we have made a lot of - otc markets

We have made a lot of

DMX TECHNOLOGIES GrOup LIMITEDaNNuaL rEpOrT 2011

Contents

13Chairman’sStatement 16

CEO’sStatement

22Board ofDirectors

29Directorships

30Key

Management

32regionalCoverage

33BusinessSegments

34Financial

Highlights

36Corporate

Information

37Corporate

Governance

...but there is still a

lot more progress to be made.

Over the years we have successfully expanded into the region and made our presence felt in the

fastest growing digital market in the world.

In the course of our journey, a synergistic partnership with KDDI, Japan’s second largest telecommunications provider has enabled us to expand our service offerings in the markets that we serve.

We see great potential in the lands of Asia and have begun...

planting the seeds of

growth for the future.

nurturing the growth of our

business,

With our experience, expertise and with

the right people

we are on our way to harvest the fruits of our labour…

...and transform ourselves from a system integrator to a total solutions provider.

Chairman’s Statement

13

planting the Seeds of progressWith the foundations laid in 2010, we planted the seeds of progress.

On the Digital Media front, we launched Vision CEP at the China Content Broadcasting Network Exhibition (“CCBN”) to 85,000 industry professionals from 30 countries. Vision CEP is an intelligent content discovery platform that enables Fixed, Mobile and Broadcasting Convergence (“FMBC”) – the simultaneous adaptation and sharing of content across TV, Internet and mobile phones. It is a solution that rides on China’s network convergence and paves the way for other value-added services across multiple web-based sources.

In addition, Vision Targeted Advertising (“Vision TA”), a DMX-owned solution, was rolled out to provide operators additional revenue streams. Vision TA enables commercial advertisements to be accurately addressed to targeted groups or individuals according to demographics, consumption habits and the advertiser’s campaign objectives. Vision CEP and Vision TA were adopted by Jiangsu Cable and Changsha Cable, both the firsts by cable operators in Asia Pacific. We are proud of these partnerships as they are recognition of our collaboration with KDDI and showcase our software skills and capability to the Chinese cable market.

According to technology industry research firm, iSuppli, shipment of smart phones to China is forecasted to more than triple to 188 million units in 2015 from 52 million units in 2011. To leverage on the increasing demand for smart phones in China, we launched D-Smart, a platform which offers a wide variety of cloud-based mobile applications. The applications, offered as software as a service (“SaaS”) under our New Media Services division, are advanced technologies from KDDI that seek to generate recurring income streams.

Such progress would not have been possible without the synergistic partnership with Japan’s second largest telco, KDDI Corporation, as it gave us access to their suite of proprietary applications via a technology transfer programme. By localizing and adapting the tried-and-tested Japanese solutions for use in China, we were able to launch new offerings and gain traction quickly in a new market.

Steady Growth performanceWe are pleased to report a strong finish for the Group with a 19.6% year on year (“yoy”) climb in net profit to US$18.6 million on the back of a 24.1% increase in revenue to US$335.7 million. This marks the fourth year of record breaking growth for us, enhanced by strong 4Q2011 revenue of US$101.7 million as the Group crosses the US$100 million sales mark for the first time.

In spite of the challenges of the macroeconomic environment, we posted growth across all our business divisions. In line with our strategy to shift towards higher-margin software and service businesses, our mainstay Infrastructure Enabling division grew at a moderate 12.3% to US$190.2 million while Digital Media revenue surged 42.6% to US$143.0 million. The growth achieved was due to the Group’s continued focus on the burgeoning Chinese cable TV market and IPTV market in South Korea.

During the year, the Group grappled with higher than anticipated technicalities and issues which in turn slowed down progress in our latest addition, the New Media Services division. Notwithstanding that, the division grew 177.8% yoy to US$2.5 million in revenue.

Dear Shareholders

2011 was an exciting year for DMX, as we achieved several breakthroughs with new business initiatives, strengthened our presence in China and laid the groundwork for future growth.

We are well poised to tap into the growth opportunities presented to us by our ability to market interactive services to end users

Our first D-Smart solution was implemented in Jam City, a subsidiary of Onisi Group Company, Japan’s biggest fashion apparel manufacturer and wholesaler. D-Smart POS, a mobile point-of-sale service, enables enterprises to smoothen the flow of their business operations via real-time sales tracking and inventory management, thereby offering a cost-effective, seamless solution to enterprises.

Another New Media Services initiative was the launch of 22 Android applications on China Mobile’s Mobile Market, in collaboration with China Mobile, the largest mobile operator in China. Modeled after KDDI’s Android au one market, the applications are targeted at China Mobile’s 80 million Mobile Market subscribers. This move is a starting point for expansion into the international mobile market, where applications can be shared and content developers from various parts of the world can participate in the creation of new applications.

The past year was well spent in introducing breakthrough solutions in China, which were warmly received by telecom providers and enterprises. There remains, nonetheless, an immense untapped potential that we hope to capture. As part of our ongoing strategy to secure more steady sources of revenue, we will continue to cultivate our Digital Media and New Media Services divisions while maintaining our lead in the Information and Communication Technologies (“ICT”) space.

Seeds sown, we look forward to the fruits they will bear.

Nurturing GrowthTo keep abreast with the changing ICT landscape and consumer demands, our focus for the Infrastructure Enabling division has progressed towards being a cloud enabler. While Gartner has lowered its growth forecast for global IT spending, the research firm foresees that enterprises may still invest in cloud computing, a market that is estimated to grow at a compounded rate of 25% each year. In the meantime, we will also offer differentiated security and IT services so as to capitalize on our existing foothold in Asia.

For our Digital Media division, we continue to work with cable operators to migrate subscribers of analog TV to digital TV in China. Also ongoing in China is the

Chairman’s Statement

15

network convergence trial (among telecom, TV and Internet). While China’s state council has announced plans to expand the trial of network convergence from 12 to 54 cities starting from January 2012, progress has been slower than expected. Notwithstanding that, we will continue to develop and cater differentiated solutions for this market.

To develop the New Media Services division, several D-Smart enterprise solutions are already in the pipeline, including a mobile Location-Based Service (“LBS”) and Workforce Management System. Ovum expects China’s enterprise mobility revenues to grow in excess of US$4.1 billion by 2014. With such a potential, we are convinced that we have identified the right market for our solutions and services. For consumers, we have launched Security Navi, a child surveillance service that serves to address the problem of child abduction in China. Via a mobile phone with Global Position Service (“GPS”) and LBS capabilities, parents can identify their child’s location and ensure their safety.

appreciation & Dividend2011 has been a year of achievements for us, and we are well-positioned to continue our growth in the coming year. Given our valuable partnership with KDDI and firm footing established in our key markets, we look forward to another profitable year as we overcome market challenges and harness the opportunities across all three business divisions.

In closing, I would like to express my appreciation for the continuous support of our shareholders, customers, employees and business associates. In appreciation of our shareholders, the Board is pleased to recommend a first and final tax exempt dividend of 0.03 Singapore cents per ordinary share, subject to shareholders’ approval at the upcoming Annual General Meeting. I look forward to meeting you at our Annual General Meeting on 27 April 2012.

Emmy WuExecutive Chairman

CEO’s Statement

16

Dear Shareholders

Our partnership with KDDI Corporation has unlocked a treasure chest of opportunities for us. Leveraging on KDDI’s expertise and proprietary technologies, we adapted and implemented several Digital Media and New Media Services solutions. These solutions, in turn, enabled us to diversify our revenue streams and honed our competitive edge over our peers. Not neglecting our traditional Infrastructure Enabling business, we continued to bring in hardware revenue from conglomerates in South Korea and Indonesia while growing the higher margin, recurring Managed Services segment.

On that note, I am pleased to report our stellar performance for the year and the operational milestones we have achieved.

Financial Overview2011 has been another year of record breaking growth and profits for us, having broken our quarterly revenue record once again to cross the US$100 million mark in 4Q2011. As a result, we ended the year on a high note with a jump in sales by 24.1% to US$335.7 million and increase in net profit attributable to shareholders by 19.6% to US$18.6 million. Earnings per share (“EPS”) grew by 19.1% to US1.62 cents.

As importantly, our margins have been stable as we balance our market share expansion from the Digital Media and Infrastructure Enabling segments with high value contributions from the Managed Services and Multimedia Software segments.

Geographically, revenue outside China surged 64.4% to US$104.2 million for the year, largely driven by the strong revenue contribution from South Korea and Indonesia. As a result, revenue contribution outside of China formed 31.0% of the Group’s total revenue, compared to 23.4% the preceding year. Revenue from China grew at a relatively slower pace of 11.7%, as we navigated a shift away from project based Infrastructure Enabling businesses towards higher margin, recurring revenue from Digital Media and New Media Services. On the whole, China contributed 69.0% of total revenue, compared to 76.6% in the previous year.

As we sow the seeds of progress, our operating expenses (distribution and administrative expenses) rose by 31.6% to US$42.1 million. The expenses incurred were mainly due to higher depreciation expenses, the expansion of operations into new geographies and an increase in resources so as to support the Group’s higher business volume.

As at 31 December 2011, the Group had structured, pledged and fixed deposits of US$44.3 million and cash and cash equivalents of US$46.2 million. Positive cash was generated from operating activities in the second half of the year, attributable to an improvement in collections of trade receivables and a higher utilization of trade and other payables for the increase in inventories, which led to lower cash used in operating activities of US$1.6 million. This was a marked improvement over the previous year when US$23.5 million cash was utilized. Adjusting for a bank-issued promissory note of US$3.8 million which could not be utilized to offset our accounts receivables, our net cash generated from operations would have been higher at US$1.2 million.

Digital MediaApart from our continued involvement in China’s ambitious multi-billion dollar plan to migrate from analog to digital cable TV, we took a step further to participate in the country’s network convergence. Towards that end, we implemented solutions such as Vision CEP and Vision TA, for which we inked deals with major cable operators such as Jiangsu Cable and Changsha Cable.

On the back of these developments, the Group’s revenue from the TV-related Digital Media division rose 42.6% to US$143.0 million as it continued to capitalize on the growth in the Chinese cable TV market and growing IPTV market in South Korea. Our strategy is to offer customers highly competitive pricing in Digital Media Solutions so as to attract more customers to take up the higher margin Multimedia Software services. Together, the two segments contributed a higher 42.6% of total sales versus 37.1% previously.

CEO’s Statement

18

It was a fruitful year as we achieved a net profit after tax of

US$19m

Our partnership with KDDI permits us to provide one stop solution to customers worldwide by leveraging on our partner’s global network

CEO’s Statement

21

Infrastructure EnablingThe Group’s Internet-related Infrastructure Enabling division grew at a more moderate 12.3% to achieve revenue of US$190.2 million. The South Korea operation secured breakthroughs into some of the conglomerates, while the Indonesia operation secured expansion contracts from telecom operators and major enterprises.

The continued emphasis on growing the higher margin, recurring Managed Services segment paid off with a healthy 25.7% growth to US$25.4 million. This offset the anticipated slower sales growth for the high volume Infrastructure Solutions segment, which was up 10.5% to US$164.8 million. Overall contribution from this division went down to 56.7% versus 62.6% the year before.

New Media ServicesOn the New Media Services front, we achieved progress; albeit slower than planned. Since the attainment of the Value-added Telecommunications Business Operation License and Internet Content Provider License from China’s Ministry of Industry and Information Technology, we have gained entry into China’s mobile market and provided content and applications to mobile and telecom operators.

While this division grew 177.8% to US$2.5 million in revenue, higher than anticipated technicalities and issues had to be overcome and resulted in slower-than expected progress. Notwithstanding that, contribution from this fast-growing division more than doubled to 0.7% from 0.3%.

ConclusionOn the whole, the year has been a fruitful one for us, with growth achieved across all our business divisions. With our latest and upcoming product offerings, we are poised for growth in the fast-growing digital media space and ready to leverage on the rapid adoption of smart phone usage in emerging markets such as China.

We will continue to invest in our Digital Media, Infrastructure Enabling and New Media Services divisions to create differentiated software, services and applications. The increase in application and service offerings are in line with our long-term strategy to transform our business model into one supported by diversified, recurring and high margin revenue streams.

Jismyl TeoChief Executive Officer

Board of Directors

From left to right:

Shinichi SuzukawaExecutive Vice Chairman

Emmy WuExecutive Chairman

Jismyl Teo Chor KhinExecutive Director,Chief Executive Officer

Thian Nie KhianNon-IndependentNon-Executive Director

Takashi NagashimaNon-IndependentNon-Executive Director

Kenichiro uchimuraNon-IndependentNon-Executive Director

Iwao OishiExecutive Director

Foo Meng TongIndependentNon-Executive Director

Mark Wang Yat-YeeIndependentNon-Executive Director

Kazuo MiwaNon-IndependentNon-Executive Director

Takuro awazuIndependentNon-Executive Director

22

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. Shinichi SuzukawaExecutive Vice Chairman

Shinichi Suzukawa was appointed as an Executive Director of our Company in December 2009 and Vice Chairman in March 2010. Besides assisting the Executive Chairman, Mr Suzukawa is also responsible for the Group’s business alliance with KDDI Corporation. Mr Suzukawa has more than 30 years of experience in the network, telecommunications and information and communication industry. Prior to joining DMX, Mr Suzukawa was the managing director of KDDI Singapore Pte Ltd, a subsidiary of KDDI Corporation. Mr Suzukawa joined KDD Company Ltd in 1978 and held various positions within KDDI Corporation’s Group; including general manager of ICT Solution in Kansai regional sales office and managing director of Telehouse Europe and deputy managing director of KDDI Europe. Mr Suzukawa graduated with a Bachelor of Economics from the Kobe University (Japan) in 1978.

Jismyl Teo Chor Khin Chief Executive Officer, Executive Director

Jismyl Teo Chor Khin has been the Chief Executive Officer of the Group since September 2006. Ms Teo is responsible for the strategic directions, management and financial well-being of our Group. Prior to her current role, Ms Teo was the Chief Financial Officer and was 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 Asia Group 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 the Massey University of New Zealand.

Board of Directors

24

Iwao Oishi Executive Director

Iwao Oishi was appointed as an Executive Director of our Company in December 2009. Mr Oishi is responsible to assist the financial issues for the development and growth for the Group and co-ordinate the financial reporting and policies under the Board’s direction. Mr Oishi has more than 20 years of experience in the telecommunications industry. Prior to joining DMX, Mr Oishi was the senior manager and head of the overseas management section of the global business division of KDDI Corporation, responsible for the management of KDDI’s overseas subsidiaries. Mr Oishi joined KDD Company Ltd in 1988 and held various positions within KDDI Corporation’s Group, including that of manager of the finance department. Mr Oishi was also the managing director of KDDI Deutschland GmbH, subsidiary of KDDI Corporation. Mr Oishi graduated with a Bachelor of Commerce from the Waseda University (Japan) in 1988. 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 30 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.

25

Takashi Nagashima Non-Independent Non-Executive Director

Takashi Nagashima was appointed as a Non-Independent Non-Executive Director in November 2011. Mr Nagashima is the Executive Director, Chief Executive Officer of Global Business, Chief Operating Officer and Head of Global ICT Business of KDDI Corporation. Prior to that, Mr Nagashima held various positions in KDDI Corporation, including General Manager of Solution Business Strategy Division, Solution Business Sector, General Manager of Consumer Service & Product Planning Division, Consumer Business Sector, General Manager of Content and EC Division, Content and Media Business Sector and Director of Solution Sales Department 3, Solution Domestic Sales Division, EVP of KDDI AMERICA from 2000 to 2003. Mr Nagashima was the President of DDI Communications America Corporation from 1999 to 2000.

Board of Directors

26

Kazuo Miwa Non-Independent Non-Executive Director

Kazuo Miwa was appointed as a Non-Independent Non-Executive Director of our Company in May 2010. Mr Miwa has been the Chief Representative of China and Eastern Asia of the KDDI companies since April 2010. Prior to this role, Mr Miwa was the General Manager of the Solution Sales Department of the KDDI Corporation. With over 30 years’ experience, Mr Miwa has held various positions in the KDDI Corporation’s Group, including Director of Network Solutions Chubu Regional Sales Office and Network Solution Sales Department Corporate Account Sales 1. Mr Miwa joined Kokusai Denshin Denwa Co. Ltd. (KDD CO. Ltd.) in 1980 and holds a Bachelor of Engineering degree from the Waseda University, Japan. Kenichiro uchimura Non-Independent Non-Executive Director

Kenichiro Uchimura was appointed as a Non-Independent Non-Executive Director of our Company in November 2010. Mr Uchimura is the Senior Manager Head of Post-Merger Integration Group, Global Business Planning & Development Department of Global Business Division of KDDI Corporation. Prior to that, Mr Uchimura was the President of KDDI Korea Corporation. He was the Vice President of Prism Communications Corp. from 2005 to 2009 and CFO of HOLA Paraguay S.A. from 1998 to 2005.

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 a private investor in various businesses in Singapore and China. Prior to his retirement in June 2009, Mr Wang was 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.

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 the Stanford University, USA in 1985. He is a Fellow of the Institution of Engineers, Singapore.

Board of Directors

28

Takuro awazu Independent Non-Executive Director

Takuro Awazu was appointed as an Independent Non-Executive Director of our Company in March 2011. Mr Awazu is an attorney-at-law registered in Japan, New York and California and is a partner of Soga Law Office. Prior to that, Mr Awazu was a partner of Soga, Uryu & Itoga from 2005 to January 2012 and before that had been the Deputy Director of Multilateral Trade System Department of Ministry of Economy, Trade and Industry of Japan from 2003 to 2005. He was in charge of anti-dumping and dispute resolution in the Ministry. Mr Awazu was an attorney-at-law (associate) at Itoga & Soga Law Office (former name of Soga, Uryu & Itoga) from 2001 to 2003 and an attorney-at-law (associate) at Anderson Mori Law Office from 1999 to 2000. Mr Awazu obtained his Bachelor of Law from the University of Tokyo in 1997 and his L.L.M from Tulane Law School in 2002.

Directorships

29

Emmy WuGroup Companies

1MP Limited1MP (HK) LimitedBEE MediaSoft LimitedDMX (BVI) LimitedDMX Technologies (Hong Kong) LimitedDMX Technologies Sdn BhdDMX Technologies (S’pore) Pte LtdDMX Technologies (Macao Commercial Offshore) Co. Limited Lotun Technology LimitedNettasking Technology (BVI) LtdPacket Systems Pte. Ltd

Other Companies

Brilliant Rainbow Investment Limited Brilliant Regal Investment LimitedFast On Limited Group Equity International Limited Hubbard Management LimitedSure Bright Investment Limited

Shinichi Suzukawa–

Jismyl Teo Chor KhinGroup Companies

1MP Limited1MP (HK) LimitedBEE MediaSoft LimitedBJ DMX Technology Ltd DMX (BVI) Limited DMX Technologies (Hong Kong) Limited DMX Technologies Sdn Bhd DMX Technologies (S’pore) Pte LtdDMX Technologies (China) LimitedDMX Technologies (India) Private LtdDMX Technologies (Macao Commercial Offshore) Co. Limited DMX Technologies Korea Co. LtdLotun Technology LimitedNettasking Technology (BVI) LtdPacket Systems Pte. LtdPacket Systems (Malaysia) Sdn BhdPT Packet Systems Indonesia

Other Companies

Eagle One Consultants LimitedGroup Equity International Limited

Iwao Oishi

DMX Technologies (India) Private Ltd

Thian Nie Khian–

Kazuo MiwaOther Companies

KDDI HONG KONG LIMITEDKDDI CHINA CORPORATIONShanghai KDDI Communications Engineering Co. Ltd.KDDI SHANGHAI CorporationKDDI GUANGZHOU CorporationKDDI TAIWAN CorporationKDDI KOREA CorporationTELEHOUSE BEIJING CO., LTD

Takashi NagashimaOther Companies

KDDI AMERICA, INCKDDI EUROPE LTDKDDI CHINA CORPORATIONKDDI TAIWAN CorporationKDDI KOREA CorporationKDDI SINGAPORE PTE LTDBracnet LtdCDNetworks Co., Ltd

Kenichiro uchimuraOther Companies

KDDI HONG KONG LIMITEDBracnet Ltd

Foo Meng TongOther Companies

Actatek Pte. LtdFischer Tech Ltd Whiterock Medical Company Pte Ltd

Mark Wang Yat-YeeOther Companies

Net-ltech Asia Pacific Pte LtdMajestic Resources Asia IncSonata Services Co. LimitedStraw Technology Asia Pacific Pte LtdTrek Innovations Pte Limited

Takuro awazu–

Directorships - The list of present directorships of each Director including those held within the Group:

Key Management

30

Skip TangChief Financial Officer

Mr Skip Tang assumed the role of Chief Financial Officer in 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 YanRegional CEO, China

Mr Fu Yan Yan, Regional CEO of China, is responsible for all 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 MingRegional Director, HK & Taiwan

Mr Michael Mak Tak Ming joined us in June 2001 and is our Regional Director for HK & Taiwan; 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 in1984 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.

Lee Mun YoungRegional Chairman, SE Asia and Korea

Mr Lee Mun Young joined us in July 2005 and is the Regional Chairman, South East Asia and Korea. He is responsible for the management and development of the businesses in South East Asia and Korea; especially to multi-national corporations. 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 the Sungkyunkwa University and a master degree from the Graduate School of Foreign Trade and Policy Sungkyunkwan University.

Tang Yik HongRegional Director, New Business Development

Mr Tang Yik Hong joined our company in January 2001 and is our Regional Director, New Business Development. He is responsible for the company’s development in new businesses especially with telecom operators. Prior to this role, Mr Tang was the Regional Director for South Asia, responsible for the businesses in Singapore, Malaysia 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.

31

Kelvin ChoiGroup Marketing Director

Mr Kelvin Choi, Group Marketing Director, is responsible for marketing, segmental business planning and marketing communication activities of the Group and also spearheads all marketing related activities in China. Mr Kelvin Choi joined DMX in January 2010 and has over 20 years of experience in the Information Communication and Technology (“ICT”) industry. He began his career at Data General in 1989 as a systems engineer. He joined the Datacraft Asia Group in 1991 and served in various positions, including senior engineer, service manager and marketing director for Datacraft China Limited and regional marketing manager for North Asia of Datacraft Asia Limited. Mr Choi left Datacraft Asia in 2001 and co-founded a number of businesses in the ICT and consumer electronics industries; focusing on China market. Mr Choi holds a Bachelor of Science degree in Computer Science from the Chinese University of Hong Kong, a Master of Engineering degree in Computer Engineering from the Tsinghua University and a Master of Business Administration degree from the Heriot-Watt University.

Samson ChengRegional Director, Digital Media Solutions

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 wasthe Vice President, Product Management, responsible for the product development in BEE MediaSoft. Mr Cheng has over 20 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 the City University of Hong Kong.

ashley YauRegional Director, ICT & Mobile Solutions

Mr Ashley Yau, Regional Director of ICT & Mobile Solutions since 2007 is responsible for the direction and business development of ICT and recently, Mobile Solutions within the Group. Mr Yau joined DMX as the Field Marketing Manager in 2001 and was responsible for managing a pre-sales team of 20 network professionals in China to ensure technical competency and solutions formulation for infrastructure projects. Prior to that, 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 15 years experience in computer and communication technologies and holds a First Class Honours Degree in Engineering from the University of Hong Kong.

Danny LiRegional Director, ICT Software and Services

Mr Danny Li joined DMX in 2006 and has been the Regional Director, ICT Software and Services since 2008. Mr Li is responsible for the setup and management of the managed services division brand “Vantage”. Besides development of the software and services segments within the Group, Mr Li is also responsible for the MIS of the company. Prior to this assignment, Mr Li was the Business Development Director & Director of Technology responsible for the business development of the Infrastructure Management tools, “Everest”, and the incubation of Vantage. Mr Li has over 15 years of extensive operations and engineering experience in the field of Telecommunications, IP VPN Carrier, and ISP. Mr Li holds a Master degree in Electrical Engineering, major in Telecommunications, and a Bachelor degree in Computer Engineering from the University of Alberta, Canada.

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Regional Coverage

KOrEa

CHINa

HONG KONGMaCau

INDIa

MaLaYSIa

VIETNaM

SINGapOrE

INDONESIa

Business Segments

33

SEGMENTS

CuSTOMErS

prODuCT/SErVICES

Mobile applications

DigitalMedia

Solutions

MultimediaSoftware

ICTInfrastructure

GrOupS

Digital Media New Media Services

Infrastructure (ICT) Solutions

ManagedServices

Cloud Services

TelcoMobile Operators

Enterprises

routers & SwitchesBandwidth Management

Data Network Security SolutionsNetwork & Security Services

Encoders/DecodersVideo Servers

Conditional accessInteractive TV

software platform

Mobile Cloud platformLocation Based Services

pOS Solutions

TelcoMobile Operators

Enterprises

Cable TV Telco

Mobile Operators

Financial Highlights

34

turnOver (uS$M)

GrOSS prOfit (uS$M)

prOfit after tax (uS$M)

caSh and bank depOSitS (uS$M)

SharehOLder’S eQuitY (uS$M)

earninGS per Share (uS cents)

2011

2011

2011 2011

2011

20112010

2010

2010 2010

2010

20102009

2009

2009 2009

2009

20092008

173

46

24

190

50

152

271

62

84

336

75

55

20082008

2008 2008

2008

2008

185

0.68

1.44 1.36

1.62

327347

365

4

9

16

19

35

revenue bY buSineSS SeGMentS

revenue bY GeOGraphicaL reGiOn

uS$335.7M uS$270.6MFY2011 Total revenue FY2010 Total revenue

uS$335.7MFY2011 Total revenue

uS$231.5M

uS$104.2M

China

Outside China

uS$270.6MFY2010 Total revenue

uS$207.2M

uS$63.4M

China

Outside China

76.6%

55.1%49.1% 28.9%33.7%

8.2%8.9%7.5%7.6%

0.3%0.7%

31.0% 23.4%

69.0%

Digital Media Solution uS$113.1M

Multimedia Software uS$29.9M

New Media Services uS$2.5M

Infrastructure Solution uS$164.8M

Managed Services uS$25.4M

Digital Media Solution uS$78.2M

Multimedia Software uS$22.1M

New Media Services uS$0.9M

Infrastructure Solution uS$149.2M

Managed Services uS$20.2M

BOarD OF DIrECTOrS

Emmy Wu (Executive Chairman)

Shinichi Suzukawa (Executive Vice Chairman)

Jismyl Teo Chor Khin (Chief Executive Officer, Executive Director)

Iwao Oishi (Executive Director)

Thian Nie Khian (Non-Independent Non-Executive Director)

Kazuo Miwa (Non-Independent Non-Executive Director)

Kenichiro Uchimura (Non-Independent Non-Executive Director)

Takashi Nagashima (Non-Independent Non-Executive Director)

Foo Meng Tong (Independent Non-Executive Director)

Mark Wang Yat-Yee (Independent Non-Executive Director)

Takuro Awazu (Independent Non-Executive Director)

auDIT COMMITTEE

Foo Meng Tong (Chairman)

Thian Nie Khian

Kenichiro Uchimura

Mark Wang Yat-Yee

Takuro Awazu

NOMINaTING COMMITTEE

Foo Meng Tong (Chairman)

Emmy Wu

Takashi Nagashima

Mark Wang Yat-Yee

Takuro Awazu

rEMuNEraTION COMMITTEE

Mark Wang Yat-Yee (Chairman)

Thian Nie Khian

Foo Meng Tong

Takashi Nagashima

Takuro Awazu

COMpaNY SECrETarY

Low Siew Tian

rEGISTErED OFFICE

Canon’s Court, 22 Victoria StreetHamilton HM12BermudaTelephone : (441) 295 2244Facsimile : (441) 292 8666

BErMuDa SHarE rEGISTEr

Appleby Management (Bermuda) Ltd.Canon’s Court22 Victoria StreetHamilton HM 12Bermuda

SINGapOrE SHarE TraNSFEr aGENT

Boardroom Corporate & Advisory Services Pte Ltd50 Raffles PlaceSingapore Land Tower #32-01Singapore 048623 Telephone : (65) 6536 5355 Facsimile : (65) 6536 1360

auDITOrS

Deloitte & Touche LLP Public Accountants and Certified Public Accountants6 Shenton Way #32-00DBS Building Tower TwoSingapore 068809 Audit Partner : Tsia Chee WahDate of Appointment : 08 January 2009

prINCIpaL BaNKErS

The Hong Kong and Shanghai Banking Corporation Limited

Hang Seng Bank Limited

Mizuho Corporate Bank, Ltd

Bank of China (HK) Ltd

Corporate Information

36

37

Corporate GovernanCe

DMX Technologies Group Limited (the “Company”) continues 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 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) to approve the Group’s key business strategies and financial objectives;

(b) to approve the annual budget, major investments and divestments, and funding proposals;

(c) to oversee the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance; and

(d) to assume responsibility for corporate governance.

The Board discharges its responsibilities either directly or indirectly through various committees comprising members of the Board. The Board works closely with management. All directors objectively make decisions in the interests of the Company.

During the financial year, the Directors received updates on regulatory changes to the Listing Manual of the Singapore Exchange Securities Trading Limited (the “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


The number of meetings held and the attendance of each Director at every Board and other committees meetings for FY2011 are as follows:-

Name

Board Audit

CommitteeNominatingCommittee

RemunerationCommittee

No. ofmeetings

held

No. ofmeetings attended

No.of meetings

held

No. ofmeetings attended

No. of meetings

held

No. of meetings attended

No. ofmeeting

held

No. ofmeetingsattended

Mr Emmy Wu (Executive Chairman)

4 4 4 11 2 2 N/A N/A

Mr Shinichi Suzukawa (Executive Vice Chairman)

4 4 N/A N/A N/A N/A N/A N/A

Ms Jismyl Teo Chor Khin (Chief Executive Officer and Executive Director)


Mr Iwao Oishi (Executive Director)


Mr Thian Nie Khian (Non-Independent Non-Executive Director)

4 4 4 4 N/A N/A 4 4

Mr Kazuo Miwa(Non-Independent Non-Executive Director)


Mr Kenichiro Uchimura (Non-Independent Non-Executive Director)

4 3 4 3 N/A N/A N/A N/A

Mr Foo Meng Tong (Independent Non-Executive Director)

4 4 4 4 2 2 4 4

Mr Mark Wang Yat-Yee (Independent Non-Executive Director)

4 4 4 4 2 2 4 4

Mr Takuro Awazu(Independent Non-Executive Director)

4 32 4 32 2 12 4 32

Mr Takashi Nagashima(Non-Executive Director)

4 N/A3 N/A N/A 2 N/A3 4 N/A3

Mr Masaaki Nakanishi (Non-Executive Director)

4 44 N/A N/A 2 24 4 44

Mr Hiroaki Hosoi(Non-Independent Non-Executive Director)


Note: N/A Not applicable1 Mr Emmy Wu ceased as a member of Audit Committee with effect from 15 March 2011.2 Mr Takuro Awazu was appointed as an Independent Non-Executive Director with effect from 1 March 2011 and as a member of Audit, Nominating and Remuneration Committees on the same day.3 Mr Takashi Nagashima was appointed as a Non-Independent Non-Executive Director with effect from 30 November 2011 and as a member of Nominating and Remuneration Committees on the same day.4 Mr Masaaki Nakanishi resigned as a Non-Independent Non-Executive Director with effect from 30 November 2011 and relinquished his position as a member of Nominating Committee and as a member of Remuneration Committee on the same day.5 Mr Hiroaki Hosoi resigned as a Non-Independent Non-Executive Director with effect from 30 March 2011.

39

Principle 2: Board Composition and Balance

The Board comprises 11 Directors: three (3) Independent Non-Executive Directors, four (4) Executive Directors and four (4) Non-Independent Non-Executive Directors. Their collective experience and contribution are valuable to the Group. The Directors as at the date of this report are listed as follows:-

Mr Emmy Wu (Executive Chairman)Mr Shinichi Suzukawa (Executive Vice Chairman)Ms Jismyl Teo Chor Khin (Chief Executive Officer and Executive Director)Mr Iwao Oishi (Executive Director)Mr Thian Nie Khian (Non-Independent Non-Executive Director)Mr Takashi Nagashima (Non-Independent Non-Executive Director)Mr Kazuo Miwa (Non-Independent Non-Executive Director)Mr Kenichiro Uchimura (Non-Independent Non-Executive Director)Mr Foo Meng Tong (Independent Non-Executive Director)Mr Mark Wang Yat-Yee (Independent Non-Executive Director)Mr Takuro Awazu (Independent Non-Executive Director)

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, Mr Mark Wang Yat-Yee and Mr Takuro Awazu are independent. The Board believes that there is an independent element on the Board. The Board is able to exercise independent judgement on corporate affairs and provide management with a diverse and objective perspective on issues. 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 22 to 29 of the Annual Report.

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. The Board will constantly examine its size with the view to determining its impact upon its effectiveness.

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.

40


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 Secretary. The Company Secretary 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 Bermuda Companies Act and the Listing Manual of the 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 Nominating Committee (“NC”) comprises the following directors, the majority of whom including the Chairman, is independent. The Chairman is not associated with the substantial shareholders of the Company:

Mr Foo Meng Tong Independent Non-Executive Director (Chairman)Mr Mark Wang Yat-Yee Independent Non-Executive Director (member)Mr Takuro Awazu Independent Non-Executive Director (member)Mr Emmy Wu Executive Director (member)Mr Takashi Nagashima Non-Independent Non-Executive Director (member)

The NC is responsible for:-

(a) reviewing and making recommendations to the Board on all candidates nominated for appointment to the Board;

(b) reviewing all candidates nominated for appointment as senior management staff;

(c) 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;

(d) making recommendations to the Board on the continuation of the services of any Director who has reached the age of 70;

(e) 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;

(f) determining whether a Director is independent (taking into account the circumstances set out in the Code and other salient factors); and

(g) 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.

41

The NC held two meetings during the financial year and has reviewed and determined that Mr Foo Meng Tong, Mr Mark Wang Yat-Yee and Mr Takuro Awazu are independent.

The NC has also reviewed the composition of the AC and RC and is satisfied that it is adequate and appropriate for the Company.

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 for 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 Shinichi Suzukawa, Ms Jismyl Teo Chor Khin, Mr Foo Meng Tong, Mr Takuro Awazu and Mr Takashi Nagashima be nominated for re-election at the forthcoming AGM.

In making the recommendation, the NC had considered the Directors’ overall contribution and performance.

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 FY2011.

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.

42


Remuneration Committee

Principle 7: Procedures for Developing Remuneration Policies

The Remuneration Committee (“RC”) comprising entirely of Non-Executive Directors, the majority of whom, including the Chairman is independent. The members of the RC are:

Mr Mark Wang Yat-Yee Independent Non-Executive Director (Chairman)Mr Foo Meng Tong Independent Non-Executive Director (member)Mr Takuro Awazu Independent Non-Executive Director (member)Mr Thian Nie Khian Non-Independent Non-Executive Director (member)Mr Takashi Nagashima Non-Independent Non-Executive Director (member)

The RC held four meetings during the financial year.

The RC is responsible for:-

(a) 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;

(b) proposing to the Board, appropriate and meaningful measures for assessing the performance of the Executive Directors;

(c) determining the specific remuneration package for each Executive Director;

(d) considering the eligibility of Directors for benefits under long-term incentive schemes; and

(e) 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.

43

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 seven key executives for 2011.

Remuneration BandsSalary

%

Performance Bonus

%

Directors’ fees

%Others

%

Total Compensation

%

DirectorBelow S$1,000,000

Emmy Wu 77 23 100

DirectorBelow S$750,000

Jismyl Teo Chor Khin 77 23 100

Director Below S$250,000

Foo Meng Tong 100 100

Mark Wang Yat-Yee 100 100

Takuro Awazu 100 100

Shinichi Suzukawa 71 29 100

Iwao Oishi 69 31 100

Key ExecutivesBelow S$500,000

Kelvin Choi 91 9 100

Fu Yan Yan 100 100

Lee Mun Young 77 23 100

Key ExecutivesBelow S$250,000

Skip Tang 77 23 100

Samson Cheng 91 9 100

Ashley Yau 91 9 100

Danny Li 91 9 100

Michael Mak Tak Ming 91 9 100

Tang Yik Hong 100 100

Susan Leong 77 23 100

Save for Messrs Thian Nie Khian, Takashi Nagashima, Kazuo Miwa and Kenichiro Uchimura 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 four executive Directors of the Company, Mr Emmy Wu, Mr Shinichi Suzukawa, Ms Jismyl Teo and Mr Iwao Oishi, 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.

44


The Company does not have any employees who are immediate family members of a Director or the Chief Executive Officer, whose remuneration exceeded S$150,000.00 during the financial year ended 31 December 2011.

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 50-51 of the Annual Report.

DMX Performance Share Plan (“Plan”) which was adopted on 26 April 2011 as a share incentive scheme is designed to reward all eligible participants (“Participants”) through the issue of fully-paid Shares according to the extent to which they complete certain time-based service conditions or achieve their performance targets over set performance periods. The Plan aims to motivate and incentive Participants to greater dedication, loyalty and higher standards of performance, and to give recognition to the employees and Non-Executive Directors who has contributed to success and development of the Company, its Subsidiaries and Associated Company (as they may exist from time to time). The Plan is managed by the Administration Committee whose members are RC Members and Mr Iwao Oish. As at the date of the Annual Report, no awards have been granted under the Plan.

Principle 11: Audit Committee

The Audit Committee (“AC”) comprises all Non-Executive Directors, majority of whom including the Chairman is independent. The AC members are:

Mr Foo Meng Tong Independent Non-Executive Director (Chairman)Mr Mark Wang Yat-Yee Independent Non-Executive Director (member)Mr Takuro Awazu Independent Non-Executive Director (member)Mr Thian Nie Khian Non-Independent Non-Executive Director (member)Mr Kenichiro Uchimura Non-Independent Non-Executive Director (member)

The AC is responsible for :-

(a) reviewing with external auditors the audit plan, and results of the internal auditors’ examination and evaluation of the system of internal accounting controls;

(b) reviewing the Group’s financial results and the announcements before submission to the Board for approval;

(c) reviewing the assistance given by management to external auditors;

(d) considering and recommending the appointment/re-appointment of the external auditors;

(e) reviewing the internal audit programme; if any

(f) reviewing interested person transactions; and

(g) 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.

45

The AC has reviewed the volume of non-audit services to the Group by the external auditors, and being satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. The audit and non-audit fees paid to external auditors, Deloitte & Touche LLP for the financial year ended 31 December 2011 were US$408,000.00 and US$79,000.00 respectively.

The AC also satisfied that the external auditors, Deloitte & Touche LLP is able to meet the audit obligations of the Company and is pleased to recommend to the Board of Directors, the nomination of the external auditors for re-appointment at the forthcoming AGM.

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 given the nature and scope of the Company operation.

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.

During the financial year, the AC had reviewed and the Board with the concurrence of the AC is of the opinion 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 addressing financial, operational and compliance risks.

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 is vested with the power and authority to receive, investigate and enforce appropriate action when any such non-compliance matter is brought to its attention.

During the financial year, there was no whistle blowing report received by the AC.

Principle 13: Internal Audit

The internal audit function of the Company is outsourced to RSM Nelson Wheeler Consulting Limited.

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.

46


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 of the SGX-ST. 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 chairman 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.

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 83-88 of the Annual Report.

SECURITIES TRANSACTIONS(Listing Manual Rule 1207(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 and 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.

47

MATERIAL CONTRACTS(Listing Manual Rule 1207(8))

Save for the service agreements between the Executive Directors and the Company and 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 2011.

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 aggregate value of interested person transactions entered into for the financial year ended 31 December 2011 is as follow:

Name of interested person

Aggregate value of all interested person transactions during the

financial year under review (excluding transactions less

than S$100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under

shareholders’ mandate pursuant to Rule 920 (excluding transactions

less than S$100,000)

Transactions for the sales of goods and services

KDDI Corporation and/or its Associates Nil US$3.8m

Transactions for the purchase of goods and services

KDDI Corporation and/or its Associates Nil US$0.8m

Total Interested Person Transaction Nil US$4.6m

USE OF PROCEEDS

The Board of Directors of the Company wishes to provide an update on the use of the net proceeds up to 31 December 2011, from the S$183.2 million raised from the Placement.

(a) US$24.9 million or approximately S$35 million for continuous software development and development of new technologies to enhance the niche advantages of the Group in the industry;

(b) US$20.4 million or approximately S$28.6 million for the expansion of the Group’s digital media and infrastructure solution businesses in Asia.

48

Financial Contents

49Report of the

Directors53

Statement of Directors

54Independent

Auditor’s Report

55Statements of

Financial Position

57Consolidated Statement of

Comprehensive Income 58

Statements of Changes

in Equity60

Consolidated Statement of Cash Flows

115Statistics of

Shareholdings

117Notice of Annual General Meeting

62Notes to the

Consolidated Financial

Statements

49

report oF the DireCtors

The directors present their report together with the audited consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company for the financial year ended 31 December 2011.

1. DIRECTORS

The directors of the Company in office at the date of this report are:

Emmy Wu Jismyl Teo Chor Khin Foo Meng Tong Mark Wang Yat-Yee Thian Nie Khian Shinichi Suzukawa Iwao Oishi Kazuo Miwa Kenichiro Uchimura Takuro Awazu (appointed on 1 March 2011) Takashi Nagashima (appointed on 30 November 2011)

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 except as follows:

Shareholdings registered in name

of the director

Shareholdings in which directors are deemed

to have an interest

At the beginning

of the year

At the end

of the year

At the beginning

of the year

At the end

of the year

The Company

Ordinary share of US$0.05 each

Emmy Wu 2,225,000 2,225,000 43,283,647 43,283,647Jismyl Teo Chor Khin 2,875,000 2,875,000 55,167,967 55,163,917Foo Meng Tong 220,000 220,000 - - Thian Nie Khian 500,000 500,000 - -

Mark Wang Yat-Yee 220,000 220,000 - - The directors’ interests in shares of the Company as at 21 January 2012 were the same as those at the end of

the financial year.

50


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 Singapore Exchange Securities Trading Limited 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 (Chairman) Foo Meng Tong Thian Nie Khian Takuro Awazu (appointed on 1 March 2011) Takashi Nagashima (appointed on 30 November 2011)

51


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:

Date of grant

Balance at beginning

of year

Exercised

Balance at end

of year

Exercise price

per share

Exercise period

3 October 2003 3,305,544 - 3,305,544 S$0.6778 2 October 2004 to 26 May 2013

25 April 2008 3,906,858 (10,000) 3,896,858 S$0.226 24 April 2009 to 25 April 2018

28 November 2008 16,930,000 (1,710,000) 15,220,000 S$0.093 27 November 2009 to 28 November 2018

24,142,402 (1,720,000) 22,422,402

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 scheme disclosed above and as disclosed in Note 25 of the consolidated financial statements.

The details of share options granted under the Scheme to the directors of the Company are as follows:

Name of director

Options granted

during the financial

year

Aggregate options

granted since commencement

of the Scheme up to the end of

financial year

Aggregate options

exercised since commencement


financial year

Aggregate options

cancelled since commencement


financial year

Aggregate options

outstanding as at end of

financial year

Emmy Wu - 9,819,930 (2,100,000) (3,000,000) 4,719,930Jismyl Teo Chor Khin - 8,503,278 (1,375,000) (3,000,000) 4,128,278Foo Meng Tong - 1,763,986 (220,000) (600,000) 943,986Mark Wang Yat-Yee - 1,763,986 (220,000) (600,000) 943,986Thian Nie Khian - 500,000 (500,000) - -

- 22,351,180 (4,415,000) (7,200,000) 10,736,180

There is no option granted or cancelled in both years.

Except as disclosed above, there were no participants to the scheme who are controlling shareholders of the Company and their associates. No participants to the 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.

52


6. AUDIT COMMITTEE

At the date of this report, the Audit Committee comprises the following members:

Foo Meng Tong Chairman and Independent Non-Executive director Mark Wang Yat-Yee Independent Non-Executive director Thian Nie Khian Non-Independent Non-Executive director Kenichiro Uchimura Non-Independent Non-Executive director Takuro Awazu Independent Non-Executive director (appointed on 1 March 2011)

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) the audit plans and results of the internal auditors’ examination and evaluation of the Group’s systems of internal accounting controls;

(b) the Group’s financial and operating results and accounting policies;

(c) 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;

(d) 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;

(e) the co-operation and assistance given by the management to the Group’s external auditors; and

(f) the re-appointment of the external auditors of the Group.

The Audit Committee has full access to and has the co-operation of the 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.

7. AUDITORS

The auditors, Deloitte & Touche LLP, has expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

Emmy Wu Jismyl Teo Chor Khin

Hong Kong 30 March 2012

53

In the opinion of the directors, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company as set out on pages 55 to 114 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 2011, 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 Jismyl Teo Chor Khin

Hong Kong30 March 2012

statement oF DireCtors

54

REPORTS ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of DMX Technologies Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) which comprise the statements of financial position of the Group and the Company as at 31 December 2011, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows 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 55 to 114.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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 about 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 management, 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 statement of financial position and statement of changes in equity of the Company give a true and fair view of the financial position of the Group and Company as at 31 December 2011, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Deloitte & Touche LLPPublic Accountants and Certified Public AccountantsSingapore

30 March 2012

inDepenDent auDitor’s reportto the memBers oF DmX teChnoLoGies Group LimiteD

55

statements oF FinanCiaL positionat 31 DeCemBer 2011

THE GROUP THE COMPANY

NOTE 2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

ASSETS

Current assets: Cash and cash equivalents 8 46,162 80,022 22,538 57,094 Fixed bank deposits with maturity period over three months 8 5,300 - 5,300 - Pledged bank deposits 8 3,611 3,737 - - Structured deposits 9 15,327 3,279 14,327 2,279 Trade receivables 10 242,920 195,214 - - Other receivables, deposits and prepayments 11 16,197 11,752 201,962 170,881 Tax recoverable 212 67 - - Held for trading investments 12 2,419 2,468 - - Inventories 13 15,654 11,157 - -

Total current assets 347,802 307,696 244,127 230,254

Non-current assets: Structured deposits 9 20,010 30,010 - 10,000 Property, plant and equipment 14 11,581 10,990 - - Goodwill 15 26,628 26,628 - - Intangible assets 16 24,621 22,981 - - Investments in subsidiaries 17 - - 11,534 11,534 Available-for-sale investment 18 - - - - Deferred tax assets 19 206 95 - -

Total non-current assets 83,046 90,704 11,534 21,534

Total assets 430,848 398,400 255,661 251,788

See accompanying notes to financial statements

56

statements oF FinanCiaL positionat 31 DeCemBer 2011


NOTE 2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

LIABILITIES AND EQUITY

Current liabilities: Bank loans 20 10,068 9,269 - - Trust receipt loans 21 5,795 8,279 - - Trade payables 22 29,911 17,525 - - Other payables 23 16,993 14,244 310 218 Tax payables 2,033 1,472 - - Current portion of finance lease payables 12 20 - -

Total current liabilities 64,812 50,809 310 218

Non-current liabilities: Finance lease payables 54 66 - - Deferred tax liabilities 19 1,055 847 - -

Total non-current liabilities 1,109 913 - -

Capital, reserves and non-controlling interests: Share capital 24 57,638 57,552 57,638 57,552 Share premium 192,964 192,872 192,964 192,872 Treasury shares 24 (1,154) - (1,154) - Contributed surplus 1,534 1,534 1,534 1,534 Legal reserve 7 7 - - Foreign currency translation reserve 3,949 3,999 - - Share option reserve 25 1,019 1,068 1,019 1,068 Accumulated profits (losses) 106,529 87,944 3,350 (1,456)

Equity attributable to owners of the Company 362,486 344,976 255,351 251,570Non-controlling interests 2,441 1,702 - -

Total equity 364,927 346,678 255,351 251,570

Total liabilities and equity 430,848 398,400 255,661 251,788


57

ConsoLiDateD statement oF Comprehensive inComeFor the Year enDeD 31 DeCemBer 2011

THE GROUP

NOTE 2011 US$’000

2010 US$’000

Revenue 26 335,716 270,615Cost of sales (260,955) (209,115)

Gross profit 74,761 61,500Other operating income 27 1,837 1,388Distribution costs (21,319) (15,903)Administrative expenses 28 (20,745) (16,066)Other operating expenses 29 (12,722) (12,736)Finance costs 30 (555) (681)

Profit before income tax 21,257 17,502Income tax expense 31 (1,815) (1,487)

Profit for the year 32 19,442 16,015Other comprehensive (loss) income Exchange differences arising on translation of foreign operations (87) 1,084

Total comprehensive income for the year 19,355 17,099

Profit for the year attributable to: Owners of the Company 18,585 15,541 Non-controlling interests 857 474

19,442 16,015

Total comprehensive income attributable to: Owners of the Company 18,535 16,625 Non-controlling interests 820 474

19,355 17,099

Earnings per share (US cents) 33

Basic 1.62 1.36

Diluted 1.60 1.34


58

statements oF ChanGes in equitYFor the Year enDeD 31 DeCemBer 2011

Share capital

Share premium

Treasury shares

Contributed surplus (note i)

Legal reserve (note ii)

Deferred purchase

consideration (note iii)

Foreign currency

translation reserve(note iv)

Share option

reserve

Accu-mulated

profits (losses)

Attributable to owners

of the Company

Non-controlling

interests Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

GROUP

Balance at 1 January 2010 56,378 190,328 - 1,534 7 1,470 2,915 1,491 72,403 326,526 1,228 327,754Total comprehensive income for the year - - - - - - 1,084 - 15,541 16,625 474 17,099Issue of shares under share option scheme 585 1,664 - - - - - (623) - 1,626 - 1,626Issue of shares for acquisition of subsidiaries 589 881 - - - (1,470) - - - - - - Transaction costs attributable to issue of shares - (1) - - - - - - - (1) - (1)Recognition of share-based payments - - - - - - - 200 - 200 - 200

Balance at 31 December 2010 57,552 192,872 - 1,534 7 - 3,999 1,068 87,944 344,976 1,702 346,678Total comprehensive (loss) income for the year - - - - - - (50) - 18,585 18,535 820 19,355Issue of shares under share option scheme 86 93 - - - - - (49) - 130 - 130Transaction costs attributable to issue of shares - (1) - - - - - - - (1) - (1)Dividends paid to non-controlling interests - - - - - - - - - - (81) (81)Shares purchased under Share Purchase Mandate and held as treasury shares (Note 24) - - (1,154) - - - - - - (1,154) - (1,154)

Balance at 31 December 2011 57,638 192,964 (1,154) 1,534 7 - 3,949 1,019 106,529 362,486 2,441 364,927


59

statements oF ChanGes in equitYFor the Year enDeD 31 DeCemBer 2011

Share capital

Share premium

Treasury shares

Contributed surplus (note i)

Legal reserve (note ii)

Deferred purchase

consideration (note iii)

Foreign currency

translation reserve(note iv)

Share option

reserve

Accu-mulated

profits (losses)

Attributable to owners

of the Company

Non-controlling

interests Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

COMPANY

Balance at 1 January 2010 56,378 190,328 - 1,534 - 1,470 - 1,491 (962) 250,239 - 250,239Total comprehensive loss for the year - - - - - - - - (494) (494) - (494)Issue of shares under share option scheme 585 1,664 - - - - - (623) - 1,626 - 1,626Issue of shares for acquisition of subsidiaries 589 881 - - - (1,470) - - - - - - Transaction costs attributable to issue of shares - (1) - - - - - - - (1) - (1)Recognition of share-based payments - - - - - - - 200 - 200 - 200

Balance at 31 December 2010 57,552 192,872 - 1,534 - - - 1,068 (1,456) 251,570 - 251,570Total comprehensive income for the year - - - - - - - - 4,806 4,806 - 4,806Issue of shares under share option scheme 86 93 - - - - - (49) - 130 - 130Transaction costs attributable to issue of shares - (1) - - - - - - - (1) - (1)Shares purchased under Share Purchase Mandate and held as treasury shares (Note 24) - - (1,154) - - - - - - (1,154) - (1,154)

Balance at 31 December 2011 57,638 192,964 (1,154) 1,534 - - - 1,019 3,350 255,351 - 255,351

Notes:

(i) 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.

(ii) Legal reserve is reserve required by the relevant laws in Macau applicable to the Group’s subsidiary established in Macau.

(iii) Deferred purchase consideration represented consideration for acquisition of subsidiaries in 2009 to be satisfied by way of issuance of new ordinary shares of the Company which were issued in 2010.

(iv) Exchange differences relating to the translation from the functional currencies of the Group’s foreign subsidiaries into United States dollars are brought to account by recognising those exchange differences in other comprehensive income and accumulating them under foreign currency translation reserve.


60

ConsoLiDateD statement oF Cash FLowsFor the Year enDeD 31 DeCemBer 2011

2011 US$’000

2010 US$’000

Operating activities:Profit before income tax 21,257 17,502Adjustments for: Amortisation expense 12,496 12,423 Depreciation expense 6,255 4,687 Interest expenses 555 681 Increase in (Reversal of) allowance for doubtful trade receivables 128 (58) Fair value change of other financial assets 93 (62) Loss on disposal of intangible assets 1 - Loss on write off of property, plant and equipment 3 113 Loss (Gain) on disposal of property, plant and equipment 1 (23) Share-based payment expenses - 200 Reversal of allowance for inventories (20) (8) Interest income (856) (707)

Operating cash flows before movements in working capital 39,913 34,748Increase in trade receivables (47,733) (63,818)Increase in other receivables, deposits and prepayments (4,445) (663)Increase in inventories (4,485) (3,503)Increase in trade payables 12,386 4,074Increase in other payables 2,749 5,652

Cash used in operations (1,615) (23,510)Income taxes paid (1,325) (1,344)Interest paid (555) (681)Interest received 856 707

Net cash used in operating activities (2,639) (24,828)

Investing activities:Addition to intangible assets (14,165) (11,204)Purchase of property, plant and equipment (6,849) (6,593)Increase in fixed bank deposits with maturity period over three months (5,300) - Purchase of structured deposits (2,092) (32,000)Decrease (Increase) in pledged bank deposits 126 (276)Proceeds on disposal of intangible assets 31 - Proceeds on disposal of property, plant and equipment 26 70

Net cash used in investing activities (28,223) (50,003)

61

ConsoLiDateD statement oF Cash FLowsFor the Year enDeD 31 DeCemBer 2011

2011 US$’000

2010 US$’000

Financing activities:Repayment of bank loans (43,290) (25,650)(Decrease) Increase in trust receipt loans (2,484) 6,888Purchase of treasury shares (1,154) - Dividends paid to non-controlling interests (81) - Repayment of finance leases (20) (24)Payment of transaction costs attributable to issue of shares of the Company (1) (1)New bank loans raised 44,207 22,313Proceeds on issue of shares 130 1,626

Net cash (used in) from financing activities (2,693) 5,152

Net decrease in cash and cash equivalents (33,555) (69,679)

Cash and cash equivalents at the beginning of the year 80,022 148,389

Net effect of exchange rate changes on the balance of cash held in foreign currencies (305) 1,312

Cash and cash equivalents at the end of the year 46,162 80,022


62

notes to the ConsoLiDateD FinanCiaL statementsFor the Year enDeD 31 DeCemBer 2011

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”). 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 17.

The consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company for the financial year ended 31 December 2011 were authorised for issue by the Board of Directors at their meeting held on 30 March 2012.

2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)

New and revised IFRSs applied with no material effect on the financial statements

The following new and revised IFRSs have been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

Amendments to IAS 1 “Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010)”

The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements.

IAS 24 “Related Party Disclosures (as revised in 2009)”

IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities.

The application of the revised definition of related party set out in IAS 24 (as revised in 2009) in the current year has not resulted in the identification of additional related parties that were not identified as related parties under the previous standard.

63


2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) - continued

New and revised IFRSs applied with no material effect on the consolidated financial statements - continued

Amendments to IFRS 3 “Business Combinations (as part of Improvements to IFRSs issued in 2010)”

As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other standards.

In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquiree’s employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 “Share-based Payment” at the acquisition date (“market-based measure”).

The application of the amendments has had no material effect on the Group’s consolidated financial statements.

Amendments to IAS 32 “Classification of Rights Issues”

The amendments address the classification of certain rights issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire a fixed number of the entity’s equity instruments for a fixed amount of any currency are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options or warrants to acquire a fixed number of an entity’s equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application.

The application of the amendments has had no effect on the amounts reported in the current and prior years because the Group has not issued instruments of this nature.

Amendments to IFRIC 14 “Prepayments of a Minimum Funding Requirement”

IFRIC 14 addresses when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and when minimum funding requirements might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contributions.

The application of the amendments has not had material effect on the Group’s consolidated financial statements. IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”

The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the consideration paid will be recognised in profit or loss. The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature.

64



New and revised IFRSs in issue but not yet effective

The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

Amendments to IFRS 7 Disclosures - Transfers of Financial Assets1

Disclosures - Offsetting Financial Assets and Financial liabilities2

Mandatory Effective Date of IFRS 9 and Transition Disclosures3

IFRS 9 Financial Instruments3

IFRS 10 Consolidated Financial Statements2

IFRS 11 Joint Arrangements2

IFRS 12 Disclosure of Interests in Other Entities2

IFRS 13 Fair Value Measurement2

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income4

IAS 19 (as revised in 2011) Employee Benefits2

IAS 27 (as revised in 2011) Separate Financial Statements2

IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures2

Amendments to IAS 32 Offsetting Financial Assets and Financial liabilities5

1 Effective for annual periods beginning on or after 1 July 2011.2 Effective for annual periods beginning on or after 1 January 2013.3 Effective for annual periods beginning on or after 1 January 2015.4 Effective for annual periods beginning on or after 1 July 2012.5 Effective for annual periods beginning on or after 1 January 2014. Amendments to IFRS 7 “Disclosures - Transfers of Financial Assets”

The amendments to IFRS 7 increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.

The directors anticipate that the application of the amendments to IFRS 7 will affect the Group’s disclosures regarding transfers of financial assets in the future.

Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities” and amendments to IFRS 7 “Disclosures - Offsetting Financial Assets and Financial Liabilities”

The amendments to IAS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

The amended offsetting disclosures are required for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should also be provided retrospectively for all comparative periods. However, the amendments to IAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

65



New and revised IFRSs in issue but not yet effective - continued

IFRS 9 “Financial Instruments”

IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9 are described as follows:

• IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• The most significant effect of IFRS 9 regarding the classification and measurement of financial

liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

IFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that the adoption of IFRS 9 in the future may have significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

IFRS 10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements”, IFRS 12 ”Disclosure of Interest in Other Entities”, IAS 27 “Separate Financial Statements (Revised)”, IAS 28 “Investments in Associates and Joint Ventures”

In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011).

66




IFRS 10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements”, IFRS 12 ”Disclosure of Interest in Other Entities”, IAS 27 “Separate Financial Statements (Revised)”, IAS 28 “Investments in Associates and Joint Ventures” - continued

Key requirements of these five Standards are described below.

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. SIC - 12 Consolidation - Special Purpose Entities has been withdrawn upon the issuance of IFRS 10. Under IFRS 10, there is only one basis for consolidation, that is control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios.

IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. SIC - 13 Jointly Controlled Entities - Non-monetary Contributions by Venturers has been withdrawn upon the issuance of IFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting.

IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards.

These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The directors anticipate that these five standards will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013. The application of these five standards may have significant impact on amounts reported in the consolidated financial statements but the extent of the impact have not been quantified as the directors have not yet performed a detailed analysis of the impact of the application of these Standards.

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IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 “Financial Instruments: Disclosures” will be extended by IFRS 13 to cover all assets and liabilities within its scope.

IFRS 13 is effective for annual periods beginning on or after 1 January 2013 with earlier application permitted.

The directors anticipate that IFRS 13 will be adopted in the Group’s financial statements for the annual period beginning 1 January 2013 and that the application of the new standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements. However, the extent of impact has not been quantified as the directors have not yet performed a detailed analysis of the impact of the application of this Standard. Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

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IAS 19 “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to IAS 19 may have impact on amounts reported in respect of the Groups’ defined benefit plans. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with International Financial Reporting Standards.

Basis of preparation

The financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair values, as disclosed in the accounting policies below.

The significant accounting policies are set out below.

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.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and 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 in full on consolidation.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Basis of consolidation - continued

Non-controlling interests in subsidiary companies are identified separately from the Group’s equity therein. The interest of non-controlling shareholders may be initially measured (at date of original business combination) either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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 profit or loss.

Business combination

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 “Income Taxes” and IAS 19 “Employee Benefits” respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 “Share-based Payment” at the acquisition date; and

• 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” are measured in accordance with that standard.

The policy disclosed above is applied to all business combinations that take place on or after January 1, 2010.

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Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

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 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 expenses are recognised on an effective interest basis for dept instruments other than those financial assets classified as at fair value through profit or loss (“FVTPL”).

Financial assets

Financial assets are classified into the following specified categories: financial assets at FVTPL, ‘available-for-sale’ financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Cash and cash equivalents

Cash and cash equivalents in the statement of cash flows 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 changes in value.


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Financial instruments - continued

Financial assets - continued

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near future; or • it is part of a portfolio of identified financial instruments that the Group manages together and has a

recent actual pattern of short-term profit-taking; or • it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 “Financial Instruments: Recognition and Measurement” permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are measured at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial asset and is included in “other operating income” or “other operating expenses” in the consolidated statement of comprehensive income. Fair value is determined in the manner described in Notes 9 and 12.


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Available-for-sale financial assets (AFS financial assets)

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments.

Certain shares held by the Group are classified as being available for sale and are stated at cost less impairment as the fair values of the shares cannot be reasonably and reliably determined.

Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, and bank deposits with maturity period over three months and pledged bank deposits) are carried at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when 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 assets have been affected.

For AFS equity instruments, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or • breach of contract, such as default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or• the disappearance of an active market for that financial asset because of financial difficulties.

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Impairment of financial assets - continued

For certain categories of financial assets, such as trade and other receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade and other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

With the exception of AFS instrument, 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 that the carrying amount of the 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 AFS equity instruments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

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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.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by the group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements 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 an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Financial liabilities

Trade and other 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. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

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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 the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance costs and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are recognised directly in profit or loss. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. 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 in bringing inventories to their present location and condition. Cost is calculated using the first-in-first-out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, 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. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

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Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently whenever there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, 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. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal. Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately with finite useful lives are carried at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

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.

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Intangible assets - continued

Internally-generated intangible assets - research and development expenditure - continued

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 measured at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, 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. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets not yet available for use are tested for impairment at least 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a 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 (or a 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 (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

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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 end of the reporting period, 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 the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a 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.

Share-based payment transactions

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 number of shares that will eventually vest.

At the end of the reporting period, the Group revises its estimates 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 such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share option reserve.

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.

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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 the goods are delivered and titles have passed, at which time 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, based on the final user acceptance.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. Payment made to state-managed retirement benefit schemes are 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 end of the reporting period.

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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 consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted in countries where the Company and the subsidiaries operate by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax 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 that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, 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. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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 assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, 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 in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly to equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

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 financial position 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 each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at 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 on monetary items, are recognised in profit or loss in the period in which they arise.

For the purpose of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. in United States dollars) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuates significantly during that period, in which case, the exchange rates prevailing at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributable to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised to profit or loss.

Goodwill and fair value adjustments on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

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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% of the sales amount is recognised when the goods are delivered to the customers and the remaining 5% of the sales amount is 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. Management is 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 end of the reporting period, 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.

Allowance for bad and doubtful debts

Allowance for bad and doubtful debts is based on an assessment of the recoverability of trade and other receivables. Allowances are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgement and estimates. When the expected outcome is different from the original estimate, such difference will impact the carrying value of trade and other receivables and doubtful debt expenses in the period in which such estimate has been changed. As at 31 December 2011, the carrying amount of trade receivables and other receivables is approximately US$242.9 million and US$9.8 million (2010: US$195.2 million and US$7.7 million) respectively.

83


4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY - continued

Key sources of estimation uncertainty - continued

Impairment of intangible assets and goodwill

Determining whether intangible assets and goodwill are 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 2011, the carring amount of intangible assets and goodwill is approximately US$24.6 million and US$26.6 million respectively (2010: US$23.0 million and US$26.6 million).

5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Categories of financial instruments

The following table sets out the financial instruments at the end of the reporting period:


2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

Financial assets Fair value through profit or loss (“FVTPL”) Structured deposits 35,337 33,289 14,327 12,279 Held for trading investments 2,419 2,468 - - Loans and receivables (including cash and cash equivalents) 307,993 286,740 229,699 227,830 Financial Liabilities Amortised cost 48,527 47,713 - -

84


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.

There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures these risks.

(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 end of the reporting period, as the monetary assets and monetary liabilities of the Group and the Company are substantially denominated in the respective entities’ functional currencies, the exposure of the Group and the Company to foreign currency fluctuations is limited, as such no sensitivity analysis is prepared.

(ii) Interest rate risk management

Interest rate risk arises from the potential changes in interest rates that may have an adverse effect 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 receipt loans are on floating rate basis. The Group is also exposed to interest rate risk on its structured deposits as the interest rates were determined by reference to the change in certain interest rates quoted in the market (Note 9). 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.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for the financial instruments at the end of the reporting period. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period were outstanding for the whole year.

If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s profit before income tax for the year ended 31 December 2011 would increase/decrease by US$246,000 (2010: US$279,000). A 50 basis points 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, bank balances and structured deposits.

The Group’s sensitivity to interest rates has decreased during the current period mainly due to the decrease in bank balances and trust receipt loans.

The Company has limited interest rate risk exposure.

85



(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 good reputation.

As at 31 December 2011, 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 is arising from the carrying amount of the respective recognised financial assets as stated in the Group and the Company’s statements of financial position.

In order to minimise the credit risk, management of the Group 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 the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors consider that the Group’s credit risk is significantly reduced. As at 31 December 2011, the Group has five customers which comprises 81% (2010: 87%) of the Group’s outstanding trade receivables, which are located in the People’s Republic of China (the “PRC”).

Further details of credit risk on trade receivables are disclosed in Note 10.

(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 following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liabilities in the consolidated statement of financial position. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period.

86


5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - CONTINUED


(iv) Liquidity risk management - continued

Liquidity and interest risk analyses - continued

Non-derivative financial liabilities - continued

Weighted average

effective interest

rate

On

demand or within

1 year

Within 2 to 5 years

Over5 years

Adjustment

Total

% US$’000 US$’000 US$’000 US$’000 US$’000

GROUP

2011Non-interest bearing - 32,598 - - - 32,598Finance lease liability (fixed rate) 4.26 13 56 - (3) 66Variable interest rate instruments 3.81 15,863 - - - 15,863

48,474 56 - (3) 48,527

2010Non-interest bearing - 26,079 - - - 26,079Finance lease liability (fixed rate) 5.37 21 52 19 (6) 86Variable interest rate instruments 5.13 17,677 - - (129) 17,548

43,777 52 19 (135) 43,713

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

Non-derivative financial assets

The following table details the Group’s and the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group’s and the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial assets in the Group and the Company’s statements of financial position.

87


5. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT - CONTINUED


(iv) Liquidity risk management - continued

Liquidity and interest risk analyses - continued

Non-derivative financial assets - continued

Weighted average

effective interest

rate

On

demand or within

1 year

Within 2 to 5 years

Adjustment

Total

% US$’000 US$’000 US$’000 US$’000

GROUP

2011Non-interest bearing - 255,407 - - 255,407Fixed interest rate instruments 0.89 25,267 - (39) 25,228Variable interest rate instruments 0.23 45,144 20,110 (140) 65,114

325,818 20,110 (179) 345,749

2010Non-interest bearing - 205,449 - - 205,449Fixed interest rate instruments 1.15 3,349 - (3) 3,346Variable interest rate instruments 0.14 83,695 30,077 (70) 113,702

292,493 30,077 (73) 322,497

COMPANY

2011Non-interest bearing - 201,861 - - 201,861Fixed interest rate instruments 1 19,478 - (28) 19,450Variable interest rate instruments 0.20 22,752 - (37) 22,715

244,091 - (65) 244,026

2010Non-interest bearing - 170,736 - - 170,736Variable interest rate instruments 0.17 59,375 10,017 (19) 69,373

230,111 10,017 (19) 240,109

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

88




(v) Fair values of financial assets and financial liabilities

The carrying amounts of cash and cash equivalents, fixed bank deposits with maturity period over three months, pledged bank deposits, trade and other receivables and payables and other liabilities recorded at amortised cost approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to the consolidated financial statements.

The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

(i) quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1);

(ii) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and

(iii) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

As at 31 December 2011, the fair value measurements of structured deposits of US$35,337,000 (2010: US$33,289,000) and held for trading investments of US$2,419,000 (2010: US$2,468,000) are derived from inputs other than quoted prices that are observable for the assets indirectly (i.e. derived from prices). These financial assets are classified as Level 2. The fair values of these financial assets are determined by reference to the valuation provided by the counterparty financial institutions.

(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 statement of financial position, excluding deferred tax liabilities, and equity is “equity” attributable to owners of the Company as shown in the consolidated statement of financial position.

The debt to equity ratios at 31 December 2011 and 2010 were as follows:

THE GROUP

2011 US$’000

2010 US$’000

Total liabilities 64,866 50,875 Equity 362,486 344,976 Debt to equity ratio 0.18 0.15

The capital structure of the Group consists of net debts (which includes bank loans (Note 20)) and equity attributable to owners (which comprises issued share capital, various reserves and accumulated profits).

The Group balances its overall capital structure through the payment of dividends, new share issues as well as the issuance of new debts or the redemption of existing debt.

The Group’s overall strategy remains unchanged from 2010.

89


6. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS

The Company’s holding company is KDDI Corporation, incorporated in Japan. Related companies refer to members of the holding company’s group of companies.

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

Some of the Group’s transactions and arrangements are between members of the holding company’s group and the effect of these on the basis determined between the parties is reflected in these financial statements. The intercompany balances are unsecured, interest-free and repayable on demand unless otherwise stated.

Trading transactions

During the year, Group entities entered into the following trading transactions with related companies that are not members of the Group:

2011 US$’000

2010 US$’000

Sales of goods to related companies 3,769 832Purchase of goods from related companies 839 -

7. 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

2011 US$’000

2010 US$’000

Short-term benefits 2,158 1,849Post-employment benefits 61 67

2,219 1,916Share-based payments - 47

Total 2,219 1,963

The remuneration of directors and key management is determined by the remuneration committee having regard to the performance of individuals and market trends.

90


8. CASH AND CASH EQUIVALENTS, FIXED BANK DEPOSITS WITH MATURITY PERIOD OVER THREE MONTHS AND PLEDGED BANK DEPOSITS


2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

Cash at banks 29,367 52,312 8,388 32,197Fixed bank deposits with maturity period less than three months 16,726 27,641 14,150 24,897Cash on hand 69 69 - -

Total cash and cash equivalents 46,162 80,022 22,538 57,094Fixed bank deposits with maturity period over three months 5,300 - 5,300 - Pledged bank deposits 3,611 3,737 - -

Total 55,073 83,759 27,838 57,094

Fixed bank deposits with maturity period less than three months bear average effective interest rate of 0.15% (2010: 0.15%) per annum and for a tenure of approximately 32 days (2010: 32 days).

Fixed bank deposits with maturity period over three months bear average effective interest rate of 1.00% per annum and for a tenure of approximately 180 days.

As at 31 December 2011, bank deposits in the aggregate amount of US$3,611,000 (2010: US$3,737,000) of the Group were pledged to financial institutions to secure general banking facilities granted to the Group.

The Group and Company’s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows:


2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

United States dollars 469 1,981 - - Singapore dollars 181 87 10 87Hong Kong dollars 2,512 2,351 - -

91


9. STRUCTURED DEPOSITS


2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

Structured deposits 35,337 33,289 14,327 12,279

Analysed as:Current 15,327 3,279 14,327 2,279Non-current 20,010 30,010 - 10,000

35,337 33,289 14,327 12,279

As at 31 December 2011, the Group and the Company had structured deposits placed with banks, with coupon rate of 3 month USD London Interbank Offered Rate flat rate and subject to a coupon floor rate at 0.5% and coupon cap rate at 5.25% (2010: coupon floor rate at 0.5% and coupon cap rate at 4.35%). Under the relevant agreements, the interest rates of these structured deposits were determined by reference to the change in certain interest rates quoted in the market.

The amount is measured at fair value at the end of the reporting period based on quoted market prices for equivalent instruments. The fair value is determined based on the valuation performed by the issuing banks. As at 31 December 2011, structured deposits of US$5,323,000 (2010: US$3,279,000) of the Group were pledged to secure general banking facilities granted to the Group.

As at 31 December 2011, the structured deposits which are denominated in United States dollars, bear floating interest rate ranging from 0.5% to 5.25% (2010: 0.5% to 4.35%) per annum and have tenures ranging from 9 months to 25 months (2010: 7 months to 30 months).

10. TRADE RECEIVABLES

THE GROUP

2011 US$’000

2010 US$’000

Trade receivables from related companies (Note 6) 1,067 13Trade receivables from outside parties 240,574 197,721Bills discounted with recourse 3,826 - Less: Allowance for trade receivables - outside parties (2,547) (2,520)

Total 242,920 195,214

The average credit period on sales of goods to non-telecommunication is 60 days (2010: 60 days). The payment terms for telecommunication customers are based on milestones as defined by each sales contract. 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 of irrecoverable amounts to third parties after reviewing the aging profile of the customers. Trade receivables are considered past due for (i) non-telecommunication customers when the trade receivables are past their credit period; and (ii) telecommunication customers when the trade receivables are past their payment terms.

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.

92


10. TRADE RECEIVABLES - continued

Of the trade receivable balance at the end of the reporting period, 81% (2010: 87%) 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$18,063,000 (2010: US$22,844,000) which are past due at the end of the reporting period 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. On average, these receivables are past due for less than 6 months (2010: less than 6 months).

Movement in the allowance for trade receivables

THE GROUP

2011 US$’000

2010 US$’000

Balance at the beginning of the year 2,520 2,556Increase in (Reversal of) allowance recognised in profit or loss 128 (58)Exchange difference (101) 22

Balance at the end of the year 2,547 2,520

During the period, the Group transferred US$3,826,000 (2010: US$ Nil) of trade receivables to an unrelated entity. As part of the transfer, the Group provided the transferors a credit guarantee over the expected losses of those receivables. Accordingly, the Group continues to recognise the full carrying amount of the receivables and has recognised the cash received on the transfer as a secured borrowing (see Note 20). At the end of the reporting period, the carrying amount of the transferred short-term receivables is US$3,826,000. The carrying amount of the associated liability is US$3,826,000. The transferee of the trade receivables has recourse only on those trade receivables. The fair value of the transferred receivables approximates the carrying amount.

The Group’s trade receivables that are not denominated in the functional currencies of the respective entities are as follows:

THE GROUP

2011 US$’000

2010 US$’000

Hong Kong dollars 249 - Singapore dollars 332 -

93


11. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS


2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

Advance to a third party - 1,804 - - Others (Note) 9,750 7,698 - - Less: Allowance for other receivables - (1,804) - -

9,750 7,698 - - Other deposits 4,309 2,315 - - Prepayments 1,888 1,670 101 145Advance to subsidiaries (Note 17) - - 196,613 170,693Advance to a related company (Note 6) 250 69 248 43Dividend receivable from a subsidiary - - 5,000 -

Total 16,197 11,752 201,962 170,881

Notes: “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 (2010: 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 the allowance for other receivables

THE GROUP

2011 US$’000

2010 US$’000

Balance at the beginning of the year 1,804 1,804Amounts written off during the year (1,804) -

Balance at the end of the year - 1,804

12. HELD FOR TRADING INVESTMENTS

The Group’s held for trading investments pertain to investments in bond funds, which are managed by a bank. The fair value of investments are determined by reference to the valuation provided by the counterparty financial institution.

As at 31 December 2011, the carrying amount of the held for trading investments which have been pledged as security for the borrowings is US$2,419,000 (2010: US$2,468,000). The carrying amount of the associated borrowings is US$577,000 (2010: US$1,124,000).

94


13. INVENTORIES

THE GROUP

2011 US$’000

2010 US$’000

Finished goods:- At cost 15,654 11,142- At net realisable value - 15

Total 15,654 11,157

For the year ended 31 December 2010, the cost of inventories recognised as an expense included US$27,000 in respect of write-downs of inventory to net realisable value.

14. PROPERTY, PLANT AND EQUIPMENT

BuildingLeasehold

improvements

Furnitureand

fixturesComputer

equipment

Other office

equipment

Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

THE GROUP

Cost: At 1 January 2010 115 527 1,012 17,548 718 19,920 Additions - 95 181 5,947 370 6,593 Exchange difference - 18 30 316 22 386 Written off - (67) (93) (5,576) (3) (5,739) Disposals - (25) (4) (6) (131) (166)

At 31 December 2010 115 548 1,126 18,229 976 20,994 Additions - 141 273 6,072 363 6,849 Exchange difference - 2 5 82 5 94 Written off - - (4) (3,292) (132) (3,428) Disposals - - (32) (78) (96) (206)

At 31 December 2011 115 691 1,368 21,013 1,116 24,303 Accumulated depreciation: At 1 January 2010 50 265 831 9,095 489 10,730 Depreciation for the year 10 50 43 4,460 124 4,687 Exchange difference - 13 20 285 14 332 Eliminated on written off - (63) (78) (5,482) (3) (5,626) Eliminated on disposals - (24) (3) (4) (88) (119)

At 31 December 2010 60 241 813 8,354 536 10,004 Depreciation for the year 10 87 208 5,645 305 6,255 Exchange difference - 2 5 55 5 67 Eliminated on written off - - (4) (3,289) (132) (3,425) Eliminated on disposals - - (11) (72) (96) (179)

At 31 December 2011 70 330 1,011 10,693 618 12,722

Carrying amount:

At 31 December 2011 45 361 357 10,320 498 11,581

At 31 December 2010 55 307 313 9,875 440 10,990

95


14. PROPERTY, PLANT AND EQUIPMENT- continued

The carrying amount of the Group’s property, plant and equipment includes an amount of US$69,000 (2010: US$107,000) 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 bases:

Building Over the term of the relevant lease or 25 years, whichever is shorter Leasehold improvements Over the term of the relevant lease of 3 to 5 years Furniture and fixtures 20% to 25% per annum Computer equipment 33¹/³% per annum Other office equipment 20% to 25% per annum

15. GOODWILL

THE GROUP

US$’000

Cost: At 1 January 2010, 31 December 2010 and 31 December 2011 27,728 Impairment: At 1 January 2010, 31 December 2010 and 31 December 2011 1,100 Carrying amount:

At 31 December 2010 and 31 December 2011 26,628

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 recognition of losses, the carrying amount of goodwill had been allocated as follows:

THE GROUP

2011 US$’000

2010 US$’000

Packet Systems Pte Ltd (“Packet Systems”) 11,874 11,874Lotun Technology Limited (“Lotun”) 12,071 12,071Equator One Software Ltd 2,507 2,507Others 1,276 1,276

Total 27,728 27,728

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

96


15. GOODWILL - continued

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 forecast, taking into consideration of industry growth rate and based on the most recent financial budgets approved by directors for the next one year and extrapolated for a further four years period using an estimated growth rate of 5% to 22% (2010: 5% to 20%). This rate does not exceed the average long-term growth rate for the relevant markets.

For the other CGUs, 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 one year and extrapolated for a further two to four years period using an estimated growth rate of 10% to 20% (2010: 10% to 33%). 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 14% (2010: 13%).

The impairment loss of US$1,100,000 relates to the goodwill arising on acquisition of Lotun in the prior years.

The recoverable amounts of the CGUs are in excess of their respective carrying amounts. Therefore, no further impairment loss is required.

The directors believe that any reasonably possible change in any of these key assumptions would not significantly cause the CGUs’ carrying amounts to exceed their respective recoverable amounts.

97


16. INTANGIBLE ASSETS

Softwarecosts/

softwaredevelopment

costs

Licensing costs

Total

US$’000 (Note i)

US$’000 (Note ii)

US$’000

THE GROUP

Cost: At 1 January 2010 39,100 10,363 49,463 Additions 11,204 - 11,204 Exchange difference 10 3 13 Written off (17,556) (5,899) (23,455)

At 31 December 2010 32,758 4,467 37,225 Additions 14,165 - 14,165 Exchange difference 3 2 5 Written off (11,044) (3,250) (14,294) Disposals - (66) (66)

At 31 December 2011 35,882 1,153 37,035

Accumulated amortisation: At 1 January 2010 17,675 7,599 25,274 Amortisation for the year 10,273 2,150 12,423 Exchange difference 1 1 2 Eliminated on written off (17,556) (5,899) (23,455)

At 31 December 2010 10,393 3,851 14,244 Amortisation for the year 12,104 392 12,496 Exchange difference 1 1 2 Eliminated on written off (11,044) (3,250) (14,294) Eliminated on disposals - (34) (34)

At 31 December 2011 11,454 960 12,414

Carrying amount:

At 31 December 2011 24,428 193 24,621

At 31 December 2010 22,365 616 22,981

98


16. INTANGIBLE ASSETS - continued

Notes:

(i) Software costs/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 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.

(ii) Licensing costs

Licensing costs are assets measured initially at cost and amortised from the date of relevant commercial activity.

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 statement of comprehensive income.

The intangible assets which have been fully amortised would be written-off.

17. INVESTMENTS IN SUBSIDIARIES

THE COMPANY

2011 US$’000

2010 US$’000

Unquoted equity shares, at cost 11,534 11,534

Details of the Company’s subsidiaries as at 31 December 2011 and 31 December 2010 are as follows:

Name of subsidiary

Country of incorporation/ operation

Proportion of ownership interest and

voting power held Principal activities

2011 %

2010 %

Held by the Company

DMX (BVI) Ltd. (a) British Virgin 100 100 Investment holding Islands (“BVI”)

Nettasking Technology BVI 100 100 Inactive (BVI) Limited (a)

99


17. INVESTMENTS IN SUBSIDIARIES - continued

Name of subsidiary




2011 %

2010 %

Held by DMX (BVI) Ltd.

BEE Mediasoft Limited (a) Hong Kong 100 100 Note (i)

DMX Technologies Hong Kong 100 100 Note (i) (Hong Kong) Limited (a)

DMX Technologies Malaysia 100 100 Note (i) Sdn Bhd (b)

DMX Technologies, Singapore 100 100 Note (i) (S’pore) Pte Ltd (b)

DMX Technologies Hong Kong 100 100 Investment holding (China) Limited (a)

DMX Technologies Macau 100 100 Note (i) (Macao Commercial Offshore) Co. Limited (a)

Lotun Technology Limited (a) Hong Kong 100 100 Note (i)

Packet Systems Pte Ltd. (b) Singapore 100 100 Investment holding

1MP Limited (“1MP BVI”) (a) BVI 100 100 Investment holding

DMX Technologies (India) India 100 - Software and Private Ltd (b) (c) managed services provider

Held by DMX Technologies (China) Limited

Beijing DMX Technologies PRC 100 100 Note (i) Limited (a)

Beijing DMX Xingnet Information PRC 100 100 Note (i) Technology Limited (“DMX Xingnet”)(b) (d)

Held by Packet Systems Pte Ltd.

DMX Technologies Korea 100 100 Note (i) Korea Co. Ltd. (a)

Packet Systems (Malaysia) Malaysia 100 100 Note (i) Sdn Bhd (a)

PT Packet Systems Indonesia (b) Indonesia 60 60 Note (i)

100


17. INVESTMENTS IN SUBSIDIARIES - continued

Name of subsidiary




2011 %

2010 %

Held by 1MP Limited

1MP (HK) Limited (a) Hong Kong 100 100 Inactive

1MP Technology Beijing Limited PRC 100 100 Content service (“1MP BJ”) (b) (d) provider

Beijing AVN Film Development PRC 100 100 Content service

Company Limited provider (“Beijing AVN”) (b) (d)

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) Audited by overseas practices of Deloitte Touche Tohmatsu Limited.

(b) Audited by other auditors.

(c) The subsidiary was incorporated during the year.

(d) 1MP BJ, Beijing AVN and DMX Xingnet are domestic enterprises established in the PRC owned legally by the PRC nationals. The Group has entered into contractual arrangements with the legal owners of these companies so that operating and financing activities of these companies are ultimately controlled by the Group. Under these arrangements, the Group is also entitled to substantially all of the operating profits and residual interests generated by these companies which will be transferred to the Group or the Group’s designee upon the Group’s request at a pre-agreed nominal consideration. On this basis, the directors regard these companies as subsidiaries of the Group.

18. AVAILABLE-FOR-SALE INVESTMENT

THE GROUP

2011 US$’000

2010 US$’000

Unquoted equity shares, at cost - 2,227Less: Impairment loss - (2,227)

- -

As at 31 December 2010, the Group held 18.8% interest in Complete TV Limited.

The above available-for-sale investment was measured at cost less impairment at 31 December 2010 because the range of reasonable fair value estimates was so significant that the directors of the Company were of the opinion that their fair value cannot be measured reliably.

The market conditions and financial performance of Complete TV Limited had deteriorated for the year ended 31 December 2008. Accordingly, the directors had made full impairment for the investment in 2008.

During the year ended 31 December 2011, Complete TV Limited has been liquidated.

The Group’s available-for-sale investment was denominated in British pound.

101


19. DEFERRED TAX (ASSETS) LIABILITIES

THE GROUP

2011 US$’000

2010 US$’000

Deferred tax assets (206) (95)Deferred tax liabilities 1,055 847

849 752

The movements for the year in deferred tax position were as follows:

THE GROUP

Accelerated tax

depreciation

Other timing differences *

Fair value adjustment

on business combination

Tax losses

Total

US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2010 1,231 (336) 240 (384) 751Charge (Credit) to profit or loss for the year (Note 31) 296 37 (96) (236) 1

At 31 December 2010 1,527 (299) 144 (620) 752(Credit) Charge to profit or loss for the year (Note 31) (48) 5 (96) 236 97

At 31 December 2011 1,479 (294) 48 (384) 849

* Other temporary differences relate mainly to allowance for doubtful debts.

As at 31 December 2011, the Group has unused tax losses of US$2,645,000 (2010: US$6,898,000) available for offset against future profits. A deferred tax asset has been recognised in respect of US$1,978,000 (2010: US$3,493,000) of such losses. No deferred tax asset has been recognised in respect of the remaining US$667,000 (2010: US$3,405,000) due to the unpredictability of future profit streams. The losses may be carried forward indefinitely.

At the end of the reporting period, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised is US$10,679,000 (2010: US$8,846,000). No liability has been recognised in respect of these temporary differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

102


20. BANK LOANS

THE GROUP

2011 US$’000

2010 US$’000

Bank loans 6,242 9,269Bills discounted with recourse 3,826 -

Total bank loans 10,068 9,269Less: Amount due for settlement within twelve months (shown under current liabilities) (10,068) (9,269)

Amount due for settlement after twelve months - -

Analysed as: Secured 10,068 6,325 Unsecured - 2,944

10,068 9,269

The bank loans bear floating interest rate ranging from 3.00% to 6.00% (2010: 4.18% to 6.68%) per annum.

The Group’s bank loans that are not denominated in the functional currencies of the respective entities are as follows:

THE GROUP

2011 US$’000

2010 US$’000

United States dollars 3,166 - Hong Kong dollars 577 2,185

The directors are of the view that the carrying amount of the bank loans approximates their fair value.

As at 31 December 2011, the bank loans are secured by held for trading investments of US$2,419,000 (2010: US$2,468,000) (Note 12), structured deposits of US$5,323,000 (2010: US$3,279,000) (Note 9) and pledged bank deposits of US$3,611,000 (2010: US$3,737,000) (Note 8).

21. TRUST RECEIPT LOANS

As at 31 December 2011, the trust receipt loans are secured by bank deposits of US$3,611,000 (2010: US$3,737,000) (Note 8), bear floating interest rate ranging from 2.26% to 4.09% (2010: 2.30% to 5.00%) per annum and are denominated in United States dollars. The credit period of these loans ranges from 90 to 120 days (2010: 90 to 120 days).

103


22. TRADE PAYABLES

THE GROUP

2011 US$’000

2010 US$’000

Related companies (Note 6) 592 127Outside parties 29,319 17,398

29,911 17,525

The average credit period on purchases of goods is 60 days (2010: 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

2011 US$’000

2010 US$’000

United States dollars 2,422 - Hong Kong dollars 123 - Singapore dollars - 20

23. OTHER PAYABLES


2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

Accrued expenses 5,503 3,460 310 218Other payables 11,490 10,784 - -

16,993 14,244 310 218

The Group’s and Company’s other payables are substantially denominated in the functional currencies of the respective entities.

104


24. SHARE CAPITAL AND TREASURY SHARES

THE GROUP AND COMPANY

2011 2010 2011 2010

Number of ordinary shares of US$0.05 each

(’000)

US$’000

US$’000

Authorised: At the beginning of the year and at the end of the year 1,500,000 1,500,000 75,000 75,000

Issued and paid up:Ordinary shares of US$0.05 each At the beginning of the year 1,151,030 1,127,570 57,552 56,378 Shares issued for acquisition of subsidiaries (Note a) - 11,764 - 589 Shares issued under share option scheme (Notes b and c) 1,720 11,696 86 585

1,152,750 1,151,030 57,638 57,552Purchase of treasury shares (Note d) (5,100) - (1,154) -

At the end of the year 1,147,650 1,151,030 56,484 57,552

Notes:

(a) On 30 June 2009, the Group acquired 100% of the issued share capital of 1MP BVI, a company incorporated in the BVI, for an aggregate consideration of US$2,039,000. As part of the consideration, 11,764,705 new ordinary shares of the Company were issued on 5 January 2010 as consideration.

(b) On 4 June 2010 and 1 December 2010, 8,625,722 share options and 3,070,000 share options were exercised at a subscription price of S$0.226 (equivalent to US$0.16414) and $0.093 (equivalent to US$0.06847) per share respectively, resulting in the issue of 11,695,722 ordinary shares of US$0.05 each in the Company and giving a total cash consideration of US$1,626,000.

(c) On 22 June 2011, 10,000 share options and 1,710,000 share options were exercised at a subscription price of S$0.226 (equivalent to US$0.18111) and $0.093 (equivalent to US$0.07453) per share respectively, resulting in the issue of 1,720,000 ordinary shares of US$0.05 each in the Company and giving a total cash consideration of US$130,000.

(d) During the year ended 31 December 2011, the Company acquired 5,100,000 of its own shares through purchases on the SGX under the Shares Purchase Mandate. Such shares were held as treasury shares, with no voting rights and dividend entitlements, for future application. The total consideration paid to acquire the shares was US$1,154,000 and this was deducted against shareholders’ equity.

105


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 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 to 2 years. 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.

Details of the share options outstanding during the year are as follows:

THE GROUP AND COMPANY

2011 2010

Number of share options

Weighted average exercise

price

Number of share options

Weighted average exercise

price

S$ S$

Outstanding at the beginning of the year 24,142,402 0.19 35,838,124 0.19 Exercised during the year (1,720,000) 0.0938 (11,695,722) 0.1911

Outstanding at the end of the year 22,422,402 0.20 24,142,402 0.19

Exercisable at the end of the year 22,422,402 0.20 24,142,402 0.19

106


25. SHARE - BASED PAYMENT - continuedThe weighed average share price at the date of exercise for share options exercised during the year was S$0.41 (2010: S$0.32). The options outstanding at the end of the year have a weighted average remaining contractual life of 6 years (2010: 7 years) with a range of exercise prices from S$0.093 to S$0.6778 (2010: S$0.093 to S$0.6778).

No share options were granted during the year. The fair value for share options granted in 2008 were calculated 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. The inputs into the model were as follows:

25 April 2008

28 November 2008

Grant date share price (S$) 0.25 0.09Exercise price (S$) 0.226 0.093Expected volatility 44.93% 63.04%Expected life 5.5 years 5.5 yearsRisk free rate 1.93% 1.53%Expected dividend yield - -

For the year ended 31 December 2010, the Group and the Company recognised total expenses of US$200,000 related to equity-settled share-based payment transactions (2011: Nil).

26. REVENUE

THE GROUP

2011 US$’000

2010 US$’000

Sale of goods 307,813 249,479Service income 27,903 21,136

Total 335,716 270,615

27. OTHER OPERATING INCOME

THE GROUP

2011 US$’000

2010 US$’000

Net foreign exchange gain 791 366Interest income from structured deposits 443 377Interest income from bank deposits 413 330Reversal of allowance for inventories 20 8Net fair value change of structured deposits and held for trading investments - 62Reversal of allowance for doubtful trade receivables - 58Gain on disposal of property, plant and equipment - 23Others 170 164

Total 1,837 1,388

107


28. ADMINISTRATIVE EXPENSES

THE GROUP

2011 US$’000

2010 US$’000

Staff costs (including directors’ remuneration) 7,891 6,239Depreciation expense 6,255 4,687Office rental expenses 1,958 1,563Other expenses 4,641 3,577

Total 20,745 16,066

29. OTHER OPERATING EXPENSES

THE GROUP

2011 US$’000

2010 US$’000

Amortisation expense 12,496 12,423Allowance for doubtful trade receivables 128 - Net fair value change of structured deposits and held for trading investments 93 - Loss on disposal of intangible assets 1 - Loss on write off of property, plant and equipment 3 113Loss on disposal of property, plant and equipment 1 - Share-based payment expenses - 200

12,722 12,736

30. FINANCE COSTS

THE GROUP

2011 US$’000

2010 US$’000

Interest expense on: - obligations under finance leases 9 21 - bank loans and trust receipt loans 546 660

555 681

108


31. INCOME TAX EXPENSE

THE GROUP

2011 US$’000

2010 US$’000

The income tax charge comprises:

Current tax 1,718 1,522Deferred tax (Note 19) 97 1Overprovision in prior years - (36)

1,815 1,487

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.

Taxation 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 profit before income tax as follows:

2011 US$’000

2010 US$’000

Profit before income tax 21,257 17,502 Tax at Hong Kong Profits Tax rate of 16.5% (2010: 16.5%) 3,507 2,888Tax effect of non-taxable income (141) (61)Tax effect of non-deductible expenses 1,226 1,017Tax effect of utilisation of tax loss previously not recognised (466) (83)Effect of different tax rates of subsidiaries operating in other jurisdictions (2,928) (2,654)Overprovision in prior years - (36)Others 617 416

Tax charge for the year 1,815 1,487

109


32. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging (crediting):

THE GROUP

2011 US$’000

2010 US$’000

Depreciation and amortisation:Depreciation expense 6,255 4,687Amortisation expense 12,496 12,423

Total depreciation and amortisation 18,751 17,110

Director’s fee 150 107

Directors’ remuneration - of the Company 1,486 1,010 - of the subsidiaries 522 732

Total directors’ remuneration 2,008 1,742

Employee benefits expense (including directors’ remuneration)Share-based payments - Equity settled - 200Defined contribution plans 1,863 1,560Salaries 20,623 14,951

Total employee benefits expense 22,486 16,711

Increase in (Reversal of) allowance for doubtful trade receivables 128 (58)Reversal of allowance for inventories (20) (8)Cost of inventories recognised as expense 260,955 209,115Net foreign exchange gain (791) (366)Loss on write off of property, plant and equipment 3 113Loss (Gain) on disposal of property, plant and equipment 1 (23)Loss on disposal of intangible assets 1 - Net fair value change of structure deposits and held for trading investments 93 (62)Auditors’ remuneration - paid to auditor of the Company 319 309 - paid to other auditors 212 188 Non-audit fees: - paid to auditor of the Company 79 43 - paid to other auditors 19 -

110


33. EARNINGS PER SHARE

THE GROUP

2011 2010

Basic US$’000

Diluted US$’000

Basic US$’000

Diluted US$’000

Profit for the year attributable to owners of the Company 18,585 18,585 15,541 15,541

THE GROUP

2011 2010

Basic Diluted Basic Diluted

No. of shares ’000

No. of shares ’000

Weighted average number of ordinary shares 1,149,800 1,149,800 1,143,897 1,143,897Adjustment for potential dilutive ordinary shares - 12,423 - 14,213

Weighted average number of ordinary shares used to compute earnings per share 1,149,800 1,162,223 1,143,897 1,158,110

Earnings per share (US cents) 1.62 1.60 1.36 1.34

The weighted average number of ordinary shares for the purposes of basic earnings per share excludes treasury shares which had been purchased on the SGX under the Share Purchase Mandate (Note 24).

111


34. OPERATING LEASE COMMITMENTS

THE GROUP

2011 US$’000

2010 US$’000

Minimum lease payments paid under operating leases recognised as an expense in the year 1,958 1,563 At the end of the reporting period, the Group has outstanding commitment under non-cancellable operating leases, which fall due as follows:

2011 US$’000

2010 US$’000

Within one year 677 548In the second to fifth year inclusive 793 697

Total 1,470 1,245

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.

35. SEGMENT INFORMATION

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expense that relate to transactions with any of the Group’s other components. The operating segments operating results are reviewed regularly by the Group’s chief operating decision makers to make decisions about the resources to be allocated to the segments and assess its performance, and for which discrete financial information is available.

The Group has five reportable segments which are described below:

(a) Infrastructure solution - provision of best of breed communication technologies and solutions; including network security solutions and network integration services to telecom operators and enterprises.

(b) Managed services - provision of value-added services to telecom operators and enterprises.

(c) Digital media solution - provision of integration solutions to telecom and cable TV operators to deliver digital interactive TV services.

(d) Multi-media software - open standard software platform that is integral in the provision of digital interactive TV services.

(e) New media services - creation of a value chain of content offering across Digital TV, Mobile and Internet broadcast platforms.

112


35. SEGMENT INFORMATION - continued

Information regarding the Group’s reportable segments is presented below.

Segment revenues and results

The following is an analysis of the Group’s revenue and results by reportable segment.

Infrastructure solution

Managed services

Digital media

solutionMulti-media

softwareNew media

services Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2011

REVENUEExternal revenue 164,807 25,368 113,101 29,905 2,535 335,716

RESULTSegment result 9,489 11,999 15,252 16,879 524 54,143Unallocated other operating income 1,837Unallocated corporate expenses (34,168)Finance costs (555)

Profit before income tax 21,257

SEGMENT ASSETSSegment assets 174,923 8,984 84,204 64,232 2,167 334,510Unallocated corporate assets 96,338

Consolidated total assets 430,848

SEGMENT LIABILITIESSegment liabilities 36,051 284 4,572 326 56 41,289Unallocated corporate liabilities 24,632

Consolidated total liabilities 65,921

113




Managed services

Digital media

solutionMulti-media

softwareNew media

services Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2010

REVENUEExternal revenue 149,235 20,190 78,186 22,058 946 270,615

RESULTSegment result 10,496 14,085 8,108 10,245 602 43,536Unallocated other operating income 1,388Unallocated corporate expenses (26,741)Finance costs (681)

Profit before income tax 17,502

SEGMENT ASSETSSegment assets 147,755 6,072 66,891 51,691 73 272,482Unallocated corporate assets 125,918

Consolidated total assets 398,400

SEGMENT LIABILITIESSegment liabilities 26,992 326 2,458 643 23 30,442Unallocated corporate liabilities 21,280

Consolidated total liabilities 51,722

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 3.

Segment profit represents the profit earned by each segment without allocation of central administration costs and directors’ salaries, unallocated distribution expense, investment revenue, unallocated other operating expenses, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance assessment.

For the purposes of monitoring segment performance and allocating resources between segments:

• all assets are allocated to reportable segments other than structured deposits, tax recoverable, held for trading investments, pledged bank deposits, fixed bank deposits with maturity period over three months, cash and cash equivalents, deferred tax assets, unallocated other receivables, deposits and unallocated property, plant and equipment; and

• all liabilities are allocated to reportable segments other than unallocated other payables, accruals, finance lease payables, bank loans, tax payables and deferred tax liabilities.

Information on other non-cash expenses were not disclosed as it is impracticable to allocate to each of the reportable segments given the nature of the business.

114



Other segment information


Managed services

Digital media

solutionMulti-media

softwareNew media

services Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2011

Depreciation and amortisation 8,894 - - 9,845 12 18,751Addition to non-current assets (note) 7,883 - - 13,131 - 21,014 2010

Depreciation and amortisation 9,118 - - 7,982 10 17,110Addition to non-current assets (note) 10,223 - - 7,571 3 17,798 Note: Amounts included addition to property, plant and equipment and intangible assets

Geographical information

The Group’s operations are located in China (including Hong Kong and Macao) and outside of China.

The Group’s revenue from external customers and information about its non-current assets by geographical location are detailed below:

Revenue from external customers

Non-current assets

2011 US$’000

2010 US$’000

2011 US$’000

2010 US$’000

China (including Hong Kong and Macao) 231,484 207,176 54,502 62,428Outside of China 104,232 63,439 28,338 28,181

335,716 270,615 82,840 90,609

Note: Non-current assets excluded deferred tax assets.

Information about major customers

For the year ended 31 December 2011, there was one customer who accounted for US$50,052,000 (2010: US$32,837,000) of total revenue, and related to all reportable segments of the Group.

115

statistiCs oF sharehoLDinGsas at 16 marCh 2012

Authorised share capital : US$75,000,000.00 Issued and fully paid-up capital : 57,637,507.30 Number of Issued Shares (excluding Treasury Shares) : 1,147,650,146 Number/Percentage of Treasury Shares : 5,100,000 (0.44%) Class of shares : Ordinary share of US$0.05 each Voting rights : One vote per share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings

No. of Shareholders

%

No. of Shares

%

1 - 999 14 0.30 1,611 0.001,000 - 10,000 1,858 39.42 13,749,959 1.2010,001 - 1,000,000 2,811 59.64 159,761,822 13.921,000,001 and above 30 0.64 974,136,754 84.88

TOTAL 4,713 100.00 1,147,650,146 100.00

TWENTY LARGEST SHAREHOLDERS

No. Name

No. of Shares

%

1 HSBC (SINGAPORE) NOMINEES PTE LTD 602,801,935 52.522 VENTURE CORPORATION LIMITED 142,500,000 12.423 UOB KAY HIAN PTE LTD 67,103,675 5.854 CIMB NOMINEES (S) PTE LTD 34,533,647 3.015 OCBC SECURITIES PRIVATE LTD 17,013,000 1.486 WATERWORTH PTE LTD 16,500,000 1.447 CITIBANK NOMINEES SINGAPORE PTE LTD 14,951,400 1.308 DBS NOMINEES PTE LTD 13,921,200 1.219 CIMB SECURITIES (SINGAPORE) PTE LTD 6,676,000 0.5810 PHILLIP SECURITIES PTE LTD 5,977,000 0.5211 NEO AIK SOO 5,568,000 0.4912 UNITED OVERSEAS BANK NOMINEES (PRIVATE) LIMITED 5,239,000 0.4613 DBS VICKERS SECURITIES (S) PTE LTD 5,025,000 0.4414 MAYBANK KIM ENG SECURITIES PTE LTD 3,915,000 0.3415 HL BANK NOMINEES (S) PTE LTD 3,872,000 0.3416 MAYBAN NOMINEES (S) PTE LTD 3,340,000 0.2917 CITIBANK CONSUMER NOMINEES PTE LTD 3,030,000 0.2618 TEO CHOR KHIN JISMYL 2,875,000 0.2519 LIM & TAN SECURITIES PTE LTD 2,796,117 0.2420 HONG LEONG FINANCE NOMINEES PTE LTD 2,470,000 0.22

TOTAL 960,107,974 83.66

116

statistiCs oF sharehoLDinGs as at 16 marCh 2012

SUBSTANTIAL SHAREHOLDERS Substantial shareholders of the Company (as recorded in the Register of Substantial Shareholders)

No. of Ordinary shares of US$0.05 each

Name Direct Interest % Indirect Interest %

KDDI Corporation - - 588,772,535 1 51.30

Venture Corporation Limited 142,500,000 12.42 - -

Jismyl Teo Chor Khin 2,875,000 0.25 55,167,967 2 4.81

Notes :

1 Registered in the name of HSBC (Singapore) Nominees Pte Ltd.

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.

FREE FLOAT

As at 16 March 2012, approximately 30.15% of the issued share capital of the Company was held in the hands of the public (based on information available to the Company). Accordingly, the Company has complied with Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited.

117

notiCe oF annuaL GeneraL meetinGDmX teChnoLoGies Group LimiteD

(inCorporateD in BermuDa)

NOTICE IS HEREBY GIVEN that the Annual General Meeting (the “AGM”) of DMX TECHNOLOGIES GROUP LIMITED (the “Company”) will be held at M Hotel, Anson 3, Level 2, 81 Anson Road, Singapore 079908 on Friday, 27 April 2012 at 10.00 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Financial Statements of the Company for the financial year ended 31 December 2011 together with the Auditors’ Report thereon.

(Resolution 1)

2. To declare a final dividend of S$0.003 per share for the financial year ended 31 December 2011. (Resolution 2)

3. To re-elect Mr Shinichi Suzukawa, who is retiring pursuant to Bye-law 104 of the Bye-laws of the Company. (Resolution 3)

4. To re-elect Ms Jismyl Teo Chor Khin, who is retiring pursuant to Bye-law 104 of the Bye-laws of the Company. (Resolution 4)

Ms Jismyl Teo Chor Khin will, upon re-election as a director of the Company, remain as the Chief Executive Officer.

5. To re-elect Mr Foo Meng Tong, who is retiring pursuant to Bye-law 104 of the Bye-laws of the Company. (Resolution 5)

Mr Foo Meng Tong will, upon re-election as a director of the Company, remain as the chairman of Audit and Nominating Committees and a member of 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 (“SGX-ST”).

6. To re-elect Mr Takuro Awazu, who is retiring pursuant to Bye-law 107 of the Bye-laws of the Company. (Resolution 6)

Mr Takuro Awazu will, upon re-election as a director of the Company, remain as a member of the Audit, Nominating and Remuneration Committees and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.

7. To re-elect Mr Takashi Nagashima, who is retiring pursuant to Bye-law 107 of the Bye-laws of the Company. (Resolution 7)

Mr Takashi Nagashima will, upon re-election as a director of the Company, remain as a member of the Nominating and Remuneration Committees and will be considered non-independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.

8. To approve the payment of Directors’ fees of S$202,500.00 for the financial year ended 31 December 2011 (2010: S$144,000.00 /-). (Resolution 8)

9. To re-appoint Messrs Deloitte & Touche LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 9)

10. To transact any other ordinary business which may properly be transacted at an AGM.

118



AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:

11. Authority to allot and issue shares – Ordinary Resolution

“That authority be and is hereby given to the Directors of the Company to:

(a) (i) issue ordinary shares in the capital of the Company (“Shares”) whether by way of rights, bonus or otherwise; and/or

(ii) 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

(b) (notwithstanding the authority conferred by this Resolution 10 may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the Directors while this Resolution 10 was in force,

provided that:

(1) the aggregate number of Shares to be issued pursuant to this Resolution 10 (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution 10) does not exceed 50% of the issued Shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with 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 10) 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

(2) [subject to such manner of calculation as may be prescribed by 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 10 is passed, after adjusting for:

(i) 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 10 is passed; and

(ii) any subsequent bonus issue, consolidation or sub-division of Shares;

(3) in exercising the authority conferred by this Resolution 10, 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

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(4) (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution 10 shall continue in force until the conclusion of the next AGM of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is the earlier.”

[See Explanatory Note (i)] (Resolution 10)

12. Authority to grant options and issue shares under the DMX Employee Share Option Scheme

“ThattheDirectorsbeandareherebyempoweredtograntoptions,andtoallotandissuefromtimetotimesuchnumberofsharesasmayberequiredtobeissuedpursuanttotheexerciseofoptionsgrantedundertheDMXEmployeeShareOptionScheme(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 (ii)]

(Resolution 11)

13. The Proposed Renewal of the DMX Performance Share Plan

That:

(1) the Directors be and are hereby authorised to offer and grant awards (“Awards”) in accordance with the rules of the DMX Performance Share Plan (“Plan”) and to allot and issue from time to time such number of fully-paid Shares as may be required to be issued pursuant to the vesting of the Awards under the Plan, provided that the aggregate number of Shares to be allotted and issued pursuant to the Plan, when added to the number of Shares issued and issuable in respect of all Awards granted under the Plan, and all Shares issued and issuable in respect of all options granted or awards granted under any other share incentive schemes or share plans adopted by the Company and for the time being in force, shall not exceed fifteen per cent. (15%) of the total number of issued Shares (excluding treasury Shares) in the capital of the Company on the day preceding the date on which the Award shall be granted and from time to time during the existence of the Plan. [See Explanatory Note (iii)]

(Resolution 12)

14. That authority be and is hereby given to the Directors of the Company to allot and issue from time to time such number of new fully- paid ordinary shares in the capital of the Company as may be required to be allotted and issued pursuant to the DMX Scrip Dividend Scheme. [See Explanatory Note (iv)]

(Resolution 13)

BYORDEROFTHEBOARD

Low Siew TianCompanySecretary

Singapore11April2012

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Explanatory Notes:

(i) The Ordinary Resolution 10 proposed in item 11 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the date of the next AGM, to allot and issue shares and convertible securities in the Company. The aggregate number of shares (including any shares issued pursuant to the convertible securities) which the Directors may allot and issue under this Resolution will not exceed fifty per cent. (50%) of the total number of issued shares excluding treasury shares of the Company. For issues of shares other than on a pro rata basis to all shareholders, the aggregate number of shares to be issued will not exceed twenty per cent. (20%) of the total number of issued shares excluding treasury shares of the Company. This authority will, unless previously revoked or varied at a general meeting, expire at the next AGM of the Company or the date by which the next AGM of the Company is required by law or the Company’s Bye-laws to be held, whichever is earlier. However, notwithstanding the cessation of this authority, the Directors are empowered to issue shares pursuant to any convertible securities issued under this authority.

(ii) The Ordinary Resolution 11 proposed in item 12 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the date of next AGM, to grant options and to allot and issue shares upon the exercise of such options in accordance with the Scheme.

(iii) The Ordinary Resolution 12 proposed in item 13 above, if passed, will empower the Directors of the Company, from the date of the above Meeting until the next AGM, to grant awards and to allot and issue such number of fully paid Shares from time to time as may be required to be issued pursuant to the DMX Performance Share Plan not exceeding fifteen per cent. (15%) of the total number of issued Shares (excluding treasury shares).

(iv) The Ordinary Resolution 13 proposed in item 14 above, if passed, will empower the Directors of the Company to allot and issue new fully-paid ordinary shares in the capital of the Company pursuant to the DMX Scrip Dividend Scheme to eligible members who, in respect of a qualifying dividend, have elected to receive their dividends in the form of shares in lieu of the cash amount of that qualifying dividend.

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 AGM, 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 AGM.

(2) If a depositor wishes to appoint a proxy/proxies, then the proxy form which is despatched together with this

Annual Report to depositors (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 50 Raffles Place, Singapore Land Tower #32-01, Singapore 048623, at least 48 hours before the time of the AGM.

1401 Stanhope House, 738 King’s Road, Quarry Bay, Hong Kong - Tel: (852) 2520 2660 Fax: (852) 2802 206210 Hoe Chiang Road, Keppel Towers #16-03, Singapore 089315 - Tel: (65) 6536 9923 Fax: (65) 6538 7566

www.dmxtechnologies.com

(Regn. No.: 31201)

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