You are on page 1of 116

DMX TECHNOLOGIES GROUP LIMITED

CONTENTS
10 14 24 29 30 32 33 34 36 37 Chairman’s Statement CEO’s Statement Board of Directors Directorships Key Management Regional Coverage Business Segments Financial Highlights Corporate Information Corporate Governance

...and it’s been accelerating in

momentum

It has and it will continue to change the way we

see

things,

giving us more

choice and freedom.

clarity,

It’s not just confined to a single country or continent but it is a...

...global phenomenon

China the most populous nation in the world is gripped by it’s

fervour

And as this

digital

revolution grows in momentum

The digital world is not just the future. It’s here NOW. Opening up vast opportunities in the way information, entertainment and communication services are delivered to consumers at home and on the go. It’s making phone, computer and television faster, better and more interactive. It’s about giving consumers more of what they want and when they want it. As this digital revolution continues to gather pace it is becoming increasingly clear that Digitisation is the Future of Media.

so too will our

growth
opportunities.

CHAIRMAN’S STATEMENT
Dear Shareholders On behalf of the Board of Directors for DMX Technologies Group Limited, I take great pleasure in presenting our Annual Report for the financial year ended 31 December 2008. It was a significant year of accomplishments marked by a series of milestone breakthroughs that were achieved by a committed DMX team. Firstly, I wish to thank all our customers and shareholders who have continued to share and support DMX’s vision as we progressively evolve DMX into an end-to-end media services and application solutions provider and thereby strengthen our long-term growth prospects. The Board and management had identified the Digital Media industry as the future growth engine as early as in 2004. Now in FY2008, we have begun to see our long-term investment paying off at the top-line, as attested by our FY2008 financial results with record revenue reported. Our Digital Media group, which developed the proprietary software applicable for both Internet Protocol TV (“IPTV”) and Cable TV (“CATV”) solutions, has been very successful in providing these solutions in China. We have extended our footprint into several large provincial and city CATV operators in the year under review and secured a forerunner position in this industry. Although there is still some way to go before we can fully enjoy the benefits of rising economies of scale on our bottom-line, we sincerely hope that our valued customers and enduring shareholders will continue to stand behind us. The years 2009 and 2010 are expected to be tough as businesses worldwide try to navigate through unchartered waters brought on by the unprecedented credit crisis and global recession. The Chinese State Administration of Radio, Film and Television (SARFT) has set the mandate to digitise all broadcast signal transmissions by 2015; some 165 million households. Digital transmission offers better efficiency and bandwidth, which in turn allow CATV operators to provide their consumers with an additional suite of interactive entertainment choices, through more TV channels, value-added services, such as Video on Demand (“VOD”), on top of future high-definition programming. Beyond the technological promise, the financial potential is also exciting. In addition to the CATV market, telecom operators and Internet service providers are now eyeing the IPTV market to make up for slower revenue growth as telephony and broadband markets become increasingly mature.

annual report 2008 11

CHAIRMAN’S STATEMENT

DMX

DIGITIzING THE HUGE CHINA MARkET THROUGH

The adoption of a “triple play” business model – bundling voice, Internet and pay-TV services – offers these operators the flexibility to package their products into various value offerings and facilitate customer retention, especially for fixed-line networks. Media Partners Asia’s April 2008 research report “Asia Pacific Pay-TV & Broadband Markets 2008” has predicted that Asia Pacific’s IPTV subscribers will reach 19.4 million by 2012 while subscription revenue is projected to hit US$2.8 billion, representing CAGR of 43.7% for the next four years. This presents a unique opportunity for us to leverage on our strategic relationships with Asia

SOLUTIONS AND SOfTwARE

annual report 2008 13

Pacific’s major telecom operators, many of which are long-standing customers from our Infrastructure Solution business. In 2008, total broadband subscribers in China grew to 83.4 million and made the country the world’s largest broadband market. While IPTV has developed at a slower pace as compared to digital cable TV in China, this increasing adoption of broadband internet – an essential IPTV delivery channel – may help to spur the future growth of IPTV. On the other hand, our Managed Services segment is poised for strong growth. Many corporations as well as government agencies are more aware of the need to safeguard their networks, data and IT infrastructure from external attacks and internal threats. Our Vantage-branded Managed Services business offers a costeffective, one-stop solution to address this concern.

The latest report published in January 2009 by a premier global IT research firm, IDC, pinpointed managed services as one of two key growth areas within the IT services market in Asia Pacific (excluding Japan) (“APEJ”) for 2009. In a separate report, IDC estimated that the managed security services (“MSS”) market in APEJ would reach US$1.1 billion in 2012 with a five-year CAGR of 17.1%. All said, FY2008 has been an exciting and satisfying year, although the unfortunate May 2008 Sichuan earthquake and the country’s focus on delivering the outstanding Beijing Olympics led to delays in some of our of project implementations and thus affected our trade receivable collections that are based on completed milestones. I would like to express my heartfelt appreciation to all our customers, suppliers and business associates for their unwavering support,

without which the significant breakthroughs we had in 2008 would not be possible. In addition, I would like to acknowledge the contributions of our Board of Directors as their insights have helped to carry the DMX Group through our ambitious transformation. Last but not least, I thank our management and staff for working smartly and effectively implementing various initiatives that led us to succeed in this important transition year. I believe that our unique business proposition will lift our business to greater heights and together with my fellow shareholders, look forward to maintaining our success in FY2009. Yours sincerely,

Emmy Wu Executive Chairman

CEO’s STATEMENT

B2C entity

DMX IS TRANSfORMING INTO A MEDIA fOCUSED

annual report 2008 15

CEO’S STATEMENT
Dear Shareholders The year 2008 will go down in the annals of corporate history for many growing enterprises as the year of credit crunch and demand evaporation on an unprecedented scale, whereby all the worst-case scenarios in corporate planning became stark reality almost overnight. However, against such an adverse backdrop, I take great pleasure and pride in reporting to my fellow shareholders that DMX had many initiatives that proceeded as planned. By and large, FY2008 turned out to be a very motivating watershed year. Our primary growth engine, Digital Media group, significantly took off and tapped on China’s explosive growth in digital media, particularly the CATV industry. This attributed to the Group achieving record-high revenue of US$172.7 Million in FY2008.

OVERVIEW In FY2008, the Group effectively harnessed the cumulative momentum achieved in previous years since establishing its exciting Digital Media business back in 2004. Our latest results underscored that our longterm investments to fortify our Digital Media group’s proprietary software and new products are starting to pay off with strategic provincial wins and improved gross margins. At the same time, we are also pleased with the taste of early success for our Vantage-branded Managed Services, which comes under our Infrastructure Enabling business group. This emerging new segment adds another spectrum to our strategy of generating recurring income streams and complements our traditionally project-centric Infrastructure Solution business, which is still generating decent gross margins.

Highlights of FY2008 include the following achievements across the Group: • Record-high total revenue of US$172.7 million for FY2008, up 6.9% y-o-y from US$161.6 million Revenue from Digital Media group surged 48.7% y-o-y as long-term contracts secured in FY2007 and FY2008 from large city and provincial cable TV operators in the China took effect. Emerging Managed Services segment gained market acceptance with 91.8% revenue growth in FY2008 and crossed the US$10.0 million milestone. With both cylinders of growth firing away in their respective markets, the Group achieved record-high revenue in spite of the planned lower revenue from the Infrastructure Solution segment, where we remain margin-selective on new projects pursued vis-à-vis challenging conditions in more mature markets such as Korea.

• Higher average gross margin of 26.45% for FY2008 compared to 24.42% for FY2007 Gross margin improved two percentage points for the year as a result of better revenue mix. • Operating profit jumped to US$20.9 million; Net profit attributable to equity holders of US$3.6 million was lower than FY2007’s US$9.3 million As Indonesian Rupiah and Korean Won substantially depreciated against the US dollar, the Group incurred US$1.3 million foreign exchange loss. Other operating expenses increased by US$9.8 million to US$15.2 million. These included a US$4.7 million increase in amortisation of intangible assets such as software and new product development activities, for which amortisation is recognized over three years upon commercial deployment.

DMX SOfTwARE IS SUITABLE fOR BOTH CABLE AND IPTV OPERATORS

The management adopted a prudent stance on possible scenarios resultant from any fallout due to the global economic crisis, We decided to record a US$2.2 million full impairment loss for our available-for-sale investment in United Kingdomincorporated Complete TV Limited (“CTV”). CTV, in which we took a stake in 2007, encountered difficulties in its attempt to raise new capital to fund its operations and growth plans. To reflect the situation, we have also initiated a provision for a US$1.5 million advance made to CTV, which we originally intended to apply towards maintaining our stake in CTV at 19.9% as CTV raises extra capital from new investors. Taking the US$1.5 million into account, our total increase in allowances for other receivables was US$2.0 million. In addition, the Group has made provisions for US$0.9 million in allowances for trade receivables and US$0.5 million of stocks written off.

annual report 2008 17

CEO’S STATEMENT
• Breaking new frontiers in its pursuit of expanding market shares as strategic initiatives expedite penetration into new segments Digital Media successfully moved up the value chain in FY2008. From signing on Beijing Gehua, the sole cable TV operator in the capital city of Beijing in FY2007 to amongst other innovative contracts for “first-ever” projects, the Group secured four major cable TV operators for Inner Mongolia, Shaanxi, Hubei and Jiangsu provinces. China continued to be the largest revenue contributor at 70.8% with 4.4% y-o-y growth despite uncertain economic conditions during second half of FY2008. The Group’s market outside of China grew 13.6% y-o-y and accounted for 29.2% of group revenue. The growth was largely from telecom operators in Indonesia. The Group’s Indonesian subsidiary, PT Packet Systems Indonesia, was conferred the Gold Vendor Award (Big Vendor Category) by Indonesia’s largest full information and communications service and network provider, PT Telekomunikasi Indonesia. • Balance sheet remained strong through FY2008 in spite of the global financial crisis; Group remains in a net cash position moving into FY2009 Trade receivables were higher in FY2008 as collections were impacted by delays to project installations and acceptances in China, mainly brought about by the May 2008 Sichuan earthquake, Beijing Olympics and the restructuring of its telecom industry. US$7.3m of cash was generated from financing activities in 4Q2008; mainly from the rights issue in October 2008 that was strongly supported by DMX’s controlling and substantial shareholders. As at 31 December 2008, total assets increased to US$220.4 million. Despite the dilution from the rights issue, net asset value per ordinary share was 34.82 US cents compared to 37.51 US cents year-ago. Total borrowings amounted to US$11.5 million, while pledged bank deposits and cash and cash equivalents stood at US$8.6 million and US$15.1 million, respectively.

220 MILLION
AN EXPECTED HOUSEHOLDS IN CHINA TO GO DIGITAL By 2015

annual report 2008 19

CEO’S STATEMENT
Digital Media In the review year, the Group definitively established DMX as a leading contender within the lucrative but highly fragmented digital media industry in China. Apart from contributing to the core revenue base for FY2008, the new contracts further strengthened DMX’s compelling value-added proposition to prospective new customers. Our strategic positioning yielded good results. Revenue from Digital Media group, our core growth engine, grew 48.7% to US$53.1 million in FY2008 from US$35.7 million, while contribution to Group revenue increased to 30.8% from 22.1% in FY2007. Sales of Digital Media Solution segment jumped 39.6% y-o-y to US$39.5 million, while Multimedia Software segment, which provides backbone software and module-based applications to CATV and internet protocol TV (“IPTV”) operators, surged 83.2% to US$13.6 million. The success of our Digital Media business is rooted in our suite of proprietary world-class multimedia video software based on international open standard architecture, which allows for maximum hardware compatibility during integration. Our software capabilities, coupled with technical skills, have put us ahead of our local competitors in the provision and implementation of large-scale, cost-effective digital media solutions for CATV operators. FY2008 was a year of breakthrough for DMX as the Group further penetrated China’s provincial CATV digitisation market by leveraging on its superior technological platform. The Group won the largest video-on-demand (“VOD”) contract in China from Jiangsu Province CATV following the consolidation of 12 other city cable TV operators in Jiangsu Province to form Jiangsu CATV in April 2008. Jiangsu CATV became one of the largest cable TV operators in China with over 13 million subscribers. The VOD contract covers an initial 280,000 subscribers across the entire province and is an expansion of a VOD system that the Group implemented for Nanjing Broadcasting Group Co. Ltd, DMX’s customer since 2006. The adoption of the VOD platform implemented by DMX from a single city operator to the consolidated provincial level is testimony to the recognition and acceptance of our software and implementation capabilities. DMX was also chosen to implement the first provincial scale rollout of interactive digital TV solutions for Inner Mongolia in March 2008. Other new contract achievements include the provision of cost-effective CATV digitisation for Hubei Province CATV and the market-leading implementation of China’s largest “smartcard-less” digital CATV solution for Shaanxi Province. Beyond China DMX also won a milestone deal in Singapore to develop the world’s first Offshore IPTV Entertainment system for Singapore’s Keppel FELS, a global leader for jack-up oil rigs, floating production, storage and offloading vessels and submersibles. The project demonstrates DMX’s flexibility in both IPTV and CATV solutions; and our ability to provide for both large-scale and customised solutions.

CEO’S STATEMENT
DMX remains differentiated in the China market, offering fully customised solutions which are hardware agnostic. We work with many of the global market-leading suppliers and partners in the industry, allowing for optimal provision of solutions in terms of both performance and price to meet the complete spectrum of customers’ needs. As the Group evolves into an end-to-end media solutions and application solutions provider, potential and on-going customers will find greater assurance in DMX’s continuing relevance to their future business requirements and growth towards providing more value-added services. To expand this vision, in FY2008 the Group further invested US$10.8 million in enhancing its proprietary multi-media software and US$1.1 million in a joint venture to further strengthen its penetration within the digital media market.

Digitisation
is the future of

media

annual report 2008 21

Infrastructure Enabling Infrastructure Enabling recorded 4.9% lower revenues to US$119.6 million from US$125.8 million year-ago. Accordingly, its share of group revenue decreased to 69.2% from 77.9%. DMX’s traditional original core business of Infrastructure Solutions continued to account for the bulk of Group revenue at 63.4%, but generated 9.1% lower revenue in FY2008 to US$109.6 million from US$120.6 million. The strict commitment to being margin-selective in pursuing new projects in more maturing markets helped ensure decent margins were retained.

Initiatives to tap DMX’s traditional customer base generated a new source of recurring fee-based income under the Vantagebranded Managed Services business. Our complete suite of services includes offsite data replication service, infrastructure security solution and managed security services (“MSS”), which uncover trends, abnormal activities and cyber attacks through our powerful Vantage Security Operations Centre. This emerging segment saw 91.8% growth to US$10.0 million or 5.8% of Group revenue in its first full-year of operations, compared to US$5.2 million in FY2007. Managed Services quickly earned credibility and market acceptance, securing major contracts including one from MNC Anji-TNT Automotive Logistics Co, one of the biggest automotive logistics companies in China, to provide MSS for their enterprise network.

DMX’s MSS capabilities were strengthened, as it became a certified Qualys reseller, facilitating its provision of regular, highly accurate audit and diagnosis of network and server vulnerabilities with an immediate view of security positioning. We also received an accolade for our customised MSS implementation during the 2008 Beijing Olympics Games. The Group also inked a strategic regional partnership with Silicon Valley-based network and security solutions partner, A10 Networks, which appointed DMX’s wholly owned Malaysian subsidiary as its strategic channel partner to market its entire range of awardwinning and innovative products in three key IT markets, Malaysia, Singapore and Indonesia.

&

largerthan life

CEO’S STATEMENT
OUTLOOK Moving ahead, our forward business prospects are buoyed by the growing momentum in China’s digitisation of all broadcast signal transmissions. According to the 2008 figures from China’s State Administration for Radio, Film and Television (“SARFT”), nationwide CATV subscribers were estimated to have reached 163 million in 2008, up 6.5% year-on-year. Of this figure, the number of digital CATV television subscribers increased 67.6% to over 45 million. Concurrently the number of digital CATV paid programming subscribers increased 158.3% to 4.5 million The forecast for digital CATV subscribers is 125.7 million by 2012; rising to 165.5 million by 2015. These data confirmed that the digital TV wave is finally happening in China. DMX will be leveraging on its strong foothold in the CATV market secured over the last few years. Collectively, the CATV operators through which DMX has secured currently have more than 30 million out of the above mentioned 163 million cable TV subscribers. We look forward to working with these operators in their digitisation and provision of value-added services in the years to come. The strategic moves undertaken by the Digital Media group are aimed at positioning DMX to become an end-to-end media solution and services provider, building recurring revenue streams. The strong reference cases the Group is establishing will continue to drive strategic long-term business relationships with operators and allow for the extension of its range of services to include significant VOD content consumption. As for our Infrastructure Enabling group, we have similarly laid a foundation to evolve into a services provider, focusing on Managed Services to complement our traditional Infrastructure Solutions. IDC forecast that telecom operators and large corporations in the APEJ region will continue to invest in strategic projects, which in turn enable them to offer new innovative services and products to remain competitive. Spending in enterprise network is expected to grow 9.0% to US$10.3 billion in 2009. We kicked off FY2009 on a high note, announcing two collaborative MSS contracts with our existing Infrastructure Solutions customers, Anhui (China) Telecom and Inner Mongolia’s Zhenglian Information Technology Co. Ltd, which will accelerate our penetration into provincial markets in 2009. More and more businesses are managing with lower working capital budgets and reducing fixed costs through replacing permanent work force with more flexible options offered by outsourced service providers. We are optimistic that over the next few years Managed Services will see substantial growth opportunities, which will underpin our focus in developing more recurrent revenue streams. In conclusion, as we build upon our operational achievements in FY2008, we will continue to invest strategically in Digital Media and Managed Services to capitalize on unlocking their full market potential. Strategic collaborations to boost our domain technology base and market presence are in the pipeline. While we focus on leveraging on the opportunities in the year ahead, we remain alert to the challenges that the market may present; barring unforeseen circumstances, we look forward to remaining profitable in FY2009. Sincerely

Jismyl Teo Chief Executive Officer

annual report 2008 23

fREEDOM
Of MOBILITy
IN THE PALM Of yOUR HAND

DIRECTORS
EMMy wU

BOARD Of

JISMyL TEO CHOR kHIN

JIM CHEUNG CHUNG wAH

annual report 2008 25

fOO MENG TONG

MARk wANG yAT-yEE

THIAN NIE kHIAN

BOARD Of DIRECTORS
Emmy Wu Executive Chairman Emmy Wu has been serving as our Executive Chairman since June 2002. He is responsible for exercising control over the quality and timeliness of the flow of information between the board of Directors and the management of the Group. Mr. Wu began his career at the Mitsubishi-Ryoden Group in 1982 where he was senior accounts executive. He left the Mitsubishi-Ryoden Group in 1986 to join Data General, initially as account manager, and later as PRC sales and marketing manager. He was subsequently promoted to regional sales and marketing manager for the PRC and Hong Kong. Mr. Wu left Data General in 1991 and joined the Datacraft Asia group in a series of positions, including general manager and managing director for Datacraft China Limited, regional director for North Asia of Datacraft Asia Limited, sales director for Datacraft Asia Limited and adviser to Datacraft Japan Limited. Mr. Wu has more than 20 years experience of doing business in China. Jismyl Teo Chor Khin Chief Executive Officer, Executive Director Jismyl Teo Chor Khin was promoted to Chief Executive Officer with effect from 8 September 2006. Ms Teo is responsible for the strategic directions, management and financial well-being of our Group. Prior to the promotion, Ms Teo was the Chief Financial Officer, who is responsible for all aspects of financial planning, financial budgeting and control, logistics, human resources, administration and corporate secretarial matters for the Group. She joined our Group in January 2001 and was appointed as our Director in December 2001. Ms. Teo worked for Ernst & Whinney as an assistant accountant from January 1984 to June 1985. She joined the Datacraft Asia group in June 1985 as an accountant, and was promoted to finance and administration manager where she stayed until October 1990. In November 1990, she joined Chin, Lim & Co Pty Ltd as an accountant and left in June 1991 to work for Frigstag Offshore Pte Ltd, Singapore as an accounts and administration manager from January 1992 to November 1992. Ms. Teo rejoined the Datacraft Asia group in November 1992 as finance and administration manager and continued to work for them in a series of positions, including regional finance manager, joint company secretary and regional director of operations. She left the Datacraft Asiagroup in January 2001 to join the TVH group in January 2001 and was assigned the Chief Financial Officer of our Group. Ms. Teo is a member of the Institute of Certified Public Accountants of Singapore and holds a post-graduate Diploma in Business Administration and Bachelor of Business Studies from Massey University of New Zealand.

annual report 2008 27

Foo Meng Tong Independent Non-Executive Director Foo Meng Tong was appointed as an Independent Non-Executive Director of our Company in November 2002. Mr. Foo worked in the Economic Development Board (EDB) for a total of 26 years until April 1993. His last appointment at the EDB was as the director of its Industry Development Division and the general manager of EDB Investments Pte Ltd. He was also the administrator of the Skills Development Fund from 1980 to 1986. He has served overseas as the regional director of EDB’s offices in Europe (based in Paris) and North America (based in New York). From 1994 to 1997, Mr. Foo was Singapore’s Ambassador to France with concurrent accreditations to Spain, Portugal, Switzerland (1994 to 1996) and Israel (1996 to 1997). Mr. Foo was awarded the Public Administration Medal (Silver) in 1986 and the French Government conferred him as a Chevalier in the Order of the Palmes Academiques in 1988. Mr. Foo holds a Professional Diploma in Electrical Engineering from the Singapore Polytechnic and has attended the Stanford Executive Program at Stanford University, USA in 1985. He is a Fellow of the Institution of Engineers, Singapore.

Mark Wang Yat-Yee Independent Non-Executive Director Mark Wang Yat-Yee was appointed as an Independent Non-Executive Director to our Company in November 2002. Mr. Wang is currently the Group Vice President of Enterprise Solutions Group, Asia Pacific for Infor Global Solutions, a private application software company. Between 1974 and 1977, Mr. Wang worked as a technical manager for the Illinois Department of Transportation. He subsequently joined Xerox Corporation as their finance manager from 1977 to 1984. In 1984, he joined Computervision Corporation where he served in various positions, including business planning manager, sales manager (based in Shanghai) and regional sales manager for ASEAN. From 1988 to 1992, Mr. Wang served as managing director for Central and Southeast Asia of Oracle Corporation. He joined Informix Corporation in 1992 as their vice president and general manager for the Asia Pacific region where he served until 1994. Mr. Wang subsequently worked at Digital Equipment Corporation from 1994 to 1995 as the vice president, systems business unit, for the Asia Pacific region. From 1995 to 1998, he was senior vice president and general manager for the Asia Pacific region of Seer Technologies Corporation. He joined Candle Corporation in 1998 as vice president and general manager of the Asia Pacific Region and left in 2000. Mr. Wang was the Senior Vice President and General Manager for Sybase Corporation in Asia Pacific region from 2000 to 2003. From 2003 to 2006, Mr Wang was a private investor in various businesses in Singapore and China. Mr. Wang graduated with a degree in Applied Mathematics from the Massachusetts Institute of Technology in 1972 and also holds both an M.A in Economics and an MBA from the University of Chicago, United States.

BOARD Of DIRECTORS
Thian Nie Khian Non-Independent Non-Executive Director Thian Nie Khian was appointed as Non-Independent Non-Executive Director in June 2007. Mr Thian is the Chief Technology Officer of Venture Corporation Limited (“Venture”) and was appointed to the Board of DMX after Venture’s investment in DMX. Mr Thian has over thirty years experience in product development and operations management. He joined Venture in November 1994 to establish the Original Design and Manufacturing (ODM) business for the company. Prior to that, he worked in Plessey Telecommunications Limited in the UK as a R&D engineer and subsequently joined Hewlett-Packard where he held various senior management positions in R&D and operations working in Malaysia, Singapore and the US. He holds a Bachelor of Engineering (Honours) in Electrical Engineering from the University of Liverpool, U.K. Jim Cheung Chung Wah Non-Independent Non-Executive Director Jim Cheung Chung Wah has been our Non-Independent Non-Executive Director since October 2002. Mr. Cheung has more than 20 years of sales and management experience in Hong Kong and China. He began his career as a sale executive at Oriental Data System Co. Ltd. in 1980. In 1983, he joined Wang Computer Corporation as an account manager before serving Concurrent Computer Corporation in 1985. In 1987, Mr. Cheung entered the textile and garment market by working for Gerber Garment Technology Co. Ltd., a technology specialist in the textile and garment industry from the US, which lay the path for his current position at Global Gartech Services Co. (China) Ltd. Mr. Cheung holds a Bachelor degree in Mathematics from the University of Waterloo, Ontario, Canada.

annual report 2008 29

DIRECTORSHIPS
The list of present directorships of each Director including those held within the Group:Emmy Wu Group Companies BEE MediaSoft Limited DMX (BVI) Limited DMX Technologies (Hong Kong) Limited DMX Technologies Sdn Bhd DMX Technologies (S’pore) Pte Ltd Equator One Pte Limited Lotun Technology Limited Packet Systems Pte Limited Other Companies Brilliant Rainbow Investment Limited Brilliant Regal Investment Limited Fast On Limited Group Equity International Limited Hubbard Management Limited Sure Bright Investment Limited Jismyl Teo Chor Khin Group Companies BEE MediaSoft Limited DMX (BVI) Limited DMX Technologies (Hong Kong) Limited DMX Technologies Sdn Bhd DMX Technologies (S’pore) Pte Ltd DMX Technologies (China) Limited DMX Technologies (Macao Commercial Offshore) Co Limited DMX Technologies Korea Co., Ltd. Equator One Pte Limited Lotun Technology Limited Nettasking Technology Limited Packet Systems Pte Ltd Packet Systems (Malaysia) Sdn Bhd PT Packet Systems Indonesia Other Companies Eagle One Consultants Limited Group Equity International Limited Jim Cheung Chung Wah Other Companies Fast Worth Management Limited Thian Nie Khian Other Companies Advanced Products Corporation Pte Ltd. Innovative Trek Technology Pte Ltd. Venture Design Services, Inc. Venture Electronics International, Inc. Venture Electronics Spain S.L. VipColor Technologies Pte Ltd. VipColor Technologies USA, Inc. VM Services, Inc VS Electronics Pte Limited Foo Meng Tong Other Companies Actatek Pte Ltd. CarrierNet Global Ltd (formerly known as ArianeCorp Limited) Eastgate Technology Ltd Fischer Tech Ltd Whiterock Medical Company Pte Ltd Mark Wang Yat-Yee Other Companies Net-Itech Asia Pacific Pte Ltd Sonata Services Co. Limited Straw Technology Asia Pacific Pte Ltd Trek Innovations Pte Limited

kEy MANAGEMENT
Skip Tang Chief Financial Officer Mr. Skip Tang was promoted to the position of Chief Financial Officer on 26 June 2008. He joined DMX in July 2001 as Business Management Manager and was part of the corporate team that led DMX’s IPO on the Singapore Exchange in 2002. Prior to his CFO appointment, he was the Business Operations Director, responsible for Treasury, Operational and Human Resources matters of the Group; and logistics and sales contract advisory to China offices. Mr. Tang has over 20 years of finance advisory and human resources administration in various technology companies including World Trade Foundation Limited, a computer system integrator distributing, DEC, HP and Hitachi Systems. He holds a degree in Business Administration from the Tamkang University in Taiwan. Fu Yan Yan Regional Director, CEO of China Mr. Fu Yan Yan, Regional Director and CEO of China, is responsible for the business operations in China. Mr. Fu has over 25 years experience in setting up and managing business in China. Mr. Fu started his career in 1975 at the Ministry of Electronic Industry of China and participated in the strategic development and project management of communications and computing products in the country. He founded Wide Trade Foundation Ltd in 1982, a company in Hong Kong in the distribution and installation of computer and office automation systems to government agencies in China. He joined Datacraft China Ltd as General Manager from 1996 to 2003. He has a degree in Electronics Engineering (majoring in wireless communications) from the University of Electronic Science and Technology of China. Michael Mak Tak Ming Regional Director, North Asia Mr. Michael Mak Tak Ming joined us in June 2001 and is our Regional Director for North Asia; and our General Manager for Hong Kong. He is responsible for all aspects of the company’s business in the assigned territory. Mr. Mak began his career at Epro System in 1984 as an account manager. He subsequently joined Digital Equipment Corporation in 1987 as a sales account manager.Between 1990 and 2001, he served the Datacraft Asia group in various positions including country sales manager, assistant general manager and general manager. He holds a Master degree in Operational Research, and a Bachelor of Science degree in Computer Science and Mathematics from the University of London. Tang Yik Hong Regional Director, South Asia Mr. Tang Yik Hong joined our company in January 2001 and is our Regional Director for South Asia. He is responsible for the company’s business in the South Asia region, which includes Malaysia, Singapore and Thailand. From April 1987 to March 1993, Mr. Tang was the assistant general manager of Dataprep (M) Sdn Bhd. Between 1993 and 2001, he served the Datacraft Asia group in various positions including regional director of the Central Asia region (comprising Malaysia and the Philippines). Mr. Tang is a member of the Chartered Institute of Marketing of the United Kingdom.

annual report 2008 31

Lee Mun Young Regional Director of the group Mr. Lee Mun Young joined us in July 2005 and is the Regional Director of DMX Technologies Group. He is responsible for the management of Packet-Systems as a Chairman, one of the subsidiaries of DMX Technologies Group. After his military services as an Officer, Mr. Lee joined Daewoo Corporation in July 1987. Between April 1991 and December 1998, he served Dacom Corporation in various capacity including international Business, Vice President of KOKOTEL (a joint-venture with a local telephone service provider in Russia) and business planning. He subsequently joined Datacraft in 1999 as CEO of Datacraft Korea and Regional Director of Datacraft Asia. In March 2003, Mr. Lee founded VNO Solution and served as the Chairman of the company. Mr. Lee then founded Packet Systems and served as the Chairman of the company prior to joining DMX. Mr. Lee holds a degree of Electrical Engineering from Sungkyunkwa University and a master degree from Graduate School of Foreign Trade and Policy Sungkyunkwan University. Samson Cheng Regional Director, Digital Media Solution Mr. Samson Cheng is the Regional Director of Digital Media Solution and CEO of BEE MediaSoft Limited, a wholly owned subsidiary of DMX. He is responsible for both the business development activities of digital solutions to CATV operators, Telcos and leading the overall strategy and executive management of BEE MediaSoft Limited. Mr. Cheng joined DMX in 2002 and prior to his CEO appointment in January 2008, he was the Vice President, Product Management, responsible for the product development in BEE MediaSoft. Mr. Cheng has over 15 years of IT experience working in various technology companies including Open Environment, a US-based technology firm on distributed system middleware and LBMSD in the UK, specialising in process management and information engineering. He holds a Bachelor and Masters Degree in Computer Science from City University of Hong Kong.

Ashley Yau Regional Director, Infrastructure Enabling Mr. Ashley Yau joined DMX in 2001 as the Field Marketing Manager responsible for managing a pre-sales team of 20 network professionals in China to ensure technical competency and solutions formulation for infrastructure projects. He was then promoted to the position of Regional Director Infrastructure Solutions in 2007. Prior to joining DMX, he was the Product Manager/Network Consultant of Datacraft China Limited for 4 years; providing assessment, design and consultation services to large telecom operators in China. Mr. Yau has over 14 years experience in computer and communication technologies and holds a First Class Honours Degree in Engineering from the University of Hong Kong. John Leung GM, New Media Content Mr. John Leung joined DMX as General Manager for the New Media Content Group in September 2007. Mr. Leung’s primary role is to spearhead the development of strategies and business plans on New Media Content products and offerings, including execution of investments, acquisitions, creation of business partnerships and original content. Mr. Leung was also appointed Director of Marketing for DMX in January 2008, responsible for marketing the company’s increasing strategic expansion in the Digital Media market. Mr. Leung has comprehensive knowledge of media, music, sport and interactive content industry in Asia Pacific; having over 13 years experience in advertising, marketing, business and corporate development. John started his career in advertising with M&C Saatchi and later moved into the entertainment industry when he joined MTV Networks Asia as Director of Marketing. Mr. Leung holds a BSc (Hons) degree from Manchester University and is a postgraduate in marketing management studies.

REGIONAL COVERAGE

Korea

China

Macau

Hong Kong

Malaysia Singapore

Indonesia

annual report 2008 33

BUSINESS SEGMENTS

Group

Digital Media

Infrastructure Enabling

Segments/Solutions

Digital Media Solution

Multi Media Software

New Media Content

Infrastructure Solution

Managed Services

Customers

CATV Telco Broadcasters Mobile Portal

Telco Enterprises Mobile

fINANCIAL HIGHLIGHTS
Turnover (US$M) 161 129 26 162 173 Cash And Bank Deposits (US$M) 50 45

24

2005 2006 2007 2008 Gross Profit (US$M) 43 36 46 40

2005 2006 2007 2008 Shareholder’s Equity (US$M) 165 173 185

102

2005 2006 2007 2008 Profit After Tax (US$M) 18 15

2005 2006 2007 2008 Earnings Per Share (US Cents) 4.04 4.05

9

1.99 4

0.68

2005 2006 2007 2008

2005 2006 2007 2008

annual report 2008 35

fINANCIAL HIGHLIGHTS

Revenue
by Business Segments

US$13.6M US$39.5M

US$10.0M 5.8% US$109.6M

US$7.4M US$28.3M 17.5%

US$5.2M 3.2% 4.6% US$120.6M

7.9%

22.9%

FY2008
63.4%

FY2007
74.7%

Digital Media Solution Multi-Media Software Infrastructure Solution Managed Services

Total Revenue US$172.7M

Total Revenue US$161.6M

Revenue

by Geographical Region

US$50.5M 29.2%

US$122.2M

US$44.4M 27.5%

US$117.2M

FY2008
70.8%

FY2007
72.5%

China Outside China

Total Revenue US$172.7M

Total Revenue US$161.6M

CORPORATE INfORMATION
BOARD OF DIRECTORS Emmy Wu (Executive Chairman) Jismyl Teo Chor Khin (Chief Executive Officer, Executive Director) Jim Cheung Chung Wah (Non-Independent Non-Executive Director) Thian Nie Khian (Non-Independent Non-Executive Director) Foo Meng Tong (Independent Non-Executive Director) Mark Wang Yat-Yee (Independent Non-Executive Director) AUDIT COMMITTEE Foo Meng Tong (Chairman) Mark Wang Yat-Yee Jim Cheung Chung Wah Thian Nie Khian Emmy Wu REMUNERATION COMMITTEE Mark Wang Yat-Yee (Chairman) Foo Meng Tong Jim Cheung Chung Wah Thian Nie Khian NOMINATING COMMITTEE Foo Meng Tong (Chairman) Mark Wang Yat-Yee Emmy Wu COMPANY SECRETARY Jismyl Teo Chor Khin DEPUTY SECRETARY Sheryn Tan Ping Ping REGISTERED OFFICE Canon’s Court, 22 Victoria Street Hamilton HM12 Bermuda Telephone: (441) 295 2244 Facsimile: (441) 292 8666 BERMUDA SHARE REGISTRAR Reid Management Limited Argyle House 41A Cedar Avenue Hamilton HM12 Bermuda SINGAPORE SHARE TRANSFER AGENT Boardroom Corporate & Advisory Services Pte Ltd 3 Church Street #08-01 Samsung Hub Singapore 049483 Telephone: (65) 6536 5355 Facsimile: (65) 6536 1360 AUDITORS Deloitte & Touche LLP Public Accountant and Certified Public Accountants 6 Shenton Way #32-00 DBS Building Tower Two Singapore 068809 Audit Partner: Tsia Chee Wah Date of Appointment: 08 January 2009 PRINCIPAL BANKERS The Hongkong and Shanghai Banking Corporation Limited Bank of China (HK) Ltd Hang Seng Bank Ltd

annual report 2008 37

CORPORATE GOVERNANCE
DMX Technologies Group Limited (the “Company”) continue to be committed to maintaining a high standard of corporate governance within the Group and has put in place self-regulatory corporate practices to protect the interests of its shareholders and enhance long-term shareholder value. The Board of Directors (the “Board”) is pleased to report compliance of the Company with the benchmark set by the Code of Corporate Governance 2005 (the “Code”), except where otherwise stated. BOARD MATTERS Principle 1: Board’s Conduct of its Affairs Apart from its statutory duties and responsibilities, the Board oversees the management and affairs of the Company. It focuses on strategies and policies, with particular attention paid to growth and financial performance. It delegates the formulation of business policies and day-to-day management to the Executive Directors. The principal functions of the Board are: (a) (b) (c) (d) to approve the Group’s key business strategies and financial objectives; to approve the annual budget, major investments and divestments, and funding proposals; to oversee the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance; and to assume responsibility for corporate governance.

The Board discharges its responsibilities either directly or indirectly through various committees comprising members of the Board. During the financial year, the Directors received updates on regulatory changes to the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”) and changes to the Accounting Standards. The Directors also received updates on the business of the Group through regular presentations and meetings. Every Executive Director receives appropriate training to develop individual skills in order to discharge his or her duties. The Group also provides extensive information about its history, mission and values to the Directors. All newly appointed directors will be given an orientation on the Group’s business strategies and operations. The Board currently holds at least four scheduled meetings each year to review and deliberate on the key activities and business strategies of the Group, including reviewing and approving internal guidelines on materiality of transactions, acquisitions, financial performance, and to endorse the release of the quarterly and annual financial results. Where necessary, additional meetings may be held to address significant transactions or issues. The Company’s Bye-laws permit a Board meeting to be conducted by way of tele-conference and video-conference.

38 annual report 2008

CORPORATE GOVERNANCE
During the financial year, the number of meetings held and the attendance of each Director at every Board and other committees meetings are as follows:Board
No. of meetings held No. of meetings attended

Name

Audit Committee
No. of meetings held No. of meetings attended

Nominating Committee
No. of meetings held No. of meetings attended

Remuneration Committee
No. of meetings held No. of meetings attended

Mr Emmy Wu (Executive Chairman) Ms Jismyl Teo Chor Khin (Chief Executive Officer, Executive Director) Mr Jim Cheung Chung Wah (Non-Independent Non-Executive Director) Mr Thian Nie Khian (Non-Independent Non-Executive Director) Mr Foo Meng Tong (Independent Non-Executive Director) Mr Mark Wang Yat-Yee (Independent Non-Executive Director)

5 5 5 5 5 4

5 5 5 5 5 5

4 4 4 4 4

4 4 4 4 4

2 2 2

2 2 2

2 2* 2 2

2 1* 2 2

Note: * Mr Thian Nie Khian has been appointed as member of Remuneration Committee with effect from 29 February 2008.

Principle 2: Board Composition and Balance The Company believes that there should be a strong and independent element in the Board to exercise objective judgment. The Board of 6 Directors includes 2 Independent and 2 Non-Executive Directors. The Directors appointed are qualified professionals who possess a diverse range of expertise to provide a balanced view within the Board. Key information regarding the Directors’ academic and professional qualifications and other appointments is set out on pages 26 to 28 of the Annual Report. The independence of each Director is reviewed by the Nominating Committee (“NC”). The NC adopts the definition of what constitutes an Independent Director from the Code. The NC is of the view that Mr Foo Meng Tong and Mr Mark Wang Yat-Yee are independent. The Board considers that the present Board size facilitates effective decision making and is appropriate for the nature and scope of the Group’s operations. Principle 3: Chairman and Chief Executive Officer The role of the Chairman and Chief Executive Officer is separate. The Chairman of the Company is Mr Emmy Wu. Mr Wu is an Executive Director. Besides giving guidance on the corporate and business direction of the Group, the role of the Chairman includes scheduling and chairing of Board meetings, and controlling of the quality, quantity and timeliness of information supplied to the Board. Ms Jismyl Teo, the Chief Executive Officer, sets the business strategies and directions of the Group and manages the business operations of the Group with the Chief Financial Officer and other Key Executive Officers of the Company.

annual report 2008 39

CORPORATE GOVERNANCE
Principle 6: Access to Information To assist the Board in fulfilling its responsibilities, the Board is provided with management reports containing complete, adequate and timely information, and papers containing relevant background or explanatory information required to support the decision-making process. The Board is also provided with updates on the relevant new laws, regulations and changing commercial risks in the Group’s operating environment through regular presentations and meetings. Orientation to the Group’s business strategies and operations is conducted as and when required. All Directors have separate and independent access to senior management and to the Company Secretaries. The Company Secretaries administer, attend and prepare minutes of Board meetings, and assist the Chairman in ensuring that Board procedures are followed and reviewed so that the Board functions effectively, and compliance with the Company’s Bye-laws and relevant rules and regulations, including requirements of the Companies Act and the Listing Manual of SGX-ST. In the event that the Directors, whether as a group or individually, require independent professional advice in the furtherance of their duties, the cost of such professional advice will be borne by the Company. BOARD COMMITTEE Nominating Committee Principle 4: Board Membership The NC comprises Mr Foo Meng Tong as Chairman and Mr Mark Wang Yat-Yee and Mr Emmy Wu as members. The majority of whom are independent. The NC is responsible for :(a) (b) (c) reviewing and making recommendations to the Board on all candidates nominated for appointment to the Board; reviewing all candidates nominated for appointment as senior management staff; reviewing and recommending to the Board on an annual basis, the Board structure, size and composition, taking into account the balance between Executive and Non-Executive, Independent and Non-Independent Directors and having regard at all times to the principles of corporate governance and the Code; procuring that at least one-third of the Board shall comprise Independent Directors; making recommendations to the Board on the continuation of the services of any Director who has reached the age of 70; identifying and making recommendations to the Board as to which Directors are to retire by rotation and to be put forward for re-election at each Annual General Meeting (“AGM”) of the Company, having regard to the Directors’ contribution and performance, including Independent Directors; determining whether a Director is independent (taking into account the circumstances set out in the Code and other salient factors); and proposing a set of objective performance criteria to the Board for approval and implementation, to evaluate the effectiveness of the Board as a whole and the contribution of each Director to the effectiveness of the Board.

(d) (e) (f)

(g) (h)

40 annual report 2008

CORPORATE GOVERNANCE
All Directors are subject to the provisions of the Company’s Bye-laws whereby one-third of the Directors are required to retire and subject themselves to re-election by shareholders at every AGM. A newly-appointed Director will have to submit himself for re-election at the AGM immediately following his appointment and, thereafter, be subjected to the one-third-rotation rule. The NC recommended to the Board that Mr Jim Cheung Chung Wah and Mr Foo Meng Tong be nominated for re-appointment at the forthcoming AGM. In making the recommendation, the NC had considered the Directors’ overall contribution and performance. The NC has reviewed the composition of the Audit Committee (“AC”) and is satisfied that it is adequate and appropriate for the Company notwithstanding its deviation from the Code. Principle 5: Board Performance The Group has implemented the Board-approved evaluation process and performance criteria to assess the performance of the Board. In drawing up the objective performance criteria for such evaluation and determination, the NC considered a number of factors, including achieving financial targets, performance of the Board, performance of individual Director’s vis-à-vis attendance and contributions during Board meetings. The NC assessed the Board’s performance as a whole in FY2008. The assessment process involves and includes input from the Board members, applying the performance criteria recommended by the NC and approved by the Board. The Directors’ input are collated and reviewed by the Chairman of the NC, who presents a summary of the overall assessment to the NC for review. Areas where the Board’s performance and effectiveness could be enhanced and recommendations for improvement are then submitted to the Board for discussion and for implementation. Remuneration Committee (“RC”) Principle 7: Procedures for Developing Remuneration Policies The RC comprises Mr Mark Wang Yat-Yee as Chairman and Mr Foo Meng Tong, Mr Jim Cheung Chung Wah and Mr Thian Nie Khian as members. All these Directors are non-executive or independent. The RC is responsible for :(a) (b) (c) (d) (e) recommending to the Board a framework of remuneration for the Board and the key executives of the Group covering all aspects of remuneration such as Director’s fees, salaries, allowances, bonuses, options and benefits-in-kind; proposing to the Board, appropriate and meaningful measures for assessing the performance of the Executive Directors; determining the specific remuneration package for each Executive Director; considering the eligibility of Directors for benefits under long-term incentive schemes; and considering and recommending to the Board the disclosure of details of the Company’s remuneration policy, level and mix of remuneration and procedure for setting remuneration and details of the specific remuneration packages of the Directors and key executives of the Company to those required by law or by the Code.

The members of the RC do not participate in any decisions concerning their own remuneration.

annual report 2008 41

CORPORATE GOVERNANCE
Principle 8 and 9 : Level and Mix of Remuneration and Disclosure on Remuneration The Company sets remuneration packages to ensure that it is competitive and sufficient to attract, retain and motivate Directors and senior management of the required experience and expertise to run the Group successfully. The following table shows a breakdown of the remuneration of Directors and eight key executives for 2008.
Performance Bonus
%

Remuneration Bands

Salary %

Directors’ Fees
%

Others
%

Total Compensation
%

Director Below S$750,000 Emmy Wu Director Below S$500,000 Jismyl Teo Chor Khin Director Below S$250,000 Foo Meng Tong Mark Wang Yat-Yee Key Executives Below S$250,000 Skip Tang Fu Yan Yan Michael Mak Tak Ming Tang Yik Hong Lee Mun Young Samson Cheng
Ashley Yau

100

100

100

100

100 100

100 100

100 100 100 100 100 100 100 100

100 100 100 100 100 100 100 100

John Leung

Save for Mr Jim Cheung Chung Wah and Mr Thian Nie Khian, who are not compensated in any form, the remuneration of the Independent Non-Executive Directors is in the form of a fixed fee. The remuneration of the Directors will be subject to shareholders’ approval at the AGM. The two Executive Directors of the Company, Mr Emmy Wu and Ms Jismyl Teo, have entered into separate service agreements with the Company. The service agreements cover the terms of employment, specifically salaries and bonuses and are renewed on a yearly basis. The Company does not have any employees who are immediate family members of a Director or the Chief Executive Officer, whose remuneration exceeded S$150,000 during the financial year ended 31 December 2008. Share options are offered to employees as a part of long-term incentive scheme to attract and retain the relevant persons to support the growth of the Company. During the year, share options were granted to Directors and employees of the Company. Further information on the share option scheme can be found on pages 94 to 95 of the Annual Report.

42 annual report 2008

CORPORATE GOVERNANCE
Principle 11: Audit Committee The AC comprises Mr Foo Meng Tong as Chairman, Mr Mark Wang Yat-Yee, Mr Emmy Wu, Mr Jim Cheung Chung Wah and Mr Thian Nie Khian as members, the majority of whom are non-executive and Chairman is independent. The AC is responsible for :a) b) c) d) e) f) g) reviewing with external auditors the audit plan, and results of the internal auditors’ examination and evaluation of the system of internal accounting controls; reviewing the Group’s financial results and the announcements before submission to the Board for approval; reviewing the assistance given by management to external auditors; considering and recommending the appointment/re-appointment of the external auditors; reviewing the internal audit programme; if any reviewing interested person transactions; and performing other functions as required by law or the Code.

During the financial year, the AC has met four times, two of which were with external auditors to discuss and review the audit plan, the audit report and to evaluate the system of internal controls. The AC has been given full access to and obtained the co-operation of the Company’s management. The AC has full discretion to invite any Director or key executive to attend its meetings. The AC has reasonable resources to enable it to discharge its functions properly. The AC has met with the external auditors without the presence of the management. The AC also met with the external auditors to discuss the results of their examinations and their evaluations of the systems of internal accounting controls. The AC has reviewed the volume of non-audit services to the Group by the external auditors, and being satisfied that nature and extent of such services will not prejudice the independence and objectivity of the external auditors, is pleased to recommend their re-appointment as auditors of the Company at the forthcoming Annual General Meeting. The Group has appointed different auditors for certain overseas subsidiaries. The Board and the AC are satisfied that the appointment would not compromise the standard and effectiveness of the audit of the Group. The Company considers the current composition of the AC adequate and appropriate given the nature and size of the Company’s operation, notwithstanding its deviation from the Code.

annual report 2008 43

CORPORATE GOVERNANCE
Principle 12: Internal Controls The Group’s internal controls and systems are designed to provide reasonable, but not absolute, assurance as to the integrity and reliability of the financial information and to safeguard and maintain the accountability of the assets. The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Group’s management and that was in place throughout the year and up to the date of this report, is adequate to meet the needs of the Group in its current business environment. The Company has established a whistle blowing policy to enable persons employed by the Group a channel to report any suspicions of non-compliance with regulations, policies and fraud, etc, to the appropriate authority for resolution, without any prejudicial implications for these employees. The AC will be vested with the power and authority to receive, investigate and enforce appropriate action when any such non-compliance matter is brought to its attention. Principle 13: Internal Audit The internal audit function of the Company is outsourced to Grant Thornton Consulting Sdn Bhd for FY2008. The AC has reviewed the internal audit programme, the scope and results of internal audit procedures. The AC is satisfied that the internal audit is adequately resourced and has appropriate standing within the Group. COMMUNICATION WITH SHAREHOLDERS Principle 10: Accountability The Board provides the shareholders with a detailed and balanced explanation and analysis of the Company’s performance, position and prospects on a quarterly basis. The management provides the Board with appropriately detailed management accounts of the Group’s performance, position and prospects on a quarterly basis. Principles 14 and 15 : Communications with Shareholders and Greater Shareholder Participation The Company does not practise selective disclosure. Information on any new initiatives is disseminated via SGXNET, news releases and the Company’s website. Price-sensitive information is publicly released on an immediate basis where required under the Listing Manual. Where an immediate announcement is not possible, the announcement is made as soon as possible to ensure that shareholders and the public have a fair access to the information. The AGM of the Company is a principal forum for dialogue and interaction with all shareholders. All shareholders will receive the Annual Report and the notice of AGM. At the AGM, shareholders will be given the opportunity to voice their views and to direct questions regarding the Group to the Directors including the chairpersons of each of the Board committees. The external auditors are also present to assist the Directors in addressing any relevant queries from the shareholders. The Company ensures that there are separate resolutions at general meetings on each distinct issue. The Company’s Bye-laws allow a member of the Company to appoint one or two proxies to attend and vote at general meetings.

44 annual report 2008

CORPORATE GOVERNANCE
RISK MANAGEMENT (Listing Manual Rule 1207(4)(b)(iv)) The Group is continually reviewing and improving the business and operational activities to take into account the risk management perspective. This includes reviewing management and manpower resources, updating work flows, processes and procedures to meet the current and future market conditions. The Group has also considered the various financial risks and management, details of which are found on pages 73 to 79 of the Annual Report. SECURITIES TRANSACTIONS (Listing Manual Rule 710(18)) The Company has put in place an internal code on dealings in securities by Directors and officers of the Group. Directors, management and officers of the Group who have access to price-sensitive, financial or confidential information are not permitted to deal in the Company’s shares during the periods commencing two weeks before announcement of the Group’s quarterly results or one month before the announcement of the Group’s yearly results and ending on the date of announcements of such results, or when they are in possession of unpublished price-sensitive information on the Group. To provide further guidance to employees on dealing in the Company’s shares, the Company has adopted a code of conduct on transactions in the Company’s shares. The code of conduct was modeled after the best practices on dealings in securities of the SGX-ST with some modifications. MATERIAL CONTRACTS (Listing Manual Rule 1207(8)) Save for the service agreements between the Executive Directors and the Company, there were no material contracts of the Company or its subsidiaries involving the interest of any Director or controlling shareholders subsisting as at the financial year ended 31 December 2008. INTERESTED PARTY TRANSACTIONS (Listing Manual Rule 907) The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that the transactions are on an arm’s length basis. The Group confirms that there were no interested party transactions during the financial year under review. USE OF PLACEMENT PROCEEDS The Company completed a rights issue of 70,450,082 new ordinary shares of US$0.05 each on 22 October 2008. The total net proceeds of S$10.2 million from the rights issue were used for the following purposes : (a) an aggregate amount of S$2.9 million were utilized for continuous development of multi-media software;

annual report 2008 45

FINANCIAL CONTENTs

CONTENTs
46 51 52 54 55 57 59 Report of the Directors Independent Auditor’s Report Balance Sheets Consolidated Profit & Loss Statement Statements of Changes in Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements 104 Statement of Directors 105 Statistics of Shareholdings 107 Notice of Annual General Meeting

46 annual report 2008

REPORT OF ThE dIRECTORs
The directors present their report together with the audited consolidated financial statements of the Group and balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008. 1. DIRECTORS The directors of the Company in office at the date of this report are: Emmy Wu Foo Meng Tong Jim Cheung Chung Wah Jismyl Teo Chor Khin Mark Wang Yat-Yee Thian Nie Khian 2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate, except for the options mentioned in paragraph 5 of the Report of the Directors. 3. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES The directors of the Company holding office at the end of the financial year had no interests in the share capital and debentures of the Company and related corporations as recorded in the register of directors’ shareholdings kept by the Company under section 164 of the Singapore Companies Act except as follows:
Shareholdings registered in name of the director At the beginning of the year At the end of the year Shareholdings in which directors are deemed to have an interest At the beginning of the year At the end of the year

The Company Ordinary share of US$0.05 each Emmy Wu Jismyl Teo Chor Khin Jim Cheung Chung Wah 100,000 100,000 1,125,000 1,875,000 28,855,765 36,778,645 30,267,295 43,283,647 55,167,967 30,267,295

The directors’ interests in shares of the Company as at 21 January 2009 were the same as those at the end of the financial year.

annual report 2008 47

REPORT OF ThE dIRECTORs
4. DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for salaries, bonuses and other benefits as disclosed in the consolidated financial statements. 5. SHARE OPTIONS (a) Options to take up unissued shares On 12 November 2002, the Company adopted the DMX Employee Share Option Scheme (the “Scheme”) to grant share options to eligible employees, including the executive directors and non-executive directors of the Company and its subsidiaries. The options under the Scheme grant the right to the holder to subscribe for new ordinary shares of the Company at a discount to market price of the share (subject to a maximum limit of 20%) or at a price equal to the average of the closing prices of the shares on the SGX-ST on the five trading days immediately preceding the date of the grant of the option. The maximum number of shares in respect of which options may be granted under the Scheme shall not exceed 15% of the issued share capital of the Company on the date preceding the date of the relevant grant. Each option grants the holder the right to subscribe for one ordinary share of US$0.05 each in the Company. The options may be exercised in full or in part thereof. The holders do not have the right to participate by virtue of the options in any share issue of the other companies in the Group. Options granted are cancelled when the holder is no longer a full-time employee of the Company or any corporations in the Group subject to certain exceptions at the discretion of the Remuneration Committee. The above share option scheme is administered by a Remuneration Committee which has been authorised to determine the terms and conditions of the grant of the options. The members of Remuneration Committee are: Mark Wang Yat-Yee Foo Meng Tong Jim Cheung Chung Wah Thian Nie Khian (Chairman) (Appointed on 29 February 2008)

48 annual report 2008

REPORT OF ThE dIRECTORs
5. SHARE OPTIONS - continued (b) Unissued shares under option and options exercised During the financial year, the following options in respect of unissued ordinary shares in the Company were granted, exercised and cancelled:
Balance at beginning of year Balance at end of year Exercise price per share (Note)

Date of grant

Granted

Cancelled

Adjustment (Note)

Exercise period

3 October 2003

3,007,000

-

-

320,677

3,327,677

S$0.6778

2 October 2004 to 26 May 2013 3 May 2008 to 26 April 2016 24 April 2009 to 25 April 2018 27 November 2009 to 28 November 2018

4 May 2007

16,068,000

- (16,068,000)

-

-

-

25 April 2008

- 18,000,000

-

1,919,580 19,919,580

S$0.226

28 November 2008

- 20,000,000

-

- 20,000,000

S$0.093

19,075,000 38,000,000 (16,068,000)

2,240,257 43,247,257

At the end of the financial year, there were no unissued shares of the Company or any corporation in the Group under option except for the share option scheme disclosed above and as disclosed in Note 25 of the financial statements. The details of share options granted under the Scheme to the directors of the Company are as follows:
Aggregate options granted since commencement of the Scheme up to the end of financial year Aggregate options exercised since commencement of the Scheme up to the end of financial year Aggregate options cancelled since commencement of the Scheme up to the end of financial year

Name of director

Options granted during the financial year

Adjustment (Note)

Aggregate options outstanding as at end of financial year

Emmy Wu Jismyl Teo Chor Khin Foo Meng Tong Mark Wang Yat-Yee Jim Cheung Chung Wah Thian Nie Khian

4,500,000 4,500,000 900,000 900,000 500,000 500,000 11,800,000

9,500,000 8,250,000 1,700,000 1,700,000 500,000 500,000 22,150,000

(1,000,000) (375,000) (1,375,000)

(3,000,000) (3,000,000) (600,000) (600,000) (7,200,000)

319,930 253,278 63,986 63,986 701,180

5,819,930 5,128,278 1,163,986 1,163,986 500,000 500,000 14,276,180

Note: The number and exercise price of the share options were adjusted as a result of the completion of a rights issue in the proportion of one rights share for every two existing shares held on 25 September 2008. The exercise prices shown above represent the adjusted exercise prices as at 31 December 2008.

annual report 2008 49

REPORT OF ThE dIRECTORs
5. SHARE OPTIONS - continued Except as disclosed above, there were no participants to the above share option scheme who are controlling shareholders of the Company and their associates. No participants to the above share option scheme received options which represents 5% or more of the total number of shares available under the above scheme and no shares were issued at a discount to the market price. 6. AUDIT COMMITTEE At the date of this report, the Audit Committee comprises the following members: Foo Meng Tong Mark Wang Yat-Yee Jim Cheung Chung Wah Thian Nie Khian Emmy Wu Chairman and Independent Non-Executive director Independent Non-Executive director Non-Independent Non-Executive director Non-Independent Non-Executive director Executive director

The Audit Committee has met four times since the last Annual General Meeting and has reviewed the following, where relevant, with the executive directors, the external auditors and the internal auditors of the Company: (a) (b) (c) (d) (e) (f) the audit plans and results of the internal auditors’ examination and evaluation of the Group’s systems of internal accounting controls; the Group’s financial and operating results and accounting policies; the financial statements of the Company and the consolidated financial statements of the Group before their submission to the directors of the Company and external auditors’ report on those financial statements; the quarterly, half-yearly and annual announcements as well as the related press releases on the results and financial position of the Company and the Group; the co-operation and assistance given by management to the Group’s external auditors; and the re-appointment of the external auditors of the Group.

The Audit Committee has full access to and has the co-operation of management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any director and executive officer to attend its meetings. The external and internal auditors have unrestricted access to the Audit Committee. The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the Group at the forthcoming Annual General Meeting of the Company.

50 annual report 2008

REPORT OF ThE dIRECTORs
7. AUDITORS The auditors, Deloitte & Touche LLP, has expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

Emmy Wu Hong Kong 31 March 2009

Jismyl Teo Chor Khin

annual report 2008 51

INdEPENdENT AUdITOR’s REPORT
TO ThE MEMBERs OF dMX TEChNOLOGIEs GROUP LIMITEd
We have audited the accompanying consolidated financial statements of DMX Technologies Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) which comprise the balance sheets of the Group and the Company as at 31 December 2008, the income statement, statement of changes in equity and cash flow statement of the Group and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 52 to 103. Directors’ Responsibility The Company’s directors are responsible for the preparation and the true and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the year ended on that date.

Deloitte & Touche LLP Public Accountant and Certified Public Accountants Singapore 31 March 2009

52 annual report 2008

BALANCE shEETs
31 dECEMBER 2008
THE GROUP NOTE 2008 US$’000 2007 US$’000 THE COMPANY 2008 US$’000 2007 US$’000

ASSETS Current assets: Cash and cash equivalents Pledged bank deposits Trade receivables Other receivables, deposits and prepayments Other financial assets at fair value through profit and loss Inventories Total current assets Non-current assets: Property, plant and equipment Goodwill Intangible assets Deposit paid for acquisition of an investment Investment in subsidiaries Interest in a jointly controlled entity Available-for-sale investment Other financial assets at fair value through profit and loss Deferred tax assets Total non-current assets Total assets 7 7 8 9 10 11 15,055 8,616 121,687 4,399 9,112 158,869 7,059 26,559 27,298 528 80 61,524 220,393 39,987 5,144 88,191 8,085 1,320 9,480 152,207 6,478 26,559 24,933 513 2,227 1,704 32 62,446 214,653 98 1,382 104,651 106,131 11,534 11,534 117,665 22 98,593 1,320 99,935 11,534 11,534 111,469

12 13 14 15 16 17 18 10 19

See accompanying notes to consolidated financial statements

annual report 2008 53

BALANCE shEETs
31 dECEMBER 2008
THE GROUP NOTE 2008 US$’000 2007 US$’000 THE COMPANY 2008 US$’000 2007 US$’000

LIABILITIES AND EQUITY Current liabilities: Bank loans Trust receipt loans Trade payables Other payables Current portion of finance lease payables Total current liabilities Non-current liabilities: Bank loans Finance lease payables Deferred tax liabilities Capital, reserves and minority interests: Share capital Share premium Contributed surplus Legal reserve Foreign currency translation reserve Share option reserve Accumulated profits (losses) Equity attributable to equity holders of the Company Minority interests Total equity Total liabilities and equity 20 21 22 23 7,317 3,985 10,675 12,470 63 34,510 152 688 840 26,571 88,496 1,534 7 2,927 1,060 63,904 184,499 544 185,043 220,393 12,566 3,142 11,874 11,089 60 38,731 2,200 217 421 2,838 23,048 85,113 1,534 7 2,161 1,511 59,515 172,889 195 173,084 214,653 261 261 26,571 88,496 1,534 1,060 (257) 117,404 117,404 117,665 184 184 23,048 85,113 1,534 1,511 79 111,285 111,285 111,469

20 19

24

25

See accompanying notes to consolidated financial statements

54 annual report 2008

CONsOLIdATEd PROFIT & LOss sTATEMENT
FOR ThE YEAR ENdEd 31 dECEMBER 2008
THE GROUP NOTE 2008 US$’000 2007 US$’000

Revenue Cost of sales Gross profit Other operating income Distribution costs Administrative expenses Other operating expenses Share of result of a jointly controlled entity Finance costs Profit before income tax Income tax expense Profit for the year Attributable to: Equity holders of the Company Minority interests

26

172,744 (127,056) 45,688 690 (11,107) (13,704) (15,251) (543) (827) 4,946 (1,367) 3,579 3,230 349 3,579

161,552 (122,108) 39,444 1,277 (12,028) (11,588) (5,410) (999) 10,696 (1,406) 9,290 9,185 105 9,290

27 28 29 30 31 32

Earnings per share (US cents) Basic Diluted

34 0.68 0.68 1.99 1.98

See accompanying notes to consolidated financial statements

annual report 2008 55

sTATEMENTs OF ChANGEs IN EQUITY
FOR ThE YEAR ENdEd 31 dECEMBER 2008
Foreign currency translation reserve US$’000 Attributable to equity holders of the Company

Share capital US$’000

Contributed Share surplus premium (note i) US$’000 US$’000

Legal reserve (note ii) US$’000

Share Accumulated option profits reserve (losses) US$’000 US$’000

Minority interests

Total US$’000

US$’000 US$’000

GROUP

Balance at 1 January 2007 Currency translation difference recognised directly in equity Net profit for the year Total recognised income and expense for the year Transfer Recognition of share-based payments Reversal upon cancellation of share options Dividends (Note 33) Balance at 31 December 2007 Currency translation difference recognised directly in equity Net profit for the year Total recognised income and expense for the year Issue of shares Transaction costs attributable to issue of shares Recognition of share-based payments Reversal upon cancellation of share options Balance at 31 December 2008

23,048

85,113

1,534

-

1,501

1,141

52,567

164,904

90 164,994

23,048

85,113

1,534

7 7

660 660 2,161

1,159 (789) 1,511

9,185 9,185 (7) 789 (3,019) 59,515

660 9,185 9,845 1,159 (3,019) 172,889

105 105 -

660 9,290 9,950 1,159 (3,019)

195 173,084

3,523 26,571

3,653 (270) 88,496

1,534

7

766 766 -

708

3,230 3,230 1,159 63,904

766 3,230 3,996 7,176 (270) 708 184,499

349 349 -

766 3,579 4,345 7,176 (270) 708 -

- (1,159) 2,927 1,060

544 185,043

See accompanying notes to consolidated financial statements

56 annual report 2008

sTATEMENTs OF ChANGEs IN EQUITY
FOR ThE YEAR ENdEd 31 dECEMBER 2008
Foreign currency translation reserve US$’000 Attributable to equity holders of the Company

Share capital US$’000

Contributed Share surplus premium (note i) US$’000 US$’000

Legal reserve (note ii) US$’000

Share Accumulated option profits reserve (losses) US$’000 US$’000

Minority interests

Total US$’000

US$’000 US$’000

COMPANY

Balance at 1 January 2007 Net profit for the year Recognition of share-based payments Reversal upon cancellation of share options Dividends (Note 33) Balance at 31 December 2007 Issue of shares Transaction costs attributable to issue of shares Net loss for the year Recognition of share-based payments Reversal upon cancellation of share options Balance at 31 December 2008
Notes: (i)

23,048 23,048 3,523 26,571

85,113 85,113 3,653 (270) 88,496

1,534 1,534 1,534

-

-

1,141 1,159 (789) 1,511 708 (1,159) 1,060

(1,405) 4,172 331 (3,019) 79 (683) 347 (257)

109,431 4,172 1,159 (458) (3,019) 111,285 7,176 (270) (683) 708 (812) 117,404

- 109,431 4,172 1,159 (458) (3,019)

- 111,285 7,176 (270) (683) 708 (812)

- 117,404

Contributed surplus represents the difference between the underlying net tangible assets of the subsidiaries which were acquired by the Company as at 31 December 2001 and the nominal amount of the shares issued by the Company under the restructuring exercise in 2002. Legal reserve is reserve required by the relevant laws in Macau applicable to the Group’s subsidiary established in Macau.

(ii)

See accompanying notes to consolidated financial statements

annual report 2008 57

CONsOLIdATEd CAsh FLOW sTATEMENT
FOR ThE YEAR ENdEd 31 dECEMBER 2008
2008 US$’000 2007 US$’000

Operating activities: Profit before income tax Adjustments for: Depreciation expense Interest expenses Allowances for doubtful trade receivables and other receivables Allowances for inventories Amortisation expense Impairment loss on available-for-sale investment Inventories written off Imputed interest income on deferred purchase consideration Fair value change other financial assets Share-based payment expenses Share of results of a jointly controlled entity Loss on disposal of property, plant and equipment Interest income Operating cash flows before movements in working capital (Increase) decrease in trade receivables Decrease (increase) in other receivables, deposits and prepayments Increase in inventories Decrease in trade payables Increase in other payables Cash (used in) generated from operations Income taxes paid Interest paid Interest received Net cash (used in) from operating activities Investing activities: Addition to intangible assets Purchase of property, plant and equipment Increase in pledged bank deposits Acquisition of interests in a jointly controlled entity Payment of deferred consideration for acquisition of subsidiaries Advance to a third party Proceeds on disposal of other financial assets Proceeds on disposal of property, plant and equipment Repayment from a third party Deposit paid for acquisition of an investment Net cash used in investing activities

4,946 3,414 827 3,109 152 8,443 2,227 552 (75) 708 543 60 (448) 24,458 (34,565) 2,245 (336) (1,199) 1,981 (7,416) (738) (827) 448 (8,533) (10,808) (4,253) (3,472) (1,071) (600) (496) 3,099 85 (17,516)

10,696 2,506 999 218 281 3,726 (30) 22 1,159 26 (1,122) 18,481 2,334 (1,212) (3,819) (7,179) 3,135 11,740 (2,455) (999) 1,122 9,408 (13,907) (3,865) (364) (3,870) (204) 600 47 6 (513) (22,070)

See accompanying notes to consolidated financial statements

58 annual report 2008

CONsOLIdATEd CAsh FLOW sTATEMENT
FOR ThE YEAR ENdEd 31 dECEMBER 2008
2008 US$’000 2007 US$’000

Financing activities: Proceeds on issue of shares (net) New bank loans raised Increase (decrease) in trust receipt loans Repayment of bank loans Repayment of finance leases Dividend paid Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Net effect of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at end of year

6,906 2,957 843 (10,406) (62) 238 (25,811) 39,987 879 15,055

17,414 (2,613) (5,475) (137) (3,019) 6,170 (6,492) 45,585 894 39,987

See accompanying notes to consolidated financial statements

annual report 2008 59

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
1. GENERAL The Company (Registration Number: 31201) was incorporated in Bermuda as an exempted Company with limited liability under the Companies Act 1981 of Bermuda with its registered office at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda. Its principal place of business is at 1401 Stanhope House, 738 King’s Road, Quarry Bay, Hong Kong. The Company is listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”). The financial statements are expressed in United States dollars. The principal activities of the Company are those of an investment holding Company. The principal activities of the subsidiaries are described in Note 16. The consolidated financial statements of the Group and balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008 were authorised for issue by the Board of Directors at their meeting held on 31 March 2009. 2. FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD (“IFRS”) The consolidated financial statements up to 31 December 2007 were prepared in accordance with Singapore Financial Reporting Standards. With effect from 1 January 2008, the Group and Company prepare the financial statements in accordance with IFRS. The Group and Company have first-time adopted IFRS and applied retrospectively for the year ended 31 December 2007. Such adoption has had no material effect on how the results for the current or prior accounting periods are prepared and presented and accordingly, no disclosures as required by IFRS1 First-Time Adoption of International Financial Reporting Standards. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The consolidated financial statements are prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with IFRS. During the financial year, the Group and the Company adopted all the new and revised IFRSs issued by the International Accounting Standards Board and the Interpretations thereof issued by the International Financial Reporting Interpretations Committee (“IFRIC”) which became effective and are applicable to their operations in the current financial year. The revised and/or new International Financial Reporting Standards effective for accounting period beginning on or after 1 January 2008 have no significant impact on the Group and on the Company. At the date of authorisation of these financial statements, the following IFRSs, IFRICs and amendments were issued but not effective: IFRS 8 IFRIC 15 IFRIC 16 IFRIC 17 IFRIC 18 Operating Segments Agreements for the Construction of Real Estate Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non-cash Assets to Owners IFRIC 18 Transfers of Assets from Customers

60 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Basis of accounting - continued Amendments to IAS 1 Presentation of Financial Statements (Revised), IAS 1 Presentation of Financial Statements (Amendments relating to puttable financial instruments and obligations arising on liquidation), IAS 23 Borrowing Costs (Revised), IAS 27 Consolidated and Separate Financial Statements (Revised), IAS 27 Consolidated and Separate Financial Statements (Amendments relating to cost of an investment in the separate financial statements), IAS 32 Financial Instruments: Presentation (Amendments relating to puttable financial instruments and obligations arising on liquidation), IAS 39 Financial Instruments : Recognition and Measurement (Amendments relating to eligible hedged items), IFRS 2 Share-based Payment (Amendments relating to vesting conditions and cancellations). Consequential amendments were also made to various standards as a result of these new or revised standards. The directors anticipate that the adoption of these IFRSs, IFRICs and amendments in future periods will not have any material impact on the financial statements of the Group and of the Company in the period of their initial application except for the following: IAS – Presentation of Financial Statements (Revised) IAS 1 (Revised) will be effective for annual periods beginning on or after 1 January 2009, and will change the basis for presentation and structure of the financial statements. It does not change the recognition, measurement or disclosure of specific transactions and other events required by other FRSs. IFRS 8 – Operating Segments IFRS 8 will be effective for annual financial statements beginning on or after 1 January 2009 and supersedes IAS 14 – Segment Reporting. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. Following the adoption of IFRS 8, the Group’s current basis of segment reporting may be changed as the identification of the reportable segments is based on the internal management reports submitted to management for decision making.

annual report 2008 61

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover its share of those losses. In the Company’s financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the income statement. Business combination The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated income statement. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

62 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Interests in joint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities. The results and assets and liabilities of jointly controlled entities are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the jointly controlled entities, less any identified impairment loss. When the Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Group’s net investment in the jointly controlled entity), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the jointly controlled entity recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the consolidated income statement. When a Group entity transacts with a jointly controlled entity of the Group, unrealised profits or losses are eliminated to the extent of the Group’s interest in the jointly controlled entity. Financial instruments Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest basis for debt instruments other than those financial instruments “at fair value through profit or loss”.

annual report 2008 63

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Financial instruments - continued Financial assets Investments are recognised and de-recognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value. Other financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss”, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Financial assets at fair value through profit or loss (“FVTPL”) Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 10. Available-for-sale financial assets Certain shares held by the Group are classified as being available for sale and are stated at fair value. Fair value is determined in the manner described in Note 18. Gains and losses arising from changes in fair value are recognised directly in the revaluation reserve with the exception of impairment losses and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the revaluation reserve is included in profit or loss for the period. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established. The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at reporting date. The change in fair value attributable to translation differences are recognised in equity. If the fair values of the shares cannot be reasonably and reliably determined, the shares are stated at cost less impairment. Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial.

64 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Financial instruments - continued Financial assets - continued Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial asset have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables where the carrying amount is reduced through the use of an allowance account. When a receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss, is recognised directly in equity. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities and equity instruments Classification as debt or equity Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

annual report 2008 65

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Financial instruments - continued Financial liabilities and equity instruments - continued Financial liabilities Trade and other payables and finance lease payables, are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis. Interest-bearing bank loans and trust receipt loans are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at initially the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Contingent rentals are recognised as expense in the periods which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis. Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred bringing inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale.

66 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss. Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceed and the carrying amount of the asset and is recognised in profit or loss. Goodwill Goodwill arising on acquisition of subsidiaries represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiaries, at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The Group’s policy for goodwill arising on the acquisition of a jointly controlled entity is described under interest in joint ventures above.

annual report 2008 67

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Intangible assets An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all the following have been demonstrated: • • • • • • the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straightline basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses. (i) Software development costs Costs that are directly associated with the development of identifiable and unique software products controlled by the Group and have probable economic benefit exceeding the costs beyond one year are recognised as intangible assets. Direct costs include the staff costs of the software development team and an appropriate portion of direct overheads. Costs which enhance or extend performance of computer software programs beyond their original specifications are capitalised and added to the original cost of the software. Other software development costs are expensed when incurred. Software development costs that are capitalised are amortised using the straight-line method over their useful lives, not exceeding a period of three years. (ii) Licensing costs Licensing costs are assets measured initially at cost and amortised commencing the date of relevant commercial activity, on a straight-line basis over their useful lives, not exceeding a period of three years.

68 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimate the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell 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 the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

annual report 2008 69

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Share-based payments The Group issues equity-settled share-based payments to certain directors and employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 25. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss overt the remaining vesting period, with a corresponding adjustments to equity-settled employee benefits reserves. The policy described above is applied to all equity-settled share-based payments that were granted after 7 November 2002 and vested after 1 January 2005. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue from sale of goods is recognised when all the following conditions are satisfied: • • • • • the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from rendering of services that are of a short duration is recognised as and when the services are completed. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

70 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Retirement benefit costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payment made to state-managed retirement benefit schemes and dealt with as payments to defined contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. Employee leave entitlement Employee entitlement to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and the subsidiaries operate by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and jointly-controlled entity, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is recognised directly in equity.

annual report 2008 71

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Borrowing costs All borrowing costs are recognised in profit or loss in the period in which they are incurred. Foreign currencies The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are presented in United States dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the retranslation of nonmonetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in United States dollars using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of. On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments are taken to the foreign currency translation reserve. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

72 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised 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. Critical judgements in applying the entity’s accounting policies The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements. Revenue recognition For certain telecommunication products, management estimates that 5% of the sales amount relate to installation fee. 95% sales amount is recognised when the goods were delivered to the customers and the remaining 5% of the sales amount will be recognised when the installation work is completed and the final acceptance issued by the customers. In making this judgement, management considered the detailed criteria for the recognition of revenue from the sale of goods set out in IAS 18 Revenue and, in particular, whether the Group had transferred to the buyer the significant risks and rewards of ownership of the goods. The directors are satisfied that the significant risks and rewards have been transferred and that recognition of the revenue is appropriate. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Estimated impairment of trade and other receivables When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 31 December 2008, the carrying amount of trade receivables and other receivables is US$121.7 million and US$2.1 million (2007 : US$88.2 million and US$4.4 million) respectively.

annual report 2008 73

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY - continued Estimated impairment of intangible assets During the year, the directors evaluated the carrying amount of its intangible assets. The relevant project continues to progress in a satisfactory manner, and customer reaction has reconfirmed the directors’ previous estimates of anticipated revenues from the project. Detailed sensitivity analysis has been carried out and the directors are confident that the carrying amount of the asset will be recovered in full. This situation will be closely monitored, and adjustments will be made in future periods, if future market activity indicates that such adjustments are appropriate. As at 31 December 2008, the carrying amount of intangible assets is US$27.3 million (2007 : US$24.9 million). Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. As at 31 December 2008, the carrying amount of goodwill is US$26.6 million (2007 : US$26.6 million). Fair value of available-for-sale investment The Group has investment in unquoted equity shares classified as available-for-sale. The available-for-sale investment is measured at cost less impairment at each balance sheet date which included some assumptions that are not supportable by observable market prices or rates. Changes in the assumptions will significantly affect the estimated value of the available-for-sale investment. As at 31 December 2008, the carrying value of the available-for-sale investment is US$Nil (2007 : US$ 2.2 million). 5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (a) Categories of financial instruments The following table sets out the financial instruments as at the balance sheet date:
THE GROUP 2008 US$’000 2007 US$’000 THE COMPANY 2008 US$’000 2007 US$’000

Financial assets Other financial assets Loans and receivables (including cash and cash equivalents) Available-for-sale investment Financial liabilities Amortised cost

147,382 30,073

3,024 137,273 2,227 36,461

106,131 -

1,320 98,614 -

74 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - continued (b) Financial risk management policies and objectives The Group has risk management policies. These policies set out the Group’s overall business strategies and its risk management philosophy. The risks associated with the Group’s financial instruments include foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Group’s overall risk management programme seeks to minimise potential adverse effects of financial performance of the Group. (i) Foreign exchange risk management The Group transacts business in various foreign currencies, including the United States dollars, Hong Kong dollars, Macao Pataca, Singapore dollars, Indonesian Rupiah, Korean Won, Malaysia Ringgit and Renminbi and therefore is exposed to foreign exchange risk. The Group does not have a foreign currency hedging policy. However, management monitors foreign exchange exposure and will consider hedging significant foreign exchange risk should the need arises. As at the reporting date, as the monetary assets and monetary liabilities of the Group and the Company are substantially denominated in the respective entities’ functional currencies which are disclosed in respective notes to the financial statements. The exposure of the Group and Company to foreign currency fluctuations is limited.

annual report 2008 75

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - continued (b) Financial risk management policies and objectives - continued ii) Interest rate risk management Interest rate risk arises from the potential changes in interest rates that may have an adverse effects on the Group’s result for the current reporting period and in future years. The Group is exposed to interest rate risk arising from the volatility of benchmark interest rates in United States dollars, as a majority of bank loans and trust receipts loans are on floating rate basis. The Group generally does not take a speculative view on the movement in interest rates and, therefore, does not actively use interest rate derivative instruments to hedge exposed risks. The Group believes that the management of floating financial assets is immaterial as the maturities of these are primarily less than three months. Interest rate sensitivity If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s before tax profit for the year ended 31 December 2008 would increase/decrease by US$27,000 (2007 : increase/decrease by US$135,000). A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings and bank balances. The Group’s sensitivity to interest rates has decreased during the current period mainly due to the reduction in variable rate debt instruments. The Company has limited interest rate risk exposure.

76 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - continued (b) Financial risk management policies and objectives - continued (iii) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by the counterparty limits that are reviewed and approved by management annually. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. As at 31 December 2008, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arise from: • • the carrying amount of the respective recognised financial assets as stated in the balance sheet; and the amount of contingent liabilities in relation to financial guarantee issued by the Group as disclosed in Note 36.

In order to minimise the credit risk, management has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced. As at 31 December 2008, the Group has five customers which comprises 75% (2007 : 81%) of the Group’s outstanding trade receivables, which are located in the People’s Republic of China (the “PRC”). Further details of credit risks on trade receivables are disclosed in Note 8.

annual report 2008 77

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - continued (b) Financial risk management policies and objectives - continued (iv) Liquidity risk management The Group maintains sufficient cash and cash equivalents, and internally generated cash flows to finance its activities. The Group finances its liquidity through internally generated cash flows, short-term bank loans and trust receipt loans facilities and minimises liquidity risk by keeping committed credit lines available. Liquidity and interest risk analyses Non-derivative financial liabilities The table below summarises the maturity profile of the Group’s financial liabilities at the balance sheet date based on contractual undiscounted payments.
Weighted average effective interest rate % On demand or within 1 year US$’000 Within 2 to 5 years US$’000

After 5 years US$’000

Total US$’000

GROUP 2008 Non-interest bearing Finance lease liability (fixed rate) Variable interest rate instruments 6.07 5.45 18,556 76 11,302 29,934 18,276 74 15,708 34,058 187 187 229 2,200 2,429 26 26 18,556 263 11,302 30,121 18,276 329 17,908 36,513

2007 Non-interest bearing Finance lease liability (fixed rate) Variable interest rate instruments

6.03 4.92

The Company does not have any significant non-derivative financial liabilities for both years.

78 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - continued (b) Financial risk management policies and objectives - continued (iv) Liquidity risk management - continued Non-derivative financial assets The table below summarises the maturity profile of the Group’s and Company’s non-derivative financial assets at the balance sheet date based on contractual undiscounted maturities.
Weighted average effective interest rate % On demand or within 1 year US$’000 Within 2 to 5 years US$’000

Total US$’000

GROUP 2008 Non-interest bearing Fixed interest rate instruments Variable interest rate instruments 3.60 3.63 123,711 6,934 16,737 147,382 92,142 3,220 41,911 137,273
On demand or within 1 year US$’000

-

123,711 6,934 16,737 147,382 92,142 3,220 41,911 137,273

2007 Non-interest bearing Fixed interest rate instruments Variable interest rate instruments

4.24 3.81

Weighted average effective interest rate %

Within 2 to 5 years US$’000

Total US$’000

COMPANY 2008 Non-interest bearing Fixed interest rate instruments Variable interest rate instruments 4 1.75 104,651 1,382 98 106,131 98,592 22 98,614 104,651 1,382 98 106,131 98,592 22 98,614

2007 Non-interest bearing Variable interest rate instruments

3.07

annual report 2008 79

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - continued (b) Financial risk management policies and objectives - continued (v) Fair value of financial assets and financial liabilities The carrying amounts of cash and cash equivalents, trade and other current receivables and payables and other liabilities approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of other classes financial assets and liabilities are disclosed in the respective notes to financial statements. (c) Capital risk management policies and objectives The Group monitors capital on the basis of the debt to equity ratio. This ratio is calculated as total liabilities divided by equity. Total liabilities is “liabilities” as shown in the consolidated balance sheet and equity is “equity” attributable to equity holders of the Company as shown in the consolidated balance sheet. The debt to equity ratios at 31 December 2008 and 2007 were as follows:
THE GROUP 2008 US$’000 2007 US$’000

Total liability Equity Debt to equity ratio There is no significant change in the debt to equity ratio from 2007.

35,350 184,499 0.19

41,569 172,889 0.24

The Group balances its overall capital structure through the payment of dividends, new share issues as well as the issuance of new debts on the redemption of existing debt. The Group’s overall strategy remains unchanged from 2007.

80 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
6. COMPENSATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL The remuneration of directors and other members of key management during the year was as follows:
THE GROUP 2008 US$’000 2007 US$’000

Short-term benefits Post-employment benefits Share-based payments Total

1,560 63 1,623 193 1,816

1,446 61 1,507 346 1,853

The remuneration of directors and key management is determined by the remuneration committee having regard to the performance of individuals and market trends. 7. CASH AND CASH EQUIVALENTS AND PLEDGED BANK DEPOSITS
THE GROUP 2008 US$’000 2007 US$’000 THE COMPANY 2008 US$’000 2007 US$’000

Cash at banks Fixed deposits Cash on hand Less: Bank overdrafts Total cash and cash equivalents Pledged bank deposits Total

15,836 272 50 (1,103) 15,055 8,616 23,671

31,697 8,104 186 39,987 5,144 45,131

98 98 1,382 1,480

22 22 22

Fixed deposits bear average effective interest rate of 3.75% (2007 : 4.18%) per annum and for a tenure of approximately 30 days (2007 : 157 days). At 31 December 2008, bank deposits in the aggregate amount of approximately US$8,616,000 (2007 : US$5,144,000) and US$1,382,000 (2007 : US$Nil) of the Group and Company respectively were pledged to financial institutions to secure general banking facilities granted to the Group. At 31 December 2007, cash and cash equivalents included US$600,000 which had been earmarked to fund the payment of deferred consideration pursuant to agreement for the acquisition for subsidiaries.

annual report 2008 81

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
7. CASH AND CASH EQUIVALENTS AND PLEDGED BANK DEPOSITS - continued The Group and Company’s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follow:
THE GROUP 2008 US$’000 2007 US$’000 THE COMPANY 2008 US$’000 2007 US$’000

United States dollars Singapore dollars Hong Kong dollars 8. TRADE RECEIVABLES

1,080 269 222

276 148 1,266

62 -

8 -

THE GROUP 2008 US$’000 2007 US$’000

Outside parties Less: Allowances for trade receivables Total

124,042 (2,355) 121,687

89,972 (1,781) 88,191

The average credit period on sales of goods to telecommunication customers and non-telecommunication customers are 270 days (2007 : 270 days) and 60 days (2007 : 60 days) respectively. No interest is charged on outstanding trade receivables. The Group reviews the customer’s credit quality regularly and defines credit limits by customer. The allowance for trade receivables is provided based on management’s estimation or irrecoverable amounts to third parties after reviewing the aging profile of the customers. The Group has provided fully for all receivables over 360 days and trade receivables between 60 days and 360 days are provided for based on estimated irrecoverable, determined by reference to past default experience. In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Accordingly, the directors believe that there is no further impairment allowance required in excess of the allowance for trade receivables. Of the trade receivable balance at the end of the year, 75% (2007 : 81%) are due from the Group’s five largest customers which are located in the PRC. Included in the Group’s trade receivable balance are debtors with a carrying amount of US$13,032,000 (2007 : US$17,399,000) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 240 days (2007 : 190 days).

82 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
8. TRADE RECEIVABLES - continued Aging of trade receivables that are past due but not impaired
THE GROUP 2008 US$’000 2007 US$’000

< 3 months 3 months to 6 months 6 months to 12 months > 12 months

1,929 4,794 6,166 143 13,032

5,490 6,772 5,137 17,399

Movement in the allowance for trade receivables
THE GROUP 2008 US$’000 2007 US$’000

Balance at the beginning of the year Amounts written off/utilised during the year Increase in allowance recognised in profit or loss Balance at the end of the year

1,781 (495) 1,069 2,355

1,739 (176) 218 1,781

The Group’s trade receivables that are not denominated in the functional currencies of the respective entities are as follows:
THE GROUP 2008 US$’000 2007 US$’000

Singapore dollars United States dollars

111 25

77 -

annual report 2008 83

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
9. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
THE GROUP 2008 US$’000 2007 US$’000 THE COMPANY 2008 US$’000 2007 US$’000

Advance to a third party Others (Note) Less: Allowance for other receivables Other deposits Prepayments Advance to subsidiaries (Note 16) Total

1,783 2,677 (2,353) 2,107 1,309 983 4,399

1,287 3,470 (313) 4,444 688 2,953 8,085

1 104,650 104,651

1 98,592 98,593

Note: “Others” includes receipts collected on the Group’s behalf by certain import/export agents. The advance to subsidiaries are interest-free and repayable on demand and the average age of these receivables is less than 180 days. The Company has not made any allowance as the directors are of the view that these receivables are fully recoverable. Movement in allowance for other receivables
THE GROUP 2008 US$’000 2007 US$’000

Balance at the beginning of the year Increase in allowance recognised in profit or loss Amounts written off/utilised during the year Balance at the end of the year

313 2,040 2,353

1,080 (767) 313

The Group’s other receivables that are not denominated in the functional currencies of the respective entities are as follows:
THE GROUP 2008 US$’000 2007 US$’000

Renminbi British pound

-

1,047 974

84 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
10. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS As at 31 December 2007, the Group had several structured deposits placed with banks. Under the relevant agreements, the interest rates of these structured deposits were determined by reference to the change in exchange rates of certain foreign currencies and the change in certain interest rates quoted in the market. The amounts were measured at fair value at each balance sheet date based on quoted market prices for equivalent instruments at the balance sheet date. Their fair values were determined based on the valuation performed by the issuing banks. These were deposits pledged to secure banking facilities granted to the Group. As at 31 December 2007, the derivative financial instruments which were denominated in United States dollars, bore floating interest rates ranging from 4.75% to 5.75% per annum. The structured deposit agreements were matured and the amounts were fully repaid by the bank during the year. The gain and loss of fair value of structured deposits have been disclosed in Note 32 to the financial statements. 11. INVENTORIES
THE GROUP 2008 US$’000 2007 US$’000

Finished goods: - At cost - At net realisable value Total

8,955 157 9,112

9,480 9,480

The cost of inventories recognised as an expense includes US$615,000 (2007 : US$567,000) in respect of write-downs of inventory to net realisable value.

annual report 2008 85

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
12. PROPERTY, PLANT AND EQUIPMENT
Building US$’000 Leasehold improvements US$’000 Furniture and fixtures US$’000 Computer Other office equipment equipment US$’000 US$’000 Total US$’000

THE GROUP Cost: At 1 January 2007 Additions Exchange difference Disposals At 31 December 2007 Additions Exchange difference Disposals At 31 December 2008 Accumulated depreciation: At 1 January 2007 Depreciation for the year Exchange difference Eliminated on disposals At 31 December 2007 Depreciation for the year Exchange difference Eliminated on disposals At 31 December 2008 Carrying amount: At 31 December 2008 At 31 December 2007 115 115 115 17 11 28 11 39 575 113 16 (78) 626 258 (17) (175) 692 441 92 12 (72) 473 119 (10) (175) 407 1,184 41 13 (29) 1,209 78 (255) (91) 941 374 59 7 (16) 424 376 (84) (11) 705 5,940 3,653 99 (54) 9,638 3,896 95 (131) 13,498 2,500 2,214 30 (51) 4,693 2,751 44 (71) 7,417 772 182 18 (130) 842 21 21 (18) 866 264 130 19 (79) 334 157 7 (13) 485 8,586 3,989 146 (291) 12,430 4,253 (156) (415) 16,112 3,596 2,506 68 (218) 5,952 3,414 (43) (270) 9,053

76 87

285 153

236 785

6,081 4,945

381 508

7,059 6,478

The carrying amount of the Group’s property, plant and equipment includes an amount of approximately US$196,000 (2007 : US$279,000) in respect of assets held under finance leases. The different classes of property, plant and equipment are depreciated on a straight-line basis on the following basis: Building Leasehold improvements Furniture and fixtures Computer equipment Other office equipment Over the term of the relevant lease or 25 years, whichever is shorter Over the term of the relevant lease of 3 to 5 years 20% to 25% per annum 331/3% per annum 20% to 25% per annum

86 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
13. GOODWILL
THE GROUP US$’000

Cost: At 1 January 2007 Adjustments to fair value of measurement of purchase consideration for acquisition of Packet Systems Pte Ltd (“Packet Systems”) in prior period At 31 December 2007 and 2008

27,416 (857) 26,559

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (“CGUs”) that are expected to benefit from that business combination. Before impairment testing, the carrying amount of goodwill had been allocated as follows:
THE GROUP 2008 US$’000 2007 US$’000

Packet Systems Lotun Technology Limited Equator One Software Ltd Others Total

11,874 12,071 2,507 107 26,559

11,874 12,071 2,507 107 26,559

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. For Packet Systems, the Group prepares cash flows forecasts, taking into consideration of industry growth rate and based on the most recent financial budgets approved by directors for the next 1 year and extrapolated for a further four years period using an estimated growth rate of 12% (2007 : 12%). This rate does not exceed the average long-term growth rate for the relevant markets. Other than Packet Systems, the Group prepares cash flows forecasts, taking into consideration of industry growth rate and based on the most recent financial budgets approved by directors for the next 1 year and extrapolated for a further four years period using an estimated growth rate of 10% (2007 : 40%). This rate does not exceed the average long-term growth rate for the relevant markets. The rate used to discount the forecast cash flows is 11% (2007 : 6.75%). At 31 December 2008 and 2007, the recoverable amount of the CGUs is in excess of their respective carrying amounts. Therefore, no impairment loss is required for the year. Directors believe that any reasonably possible change in any of these key assumptions would not significantly cause the CGUs’ carrying amounts to exceed the recoverable amounts of these CGUs.

annual report 2008 87

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
14. INTANGIBLE ASSETS
Software development costs US$’000 Licensing costs US$’000

Total US$’000

THE GROUP Cost: At 1 January 2007 Additions At 31 December 2007 Additions At 31 December 2008 Accumulated amortisation: At 1 January 2007 Amortisation for the year At 31 December 2007 Amortisation for the year At 31 December 2008 Carrying amount: At 31 December 2008 At 31 December 2007 11,946 13,907 25,853 10,808 36,661 5,371 2,680 8,051 5,751 13,802 9,149 9,149 9,149 972 1,046 2,018 2,692 4,710 21,095 13,907 35,002 10,808 45,810 6,343 3,726 10,069 8,443 18,512

22,859 17,802

4,439 7,131

27,298 24,933

The intangible assets included above have finite useful lives, over which the assets are amortised. The amortisation period for the intangible assets is three years. The amortisation expense has been included in the line item “other operating expenses” in the consolidated income statement. 15. DEPOSIT PAID FOR ACQUISITION OF AN INVESTMENT The amount represented deposit paid for acquisition of a 10% equity interest in Suntop Asia Limited, a private limited company which is engaged in the telecommunication business. During the year, the acquisition was terminated by both parties and the deposit paid for acquisition will be refundable within one year and is included in “other receivables, deposits and prepayments” in the balance sheet. The market conditions and financial performance of Suntop Asia Limited have deteriorated during the year. Accordingly, the directors have made full allowance for the refundable deposit.

88 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
16. SUBSIDIARIES
THE COMPANY 2008 US$’000 2007 US$’000

Unquoted equity shares, at cost

11,534

11,534

Details of the Company’s subsidiaries as at 31 December 2008 and 31 December 2007 are as follows:
Country of incorporation/ operation Proportion of ownership interest and voting power held 2008 % 2007 %

Name of subsidiary

Principal activities

Held by the Company DMX (BVI )Ltd. (b) Nettasking Technology (BVI) Limited (b) Held by DMX (BVI) Ltd. BEE Mediasoft Limited (b) DMX Technologies (Hong Kong) Limited (b) DMX Technologies Sdn Bhd (c) DMX Technologies, (S’pore) Pte Ltd (a) DMX Technologies (China) Limited (b) DMX Technologies (Macao Commercial Offshore) Co. Limited (b) Equator One Pte Limited (a) Lotun Technology Limited (b) Hong Kong Hong Kong Malaysia Singapore Hong Kong Macau 100 100 100 100 100 100 100 100 100 100 100 Inactive Note (i) Note (i) Note (i) Investment holding Note (i) British Virgin Islands (“BVI”) BVI 100 100 100 100 Investment holding Inactive

Singapore Hong Kong

100 100

100 100

Note (i) Trading of broadband internet equipment and network security software Investment holding

Packet Systems Pte Ltd. (a)

Singapore

100

100

annual report 2008 89

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
16. SUBSIDIARIES - continued
Country of incorporation/ operation Proportion of ownership interest and voting power held 2008 % 2007 %

Name of subsidiary

Principal activities

Held by DMX Technologies (China) Limited Beijing DMX Technologies Limited (b) Held by Packet Systems Pte Ltd. DMX Technologies Korea Co. Ltd. (c) Packet Systems (Malaysia) Sdn Bhd (c) PT Packet Systems Indonesia (c) Korea Malaysia Indonesia 100 100 60 100 100 60 Note (i) Note (i) Note (i) PRC 100 100 Note (i)

Note (i): The principal activities of these subsidiaries are the provision, installation consultation, support of broadband internet equipment, network security software and services, and business software system architecture design, implementation and delivery.
(a) (b) (c)

Audited by Deloitte & Touche LLP, Singapore Audited by overseas practices of Deloitte Touche Tohmatsu Audited by other auditors

90 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
17. INTEREST IN A JOINTLY CONTROLLED ENTITY
2008 US$’000 2007 US$’000

Unquoted equity shares, at cost Share of post-acquisition loss

1,071 (543) 528

-

As at 31 December 2008, the Group had interest in the following jointly controlled entity:
Place/ Country of incorporation Principal place of operation Proportion of ownership interest power held

Name of entity

Principal activity

Beijing Baustern Info-Tech Ltd. (a) (“Beijing Baustern”)
(a)

PRC

PRC

55% (Note)

Provision of research and development of technologies for the digital media market

Reviewed by overseas practices of Deloitte Touche Tohmatsu.

Note: The directors are of view that the above is a jointly controlled entity and is to be equity accounted for the following reasons: i) ii) although Beijing DMX Technologies Limited appointed three out of the five directors in the board, more than 2/3 of the directors are required to approve major events; while Beijing DMX Technologies Limited is mainly responsible for sales and marketing function, and other joint venture party is responsible for the production using the know-how that they have invested at fair value, on the development of new generation conditional access technologies for the digital market; and the daily operations are administered by a general manager appointed by the other joint venture party.

iii)

The financial information in respect of the Group’s interest in the jointly controlled entity which are accounted for using the equity method is set out below:
2008 US$’000

Current assets Non-current assets Current liabilities

203 1,210 (135)
2008 US$’000

Income Expenses

150 1,137

annual report 2008 91

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
18. AVAILABLE-FOR-SALE INVESTMENT
THE GROUP 2008 US$’000 2007 US$’000

Unquoted equity shares, at cost Less: impairment loss

2,227 (2,227) -

2,227 2,227

As at 31 December 2008, the Group holds 19.9% (2007 : 19.9%) interest in Complete TV Limited. The above available-for-sale investment is measured at cost less impairment at each balance sheet date because the range of reasonable fair value estimates is so significant that the directors of the Group are of the opinion that their fair value cannot be measured reliably. The market conditions and financial performance of Complete TV Limited have deteriorated during the year. Accordingly, the directors have made full impairment for the investment. The Group’s available-for-sale investment is denominated in British pound. 19. DEFERRED (ASSETS) LIABILITIES
THE GROUP 2008 US$’000 2007 US$’000

Deferred tax assets Deferred tax liabilities The movements for the year in deferred tax position were as follows:
THE GROUP Accelerated tax deprecation US$’000 Other timing differences * US$’000

(80) 688 608

(32) 421 389

Tax losses US$’000

Total US$’000

At 1 January 2007 Charge (credit) to profit or loss for the year (Note 31) At 31 December 2007 Charge to profit or loss for the year (Note 31) Effect of change in tax rate At 31 December 2008
*

354 354 708 227 (39) 896

4 (323) (319) 14 17 (288)

(215) 215 -

143 246 389 241 (22) 608

Other timing differences relate mainly to allowances for doubtful debts.

92 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
20. BANK LOANS
THE GROUP 2008 US$’000 2007 US$’000

Bank loans Less: Amount due for settlement within twelve months (shown under current liabilities) Amount due for settlement after twelve months (within 2 to 5 years)

7,317 (7,317) -

14,766 (12,566) 2,200

The bank loans are unsecured, bear floating interest ranging from 3.42% to 8.28% (2007 : 4.25% to 8.88%) per annum. The Group’s bank loans that are not denominated in the functional currencies of the respective entities are as follows:
THE GROUP 2008 US$’000 2007 US$’000

United States dollars Korean Won Hong Kong dollars

2,957 -

241 2,924

Directors are of the view that the carrying amount of the bank loans approximates their fair value. The bank loans are secured by pledged deposits of approximately US$8,616,000 (2007 : US$5,144,000) and US$1,382,000 (2007 : US$Nil) of the Group and Company respectively (Note 7). 21. TRUST RECEIPT LOANS At 31 December 2008, the trust receipt loans are secured by bank deposits of US$8,616,000 (2007 : US$5,144,000) (Note 7), bear floating interest ranging from 2.3% to 6.0% (2007 : 7.25% to 8.25%) per annum and are denominated in United States dollars.

annual report 2008 93

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
22. TRADE PAYABLES
THE GROUP 2008 US$’000 2007 US$’000

Outside parties

10,675

11,874

The average credit period on purchases of goods is 60 days (2007 : 60 days). No interest is charged on the outstanding balances. Trade creditors principally comprise amounts outstanding for trade purchases and ongoing costs. The Group’s trade payables that are not denominated in the functional currencies of the respective entities are as follows:
THE GROUP 2008 US$’000 2007 US$’000

United States dollars Hong Kong dollars 23. OTHER PAYABLES
THE GROUP 2008 US$’000 2007 US$’000

4,472 -

510

THE COMPANY 2008 US$’000 2007 US$’000

Deferred purchase consideration Accrued expenses Other payables

4,124 8,346 12,470

600 4,288 6,201 11,089

261 261

184 184

The Group’s and Company’s other payables are substantially denominated in the functional currencies of the respective entities. As at 31 December 2007, other payables included deferred purchase consideration of US$600,000 for the acquisition of subsidiaries in previous years, which was subject to adjustments depending on the level of actual profits achieved in the subsequent financial years. The consideration was settled by way of cash during the year.

94 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
24. SHARE CAPITAL
GROUP AND COMPANY 2008 2007 2008 US$’000 2007 US$’000 Number of ordinary shares of US$0.05 each (‘000)

Authorised: At the beginning of year Increase on 30 April 2008 At the end of year Issued and paid up: Ordinary shares of US$0.05 each At the beginning of year Shares issued during the year (Note) At the end of year

600,000 900,000 1,500,000

600,000 600,000

30,000 45,000 75,000

30,000 30,000

460,960 70,450 531,410

460,960 460,960

23,048 3,523 26,571

23,048 23,048

Note: On 22 October 2008, the Company completed the rights issue by issuing 70,450,082 ordinary shares of US$0.05 each on the basis of one rights share for every two existing shares held on 25 September 2008, at an exercise price of S$0.15 (equivalent to US$0.1019) per share. 25. SHARE - BASED PAYMENT Equity - settled share option scheme: A share option scheme was adopted by the Company pursuant to a resolution passed on 12 November 2002 (the “Scheme”). The board of directors of the Company may grant options to any eligible director and employee of the Group to subscribe for shares in the Company. The options under the Scheme grant the right to the holder to subscribe for new ordinary shares of the Company at a discount to market price of the share (subject to a maximum limit of 20%) or at a price equal to the average of the closing prices of the shares on the SGX-ST on the five trading days immediately preceding the date of the grant of the option. The maximum number of shares in respect of which options may be granted under the Scheme shall not exceed 15% of the issued share capital of the Company on the date preceding the date of the relevant grant. The vesting period is 1 year. Once the options are vested, they are exercisable for a contractual option term of 10 years. Each option grants the holder the right to subscribe for one ordinary share of US$0.05 each in the Company. The options granted may be exercised in full or in part thereof. The holders do not have the right to participate by virtue of the options in any share issue of other companies in the Group. Options granted are cancelled when the holder is no longer a full-time employee of the Company or any corporations in the Group subject to certain exceptions at the discretion of the Remuneration Committee. The above share option scheme is administered by a Remuneration Committee which has been authorised to determine the terms and conditions of the grant of the options.

annual report 2008 95

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
25. SHARE - BASED PAYMENT - continued Details of the share options outstanding during the year are as follows:
THE GROUP AND COMPANY 2008 2007 Number of share options Weighted average exercise price S$ Number of share options Weighted average exercise price S$

Outstanding at the beginning of the year Granted during the year Adjustment (Note) Cancelled during the year Outstanding at the end of the year Exercisable at the end of the year

19,075,000 38,000,000 2,240,257 (16,068,000) 43,247,257 3,327,677

0.60 0.16 0.29 0.575 0.20

8,789,000 18,000,000 (7,714,000) 19,075,000 3,007,000

0.92 0.575 0.89 0.60

The option outstanding at the end of the year have a weighted average remaining contractual life of 9 years (2007 : 8 years). Note: The number and exercise price of the share options were adjusted as a result of the completion of a right issue in the proportion of one right share for every two existing shares held on 25 September 2008. The exercise prices shown above represent the adjusted exercise prices as at 31 December 2008. The estimated fair values of the options granted on 25 April 2008 and 28 November 2008 (2007 : 4 May 2007) were approximately US$1,329,000 and US$674,000 respectively (2007 : US$2,610,000). The fair value for share options granted during the year were calculated using the Black-Scholes pricing model. The inputs into the model were as follows:
2008 2007

Grant date share price (S$) Exercise price (S$) Expected volatility Expected life Risk free rate Expected dividend yield

0.25 0.226 44.93% 5.5 years 1.93% -

0.09 0.093 63.04% 5.5 years 1.53% -

0.605 0.575 39% 4.75 years 2.52% -

Expected volatilities were determined by calculating the historical volatility of the Company’s share price over the previous 780 days and 932 days for the options granted on 25 April 2008 and 28 November 2008 respectively. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Group and the Company recognised total expenses of US$708,000 (2007 : US$1,159,000) related to equity-settled share-based payment transactions during the year.

96 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
26. REVENUE
THE GROUP 2008 US$’000 2007 US$’000

Sale of goods Service income Total 27. OTHER OPERATING INCOME

162,734 10,010 172,744

156,332 5,220 161,552

THE GROUP 2008 US$’000 2007 US$’000

Interest income from bank deposits Others Total 28. ADMINISTRATIVE EXPENSES

448 242 690

1,122 155 1,277

THE GROUP 2008 US$’000 2007 US$’000

Staff costs (including directors’ remuneration) Depreciation expense Office rental expenses Other expenses Total 29. OTHER OPERATING EXPENSES

4,639 3,414 1,310 4,341 13,704

5,032 2,506 1,046 3,004 11,588

THE GROUP 2008 US$’000 2007 US$’000

Allowance for doubtful trade and other receivables Allowance for inventories Amortisation expense Impairment loss on available-for-sale investment Share-based payment expenses Inventories written off Loss on disposal of property, plant and equipment

3,109 152 8,443 2,227 708 552 60 15,251

218 281 3,726 1,159 26 5,410

annual report 2008 97

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
30. FINANCE COSTS
THE GROUP 2008 US$’000 2007 US$’000

Interest expense on: - obligations under finance leases - bank loans, trust receipt loans and bank overdrafts

15 812 827

20 979 999

31.

INCOME TAX EXPENSE
THE GROUP 2008 US$’000 2007 US$’000

The income tax charge comprises: Current tax Deferred tax (Note 19) - Current year - Attributable to a change in tax rate (Over) under provision in prior years 1,169 241 (22) (21) 1,367 1,006 246 154 1,406

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment 2008 and 2009. Therefore, income tax is calculated at Hong Kong Profits Tax of 16.5% (2007 : 17.5%) of the estimated assessable profits for the year. Income tax expense arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. The tax charge for the year can be reconciled to the accounting profit as follows:
2008 US$’000 2007 US$’000

Profit before income tax Tax at Hong Kong Profits Tax of 16.5% (2007 : 17.5%) Tax effect of non-taxable income Tax effect of non-deductible expenses Effect of different tax rates of subsidiaries operating in other jurisdictions (Over) under provision in prior years Effect on deferred tax balance due to the change in income tax rate Others Tax charge for the year

4,946 816 (92) 1,640 (1,084) (21) (22) 130 1,367

10,696 1,872 (240) 2,112 (2,515) 154 23 1,406

98 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
32. PROFIT FOR THE YEAR
THE GROUP 2008 US$’000 2007 US$’000

Profit for the year has been arrived at after charging (crediting): Depreciation and amortisation: Depreciation expense Amortisation expense Total depreciation and amortisation Director’s fee Directors’ remuneration: - of the Company - of the Subsidiaries Total directors’ remuneration Employee benefits expense (including directors’ remuneration) Share-based payments - Equity settled Defined contribution plans Salaries Total employee benefits expense Allowances for doubtful trade receivables and other receivables Allowances for inventories Inventories written off Impairment loss on available-for-sale equity investment Cost of inventories recognised as expense Net foreign exchange loss (gain) Loss on disposal of property, plant and equipment Fair value change of other financial assets Non-audit fees: - paid to auditor of the Company - paid to other auditors 33. DIVIDENDS For the year ended 31 December 2007, a dividend of 0.65 US cents per share (total dividend of US$3,019,000) was paid to shareholders. 3,414 8,443 11,857 92 748 812 1,560 708 709 11,289 12,706 3,109 152 552 2,227 127,056 1,307 60 (75) 2 3 2,506 3,726 6,232 92 381 1,065 1,446 1,159 742 12,107 14,008 218 281 122,108 (198) 26 22 6

annual report 2008 99

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
34. EARNINGS PER SHARE
THE GROUP 2008 Basic US$’000 Diluted US$’000 Basic US$’000 2007 Diluted US$’000

Profit for the year attributable to equity holders of the Company

3,230

3,230

9,185

9,185

No. of shares ‘000

No. of shares ‘000

Weighted average number of ordinary shares Adjustment for potential dilutive ordinary shares Weighted average number of ordinary shares used to compute earnings per share Earnings per share (US cents)

474,627 474,627 0.68

474,627 474,627 0.68

460,960 460,960 1.99

460,960 2,396 463,356 1.98

The potential ordinary shares attributable to the Company’s outstanding share options has anti-dilutive effect for current period because the exercise price of share options outstanding was higher than the average market price for shares for 2008. 35. NON-CASH TRANSACTIONS During the year ended 31 December 2007, the Group had the following non-cash transactions: (a) (b) Additions to plant and equipment amounting to US$124,000 were financed by new finance lease. Additions to available-for-sale investment amounting to US$2,227,000 were settled by advance from a third party.

36.

CONTINGENT LIABILITIES
THE GROUP 2008 US$’000 2007 US$’000

Corporate guarantee given to a bank in respect of banking facilities granted to a third party, unsecured

579

-

100 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
37. COMMITMENTS
THE GROUP 2008 US$’000 2007 US$’000

Commitments for the acquisition of unquoted equity interest Commitments for the additional investment in a jointly controlled entity

387 387

4,500 4,500

38.

OPERATING LEASE ARRANGEMENTS
THE GROUP 2008 US$’000 2007 US$’000

Minimum lease payments paid under operating leases recognised as an expense in the year

1,310

1,046

At the balance sheet date, the Group has outstanding commitment under non-cancellable operating leases, which fall due as follows:
2008 US$’000 2007 US$’000

Within one year In the second to fifth year inclusive Total

769 563 1,332

1,129 793 1,922

Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated and rentals are fixed for an average term of two to three years. 39. RELATED PARTY TRANSACTIONS Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. During the year, the Group entered into the following transaction with a related party:
THE GROUP 2008 US$’000 2007 US$’000

Purchase of goods A jointly controlled entity

150

-

annual report 2008 101

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
40. GEOGRAPHICAL AND BUSINESS SEGMENT INFORMATION Business segments The Group operates primarily in the following segments - infrastructure solution, managed services, digital media solution and multi-media software. Segment revenue and expenses: Segment revenue and expenses are the operating revenue and expenses reported in the Group’s income statement that are directly attributable to a segment and the relevant portion of such revenue and expenses that can be allocated on a reasonable basis to a segment. Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of operating receivables, inventories and property, plant and equipment, net of allowances and provisions. Capital expenditure includes the total costs incurred to acquire property, plant and equipment, and intangible assets directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of accounts payable and accrued expenses.
Infrastructure solution US$’000 Managed services US$’000 Digital media solution US$’000 Multi-media software US$’000 Total US$’000

2008 REVENUE External revenue RESULT Segment result Unallocated other operating income Unallocated corporate expenses Share of result of a jointly controlled entity Finance costs Profit before income tax Income tax expense Profit for the year ASSETS Segment assets Interests in a jointly controlled entity Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities Unallocated corporate liabilities Consolidated total liabilities 109,622 11,727 10,010 4,095 39,530 9,759 13,582 6,969 (543) 172,744 32,550 690 (26,924) (543) (827) 4,946 (1,367) 3,579 194,244 528 25,621 220,393 20,349 15,001 35,350

117,692 -

3,466 -

42,765 -

30,321 528

16,988

579

1,396

1,386

102 annual report 2008

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
40. GEOGRAPHICAL AND BUSINESS SEGMENT INFORMATION - continued
Infrastructure solution US$’000 Managed services US$’000 Digital media solution US$’000 Multi-media software US$’000 Total US$’000

2007 REVENUE External revenue RESULT Segment result Unallocated other operating income Unallocated corporate expenses Finance costs Profit before income tax Income tax expense Profit for the year ASSETS Segment assets Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities Unallocated corporate liabilities Consolidated total liabilities 108,348 988 30,863 17,132 120,609 20,176 5,220 3,694 28,308 5,659 7,415 5,623 161,552 35,152 1,277 (24,734) (999) 10,696 (1,406) 9,290 157,331 57,322 214,653 20,182 21,387 41,569

16,457

948

2,777

-

Information on depreciation, capital additions and other non-cash expenses were not disclosed as it is impracticable to allocate to each of the primary business segments given the nature of the business.

annual report 2008 103

NOTEs TO ThE CONsOLIdATEd FINANCIAL sTATEMENTs
FOR ThE YEAR ENdEd 31 dECEMBER 2008
40. GEOGRAPHICAL AND BUSINESS SEGMENT INFORMATION - continued Geographical segments The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services:
Revenue 2008 US$’000 2007 US$’000

China (including Hong Kong and Macao) Non-China

122,285 50,459 172,744

117,140 44,412 161,552

The following is an analysis of the carrying amount of segment assets, additions to property, plant and equipment and additions to intangible assets, analysed by the geographical area in which the assets are located:
Carrying amount of segment assets 2008 US$’000 2007 US$’000 Additions to property, plant and equipment 2008 US$’000 2007 US$’000 Additions to intangible assets 2008 US$’000 2007 US$’000

China (including Hong Kong and Macao) Non-China

179,633 40,760 220,393

145,022 69,631 214,653

3,558 695 4,253

3,015 974 3,989

10,808 10,808

10,244 3,663 13,907

104 annual report 2008

sTATEMENT OF dIRECTORs
In the opinion of the directors, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company as set out on pages 52 to 103 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008, and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year then ended and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts when they fall due.

On behalf of the Board of Directors

Emmy Wu Hong Kong 31 March 2009

Jismyl Teo Chor Khin

annual report 2008 105

sTATIsTICs OF shAREhOLdINGs
As AT 16 MARCh 2009
Authorised share capital Issued and fully paid-up capital Total no. of issued shares excluding treasury shares Total no. of treasury shares Class of shares Voting rights : : : : : : US$75,000,000.00 US$26,570,509.00 531,410,184 Nil Ordinary share of US$0.05 each One vote per share

DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholdings No. of Shareholders % No. of Shares %

1 - 999 1,000 - 10,000 10,001 - 1,000,000 1,000,001 AND ABOVE TOTAL TWENTY LARGEST SHAREHOLDERS
No. Name

16 1,788 1,973 32 3,809

0.42 46.94 51.80 0.84 100.00

5,091 12,612,524 106,043,088 412,749,481 531,410,184

0.00 2.37 19.96 77.67 100.00

No. of Shares

%

1 VENTURE CORPORATION LIMITED 2 UOB KAY HIAN PTE LTD 3 CIMB BANK NOMINEES (S) SDN BHD 4 HSBC (SINGAPORE) NOMINEES PTE LTD 5 WATERWORTH PTE LTD 6 DBS NOMINEES PTE LTD 7 NEO AIK SOO 8 LIM & TAN SECURITIES PTE LTD 9 OCBC SECURITIES PRIVATE LTD 10 VIBRANT CAPITAL PTE LTD 11 SUNFIELD PTE LTD 12 KIM ENG SECURITIES PTE. LTD. 13 CITIBANK NOMINEES SINGAPORE PTE LTD 14 CIMB-GK SECURITIES PTE. LTD. 15 CHAN CHI KWONG STANLEY 16 DBS VICKERS SECURITIES (S) PTE LTD 17 HONG LEONG FINANCE NOMINEES PTE LTD 18 HL BANK NOMINEES (S) PTE LTD 19 CITIBANK CONSUMER NOMINEES PTE LTD 20 PHILLIP SECURITIES PTE LTD TOTAL

142,500,000 75,717,975 34,733,647 24,169,196 19,000,000 15,444,600 10,620,000 10,052,667 9,934,000 8,900,000 7,000,000 5,543,000 5,532,500 4,980,000 4,724,000 3,166,000 3,145,000 3,111,000 2,703,000 2,499,000 393,475,585

26.82 14.25 6.54 4.55 3.58 2.91 2.00 1.89 1.87 1.67 1.32 1.04 1.04 0.94 0.89 0.60 0.59 0.59 0.51 0.47 74.07

106 annual report 2008

sTATIsTICs OF shAREhOLdINGs
As AT 16 MARCh 2009
SUBSTANTIAL SHAREHOLDERS Substantial shareholders of the Company (as recorded in the Register of Substantial Shareholders) as at 16 March 2009
No. of Ordinary shares of US$0.05 each Name Direct Interest % Indirect Interest %

Venture Corporation Limited Fast Worth Management Limited Group Equity International Limited Jim Cheung Chung Wah Jismyl Teo Chor Khin Emmy Wu Aegis Portfolio Managers Pte Ltd and Aegis Private Capital Pte Ltd

142,500,000 30,267,295 34,133,647 1,875,000 1,125,000

26.82% 5.70% 6.42% 0.35% 0.21%

30,267,295 1 55,167,967 2 43,283,647 3 32,800,000 4

5.70% 10.38% 8.15% 6.17%

Notes : 1. Mr Jim Cheung Chung Wah is deemed to be interested in the 30,267,295 shares held by Fast Worth Management Limited (“FWML”) by virtue of the fact that he is the sole shareholder of FWML. 2. Ms Jismyl Teo Chor Khin is deemed to be interested in the 21,034,320 shares held by Eagle One Consultants Limited (“EOCL”) and 34,133,647 shares held by Group Equity International Limited (“GEIL”) by virtue of the fact that she is the sole shareholder and joint shareholder in EOCL and GEIL respectively. Mr Emmy Wu is deemed to be interested in 9,150,000 shares held by Hubbard Management Limited (“HML”) and 34,133,647 shares held by Group Equity International Ltd (“GEIL”) by virtue of the fact that he is the sole shareholder and joint shareholder in HML and GEIL. Aegis Portfolio Managers Pte Ltd and Aegis Private Capital Pte Ltd is full discretion fund management companies and are deemed to be interested in the 32,800,000 shares held on behalf of their clients.

3.

4.

FREE FLOAT As at 16 March 2009, approximately 49% of the issued share capital of the Company was held in the hands of the public (on the basis of information available to the Company.

annual report 2008 107

NOTICE OF ANNUAL GENERAL MEETING
dMX TEChNOLOGIEs GROUP LIMITEd
(INCORPORATED IN BERMUDA) NOTICE IS HEREBY GIVEN that the Annual General Meeting of DMX Technologies Group Limited (the “Company”) will be held at Amara Hotel Singapore, Level 3, Connection 1, 165 Tanjong Pagar Road, Singapore 088539 on Thursday, 30 April 2009 at 10.30 a.m. for the following purposes: AS ORDINARY BUSINESS 1. 2. To receive and adopt the Directors’ Report and Audited Accounts of the Company for the financial year ended 31 December 2008 together with the Auditors’ Report thereon. (Resolution 1) To re-elect Mr Jim Cheung Chung Wah, who is retiring pursuant to Bye-law 104 of the Bye-laws of the Company. (Resolution 2) Mr Jim Cheung Chung Wah will, upon re-election as a director of the Company, remain as the member of the Audit Committee and Remuneration Committee. 3. To re-elect Mr Foo Meng Tong, who is retiring pursuant to Bye-law 104 of the Bye-laws of the Company. (Resolution 3) Mr Foo Meng Tong will, upon re-election as a director of the Company, remain as the chairman of the Audit Committee and Nominating Committee and member of the Remuneration Committee and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited. 4. 5. 6. To approve the payment of Directors’ fees of S$124,190/- for the financial year ended 31 December 2008 (2007: S$124,190/-). (Resolution 4) To re-appoint Messrs Deloitte & Touche LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 5) To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

AS SPECIAL BUSINESS To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications: 7. Authority to allot and issue shares up to fifty per cent (50%) of total number of issued shares excluding treasury shares of the Company – Ordinary Resolution “That authority be and is hereby given to the Directors of the Company to: (a) (i) (ii) issue ordinary shares in the capital of the Company (“Shares”) whether by way of rights, bonus or otherwise; and/or make or grant offers, agreements or options (collectively, “Instruments”) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and

108 annual report 2008

NOTICE OF ANNUAL GENERAL MEETING
dMX TEChNOLOGIEs GROUP LIMITEd
(INCORPORATED IN BERMUDA) (b) (notwithstanding the authority conferred by this Resolution 6 may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the Directors while this Resolution 6 was in force,

provided that: (1) the aggregate number of Shares to be issued pursuant to this Resolution 6 (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution 6) does not exceed 50% of the issued Shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of Shares to be issued other than on a pro rata basis to shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution 6) does not exceed 20% of the issued Shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with paragraph (2) below); and (subject to such manner of calculation as may be prescribed by Singapore Exchange Securities Trading Limited (“SGX-ST”), for the purpose of determining the aggregate number of Shares that may be issued under paragraph (1) above, the percentage of issued Shares (excluding treasury shares) shall be based on the number of issued Shares (excluding treasury shares) in the capital of the Company at the time this Resolution 6 is passed, after adjusting for: (i) (ii) (3) new Shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time this Resolution 6 is passed; and any subsequent bonus issue, consolidation or sub-division of Shares;

(2)

in exercising the authority conferred by this Resolution 6, the Company shall comply with the requirements imposed by the SGX-ST from time to time and the provisions of the Listing Manual of the SGX-ST for the time being in force (in each case, unless such compliance has been waived by the SGX-ST), all applicable legal requirements under the Companies Act 1981 of Bermuda (“Companies Act”) and otherwise, and the Bye-Laws for the time being of the Company; and (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution 6 shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” [See Explanatory Note (i)] (Resolution 6)

(4)

annual report 2008 109

NOTICE OF ANNUAL GENERAL MEETING
dMX TEChNOLOGIEs GROUP LIMITEd
(INCORPORATED IN BERMUDA) 8. Authority to allot and issue shares up to one hundred per cent. (100%) of the total number of issued shares excluding treasury shares of the Company on a pro rata basis by way of a renounceable issue – Ordinary Resolution “That authority be and is hereby given to the Directors of the Company to: (a) (i) (ii) issue Shares whether by way of rights, bonus or otherwise; and/or make or grant Instruments that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and (b) (notwithstanding the authority conferred by this Resolution 7 may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the Directors while this Resolution 7 was in force,

provided that: (1) the aggregate number of Shares to be issued pursuant to this Resolution 7 on a pro rata basis to shareholders of the Company by way of a renounceable issue (other than a bonus issue) (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution 7) does not exceed 100% (or such other limit permitted by the SGX-ST from time to time) of the issued Shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), and in determining whether such 100% limit has been reached, all Shares to be issued pursuant to this Resolution 7 or Resolution 6 (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution 7 or Resolution 6) shall be taken into account (unless the SGX-ST’s prevailing regulations and requirements otherwise provide); (subject to such manner of calculation as may be prescribed by the SGX-ST), for the purpose of determining the aggregate number of Shares that may be issued under paragraph (1) above, the percentage of issued Shares (excluding treasury shares) shall be based on the number of issued Shares (excluding treasury shares) in the capital of the Company at the time this Resolution 7 is passed, after adjusting for: (i) (ii) (3) new Shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time this Resolution 7 is passed; and any subsequent bonus issue, consolidation or sub-division of Shares;

(2)

in exercising the authority conferred by this Resolution 7, the Company shall comply with the requirements imposed by the SGX-ST from time to time and the provisions of the Listing Manual of the SGX-ST for the time being in force (in each case, unless such compliance has been waived by the SGX-ST), all applicable legal requirements under the Companies Act and otherwise, and the Bye-Laws for the time being of the Company; and (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution 7 shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” [See Explanatory Note (ii)] (Resolution 7)

(4)

110 annual report 2008

NOTICE OF ANNUAL GENERAL MEETING
dMX TEChNOLOGIEs GROUP LIMITEd
(INCORPORATED IN BERMUDA) 9. Authority to allot and issue shares on a non-pro rata basis at a discount exceeding 10% but not more than 20% – Ordinary Resolution “That without prejudice to the generality of, and pursuant and subject to the approval of the general mandate to issue Shares set out in Resolution 6, authority be and is hereby given to the Directors of the Company to issue Shares on a non-pro rata basis to shareholders of the Company, at a discount to the weighted average price of the Shares for trades done on the SGX-ST for the full market day on which the placement or subscription agreement is signed (or if not available, the weighted average price based on the trades done on the preceding market day), exceeding 10% but not more than 20%, at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit, provided that: (a) in exercising the authority conferred by this Resolution 8, the Company shall comply with the requirements imposed by the SGX-ST from time to time and the provisions of the Listing Manual of the SGX-ST for the time being in force (in each case, unless such compliance has been waived by the SGX-ST), all applicable legal requirements under the Companies Act and otherwise, and the Bye-Laws for the time being of the Company; and (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution 8 shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” [See Explanatory Note (iii)] (Resolution 8)

(b)

10.

Authority to grant options and issue shares under the DMX Employee Share Option Scheme “That the Directors be and are hereby empowered to grant options, and to allot and issue from time to time such number of shares as may be required to be issued pursuant to the exercise of options granted under the DMX Employee Share Option Scheme (the “Scheme”) provided always that the aggregate number of shares in respect of which such options may be granted and which may be issued pursuant to the Scheme shall not exceed fifteen per cent. (15%) of the total number of issued shares excluding treasury shares of the Company from time to time.” [See Explanatory Note (iv)] (Resolution 9)

By Order of the Board

Jismyl Teo Chor Khin Company Secretary Singapore 13 April 2009

annual report 2008 111

NOTICE OF ANNUAL GENERAL MEETING
dMX TEChNOLOGIEs GROUP LIMITEd
(INCORPORATED IN BERMUDA) Explanatory Notes: (i) Ordinary Resolution 6 is to empower the Directors, from the date of the passing of Ordinary Resolution 6 to the date of the next Annual General Meeting, to issue Shares in the capital of the Company and to make or grant Instruments (such as warrants or debentures) convertible into Shares, and to issue Shares in pursuance of such Instruments, up to an amount not exceeding in total 50% of the issued Shares (excluding treasury shares) in the capital of the Company, with a sub-limit of 20% of the issued Shares (excluding treasury shares) for issues other than on a pro rata basis to shareholders. For the purpose of determining the aggregate number of Shares that may be issued, the percentage of issued Shares shall be based on the number of issued Shares (excluding treasury shares) in the capital of the Company at the time that Ordinary Resolution 6 is passed, after adjusting for (a) new Shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that Ordinary Resolution 6 is passed, and (b) any subsequent bonus issue, consolidation or sub-division of Shares. In exercising the authority conferred by Ordinary Resolution 6, the Company shall comply with the requirements of the SGX-ST (unless waived by the SGX-ST), all applicable legal requirements and the Company’s Bye-Laws. (ii) Ordinary Resolution 7 is to empower the Directors, from the date of the passing of Ordinary Resolution 7 to the date of the next Annual General Meeting, to issue Shares in the capital of the Company and to make or grant Instruments (such as warrants or debentures) convertible into Shares, and to issue Shares in pursuance of such Instruments, up to an amount not exceeding in total 100% of the issued Shares (excluding treasury shares) in the capital of the Company, on a pro rata basis to shareholders by way of a renounceable issue. For the purpose of determining the aggregate number of Shares that may be issued, Shares issued pursuant to Ordinary Resolution 6 shall also be counted in determining whether the 100% limit has been reached, and the percentage of issued Shares shall be based on the number of issued Shares (excluding treasury shares) in the capital of the Company at the time that Ordinary Resolution 7 is passed, after adjusting for (a) new Shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that Ordinary Resolution 7 is passed, and (b) any subsequent bonus issue, consolidation or sub-division of Shares. In exercising the authority conferred by Ordinary Resolution 7, the Company shall comply with the requirements of the SGX-ST (unless waived by the SGX-ST), all applicable legal requirements and the Company’s Bye-Laws. On 19 February 2009, the SGX-ST released a press release of new measures effective on 20 February 2009 (the “Press Release”); the new measures include allowing issuers to issue up to 100% of its issued share capital via a pro rata renounceable rights issue, subject to the condition that the issuer makes periodic announcements on the use of the proceeds as and when the funds are materially disbursed and provides a status report on the use of proceeds in its annual report. The Press Release states that this new measure will be in effect until 31 December 2010 when it will be reviewed by the SGX-ST. Ordinary Resolution 8 is to empower the Directors, pursuant to the general mandate to issue Shares set out in Ordinary Resolution 6, to issue Shares on a non-pro rata basis to shareholders of the Company, at a discount to the weighted average price of the Shares on the SGX-ST for the full market day on which the placement or subscription agreement is signed (or if not available, the weighted average price based on the trades done on the preceding market day), exceeding 10% but not more than 20%. In exercising the authority conferred by Ordinary Resolution 8, the Company shall comply with the requirements of the SGX-ST (unless waived by the SGX-ST), all applicable legal requirements and the Company’s Bye-Laws. Rule 811(1) of the SGX-ST Listing Manual presently provides that an issue of shares must not be priced at more than 10% discount to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement is signed (or if not available, the weighted average price based on the trades done on the preceding market day). The Press Release also included a new measure allowing issuers to undertake placements of new shares using the general mandate to issue shares, priced at discounts of up to 20%, subject to the conditions that the issuer seeks shareholders’ approval in a separate resolution at a general meeting to issue new shares on a non-pro rata basis at a discount exceeding 10% but not more than 20%, and the general share issue mandate resolution is not conditional on this resolution. Ordinary Resolution 8 has been included following this new measure. The Press Release states that this new measure will also be in effect until 31 December 2010 when it will be reviewed by the SGX-ST. Ordinary Resolution 9 proposed in item 10 above, if passed, will empower the Directors of the Company, to grant options and to allot and issue shares upon the exercise of such options in accordance with the Scheme.

(iii)

(iv)

112 annual report 2008

NOTICE OF ANNUAL GENERAL MEETING
dMX TEChNOLOGIEs GROUP LIMITEd
(INCORPORATED IN BERMUDA) Notes: (1) If a shareholder of the Company, being a Depositor (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore) whose name appears in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore) wishes to attend and vote at the Annual General Meeting, he must be shown to have shares entered against his name in the Depository Register, as certified by The Central Depository (Pte) Limited, at least 48 hours before the time of the Annual General Meeting. (2) If a Depositor wishes to appoint a proxy/proxies, then the Depositor Proxy Form must be completed, signed and deposited at the office of the Company’s Singapore share transfer agent, Boardroom Corporate & Advisory Services Pte. Ltd. at 3 Church Street #08-01, Samsung Hub, Singapore 049483, at least 48 hours before the time of the Annual General Meeting.

(Regn. No.: 31201)

1401 Stanhope House, 738 King’s Road, Quarry Bay, Hong Kong - Tel: (852) 2520 2660 Fax: (852) 2802 2062 10 Hoe Chiang Road, Keppel Towers #16-03, Singapore 089315 - Tel (65) 6536 9923 Fax: (65) 6538 7566 www.dmxtechnologies.com