As filed with the Securities and Exchange Commission on ~~December 21, 2011~~April 29, 2015

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

~~Securities registered or to be registered pursuant to Section 12(g) of the Act:~~SECURITIESREGISTEREDORTOBEREGISTEREDPURSUANTTO SECTION 12(G)OFTHE ACT:

~~Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:~~SECURITIESFORWHICHTHEREISAREPORTINGOBLIGATIONPURSUANTTO SECTION 15(D)OFTHE ACT:

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: ~~771,911,853~~809,016,643 Ordinary ~~Shares, par value HK$0.10 per share~~Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨Yes ¨ No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has selected to follow. Item 17 ¨ Item 18¨

If this report is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Except as otherwise indicated by the context, references in this annual report to:

We publish our consolidated financial statements in Hong Kong dollars. In this annual report, references to “Hong Kong dollars” or “HK$” are to the currency of Hong Kong, and references to “U.S. dollars” or “US$” are to the currency of the United States. This annual report contains translations of Hong Kong dollar amounts into U.S. dollar amounts solely for your convenience. Unless otherwise indicated, the translations have been made at US$1.00 = HK$~~7.7876,~~7.7531, which was the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on ~~August~~December 31, ~~2011.~~2014. On ~~December 9, 2011~~April 24, 2015, the exchange rate was US$1.00 = HK$~~7.7817.~~7.7499. You should not construe these translations as representations that the Hong Kong dollar amounts actually represent such U.S. dollar amounts or could have been or could be converted into U.S. dollars at the rates indicated or at any other rates.

~~Note regarding forward-looking statements~~PRESENTATION OF FINANCIAL INFORMATION

Unless otherwise indicated, the financial information in this annual report has been prepared in accordance with IFRS. The significant IFRS accounting policies applied to our financial information in this annual report have been applied consistently.

This annual report contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These include statements with respect to ~~City Telecom and~~ our plans, strategies and ~~beliefs and other statements that are not historical facts.~~beliefs. These statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, “intend”, “estimate”, “continue”, “plan”, “predict”, “project” or other similar words. ~~The~~All statements other than statements of historical fact included in this annual report, including statements regarding our future financial position, strategy, projects costs and plans and objectives of management for future operations, are ~~based on management’s assumptions and beliefs in light of the information currently available to us.~~forward-looking statements.

These assumptions involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from ~~any future results, performance or achievements~~those expressed or implied by such forward looking statements. Potential risks and uncertainties ~~include, without limitation:~~include:

When considering such forward-looking statements, you should keep in mind the factors described in Item 3 “Key information — ~~risk factors”~~Risk Factors” and other cautionary statements appearing in Item 5 “Operating and ~~financial review~~Financial Review and ~~prospects”~~Prospects” of this annual report. Such risk factors and statements describe circumstances that could cause actual results to differ materially from those contained in any forward-looking statement. Additionally, new risk factors can emerge from time to time, and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.

~~Special note on our financial information presented~~All forward-looking statements included in this annual report are based on information available to us on the date of this annual report. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this annual report.

The following table presents our selected historical financial data as of and for the ~~years~~twelve months ended August 31, ~~2008, 2009,~~ 2010, 2011, 2012 and 2011 included in this annual report on Form 20-F have been prepared in accordance with IFRSs as issued by the International Accounting Standards Board, or the IASB. Pursuant to the requirement under IFRS 1: First-Time Adoption of International Financial Reporting Standards, or IFRS 1, the date of our transition to IFRSs was September 1, 2007, which is the beginning of the earliest period for which we presented full comparative information in our consolidated financial statements in our annual report for the year ended August 31, 2009. With due regard to our accounting policies in previous periods2013, and the ~~requirements of IFRS 1, we have concluded that no adjustments were required to the amounts reported under HKFRSs as of September 1, 2007 or in respect of the year~~sixteen months ended ~~August~~December 31, ~~2008.~~

In accordance with rule amendments adopted by the U.S. Securities and Exchange Commission, or the SEC, which became effective on March 4, 2008, we are not required to provide reconciliation to U.S. GAAP.

~~The following table presents selected historical financial data of our Company as of and for each of the years in the five-year period ended August 31, 2011.~~2014. Except for amounts presented in U.S. dollars, the selected historical consolidated income statement data and other financial data for the ~~years~~twelve months ended August 31, ~~2009, 2010~~2012 and ~~2011~~2013 and the sixteen months ended December 31, 2014, and the selected historical consolidated balance sheet data as of August 31, ~~2010~~2013 and ~~2011~~December 31, 2014, set forth below are derived from, should be read in conjunction with, and are qualified in their entirety by reference to our audited consolidated financial statements, including the related notes, included elsewhere in this annual ~~report on Form 20-F.~~report. The selected historical consolidated income statement data for the ~~years~~twelve months ended August 31, ~~2007~~2010 and ~~2008~~2011 and ~~the selected historical~~ consolidated balance sheet data as of August 31, ~~2007, 2008~~2010, 2011 and ~~2009~~2012 set forth below are derived from our audited consolidated financial statements that are not included in this annual ~~report on Form 20-F.~~report. Our consolidated financial statements have been prepared in accordance with ~~International~~IFRS.

You should read the selected financial data in conjunction with our consolidated financial statements and related notes and Item 5 “Operating and Financial ~~Reporting Standards, or~~Review and Prospects” included elsewhere in this annual report. Our historical results do not necessarily indicate our expected results for any future periods.

Pursuant to a resolution of the Board dated August 29, 2014, the Company’s financial year end date has been changed from August 31 to December 31 in order to unify the financial year-end dates of the Company and its subsidiaries and align with the business cycle of the Group’s potential customers in the retail e-commerce industry and the multimedia advertising industry. Accordingly, the accompanying consolidated financial statements, and the selected financial information below, for the current financial period cover a period of sixteen months from September 1, 2013 to December 31, 2014. As the fiscal 2010 through fiscal 2013 figures are not directly comparable with those of the current financial period, financial information for the twelve months ended August 31, 2014 and the four months ended December 31, 2014 prepared in accordance with IFRS, ~~as issued by~~has been presented to enhance comparability. This supplementary financial information has not been audited. For further information, see Note 1 to the ~~International Accounting Standards Board.~~consolidated financial statements included elsewhere in this annual report.

~~We may be unable to capitalize on any economy of scale benefits~~financial statements if we fail to ~~expand~~maintain effective internal controls over financial reporting, which in turn could harm our ~~network coverage~~business and adversely affect the trading prices of our ADSs.

Under the Sarbanes-Oxley Act, every public company must include a management report on its internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Under the Sarbanes-Oxley Act, we are also required to have an independent registered public accounting firm to attest to and report on the effectiveness of our internal controls over financial reporting. For a detailed discussion of our controls and procedures, see Item 15 “Controls and procedures.”

Notwithstanding our efforts, our management could conclude that our internal controls over financial reporting are not effective. Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may conclude that our internal controls over financial reporting are not effective. If either of these were to occur, we could experience a negative reaction in the financial markets and incur additional costs to improve our internal controls. If we do not successfully design and implement changes to our internal controls and management systems, or if we fail to maintain the adequacy of these controls as the relevant standards are modified or amended from time to time, we may not be able to comply with the Sarbanes-Oxley Act. This could subject us to regulatory scrutiny and penalties that could lead to a loss of public confidence in our management, which in turn could, among other things, adversely affect our shareholders’ confidence, our stock price and our ability to raise additional capital and operate our business as projected.

We may not be able to sustain the level of other income we generated in fiscal 2014.

We recorded “other income, net” of HK$147.6 million in fiscal 2014, which was significantly more than in previous years. As compared with fiscal 2013, the increase was mainly due to an increase of HK$56.3 million in investment return, which included an additional four months’ investment return of HK$35.5 million, as well as an additional four month’s rental from investment properties of HK$3.8 million, which were partially offset by a HK$41.4 million decrease in exchange gain. In fiscal 2014, our “other income, net” mainly comprised interest income from available-for-sale securities, bank interest income, net exchange gain and rental income from investment properties. As we develop our Multimedia Business, less surplus cash will be available for these investments and, accordingly, we may not be able to generate a similar level of other income as we did in fiscal 2014.

In addition, our investment income is affected by many factors beyond our control. For example, our interest income is affected by changes in interest rates, which are highly sensitive to many factors, including governmental monetary policy and domestic and international economic and political conditions. Deterioration in the credit of the securities in which we have invested and general market conditions may also materially and adversely affect our investment income.

We may not be able to realize our investment in other financial assets at our ~~projected rate.~~desired time, price and transaction size, or to receive the debt principal back upon maturity.

We recorded other financial assets of HK$1,784.4 million as of December 31, 2014 which represented investment in available-for-sale securities mainly composed of debt securities, a significant portion of which has a maturity date of over one year from December 31, 2014, and equity securities. Although we mostly invested in liquid instruments with sound credit quality, such as investment grade products, securities of constituents in major stock indices or securities of state-owned or -controlled companies, we may still face liquidity risk, which is highly sensitive to many factors, including issuers’ credit and financial condition, governmental monetary policy and general market conditions. We may not be able to realize our investment in other financial assets at our desired time, price and transaction size.

In addition, we may not be able to recover the par value of our investment in available-for-sale debt securities, upon maturity or at all, if the credit quality and financial position of the debt issuers deteriorate.

If we are unable to offer products that attract new customers and recurring purchases from existing customers through our online shopping platform, HKTV Mall, our business, financial condition and results of operations may be materially and adversely affected.

We launched our 24-hour online shopping platform on HKTV Mall in February 2015. We expect this online shopping business will be one of the major contributors to our business. Our future growth ~~opportunities~~depends on our ability to continue to attract new online shopping customers as well as recurring purchases from existing online shopping customers. Constantly changing consumer preferences have affected and will continue to affect the online retail industry. We must stay abreast of emerging consumer preferences and anticipate product trends that will appeal to existing and potential customers. Our customers choose to purchase authentic and quality products on our website due in part to the attractive prices that we offer, and they may choose to shop elsewhere if we cannot match the prices offered by other websites or by physical stores. If our customers cannot find their desired products on our website at attractive prices, they may lose interest in us and visit our website less frequently or even stop visiting our website altogether, which in turn could materially and adversely affect our business, prospects, financial condition and results of operations.

Our online shopping business faces intense competition. We may lose customers if we fail to compete effectively.

The online retail industry in Hong Kong is intensely competitive. Our current or potential competitors include major online retailers in the Hong Kong area that offer a wide range of general merchandise product categories, major traditional retailers in Hong Kong that are moving into online retailing, major internet companies that have commenced online retail businesses, online retail companies in Hong Kong focused on specific product categories, and physical retail stores, including big-box stores that also aim to offer a one-stop shopping experience. In addition, new and enhanced technologies may increase the competition in the online retail industry. New competitive business models may appear, for example based on new forms of social media or social commerce.

Increased competition may reduce our margins or result in significant losses. When we set prices, we have to consider how competitors have set prices for the same or similar products. When they cut prices or offer additional benefits to compete with us, we may have to lower our own prices or offer additional benefits or risk losing market share, either of which could harm our financial condition and results of operations.

Some of our current or future competitors may have longer operating histories, greater brand recognition, better supplier relationships, larger customer bases or greater financial, technical or marketing resources than we do. Some of our competitors may be ~~limited~~able to secure more favorable terms from suppliers, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory policies and devote substantially more resources to their website, mobile application and systems development than us. We cannot assure you that we will be able to compete successfully against current or future competitors, and competitive pressures may have a material and adverse effect on our business, prospects, financial condition and results of operations.

Our online shopping business offers product categories which are not familiar to us, and a substantial increase in the number of products in the future may expose us to new challenges and more risks.

As of April 27, 2015, our online shopping mall has over 350 stores offering a variety of products in categories which include fashion, mother and baby, skin care and make up, personal care, medicine and health, supermarket, food and wine, household, music, video and books, games, toys and stationery, outdoor and sports, pet care, and digital and electronics products. In addition, we may substantially increase number of products we offer in the future. Our lack of familiarity with these products and lack of relevant customer data relating to these products may make it more difficult for us to anticipate customer demand and preferences. We may misjudge customer demand. It may also make it more difficult for us to inspect and control quality and ensure proper handling, storage and delivery. We may experience higher return rates on new products, receive more customer complaints about them and face costly product liability claims as a ~~result.~~

~~Internet security concerns~~result of selling them for the merchants who are the owners of the products, which could harm our brand and reputation as well as our financial performance. Furthermore, we may not be able to negotiate favorable terms with suppliers. We may need to provide aggressive promotional offers to gain market share or remain competitive in new categories. It may be difficult for us to achieve profitability in the new product categories, and our profit margin, if any, may be lower than we anticipate, which could adversely affect our ~~Internet access services.~~overall profitability and results of operations.

We may be subject to product liability claims if people or properties are harmed by the products we sell through our online shopping platform.

~~To remain competitive,~~We are a marketplace with a substantial number of products and services, selling for third-party merchants through our online shopping platform, some of which may be defectively designed or manufactured. As a result, sales of such products could expose us to product liability claims relating to personal injury or property damage and may require product recalls or other actions. Third parties subject to such injury or damage may bring claims or legal proceedings against us as the operator of the marketplace selling the product. Although we ~~must continue~~would have legal recourse against the third-party merchants or manufacturer of such products under Hong Kong law, attempting to ~~upgrade~~enforce our ~~broadband Internet access, local VoIP, IP-TV~~rights against such parties may be expensive, time-consuming and ~~corporate data services. Computer viruses, break-ins~~ultimately futile. In addition, we do not currently maintain any product liability insurance in relation to products we sell. As a result, any material product liability claim or litigation could have a material and ~~other inappropriate or unauthorized uses~~adverse effect on our business, prospects, financial condition and results of operations. Even unsuccessful claims could result in the expenditure of funds and managerial efforts in defending them and could have a negative impact on our reputation.

We enable customers of our ~~Next Generation Network~~online shopping business to make payments through our website by working with third-party online payment processing service providers. As we rely on third parties to provide payment processing services, including processing payments made with credit cards, it could ~~affect the provision of our full suite of Internet Protocol services and have the following effects on our FTNS business:~~

~~To protect~~disrupt our business ~~from computer viruses and other harmful attacks,~~or even we may need to scale down or suspense the online shopping business if these companies become unwilling or unable to provide these services to us. We may be subject to human error, fraud and other illegal activities in connection with third-party online payment services. If our data security systems are breached or compromised, we may lose our ability to accept credit card payments from our customers, and we may be subject to claims for damages from our customers and third parties, all of which could adversely and materially affect our reputation as well as our results of operations.

If we are unable to conduct our marketing activities cost-effectively, our business, financial conditions and results of operations may be materially and adversely affected.

We have incurred, and we may in the future incur, significant ~~costs~~expenses on a variety of marketing efforts designed to increase sales of our products and enhance our brand recognition. Our marketing activities may not be well received by consumers and may not result in the levels of sales that we anticipate. Marketing approaches and tools in the online shopping business in Hong Kong are evolving. This further requires us to enhance our marketing approaches and experiment with new marketing methods to keep pace with industry developments and customer preferences. Failure to refine our existing marketing approaches or to introduce new marketing approaches in a cost-effective manner could reduce our market share, cause our net revenue to decline and negatively impact our prospects to achieve profitability.

Failure to protect confidential information of the customers of our online shopping business, due to network against security breaches or other causes, could damage our reputation and substantially harm our business and results of operations.

A significant challenge to the online retail industry is the secure storage of confidential information and its secure transmission over public networks. The online payments for products sold on our online shopping platform are settled through third-party online payment processing service providers. Maintaining complete security for the storage and transmission of confidential information on our technology platform, such as customer names, personal details and billing addresses, is essential to maintaining customer confidence.

We have adopted security policies and measures, including encryption technology, to protect our proprietary data and customer information. However, advances in technology, the expertise of hackers, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the technology that we use to protect confidential information. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining the confidential or private information we hold as a result of our customers’ visits to our website and use of our mobile applications. Any individuals or entities that obtained our customers’ confidential or private information could engage in various other illegal activities using such information. In addition, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which our customers may elect to make payment for purchases. If we give third parties greater access to our technology platform in the future as part of a strategy of providing more technology services to third-party sellers and others, it may become more challenging for us to ensure the security of our systems. Any compromise of our information security, or the information security measures of our contracted third-party online payment and other service providers, could have a material and adverse effect on our reputation, business, prospects, financial condition and results of operations.

Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet have recently come under increased public scrutiny. As online retail continues to evolve, we believe that increased regulation by the relevant authorities of data privacy on the Internet is likely. We may become subject to new laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information that could affect how we store, process and share data with our customers, suppliers and third-party sellers. Compliance with any additional laws could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with our customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against ~~the threat of~~us.

Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such ~~breaches. We intend~~breaches or to ~~continue~~comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to ~~strengthen~~prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, could cause our ~~network security~~customers to ~~alleviate these problems. Our efforts, however,~~lose trust in us and could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online retail and other online services generally, which may ~~cause interruptions, delays or cessations~~reduce the number of orders we receive.

The proper functioning of our ~~services, and~~technology platform is essential to our ~~customers may stop using our service or assert claims against us as a result.~~

~~We may be unable~~business. Any failure to ~~further expand~~maintain the ~~scope~~satisfactory performance of our ~~Internet access services unless we obtain additional network capacity.~~

Our ability to transition from time to time to more advanced technologies for faster Internet access is critical to our sustainable competitiveness. Because our Next Generation Network has limited capacity, our ability to expand the network bandwidth on a timely basis is subject to the following factors:

~~If we fail to increase the capacity of our international bandwidth, our ability to increase our market share and revenue in the Internet access market segment will be limited.~~

~~Natural disasters and other disruptive regional events~~systems could ~~damage our network~~materially and adversely affect our business and ~~operating results.~~reputation.

The satisfactory performance, reliability and availability of our technology platform are critical to our success and our ability to attract and retain customers and provide quality customer service. All of our sales of products are made online through our website. Any system interruptions caused by telecommunications failures, computer viruses, hacking or other attempts to harm our systems that result in the unavailability or slowdown of our website or reduced order fulfillment performance could reduce the volume of products sold and the attractiveness of product offerings on our website. Our ~~network is~~servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, website slowdown or unavailability, delays or errors in transaction processing, loss of data or the inability to accept and fulfill customer orders. Security breaches, computer viruses and hacking attacks have become more prevalent in the e-commerce industry. We can provide no assurance that our current security mechanisms will be sufficient to protect our IT systems from third-party intrusions, viruses or hacker attacks, information or data theft or other similar activities. Any such future occurrences could reduce customer satisfaction, damage our reputation and result in a material decrease in our revenue.

Additionally, we must continue to upgrade and improve our technology platform to support our business growth; failure to do so could impede our growth. However, we cannot assure you that we will be successful in executing these system upgrades and improvement strategies. In particular, our systems may experience interruptions during upgrades, and the new technologies or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all. If our existing or future technology platform does not function properly, it could cause system disruptions and slow response times, affecting data transmission, which in turn could materially and adversely affect our business, financial condition and results of operations.

Any interruption in our logistics operation, including our warehousing and delivery operations, for an extended period may have an adverse impact on our business.

We have set up our own logistics center at Kowloon Bay with a logistics, warehousing and delivery team. Our ability to process and fulfill orders accurately and provide high quality customer service depends on the smooth operation of our logistics team, which includes our warehousing operation and the delivery services provided by our couriers and drivers. Our logistics operations may be vulnerable to damage ~~or cessation of operations from~~caused by fire, ~~earthquakes, severe storms, heavy rainfall,~~flood, power ~~loss,~~outage, telecommunications ~~failures, network software flaws, vandalism, transmission cable cuts~~failure, break-ins, human error and other ~~catastrophic~~ events. ~~We may experience failures or shut downs relating to individual points of presence or even catastrophic failure~~If any of our ~~entire network. Any sustained failure~~warehouse or delivery services were rendered incapable of ~~our network, our servers, or~~operation, then we may be unable to fulfill relevant orders. We do not carry business interruption insurance, and the occurrence of any ~~link in~~of the ~~delivery chain, whether from operational disruption, natural disaster or otherwise,~~foregoing risks could have a material adverse effect on our business, prospects, financial condition and results of operations.

~~The loss~~We may incur liability or become subject to penalties for counterfeit or unauthorized products sold on our website, or for products sold on our website or content posted on our website that infringe on third-party intellectual property rights, or for other misconduct.

As of ~~key suppliers or their failure to deliver equipment on~~April 27, 2015, our online shopping mall has over 350 stores offering a ~~timely basis could negatively impact our business.~~

~~We rely on third parties for the supply~~variety of ~~network equipment. Further, because an IP set-top box must be installed~~products in ~~order to access our IP-TV services, we must have an adequate supply~~categories which include fashion, mother and baby, skin care and make up, personal care, medicine and health, supermarket, food and wine, household, music, video and books, games, toys and stationery, outdoor and sports, pet care, and digital and electronics products. A substantial majority of such ~~installation equipment on hand~~products and services are offered by third-party merchants through our online shopping platform which functions as a marketplace for ~~delivery to our customers in a timely manner.~~

such third parties. We ~~purchase all of our IP set-top boxes and other equipment~~also directly sell from our suppliers on a purchase order basis and have no long-term contracts. If our suppliers are unable to supply us with these products in a timely manner or the costs of these products increase due to unforeseen causes, this could negatively impact our operating results, especially if we are unable to spread the costs over a larger subscription base or effectively pass the additional costs on to our subscribers.

Because we rely on third parties in delivering services through our Next Generation Network, our operating results could be adversely affected if their services are not timely or do not meet our standards.

~~We depend on third parties for the ongoing maintenance and repair of our Next Generation Network. Further, although our Next Generation Network is operated essentially as an independent network,~~own inventory a small portion of itthe products and services on our online shopping platform. Some of products offered on our online shopping platform may be defectively designed or manufactured.

In addition to acting as a marketplace for merchants, we also source a small portion of products in our inventory from third-party suppliers. Third-party sellers on our online marketplace are separately responsible for sourcing the products they sell on our website. Although we have adopted measures to verify the authenticity and authorization of products sold on our website and avoid potential infringement of third-party intellectual property rights in the course of sourcing and selling products, we may not always be successful.

In the event that counterfeit, unauthorized or infringing products are sold on our website, or infringing content is ~~connected~~posted on our website, we could face claims that we should be held liable. Irrespective of the validity of such claims, we could incur significant cost and effort in either defending against or settling such claims. If there is a successful claim against us, we might be required to pay substantial damages or refrain from further sale of the ~~network of other providers~~relevant products. Potential liability under ~~interconnection agreements. We are also dependent on certain~~ Hong Kong ~~rail transport providers~~law if we negligently participated or assisted in infringement activities associated with counterfeit goods includes injunctions to ~~maintain~~cease infringing activities, rectification, compensation, administrative penalties and ~~provide us with access to their infrastructure to support the proper functioning of our equipment and fiber-based backbone. If these third parties fail to respond~~even criminal liability. Moreover, such third-party claims or ~~are untimely~~administrative penalties could result in their response to our maintenance and repair needs, our customers may experience interruptions or variations in the quality of our fixed telecommunications network services. Any service interruptions or variations could adversely affect our operating resultsnegative publicity, and our ~~ability to retain or add new customers.~~

~~We cannot assure you that the license~~reputation could be severely damaged. Any of ~~domestic free television program service license will be granted to us~~these events could have a material and ~~our new business in the provision of domestic free television program will generate revenue in short period of time or become profitable in long run~~

On December 31, 2009, we submitted an application for the domestic free television program service license in Hong Kong to the HKBA. If granted, such license would allow us to provide free television program services in Hong Kong. As of December 13, 2011, our application for such license is still pending. If granted, we will incur additional expense for program production before we can generate revenue. In addition, given that Television Broadcasts Limited has dominance in viewership, we cannot assure that we can generate revenue in a short period of time and become profitable in the long run.

~~If we cannot manage~~adverse effect on our business, ~~expansion in multimedia production, our operating~~prospects, results ~~could be adversely affected.~~of operations or financial condition.

We target to invest HK$600 million to build a multimedia center plus incur additional expenditure to produce drama series and a variety of TV contents for broadcasting in Hong Kong to generate advertising revenues within Hong Kong and for sale to international markets. Contrary to our telecommunications business with 19 years of operational track record, we lack direct experience in this new business.

~~Our ability to manage the expansion in the multimedia production business will depend on our ability to:~~

~~Our failure to achieve any of the above could increase our costs of operation and investments, thus affecting our operating results adversely.~~

~~Regulatory reforms and currently contemplated regulatory initiatives in the telecommunications industry may adversely affect us.~~

~~The Hong Kong telecommunications industry is undergoing continuous regulatory reform.~~ Our ~~business and~~ results of operations may be ~~adversely affected by changes~~subject to seasonal fluctuations.

We may experience seasonality in our online shopping business similar to other retail businesses in Hong Kong. For example, sales in the ~~telecommunications regulations, especially~~traditional retail industry are significantly higher in the ~~following areas:~~

~~We require licenses from OFTA to provide~~modify our ~~services. If one of these licenses is revoked or not renewed or there are substantial changes in its terms~~current business practices and ~~conditions, we may be unable to deliver the services authorized by that license.~~incur increased costs.

We ~~require licenses from OFTA to provide our fixed telecommunications network and international telecommunications services. Our business operations therefore~~ are ~~susceptible to the following changes in the regulatory environment in particular:~~

~~Our international telecommunications revenues may be adversely affected by increases in carrier charges in China.~~

In China, tariffs for all domestic and international long distance services offered through public switched telephone networks, leased lines and data services are jointly set by the Ministry of Information Industry of the PRC and the State Development Planning Commission. Certain tariffs payable by us to our carrier partners are based, among other things, on the tariffs set by these agencies with respect to the calls our subscribers make to persons in China. In fiscal 2011, approximately 80% of our international call traffic volume was to China. We cannot predict the timing, likelihood or magnitude of any tariff adjustments that may be imposed by the Ministry of Information Industry of the PRC and the State Development Planning Commission, nor can we predict the extent or potential impact upon our business of any future tariff increases. Such increases may lead to a decrease in traffic, reduce our revenues and adversely affecthurt our business and results of operations. ~~In addition, if~~Legal requirements are frequently changed and subject to interpretation, and we are unable to ~~effectively manage~~predict the ~~increased network~~ultimate cost of compliance with these requirements or their effect on our operations. We may be required to make significant expenditure or modify our business practices to comply with existing or future laws and regulations, which may increase our costs ~~the profit margins of our IDD business could be adversely affected.~~

~~As approximately 50% of our Talents are located in Guangzhou, China, changes in Chinese labor or business laws may significantly affect our operations~~ and materially limit our ability to ~~serve~~operate our ~~Hong Kong based customers.~~business.

~~Our call center in Guangzhou employs over 1,500 Talents and is an important resource to us.~~ We ~~are therefore significantly~~may be adversely affected by the complexity, uncertainties and changes in Hong Kong regulation of Internet-related businesses.

We are subject to Hong Kong laws and regulations ~~governing foreign companies with operations in China. As~~that regulate the ~~Chinese legal system develops, changes in such~~Internet industry. The Internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or ~~their enforcement~~omissions may ~~lead~~be deemed to ~~restrictions on~~be in violation of applicable laws and regulations. New laws and regulations may be promulgated that will regulate Internet activities, including online retail. If these new laws and regulations are promulgated, additional licenses may be required for our ~~ability~~operations. If our operations do not comply with these new regulations at the time they become effective, or if we fail to ~~hire~~obtain any licenses required under these new laws and ~~retain~~regulations, we could be subject to penalties which may materially and adversely affect our ~~Talents in China, which could impact our ability to provide services to our Hong Kong-based customers.~~business, prospectus, results of operations and financial condition.

Currency fluctuations of the Hong Kong dollar, our functional currency, may increase our operating costs and ~~long term liability.~~adversely affect our profitability.

We are exposed to ~~a certain amount of~~ foreign exchange risk because our ~~revenues are~~expected revenue will be predominantly denominated in Hong Kong dollars, while a ~~major~~ portion of our operating costs and some of our capital expenditure plans are expected to be denominated in U.S. dollars, Renminbi or other foreign currencies. ~~Our foreign currency-denominated expenses primarily consist of the following:~~

~~Since October 17, 1983,~~Although the Hong Kong dollar has been linked to the U.S. dollar ~~at the rate of HK$7.80 per US$1.00. We, however, cannot assure you the link will~~since 1983, it may not continue to be ~~maintained in the future.~~linked. Any material depreciation of the Hong Kong dollar against the U.S. dollar, Renminbi or other currencies would increase our operating costs, ~~including our debt servicing costs,~~ make some of our capital expenditure plans more expensive and adversely affect our profitability.

~~The Renminbi is presently pegged to a basket of currencies, and there remains significant international pressure on the PRC government to further liberalize its currency policy. This could result~~ In addition, any depreciation in ~~a further and more significant appreciation in the value of the~~U.S. dollar or Renminbi against the Hong Kong dollar ~~which~~ would ~~increase~~reduce the ~~cost~~value of ~~operating~~ our ~~call center.~~investments in available-for-sale securities and deposits.

Our Chairman and Vice Chairman have significant ownership ~~interest~~interests in the ~~company. We cannot assure you that our Chairman and Vice Chairman will not~~Company. They could engage in ~~any~~ transactions that ~~lead to conflicts~~could conflict with the interests of ~~interest resulting from their ownership interests.~~our shareholders.

Our Chairman and Vice Chairman each have an indirect ownership interest in our Company through Top Group International Limited, which, as of ~~December 13, 2011,~~April 27, 2015, held approximately ~~43.98%~~42.00% of the Company’s shares, of which 42.12% and 27.06% was owned by our Chairman and Vice Chairman, respectively. Top Group International Limited is a special purpose vehicle incorporated in the British Virgin Islands. Its board of directors consists of Mr. Wong and Mr. Cheung. Mr. Wong and Mr. Cheung have entered into a voting agreement pursuant to which they agreed to vote the 339,814,284 shares held by Top Group International Limited, the ~~7,145,289~~15,236,893 shares held by Mr. Wong individually, and the ~~44,286,159~~50,377,763 shares held by Mr. Cheung individually, collectively as a group. ~~We cannot make assurances that our~~Our Chairman orand Vice Chairman ~~will not~~could take actions that may not be in the best interests of our other shareholders.

~~ITEM 4~~ We believe we were a passive foreign investment company for our taxable year ended December 31, 2014, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our American depository shares or ordinary shares.

Based on the market price of our American depository shares, the value of our assets, and the composition of our income and assets, we believe we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended December 31, 2014. In addition, it is likely one or more of our subsidiaries were also PFICs for such year. A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). In general, the total value of our assets for purposes of the asset test will be determined based on the market price of our American depositary shares and ordinary shares. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our American depositary shares and ordinary shares, our PFIC status will depend in large part on the market price of the American depositary shares and ordinary shares, which may fluctuate significantly. Furthermore, unless our share value increases and/or we invest a substantial amount of our cash and other passive assets in assets that produce active income, there is a significant risk we will be a PFIC for our taxable year ending December 31, 2015. Because we believe we were a PFIC for our taxable year ended December 31, 2014, certain adverse U.S. federal income tax consequences could apply to a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income Taxation”) who holds an American depository share or an ordinary share with respect to any “excess distribution” received from us and any gain from a sale or other disposition of the American depositary shares or ordinary shares. See “Item 10. Additional Information—E. Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.”

As a foreign private issuer, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that are more lenient than those of a U.S. issuer.

As a foreign private issuer, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic issuers, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents and authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In addition, the executive compensation disclosure requirements to which we are subject under Form 20-F are less rigorous than those required of U.S. issuers under Form 10-K. Furthermore, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are not large accelerated filers or accelerated filers are required to file their annual report on Form 10-K within 90 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, aimed at preventing issuers from making selective disclosure of material information.

Holders of ADSs must act through the depositary to exercise their rights as shareholders of our Company.

Holders of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. If you are a holder of our ADSs, when a general meeting is convened, you may not receive sufficient notice to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but you might not receive the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ADSs are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders’ meeting.

Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests. Holders of our ordinary shares are not subject to this discretionary proxy.

Our ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings, and you may not receive cash dividends or other distributions if it is impractical to make them available to you.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary will not make rights available to you unless either both the rights and any related securities are registered under the Securities Act or the distribution of them to ADS holders is exempted from registration under the Securities Act. We are not obligated to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

The holding, acquisition or exercise of voting control by non-Hong Kong resident ADS holders and shareholders may be restricted if we obtain a free TV license.

The holding, acquisition or exercise of voting control of a free TV license by persons who do not meet certain Hong Kong residency requirements as set out in the Broadcasting Ordinance (“Unqualified Voting Controllers”) is restricted in various ways by the Broadcasting Ordinance. Such restrictions include, but are not limited to, the requirement for prior approval from the CA for the holding, acquisition or exercise of voting control by an Unqualified Voting Controller of more than 2% of a licensee and restrictions on the exercise of “voting control” by such Unqualified Voting Controller. Under the Broadcasting Ordinance, “voting control” means “the control of or the ability to control, whether directly or indirectly, the exercise of the right to vote attaching to one or more voting shares of a licensee.” If we obtain a free TV license, our Company and any Unqualified Voting Controller will be subject to these restrictions. See “Item 4. Information on the Company—B. Business Overview—Regulatory Framework—Domestic Free Television Programme Services—Foreign Ownership Restrictions.”

The legal and commercial name of our Company is Hong Kong Television Network Limited, effective from January 10, 2013 (our Company was formerly known as City Telecom (H.K.) ~~Limited.~~Limited). We were incorporated on May 19, 1992 under the Hong Kong Companies Ordinance and isare a limited liability company. Our registered office is located at ~~Level 39, Tower 1, Metroplaza, No. 223 Hing Fong Road,~~13th Floor, Trans Asia Centre, No.18 Kin Hong Street, Kwai Chung, New Territories, Hong Kong, telephone ~~(852)~~(+852) 3145-6888. Our agent for U.S. federal securities laws purposes is CT Corporation System, 111 Eighth Avenue, New York, NY 10011.

We began offering international telecommunications services in ~~September~~ 1992. In our early stage of development, we focused on increasing our subscription base and amount of international traffic, and on building the CTI brand name as a low cost provider of international telecommunications services. In addition to our operations in Hong Kong, we also provide international telecommunications and Internet access services in Canada through two telecommunications companies in Canada, City Telecom Inc. and City Telecom (B.C.) Inc. We acquired our interests in these companies in December 1998, ~~as part of our efforts to increase our market share of the telecommunications traffic between Canada and Hong Kong.~~

~~In January 1999,~~ we became the first company in Hong Kong to obtain a PNETS ~~License. This~~ license, ~~gives~~which gave us the right to offer international telecommunications services using ~~ISR~~the International Simple Resale (ISR) method and ~~has~~ had a significant positive impact on our international telecommunications ~~revenues.~~revenue. We incorporated HKBN in Hong Kong in ~~August~~ 1999 and launched our broadband Internet access services in ~~March~~ 2000. In addition, we began providing local VoIP services in ~~April~~ 2002, IP-TV services in ~~August~~ 2003, and corporate data services in ~~July~~ 2004 using our Next Generation Network. In September 2007, we launched “Fibre-To-The-Home” residential broadband, including the “FibreHome100”, “FibreHome200” and “FibreHome1000” services. In December 2009, we achieved the one-million mark for fixed telecommunications network services subscriptions.

In December 2009, we submitted an application to the HKBA to obtain a free TV license. In August 2011, Hong Kong Science and Technology Parks Corporation granted us a parcel of land in Tseung Kwan O Industrial Estate, New Territories to build the Centre, a center for television and multimedia production. The ~~network has the capability of providing value-added broadband services and content that combine voice, data and images with increased efficiency and flexibility.~~

~~We believe that one~~construction of the ~~cornerstones~~Centre was suspended following the rejection of our ~~success~~application for a free TV license. Depending on the outcome of the reconsideration of our application by the Chief Executive in Council in light of the results of the judicial review, we may resume the construction of the Centre to support our business development, and upon completion, the Centre would become our headquarters. We have obtained an extension of time for the development of the Centre to February 28, 2017.

In March and April 2012, we entered into the Telecom Group Agreement and the Guangzhou Agreement, respectively, and in May 2012, we completed the very substantial disposal transaction of both the FTNS Business and the IDD Business. Since then, the Multimedia Business has been our principal focus. Our Multimedia Business includes the production, sale and distribution of television drama series and variety and infotainment programs locally and internationally. Our business also includes artiste management services and independent content production.

Beginning in mid-2011, we embarked on a large-scale recruitment process in the multimedia industry, from creative directors to post-production professionals, and we began content production in April 2012. During fiscal 2014, we started the production for a number of drama series, including “End of the Day + 5”, “Sexpedia”, “The Wicked League” and “The Election”. On drama program production, we encourage our Talents to go beyond traditional or mass market drama programs. We have conducted workshops and invited different experts to develop new creative and production ideas and have conducted numerous focus groups by inviting mass market audiences to provide feedback on the first episode of certain drama series. We put the first episode of “Borderline” on YouTube to receive feedback on a larger-scale basis, held workshops to benchmark our creative and production skills, and held workshops with professional consultants for our field production and post-production Talent to enhance their techniques with respect to shooting, lighting and color grading skills when using Hollywood-grade cameras.

Our infotainment and variety programs cover a spectrum of program types, with a variety of subjects and locations, ranging from world class productions, such as “Challenge”, an adventure program, to programs introducing domestic local culture, such as “Secret of Food.” In March 2013, we invited our artistes Mr. Ai Wai, Ms. Lau Yuk Chui and Mr. Chou Tsun Wai to join us and become the first production crew in the world to walk through the entire Hang Son Doong, the world’s biggest cave in central Vietnam, which measures more than seven kilometers in length, 90 meters in width and 200 meters in height. In February 2014, we introduced a new program: a reality show crossover travel diary called “HKTV ‘Working’ Holiday”. The objective of this program is to provide a platform for young people, mostly those born in the 1990s, who are often considered spoiled and dependent, to demonstrate their ability, creativity and determination. The shortlisted candidates are responsible for the entire filming process, from research to ~~quickly expand~~script writing to serving as the emcee of luxury travel programs (for example, a program involving a test drive of a Ferrari along Lake Como in Milan and another involving a visit to Arte e Querce to be a truffle hunter with the help of a truffle dog, a journey which became a HK$180,000 treasury hunting adventure).

Upon the disposal of the Telecom Business, the news production operations unit remained with the Company and provided news content to the Telecom Business for their bbTV broadcasting use under a licensing arrangement. The licensing arrangement expired on August 31, 2013. Apart from the above self-produced programs, we also purchased popular and high-quality content from Japan, Korea and Mainland China, including television drama series and cartoons. To adapt to local audiences, we maintain a professional team for dubbing to local language and subtitling as part of the post production process. As of December 31, 2014, we had more than 1,000 episodes of purchased content in our ~~service offerings when changes~~library.

On October 15, 2013, the Chief Executive in ~~regulation or technology have provided~~Council announced its decision against HKTV’s application for a free TV license which was first made in December 2009. In the light of this decision, in order to ensure its long-term well-being, the Company made redundant about 320 Talents, who started leaving us in phases beginning in October 2013.

On December 20, 2013, we announced our decision to launch our OTT and mobile television services. The intended launch of mobile TV services, however, has been suspended due to a dispute with ~~an opportunity~~the CA over the transmission standards the services would use. In April 2014, as a result of this, the Company took steps to ~~do so.~~ reduce the scale of its workforce in the creative and production teams to match its business needs and suspended the filming of new television programs, which has affected approximately 207 Talents mainly from the television content production team.

For the HKTV Mall, we launched our OTT services in November 2014. Subsequent to that, we formally launched the online shopping business on February 2, 2015. To cope with the development and launch of the HKTV Mall, the Company has increased its workforce accordingly.

Some of the key events in our history and development include the following:

The Group principally provides multimedia production and ~~enterprise market segments. The majority of our revenues are derived from business conducted in Hong Kong.~~

~~We derive our revenues from two business segments: FTNS~~distribution and ~~IDD. A breakdown of our revenues is as follows:~~

Big data analysis. By analyzing the data obtained from the HKTV Mall relating to our viewers’ responses to our programs and advertisements as measured by their watching behavior, and the customers’ interest and purchases of products across various categories, we are building our ability to ~~deliver a range of calling plans with varying features that cater~~provide personalized promotional offers and product recommendations, which we expect will add value to ~~different customer needs has been one~~the third-party merchants and the brand owners of the ~~key factors of our success. We market our international telecommunications services under~~products offered in the ~~IDD 1666 and IDD 0030 brand names. These two brands provide us with flexibility in our~~HKTV Mall by enabling them to conduct more effective marketing ~~strategies. The primary international telecommunications services that we currently offer our customers are the following:~~
~~Service~~ ~~Description~~
~~IDD 1666~~ ~~Provides subscribers with international direct dial using the access code 1666 in Hong Kong.~~
~~IDD 0030~~ ~~Provides subscribers with international direct dial using the access code 0030 in Hong Kong.~~
~~Mobile call forwarding services~~ ~~Allows call forwarding of Hong Kong mobile numbers to any overseas telephone number so that subscribers can receive calls while in overseas.~~
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~~Pricing~~. We charge our IDD 1666 and IDD 0030 users a per minute tariff rate that varies according to the destination of the call and the calling prefix, with discounts depending on the time of day or day of the week when the call is placed as well as monthly plans. To maintain our market share in a market segment with increasingly intense competition, we have significantly reduced some of our international telecommunications rates and introduce new marketing and promotional offers from time to time. To offset the effects of these price reductions, we have taken steps to reduce our cost base, such as using our relatively large traffic volume to negotiate lower prices from our international partners, establishing a call center in Guangzhou to provide customer service and back office support services, and developing our own international telecommunications infrastructure. Our employment of two separate brand names, IDD 1666 and IDD 0030, also provide us with flexibility in our marketing strategies.
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~~Competition~~. PCCW-HKT, HGC, New World, and Wharf T&T are our main competitors in the international telecommunications business. As in previous years, we experienced fierce price competition in Hong Kong during fiscal 2011. This competition drove down the average tariff rates per minute and we expect this price competition to continue in fiscal 2012.
~~Further, technology substitution from global VoIP providers such as Skype, which offers free PC-to-PC based international calls, is becoming more prevalent.~~
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~~Market share~~. We experienced a reduction in total traffic volume of 4.7% to 464 million minutes in fiscal 2010 and a further reduction of 11.2% to 412 million minutes in fiscal 2011. The continuing reduction in traffic volume was mainly due to intense competition as some of our integrated competitors offered free or very low cost international direct dial minutes as a customer incentive to gain local fixed line and mobile market share.
~~Our network infrastructure~~
~~Fixed telecommunications network~~
Our fixed telecommunications network services are delivered over our self-owned Next Generation Network, which allows us to deliver multiple services, including the triple play service of voice, broadband and IP-TV. The coverage of our Next Generation Network is concentrated in Hong Kong’s most densely populated areas, characterized by high-rise apartment buildings with multiple apartments on each floor. The network currently covers approximately 1.94 million residential homes pass, representing approximately 80% of Hong Kong’s total households and also about 1,600 commercial buildings. We plan to extend the coverage of our Next Generation Network to 2.0 million residential homes pass, representing approximately 90% of Hong Kong’s population, and to 1,800 commercial buildings by the end of 2011. As we expand the reach and coverage of our Next Generation Network, we plan to continue introducing new services.
Our Next Generation Network is deployed using Metro Ethernet technology. Metro Ethernet technology is highly cost-effective when access is to be provided to a large number of users in a single building or cluster of buildings and is typically used in commercial buildings in metropolitan areas in other geographical markets. Our Ethernet infrastructure is a system of Category-5e copper wiring that connects our subscribers’ premises to our local area network, or LAN, switches within a residential or commercial building. By keeping our Category-5e copper distance to less than 100 meters we are able to deliver bandwidth of up to 1000 Mbps to our subscribers.
The first step in expanding the reach of our fixed telecommunications network infrastructure is to select buildings that we believe will provide sufficient economic returns to justify our investment based on several factors, including population density, proximity of the building to our existing fiber loop and our projected ability to sell services. We then perform a site visit to analyze the feasibility of installing our Ethernet technology. Once we are satisfied with the prospects of a particular building, we must obtain access rights from the building’s management, which may take several weeks or months. After receiving the required access rights, we employ a combination of our full-time Talents and contractors to begin installation of our in-building Ethernet. The length of time required for the installation process depends on the size and structural features of the building and can be completed in as little as three weeks or take several months. As we install our in-building Ethernet infrastructure we simultaneously connect the building to our fiber-based backbone.
Unlike many of our competitors, which use multiple platforms to provide comparable services, all of our fixed telecommunications network services are offered through a single IP platform. In addition, unlike many new entrants to the industry, we operate an “end-to-end” network that extends from our IP network hub sites and our switching centers in Hong Kong to our subscribers’ premises. All the buildings covered by us are served by our self-owned infrastructure.
Since November 2007, we have been collaborating with one of the largest network solution providers for the deployment of our Next Generation Network using GPON technology. As the reach of GPON is considerably more than 100 meters, it can be a more cost effective solution to expand our Next Generation Network than our Ethernet setup for lower density deployments.
We incurred capital expenditures of approximately HK$344.8 million in fiscal 2010 and HK$449.2 million in fiscal 2011, substantially all of which were made in connection with the construction and upgrade of our infrastructure for the provision of fixed telecommunications network services. In fiscal 2012, we plan to further incur total capital expenditures about HK$320 million to HK$350 million in our fixed telecommunications network service business.
~~International telecommunications network~~
Our international telecommunications network consists of a system of switches, self-owned and leased backbone capacity, interconnection arrangements and undersea cables for the transmission of long distance calls and data.
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~~Undersea cables~~. In March 2002, we received our license to provide undersea cable-based FTNS. This license allows us to purchase and operate our own undersea cables. In 2000, we entered into contracts with two large consortia of international telecommunications companies to acquire undersea cable capacity. Pursuant to the first contract, we completed the construction of a Japan-U.S. undersea cable in August 2001. Pursuant to the second contract, we agreed to jointly construct and maintain the Asia-Pacific Cable Network 2 undersea cable as an international transmission facility. Construction of the cable was completed in May 2002, and commercial operation began immediately thereafter. We spent a total of HK$120 million on these two projects. We believe the utilization of these undersea cables provides capacity for significant future growth of our international and fixed-network telecommunications services.
Having our own undersea cables and our fiber-based backbone have enabled us to better control international transmission quality, reduce the costs associated with international transmission and reduce our reliance on third party infrastructure. Our international telecommunications network currently has a monthly handling capacity of approximately 130 million minutes. We believe that the continuing improvement of our international telecommunications network is important in supporting the growth of our subscription base and the expansion of our range of services.
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~~Interconnection arrangements~~. We have entered into interconnection arrangements with other local fixed network operators in Hong Kong and overseas carriers to transmit calls between Hong Kong and overseas destinations for our customers. We take into account a number of factors in choosing the local fixed network operators and overseas carriers with whom we cooperate, including the level of termination charges and transmission efficiency and quality. We evaluate the performance of parties with whom we have interconnection arrangements periodically. We believe that we will not have difficulty in finding alternative overseas carriers if performance standards are not being met or a change is otherwise necessary. We have not experienced any disruption in the provision of our services as a result of a change of arrangements with overseas carriers or local fixed network operators.
~~We pay a fixed monthly fee to local fixed network operators for connection between our switches and~~ their networks and a variable access fee payable on a per-minute basis when accessing their network. For customers using our own network, no interconnection fee is charged. We negotiate the termination charges we pay with the overseas carriers, and the termination charges vary from one overseas carrier to another. All of the interconnection and termination charges we pay to local fixed network operators and overseas carriers, respectively, are made on an open account basis with credit terms ranging from 10 to 30 days. The interconnection charges we pay to local fixed network operators are denominated in Hong Kong dollars and substantially all the interconnection charges we pay to overseas carriers are denominated in U.S. dollars.
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~~International telecommunications switching systems~~~~. We own four international telecommunications switching systems: two in Hong Kong and two in Canada, one in Vancouver and one in Toronto.~~
Our two international telecommunications switching systems in Hong Kong handle telephone calls originating or terminating in Hong Kong as well as transit traffic. Our telecommunications network mainly consists of switching equipment supplied by Nortel Networks Limited and compression units supplied by Cisco Systems, Inc. and ECI Telecom Ltd. These systems are programmed to automatically choose the optimal routing for each transmission. Optimal routing is a function of a variety of factors, such as country or territory of origination and destination, communication quality, efficiency and costs, and the capacity of the various communication methods available.
Because our two international telecommunications switching systems in Hong Kong operate independently of each other, if one system breaks down, all transmissions are immediately diverted to another switching system. We have never experienced a period where all systems experienced a failure at the same time since we commenced operations in 1992.
~~Sales and marketing~~
We advertise our products and services through our “Fibre Shops”, “on-the-street” marketing kiosks, telemarketing and direct mailing, as well as through Chinese language television, radio, print media and on the Internet.
As of August 31, 2011, we had 16 “Fibre Shops” and a customer service center. We believe these shops can offer our customers convenient access to our wide range of services. We continue to identify new locations to expand our sales network.
We have an extensive sales network in Hong Kong. Our senior marketing personnel closely oversee our sales network to ensure that a consistent image is presented by all of our sales representatives in promoting City Telecom and HKBN. We provide commission based incentives to our residential sales force for our fixed telecommunications network services and international telecommunications services.
We have a sales division responsible for coordinating our corporate marketing and sales efforts. We believe our dedicated corporate and small-to-medium enterprise sales force is one of the largest sales forces targeted at corporate users of telecommunications and Internet services in Hong Kong. In addition, our dedicated corporate Talents designs marketing and sales promotions specifically tailored to address the concerns of business users. This division also organizes seminars for current and prospective customers to promote new products and services and to raise the public awareness of our various corporate offerings.
~~Maintenance and monitoring~~
~~To ensure reliability of our fixed telecommunications network, we continue to maintain our monitoring system, which involves:~~
two separate network operation centers in two different locations that operate 24 hours a day, 7 days a week, providing real-time service monitoring and maintenance services and supported by about 120 operational and field Talents;
products.
~~individual self-reporting mechanisms and centralized performance monitoring systems for our switches and equipment;~~
~~an emergency self-reporting system that automatically contacts designated personnel; and~~
~~back-up systems for our switches, critical software and hardware components.~~
Once a network fault is detected by our control room, we will either rectify the problem remotely or dispatch field Talents to that location should physical interaction be required. After the problem has been resolved, we will continue to monitor network performance as well as track customer service feedback until we are assured of the fault being fully rectified.
Research and development activities
As of ~~August 31, 2011,~~April 27, 2015, our research and development ~~department~~team in Hong Kong consisted of approximately 2527 Talents experienced in systems design, engineering, ~~telecommunications~~mobile technology and computer programming. Our research and development ~~department~~team is primarily responsible for assessing and adapting the technology that we ~~employ~~expect to deploy in ~~upgrading~~our Multimedia Business, such as through the Internet. In particular, our research and ~~expanding our Next Generation Network.~~development team has been discussing and evaluating with prospective applications developers various technical solutions available for the deployment and enhancement the OTT and online shopping platform and services. To identify and develop new market opportunities and product advancement, our research and development ~~department~~team evaluates new ~~services offered by telecommunications and Internet companies~~technology under development in the United States and elsewhere and works closely with our sales and marketing ~~department for product development. Our research and development expenditures were approximately HK$10.8 million, HK$11.2 million and HK$11.8 million for fiscal 2009, 2010 and 2011, respectively.~~department.
~~Customer service~~
We believe that excellent customer service and support is essential to our building and retaining of a large and loyal subscription base. We therefore have committed considerable personnel and financial resources to establishing a reliable and accessible customer service system.
Our customer service department provides integrated support to subscribers of FTNS business and IDD business. We provide a hotline to handle complaints, subscription applications and queries relating to account balances, pricing, billing, service and technical information. Complaints and in-depth queries from subscribers that cannot be immediately remedied or answered are forwarded to a customer care team, which is responsible for answering such complaints and queries. We also have a dedicated customer service team to provide service to our corporate subscribers, which includes access to a highly skilled technical team that may go to the customer site for trouble shooting and repairs.
Our centralized customer service call center is located in Guangzhou, which provides our customer service and back office support services at that location. This enables us to lower our operating costs while continuing to increase our customer service capabilities. As of August 31, 2011, our Guangzhou customer service facility had 1,532 Talents.
~~Billing and collection~~
Our credit and collection team is responsible for securing prompt payment from subscribers. Invoices are issued on a monthly or quarterly basis with a specified payment due date. A variety of payment methods are made available to our subscribers, including cash, check, credit card, payment by telephone service, automatic transfer from subscribers’ bank accounts or through Internet banking. Our bad debts expense represented approximately 0.8%, 0.9% and 0.8% of our revenue for each of fiscal 2009, 2010 and 2011, respectively.
We maintain tight collection procedures, including periodic reminder notices, and impose a charge of HK$10 or a fee of 1.5% to 2.5% per month on outstanding overdue amount for late payment. We have the right to charge the outstanding overdue amount to the subscriber’s pre-registered credit card account for any amount overdue or if applicable, deduct such amount from the subscriber’s application deposit. Moreover, we generally suspend an account when the amount overdue is not settled within our prescribed period. If payment is still not settled after we suspend the account, further recovery actions including court proceedings and/or the use of collection agencies will be taken.
Seasonality
Our operations ~~are not~~may be subject to ~~significant~~ seasonal fluctuations ~~generally. Our IDD business typically experiences a slight decrease~~similar to other retail businesses in ~~revenue during~~Hong Kong. Given that our OTT services were launched only in November 2014 and our online shopping mall began operations only in February 2015, we will observe the ~~second quarter~~significance of ~~each fiscal year (i.e. December through February)~~any seasonal fluctuations in ~~connection with the Christmas holiday and Chinese New Year holiday. We do not believe that seasonality has had a material effect on~~ our business ~~financial condition or~~and their impact on our results of operations. Over time, we expect to partially offset such fluctuations by launching promotional offers at key points in the year.
Environmental matters
~~Since our date of incorporation, we have not violated any environmental laws, ordinances or regulations, and~~We believe that all of our operations comply ~~fully~~in all material respects with applicable environmental laws.
Intellectual property rights
We have registered and applied to register our trademarks with the Trademarks Registry of the Intellectual Property Department in Hong Kong. We ~~have no other material intellectual property.~~
maintain copyright in our self-produced television programs.
C. ~~Regulatory framework~~
Regulatory framework
The following is a brief summary of the Hong Kong laws and regulations that currently materially affect our business. This section does not purport to be a comprehensive summary of all present and proposed regulations and legislation relating to the industries in which we operate.
~~As a provider~~Mobile TV services
To facilitate further development of ~~broadband Internet access, local VoIP, IP-TV and international telecommunications~~mobile TV services, the Hong Kong Government announced the “Framework for Development of Broadcast-type Mobile TV Services in Hong ~~Kong, our operations~~Kong” in February 2010 (the “Mobile TV Policy Framework”). The radio spectrum of 678 - 686 MHz (i.e., the Mobile TV Spectrum) was then assigned through auction in June 2010. As disclosed in Item 4B, we obtained the Mobile TV Spectrum upon completion of the Mobile TV Acquisition on December 20, 2013. There are ~~subject to~~separate regimes for regulating “conveyance” and the “content” of mobile TV services. Establishing and maintaining a distributing network for transmitting local broadcast-type mobile TV services (i.e., conveyance) will require a Unified Carrier License issued under the Telecommunications Ordinance (Chapter 106 of the Laws of Hong Kong). The Telecommunications Ordinance sets out the overall licensing framework for Hong Kong’s telecommunications market. The Telecommunications Regulations (Chapter 106A of the Laws of Hong Kong) and the Telecommunications (Carrier Licences) Regulation (Chapter 106V of the Laws of Hong Kong) set out the prescribed licencss and provide for the license conditions that may be issued under the Telecommunications Ordinance. In issuing a Unified Carrier License for different types of services, the CA may attach additional special conditions which are not inconsistent with the Telecommunications Ordinance and the general conditions. Licensees will also need to comply with the Telecommunications Ordinance (including, among other things, provisions relating to anti-competitive practices, abuse of position, changes in relation to carrier licensees), regulations made under the Telecommunications Ordinance, license conditions or any other instruments which may be issued by the CA under the Telecommunications Ordinance.
The CA issued Unified Carrier License No.041 to our wholly-owned subsidiary, HKMTV, the holder of the Mobile TV Spectrum, on December 20, 2013. Unified Carrier License No. 041 sets out, among other things, the terms and conditions, in connection with the provision of broadcast-type mobile television services.
Anti-competitive conduct in the telecoms industry is currently regulated by the CA through provisions of the Telecommunications Ordinance and conditions imposed under licenses. The key governing competition provisions for the telecommunications sector are Sections 7K, 7L and 7N of the Telecommunications Ordinance, which prohibit anti-competitive conduct, abuse of dominance and discriminatory practices. Mergers and acquisitions of telecommunications carriers in Hong Kong are also subject to the sector-specific merger control rules that are set out in Section 7P of the Telecommunications Ordinance.
In relation to the content, the Broadcasting Ordinance Chapter 562 of the Laws of Hong Kong currently does not regulate television program services for mobile reception (i.e., reception at moving locations not related to any specified premises) in Hong Kong unless the services are not primarily targeting Hong Kong. As such, content delivered by both the streaming-type mobile TV services and ~~their respective~~the broadcast-type mobile TV services are subject to regulation by general laws.
Pursuant to the Mobile TV Policy Framework, the not-for-profit Communications Association of Hong Kong (“CAHK”) published its Code of Practice for the Provision of Mobile Television Services (“Mobile TV Code of Practice”) in August 2012. The Mobile TV Code of Practice is a voluntary code for the self-regulation of mobile television service providers. The requirements of the Mobile TV Code of Practice supplement the relevant legislation and regulations currently in force and do not absolve any mobile television service providers from complying with all relevant legislation, regulations and license conditions. The Mobile TV Code of Practice covers broadcast-type mobile television services, streaming-type mobile television services and mobile video content, provided free of charge or subject to a fee. Content which is obtained from the Internet, obtained through mobile apps from independent third party and which is readily obtained from the Internet even if it is part of the content of mobile television services provided by mobile television service providers fall outside the scope of the Mobile TV Code of Practice. The CAHK may, in consultation with industry players and other stakeholders including the CA, review and amend the Mobile TV Code of Practice from time to time in order to meet the needs of the industry, to fulfill the needs and expectations of the society and to reflect changes in the market.
Domestic free television program services
We submitted our application for a free TV license to the HKBA in 2009. On October 15, 2013, the Hong Kong Government announced that our application for the license was rejected by the Chief Executive in Council, a decision that we challenged by judicial review. On April 11, 2014, we submitted a new application for a free TV license, which remains under consideration by the CA. On April 24, 2015, the court’s judgment in the judicial review was handed down, quashing the Chief Executive’s denial of our initial application for a free TV license and directing the government to pay our legal fees and expenses in relation to the judicial review. The application was remitted to the Chief Executive in Council for reconsideration. If and when we have been granted a free TV license, we will be regulated by the CA through its executive arm, the Office of the Communications Authority, and our broadcasting operations will be subject to the Broadcasting Ordinance, the Broadcasting (Miscellaneous Provisions) Ordinance (Chapter 391 of the Laws of Hong Kong) and the related subsidiary legislation, regulations, directions, orders, determinations and codes of ~~practice. The Telecommunications Ordinance provides~~practice issued by the ~~legislative and regulatory framework for~~CA, as well as the ~~provision of telecommunications services and facilities in Hong Kong.~~license conditions. The Broadcasting Ordinance governs the content and scope of television programming and the licensing of television broadcasters.
Our primary regulator is OFTA, whose responsibility and functions include regulating and licensing telecommunications network services and regulating the telecommunications markets in Hong Kong, including the issuance of non-exclusive licenses; the determination of terms of interconnection; promotion of fair competition in the telecommunications sector; management of the radio frequency spectrum; development of technical standards and customer equipment testing; protection of consumer interests; and the control and administration of the Hong Kong numbering plans (including allocation of numbers or codes). The OFTA is also responsible for the administration of the Telecommunications Ordinance. We are also regulated by HKBA, which administers the Broadcasting Ordinance and makes recommendations to the Chief Executive-in-Council of Hong Kong on applications for broadcasting licenses, as well as on the renewal, suspension and revocation of licenses.
~~Telecommunications industry~~
~~Licensing~~
It is unlawful to establish or maintain any means of telecommunications, or possess, use or deal with telecommunications apparatus in Hong Kong without a license. OFTA has the authority to grant licenses for all means of telecommunications services and facilities in Hong Kong, including the provision of fixed wireline, public mobile telephone, Internet and satellite services. Furthermore, OFTA has the authority to require a licensee to comply with the terms of its license and any applicable legislation or regulations or codes of practice, and to suspend or revoke licenses to enforce the Telecommunications Ordinance or other rules or regulations or codes of practice to protect the public interest.
Prior to August 1, 2008 the operation of fixed and mobile services were regulated separately under four types of carrier license. Further, a number of other types of licenses permitted a licensee to establish facilities or services of a similar kind.
However, in recognition of the convergence of fixed and mobile services enabling voice, data and multimedia applications to be provided over common core networks, delivered through a range of wireline and wireless customer access networks and which will be accessible from common end-user devices irrespective of whether the users are at fixed locations or on the move with the result that is becoming more difficult to classify a service as a “fixed” or “mobile”, amendment legislation has been passed to create a single unified carrier license (UC License) encompassing both fixed and mobile carrier services. The UC License regime came into operation on August 1, 2008. After that date OFTA will not issue any further fixed or mobile carrier licenses. Instead the UC License is the only carrier license to be issued for the provision of fixed, mobile and/or converged services. In the meantime, existing fixed and mobile licenses continue to be effective until their expiry date. License holders may convert existing fixed or mobile licenses into UC Licenses before their expiry on a voluntary basis or apply for UC Licenses upon the expiry of existing fixed or mobile licenses.
~~General Licensing Requirements~~
Generally, a licensee is required to be a company incorporated in Hong Kong (which can be wholly owned by a foreign company) or a foreign company registered in Hong Kong. Currently, there is no foreign ownership restriction on the holder of a telecommunications license under the current regulatory regime.
Non-compliance by a telecommunication licensee with the Telecommunications Ordinance, any subsidiary legislation made pursuant to it, any of the license conditions or any direction issued by OFTA, could result in the revocation or suspension of the relevant license. The Telecommunications Ordinance contains a set of provisions setting forth the procedural steps which OFTA must adhere to prior to revoking or suspending any telecommunications licenses. In addition, the Chief Executive of Hong Kong has the authority, at the recommendation of OFTA, to revoke a telecommunications license at any time if it is in the public interest to do so.
~~Public Non-Exclusive Telecommunications Services License~~
A PNETS License is used by OFTA to cover the provision of a number of different telecommunications services where the service provider provides the service to the public using the network of a licensed carrier or by establishing or maintaining transmission facilities within the boundary of a building or property. In practice, the PNETS License is also used as a “sweep-up” license category, where a license is required by virtue of the Telecommunications Ordinance but none of the existing categories are applicable to the means of telecommunications or telecommunications service for which the license is required. With effect from November 30, 2009, the OFTA no longer issue PNETS Licenses to service-based providers using the network of a licensed carrier. As a replacement, all PNETS License will be gradually replaced by the modified Services-Based Operator License, i.e. Class 3 Services-Based Operator License. Holder of Class 1 & 2 Services-Based Operator License is allowed to provide Internet Protocol based telephony services making use of Hong Kong telephone numbers, while Class 3 Services-Based Operator is not allowed.
A Class 3 Services-Based Operator License has a validity period of 12 months and is renewable at the discretion of OFTA on an annual basis upon the payment of a prescribed annual fee, which is currently set at HK$750. Where radio communications apparatus is used, there is an additional variable component calculated by reference to the number of base stations and mobile stations involved.
Since the expiry of PNETS License in December 2009, OFTA granted us a Class 3 Services-Based operator License. The Class 3 Services-Based Operator License presently gives us the right to provide calling card services, ISR services for facsimile and data services, virtual private network services and external telecommunications services over the external telecommunications facilities of other licensed external facilities providers, the scope of service under the Class 3 Services-Based operator License is similar to the PNETS License previously granted to us by OFTA. HKBN also holds a Class 3 Services-Based Operator License, which was issued to us in December 2009. This Class 3 Services-Based Operator License allows us to act as an Internet service provider.
Under the terms of the Class 3 Services-Based Operator License, we and IDD1600 Company Limited, or IDD1600, our wholly owned subsidiary, are required to comply with certain license conditions relating to technical and reporting matters.
~~FTNS License~~
~~A FTNS License authorizes the licensee, among other things:~~
~~to provide a public fixed telecommunications network service, covering internal services or external services, or both; and~~
~~to establish and maintain a fixed telecommunications network, which may be wireline-based or wireless-based (Wi-Fi spectrum included), or a combination of both.~~
A FTNS License is valid for a period of 15 years and is renewable for a further period of not exceeding 15 years at OFTA’s discretion. The amount of license fee payable by a holder of a FTNS License comprises (i) a fixed annual amount of HK$1.0 million; (ii) a variable amount calculated on the basis of the number of customer connections (which is currently set at HK$700 for each 100 customer connections); and (iii) a variable fee calculated by reference to the radio spectrum assigned and used by the license holder.
HKBN currently holds a FTNS License, which was issued to it in February 2000 initially for the operation of a local fixed wireless network. This FTNS License has been subsequently amended three times and presently, HKBN is authorized to operate both local fixed telecommunications networks (wireline and wireless based) and external telecommunications facilities.
~~Interconnection~~
OFTA divides interconnection into two main types. The first type is “Type I Interconnection”, which is interconnection between network gateways, such as tandem exchanges, local exchanges or dedicated interconnection gateways, which allow end users on different networks to “communicate” with each other. The second type is “Type II Interconnection”, which is a connection to a fixed carrier’s network at points of the customer access network level (more often referred to as local access or local loop unbundling) allowing the end customer requesting the interconnection to use the customer access network of the fixed carrier to obtain FTNS. OFTA introduced the Type II interconnection policy in 1995 under which the fixed carriers have obligation to provide Type II interconnection at regulated terms and conditions.
On July 6, 2004 the Hong Kong government announced that the mandatory Type II Interconnection policy applicable to telephone exchanges for individual buildings covered by such exchanges, would be gradually withdrawn on a building-by-building basis, applying to buildings already connected to at least two self-built customer access networks, such withdrawal to be fully implemented by a final sunset date of June 30, 2008. Since that time, mandatory Type II Interconnection was to be maintained only in buildings for which it is technically not feasible or economically not viable for an operator to roll out its customer access network.
On July 3, 2008, OFTA issued a statement to confirm that the mandatory Type II Interconnection policy has been successfully withdrawn as from July 1, 2008 as well as to set out the issues to be followed up after its withdrawal. Since that date, interconnection terms including charges have been determined by commercial negotiation between carriers.
On April 27, 2009, OFTA issued a statement on “Carrier-to-Carrier Charging Principles (For Fixed Carrier Interconnections) providing guidance on carrier-to-carrier charging principles for fixed carrier interconnections that the OFTA will rely on when making determination for interconnection between fixed telecommunications networks in Hong Kong.
~~Competition provisions~~
~~Regulation of anti-competitive conduct~~
Although Hong Kong has never had a general competition code, historically, holders of FTNS Licenses have been prohibited from engaging in anti-competitive conduct, abusing a dominant position in a telecommunications market, or engaging in any discriminatory conduct by certain competition-related license conditions contained in the FTNS Licenses issued by OFTA. In June 2000, the competition provisions of the Telecommunications Ordinance became operational and, as from that time, anti-competitive conduct was prohibited by legislation as well as under the relevant license conditions.
The Telecommunications Ordinance provides an appeal mechanism by the establishment of a Telecommunications (Competition Provisions) Appeal Board. A person or a licensee aggrieved by a decision made by OFTA relating to the competition provisions may appeal to the Telecommunication (Competition Provisions) Appeal Board. Additionally, a third party suffering loss or damage from breach of such competition provisions may bring an action for damages or seek other appropriate remedies against the offending licensee.
~~Control on mergers and acquisitions~~
If OFTA determines that the relevant merger and acquisition activity has, or is likely to have, the effect of preventing or substantially lessening competition in a telecommunications market, OFTA is empowered to direct a carrier licensee to take such actions, such as the complete or partial divestiture of the relevant parties’ interests in the merged entity, as OFTA considers necessary, to eliminate or avoid any anti-competitive effect. However, OFTA may not issue such a directive if it takes the view that the public benefit of the merger and acquisition outweighs any detriment caused by a reduction in competition. Any decision made or direction issued by OFTA under the merger and acquisition provision is subject to appeal to the Telecommunications (Competition Provisions) Appeal Board.
The regulatory regime on mergers and acquisitions only applies to carrier licensees, which includes HKBN as a holder of a FTNS License, which is regarded as a carrier license for the purpose of the Telecommunications Ordinance.
~~Consumer protection~~
The Telecommunications Ordinance also contains a statutory provision that is primarily aimed at protecting consumers. This provision prohibits a licensee from engaging in any misleading or deceptive conduct.
OFTA has taken an active role in enforcing this prohibition and has developed voluntary codes to assist in this respect. For instance, in February 2010, OFTA issued a “Code of Practice for Communications Service Contracts” (the “Code”) which supersedes the “Code of Practice for the Service Contracts for the Provision of Public Telecommunications Services” issued in November 2004. The Code is a voluntary scheme intended to heighten customer satisfaction levels by improving the provisions used in communications customer contracts. The Code sets out guidelines on, among other things, the style, format and structure of written contracts, the expiry of term contract, termination of contract etc. In addition, the Code requires that an unsolicited contract must provide a cooling-off period of not less than seven days during which the customers may cancel the contract without incurring any payment liability or any other obligation whatsoever. The Code is applicable to all providers of communications service which include the supply of telecommunications services. Service providers pledging compliance with the Code shall publish on their respective website their pledges to the Code. On December 21, 2010, the Code has been adopted by the Communications Association of Hong Kong and the majority of providers, including HKBN, has pledged compliance with the Code.
Apart from the Telecommunications Ordinance, like any company carrying on business in Hong Kong, telecommunications operators are required to comply with applicable Hong Kong consumer protection laws, for example, the Sale of Goods Ordinance (Cap 26), Control of Exemption Clauses Ordinance (Cap 71), Supply of Services (Implied Terms) Ordinance (Cap 457), the Unconscionable Contracts Ordinance (Cap 458) , Personal Data (Privacy) Ordinance (Cap 486), and the Unsolicited Electronic Messages Ordinance (Cap 593).
~~Regulation of pricing~~
Currently, the pricing of both FTNS and public non-exclusive external telecommunications services in Hong Kong is regulated by license conditions. However, the regulatory frameworks of each type of services are different.
~~All Services-Based Operator Licenses contain license conditions requiring the licensees to publish their tariffs and to charge no more than the published tariffs.~~
Similarly, holders of FTNS Licenses or UC Licenses are prohibited by license conditions from charging more than their published tariffs for their services. The FTNS License/UC License conditions prohibit licensees from offering discounts to their published tariffs and require the licensees to seek approval from OFTA in connection with (i) any revision of published tariffs, (ii) tariffs for any new services or products or (iii) tariffs for any trial services. However, OFTA may grant a waiver of the application of any or all of these restrictions in relation to a relevant telecommunications market if, in the opinion of OFTA, the licensee is not “dominant” in such market. This is known as an ex ante regime.
~~HKBN has been granted a waiver from all the tariff revision prohibitions contained in its FTNS License and is able to provide discounts and revise its tariffs in all the FTNS markets.~~
~~Universal service contribution and local access charge~~
Under the current regulatory regime, PCCW-HKT has a universal service obligation to provide good, efficient and continuous basic telecommunications services at reasonable cost on a non-discriminatory basis to all persons in Hong Kong. To compensate PCCW-HKT for the expenses of this obligation, certain licensees are required to contribute to such cost, which is referred to as the USC.
On June 8, 2007, OFTA issued a Statement entitled “Review of the Regulatory Framework for Universal Service Arrangement”, which announced the new USC arrangement for funding the cost of universal service obligation. Commencing from May 1, 2009, the USC sharing arrangement based on external traffic volume has been migrated to that based on the number of all telephone numbers allocated which may be assigned to customers for voice services, non-voice services or both voice and non-voice services. Under the new arrangement, local fixed carrier license, local fixed telecommunications network service licensee, mobile carrier licensee, unified carrier licensee authorized to provide local fixed or mobile services, mobile virtual network operator licensee and services-based operator licensee authorized to provide Class 1 or 2 services are the USC contributing parties. In respect of the above, HKBN as a local fixed telecommunications network service licensee is classified as a USC contributing party and is required to pay USC under the regime that was introduced in 2009.
The level of USC is determined by OFTA and is reviewed periodically based on actual cost and revenue and on a customer-by-customer basis. The average rate has declined over the past several years. In accordance with a statement dated April 27, 2010 issued by OFTA, the level for the period from July 1, 2008 to April 30, 2009 is confirmed to be zero cent per minute and OFTA decided that USC contributing parties are not required to pay provisional USC from May 1, 2009 onward until a further review of the USC. Until November 23, 2011, OFTA has not yet released further review of the USC.
Additionally, providers of external telecommunications services, such as holders of Class 3 Services-Based Operator License, including ourselves and IDD1600, are required to pay a local access charge, or LAC, to the local network operators whose network facilities holders of Class 3 Services-based Operator Licenses use to transmit calls to and from their customers’ sites. The level of the LAC is calculated on a per-minute basis and its arrangement is based on the statement dated November 25, 1998 issued by OFTA. Since December 2009, OFTA is conducting a review on the LAC regime, for the time being, the existing LAC arrangement prevails.
~~Fixed mobile interconnection charge~~
In June 2007, OFTA determined the FMIC rates for HKBN, which is a fixed network operator, with one of its mobile network operators, China Resources Peoples Telephone Company Limited, or Peoples, at a rate of 4.8 Hong Kong cents per occupancy minute for interconnection from April 1, 2002 to August 31, 2002, 4.22 Hong Kong cents per occupancy minute for interconnection from September 1, 2002 to August 31, 2003 and 2.89 Hong Kong cents per occupancy minute for interconnection from September 1, 2004 to August 31, 2004. In February 2008, HKBN requested OFTA to make a new determination with four mobile network operators on the rate of FMIC payable by these mobile network operators for mobile interconnection service. In September 2008 OFTA indicated that it accepted HKBN’s request for determination. On May 28, 2010, OFTA issued its decision on the determination which set out the rates of mobile interconnection charges payable by the mobile operators under dispute. Based on this determination, we adjusted our revenue related to mobile interconnection charges and interest income during the year ended August 31, 2010. For details, please refer to note 2(b) of our consolidated financial statements.
Fixed Mobile Interconnection Charge, or FMIC, is an interconnection charge for circuit-switched traffic between a fixed network operator and a mobile network operator. OFTA has indicated in its statement published on April 27, 2007, that it will deregulate the existing FMIC arrangement with effect from April 27, 2009. When this occurs, the fixed and mobile network operators would have to adopt a more market driven approach in that parties are expected bilaterally to negotiate a commercially agreed FMIC without OFTA’s intervention.
Since the deregulation of FMIC arrangement on April 27, 2009, HKBN reached agreements with some of the mobile operators on the new settlement arrangements of FMIC. As of December 13, 2011, the discussion with remaining mobile operators on FMIC is still in progress.

Television broadcasting industry

At present, Hong Kong has two licensed domestic free television ~~program~~programme broadcasters, ~~TVB~~Television Broadcasts Limited and Asia Television Limited (“ATV”), providing free-to-air broadcasting services. In addition, there are ~~also~~ three licensed domestic pay-TV broadcasters, namely Hong Kong Cable Television Limited, PCCW Media Limited and TVB ~~Pay~~Network Vision Limited (formerly known as ~~Galaxy Satellite Broadcasting~~TVB Pay Vision Limited). ~~HKBN provides TV services over~~On October 15, 2013, the ~~Internet under its FTNS License, while Star TV continues to provide its services through satellite means under its satellite television uplink and downlink license. Currently,~~Hong Kong Government announced that the ~~HKBA is processing~~Chief Executive in Council had approved in principle applications for ~~a domestic~~ free ~~television program service license~~TV licenses from Fantastic Television Limited and HK Television and Entertainment Company Limited (“HKTVE”), subject to further review and ~~us.~~final determination by the Chief Executive in Council of the application at a later stage. On April 1, 2015, the Hong Kong Government announced the Chief Executive in Council’s decision on ATV’s application for renewal of its free TV license and HKTVE’s application for a new free TV license. The Chief Executive in Council decided not to renew ATV’s free TV license. Under the Broadcasting Ordinance, a written notice was required to be served on ATV at least twelve months before expiration of the license on November 10, 2015. In order to comply with the statutory requirement as to the length of notice, ATV will have its license extended to April 1, 2016. As ~~of December 13, 2011,~~regards HKTVE, the ~~HKBA has not yet announced its decision~~Chief Executive in Council decided to grant a free TV license to HKTVE, and such license will be valid for ~~the aforesaid applications.~~12 years, until March 31, 2027, subject to a mid-term review in 2021.

Licensing

It is unlawful to offer any “television ~~program~~programme service” in Hong Kong without aan appropriate license. “Television ~~program~~programme service” is broadly defined to mean the provision of television ~~programs~~programmes for transmission by telecommunications that are readily accessible to the general public in or outside Hong Kong or to persons in 2two or more specified premises simultaneously or on demand, whether on a point-to-point or a point-to-multipoint ~~basis.~~basis (or any combination thereof), having equipment appropriate for receiving that service. The Broadcasting Ordinance exempts certain categories of television ~~program~~programme services from the current licensing regime, including television ~~program~~programme services provided on the service commonly known as the ~~“Internet”.~~“Internet.” The Broadcasting Ordinance itself, however, does not contain a definition of ~~“Internet”.~~“Internet.”

The Secretary for Commerce, Industry and Technology has indicated that on the condition that HKBN continues to provide its service on the platform currently deployed by HKBN, the Hong Kong government does not dispute that HKBN’s service is provided on the “Internet” and is thus exempt. On this basis, HKBN is not required to obtain a pay-television broadcasting license and continues to provide IP-TV services under its FTNS License.

Cross media ownership restrictions

As with other television regulatory regimes, there are detailed cross-media ownership restrictions in the Broadcasting Ordinance. The restrictions are only applicable to domestic free and domestic pay television ~~program~~programme service licenses.

The Broadcasting Ordinance essentially provides that a company which is either a “disqualified person” or has a “disqualified person” exercising control over it will not be ~~eligible to be~~ granted a ~~broadcasting license~~domestic free and domestic pay television programme service licence unless ~~it discloses~~with the ~~disqualification~~prior approval of the Chief Executive in ~~its license application.~~Council. “Disqualified person” includes, for example, a company which is an existing domestic free or domestic pay television ~~program~~programme licensee; an advertising agent; a sound broadcasting licensee; or a proprietor of newspaper printed or produced in Hong Kong.

Generally, a disqualified person who has ~~complied with the disclosure requirement~~disclosed its disqualification in its license application may apply for a broadcasting license. The Broadcasting Ordinance provides that the Chief Executive ~~of Hong Kong~~in Council may grant a broadcasting license to a company, including a disqualified person or to a company which has a disqualified person exercising control over it, ~~or to a disqualified person in which another disqualified person exercises control~~ subject to such conditions as the Chief Executive ~~of Hong Kong~~in Council sees fit.

Foreign ownership restrictions

In addition to the cross-media ownership restrictions outlined above, the Broadcasting Ordinance also imposes restrictions on foreign ownership of a holder of a ~~domestic~~ free ~~television program service~~TV license. The restrictions do not prohibit the ownership of any voting shares in a ~~domestic~~ free ~~television program service~~TV licensee but rather take the form of prohibiting the exercise of any voting rights attached to such voting shares.

~~Upon receiving~~If we obtain a ~~domestic~~ free ~~television program service~~TV license, an unqualified voting controller of our Company will be subject to the voting restrictions ~~under Section 20(1)~~as set out in Part 3 of Schedule 1 to the Broadcasting Ordinance. An “unqualified voting controller” under the Broadcasting Ordinance refers to a voting controller who is not a qualified voting controller, and a qualified voting controller refers to a voting controller who satisfies the ordinary resident requirement and who, in the case of an individual, has resided in Hong Kong for a period of no less than seven years or in the case of a corporation, whose directors satisfy the Hong Kong residency requirement. According to ~~Section~~paragraph 20(1) of Schedule 1 to the Broadcasting Ordinance, no unqualified voting controller may hold, acquire, or exercise or cause or permit to be exercised 2% to 6% or 6% to 10% or more than 10% of the total voting control of a ~~domestic~~ free ~~television program service~~TV licensee without the prior approval of the ~~HKBA. Section~~CA. If an unqualified voting controller holds more than 10%, in the aggregate, of the total voting control of a licensee without the prior approval in writing of the CA, notwithstanding anything contained in the memorandum or articles of association of the licensee or any provision of the laws of Hong Kong apart from this section, he shall not exercise or cause or permit to be exercised, in relation to any question or matter arising at a general meeting of the licensee, voting rights exceeding, in the aggregate, 10% of the total voting control of the licensee. Paragraph 20(3) of Schedule 1 to the Broadcasting Ordinance provides that the ~~HKBA~~CA may, in respect of any unqualified voting controller who is in contravention of ~~Section 20(1) of Schedule 1 to the Broadcasting Ordinance,~~such voting restriction, direct such unqualified voting controller in question to cease any such contravening ~~act, the~~act. If and when a free TV license is granted to our Company, an unqualified voting controller ~~will~~may need to seek the requisite approval of the ~~HKBA, if and when the license is granted to~~CA for exercising its voting power in our Company. Our Company ~~shall~~will be required to notify the ~~HKBA~~CA of the unqualified voting controller pursuant to the directions of the ~~HKBA~~CA and ~~sections~~paragraphs 22 and 30 of Schedule 1 to the Broadcasting ~~Ordinance~~Ordinance.

Competition provisions

~~The~~Currently, competition provisions governing the broadcasting sector in Hong Kong are set out in the Broadcasting Ordinance, ~~also contains competition provisions,~~ which are aimed at prohibiting a licensee from engaging in “anti-competitive conduct” and a licensee who is in a dominant position from abusing its position. “Anti-competitive conduct” is defined as conduct that has the purpose or effect of preventing, distorting or substantially restricting competition in a television program service market.

The Broadcasting Ordinance provides that a breach of any of the competition statutory provisions may lead to the relevant contractual provisions in an agreement being regarded as void.

~~Unlike the regulatory regime for the telecommunications industry, there~~There is no equivalent of a specialized competition appeal board for the television broadcasting industry. A licensee aggrieved by a decision made by the ~~HKBA,~~CA, may appeal by way of petition to the Chief Executive ~~of Hong Kong.~~in Council.

Program standards, ~~and~~ advertising standards and technical standards

~~A broadcasting~~In addition to the Broadcasting Ordinance, the Broadcasting (Miscellaneous Provisions) Ordinance and the related subsidiary legislation, regulations, directions, orders and determinations, a television programme service licensee is required to comply with the terms and conditions of its license and the codes of practice issued by the CA, pursuant to section 3 of the Broadcasting Ordinance, which set out generic standards with respect to program, advertising and technical standards applicable to the licensee. The Generic Codes of Practice for Television currently comprises of three sets of standards, i.e., the program standards, the advertising standards and the technical standards. The program standards and the advertising standards ~~published by~~apply to the ~~HKBA.~~four categories of television programme services licensed under the Broadcasting Ordinance,viz., domestic free television programme services, domestic pay television program services, non-domestic television programme services and other licensable television programme services. The technical standards are applicable to television programme services licensed under the Broadcasting Ordinance except for a service provided to hotel rooms. These codes are reviewed in consultation with the licensees and the general public. The latest program standards ~~and~~were issued in May 2014, the advertising standards were ~~both~~ issued ~~on December 12, 2008.~~in January 2013 and the latest technical standards were issued in October 2012.

~~PRC Regulations~~

Non-compliance by licensee

~~Corporate laws relating~~Non-compliance by a licensee with the Broadcasting Ordinance, any subsidiary legislation made pursuant to ~~foreign investment~~it, any of the license conditions or any direction issued by the CA or any of the code of practice, could result in the revocation or suspension of the relevant license. The Broadcasting Ordinance contains a set of provisions setting forth the procedural steps which the CA and the Chief Executive in Council must adhere to prior to revoking or suspending any broadcasting licenses.

Online shopping business

Misleading advertising

The ~~establishment, operation~~Trade Descriptions (Unfair Trade Practices) (Amendment) Ordinance 2012 (the “Amendment Ordinance”) came into effect on July 19, 2013 and ~~management~~amended the Trade Descriptions Ordinance by prohibiting specified unfair trade practices and strengthening the enforcement mechanism. The Customs and Excise Department is the principal enforcement agency under the Trade Descriptions Ordinance. Concurrent jurisdiction is conferred on the Office of ~~corporate entities~~the Communications Authority to enforce the new fair trading sections in ~~China~~relation to the commercial practices of licensees under the Telecommunications Ordinance and the Broadcasting Ordinance that are ~~governed~~directly connected with the provision of telecommunications and broadcasting services.

The key amendments include:

the expansion of the definition of trade descriptions in relation to goods, as well as the extension of the scope to cover services;

the creation of new criminal offenses on unfair trade practices, namely misleading omissions, aggressive commercial practices, bait advertising, bait-and-switch and wrongly accepting payment;

the introduction of a compliance-based mechanism under which civil enforcement options, namely the acceptance of an undertaking from traders and the seeking of an injunction from a court where necessary, can be drawn on to promote compliance with the new fair trading sections introduced by the ~~Company Law~~Amendment Ordinance; and

the creation of a new private right of action for damages to facilitate consumer redress.

On July 15, 2013, the Customs and Excise Department and the Office of the ~~PRC, or~~Communications Authority published the ~~Company Law, effective~~Enforcement Guidelines for the Amendment Ordinance to state the manner in ~~1994, as amended in 1999, 2004~~which they will exercise their enforcement powers and ~~2005, respectively. The Company Law is applicable to our PRC subsidiary CTI Guangzhou Customer Services Co. Ltd. unless~~provide guidance on the ~~PRC laws on foreign investment have stipulated otherwise.~~operation of the new legislative provisions.

Data privacy

The ~~establishment, approval, registered capital requirement~~Personal Data (Privacy) Ordinance (“PDPO”) governs our collection and ~~day-to-day operational matters of wholly foreign-owned enterprises, such as our PRC subsidiary, CTI Guangzhou Customer Services Co. Ltd., are regulated by the Wholly Foreign-owned Enterprise Law~~use of the ~~PRC effective in 1986, as amended in 2000,~~personal data we collect from our customers and users of our HKTV Mall service.

The PDPO regulates all aspects of personal data processing. The PDPO defines “personal data” very broadly to include any data relating directly or indirectly to a living individual from which it is practicable for the ~~Implementation Rules~~identity of the ~~Wholly Foreign-owned Enterprise Law~~individual to be directly or indirectly ascertained. A “data user” is defined as the person who, either alone or jointly or in common with other persons, controls the collection, holding, processing or use of the ~~PRC effective in 1990, as amended in 2001.~~

~~Foreign exchange~~

~~On August 29, 2008,~~personal data. A “data subject” is the ~~Notice~~individual who is the subject of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-funded Enterprises, or Circular 142, was promulgated by the State Administration of Foreign Exchange, or SAFE. Pursuant to Circular 142, the foreign currency capital of foreign-invested enterprises, after being converted to Renminbi,personal data.

Personal data can only be processed or used by us for the purposes notified to the data subject on or before the collection of the data and any directly related purpose. Data subjects must consent to any new or additional purpose.

We are required under the PDPO to obtain data subjects’ consent to the processing of personal data for direct marketing purposes. Such consent must describe the kinds of personal data we will be using for direct marketing purposes and the classes of goods or services that will be marketed.

Contracts for the sale of goods

The Sale of Goods Ordinance (the “SGO”) applies to all contracts for the sale of goods. A contract for the sale of goods is made when the seller transfers or agrees to transfer the property in goods to the buyer for a price.

The SGO provides that goods for sale must:

be sold under terms that include an implied condition that the seller has the right to sell the goods or will have the right to sell goods when the property is to pass (section 14 of the SGO);

be of merchantable (that is, satisfactory) quality. Goods must meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price and all other relevant circumstances. The quality of goods includes their appearance and finish, their safety and their durability. Goods must be free from defects, even minor ones, except where these defects have been brought to the consumer’s attention by the seller (section 16 of the SGO);

be fit for their purposes (section 16 of the SGO);

be as described on the package or a display sign, or by the seller (section 15 of the SGO); and

correspond with any sample (section 17 of the SGO).

If sellers fail to meet any one of the above conditions, they are in breach of contract. Under these circumstances, consumers are entitled to reject the goods and demand a full refund.

We will be bound by the provisions of the SGO where we are the seller of products. The SGO will not apply to our activities as an intermediary where we are acting as a marketplace for the sale of goods offered by third-party merchants only.

Contracts for the supply of services

The Supply of Services (Implied Terms) Ordinance (the “SSO”), provides that in the absence of provisions in the contract for services, services should be carried out (i) with reasonable care and skill (which generally means the services must meet the standard that a reasonable person would regard as satisfactory) (section 5 of the SSO), (ii) the services should be performed within a reasonable time if the time of performance has not been fixed by the contract (section 6 of the SSO); and (iii) a reasonable charge should be paid if the charge has not been fixed by the contract (section 7 of the SSO).

If we fail to meet any one of the above conditions, we would be “in breach of contract”. Under these circumstances, consumers would be entitled to seek compensation from us.

Section 8(1) of the SSO provides that as against a party to a contract for the supply of a service who deals as a consumer, the other party (the service supplier) cannot, by reference to any contract term, exclude or restrict any liability of his arising under the contract by virtue of this Ordinance. In other words, we cannot impose a contract term that excludes or restricts our liability on breach of contract.

We will be bound by the provisions of the SSO where we are the provider of services. The SSO will not apply to our activities as an intermediary where we are acting as a marketplace for the sale of services offered by third-party merchants only.

Unconscionable contracts for the sale of good or supply of services

The Unconscionable Contracts Ordinance (the “UCO”) applies to a contract for the sale of goods or supply of services in which one of the contracting parties is dealing as a consumer. If the Court finds that the contract or any part of it was unconscionable (that is, unfair or not sensible) in circumstances relating to the contract at the time when it was made, the Court would have the jurisdiction under section 5 of the UCO to refuse to enforce the contract, or to enforce the remainder of the contract without the unconscionable part, or to limit the application of, or to revise or alter, any unconscionable part so as to avoid any unconscionable result.

Misrepresentation

A person who makes a false statement of fact that induces another person to enter into a contract is guilty of making a misrepresentation. The three prerequisites for misrepresentation are:(i) someone has given a statement of fact,(ii) that statement is wrong, and (iii) that false statement induced the innocent party to enter into the contract.

The Misrepresentation Ordinance allows an innocent party to apply to court to cancel the contract and restore the parties to where they were before the contract was made and to claim compensation.

Limitations on liability

The Control of Exemption Clauses Ordinance (“CECO”) subjects any attempt by us to exclude our liability for financial loss or damage to property during the course of the provision of our services to the test of “reasonableness”. The reasonableness test is satisfied if the court concludes that the relevant exemption clause was fair and reasonable having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the agreement was made (section 3(1) CECO).

Under CECO, we cannot exclude or restrict our liability in relation to goods we have sold in respect of the following areas:

liability arising from the death or personal injury caused by negligence;

goods proving defective while in consumer use (section 10(1)(a));

negligence in the distribution of goods for private use or consumption (section 10(1)(b)); and

liability for breach of the obligations arising under the implied undertakings in the SGO.

We will be bound by the provisions of CECO where we are the provider of goods and services. CECO will not apply to our activities as an intermediary where HKTV Mall is serving only as a marketplace for the sale of goods or services offered by third party merchants only.

Product safety

The Consumer Goods Safety Ordinance (the “CGSO”) and the Toys and Children’s Products Safety Ordinance (the “TCPS”) impose a statutory duty on manufacturers, importers and suppliers of consumer goods, toys and children’s products to ensure that the goods and products are reasonably safe. The CGSO also imposes controls on the advertising of consumer goods.

The CGSO does not prescribe any mandatory safety tests to be carried out on products before they are offered for sale. Suppliers are, however, encouraged to have their consumer goods tested by an approved laboratory to determine whether they are reasonably safe.

Under the TCPS, all toys manufactured, imported or supplied for consumption in Hong Kong must comply with one of three sets of safety standards for toys, while children’s products must comply with the corresponding standards set out in a schedule to the Ordinance. Toys with no relevant ISO 8124/IEC 62115, EN 71 (BS EN 71) or ASTM F963 standards and children’s products with no relevant standard requirements must comply with the ordinance’s general safety requirements, which imposes a duty on manufacturers, importers and suppliers to ensure that their products are reasonably safe.

As with the SGO, we will be bound by the provisions of the CGSO and TCPS where we are the seller of consumer products. Neither the CGSO nor the TCPS will apply to our activities as an intermediary where HKTV Mall is serving only as a marketplace for the sale of goods offered by third-party merchants.

Pharmaceutical safety

Under the Pharmacy and Poisons Ordinance, there are two kinds of medicine retailers: Listed Sellers of Poisons and Authorized Sellers of Poisons.

A Listed Seller of Poisons is only allowed to sell category 3 medicines, as set out in the Ordinance. Medicines in this category can be sold in pharmacies or medicine stores without resident pharmacists. Examples include drugs for the common cold, antipyretics, painkillers and those used to treat or alleviate minor illnesses.

An Authorized Seller of Poisons is authorized to sell all 3 categories of medicine under specific conditions. The Ordinance requires that medicines in categories 1 and 2 must be sold under the supervision of registered pharmacists at the premises of the Authorized Seller of Poisons.

Copyright infringement

Copyright is infringed by any person who, not being the owner of the copyright or his licensee, engages in any of the acts restricted by the Copyright Ordinance in Hong Kong. Under the Copyright Ordinance, an online service provider (“OSP”) such as HKTV Mall may be liable for copyright infringement if it “authorizes” another party to engage in an act restricted by copyright. Once an OSP becomes aware (or ought reasonably to have become aware) that its platform is being used for ~~doing business within~~infringing activities, it must take prompt action to bring the ~~business scope approved~~infringing activity to an end.

The Copyright (Amendment) Bill 2014 was introduced in the Legislative Council on June 13, 2014 but has not yet been passed. The 2014 Bill would introduce safe harbor provisions which would have the effect of limiting, subject to conditions, our liability as an OSP for copyright infringement caused by ~~relevant governmental~~third parties on our service platform.

Online transactions

The Electronic Transactions Ordinance provides the legal framework for the recognition of electronic records and signatures, giving them the same legal status as their paper counterparts. It has also established a Voluntary Certification Authority Recognition Scheme for certification authorities to enhance public confidence in electronic transactions.

Employment

All our employees are employed in Hong Kong, and ~~shall~~we are subject to the Hong Kong Employment Ordinance (the “EO”). The EO is the main employment legislation in Hong Kong, providing for certain minimum benefits and protections, including:

paid annual leave;

paid sick leave;

paid maternity leave; and

compensation payments in certain cases of severance, unfair dismissal or termination after long service.

Subject to limited exceptions, the EO applies to all employees working in Hong Kong, regardless of their nationality. Observing the terms of the EO is generally considered to be mandatory, although it is not specifically expressed to be ~~used for domestic equity investment except as otherwise explicitly provided by~~an overriding statute.

Other mandatory laws that are likely to apply to the employment relationship with our employees include the following:

The PDPO. This ordinance regulates an employer’s collection or surveillance, use and ~~regulations. In addition, foreign-invested enterprises may not change how they use such capital without SAFE’s approval,~~disclosure of an employee’s personal data (including personal data contained in e-mails and ~~may not~~phone calls).

Mandatory Provident Fund Schemes Ordinance. Subject to limited exceptions, this ordinance requires employers in ~~any case use such capital~~Hong Kong to ~~repay Renminbi loans~~enroll employees in a Mandatory Provident Fund Scheme (that is, a retirement scheme), to which the employer and employee must make certain contributions. Foreign nationals are exempt if they ~~have~~are posted in Hong Kong to work for a period not ~~used the proceeds~~exceeding 13 months or belong to a retirement scheme outside of ~~such loans.~~
~~Income tax~~
Hong Kong. In ~~January 2008, the PRC Enterprise Income Tax Law took effect. The PRC Enterprise Income Tax Law applies~~certain cases, a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, unless tax incentives are granted to special industries and projects. Under the PRC Enterprise Income Tax Law and its implementation regulations, dividends generated from the businessHong Kong national working outside of ~~a PRC subsidiary after January 1, 2008 and payable to its foreign investor~~Hong Kong may still be subject to ~~a withholding tax rate of 10%~~this ordinance if the ~~PRC tax authorities determine that~~employment has sufficient connection with Hong Kong.

Occupational Safety and Health Ordinance. This ordinance imposes a duty on all employers, as far as is reasonably practical, to ensure the safety and health in the workplace of its employees. The Occupational Safety and Health Ordinance covers most industrial and non-industrial workplaces in Hong Kong.

Employees’ Compensation Ordinance. If an employee suffers injury arising out of and in the course of employment in Hong Kong (or overseas, if the travel is authorized by the employer), the employer is usually liable to compensate the employee under the Employees’ Compensation Ordinance. Eligible family members of an employee killed in an accident at work may also be entitled to compensation. If an employer carries on business in Hong Kong, its employees are protected under the ordinance. (To be covered, an employee can work outside Hong Kong but his employment contract must have been entered into in Hong Kong.) All employers are required to maintain valid employees’ compensation insurance policies to cover their liabilities under the ordinance and at common law.

Companies Ordinance. The Companies Ordinance protects employees of a Hong Kong company (including a Hong Kong subsidiary of a foreign ~~investor~~company) in relation to wages and other entitlements if the company is ~~a non-resident enterprise, unless there is a tax treaty with China that~~wound up. Under the Companies Ordinance, the employees become preferential creditors in the winding-up.

Sex Discrimination Ordinance, Disability Discrimination Ordinance, Family Status Discrimination Ordinance and Race Discrimination Ordinance. All four of these ordinances legislate against various forms of discrimination.

Basic Law and the Hong Kong Bill of Rights Ordinance. This legislation safeguards certain rights of individuals, although both of these have limited application in the context of employment law.

Labour Tribunal Ordinance. This ordinance empowers the Labour Tribunal to hear and resolve disputes relating to employment contracts as well as alleged breaches of the Employment Ordinance. It potentially covers disputes involving foreign nationals or Hong Kong residents working abroad.

Prevention of Bribery Ordinance (POBO). The POBO provides for ~~a preferential withholding tax rate. Distributions of earnings generated before January 1, 2008 are exempt from PRC withholding tax.~~
~~Labor and work safety in China~~
The Labor Law of the PRC, or the Labor Law, which was effective on January 1, 1995, provides basic protections for employees, e.g. employment contracts shall be concluded if labor relationships are to be established between employers and employees; employers cannot compel employees to work beyond the time limit and shall provide wages which are not lower than local standards on minimum wages to the employees punctually; employers shall establish and improve their systems for labor safety and sanitation and strictly abide by applicable PRC rules and standards on labor safety and sanitation; and female employees and juvenile employees are given special protection.
On June 29, 2007, the National People’s Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008. On September 18, 2008, the State Council further promulgated the Regulations on Implementation of the Labor Contract Law. Compared to the Labor Law, the Labor Contract Law and its implementing regulations impose more restrictions on employers and have been deemed to potentially increase labor costs for employers to terminate employment relationship with employees. Such restrictions include specific provisions related to fixed term employment contracts, temporary employment, probation, consultation with the labor union and employee assembly, employment without a contract, dismissal of employees, compensation upon termination and overtime work, and collective bargaining. According to the Labor Contract Law and its implementing regulations, an employer is obliged to sign an unlimited term employment contract withoffenses where an employee if the employer intends to renew employment relationship with such employee after two consecutive fixed term employment contracts. The employer also has to pay a compensation fee to the employee if the employer terminates the unlimited term labor contract, unlessaccepts or solicits advantages from third parties (for example, an employee ~~refuses~~who receives an inducement from a supplier of goods in return for placing orders with that supplier) or who offers advantages to ~~extend an expired employment contract under terms which are the same~~public servants or ~~more favorable than those~~ in ~~the expired contract. Compensation is~~connection with contracts with public bodies. In some cases, employees may also required when the labor contract expires. Further, under the Regulations on Paid Annual Leave for Employees, which became effective on January 1, 2008, employees who have worked more than one year for an employer are entitledbe subject to a paid vacation ranging from 5 to 15 days, depending on their length of service. Employees who waive such vacation time at the request of employers shall be compensated for three times their normal salaries for each waived vacation day.
anti-corruption legislation in other jurisdictions.

~~The~~Other laws and regulations ~~governing~~affecting our business

Competition

Hong Kong’s first cross-sector competition legislation, the ~~labor relations and work safety also include:~~

~~the Work Safety Law~~Competition Ordinance (Chapter 619 of the ~~PRC (2002);~~Laws of Hong Kong), was enacted on June 14, 2012 and has been implemented in phases since January 18, 2013.

The main features of the ~~Regulation~~Competition Ordinance are to: (i) prohibit restrictive agreements and concerted practices; (ii) prohibit the abuse of a substantial degree of market power; (iii) prohibit anti-competitive mergers in the telecommunications sector; (iv) establish a Competition Commission and a Competition Tribunal; and (v) provide for incidental and connected matters.

The two sector-specific competition regimes that apply to the telecommunications and broadcasting sectors under the Telecommunications Ordinance and the Broadcasting Ordinance will be replaced upon implementation of the Competition Ordinance in phases.

Pursuant to the Competition Ordinance, both the CA and the Competition Commission are competent regulators and have concurrent jurisdiction on ~~Occupational Injury Insurance (2004);~~

competition matters relating to telecommunications and broadcasting. The Competition Ordinance also provides a mechanism whereby such telecommunications and broadcasting related competition matters may be transferred between the ~~Interim Measures Concerning~~CA and the ~~Maternity Insurance (1995);~~

Competition Commission. It is envisaged that in addition to the ~~Interim Regulations~~various codes and guidelines on competition related matters issued by the CA, new guidelines will be issued by the Competition Commission on the ~~Collection~~interpretation of the conduct rules. the CA and ~~Payment~~the Competition Commission will enter into a Memorandum of ~~Social Insurance Premiums (1999) and its interim measures (1999); and~~

~~the Regulation~~Understanding to provide more clarity on the ~~Administration~~operation of ~~Housing Fund (2002).~~

the competition regime in the telecommunications and broadcasting sectors.
D. ~~Organizational structure~~
C. Organizational structure
The following chart sets forth our principal subsidiaries as of ~~December 13, 2011:~~April 29, 2015:

~~Notes:~~
~~(1)~~ ~~The other immediate subsidiary of City Telecom (H.K.) Limited is Golden Trinity Holdings Limited. Its immediate subsidiary is Attitude Holdings Limited.~~
~~(2)~~ ~~Our Company has only registered its Chinese name. The English name is an unregistered translation.~~
~~(3)~~ The other immediate subsidiaries of Automedia Holdings Limited are CTI International Limited, BBTV Company Limited, City Telecom (U.S.A.) Inc., City Telecom (Vancouver) Inc. and City Telecom (Toronto) Inc.
~~(4)~~ The immediate subsidiaries of Hong Kong Broadband Network Limited are Excel Billion Profits Limited, Hong Kong Television Network Limited, Hong Kong Broadband Television Company Limited, Hong Kong Broadband Phone Limited and Hong Kong Broadband Digital TV Limited.
~~(5)~~ ~~The immediate subsidiary of Hong Kong Media Production Company Limited is Leader Artiste Management Company Limited.~~
The jurisdiction of incorporation and our ownership percentage of each these subsidiaries as of ~~December 13, 2011~~April 29, 2015 were as follows:

Name
Jurisdiction of
incorporation
Percentage of interest
held by HKTV

~~Percentage of interest~~
~~held by City Telecom~~
~~Name~~
~~Jurisdiction of~~
~~incorporation~~
Direct
%

Indirect
%
~~963673 Ontario Limited~~
~~Canada~~ —   ~~100~~
Attitude Holdings Limited
   British Virgin Islands    —      100 %
~~Automedia Holdings~~Best Intellect Limited
   British Virgin Islands    100 % —
~~BBTV Company~~City Telecom (H.K.) Limited
   Hong Kong    —      100 %
~~Best Intellect~~Cosmo True Limited
   British Virgin Islands    100 % —
~~City Telecom (B.C.) Inc.~~
~~Canada~~ —   ~~100~~
~~City Telecom (Canada) Inc.~~
~~Canada~~ —   ~~100~~
~~City Telecom (Toronto) Inc.~~
~~Canada~~ —   ~~100~~
~~City Telecom (U.S.A.) Inc.~~
~~United States of America~~ —   ~~100~~
~~City Telecom (Vancouver) Inc.~~
~~Canada~~ —   ~~100~~
~~City Telecom Inc.~~
~~Canada~~ —   ~~100~~
~~City Telecom International Limited~~
~~British Virgin Islands~~ ~~100~~ —
~~Credibility Holdings Limited~~
~~British Virgin Islands~~ ~~100~~ —
~~CTI Guangzhou Customer Services Co. Ltd. (note)~~
~~People’s Republic of China~~ ~~100~~ —
~~CTI International Limited~~
~~Hong Kong~~ —   ~~100~~
~~CTI Marketing Company Limited~~
~~Hong Kong~~ —   ~~100~~
Excel Billion Profits Limited
   Hong Kong    —      100 %
Golden Trinity Holdings Limited
   British Virgin Islands    100 % —
HKTV Japan Company Limited
Japan —   100 %
Hong Kong Broadband Digital TV Limited
   Hong Kong    —      100
~~Hong Kong Broadband Network Limited~~
~~Hong Kong~~ —   ~~100~~
~~Hong Kong Broadband Phone Limited~~
~~Hong Kong~~ —   ~~100~~ %
Hong Kong Broadband Television Company Limited
   Hong Kong    —      100 %
Hong Kong Media Production Company Limited ~~(formerly known as Global Courier Company Limited)~~
   Hong Kong    —      100 %
Hong Kong Mobile Television Network Limited
   Hong Kong    —      100 %
~~IDD1600~~Hong Kong Mobile Television (Leasing) Limited
Hong Kong —   100 %
Hong Kong Music Network Limited
Hong Kong —   100 %
Hong Kong TV Shopping Network Company Limited
   Hong Kong    —      100 %
Leader Artiste Management Company Limited
   Hong Kong    —      51100 %
Multi Talent Enterprise Limited
British Virgin Islands 100 % —
Talent Ascent Limited
British Virgin Islands 100 % —
D. Property, plant and equipment
As of December 31, 2014, we owned premises with an aggregate area of 51,000 square feet, all of which were in Hong Kong, for our own use. We also had an aggregate of 126,000 square feet of investment properties for rental income or capital appreciation. In addition, we leased office and warehouse properties in Hong Kong.
~~Note: Our Company has only registered its Chinese name. The English name is an unregistered translation.~~During fiscal 2014, we invested HK$68.7 million on capital expenditure mainly for the set-up of the HKTV Mall, including computer system for OTT and online shopping platform, motor vehicles and equipment for logistics function, etc.

E.ITEM 4A ~~Property, plant and equipment~~UNRESOLVED STAFF COMMENTS
For the provision of fixed telecommunication network services, we own, or control through long-term leases, equipment consisting of switching, transmission and power equipment and connecting lines comprised of in-building wiring, fiber-based backbone, wireless and leased wire-line backbone and other support structures, conduits and similar items that comprise our Next Generation Network. The majority of the fiber-based backbone connecting our services is under public road, highways and streets. In Hong Kong, we owned an aggregate of 161,000 square feet predominately for self use as of August 31, 2011.None
For the provision of international telecommunications services, we own two switching systems in Hong Kong and two in Canada (one in Vancouver and the other in Toronto). We have invested and have rights to dedicated capacity in two undersea cables, the Japan-U.S. cable and the APCN 2 cable, for use as international transmission facilities, both of which were completed and have been operational since May 2002.
ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
~~In addition, we have leased properties for 16 retail shops in Hong Kong and for a 3,500 square feet customer service center in Mongkok, Hong Kong.~~
We rely on suppliers to provide equipment, underground cables and other necessary components for the construction and upgrade of our Next Generation Network, and for our VoIP equipment. In order for new subscribers to be able to access our IP-TV services, we must install an IP set-top box in their homes. We must have an adequate supply of such installation equipment on hand to respond to new customer subscriptions in a timely manner. We purchase all of our IP set-top boxes and other equipment from our suppliers on a purchase order basis and have no long-term contracts. If our suppliers are unable to supply us with these products in a timely manner or the costs of these products increase due to unforeseen causes, this could negatively impact our operating results, especially if we are unable to acquire new subscribers or effectively appropriate our costs on to our customers.
~~ITEM 5~~
~~OPERATING AND FINANCIAL REVIEW AND PROSPECTS~~
You should read the following discussion together with the rest of this annual report, including the consolidated financial statements and related notes included elsewhere in this annual report. The ~~results discussed below~~following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not ~~necessarily indicative~~statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in Item 3 “Risk Factors” above and “Liquidity and Capital Resources” below. All forward-looking statements in this annual report are based on information available to us as of the date of this annual report and we assume no obligation to update any such forward-looking statements.
Pursuant to a resolution of the Board dated August 29, 2014, the Company’s financial year end date has been changed from August 31 to December 31 in order to unify the financial year end dates of the Company and its subsidiaries and align with the business cycle of the Group’s potential customers in the e-commerce retail industry and the multimedia advertising industry. As a result of this change, the Company’s fiscal 2014 results include consolidated financial statements for the sixteen months ended December 31, 2014, with comparative figures for the twelve months ended August 31, 2013 and August 31, 2012 for fiscal 2013 and 2012, respectively, and the fiscal 2014 results are accordingly not fully comparable to ~~be expected~~the prior fiscal year results. For further information, see Note 1 to the consolidated financial statements included elsewhere in ~~any future periods.~~this annual report.
A.
A. Operating results
~~Overview~~
~~We are a provider of~~Overview
Prior to May 2012, we principally engaged in providing residential and corporate fixed telecommunications network ~~services in Hong Kong. We offer our customers an integrated suite of broadband Internet access, local VoIP, IP-TV~~service and ~~corporate data~~international telecommunications services ~~through our self-owned Next Generation Network. Our network covered 1.94 million residential homes pass as of August 31, 2011, representing more than 80% of the total households~~ in Hong Kong and ~~is concentrated~~ in ~~Hong Kong’s most densely populated areas, which reduces~~Canada. We derived our ~~cost~~revenue from two business segments: the FTNS Business and the IDD Business. In March and April 2012, we entered into the Telecom Group Agreement and the Guangzhou Agreement and in May 2012, we disposed of ~~network deployment per home pass. As~~the entire FTNS Business and IDD Business. Since then, the Multimedia Business has become our principal focus. The Multimedia Business includes the production, sale and distribution of ~~August 31, 2011,~~television drama series, variety and infotainment programs locally and internationally, and the online shopping business. It also includes artiste management services and multimedia content production. The operating results of the disposed Telecom Business and the Multimedia Business have been presented, as discontinued operations and continuing operations, respectively, in our FTNS business had a subscription base of approximately 1,247,000 subscriptions. In addition, we offer a variety of international telecommunications services, including direct dial services, international calling cards and mobile call forwarding services, in Hong Kong. As of August 31, 2011, our IDD business had a subscription base of approximately 2.5 million registered accounts.consolidated financial statements.
Factors affecting our results of continuing operations
Our ~~revenues~~turnover
~~Our revenues are derived~~In fiscal 2014, our turnover represented income from ~~two business segments: our FTNS business~~program content broadcasting and our IDD business. Our FTNS business primarily consists of broadband Internet access, local VoIP, IP-TV and corporate data services, while our IDD business primarily consists of direct dial services, international calling cards and mobile call forwarding services.
~~FTNS business~~~~. Revenues~~licensing, income from our ~~FTNS business primarily consist of monthly service charges payable by our subscribers~~artiste management functions, income from independent content production, and ~~interconnection charges payable by other telecommunications operators.~~
•
~~Monthly service charges~~. We charge our subscribers a monthly service charge, which generally varies by the number and nature of the fixed telecommunications network services subscribed. Our strategy is to market additional services to our subscribers by leveraging our broadband Internet access subscription base of 590,000 as of August 31, 2011 and the scalability of our Next Generation Network.
•
~~Interconnection charges~~. We offer fixed telecommunications network services through our self-owned Next Generation Network. Under the terms of HKBN’s fixed telecommunications network services license, we are required to provide interconnection services to other network operators, including mobile network operators.
~~IDD business~~. Substantially all of revenues from our IDD business consist of tariffs, which generally varies by the destination of the call and the calling prefix, with discounts depending on the time of the day or day of the week when the call is placed.
e-commerce related income.
Our operating expenses
Our operating expenses consist of ~~network costs and costs~~cost of sales and other operating expenses.

~~Network costs and costs~~Cost of sales. ~~Network~~Cost of sales refers to programme costs ~~vary according~~charged to ~~either our network capacity or our traffic volume. Such~~profit and loss over the showing period and talent costs ~~mainly include leased line rentals, program fees~~ and other production costs ~~for our IP-TV services~~which are directly attributable to the turnover generated from the licensing of program rights, program production and interconnection charges payable to other local fixed network operators and international bandwidth providers. Network costs do not include depreciation charge, which is included in other operating expenses.
the provision of artiste management services.

Other operating expenses. Other operating expenses mainly consist of ~~Talent~~salaries and related costs for Talents which are not capitalized as programme costs, costs relating to our e-commerce operations, costs of corporate functions, uncapitalized depreciation of fixed assets, amortization of intangible assets, advertising and marketing expenses, ~~depreciation~~write-offs of ~~owned fixed assets.~~
artiste prepayment, provision for committed artiste payment, auditors’ remuneration and operating lease charges in respect of land and buildings.
•
~~Talent costs~~~~. Salaries and related costs incurred for services rendered by Talents.~~
•
~~Advertising and marketing expenses~~. Due to our efforts in promoting our FTNS services, our advertising and marketing expenses incurred in connection with subscription acquisition activities have been relatively high. We expect that we will be required to continue to invest significant financial and human resources in our sales and marketing efforts as we strive to build our subscription base and enhance our brand value.
•
~~Depreciation~~. Depreciation is calculated to write off the cost of fixed assets less their estimated residual value, if any, using straight line method over their estimated useful lives. We expect that we will continue to invest in our Next Generation Network to expand our network coverage. In addition, any technological advancement or obsolescence might affect the estimated useful lives of our fixed assets.

Critical accounting policies

The following discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with IFRSs for the fiscal years ended August 31, 2008, 2009, 2010 and 2011. Our significant accounting policies are more fully described in note 1 to our consolidated financial ~~statements.~~statements included elsewhere in this annual report.

The preparation of our consolidated financial statements in conformity with ~~IFRSs~~IFRS requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, ~~revenues~~revenue and expenses and the disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments, including those related to fixed assets, ~~provision for doubtful accounts,~~intangible assets, programme costs, investment properties, available-for-sale securities and deferred ~~taxes, USC charges and certain revenue items.~~taxes. We base our estimates and judgments on historical experience and on various other factors we believe to be reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates as facts, circumstances and conditions change. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes to accounting estimates are recognized in the period in which the estimate is changed if the change affects only that period or in the period of the change and future periods if the change affects both current and future periods.

Our accounting policies have been developed over many years as the telecommunications industry and generally accepted accounting principles have evolved. As our financial statements are prepared under IFRSs, our accounting policies are necessarily compliant with all aspects of IFRSs. IFRSs are based on a “substance over form” conceptual framework that requires us to look through the legal interpretation of an arrangement or transaction to its underlying purpose and to reflect it in our consolidated financial statements on that basis.

The following are the most significant accounting estimates and judgments we apply in preparing our consolidated financial statements.

~~Revenue recognition~~

Revenue for the provision of telecommunications services is recognized when an arrangement exists, service is rendered, fee is fixed or determinable and collectability is probable. Revenue received in advance is deferred and recognized as revenue on a straight-line basis over the stated period of time in the subscriber agreement.

A portion of revenue from our FTNS business is derived from network interconnection charges. Network interconnection charges are recorded as revenue based on usage of our fixed telecommunications network by the fixed telecommunications network operators. The determination of the rates on mobile interconnection charges at which revenue is recognized involved significant estimates by management. Significant changes in management estimates may result in material revenue adjustments.

Prior to April 27, 2009, mobile network operators were obliged to pay interconnection charges to us in accordance with the charging principles promulgated by OFTA. As certain local mobile network operators disagreed with the level of charges computed by us in the past, we recognize revenue related to mobile interconnection charges at amounts we believe to be realizable after consideration of the uncertainty regarding the timing and amount of the ultimate collection of amounts due. Specifically:

In August 2004, we requested OFTA to make a determination (the “2004 Determination”) on the level of mobile interconnection charges payable by one of the mobile network operators to us and the effective date of the determined mobile interconnection charges. The amount recognized in fiscal 2008 was based also on the 2004 Determination issued by OFTA in June 2007. In February 2008, we requested OFTA to make a new determination with four mobile operators on the rates of mobile interconnection charge and interest thereon. We subsequently entered into contractual agreements with some of these mobile operators, which agreed to pay mobile interconnection charges based on the 2004 Determination for the period from April 1, 2002 to August 31, 2004 and with respect to the period after August 31, 2004 at the interim rates stated in the agreements, which will be adjusted based on further determination to be issued by OFTA.

The amount recognized in fiscal 2009 and before was based on the 2004 Determination issued by OFTA in June 2007 which set out the rates of mobile interconnection charge payable by the mobile operators under dispute for interconnection services provided by us for the period from April 1, 2002 to August 31, 2004. In September 2008, OFTA indicated that it accepted our request for determination on the rate of mobile interconnection charge for the period from April 1, 2002 to April 26, 2009 payable by the mobile operators that have not reached contractual agreements with us, and the rate for period from September 1, 2004 to April 26, 2009 payable by those mobile operators that have reached contractual agreements with us and the interest thereon (the “2008 Determination”). On November 25, 2009, OFTA issued a Preliminary Analysis in relation to the 2008 Determination for the parties’ comments.

In May 2010, OFTA issued its decision on the 2008 Determination, which set out the rates of mobile interconnection charges payable by the mobile operators involved in the dispute. Based on such decision on the 2008 Determination, we reversed approximately HK$19.7 million revenue related to mobile interconnection charges and recognized approximately HK$10.1 million interest income in fiscal 2010.

For a discussion of our revenue recognition of mobile interconnection charges, please refer to note 2(b) to our consolidated financial statements. Actual amounts realized could be different from our estimate.

Useful lives of fixed assets

We estimate the useful lives of fixed assets in order to determine the amount of depreciation expense to be recorded. The useful life of an asset is estimated at the time the asset is acquired based on historical experience, the expected usage, and wear and tear of the asset, as well as technical obsolescence arising from changes in ~~the~~ market ~~demands~~demand or service output of the asset. Changes in technology or industry conditions may cause the estimated period of use or the value of these assets to change. We perform periodic reviews to confirm the appropriateness of estimated economic useful lives for each class of fixed assets. For ~~the three years ended August 31, 2011,~~fiscal 2012, fiscal 2013 and fiscal 2014, there were no changes in the useful lives of our fixed assets.

Intangible assets

Upon the completion of the disposal of the Telecom Business in May 2012 and as part of the consideration received from the disposal, we were granted the indefeasible right of use of the telecommunications capacity of the Telecom Business for a term of 20 years and the right to use the telecommunications services from the Telecom Business for a term of 10 years. The fair value of these intangible assets as of the completion date of the disposal was determined with reference to comparable market transactions.

During fiscal 2014, we acquired a wholly-owned subsidiary and recorded an intangible asset relating to our acquisition of Mobile TV Spectrum for the provision of broadcast-type mobile television services for a period of about 12 years.

Intangible assets acquired by us are stated at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses.

Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives.

Both the period and method of amortization are reviewed annually.

Impairment of ~~fixed~~ assets

Under ~~IFRSs,~~IFRS, if a triggering event occurs indicating that the carrying amount of an asset may not be recoverable, a new assessment of the carrying amount of that asset is required. Triggering events include significant adverse changes in the market value of an asset, changes in the business or regulatory environment, or certain legal events. The interpretation of such events requires judgment from the management with respect to whether such an event has occurred and whether management ~~feels~~considers that reassessment of the carrying value of the asset is required. If an event occurs that could affect the carrying value of the asset and management does not identify it as a triggering event and identify the asset as impaired, future operations could be adversely affected if this asset is subsequently written off or sold for less than its carrying value due to sudden downturns in the business environment.

Upon the occurrence of triggering events, the carrying amounts of fixed assets are reviewed to assess whether their recoverable amounts have declined below their carrying amounts. Under ~~IFRSs,~~IFRS, the recoverable amount is the greater of its fair value less costs of sales and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the assets. Where the asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest identifiable group of assets that generates cash inflows ~~independently (i.e. cash-generating-unit)~~that are largely independent of the cash inflows from other assets or groups of assets (such smallest identifiable groups being referred to as a cash-generating unit or “CGU”). Where the recoverable amount of fixed and other long-lived assets is less than their carrying value, an impairment loss is recognized to write down the assets to their recoverable amount, which is based on the fair value less costs to sell or value in use.

Estimation of cash flows arising from future use of the asset requires careful analysis regarding what we expect to recover from its future use. This includes consideration of our target market share and ~~subscription base,~~viewership, market competition, future changes to our cost structure and technological change. In addition, the residual value of the asset on disposal requires judgment, as the estimated fair value of the asset at the time of disposal could change in response to market conditions and changes in expected use of the asset prior to disposal. Changes in the estimate of cash flows arising from expected future use of the asset or its residual value on disposal — based on changes in market conditions, changes in the use of assets, changes to our management ~~plan,~~plans, and foreseeable technological changes or otherwise — could significantly change the calculation of the fair value or recoverable amount of the asset and the resulting impairment loss. This in turn could significantly affect ~~the~~our results of ~~our~~ operations.

~~For~~Our Multimedia Business comprises two CGUs, namely our “Media” CGU, which includes the ~~three years ended August 31, 2011, no~~multimedia, drama production and content distribution business, and our “E-commerce” CGU, which includes our online shopping business. During fiscal 2014, we recognized impairment loss on fixed assets, intangible assets and programme costs and wrote off certain construction in progress with an aggregated amount of HK$32.0 million. We have identified indications of impairment of our Media CGU assets, primarily as a result of the uncertainty related to the legal and technical feasibility in the provision of mobile television services. The recoverable amounts of these assets, which include primarily programme costs, certain fixed assets ~~has been recognized.~~

~~Accounts receivable~~

~~Under IFRSs, provision is made against accounts receivable to~~and intangible assets, were assessed based on their value-in-use at the ~~extent they are considered~~Media CGU level as well as our Multimedia Business as a whole and were determined by discounting the estimated cash flows to be ~~doubtful. This provision requires judgment regarding~~generated from the ~~collectability~~use of ~~certain receivables both~~these assets at pre-tax discount rates of 13.40% at the Media CGU level and 15.25% at the overall Multimedia Business level. Key assumptions used in the estimation of value in use included discount rate, projected revenue of the Media CGU and projected revenue of our E-commerce CGU.

Any change in the assumptions adopted in the cash flow forecasts would significantly affect our impairment testing and hence our results of operations.

Fair value measurement of investment properties

Investment properties are stated at fair value. Any gain or loss arising from the change in fair value or from the retirement or disposal of an investment property is recognized in profit or loss.

Valuations of investment properties are carried out by an independent firm of surveyors. The fair value of our investment properties are determined by using the direct comparison approach by reference to recent sales prices of comparable properties.

Fair value measurement of available-for-sale securities

Our investments in debt and equity securities are classified as ~~they~~available-for-sale securities, which are ~~incurred~~initially stated at fair value, which is their transaction price unless it is determined that the fair value at initial recognition differs from the transaction price and ~~as they age. We assess bad debt provision~~that fair value is evidenced by ~~type of customers, namely residential, corporate and carrier,~~a quoted price in an active market for an identical asset or liability or based on ~~past experience~~a valuation technique that uses only data from observable markets.

At the balance sheet date, the fair value is remeasured, with any resultant gain or loss being recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. When the investments are derecognized or impaired, the cumulative gain or loss recognized in equity is reclassified to profit or loss.

The fair value of ~~recovery of old receivables,~~available-for-sale securities are based on quoted market prices for identical financial instruments at the ~~aging of~~balance sheet date.

Programme costs

Programme costs are stated at cost less amounts expensed and any provision considered necessary by management. Programme costs are charged to profit or loss based on the accounts receivable balance and historical write-off experience. Certain receivables may be initially identified as collectible, yet subsequently become uncollectible and result in a subsequent write-offbroadcasting schedule of the related ~~receivable to~~program reflecting the ~~consolidated income statement. Changes in the collectability~~pattern of ~~accounts receivable~~consumption of their economic benefits.

- Self-produced programs

Self-produced programs consist primarily of drama, infotainment and variety programs. The cost of self-produced programs comprises direct production costs and an appropriate proportion of production overheads.

- Purchased programs

Purchased programs consist of film rights acquired for ~~which provisions are not made could affect~~showing on our ~~future results~~television platforms. Cost of ~~operations.~~purchased programs comprises cost of purchase, cost of conversion and an appropriate proportion of production overheads.

Included in the accounts receivable balance (net of allowance for doubtful debts) were receivables for mobile interconnection charges of HK$68.8 million, HK$39.8 million and less than HK$0.1 million as of August 31, 2009, 2010 and 2011, respectively. The balance represented mobile interconnection charges we billed to the local mobile network operators, and some of these charges had not been collected.

~~Changes in the allowance for doubtful debts consist of:~~

   For the year ended August 31,

2009
HK$

2010
HK$

2011
HK$

2011
US$

   (Amounts in thousands)
Balance at beginning of the year
   11,944    3,160    5,823    748
Additions charged to expense
   12,103    14,742    13,636    1,751
Write-off
   (20,887 ) (12,079 ) (12,929 ) (1,660 )


Balance at the end of the year
   3,160    5,823    6,530    839

Deferred taxation

We recognized deferred tax assets for all deductible temporary differences and operating loss ~~carry forwards~~carry-forwards to the extent it is probable that future taxable profits will be available against which the ~~asset~~assets can be utilized. The recognition of deferred tax assets requires judgment regarding the results of future operations, including the assumption that there will be sufficient future operations to allow us to utilize the related deferred tax assets. Our management projects future taxable income by considering all available information, including projected future taxable profit by taking into consideration of the effect of our capital ~~expenditures~~expenditure and other plans (such as the ~~existing network capacity,~~ technological changes and future market ~~trends and projected fixed network coverage)~~trends), tax planning strategies, historical taxable incomes, and the expiration period of the unused tax ~~losses carry forwards~~loss carry-forwards of the Company and each of ~~our Company and~~its subsidiaries.

As of August 31, ~~2010~~2013 and ~~2011,~~December 31, 2014, we had not recognized deferred tax assets in respect of unused tax losses of HK$~~8.2~~204.9 million and HK$~~8.1~~566.0 million respectively, because it was not probable that future taxable profits could be generated to utilize the tax losses. All tax losses are subject to agreement with local tax authorities. Any changes in the estimate of future operations could change the recognition of our deferred tax assets, which could significantly affect our results of operations.

~~USC charges~~

Our management makes their best estimates for the USC, payable to PCCW-HKT in order to fund the network development costs incurred by PCCW-HKT in remote areas in Hong Kong. Such estimated costs are included as part of our costs of rendering services. The estimate is made based on the provisional rates announced by OFTA and is effective up to the date of the release of our consolidated financial statements. OFTA periodically reviews the actual costs incurred by PCCW-HKT in the development and adjusts the amounts owed to PCCW-HKT, or to be refunded by it, to the respective USC contributing parties, including us. Accordingly, the estimate made by our management for a financial year is subject to changes based on the revisions published by OFTA up to the date prior to the release of our consolidated financial statements. We adjust such differences as an addition to, or reduction of, the corresponding costs of services in that particular reporting period.

Any sum received in advance from PCCW-HKT as an estimated refund of USC on a provisional basis, which is subject to the final confirmation and determination of OFTA, is recorded in other payables and accrued charges in our balance sheet.

Operating Results

The following table sets forth, for the years indicated, a summary of our results of operations.

   For the year ended August 31,
   2009 2010 2011 2011
   HK$ HK$ HK$ US$
   (Amounts in thousands)
Revenue

FTNS business
   1,230,880    1,356,098    1,484,324    190,601
IDD business
   247,359    218,589    197,134    25,314


   1,478,239    1,574,687    1,681,458    215,915


Network costs and costs of sales
   (175,129 ) (195,292 ) (212,315 ) (27,263 )
Other operating expenses
   (1,037,964 ) (1,105,604 ) (1,097,164 ) (140,886 )
Other income, net
   41,540    7,989    7,249    931
Finance costs
   (55,127 ) (22,235 ) (6,359 ) (817 )


Profit before taxation
   251,559    259,545    372,869    47,880
Income taxes expense
   (38,730 ) (42,679 ) (58,954 ) (7,570 )


Net income
   212,829    216,866    313,915    40,310


	Twelve months ended August 31, 2012 (Fiscal 2012)			Twelve months ended August 31, 2013 (Fiscal 2013)			Twelve months ended August 31, 2014			Four months ended December 31, 2014			Sixteen months ended December 31, 2014 (Fiscal 2014)			Sixteen months ended December 31, 2014 (Fiscal 2014)
	HK$			HK$			HK$			HK$			HK$			US$
							*(in thousands)*
Continuing operations:
Turnover		3,762			7,802			1,391			21,636			23,027			2,970
Cost of sales		(6,006	)		(15,706	)		(560	)		(27,207	)		(27,767	)		(3,581	)
Valuation gains on investment properties		18,200			43,400			1,800			2,100			3,900			503
Other operating expenses		(104,960	)		(201,514	)		(245,581	)		(98,218	)		(343,799	)		(44,344	)
Other income/(loss), net		19,920			128,909			117,702			29,907			147,609			19,038
Finance costs, net		(2,455	)		(4,860	)		(5,751	)		(2,016	)		(7,767	)		(1,002	)
Impairment losses/ write off of assets		—			—			(32,000	)		—			(32,000	)		(4,127	)

Loss before taxation		(71,539	)		(41,969	)		(162,999	)		(73,798	)		(236,797	)		(30,543	)
Income tax (expenses)/credit		(2,281	)		1,659			(145	)		(60	)		(205	)		(26	)

Loss from continuing operations		(73,820	)		(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)

Discontinued operations:
Profit from discontinued operations (net of tax)		3,771,694			—			—			—			—			—

(Loss)/profit for the period		3,697,874			(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)

Note:

(1)	Following the disposal of our Telecom Business in May 2012, the Telecom Business was reclassified as discontinued operations for fiscal 2012.

Fiscal ~~2011~~2014 Compared to Fiscal ~~2010~~2013

The following discussion compares fiscal 2013 (the twelve months ended August 31, 2013) with fiscal 2014 (the sixteen months ended December 31, 2014). For a comparison of fiscal 2013 results with results for the unaudited twelve months ended August 31, 2014, see “Management’s Discussion and Analysis” set forth in the Company’s Second Interim Report of 2014, which the Company furnished on a Form 6-K dated October 28, 2014.

~~Revenues.~~Turnover. ~~Revenues increased by 6.8% to~~We recorded turnover of HK$~~1,681.5~~23.0 million in fiscal ~~2011 from~~2014, as compared to HK$~~1,574.7~~7.8 million in fiscal ~~2010, reflecting~~2013, primarily comprising program content broadcasting and licensing, content production, provision of artiste management services and e-commerce related income. The increase of HK$15.2 million was mainly due to an increase in ~~revenue from~~program content broadcasting and in licensing income as a result of our ~~FTNS business,~~launch of HKTV Mall on November 19, 2014, all of which was partially offset by the ~~effects~~expiration of the news content license agreement on September 1, 2013 in relation to our discontinued operations. Of the HK$23.0 million of turnover in fiscal 2014, we recorded HK$21.6 million during the four months ended December 31, 2014 and HK$1.4 million during the twelve months ended August 31, 2014.

Cost of sales. We recorded cost of sales of HK$27.8 million for fiscal 2014 (all but HK$0.6 million of which arose in the four months ended December 31, 2014), as compared to HK$15.7 million for fiscal 2013. In both periods, our cost of sales mainly comprised programme costs charged to profit and loss over the showing period, talent, and other production costs for content production for third-party customers. The increase of HK$12.1 million was mainly due to the showing of program content during the period net of the decrease due to the expiration of the license agreement on September 1, 2013 for the distribution of news content.

Valuation gains on investment properties. Valuation gains on investment properties were HK$3.9 million in fiscal 2014 as compared to HK$43.4 million in fiscal 2013, based on the valuation carried out by an independent firm of surveyors.

Other operating expenses. We recorded operating expenses of HK$343.8 million in fiscal 2014 as compared to HK$201.5 million in fiscal 2013, representing an increase of HK$142.3 million. This increase was mainly driven by the following:

Uncapitalized talent costs increased by HK$62.2 million as a result of an additional four months of expenses, amounting to HK$40.7 million, incurred for the current period, as well as an increase in the size of our workforce to scale up our HKTV Mall operations and a reduction in capitalization due to our slowdown and suspension of program production, all of which were partially offset by ~~a decrease~~the savings in ~~revenue~~salary and compensation and other talent costs resulting from ~~our IDD business. Revenue contribution from our FTNS business~~the redundancies we made in October 2013 and April 2014.

Amortization of intangible assets and uncapitalized depreciation of fixed assets increased ~~to 88.3%~~by HK$19.7 million and HK$15.3 million, respectively in fiscal ~~2011 from 86.1% in fiscal 2010.~~

~~FTNS business~~. Revenues from our FTNS business increased by 9.5% to HK$1,484.3 million in fiscal 2011 from HK$1,356.1 million in fiscal 2010. The increase was primarily caused by an increase of 12.3% of our FTNS subscription base to 1,247,000 as of August 31, 2011 from 1,110,000 as of August 31, 2010.

•

~~Broadband Internet access~~. The subscription base for our Internet access services increased by 12.2%, to 590,000 as of August 31, 2011 from 526,000 as of August 31, 2010. During fiscal 2011, despite competitive market environment, we were able to maintain our growth while harvesting the record high broadband subscription growth that we achieved in fiscal 2010 pursuant to the “Member-Get-Member” marketing campaign.

•

~~Local VoIP~~. The subscription base for our local VoIP services increased by 10.4%, to 476,000 as of August 31, 2011 from 431,000 as of August 31, 2010, mainly due to improved branding that allowed us to increase sales of our VoIP services to subscribers of our Internet access services.

•

~~IP-TV~~. The subscription base for our IP-TV services increased by 18.3% to 181,000 subscriptions as of August 31, 2011 from 153,000 as of August 31, 2010 because we remained focused on offering mass value. We continued to enhance our channel variety so as to increase the content value to our customers. We currently offer more than 110 channels to our customers.

~~IDD business~~~~. Revenues from our IDD business decreased by 9.8% to HK$197.1 million in fiscal 2011 from HK$218.6 million in fiscal 2010. The decrease was primarily~~2014, due to the ~~reduction in IDD traffic volume~~additional four months of expenses, amounting to HK$11.0 million and HK$9.7 million, respectively; the ~~decrease in~~additional amortization arose from the ~~tariff rate we charged to~~Mobile TV Spectrum obtained through our ~~customers. Competition during fiscal 2011 intensified as some~~acquisition of ~~our competitors offered international direct dial minutes for free or at significantly lower rates as a marketing incentive to gain local fixed line~~HKMTV, and ~~mobile market shares. Further, technology from global VoIP providers such as Skype, which offer free PC-to-PC based international calls, was also becoming more prevalent in Hong Kong.~~

~~Network costs and costs of sales.~~ ~~Network costs and costs of sales increased by 8.7% to HK$212.3 million in fiscal 2011 from HK$195.3 million in fiscal 2010 mainly due to~~ the increase in ~~the cost of purchasing international bandwidth as~~uncapitalized depreciation was a result of ~~the combined effect~~our slowdown and suspension of ~~the record growth in broadband subscription and the increasing demand of bandwidth from customers as well as the~~program production.

An increase in ~~program fees~~write-offs of artiste prepayments and provision for ~~IP-TV services to enhance the value of content to customers.~~

~~Other operating expenses.~~ ~~Other operating expenses decreased by 0.8% to~~committed artiste payments, together totaling HK$~~1,097.2~~17.5 million, ~~in fiscal 2011 from HK$1,105.6 million in fiscal 2010 mainly~~ due to under-utilization during the ~~following:~~

period, and a provision made for onerous commitments which we did not expect to be utilized because of our slowdown and suspension of program production.

Set forth below is a table summarizing the details of our other operating expenses in fiscal ~~2010~~2013 and ~~2011:~~2014:


	For the year ended August 31,
	2010			2011			2011			Twelve months ended August 31, 2013 (Fiscal 2013)		Twelve months ended August 31, 2014		Four months ended December 31, 2014			Sixteen months ended December 31, 2014 (Fiscal 2014)		Sixteen months ended December 31, 2014 (Fiscal 2014)
	HK$			HK$			US$			HK$		HK$		HK$			HK$		US$
	(Amounts in thousands)											*(in thousands)*
Talent costs		(301,760	)		(311,355	)		(39,981	)		84,303		105,814		40,688			146,502		18,896
Advertising and marketing expenses		(372,727	)		(344,136	)		(44,190	)		8,595		839		9,231			10,070		1,299
Depreciation		(199,029	)		(218,197	)		(28,018	)		19,107		24,690		9,680			34,370		4,433
Amortization of intangible assets											20,360		29,075		10,992			40,067		5,168
Write off/provision of artiste prepayment											16,852		24,975		3,353			28,328		3,654
Provision for committed artiste payment											—		10,863		(4,860	)		6,003		774
Others		(232,088	)		(223,476	)		(28,697	)		52,297		49,325		29,134			78,459		10,120

Other operating expenses		(1,105,604	)		(1,097,164	)		(140,886	)		201,514		245,581		98,218			343,799		44,344

•

~~Talent costs~~~~. Talent costs increased by 3.2% to HK$311.4 million in fiscal 2011 from HK$301.8 million in fiscal 2010.~~

•

~~Advertising and marketing expenses~~. Advertising and marketing expenses decreased by 7.7% to HK$344.1 million in fiscal 2011 from HK$372.7 million in fiscal 2010 due to a decrease in the scale of marketing campaign, especially lower mass media advertising costs after the cessation of the Member-Get-Member campaign in fiscal 2010.

•

~~Depreciation~~~~. Depreciation increased by 9.6% to HK$218.2 million in fiscal 2011 from HK$199.0 million in fiscal 2010 because of our acceleration in the expansion of our Next Generation Network.~~

Other income, net. ~~Other~~We recorded other income, net, ~~decreased to~~of HK$~~7.2~~147.6 million in fiscal ~~2011 from~~2014, as compared to HK$~~8.0~~128.9 million in fiscal ~~2010.~~

~~Finance costs.~~ ~~Finance costs decreased by 71.6% to~~2013. The increase of HK$~~6.3~~18.7 million ~~in fiscal 2011 from HK$22.2 million in fiscal 2010. The decrease~~ was mainly due to ~~full year impact~~an increase of ~~the finance cost savings through repurchase and redemption of our 10-year senior notes in fiscal 2010.~~

~~Income tax expense.~~ ~~We recorded an income tax expense of~~ HK$~~59.0 million, which included a non-cash deferred tax expenses of HK$55.3~~56.3 million in ~~fiscal 2011, compared~~investment return (which included an additional four months of investment return, amounting to ~~an income tax expense of~~ HK$~~42.7~~35.5 million, in ~~fiscal 2010, which included a non-cash deferred tax expenses~~the current period) and an additional four months of ~~HK$40.1 million.~~

~~Net income.~~ ~~For the foregoing reasons, net~~rental income ~~increased~~from investment properties, amounting to HK$~~313.9~~3.8 million, ~~in fiscal 2011 from HK$216.9 million in fiscal 2010. Net margin increased to 18.7% in fiscal 2011 from 13.8% in fiscal 2010.~~

~~Fiscal 2010 Compared to Fiscal 2009~~

~~Revenues.~~ ~~Revenues increased by 6.5% to HK$1,574.7 million in fiscal 2010 from HK$1,478.2 million in fiscal 2009, reflecting an increase in revenue from our FTNS business, the effects~~both of which were partially offset by a HK$41.4 million decrease in ~~revenue from our IDD business and~~exchange gain mainly caused by the ~~change in the regulatory regime~~depreciation of ~~mobile interconnection charges summarized below. Revenue contribution from our FTNS business increased~~Renminbi (including an additional four months of net exchange loss amounting to ~~86.1% in fiscal 2010 from 83.3% in fiscal 2009.~~

•

~~FTNS business~~. Revenues from our FTNS business increased by 10.2% to HK$1,356.1 million in fiscal 2010 from HK$1,230.9 million in fiscal 2009. The increase was primarily caused by an increase of 17.7% of our FTNS subscription base to 1,110,000 as of August 31, 2010 from 943,000 as of August 31, 2009.

•
~~Broadband Internet access~~. The subscription base for our Internet access services increased by 34.5%, to 526,000 as of August 31, 2010 from 391,000 as of August 31, 2009. During fiscal 2010, we were able to have a record growth of 135,000 net additions through our Member-Get-Member marketing campaigns which reduced the price of our symmetric 100 Mbps broadband services by half to HK$99 per month if a customer introduces a new customer at HK$99 per month. Such marketing campaigns essentially allowed us to increase our revenues by converting one subscriber at HK$182 per month to two subscribers at a minimum rate of HK$99 per month.

•

~~Local VoIP~~. The subscription base for our local VoIP services increased by 12.8%, to 431,000 as of August 31, 2010 from 382,000 as of August 31, 2009, mainly due to improved branding that allowed us to increase sales of our VoIP services to subscribers of our Internet access services.

•

~~IP-TV~~. The subscription base for our IP-TV services decreased by 10.0% to 153,000 subscriptions as of August 31, 2010 from 170,000 as of August 31, 2009 because we proactively dropped certain free or low paying IP-TV subscribers and redeployed the set-top boxes to higher yielding customers. We continued to enhance our channel variety so as to increase the content value to our customers.

~~As a result of OFTA’s decision on the 2008 Determination in May 2010 as stated above, revenue of~~ HK$19.7 million related to mobile interconnection charges was reversed in fiscal 2010. In addition, prior to April 26, 2009, the mobile network operators were required to pay interconnection charges for all calls originating to and from the mobile users. After April 26, 2009, the chargeability of interconnection charges is subject to commercial negotiation. With the withdrawal of regulatory guidance on FMIC in favor of mobile network operators on April 27, 2009, only an insignificant amount of revenue related to mobile interconnection charges was recognized.

~~IDD business~~~~. Revenues from our IDD business decreased by 11.6% to HK$218.6~~9.5 million in fiscal ~~2010~~2014). In fiscal 2014, our other income, net, mainly comprised interest income from available-for-sale securities, bank interest income, rental income from investment properties and net exchange losses. Our investment income is affected by many factors beyond our control. For example, our interest income is affected by changes in interest rates, which are highly sensitive to many factors, including governmental monetary policy and domestic and international economic and political conditions. Deterioration in the credit of the securities in which we have invested and general economic conditions may also materially and adversely affect our investment income.

Finance costs, net. We recorded finance costs of HK$~~247.4~~7.8 million in fiscal ~~2009. The decrease was primarily due~~2014, as compared to the reduction in IDD traffic volume and the decrease in the tariff rate we charged to our customers. Competition during fiscal 2010 intensified as some of our competitors offered international direct dial minutes for free or at significantly lower rates as a marketing incentive to gain local fixed line and mobile market shares. Further, technology from global VoIP providers such as Skype, which offer free PC-to-PC based international calls, was becoming more prevalent.

~~Network costs.~~ ~~Network costs increased by 11.5% to~~ HK$~~195.3~~4.9 million in fiscal ~~2010 from~~2013. The increase of HK$~~175.1~~2.9 million is mainly due to a HK$4.6 million increase in interest on bank loans for investment yield enhancement purposes (including an additional four months of interest on bank loans, amounting to HK$2.0 million in fiscal ~~2009~~2014), partially reduced by a decrease of HK$2.0 million in bank charges.

Impairment losses/write off of assets.We recognized impairment losses and wrote off certain Multimedia Business related assets of HK$32.0 million for fiscal 2014 in our profit and loss.

Income tax credit/(expenses). We recorded income tax expenses of HK$0.2 million in fiscal 2014, which included a non-cash deferred tax charge of HK$0.6 million and a HK$0.4 million over-provision of current tax for the prior year, compared to an income tax credit of HK$1.7 million in fiscal 2013, which mainly was composed of a non-cash deferred tax credit of HK$1.1 million and a HK$0.5 million over-provision of current tax for prior year.

Net loss. For the foregoing reasons, net loss of HK$237.0 million was incurred in fiscal 2014 as compared to HK$40.3 million in fiscal 2013.

Fiscal 2013 Compared to Fiscal 2012

Turnover. Our turnover from the Multimedia Business primarily consists of licensing fees, independent content production and artiste management fees. We recorded turnover of HK$7.8 million in fiscal 2013, primarily reflecting the licensing fees received from the Telecom Business to broadcast news content produced by our news production operation unit, the income from independent content production and the income received from our artiste management functions. We had HK$3.8 million of turnover in fiscal 2012 generated from our Multimedia Business.

Cost of sales. Cost of sales in fiscal 2013 was HK$15.7 million, primarily consisting of talent costs and other production costs which are directly attributable to the turnover generated from licensing of program rights, independent content production and the provision of artiste management services. Our cost of sales in fiscal 2012 was HK$6.0 million incurred. The increase between these two periods was mainly due to the ~~increase~~full-year impact of the license agreement for news content in fiscal 2013, as this license revenue started in April 2012. The license agreement for news content in relation to our discontinued operations expired on August 31, 2013.

Valuation gains on investment properties. Valuation gains on investment properties were HK$43.4 million in fiscal 2013 as compared to HK$18.2 million in fiscal 2012. These valuation gains consisted of the changes in the ~~cost of purchasing international bandwidth as a result~~fair value of the combined effect of the record growth in broadband subscription and the increasing demand of bandwidth from customers as well as the increase in program fees for IP-TV services to enhance the value of content to customers.investment properties held by us.

Other operating expenses. ~~Other~~Our other operating expenses increased ~~by 6.5%~~ to HK$~~1,105.6~~201.5 million in fiscal ~~2010~~2013 from HK$~~1,038.0~~105.0 million in fiscal ~~2009~~2012. This increase was mainly driven by the following:

Amortization of intangible assets and uncapitalized depreciation on fixed assets increased by HK$29.6 million mainly due to the ~~following:~~full-year impact in fiscal 2013 versus five months of effect in fiscal 2012 arised from the grant of the indefeasible right of use of the telecommunications capacity of the Telecom Business for a term of 20 years and the right to use the telecommunications services from the Telecom Business for a term of 10 years, and the purchase of fixed assets mainly on broadcasting and production equipment during fiscal 2012.

Uncapitalized talent costs increased by HK$28.3 million mainly due to the full-year impact in fiscal 2013 on (a) the full range of corporate functions which were previously shared with discontinued operations and (b) uncapitalized production talent costs which were expensed to profit and loss before the resources were fully deployed to production during the year.

Write-off or provision of artiste prepayment amounted to HK$16.9 million due to under-utilization during fiscal 2013.

Advertising and marketing expenses increased by HK$8.4 million for promotional and marketing activities in program preview and corporate events.

Set forth below is a table summarizing the details of our other operating expenses in fiscal ~~2009~~2012 and ~~2010:~~2013:


	For the year ended August 31,									Twelve months ended August 31, 2012 (Fiscal 2012)		Twelve months ended August 31, 2013 (Fiscal 2013)
	2009			2010			2010
	HK$			HK$			US$
	(Amounts in thousands)
*(in thousands)*										HK$		HK$
Talent costs		(302,279	)		(301,760	)		(38,796	)		55,971		84,303
Advertising and marketing expenses		(299,794	)		(372,727	)		(47,920	)		214		8,595
Depreciation		(206,241	)		(199,029	)		(25,588	)		4,636		19,107
Amortization of intangible assets											5,217		20,360
Write off/provision of artiste prepayment											697		16,852
Others		(229,650	)		(232,088	)		(29,839	)		38,225		52,297

Other operating expenses		(1,037,964	)		(1,105,604	)		(142,143	)		104,960		201,514

•

~~Talent costs~~~~. Talent costs decreased by 0.2% to HK$301.8 million in fiscal 2010 from HK$302.3 million in fiscal 2009.~~

•

~~Advertising and marketing expenses~~. Advertising and marketing expenses increased by 24.3% to HK$372.7 million in fiscal 2010 from HK$299.8 million in fiscal 2009. Our salaries and commissions for our sales and marketing Talents increased by HK$28.5 million due to our growth in broadband subscription base. Moreover, our marketing campaigns resulted in an increase in mass media advertising costs of HK$21.6 million and other advertising costs of HK$14.9 million. In addition, the expansion of our sales channels through opening new shops resulted in an increase of advertising and marketing related expenses of HK$7.9 million.

•
~~Depreciation~~. Depreciation decreased by 3.5% to HK$199.0 million in fiscal 2010 from HK$206.2 million in fiscal 2009. Notwithstanding our purchase of additional fixed assets for our network infrastructure as we increased the scale of operations in our FTNS business, a portion of our owned fixed assets were fully depreciated. As a result, we incurred lower depreciation expenses.

Other income, net. Other income, net, ~~decreased~~increased to HK$~~8.0~~128.9 million in fiscal ~~2010~~2013, from HK$~~41.5~~19.9 million in fiscal ~~2009. The decrease~~2012, mainly due to an increase in return driven by the investment of surplus cash retained from the proceeds of the sale of the Telecom Business. Other income, net, was mainly ~~contributed by the loss on extinguishment~~composed of ~~our 10-year senior notes of~~investment income generated from available-for-sale securities, bank interest income, net exchange gain and rental income from investment properties.

Finance costs, net. Finance costs, net, increased to HK$~~9.7~~4.9 million in fiscal ~~2010 compared to the gain on extinguishment of our 10-year senior notes of~~2013 from HK$~~31.4~~2.5 million in fiscal ~~2009. The effect of which was partially offset by~~2012, primarily due to an increase in interest on bank loans and bank charges incurred for investments in available-for-sale securities.

Income tax credit/(expenses). We recorded income tax credit of HK$~~10.1 million recognized in relation to mobile interconnection charges in fiscal 2010.~~

~~Finance costs.~~ ~~Finance costs decreased by 59.7% to HK$22.2~~1.7 million in fiscal ~~2010 from~~2013, which included a HK$~~55.1~~1.1 million non-cash deferred tax credit and a HK$0.5 million over-provision of current tax for the prior year. In fiscal 2012, we incurred HK$2.3 million in fiscal 2009. The decrease was mainly due to finance cost savings through repurchase and redemption of our 10-year senior notes and interest bearing bank borrowings at a lower interest rate. The effect of which was partially offset by the change in fair value of derivative financial instrument that we did not have in fiscal 2009.

~~Income tax expense.~~ ~~We recorded an~~ income tax ~~expense~~expenses, mainly composed of HK$~~42.7~~1.3 million ~~which included a~~in non-cash deferred tax expenses ofand a HK$~~40.1~~0.9 million ~~in fiscal 2010, compared to an income tax expense of HK$38.7 million in fiscal 2009, which included a non-cash deferred tax expenses of HK$37.1 million.~~provision for current tax.

Net ~~income.~~loss. For the foregoing reasons, we recorded net ~~income increased to~~loss of HK$~~216.9~~40.3 million in fiscal ~~2010 from~~2013 as compared to HK$~~212.8~~73.8 million in fiscal ~~2009. Net margin decreased~~2012.

Discontinued operations. The disposal of the Telecom Business was completed on May 30, 2012. The operating results of the disposed Telecom Business up to ~~13.8%~~the disposal date have been presented as discontinued operations in ~~fiscal 2010 from 14.4% in fiscal 2009. The slight decrease in net margin was primarily due~~this annual report. For a detailed discussion of discontinued operations, see Item 18: Financial Statements—Notes to ~~a higher cost in acquiring new customers.~~Consolidated Financial Statements—Note 3.

Recent accounting pronouncements

~~Recent~~Recently issued but not yet effective accounting pronouncements under ~~IFRSs~~IFRS have been included in note 31 to our consolidated financial statements.

B. Liquidity and capital resources

B.	~~Liquidity and capital resources~~

~~We expect cash flow from operating activities to continue to be our principal source of liquidity.~~ As of ~~August~~December 31, ~~2011, we~~2014, the Group had a total cash ~~and bank balances~~position of HK$~~409.0 million. Our day-to-day operations are also supported by~~819.2 million representing our cash at bank and in hand, as compared to HK$~~38.9~~690.5 million ~~banking facilities, of which HK$6.9 million was utilized~~ as of August 31, ~~2011.~~2013 representing our term deposits and cash at bank and in hand. Our outstanding borrowings were HK$802.2 million as of December 31, 2014, as compared to HK$532.0 million as of August 31, 2013. The increase in total cash position was mainly due to the additional net bank loan of HK$270.3 million drawn for investment yield enhancement purposes, net proceeds from disposal or maturity of available-for-sale securities of HK$203.7 million and net interest received of HK$146.8 million, which was partially offset by cash outflow of HK$142.3 million for the acquisition of HKMTV and the assets therein, purchases of certain fixed assets for HK$61.3 million and the utilization of resources for program production and other operating costs. As of December 31, 2014, we had utilized HK$802.2 million (HK$531.9 million as of August 31, 2013) uncommitted banking facilities, mainly for investment purpose, leaving HK$1,508.8 million (HK$2,011.8 million as of August 31, 2013) uncommitted banking facilities available for future utilization.

We believe that our current cash and cash equivalents and ~~cash flow from operations~~term deposits on hand, together with the unutilized banking facilities, will be sufficient to meet our anticipated cash needs, including working capital requirements, capital ~~expenditures,~~expenditure, repayment of our indebtedness when fall due and various contractual obligations, for at least the next 12twelve months. Our cash flows from operations, however, may decrease due to lower customer demand resulting from rapid technological changes, increasing competition resulting from new local and foreign entrants into the market, or our failure to obtain or renew the necessary telecommunication licenses. A decrease in our operating cash flow could adversely affect our ability to make planned capital expenditures, to comply with our obligations under various operating and capital leases and to repay amounts due under banking facilities.

Cash flow

The following table summarizes our cash flows for each of fiscal ~~2009, 2010~~2012, 2013 and ~~2011:~~2014:

   For the year ended August 31,
   2009 2010 2011 2011
   HK$ HK$ HK$ US$
   (Amounts in thousands)
Net cash inflow from operating activities
   536,771    485,340    585,899    75,235
Net cash outflow from investing activities
   (176,488 ) (306,254 ) (414,189 ) (53,186 )
Net cash (outflow)/inflow from financing activities
   (561,292 ) 178,307    (343,112 ) (44,059 )


(Decrease)/increase in cash and cash equivalents
   (201,009 ) 357,393    (171,402 ) (22,010 )
Cash and cash equivalents, at the beginning of year
   421,610    221,052    578,175    74,243
Effect of foreign exchange rate changes on cash
   451    (270 ) 1,358    174


Cash and cash equivalents, at the end of the year
   221,052    578,175    408,131    52,407


Analysis of the balances of cash and cash equivalents

Cash at bank and in hand
   226,416    588,665    408,976    52,516
Bank overdrafts — unsecured
   (5,364 ) (10,490 ) (845 ) (109 )


   221,052    578,175    408,131    52,407


	Twelve months ended August 31, 2012 (Fiscal 2012)			Twelve months ended August 31, 2013 (Fiscal 2013)			Twelve months ended August 31, 2014			Four months ended December 31, 2014			Sixteen months ended December 31, 2014 (Fiscal 2014)			Sixteen months ended December 31, 2014 (Fiscal 2014)
	HK$			HK$			HK$			HK$			HK$			US$
							*(in thousands)*
Net cash (outflow)/inflow from operating activities		181,924			(356,804	)		(241,404	)		(49,662	)		(291,066	)		(37,542	)
Net cash inflow/(outflow) from investing activities		3,681,791			(1,781,342	)		(120,577	)		627,835			507,258			65,426
Net cash inflow/(outflow) from financing activities		(2,191,749	)		403,762			322,129			(65,116	)		257,013			33,150

Increase/(decrease) in cash and cash equivalents		1,671,966			(1,734,384	)		(39,852	)		513,057			473,205			61,034
Cash and cash equivalents, at the beginning of period		408,131			2,080,053			347,849			305,221			347,849			44,866
Effect of foreign exchange rate changes on cash		(44	)		2,180			(2,776	)		908			(1,868	)		(241	)

Cash and cash equivalents, at the end of the period		2,080,053			347,849			305,221			819,186			819,186			105,659

Analysis of the balances of cash and cash equivalents
Cash at bank and in hand		2,083,079			347,849			305,221			819,186			819,186			105,659
Bank overdrafts – unsecured		(3,026	)		—			—			—			—			—

		2,080,053			347,849			305,221			819,186			819,186			105,659

Operating activities

~~Our principal source~~In fiscal 2014, we incurred a net cash outflow from operating activities of HK$291.1 million, as compared to a net cash outflow of HK$356.8 million in 2013. The decrease was mainly due to the slow-down and suspension of our production and a cash-advance received for program content licensing and advertising.

In fiscal 2013, we incurred a net cash ~~generated~~outflow from ~~our FTNS business. Net~~operating activities of HK$356.8 million, as compared to HK$181.9 million net cash inflow in fiscal 2012. The decrease was mainly due to nil contribution from the disposed Telecom Business during the year, an increase in programme costs and the costs for maintaining full spectrum of corporate overheads for the Multimedia Business.

Investing activities

In fiscal 2014, we incurred a net cash inflow from ~~operating~~investing activities ~~decreased by 9.6%~~of HK$507.3 million, mainly representing decrease in term deposit of HK$335.3 million, net proceeds from the maturity, disposal and investment in available-for-sales securities of HK$~~536.8~~203.7 million, interest income received from investment in ~~fiscal 2009 to~~available-for-sale securities and bank deposits of HK$~~485.3~~160.1 million, ~~in fiscal 2010, which was a reflection~~net of cash outflow for the acquisition of a ~~slight increase in our profit before taxation offsetting by lower cash receipt~~subsidiary of ~~receivables. Net cash inflow from operating activities increased 20.7% from~~ HK$~~485.3~~142.3 million ~~in fiscal 2010 to HK$585.9 million in fiscal 2011, primarily reflecting the increase in our profit before taxation resulting from the continued expansion of our subscription base.~~

~~Investing activities~~

~~Net~~and cash outflow ~~from investing activities in fiscal 2011 was HK$414.2 million. The net cash outflow was mainly due to~~for the purchase of fixed assets of HK$~~397.9 million for the development of our Next Generation Network and the purchase of land premium of HK$48.0 million for constructing~~61.3 million. In fiscal 2013, we incurred a ~~multimedia production and distribution centre.~~

~~Net~~net cash outflow from investing activities ~~in fiscal 2010 was HK$306.3 million. The net cash outflow was mainly due to our purchase of fixed assets in the amount~~ of HK$~~349.1 million.~~

~~Net cash outflow from investing activities~~1,781.3 million, mainly representing the investment in ~~fiscal 2009 was~~available-for-sale securities of HK$~~176.5 million. The net cash outflow was mainly due to our~~2,181.3 million and purchase of fixed assets of HK$~~289.9~~39.4 million, ~~the effect~~net of ~~which were partially offset by an~~ decrease in ~~pledged~~term deposits of HK$211.7 million, proceeds from disposal of certain available-for-sale securities of HK$155.9 million and interest income from investment in available-for-sale securities and bank deposits of HK$~~72.3~~70.7 million.

In fiscal 2012, we incurred as net cash inflow from investing activities of HK$3,681.8 million, mainly representing the proceeds from the disposal of the Telecom Business (net of cash disposed of), net of increase in term deposits of HK$544.0 million and ~~net proceeds from maturity~~purchase of ~~investment in debt securities~~fixed assets of HK$~~28.1~~467.8 million.

Financing activities

~~Net cash outflow from financing activities in~~In fiscal ~~2011 was HK$343.1 million. The~~2014, we recorded net ~~cash outflow was mainly due to our repayment of our bank loan of HK$125 million and payment of cash dividends of HK$219.3 million.~~

~~Net~~ cash inflow from financing activities inof HK$257.0 million, mainly due to proceeds from bank loans of HK$270.4 million.

In fiscal ~~2010 was~~2013, we recorded net cash inflow from financing activities of HK$~~178.3~~403.8 million. The net cash inflow was mainly due to ~~the~~ proceeds from ~~the offering of new ordinary shares in the amount of HK$396.4 million and the proceeds from new~~ bank loans of HK$~~163.4~~531.8 million ~~which were partially offset by the repurchase and redemption~~net of ~~our 10-year senior notes of HK$172.4 million and~~final dividend paid for fiscal 2012 during the year of HK$~~158.4~~121.4 million.

~~Net~~In fiscal 2012, we recorded net cash outflow from financing activities ~~in fiscal 2009 was HK$561.3 million. The net cash outflow was mainly due to our repurchase of 10-year senior notes for an aggregate consideration~~ of HK$~~485.8~~2,191.7 million, ~~(including transaction costs), payment of interest on~~mainly attributable to the ~~10-year senior notes of HK$52.7 million and~~ payment of cash dividends of HK$~~23.0~~2,257.8 million.

~~Long-term~~ Indebtedness

As of ~~August~~December 31, ~~2011,~~2014, we had outstanding debt of HK$~~1.2~~802.2 million. See Note 22 to the consolidated financial statements included elsewhere in this annual report for additional information concerning our outstanding debt.

Banking facilities

As of ~~August~~December 31, ~~2011, we had available~~2014, the Group has utilized HK$802.2 million of its banking facilities, ~~and revolving loan facility of~~mainly for investment purposes, leaving HK$~~38.9~~1,508.8 million of ~~which HK$6.9 million was utilized.~~uncommitted banking facilities available for future utilization. The Group’s loans are secured by an equivalent amount of available-for-sale securities. See Note 22 to the consolidated financial statements included elsewhere in this annual report for additional information concerning our banking facilities.

Capital ~~expenditures~~expenditure

In ~~order to further develop our Next Generation Network and continue to increase~~fiscal 2014, the ~~scale~~Company recorded HK$68.7 million of ~~operations of our FTNS business, we plan to make a total~~ capital expenditure ~~ranging~~as compared to HK$37.7 million for fiscal 2013. The fiscal 2014 capital expenditure mainly related to the set-up of the HKTV Mall, including computer system for OTT and online shopping platform, motor vehicles and equipment for logistics function. Moreover, the Group, through its wholly-owned subsidiary, acquired 100% of the equity interests of HKMTV for HK$157.5 million on December 20, 2013, however, its service launch was suspended due to the dispute on the transmission standard for mobile TV services.

With regard to future capital expenditure requirements for the Multimedia Business, the Company will remain cautious and it expects to fund its requirements with the consideration received from ~~approximately HK$320 million to HK$350 million in~~the disposal of the Telecom Business during fiscal 2012 ~~to further increase~~and banking facilities within the ~~coverage of our Next Generation Network. In addition, we plan to invest HK$600 million for a multimedia production~~Group.

C. Research and ~~distribution centre within three years.~~development, patents and licenses

C. ~~Research and development, patents and licenses~~

We commit considerable resources to our research and development ~~department~~team in order to ~~continuously~~ improve our services and ~~improve our market position.~~to better position ourselves in the multimedia market. As of ~~August 31, 2011,~~April 27, 2015, our research and development ~~team~~department in Hong Kong consisted of approximately 2527 Talents experienced in systems design, engineering, ~~telecommunications~~mobile technology and computer programming. Our research and development ~~department~~team is primarily responsible for assessing and adapting the technology that we ~~employ~~expect to deploy in ~~upgrading~~Multimedia Business, such as through the Internet. In particular, our research and ~~expanding our Next Generation Network.~~development team has been discussing and evaluating with prospective applications developers the different technical solutions available for the deployment and enhancement of the OTT and online shopping platform and services. To identify and develop new market opportunities ~~the~~and product advancement, our research and development team ~~assesses~~evaluates new ~~services offered by telecommunications and Internet companies~~technology under development in the United States and elsewhere and works closely with our sales and marketing ~~department. Our research and development expenditures were approximately HK$10.8 million, HK$11.2 million and HK$11.8 million~~department for ~~fiscal 2009, 2010 and 2011, respectively.~~product development.

D. Trend information

D.	~~Trend information~~

Revenue from our IDD business decreased by 9.8% to HK$197.2 million in fiscal 2011 from HK$218.6 million in fiscal 2010. The principal reason for this decrease was the intense competition, as our key competitors introduced highly aggressive price cuts. Partly as a result, the traffic volume of our IDD business decreased by 11.2% to 412.0 million minutes in fiscal 2011 from 464.0 million minutes in fiscal 2010. We expect competition will continue to increase in the future, creating further pressure on our volume and pricing.

Revenue from our FTNS business grew by 9.5% to HK$1,484.3 million in fiscal 2011 from HK$1,356.1 million in fiscal 2010. The principal reason for this increase was due to the broadband subscription growth of 12.2% to 590,000 subscription accounts as of August 31, 2011 from 526,000 subscription accounts as of August 31, 2010.

The global economic downturn has had a dampening effect on consumer sentiment and business activities across the globe in late 2008 and 2009 and the global economy continues to experience continued market volatility. The impact of the downturn on our operations has been limited because our FTNS and IDD services are “semi-utility” services. However, if the global economic downturn continues to experience significant volatility, demand for our services may be adversely affected.

E.	~~Off-balance sheet arrangements~~

Other than as ~~described~~disclosed elsewhere in ~~note 27~~this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from September 1, 2013 to December 31, 2014 that are reasonably likely to have a material adverse effect on our ~~Consolidated Financial Statements, we have~~revenue, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not ~~entered into any~~necessarily indicative of future operating results or financial conditions.

E. Off-balance sheet arrangements

As of December 31, 2014 and August 31, 2013, the Group had no material contingent liabilities or off-balance-sheet ~~arrangements with any entities or individuals.~~obligations.

F. ~~Tabular disclosure of contractual obligations~~

F. Tabular disclosure of contractual obligations

The following table sets forth information regarding our aggregate payment obligations in future years of the contractual obligations and commercial commitments that we had as of ~~August~~December 31, ~~2011.~~2014.


	Payments due by period
Contractual obligations	Total HK$		Within 1 year HK$		More than 1 year but within 3 years HK$		More than 3 years but within 5 years HK$		More than 5 years HK$		Total HK$		Within 1 year HK$		More than 1 year but within 3 years HK$		More than 3 years but within 5 years HK$
	(Amounts in thousands)										(in thousands)
Capital expenditure items		141,432		141,432		—		—		—		19,087		19,087		—		—
Operating leases		131,935		90,979		33,315		4,430		3,211		5,976		3,585		2,391		—
Obligation under finance leases		435		125		238		72		—
Other current liabilities		257,099		257,099		—		—		—
Programming fees (IP-TV)		52,974		25,777		27,194		3		—

Other current liabilities⁽¹⁾												882,450		882,450		—		—
Program fee												13,955		11,350		2,605		—
Total		583,875		515,412		60,747		4,505		3,211		921,468		916,472		4,996		—

Note:

~~Note:~~

(1)

The other current liabilities of HK$~~257.1~~882.5 million was comprised of bank ~~overdrafts —~~ loans—unsecured ~~liabilities~~ of HK$~~0.8~~802.2 million, accounts payable of HK$~~17.4~~4.5 million, other payables and accrued charges of HK$~~209.6~~73.9 million and deposits received of HK$~~27.0 million and tax payable of HK$2.3~~1.9 million. A detailed explanation of the nature of accounts payable and other payables and accrued charges is contained in Note 1721 to the Company’s audited consolidated financial statements included in this ~~Form~~
~~20-F.~~annual report.

G. Safe Harbor

G.	~~Safe Harbor~~

See “Note regarding forward-looking ~~statements”.~~

~~ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES~~statements.”

A.ITEM 6

~~Directors and senior management~~DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and senior management

Our board of directors consists of ~~eight~~seven directors, three of whom, Mr. Lee Hon Ying, John, ~~Dr. Chan Kin Man and~~ Mr. Peh Jefferson Tun Lu and Mr. Mak Wing Sum, Alvin, are independent non-executive ~~directors and one of whom, Dr. Cheng Mo Chi, Moses, is a non-executive director. The remaining four,~~directors. Mr. Wong Wai Kay, Ricky, Mr. Cheung Chi Kin, Paul, ~~Mr. Yeung Chu Kwong, William~~Ms. To Wai Bing and ~~Mr.~~Ms. Wong Nga Lai, ~~Ni Quiaque,~~Alice, are executive directors. Every director, including non-executive and independent non-executive directors, is subject to retirement by rotation at least once every three years. One-third of the directors must retire from office at each annual general meeting and their re-election is subject to the approval of shareholders of the Company. Mr. Wong Wai Kay, Ricky, Mr. Cheung Chi Kin, Paul and Ms. Wong Nga Lai, Alice will retire from office by rotation at the forthcoming annual general meeting and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting.

The following table sets forth certain information concerning our directors and senior management as of ~~December 13, 2011.~~April 27, 2015.

Date
joined
City

Name    Age    Position    Telecom
Board of directors:

WONG Wai Kay, Ricky
   50       Executive Director and Chairman    1992
CHEUNG Chi Kin, Paul
   54       Executive Director and Vice Chairman    1992
YEUNG Chu Kwong, William
   51       Executive Director and Chief Executive Officer    2005
LAI Ni Quiaque
   42       Executive Director, Chief Financial Officer, Company Secretary and Head of Talent Engagement    2004
CHENG Mo Chi, Moses
   61       Non-Executive Director    1997
LEE Hon Ying, John
   65       Independent Non-Executive Director    1997
CHAN Kin Man
   52       Independent Non-Executive Director    1997


Name	Age	Position	Date joined HKTV
Board of directors:
WONG Wai Kay, Ricky	53	Executive Director and Chairman	1992
CHEUNG Chi Kin, Paul	57	Executive Director and Vice Chairman	1992
TO Wai Bing	53	Executive Director and Chief Executive Officer	2007
WONG Nga Lai, Alice	40	Executive Director, Chief Financial Officer, Company Secretary	2003
LEE Hon Ying, John	68	Independent Non-Executive Director	1997
PEH Jefferson Tun Lu	55	Independent Non-Executive Director	2004
MAK Wing Sum, Alvin	62	Independent Non-Executive Director	2013

PEH Jefferson Tun Lu
   52       Independent Non-Executive Director    2004
Senior management:

CHONG Kin Chun, John
   49       Managing Director of Corporate Division    1996
LO Sui Lun
   47       Chief Technology Officer    1998
TO Wai Bing
   49       Managing Director of Business Development    2007

Executive directors

Mr. WONG Wai Kay, Ricky, aged ~~50,~~53, is the co-founder and Chairman of the Group and is also a director of certain subsidiaries of the Group. HeMr. Wong is responsible for ~~our~~ overall strategic planning and ~~management.~~management of the Group. Mr. Wong has ~~over 26 years’~~extensive experience in the telecommunications and computer ~~industries.~~industries as well as in corporate management. He had worked at a major US-listed computer company as a marketing representative and was responsible for marketing and distribution of computer products in Hong Kong from 1985 to 1989. He was also a co-founder and director of a company principally engaged in import and distribution of computer systems in Canada prior to co-founding of the Group. Mr. Wong holds a Bachelor’s Degree in Science and a Master of Business Administration Degree (Executive MBA ~~Program)~~Programme) from The Chinese University of Hong Kong. He is a first cousin of Mr. Cheung Chi Kin, Paul, the Vice Chairman of the Group. Currently, Mr. Wong is a member of ~~Zhejiang Committee, Chinese People’s Political Consultative Conference, a member of~~ the Board of Trustees, United College, The Chinese University of Hong ~~Kong and a member of the executive committee of the Digital Solidarity Fund of Hong Kong Council of Social Service.~~Kong.

Mr. CHEUNG Chi Kin, Paul, aged ~~54,~~57, is the co-founder and Vice Chairman of the Group and is also a director of certain subsidiaries of the Group. Mr. Cheung is responsible for overall strategic planning and management of the Group. Prior to that, Mr. Cheung was ~~appointed as~~previously the Chief Executive Officer of the Company and was responsible for our day-to-day operations and technological research, development and support activities. Mr. Cheung has ~~more than 30 years’~~extensive experience in the telecommunications and computer ~~industries.~~industries as well as in corporate management. He had worked in several companies engaged in application software development and computer consultancy prior to co-founding of the Group. Mr. Cheung graduated with a Diploma of Advanced Programming and System Concepts Design from Herzing Institute, Canada. Mr. Cheung is a first cousin of Mr. Wong Wai Kay, Ricky, the Chairman of the Group.

~~Mr. YEUNG Chu Kwong, William,~~Ms. TO Wai Bing, aged ~~51,~~53, was appointed as the Executive Director and Chief Executive Officer of the Group in ~~November 2008 with~~May 2012. Ms. To is a director of certain subsidiaries of the ~~responsibilities~~Group, the Chief Operating Officer of Hong Kong Media Production Company Limited and the Chief Executive Officer of Leader Artiste Management Company Limited. Ms. To is responsible for ~~developing corporate strategies and overseeing~~ the ~~operations~~day-to-day management of the Group’s business. Prior to that, Ms. To was the Managing Director of Business Development of the Group. ~~Before that, Mr. Yeung joined the Group as Chief Operating Officer~~Ms. To has a Diploma in ~~October 2005. He was~~Electronic Engineering and a Higher Certificate in charge of the Customer Engagement Department overseeing customer relationship management and was also in charge of the Network Development Department. Mr. Yeung has more than 20 years’ experience in the telecommunications industry. Prior to joining the Group, Mr. Yeung was the Director of Customers Division in SmarTone-Vodafone, and was an Inspector of Police in theElectronic Engineering from The Hong Kong Police Force. Mr. Yeung holds a Bachelor of Arts Degree from Hong Kong Baptist University, a Master of Business Administration Degree from University of Strathclyde, U.K. and a Master of Science Degree in Electronic Commerce and Internet Computing from The University of Hong Kong. Mr. Yeung is also a graduate of the Senior Executive Program of the Columbia University Graduate School of Business in New York. In 2010, Mr. Yeung was awarded the “Champion of Human Resources” by the HRM Awards.

~~Mr. LAI Ni Quiaque, aged 42, is Chief Financial Officer, Company Secretary and Head of Talent Engagement. Mr. Lai joined~~Polytechnic University. Ms. To re-joined the Group in May ~~2004 and has over 20 years of experience in telecommunications industry, research and finance. Prior~~2007 after her previous service with the Group from September 1998 to July 2006. Before joining the Group, ~~Mr.~~Ms. To had worked at Hong Kong Telecom International Limited for 16 years.

Ms. WONG Nga Lai, Alice, aged 40, was appointed as the Executive Director, Chief Financial Officer and Company Secretary of the Group in May 2012 and is also a ~~highly rated analyst as Director~~director of certain subsidiaries of the Group. Ms. Wong has extensive experience in financial management, financial reporting and ~~Head~~corporate finance. She has overall responsibility for the Group’s finance, treasury, procurement and investor engagement functions. Prior to that, Ms. Wong was the Financial Controller of Asia Telecom Research for Credit Suisse and was involved in numerous global fund raisings for a wide range of Asian Telecom carriers such as China Mobile, China Telecom, China Unicom, SK Telecom, PCCW, Telekom Malaysia, etc. Before that, Mr. Lai held positions with Hongkong Telecom (now known as PCCW) and Kleinwort Benson Securities (Asia). Mr. Laithe Group. Ms. Wong holds a Bachelor of Commerce degree from the University of ~~Western Australia and an Executive~~Queensland, a Master of Business Administration ~~Degree~~degree from ~~Kellogg-HKUST. Mr. Lai~~the Hong Kong University of Science and Technology and a Postgraduate Diploma in Corporate Governance. She is a ~~Fellow~~qualified member of the Hong Kong Institute of Certified Public Accountants ~~or HKICPA~~(HKICPA) and ~~CPA Australia and is a Member~~Association of the Hong Kong Institute of Directors. In 2009, Mr. Lai was awarded the “Champion of Human Resources” by the HRM Awards, and in 2011 he was selected by Global Telecom Business Magazine as one of the Top 50 CFOs in the industry to watch. Mr. LaiChartered Certified Accountants (ACCA). She has ~~also~~ been ~~appointed as~~ a member of the ~~Remuneration Committee~~Student Affairs Sub-committee of ~~the Company.~~

~~Non-executive director~~

~~Dr. CHENG Mo Chi, Moses, aged 61, was appointed as an Independent Non-executive Director of~~ACCA Hong Kong since 2010. Before joining the Group, on June 17, 1997 and has been re-designated as a Non-executive Director of the Group with effect from September 30, 2004. Dr. Cheng has also been appointed as a member of the Remuneration Committee of the Company. Dr. Cheng is a practicing solicitor and the senior partner of Messrs. P.C. Woo & Co. and was a member of the Legislative Council of Hong Kong. He is the Founder Chairman of the Hong Kong Institute of Directors of which he is now the Honorary President and Chairman Emeritus. Dr. Cheng currently holds directorships in K. Wah International Holdings Limited, China Mobile Limited, China Resources Enterprise, Limited, Towngas China Company Limited, Hong Kong Exchanges and Clearing Limited, Kader Holdings Company Limited, Liu Chong Hing Investment Limited, Guangdong Investment Limited and Tian An China Investments Company Limited, all of which are publicly listed companies in Hong Kong. Dr. Cheng is also an independent non-executive director of ARA Asset Management Limited, a company whose shares are listed on Singapore Exchange Limited. His other directorships in publicly listed companies in the last three years include China COSCO Holdings Company Limited and Galaxy Entertainment Group Limited, both of which are public listed companiesMs. Wong had worked for PricewaterhouseCoopers in Hong Kong ~~and ARA Asset Management (Fortune) Limited which manages Fortune Real Estate Investment Trust, a real estate investment trust listed~~primarily focusing on the ~~Singapore Stock Exchange.~~technology, info-communications and entertainment sectors.

Independent non-executive directors

Mr. LEE Hon Ying, John, aged ~~65,~~68, is the managing director of Cyber Networks Consultants Company in Hong Kong. He was the Regional Director, Asia Pacific of Northrop Grumman-Canada, Ltd. He was previously the director of network services of Digital Equipment (HK) Limited and prior to that, worked for Cable and Wireless (HK) Limited and Hong Kong Telecom. He is a chartered engineer and a member of Institution of Engineering and Technology, the United Kingdom, the Hong Kong Institution of Engineers and the Hong Kong Computer Society. He received a Master’s Degree in Information System from The Hong Kong Polytechnic University in 1992. In addition, he is the Vice President, International Structure covering 150 countries worldwide and Board Member of the Society of St. Vincent de Paul, Council General, which is an international charity body with its head office in Paris, France. He is the ~~Commission member~~Vice President of ~~Catholic Diocese~~Parish Council of St. Anthony Church in Hong ~~Kong Diocesan for Hospital Pastoral Care.~~Kong. Mr. Lee has been a Director of the Group since June 1997. Mr. Lee has also been appointed as the chairman of the Audit Committee and Remuneration Committee ~~of the Company.~~

~~Dr. CHAN Kin Man, aged 52, is Director of Centre for Civil Society Studies, Associate Director of Center for Entrepreneurship~~ and Associate Professor of the Department of Sociology of The Chinese University of Hong Kong. He received a Bachelor of Social Science Degree from The Chinese University of Hong Kong in 1983 and a Doctor of Philosophy Degree from Yale University in the U.S. in 1995. Dr. Chan has been a Director of the Group since June 1997. Dr. Chan has also been appointed as a member of the ~~Audit Committee and Remuneration~~Nomination Committee of the Company.

Mr. PEH Jefferson Tun Lu, aged ~~52,~~55, is a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants and a Certified Practicing Accountant of CPA Australia. Mr. Peh holds a Master Degree in Business from the University of Technology, Sydney. He has over 2932 years of experience in finance, accounting and management from listed and private companies in Hong Kong and Australia. Mr. Peh has been a Director of the Group since September 2004. Mr. Peh has also been appointed as a member of the Audit Committee and Remuneration Committee as well as the chairman of the Nomination Committee of the Company.

~~Senior management~~

Mr. ~~CHONG Kin Chun, John,~~MAK Wing Sum, Alvin, aged ~~49, is the Managing~~62, was appointed as an Independent Non-executive Director of the ~~Corporate Division~~Group on September 1, 2013. Mr. Mak has also been appointed as a member of the ~~Group.~~Audit Committee, Nomination Committee and Remuneration Committee of the Company. He is ~~responsible for sales, servicing~~a Chartered Accountant and ~~network expansion development~~is a member of the ~~Group’s international telecommunications services~~Canadian Institute of Chartered Accountants as well as a member of the Hong Kong Institute of Certified Public Accountants. Mr. Mak is currently an independent non-executive director of Goldpac Group Limited, I.T Limited, Lai Fung Holdings Limited and ~~fixed telecommunications network services for business, corporate and carrier customers. Mr. Chong joined the Group in February 1996 and holds a Bachelor’s Degree in Arts from~~Luk Fook Holdings (International) Limited, all four companies are listed on The ~~University~~Stock Exchange of Hong Kong Limited. After working in Citibank for over 26 years, Mr. Mak retired in May 2012. He last served as the Head of Markets and a Master of Business Administration Degree (Executive MBA Program) from The Chinese University of Hong Kong. Mr. Chong worked as a general manager overseeing product management and the sales force of a listed telecommunications products company inBanking for Citibank Hong Kong, ~~from 1987 to 1996.~~

~~Mr. LO Sui Lun, aged 47, was appointed as~~being the ~~Chief Technology Officer~~country business manager for corporate and investment banking business. At Citibank, he had held various senior positions including Head of ~~the Group in April 2011. He is~~Global Banking responsible for managing all the Group’s network, information system development and operations including broadband networking, wireless applications, VoIP networks, Pay TV operation and product development. He is also responsible for regulatory and carrier relations matters of the Group. Currently, he is in-charge of the Multimedia Production and Distribution Centre Project. Mr. Lo joined the Group in September 1998.coverage bankers. Prior to that, he also managed the Hong Kong corporate finance business, regional asset management business and was the Chief Financial Officer of North Asia. Before joining Citibank in 1985, Mr. LoMak was an audit group manager at Coopers & Lybrand (now known as PricewaterhouseCoopers). He worked for ~~PCCW (formerly known as “Hong Kong Telecom”)~~Coopers & Lybrand for ~~nine~~eight years, ~~gaining experience~~five of which was in network planning and undersea cable investment. Mr. Lo holds a Bachelor’s Degree in Sciences in Electronics from The Chinese University of Hong Kong and a Master’s Degree in Business AdministrationToronto, Canada. He graduated from University of ~~Strathclyde, U.K.~~Toronto with a Bachelor of Commerce in 1976.

~~Ms. TO Wai Bing, aged 49, is the Managing Director~~Senior management

Our Executive Directors are also members of Business Development of the Group. Ms. To is also in charge of International Business Department, Carrier Business Department and Pay TV Department. She is responsible for the control of cost of services, sales of carrier business, development of Pay TV business, explore and secure business partnerships to strengthen the Group’s business operations and development. Before joining the Group, Ms. To had worked in the Hong Kong Telecom Group for 16 years after graduating from The Hong Kong Polytechnic University with a Diploma in Electronic Engineering and subsequently a Higher Certificate in Electronic Engineering. Ms. To rejoined the Group in May 2007 after her previous service with the Group from September 1998 to July 2006.our senior management.

B. Compensation

Directors’ and senior management’s compensation

Our directors and senior management receive compensation in the form of salaries, housing allowances, discretionary bonuses, other allowances and benefits in kind, including our contribution to the pension schemes for such individuals. We also granted share options to various directors and members of our senior management. For more information regarding share options granted to directors and members of our senior management, see Item 6 “Directors, senior management and ~~employees —~~ employees—Share ownership” below in this annual report.

Our senior management and Talents are entitled to receive an annual discretionary bonus based on their individual performance and our financial performance during the year ~~in question.~~under review.

The aggregate amount of salaries or other compensation, housing allowances, other allowances and benefits in kind paid by us to our directors and senior management was ~~approximately~~ HK$~~40.6~~26.5 million for fiscal ~~2011,~~2014, compared with HK$~~46.1~~20.6 million for fiscal ~~2010.~~2013. The aggregate amount of contribution that we made to the retirement or similar benefits for our directors and members of our senior management was HK$~~2.6~~2.4 million for fiscal ~~2011,~~2014, compared with HK$~~2.7~~1.8 million for fiscal ~~2010.~~2013.

Except as discussed herein, no other payments have been paid or are payable, in respect of fiscal ~~2011,~~2014, by us or any of our subsidiaries to our directors and senior management.

C. Board practices

C.	~~Board practices~~

Service contracts

We entered into service agreements with our four executive directors, ~~Messrs.~~Mr. Wong Wai Kay, Ricky, Mr. Cheung Chi Kin, Paul, ~~Yeung Chu Kwong, William~~Ms. To Wai Bing and Ms. Wong Nga Lai, ~~Ni Quiaque,~~Alice, respectively. These service agreements include non-competition clauses under which our executive directors agree not to compete with us in accordance with the terms and conditions therein and shall continue to be effective unless and until terminated by either party of the respective service agreements. None of the agreements provide for any benefits or compensation upon termination of employment.

“Controlled company” exemption

We are a “controlled company” within the meaning of Nasdaq Listing Rule 5615(c) and IM-5615-5. More than 50.0% of the voting power for the election of our directors is held by a group consisting of Top Group International Limited, Mr. Wong Wai Kay, Ricky and Mr. Cheung Chi Kin, Paul. Mr. Wong and Mr. Cheung are the controlling shareholders of Top Group International Limited and have entered into a voting agreement pursuant to which they agreed to vote all of the shares held by Top Group International Limited, representing ~~43.98%~~42.00% of the voting power, all of the shares held by Mr. Wong individually, representing ~~0.93%~~1.88% of the voting power, and all of the shares held by Mr. Cheung individually, representing ~~5.73%~~6.23% of the voting power, collectively as a group.

We have elected to rely on the exemption from the majority independent board requirement, as set forth in Nasdaq Listing Rule 5615(b), except for the requirements of subsection (b)(2), which pertain to executive sessions of independent directors, and from the requirement for independent director oversight of executive officer compensation and director nominations, as set forth in Nasdaq Listing Rules 5605(d) and 5605(e).

In accordance with the laws of Hong Kong, the nomination and remuneration of our directors are governed by our ~~Articles~~Articles. Pursuant to our Articles, our directors are appointed by our shareholders in the annual general meeting, and our directors’ fees are recommended by the remuneration committee of our board of directors and determined by our shareholders at the annual general meeting.

Audit committee

Our board of directors established an audit committee in March 1999 to ensure the impartial supervision of our accounting and business operations. The audit committee is comprised of three independent non-executive directors, namely, Mr. Lee Hon Ying, John (the Chairman of the audit committee), ~~Dr. Chan Kin Man and~~ Mr. Peh Jefferson Tun ~~Lu.~~Lu and Mr. Mak Wing Sum, Alvin. Mr. Peh was appointed to the audit committee on September 1, 2004 and ~~is a~~Mr. Mak was appointed to the audit committee on September 1, 2013. Both are “financial ~~expert”~~experts” within the meaning of, and as required by, the ~~U.S.~~ Sarbanes-Oxley ~~Act of 2002.~~Act.

The audit committee is governed by an audit committee charter, which was adopted by our board of directors in ~~August~~ 2004 and updated in ~~November 2010. It~~March 2015. The audit committee is responsible for the following:

overseeing the accounting and financial reporting process of the Company and the audits of the Company’s consolidated financial statements on behalf of the board of directors; and

the appointment, compensation, retention and oversight of the work of the Company’s independent auditors (including resolution of disagreements between management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.

As provided in our audit committee charter, the audit committee is required to meet in person or telephonically at least twice a year and has the resources and authority appropriate to discharge its responsibilities as required by law, including the authority to engage independent counsel and other advisors as the audit committee deems necessary to carry out its duties.

The audit committee met ~~four~~five times in fiscal ~~2011.~~2014. The major works performed by the committee from September 1, ~~2010~~2013 to ~~August~~December 31, ~~2011~~2014 included the following:

Reviewed our consolidated financial statements for the fiscal year ended August 31, ~~2010 and~~2013, for the six months ended February 28, ~~2011;~~

2014 and for the twelve months ended August 31, 2014;

Reviewed the internal audit progress, including procedures required for compliance with the Sarbanes-Oxley Act;

Reviewed the external auditor’s ~~report~~reports on the ~~review~~reviews of our interim financial report for the six months ended February 28, ~~2011~~2014 and our ~~audited~~second interim financial report for the twelve months ended August 31, 2014 and the audit of our consolidated financial statements for the financial year ended August 31, ~~2010;~~2013; and

Pre-approved the audit and non-audit services provided by KPMG, our external auditor.

Remuneration committee

Our board of directors established a remuneration committee in ~~August~~ 2001 to oversee the Company’s remuneration packages for executive directors. Among others, each of our executive directors is entitled to receive ~~an annual~~the discretionary performance bonus of such amount as determined by the board of directors upon recommendation and approval by the remuneration committee. The remuneration committee is comprised of ~~six~~four members with three independent non-executive directors, Mr. Lee Hon Ying, John, ~~Dr. Chan Kin Man and~~ Mr. Peh Jefferson Tun ~~Lu; the non-executive director, Dr. Cheng Mo Chi, Moses;~~Lu, Mr. ~~Lai Ni Quiaque, the executive director, Chief Financial Officer, Company Secretary and Head of Talent Engagement~~Mak Wing Sum, Alvin and Ms. Choy Mei Yuk, Mimi, Director of Talent Management. Mr. Lee Hon Ying, John is the chairman of the remuneration committee. The remuneration committee’s objectives are set out as follows:

Establish formal, fair and transparent procedures for developing policy and structure of all remuneration of directors and senior management;

Review and consider the Company’s policy for remuneration of directors and senior management;

Determine the remuneration packages of executive directors and senior management; and

Recommend the remuneration packages of non-executive directors (including independent non-executive directors).

The remuneration committee held one meeting during fiscal ~~2011.~~2014. The major works performed by the committee from September 1, ~~2010~~2013 to ~~August~~December 31, ~~2011~~2014 included the following:

Reviewed and approved the discretionary performance bonus for the ~~management committee members;~~

executive directors; and

~~Reviewed and approved the remuneration packages for management committee members; and~~

Reviewed and approved the remuneration packages for the directors.

Nomination committee

Our board of directors established a nomination committee in February 2012. The nomination committee comprises three members, namely, Mr. Lee Hon Ying, John, Mr. Peh Jefferson Tun Lu, Mr. Mak Wing Sum, Alvin. Mr. Peh Jefferson Tun Lu is the chairman of the nomination committee. The nomination committee’s objectives are as follows:

Review the structure, size and diversity of the Board and make recommendations on any proposed changes to the Board to implement our corporate strategy;

D. ~~Employees~~

Identify qualified individuals to become members of the Board and select or make recommendations to the Board on the selection of individuals nominated for directorship;

Assess the independence of independent non-executive Directors; and

Make recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors, in particular the Chairman and chief executive.

The nomination committee held one meeting during fiscal 2014. The major works performed by the committee from September 1, 2013 to December 31, 2014 included the following:

Reviewed the structure, size and composition of the Board and made recommendations to the Board;

Reviewed the independence of independent non-executive Directors;

Made recommendation to the Board regarding the retirement and re-appointment of Directors by rotation at the forthcoming annual general meeting for the Company;

Assessed the composition of the Nomination Committee;

Assessed and selected potential candidates for the nomination of an independent Non-executive Director to fill vacancy and made recommendations to the Board; and

Made recommendation to the Board regarding the adoption of the Board Diversity Policy and the revised terms of reference of the Nomination Committee.

D. Employees

The following table sets forth the number of our Talents by functional area as of August 31, ~~2011.~~2013 and December 31, 2014.

~~Talents~~


	As of August 31, 2013		As of December 31, 2014
Talents
Information technology and engineering		41		35
Sales and marketing		6		10
HKTV Mall operation		—		241
General administration and others		82		55
Creative and production		398		53

Total		527		394

~~Information technology and engineering~~

~~357~~

~~Sales and marketing, customer service and special duty unit (SDU)~~

~~2,365~~

~~General administration and others~~

~~358~~

~~Total~~

~~3,080~~

The following table sets forth the number of our Talents by geographical region as of August 31, ~~2011.~~2013 and December 31, 2014.


	~~Talents~~
~~Hong Kong~~		~~1,529~~
~~Guangzhou~~		~~1,532~~
~~Canada~~		19

~~Total~~		~~3,080~~


	As of August 31, 2013		As of December 31, 2014
Talents
Hong Kong		527		394

Total		527		394

AsThe decrease in headcount was mainly due to the suspension of ~~August 31, 2010~~the program production in light of the Chief Executive in Council’s decision against our application for a free TV license and ~~2011, we had 3,232 and 3,080 Talents, respectively.~~the unfavorable reply from the CA on the adoption of DRMB transmission standard for the provision of mobile television service, which was partially offset by the new hiring for the operation of HKTV Mall.

E. Share ownership

E.	Share ownership

~~Share ownership~~

The following table sets forth the share ownership of our directors and senior management as of ~~December 13, 2011.~~April 27, 2015.

Title of class
Identity of person
or Group

Number
of shares
beneficially
owned
(note 3)

Percentage
of shares
beneficially
owned (note 2)
%

Outstanding
share
options

Ordinary shares
   Wong Wai Kay, Ricky

391,245,732
(note 1

)
   50.64       8,091,604
Ordinary shares
   Cheung Chi Kin, Paul

391,245,732
(note 1

)
   50.64       6,091,604
Ordinary shares
   Yeung Chu Kwong, William       2,306,000       Less than 1.0       11,542,956
Ordinary shares
   Lai Ni Quiaque       12,415,405       1.61       6,044,791
Ordinary shares
   Chong Kin Chun, John       2,199,089       Less than 1.0       2,022,900
Ordinary shares
   Lo Sui Lun       175       Less than 1.0       0
Ordinary shares
   To Wai Bing       Nil       Nil       302,239


Title of class	Identity of person or group	Number of shares beneficially owned⁽¹⁾			Percentage of shares beneficially owned⁽²⁾			Outstanding share options
Ordinary shares	Wong Wai Kay, Ricky		405,428,940	⁽³⁾		50.11	%	0
Ordinary shares	Cheung Chi Kin, Paul		405,428,940	⁽³⁾		50.11	%	0
Ordinary shares	To Wai Bing		95,239			Less than 1.0	%	0
Ordinary shares	Wong Nga Lai, Alice		50,000			Less than 1.0	%	0
Ordinary shares	Lee Hong Ying, John		0			0	%	0
Ordinary shares	Peh Jefferon Tun Lu		0			0	%	0
Ordinary shares	Mak Wing Sum, Alvin		0			0	%	0

Notes:

(1)	Beneficial ownership is determined in accordance with the rules of the SEC.

(2)	Percentage ownership is based on 809,016,643 shares issued as of April 27, 2015.

(3)

The ~~391,245,732~~405,428,940 shares are held by a group consisting of Top Group International Limited, Mr. Wong Wai Kay, Ricky, our chairman, and Mr. Cheung Chi Kin, Paul, our vice chairman. Top Group International Limited is a special purpose vehicle incorporated in the British Virgin Islands. Its board of directors consists of Mr. Wong and Mr. Cheung. Mr. Wong and Mr. Cheung have entered into a voting agreement pursuant to which they agreed to vote the 339,814,284 shares held by Top Group International Limited, the ~~7,145,289~~15,236,893 shares held by Mr. Wong individually, and the ~~44,286,159~~50,377,763 shares held by Mr. Cheung individually, collectively as a group. The registered address of Top Group International Limited is Akara Bldg, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. Top Group International Limited has four shareholders: Mr. Wong, Mr. Cheung, Mr. Leung Ka Pak, and Mr. Yau Ming Yan, Andrew, and their equity interests are 42.12%, 27.06%, 21.00% and 9.82%, respectively.

~~(2)~~

~~Percentage ownership is based on 772,673,022 shares issued as of December 13, 2011.~~

~~(3)~~

~~Beneficial ownership is determined in accordance with the rules of the SEC.~~

As at December 31, 2014 and August 31, 2013, there were no options outstanding.

Share Option Scheme

The ~~following table sets forth the~~Company operates a share ~~options for the details of the share options held~~option scheme (the “Share Option Scheme”) which was adopted by the ~~directors and senior management~~shareholders of the Company on December 31, 2012 which the directors may, at their discretion, invite eligible participants to take up options to subscribe for shares subject to the terms and conditions stipulated therein. The Share Option Scheme is summarized as ~~of December 13, 2011:~~

Directors
Date of
grant

Exercise
price
HK$

Balance
as of
December 14,
2010

Options
granted
during
the
period

Exercise
period

Options
exercised
during
the
period

Options
cancelled/
lapsed
during
the period

Balance
as of
December 13,
2011

Mr. Wong Wai Kay, Ricky
   January 5, 2005    1.5224       8,091,604       —         January 5, 2005 to October 20, 2014    —         —         8,091,604
Mr. Cheung Chi Kin, Paul
   January 5, 2005    1.5224       8,091,604       —         January 5, 2005 to October 20, 2014    2,000,000       —         6,091,604
Mr. Yeung Chu Kwong, William
   May 22, 2006    0.6523       165       —         May 22, 2007 to May 21, 2016    —         —         165
   February 6, 2008    1.7568       5,542,791       —         (note 1)    —         —         5,542,791
   February 5, 2010    4.2400       6,000,000       —         (note 2)    —         —         6,000,000
Mr. Lai Ni Quiaque
   February 11, 2008    1.8660       6,044,791       —         (note 3)    —         —         6,044,791
Senior management

Mr. Chong Kin Chun, John
   October 21, 2004    1.5224       2,022,900       —         January 1, 2005 to October 20, 2014    —         —         2,022,900
Mr. Lo Sui Lun
   October 21, 2004    1.5224       505,726       —         January 1, 2005 to October 20, 2014    505,726       —         —
   May 22, 2006    0.6523       1,133,175       —         May 22, 2007 to May 21, 2016    1,133,175       —         —
Ms. To Wai Bing
   February 15, 2008    1.7568       302,239       —         (note 4)    —         —         302,239

~~Notes:~~follows:

(1)

The exercise of the options is subject to certain conditions that must be achieved by the grantee. A modification to the expiry date of the options granted to the grantee was approved by shareholders of the Company on December 21, 2010, upon which such options must be exercised not later than February 5, 2018.Purpose

To grant share options to the eligible participants as incentives and rewards for their contribution to the Company or its subsidiaries.

(2)

~~The exercise of the options is subject to certain conditions that must be achieved by the grantee, including such options must be exercised not later than February 4, 2020.~~

~~(3)~~

The exercise of the options is subject to the performance of the Company’s share and certain conditions that must be achieved by the grantee. A modification to the expiry date of the options granted to the grantee was approved by shareholders of the Company on December 21, 2010, upon which such options must be exercise not later than February 10, 2018.

~~(4)~~

~~The exercise of the options is subject to certain conditions that must be advanced by the grantees, including such options must be exercised not later than December 23, 2012.~~Eligible participants

~~All shareholders own ordinary shares~~Eligible participants include employee, executives or officers (including executive, non-executive and ~~enjoy the same voting rights with respect to each share.~~

~~Share Option Schemes~~

We adopted a second share option scheme, which we refer to as the 2002 Share Option Scheme, on December 23, 2002 and terminated the share option scheme adopted on July 12, 1997, which we refer to as the 1997 Share Option Scheme. Upon termination of the 1997 Share Option Scheme, no further options can be granted under the 1997 Share Option Scheme. Options granted under the 1997 Share Option Scheme that are not exercised lapsed automatically on July 12, 2007. Under the terms of the 2002 Share Option Scheme, our board of directors may, in its discretion from time to time, and subject to such conditions as the board may determine, within ten years beginning on December 23, 2002, grant any Talent or executive or officerindependent non-executive directors) of the Company or any of its subsidiaries, ~~(including executive, non-executive~~suppliers and ~~independent non-executive directors of each~~professional advisers of the ~~abovementioned companies) and any suppliers or professional advisers who will or have provided services to the Company and/or its subsidiaries to subscribe for our ordinary shares.~~Group.

(3) The total number of shares available for issue

The ~~maximum~~total number of ~~ordinary~~ shares which may be issued upon exercise of ~~all~~ options to be granted under ~~our 2002 Share Option Scheme and any of our other share option scheme(s) must~~the scheme shall not exceed 10% of the ~~ordinary~~ shares in issue as ofat the date of ~~approval or~~ adoption of the ~~scheme by the shareholders~~Share Option Scheme on December 23, 2002. Ordinary shares which would have been issuable pursuant to options which have lapsed in accordance with the terms of such share option schemes will not be counted for the purpose of the 10% limit. Such limit may be refreshed upon approval by shareholders and compliance with all requirements under the HKSE Listing Rules. Pursuant thereto, such limit was refreshed with the approval of our shareholders in our annual general meetings held on December 29, 2004 and December 24, 2007 respectively up to a maximum limit equal to 10% of our total number of issued shares as of31, 2012 (i.e., 80,901,664 shares). As at the date of ~~the said general meetings. Notwithstanding the foregoing,~~this annual report, the number of ~~ordinary~~shares available for issue in respect thereof is 80,901,664 shares, representing approximately 10% of the issued share capital of the Company. The shares which may be issued upon exercise of all outstanding options to be granted and yet to be exercised under ~~our 2002~~the Share Option Scheme and any ~~of our~~ other share option scheme(s) of the Company at any time shall not exceed 30% of the ~~total number of ordinary~~ shares in issue from time to time. No options shall be granted under any scheme(s) of the Company or any of its subsidiaries if this will result in the 30% limit being exceeded.

(4)

The maximum entitlement of each participant under the Share Option Scheme

The total number of ~~ordinary~~ shares issued and which may fall to be issued upon exercise ~~in full~~ of the options granted under ~~our 2002~~the Share Option Scheme and any ~~of our~~ other share option scheme(s) of the Company (including exercised, cancelled and outstanding options) to each ~~eligible~~ participant in any ~~12-month period~~twelve months up to and including the date of grant shall not exceed 1% of the ~~outstanding ordinary~~ shares in issue as ofat the date of grant. Any further grant of options in excess of this 1% limit ~~must~~shall be ~~approved~~subject to the issue of a circular by ~~shareholders.~~

~~The subscription price for an ordinary share payable by a participant upon~~ the ~~exercise of any option granted under~~Company and the ~~2002 Share Option Scheme will be determined by our board of directors in its absolute discretion, except that such price will not be less than the highest of (a) the closing price~~approval of the ~~ordinary shares as stated in The Stock Exchange of Hong Kong Limited’s daily quotations sheet on the date of grant, which must be a business day; (b) the average~~shareholders of the ~~closing prices of the ordinary shares as stated~~Company in ~~The Stock Exchange of Hong Kong Limited’s daily quotations sheets for the five business days immediately preceding the date of grant;~~general meeting with such grantee and ~~(c) the nominal value of an ordinary share.~~

~~Any grant of options to any of our directors, chief executives or substantial shareholders or any of their respective~~his associates (as defined in the ~~HKSE~~ Listing Rules) ~~is required to be approved by our non-grantee independent non-executive directors. If we propose to grant options to a substantial shareholder~~ abstaining from voting and/or any of its independent non-executive directors, or their respective associates, which will result in the number of ordinary shares issued and to be issued upon exercise of options granted and to be granted under our 2002 Share Option Scheme and any of our other share option scheme(s) (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant (a) representing in aggregate over 0.1% of the outstanding ordinary shares; and (b) having an aggregate value in excess of HK$5 million, based on the closing price of the ordinary shares at the date of each grant, such further grant of options will be subject to approval by shareholders and all requirements prescribed under the ~~HKSE~~ Listing ~~Rules.~~Rules from time to time.

A grant of options may not be made after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision until such price sensitive information, including annual and interim results, has been made public.

(5)

The period within which the shares must be taken up under an option

The period during which an option may be exercised will be determined by ~~our board of directors in~~the Board at its absolute discretion, ~~except~~save that no option may be exercised ~~later~~more than ~~ten~~10 years from the date of grant. No option may be granted more than ten years after December 23, 2002. Subject to our earlier termination, the 2002 Share Option Scheme shall be valid and effective for a period of ten years after the date of adoption, that is, until December 23, 2012. In addition and to the extent not already exercised, an option will automatically lapse and not be exercisable upon the occurrence of any of the following events:

~~(a)~~(6)

~~the expiry date relevant to that option;~~The minimum period for which an option must be held before it can be exercised

The Board is empowered to impose, at its discretion, any minimum period that an option must be held at the time of the grant of any particular option.

~~(b)~~(7)

~~one month following the date a grantee ceases to be an eligible participant for any reason other than death~~The amount payable on application or ~~termination of his relationship with us (or the relevant subsidiary, as the case may be) on any~~acceptance of the ~~grounds specified in (g) below;~~option and the period within which payments or calls must or may be made or loans for such purposes must be paid

Acceptance of the option must be made within 30 days after the date of offer and HK$1.00 must be paid as a consideration for the grant of option.

~~(c)~~(8)

~~12 months, or such longer period as our board~~The basis of ~~directors may determine, following~~determining the ~~death of a grantee whose relationship with us (or the relevant subsidiary, as the case may be) would not have been terminated on any of the grounds specified in (g) below;~~exercise price

The Board shall determine the exercise price of each option granted but in any event shall not be less than the highest of: (a) the closing price of the shares of the Company as stated in the Stock Exchange’s daily quotation sheet on the date of grant; and (b) the average of the closing price of the shares of the Company as stated in the Stock Exchange’s daily quotation sheet for the five business days immediately preceding the date of grant.

~~(d)~~(9)

~~21 days following~~The remaining life of the ~~date an effective resolution is passed for our voluntary winding-up;~~Share Option Scheme

~~(e)~~

~~subject to (d) above, the date of commencement of such winding-up;~~

~~(f)~~

the date on which any compromise or arrangement between us and our members or creditors in connection with a scheme for our reconstruction or our amalgamation with any other company or companies becomes effective;

~~(g)~~

the date on which the grantee ceases to be an eligible participant by reason of the termination of his or her relationship with us or the relevant subsidiary on any one or more of the grounds of serious misconduct or breach, bankruptcy, insolvency, composition with his or her creditors or conviction of any criminal offence involving his or her integrity or honesty or, in the case of a grantee-Talent and if so determined by our board of directors, on any other common law, statutory or contractual ground on which an employer would be entitled to terminate such grantee’s employment;

The Share Option Scheme will remain in force for a period of 10 years commencing on December 31, 2012 up to December 30, 2022.

~~(h)~~ ~~14 days following the date a general offer (which has been made to shareholders by way of take-over offer,~~During the sixteen months ended December 31, 2014, no share ~~repurchase offer or scheme of arrangement or otherwise in like manner) becomes, or is declared unconstitutional; and~~

~~(i)~~

the date on which we cancel the options by reason that the grantee in any way sells, transfers, charges, mortgages, encumbers or creates any interest in favor of any third party over or in relation to any of his or her options or attempt to do so.

~~As of December 13, 2011, a total number of 96,247,857~~ options were granted 45,371,325 options were exercised, 14,532,018 options were lapsed and 36,344,514 options remain outstanding and unexercised. Total number of 45,249,001 options are available for issue as of December 13, 2011.under the Share Option Scheme by the Company.

~~ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTION~~

A.ITEM 7

~~Major shareholders~~MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTION

A. Major shareholders

The following table sets forth certain information regarding ownership of our ordinary shares as of ~~December 13, 2011~~April 27, 2015 by all persons who are known to us to own beneficially 5% or more of our ordinary shares.

Title of class

~~Identity of person~~

~~or Group~~

~~beneficially~~

~~owned~~

~~(note 3)~~Identity of person or group

~~Percentages~~

Number of shares
beneficially owned⁽¹⁾

Percentage

~~Beneficially~~of shares

beneficially
owned

~~(note 1)~~

%⁽²⁾

Ordinary shares

Wong Wai Kay, Ricky

~~391,245,732 (note 2)~~

405,428,940

⁽³⁾

~~50.64~~50.11

Ordinary shares

Cheung Chi Kin, Paul

~~391,245,732 (note 2)~~

405,428,940

⁽³⁾

~~50.64~~50.11

Ordinary shares

Top Group International Limited

~~391,245,732 (note 2)~~

405,428,940

⁽³⁾

~~50.64~~50.11

Ordinary shares

Leung Ka Pak

339,814,284 ~~(note 3)~~

⁽⁴⁾

~~43.98~~42.00

Ordinary shares

Yau Ming Yan, Andrew

339,814,284 ~~(note 3)~~

⁽⁴⁾

~~43.98~~42.00

~~Ordinary shares~~

~~Jennison Associates LLC~~

~~62,123,760 (note 4)~~

~~8.04~~

~~Ordinary shares~~

~~Prudential Financial, Inc.~~

~~62,123,760 (note 5)~~

~~8.04~~

Notes:

(1)	Beneficial ownership is determined in accordance with the rules of the SEC.

(2)	Percentage ownership is based on ~~772,673,022~~809,016,643 shares issued as of ~~December 13, 2011.~~April 27, 2015.

~~(2)~~(3)

The ~~391,245,732~~405,428,940 shares are held by a group consisting of Top Group International Limited, Mr. Wong Wai Kay, Ricky, our chairman, and Mr. Cheung Chi Kin, Paul, our vice ~~chairman,~~chairman. Top Group International Limited is a special purpose vehicle incorporated in the British Virgin Islands, and its board of directors consists of Mr. Wong and Mr. Cheung. Mr. Wong and Mr. Cheung have entered into a voting agreement pursuant to which they agreed to vote the 339,814,284 shares held by Top Group International Limited, the ~~7,145,289~~15,236,893 shares held by Mr. Wong individually, and the ~~44,286,159~~50,377,763 shares held by Mr. Cheung individually, collectively as a group. The registered address of Top Group International Limited is Akara Bldg, 24 De Castro Street, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. Top Group International Limited has four shareholders: Mr. Wong, Mr. Cheung, Mr. Leung Ka Pak, and Mr. Yau Ming Yan, ~~Andrew(See Note (3) below),~~Andrew, and their equity interests are 42.12%, 27.06%, 21.00% and 9.82%, respectively.

~~(3)~~(4)

Mr. Leung Ka Pak and Mr. Yau Ming Yan, Andrew may be deemed to have beneficial ownership in the 339,814,284 shares held by Top Group International Limited. Each of them expressly disclaims any beneficial ownership in such shares except to the extent of their respective pecuniary interest therein. Mr. Leung was a director and the president of all of our subsidiaries in Canada (other than City Telecom (Canada) Inc.) and resigned as a director and president in October 2005. After Mr. Leung’s resignation, Mr. Yau became a director and the president of all of our subsidiaries in Canada (other than City Telecom (Canada) Inc.). He resigned as a director and president in July 2006.

~~(4)~~

~~Beneficial ownership calculation is based solely on a review of Form 2 filing made with the Hong Kong Stock Exchange on June 13, 2011.~~

~~(5)~~

Prudential Financial, Inc. indirectly owns 100% equity interests of Jennison Associates LLC, and therefore may be deemed to have voting and dispositive power over the shares held by Jennison Associates LLC.

~~(6)~~

~~Beneficial ownership is determined in accordance with the rules of the SEC.~~

As of ~~December 13, 2011,~~April 27, 2015, there were 1425 registered holders of ~~9,742,866~~1,962,380 American Depositary Shares in the United States, ~~consisting of 25.22%~~comprising 4.85% of our outstanding shares.

All shareholders own ordinary shares and enjoy the same voting rights with respect to each share.

Except as disclosed above, we are not directly or indirectly owned or controlled by any other person, corporation or foreign government.

We are not aware of any arrangement the operation of which may at a subsequent date result in a change of control of ~~City Telecom.~~HKTV.

B. Related party transactions

B.	~~Related party transactions~~

For the period since the beginning of our preceding three financial years up to the date of this document, we were a party to the following related party transactions.

Contracts with our directors and senior management

All of our directors and senior management have employment service agreements with us. Certain of our directors and senior management receive housing allowances, pensions, bonuses and commissions. In addition, some of our directors are also senior management of ~~City Telecom~~HKTV and these persons may also have the ability to make significant business decisions ~~effecting~~affecting our operations. See Item 6 “Directors and senior management” above of this annual report for details concerning these arrangements.

C. Interests of experts and counsel

C.	~~Interests of experts and counsel~~

Not ~~applicable.~~

~~ITEM 8 FINANCIAL INFORMATION~~applicable

A.ITEM 8

~~Consolidated statements and other financial information~~FINANCIAL INFORMATION

A. Consolidated statements and other financial information

Financial statements

See pages F-1 ~~— F-60~~to F-55 following Item 19.

Legal and regulatory proceedings

AsOn January 6, 2014, we filed an application for leave to apply for judicial review against the Chief Executive in Council’s decision to reject our application dated December 31, 2009 under the Broadcasting Ordinance for a free TV license. The application for leave was granted by the High Court of the Hong Kong Special Administrative Region on January 9, 2014. The substantive hearing was conducted from August ~~31, 2011, there were no legal or arbitration proceedings~~ 27 to 29, 2014. On April 24, 2015, the Court of First Instance of the High Court of the Hong Kong Special Administrative Region quashed the Chief Executive in Council’s decision and remitted it to the Chief Executive in Council for reconsideration. The court further ordered the government to pay for the costs associated with the judicial review (making an ordernisithat ~~have had~~costs of the judicial review be to the Company, to be taxed (meaning that the court will decide the amount) if not agreed).

On April 11, 2014, the Company filed an application for leave to apply for judicial review in respect of the ~~recent past, or~~Office of Communication Authority’s decision on March 11, 2014 that HKMTV would not be entitled to ~~our knowledge, may have, significant effects on our financial position or profitability.~~commence operations if HKMTV adopted the DTMB transmission standard for its proposed mobile television service unless a domestic free/pay television programme service licence was first obtained by HKMTV. On May 20, 2014, the High Court granted HKMTV leave to apply for judicial review. The substantive hearing was conducted from November 26 to 27, 2014, and the judgment was reserved to be handed down at a later date.

Dividends

Unless the relevant provisions of the Hong Kong Companies Ordinance require otherwise, we may by ordinary resolution (being a resolution passed by a majority of our shareholders who attend and vote at a meeting of shareholders) from time to time declare dividends, but no dividend shall exceed the amount recommended by our board of directors. Our Articles contain provisions on apportioning dividends where shares are not or were not fully paid for during the period covered by the dividend.

Unless the relevant provisions of the Hong Kong Companies Ordinance require otherwise, our board of directors may pay such interim dividends as appears to them to be justified by our financial position and pay any dividend payable at a fixed rate at intervals decided upon by our board of directors, whatever our financial position, if the board of directors feels that this payment is justified.

Any dividend not claimed by a shareholder after a period of six years from the date when it was first due to be paid shall be forfeited and shall revert to us. The payment by our board of directors of any unclaimed dividend, interest or other sum payable on or in respect of a share into a separate account shall not make us responsible as a trustee for such sums.

~~For fiscal 2011, an~~No interim or final dividend was declared ~~at 15 Hong Kong cents per ordinary share. The total amount of HK$115,604,051.70 was paid as cash dividend on May 31, 2011.~~during fiscal 2014.

A final dividend of 15 Hong Kong cents per ordinary share was proposed on November 8, 2011, which will be approved by shareholders in the annual general meeting to be held on December 16, 2011. The 2011 final dividend will be paid on or about January 10, 2012.B. Significant changes

None

B.ITEM 9

~~Significant changes~~THE OFFER AND LISTING

~~None.~~

~~ITEM 9 THE OFFER AND LISTING~~A. Offer and listing details

A.	~~Offer and listing details~~

Our ordinary shares have been listed under the number “1137” on ~~The Stock Exchange of Hong Kong Limited, or~~ the HKSE since August 4, 1997. Our American depositary shares, each representing 20 ordinary shares, ~~have~~had been listed under the symbol “CTEL” on Nasdaq since November 3, ~~1999. Our 10-year senior notes were listed under the ISIN codes of US178677AA87~~1999 before we changed our name to “Hong Kong Television Network Limited” and ~~USY16599AA30~~our symbol on ~~the Singapore Exchange Securities Trading Limited, or SGX-ST,~~Nasdaq to “HKTV” on January 24, 2005. The 10-year senior notes were subsequently exchanged for registered notes with ISIN code US178677AB60 pursuant to a registration statement under the U.S. Securities Act of 1933 on June 24, 2005.28, 2013.

On December 4, 2009, we repurchased a portion of the 10-year senior notes with a cumulative principal amount of HK$11.6 million (US$1.5 million) from the open market. We paid a total consideration, including accrued interest, of approximately HK$12.1 million (US$1.6 million). On February 1, 2010, we redeemed the then outstanding 10-year senior notes with a cumulative principal amount of HK$153.9 million (US$19.9 million) at the redemption price equal to 104.375% of the principal amount. We paid a total consideration, including accrued interest, of approximately HK$167.6 million (US$21.6 million). As of August 31, 2010, all the 10-year senior notes has been repurchased and redeemed.

In April 2010, we offered an aggregate of 4,025,000 ADSs representing 80,500,000 ordinary shares at the offer price of US$13.00 per ADS. The proceeds we received, after deduction of underwriters’ discount but before deduction of offering expenses, amounted to US$49.8 million.

The price of our ordinary shares on the HKSE as of its close of trading on ~~December 13, 2011~~April 27, 2015 was HK$~~4.190~~3.470 per share. The table below shows the high and low ~~closing~~ prices of the shares on the HKSE ~~since listing.~~for the periods indicated below.


	Price					Price
		High			Low	High		Low
			(In HK$	)		(in HK$)
Annual Date

2006		0.830			0.570
2007		3.670			0.830
2008		2.170			0.750
2009		3.950			0.840
Calendar Year Data
2010		6.770			3.690		6.770		3.690



2011							6.200		3.520
2012							5.240		1.370
2013							4.460		1.880
2014							5.000		2.120
2015 (through April 27, 2015)							3.890		2.530
Quarterly Data

2009

2012
September to December							2.770		1.570
2013
January to March		1.140			0.840		2.820		2.100
April to June		1.780			1.100		2.950		2.180
July to September		2.630			1.630		2.580		2.280
October to December		3.950			2.500		4.460		1.880

2010

2014
January to March		6.210			3.800		3.760		2.150
April to June		6.770			4.420		2.540		2.120
July to September		5.200			3.690		3.150		2.270
October to December		6.200			4.800		5.000		2.240

2011

2015
January to March		6.200			5.350		3.890		2.530
April to June		6.080			4.410
July to September		4.850			3.520
October to December (through December 13, 2011)		4.340			3.520
Monthly Data
2014
October							3.200		2.240
November							5.000		3.140
December							4.250		3.320
2015
January							3.890		3.070
February							3.480		2.810
March							3.240		2.530
April (through April 27, 2015)							3.820		2.690

      Price
   High       Low
      (In HK$)
Monthly Data

2011

June
   5.670          4.410
July
   4.850          4.420
August
   4.400          3.740
September
   3.840          3.520
October
   3.780          3.520
November
   4.340          3.700
December (through December 13, 2011)
   4.340          4.180

The price of our American depositary shares on Nasdaq as of its close of trading on ~~December 13, 2011~~April 27, 2015 was US$~~10.670~~8.40 per American depositary share. The table below shows the high and low ~~closing~~ prices of the American depositary shares on Nasdaq ~~since listing.~~for the periods indicated below.


			Price			Price
	High			Low		High		Low
			(In US$)			(in US$)
Annual Date

2006		2.009			1.380
2007		10.750			2.010
2008		5.750			1.915
2009		10.300			2.000
Calendar Year Data
2010		17.330			9.670		17.33		9.67

2011							15.78		9.08
2012							13.48		3.91
2013							9.88		4.96
2014							11.83		5.00
2015 (through April 27, 2015)							10.94		6.46
Quarterly Data
2009

2012
September to December							6.89		3.88
2013
January to March		2.870			2.000		6.97		5.40
April to June		4.650			2.870		7.43		5.50
July to September		7.023			4.050		6.40		5.75
October to December		10.300			6.610		9.88		4.96

2010

2014
January to March		16.180			10.150		9.26		5.65
April to June		17.330			11.340		6.30		5.00
July to September		13.500			9.670		7.74		5.85
October to December		15.980			12.500		11.83		5.75

2011

2015
January to March		15.780			13.730		10.94		6.46
April to June		15.300			11.360
July to September		12.040			9.220
October to December(through December 13, 2011)		11.170			9.080

Monthly Data
2011

June		14.260			11.360
July		12.040			11.000
August		11.180			9.450
September		9.720			9.220
2014
October		9.670			9.080		7.88		5.75
November		11.170			9.370		11.83		8.42
December (through December 13, 2011)		10.800			10.620
December							10.69		8.55
2015
January							9.77		8.32
February							8.62		7.26
March							10.94		6.46
April (through April 27, 2015)							9.72		7.20

B. Plan of distribution

B. ~~Plan of distribution~~

Not ~~applicable.~~applicable

C. Markets

C.	~~Markets~~

See Item 9A above.

D. Selling shareholders

Not applicable

E. Dilution

Not applicable

F. Expenses of the issue

Not applicable

D.ITEM 10 ~~Selling shareholders~~ADDITIONAL INFORMATION

~~Not applicable.~~A. Share capital

E.	~~Dilution~~

Not ~~applicable.~~applicable

F.	~~Expenses of the issue~~

~~Not applicable.~~

~~ITEM 10 ADDITIONAL INFORMATION~~B. Memorandum and Articles of Association

A.	~~Share capital~~

~~Not applicable.~~

B.	~~Memorandum and Articles of Association~~

Described below is a summary of certain provisions of our ~~existing~~ Articles and, where relevant, the Hong Kong Companies Ordinance. As this is a summary, it does not contain all the information that may be important to you. You should therefore read our complete Articles if you would like additional information, which were filed with the ~~U.S. Securities and Exchange Commission~~SEC as an exhibit 1 to the annual report ~~on Form 20-F~~ for fiscal 2005 and isare incorporated by reference herein.

General

~~City Telecom~~HKTV was incorporated in Hong Kong on May 19, 1992 under the Hong Kong Companies Ordinance. Clause 3 of the Memorandum of Association states that the Company’s objects are to carry on, ~~the business of telecommunications services~~ in addition to various ~~other related~~specific types of business activities, any types of business as may be lawfully undertaken and ~~unrelated business activities.~~carried on. Pursuant to the special resolution passed at the extraordinary general meeting of the Company held on December 31, 2012, the name of the Company was changed from “City Telecom (H.K.) Limited” to “Hong Kong Television Network Limited.” The Registrar of Companies in Hong Kong issued the Certificate of Change of Name on January 10, 2013.

Directors’ interests

A director shall not vote on, or be counted in the quorum in relation to, any resolution of our board of directors in respect of any contract, arrangement or other proposal whatsoever in which the director or any of his associate(s) (within the meaning of the HKSE Listing Rules) has aany material interest. This prohibition shall not apply to the ~~following:~~following (assuming there is no material interest other than indicated below):

(a)

the giving of any security or indemnity to him or his associates(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries;

(b)

the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which he or his associate(s) has himself/themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security;

(c)

any proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase in which offer he or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting thereof;

(d)

any proposal concerning any other company in which he or his associate(s) is/are interested only, whether directly or indirectly, as an officer, executive or shareholder or in which he or his associate(s) is/are beneficially interested in shares of that ~~Company,~~company, provided that he and any of his associate(s) are not in aggregate beneficially interested in five per cent or more of the issued shares of any class of such ~~Company~~company (or of any third company through which his interest or that of his associate(s) is derived) or of the voting rights;

(e) any proposal or arrangement concerning the benefit of Talents of the Company or its subsidiaries, including the adoption, modification or operation of any Talents’ share scheme or any share incentive or share option scheme under which the director or his associate(s) may benefit;

(f)

any proposal or arrangement concerning the benefit of Talents of the Company or its subsidiaries, including the adoption, modification or operation of a pension fund or retirement, death or disability benefits scheme which relates both to directors (or his associate(s)) and Talents of the Company or any of its subsidiaries and does not provide in respect of any director or his associate(s), as such any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and

(g)

any contract or arrangement in which he or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company.

Additionally, there is no shareholding qualification required to be a director.

Dividends

In accordance with our Articles, we may by ordinary resolution (being a resolution passed at a general meeting by a simple majority of ~~those~~the votes cast by ~~the~~those shareholders ~~who attend~~present and entitled to vote ~~at a general meeting)~~in person or by proxy) from time to time declare dividends, but no dividend shall exceed the amount recommended by our board of directors. Our Articles contain provisions on apportioning dividends according to the amounts paid up on the shares in respect of which dividend is paid ~~under~~on a pro rata basis during the period covered by the dividend.

In accordance with our Articles, subject to the requirements under the Hong Kong Companies Ordinance, our board of directors may pay such interim dividends that appear to be justified by our financial position and may also pay any dividend payable at a fixed rate at intervals decided upon by our board of directors, whenever our financial position, in the opinion of our board of directors, justifies the payment.

In respect of any dividend proposed to be paid or declared, our board of directors may further propose and announce prior to or at the same time as the payment or declaration of such dividend either that:

(a)

such dividend be satisfied in whole or in part in the form of an allotment of shares to the shareholders, credited as being fully paid up, provided that all the shareholders entitled to receive the dividend will also be entitled to choose to receive the dividend (or a part of it) in ~~cash;~~cash instead of such allotment; or

(b)

the shareholders entitled to such dividend are entitled to elect to receive an allotment of shares credited as fully paid up instead of the whole or part of the cash dividend our board of directors may decide upon.

Any general meeting declaring a dividend may, upon the recommendation of our board of directors, by ordinary resolution, direct that the dividend shall be met, wholly or partly, by the distribution of our assets.

Liquidation

~~Subject to the requirements under the Hong Kong Companies Ordinance, in~~In the event of a members’ winding up, the liquidator may, with the sanction of a special resolution of the ~~Company:~~Company and any other sanction required by the Hong Kong Companies Ordinance:

(a)

divide among the shareholders in kind the whole or any part of the assets of the Company and set such value as the liquidator deems fair upon any property to be divided and determine how the division shall be carried out between the shareholders; or

(b)

vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator shall think fit, but no shareholder shall be compelled to accept any shares or other assets upon which there is any liability.

Annual and extraordinary general meeting of shareholders

The Hong Kong Companies Ordinance requires our board of directors to hold an annual general meeting of our shareholders once every year and not more than 15 months after our previous annual general meeting. The annual general meeting is held at such time (within a period of not more than 15 months, or such longer period as the Registrar of Companies of Hong Kong may authorize in writing after the holding of the previous annual general meeting). Pursuant to our Articles, the annual general meeting and any other general meeting of our shareholder held for the passing of a special resolution (being a resolution passed at a general meeting by not less than 75% of ~~those~~the votes cast by ~~the~~those shareholders ~~who attend~~present and entitled to vote ~~at a general meeting)~~in person or by proxy) should be convened by not less than 21 clear days’ notice in writing. The HKSE Listing Rules further requires a notice period of at least 20 clear business days for annual general meetings. The notice shall specify the place, date and time of meeting and the general nature of the business to be transacted. An annual general meeting may be called by ~~not less than 20 clear business days’~~shorter notice if it is agreed by all shareholders entitled to attend and vote at the meeting. The business of the annual general meeting ~~will~~usually include:

(a)

the declaration and sanctioning of dividends;

(b)

the consideration and adoption of the accounts, balance sheet and reports of the directors and auditors and other documents required to be attached to the financial statements;

(c)

the appointment of directors in place of those retiring (by rotation or otherwise);

(d)

the appointment of auditors; and

(e)

the fixing of, or the determining of the method of fixing, the remuneration of the directors and of the auditors.

Our board of directors may convene an extraordinary general meeting (which is any general meeting of the shareholders other than the annual general meeting) whenever it thinks fit and must do so upon the request in writing of shareholders holding not less than ~~one-twentieth~~5% of ~~our paid-up capital~~the total voting rights of all shareholders of the Company and carrying the right ~~to vote~~of voting at a general meeting. ~~All~~Pursuant to our Articles, all extraordinary general meetings (other than those convened for the passing of a special resolution referred to above) should be convened by at not less than 1014 clear ~~business~~ days’ notice in writing. The HKSE Listing Rules further requires a notice period of at least 10 clear business days for extraordinary general meetings. Extraordinary general meetings may be called by ~~less than 10 clear business days’~~shorter notice by a majority in number of the shareholders having the right to attend and vote at the meeting, being a majority together ~~holding not less than~~representing at least 95% ~~in nominal value~~ of the ~~shares giving that right.~~total voting rights at the meeting of all shareholders of the Company.

Except as otherwise provided by our Articles, two shareholders present in person or by proxy and entitled to vote shall be a quorum for all purposes. Whilst no business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, the absence of a quorum shall not preclude the choice or appointment of a chairman which shall not be treated as part of the business of the meeting.

~~The Nasdaq marketplace rules also provide~~On August 29, 2014, our board of directors resolved to change our financial year-end date from August 31 to December 31 in order to unify our financial year-end date with the year-end dates of our subsidiaries and bring us in line with the business cycle of our potential clients.

Our 2013 annual general meeting was held on December 30, 2013. As a result of the change of our financial year-end date, our accounts and the accounts of our subsidiaries were not ready for approval on or before December 31, 2014 as would have been required if the financial year-end date had not been changed. We published our annual results for the sixteen months ended December 31, 2014 pursuant to the HKSE Listing Rules on March 26, 2015. Upon our application to change our financial year-end date, the Registrar of Companies in Hong Kong directed that ~~a foreign private issuer such as~~the holding of an annual general meeting by us ~~may be granted an exemption from such requirements if it follows~~in calendar year 2014 was not required. We will hold our annual general meeting for the ~~practice of its home country.~~calendar year 2015 on May 20, 2015.

Restrictions on ownership of shares

There are no restrictions, either pursuant to our Articles or to the laws of Hong Kong, on the rights of non-residents of Hong Kong or foreign persons to hold or exercise voting rights with respect to our ordinary shares.

Voting rights

Any decisions that are made by the shareholders in a general meeting require the passing of either an ordinary or a special resolution at such meeting. The type of resolution required to be passed depends upon ~~the provisions of~~requirements under the Hong Kong Companies Ordinance and our Articles as certain matters may only be decided by the passing of a special resolutions.

Unless any shares have special terms as to voting, on a show of hands every shareholder who is present in person at a general meeting, shall have one vote irrespective of the number of shares he holds and on a poll every shareholder who is present in person or by proxy shall have one vote for every share of which he is the holder. Our Articles set out the circumstances in which a poll can be demanded.

Pursuant to ~~Rule 13.39(4) of~~ the HKSE Listing Rules, ~~which became effective on January 1, 2009,~~ any votes of the ~~Shareholders~~shareholders at a general meeting must be taken by poll.

Any shareholder that is a recognized clearing house within the meaning of the Securities and Futures Ordinance of Hong Kong may authorize such person or persons as it thinks fit to act as its representative (or representatives) at any general meeting or at any separate meeting of any class of shareholders (if relevant). However, if more than one person is authorized, the authorization must specify the number and class of shares in respect of which each person is in fact authorized. The authorized person will be entitled to exercise the same power on behalf of the recognized clearing house as that clearing house (or its nominees) could exercise if it were an individual shareholder of the Company.

Issue of shares

Under the Companies Ordinance, our board of directors may, without the prior approval of the shareholders, offer to issue new shares to existing shareholders in proportion to their current shareholdings. Our board of directors may not issue new shares in any other way without the prior approval of the shareholders. Any such approval to issue new shares given in a general meeting shall continue in force until the earlier of: (1) the conclusion of the next annual general meeting; or (2) the expiration of the period within which the next annual general meeting is required by law to be held; or (3) when revoked or varied by an ordinary resolution of the shareholders in a general meeting. Where such shareholders’ approval is given, subject to the HKSE Listing Rules and any conditions attached to such approval, our unissued shares may be at the disposal of our board of directors, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration and upon such terms and conditions as the directors may decide.

Subject to the provisions of our Articles, any shareholder may transfer all or any of his shares by an instrument of transfer in the usual or common form or in such other form as our board of directors may accept and may approve. Such instrument may be signed by hand or, if the buyer or seller is a clearing house or its nominee(s), signed by hand or by a machine imprinted signature or by such other manner as our board of directors may approve from time to time.

The instrument of transfer of a share shall be executed by or on behalf of both the buyer and the seller of that share provided that our board of directors may dispense with the signing of the instrument of transfer by the buyer in any case which it thinks fit in its discretion to do so. Except as provided in the paragraph above, our board of directors may also decide, either generally or in any particular case, upon request by either the buyer or seller of shares to accept mechanically signed transfers. The seller shall be deemed to remain the holder of the share until the name of the buyer is entered into our register in respect of that share. All instruments of transfer, when registered, may be retained by us. Nothing in our Articles prevents our board of directors from recognizing a renunciation of the allotment or provisional allotment of any share by the person to whom the shares were to be allotted in favor of some other person.

Our board of directors may in its absolute discretion and without giving any reason, decline to register any transfer of any share which is not a fully paid share.

Our board of directors may also decline to register any transfer unless:

(a)

the instrument of transfer, duly stamped, is lodged with us accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the seller to make the transfer;

(b)

such fee, not more than the maximum amount allowed by ~~The Stock Exchange of Hong Kong Limited~~the HKSE from time to time, as our board of directors may from time to time require is paid to us in respect of it;

(c)

the instrument of transfer is in respect of only one class of share;

(d)

in the case of a transfer of a share jointly held by two or more holders, the number of joint holders to whom the share is to be transferred does not exceed four; and

(e)

the shares concerned are free of any lien in favor of us.

If our board of directors declines to register a transfer of any share, it shall, within two months after the date on which the instrument of transfer was lodged, send to the buyer notice of the refusal.

Shareholders

In accordance with our Articles, only persons who are registered in our register of members are recognized by us as shareholders and absolute owners of the shares. The register of members may be closed by our board of directors at such times and for such periods as it may from time to time decide by giving notice in accordance with the HKSE Listing Rules, but the register shall be closed in any year for not more than 30 days (excluding Sundays and public holidays) unless extended by ordinary ~~resolution.~~resolution and the book closure period shall not be extended beyond 60 days in any year.

Variations of Rights of Shares

Subject to the Companies Ordinance, all or any of the rights for the time being attached to any class of shares for the time being issued may from time to time (whether or not the Company is being wound up) be varied with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of such shares.

C. Material contracts

C. ~~Material contracts~~

Other than such contracts entered into the ordinary course of business as are described in our disclosure in Item ~~7 “Major shareholders and related party transactions — related party transactions”,~~4 “Information on the Company,” we have not entered into any material contracts outside the ordinary course of our business within the two years preceding the date of this annual report.

D. Exchange controls

D.	~~Exchange controls~~

The Basic Law of Hong Kong provides that the Hong Kong dollar will remain the legal tender in Hong Kong after July 1, 1997. The Basic Law also provides that no foreign exchange control policies will be applied in Hong Kong and that the Hong Kong dollar will be freely convertible. During the Asia regional economic crisis in 1998, however, the Hong Kong government intervened on several occasions in the foreign exchange market by purchasing the Hong Kong dollar and selling the U.S. dollar to support the value of the Hong Kong dollar.

There are no restrictions, either pursuant to our Articles, or pursuant to the laws of Hong Kong, on the rights of non-residents of Hong Kong or foreign persons to hold or exercise voting rights with respect to our ordinary shares, or export or import capital.

E. Taxation

E.	~~Taxation~~

The following provides a general outline of the material tax considerations that may be relevant to a decision to own or dispose of our American depositary shares or shares but does not purport to deal with the tax consequences applicable to all categories of investors. Prospective investors should consult their own professional advisers on the Hong Kong, United States and overall tax implications of investing, holding or disposing the American depositary shares or shares under the laws of the countries in which they are liable to taxation. The discussion below is applicable to both U.S. and non-U.S. citizens as an investor.

Hong Kong Taxation

Tax on dividends

No tax is payable in Hong Kong by withholding or otherwise in respect of dividends paid by ~~City Telecom.~~HKTV.

Profits tax

No tax is imposed in Hong Kong in respect of gains from the sale of our shares and American depositary shares, unless all the following factors are present:

(i)

such profits are derived from or arise in Hong Kong;

(ii)

such profits are attributable to a trade, profession or business carried on in Hong Kong; and

(iii)

the property in question, such as shares and American depositary shares, are not capital assets of that trade, profession or business.

Taxable profits are subject to Hong Kong profits tax on corporations at the rate of 16.5% and on unincorporated businesses or individuals at the rate of 15%.

Profits from the sales of our shares, which are effected on the ~~Hong Kong Stock Exchange,~~HKSE, will be considered to be derived from or arising in Hong Kong. Such profits are taxable if the shares are not held as capital assets and the profits are attributable to a business, trade or profession carried out in Hong Kong.

Profits from the sales of our American depositary shares will be considered to be derived from or arising in Hong Kong if the relevant purchase or sales contracts are effected in Hong Kong. In the event that those persons dealing or trading in the American depositary shares are doing so as part of their trade, profession or business that is being carried out in Hong Kong and the shares are not capital assets of such trade of business, then such profits will be subject to Hong Kong profits tax. In any case of an exchange of any American depositary receipts evidencing American depositary shares for certificates representing shares, any profit gained on subsequent disposition of such shares will be the difference between the initial price of American depositary shares and the market value of such shares at the date of disposition.

Stamp duty

The sale and purchase of shares is subject to Hong Kong stamp duty which is payable by both the seller and ~~purchase.~~the purchaser. Both seller and purchaser must pay stamp duty at a rate of 0.1% each, totaling 0.2%, of the total value of the greater of (i) the consideration paid or (ii) the market value of the shares on the ~~Hong Kong Stock Exchange,~~HKSE, or otherwise, on the date the contract note for the sale or purchase is executed. ~~If, in~~Where one of the ~~case~~parties to a transfer of ~~a sale or purchase of~~the shares ~~effected by a person who~~ is not resident in Hong Kong and the stamp duty on either or both of the contract notes is not paid, the ~~transferee~~duty not paid will be ~~liable to stamp~~assessed on the instrument of transfer (if any) and ~~pay stamp duty on~~will be payable by the ~~instrument in an amount equal to the unpaid duty.~~transferee. If the instrument is not stamped before or within the time for stamping such instrument, a penalty of up to ~~ten~~10 times the duty payable may be imposed. In addition, a fixed duty of HK$5.00 is currently payable on any instrument of transfer of shares.

In addition to the depositary’s charges, if any, the withdrawal of the shares upon the surrender of American depositary receipts evidencing American depositary shares, and the issuance of American depositary receipts evidencing American depositary shares upon the deposit of the shares, will be subject to Hong Kong stamp duty at the rate described above for sale and purchase transactions. In the event the withdrawal or deposit does not result in a change in the beneficial ownership of the shares under Hong Kong law, only the nominal fixed duty of HK$5.00 will be payable. Investors are not liable for stamp duty on the issuance of the American depositary shares upon the initial deposit of shares issued directly to the depositary or for the account of the depositary. No Hong Kong stamp duty is payable upon the transfer of American depositary receipts evidencing our American depositary shares if such American depositary receipts are not maintained on a register in Hong Kong.

Tax treaty

There is currently no reciprocal tax treaty between Hong Kong and the U.S. regarding withholding.

United States ~~Taxation~~

~~Certain U.S.~~ Federal Income ~~Tax Considerations~~Taxation

The following ~~is a summary of~~discussion describes certain ~~United States~~U.S. federal income tax ~~considerations that are anticipated~~consequences to ~~be material to the purchase, ownership, and disposition~~U.S. Holders (as defined below) under present law of an investment in our American depository shares or ~~American depositary shares by~~ordinary shares. This discussion applies only to U.S. Holders that hold the American depository shares or ordinary shares as ~~defined below. This summary is based on~~capital assets within the ~~U.S.~~meaning of Section 1221 of the Internal Revenue Code of 1986, as amended ~~(the “Code”), its legislative history, existing~~(generally, property held for investment) and ~~proposed~~that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as of the date of this annual report and on U.S. Treasury regulations ~~published rulings and court decisions, all as~~ in effect onor, in some cases, proposed as of the date ~~hereof. These laws~~of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are ~~all~~ subject to change, ~~or different interpretation, possibly on a retroactive basis. This summary does not discuss~~which change could apply retroactively and could affect the tax consequences described below.

The following discussion neither deals with the tax consequences to any particular investor nor describes all ~~aspects~~ of ~~United States federal income taxation which may be important~~the tax consequences applicable to ~~particular investors~~persons in ~~light of their individual investment circumstances, such as investors subject to~~ special tax ~~rules including: partnerships,~~situations such as:

banks;

certain financial ~~institutions,~~ institutions;

insurance ~~companies,~~ companies;

regulated investment ~~companies,~~ companies;

real estate investment ~~trusts,~~ trusts;

broker-dealers or other dealers or traders in securities;

traders that elect to mark to market;

U.S. expatriates;

tax-exempt ~~organizations,~~entities, “individual retirement accounts” and ~~except as described below, non-U.S. Holders,~~“Roth IRAs”;

persons liable for alternative minimum tax;

persons holding an American depository share or ~~to persons that will hold our shares or American depositary shares~~ordinary share as part of a straddle, ~~hedge,~~wash sale, hedging, conversion or integrated transaction or persons entering into a constructive sale ~~transaction for~~with respect to the American depository shares or ordinary shares;

persons that directly, indirectly or constructively own 10% or more of the total combined voting power of all classes of our voting stock;

persons whose functional currency is not the U.S. dollar;

persons holding American depository shares or ordinary shares in connection with a trade or business conducted outside of the United ~~States~~States;

persons who acquired American depository shares or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation; or

partnerships or pass-through entities, or persons holding American depository shares or ordinary shares through such entities.

INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF AMERICAN DEPOSITORY SHARES OR ORDINARY SHARES.

The discussion below of the U.S. federal income tax ~~purposes or that have a functional currency other than~~consequences to “U.S. Holders” will apply to you if you are the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any foreign, state, or local tax considerations. This summary assumes that investors will hold our shares or American depositary shares as “capital assets” (generally, property held for investment) under the Code.

Each prospective investor is urged to consult its own tax advisor regarding the United States federal, state, local, and foreign income and other tax considerations of the purchase, ownership, and disposition of our shares or American depositary shares.

~~For purposes of this summary, a U.S. Holder is a~~ beneficial owner of our American depository shares or ~~American depositary~~ordinary shares ~~that is~~and you are, for ~~United States~~U.S. federal income tax purposes:

an individual who is a citizen or resident of the United States;

a corporation or(or other entity ~~that is taxable~~treated as a corporation for U.S. federal income tax purposes) created in or organized in the United States or under the laws of the United States, or any State thereof or ~~political subdivision thereof;~~

the District of Columbia;

an estate, the income of which is ~~includible in gross income for United States~~subject to U.S. federal income ~~tax purposes~~taxation regardless of its source;

a trust ~~the administration of which~~that (1) is subject to the primary supervision of a court within the United States ~~court~~ and ~~which has~~the control of one or more ~~United States~~U.S. persons ~~who have the authority to control~~for all substantial decisions ~~of the trust;~~ or

(2) has a ~~trust that was~~valid election in ~~existence on August 20, 1996, was~~effect under applicable U.S. Treasury regulations to be treated as a ~~United States person, for United States federal income tax purposes, on the previous day, and elected to continue to be so treated.~~

U.S. person.

If you are a partner in a partnership or other entity ~~or arrangement treated~~taxable as a partnership ~~for United States federal income tax purposes~~that holds ~~our~~American depository shares or ~~American depositary receipts, the~~ordinary shares, your tax treatment ~~of a partner~~ will ~~generally~~ depend ~~upon the~~on your status ~~of the partner~~ and the activities of the partnership. ~~A U.S. Holder that is~~If you are a partner in such a partnership, ~~holding our~~you should consult your tax advisor.

The discussion below assumes the representations contained in the deposit agreement are true and the obligations in the deposit agreement and any related agreement have been and will be complied with in accordance with their terms. If you own American depository shares, oryou should be treated as the owner of the underlying ordinary shares represented by those American ~~depositary receipts is urged to consult its own tax advisor concerning the United States~~depository shares for U.S. federal income tax ~~consequences~~purposes.

The U.S. Treasury has expressed concerns that intermediaries in the chain of ~~purchasing, owning~~ownership between the holder of an American depository share and ~~disposing~~the issuer of the security underlying the American depository share may be taking actions that are inconsistent with the beneficial ownership of the underlying security (for example, pre-releasing American depository shares to persons that do not have the beneficial ownership of the securities underlying the American depository shares). Accordingly, the creditability of any foreign taxes and the availability of the reduced tax rate for any dividends received by certain non-corporate U.S. Holders, including individual U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of American depository shares and our Company if as a result of such actions the holders of American depository shares are not properly treated as beneficial owners of underlying ordinary shares.

Passive Foreign Investment Company

Based on the market price of our American depository shares, ~~or American depositary receipts by~~ the ~~partnership.~~

~~A beneficial owner~~value of our ~~shares~~assets, and the composition of our income and assets, we believe we were a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2014. A non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year if either:

at least 75% of its gross income for such year is passive income, or ~~American depositary shares~~

at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that ~~is not a U.S. Holder is referred to herein as a “Non-U.S. Holder.”~~

produce passive income or are held for the production of passive income.

~~A foreign corporation~~For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.

A separate determination must be made after the close of each taxable year as to whether we were a ~~“passive foreign investment company”,~~PFIC for that year. Because the value of our assets for purposes of the asset test will generally be determined by reference to the market price of our American depository shares and ordinary shares, our PFIC status will depend in large part on the market price of our American depository shares and ordinary shares, which may fluctuate significantly. Based on the market price of our American depository shares and ordinary shares, and the composition of our assets during the taxable year ended December 31, 2014, we believe we were a PFIC for such year. In addition, we believe there is a significant risk we will be a PFIC for the taxable year ending December 31, 2015 and for future taxable years, unless the market price of our American depositary shares increases or ~~“PFIC”,~~we reduce the amount of cash and other passive assets we hold relative to the amount of non-passive assets we hold. If we are a PFIC for ~~United States federal~~any taxable year during which you hold American depository shares or ordinary shares, we generally will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold American depository shares or ordinary shares, unless we cease to be a PFIC and you make a “deemed sale” election with respect to the American depository shares or ordinary shares. If such election is made, you will be deemed to have sold American depository shares or ordinary shares you hold at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale would be subject to the consequences described in the following two paragraphs. After the deemed sale election, your American depository shares or ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC, and you would not be subject to the rules described below with respect to any “excess distribution” you receive from us or any gain from an actual sale or other disposition of the American depositary shares or ordinary shares, unless we subsequently become a PFIC.The rules dealing with deemed sale elections are complex. You are encouraged to consult your tax advisor as to the possibility and consequences of making a deemed sale election if we cease to be treated as a PFIC and such election becomes available to you.

For each taxable year that we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” you receive and any gain you recognize from a sale or other disposition (including a pledge) of the American depository shares or ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the American depository shares or ordinary shares will be treated as an excess distribution. Under these special tax rules:

the excess distribution or recognized gain will be allocated ratably over your holding period for the American depository shares or ordinary shares,

the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

the amount allocated to each other taxable year will be subject to the highest tax ~~purposes,~~rate in effect for individuals or corporations, as applicable, for each such year, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale or other disposition of our American depository shares or ordinary shares cannot be treated as capital, even if ~~75%~~you hold the American depository shares or ~~more~~ordinary shares as capital assets.

If we are treated as a PFIC with respect to you for any taxable year, to the extent any of ~~its gross~~our subsidiaries are also PFICs or we make direct or indirect equity investments in other entities that are PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion which the value of the American depository shares or ordinary shares you own bears to the value of all of our American depository shares and ordinary shares, and you may be subject to the adverse tax consequences described in the preceding two paragraphs with respect to the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisor regarding the application of the PFIC rules to any of our subsidiaries.

Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If you make a mark-to-market election for our American depository shares or ordinary shares, you will include in income ~~consists of certain types of “passive” income or 50% or more~~for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of ~~its assets are “passive”~~the American depository shares or ordinary shares as of the close of your taxable year over your adjusted basis in such American depository shares or ordinary shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of the American depository shares or ordinary shares over their fair market value as of the close of the taxable year. ~~Based~~However, deductions will be allowable only to the extent of any net mark-to-market gains on ~~our current~~the American depository shares or ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the American depository shares or ordinary shares, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on the American depository shares or ordinary shares, as well as to any loss realized on the actual sale or other disposition of the American depository shares or ordinary shares, to the extent the amount of such loss does not exceed the net mark-to-market gains previously included for such American depository shares or ordinary shares. Your basis in the American depository shares or ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a mark-to-market election, any distributions we make would generally be subject to the rules discussed below under “—Dividends and ~~projected~~Other Distributions on the American Depository Shares or Ordinary Shares,” except the lower rate applicable to qualified dividend income ~~assets,~~would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. Our American depository shares are listed on the Nasdaq, which is a qualified exchange or other market for these purposes. Consequently, if the American depository shares continue to be listed on the Nasdaq and ~~activities,~~are regularly traded, and you are a holder of American depository shares, we ~~presently believe~~expect the mark-to-market election would be available to you if we were to become a PFIC. Because a mark-to-market election cannot be made for equity interests in any lower-tier PFICs that we ~~are not~~own, a ~~PFIC in the current taxable year and do not anticipate becoming a PFIC in the future. The PFIC status of a foreign corporation for any taxable year, however, will not~~U.S. Holder may continue to be ~~determinable until after the end of that taxable year. Because the classification of certain of our assets for United States federal income tax purposes is uncertain,~~subject to the PFIC rules ~~are subject~~with respect to ~~administrative interpretation, and the relevant facts may change~~its indirect interest in ~~the future, however, no assurance can be given~~any investments held by us that we are ~~not or will not be~~ treated as a PFIC. The discussion below under “U.S. Holders-Dividends” and “U.S. Holders-Sale or Other Disposition of Shares or American depositary shares,” assumes that we will not be subject to treatment asan equity interest in a PFIC for ~~United States~~U.S. federal income tax purposes. You should consult your tax advisor as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.

If ~~we were currently or were to become~~a non-U.S. corporation is a PFIC, ~~U.S. Holders would be subject to special rules and~~ a ~~variety~~holder of ~~potentially adverse tax consequences~~shares in that corporation may avoid taxation under the ~~Code. See “PFIC Considerations” below.~~PFIC rules described above regarding excess distributions and recognized gains by making a “qualified electing fund” election to include in income its share of the corporation’s income on a current basis. However, you may make a qualified electing fund election with respect to your American depository shares or ordinary shares only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.

Unless otherwise provided by the U.S. Treasury, each U.S. Holder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. You should consult your tax advisor regarding any reporting requirements that may apply to you.

You are strongly urged to consult your tax advisor regarding the application of the PFIC rules to your investment in American depository shares or ordinary shares.

~~Dividends.~~Dividends and Other Distributions on the American Depository Shares or Ordinary Shares ~~Any cash~~

Subject to the PFIC rules discussed above, the gross amount of any distributions ~~paid by us out~~we make to you (including the amount of any taxes withheld) with respect to our ~~earnings and profits, as determined under United States federal income tax rules, will be subject to tax as~~American depository shares or ordinary ~~dividend income and~~shares generally will be includible in ~~the~~your gross income as dividend income on the date of ~~a U.S. Holder upon actual~~receipt by the depositary, in the case of American depository shares, or ~~constructive receipt. Cash distributions~~by you, in the case of ordinary shares, but only to the extent the distribution is paid ~~by us in excess~~out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any such dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a tax-free return of ~~capital~~your tax basis in your American depository shares or ordinary shares, and then, to the extent ~~of the U.S. Holder’s adjusted~~such excess amount exceeds your tax basis in ~~our~~your American depository shares or ordinary shares, as capital gain. We currently do not, and we do not intend to, calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

With respect to certain non-corporate U.S. Holders, including individual U.S. Holders, dividends may be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided (1) the American ~~depositary~~depository shares ~~and thereafter as gain from the sale~~ or ~~exchange of a capital asset. Dividends paid~~ordinary shares are readily tradable on an established securities market in ~~Hong Kong dollars will be includible in income in a United States dollar amount based on~~ the United States, ~~dollar~~(2) we are neither a PFIC nor treated as such with respect to Hong Kong dollar “spot” exchange rate prevailing at the time of receipt of such dividends by the depositary, in the case of American depositary shares, or by the U.S. Holder, in the case of shares held directly by such U.S. Holder. U.S. Holders should consult their own tax advisors regarding the United States federal income tax treatment of any foreign currency gain or loss recognized on the subsequent conversion of Hong Kong dollars received as dividends to United States dollars. Dividends received on shares or American depositary shares will not be eligibleyou (as discussed above) for the ~~dividends received deduction allowed to corporations.~~

~~Under current law, “qualified~~taxable year in which the dividend income” received by an individual prior to January 1, 2013 is subject to United States federal income tax rates lower than those applicable to ordinary income. The maximum federal income tax rate on such qualifying dividends received by an individual is 15%. Based upon our existing and anticipated future operations and current assets,was paid and the ~~anticipation that our~~preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, American depository shares are ~~and~~considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on Nasdaq, as are our American depository shares. However, based on existing guidance, it is not entirely clear whether dividends you receive with respect to the ordinary shares will be taxed as qualified dividend income, because the ordinary shares are not themselves listed on ~~the NASDAQ,~~a U.S. exchange. As discussed above in “—Passive Foreign Investment Company,” we believe ~~that~~ we ~~are~~were a ~~“qualified foreign corporation” and that our~~PFIC for the taxable year ended December 31, 2014. You should consult your tax advisor regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends paid ~~to U.S. Holders who are individuals will be eligible to be treated as “qualified dividend income”, provided that such Holders satisfy applicable holding period requirements~~ with respect to the American ~~depositary shares and other application requirements. Dividends paid by foreign corporations that are classified as PFICs are not “qualified dividend income”. See “PFIC Considerations” below.~~

~~Dividends received on~~depository shares or ~~American depositary shares generally~~ordinary shares.

Any dividends will ~~be treated, for United States federal income tax purposes, as income from non-U.S. sources. Such non-U.S.~~constitute foreign source income ~~generally will be “passive category income”~~for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), ~~or in certain cases “general category income”, which is treated separately from other types~~the amount of ~~income~~the dividend taken into account for purposes of ~~computing~~calculating the ~~U.S. foreign tax credit. A U.S. Holder may be eligible, subject to a number of complex limitations, to claim a~~ foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of ~~any foreign withholding taxes imposed on~~income. For this purpose, dividends ~~received on~~distributed by us with respect to our American depository shares or ~~American depositary shares.~~ordinary shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, who do not elect to claim a U.S. foreign tax credit for foreign income tax withheld may instead claim a deduction, for United States federal income tax purposes, in respect of such withholdings, but only for a year in which the U.S. Holder elects to do so for all creditable foreign income taxes.constitute “general category income.”

In addition, the United States Treasury has expressed concerns that parties to whom depositary shares are pre-released may be taking actions that are inconsistent with the claiming of U.S. foreign tax credits by the holdersDisposition of American ~~depositary shares. The analysis of the creditability of foreign withholding taxes could be affected by future actions that may be taken by the United States Treasury.~~

~~Sale or Other Disposition of~~Depository Shares or ~~American depositary shares. A U.S. Holder~~Ordinary Shares

Subject to the PFIC rules discussed above, you will recognize ~~capital~~taxable gain or loss ~~upon the~~on any sale, exchange or other taxable disposition of ~~shares~~an American depository share or ~~American depositary shares in an amount~~ordinary share equal to the difference between the amount realized ~~upon~~for the ~~disposition~~American depository share or ordinary share and ~~the U.S. Holder’s adjusted~~your tax basis in ~~such shares~~the American depository share or ~~American depositary shares, as each is determined in U.S. dollars. Any such~~ordinary share. The gain or loss generally will be capital gain or ~~loss will be long-term if~~loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, that has held the ~~shares~~American depository share or ~~American depositary shares have been held~~ordinary share for more than one year, ~~and~~you may be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any gain or loss you recognize on a disposition of American depository shares or ordinary shares will generally be ~~United States~~treated as U.S. source ~~gain~~income or loss. Certain non-corporate U.S. Holders (including individuals) may qualify for preferential rates of United States federal income taxation in respect of long-term capital gains for taxable years beginning before January 1, 2013. The claim of a deduction in respect of a capital loss for ~~United States federal income~~foreign tax ~~purposes, may be subject~~credit limitation purposes.

Information Reporting and Backup Withholding

Any dividend payments with respect to limitations. If a U.S. Holder receives Hong Kong dollars for any such disposition, such U.S. Holder should consult its own tax advisor regarding the United States federal income tax treatment of any foreign currency gain or loss recognized on the subsequent conversion of the Hong Kong dollars to United States dollars.

~~Medicare Tax~~

For taxable years beginning after December 31, 2012, a United States person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) the United States person’s “net investment income” for the relevant taxable year and (2) the excess of the United States person’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between US$125,000 and US$250,000, depending on the individual’s circumstances). A holder’s net investment income will generally include its gross dividend income and its net gains from the disposition of ADSs, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a United States person that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your income and gains in respect of your investment in the ADSs.

~~PFIC considerations~~

If we were to be classified as a PFIC for any taxable year, a U.S. Holder would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of United States federal income tax that a U.S. Holder could derive from investing in a foreign company that does not distribute all of its earnings on a current basis. In such event, a U.S. Holder of theAmerican depository shares or ~~American depositary shares may be subject to tax at~~ ordinary ~~income tax rates on (i) any gain recognized on the sales of the shares or American depositary~~ shares and (ii) any “excess distribution” paid on the shares or American depositary shares (generally, a distribution in excess of 125% of the average annual distributions paid by us in the three preceding taxable years). In addition, a U.S. Holder may be subject to an interest charge on such gain or excess distribution. Prospective investors are urged to consult their own tax advisors regarding the potential tax consequences to them if we are or do become a PFIC, as well as certain elections that may be available to them to mitigate such consequences.

~~Non-U.S. Holders~~

~~An investment in shares or American depositary shares by a Non-U.S. Holder will not give rise to any United States federal income tax consequences unless:~~

the dividends received or gain recognized on the sale of the shares or American depositary shares by such person is treated as effectively connected with the conduct of a trade or business by such person in the United States as determined under United States federal income tax law, and the dividends are attributable to a permanent establishment (or in the case of an individual, a fixed place of business) that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis. In such cases you generally will be taxed in the same manner as a U.S. holder. If you are a corporate non-U.S. Holder, “effectively connected” dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate, or

in the case of gains recognized on a sale of shares or American depositary shares by an individual, such individual is present in the United States for 183 days or more and certain other conditions are met. The non-U.S. Holder will be subject to United States federal income tax at a rate of 30% on the amount by which the U.S. — source capital gains exceed non-U.S. — source capital losses.

~~Backup withholding and information reporting~~

~~In general, information reporting requirements will apply to dividends on or the~~ proceeds ~~received on~~from the sale, exchange or redemption of American depository shares or ~~American depositary~~ordinary shares ~~paid within~~may be subject to information reporting to the ~~United States (and, in certain cases, outside the United States)~~U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification or that is otherwise exempt from backup withholding. U.S. Holders ~~other than certain~~that are required to establish their exempt ~~recipients,~~status generally must provide such ~~as corporations,~~certification on U.S. Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisor regarding the application of the U.S. information reporting and backup withholding tax may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (or otherwise establishes, in the manner provided by law, an exemption from backup withholding) or to report dividends required to be shown on the U.S. Holder’s United States federal income tax returns.rules.

Backup withholding is not an additional ~~income tax, and the amount of any~~tax. Amounts withheld as backup withholding ~~from a payment to a~~may be credited against your U.S. ~~Holder will be allowed as credit against the U.S. Holder’s United States~~ federal income tax liability, ~~provided that~~and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate ~~returns~~claim for refund with the U.S. Internal Revenue Service and furnishing any required information in a timely manner.

Additional Reporting Requirements

Certain U.S. Holders who are ~~filed.~~

A non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status to the payer, under penalties of perjury, on IRS Form W-8BEN.

~~Information with Respect to Foreign Financial Assets~~

~~Under recently enacted legislation,~~ individuals ~~that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 in taxable years beginning after March 18, 2010~~ will ~~generally~~ be required to ~~file~~report information relating to an ~~information report with respect~~interest in our American depository shares or ordinary shares, subject to such assets with their tax returns. “Specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are notcertain exceptions (including an exception for American depository shares or ordinary shares held in accounts maintained by certain financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities.institutions). U.S. ~~holders that are individuals are urged to~~Holders should consult their tax advisors regarding the ~~application~~effect, if any, of ~~this legislation to~~these rules on their ownership and disposition of ~~ADSs.~~the American depository shares and ordinary shares.

THE ABOVE DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY, DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO OUR SHARES OR AMERICAN DEPOSITARY RECEIPTS AND IS NOT INTENDED TO BE CONSTRUED AS TAX ADVICE. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF PURCHASING, OWNING AND DISPOSING OF OUR SHARES OR AMERICAN DEPOSITARY RECEIPTS, INCLUDING THE APPLICABILITY AND EFFECT OF ANY UNITED STATES FEDERAL, STATE, LOCAL OR NON-UNITED STATES TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.F. Dividends and paying agents

F.	~~Dividends and paying agents~~

Not ~~applicable.~~applicable

G. Statement by experts

G.	~~Statement by experts~~

Not ~~applicable.~~applicable

H. Documents on display

H.	~~Documents on display~~

We filed with ~~Securities and Exchange Commission~~the SEC in Washington, D.C. a registration statement on Form F-1 (Registration No. 333-11012) under the Securities Act in connection with our global offering of American depositary shares in November 1999. The registration statement contains exhibits and schedules. For further information with respect to ~~City Telecom~~HKTV and the American depositary shares, please refer to the registration statement and to the exhibits and schedules filed with the registration statement. In addition, whenever a reference is made in this annual report to a contract or other document of ~~City Telecom,~~HKTV, you should be aware that such reference is not necessarily complete and that you should refer to the exhibits and schedules that are a part of the registration statement for a copy of the contract or other document.

The Company’s registration statements may be inspected and copied, including exhibits and schedules, and the reports and other information as filed with the ~~Securities and Exchange Commission~~SEC in accordance with the ~~Securities~~ Exchange Act ~~of 1934~~ at the public reference facilities maintained by the ~~Securities and Exchange Commission~~SEC at ~~100F~~100 F Street NE, Washington, D.C. 20549. Copies of such material may also be obtained from the Public Reference Section of the ~~Securities and Exchange Commission~~SEC at ~~100F~~100 F Street NE, Washington, D.C. 20549, at prescribed rates. Information may be obtained regarding the Washington D.C. Public Reference Room by calling the ~~Securities and Exchange Commission~~SEC at 1-800-SEC-0330 or by contacting the ~~Securities and Exchange Commission~~SEC over the Internet at its website at http://~~www.sec.gov/.~~www.sec.gov.

I. Subsidiary information

Not applicable

I.ITEM 11

~~Subsidiary information~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Not applicable.~~

~~ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Quantitative and qualitative disclosures about market risk have been included in note 2427 to our consolidated financial statements.

~~ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES~~

A.ITEM 12

~~Debt securities~~DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

~~Not applicable.~~A. Debt securities

B.	~~Warrants and rights~~

Not ~~applicable.~~applicable

B. Warrants and rights

C.	~~Other securities~~

Not ~~applicable.~~applicable

C. Other securities

D.	~~American depositary shares~~

Not applicable

D. American depositary shares

Fees and Expenses


Persons depositing ordinary shares or ADR holders must pay:		For:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		• Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property


US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)		• Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates

US$0.02 (or less) per ADS		• Any cash distribution to our ADR holders

A fee equivalent to the fee that would be payable if securities distributed to our ADR holders had been ordinary shares and the ordinary shares had been deposited for issuance of ADSs		• Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADR holders

Registration or transfer fees		• Transfer and registration of ordinary shares on our ordinary share register to or from the name of the depositary or its agent when our ADR holders deposit or withdraw ordinary shares

Expenses of the depositary in converting foreign currency to U.S. dollars		• Whenever the depositary or the custodian receives foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the depositary be converted on a reasonable basis into U.S. dollars and the resulting U.S. dollars transferred to the United States

Expenses of the depositary		• Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)

Taxes and other governmental charges the depositary or the custodian have to pay on any ADR or ordinary share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes		As necessary

Any charges incurred by the depositary or its agents for servicing the deposited securities		As necessary

Payment of Taxes

The ADR holder is required to pay all taxes and other governmental charges that may be payable in respect of any their ADSs, or the shares or other securities underlying their ADSs. The depositary may refuse to effect a transfer of any ADRs or refuse to effect the withdrawal of any securities underlying the ADRs while any such taxes and charges are outstanding. The depositary may deduct the amount of any taxes owed from any payments to our ADR holders. It may also sell deposited securities, by public or private sale, to pay any taxes owed. Our ADR holders will remain liable if the proceeds of the sale are not enough to pay the taxes. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to our ADR holders any proceeds, or send to our ADR holders any property, remaining after it has paid the taxes.

Fees and Payments from the Depositary to Us

In fiscal ~~year 2011,~~2014, the Company ~~had~~did not ~~received~~receive any payment from the depositary.

PART II

~~ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES~~

~~None.~~

~~ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS~~

~~None.~~

~~ITEM 15 CONTROLS AND PROCEDURES~~

A.ITEM 13

~~Disclosure controls and procedures~~DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None

ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None

ITEM 15

CONTROLS AND PROCEDURES

A. Disclosure and procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. As of the end of the period covered by this annual report, based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures ~~are~~were effective to provide reasonable assurance that information the Company iswas required to disclose in reports that the Company ~~files~~filed or ~~submits~~submitted under the ~~Securities~~ Exchange Act ~~of 1934 is~~was recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information iswas accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Subsequent to the date of their evaluation, there have been no significant changes in our internal controls or in other factors that could significantly affect these controls.

B. Management’s report on internal control over financial reporting

B.	~~Management’s report on internal control over financial reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as defined in Rules 13a-15(f) under the ~~Securities~~ Exchange Act, ~~of 1934,~~ as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purpose in accordance with generally accepted accounting principles. Under Section 404(a) of the Sarbanes-Oxley Act, ~~of 2002,~~ our management is required to include its assessment of the effectiveness of our internal control procedures over financial reporting in ~~our~~this annual ~~report on Form 20-F beginning in the fiscal year ended August 31, 2009.~~report. With the assistance of the Company’s internal audit department, ~~and external consultants,~~ our management organized and conducted ~~a comprehensive~~an assessment of internal control over financial reporting based on the control criteria in ~~COSO framework.~~COSO’s 2013 Internal Control Integrated Framework. Based on this assessment, ~~the Directors believe~~our management has concluded that, as of ~~August~~December 31, ~~2011, the~~2014, our internal control over financial reporting iswas effective.

KPMG has issued an attestation report on our management’s assessment of our internal control over financial reporting.

C. ~~Report of Independent Registered Public Accounting Firm~~
C. Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of ~~City Telecom (H.K.)~~Hong Kong Television Network Limited:

We have audited ~~City Telecom (H.K.)~~Hong Kong Television Network Limited’s internal control over financial reporting as of ~~August~~December 31, ~~2011,~~2014, based on criteria established in Internal ~~Control –~~ Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). ~~The~~Hong Kong Television Network Limited’s management ~~of City Telecom (H.K.) Limited~~ is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s ~~Report~~report on ~~Internal Control~~internal control over ~~Financial Reporting.~~financial reporting. Our responsibility is to express an opinion on ~~the City Telecom (H.K.)~~Hong Kong Television Network Limited’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, ~~City Telecom (H.K.)~~Hong Kong Television Network Limited maintained, in all material respects, effective internal control over financial reporting as of ~~August~~December 31, ~~2011,~~2014, based on criteria established in Internal ~~Control –~~ Control—Integrated Framework (2013) issued by the ~~Committee of Sponsoring Organizations of the Treadway Commission.~~COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of ~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries as of December 31, 2014 and August 31, ~~2011 and 2010,~~2013, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for ~~each of~~ the ~~years in~~sixteen months ended December 31, 2014 and the ~~three-year period~~twelve months ended August 31, ~~2011,~~2013 and 2012, and our report dated ~~December 19, 2011~~April 29, 2015 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG

~~/s/ KPMG~~

~~Hong Kong, China~~

~~December 19, 2011~~

Hong Kong, China

D.	~~Changes in internal control over financial reporting~~

April 29, 2015

D. Changes in internal control over financial reporting

During ~~fiscal 2011,~~ the period covered by this annual report, except for the new control procedures introduced for the OTT platform and online shopping platform, which were launched in November 2014 and on trial run in December 2014 respectively, there have been no ~~change has occurred~~material changes in our internal controls over financial reporting that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

~~ITEM 16A Audit committee financial expert~~

ITEM 16A

AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors established an audit committee to ensure the impartial supervision of our accounting and business operations. The audit committee is comprised of three independent non-executive directors, namely, Mr. Lee Hon Ying, John, ~~Dr. Chan Kin Man and~~ Mr. Peh Jefferson Tun ~~Lu.~~Lu and Mr. Mak Wing Sum, Alvin. Mr. Peh was appointed to the audit committee on September 1, 2004 and ~~is a~~Mr. Mak was appointed to the audit committee on September 1, 2013. Both are “financial ~~expert”~~experts” within the meaning of, and as required by, the ~~U.S.~~ Sarbanes-Oxley ~~Act of 2002.~~

Act.

~~ITEM 16B Code of ethics~~

ITEM 16B

CODE OF ETHICS

All of our Talents, officers and directors are bound by our code of business ethics and conduct. We adopted our code of ethics and modified it following the passage of, and to comply with, the ~~U.S. Sarbanes Oxley Act of 2002.~~Sarbanes-Oxley Act. Copies of our code of ethics are available for viewing on our website at http://~~www.ctigroup.com.hk~~www.hktv.com.hk and free of charge upon request made to our company secretary. We have never granted a waiver for non-compliance with the policies and procedures set forth in the code of ethics for any Talent of our Company or any of our subsidiaries.

~~ITEM 16C Principal accountant fees and services~~

ITEM 16C

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the remuneration that we paid to KPMG, our independent auditor in each of our previous two fiscal years.


					Fiscal 2013		Fiscal 2014
					*(in millions)*
					HK$		HK$
Nature of the service	2011 HK$ million		2010 HK$ million

Audit fees		2.3		2.3		1.4		2.1
Audit-related fees		0.2		0.2
Non-audit services fees		—		0.3

Audit related fees						0.1		0.3
Total		2.5		2.8		1.5		2.4

Audit fees

Audit fees are the aggregate fees billed by our independent auditors for the annual financial statement audit, subsidiary audits and other procedures required to be performed for the auditors to form an opinion on our consolidated financial statements.

Audit-related fees

Audit-related fees in fiscal 2013 and 2014 are the aggregate fees billed by our independent auditors mainly for the review of our interim financial ~~statements and review of reports for compliance with telecommunications regulations and debt obligations.~~statements.

~~Non-audit services fees~~

~~Non-audit services fees are the aggregate fees billed by our independent auditors for the services provided for the ADS offering in April 2010.~~

Pre-approval polices

The engagement of KPMG and the services provided pursuant to such engagement were approved by our audit committee in accordance with paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X. The fees for all such services have been pre-approved by our audit committee. ~~Our audit committee has satisfied itself that the provision of the above-stated non-audit services has not impaired the independence of KPMG.~~

~~ITEM 16D Exemptions from the listing standards for audit committees~~

ITEM 16D

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

~~ITEM 16E Purchase of equity securities by the issuer and affiliated purchasers~~

ITEM 16E

PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

By way of a general mandate granted to our directors, the maximum aggregate nominal amount of shares that may be purchased pursuant to a mandate corresponds to 10% of the aggregate nominal amount of our issued share capital at the date the mandate was granted. During the ~~year~~sixteen months ended ~~August~~December 31, ~~2011,~~2014, we had not repurchased any of the ordinary shares on the HKSE.

~~ITEM 16F Change in Registrant’s Certifying Accountant~~

ITEM 16F

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

~~ITEM 16G Corporate Governance~~

ITEM 16G

CORPORATE GOVERNANCE

As our ordinary shares are listed on the HKSE and American depositary shares representing our ordinary shares are listed on the Nasdaq Global Market, we are subject to applicable Hong Kong laws and regulations, including the HKSE Listing Rules, and the Hong Kong Companies Ordinance, as well as applicable U.S. federal securities laws, including the Exchange Act and the Sarbanes-Oxley Act. In addition, we are subject to the corporate governance requirements imposed by Nasdaq to the extent they apply to foreign private issuers. Under Nasdaq Stock Market Rule 5615(a)(3), a foreign private issuer such as us may follow its home country corporate governance practices in lieu of certain of the Nasdaq Stock Market Rules corporate governance requirements. Our current corporate governance practices differ from Nasdaq corporate governance requirements for U.S. companies in certain respects, as summarized below:

Nasdaq Stock Market Rule 5605(b)(1) requires a Nasdaq listed company to have a board of directors consisting of a majority of independent ~~members,~~members. In this regard we have elected to adopt the practices of our home ~~country,~~country. As a listed company in Hong Kong, we are subject to the requirement under the HKSE Listing Rules that at least three members of our board of directors be independent as determined under the HKSE Listing Rules. In compliance with our home country practices, we currently have three independent directors out of a total of ~~eight~~seven directors. The standards for establishing independence under the HKSE Listing Rules also differ from those set forth in the Nasdaq Stock Market Rules.

Nasdaq Stock Market Rule 5605(b)(2) requires a Nasdaq listed company to schedule regular executive sessions in which non-management directors meet without management participation. In this regard we have elected to adopt the practices of our home country. Under the applicable Hong Kong law, our board of directors is required to meet regularly and at least four times a year and we are required to ensure that there is active participation by a majority of the directors and afford all directors an opportunity to include matters on the agenda. In addition, when a board meeting considers a matter in which a substantial shareholder or a director has a conflict of interest, the independent directors with no material interest in such matter must be present. ~~In compliance~~As a listed company in Hong Kong, we are subject to the requirement under the HKSE Listing Rules that our Chairman should hold meetings at least annually with ~~our home country practices, we do not organize exclusive meetings for our~~the non-executive directors (including independent non-executive ~~directors on a regular basis.~~

directors) without the presence of the executive directors.

Nasdaq Stock Market Rule 5605(d)(1) requires a Nasdaq listed company to have the compensation of the chief executive officer and the other executive officers be determined, or recommended to ~~the~~ its board of directors for determination, by a compensation committee comprised solely of independent directors. In this regard we have elected to adopt the practices of our home country. Under the HKSE Listing Rules, listed companies are required to establish a remuneration committee with a majority of independent non-executive directors. The compensation of our executive officers is determined by a remuneration committee consisting of ~~six directors,~~four members, three of whom are independent non-executive directors.

Other than the above, we have followed and intend to continue to follow the applicable Nasdaq corporate governance standards.

~~Index to Consolidated Financial Statements~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

We have audited the accompanying consolidated balance sheets of ~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries ~~(the “Group”)~~ as of December 31, 2014 and August 31, ~~2011 and 2010,~~2013, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and ~~the~~ consolidated cash flow statements for the ~~each of years in~~sixteen months ended December 31, 2014 and the ~~three-year period~~twelve months ended August 31, ~~2011.~~2013 and 2012. These consolidated financial statements are the responsibility of ~~City Telecom (H.K.)~~Hong Kong Television Network Limited’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries as of December 31, 2014 and August 31, ~~2011 and 2010,~~2013, and the results of their operations and their cash flows for ~~each of~~ the ~~years in~~sixteen months ended December 31, 2014 and the ~~three-year period~~twelve months ended August 31, ~~2011,~~2013 and 2012, in conformity with ~~the~~ International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), ~~City Telecom (H.K.)~~Hong Kong Television Network Limited’s internal control over financial reporting as of ~~August~~December 31, ~~2011,~~2014, based on criteria established in Internal ~~Control –~~ Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated ~~December 19, 2011~~April 29, 2015 expressed an unqualified opinion on the effectiveness of the internal control over financial reporting of ~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries.

~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries

The accompany notes are integral part of these consolidated financial statements.

~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries

The accompany notes are integral part of these consolidated financial statements.

~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries

The accompany notes are integral part of these consolidated financial statements.

~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries

For the twelve months ended August 31, 2014 and the four months ended December 31, 2014 - unaudited

The accompany notes are integral part of these consolidated financial statements.

~~City Telecom (H.K.)~~Hong Kong Television Network Limited and its subsidiaries

The accompany notes are integral part of these consolidated financial statements.

~~City Telecom (H.K.)~~Hong Kong Television Network Limited (the “Company”) was incorporated in Hong Kong on May 19, 1992 under the Hong Kong Companies Ordinance. ~~City Telecom (H.K.~~Pursuant to a resolution of the Board dated August 29, 2014, the Company’s financial year end date has been changed from August 31 to December 31 in order to unify the financial year end dates of the Company and its subsidiaries and align with the business cycle of the Group’s potential customers in the e-commerce retail industry and the multimedia advertising industry. Accordingly, the consolidated financial statements for the current financial period cover a period of sixteen months from September 1, 2013 to December 31, 2014. The figures presented for the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement and related notes cover the financial year from September 1, 2012 to August 31, 2013 (“Fiscal 2013”) ~~Limited~~and financial year from September 1, 2011 to August 31, 2012 (“Fiscal 2012”). As the Fiscal 2013 and Fiscal 2012 figures are not directly comparable with those of current financial period, financial information for the twelve months ended August 31, 2014 and the four months ended December 31, 2014 (“Supplementary financial information”), prepared in accordance with International Financial Reporting Standards, has been disclosed to enhance comparability. The Supplementary financial information has not been audited.

The Company and its subsidiaries (collectively referred to as the “Group”) are engaged in the provision of ~~international telecommunications~~multimedia business, including but not limited to the offer of free TV programme through Over-The-Top (“OTT”) platform, multimedia and drama productions, content distribution, online shopping mall operation and other related services ~~and fixed telecommunications network services to customers in Hong Kong and Canada.~~(“Multimedia Business”).

The accompanying consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“IASs”) and Interpretations issued by the IASB.

The IASB has issued ~~a number a~~certain new orand revised IFRSs that are first effective or available for early adoption for the current accounting period of the ~~Group and the Company. None of these~~Group.

Note 2(c) provides information on any changes in accounting policies ~~would have a material impact on~~resulting from initial application of those developments to the ~~Group’s~~extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements.

The ~~Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 31).~~

~~The~~accompanying consolidated financial statements were authorized for issue by the Board of Directors on ~~December 19, 2011.~~April 29, 2015.

The measurement basis used in the preparation of the financial statements is the historical cost basis except that investments in available-for-sale securities, investment properties and certain financial assets and liabilities are stated at their fair values or amortized costs as explained in the accounting policies set out below (see notes ~~1(j)~~2(f), ~~1(l)~~2(g), ~~1(q)~~2(l), 2(n), 2(s) and ~~1(r)~~2(t)).

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances but are inherently uncertain and unpredictable, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in ~~note 30.~~notes 7, 15 and 27.

The IASB has issued a number of new IFRSs, which term collectively includes all applicable individual IFRSs, IASs and Interpretations and amendments to IFRSs, that are first effective for the current accounting period of the Group. Of these, the following developments are relevant to the Group’s financial statements:

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

IFRS 13 replaces existing guidance in individual IFRSs with a single source of fair value measurement guidance. IFRS 13 also contains extensive disclosure requirements about fair value measurements for both financial instruments and non-financial instruments. The Group has provided those disclosures in notes 15 and 27. The adoption of IFRS 13 does not have any material impact on the fair value measurements of the Group’s assets and liabilities.

Amendments to IFRS 7, Financial Instruments: Disclosures –Offsetting financial assets and financial liabilities

The amendments introduce new disclosures in respect of offsetting financial assets and financial liabilities. Those new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32, Financial instruments: Presentation and those that are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments and transactions, irrespective of whether the financial instruments are set off in accordance with IAS 32.

The adoption of the amendments does not have an impact on the Group’s financial statements because the Group has not offset financial instruments, nor has it entered into any master netting arrangement or similar agreement which is subject to the disclosure requirements of IFRS 7.

Subsidiaries are entities controlled by the Group. ~~Control exists~~The Group controls an entity when it is exposed, 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. When assessing whether the Group has power, only substantive rights (held by the ~~power to govern the financial~~Group and ~~operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently~~other parties) are ~~exercisable are taken into account.~~

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases.

Intra-group balances and transactions and cash flows and any unrealized profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealized losses resulting from intra-group transactions are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability.

Non-controlling interests are presented in the consolidated balance sheets within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests and no gain or loss is recognized.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognized of an investment in an associate or jointly venture.

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in profit or loss.

~~For consolidation purposes, the balance sheets~~The results of ~~subsidiaries denominated in~~ foreign ~~currencies~~operations are translated ~~at the rates of exchange ruling at the balance sheet date whilst the income statement is translated~~into Hong Kong dollars at an average rate for the year. ~~Exchange~~Balance sheet items are translated into Hong Kong dollars at the closing foreign exchange rates at the balance sheet date. The resulting exchange differences are ~~dealt with as a movement~~recognized in ~~reserves.~~

~~The accompanying consolidated financial statements are presented~~other comprehensive income and accumulated separately in ~~Hong Kong Dollars, which is~~equity in the ~~Group’s functional currency. All financial information have been rounded to the nearest thousand.~~

~~When (ii) is greater than (i), then this excess is recognized immediately in profit or loss as a gain on a bargain purchase.~~

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash-generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 1(i)).exchange reserve.

On disposal of a ~~cash-generating unit during~~foreign operation, the ~~year, any attributable~~cumulative amount of ~~purchased goodwill~~the exchange differences relative to that foreign operation is ~~included in the calculation of~~reclassified from equity to profit or loss when the profit or loss on ~~disposal.~~disposal is recognized.

The Group’s policies for investments in debt and equity securities, are as follows:

Investments in debt and equity securities are initially stated at fair value, which is their transaction price unless it is determined that the fair value at initial recognition differs from the transaction price and that fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that uses only data from observable markets. Cost includes attributable transaction costs, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

Investments in securities held for trading are classified as current assets. Any attributable transaction costs are recognized in profit or loss as incurred. At the balance sheet date the fair value is remeasured, with any resultant gain or loss being recognized in profit or loss. The net gain or loss recognized in profit or loss does not include any dividends or interest earned on these investments as these are recognized in accordance with the policies set out in notes 2(u)(v) and 2(u)(vii).

Dated debt securities that the Group and/or the Company have the positive ability and intention to hold to maturity are classified as held-to-maturity securities. Held-to-maturity securities are stated at amortized cost less impairment losses (see note 2(k)).

Investments in securities which do not fall into any of the above categories are classified as available-for-sale securities. At the balance sheet date the fair value is remeasured, with any resultant gain or loss being recognized in other comprehensive income and accumulated separately in equity in the fair value reserve. As an exception to this, investments in equity securities that do not have a quoted price in an active market for an identical instrument and whose fair value cannot otherwise be reliably measured are recognized in the balance sheet at cost less impairment losses (see note 2(k)). Dividend income from equity securities and interest income from debt securities calculated using the effective interest method are recognized in profit or loss in accordance with the policies set out in notes 2(u)(v) and 2(u)(vii) respectively. Foreign exchange gains and losses resulting from changes in the amortized cost of debt securities are also recognized in profit or loss.

When the investments are derecognized or impaired (see note 2(k)), the cumulative gain or loss recognized in equity is reclassified to profit or loss. Investments are recognized/derecognized on the date the Group commits to purchase /sell the investments or they expire.

Investment properties are land and/or buildings which are owned and held to earn rental income and/or for capital appreciation.

Investment properties are stated at fair value, unless they are still in the course of construction or development at the balance sheet date and their fair value cannot be reliably measured at ~~cost less accumulated depreciation (see note 1(g)) and impairment losses (see note 1(i)) if any.~~that time. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognized in ~~the income statement.~~profit or loss. Rental income from investment properties is accounted for as described in note 2(u)(vi).

When the Group holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a property-by-property basis. Any such property interest which has been classified as an investment property is accounted for ~~in accordance with~~as if it were held under a finance lease (see note 2(j)), and the same accounting ~~policy~~policies are applied to that interest as ~~set out~~are applied to other investment properties leased under finance leases. Lease payments are accounted for as described in note ~~1(s)(v)~~2(j).

Construction in progress was carried at cost, which includes development and construction expenditure incurred and interest and direct costs attributable to the development less any accumulated impairment loss ~~(note 1(i)~~(see note 2(k)) as considered necessary by the directors. No depreciation ~~was~~is provided for construction in progress. OnUpon completion, the associated costs ~~were~~are transferred to leasehold land and ~~building.~~buildings.

Other fixed assets, comprising ~~building,~~buildings, leasehold improvements, ~~telecommunications,~~broadcasting and production equipment, network, computer and office equipment, furniture, fixtures and fittings and motor vehicles, are stated at cost less accumulated depreciation and accumulated impairment losses ~~(note 1(i)~~(see note 2(k)).

Depreciation is calculated to write off the cost of items of ~~property, plant and equipment,~~fixed assets, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

• Network, computer and office equipment

4 ~~years — 20~~- 15 years

• Motor vehicles

4 years

• Leasehold improvements are depreciated over the shorter of the unexpired term of the leases and their estimated useful lives

• Leasehold land classified as held under finance leases is depreciated over the unexpired term of leases

~~Leasehold improvements are depreciated over the shorter of the unexpired term of the leases and their estimated useful lives~~

~~Leasehold land classified as held under finance leases is depreciated over the unexpired term of leases~~

~~Investment properties situated on leasehold land are depreciated over the shorter of the unexpired term of lease and their estimated useful lives of 50 years~~

Where the parts of an item of ~~property, plant and equipment~~fixed assets have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

Major costs incurred in restoring fixed assets to their normal working condition are charged to profit or loss. Major improvements are capitalized and depreciated over their expected useful lives to the Group.

The gain or loss on disposal of a fixed asset is the difference between the net ~~sales~~disposal proceeds and the carrying amount of the relevant asset, and is recognized in profit or loss on the date of disposal.

1(i)	~~Significant accounting policies (continued)~~*Intangible assets*

Intangible assets that are acquired by the Group are stated at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses (see note 2(k)).

Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortized from the date they are available for use and their estimated useful lives are as follows:

• Indefeasible right of use (“IRU”) of telecommunications capacity

20 years

• Right to use of telecommunications services

10 years

• Mobile television broadcast spectrum

12 years

Both the period and method of amortization are reviewed annually.

~~(h)~~(j)

Assets held under leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i)	Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating ~~leases.~~leases, with the following exceptions:

Land held for own use under an operating lease for which its fair value cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease (see note 1(h)(iii)).

property held under operating leases that would otherwise meet the definition of an investment property is classified as investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (see note 2(g)); and

land held for own use under an operating lease for which its fair value cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

(ii)	Finance leases

Where the Group ~~acquired~~acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset or, if lower, the present value of the minimum lease payments of such assets, are included in fixed assets with the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation and impairment losses are accounted for in accordance with the accounting policy as set out in note ~~1(g)~~2(h) and note ~~1(i)~~2(k). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

(iii)

Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Receipts and payments made under operating leases net of any incentives received by/from the lessor are credited/charged to profit or loss on a straight-line basis over the lease periods.

~~(i)~~(k)

Impairment of assets

(i)	Impairment of investments in debt and equity securities and accounts and other receivables

Investments in debt and equity securities and other current and non-current receivables that are stated at cost or amortized cost or are classified as available-for-sale securities are reviewed at the end of each ~~reporting period~~balance sheet date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

significant financial difficulty of the debtor;

a breach of contract, such as a default or delinquency in interest or principal payments;

it becoming probable that the debtor will enter bankruptcy or other financial reorganization;

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and

a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

1 ~~Significant accounting policies (continued)~~

~~(i)~~

~~Impairment of assets (continued)~~

~~(i)~~

~~Impairment of investments in debt and equity securities and accounts and other receivables (continued)~~

If any such evidence exists, any impairment loss is determined and recognized as follows:

For trade and other current receivables and other financial assets carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these ~~assets~~assets), where the effect of discounting is ~~material).~~material. This assessment is made collectively where financial assets carried at amortized cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years.

For available-for-sale securities, the cumulative loss that has been recognized in the fair value reserve is classified to profit or loss. The amount of the cumulative loss that is recognized in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that asset previously recognized in profit or loss.

Impairment losses recognized in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognized directly in other comprehensive income.

Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognized. Reversals of impairment losses in such circumstances are recognized in profit and loss.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognized in respect of ~~accounts receivable,~~trade debtors, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against ~~accounts receivable~~trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss.

(ii)	Impairment of other assets

Internal and external sources of information are reviewed at the ~~end of each reporting period~~balance sheet date to identify indications that the following assets may be impaired or, ~~except in the case of goodwill,~~ an impairment loss previously recognized no longer exists or may have decreased:

fixed assets;

~~investment property;~~ and

~~goodwill.~~intangible assets.

If any such indication exists, the asset’s recoverable amount is estimated. ~~In addition, for goodwill, the recoverable amount is estimated annually whether or not there is any indication of impairment.~~

1 ~~Significant accounting policies (continued)~~

~~(i)~~

~~Impairment of assets (continued)~~

~~(ii)~~

~~Impairment of other assets (continued)~~

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs ~~to sell~~of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

Recognition of impairment losses

An impairment loss is recognized in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated ~~first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then,~~ to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to ~~sell,~~disposal (if measurable) or value in use ~~if determinable.~~(if determinable).

Reversals of impairment losses

~~In respect of assets other than goodwill, an~~An impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. ~~An impairment loss in respect of goodwill is not reversed.~~

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognized.

(iii)

Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, the Group is required to prepare an interim financial report in compliance with IAS ~~34/HKAS~~ 34,Interim financial reporting , in respect of the first six months and twelve months of the financial year. At the end of the interim ~~period,~~periods, the Group applies the same impairment testing, recognition and reversal criteria as it would at the end of the financial ~~year~~period (see ~~note 1(i)~~notes 2(k)(i) and ~~1(i)~~2(k)(ii)).

Impairment losses recognized in an interim period in respect of ~~goodwill,~~ available-for-sale ~~equity securities and unquoted~~ equity securities carried at ~~costs~~cost are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognized had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognized in other comprehensive income and not profit or losses.

~~(j)~~(l)

Derivative financial instruments

Derivative financial instruments are recognized initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss on remeasurement to fair value is recognized immediately in profit or loss, except where the derivatives qualify for cash flow hedge accounting or hedge of a net investment in a foreign operation, in which case recognition of any resultant gain or loss depends on the nature of the item being hedged. For the years presented in the consolidated financial statements, none of the Group’s derivative financial instruments qualify as hedges or hedge accounting.

~~(k)~~(m)

~~Deferred expenditure~~Programme costs

~~Deferred expenditure represents customer acquisition costs incurred for successful acquisition or origination of a service subscription agreement with a customer. Such~~Programme costs are ~~deferred~~stated at cost less amounts expensed and ~~amortized~~any provision considered necessary by management. Programme costs are charged to the profit or loss based on ~~a straight-line basis over~~ the ~~period~~broadcasting schedule of the ~~underlying service subscription agreements.~~programme reflecting the pattern of consumption of their economic benefits.

1 ~~Significant accounting policies (continued)~~

Self-produced programmes

Self-produced programmes consist primarily of drama, infotainment and variety programmes. Cost of self-produced programmes comprises direct production cost and an appropriate proportion of production overheads.

Purchased programmes

Purchased programmes consist film rights acquired for showing on the Group’s television platform. Cost of purchased programme comprises cost of purchase, cost of conversion and an appropriate proportion of production overheads.

~~(l)~~(n)

Accounts ~~receivable~~receivables

Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost less allowance for impairment of doubtful debts (see note ~~1(i)~~2(k)(i)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment of doubtful debts (see note ~~1(i)~~2(k)(i)).

~~(m)~~(o)

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

~~(n)~~(p)

Financial guarantees issued, provisions and contingent liabilities

(i)	Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee ~~(being the transaction price, unless the fair value can otherwise be reliably estimated)~~ is initially recognized as deferred income within trade and other payables. The fair value of financial guarantees issued at the time of issuance is determined by reference to fees charged in an arm’s length transaction for similar services. When such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognized in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognized in profit or loss on initial recognition of any deferred income. The amount of the guarantee initially recognized as deferred income is amortized in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognized in accordance with note ~~1(n)~~2(p)(ii) if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognized, less accumulated amortization.

(ii)	Other provisions and contingent liabilities

Provisions are recognized for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

1 ~~Significant accounting policies (continued)~~

~~(o)~~(q)

Talent benefits

(i)	Leave entitlements

Entitlements to annual leave and long service leave are recognized when they accrue to individuals employed by the Group hereinafter (referred to as “Talents”), including directors of the Company. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by Talents up to the balance sheet date. Entitlements to sick leave and maternity or paternity leave are not recognized until the time of leave.

(ii)	Profit sharing and bonus plans

Provisions for profit sharing and bonus plans are recognized when the Group has a present legal or constructive obligation as a result of services rendered by Talents and a reliable estimate of the obligation can be made.

(iii)

Retirement benefit costs

The Group contributes to defined contribution retirement schemes which are available to certain Talents. Contributions to the schemes by the Group are calculated as a percentage of Talents’ basic salaries and charged to profit or loss. The Group’s contributions are reduced by contributions forfeited by those Talents who leave the scheme prior to vesting fully in the contributions.

The assets of the scheme are held in an independently administered fund that is separated from the Group’s assets.

(iv)	Share-based payments

The fair value of share options granted to Talents or directors is recognized as an Talent cost with a corresponding increase in capital reserve within equity. The fair value is measured at grant date using the Black-Scholes option pricing model or Monte Carlo model, taking into account the terms and conditions upon which the options were granted. Where the Talents have to meet vesting conditions before becoming unconditionally entitled to the share options, the total estimated fair value of the share options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any adjustment to the cumulative fair value recognized in prior years is charged/credited to profit or loss, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company’s shares. The amount related to share options expense is recorded in the capital reserve until either the option is exercised or the option expires.

~~(p)~~(r)

Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss ~~except to the extent that they relate to business combinations,~~ or items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

1 ~~Significant accounting policies (continued)~~

~~(p)~~

~~Income tax (continued)~~

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

~~The~~Where investment properties are carried at their fair value in accordance with the accounting policy set out in note 2(g), the amount of deferred tax recognized is measured using the tax rates that would apply on sale of those assets at their carrying value at the balance sheet date unless the property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. In all other cases, the amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the ~~Company or the~~ Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the ~~Company or the~~ Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

the same taxable entity; or

different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

~~(q)~~(s)

Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, the interest-bearing borrowings are stated at amortized cost with the difference between amortized cost and redemption value recognized in profit or loss over the period of borrowings using the effective interest method.

1 ~~Significant accounting policies (continued)~~

~~(r)~~(t)

Trade and other payables

Trade and other payables are initially recognized at fair value. Except for financial guarantee liabilities measured in accordance with note ~~1(n)~~2(p), trade and other payables are subsequently stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

~~(s)~~(u)

Revenue recognition

(i)	Advertising income, net of agency deductions, is recognized when the advertisements are delivered through the Group’s OTT platform.

(ii)	Revenue for licensing of programme rights is recognized over the contract period or upon delivery of the programmes concerned in accordance with the terms of the contracts.

(iii)

Artiste management fee income is recognized when the services are rendered.

(iv)

E-commerce income primarily comprised of commission income and revenue from merchandise sales. Commission income are recognized for transactions where the Group is not the primary obligor, is not subject to inventory risk, and does not have latitude in establishing prices and selecting suppliers. Commission income are recognized on a net basis which is based on a fixed percentage of the sales amount. Revenue from merchandise sales and related costs are recognized on a gross basis when the Group acts as a principal.

Commission income and revenue from merchandise sales are recognized when the customer has accepted the goods and the related risks and rewards of ownership.

(v)	Interest income is recognized as it accrues using the effective interest method.

(vi)

Rental income receivable under operating leases is recognized in profit or loss in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the platform of benefits to be derived from the leased assets. Lease incentives granted are recognized in profit or loss as an integral part of the aggregate net lease payments receivable.

(vii)

Dividend income from unlisted investments is recognized when the shareholder’s right to receive payment is established. Dividend income from listed investments is recognized when the share price of the investment goes ex-dividend.

(viii)

Revenue for the provision of international ~~telecommunications~~telecommunication and fixed telecommunications network services isare recognized, when an arrangement exists, service is rendered, the fee is fixed or determinable, and ~~collectibility~~collectability is probable.

~~(ii)~~(ix)

Tariff-free period granted to subscribers of fixed ~~telecommunications network~~communications networks services are recognized in profit or loss ratably over the respective term of the ~~service~~services subscription agreement.

~~(iii)~~(x)

Amount received in advance for the provision of fixed telecommunications network services is deferred and included under deferred service revenue, and subsequently recognized as revenue on a straight-line basis over the related service period.

~~(iv)~~

~~Interest income is recognized as it accrues using the effective interest method.~~

~~(v)~~

Rental income receivable under operating leases is recognized in profit or loss in equal installments over the periods covered by the lease term. Lease incentives granted are recognized in profit or loss as an integral part of the aggregate net lease payments receivable.

~~(t)~~(v)

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset.

All other borrowing costs are charged to profit or loss in the year in which they are incurred.

~~(u)~~(w)

Discontinued operations

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. Classification as a discontinued operation occurs upon disposal.

Where an operation is classified as discontinued, a single amount is presented on the face of the income statement, which comprises:

the post-tax profit or loss of the discontinued operation; and

the post-tax gain or loss recognized on the disposal of the assets or disposal group constituting the discontinued operation.

(x)

Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s ~~two~~ lines of business.

Geographical information is not presented as the majority of the Group’s ~~revenue is attributed to customers~~operations are conducted in Hong Kong and ~~the~~ majority of the assets are located in Hong Kong.

~~(v)~~(y)

~~Accounting for barter transactions~~

~~When goods or services are exchanged for goods or services which are of a similar nature and value, the exchange is not regarded as a revenue generating transaction.~~

When goods are sold or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. The revenue is measured at the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the revenue is measured at the fair value of the goods or services rendered, adjusted by the amount of any cash or cash equivalents transferred.

1 ~~Significant accounting policies (continued)~~

~~(w)~~

Related parties

~~For the purposes of these financial statements, a party is considered to be related to the Group if:~~

(a)

A person, or a close member of that person’s family, is related to the Group if that person:

(i)

~~the party~~ has ~~the ability, directly~~control or ~~indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has~~ joint control over the Group;

(ii)

has significant influence over the ~~Group and the party are subject to common control;~~Group; or

(iii)

~~the party is an associate of the Group or a joint venture in which the Group is a venturer;~~

~~(iv)~~

~~the party~~ is a member of the key management personnel of the Group or the Group’s parent.

(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 ~~close family~~ member of ~~such an individual, or~~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 ~~entity under~~associate of the ~~control, joint control or significant influence of such individuals;~~third entity.

(v)

~~the party~~The entity is a ~~close family member~~post-employment benefit plan for the benefit of ~~a party referred to in (i)~~employees of either the Group or is an entity ~~under~~related to the ~~control, joint control or significant influence of such individuals; or~~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 ~~party~~entity or is a ~~post-employment benefit plan which is for the benefit of Talents~~member of the ~~Group or of any entity that is a related party~~key management personnel of the ~~Group.~~entity (or of a parent of the entity).

Close ~~family~~ members of ~~an individual~~the family of a person are those family members who may be expected to influence, or be influenced by, that ~~individual~~person in their dealings with the entity.

3 Discontinued operations

On March 31, 2012, the Group entered into a Sales and Purchase Agreement with a third party (the “Purchaser”) to dispose of the Group’s International Telecommunications Services and Fixed Telecommunications Network Service businesses (the “Telecom Business”) (the “Disposal”). The consideration for the Disposal comprised of cash consideration of HK$4,873,649,000 on a cash-free, debt-free basis. As part and parcel of the Disposal, the Telecom Business grant an intangible asset, including indefeasible right of use (“IRU”) of the telecommunications capacity and right to use of telecommunications services to the Group upon the completion of Disposal. The Disposal was completed on May 30, 2012. The operating results of the disposed Telecom Business up to the disposal date have been presented as discontinued operations in the twelve months ended August 31, 2012.

2(a)	*The results of the discontinued operations included in the consolidated financial statements for the twelve months ended August 31, 2012 are as follows:*


		Twelve months ended August 31, 2012
	Note	HK$’000
Turnover	4		1,433,775
Network costs and cost of sales	5		(277,028	)
Other operating expenses	6(a)		(860,946	)
Other income, net	6(b)		3,638
Finance costs, net	6(c)		574

Profit before taxation			300,013
Income tax expense	8		(48,407	)

Profit after taxation			251,606
Gain on sale of discontinued operations	3(c)		3,520,088

Profit from discontinued operations			3,771,694

(b)

The cash flows of the discontinued operations for the twelve months ended August 31, 2012 are as follows:


	Twelve months ended August 31, 2012
	HK$’000
Net cash inflow from operating activities		414,695
Net cash inflow from investing activities		4,336,661
Net cash outflow from financing activities		(211,887	)

Net cash inflow from discontinued operations		4,539,469

(c) Effect of Disposal on the financial position of the Group:


		Twelve months ended August 31, 2012
	Note	HK$’000
Net assets disposed of:
Goodwill			1,066
Fixed assets			1,601,528
Long term receivable and prepayment			4,533
Deferred expenditure			36,978
Accounts receivable			75,481
Other receivables, deposits and prepayments			165,161
Cash at bank and in hand			42,357
Bank overdrafts - unsecured			(7,529	)
Accounts payable			(19,221	)
Other payables and accrued charges			(147,364	)
Deposits received			(20,946	)
Tax payable			(1,721	)
Deferred tax liabilities			(157,102	)
Deferred services revenue			(81,241	)
Obligations under finance leases			(49	)

			1,491,931

Satisfied by:
Cash consideration			(4,873,649	)
Grant of intangible assets including IRU of the telecommunications capacity and right to use of telecommunications services			(316,943	)
Exchange reserve realized upon disposal of Telecom Business	10		(4,881	)
Transaction costs			183,454

Gain on sale of discontinued operations			(3,520,088	)

No provision for Hong Kong Profits Tax has been made for the gain on sale of discontinued operations.

(d)

Analysis of the net cash inflow in respect of the Disposal:


	Twelve months ended August 31, 2012
	HK$’000
Cash consideration		4,873,649
Transaction costs		(183,454	)
Cash and cash equivalents disposed of		(34,828	)

Net cash inflow		4,655,367

4 Turnover and segment information

The Group is principally engaged in the provision of multimedia business, including but not limited to the offer of free TV programming through OTT platform, multimedia and drama productions, contents distribution, online shopping mall operation and other related services.

Prior to the Disposal, the Group was also engaged in the provision of international telecommunications services and fixed telecommunications network services to customers in Hong Kong and ~~Canada. Revenues~~Canada which have been classified as discontinued operations in the twelve months ended August 31, 2012.

Turnover

The amount of each significant category of revenue recognized in turnover during the ~~year are~~periods is as follows:

   2011
HK$’000    2010
HK$’000    2009
HK$’000
Turnover

International telecommunications services
   197,134       218,589       247,359
Fixed telecommunications network services (note 2(b))
   1,484,324       1,356,098       1,230,880






   1,681,458       1,574,687       1,478,239


	Sixteen months ended December 31, 2014 HK$’000		Four months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000		Twelve months ended August 31, 2013 HK$’000		Twelve months ended August 31, 2012 HK$’000
			(Unaudited)		(Unaudited)
Continuing operations
Licensing of programme rights and net advertising income		20,612		20,542		70		6,745		3,762
Artiste Management services		924		318		606		277		—
Others (Note)		1,491		776		715		780		—

		23,027		21,636		1,391		7,802		3,762

Discontinued operations
International telecommunications services		—		—		—		—		134,645
Fixed telecommunications network services		—		—		—		—		1,299,130

		—		—		—		—		1,433,775

		23,027		21,636		1,391		7,802		1,437,537

2 ~~Turnover and segment information (continued)~~
Note: Others include income from programme production and e-commerce income.

Segmental Information

For the sixteen months ended December 31, 2014, four months ended December 31, 2014, twelve months ended August 31, 2014 and 2013

In a manner consistent with the way in which information is reported internally to the Group’s chief operating decision maker for purposes of resource allocation and performance assessment, the Group has only identified one business segment i.e. Multimedia Business. In addition, the majority of the Group’s operations are conducted in Hong Kong and majority of the assets are located in Hong Kong. Accordingly, no operating or geographical segment information is presented.

For the twelve months ended August 31, 2012

Prior to the Disposal, the Group had two reportable business segments – international telecommunication services and fixed telecommunications network services. As a result of the Disposal, the Group has one reportable business segment – Multimedia Business.

~~(a)~~

~~Segmental information~~

~~The Group is organized on a worldwide basis into two business segments:~~


• Continuing operations:

–	Multimedia services and others	:	provision of multimedia production and distribution and other multimedia related activities

Discontinued operations:

–	International telecommunications	:	provision of international long distance calls services

• –	Fixed telecommunications network	:	provision of dial up and broadband Internet access services, , local voice-over-IP (VoIP) services, IP-TV services and corporate data services

The Group’s inter-segment transactions mainly ~~consist~~consisted of provision of leased lines ~~services.~~services and licensing of programme right. These transactions were entered into on similar terms as those contracted with third parties.


											Twelve months ended August 31, 2012
	2011										Continuing operations			Discontinued operations
	International tele- communications services HK$’000		Fixed tele- communications network services HK$’000		Elimination HK$’000			Group HK$’000			Multimedia services and others HK$’000			International telecommunications services HK$’000		Fixed telecommunications network services HK$’000		Elimination HK$’000			Group HK$’000
Turnover
- External sales		197,134		1,484,324		—			1,681,458			3,762			134,645		1,299,130		—			1,437,537
- Inter-segment sales		3,814		14,837		(18,651	)		—			1,100			698		10,530		(12,328	)		—

		200,948		1,499,161		(18,651	)		1,681,458			4,862			135,343		1,309,660		(12,328	)		1,437,537

Segment results		65,832		306,147					371,979			(107,204	)		32,555		263,246					188,597

Other net income, excluding interest income									3,883
Interest income									3,366
Finance costs									(6,359	)
Other net income																						6,317
Valuation gains on investment properties																						18,200
Gain on sale of discontinued operations																						3,520,088
Bank interest income																						17,241
Finance costs, net																						(1,881	)

Profit before taxation									372,869													3,748,562
Income tax expense									(58,954	)												(50,688	)

Net profit									313,915
Profit for the year																						3,697,874

2 ~~Turnover and segment information (continued)~~


	August 31, 2012
	Continuing operations		Discontinued operations
	Multimedia services and others HK$’000		International telecommunications services HK$’000		Fixed telecommunications network services HK$’000		Group HK$’000
Segment assets		2,755,116		—		—		2,755,116
Term deposits								544,040
Investment properties								238,200

Total assets								3,537,356

Segment liabilities		51,682		—		—		51,682
Tax payable								935
Deferred tax liabilities								1,346

Total liabilities								53,963

Capital expenditure incurred during the year		178,750		3,665		279,978		462,393
Depreciation for the year		4,636		7,021		174,248		185,905

~~(a)~~

~~Segmental information (continued)~~

   2010

International
tele-
communications
services
HK$’000

Fixed
tele-
communications
network services
HK$’000

Elimination
HK$’000

Group
HK$’000

Turnover

- External sales
   218,589       1,356,098       —      1,574,687
- Inter-segment sales
   5,673       16,673       (22,346 ) —






   224,262       1,372,771       (22,346 ) 1,574,687






Segment results
   54,173       219,618       273,791





Other net income, excluding interest income
         (3,383 )
Interest income
         11,372
Finance costs
         (22,235 )


Profit before taxation
         259,545
Income tax expense
         (42,679 )


Net profit
         216,866

   2009
   International
tele-
communications
services
HK$’000
Fixed
tele-
communications
network services
HK$’000

Elimination
HK$’000

Group
HK$’000

Turnover

- External sales
   247,359       1,230,880       —      1,478,239
- Inter-segment sales
   5,669       19,784       (25,453 ) —






   253,028       1,250,664       (25,453 ) 1,478,239






Segment results
   61,631       203,515       265,146





Other net income, excluding interest income
         36,671
Interest income
         4,869
Finance costs
         (55,127 )


Profit before taxation
         251,559
Income tax expense
         (38,730 )


Net profit
         212,829

2 ~~Turnover and segment information (continued)~~

~~(a)~~

~~Segmental information (continued)~~

   2011

International
tele-
communications
services
HK$’000

Fixed
tele-
communications
network services
HK$’000

Group
HK$’000

Segment assets
   432,716       1,831,746       2,264,462


Segment liabilities
   79,459       274,203       353,662
Tax payable
         2,281
Deferred tax liabilities
         111,138


Total liabilities
         467,081


Capital expenditure incurred during the year
   1,631       447,565       449,196
Depreciation for the year
   11,499       206,698       218,197

   2010

International
tele-
communications
services
HK$’000

Fixed
tele-
communications
network services
HK$’000

Group
HK$’000

Segment assets
   590,888       1,660,661       2,251,549


Segment liabilities
   92,982       289,085       382,067
Tax payable
         1,533
Deferred tax liabilities
         55,843
Long-term bank loan
         123,567


Total liabilities
         563,010


Capital expenditure incurred during the year
   5,223       339,621       344,844
Depreciation for the year
   12,637       186,392       199,029

2 ~~Turnover and segment information (continued)~~

~~(b)~~

Hong Kong Broadband Network Limited (“HKBN”), a wholly-owned subsidiary of the Company, is a Fixed Telecommunications Network Services (“FTNS”) licensee and provides interconnection services to enable delivery of telecommunications service to customers of different operators. Since the FTNS license was granted by the Telecommunication Authority (“TA”) and interconnection services have been provided, HKBN has been billing mobile operators for the interconnection services provided to them and recognizing revenue (“mobile interconnection charges”) based on management’s best estimate of the amounts to be collected. In prior years, majority of the mobile operators rejected HKBN’s demand for payment of the mobile interconnection charges. As a result of non-payment by certain mobile operators, in 2004, the Group requested the TA to make a determination (the “2004 Determination”) on the level of mobile interconnection charges payable by one of the mobile operators (“mobile operator under dispute”) to HKBN; and the effective date of the determined mobile interconnection charges.

In June 2007, the TA issued the 2004 Determination which set out the rates of mobile interconnection charge payable by the mobile operator under dispute for interconnection services provided by HKBN for the period from April 1, 2002 to August 31, 2004 and the mobile operator under dispute paid mobile interconnection charge for the relevant period accordingly.

Subsequent to June 2007, HKBN entered into contractual agreements with several mobile operators which agreed to pay mobile interconnection charges based on the 2004 Determination for the period from April 1, 2002 to August 31, 2004 and with respect to the period after August 31, 2004 at the interim rate stated in the contractual agreements. The interim rate was subject to adjustment based on further determination to be issued by the TA.

In February 2008, since certain mobile operators had still not yet settled their mobile interconnection charges for interconnection services provided by HKBN, HKBN requested TA to make a new determination on the rate of mobile interconnection charge and interest thereon with the four mobile operators.

In September 2008, the TA accepted HKBN’s request for determination on the rate of mobile interconnection charges for the period from April 1, 2002 to April 26, 2009 payable by the mobile operators that had not reached contractual agreements with HKBN, and the rate for the period from September 1, 2004 to April 26, 2009 payable by those mobile operators that have reached contractual agreements with HKBN, and the interest rate thereon (the “2008 Determination”).

~~In May 2010, the TA issued its decision on the 2008 Determination which set out the rates of mobile interconnection charges payable by the mobile operators under dispute.~~

Based on the 2008 determination, the Group reversed approximately HK$19,706,000 revenue related to mobile interconnection charges and recognized approximately HK$10,053,000 interest income during the year ended August 31, 2010.

~~Included in the accounts receivable balance as at August 31, 2011 were receivable relating to mobile interconnection charges of HK$23,000 (August 31, 2010: HK$39,763,000).~~

35	Network costs and ~~costs~~cost of sales

Continuing operations:

Cost of sales mainly include programme costs charged to the profit or loss over the showing period and talent costs and other production costs which are directly attributable to the revenue generated from licensing of programme rights, programme production and provision of artiste management services.

Discontinued operations:

Network costs and ~~costs~~cost of sales mainly include interconnection charges paid to local and overseas carriers, leased line rentals, ~~program~~programme fees, and production costs for the IP-TV service, and do not include depreciation charge which is included in other operating expenses.

46 ~~Profit~~(Loss)/profit before taxation

~~Profit~~(Loss)/profit before taxation is arrived at after charging/~~(crediting)~~crediting the following:

(a)

Other operating expenses

   2011
HK$’000    2010
HK$’000 2009
HK$’000
Advertising and marketing expenses
   344,136       372,727    299,794
Amortization of deferred expenditure (note 14)
   37,873       48,621    53,160
Auditors’ remuneration
   2,777       2,910    3,455
Depreciation of owned fixed assets
   217,790       198,323    205,624
Depreciation of fixed assets held under finance lease
   407       706    617
Operating lease charges in respect of land and buildings
   28,426       22,669    17,010
Operating lease charges in respect of equipment
   —         39    42
Provision for doubtful debts (note 15(b))
   13,636       14,742    12,103
Impairment loss on other receivable
   1,587       —      —
Loss / (gain) on disposal of fixed assets
   1,008       (1,375 ) 1,016
Talent costs (note 4(d))
   311,355       301,760    302,279
Others
   138,169       144,482    142,864




   1,097,164       1,105,604    1,037,964


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
Continuing operations
Depreciation		37,773			10,188			27,585			26,622			6,268
Less: depreciation capitalized as programme costs		(3,403	)		(508	)		(2,895	)		(7,515	)		(1,632	)

		34,370			9,680			24,690			19,107			4,636

Advertising and marketing expenses		10,070			9,231			839			8,595			214
Auditor’s remuneration		2,395			1,331			1,064			1,500			1,630
Operating lease charges in respect of
- land and building		11,652			4,414			7,238			4,796			2,827
- equipments		1,701			1,074			627			—			—
Loss/(gain) on disposal of fixed assets		208			(3	)		211			263			675
Talent costs (note 6(d))		146,502			40,688			105,814			84,303			55,971
Amortization of intangible assets (note 16)		40,067			10,992			29,075			20,360			5,217
Impairment of accounts receivable		—			—			—			100			—
Write off of artiste prepayment		28,328			3,353			24,975			16,852			697
Provision for committed artiste payment		6,003			(4,860	)		10,863			—			—
Others		62,503			22,318			40,185			45,638			33,093

		343,799			98,218			245,581			201,514			104,960

Discontinued operations
Depreciation		—			—			—			—			181,269
Advertising and marketing expenses		—			—			—			—			271,532
Auditor’s remuneration		—			—			—			—			1,071
Operating lease charges in respect of land and buildings		—			—			—			—			26,910
Gain on disposal of fixed assets		—			—			—			—			(2,674	)
Talent costs (note 6(d))		—			—			—			—			233,814
Amortization of deferred expenditure		—			—			—			—			29,902
Others		—			—			—			—			119,122

		—			—			—			—			860,946

		343,799			98,218			245,581			201,514			965,906

(b)

Other income, net


	2011 HK$’000			2010 HK$’000			2009 HK$’000			Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000		Twelve months ended August 31, 2012 HK$’000
													(Unaudited)			(Unaudited)
Continuing operations
Bank interest income											23,017			5,292			17,725			27,051		16,167
Dividend income from available-for-sale equity securities											1,825			336			1,489			895		—
Interest income from available-for-sale debt securities											120,353			29,407			90,946			61,406		—
Gain on disposal of available-for-sale securities											4,946			504			4,442			4,508		—
Rentals from investment properties											15,306			3,809			11,497			11,765		3,388
Net exchange (loss)/gain											(18,425	)		(9,469	)		(8,956	)		23,007		229
Others											587			28			559			277		136

											147,609			29,907			117,702			128,909		19,920

Discontinued operations
Interest income		(3,366	)		(11,372	)		(4,869	)		—			—			—			—		1,074
Loss/(gain) on extinguishment of 10-year senior notes		—			9,650			(31,371	)
Net exchange gain		(995	)		(324	)		(3,038	)		—			—			—			—		408
Others		(2,888	)		(5,943	)		(2,262	)		—			—			—			—		2,156

		(7,249	)		(7,989	)		(41,540	)		—			—			—			—		3,638

											147,609			29,907			117,702			128,909		23,558

(c)

Finance costs, net

   2011
HK$’000    2010
HK$’000    2009
HK$’000
Interest element of finance leases
   30       42       27
Interest on 10-year senior notes
   —         5,881       52,670
Amortization of incidental issuance costs
   —         188       1,545
Interest on bank borrowings
   1,152       1,379       —
Amortization of upfront costs on long-term bank loan
   182       192       —
Change in fair value of derivative financial instrument
   271       11,293       —
Write-off of upfront costs upon settlement of long-term bank loan
   1,251       —         —
Other borrowing costs
   3,473       3,260       885






   6,359       22,235       55,127


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
Continuing operations
Interest element of finance leases		3			—			3			9			15
Bank charges		178			61			117			2,150			—
Interest on bank loans		7,169			1,952			5,217			2,530			—
Change in fair value of derivative financial instrument		(5,181	)		(1,340	)		(3,841	)		(4,482	)		(1,901	)
Other borrowing costs		5,598			1,343			4,255			4,653			4,341

		7,767			2,016			5,751			4,860			2,455

Discontinued operations
Interest element of finance leases		—			—			—			—			4
Others		—			—			—			—			(578	)

		—			—			—			—			(574	)

		7,767			2,016			5,751			4,860			1,881

4 ~~Profit before taxation (continued)~~

(d)

Talent costs

2011
HK$’000

2010
HK$’000

2009
HK$’000

Wages and salaries
   517,609    518,380    506,638
Provision for annual leave
   612    561    613
Equity settled share-based transaction
   4,652    5,347    4,768
Retirement benefit costs — defined contribution plans (note 8)
   43,872    38,820    34,614
Less: Talent costs capitalized as fixed assets
   (22,206 ) (20,851 ) (16,621 )
Talent costs incurred in network costs and costs of sales
   (10,843 ) (11,098 ) (13,461 )
Talent cost incurred in advertising and marketing expenses
   (222,341 ) (229,399 ) (214,272 )


   311,355    301,760    302,279


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
Continuing operations
Wages and salaries		200,103			43,494			156,609			208,264			104,411
Retirement benefit costs - defined contribution plans (note 12)		9,004			1,866			7,138			9,876			3,993

		209,107			45,360			163,747			218,140			108,404
Less: Talent costs capitalized as programme costs		(62,605	)		(4,672	)		(57,933	)		(121,207	)		(47,140	)
Talent costs included in cost of sales		—			—			—			(12,630	)		(5,293	)

		146,502			40,688			105,814			84,303			55,971

Discontinued operations
Wages and salaries		—			—			—			—			396,008
Equity settled share-based transaction		—			—			—			—			10,480
Retirement benefit costs - defined contribution plans (note 12)		—			—			—			—			38,074

		—			—			—			—			444,562
Less: Talent costs capitalized as fixed assets		—			—			—			—			(17,671	)
Talent costs included in network costs and cost of sales		—			—			—			—			(6,247	)
Talent costs included in advertising and marketing expenses		—			—			—			—			(186,830	)

		—			—			—			—			233,814

		146,502			40,688			105,814			84,303			289,785

Talent costs include all compensation and benefits paid to and accrued for all individuals employed by the Group, including directors.

~~(e)~~

~~Other items~~Impairment losses/ write off of assets

The Group’s Multimedia Business comprised of two cash generating units (“CGU”), namely “Media”, which operates the multimedia and drama production and contents distribution business, and “E-commerce”, which operates the online shopping business of the Group.

~~2011~~

The Group recognized impairment loss on fixed assets, intangible assets and programme costs and wrote off certain construction in progress with an aggregated amount of HK$32,000,000 during the sixteen months ended December 31, 2014.

The Group has identified indications of impairment of its Media CGU assets, primarily as a result of the uncertainty in the legal and technical feasibility in the provision of mobile television services. The recoverable amounts of these assets, which include primarily programme costs and certain fixed assets and intangible assets, were assessed based on their value in use at the Media CGU level as well as the Group’s Multimedia Business as a whole, and determined by discounting the estimated cashflows to be generated from the use of these assets at pre-tax discount rates of 13.40% at the Media CGU level and 15.25% at the overall Multimedia Business level. Key assumptions used in the estimation of value in use included discount rate, projected revenue of the Media CGU and projected revenue of E-commerce CGU.

~~HK$’000~~

~~2010~~

~~HK$’000~~

~~2009~~

~~HK$’000~~

~~Realized and unrealized gain on other financial assets~~

—

~~(189~~

)

58	Income tax ~~expense~~(expense)/credit

Hong Kong Profits Tax rate is 16.5%. ~~There was no provision for Hong Kong Profits Tax for 2009, 2010 and 2011 as the Group’s Hong Kong subsidiaries which were subject to Hong Kong Profits Tax sustained tax losses.~~ The statutory income tax rate in the People’s Republic of China (“PRC”) is 25%. CTI Guangzhou Customer Services Co., Ltd., a former wholly owned subsidiary of the Company, being a recognized Advanced Technology Service Enterprise, is subject to income tax at a reduced rate of 15% from calendar years 2010 to 2012. ~~The provision of PRC income tax was calculated at 25% for calendar year 2009.~~ Non-Hong Kong current taxation is mainly related to the PRC income tax.

The amount of income tax ~~expense~~(expense)/credit in the consolidated income statement represents:

   2011
HK$’000 2010
HK$’000 2009
HK$’000
Current taxation:

Hong Kong

- Over-provision in prior years
   —      40    —
Non-Hong Kong

- Provision for the year
   (3,524 ) (2,585 ) (1,622 )
- Under-provision in prior years
   (135 ) —      —
Deferred taxation:

- Origination and reversal of temporary differences (note 20)
   (55,295 ) (40,134 ) (37,108 )
- Recognition of previously unrecognized tax losses (note 20)
   —      —      —


Income tax expense
   (58,954 ) (42,679 ) (38,730 )


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000		Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
Continuing operations
Current taxation
Hong Kong
- Provision for the year		—			—			—			—		(935	)
- Over-provision in respect of prior year		394			284			110			540		—
Deferred taxation
Origination and reversal of temporary differences		(599	)		(344	)		(255	)		1,119		(1,346	)

		(205	)		(60	)		(145	)		1,659		(2,281	)

Discontinued operations
Current taxation
Non-Hong Kong
- Provision for the year		—			—			—			—		(2,443	)
Deferred taxation
Origination and reversal of temporary differences		—			—			—			—		(45,964	)

		—			—			—			—		(48,407	)

		(205	)		(60	)		(145	)		1,659		(50,688	)

5 ~~Income tax expense (continued)~~

The Group’s income tax ~~expense~~(expense)/credit differs from the theoretical amount that would arise using the ~~profits~~(loss)/profit before taxation at applicable tax rates as follows:

   2011
HK$’000 2010
HK$’000 2009
HK$’000
Profit before taxation
   372,869    259,545    251,559


Notional tax on profit before taxation, calculated at the prevailing tax rates applicable to profit in the jurisdictions concerned
   (63,606 ) (43,781 ) (42,240 )
Effect of non-taxable income
   535    4,692    1,466
Effect of (loss)/gain on extinguishment of 10-year senior notes not subject to taxation
   —      (1,592 ) 5,176
Effect of non-deductible expenses
   (4,975 ) (2,367 ) (3,648 )
(Under)/over-provision in prior years
   (135 ) 40    —
Utilization of tax loss related to prior years
   6,872    —      —
PRC income tax concession
   2,406    —      —
Others
   (51 ) 329    516


Income tax expense
   (58,954 ) (42,679 ) (38,730 )


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
(Loss)/profit before taxation		(236,797	)		(73,798	)		(162,999	)		(41,969	)		3,748,562

Notional tax on (loss)/profit before taxation, calculated at the prevailing tax rates applicable to profit in the jurisdiction concerned		39,072			12,178			26,894			6,925			(619,401	)
Effect of non-taxable income		21,577			6,399			15,178			22,691			4,662
Effect of non-deductible expenses		(8,705	)		470			(9,175	)		(4,886	)		(3,627	)
Over-provision in respect of prior years		394			284			110			540			—
Effect of unused tax losses not recognized		(53,200	)		(18,772	)		(34,428	)		(23,952	)		(9,693	)
Effect of disposal of Telecom Business		—			—			—			—			577,383
Others		657			(619	)		1,276			341			(12	)

Income tax (expense) /credit		(205	)		(60	)		(145	)		1,659			(50,688	)

Representing by
- Continuing operations		(205	)		(60	)		(145	)		1,659			(2,281	)
- Discontinued operations		—			—			—			—			(48,407	)

		(205	)		(60	)		(145	)		1,659			(50,688	)

Dividends

(a)

Dividends payable to equity shareholders of the Company attributable to the ~~year~~period

   2011
HK$’000    2010
HK$’000    2009
HK$’000
Interim dividend declared and paid of HK15 cents per ordinary share (2010: HK6.5 cents per ordinary share , 2009: HK3 cents per ordinary share)
   115,605       49,725       19,904
Final dividend proposed after the balance sheet date, of HK15 cents per ordinary share (2010: HK13.5 cents per ordinary share, 2009: HK16 cents per ordinary share)
   115,787       103,275       106,269






   231,392       153,000       126,173


	Sixteen months ended December 31, 2014 HK$’000		Four months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000		Twelve months ended August 31, 2013 HK$’000		Twelve months ended August 31, 2012 HK$’000
			(Unaudited)		(Unaudited)
Special dividend declared and paid of HK$2.5 per ordinary share		—		—		—		—		2,022,542
Interim dividend declared and paid of HK15 cents per ordinary share		—		—		—		—		119,674
Final dividend proposed after the August 31, 2012 of HK15 cents per ordinary share		—		—		—		—		121,352

		—		—		—		—		2,263,568

The Board has resolved not to declare any final dividend for the sixteen months ended December 31, 2014 and the twelve months ended August 31, 2013.

The final dividend proposed after the balance sheet date has not been recognized as a liability at the balance sheet date.

(b)

Dividends attributable to the previous financial year, approved and paid during the ~~year:~~period:

   2011
HK$’000    2010
HK$’000    2009
HK$’000
Final dividend in respect of the financial year ended August 31, 2010, approved and paid of HK13.5 cents per ordinary share (2010: HK16 cents per ordinary share in respect of financial year ended August 31, 2009, 2009: HK2 cents per ordinary share in respect of financial year ended August 31, 2008)
   103,735       108,735       13,014

Sixteen months

ended

December 31,

2014

HK$’000

Four months

ended

December 31,

2014

HK$’000

Twelve months

ended

August 31,

2014

HK$’000

Twelve months

ended

August 31,

2013

HK$’000

Twelve months

ended

August 31,

2012

HK$’000

(Unaudited)

Final dividend in respect of the twelve months ended August 31, 2012, approved and paid of HK15 cents per ordinary share (2012: HK15 cents per ordinary share in respect of twelve months ended August 31, 2011)

—

121,352

115,901

~~During~~

10	Other comprehensive income

Tax effects relating to each component of other comprehensive income


	Sixteen months ended December 31, 2014
	Before-tax amount HK$’000			Tax expense HK$’000		Net-of-tax amount HK$’000
Exchange difference on translation of financial statements of an overseas subsidiary		1			—		1
Available-for-sale securities: net movement in fair value reserve		41,540			—		41,540

		41,541			—		41,541


	Four months ended December 31, 2014 (Unaudited)
	Before-tax amount HK$’000			Tax expense HK$’000		Net-of-tax amount HK$’000
Exchange difference on translation of financial statements of an overseas subsidiary		1			—		1
Available-for-sale securities: net movement in fair value reserve		(38,277	)		—		(38,277	)

		(38,276	)		—		(38,276	)


	Twelve months ended August 31, 2014 (Unaudited)
	Before-tax amount HK$’000			Tax expense HK$’000		Net-of-tax amount HK$’000
Exchange difference on translation of financial statements of an overseas subsidiary		—			—		—
Available-for-sale securities: net movement in fair value reserve		79,817			—		79,817

		79,817			—		79,817


	Twelve months ended August 31, 2013
	Before-tax amount HK$’000			Tax expense HK$’000		Net-of-tax amount HK$’000
Exchange difference on translation of financial statements of an overseas subsidiary		—			—		—
Available-for-sale securities: net movement in fair value reserve		(71,109	)		—		(71,109	)

		(71,109	)		—		(71,109	)

   Twelve months ended August 31, 2012

Before-tax
amount
HK$’000

Tax
expense
HK$’000

Net-of-tax
amount
HK$’000

Exchange difference on translation of financial statements of overseas subsidiaries
   (265 )    —         (265 )
Exchange reserve realized upon disposal of Telecom business
   (4,881 )    —         (4,881 )






   (5,146 )    —         (5,146 )

Component of other comprehensive income, including reclassification adjustments


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
Available-for-sale securities: net movement in fair value reserve
Changes in fair value recognized during the period		46,486			(37,773	)		84,259			(66,601	)		—
Reclassified to profit or loss upon disposal		(4,946	)		(504	)		(4,442	)		(4,508	)		—

		41,540			(38,277	)		79,817			(71,109	)		—



11 (Loss)/earnings per share

	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
(Loss)/profit attributable to equity shareholders		(237,002	)		(73,858	)		(163,144	)		(40,310	)		3,700,288



Weighted average number of ordinary shares

	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(Unaudited)			(Unaudited)
Issued ordinary shares at the beginning of the period		809,017			809,017			809,017			809,017			771,912
Effect of share options exercised		—			—			—			—			12,164

Weighted average number of ordinary shares at the end of the period (basic)		809,017			809,017			809,017			809,017			784,076
Incremental shares from assumed exercise of share options		—			—			—			—			11,511

Weighted average number of ordinary shares at the end of the period (diluted)		809,017			809,017			809,017			809,017			795,587

Basic (loss)/earnings per share		HK(29.3)cents			HK(9.1)cents			HK(20.2)cents			HK(5.0) cents			HK471.9 cents

Diluted (loss)/earnings per share		HK(29.3)cents			HK(9.1)cents			HK(20.2)cents			HK(5.0) cents			HK465.1 cents

The diluted loss per share for the ~~year~~sixteen months ended December 31, 2014, four months ended December 31, 2014, twelve months ended August 31, ~~2009, a scrip dividend option was offered to all shareholders of~~2014 and 2013 are the ~~Company, excluding shareholders with registered addresses outside Hong Kong, who~~same as the basic loss per share as no potential ordinary share were ~~entitled to the final dividend in respect of the financial year ended August 31, 2008. 12,212,142 shares were issued~~outstanding during the ~~year ended August 31, 2009 to the shareholders of the Company who had elected to receive all or part of their entitlement to dividends in the form of scrip.~~respective periods.

7	~~Earnings per share~~

   2011
HK$’000    2010
HK$’000    2009
HK$’000
Profit attributable to shareholders
   313,915       216,866       212,829

~~Weighted average number of ordinary shares~~

2011
Number
of shares
‘000

2010
Number
of shares
‘000

2009
Number
of shares
‘000

Issued ordinary shares at the beginning of the year
   764,997    664,180    650,622
Effect of scrip dividend issued
   —      —      6,256
Effect of share options exercised
   3,810    14,856    329
Effect of placement
   —      27,569    —
Effect of shares repurchased and cancelled
   —      —      (6 )


Weighted average number of ordinary shares at the end of the year (basic)
   768,807    706,605    657,201
Incremental shares from assumed exercise of share options
   23,992    30,011    11,183
Weighted average number of ordinary shares at the end of the year (diluted)
   792,799    736,616    668,384


Basic earnings per share
   HK40.8 cents HK30.7 cents HK32.4 cents


Diluted earnings per share
   HK39.6 cents HK29.4 cents HK31.8 cents

812 Retirement benefit costs

The Group contributes to an Occupational Retirement Scheme (the “ORSO Scheme”), a defined contribution retirement scheme, which is available to some of its Talents in Hong Kong. Under the ORSO Scheme, the Talents are required to contribute 5% of their monthly salaries, while the ~~Group’s~~Groups contributions are calculated at 10% and 5% of the monthly salaries of senior ~~management~~ Talents and all other Talents respectively. The Talents are entitled to 100% of the employer’s contributions after 10 years of completed service, or at a reduced scale after completion of 3 to 9 years’ service. Contributions to the ORSO Scheme are reduced by contributions forfeited by those Talents who leave the ORSO Scheme prior to vesting fully in the Groups contributions. The Talents are entitled to 100% of the employer’s contributions after 10 years of completed service, or at a reduced scale after completion of 3 to 9 years’ service. Contributions to the ORSO Scheme are reduced by contributions forfeited by those Talents who leave the ORSO Scheme prior to vesting fully in the Group’s contributions.

A mandatory provident fund scheme (the “MPF Scheme”) has been established under the Hong Kong Mandatory Provident Fund Scheme Ordinance in December 2000. The ~~then~~ existing Talents of the Group in Hong Kong could elect to join the MPF Scheme, while all new Talents joining the Group in Hong Kong from then onwards are required to join the MPF Scheme. Both the Group and the Talents are required to contribute 5% of each individual’s relevant income with a maximum amount of HK$1,000 per month before June 1, 2012, HK$1,250 per month before June 1, 2014, and commenced from June 1, 2014, the maximum amount has been increased to HK$1,500, as a mandatory contribution. Employer’s mandatory contributions are 100% vested in the Talents as soon as they are paid to the MPF Scheme. Senior Talents may also elect to join a Mutual Voluntary Plan (the “Mutual Plan”) in which both the Group and the Talent, on top of the MPF Scheme mandatory contributions, make a voluntary contribution to the extent of contributions that would have been made under the ORSO Scheme.

~~Pursuant~~During the twelve months ended August 31, 2012, pursuant to the relevant regulations in the PRC, the Group ~~contributes~~contributed to a defined contribution retirement scheme organized by the local social security bureau for each Talent of the former subsidiary in the PRC at the rate of 20% of a standard salary base as determined by the local social security bureau. The Group has no other obligation to make payments in respect of retirement benefits of these Talents.

The retirement schemes for Talents of the Group in other countries follow the local statutory requirements of the respective countries.

The aggregate employer’s contributions, net of forfeited contributions, which have been dealt with in the consolidated income statement during the year are as follows:

   2011
HK$’000    2010
HK$’000    2009
HK$’000
Gross contributions
   43,872       38,820       34,614


	Sixteen months ended December 31, 2014 HK$’000		Four months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000		Twelve months ended August 31, 2013 HK$’000		Twelve months ended August 31, 2012 HK$’000
			(Unaudited)		(Unaudited)
Gross contributions
- Continuing operations		9,004		1,866		7,138		9,876		3,993
- Discontinued operations		—		—		—		—		38,074

		9,004		1,866		7,138		9,876		42,067

At ~~August~~December 31, ~~2011,~~2014, there was no forfeited contribution available to offset future contributions by the Group to the ORSO Scheme ~~(2010~~(August 31, 2013 and ~~2009:~~2012: Nil).

913	Directors’ and senior management’s emoluments

(a)

Directors’ remuneration

~~The remuneration of each director for~~For the ~~year~~sixteen months ended December 31, 2014:


Name of director	Fee HK$’000		Salary HK$’000		Discretionary bonuses HK$’000		Share- based payment HK$’000		Employer’s contribution to defined contribution scheme HK$’000		Total HK$’000
Wong Wai Kay, Ricky		—		8,941		559		—		893		10,393
Cheung Chi Kin, Paul		—		8,941		559		—		893		10,393
To Wai Bing		—		3,010		188		—		301		3,499
Wong Nga Lai, Alice		—		3,010		188		—		300		3,498
Cheng Mo Chi, Moses (note (a))		202		—		—		—		—		202
Lee Hon Ying, John		297		—		—		—		—		297
Peh Jefferson Tun Lu		278		—		—		—		—		278
Mak Wing Sum, Alvin (note (b))		278		—		—		—		—		278

Total		1,055		23,902		1,494		—		2,387		28,838

For the four months ended December 31, 2014 (Unaudited):


Name of director	Fee HK$’000		Salary HK$’000		Discretionary bonuses HK$’000		Share- based payment HK$’000		Employer’s contribution to defined contribution scheme HK$’000		Total HK$’000
Wong Wai Kay, Ricky		—		2,235		—		—		223		2,458
Cheung Chi Kin, Paul		—		2,235		—		—		223		2,458
To Wai Bing		—		752		—		—		75		827
Wong Nga Lai, Alice		—		752		—		—		75		827
Cheng Mo Chi, Moses (note (a))		—		—		—		—		—		—
Lee Hon Ying, John		74		—		—		—		—		74
Peh Jefferson Tun Lu		69		—		—		—		—		69
Mak Wing Sum, Alvin (note (b))		69		—		—		—		—		69

Total		212		5,974		—		—		596		6,782

For the twelve months ended August 31, ~~2011 is set out below:~~2014 (Unaudited):


Name of director	Fee HK$’000		Salary HK$’000		Discretionary bonuses HK$’000		Share-based payment HK$’000		Employer’s contribution to defined contribution scheme HK$’000		Total HK$’000		Fee HK$’000		Salary HK$’000		Discretionary bonuses HK$’000		Share- based payment HK$’000		Employer’s contribution to defined contribution scheme HK$’000		Total HK$’000
Wong Wai Kay, Ricky		—		6,704		1,000		—		670		8,374		—		6,706		559		—		670		7,935
Cheung Chi Kin, Paul		—		6,706		1,000		—		670		8,376		—		6,706		559		—		670		7,935
Yeung Chu Kwong, William		—		9,733		1,310		3,006		456		14,505
Lai Ni Quiaque		—		2,762		635		1,906		276		5,579
Cheng Mo Chi, Moses		176		—		—		—		—		176
To Wai Bing														—		2,258		188		—		226		2,672
Wong Nga Lai, Alice														—		2,258		188		—		225		2,671
Cheng Mo Chi, Moses (note (a))														202		—		—		—		—		202
Lee Hon Ying, John		195		—		—		—		—		195		223		—		—		—		—		223
Chan Kin Man		182		—		—		—		—		182
Peh Jefferson Tun Lu		182		—		—		—		—		182		209		—		—		—		—		209
Mak Wing Sum, Alvin (note (b))														209		—		—		—		—		209

Total		735		25,905		3,945		4,912		2,072		37,569		843		17,928		1,494		—		1,791		22,056

~~9 Directors’ and senior management’s emoluments (continued)~~For the twelve months ended August 31, 2013:


Name of director	Fee HK$’000		Salary HK$’000		Discretionary bonuses HK$’000		Share- based payment HK$’000		Employer’s contribution to defined contribution scheme HK$’000		Total HK$’000
Wong Wai Kay, Ricky		—		6,706		—		—		670		7,376
Cheung Chi Kin, Paul		—		6,706		—		—		670		7,376
To Wai Bing		—		2,326		564		—		226		3,116
Wong Nga Lai, Alice		—		2,273		1,276		—		226		3,775
Cheng Mo Chi, Moses		193		—		—		—		—		193
Lee Hon Ying, John		212		—		—		—		—		212
Chan Kin Man (note (c))		152		—		—		—		—		152
Peh Jefferson Tun Lu		199		—		—		—		—		199

Total		756		18,011		1,840		—		1,792		22,399

For the twelve months ended August 31, 2012:


Name of director	Fee HK$’000		Salary HK$’000		Discretionary bonuses HK$’000		Share- based payment HK$’000		Employer’s contribution to defined contribution scheme HK$’000		Total HK$’000
Wong Wai Kay, Ricky		—		6,707		1,050		—		670		8,427
Cheung Chi Kin, Paul		—		6,707		1,050		—		670		8,427
Yeung Chu Kwong, William (note (d))		—		7,477		66,163		8,901		342		82,883
Lai Ni Quiaque (note (d))		—		2,070		59,915		120		207		62,312
To Wai Bing (note (e))		—		6,199		4,200		—		192		10,591
Wong Nga Lai, Alice (note (e))		—		1,659		1,839		—		166		3,664
Cheng Mo Chi, Moses		183		—		—		—		—		183
Lee Hon Ying, John		202		—		—		—		—		202
Chan Kin Man		190		—		—		—		—		190
Peh Jefferson Tun Lu		190		—		—		—		—		190

Total		765		30,819		134,217		9,021		2,247		177,069

Notes:

(a)

~~Directors’ remuneration (continued)~~Dr. Cheng Mo Chi, Moses resigned as the Non-executive Director with effect from August 31, 2014.

~~The remuneration of each director for the year ended August 31, 2010 is set out below:~~

Name of director    Fee
HK$’000    Salary
HK$’000
Discretionary
bonuses
HK$’000
   Share-based
payment
HK$’000    Employer’s
contribution
to defined
contribution
scheme
HK$’000    Total
HK$’000
Wong Wai Kay, Ricky
   —         6,707       1,800       —         670       9,177
Cheung Chi Kin, Paul
   —         6,709       1,800       —         670       9,179
Yeung Chu Kwong, William
   —         8,264       2,400       2,526       456       13,646
Lai Ni Quiaque
   —         2,642       750       2,455       264       6,111
Cheng Mo Chi, Moses
   168       —         —         —         —         168
Lee Hon Ying, John
   185       —         —         —         —         185
Chan Kin Man
   174       —         —         —         —         174
Peh Jefferson Tun Lu
   174       —         —         —         —         174












Total
   701       24,322       6,750       4,981       2,060       38,814

(b)	Mr. Mak Wing Sum, Alvin was appointed as Independent Non-executive Director with effect from September 1, 2013.

(c)	Dr. Chan Kin Man resigned as the Independent Non-Executive Director with effect from June 7, 2013.

(d)	Mr. Yeung Chu Kwong, William and Mr. Lai Ni Quiaque resigned as Executive Directors with effect from May 30, 2012.

(e)	Ms. To Wai Bing and Ms. Wong Nga Lai, Alice were appointed as Executive Directors with effect from May 30, 2012.

No ~~Director~~director waived any emoluments in respect of the ~~years~~sixteen months ended December 31, 2014, and twelve months ended August 31, ~~2010~~2014, 2013 and ~~2011.~~2012.

The share-based payment represents the expenses determined based on the fair value of share options granted to certain directors under the Company’s share option scheme. Fair value of share options is estimated in accordance with the Group’s significant accounting policies in note ~~1. The details of the share-based payment are disclosed in note 10.~~2.

(b)

Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the ~~year~~sixteen months ended December 31, 2014 include four ~~(2010: four)~~(four months ended December 31, 2014, twelve months ended August 31, 2014 and 2013: four; twelve months ended August 31, 2012: five) directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining one ~~(2010: one)~~ individual during the ~~year~~respective periods are as follows:

   2011
HK$’000    2010
HK$’000
Basic salaries, other allowances and benefits in kind
   2,523       2,492
Discretionary bonuses
   300       300
Retirement benefit costs — defined contribution plans
   181       181




   3,004       2,973

~~The emoluments fell within the following band:~~


	Sixteen months ended December 31, 2014 HK$’000		Four months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000		Twelve months ended August 31, 2013 HK$’000
			(Unaudited)		(Unaudited)
Basic salaries, other allowances and benefits in kind		1,370		303		1,067		1,558
Discretionary bonuses		118		—		118		100
Retirement benefit costs – defined contribution plans		65		13		52		78

		1,553		316		1,237		1,736


	~~Number of individual~~
	~~2011~~		~~2010~~
~~HK$2,500,001 — HK$3,000,000~~		—		1
~~HK$3,000,001 — HK$3,500,000~~		1		—

1014 Equity settled share-based transactions

The Company operates a share option scheme (the ~~“2002~~“2012 Share Option Scheme”) which was adopted by shareholders of the Company on December ~~23, 2002~~31, 2012 whereby the directors may, at their discretion, invite eligible participants to receive options to subscribe for shares subject to the terms and conditions stipulated therein.

Under the ~~2002~~2012 Share Option Scheme, the Company may grant options to Talents (including executive, non-executive and independent non-executive directors), suppliers and professional advisers to subscribe for shares of the Company. The maximum number of options authorized under the ~~2002~~2012 Share Option Scheme may not, when aggregated with any shares subject to any other executive and ~~Talent~~talent share option scheme, exceed 10% of the Company’s issued share capital on the date of adoption. The exercise price of the option is determined by the Company’s ~~board~~Board of ~~directors~~Directors at a price not less than the highest of (a) ~~the par value of a share; (b)~~ the average closing price of the Company’s shares for five trading days preceding the grant date; and ~~(c)~~(b) the closing price of the Company’s shares on the date of grant. The ~~2002~~2012 Share Option Scheme is valid and effective for a ten year period up to December ~~22, 2012~~30, 2022 subject to earlier termination by the Company by resolution in general meeting or by the ~~board~~Board of ~~directors.~~Directors. The period during which the option may be exercised will be determined by the ~~board~~Board of ~~directors~~Directors at its discretion, save that no option may be exercised after more than ten years from the date of grant.

During the sixteen months ended December 31, 2014 and twelve months ended August 31, 2013, no share options have been granted under the 2012 Share Option Scheme by the Company.

The Company also operated an old share option scheme (the “2002 Share Option Scheme”) which was adopted by shareholders of the Company on December 23, 2002 and expired on December 22, 2012.

During the twelve months ended August 31, 2012 and in connection with the Disposal, certain conditions imposed on the share options granted under the 2002 Share Option Scheme were waived and all unvested outstanding share options become vested and exercisable immediately. The unamortized original grant date fair value amounting to HK$8,328,000 was fully recognized to profit or loss as share-based payment expenses at the date of modification.

As at December 31, 2014, August 31, 2014, 2013 and 2012, there were no options outstanding.

15 Fixed assets


	Construction in progress			Investment properties			Leasehold land and buildings		Leasehold improvements			Furniture, fixtures and fittings			Network, computer and office equipment			Motor vehicles			Broadcasting and production equipment			Total
	HK$’000			HK$’000			HK$’000		HK$’000			HK$’000			HK$’000			HK$’000			HK$’000			HK$’000
*Cost and valuation:*
At September 1, 2013		150,210			234,200			57,866		20,051			2,739			30,851			6,950			64,302			567,169
Additions		6,055			—			—		169			21			4,019			—			8,357			18,621
Acquisition of a subsidiary		—			—			—		—			—			13,645			—			—			13,645
Disposals (note 15(c))		—			(9,200	)		—		—			(3	)		(29	)		(1,894	)		(6	)		(11,132	)
Fair value adjustment		—			1,800			—		—			—			—			—			—			1,800

At August 31, 2014/ September 1, 2014 (Unaudited)		156,265			226,800			57,866		20,220			2,757			48,486			5,056			72,653			590,103
Additions		6,433			—			—		1,813			548			25,997			5,187			10,118			50,096
Disposals		—			—			—		—			—			(16	)		—			—			(16	)
Write off		(17,978	)		—			—		—			—			—			—			—			(17,978	)
Fair value adjustment		—			2,100			—		—			—			—			—			—			2,100

At December 31, 2014		144,720			228,900			57,866		22,033			3,305			74,467			10,243			82,771			624,305

*Representing:*
Cost		156,265			—			57,866		20,220			2,757			48,486			5,056			72,653			363,303
Valuation		—			226,800			—		—			—			—			—			—			226,800

At August 31, 2014/ September 1, 2014 (Unaudited)		156,265			226,800			57,866		20,220			2,757			48,486			5,056			72,653			590,103

Cost		144,720			—			57,866		22,033			3,305			74,467			10,243			82,771			395,405
Valuation		—			228,900			—		—			—			—			—			—			228,900

At December 31, 2014		144,720			228,900			57,866		22,033			3,305			74,467			10,243			82,771			624,305

*Accumulated depreciation:*
At September 1, 2013		—			—			1,319		9,947			1,408			9,486			2,260			11,472			35,892
Charge for the period		—			—			1,967		3,495			518			8,340			1,584			11,681			27,585
Impairment loss		4,830			—			—		243			28			975			126			1,544			7,746
Disposals		—			—			—		—			(3	)		(23	)		(908	)		(6	)		(940	)

At August 31, 2014/ September 1, 2014 (Unaudited)		4,830			—			3,286		13,685			1,951			18,778			3,062			24,691			70,283
Charge for the period		—			—			554		366			190			4,397			579			4,102			10,188
Reclassification of impairment loss/ write off		(4,343	)		—			—		(243	)		(28	)		(837	)		(126	)		(748	)		(6,325	)

At December 31, 2014		487			—			3,840		13,808			2,113			22,338			3,515			28,045			74,146

*Net book value:*
At August 31, 2014 (Unaudited)		151,435			226,800			54,580		6,535			806			29,708			1,994			47,962			519,820

At December 31, 2014		144,233			228,900			54,026		8,225			1,192			52,129			6,728			54,726			550,159

Construction
in progress

Investment
properties

Leasehold
land and
buildings

Leasehold
improvements

Furniture,
fixtures
and fittings

Network,
computer
and office
equipment

Motor
vehicles
Broadcasting
and
production
equipment Total
   HK$’000    HK$’000 HK$’000    HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Cost and valuation:

At September 1, 2012
   134,797       238,200    10,466       19,662    3,849    44,854    5,157    53,433    510,418
Additions
   15,413       —   —      612    152    7,615    2,875    11,041    37,708
Disposals
   —      —   —      (11 ) —   (1,503 ) —   (172 ) (1,686 )
Fair value adjustment
   —      43,400    —      —   —   —   —   —   43,400
Write off
   —      —   —      (212 ) (1,262 ) (20,115 ) (1,082 ) —   (22,671 )
Transfer from investment properties
(note 15(d))
   —      (47,400 ) 47,400       —   —   —   —   —   —






At August 31, 2013
   150,210       234,200    57,866       20,051    2,739    30,851    6,950    64,302    567,169






Representing:

Cost
   150,210       —   57,866       20,051    2,739    30,851    6,950    64,302    332,969
Valuation
   —      234,200    —      —   —   —   —   —   234,200






   150,210       234,200    57,866       20,051    2,739    30,851    6,950    64,302    567,169






Accumulated depreciation:

At September 1, 2012
   —      —   188       3,166    2,162    23,118    2,167    2,476    33,277
Charge for the period
   —      —   1,131       7,000    508    7,765    1,175    9,043    26,622
Disposals
   —      —   —      (7 ) —   (1,282 ) —   (47 ) (1,336 )
Write off
   —      —   —      (212 ) (1,262 ) (20,115 ) (1,082 ) —   (22,671 )






At August 31, 2013
   —      —   1,319       9,947    1,408    9,486    2,260    11,472    35,892






Net book value:

At August 31, 2013
   150,210       234,200    56,547       10,104    1,331    21,365    4,690    52,830    531,277

(a) ~~The terms and conditions~~Fair value measurement of ~~the options~~

~~Options that existed during the year ended August 31, 2011 are as follows, whereby all options are settled by physical delivery of shares:~~


	~~Number~~ ~~of option~~		~~Vesting~~ ~~conditions~~	~~Exercisable~~ ~~period~~
~~2002 Share Option Scheme~~

~~Options granted to directors:~~

~~-January 5, 2005~~		~~16,183,208~~	~~Condition 1~~		~~On or prior to~~ ~~October 20, 2014~~
~~-May 22, 2006~~		~~2,023,064~~	~~Condition 1~~		~~On or prior to~~ ~~May 21, 2016~~
~~-February 6, 2008~~		~~5,542,791~~	~~Condition 3 /6~~		~~On or prior to~~ ~~February 5, 2018~~
~~-February 11, 2008~~		~~6,044,791~~	~~Condition 2 /6~~		~~On or prior to~~ ~~February 10, 2018~~
~~-February 5, 2010~~		~~6,000,000~~	~~Condition 4~~		~~On or prior to~~ ~~February 4, 2020~~

~~Options granted to Talents excluding Directors:~~

~~-October 21, 2004~~		~~4,158,680~~	~~Condition 1~~		~~On or prior to~~ ~~October 20, 2014~~
~~-May 22, 2006~~		~~3,160,379~~	~~Condition 1~~		~~On or prior to~~ ~~May 21, 2016~~
~~-February 15, 2008~~		~~604,479~~	~~Condition 5~~		~~On or prior to~~ ~~December 23, 2012~~
~~-May 2, 2008~~		~~932,465~~	~~Condition 5 /6~~		~~On or prior to~~ ~~May 1, 2018~~

~~Total share options~~		~~44,649,857~~

10 ~~Equity settled share-based transactions (continued)~~investment properties

~~(a)~~

(i)

~~The terms and conditions of the options (continued)~~

~~Options that existed during the year ended August 31, 2010 are as follows, whereby all options are settled by physical delivery of shares:~~


	~~Number~~ ~~of option~~		~~Vesting~~ ~~conditions~~		~~Exercisable~~ ~~period~~
~~2002 Share Option Scheme~~

~~Options granted to directors:~~

~~-January 5, 2005~~		~~16,183,208~~		~~Condition 1~~	~~On or prior to~~ ~~October 20, 2014~~
~~-May 22, 2006~~		~~15,178,466~~		~~Condition 1~~	~~On or prior to~~ ~~May 21, 2016~~
~~-February 6, 2008~~		~~6,044,791~~		~~Condition 3~~	~~On or prior to~~ ~~December 23, 2012~~
~~-February 11, 2008~~		~~6,044,791~~		~~Condition 2~~	~~On or prior to~~ ~~December 23, 2012~~
~~-February 5, 2010~~		~~6,000,000~~		~~Condition 4~~	~~On or prior to~~ ~~February 4, 2020~~

~~Options granted to Talents excluding Directors:~~

~~-October 21, 2004~~		~~6,909,527~~		~~Condition 1~~	~~On or prior to~~ ~~October 20, 2014~~
~~-May 22, 2006~~		~~6,414,433~~		~~Condition 1~~	~~On or prior to~~ ~~May 21, 2016~~
~~-August 3, 2006~~		~~40,540~~		~~Condition 1~~	~~On or prior to~~ ~~August 2, 2016~~
~~-November 22, 2006~~		~~136,545~~		~~Condition 1~~	~~On or prior to~~ ~~November 14, 2016~~
~~-February 15, 2008~~		~~1,007,465~~		~~Condition 5~~	~~On or prior to~~ ~~December 23, 2012~~
~~-May 2, 2008~~		~~1,007,465~~		~~Condition 5~~	~~On or prior to~~ ~~December 23, 2012~~

~~Total share options~~		~~64,967,231~~

10 ~~Equity settled share-based transactions (continued)~~

~~(a)~~

~~The terms and conditions of the options (continued)~~Fair value hierarchy

The ~~vesting conditions of the respective share option grant are as follows:~~

~~Condition 1~~

Options granted are vested in one year or evenly vested over a period of two to three years. Options are awarded without performance conditions and are exercisable provided the participants have remained employed by the end of respective vesting periods.

~~Condition 2~~

~~Vesting of the options is conditional upon the performance of the Company’s shares over the period from the close of trading in Hong Kong on November 22, 2007 to November 21, 2010.~~

~~Upon fulfillment of the market conditions, certain options granted vest immediately, while other options affected by the same market conditions vest evenly over a period of three years.~~

During the year ended August 31, 2010, one of the market conditions in the option agreement has been replaced and the vesting of certain options is now conditional upon the Company reaching a non-market performance condition. Upon fulfillment of this non-market performance condition, a portion of the options affected by this condition vest immediately, while other options affected by this condition vest evenly over a period of three years.

~~The Group has accounted for the modification in accordance with IFRS/HKFRS 2 “Share-based payment” by measuring the incremental fair value which is the difference between~~following table presents the fair value of the ~~modified share options~~company’s investment properties measured at balance sheet date on a recurring basis, categorized into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified as determined with reference to the observability and ~~that~~significance of the ~~original share options, both estimated~~inputs used in the valuation technique as follows:

Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available

Level 3 valuations: Fair value measured using significant unobservable inputs


	Fair value measurements categorized into
	Fair value HK$’000		Level 1 HK$’000		Level 2 HK$’000		Level 3 HK$’000
Recurring fair value measurements
Investments properties:
- December 31, 2014		228,900		—		228,900		—
- August 31, 2014 (Unaudited)		226,800		—		226,800		—

During the sixteen months ended December 31, 2014, there were no transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Company’s policy is to recognize transfers between levels of fair value hierarchy as at the balance sheet date in which they occur.

All of the ~~modification,~~Group’s investment properties were revalued as at August 31, 2014 and ~~recognizing~~December 31, 2014. The valuations were carried out by an independent firm of surveyors, RHL Appraisal Limited, who have among their staff Fellows of the ~~incremental fair value over~~Hong Kong Institute of Surveyors with recent experience in the ~~period from~~location and category of property being valued. Management has discussion with the ~~modification date until~~surveyors on the ~~date~~valuation assumptions and valuation results when the ~~modified share options vest. The balance of the original grant-date fair value as~~valuation is performed at ~~the date of modification continues to be recognized over remaining original vesting period. The total incremental fair value arisen from this modification amounts to HK$4,278,000.~~each period end date.

~~Condition 3~~

(ii)

Valuation techniques and inputs used in Level 2 fair value measurements

Vesting of the options is conditional upon the performance of the participants. Options granted are vested over a period of three to four years from the date of fulfillment of certain key performance indicators.

During the year ended August 31, 2010, one of the performance conditions has been modified. Such modification does not result in any incremental fair value, and therefore, there is no financial impact in the financial statements.

~~Condition 4~~

~~Vesting of the options is conditional upon the performance of the participants. Options granted are vested immediately from the date of fulfillment of the certain key performance indicators.~~

~~Condition 5~~

~~Condition 6~~

During the year ended August 31, 2011, one of the clauses in the option agreement has been modified. As a result of this modification, the expiry period of the share option has been extended to 10 years from the grant date of share options. The ~~Group has accounted for the modification in accordance with IFRS/HKFRS 2 “~~~~Share-based payment”~~ ~~by measuring the incremental fair value which is the difference between the~~ fair value of investment properties located in Hong Kong is determined using direct comparison approach by reference to recent sales price of comparable properties.

Fair value adjustment of investment properties is recognized in the ~~modified share options and that~~line item “valuation gains on investment properties” on the face of the original share options, both estimated as at the date of the modification, and recognizing the incremental fair value over the period from the modification date until the date when the modified share options vest. If the modification occurs after vesting date, the incremental fair value granted is recognized immediately. The balance of the original grant-date fair value as at the date of modification continues to be recognized over the remaining original vesting period. The total incremental fair value arisen from this modification amounts to HK$276,000.consolidated income statement.

10 ~~Equity settled share-based transactions (continued)~~

(b)

~~The number and weighted average exercise prices of share options are as follows:~~

   2011 2010

Weighted
average
exercise
price
HK$

Number of
options

Weighted
average
exercise
price
HK$
   Number of
options
2002 Share Option Scheme

Outstanding at the beginning of the year
   1.87       44,649,857    1.27       58,967,231
Granted during the year
   —         —      4.24       6,000,000
Exercised during the year
   1.05       (6,914,509 ) 0.82       (20,317,374 )
Forfeited during the year
   1.79       (629,665 ) —         —




Outstanding at the end of the year
   2.03       37,105,683    1.87       44,649,857




Exercisable at the end of the year
   1.47       19,217,594    1.35       25,603,183

~~The weighted average share price at the date of exercise for the share options exercised during the year was HK$5.63 (2010: HK$3.85).~~

~~The options outstanding at August 31, 2011 had a weighted exercise price of HK$2.03 (2010: HK$1.87) and a weighted average remaining contractual life of 3 years (2010: 4 years).~~

~~(c)~~

~~Fair value of share options and assumptions~~

In determining the value of the share options granted during the year ended August 31, 2010 and share option modified during the year ended August 31, 2011 and August 31, 2010, the Black-Scholes option pricing model (the “Black-Scholes Model”) and Monte Carlo option pricing model (“Monte Carlo Model”) have been used. Both models are among the most generally accepted methodologies used to calculate the value of options. The variables of the models include expected life of the options, risk-free interest rate, expected volatility and expected dividend yield of the shares of the Company.

~~In determining the value of the share options granted during the year ended August 31, 2010, the following variables have been applied to the Black-Scholes Model:~~


*~~Measurement date~~*	*~~February~~* *~~5, 2010~~*
~~Variables~~
~~-Expected life~~		~~8 years~~
~~-Risk-free rate~~		~~2.33~~	%
~~-Expected volatility~~		~~61.49~~	%
~~-Expected dividend yield~~		~~2.99~~	%

10 ~~Equity settled share-based transactions (continued)~~

~~(c)~~

~~Fair value of share options and assumptions (continued)~~

~~The above variables were determined as follows:~~

~~(i)~~

~~The expected life is estimated to be 8 years from the date of grant (the “Date of grant”).~~

~~(ii)~~

~~The risk-fee rate represents the yield of the Hong Kong Exchange Fund Notes corresponding to the expected life of the options as at the Date of grant.~~

~~(iii)~~

The expected volatility represents the annualized standard deviation of the return on the daily share price of the Company over the period commensurate to the expected life of the options (taking into account the remaining contractual life of the option and the effect of the expected early exercise of the option).

~~(iv)~~

~~The expected dividend yield was based on the historical dividend yield over the last eight years.~~

~~The fair value of the options granted was estimated as below:~~


~~Date of grant~~			~~February 5, 2010~~
~~Fair value per share option~~			~~HK$1.94~~

~~In determining the value of the share options modified during the year ended August 31, 2010, the Black-Scholes Model and Monte Carlo Model had been used.~~

~~The following variables of original share option and modified share option had been applied to the Monte Carlo Model and Black-Scholes Model respectively:~~

Measurement date    January 20, 2010

Original share
option

Modified share
option

Variables

-Expected life
   3 years    3 years
-Risk-free rate
   0.96 % 0.96 %
-Expected volatility
   74.73 % 74.73 %
-Expected dividend yield
   6.09 % 6.09 %

~~The above variables were determined as follows:~~

~~(i)~~

~~The expected life was estimated to be 3 years from the date of modification (the “Modification Date 1”).~~

~~(ii)~~

~~The risk-fee rate represented the yield of the Hong Kong Exchange Fund Notes corresponding to the expected life of the options as at the Modification Date 1.~~

~~(iii)~~

The expected volatility represented the annualized standard deviation of the return on the daily share price of the Company over the period commensurate to the expected life of the options (taking into account the remaining contractual life of the option and the effect of the expected early exercise of the option).

~~(iv)~~

~~The expected dividend yield was based on the historical dividend yield over the last three years.~~

~~The fair value of the options modified was estimated as below:~~


~~Modification Date 1~~			~~January 20, 2010~~
~~Incremental fair value per share option~~			~~HK$2.123~~

10 ~~Equity settled share-based transactions (continued)~~

~~(c)~~

~~Fair value of share options and assumptions (continued)~~

~~In determining the value of the share options modified during the year ended August 31, 2011, the Black-Scholes Model had been used.~~

~~The following variables had been applied to the Black-Scholes Model:~~

Measurement date    December 21, 2010
   Original share
option Modified share
option
Variables

-Expected life
   2 years    4 years
-Risk-free rate
   0.56 % 1.18 %
-Expected volatility
   51.20 % 66.85 %
-Expected dividend yield
   6.94 % 5.90 %

~~The above variables were determined as follows:~~

~~(i)~~

~~The expected life is estimated to be 2 years/4 years from the date of modification (the “Modification Date 2”).~~

~~(ii)~~

~~The risk-fee rate represents the yield of the Hong Kong Exchange Fund Notes corresponding to the expected life of the options as at the Modification Date 2.~~

~~(iii)~~

~~(iv)~~

~~The expected dividend yield is based on the historical dividend yield over the last two years/four years.~~

~~The fair value of the options modified during the year is estimated as below:~~


~~Modification Date 2~~			~~December 21, 2010~~
~~Incremental fair value per share option~~			~~HK$0.001 —HK$0.039~~

The Group recognizes the fair value of granted share options and incremental fair value of modified share options as an expense in the income statement over the vesting period. The fair value of the granted share options and incremental fair value of modified share options are measured at the date of grant and date of modification respectively.

The Black-Scholes Model and Monte Carlo Model applied for the determination of the estimated value of the options granted under 2002 Share Option Scheme require input of highly subjective assumptions, including the expected stock volatility. Changes in subjective inputs may materially affect the estimated fair value of the options granted.

11 ~~Goodwill~~


	~~HK$’000~~
*~~Cost and carrying amount:~~*
~~At August 31, 2011/2010~~		~~1,066~~

~~Impairment tests for cash-generating units containing goodwill~~

~~Goodwill is allocated to the Group’s cash-generating units (“CGU”) identified according to business segment as follows:~~

   2011    2010
   HK$’000    HK$’000
Fixed telecommunications network service segment
   1,066       1,066

The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows for the five-year period are estimated based on average growth rates of 14% and a pre-tax discount rate of 16%. Cash flows beyond the five year period are assumed to remain constant. The estimated growth rates used are comparable to the growth rate for the industry.

The key assumption used in the value-in-use calculation is the annual growth rate of the turnover of the fixed telecommunications network services, which are determined based on the past performance and management’s expectation for market development. The discount rate used is pre-tax and reflects specific risks relating to the fixed telecommunications services segment.

~~Any adverse change in the key assumptions could reduce the recoverable amount below carrying amount.~~

12 ~~Fixed assets~~

Construction
in progress

Investment
property

Leasehold
land and
buildings

Leasehold
improvements

Furniture,
fixtures
and fittings

Telecom-
munications,
computer
and office
equipment

Motor
vehicles
Total
   HK$’000    HK$’000 HK$’000    HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Cost:

At September 1, 2010
   —         5,197    90,911       113,286    21,191    3,130,209    12,948    3,373,742
Additions
   51,111       —      1,576       6,851    203    388,828    627    449,196
Disposals
   —         —      —         —      (42 ) (57,268 ) (1,356 ) (58,666 )
Exchange adjustments
   —         —      —         1,461    484    4,593    —      6,538
Transfer of investment property
   —         (5,197 ) 5,197       —      —      —      —      —






At August 31, 2011
   51,111       —      97,684       121,598    21,836    3,466,362    12,219    3,770,810






Accumulated depreciation:

At September 1, 2010
   —         2,413    14,284       80,316    18,132    1,816,942    9,842    1,941,929
Charge for the year
   —         104    1,850       10,349    1,121    203,009    1,764    218,197
Disposals
   —         —      —         —      (42 ) (36,098 ) (1,356 ) (37,496 )
Exchange adjustments
   —         —      —         1,272    450    3,757    —      5,479
Transfer of investment property
   —         (2,517 ) 2,517       —      —      —      —      —






At August 31, 2011
   —         —      18,651       91,937    19,661    1,987,610    10,250    2,128,109






Net book value:

At August 31, 2011
   51,111       —      79,033       29,661    2,175    1,478,752    1,969    1,642,701






Cost:

At September 1, 2009
   —         5,197    90,911       100,447    19,885    2,850,444    12,773    3,079,657
Additions
   —         —      —         12,885    1,343    330,441    175    344,844
Disposals
   —         —      —         (212 ) (109 ) (51,906 ) —      (52,227 )
Exchange adjustments
   —         —      —         166    72    1,230    —      1,468






At August 31, 2010
   —         5,197    90,911       113,286    21,191    3,130,209    12,948    3,373,742






Accumulated depreciation:

At September 1, 2009
   —         2,309    12,466       69,102    17,017    1,668,160    8,223    1,777,277
Charge for the year
   —         104    1,818       11,270    1,166    183,052    1,619    199,029
Disposals
   —         —      —         (212 ) (109 ) (35,344 ) —      (35,665 )
Exchange adjustments
   —         —      —         156    58    1,074    —      1,288






At August 31, 2010
   —         2,413    14,284       80,316    18,132    1,816,942    9,842    1,941,929






Net book value:

At August 31, 2010
   —         2,784    76,627       32,970    3,059    1,313,267    3,106    1,431,813






��

12 ~~Fixed assets (continued)~~

~~(a)~~

The Group’s total future aggregate lease income receivable under non-cancellable operating lease are as follows:

   2011
HK$’000    2010
HK$’000
Leases in respect of investment property which are receivable:

- Within 1 year
   —         108
- After 1 year but within 5 years
   —         —




   —         108




Leases in respect of telecommunications facilities and computer equipment which are receivable:

- Within 1 year
   3,604       2,335
- After 1 year but within 5 years
   2,653       607




   6,257       2,942




   6,257       3,050

~~(b)~~

~~At August 31, 2011, the fair value of the investment property was HK$6,390,000 (2010: HK$5,300,000). Management estimated the fair value of the investment property based on its open market value.~~

During the year ended August 31, 2011, the lease of the investment property to a third party expired and the property has then been leased to a group entity for self-use. Upon this change in use, the Group transferred the investment property into leasehold land and buildings.


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Continuing operations:
Leases in respect of investment properties which are receivable:
- Within 1 year		11,428		11,428		11,481
- After 1 year but within 5 years		16,189		19,999		31,426

		27,617		31,427		42,907

(c)

~~The net book~~During the sixteen months ended December 31, 2014, the Company disposed of an investment property with carrying value of ~~interests in leasehold land and buildings and~~HK$9,200,000. Proceed from the disposal of investment property ~~situated in Hong Kong are analyzed as follows:~~was HK$9,200,000 with the relevant revaluation reserve of HK$5,397,000 realized and transferred to retained profits.

   2011
HK$’000    2010
HK$’000
Leases of between 10 to 50 years
   130,144       79,411




Representing:

Construction in progress carried at cost
   51,111       —
Leasehold land and building carried at cost
   79,033       76,627
Investment property carried at cost less impairment loss
   —         2,784




   130,144       79,411

(d)

~~In addition to~~During the twelve months ended August 31, 2013, one of the investment properties was retained by the Group for self use. Upon the change in use, the Group transferred the investment property of carrying value of HK$47,400,000, being the fair value of the transferred investment property as at the date of such transfer, into leasehold land and buildings classified as being held under a finance lease, the Group leases telecommunications, computer and office equipment under finance leases expiring from one to five years. At the end of the lease term the Group has the option to purchase the equipment at a price deemed to be a bargain purchase option. None of the leases included contingent rental.

~~At August 31, 2011, the net book value of telecommunications, computer and office equipment under finance lease held by the Group amounted to HK$267,000 (2010: HK$674,000).~~

12 ~~Fixed assets (continued)~~buildings.

(e)

The net book value of interests in construction in progress, leasehold land and buildings and investment properties situated in Hong Kong are analyzed as follows:


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Medium term lease		427,159		432,815		440,957

Representing:
Construction in progress carried at cost less impairment loss		144,233		151,435		150,210
Leasehold land and buildings carried at cost		54,026		54,580		56,547
Investment properties stated at fair value		228,900		226,800		234,200

		427,159		432,815		440,957

(f)

The cost of construction in progress comprises premium paid for the land registered in Hong Kong with a lease term of about 36 years and expenditure incurred on the development of buildings not yet completed at the ~~year-end.~~period end.

13(g)

Further particulars of the Group’s leasehold land and properties interest at December 31, 2014 are as follows:


Location	Use	Lease term	Attributable interest of the Group
12/F,14/F, 15/F & Roof on 17/F, Trans Asia Centre, No. 18 Kin Hong Street, Kwai Chung, New Territories	Leasing for rental income	Medium term lease		100	%
13/F and 16/F, Trans Asia Centre, No. 18 Kin Hong Street, Kwai Chung, New Territories	Self-use	Medium term lease		100	%
The whole of 14/F and Lorry Parking Space No. L13 on 1/F, Mita Centre, Nos.552-566 Castle Peak Road, Kwai Chung, New Territories	Leasing for rental income	Medium term lease		100	%
The remaining portion of section S of Tseung Kwan O Town, Lot No. 39, Tseung Kwan O, Sai Kung, New Territories	Self-use	Medium term lease		100	%

16 Intangible assets


	Mobile television broadcast spectrum HK$’000			IRU of the tele- communications capacity HK$’000			Right to use of telecommunications services HK$’000			Total HK$’000
Cost:
At September 1, 2013		—			226,700			90,243			316,943
Additions through acquisition of a subsidiary		146,591			—			—			146,591

At August 31, 2014/December 31, 2014		146,591			226,700			90,243			463,534

Accumulated amortization:
At September 1, 2013		—			14,240			11,337			25,577
Amortization for the period		8,716			11,335			9,024			29,075
Impairment losses		4,594			6,589			2,371			13,554

At August 31, 2014 (Unaudited)		13,310			32,164			22,732			68,206

Amortization for the period		4,186			3,789			3,017			10,992
Reclassification of impairment loss (note 7)		(2,345	)		(3,270	)		(1,247	)		(6,862	)

At December 31, 2014		15,151			32,683			24,502			72,336

Net book value:
At August 31, 2014 (Unaudited)		133,281			194,536			67,511			395,328

At December 31, 2014		131,440			194,017			65,741			391,198

Cost:
At September 1, 2012 and August 31, 2013		—			226,700			90,243			316,943

Accumulated amortization:
At September 1, 2012		—			2,905			2,312			5,217
Amortization for the period		—			11,335			9,025			20,360

At August 31, 2013		—			14,240			11,337			25,577

Net book value:
At August 31, 2013		—			212,460			78,906			291,366

During the twelve months ended August 31, 2012, upon the completion of Disposal and as part of the consideration received from the Disposal, the Group was granted the IRU to use certain capacity of the telecommunications network of the Telecom Business for a term of 20 years and right to use of the telecommunications services from the Telecom Business for a term of 10 years.

During the sixteen months ended December 31, 2014, the Company acquired a wholly-owned subsidiary and recorded an intangible asset in the amount of HK$146,591,000 relating to the spectrum with frequency at 678–686 MHz and microwave link at the frequency range of 7910–7920 MHz (the “Spectrum”) for the provision of broadcast-type mobile television services for a period of about 12 years.

17 Principal subsidiaries

The following is a list of the principal subsidiaries which principally affected the results, assets or liabilities of the ~~Group at August 31, 2011:~~Group:


Name	Place of incorporation	Principal activities and place of operations	Particulars of issued share capital	Percentage of ~~interest held~~ of interest held as at December 31, 2014
Attitude Holdings Limited	British Virgin Islands	Inactive	Ordinary US$1		100
~~Automedia Holdings~~Best Intellect Limited	British Virgin Islands	Investment holding in Hong Kong	Ordinary US$1		*100
~~Best Intellect~~City Telecom (H.K.) Limited	Hong Kong	Inactive	Ordinary HK$2		100
Cosmo True Limited	British Virgin Islands	~~Investment holding~~Property investment in Hong Kong	Ordinary US$1		*100
~~City Telecom (B.C.) Inc.~~	~~Canada~~	~~Provision of international telecommunications and dial-up internet access services in Canada~~	~~Common~~ ~~Canadian dollar~~ ~~(“CAD”)~~ ~~501,000~~		~~100~~
~~City Telecom (Canada) Inc.~~	~~Canada~~	~~Leasing and maintenance of switching equipment and provision of operational services in Canada~~	~~Common CAD100~~		~~100~~
~~City Telecom Inc.~~	~~Canada~~	~~Provision of international telecommunications and dial-up internet access services in Canada~~	~~Common CAD1,000~~		~~100~~
~~City Telecom International Limited~~	~~British Virgin Islands~~	~~Investment holding in Hong Kong~~	~~Ordinary US$5,294~~		* 100
~~Credibility Holdings Limited~~	~~British Virgin Islands~~	~~Investment holding in Hong Kong~~	~~Ordinary US$1~~		* 100

13 ~~Principal subsidiaries (continued)~~

~~The following is a list of the principal subsidiaries which principally affected the results, assets or liabilities of the Group at August 31, 2011: (continued)~~


~~Name~~	~~Place of~~ ~~incorporation~~	~~Principal~~ ~~activities~~ ~~and place of~~ ~~operations~~	~~Particulars~~ ~~of issued~~ ~~share capital~~	~~Percentage of~~ ~~interest held~~
~~CTI Guangzhou Customer Services Co. Ltd. (translated from the registered name in Chinese)~~	~~PRC~~	~~Provision of administrative support services in the PRC~~	~~Paid in capital of HK$8,000,000~~		* 100
~~CTI Marketing Company~~Excel Billion Profits Limited	Hong Kong	Inactive	Ordinary HK$10,000		100
Golden Trinity Holdings Limited	British Virgin Islands	Investment holding in Hong Kong	Ordinary US$1		*100
HKTV Japan Company Limited	Japan	Engaged in trading activities	Ordinary JPY10,000		100
Hong Kong Broadband ~~Network~~Digital TV Limited	Hong Kong	~~Provision of international telecommunications and fixed telecommunications network services in~~ Inactive	Ordinary HK$10,000		100
Hong Kong Broadband Television Company Limited	Hong Kong	Inactive	Ordinary HK$~~383,049~~2		100
Hong Kong Media Production Company Limited ~~(formerly known as Global Courier Company Limited)~~	Hong Kong	Provision of ~~,multimedia~~ multimedia production and distribution services	Ordinary HK$10,000		100
~~IDD1600~~Hong Kong Mobile Television Network Limited	Hong Kong	Provision of Mobile Television Service	Ordinary HK$2		100
Hong Kong Mobile Television (Leasing) Limited	Hong Kong	Inactive	Ordinary HK$1		100
Hong Kong Music Network Limited	Hong Kong	Producing, publishing and licensing of musical works	Ordinary HK$1		100
Hong Kong TV Shopping Network Company Limited	Hong Kong	TV programming through OTT platform and ecommerce business	Ordinary HK$1		100
Leader Artiste Management Company Limited	Hong Kong	Provision of ~~international telecommunications~~management and agency services to artistes	Ordinary HK$100		100
Multi Talent Enterprise Limited	British Virgin Islands	Investment holding in Hong Kong	Ordinary ~~HK$2~~US$1		*100
Talent Ascent Limited	British Virgin Islands	Investment holding in Hong Kong	Ordinary US$1		*100

*	Shares held directly by the Company.

18 Other financial assets


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Available-for-sale debt securities
- Maturity dates within 1 year		293,943		257,152		341,337
- Maturity dates over 1 year		1,450,267		1,593,674		1,581,553

		1,744,210		1,850,826		1,922,890

Available-for-sale equity securities
- Listed		29,090		27,697		27,724
- Unlisted		11,063		12,025		11,000

		40,153		39,722		38,724

		1,784,363		1,890,548		1,961,614

The available-for-sale securities were carried at fair value as at December 31, 2014, August 31, 2014 and 2013.

14	~~Deferred expenditure~~

   2011
HK$’000 2010
HK$’000
Balance as at the beginning of the year
   35,612    49,460
Additions during the year
   46,896    34,773
Less: amortization charge for the year (note 4(a))
   (37,873 ) (48,621 )


   44,635    35,612
Current portion
   (29,312 ) (28,986 )


Balance as at the end of the year
   15,323    6,626

Deferred expenditure represents costs incurred to acquire subscribers of the services offered by the Group, which is treated as customer acquisition costs and are amortized over the period of the underlying service subscription agreements.

1519 Accounts receivable, other receivables, deposits and prepayments


	2011			2010			December 31, 2014 HK$’000			August 31, 2014 HK$’000			August 31, 2013 HK$’000
	HK$’000			HK$’000						(Unaudited)
Accounts receivable		78,529			105,552			7,788			470			1,425
Less: Allowance for doubtful debts		(6,530	)		(5,823	)
Less: allowance for doubtful debts								(100	)		(100	)		(100	)

								7,688			370			1,325
		71,999			99,729
Other receivables, deposits and prepayments		90,984			89,490			40,752			50,202			66,688

		162,983			189,219			48,440			50,572			68,013

(a)

Aging analysis

The aging analysis of accounts receivable is as follows:

   2011    2010
   HK$’000    HK$’000
Current — 30 days
   44,949       41,244
31 — 60 days
   16,417       9,024
61 — 90 days
   6,861       5,245
Over 90 days
   10,302       50,039




   78,529       105,552


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Current - 30 days		7,036		326		743
31 - 60 days		460		3		554
61 - 90 days		12		8		—
Over 90 days		280		133		128

		7,788		470		1,425

The majority of the Group’s accounts receivable are due within 30 days from the date of billings. ~~Subscribers~~Customers with receivable that are more than 3 months overdue are requested to settle all outstanding balance before further credit is granted.

(b)

Impairment of accounts receivable

Impairment losses in respect of accounts receivable are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against accounts receivable directly (see note ~~1(i)~~2(k)(i)).

The movement in the allowance for doubtful debts during the ~~year including both specific and collective loss components~~period is as follows:

   2011 2010 2009
   HK$’000 HK$’000 HK$’000
Balance as at the beginning of the year
   5,823    3,160    11,944
Impairment loss recognized
   13,636    14,742    12,103
Uncollectible amounts written off
   (12,929 ) (12,079 ) (20,887 )


Balance as at the end of the year
   6,530    5,823    3,160


	Sixteen months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000		Twelve months ended August 31, 2013 HK$’000
			(Unaudited)
Balance as at the beginning of the period		100		100		—
Impairment loss recognized		—		—		100

Balance as at the end of the period		100		100		100

(c)

Accounts receivable that are not impaired

The aging analysis of accounts receivable that are neither individually nor collectively considered to be impaired are as follows:

   2011    2010
   HK$’000    HK$’000
Neither past due nor impaired
   44,949       41,244
0 — 30 past due
   16,417       9,024
31 — 60 past due
   6,861       5,245
Over 60 past due
   3,772       44,216




   71,999       99,729


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Neither past due nor impaired		7,036		326		743
1 - 30 days past due		460		3		554
31 - 60 days past due		12		8		—
Over 60 days past due		180		33		28

		7,688		370		1,325

15 Accounts ~~receivable, other~~ receivables ~~deposits and prepayments (continued)~~

~~(c)~~

~~Accounts receivable that are not impaired (continued)~~

~~Receivables~~ that were neither past due nor impaired relate to ~~a wide range of~~ customers for whom there was no recent history of default.

~~The amounts over 60 days past due for the Group included receivable relating to mobile interconnection charges of HK$23,000 as at August 31, 2011 (August 31, 2010: HK$39,763,000) (see note 2(b)).~~

Other accounts receivable that were past due but not impaired relate to ~~a number of~~ independent customers that have a good track record of ~~payment.~~payment or a reputable corporate with sound financial conditions. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold collateral over these balances.

(d)

Other receivables, deposits and prepayments

Other receivables, deposits and prepayments consist of rental deposits, ~~for purchase of fixed assets, rental deposit,~~ interest ~~receivable, unbilled revenue, prepayment~~receivables, prepayments and other receivables. All of the other receivables, except for an amount of HK$1,775,000 (August 31, 2014: HK$1,790,000; August 31, 2013: HK$1,012,000), being primarily the rental deposits, ~~and others amounted to HK$9,026,000 (2010: HK$8,643,000),~~ are expected to be recovered within one year.

20 Bank deposits and cash

16(a)

Term deposits

Term deposits are time deposits with banks with maturity over three months at acquisition.

(b)

Cash at bank and in hand

   2011    2010
   HK$’000    HK$’000
Time deposits with banks and other financial institutions
   263,270       262,280
Cash at bank and in hand
   145,706       326,385




Cash at bank and in hand in the balance sheet
   408,976       588,665


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Time deposits with banks within three months of original maturity		727,226		197,534		176,684
Cash at bank and in hand		91,960		107,687		171,165

Cash at bank and in hand in the balance sheet		819,186		305,221		347,849

1721	Accounts payable, other payables and accrued charges


	2011		2010		December 31, 2014 HK$’000		August 31, 2014 HK$’000			August 31, 2013 HK$’000
	HK$’000		HK$’000					(Unaudited	)
Accounts payable		17,419		35,128		4,504		4,087			4,074
Other payables and accrued charges		209,585		195,931		73,876		59,921			38,600

		227,004		231,059		78,380		64,008			42,674

(a)

The aging analysis of the accounts payable ~~was~~is as follows:

   2011    2010
   HK$’000    HK$’000
Current — 30 days
   11,719       6,838
31 — 60 days
   245       1,982
61 — 90 days
   733       1,647
Over 90 days
   4,722       24,661




   17,419       35,128


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Current - 30 days		2,155		830		1,147
31 - 60 days		85		130		140
61 - 90 days		67		99		119
Over 90 days past due		2,197		3,028		2,668

		4,504		4,087		4,074

(b)

Other payables and accrued charges

Other payables primarily consist of accrual for ~~Talents~~Talent salaries and bonus, ~~carrier fees~~deferred revenue for unearned licensing income and ~~charges,~~advertising income, payable for purchase of fixed assets, advertising and promotional expenses as well as interest payable.

1822 ~~Deferred service revenue~~Bank loans

~~Deferred service revenue primarily includes service fees received from customers~~The bank loans were repayable as follows:

December 31, 2014

HK$’000

August 31, 2014

HK$’000

August 31, 2013

HK$’000

(Unaudited)

Within 1 year

802,165

862,941

531,883

At December 31, 2014, the uncommitted banking facilities of the Company amounted to HK$2,311,010,000 (August 31, 2014: HK$2,542,065,000; August 31, 2013: HK$2,543,728,000). The facilities were utilized to the extent of bank loans of HK$802,165,000 (August 31, 2014: HK$862,941,000; August 31, 2013: HK$531,883,000).

All of the Company’s banking facilities are subject to the fulfilment of covenants as are commonly found in ~~advance for~~lending arrangements with financial institutions. If the Company were to breach the covenants, the drawn down facilities would become payable on demand. The Company regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in note 27(b). As at December 31, 2014, and August 31, 2014 and 2013, none of the covenants relating to drawn down facilities had been breached.

At December 31, 2014, the bank loans of HK$802,165,000 bore fixed ~~telecommunications network services. Service fees received in advance is deferred~~interest rate ranged from 0.6% to 0.8% per annum (August 31, 2014: 0.6% to 0.7%; August 31, 2013: 0.6% to 0.8%).

At December 31, 2014, August 31, 2014 and ~~recognized as revenue on a straight-line basis over~~August 31, 2013, all bank loans were secured by certain of the ~~related contract period.~~Group’s available-for-sale securities with an equivalent amount to the bank loans.

1923	Capital and reserves

(a)

~~Share~~Authorized and issued share capital

2011
No. of
Shares

Amount
HK$’000

2010
No. of
shares

Amount
HK$’000

Authorized:

Ordinary shares of HK$0.10 each
   2,000,000,000       200,000       2,000,000,000       200,000








Issued and fully paid:

Ordinary shares of HK$0.10 each

At the beginning of the year
   764,997,344       76,500       664,179,970       66,418
Shares issued upon exercise of share options (note (i))
   6,914,509       691       20,317,374       2,032
Shares issued upon placement (note (ii))
   —         —         80,500,000       8,050








At the end of the year
   771,911,853       77,191       764,997,344       76,500


	December 31, 2014				August 31, 2014				August 31, 2013
	No. of Shares		Amount HK$’000		No. of Shares		Amount HK$’000		No. of shares		Amount HK$’000
							(Unaudited)
Authorized: (note 1)
Ordinary shares of HK$0.10 each (note 2)		—		—		—		—		2,000,000,000		200,000

Issued and fully paid:
Ordinary shares
At the beginning of the period		809,016,643		1,268,914		809,016,643		80,902		809,016,643		80,902
Transition to no-par value regime on March 3, 2014 (note 3)		—		—		—		1,188,012		—		—

At the end of the period		809,016,643		1,268,914		809,016,643		1,268,914		809,016,643		80,902

Note 1:

Under the new Hong Kong Companies Ordinance (Cap. 622), which commenced operation on March 3, 2014, the concept of authorized share capital no longer exists.

Note 2:

In accordance with section 135 of the new Hong Kong Companies Ordinance (Cap. 622), the Company’s shares no longer have a par or nominal value with effect from March 3, 2014. There is no impact on the number of shares in issue or the relative entitlement of any of the members as a result of this transition.

Note 3:

In accordance with the transitional provisions set out in section 37 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) on March 3, 2014 any amount standing to the credit of the share premium account and the capital redemption reserve has become part of the Company’s share capital.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per ordinary share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

~~Notes:~~

~~(i)~~

During the year ended August 31, 2011, 6,914,509 ordinary shares (2010: 20,317,374 ordinary shares) were issued at a weighted average price of HK$1.05 per ordinary share (2010: HK$0.82 per ordinary share) to share option holders who had exercised their options. These shares so issued rank pari passu with the then existing ordinary shares in issue.

~~(ii)~~

On April 28, 2010, the Company completed its public offering of 4,025,000 American Depositary Shares (ADSs). An aggregate of 80,500,000 ordinary shares (4,025,000 ADSs) were issued at a price of HK$5.0455 per ordinary share (US$13.00 per ADS) to independent professional, institutional and private investors. The Company raised net proceeds of approximately HK$379,612,000 from the ADS offering.

~~(iii)~~

~~The movement of outstanding share options during the year was as follows:~~

Date of grant
Exercise
price
per share

Number of
share options
outstanding at
September 1,
2010
   Granted    Exercised Forfeited
Number of
share options
outstanding
at August 31,
2011

October 21, 2004
   HK$ 1.5224       4,158,680       —         (350,709 ) —      3,807,971
January 5, 2005
   HK$ 1.5224       16,183,208       —         (2,000,000 ) —      14,183,208
May 22, 2006
   HK$ 0.6523       5,183,443       —         (3,958,760 ) —      1,224,683
February 6, 2008
   HK$ 1.7568       5,542,791       —         —      —      5,542,791
February 11, 2008
   HK$ 1.8660       6,044,791       —         —      —      6,044,791
February 15, 2008
   HK$ 1.7568       604,479       —         (302,240 ) —      302,239
May 2, 2008
   HK$ 1.7866       932,465       —         (302,800 ) (629,665 ) —
February 5, 2010
   HK$ 4.2400       6,000,000       —         —      —      6,000,000






      44,649,857       —         (6,914,509 ) (629,665 ) 37,105,683

~~Each option entitles the holder to subscribe for one ordinary share of HK$0.10 each in the Company at a predetermined exercise price.~~

19 ~~Capital and reserves (continued)~~

(b)

~~Nature~~Share premium and ~~purpose of~~capital redemption reserves

~~(i)~~

~~Share premium~~

~~The~~Prior to March 3, 2014, the application of the share premium account and the capital redemption reserve was governed by sections 48B and 49H respectively of the predecessor Hong Kong Companies Ordinance (Cap. 32). In accordance with the transitional provisions set out in section 37 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622), on 3 March 2014 any amount standing to the credit of the share premium account and the capital redemption reserve has become part of the Company’s share capital (see note 23(a)). The use of share capital as from 3 March 2014 is governed by ~~Sections 48B of~~ the new Hong Kong Companies ~~Ordinance.~~

~~(ii)~~

~~Capital reserve~~

The capital reserve comprises the fair value of the actual or estimated number of unexercised share options granted to Talents of the Group that was recognized in accordance with the accounting policy adopted for share based payment in note 1(o)Ordinance (Cap. 622).

~~(iii)~~(c)

~~PRC statutory reserve~~

In accordance with Accounting Regulations for Business Enterprises, foreign investment enterprises in the PRC are required to transfer at least 10% of their profit after taxation, as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) to the general reserve until the balance of the general reserve is equal to 50% of their registered capital.

For the year ended August 31, 2011, CTI Guangzhou Customer Services Co Ltd (“CTIGZ”), a wholly-owned subsidiary of the Group, made appropriation to the statutory reserve of RMB951,000 (2010: RMB597,000). The accumulated balance of the statutory reserve maintained at the CTIGZ as at August 31, 2011 was RMB2,963,000 (2010: RMB2,012,000). The statutory reserve can be used to reduce previous years’ losses and to increase the capital of the subsidiary.

~~(iv)~~

Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of ~~foreign operations.~~operations outside Hong Kong. The reserve is dealt with in accordance with the accounting policies set out in note ~~1(d)~~2(e)(ii).

~~(c)~~(d)

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale securities held at the balance sheet date and is dealt with in accordance with the accounting policies in notes 2(f) and 2(k)(i).

(e)

Capital management

The Group’s primary objectives when managing capital are to maintain a reasonable capital structure, safeguard the Group’s ability to continue as a going concern, and to provide returns for shareholders.

The Group manages the amount of capital in proportion to risk, and makes adjustments to its capital structure through the amount of dividend payment to shareholders, issuance of scrip and new shares, and managing its debt portfolio in conjunction with cash flow requirements, taking into account its future financial obligations and commitments.

The Group monitors its capital structure by reviewing its net debt to net asset gearing ratio. For this purpose, the Group defines net debt as total ~~loans~~borrowing less cash at bank and in hand and ~~after adding back bank overdraft - unsecured.~~term deposits.

The net debt to net asset gearing ratio as at December 31, 2014, August 31, ~~2011~~2014 and ~~2010~~2013 are as follows:

   2011 2010
   HK$’000 HK$’000
Unsecured

- Long-term bank loan
   —      123,567
- Obligations under finance leases
   393    605


Total loans
   393    124,172
Less: Cash at bank and in hand
   (408,976 ) (588,665 )
Add: Bank overdrafts — unsecured
   845    10,490


Net cash
   (407,738 ) (454,003 )
Net asset
   1,797,381    1,688,539


Net debt to net asset gearing ratio
   —      —


	December 31, 2014 HK$’000			August 31, 2014 HK$’000			August 31, 2013 HK$’000
				(Unaudited)
Bank loans		(802,165	)		(862,941	)		(531,883	)
Obligations under financial leases		—			—			(160	)

Total borrowings		(802,165	)		(862,941	)		(532,043	)
Less: Cash at bank and in hand		819,186			305,221			347,849
Less: Term deposits		—			573,043			342,657

Net cash		17,021			15,323			158,463
Net assets		3,055,161			3,167,295			3,250,622

Net debt to net asset gearing ratio		N/A			N/A			N/A

Neither the Company nor any of its subsidiaries are currently subject to externally imposed capital requirements.

2024 Deferred taxation

(a)

Deferred tax assets and liabilities recognized

(i)	The components of deferred tax (liabilities)/assets recognized in the consolidated balance sheet and the ~~movement~~movements during the ~~year~~periods are as follows:

Depreciation
allowances
in excess of
the related
depreciation

Tax losses
carried
forward
Total
Deferred tax arising from:    HK$’000 HK$’000 HK$’000
At September 1, 2008
   (126,447 ) 147,845    21,398
Charged to consolidate income statement
   (5,326 ) (31,782 ) (37,108 )
Exchange differences
   7    (6 ) 1


At August 31, 2009
   (131,766 ) 116,057    (15,709 )


At September 1, 2009
   (131,766 ) 116,057    (15,709 )
Charged to consolidate income statement
   (15,027 ) (25,107 ) (40,134 )
Exchange differences
   (6 ) 6    —


At August 31, 2010
   (146,799 ) 90,956    (55,843 )


At September 1, 2010
   (146,799 ) 90,956    (55,843 )
Charged to consolidate income statement
   (21,185 ) (34,110 ) (55,295 )
Exchange differences
   (7 ) 7    —


At August 31, 2011
   (167,991 ) 56,853    (111,138 )


	Depreciation allowances in excess of the related depreciation HK$’000			Tax losses carried forward HK$’000		Total HK$’000
Deferred tax arising from:
At September 1, 2012		(12,103	)		10,757		(1,346	)
(Charged)/credited to consolidated income statement		(3,849	)		4,968		1,119

At August 31, 2013		(15,952	)		15,725		(227	)

At September 1, 2013		(15,952	)		15,725		(227	)
(Charged)/credited to consolidated income statement		(4,550	)		4,295		(255	)

At August 31, 2014 (Unaudited)		(20,502	)		20,020		(482	)

At September 1, 2014 (Unaudited)		(20,502	)		20,020		(482	)
(Charged)/credited to consolidated income statement		(5,120	)		4,776		(344	)

At December 31, 2014		(25,622	)		24,796		(826	)

(ii)	Reconciliation to the consolidated balance sheet

   The Group
   2011 2010
   HK$’000 HK$’000
Net deferred tax asset recognized in the balance sheet
   —      —
Net deferred tax liabilities recognized in the balance sheet
   (111,138 ) (55,843 )


   (111,138 ) (55,843 )

20 ~~Deferred taxation (continued)~~


	December 31, 2014 HK$’000			August 31, 2014 HK$’000			August 31, 2013 HK$’000
				(Unaudited)
Net deferred tax liabilities recognized in the balance sheet		(826	)		(482	)		(227	)

(b)

Deferred tax assets not recognized

As at ~~August~~December 31, ~~2011,~~2014, the Group did not recognize deferred tax assets in respect of unused tax losses of HK$~~8,087,000 (2010:~~566,004,000 (August 31, 2014; HK$~~8,242,000)~~404,330,000; August 31, 2013: HK$204,948,000) as it was not probable that future taxable profits against which the losses could be utilized would be available in the relevant tax jurisdictions.

   The Group
   2011    2010
   HK$’000    HK$’000
Expiry in 15-20 years
   2,412       2,553
No expiry date
   5,675       5,689




   8,087       8,242

~~(c)~~

~~Deferred tax liabilities not recognized~~

~~As at August 31, 2011,~~ The tax losses do not expire under the ~~Group has not recognized deferred~~current tax liabilities in respect of the 10% (or 5% if tax treaty relief is available) PRC dividend withholding tax on temporary differences relating to the undistributed profits of its PRC subsidiary amounted to HK$31,550,000 (2010: HK$12,283,000), as the Group controls the dividend policy of the subsidiary and it has been determined that it is probable that profits will not be distributed in the foreseeable future.legislation.

2125	Derivative financial instrument

   2011    2010
   HK$’000    HK$’000
Non-current liability

Interest rate swap, at fair value through profit or loss
   11,564       11,293

December 31, 2014

HK$’000

August 31, 2014

HK$’000

August 31, 2013

HK$’000

(Unaudited)

Interest rate swap, at fair value through profit or loss

—

1,340

5,181

As at August 31, ~~2011~~2014 and August 31, ~~2010,~~2013, the Group ~~has~~had a 5-year interest rate swap contract with a HK$175,000,000 notional amount to hedge against interest rate risk. Under this arrangement, the Group ~~will~~would pay a fixed rate interest on the notional amount on a quarterly basis, and receive a floating interest rate at HIBOR rate. The contract iswas recognized initially at fair value and iswas remeasured at each balance sheet date. The 5-year interest swap contract was matured on December 24, 2014.

The ~~Interest~~interest rate swap ~~does~~was not quality for hedge accounting under ~~IAS/HKAS~~IAS 39,Financial instruments: Recognition and measurement, and therefore changes in its fair value is recognized immediately in profit or loss.

22	~~Long-term debt and other liabilities~~

   2011 2010
   HK$’000 HK$’000
Long-term bank loan — unsecured (note (a))
   —      123,567
Obligations under finance leases (note (b))
   393    605


   393    124,172
Current portion of — obligations under finance leases
   (105 ) (212 )


   288    123,960

22 ~~Long-term debt and other liabilities (continued)~~

~~At August 31, 2011, the Group’s long-term debt and other liabilities were repayable as follows:~~

   2011 2010
   HK$’000 HK$’000
Long-term debt

- after 2 years but within 5 years
   —      123,567


Obligations under finance leases

- Within 1 year
   105    212
- After 1 year but within 2 years
   105    105
- After 2 years but within 5 years
   183    288


   393    605
Less: Current portion of obligations under finance leases
   (105 ) (212 )


   288    393


   288    123,960

~~Notes:~~

~~(a)~~

~~In March 2011, the floating interest rate bank borrowing was fully repaid. Before the borrowing was fully repaid, none of the covenants relating to drawn down facilities was breached.~~

~~(b)~~

~~At August 31, 2011, the Group had obligations under finance leases repayable as follows:~~

   2011    2010

Present
value
of the
minimum
lease
payments

Interest
expense
relating to
future
periods

Total
minimum
lease
payments

Present
value
of the
minimum
lease
payments

Interest
expense
relating to
future
periods

Total
minimum
lease
payments

   HK$’000    HK$’000    HK$’000    HK$’000    HK$’000    HK$’000
Within 1 year
   105       20       125       212       30       242












After 1 year but within 2 years
   105       14       119       105       20       125
After 2 years but within 5 years
   183       8       191       288       22       310












   288       22       310       393       42       435












   393       42       435       605       72       677

2326 Notes to the consolidated cash flow statement

Reconciliation of profit before taxation to net cash (outflow)/inflow generated from operations

~~(a)~~

~~Reconciliation of profit before taxation to net cash inflow generated from operations~~

   2011
HK$’000 2010
HK$’000 2009
HK$’000
Profit before taxation
   372,869    259,545    251,559
Depreciation of owned fixed assets
   217,790    198,323    205,624
Depreciation of fixed assets held under finance lease
   407    706    617
Amortization of deferred expenditure
   37,873    48,621    53,160
Interest income
   (3,366 ) (11,372 ) (4,869 )
Interest element of finance lease
   30    42    27
Loss/(gain) on disposal of fixed assets
   1,008    (1,375 ) 1,016
Realized and unrealized gain on other financial assets
   —      —      (189 )
Equity settled share-based transactions
   4,652    5,347    4,768
Loss/(gain) on extinguishment of 10-year senior notes
   —      9,650    (31,371 )
Change in fair value of derivative financial instruments
   271    11,293    —
Interest, amortization and exchange difference on 10-year senior notes
   —      6,069    49,214
Other borrowings costs
   3,473    3,260    885
Amortization of upfront cost on long-term bank loan
   182    192    —
Interest on bank borrowings
   1,152    1,379    —
Write-off of upfront costs upon settlement of long-term bank loan
   1,251    —      —


Net cash inflow before working capital changes
   637,592    531,680    530,441
Decrease/(increase) in long-term receivable and prepayment
   1,073    917    (505 )
Decrease in accounts receivable, other receivables, deposits and prepayments
   26,543    738    33,052
Increase in deferred expenditure
   (46,896 ) (34,773 ) (46,525 )
(Decrease)/increase in accounts payable, other payables, accrued charges and deposits received
   (9,490 ) (1,937 ) 17,419
(Decrease)/increase in deferred service revenue
   (19,911 ) (8,272 ) 4,621


Net cash inflow generated from operations
   588,911    488,353    538,503


	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000			Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
				(unaudited)			(Unaudited)
(Loss)/profit before taxation		(236,797	)		(73,798	)		(162,999	)		(41,969	)		3,748,562
Depreciation of fixed assets		37,773			10,188			27,585			26,622			187,537
Depreciation capitalized as programme costs		(3,403	)		(508	)		(2,895	)		(7,515	)		(1,632	)
Amortization of deferred expenditure		—			—			—			—			29,902
Amortization of programme cost		26,626			26,626			—			—			—
Intangible assets written off		—			—			—			—			2,450
Bank interest income		(23,017	)		(5,292	)		(17,725	)		(27,051	)		(17,241	)
Interest income from available-for-sale securities		(120,353	)		(29,407	)		(90,946	)		(61,406	)		—
Dividend income from available-for-sale securities		(1,825	)		(336	)		(1,489	)		(895	)		—
Gain on disposal of available-for-sale securities		(4,946	)		(504	)		(4,442	)		(4,508	)		—
Interest element of finance lease		3			—			3			9			19
Loss/(gain) on disposal of fixed assets		208			(3	)		211			263			(1,999	)
Equity settled share-based transactions		—			—			—			—			10,480
Valuation gains on investment properties		(3,900	)		(2,100	)		(1,800	)		(43,400	)		(18,200	)
Gain on sale of discontinued operations		—			—			—			—			(3,520,088	)
Amortization of intangible assets		40,067			10,992			29,075			20,360			5,217
Change in fair value of derivative financial instrument		(5,181	)		(1,340	)		(3,841	)		(4,482	)		(1,901	)
Other borrowing costs		5,598			1,343			4,255			4,653			3,763
Interest expenses on bank loans		7,169			1,952			5,217			2,530			—
Impairment losses/write off of assets		32,000			—			32,000			—			—
Exchange loss/(gain)		18,311			9,327			8,984			(22,603	)		—

Net cash (outflow)/inflow before working capital changes		(231,667	)		(52,860	)		(178,807	)		(159,392	)		426,869
(Decrease)/increase in long-term receivable and prepayment		(152	)		(241	)		89			151			(716	)
Increase/(decrease) in accounts receivable, other receivables, deposits and prepayments, and inventories		82			(11,899	)		11,981			(9,886	)		(108,169	)
Increase in programme costs		(83,439	)		(2,093	)		(81,346	)		(194,649	)		(85,985	)
Increase in deferred expenditure		—			—			—			—			(22,245	)
Increase/(decrease) in accounts payable, other payables, accrued charges and deposits received		24,110			17,431			6,679			6,972			(19,181	)
Decrease in deferred services revenue		—			—			—			—			(5,646	)

Net cash (outflow)/inflow from operations		(291,066	)		(49,662	)		(241,404	)		(356,804	)		184,927

23 ~~Notes to the consolidated cash flow statement (continued)~~

~~(b)~~

~~Analysis of financing activities during the year~~

Share capital
(including share
premium and
capital reserve)
HK$’000

Obligations
under finance
leases
HK$’000

10-year
senior notes
HK$’000

Long-term
bank loan
HK$’000

Balance at September 1, 2008
   754,792    376    683,242    —
Share issued upon exercise of share options
   1,399    —      —      —
Repurchase and cancellation of ordinary shares
   (7 ) —      —      —
Share issued in respect of scrip dividend
   9,906    —      —      —
Purchase of fixed assets under finance lease
   —      494    —      —
Repayment of capital element of finance lease
   — ��    (138 ) —      —
Repurchase of 10-year senior notes
   —      —      (485,829 ) —
Gain on extinguishment of 10-year senior notes
   —      —      (31,371 ) —
Amortization of incidental issuance costs
   —      —      1,545    —
Equity settled share-based transactions
   4,768    —      —      —
Effect of foreign exchange rate changes
   —      —      (5,001 ) —


Balance at August 31, 2009
   770,858    732    162,586    —


Balance at September 1, 2009
   770,858    732    162,586    —
Share issued upon exercise of share options
   16,744    —      —      —
Shares issued upon placement
   379,612    —      —      —
Purchase of fixed assets under finance lease
   —      90    —      —
Repayment of capital element of finance lease
   —      (217 ) —      —
Repurchase and redemption of 10-year senior notes
   —      —      (172,423 ) —
Loss on extinguishment of 10-year senior notes
   —      —      9,650    —
Amortization of incidental issuance costs
   —      —      188    —
Net proceeds from new bank loan
   —      —      —      123,375
Amortization of upfront costs on long-term bank loan
   —      —      —      192
Equity settled share-based transactions
   5,347    —      —      —
Effect of foreign exchange rate changes
   —      —      (1 ) —


Balance at August 31, 2010
   1,172,561    605    —      123,567


Balance at September 1, 2010
   1,172,561    605    —      123,567
Share issued upon exercise of share options
   7,232    —      —      —
Repayment of capital element of finance lease
   —      (212 ) —      —
Repayment of long-term bank loan
   —      —      —      (125,000 )
Write-off of upfront costs upon settlement of long-term bank loan
   —      —      —      1,251
Amortization of upfront cost of bank loan
   —      —      —      182
Equity settled share-based transactions
   4,652    —      —      —


Balance at August 31, 2011
   1,184,445    393    —      —

2427 Financial instruments

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. These risks are limited by the Group’s financial management policies and practices described below.

(a)

Credit risk

The Group’s credit risk is ~~primarily attributable to accounts receivable~~mainly arose from trade and other ~~receivables.~~receivables, term deposits, cash at bank and available-for-sale debt securities. Management has a credit policy in place and the exposure to the credit risk is monitored on an ongoing basis.

In respect of ~~accounts receivable~~trade and other receivables, credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay and ~~take into account information specific to the customer as well as pertaining to the economic environment in which the customer locates.~~its financial condition. These receivables are normally due within 30 days from the date of billing. ~~Subscribers~~Customers with receivables that are more than 3 months overdue are requested to settle all outstanding balances before any further credit is granted. The Group generally does not obtain collateral from customers.

The Group’s exposure to credit risk arising from accounts receivables is influenced mainly by individual characteristics of each ~~customer.~~customer and further quantitative disclosures are set out in note 19. The ~~default~~credit risk on trade receivables is not considered significant given majority credit sales were attributable to reputable corporations.

Available-for-sale debt securities, term and other bank deposits are invested or placed with counterparties and financial institutions with sound credit quality. To mitigate the risk of non-recovery of investments in available-for-sale debt securities and their related concentration risk, the ~~country~~Group maintains portfolio which comprises mainly of investment grade products, constituents of defined world indices and instruments issued by state owned or controlled enterprises. The Group closely monitors the credit quality and financial positions of counterparties and consider appropriate action if the market value of the securities decline by a pre-determined threshold. Investments in ~~which customer locates also has an influence on credit risk but~~debt securities related to a ~~lesser extent. Concentrations~~number of ~~credit risk~~counterparties with ~~respect to accounts receivable are limited due~~no history of default on interest payments to the Group. As at December 31, 2014, there was no significant concentration risk, as the portfolio of the Group’s ~~customer base being large~~available-for-sale debt securities was diversified and ~~unrelated. As such, management does not expect any significant losses~~comprised of ~~accounts receivable that have not been provided~~a number of counterparties and no individual counterparty accounted for ~~by way~~more than 10% of ~~allowances as disclosed in note 15.~~the portfolio. All deposits were placed with financial institutions with credit rating of A- (S&P) or above.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset after deducting any impairment allowance in the balance sheet. ~~Except for the financial guarantee given by the Group as disclosed in note 25,~~At December 31, 2014, the Group does not provide any ~~other~~financial guarantees which expose the Group to credit risk. ~~The maximum exposure to credit risk in respect of these financial guarantees at the balance sheet date is disclosed in note 25.~~

~~Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from accounts receivable are set out in note 15.~~

24 ~~Financial instruments (continued)~~

(b)

Liquidity risk

The Group has a cash management policy, which includes ~~the short term~~ investment of surplus cash ~~surpluses~~ and the raising of loans and other borrowings at acceptable costs to cover expected shortfall on cash demands. The Group’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient free cash, ~~and~~ readily ~~realizable~~realisable marketable securities and ~~adequate amount of committed~~ credit facilities from major financial institutions to meet its liquidity requirements in the short and long term. ~~Due to the dynamic nature~~

The Group determines that there is no significant liquidity risk in view of ~~the underlying business, the Group aims to maintain flexibility in funding by maintaining committed credit lines available.~~our adequate funds and unutilized banking facilities.

The following table details the remaining contractual maturities at the balance sheet date of the Group’s financial liabilities, which are based on undiscounted cash flows (including interest) and the earliest date the Group ~~are~~can be required to pay.

2011 2010

Carrying
amount
HK$’000

Total
contractual
undiscounted
cash flow
HK$’000

Within
1 year or
on demand
HK$’000

More than
1 year but
less than
2 years
HK$’000

More than
2 years but
less than
5 years
HK$’000

Carrying
amount
HK$’000

Total
contractual
undiscounted
cash flow
HK$’000

Within
1 year or
on demand
HK$’000

More than
1 year but
less than
2 years
HK$’000

More than
2 years but
Less than
5 years
HK$’000

Current liabilities

Bank overdrafts - unsecured
845    845    845    —      —      10,490    10,490    10,490    —      —
Accounts payable
17,419    17,419    17,419    —      —      35,128    35,128    35,128    —      —
Other payables and accrued charges
209,585    209,585    209,585    —      —      195,931    195,931    195,931    —      —
Deposits received
26,969    26,969    26,969    —      —      21,822    21,822    21,822    —      —
Obligations under finance leases
105    125    125    —      —      212    242    242    —      —
Tax payable
2,281    2,281    2,281    —      —      1,533    1,533    1,533    —      —
Non-current liabilities

Long-term bank loan
—      —      —      —      —      123,567    133,996    1,829    2,166    130,001
Derivative financial instrument
11,564    12,590    4,716    4,000    3,874    11,293    11,435    4,580    3,441    3,414
Obligations under finance leases
288    310    —      119    191    393    435    —      125    310

269,056    270,124    261,940    4,119    4,065    400,369    411,012    271,555    5,732    133,725

24 ~~Financial instruments (continued)~~
   December 31, 2014
   Carrying
Amount
HK$’000    Total
contractual
undiscounted
cash flow
HK$’000    Within
1 year or on
demand
HK$’000    More than
1 year but less
than 2 years
HK$’000    More than
2 year but less
than 5 years
HK$’000
Current liabilities

Bank loans
   802,165       802,640       802,640       —      —
Accounts payable
   4,504       4,504       4,504       —      —
Other payables and accrued charges
   73,876       73,876       73,876       —      —
Deposits received
   1,905       1,905       1,905       —      —










   882,450       882,925       882,925       —      —










   August 31, 2014 (Unaudited)
   Carrying
Amount
HK$’000    Total
contractual
undiscounted
cash flow
HK$’000    Within
1 year or on
demand
HK$’000    More than
1 year but less
than 2 years
HK$’000    More than
2 year but less
than 5 years
HK$’000
Current liabilities

Bank loans
   862,941       863,459       863,459       —      —
Accounts payable
   4,087       4,087       4,087       —      —
Other payables and accrued charges
   59,921       59,921       59,921       —      —
Deposits received
   1,905       1,905       1,905       —      —
Derivative financial instrument
   1,340       1,341       1,341       —      —










   930,194       930,713       930,713       —      —










   August 31, 2013
   Carrying
Amount
HK$’000    Total
contractual
undiscounted
cash flow
HK$’000    Within
1 year or on
demand
HK$’000    More than
1 year but less
than 2 years
HK$’000    More than
2 year but less
than 5 years
HK$’000
Current liabilities

Bank loans
   531,883       532,203       532,203       —      —
Accounts payable
   4,074       4,074       4,074       —      —
Other payables and accrued charges
   38,600       38,600       38,600       —      —
Deposits received
   1,905       1,905       1,905       —      —
Obligation under finance leases
   90       95       95       —      —
Non-current liabilities

Derivative financial instrument
   5,181       5,600       4,115       1,485       —
Obligation under finance leases
   70       71       —      71       —










   581,803       582,548       580,992       1,556       —

(c)

Interest rate risk

Interest rate risk arose principally from available-for-sale debt securities, term deposits, bank loans and interest rate swap. Financial instruments with fixed and variable interest rates expose the Group to fair value and cash flow interest rate risk respectively due to fluctuations of market interest rates. The Group actively manages available-for-sale debt securities, term deposits and bank loans by comparing investment yields and quotations from the market, with a view to select terms which are most favorable to the Group.

Interest-bearing financial instruments of the Group were as follows:


	December 31, 2014 HK$’000			August 31, 2014 HK$’000			August 31, 2013 HK$’000
				(Unaudited)
Fixed rate instruments:
- Other financial assets: available-for-sale debt securities		1,744,210			1,850,826			1,922,890
- Term deposits		—			573,043			342,657
- Bank loans		(802,165	)		(862,941	)		(531,883	)
Variable rate instruments
- Derivative financial instrument – interest rate swap		—			(1,340	)		(5,181	)

		942,045			1,559,588			1,728,483

Fair value sensitivity analysis for fixed rate instruments

The Group account for the investments in debt securities as available-for-sale with any change in fair value recognized in other comprehensive income and accumulated in equity. With other variable held constant, a decrease or increase of 100 basis-points in interest rates at balance sheet date would have increased or decreased equity by HK$38,741,000 (August 31, 2014: HK$41,032,000; August 31, 2013: HK$54,180,000).

The Group account for the term deposits and bank loans at amortized cost, therefore a change in interest rates at balance sheet date would not affect profit or loss and equity.

Cash flow sensitivity analysis for variable rate instruments

The Group’s cash flow interest-rate risk arose mainly from the HK$125,000,000 long-term bank loan as at August 31, 2010 which bore floating interest rate. Bank loans at variable rates exposed the Group to cash flow interest rate risk. The long-term bank loan was fully repaid in the year ended August 31, 2011. The Group has a 5-year interest rate swap contract with a HK$175,000,000 notional amount as at August 31, ~~2011~~2014 and ~~2010.~~2013. The Group ~~will~~ pay a fixed rate interest on the notional amount on a quarterly basis, and receive a floating interest rate at HIBOR rate.

~~(i)~~

~~Interest rate profile~~

The ~~following table details the~~contract was recognized initially at fair value and is re-measured at each balance sheet date. The 5-year interest rate ~~profile of the Group’s borrowings~~swap contract was matured on December 24, 2014.

The Group has no variable rate instrument subject to cash flow interest rate risk as at ~~the balance sheet date.~~December 31, 2014.

   2011    2010

Effective
interest
rate
%
   HK$’000
Effective
interest
rate
%
   HK$’000
Fixed rate borrowings:

Obligations under finance leases
   5.6       393       5.6       605




Floating rate borrowings:

Bank overdrafts — unsecured
   6.3       845       5.3       10,490
Long-term bank loan
   —         —         1.7       123,567

~~(ii)~~

~~Sensitivity analysis~~

The Group’s ~~profit~~loss attributable to shareholders would decrease by approximately HK$1,750,000 ~~(2010:~~(August 31, 2013: decrease in loss attributable to shareholder of HK$~~1,250,000)~~1,750,000) in response to a 100 basis-points increase in market interest rates applicable as at August 31, ~~2011,~~2014, with all other variables held constant. ~~The analysis performed including the effect of the Group’s interest rate swap contract as disclosed in note 21 to the financial statements.~~

24 ~~Financial instruments (continued)~~

(d)

Foreign currency risk

All the Group’s monetary assets and liabilities are primarily denominated in either Hong Kong dollars or United States dollars. Given the exchange rate of the Hong Kong dollar to the U.S. dollar has remained close to the current pegged rate of HKD7.80 = USD1.00 since 1983, management does not expect significant foreign exchange gains or losses between the two currencies.

The Group is ~~also~~ exposed to ~~a certain amount of foreign exchange~~currency risk, ~~based on~~due to the fluctuations between the Hong Kong dollars and the Renminbi arising from its ~~operations~~investments in ~~the PRC.~~Renminbi available-for-sale securities, term deposits and cash at bank. In order to limit this ~~foreign~~ currency risk, ~~exposure,~~ the Group ~~maintained~~closely monitors Renminbi ~~cash balance that approximates two~~exposure to ~~three months’ of operating cash flows.~~an acceptable level by buying or selling Renminbi at spot rates where necessary.

~~(i)~~

~~Exposure to currency risk~~

The following table details the Group’s exposure at the balance sheet date to currency risk arising from recognized assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate. For presentation purposes, the amounts of the exposure are shown in HKD, translated using the spot rate at the balance sheet date.

   2011 2010

United
States
Dollars
‘000

Japanese
Yen
‘000

Canadian
Dollars
‘000

United
States
Dollars
‘000

Japanese
Yen
‘000

Canadian
Dollars
‘000

Cash at bank and in hand
   3,240    252    526    30,443    591       435
Bank overdrafts — unsecured
   (107 ) —      —      (294 ) —         —
Accounts payable
   (795 ) (168 ) (5 ) (1,350 ) —         —
Other payables and accrued charges
   (291 ) —      —      (1,075 ) —         —




Overall net exposure
   2,047    84    521    27,724    591       435


	Exposure to foreign currencies (expressed in HKD) December 31, 2014					Exposure to foreign currencies (expressed in HKD) August 31, 2014					Exposure to foreign currencies (expressed in HKD) August 31, 2013
	USD			RMB		USD			RMB		USD			RMB
	’000			’000		’000			’000		’000			’000
						(Unaudited)			(Unaudited)
Term deposits		—			—		310,761			262,282		177,441			165,216
Cash at bank and in hand		263,928			514,928		80,326			209,060		67,888			137,595
Other financial assets
- Available-for-sale debt securities		1,166,767			523,183		1,213,234			583,734		1,137,122			735,711
- Available-for-sale equity securities		11,063			—		12,025			—		11,000			—
Bank loans		(802,165	)		—		(862,941	)		—		(473,597	)		—

		639,593			1,038,111		753,405			1,055,076		919,854			1,038,522

Sensitivity analysis

~~(ii)~~

~~Sensitivity analysis~~

~~Management determines~~The following table indicates the instantaneous change in the Group’s loss for the year and other components of equity in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the balance sheet date. In this respect, it is assumed that the ~~Group’s exposure~~pegged rate between the HKD and the USD would be materially unaffected by any changes in movement in value of the USD against other currencies.


	Increase/ (decrease) in foreign exchange rate HK$’000			Decrease/ (increase) in loss for the year HK$’000			Increase/ (decrease) in other components of equity HK$’000
December 31, 2014
RMB		1	%		10,510			(129	)
		(1	%)		(10,510	)		129
August 31, 2014 (Unaudited)
RMB		1	%		10,579			(29	)
		(1	%)		(10,579	)		29
August 31, 2013
RMB		1	%		10,534			(149	)
		(1	%)		(10,534	)		149

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those assets or liabilities denominated in foreign currency held by the Group which expose the Group to foreign currency risk ~~was not significant and hence no sensitivity~~at the balance sheet date. The analysis is ~~prepared.~~

24 ~~Financial instruments (continued)~~
performed on the same basis as at August 31, 2014 and August 31, 2013.

(e)

~~Fair values~~Equity price risk

~~Financial instrument carried at fair value~~The Group is exposed to equity price changes from available-for-sale equity securities.

~~The following table presents~~Available-for-sale equity securities portfolio have been chosen based on their long term growth potential and returns and are monitored regularly for performance against expectations. Assuming that the ~~carrying~~market value of ~~financial instrument measured~~the Group’s available-for-sale equity securities had increased/decreased by not more than 10% at ~~fair value at~~December 31, 2014, with all other variables held constant, the ~~balance sheet date across~~impact on the ~~three levels~~total equity of the ~~fair value hierarchy defined~~Group is not expected to be material. Any increase or decrease in ~~IFRS/HKFRS 7,~~~~Financial Instruments: Disclosures~~ ~~, with~~ the ~~fair~~market value of ~~each financial instrument categorized in its entirety based on~~ the ~~lowest level of input that is significant to that fair value measurement. The levels~~Group’s available-for-sale equity securities would not affect the Group’s loss for the year unless they are ~~defined as follows:~~impaired or disposed.

~~Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments~~

Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data

~~Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data~~

~~2011~~

   Level 1
HK$’000    Level 2
HK$’000    Level 3
HK$’000    Total
HK$’000
Liability

Derivative financial instrument:
- Interest rate swap
   —         11,564       —         11,564

~~2010~~

   Level 1
HK$’000    Level 2
HK$’000    Level 3
HK$’000    Total
HK$’000
Liability

Derivative financial instrument:
- Interest rate swap
   —         11,293       —         11,293

(f)

~~Estimation of fair~~Fair values

(i)	Financial assets and liabilities measured at fair value

The following table presents the fair value of the Group’s financial instruments measured at the balance sheet date on a recurring basis, categorized into the three-level fair value hierarchy defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified as determined with reference to the observability and significance of ~~financial instruments is estimated~~the inputs used in the valuation technique as follows:

Level 1 valuations: Fair values measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical financial assets or liabilities at the measurement date

Level 2 valuations: Fair values measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using unobservable inputs. Unobservable inputs are inputs for which market data are not available

Level 3 valuations: Fair values measured using significant unobservable inputs

December 31, 2014


	Level 1 HK$’000		Level 2 HK$’000		Level 3 HK$’000		Total HK$’000
Assets
- Available-for-sale debt securities		—		1,744,210		—		1,744,210
- Available-for-sale equity securities		29,090		11,063		—		40,153

August 31, 2014 (Unaudited)


	Level 1 HK$’000		Level 2 HK$’000			Level 3 HK$’000		Total HK$’000
Assets
- Available-for-sale debt securities		—		1,850,826			—		1,850,826
- Available-for-sale equity securities		27,697		12,025			—		39,722
Liability
Derivative financial instrument:
- Interest rate swap		—		(1,340	)		—		(1,340	)

August 31, 2013


	Level 1 HK$’000		Level 2 HK$’000			Level 3 HK$’000		Total HK$’000
Assets
- Available-for-sale debt securities		—		1,922,890			—		1,922,890
- Available-for-sale equity securities		27,724		11,000			—		38,724
Liability
Derivative financial instrument:
- Interest rate swap		—		(5,181	)		—		(5,181	)
				��

During the sixteen months ended December 31, 2014, there were no transfers between Level 1 and Level 2, or transfer into or out of Level 3. The Group’s policy is to recognize transfers between levels of fair value hierarchy as at the balance sheet date in which they occur.

Valuation techniques and inputs used in Level 2 fair value measurements

The fair value of available-for-sale securities are based on quoted market prices for identical financial instruments at the balance sheet date.

The fair value of the interest rate swap is determined based on the discounted cash flow technique which takes into account estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date.

(ii) ~~(i)~~ ~~Trade receivables less impairment provision and account payables are assumed to approximate their~~Fair value of financial instruments carried at other than fair ~~values.~~value

~~(ii)~~

~~The fair value of the long-term bank loan as at August 31, 2010 was estimated as the present value of future cash flows, discounted at current market interest rate for similar financial instruments.~~

~~(iii)~~

25 ~~Contingent liabilities~~

2011
HK$’000

2010
HK$’000

Bank guarantees provided to suppliers
   1,330       2,770
Bank guarantee in lieu of payment of utility deposits
   5,572       5,572




   6,902       8,342

AtThe carrying amounts of the Group’s other financial instruments carried at cost or amortized cost are not materially different from their fair value as at December 31, 2014, August 31, ~~2011, HK$6,902,000 (2010: HK$133,342,000) of the HK$38,900,000 (2010: HK$353,840,000) total banking facility was utilized by the Company~~2014 and ~~the subsidiary.~~2013.

2628	Commitments

(a)

Capital commitments

2011
HK$’000

2010
HK$’000

Purchase of telecommunications, computer and office equipment - contracted but not provided for
   141,432       132,340




Construction of multimedia production and distribution city - authorized but not provided for
   600,000       —




Others - contracted but not provided for
   5,000       —


	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			(Unaudited)
Purchase of computer and office equipment
- contracted but not provided for		5,038		42,716		3,465

Construction of Multimedia Production and Distribution Center
- authorized but not contracted for		823,438		831,921		845,603
- contracted but not provided for		14,049		13,911		7,168

(b)

Commitments under operating leases

~~At August 31, 2011 and 2010, the~~The Group has future aggregate minimum lease payments under non-cancellable operating leases as follows:


	2011 HK$’000		2010 HK$’000		December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
Leases in respect of land and buildings which are payable:
							(Unaudited)
Land and buildings:
- Within 1 year		27,679		24,873		3,585		3,416		2,172
- After 1 year but within 5 years		20,642		16,417		2,391		2,236		—

		48,321		41,290		5,976		5,652		2,172

Leases in respect of telecommunications facilities and computer equipment which are payable
- Within 1 year		63,300		63,948
- After 1 year but within 5 years		17,103		14,200
- After 5 years		3,211		4,849

		83,614		82,997

		131,935		124,287

26 ~~Commitments (continued)~~

(c)

~~Program fee~~Production costs commitments

The Group entered into several long-term agreements with ~~program content providers~~certain production-related talents for ~~the rights to use certain program contents~~future production in the Group’s ~~IP-TV services.~~Multimedia Business. Minimum amounts of ~~program fees~~ to be paid by the Group are analyzed as follows:


	2011 HK$’000		2010 HK$’000		December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
Program fee in respect of program rights which are payable:
							(Unaudited)
Production costs which are payable:
- Within 1 year		25,777		25,539		11,350		35,552		81,472
- After 1 year but within 5 years		27,197		48,087		2,605		3,804		31,146

		52,974		73,626		13,955		39,356		112,618

27	~~Barter transaction~~

During the year ended August 31, 2010, HKBN entered into an agreement with a third party (the “Contract Party”). Pursuant to the agreement, HKBN would provide network capacity to the Contract Party for a service term of 10 years commencing on May 1, 2010 or after the respective activation of the relevant network capacity, and in exchange, the Contract Party would provide HKBN the right to use telecommunications facilities for a term of 10 years commencing on May 1, 2010 or after the respective activation of the relevant network capacity. The transaction has been entered into on a barter basis with no consideration being exchange. The agreement expires on April 30, 2020.

The Directors of the Company made an assessment and determined that since the arrangement above involves exchange of services of a similar nature and value, the exchange is not regarded as a transaction which generates revenue. Accordingly, the network capacity of the Contract Party under the assessment have not been recognized as an asset and no revenue or deferred revenue have been recognized in the financial statements of the Group since inception of the arrangement.

2829	Material related party transactions

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party transactions.

Key management personnel remuneration

Remuneration for key management personnel, including amounts paid to the Company’s ~~Directors~~directors as disclosed in note ~~9(a) and certain of the highest paid Talents as disclosed in note 9(b),~~13(a) is as follows:


							Sixteen months ended December 31, 2014 HK$’000		Four months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000		Twelve months ended August 31, 2013 HK$’000		Twelve months ended August 31, 2012 HK$’000
	2011 HK$’000		2010 HK$’000		2009 HK$’000				(Unaudited)		(Unaudited)
Short-term Talent benefits		35,979		40,716		34,687		26,451		6,186		20,265		20,607		176,852
Post-employment benefits		2,616		2,725		2,614		2,387		596		1,791		1,792		2,488
Equity compensation benefits		4,652		5,347		4,071		—		—		—		—		9,546

		43,247		48,788		41,372		28,838		6,782		22,056		22,399		188,886

29	~~Reclassification of Fiscal 2010 figures~~

During the year, management performed a review of the classification of the Group’s deferred service revenue balance. As a result of the review, the Group’s “deferred service revenue” balance amounting to HK$9,550,000 which was previously included in the current liabilities balance at August 31, 2010 have been reclassified as a non-current liability. This change in classification had no effect on the reported results of the prior year.

30 ~~Accounting estimates and judgments~~Acquisition of a subsidiary

~~(a)~~

~~Key sources of estimation uncertainty~~

~~Notes 10~~On December 20, 2013, the Company completed the acquisition of Hong Kong Mobile Television Network Limited (“HKMTV”, formerly known as China Mobile Hong Kong Corporation Limited) at an aggregate of cash consideration and ~~24 contain information about~~related transaction costs of HK$157,539,000. This transaction has been accounted for as an acquisition of assets and the ~~assumptions~~Company recorded intangible assets of HK$146,591,000, fixed assets of HK$13,645,000 and ~~risk factors relating to fair value~~other payables of ~~share options and financial instruments. Other key sources~~HK$2,697,000, as at the date of ~~estimation uncertainty are as follows:~~acquisition.

~~(b)~~31

~~Impairment loss for doubtful accounts~~Non-adjusting post balance sheet events

On October 15, 2013, the Chief Executive in Council announced that the Company’s application dated December 31, 2009 under the Broadcasting Ordinance for the grant of a domestic free television programme service licence (the “Licence”) had been rejected. On January 6, 2014, the Company filed an application for leave to apply for judicial review against the Chief Executive in Council’s decision. The ~~Group maintains impairment loss~~application for ~~doubtful accounts based upon evaluation~~leave was granted by the High Court of the ~~recoverability~~Hong Kong Special Administrative Region on January 9, 2014. The substantive hearing was conducted August 27-29, 2014. On April 24, 2015, the Court of First Instance of the ~~accounts receivable and other receivables which takes into account the historical write-off experience and recovery rates. If the financial condition~~High Court of the ~~customers were~~Hong Kong Special Administrative Region quashed the decision and ordered to ~~deteriorate, additional impairment~~remit it back to the Chief Executive in Council for reconsideration.

Despite the Court of First Instance of the High Court of the Hong Kong Special Administrative Region quashed the decision and ordered to remit it back to the Chief Executive in Council for reconsideration, the final decision on the application for the Licence may continue to be ~~required.~~

~~(c)~~

~~Depreciation~~

~~Depreciation is calculated to write off~~protracted by the ~~cost~~Chief Executive in Council by way of ~~items~~legal proceedings or administrative process and hence, the management do not consider the result of ~~property, plant and equipment, less their estimated residual value, if any, using~~ the ~~straight-line method over their estimated useful lives. The Group reviews~~judicial review has a material impact on the ~~estimated useful lives~~recoverable amount of the assets ~~annually in order~~relating to ~~determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on~~ the Group’s historical experience with similar assets and takes into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

~~(d)~~

~~Income taxes~~

Determining income tax provisions involves judgment on the future tax treatment of certain transactions and interpretation of tax rules. The Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislation and practices.

Deferred tax assets are recognized for certain unused tax losses as set out in note 20. In assessing the recognition of deferred tax assets, management considers all available evidence, including available taxable temporary differences, projected future taxable income, tax planning strategies, historical taxable income, and the expiration periods of the tax losses. For certain subsidiaries, deferred tax assets can only be recognized to the extent that it is probable that future taxable profits will be available against which they can be utilized. Management’s judgment is thus required to assess the probability of future taxable profits and this assessment is constantly reviewed and additional deferred tax assets are recognized if it becomes probable that future taxable profits will allow the deferred tax assets to be recovered.Multimedia Business.

3132 Possible impact of amendments, new standards and interpretations issued but not yet effective for the ~~year~~sixteen months ended ~~August~~December 31, ~~2011~~2014

Up to the date of issue of these financial statements, the ~~IASB/HKICPA~~IASB has issued a number of amendments and new standards ~~and interpretations~~ which are not yet effective for the ~~year~~sixteen months ended ~~August~~December 31, ~~2011~~2014 and which have not been adopted in ~~these~~the Group’s financial statements. These include the following which may be relevant to the Group.


			Effective for accounting periods beginning on or after
~~IFRSs/HKFRSs (Amendments)~~	~~Improvement~~ Amendments to ~~IFRSs/HKFRSs (2010)~~			~~January 1, 2011~~

~~IAS/HKAS 24 (Revised)~~	~~Related party disclosures~~IFRS 10, Consolidated financial statements, IFRS 12, Disclosure of interests in other entities and IAS 27, Separate financial statements – Investment in entities			January 1, ~~2011~~2014

Amendments to IAS 32, Financial instruments: Presentation – Offsetting financial assets and financial liabilities		January 1, 2014

Amendments to ~~IFRS/HKFRS 7~~IAS 36, Impairment of assets – Recoverable amount disclosures for non-financial assets	~~Financial instruments: Disclosures — Transfer of financial assets~~	January 1, 2014

Annual improvements to IFRSs 2010-2012 cycle		July 1, ~~2011~~2014

Annual improvements to IFRSs 2011-2013 cycle		July 1, 2014

~~IFRS/HKFRS 9~~	~~Financial instruments~~ Amendments to IAS 16, Property, plant and equipment and IAS 38, Intangible assets – Clarification of acceptable methods of depreciation and amortization			January 1, ~~2013~~2016

~~IFRS/HKFRS 12~~	~~Disclosure of interests in other entities~~ IFRS 15, Revenue from contract with customers			January 1, ~~2013~~2017

~~IFRS/HKFRS 13~~	~~Fair value measurement~~ IFRS 9, Financial instruments			January 1, ~~2013~~

~~IAS/HKAS 19 (2011)~~	~~Employee benefits~~			~~January 1, 2013~~2018

The Group is in the process of making an assessment of what the impact of these amendments ~~new standards~~ and new ~~interpretations~~standards is expected to be in the period of initial application. So far the Group is not yet in a position to state whether they would have a significant impact on the Group’s results of operations and financial position.

32	~~Supplemental guarantors consolidated financial information~~

~~The 10-year senior notes mentioned above were fully, irrevocably~~In addition, the requirements of Part 9, “Accounts and ~~unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all~~Audit”, of the ~~subsidiaries~~new Hong Kong Companies Ordinance (Cap. 622) come into operation from the Company’s first financial year commencing after March 3, 2014 (i.e. the Company’s financial year which began on January 1, 2015) in accordance with section 358 of ~~City Telecom (H.K.) Limited (collectively defined as “Guarantor Subsidiaries”), except CTI Guangzhou Customer Services Co. Ltd.~~that Ordinance. The Group is in the ~~PRC (“Non-guarantor Subsidiary”).~~

~~The condensed consolidated financial information is presented below and should be read~~process of making an assessment of the expected impact of the changes in ~~connection with~~the Companies Ordinance on the consolidated financial statements in the period of ~~City Telecom (H.K.) Limited prepared under IFRSs. Separate financial statements~~initial application of Part 9. So far it has concluded that the ~~Guarantor Subsidiaries are not presented because~~impact is unlikely to be significant and will primarily only affect the ~~Guarantor Subsidiaries are wholly-owned~~presentation and ~~have had fully and unconditionally guaranteed~~disclosure of information in the ~~Notes on a joint and several basis.~~

On February 1, 2010, the Company redeemed all the outstanding 10-year senior notes with a cumulative principal amount of HK$153.9 million (US$19.9 million) at the redemption price equal to 104.375% of the principal amount.

~~Since as of August 31, 2010, all the outstanding 10-year senior notes has been fully redeemed, the following condensed~~ consolidated financial ~~information is limited to the year ended August 31, 2009.~~

The following condensed consolidated financial information presents the consolidated balance sheets as of August 31, 2009 and the related consolidated income statements and cash flow statements for the years ended August 31, 2009 of (a) City Telecom (H.K.) Limited, the parent; (b) the Guarantor Subsidiaries on a combined basis; (c) the Non-guarantor Subsidiary; (d) eliminating entries; and (e) the total consolidated amounts.statements.

32 ~~Supplemental guarantors consolidated financial information (continued)~~

~~Consolidated balance sheet as of August 31, 2009~~

   City
Telecom
(H.K.)
Limited    Guarantor
subsidiaries Non-
guarantor
subsidiary    Eliminating
entries Consolidated
total
   HK$’000    HK$’000 HK$’000    HK$’000 HK$’000
Non-current assets

Investments in subsidiaries (note)
   1,258,726       228,875    —         (1,487,601 ) —
Goodwill
   —         —      —         1,066    1,066
Fixed assets
   74,688       1,221,172    6,520       1,302,380
Long term receivable and prepayment
   —         16,573    —         (10,482 ) 6,091
Deferred expenditure
   —         12,786    —         12,786






   1,333,414       1,479,406    6,520       1,322,323






Current assets

Accounts receivable
   9,220       110,972    —         120,192
Other receivables, deposits and prepayments
   3,393       67,584    2,492       (3,704 ) 69,765
Deferred expenditure
   —         36,674    —         36,674
Pledged bank deposits
   15,038       —      —         15,038
Cash at bank and in hand
   120,315       78,665    27,436       226,416






   147,966       293,895    29,928       468,085






Current liabilities

Bank overdrafts — unsecured
   896       4,468    —         5,364
Amounts due to subsidiaries/ fellow subsidiaries
   10,830       905,460    4,427       (920,717 ) —
Accounts payable
   20,484       17,071    —         37,555
Other payables and accrued charges
   23,530       172,676    10,281       206,487
Deposits received
   7,886       8,499    —         16,385
Deferred service revenue
   10,848       107,904    —         (3,682 ) 115,070
Tax payable
   356       496    1,141       1,993
Current portion — obligation under finance leases
   193       9    —         202






   75,023       1,216,583    15,849       383,056






Net current assets/(liabilities)
   72,943       (922,688 ) 14,079       85,029

32 ~~Supplemental guarantors consolidated financial information (continued)~~

~~Consolidated balance sheet as of August 31, 2009 (continued)~~

   City
Telecom
(H.K.)
Limited    Guarantor
subsidiaries    Non-
guarantor
subsidiary    Eliminating
entries Consolidated
total
   HK$’000    HK$’000    HK$’000    HK$’000 HK$’000
Total assets less current liabilities
   1,406,357       556,718       20,599       1,407,352








Non-current liabilities

Deferred tax liabilities
   7,047       8,662       —         15,709
Long-term deferred service revenue
   10,535       —         —         (10,535 ) —
Long-term debt and other liabilities
   163,108       8       —         163,116








   180,690       8,670       —         178,825








Net assets
   1,225,667       548,048       20,599       1,228,527








Capital and reserves

Share capital
   66,418       15,485       8,131       (23,616 ) 66,418
Reserves
   1,159,249       532,563       12,468       (542,171 ) 1,162,109








Total equity attributable to equity shareholders of the Company
   1,225,667       548,048       20,599       1,228,527

~~Note:~~

~~The amounts of investment in subsidiaries and retained profits at City Telecom (H.K.) Limited level have included the share of net assets of its subsidiaries using the equity method of accounting.~~

~~Consolidated income statement for the year ended August 31, 2009~~

   City
Telecom
(H.K.)
Limited Guarantor
subsidiaries Non-
guarantor
subsidiary Eliminating
entries Consolidated
Total
   HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue
   95,386    1,390,697    142,603    (150,447 ) 1,478,239
Network costs
   (29,973 ) (177,655 ) —      32,499    (175,129 )
Other operating expenses
   (90,557 ) (959,960 ) (136,750 ) 149,303    (1,037,964 )
Other income, net
   108,933    31,684    576    (99,653 ) 41,540
Finance costs
   (54,241 ) (69,017 ) —      68,131    (55,127 )
Share of net profit from subsidiaries (note)
   185,391    —      —      (185,391 ) —


Profit before taxation
   214,939    215,749    6,429    251,559
Income tax expense
   (2,110 ) (34,998 ) (1,622 ) (38,730 )


Net profit
   212,829    180,751    4,807    212,829

~~Note:~~

~~The net profit amounts at City Telecom (H.K.) Limited level have included the share of net profit of its subsidiaries using the equity method of accounting.~~

32 ~~Supplemental guarantors consolidated financial information (continued)~~

~~Condensed consolidated cash flow statement for the year ended August 31, 2009~~

   City
Telecom
(H.K.)
Limited Guarantor
subsidiaries Non-
guarantor
subsidiary Eliminating
entries Consolidated
total
   HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Net cash inflow/(outflow) from operating activities
   487,691    88,243    (38,930 ) (233 ) 536,771
Net cash inflow/(outflow) from investing activities
   101,605    (276,843 ) (1,250 ) (176,488 )
Net cash outflow from financing activities
   (560,397 ) (895 ) —      (561,292 )


Increase/(decrease) in cash at bank and in hand
   28,899    (189,495 ) (40,180 ) (201,009 )
Cash at bank in hand at September 1, 2008
   90,386    263,386    67,838    421,610
Effects of foreign exchange rates changes
   134    306    (222 ) 233    451


Cash at bank and in hand at August 31, 2009
   119,419    74,197    27,436    221,052


Analysis of the balances of cash and cash equivalent:

Cash at bank and in hand
   120,315    78,665    27,436    226,416
Bank overdrafts — unsecured
   (896 ) (4,468 ) —      (5,364 )


   119,419    74,197    27,436    221,052

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


~~CITY TELECOM (H.K.)~~HONG KONG TELEVISION NETWORK LIMITED

By:		/s/ ~~Yeung Chu Kwong, William~~To Wai Bing
Name:		~~Name: Yeung Chu Kwong, William~~To Wai Bing
Title:		~~Title:~~ Chief Executive Officer

By:		/s/ Wong Nga Lai, ~~Ni Quiaque~~Alice
Name:		~~Name:~~Wong Nga Lai, ~~Ni Quiaque~~Alice
Title:		~~Title:~~ Chief Financial Officer

Date: ~~December 21, 2011~~April 29, 2015


Title Of Each Class		Name Of Each Exchange On Which Registered
American Depositary Shares, each representing 20 Ordinary Shares ~~par value HK$0.10 per share~~		The Nasdaq Stock Market LLC

Ordinary Shares, par value HK$0.10 per shareShares		The Nasdaq Stock Market LLC*


“Articles”		are to the Company’s Memorandum and Articles of Association;

“Broadcasting Ordinance”		are to the Broadcasting Ordinance (Chapter 562 of the laws of Hong Kong);

“CA”		are to the Communications Authority, a unified Hong Kong regulatory body for the broadcasting and the telecommunications sectors, which has taken over the functions and responsibilities of the HKBA and the Hong Kong Telecommunications Authority since April 1, 2012;

“Centre”		are to the Television and Multimedia Production Centre under construction in Tseung Kwan O Industrial Estate in Hong Kong;

“DTMB”		are to Digital Terrestrial Multimedia Broadcast, a standard widely adopted in the PRC, Hong Kong and Macau for the transmission of television to mobile and fixed terminals;

“Exchange Act”		are to the Securities Exchange Act of 1934, as amended;

“fiscal 2010”		are to the period of twelve months from September 1, 2009 to August 31, 2010;

“fiscal 2011”		are to the period of twelve months from September 1, 2010 to August 31, 2011;

“fiscal 2012”		are to the period of twelve months from September 1, 2011 to August 31, 2012;

“fiscal 2013”		are to the period of twelve months from September 1, 2012 to August 31, 2013;

“fiscal 2014”		are to the period of sixteen months from September 1, 2013 to December 31, 2014;

“free TV license”		are to a domestic free television programme service licence issued under the Broadcasting Ordinance

“FTNS Business”		are to our former business segment in which we provided fixed telecommunications network services, including dial-up and broadband Internet access services, local VoIP services, IP-TV services and corporate data services;

“Group”		are to the Company and its subsidiaries;

“Guangzhou Agreement”		are to the sale and purchase agreement dated April 19, 2012 entered into by the Company and Metropolitan Light (HK) Company Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of Metropolitan Light Company Limited;

“Hong Kong Companies Ordinance”		are to Chapter 622 of the laws of Hong Kong;

“HKBA” or the “Hong Kong Broadcasting Authority”		are to an independent statutory body established by the Hong Kong government for the regulation of the broadcasting industry in Hong Kong;

“HKBN”		are to Hong Kong Broadband Network Limited, a former wholly-owned subsidiary of the Company;

“HKMA” or “Hong Kong Monetary Authority”		are to the government authority in Hong Kong responsible for maintaining monetary and banking stability in Hong Kong;

“HKSE”		are to The Stock Exchange of Hong Kong Limited;

“HKSE Listing Rules”		are to Rules Governing the Listing of Securities on the HKSE;

“HKTV” or the “Company”		are to Hong Kong Television Network Limited;

“IDD Business”		are to our former business segment in which we provided international direct dialing telecommunications services, including international long distance call services;



“IFRS”		are to International Financial Reporting Standards, as issued by the International Accounting Standards Board;

“Mobile TV Acquisition”		are to our acquisition on December 20, 2013 of the entire issued share capital of the Target Company pursuant to an option exercised by the Company under an agreement dated August 16, 2013 entered into between the Company and the Vendor;

“Mobile TV Spectrum”		are to the frequency at 678 – 686 MHz and microwave link in the frequency range of 7910 – 7920 MHz for the provision of broadcast-type mobile television services;

“Multimedia Business”		are to our business in which we provide multimedia production and distribution and other multimedia related services, including the offer of television programming through our OTT platform, our online shopping operation, multimedia and drama productions, content distribution and other related services;

“Nasdaq”		are to The Nasdaq Stock Market LLC;

“OTT”		are to Over-The-Top, which is the delivery of multimedia content over the Internet;

“Sarbanes-Oxley Act”		are to the Sarbanes-Oxley Act of 2002;

“SEC”		are to the Securities and Exchange Commission;

“Securities Act”		are to the Securities Act of 1933, as amended;

“Supplementary Financial Information”		are to the Company’s unaudited financial information relating to the twelve months ended August 31, 2014 and four months ended December 31, 2014;

“Talents”		are to all individuals employed by us, including the directors of the Company;

“Target Company”or“HKMTV”		are to Hong Kong Mobile Television Network Limited (formerly China Mobile Hong Kong Corporation Limited), a company incorporated in Hong Kong with limited liability and, prior to the Mobile TV Acquisition, a wholly-owned subsidiary of the Vendor;

“Telecom Group Agreement”		are to the sale and purchase agreement dated March 31, 2012 entered into between the Company and Metropolitan Light Company Limited in relation to the disposal of 100% of the issued share capital of City Telecom International Limited, Credibility Holdings Limited and Automedia Holdings Limited;

“Telecom Business”		are to the disposed businesses, which include the FTNS Business and IDD Business;

“Unified Carrier License”		are to a unified carrier licence issued by the Communications Authority to the Target Company;

“Vendor”		are to China Mobile Hong Kong Company Limited, a company incorporated in Hong Kong with limited liability and an wholly-owned subsidiary of China Mobile Limited, a company listed on the New York Stock Exchange and the main board of the HKSE; and

“we”, “us” or “our”		are to Hong Kong Television Network Limited and/or its subsidiaries, as the context requires.


	As of and for the year ended August 31,
	2008		2009		2010		2011
FTNS subscriptions:
- Broadband Internet access		316,000		391,000		526,000		590,000
- Local VoIP		329,000		382,000		431,000		476,000
- IP-TV		156,000		170,000		153,000		181,000
Total		801,000		943,000		1,110,000		1,247,000
Registered international telecommunications accounts (note 5)		2,336,000		2,383,000		2,445,000		2,488,000
IDD outgoing minutes (in thousands)		574,000		487,000		464,000		412,000


	~~For the year ended August 31,~~
	~~2007~~ ~~HK$~~
	~~(Amounts in thousands except per share data)~~
~~HKFRS~~

~~Revenues:~~
~~Fixed telecommunications network services~~		~~816,800~~
~~International telecommunications services~~		~~324,470~~

~~Total operating revenue~~		~~1,141,270~~

~~Network costs and costs of sales:~~
~~Fixed telecommunications network services~~		~~(103,795~~	)
~~International telecommunications services~~		~~(110,796~~	)

~~Total network costs and costs of sales~~		~~(214,591~~	)
~~Other operating expenses~~		~~(834,104~~	)

~~Income from operations~~		~~92,575~~
~~Interest expense, net~~		~~(64,833~~	)
~~Other income, net~~		~~3,149~~
~~Income taxes expense~~		~~(2,026~~	)

~~Net income~~		~~28,865~~
~~Basic earnings per share (cents)~~		~~4.7~~
~~Diluted earnings per share (cents) (note 1)~~		~~4.6~~
~~Dividends declared per share (cents)~~		~~8.0~~
~~Weighted average number of shares~~		~~614,840~~
~~Diluted weighted average number of shares (note 2)~~		~~631,319~~


	Twelve months ended August 31, 2010			Twelve months ended August 31, 2011			Twelve months ended August 31, 2012			Twelve months ended August 31, 2013			Twelve months ended August 31, 2014			Four months ended December 31, 2014			Sixteen months ended December 31, 2014			Sixteen months ended December 31, 2014
	HK$			HK$			HK$			HK$			HK$			HK$			HK$			US$
	(in thousands, except per share data)
Continuing operations:
Turnover		—			—			3,762			7,802			1,391			21,636			23,027			2,970
Cost of sales		—			—			(6,006	)		(15,706	)		(560	)		(27,207	)		(27,767	)		(3,581	)
Valuation gains on investment properties		—			—			18,200			43,400			1,800			2,100			3,900			503
Other operating expenses		(21,932	)		(23,481	)		(104,960	)		(201,514	)		(245,581	)		(98,218	)		(343,799	)		(44,344	)
Other income/(loss), net		(7,696	)		3,456			19,920			128,909			117,702			29,907			147,609			19,038
Finance costs, net		(21,289	)		(7,303	)		(2,455	)		(4,860	)		(5,751	)		(2,016	)		(7,767	)		(1,002	)
Impairment losses/ write off of assets		—			—			—			—			(32,000	)		—			(32,000	)		(4,127	)

Loss before taxation		(50,917	)		(27,328	)		(71,539	)		(41,969	)		(162,999	)		(73,798	)		(236,797	)		(30,543	)
Income tax (expenses)/ credit		(5,611	)		(4,782	)		(2,281	)		1,659			(145	)		(60	)		(205	)		(26	)

Loss from continuing operations		(56,528	)		(32,110	)		(73,820	)		(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)

Discontinued operations:
Profit from discontinued operations (net of tax)		273,394			346,025			3,771,694			—			—			—			—			—

(Loss)/profit for the period		216,866			313,915			3,697,874			(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)

Attributable to:
Equity shareholders of the Company
-Continuing operations		(56,528	)		(32,110	)		(71,406	)		(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)
-Discontinued operations		273,394			346,025			3,771,694			—			—			—			—			—

		216,866			313,915			3,700,288			(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)

Non-controlling interest
-Continuing operations		—			—			(2,414	)		—			—			—			—			—
-Discontinued operations		—			—			—			—			—			—			—			—

		—			—			(2,414	)		—			—			—			—			—

(Loss)/profit for the period		216,866			313,915			3,697,874			(40,310	)		(163,144	)		(73,858	)		(237,002	)		(30,569	)

Basic (loss)/earnings per share (cents)
-Continuing and discontinued operations		30.7			40.8			471.9			(5.0	)		(20.2	)		(9.1	)		(29.3	)		(3.8	)
-Continuing operations		(8.0	)		(4.1	)		(9.0	)		(5.0	)		(20.2	)		(9.1	)		(29.3	)		(3.8	)
-Discontinued operations		38.7			44.9			480.9			—			—			—			—			—
Diluted (loss)/earnings per share (cents)⁽¹⁾
-Continuing and discontinued operations		29.4			39.6			465.1			(5.0	)		(20.2	)		(9.1	)		(29.3	)		(3.8	)
-Continuing operations		(7.7	)		(4.1	)		(9.0	)		(5.0	)		(20.2	)		(9.1	)		(29.3	)		(3.8	)
-Discontinued operations		37.1			43.7			474.1			—			—			—			—			—


	As of August 31,															August 31, 2010			August 31, 2011			August 31, 2012			August 31, 2013			August 31, 2014			December 31, 2014			December 31, 2014
	2008 HK$			2009 HK$			2010 HK$			2011 HK$			2011 US$			HK$			HK$			HK$			HK$			HK$			HK$			US$
	(Amounts in thousands)															(in thousands)
Total assets		2,093,410			1,790,408			2,251,549			2,264,462			290,778			2,251,549			2,264,462			3,537,356			3,833,047			4,098,256			3,938,437			507,982

10-year senior notes due 2015		(683,242	)		(162,586	)		—			—			—
Long-term bank loan - unsecured		—			—			(123,567	)		—			—
Long-term bank loan – unsecured																	(123,567	)		—			—			—			—			—			—
Finance lease obligations – non-current portion		(255	)		(530	)		(393	)		(288	)		(37	)		(393	)		(288	)		(160	)		(70	)		—			—			—
Derivative financial instrument		—			—			(11,293	)		(11,564	)		(1,485	)		(11,293	)		(11,564	)		(9,663	)		(5,181	)		(1,340	)		—			—
Finance lease obligations – current portion		(121	)		(202	)		(212	)		(105	)		(13	)		(212	)		(105	)		(85	)		(90	)		—			—			—
Other liabilities		(377,185	)		(398,563	)		(427,545	)		(455,124	)		(58,443	)		(427,545	)		(455,124	)		(44,055	)		(577,084	)		(929,621	)		(883,276	)		(113,925	)

Total liabilities		(1,060,803	)		(561,881	)		(563,010	)		(467,081	)		(59,978	)		(563,010	)		(467,081	)		(53,963	)		(582,425	)		(930,961	)		(883,276	)		(113,925	)

Net assets		1,032,607			1,228,527			1,688,539			1,797,381			230,800			1,688,539			1,797,381			3,483,393			3,250,622			3,167,295			3,055,161			394,057

Share capital		65,062			66,418			76,500			77,191			9,912			76,500			77,191			80,902			80,902			—			—			—
Share premium		670,717			681,208			1,074,997			1,083,495			139,131
Reserves		296,828			480,901			537,042			636,695			81,757
Other statutory capital reserves																	1,096,068			1,107,261			1,188,012			1,188,012			—			—			—

Share capital and other statutory reserves																	1,172,568			1,184,452			1,268,914			1,268,914			1,268,914			1,268,914			163,665
Other reserves																	515,971			612,929			2,214,479			1,981,708			1,898,381			1,786,247			230,392

Total shareholders’ equity		1,032,607			1,228,527			1,688,539			1,797,381			230,800			1,688,539			1,797,381			3,483,393			3,250,622			3,167,295			3,055,161			394,057


Write-off of upfront costs upon settlement of long-term bank loan	—		—		—		1,251		161
Realized gain on long term bank deposit	(1,185	)	—		—		—		—
Loss/(gain) on disposal of fixed assets	1,431		1,016		(1,375	)	1,008		129
Equity settled share-based transaction	4,204		4,768		5,347		4,652		597
Realized loss on derivatives financial instruments	1,039		—		—		—		—
Realized and unrealized gain on other financial assets	(3,284	)	(189	)	—		—		—
(Gain)/loss on extinguishment of senior notes	(2,582	)	(31,371	)	9,650		—		—
Taxation paid	(4,250	)	(1,732	)	(3,013	)	(3,012	)	(387	)
Change in long term receivable and prepayments	1,346		(505	)	917		1,073		138
Change in working capital, net	(27,434	)	8,567		(44,244	)	(49,754	)	(6,389	)

Net cash inflow from operating activities	381,991		536,771		485,340		585,899		75,235


	~~As of August 31,~~
	~~2007~~ ~~HK$~~
	~~(Amounts in thousands)~~
~~HKFRS~~
~~Total assets~~		~~2,161,133~~
~~Debt~~		~~(952,593~~	)
~~Finance lease obligation~~		~~(1,210~~	)
~~Other liabilities~~		~~(303,448~~	)

~~Total liabilities~~		~~(1,257,251~~	)

~~Net assets employed~~		~~903,882~~

~~Share capital~~		~~61,650~~
~~Share premium~~		~~622,433~~
~~Reserves~~		~~219,799~~

~~Total shareholders’ equity~~		~~903,882~~


	~~As of August 31,~~
	~~2007~~ ~~HK$~~
	~~(Amounts in thousands)~~
~~U.S. GAAP~~
~~Total assets~~		~~2,189,086~~
~~Total liabilities~~		~~(1,279,587~~	)
~~Net shareholders’ equity~~		~~909,499~~


	~~For the year ended August 31~~ ~~2007~~ ~~HK$~~ ~~(Amounts in thousands)~~
~~EBITDA~~~~(note 3)~~		~~353,827~~
~~Depreciation and amortization~~		~~(258,103~~	)
~~Interest expense, net~~		~~(64,833~~	)
~~Income taxes expense~~		~~(2,026~~	)

~~Net income~~		~~28,865~~
~~Depreciation and amortization~~		~~258,103~~
~~Amortization of deferred expenditure~~		~~15,580~~
~~Income taxes expense~~		~~2,026~~
~~Interest income~~		~~(22,671~~	)
~~Interest, amortization and exchange difference on senior notes~~		~~89,879~~
~~Other borrowing costs~~		~~(739~~	)
~~Loss on disposal of fixed assets~~		~~1,714~~
~~Equity settled share-based transaction~~		~~5,727~~
~~Realized and unrealized loss on derivatives financial instruments~~		~~806~~
~~Unrealized gain on other investments~~		~~(1,887~~	)
~~Taxation paid~~		~~(2,171~~	)
~~Change in long term receivable~~		~~5,600~~
~~Change in working capital, net~~		~~3,167~~

~~Net cash flow provided by operating activities~~		~~383,999~~


	~~As of and for the year ended August 31,~~
	~~2007~~
~~FTNS Subscriptions:~~
~~Broadband Internet Access~~		~~247,000~~
~~Local VoIP~~		~~308,000~~
~~IP-TV~~		~~128,000~~

~~Total~~		~~683,000~~

~~Registered international telecommunications accounts (note 5)~~		~~2,331,000~~
~~IDD outgoing minutes (in thousands)~~		~~659,000~~


	Average		High		Low		Period-end
	(note) HK$		HK$		HK$		HK$
Fiscal 2007		7.8029		7.8289		7.7665		7.7968
Fiscal 2008		7.7915		7.8159		7.7497		7.8036
Fiscal 2009		7.7550		7.8094		7.7495		7.7505
Fiscal 2010		7.7646		7.8040		7.7495		7.7781
Fiscal 2011		7.7776		7.8087		7.7506		7.7876
June 2011		7.7850		7.7976		7.7767		7.7814
July 2011		7.7892		7.7964		7.7802		7.7942
August 2011		7.7965		7.8087		7.7876		7.7876
September 2011		7.7943		7.8040		7.7830		7.7840
October 2011		7.7774		7.7884		7.7634		7.7641
November 2011		7.7809		7.7957		7.7679		7.7730
December 2011 (through December 9, 2011)		7.7727		7.7817		7.7676		7.7817


	Average⁽¹⁾		High		Low		Period-end
	HK$		HK$		HK$		HK$
Fiscal 2010		7.7646		7.8040		7.7495		7.7781
Fiscal 2011		7.7776		7.8087		7.7506		7.7876
Fiscal 2012		7.7670		7.8040		7.7532		7.7560
Fiscal 2013		7.7559		7.7654		7.7493		7.7544
October 2014		7.7572		7.7645		7.7541		7.7551
November 2014		7.7543		7.7572		7.7519		7.7548
December 2014		7.7541		7.7616		7.7509		7.7531
January 2015		7.7531		7.7563		7.7508		7.7529
February 2015		7.7551		7.7584		7.7517		7.7559
March 2015		7.7584		7.7686		7.7534		7.7540
April 2015 (through April 24, 2015)		7.7509		7.7525		7.7495		7.7499


	As of August 31,
	2009		2010		2011
Broadband Internet access		391,000		526,000		590,000
Local VoIP		382,000		431,000		476,000
IP-TV		170,000		153,000		181,000

Total FTNS subscriptions		943,000		1,110,000		1,247,000


~~Service~~		~~Description~~
~~IDD 1666~~		~~Provides subscribers with international direct dial using the access code 1666 in Hong Kong.~~

~~IDD 0030~~		~~Provides subscribers with international direct dial using the access code 0030 in Hong Kong.~~

~~Mobile call forwarding services~~		~~Allows call forwarding of Hong Kong mobile numbers to any overseas telephone number so that subscribers can receive calls while in overseas.~~


Name	Jurisdiction of incorporation	Percentage of interest held by HKTV
		~~Percentage of interest~~ ~~held by City Telecom~~
~~Name~~	~~Jurisdiction of~~ ~~incorporation~~	Direct %			Indirect %
~~963673 Ontario Limited~~	~~Canada~~		—			~~100~~
Attitude Holdings Limited	British Virgin Islands		—			100	%
~~Automedia Holdings~~Best Intellect Limited	British Virgin Islands		100	%		—
~~BBTV Company~~City Telecom (H.K.) Limited	Hong Kong		—			100	%
~~Best Intellect~~Cosmo True Limited	British Virgin Islands		100	%		—
~~City Telecom (B.C.) Inc.~~	~~Canada~~		—			~~100~~
~~City Telecom (Canada) Inc.~~	~~Canada~~		—			~~100~~
~~City Telecom (Toronto) Inc.~~	~~Canada~~		—			~~100~~
~~City Telecom (U.S.A.) Inc.~~	~~United States of America~~		—			~~100~~
~~City Telecom (Vancouver) Inc.~~	~~Canada~~		—			~~100~~
~~City Telecom Inc.~~	~~Canada~~		—			~~100~~
~~City Telecom International Limited~~	~~British Virgin Islands~~		~~100~~			—
~~Credibility Holdings Limited~~	~~British Virgin Islands~~		~~100~~			—
~~CTI Guangzhou Customer Services Co. Ltd. (note)~~	~~People’s Republic of China~~		~~100~~			—
~~CTI International Limited~~	~~Hong Kong~~		—			~~100~~
~~CTI Marketing Company Limited~~	~~Hong Kong~~		—			~~100~~
Excel Billion Profits Limited	Hong Kong		—			100	%
Golden Trinity Holdings Limited	British Virgin Islands		100	%		—
HKTV Japan Company Limited	Japan		—			100	%
Hong Kong Broadband Digital TV Limited	Hong Kong		—			100
~~Hong Kong Broadband Network Limited~~	~~Hong Kong~~		—			~~100~~
~~Hong Kong Broadband Phone Limited~~	~~Hong Kong~~		—			~~100~~	%
Hong Kong Broadband Television Company Limited	Hong Kong		—			100	%
Hong Kong Media Production Company Limited ~~(formerly known as Global Courier Company Limited)~~	Hong Kong		—			100	%
Hong Kong Mobile Television Network Limited	Hong Kong		—			100	%
~~IDD1600~~Hong Kong Mobile Television (Leasing) Limited	Hong Kong		—			100	%
Hong Kong Music Network Limited	Hong Kong		—			100	%
Hong Kong TV Shopping Network Company Limited	Hong Kong		—			100	%
Leader Artiste Management Company Limited	Hong Kong		—			51100	%
Multi Talent Enterprise Limited	British Virgin Islands		100	%		—
Talent Ascent Limited	British Virgin Islands		100	%		—


				Date joined City
Name	Age		Position	Telecom
Board of directors:
WONG Wai Kay, Ricky		50	Executive Director and Chairman		1992
CHEUNG Chi Kin, Paul		54	Executive Director and Vice Chairman		1992
YEUNG Chu Kwong, William		51	Executive Director and Chief Executive Officer		2005
LAI Ni Quiaque		42	Executive Director, Chief Financial Officer, Company Secretary and Head of Talent Engagement		2004
CHENG Mo Chi, Moses		61	Non-Executive Director		1997
LEE Hon Ying, John		65	Independent Non-Executive Director		1997
CHAN Kin Man		52	Independent Non-Executive Director		1997


Directors	Date of grant	Exercise price HK$		Balance as of December 14, 2010		Options granted during the period		Exercise period	Options exercised during the period		Options cancelled/ lapsed during the period		Balance as of December 13, 2011
Mr. Wong Wai Kay, Ricky	January 5, 2005		1.5224		8,091,604		—	January 5, 2005 to October 20, 2014		—		—		8,091,604
Mr. Cheung Chi Kin, Paul	January 5, 2005		1.5224		8,091,604		—	January 5, 2005 to October 20, 2014		2,000,000		—		6,091,604
Mr. Yeung Chu Kwong, William	May 22, 2006		0.6523		165		—	May 22, 2007 to May 21, 2016		—		—		165
	February 6, 2008		1.7568		5,542,791		—	(note 1)		—		—		5,542,791
	February 5, 2010		4.2400		6,000,000		—	(note 2)		—		—		6,000,000
Mr. Lai Ni Quiaque	February 11, 2008		1.8660		6,044,791		—	(note 3)		—		—		6,044,791
Senior management
Mr. Chong Kin Chun, John	October 21, 2004		1.5224		2,022,900		—	January 1, 2005 to October 20, 2014		—		—		2,022,900
Mr. Lo Sui Lun	October 21, 2004		1.5224		505,726		—	January 1, 2005 to October 20, 2014		505,726		—		—
	May 22, 2006		0.6523		1,133,175		—	May 22, 2007 to May 21, 2016		1,133,175		—		—
Ms. To Wai Bing	February 15, 2008		1.7568		302,239		—	(note 4)		—		—		302,239

*~~(b)~~*
Exhibit Number		Description of Document

1.1		Memorandum and Articles of Association of the Company (filed as Exhibit 1 to the Company’s Annual Report on Form 20-F on January 30, 2006 and incorporated herein by reference).

3.1		Deed of Covenant, dated as of March 15, 2011, by and among Top Group International Limited, Wong Wai Kay, Ricky, and Cheung Chi Kin, Paul (filed as Exhibit 3.1 to the Company’s Annual Report on Form 20-F on December 21, 2011 and incorporated herein by reference).

8.1		Subsidiaries of the Company.

12.1 —		Section 302 Certifications of the Chief Executive Officer.

*~~(c)~~*	~~Exhibit~~
12.2 —		Section 302 Certifications of the Chief Financial Officer.

*~~(d)~~*	~~Exhibit~~
13 —		Section 906 Certification of Chief Executive Officer and Chief Financial Officer.


Audited Consolidated Financial Statements	Pages
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Income Statements		F-2
Consolidated ~~Statement~~Statements of Comprehensive Income		F-3
Consolidated Balance Sheets		F-4
Consolidated Statements of Changes in Equity		F-5
Consolidated Cash Flow Statements		~~F-7~~F-8
Notes to the Consolidated Financial Statements		~~F-8~~F-10


	As at August 31,						Note	December 31, 2014 HK$’000		August 31, 2014 HK$’000		August 31, 2013 HK$’000
			2011		2010					(Note 1)
	Note		HK$’000		HK$’000					(Unaudited)
Non-current assets

Goodwill		11		1,066		1,066
Fixed assets		12		1,642,701		1,431,813	15		550,159		519,820		531,277
Intangible assets							16		391,198		395,328		291,366
Long term receivable and prepayment				4,101		5,174			285		44		133
Deferred expenditure		14		15,323		6,626
Other financial assets							18		1,490,420		1,633,396		1,620,277

				1,663,191		1,444,679			2,432,062		2,548,588		2,443,053

Current assets

Accounts receivable		15		71,999		99,729	19		7,688		370		1,325
Other receivables, deposits and prepayments		15		90,984		89,490	19		40,752		50,202		66,688
Deferred expenditure		14		29,312		28,986
Programme costs									344,088		363,323		289,781
Inventories									718		357		357
Other current financial assets							18		293,943		257,152		341,337
Term deposits							20(a)		—		573,043		342,657
Cash at bank and in hand		16		408,976		588,665	20(b)		819,186		305,221		347,849

									1,506,375		1,549,668		1,389,994
				601,271		806,870
Current liabilities

Bank overdrafts — unsecured				845		10,490
Accounts payable		17		17,419		35,128	21		4,504		4,087		4,074
Other payables and accrued charges		17		209,585		195,931	21		73,876		59,921		38,600
Deposits received				26,969		21,822			1,905		1,905		1,905
Current portion — Deferred service revenue		18		85,895		97,248
Bank loans							22		802,165		862,941		531,883
Tax payable				2,281		1,533			—		285		395
Current portion — obligations under finance leases		22		105		212
Derivative financial instrument							25		—		1,340		—
Current portion - obligations under finance leases									—		—		90

				343,099		362,364			882,450		930,479		576,947

Net current assets				258,172		444,506			623,925		619,189		813,047

Total assets less current liabilities				1,921,363		1,889,185			3,055,987		3,167,777		3,256,100

Non-current liabilities

Deferred tax liabilities		20		111,138		55,843	24		826		482		227
Long-term deferred service revenue				992		9,550
Derivative financial instrument		21		11,564		11,293	25		—		—		5,181
Long-term debt and other liabilities		22		288		123,960
Obligations under finance leases									—		—		70

									826		482		5,478

Net assets				1,797,381		1,688,539			3,055,161		3,167,295		3,250,622

Capital and reserves							23
Share capital		19		77,191		76,500
Reserves		19		1,720,190		1,612,039
Share capital: nominal value									—		—		80,902
Other statutory capital reserves									—		—		1,188,012

Total equity attributable to equity shareholders of the Company				1,797,381		1,688,539
Share capital and other statutory reserves									1,268,914		1,268,914		1,268,914
Other reserves									1,786,247		1,898,381		1,981,708

Total equity									3,055,161		3,167,295		3,250,622


	Note		Share capital HK$’000		Share premium HK$’000		Capital reserve HK$’000			Capital redemption reserve HK$’000		Retained profits HK$’000			Exchange reserve HK$’000			Total HK$’000
At September 1, 2010				76,500		1,074,997		21,064			7		513,208			2,763			1,688,539
Total comprehensive income for the year				—		—		—			—		313,915			2,383			316,298
Dividend paid in respect of previous year		6		—		—		—			—		(103,735	)		—			(103,735	)
Dividend paid in respect of current year		6		—		—		—			—		(115,605	)		—			(115,605	)
Shares issued upon exercise of share option				691		8,498		(1,957	)		—		—			—			7,232
Equity settled share-based transactions				—		—		4,652			—		—			—			4,652

At August 31, 2011				77,191		1,083,495		23,759			7		607,783			5,146			1,797,381


	Note		Share capital HK$’000		Share premium HK$’000		Capital reserve HK$’000			Capital redemption reserve HK$’000		Retained profits HK$’000			Exchange reserve HK$’000			Total HK$’000
At September 1, 2009				66,418		681,208		23,232			7		454,802			2,860			1,228,527
Total comprehensive income for the year				—		—		—			—		216,866			(97	)		216,769
Dividend paid in respect of previous year		6		—		—		—			—		(108,735	)		—			(108,735	)
Dividend paid in respect of current year		6		—		—		—			—		(49,725	)		—			(49,725	)
Shares issued upon exercise of share option				2,032		22,227		(7,515	)		—		—			—			16,744
Equity settled share-based transactions				—		—		5,347			—		—			—			5,347
Shares issued upon placement				8,050		371,562		—			—		—			—			379,612

At August 31, 2010				76,500		1,074,997		21,064			7		513,208			2,763			1,688,539


		Attributable to the equity shareholders of the Company
	Note	Share capital HK$’000		Share premium HK$’000			Capital redemption reserve HK$’000			Retained profits HK$’000			Revaluation reserve HK$’000			Fair value reserve HK$’000			Exchange reserve HK$’000		Other reserve HK$’000			Total HK$’000			Non-controlling interest HK$’000		Total equity HK$’000
At September 1, 2013			80,902		1,188,005			7			1,889,487			165,156			(71,109	)		—		(1,826	)		3,250,622			—		3,250,622

Loss for the period			—		—			—			(237,002	)		—			—			—		—			(237,002	)		—		(237,002	)
Other comprehensive income	10		—		—			—			—			—			41,540			1		—			41,541			—		41,541

Total comprehensive income for the period			—		—			—			(237,002	)		—			41,540			1		—			(195,461	)		—		(195,461	)
Transition to no-par value regime on March 3, 2014	23(a)		1,188,012		(1,188,005	)		(7	)		—			—			—			—		—			—			—		—
Revaluation reserve realized upon disposal of an investment property	15(c)		—		—			—			5,397			(5,397	)		—			—		—			—			—		—

At December 31, 2014			1,268,914		—			—			1,657,882			159,759			(29,569	)		1		(1,826	)		3,055,161			—		3,055,161


	Note	Sixteen months ended December 31, 2014 HK$’000			Four months ended December 31, 2014 HK$’000		Twelve months ended August 31, 2014 HK$’000			Twelve months ended August 31, 2013 HK$’000			Twelve months ended August 31, 2012 HK$’000
		(Note 1)			(Note 1)		(Note 1)
					(Unaudited)		(Unaudited)
Increase/(decrease) in cash and cash equivalents			473,205			513,057		(39,852	)		(1,734,384	)		1,671,966
Cash and cash equivalent at the beginning of the period			347,849			305,221		347,849			2,080,053			408,131
Effect of foreign exchange rate changes			(1,868	)		908		(2,776	)		2,180			(44	)

Cash and cash equivalent at the end of the period			819,186			819,186		305,221			347,849			2,080,053

Analysis of the balances of cash and cash equivalents
Cash at bank and in hand	20(b)		819,186			819,186		305,221			347,849			2,083,079
Bank overdrafts - unsecured			—			—		—			—			(3,026	)

			819,186			819,186		305,221			347,849			2,080,053


	2009
	International tele- communications services HK$’000		Fixed tele- communications network services HK$’000		Elimination HK$’000			Group HK$’000
Turnover
- External sales		247,359		1,230,880		—			1,478,239
- Inter-segment sales		5,669		19,784		(25,453	)		—

		253,028		1,250,664		(25,453	)		1,478,239

Segment results		61,631		203,515					265,146

Other net income, excluding interest income									36,671
Interest income									4,869
Finance costs									(55,127	)

Profit before taxation									251,559
Income tax expense									(38,730	)

Net profit									212,829


	Twelve months ended August 31, 2012
	Before-tax amount HK$’000			Tax expense HK$’000		Net-of-tax amount HK$’000
Exchange difference on translation of financial statements of overseas subsidiaries		(265	)		—		(265	)
Exchange reserve realized upon disposal of Telecom business		(4,881	)		—		(4,881	)

		(5,146	)		—		(5,146	)


	2011 Number of shares ‘000			2010 Number of shares ‘000			2009 Number of shares ‘000
Issued ordinary shares at the beginning of the year		764,997			664,180			650,622
Effect of scrip dividend issued		—			—			6,256
Effect of share options exercised		3,810			14,856			329
Effect of placement		—			27,569			—
Effect of shares repurchased and cancelled		—			—			(6	)

Weighted average number of ordinary shares at the end of the year (basic)		768,807			706,605			657,201
Incremental shares from assumed exercise of share options		23,992			30,011			11,183

Weighted average number of ordinary shares at the end of the year (diluted)		792,799			736,616			668,384

Basic earnings per share		HK40.8	cents		HK30.7	cents		HK32.4	cents

Diluted earnings per share		HK39.6	cents		HK29.4	cents		HK31.8	cents


	2011					2010
	Weighted average exercise price HK$		Number of options			Weighted average exercise price HK$		Number of options
2002 Share Option Scheme

Outstanding at the beginning of the year		1.87		44,649,857			1.27		58,967,231
Granted during the year		—		—			4.24		6,000,000
Exercised during the year		1.05		(6,914,509	)		0.82		(20,317,374	)
Forfeited during the year		1.79		(629,665	)		—		—

Outstanding at the end of the year		2.03		37,105,683			1.87		44,649,857

Exercisable at the end of the year		1.47		19,217,594			1.35		25,603,183


*Measurement date*	*January 20, 2010*
	Original share option			Modified share option
Variables
-Expected life		3 years			3 years
-Risk-free rate		0.96	%		0.96	%
-Expected volatility		74.73	%		74.73	%
-Expected dividend yield		6.09	%		6.09	%


*Measurement date*	*December 21, 2010*
	Original share option			Modified share option
Variables
-Expected life		2 years			4 years
-Risk-free rate		0.56	%		1.18	%
-Expected volatility		51.20	%		66.85	%
-Expected dividend yield		6.94	%		5.90	%


	Construction in progress		Investment property			Leasehold land and buildings		Leasehold improvements			Furniture, fixtures and fittings			Telecom- munications, computer and office equipment			Motor vehicles			Total
	HK$’000		HK$’000			HK$’000		HK$’000			HK$’000			HK$’000			HK$’000			HK$’000
*Cost:*

At September 1, 2010		—		5,197			90,911		113,286			21,191			3,130,209			12,948			3,373,742
Additions		51,111		—			1,576		6,851			203			388,828			627			449,196
Disposals		—		—			—		—			(42	)		(57,268	)		(1,356	)		(58,666	)
Exchange adjustments		—		—			—		1,461			484			4,593			—			6,538
Transfer of investment property		—		(5,197	)		5,197		—			—			—			—			—

At August 31, 2011		51,111		—			97,684		121,598			21,836			3,466,362			12,219			3,770,810

*Accumulated depreciation:*

At September 1, 2010		—		2,413			14,284		80,316			18,132			1,816,942			9,842			1,941,929
Charge for the year		—		104			1,850		10,349			1,121			203,009			1,764			218,197
Disposals		—		—			—		—			(42	)		(36,098	)		(1,356	)		(37,496	)
Exchange adjustments		—		—			—		1,272			450			3,757			—			5,479
Transfer of investment property		—		(2,517	)		2,517		—			—			—			—			—

At August 31, 2011		—		—			18,651		91,937			19,661			1,987,610			10,250			2,128,109

*Net book value:*

At August 31, 2011		51,111		—			79,033		29,661			2,175			1,478,752			1,969			1,642,701

*Cost:*

At September 1, 2009		—		5,197			90,911		100,447			19,885			2,850,444			12,773			3,079,657
Additions		—		—			—		12,885			1,343			330,441			175			344,844
Disposals		—		—			—		(212	)		(109	)		(51,906	)		—			(52,227	)
Exchange adjustments		—		—			—		166			72			1,230			—			1,468

At August 31, 2010		—		5,197			90,911		113,286			21,191			3,130,209			12,948			3,373,742

*Accumulated depreciation:*

At September 1, 2009		—		2,309			12,466		69,102			17,017			1,668,160			8,223			1,777,277
Charge for the year		—		104			1,818		11,270			1,166			183,052			1,619			199,029
Disposals		—		—			—		(212	)		(109	)		(35,344	)		—			(35,665	)
Exchange adjustments		—		—			—		156			58			1,074			—			1,288

At August 31, 2010		—		2,413			14,284		80,316			18,132			1,816,942			9,842			1,941,929

*Net book value:*

At August 31, 2010		—		2,784			76,627		32,970			3,059			1,313,267			3,106			1,431,813
													��


	2011 HK$’000		2010 HK$’000
Leases in respect of investment property which are receivable:
- Within 1 year		—		108
- After 1 year but within 5 years		—		—

		—		108

Leases in respect of telecommunications facilities and computer equipment which are receivable:
- Within 1 year		3,604		2,335
- After 1 year but within 5 years		2,653		607

		6,257		2,942

		6,257		3,050


	2011 HK$’000		2010 HK$’000
Leases of between 10 to 50 years		130,144		79,411

Representing:

Construction in progress carried at cost		51,111		—
Leasehold land and building carried at cost		79,033		76,627
Investment property carried at cost less impairment loss		—		2,784

		130,144		79,411