中国新电信 2015年年报

中国新电信 2015年年报

(Incorporated in the Cayman Islands with limited liability)Stock Code : 8167ANNUAL REPORT 2015

中国新电信 2015年年报

1. 2. 3. CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

Hong Kong Exchanges and Clearing Limited and the Exchange take no responsibility for the contents of this report, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this report.

This report, for which the directors (the “Directors ”) of Neo Telemedia Limited (the “Company ”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

1. the information contained in this report is accurate and

complete in all material respects and not misleading;

2. there are no other matters the omission of which would

make any statement in this report misleading; and

3. all opinions expressed in this report have been arrived at

after due and careful consideration and are founded on

bases and assumptions that are fair and reasonable.

中国新电信 2015年年报

2Contents

Corporate Information 3

Chairman’s Statement 5 Biographies of Directors 21 Report of the Directors 25 Corporate Governance Report 37 Independent Auditors’ Report 53

Consolidated Statement of Profit or Loss and

Other Comprehensive Income

57 Consolidated Statement of Financial Position 59 Consolidated Statement of Changes in Equity 61 Consolidated Statement of Cash Flows 63 Notes to the Consolidated Financial Statements 65 Financial Summary 219

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

3

Corporate Information

BOARD OF DIRECTORS

EXECUTIVE DIRECTORS

Mr. CHEUNG Sing Tai (Chairman and Chief Executive Officer)Mr. ZHANG Xinyu (Vice President)Mr. LIAN Xin Mr. XU Gang

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. LEUNG Ka Wo Mr. CHOU Jianzhong Ms. XI Lina

Mr. HUANG Zhixiong

COMPANY SECRETARY

Mr. TSE Kam Fai

COMPLIANCE OFFICER

Mr. CHEUNG Sing Tai

AUTHORISED REPRESENTATIVES

Mr. CHEUNG Sing Tai Mr. TSE Kam Fai

AUDIT COMMITTEE

Mr. LEUNG Ka Wo (Chairman)Mr. CHOU Jianzhong Ms. XI Lina

REMUNERATION COMMITTEE

Mr. LEUNG Ka Wo (Chairman)Mr. CHEUNG Sing Tai Ms. XI Lina

NOMINATION COMMITTEE

Mr. CHEUNG Sing Tai (Chairman)Mr. LEUNG Ka Wo Ms. XI Lina

AUDITOR

HLB Hodgson Impey Cheng Limited

中国新电信 2015年年报

4Corporate Information

8167

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

39

1504

Codan Trust Company (Cayman) Limited

Cricket Square

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

183

22

LEGAL ADVISERS

TC & Co.

Fan Wong & Tso

Stevenson, Wong & Co

PRINCIPAL BANKERS

Industrial and Commercial Bank of China (Asia) Limited

Bank of China (Hong Kong) Limited

Bank of Communications Co., Ltd.

China Construction Bank Corporation

The Bank of East Asia Limited

GEM STOCK CODE

8167

REGISTERED OFFICE

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

HEAD OFFICE AND PRINCIPAL PLACE

OF BUSINESS IN HONG KONG

Unit 1504, Harcourt House

39 Gloucester Road

Wanchai

Hong Kong

PRINCIPAL SHARE REGISTRAR AND

TRANSFER OFFICE

Codan Trust Company (Cayman) Limited

Cricket Square

P.O. Box 2681

Grand Cayman

KY1-1111

Cayman Islands

HONG KONG BRANCH SHARE

REGISTRAR AND TRANSFER OFFICE

Tricor Tengis Limited

Level 22, Hopewell Centre

183 Queen’s Road East

Hong Kong

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

5Chairman ’s Statement

P2P (i) + (ii) (iii) (iv) WIFI P2P

On behalf of the board (the “Board ”) of directors (the

“Directors ”) of Neo Telemedia Limited (the “Company ”), I hereby

present to the shareholders of the Company the annual results of

the Company and its subsidiaries (collectively referred to as the

“Group ”) for the year ended 31 December 2015.REVIEW AND ANALYSIS

During the year ended 31 December 2015, the G roup ’s

operations comprised sales of telecommunications products and

services, peer-to-peer (“P2P ”) lending platform business, and

transmedia advertising services in the People ’s Republic of China

(“PRC ”).

According to the “Opinions on the implementation of division

of work under the report on the work of the government ”

issued by the State Council of the PRC on 25 March 2015, the

PRC government planned to, among others, (i) formulate the

“Internet Plus ” action plan; (ii) promote the integration of modern

manufacturing industry and the mobile internet, cloud computing,

big data and internet of things; (iii) encourage the development

of e-commerce business; and (iv) guide the expansion of internet

enterprises into the international market. In view of the potential

growth in the e-commerce business and the favorable support

from the PRC government, the Group is positioned to optimize its

resources and seize the opportunities brought by the Internet and

big data era, and has made several acquisitions of the related

businesses in trading of mobile phones and tablets, operation of

mobile and Internet WIFI platforms and P2P lending platform.

During the year under review, the G roup completed the

acquisitions of (Guangdong Bluesea

Mobile Development Company Limited*) (“Bluesea Mobile ”)

and its subsidiaries (collectively referred to as “Bluesea Mobile

Group ”), (Guangdong Avatar

Wealth Investment Management Company Limited*) (“Avatar

Wealth ”), and Million Ace Limited and its subsidiaries (collectively

referred to as “Million Ace Group ”).* for identification purpose only

中国新电信 2015年年报

6Chairman’s Statement

34.6

1,914.9

47.0

567.4

32.2

WIFI

P2P

5.2

6.2

Driven by the newly acquired businesses, the G roup’s turnover

increased significantly to approximately HK$1,914.9 million for

the year ended 31 December 2015 from approximately HK$34.6

million for the year ended 31 December 2014. These newly

acquired businesses have contributed a positive profit stream of

approximately HK$47.0 million to the Group. However, due to the

burden of debt financing and unsatisfactory performance in the

Group’s other businesses, the Group recorded a loss attributable

to owners of the Company for the year ended 31 December

2015. In the absence of the impairment loss on goodwill arose

from various acquisitions completed during previous years,

the G roup’s net loss attributable to owners of the Company

decreased significantly from approximately HK$567.4 million for

the year ended 31 December 2014 to approximately HK$32.2

million for the year ended 31 December 2015.

SALE OF TELECOMMUNICATIONS

PRODUCTS AND SERVICES

Bluesea Mobile Group

On 1 April 2015, the G roup obtained the control of Bluesea

Mobile G roup through structured contracts. Bluesea Mobile

G roup is mainly engaged in the operation of a mobile and

Internet commercial WIFI platform, a P2P lending platform and

a cross-border e-commerce platform. Bluesea Mobile G roup’s

telecommunication business has contributed a positive profit

stream of approximately HK$5.2 million since being acquired by

the Group.

Million Ace Group

On 11 September 2015, the G roup completed the acquisition

of the Million Ace G roup which is mainly engaged in trading

of mobile phones and tablets. Million Ace G roup has greatly

boosted the revenue of the G roup and contributed a positive

profit stream of approximately HK$6.2 million since being

acquired by the Group.

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

7Chairman ’s Statement

(i) (ii) (a) (b) 1) 2)

P2P 70% P2P 36.9

Hughes China Group

During the year under review, the performance of satellite-

related services has declined as compared to the year ended 31

December 2014. Hughes China Group continued to work on the

coal-mine surveillance projects, as well as the two other projects

namely “ ” and “ ”.CERNET Wifi Group Due to (i) the non-cooperation of the former general manager of (CERNET Wifi Technology (Beijing) Company Limited*) (“CERNET Wifi ”), and (ii) the non-cooperation of the holders of the non-controlling interests, the Company had been unable to both (a) access the complete sets of books and records together with the supporting documents of CERNET Wifi and (b) maintain and operate the business of CERNET Wifi properly. As such, CERNET Wifi has been de-consolidated from the consolidated financial statements since last financial year. During the year under review, CERNET Wifi has recovered its common seal, contract chop and business registration documents and its duplicate from its former general manager. To resume the operations of and repossess control over CERNET Wifi, the Company had been working on 1) a claim against holders of CERNET Wifi ’s non-controlling interests who own the brand name and network of CERNET which CERNET Wifi has used for its operations pursuant to an asset leasehold

agreement, and 2) recovery of CERNET Wifi ’s complete books

and records together with the relevant supporting documents

during the year under review. CERNET Wifi remained de-

consolidated from the Group ’s consolidated financial statements

as at 31 December 2015.

PEER-TO-PEER LENDING PLATFORM

BUSINESS

Avatar Wealth

On 1 April 2015, the G roup completed the acquisition of 70%

equity interest of Avatar Wealth through obtaining control of

Bluesea Mobile. Avatar Wealth is engaged in running P2P lending

platform business. It offers a full range of products to lenders and

on the other hand provides simplified, convenient and flexible

financing solutions to both SME ’s and individual borrowers. Since

being acquired, Avatar Wealth has contributed a positive profit

stream of approximately HK$36.9 million to the Group.

* for identification purpose only

中国新电信 2015年年报

8Chairman’s Statement

45% P2P

P2P

P2P

40,000 3,000

IDC

Bees Financial

In addition to Avatar Wealth, the G roup also launched a P2P

lending platform in

(Shenzhen Bees Financial Internet Financial Services Co Ltd.*)

(“Bees Financial”), a 45% owned subsidiary of the Company.

Bees Financial has entered into a funds depository business

cooperation agreement with (Guangdong Huaxing

Bank*) (“Guangdong Huaxing”) pursuant to which G uangdong

Huaxing agreed to provide funds depository services to clients

of Bees Financial’s P2P online lending platform. G uangdong

Huaxing also agreed to continue to cooperate with Bees Financial

in the areas of payment and settlement, client resources sharing,

wealth management and other internet finance services. The

cooperation with G uangdong Huaxing promotes transparency

and significantly reduces the credit risk and liquidity risk of Bees

Financial’s P2P online lending business.

PROVISION OF TRANSMEDIA ADVERTISING

SERVICES

During the year under review, Ease Ray G roup’s revenue

has decreased as compared to 2014 due to the temporary

suspension of its services in various cities as a result of the

policies implemented to regulate the traffic signboard advertising

by the municipal governments.

PROSPECTS

SALE OF TELECOMMUNICATION

PRODUCTS AND SERVICES

Bluesea Mobile Group

Upon the completion of open offer, the Group is ready to expand

further in the telecommunication sector. An Internet data center

(“IDC”) in Panyu, the PRC with gross floor area of approximately

40,000 sq.m. and 3,000 server cabinets will be set up for

provision of, among others, value-added services including data

distribution and analysis and cloud related services.

* for identification purpose only

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

9Chairman ’s Statement

IDC

WIFI

WiFi 21

180,000

B (O2O) 1) 2)

In addition to IDC in Panyu, Bluesea Mobile has entered into a strategic cooperation framework agreement in respect of the joint development of Zhuxishugu (Cloud Computing Center) to further rigorous drive the joint development of information-based industry with core big data in Jiangmen City. Pursuant to the framework agreement, Bluesea Mobile shall be responsible for, among others, the overall investment, construction, planning and coordination of the development project. With the support of Jiangmen Municipal G overnment, Bluesea Mobile shall jointly develop and construct with (China Telecom Corporation Limited, G uangdong Branch*), a main station of big data industrial base in Binjiang New Area, Jiangmen City and the resource centre of big data industrial base in Taishan City, introduce well-known enterprises and promote the high-speed development of cloud services and cloud application in Jiangmen.Bluesea Mobile ’s WIFI services network, “bluesea-free WIFI ”, will also be expanded to cover not less than 21 municipalities in G uangdong Province, the PRC. A cross-

border e-commerce integrated zone of at least 180,000 sq.m. is also being set up in Foshan International Furniture Expo Mall in support of the G roup ’s cross-border e-commerce platform “ ”. Facilities of the integrated zone include a Type B customs warehouse and an Online to Offline (O2O) experience zone.

CERNET Wifi Group

As the outcome of the legal proceedings had remained uncertain, operations of CERNET Wifi and the G roup ’s control over CERNET Wifi had remained suspended during the year under review. With a view to saving time and costs involved in the legal proceedings, on 17 February 2016, the Group entered into agreements (the “Unwinding Agreements ”) with (“A1 Net ”), the immediate holding company of CERNET Wifi and a subsidiary of the Company by way of structured contracts (the “Structured Contracts ”), the shareholders of A1 Net and two independent third parties (the “Purchasers ”) to unwind the Structured Contracts. Pursuant to the Unwinding Agreements, among others, 1) the Structured Contracts under which the G roup had obtained control over CERNET Wifi would be unwound; and 2) the shareholders of A1 Net disposed of their entire interests in A1 Net to the Purchasers.* for identification purpose only

中国新电信 2015年年报

10Chairman’s Statement

P2P

P2P

P2P

P2P

43%

50

In addition, upon the unwinding of the Structured Contracts,

while the Group will not incur further cost in relation to the legal

proceedings, A1 Net has undertaken to repay the Group its share

of any claimed amount received by CERNET Wifi if the outcome

of the legal proceedings is in favour of CERNET Wifi.

The Directors are of the view that the entering into the

Unwinding Agreements is in the interest of the Company and

its shareholders as a whole and would not result in any material

adverse impact on the operation and financial position of the

Group.

Hughes China Group

The management of the Hughes China G roup will continue

to work on additional coverage of the coal-mine surveillance

projects and develop its “ ” and “ ” projects.

PEER-TO-PEER LENDING PLATFORM

BUSINESS

The G roup is ready to expand further in the P2P business and

plans to establish a third-party payment company, develop

personal credit information platform, set up integrated service

shops in the Pearl River Delta and expand its customer base.

With the launch of the P2P lending platform business in Avatar

Wealth and Bees Financial, the G roup aims to establish an

integrated data transfer, mobile marketing and sales, and financial

transactions system and become one of the leading P2P Internet

financial group in China.

OTHER PROJECTS

CNCC Logistics

In June 2015, the G roup completed the acquisition of 43% of

the equity interest in (CNCC Logistics

Equipment Co., Ltd.*) (“CNCC Logistics”). CNCC Logistics

is principally engaged in the design, manufacture and sale of

logistics equipment, and the provision of relevant technical

advisory services. Through CNCC Logistics, the G roup will set

up 50 skid mounted liquefied natural gas (LNG) filling stations

and related business, as well as manufacturing plants in Jinan,

Shandong Province and in Northwest China.

* for identification purpose only

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

11Chairman ’s Statement

(i) (ii) (iii)

0.38 3,176,281,448 1,089

Shenzhou Aerospace Institute

(G uangdong Shenzhou

Aerospace Manufacturing Technology Institute*) (“Shenzhou

Aerospace Institute ”) has been set up as a private non-

enterprise entity of which Bluesea Mobile is one of the organizers.

The objective of Shenzhou Aerospace Institute is to, among

others, (i) promote aerospace technology amongst the general

public; (ii) expand the aerospace technology industry; and

(iii) promote the manufacturing technology information within

traditional manufacturing industry in the Foshan region by

integrating aerospace related technology, for commercial use in

the Pearl River Delta region with a focus on industrial information

technology and communication, intelligent manufacturing

technology and the relevant manufacturing services. Further,

depending on the development and progress of various projects,

Shenzhou Aerospace Institute may establish future joint venture

companies with the Company.OVERALL

The acquisitions of Bluesea Mobile, Avatar Wealth and Million

Ace G roup have been important moves for the G roup in

picking up its growth momentum. Moving forward, the G roup

will continue to explore potential investment opportunities in

the telecommunication and Internet finance sectors. With the

favorable policies and support from the PRC government towards

these fast growing sectors, the management is optimistic that the

Group will regain its strength and be able to reward shareholders

with better results in the foreseeable future.FINANCIAL POSITION

During the year under review, the Group completed an open offer

of 3,176,281,448 shares at the subscription price of HK$0.38

per offer share on the basis of one open offer share for every two

shares held on 7 December 2015 (the “Open Offer ”). The Open

Offer was completed on 30 December 2015 and the net proceeds

raised from the open offer were approximately HK$1,089 million.

The net proceeds were intended to be used according to the

prospectus of the Company issued on 8 December 2015.* for identification purpose only

中国新电信 2015年年报

12Chairman’s Statement

26.2

27.3

27.3

1,384.1 48.5

1,111.9

31.7

246.8 16.6

374.0

95.3

0.5

3.7

1,729.6

147.8 410.7

250.8

23.7%

170%

1,914.9

34.6

As at 31 December 2015, the G roup had interest-bearing bank

borrowings of HK$26.2 million (2014: HK$ nil) and other loan

of HK$27.3 million (2014: HK$27.3 million) which are repayable

within one year.

As at 31 December 2015, the G roup had current assets of

approximately HK$1,384.1 million (2014: HK$48.5 million),

including cash and cash equivalents of approximately

HK$1,111.9 million (2014: HK$31.7 million), trade receivables,

prepayments and other receivables and payments in advance

of approximately HK$246.8 million (2014: HK$16.6 million);

and current liabilities of approximately HK$374.0 million (2014:

HK$95.3 million). The G roup’s current ratio had been increased

from approximately 0.5 times as at 31 December 2014 to

approximately 3.7 times as at 31 December 2015.

The Group had total assets of approximately HK$1,729.6 million

(2014: HK$147.8 million) and total liabilities of approximately

HK$410.7 million (2014: HK$250.8 million), representing a

gearing ratio (expressed as total liabilities to total assets) of

approximately 23.7% as at 31 December 2015 (2014: 170%).

The G roup’s turnover for the year ended 31 December 2015

amounted to approximately HK$1,914.9 million (2014: HK$34.6

million).

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

13Chairman ’s Statement

38

COMMITMENTS

Details of commitments of the Group were set out in note 38 to

the consolidated financial statements.CONTINGENT LIABILITIES

As at 31 December 2015, the G roup did not have any material

contingent liabilities.CHARGES ON ASSETS

As at 31 December 2015, there were no material charges on the

Group ’s assets.FOREIGN EXCHANGE EXPOSURE AND

TREASURY POLICIES

Most of the G roup ’s cash balances and transactions are either

denominated in Renminbi or Hong Kong dollars, i.e. functional

currencies of relevant group entities. The G roup does not have

a foreign currency hedging policy. However, the management

monitors foreign exchange exposure and will consider hedging

significant foreign currency exposure should the need arise. As

at 31 December 2015 and 2014, the G roup did not have any outstanding hedging instruments.

中国新电信 2015年年报

14Chairman’s Statement

Beyond Net Service Limited

3,067,500

3,067,500

LEGAL PROCEEDINGS

THE COMPANY

Winding-up petition

Reference is made to the announcement of the Company

dated 15 October 2014 regarding the receipt of a winding-

up petition (the “Winding-up Petition”) by the Company on

15 October 2014, presented by Beyond Net Service Limited

(the “Petitioner”) at the Court of First Instance of the High

Court of the Hong Kong Special Administrative Region (the

“High Court”) against the Company. The Winding-up Petition

concerns a sum of HK$3,067,500 (the “Claim”), being the

amount of a cheque issued by the Company on behalf of Cloud

Computing Investment Limited (“Cloud Computing”), a wholly

owned subsidiary of the Company, to the Petitioner pursuant to

a consultancy agreement entered into between the Petitioner

and Cloud Computing on 1 August 2012 (the “Consultancy

Agreement”). In accordance with the Consultancy Agreement,

the Petitioner should provide certain consultation and services to

Cloud Computing within one year from the date of the agreement

but the Petitioner has failed to do so. Having reviewed the details

of the Winding-up Petition and the relevant facts, the Company

has instructed its legal advisers to apply for striking out and

dismissal of the Winding-up Petition (the “Application”), which

was heard at the High Court on 4 May 2015, and the Company

received on 12 May 2015 the decision (the “Decision”) from the

High Court that the Application has failed. The Company has

instructed its legal advisers to appeal the Decision. The appeal

was dismissed by the Court of Appeal of the High Court on 8

October 2015 (the “Order”). Pursuant to the Order, the sum of

HK$3,067,500 paid into the High Court by the Company had

been paid out to the Petitioner in satisfaction of the Claim and the

Winding-up Petition was dismissed on 19 October 2015.

The Company has further instructed its legal advisers to advise

and take action on behalf of Cloud Computing against the

Petitioner on the Petitioner’s failure to perform the Consultancy

Agreement. Pursuant to such instructions, the legal adviser has

issued a High Court Action on 5 December 2014 against the

Petitioner.

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

15Chairman ’s Statement

Arch Capital Limited Hillgo Asia Limited 1281 144,000,000 144,000,000

Oberlin Asia Inc. HCH Investments Limited

Writ of summons

Reference is made to the announcement of the Company dated

14 June 2015, a writ of summons (the “Writ ”) was issued by

Arch Capital Limited and Hillgo Asia Limited against the Company

under Court of First Instance of the High Court of Hong Kong

Action No.1281 of 2015 (“Action ”). In the statement of claim

under the Writ, the said two companies purportedly claim as

the holders for value of two convertible notes in an aggregate

principal amount of HK$144,000,000 issued by the Company

(the “Convertible Note(s)”), and claim for the principal amount

of HK$144,000,000 under the said Convertible Notes together

with interest and costs.The Convertible Notes were issued by the Company in relation to the acquisition of HCH Investments Limited in April 2013 as part of the consideration payable to Oberlin Asia Inc. (the “Vendor ”). The Vendor nominated the said two companies to hold the Convertible Notes; and it was expressly provided in the Convertible Notes that they were non-transferable. There are on-going disputes between the Company and the Vendor regarding the said acquisition. Further, subsequent to the said acquisition and without the prior knowledge or consent of the Company, the ultimate beneficial ownership of the said two companies was transferred to Next-G eneration Satellite Communications Limited (“Next-Gen ”), a company listed on the Singapore Stock Exchange. It is the Company ’s position that the said transfer was in breach of aforesaid provision of non-transferability, and

therefore the said two companies and Next-Gen are not entitled

to claim on the Convertible Notes.

The Directors have therefore given instructions to the Company ’s

legal adviser to contest and defend the Action and to raise

a counterclaim against the said two companies. A Defence

and Counterclaim has accordingly been filed on behalf of the

Company on 26 August 2015, disputing the claim of the said

two companies and counterclaiming them for damages (the

“Counterclaim ”).

中国新电信 2015年年报

16Chairman’s Statement

On 6 January 2016, an order for discontinuance of the

Counterclaim and a Tomlin order were filed with the High Court

that all further proceedings in relation to the Action be stayed

except for carrying out the terms that include the following,

among other things, into effect:

– The Company shall, within 3 business days after closing of

the Open Offer, pay to the said two companies the sum of

HK$10,080,000, representing the outstanding interest on

the Convertible Notes for the period from 5 October 2014

to 4 October 2015.

– The Company shall comply with all terms of the Convertible

Notes.

– The obligation of the Company to pay interest of the

Convertible Notes at the rate of 7% per annum from 5

October 2015 until full payment is expressly waived by the

said two companies.

The Directors consider that with a view to saving time and costs

involved in the Action and the Counterclaim, the filing of the said

orders is in the interest of the Company and its shareholders as a

whole and would not result in any material adverse impact on the

operation and financial position of the Group.

CERNET WIFI

ASSET LEASEHOLD ARBITRATION CLAIM

Reference is made to the announcement of the Company dated

19 December 2014 in relation to the application by CERNET

Wifi to the China International Economic And Trade Arbitration

Commission (“CIETAC”)

to claim against (CERNET Company

Limited*) (“CCL”) and (CERNET Investment

Company Limited*) (“CERNET Investment”) for, inter alia, an

amount of RMB22,529,555, being the benefits after deduction

of tax generated from the assets leased by CCL and CERNET

Investment to CERNET Wifi pursuant to the Asset Leasehold

Agreement (the “Asset Leasehold Arbitration”).

* for identification purpose only

3

10,080,000

7%

22,529,555

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

17Chairman ’s Statement

26,528,148 (i) (ii) 17,786,802 23,330,550

On 5 February 2015, CERNET Wifi received a counterclaim from CCL and CERNET Investment claiming for, inter alia , a total amount of RMB26,528,148.

On 13 February 2015, in addition to the claims made in the Asset Leasehold Arbitration, CERNET Wifi has further claimed against CCL and CERNET Investment for, inter alia , (i) the continuation of the Asset Leasehold Agreement and (ii) the benefits after deduction of tax generated from the assets leased by CCL and CERNET Investment to CERNET Wifi since 1 October 2014.

On 4 June 2015, CCL and CERNET Investment revised their counter claim amount to RMB17,786,802.

On 15 June 2015, CERNET Wifi further revised its claim amount to RMB23,330,550.

CIETAC has deferred its decision to 12 September 2015 in order to gather more information before arriving at a conclusion. In early September 2015, CIETAC further deferred its decision to 14 December 2015. In mid January 2016, CIETAC further deferred its decision to a date to be determined as more time is required to review the audit report on the financial information in relation to this claim.

中国新电信 2015年年报

18Chairman’s Statement

CERNET Wifi’s PRC legal advisor is of the opinion that the

outcome of the Asset Leasehold Arbitration will be based upon

calculation and settlement of cost, revenue and benefits under

the Asset Leasehold Agreement. As such, as at the date of this

report, the outcome is uncertain.

COMMON SEAL AND DOCUMENTS CLAIM

On 12 January 2015, CERNET Wifi filed a claim against

the former general manager of CERNET Wifi (the “Former

GM”), in (Beijing Haidian District

People’s Court*) (the “Beijing Haidian Court”) for, inter alia,

the return of CERNET Wifi’s common seal, contract chop,

business registration, and license to carry out value-added

telecommunication business (“CERNET Wifi’s Documents”).

On 17 November 2014, the Former G M was dismissed in

response to CERNET Wifi’s declining business by way of board

resolution passed by the CERNET Wifi’s board. On 5 December

2014, CERNET Wifi passed a shareholders’ resolution that

CERNET Wifi’s Documents be under the custody of CERNET

Wifi’s legal representative, Mr. Zhang Xinyu, a director of the

Company. On 26 December 2014, CERNET Wifi requested the

Former GM for the return of CERNET Wifi’s Documents but the

Former GM had failed to do so. Beijing Haidian Court issued the

judgement on 18 March 2015, pursuant to which the Former

GM shall return CERNET Wifi’s common seal, contract chop and

business registration and its duplicate.

The Former G M has brought the claim to

(Beijing No.1 Intermediate People’s Court*) as an appeal to

the Beijing Haidian Court’s decision. On 21 May 2015, Beijing

No.1 Intermediate People’s Court issued the final judgement

and upheld the original judgement. As at 31 December 2015,

the CERNET Wifi’s common seal, contract chop and business

registration and its duplicate were received by CERNET Wifi.

* for identification purpose only

Neo Telemedia Limited

中国新电信 2015年年报

Annual Report 2015

19Chairman ’s Statement

69 1,361,993.57 34

320 45 30.3 16.0

LABOUR ARBITRATION CLAIM

On 12 January 2015, notices of claim of 69 former employees of CERNET Wifi were served on CERNET Wifi by (Haidian District Labour Dispute Arbitration Committee of Beijing Municipality*) (the “HDLDAC ”) pursuant to which, the applicants claimed for the amount of RMB1,361,993.57, being the salary, over-time payment, meals fee, disbursement, annual leave fee, and dismissal fees payable by CERNET Wifi. CERNET Wifi has counter-claimed against 34 applicants for the return of company properties and payment of commissions (the “Labour Arbitration Claim ”).

The HDLDAC rendered its decision with respect to the Labour Arbitration Claim and CERNET Wifi has brought the claim to the Beijing Haidian Court as an appeal to the HDLDAC ’s decision.On 19 May 2015, Beijing Haidian Court upheld the decision rendered by HDLDAC. CERNET Wifi has brought the claim to Beijing No.1 Intermediate People ’s Court as an appeal to the Beijing Haidian Court ’s decision.EMPLOYEES

As at 31 December 2015, the G roup had approximately 320 staff (2014: 45). The total remuneration, including that of the Directors, for the year under review is approximately HK$30.3 million (2014: HK$16.0 million). The G roup remunerates its employees based on their performances, experience and the prevailing industry practice. Employee remuneration, excluding Director ’s emoluments, is reviewed annually. In addition to the basic salaries, employees are also entitled to benefits including bonus and mandatory provident fund. On 19 December 2012, the Company had adopted a share option scheme under which full time employees, including Directors, of the Company and its subsidiaries, might be granted options to subscribe for the Company ’s ordinary shares.* for identification purpose only

中国新电信 2015年年报

20Chairman’s Statement

APPRECIATION

On behalf of the Board, I would like to take this opportunity

to express my appreciation to the G roup’s shareholders and

customers for their utmost support, and to the management and

staff for their dedication and contribution to the Group during the

year.

CHEUNG Sing Tai

Chairman

Hong Kong, 18 February 2016

Neo Telemedia Limited

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