Dear Shareholders,

2014 is still a year of preparation for HKTV. While we are still waiting for the Court’s judgment on the two Judicial Review cases on the rejection of our domestic free television programme service licence (The “free TV licence”) application and the transmission standard for mobile TV service, the Group is going to launch its new business by phases starting from mid-November - building a new platform for TV entertainment and online shopping on the Internet, the HKTV Mall.

After the application for free TV licence was rejected, our management team has immediately reviewed the strengths and resources that the Group possesses and to explore other feasible business opportunities. At the same time, we are thinking how to match these strengths with the new endeavor.

We noted that many Hong Kong consumers started to shop online, for the reasons of competitive pricing, variety of choices, convenience, trendiness, habitual and informative. However, we also noted that there is no successful and large scale precedent for online shopping mall in Hong Kong. Despite that online shopping portals for supermarkets, convenience stores, fashion, music and other industries have been commenced some time ago, they have devoted most of their resources in marketing in order to arouse public awareness on their portals, but no remarkable results were achieved; Some online shopping portals failed to provide satisfactory customer services that they take couple of days for product delivery. From our observation, there are two critical success factors for online shopping mall: to develop your own strong logistics team and be able to attract stably sufficient visitor traffic. In light of these, we have the following business plan in mind:

1. We strike to become the largest online shopping mall in Hong Kong. We work with merchants from Hong Kong and overseas, to enrich the variety of our products and services as much as possible, even outpace physical shopping malls. In view of the existing progress, we expect that HKTV Mall will have 300 stores in operation in 2015.
2. All visitors can watch our dramas, variety and infotainment programs for free via our video-on-demand and live systems, by then they will also discover that they can shop most of the goods that are needed in their daily lives. In such way it will be easy to establish viewing habit, thus generating significant and stable visitor traffic.
3. To encourage repeated purchase at HKTV Mall, we offer at least 3% credit rebate for each purchase, which is equivalent to cash for spending in next purchase.
4. We plan to establish a full scale logistics and delivery team. With our own vehicles and delivery talents, we aim to deliver local products on the same day or the next day.

Other than the income from overseas distribution on our self-produced contents, in future, the two main income streams of HKTV Mall are the commission paid by merchants upon completion of transactions, and the advertising income from our Internet TV service.

The road ahead is uncertain, as there are neither preceding business reference nor successful cases on Internet TV and online shopping platform in Hong Kong. Just like more than decade years ago that we did on IDD and Fibre-to-home broadband businesses, the Group is marching towards a new chapter again.

Wong Wai Kay, Ricky
Chairman