar basis. The total incremental tax liability in relation to year 2004 to year 2011 to the Group thereon is approximately NT$258 million (approximately HK$66 million).

Employee Information

As at 31 December 2011, TOM Group had 3,025 full-time employees. Employee costs, excluding Directors’ emoluments, totalled HK$589 million for the year (2010: HK$551 million). All of the TOM Group companies are equal opportunity employers, with the selection and promotion of individuals being based on suitability for the position offered. The salary and benefit levels of the Group’s employees are kept at a competitive level and employees are rewarded on a performance related basis within the general framework of TOM Group’s salary and bonus system, which is reviewed annually. A wide range of benefits including medical coverage and provident funds are also provided to employees. In addition, training and development programmes are provided on an ongoing basis throughout TOM Group. Social, sporting and recreational activities were arranged during the year for the employees on a Group-wide basis.

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The Group also adopted a share option scheme under which, inter alia, the employees of the Group may be granted share options to subscribe for shares of the Company for the purposes of recognising the contributions made by the employees of the Group and retaining the services of the employees who will continue to make valuable contributions to the Group.

Disclaimer: Non-GAAP measures

Certain non-GAAP (generally accepted accounting principles) measures, such as operating profit/(loss) including share of results of associated companies and jointly controlled entities and segment profit/(loss) excluding provision for impairment and write back of consideration payable on a prior year’s acquisition, are used for assessing the Group’s performance. These non-GAAP measures are not expressly permitted measures under GAAP in Hong Kong and may not be comparable to similarly titled measures for other companies. Accordingly, such non-GAAP measures should not be considered as an alternative to operating income as an indicator of the operating performance of the Group or as an alternative to cash flows from operating activities as a measure of liquidity. The use of non-GAAP measures is provided solely to enhance the overall understanding of the Group’s current financial performance. Additionally, since the Group has historically reported certain non-GAAP results to investors, it is considered the inclusion of non-GAAP measures provides consistency in the Group’s financial reporting.

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AUDITED CONSOLIDATED RESULTS

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2011

	Note	2011	2010
		HK$’000	HK$’000
Revenue	2	2,326,360	2,464,227
		═════════	═════════
Cost of sales	4	(1,744,153)	(1,845,688)
Selling and marketing expenses	4	(287,415)	(263,975)
Administrative expenses	4	(170,733)	(171,164)
Other operating expenses	4	(326,080)	(285,797)
Other gains, net	4	25,615	37,659
Write back of consideration payable on a prior
year’s acquisition		154,017	-
Provision for impairment of goodwill and other
assets	3	(421,201)	(11,514)
Share of profits less losses of jointly controlled
entities		(11,572)	(22,447)
Share of profits less losses of associated
companies		(3,416)	5,698
		─────────	─────────
		(458,578)	(93,001)
Finance income	5	19,754	15,285
Finance costs	5	(59,420)	(60,474)
		─────────	─────────
Finance costs, net	5	(39,666)	(45,189)
		─────────	─────────
Loss before taxation		(498,244)	(138,190)
Taxation	6	(27,675)	(38,933)
		─────────	─────────
Loss for the year		(525,919)	(177,123)
		═════════	═════════
Attributable to:
Non-controlling interests		(27,649)	(9,171)
		═════════	═════════
Equity holders of the Company		(498,270)	(167,952)
		═════════	═════════
Loss per share for loss attributable to equity
holders of the Company during the year
Basic and diluted	8	HK(12.80) cents	HK(4.31) cents
		═══════════	═══════════

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011

	2011	2010
	HK$’000	HK$’000
Loss for the year	(525,919)	(177,123)
Other comprehensive income
Exchange translation differences	126,434	51,313
Net actuarial loss on defined benefit plans	(2,747)	(2,801)
Available-for-sale financial assets:
Revaluation (deficit)/surplus during the year, net of tax	(1,453)	669
	───────	───────
Other comprehensive income
for the year, net of tax	122,234	49,181
	───────	───────
Total comprehensive expense
for the year	(403,685)	(127,942)
	═══════	═══════
Total comprehensive income/(expense) attributable
to:
- Non-controlling interests	(17,183)	5,327
	═══════	═══════
- Equity holders of the Company	(386,502)	(133,269)
	═══════	═══════

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011

Note ASSETS AND LIABILITIES Non-current assets Fixed assets Goodwill Other intangible assets Interests in jointly controlled entities Interests in associated companies Available-for-sale financial assets Advance to an investee company Deferred tax assets Other non-current assets Current assets Inventories Trade and other receivables 9 Restricted cash Cash and cash equivalents Current liabilities Trade and other payables 10 Taxation payable Long-term bank loans - current portion Short-term bank loans Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Non-current portion of long-term bank loans Pension obligations Net assets EQUITY Equity attributable to the Company’s equity holders Share capital Reserves Own shares held Non-controlling interests Total equity	2011 HK$’000 159,990 2,355,948 99,969 (117,523) 221,753 12,763 2,172 41,875 27,555 ──────── 2,804,502 --------------- 101,062 860,951 3,766 961,773 ──────── 1,927,552 --------------- 1,048,361 43,080 73,160 118,082 ──────── 1,282,683 --------------- 644,869 --------------- 3,449,371 --------------- 17,650 1,940,656 35,291 ──────── 1,993,597 --------------- 1,455,774 ════════ 389,328 743,175 (6,244) ──────── 1,126,259 329,515 ──────── 1,455,774 ════════	2010 HK$’000 143,769 2,682,513 112,207 (132,651) 230,736 28,780 2,172 31,235 23,609 ──────── 3,122,370 --------------- 98,354 836,240 3,958 1,079,340 ──────── 2,017,892 --------------- 1,226,149 45,937 72,039 109,032 ──────── 1,453,157 --------------- 564,735 --------------- 3,687,105 --------------- 12,449 1,770,361 32,384 ──────── 1,815,194 --------------- 1,871,911 ════════ 389,328 1,130,525 (6,244) ──────── 1,513,609 358,302 ──────── 1,871,911 ════════

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

Balance at 1 January 2010 Comprehensive income: Loss for the year Other comprehensive income: Revaluation surplus on available-for- sale financial assets, net of tax Net actuarial loss on defined benefit plans Exchange translation differences Total comprehensive expense for the year ended 31 December 2010 Transactions with equity holders: Dividend paid to non-controlling interests Deconsolidation of subsidiaries Acquisition of additional interests in a subsidiary Contribution from non-controlling interests Transfer to general reserve Transactions with equity holders Balance at 31 December 2010

Group Attributable to equityholders of the Company Share capital Own shares held Share premium Capital reserve Capital redemption reserve General reserve Available- for-sale financial assets reserve Exchange reserve Accumulated losses Total shareholders’ funds Non- controlling interests Total equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 389,328 (6,244) 3,625,981 38,437 776 133,760 2,332 569,729 (3,095,946) 1,658,153 377,723 2,035,876 ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - - - - - - (167,952) (167,952) (9,171) (177,123) - - - - - - 669 - - 669 - 669 - - - - - - - - (2,250) (2,250) (551) (2,801) - - - - - - - 36,264 - 36,264 15,049 51,313 ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - - - - 669 36,264 (170,202) (133,269) 5,327 (127,942) ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - - - - - - - - (25,916) (25,916) - - - - - - - - - - (12,004) (12,004) - - - (11,275) - - - - - (11,275) 11,275 - - - - - - - - - - - 1,897 1,897 - - - - - 3,586 - - (3,586) - - - ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - (11,275) - 3,586 - - (3,586) (11,275) (24,748) (36,023) ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── 389,328 (6,244) 3,625,981 27,162 776 137,346 3,001 605,993 (3,269,734) 1,513,609 358,302 1,871,911 ═══════ ══════ ════════ ══════ ════ ══════ ═════ ═══════ ════════ ════════ ═══════ ════════

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

Balance at 1 January 2011 Comprehensive income: Loss for the year Other comprehensive income: Revaluation deficit on available-for- sale financial assets, net of tax Net actuarial loss on defined benefit plans Exchange translation differences Total comprehensive expense for the year ended 31 December 2011 Transactions with equity holders: Dividend paid to non-controlling interests Acquisition of additional interests in a subsidiary Contribution from non-controlling interests Transfer to general reserve Transactions with equity holders Balance at 31 December 2011

Group Attributable to equityholders of the Company Share capital Own shares held Share premium Capital reserve Capital redemption reserve General reserve Available- for-sale financial assets reserve Exchange reserve Accumulated losses Total shareholders’ funds Non- controlling interests Total equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 389,328 (6,244) 3,625,981 27,162 776 137,346 3,001 605,993 (3,269,734) 1,513,609 358,302 1,871,911 ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - - - - - - (498,270) (498,270) (27,649) (525,919) - - - - - - (1,453) - - (1,453) - (1,453) - - - - - - - - (2,869) (2,869) 122 (2,747) - - - - - - - 116,090 - 116,090 10,344 126,434 ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - - - - (1,453) 116,090 (501,139) (386,502) (17,183) (403,685) ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - - - - - - - - (14,349) (14,349) - - - (848) - - - - - (848) 848 - - - - - - - - - - - 1,897 1,897 - - - - - 1,911 - - (1,911) - - - ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── - - - (848) - 1,911 - - (1,911) (848) (11,604) (12,452) ─────── ────── ──────── ────── ──── ────── ───── ─────── ──────── ──────── ─────── ──────── 389,328 (6,244) 3,625,981 26,314 776 139,257 1,548 722,083 (3,772,784) 1,126,259 329,515 1,455,774 ═══════ ══════ ════════ ══════ ════ ══════ ═════ ═══════ ════════ ════════ ═══════ ════════

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The consolidated financial statements have been prepared under the historical cost convention except that available-for-sale financial assets are stated at fair value, unless fair value cannot be reliably measured.

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.

In the current year, the Group has adopted the amendments to standards that are relevant to the Group’s operations and mandatory for annual periods beginning 1 January 2011. The effect of the adoption of the amendments to standards beginning 1 January 2011 is not material to the Group’s results of operations or financial position.

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2 Turnover, revenue and segment information

The Group has five reportable operating segments:

• Internet Group - provision of wireless internet services, online advertising, commercial enterprise solutions and internet access services.

• E-Commerce Group - merchandise sales through internet-based marketplace.

• Publishing Group - magazine and book circulation, sales of publication advertising and other related products.

• Outdoor Media Group - advertising sales of outdoor media assets and provision of outdoor media services.

• Television and Entertainment Group - advertising sales in relation to satellite television channel operations, production of broadcasting programmes and provision of media sales, event production and marketing services.

Sales between segments are carried out at arm’s length.

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2 Turnover, revenue and segment information (Continued)

The segment results for the year ended 31 December 2011 are as follows:

Gross segment revenue Inter-segment revenue Net revenue from external customers Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Other material non-cash items: Write back of consideration payable on a prior year’s acquisition Provision for impairment of goodwill Share of profits less losses of jointly controlled entities Share of profits less losses of associated companies Finance costs: Finance income (note a) Finance expenses (note a) Segment profit/(loss) before taxation Unallocated corporate expenses Loss before taxation Expenditure for operating segment non-current assets Unallocated expenditure for non- current assets Total expenditure for non-current assets

Year ended 31 December 2011 Internet Group E-Commerce Group Publishing Group Outdoor Media Group Television and Entertainment Group Total HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 727,452 - 1,051,584 331,112 217,142 2,327,290 - - - - (930) (930) ─────── ─────── ─────── ─────── ─────── ──────── 727,452 - 1,051,584 331,112 216,212 2,326,360 ═══════ ═══════ ═══════ ═══════ ═══════ ════════ (46,767) (51,826) 225,848 16,419 (38,958) 104,716 (11,610) (3,324) (122,619) (37,896) (42,875) (218,324) ─────── ─────── ─────── ─────── ─────── ──────── (58,377) (55,150) 103,229 (21,477) (81,833) (113,608) ═══════ ═══════ ═══════ ═══════ ═══════ ════════ 154,017 - - - - 154,017 (421,201) - - - - (421,201) - (11,572) - - - (11,572) 469 - (3,885) - - (3,416) ─────── ─────── ─────── ─────── ─────── ──────── (266,715) (11,572) (3,885) - - (282,172) ─────── ─────── ─────── ─────── ─────── ──────── 16,029 39 22,477 2,424 74 41,043 - - (14,830) - (20,797) (35,627) ─────── ─────── ─────── ─────── ─────── ──────── 16,029 39 7,647 2,424 (20,723) 5,416 ─────── ─────── ─────── ─────── ─────── ──────── (309,063) (66,683) 106,991 (19,053) (102,556) (390,364) ═══════ ═══════ ═══════ ═══════ ═══════ (107,880) ──────── (498,244) ════════ 9,160 1,181 134,391 31,355 49,017 225,104 955 ──────── 226,059 ════════

Note (a):

Inter-segment interest income and inter-segment interest expenses amounted to HK$21,820,000 and HK$21,713,000 were included in the finance income and finance expenses respectively.

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2 Turnover, revenue and segment information (Continued)

The segment assets and liabilities at 31 December 2011 are as follows:

Segment assets Interests in jointly controlled entities Interests in associated companies Unallocated assets Total assets Segment liabilities Unallocated liabilities: Corporate liabilities Current taxation Deferred taxation Borrowings Total liabilities

As at 31 December 2011 Internet Group E-Commerce Group Publishing Group Outdoor Media Group Television and Entertainment Group Total HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 2,275,238 161,797 1,275,856 609,842 201,293 4,524,026 - (117,523) - - - (117,523) 4,609 - 217,144 - - 221,753 103,798 ──────── 4,732,054 ════════ 329,799 2,004 415,226 150,554 71,802 969,385 114,267 43,080 17,650 2,131,898 ──────── 3,276,280 ════════

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2 Turnover, revenue and segment information (Continued)

The segment results for the year ended 31 December 2010 are as follows:

Gross segment revenue Inter-segment revenue Net revenue from external customers Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Other material non-cash items: Provision for impairment of goodwill and other assets Share of losses of jointly controlled entities Share of profits less losses of associated companies Finance costs: Finance income (note a) Finance expenses (note a) Segment profit/(loss) before taxation Unallocated corporate expenses Loss before taxation Expenditure for operating segment non-current assets Unallocated expenditure for non- current assets Total expenditure for non-current assets

Year ended 31 December 2010 Internet Group E-Commerce Group Publishing Group Outdoor Media Group Television and Entertainment Group Total HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 1,031,963 1,834 947,492 275,348 208,738 2,465,375 - - - - (1,148) (1,148) ─────── ─────── ─────── ─────── ─────── ──────── 1,031,963 1,834 947,492 275,348 207,590 2,464,227 ═══════ ═══════ ═══════ ═══════ ═══════ ════════ 32,430 (30,520) 200,660 28,355 (29,500) 201,425 (14,593) (1,879) (99,378) (50,456) (33,878) (200,184) ─────── ─────── ─────── ─────── ─────── ──────── 17,837 (32,399) 101,282 (22,101) (63,378) 1,241 ═══════ ═══════ ═══════ ═══════ ═══════ ════════ - - - (11,514) - (11,514) (255) (22,192) - - - (22,447) 949 - 4,749 - - 5,698 ─────── ─────── ─────── ─────── ─────── ──────── 694 (22,192) 4,749 (11,514) - (28,263) ─────── ─────── ─────── ─────── ─────── ──────── 12,671 5 25,114 2,719 102 40,611 - - (17,944) (569) (17,986) (36,499) ─────── ─────── ─────── ─────── ─────── ──────── 12,671 5 7,170 2,150 (17,884) 4,112 ─────── ─────── ─────── ─────── ─────── ──────── 31,202 (54,586) 113,201 (31,465) (81,262) (22,910) ═══════ ═══════ ═══════ ═══════ ═══════ (115,280) ──────── (138,190) ════════ 11,669 9,774 134,805 33,543 36,734 226,525 352 ──────── 226,877 ════════

Note (a):

Inter-segment interest income and inter-segment interest expenses amounted to HK$25,493,000 and HK$19,423,000 were included in the finance income and finance expenses respectively.

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2 Turnover, revenue and segment information (Continued)

The segment assets and liabilities at 31 December 2010 are as follows:

Segment assets Interests in jointly controlled entities Interests in associated companies Unallocated assets Total assets Segment liabilities Unallocated liabilities: Corporate liabilities Current taxation Deferred taxation Borrowings Total liabilities

As at 31 December 2010 Internet Group E-Commerce Group Publishing Group Outdoor Media Group Television and Entertainment Group Total HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 2,830,779 25,874 1,243,478 726,167 169,444 4,995,742 - (132,651) - - - (132,651) 3,722 - 227,014 - - 230,736 46,435 ──────── 5,140,262 ════════ 517,567 11,739 401,565 158,023 64,125 1,153,019 105,514 45,937 12,449 1,951,432 ──────── 3,268,351 ════════

The unallocated assets represent the corporate assets. The unallocated liabilities represent the corporate liabilities in addition to operating segment taxation payable, deferred tax liabilities and borrowings which are managed on a central basis.

3 Provision for impairment of goodwill and other assets

The amount in the current year represented a provision for impairment of goodwill of the Internet Group of HK$421,201,000. This provision was made as a result of the decline in operating environment and overall lower industry valuations of the Group’s wireless value-added services and traditional portal operation in Mainland China. (2010: provision for impairment of goodwill of HK$2,614,000 and availablefor-sale financial assets of HK$8,900,000 relating to the Outdoor Media Group).

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4 Operating loss

Operating loss is stated after charging/crediting the following:

5	Charging: Depreciation Amortisation of other intangible assets Cost of inventories sold Loss on disposal of fixed assets Crediting: Dividend income from available-for-sale financial assets Gain on disposal of available-for-sale financial assets Gain on disposal of a subsidiary Exchange gain, net Finance costs, net Interest and borrowing costs on bank loans Interest on other loans Less: Bank interest income	2011 HK$’000 57,180 162,225 561,337 330 ═══════ 6,153 - - 19,792 ═══════ 2011 HK$’000 57,523 1,897 ─────── 59,420 ------------ (19,754) ------------ 39,666 ═══════	2010 HK$’000 64,888 136,135 540,831 182 ═══════ 494 5,402 7,666 24,279 ═══════ 2010 HK$’000 58,574 1,900 ─────── 60,474 ------------ (15,285) ------------ 45,189 ═══════

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6 Taxation

Hong Kong profits tax has been provided at the rate of 16.5% (2010: 16.5%) on the estimated assessable profits for the year. Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Group operates. The amount of taxation charged to the consolidated income statement represents:

	2011	2010
	HK$’000	HK$’000
Overseas taxation	33,146	31,942
Under/(over)-provision in prior years	502	(321)
Deferred taxation	(5,973)	7,312
	──────	──────
Taxation charge	27,675	38,933
	══════	══════

7 Dividends

No dividends had been paid or declared by the Company during the year (2010: Nil).

8 Loss per share

(a) Basic

The calculation of the basic loss per share is based on consolidated loss attributable to equity holders of the Company of HK$498,270,000 (2010: HK$167,952,000) and the weighted average of 3,893,270,558 (2010: 3,893,270,558) ordinary shares in issue during the year.

(b) Diluted

Diluted loss per share is equal to the basic loss per share for the year ended 31 December 2011 as the exercise price of the outstanding share options granted by the Company were higher than the average market price of the share of the Company (2010: Same).

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9 Trade and other receivables

Trade receivables Prepayments, deposits and other receivables	Group 2011 2010 HK$’000 HK$’000 552,983 538,364 307,968 297,876 ─────── ─────── 860,951 836,240 ═══════ ═══════

The Group has established credit policies for customers in each of its businesses. The average credit period granted for trade receivables ranges from 30 to 90 days. The Group’s turnover is determined in accordance with terms specified in the contracts governing the relevant transactions. The carrying values of trade and other receivables approximate their fair values.

As at 31 December 2011 and 2010, the ageing analyses of the Group’s trade receivables were as follows:

Current 31-60 days 61-90 days Over 90 days Less: Provision for impairment	Group 2011 2010 HK$’000 HK$’000 195,782 168,424 130,766 132,085 81,572 89,129 238,369 244,635 ─────── ─────── 646,489 634,273 (93,506) (95,909) ─────── ─────── 552,983 538,364 ═══════ ═══════

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10 Trade and other payables

Trade payables Other payables and accruals	Group 2011 2010 HK$’000 HK$’000 295,259 319,787 753,102 906,362 ──────── ──────── 1,048,361 1,226,149 ════════ ════════

The carrying values of trade and other payables approximate their fair values.

As at 31 December 2011 and 2010, the ageing analyses of the Group’s trade payables were as follows:

Current 31-60 days 61-90 days Over 90 days	Group 2011 2010 HK$’000 HK$’000 116,215 101,460 35,846 47,170 31,576 27,951 111,622 143,206 ─────── ─────── 295,259 319,787 ═══════ ═══════

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REVIEW OF ACCOUNTS

The Audit Committee of the Company has reviewed the annual results of the Group for the year ended 31 December 2011. The figures in respect of the preliminary announcement of the Group’s results for the year ended 31 December 2011 have been agreed by the Group’s auditor, PricewaterhouseCoopers, to the amounts set out in the Group’s audited consolidated financial statements for the year. The work performed by PricewaterhouseCoopers in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by PricewaterhouseCoopers on the preliminary announcement.

CODE ON CORPORATE GOVERNANCE PRACTICES

The Company has complied with all the code provisions of the Code on Corporate Governance Practices (which has new amendments made effective in 2012, including the name of the Code, which is now renamed as Corporate Governance Code) (“Code”) contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited throughout the year ended 31 December 2011.

The Company has also adopted certain recommended practices stated therein. The Company has reviewed its position against the amended code provisions with respect to amendments that are to be made in 2012 and can confirm that, as at the date of this announcement, it is compliant with most of the code provisions of the Code ahead of the scheduled effective dates.

PURCHASE, SALE OR REDEMPTION OF SECURITIES

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed shares.

As at the date hereof, the directors of the Company are:

Executive Directors: Mr. Yeung Kwok Mung Ms. Angela Mak

Non-executive Directors: Independent Non-executive Directors: Mr. Frank Sixt (Chairman) Mr. Henry Cheong Ms. Debbie Chang Ms. Anna Wu Mr. Edmond Ip Mr. James Sha Mrs. Angelina Lee

Alternate Directors: Mrs. Susan Chow (Alternate to Mr. Frank Sixt) Mr. Francis Meehan (Alternate to each of Mr. Frank Sixt, Ms. Debbie Chang and Mr. Edmond Ip)

• 24 -