CONTENTS APTT Annual Report Disclaimer

Transcription

1 ANNUAL REPORT 2013

2 CONTENTS Trust Profi le... 1 Corporate Structure... 2 Financial Highlights... 3 Chairman s Statement... 4 Asset Portfolio... 7 Sustainability... 8 Operational and Financial Review Board of Directors and Executive Offi cers of the Trustee-Manager Corporate Information Corporate Governance Statement Consolidated Financial Statements Statistics of Unitholdings Additional Singapore Exchange Securities Trading Limited Listing Manual Disclosure Requirements Notice of Annual General Meeting Proxy Form Disclaimer... IBC Investors should note that there are limitations on the right of certain investors to own units in APTT under applicable Taiwan laws and regulations (the Relevant Restrictions). Such investors include PRC individuals and corporate entities, the Taiwan government and political entities and other restricted entities and restricted persons (collectively, the Restricted Persons). Investors should note that the Deed of Trust constituting APTT dated 30 April 2013 (the Trust Deed) provides that the Trustee-Manager may, in the case of a breach of the Relevant Restrictions, take all steps and do all things as it may in its absolute discretion deem necessary to ensure that the Relevant Restrictions are complied with. In particular, the Trust Deed provides that the Trustee-Manager has the power to require the relevant Restricted Person to dispose of their units in APTT and, if such request is not complied with within 21 days after such request (or such shorter period as the Trustee-Manager shall consider reasonable), to arrange for the sale of the units. The Trustee-Manager is not required to provide any reason for, and is not liable or responsible for any losses incurred as a result of, exercising such power. For further information, investors should refer to the prospectus dated 16 May 2013 issued by APTT and the Trust Deed.

3 TRUST PROFILE Asian Pay Television Trust (APTT or the Trust) is the fi rst listed business trust in Asia focused on pay-tv businesses. APTT intends to distribute 100% of its distributable free cash fl ows, and has an investment mandate to acquire controlling interests and to own, operate and maintain mature, cash generative pay-tv and broadband businesses in Taiwan, Hong Kong, Japan and Singapore. APTT s seed asset, Taiwan Broadband Communications Group (TBC), is Taiwan s third-largest cable TV operator and has been owned and managed by Macquarie Group entities since APTT is managed by Macquarie APTT Management Pte. Limited (the Trustee-Manager) which operates within Macquarie Infrastructure and Real Assets (MIRA), a division of Macquarie Group and a global alternative asset manager with approximately A$108 billion 1 in assets under management through specialized funds focused on real estate, infrastructure and related sectors. The Trustee-Manager is led by an executive management team that has extensive experience in the pay-tv and broadband industries and complementary skill sets in acquisition, asset and capital management. 1 Based on proportionate enterprise value, calculated as proportionate net debt and equity value at 30 June 2013 for the majority of assets. ANNUAL REPORT 2013 Asian Pay Television Trust 1

4 CORPORATE STRUCTURE 100% Macquarie Capital Group Limited (Sponsor) (3.0%) Public (97.0%) Macquarie APTT Management Pte. Limited (Trustee-Manager) Trust Deed Offshore Holdcos Offshore companies Onshore (Taiwan) Companies and System Operators Taiwan Broadband Communications Group (TBC) 2 Asian Pay Television Trust ANNUAL REPORT 2013

5 FINANCIAL HIGHLIGHTS Total Revenue 1 (S$) Net Profit 1 (S$) million 74.4 million Asset EBITDA Margin Distributions per Unit (Singapore cents) 65 % 8.93 cents Total Assets (S$) Net Asset Value per Unit (Singapore cents) 2,505.6 million 92 cents 1 Represents the full year number had the acquisition of TBC been effected on 1 January See Note 4(v) on page 60. ANNUAL REPORT 2013 Asian Pay Television Trust 3

6 CHAIRMAN S STATEMENT We remain at the forefront of digitisation in Taiwan with 37% of our subscribers receiving digital TV services. This is forecast to grow to 70% by the end of Dear Unitholders, I am pleased to present to you the fi rst annual report of Asian Pay Television Trust (APTT or the Trust) for the period ended 31 December APTT listed on the Main Board of the Singapore Exchange Securities Trading Limited (SGX-ST) on 29 May Our investment Taiwan Broadband Communications Group (TBC), is a leading provider of pay-tv and broadband services in Taiwan. TBC owns the cable network in fi ve areas across Taiwan that pass over 1.1 million homes. Through this network we sell basic cable TV and premium digital TV services as well as high speed broadband services to homes in these areas. Resilient business, stable and growing over time Since the listing, our performance has been strong. Despite challenging economic conditions in Taiwan, we have generated growth in revenue, EBITDA and cash fl ow in line with the forecasts outlined in the APTT Prospectus. Our basic cable TV subscriber base has now reached 755 thousand homes, which is a penetration rate of 67%. This level of penetration is a refl ection of the high quality services we provide, the variety of the content our subscribers receive and the solid reputation of our business in the areas in which we operate. The relationship that we have established with our subscribers over a long period of time continues to generate a deep sense of customer loyalty that contributes to the stability of our subscriber levels and our overall revenues. We remain at the forefront of digitisation in Taiwan with 37% of our subscribers receiving digital TV services. This is forecast to grow to 70% by the end of Through this digital TV offering, we are able to provide subscribers with the opportunity to watch the latest TV offerings in high defi nition digital format. This drives subscriber satisfaction levels as well as generating additional revenues. We also continue to offer the fastest residential broadband service available in Taiwan today, with speeds available of up to 120 Mbps. We enjoy a reputation across Taiwan of being a provider of fast and reliable fi xed line broadband services, and are fast becoming the preferred provider of broadband services to homes in the areas in which we operate. 4 Asian Pay Television Trust ANNUAL REPORT 2013

7 CHAIRMAN S STATEMENT The network through which these services are provided has been completely upgraded with no further signifi cant capital expenditure required. The network is MPEG4 compliant and DOCSIS 3.0 enabled, ensuring that our subscribers receive the latest pay-tv and broadband services that are available today. Experienced management team We have a very strong board of directors with extensive experience in the telecommunications, media and fi nance industries. Several board members have been long serving senior members of well known pay-tv providers in the region and have many years of experience in the fi nance industry with a focus on pay-tv businesses. We have a strong management team within TBC. This team has been responsible for the business since 2007 and has overseen the growth in revenue and EBITDA from that time, year on year, throughout economic cycles. The strength of our board and management team ensures that we are well placed to manage the business to produce the results we have outlined in our forecasts and guidance, and also to pursue new exciting growth opportunities. APTT is managed by Macquarie APTT Management Pte. Limited (the Trustee-Manager) which operates within Macquarie Infrastructure and Real Assets (MIRA), a division of Macquarie Group and a global alternative asset manager with approximately A$108 billion 1 in assets under management through specialised funds focused on real estate, infrastructure and related sectors. The Trustee-Manager is led by an executive management team that has extensive experience in the pay-tv and broadband industries and complementary skill sets in acquisition, asset and capital management. Distributions APTT has declared two distributions to Unitholders. Total distributions of 8.93 cents per unit were declared for 2013, consistent with what was outlined in the Prospectus. The distribution guidance for 2014 of 8.25 cents per unit has been re-affi rmed, to be paid in two instalments. This is a refl ection of the confi dence of the board in the ability of the business to perform throughout The fi rst half distribution of 4.12 cents per unit is expected to be declared during August 2014 and paid shortly after. The second half distribution is expected to be declared during February 2015 and paid shortly after. APTT will continue to pay to Unitholders 100% of distributable free cash fl ow on a semi-annual basis. 1 Based on proportionate enterprise value, calculated as proportionate net debt and equity value at 30 June 2013 for the majority of assets. ANNUAL REPORT 2013 Asian Pay Television Trust 5

8 CHAIRMAN S STATEMENT Focus for 2014 Moving into 2014, we remain focused on growing cash fl ows by driving penetration rates across the basic cable TV, premium digital TV and high speed broadband services. We expect total revenues, EBITDA and cash fl ow generation to be consistent with the forecasts outlined in the Prospectus, and this has given us the confi dence to re-affi rm the distribution guidance for 2014 at 8.25 cents per unit. The accelerated set top box roll-out ensures that we remain a leading provider of digital TV services in Taiwan as well as opening up opportunities for further revenue generation through up-sell and cross-sell initiatives. The expansion of the network across greater Taichung is an exciting growth opportunity that gives us the opportunity to provide our services to an additional 400 thousand homes. Signifi cant progress has been made on the network build and commercial operations are expected to commence during We look forward to keeping the market informed as this progresses. We continue to hedge external economic risks that may impact our business by entering into appropriate hedging strategies, particularly with respect to interest rates and foreign exchange rates. Our hedging policies ensure that the impact of movements in these external factors is minimised. Acknowledgements On behalf of the Trustee-Manager board, I would like to thank you, our Unitholders, for your continued support of APTT. I also thank the board and management team for their ongoing and committed service during our fi rst year, and going forward into Yong Lum Sung Chairman 6 Asian Pay Television Trust ANNUAL REPORT 2013

9 ASSET PORTFOLIO Taiwan Broadband Communications Group (TBC) Asset description TBC is a leading, integrated cable operator in Taiwan that generates stable cash fl ows and has an attractive growth profi le. Established in 1999, TBC is a provider of cable TV services in closely clustered franchise areas in northern and central Taiwan. With network coverage of more than one million homes, TBC offers Basic cable TV, Premium digital cable TV and Broadband services to households and businesses in these areas. ANNUAL REPORT 2013 Asian Pay Television Trust 7

10 SUSTAINABILITY Macquarie APTT Management Pte. Limited, the trusteemanager of APTT (Trustee-Manager), is a wholly owned subsidiary of Macquarie Capital Group Limited and operates in accordance with the policies and procedures of Macquarie Group Limited (Macquarie), which has made a public statement on corporate citizenship which is available on its website at The commitment is based on Macquarie taking a longterm view of its business activities and acknowledging the importance of good custodianship to the communities in which it operates. As set out on Macquarie s website, this commitment is underpinned by: A clear expectation of ethical behaviour from all Macquarie staff, which has been adopted by the board of the Trustee-Manager (in its capacity as the trusteemanager of APTT) and which is set out in the Trustee- Manager s code of conduct (available on request); and A robust framework of policies including those relevant to environmental, social and governance responsibilities. All Macquarie staff, including those working on behalf of APTT, have a collective responsibility to ensure that Macquarie continues to be a good corporate citizen. The Trustee- Manager is supported by Macquarie s integrity offi cers and risk management group. Macquarie staff may also contribute their time, expertise and/or fi nances to community organisations through the Macquarie Group Foundation. Macquarie is committed to supporting the charitable, sponsorship and volunteer work of the Macquarie Group Foundation and Macquarie staff in the communities in which Macquarie operates. Policies adopted by APTT APTT is committed to operating within the laws of any jurisdiction in which it does business and rejects absolutely the use of any form of bribery or corruption either directly or indirectly on its behalf to advance its business interests or those of its associates. The Trustee-Manager has adopted a code of conduct, which includes anti-bribery and corruption and anti-money laundering policies, intended to help directors and staff to understand their responsibilities to uphold the goals and values to which Macquarie aspires and to conduct business in accordance with applicable laws and regulations. In addition, APTT recognises that its investment in and development and management of operating businesses may have environmental and social impacts. APTT acknowledges that many people are touched by the activities of its businesses operations and will work to ensure its operations are conducted in an environmentally and socially responsible manner. APTT has adopted policies and procedures to manage these risks, which are consistent with Macquarie s policies and refl ect the risk specifi cally associated with APTT s portfolio and the management thereof. The framework is applied throughout APTT s investment and portfolio management process as follows: Asset selection environmental and social issues are reviewed as part of the acquisition due diligence process; Ongoing portfolio management the environmental and social risk management framework of assets and businesses in APTT s portfolio is assessed to ensure it is appropriate to the level of environmental and social risks. APTT s ability to control or infl uence such a framework will be determined through its level of ownership/control. Regular reporting to the board enables compliance with environmental requirements to be monitored and environmental and social responsibility issues to be identifi ed; and Stakeholder reporting policies, social and environmental initiatives, and compliance performance are reported internally and, where appropriate, externally. Environmental and Social Responsibility-related Initiatives at APTT Businesses in FY2013 APTT understands the importance of sustainable business growth, and APTT and its businesses adopt practices and cooperative measures that ensure sustainability. Taiwan Broadband Communications (TBC), the sole asset of APTT, is an active member of its community and plays an integral role in a wide range of social, cultural and environmental activities in its operating areas. Examples of notable environmental and social responsibility-related initiatives undertaken during the past fi nancial year include the following initiatives by the TBC system operators: 8 Asian Pay Television Trust ANNUAL REPORT 2013

11 SUSTAINABILITY In 2013, Nan Tao Yuan Cable Television Co., Ltd (Nan Tao Yuan) sponsored a wide range of community activities including the annual Taoyuan Film Festival to promote video production amongst students in the county, as well as the Taoyuan County Orchestra Festival and the Taoyuan County Dragon Boat Competition amongst others. Best Cable Television Co., Ltd s (Best) community initiatives in 2013 included sponsorship of the national 2013 Taiwan Lantern Festival held in Hsinchu, as well the Hsinchu Hakka Tong Blossom Festival. In addition, Best also contributed to a range of local charitable causes including the Fong-Ru Educational Foundation and a food drive for mountainous villages in the County. Shin Ho Cable Television Co., Ltd s (Shin Ho) involvement in the Miaoli community is seen in its active participation in local activities. In 2013, these included fund raising for the Genesis Social Welfare Foundation and sponsorship of the Warmth in Winter charity event by the Concord Charity Foundation. Other local community activities Shin Ho participated in also included the Teenage Buskers Music Festival. Chun Chien Cable TV Co., Ltd s (Chun Chien) community contributions in 2013 included sponsorship of the Memorial Services and Music Concert for 228 Peace Memorial Day and the 2012 Taichung New Year s Eve Celebrations. It also continued to provide live telecasts of key Taichung City Hall meetings including City Council meetings. As before, TBC continued to provide free air time and fi nancial support for community announcements, as well as subscription subsidies for low-income homes. ANNUAL REPORT 2013 Asian Pay Television Trust 9

12 OPERATIONAL AND FINANCIAL REVIEW SELECTED FINANCIAL INFORMATION AND OPERATING DATA The selected fi nancial information and operating data presented on page 11 supports the distributions to Unitholders and therefore are key fi nancial and operating metrics that the Trustee-Manager focuses on to review the amount of distributions that will be paid to Unitholders. Some of the selected fi nancial information includes non-ifrs measures. Non-IFRS measures Asset EBITDA and Asset EBITDA margin are supplemental fi nancial measures of the Trust s performance and liquidity and are not required by, or presented in accordance with International Financial Reporting Standards (IFRS) or any other generally accepted accounting principles. Furthermore, Asset EBITDA and Asset EBITDA margin are not measures of fi nancial performance or liquidity under IFRS or any other generally accepted accounting principles and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with IFRS or any other generally accepted accounting principles. Asset EBITDA and Asset EBITDA margin may not refl ect all of the fi nancial and operating results and requirements of the Trust. In particular, Asset EBITDA and Asset EBITDA margin do not refl ect the Trust s needs for capital expenditures, debt servicing or additional capital that may be required to replace assets that are fully depreciated or amortised. Other companies may calculate Asset EBITDA and Asset EBITDA margin differently, limiting their usefulness as comparative measures. The Trustee-Manager believes that these supplemental fi nancial measures facilitate operating performance comparisons for the Trust from period to period by eliminating potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods of changes in effective tax rates or net operating losses), the age and book depreciation of tangible assets (affecting relative depreciation expense). In particular, Asset EBITDA eliminates the non-cash depreciation expense that arises from the capital-intensive nature of the Trust s businesses and intangible assets recognised in business combinations. The Trustee-Manager presents these supplemental fi nancial measures because it believes these measures are frequently used by securities analysts and investors in evaluating similar issuers. 10 Asian Pay Television Trust ANNUAL REPORT 2013

13 OPERATIONAL AND FINANCIAL REVIEW 1, 2, 3 Group Period ended 31 December 2013 $ 000 Revenue Basic cable TV 147,641 Premium digital cable TV 7,861 Broadband 29,538 Total revenue 185,040 Operating expenses 4 Broadcast and production costs (35,492) Staff costs 5 (15,181) Other operating expenses 6 (13,914) Total operating expenses (64,587) Asset EBITDA 120,453 Asset EBITDA margin 65.1% Capital expenditures 42,627 As a % of revenue 23.0% Subscribers ( 000) As at 31 December 2013 Basic cable TV 755 Premium digital cable TV 123 Broadband 180 Twelve months ended ARPU 7 (NT$ per month) 31 December 2013 Basic cable TV 537 Premium digital cable TV 207 Broadband Group refers to APTT and its subsidiaries taken as a whole. 2 The fi nancial period was from 30 April 2013 (the date of constitution of APTT) to 31 December Although APTT was constituted on 30 April 2013, the acquisition of the assets and business undertakings of its initial portfolio, TBC, was only completed on 29 May Consequently, there were no operating activities for the period prior to 29 May Revenue and expenses of TBC are included for the period from 30 May 2013 to 31 December No comparative selected fi nancial information and operating data has been presented as APTT was constituted on 30 April The fi rst fi nancial period was from 30 April 2013 to 31 December APTT was listed on SGX-ST on 29 May Operating expenses presented here exclude Trustee-Manager fees and Depreciation and amortisation expense, appearing in the consolidated statements of profi t or loss on page 41, in order to arrive at Asset EBITDA and Asset EBITDA margin. 5 Staff costs exclude costs attributable to offshore entities within the Group. 6 Other operating expenses exclude Trust expenses composed mainly of administrative expenses, corporate services fees, audit fees, annual fi ling fees, occupancy fees, legal costs, other professional fees, insurance and other miscellaneous expenses. 7 Average Revenue Per User (ARPU) is calculated by dividing the subscription revenue for Basic cable TV, Premium digital cable TV or Broadband, as applicable, by the average number of revenue generating units (RGUs, or Subscribers) for that service during the period. The ARPU to 31 December 2013 is presented in Taiwan dollars (NT$) and represents the actual average monthly ARPU for the twelve month period ended 31 December ANNUAL REPORT 2013 Asian Pay Television Trust 11

14 OPERATIONAL AND FINANCIAL REVIEW REVIEW OF SELECTED FINANCIAL INFORMATION AND OPERATING DATA Revenue and expenses for the year-to-date period ended 31 December 2013 were in line with expectations; Asset EBITDA was $120.5 million for the year-to-date period ended 31 December Total revenue for the year-to-date period ended 31 December 2013 of $185.0 million comprises: Basic cable TV revenue of $147.6 million, Premium digital cable TV revenue of $7.9 million and Broadband revenue of $29.5 million. Total revenue for the year-to-date period was in line with expectations. Revenue from Basic cable TV was higher than expectations. Revenue from Premium digital cable TV was higher than expectations. Revenue from Broadband was lower than expectations. Broadband revenue was impacted by the continued slower than expected economic recovery. A much more disruptive than normal typhoon season in the third quarter impacted Broadband subscriber additions in that quarter, which in turn impacted Broadband revenue for the year-to-date period. Total operating expenses for the year-to-date period ended 31 December 2013 of $64.6 million comprise: Broadcast and production costs of $35.5 million, Staff costs of $15.2 million and Other operating expenses of $13.9 million. Total operating expenses were in line with expectations. Asset EBITDA of $120.5 million and Asset EBITDA margin of 65.1% were also consistent with expectations for the year-to-date period ended 31 December Basic cable TV subscribers of 755 thousand at 31 December 2013 were 0.5% higher than at 31 December but increased less than expectations. Premium digital cable TV subscribers of 123 thousand at 31 December 2013 were 11.8% higher than at 31 December and increased more than expectations. Broadband subscribers of 180 thousand at 31 December 2013 were 2.9% higher than at 31 December but increased less than expectations. Basic cable TV ARPU was consistent with expectations, Premium digital cable TV ARPU was higher than expectations and Broadband ARPU was lower than expectations. The slower than expected economic recovery in Taiwan has resulted in some subscribers choosing to subscribe for lower cost Broadband packages. Management is focused on stabilising ARPU going forward. Capital expenditures as a percentage of revenue for the year-to-date period ended 31 December 2013 were 23.0%. Capital expenditures for the full twelve months ended 31 December 2013 were 19.6% of total revenue which is higher than the amount outlined in the Prospectus of 15.9%. Capital expenditures in 2013 included the following: Capital expenditures relating to ordinary operations (ordinary maintenance capital expenditures, growth capital expenditures including digital set-top boxes, high-speed broadband modems, cable line extensions and other items). Capital expenditures relating to the one-time network upgrade from 750 MHz to 870 MHz. Capital expenditures relating to the network expansion. These were not included in the capital expenditures outlined in the Prospectus. Taking into account the new network expansion, capital expenditures were in line with expectations. 1 Subscribers as at 31 December 2012 are taken from the Prospectus. 12 Asian Pay Television Trust ANNUAL REPORT 2013

15 OPERATIONAL AND FINANCIAL REVIEW RECONCILIATION OF NET PROFIT TO EBITDA AND ASSET EBITDA Group 1, 2 Period ended 31 December 2013 $ 000 Net profit for the period 45,323 Add: Depreciation and amortisation expense 25,350 Add: Other operating expenses 3 (1,829) Add: Interest and other fi nance costs 25,237 Add: Income tax expense 17,343 EBITDA 111,424 Add: Offshore expenses 2,984 Add: Trustee-Manager fees 4,162 Add: Trust expenses 4 1,883 Asset EBITDA 120,453 Asset EBITDA margin % 1 The fi nancial period was from 30 April 2013 (the date of constitution of APTT) to 31 December Although APTT was constituted on 30 April 2013, the acquisition of the assets and business undertakings of its initial portfolio, TBC, was only completed on 29 May Consequently, there were no operating activities for the period prior to 29 May Revenue and expenses of TBC are included for the period from 30 May 2013 to 31 December No comparative reconciliation of net profi t to EBITDA and Asset EBITDA has been presented as APTT was constituted on 30 April The fi rst fi nancial period was from 30 April 2013 to 31 December APTT was listed on SGX-ST on 29 May Includes net foreign exchange gain and non-cash adjustment to retirement benefi t obligations which are not included in the calculation of EBITDA and Asset EBITDA. 4 Trust expenses are included in Other operating expenses appearing in the consolidated statements of profi t or loss on page Asset EBITDA margin is a non-ifrs fi nancial measure and is calculated by dividing Asset EBITDA by Revenue. ANNUAL REPORT 2013 Asian Pay Television Trust 13

16 OPERATIONAL AND FINANCIAL REVIEW A) REVIEW OF REVENUE APTT reported total revenue of $185.0 million for the year-to-date period ended 31 December Total revenue comprises: Basic cable TV revenue, Premium digital cable TV revenue and Broadband revenue. Total revenue was in line with expectations. An analysis of the Group s revenue items is as follows: (i) Basic cable TV Basic cable TV revenue, comprising subscription revenue and other non-subscription revenue, represents almost 80% of total revenue. Other Basic cable TV non-subscription revenue comprises revenue generated from the leasing of television channels to third parties, sales of advertising time during the Group s television programming and fees for the installation of set-top boxes. Channel leasing revenue represents a signifi cant portion of other Basic cable TV non-subscription revenue. Total revenue from Basic cable TV for the year-to-date period ended 31 December 2013 includes subscription revenue of $121.2 million and other non-subscription revenue of $26.4 million. Basic cable TV revenue for the year-to-date period ended 31 December 2013 was higher than expectations. (ii) Premium digital cable TV Premium digital cable TV revenue comprises subscription revenue and other non-subscription revenue. Subscription revenue includes revenue generated from subscriptions to basic package Premium digital cable TV, premium packs and bundled DVR services. Other Premium digital cable TV non-subscription revenue comprises of DVR-only fees in addition to revenue generated from the installation of set-top boxes, sales of electronic programme guide data to other system operators, and other revenue. Premium digital cable TV revenue for the year-to-date period ended 31 December 2013 was higher than expectations. (iii) Broadband Broadband revenue comprises subscription revenue and other non-subscription revenue mostly from installation services. Revenue from Broadband services was lower than expectations due to lower than expected new subscribers and ARPU. Broadband revenue for the year-to-date period was impacted by the continued slower than expected economic recovery. A much more disruptive than normal typhoon season in the third quarter impacted Broadband subscriber additions in that quarter, which in turn impacted Broadband revenue for the year-to-date period. B) REVIEW OF OPERATING EXPENSES An analysis of the Group s expense items is as follows: (i) Broadcast and production costs Broadcast and production costs were $35.5 million for the year-to-date period ended 31 December Broadcast and production costs consist of the cost of acquiring Basic cable TV and Premium digital cable TV content, the cost of acquiring bandwidth (which consists of the leasing of domestic and international bandwidth capacity from operators to support TBC s Broadband services) and costs for producing the Group s own programming and news production costs. (ii) Staff costs Staff costs were $16.1 million for the year-to-date period ended 31 December Staff costs consist of direct employee costs and costs for general and administrative employees, in each case including salaries, bonuses and benefi ts, such as retirement benefi ts. 14 Asian Pay Television Trust ANNUAL REPORT 2013

17 OPERATIONAL AND FINANCIAL REVIEW (iii) Depreciation and amortisation expense Depreciation and amortisation expense was $25.4 million for the year-to-date period ended 31 December Depreciation and amortisation expense includes depreciation and amortisation of the Group s capital expenditures in relation to network equipment, set-top boxes, other plant and equipment and software. (iv) Trustee-Manager fees The Trustee-Manager is entitled to a base fee and a performance fee as specifi ed under the Trust Deed. The Trustee-Manager base fee was $4.2 million for the year-to-date period ended 31 December There were no performance fees payable to the Trustee-Manager for the year The base fee is payable semi-annually in arrears for every six months ending 30 June and 31 December of each year. Payment of the base fee, whether in the form of cash and/or units, shall be made out of Trust property within 30 days of the last day of every six months (or such other period as may be determined by the Trustee-Manager at its discretion) in arrears. (v) Other operating expenses Other operating expenses were $16.0 million for the year-to-date period ended 31 December Other operating expenses include Trust expenses, comprising of administrative expenses, corporate services fees, audit fees, annual fi ling fees, occupancy fees, legal costs, other professional fees, insurance and other miscellaneous expenses and other Group expenses, composed of rent for fi bre and utility poles, installation costs, local and National Communications Commission of Taiwan (NCC) taxes, billing expenses, utility expenses, marketing expenses as well as offshore administrative expenses. Other operating expenses also include foreign exchange gains of the Group and period end mark-to-markets on the Trust s foreign currency swaps. (vi) Interest and other finance costs Interest and other fi nance costs were $25.2 million for the year-to-date period ended 31 December 2013 and include interest expense, commitment fees and amortisation of arrangement fees on the Group s debt facilities. (vii) Income tax expense The Group is subject to income tax in several jurisdictions. Signifi cant judgment is required in determining provisions for income tax, including a judgment on whether tax positions are probable of being sustained in income tax assessments. There are certain transactions and calculations for which the ultimate income tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated income tax issues based on estimates of whether additional taxes will be due. Where the fi nal income tax outcome of these matters is different from the amounts that were initially recorded, these differences will impact the income tax and deferred income tax provisions in the period in which such determination is made. The Trustee-Manager evaluates positions taken in income tax returns with respect to situations in which applicable income tax regulations are subject to interpretation. The income tax liabilities are recognised when it is more likely than not that certain tax positions may be changed upon review by income tax authorities. The Group believes that the fi nal tax outcome of these positions can differ from those initially recognised when reviews or audits by tax authorities of tax returns are completed. Benefi ts from tax positions are measured at the single best estimate of the most likely outcome. At each statement of fi nancial position date, the tax positions are reviewed, and to the extent that new information becomes available that causes the Trustee-Manager to change their judgment regarding the adequacy of existing income tax liabilities, these changes to income tax liabilities are duly recognised in income tax expense in the year in which the determination is made. ANNUAL REPORT 2013 Asian Pay Television Trust 15

18 OPERATIONAL AND FINANCIAL REVIEW REVIEW OF ACTUAL PERFORMANCE AGAINST THE FORECAST DISCLOSED IN THE PROSPECTUS Actual 1 Forecast 2 Variance period period ended ended 31 December 31 December $ 000 $ 000 % Revenue Basic cable TV 147, , Premium digital cable TV 7,861 7, Broadband 29,538 31,084 (5.0) Total revenue 185, , Operating expenses Broadcast and production costs (35,492) (35,464) (0.1) Staff costs (16,120) (15,576) (3.5) Depreciation and amortisation expense (25,350) (26,630) 4.8 Trustee-Manager fees (4,162) (4,162) - Other operating expenses (16,013) (15,311) (4.6) Total operating expenses (97,137) (97,143) 0.0 Operating profit 87,903 86, Interest and other fi nance costs (25,237) (42,840) 41.1 Profit before income tax 62,666 43, Income tax expense (17,343) (14,023) (23.7) Profit after income tax 45,323 29, Profit after income tax attributable to: Unitholders of APTT 45,139 29, Non-controlling interests Profit after income tax 45,323 29, The fi nancial period was from 30 April 2013 (the date of constitution of APTT) to 31 December Although APTT was constituted on 30 April 2013, the acquisition of the assets and business undertakings of its initial portfolio, TBC, was only completed on 29 May Consequently, there were no operating activities for the period prior to 29 May Revenue and expenses of TBC are included for the period from 30 May 2013 to 31 December The forecast fi gures disclosed from the Prospectus have been prorated for the relevant period. Total revenue for the year-to-date period ended 31 December 2013 was 0.6% higher than the forecast in the Prospectus, prorated for the relevant period, due to higher than expected revenue from Basic cable TV and from Premium digital cable TV. This has been partially offset by lower than expected revenue from Broadband. Total operating expenses for the year-to-date period ended 31 December 2013 were 0.01% lower, than the forecast in the Prospectus, prorated for the relevant period. The variance for the year-to-date period ended 31 December 2013 is primarily due to amounts paid or accrued under the Group s long-term incentive plan and non-cash mark-to-market losses on the Trust s foreign exchange swaps, which were not included in the forecast for Other operating expenses in the Prospectus; these are mostly non-cash expenses in These negative variances were more than offset by foreign exchange gains and lower than expected depreciation and amortisation expense. Operating profi t for the year-to-date period ended 31 December 2013 was 1.3% higher than the forecast in the Prospectus, prorated for the relevant period, due to the factors mentioned above. 16 Asian Pay Television Trust ANNUAL REPORT 2013

19 OPERATIONAL AND FINANCIAL REVIEW Interest and other fi nance costs for the year-to-date period ended 31 December 2013 were 41.1% lower than the forecast in the Prospectus, prorated for the relevant period, due to the assumed write-off of deferred fi nancing fees included in the forecast interest and other fi nance costs in the Prospectus. Deferred fi nancing fees from TBC s refi nancing prior to APTT s acquisition were written off as part of the purchase price allocation and therefore are not included in interest and other fi nance costs for the year-to-date period ended 31 December Income tax expense for the year-to-date period ended 31 December 2013 was 23.7% higher than the forecast in the Prospectus, prorated for the relevant period. This is mostly due to higher profi t before income tax resulting from the factors mentioned above. Other factors impacting the effective income tax rate include: i) the income tax expense impact of the assumed write-off of deferred fi nancing fees included in the forecast interest and other fi nance costs in the Prospectus (described above), and ii) the impact on income tax expense of unrealised losses on the revaluation of foreign exchange swaps not included in the forecast in the Prospectus. Profi t after income tax for the year-to-date period ended 31 December 2013 was 51.5% higher than the forecast in the Prospectus, prorated for the relevant period, due to the factors mentioned above. ANNUAL REPORT 2013 Asian Pay Television Trust 17

20 BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE TRUSTEE-MANAGER 1. Yong Lum Sung Chairman and Independent Director 1 2 Yong Lum Sung is an Independent Director and Chairman of the Board of the Trustee-Manager. He was appointed on 29 April Mr. Yong was formerly the Chief Operating Offi cer of StarHub Ltd from 2002 to 2006, and President of Singapore Cable Vision Ltd from 1998 to Since 2007 he has served as a board member of several companies. Mr. Yong holds a Master of Engineering degree from the University of Singapore and a Certifi ed Diploma in Accounting and Finance from the Chartered Association of Certified Accountants, United Kingdom. He has also attended the Advanced Management Program at Harvard Business School. 2. Tan Chung Yaw, Richard Independent Director Tan Chung Yaw, Richard is an Independent Director of the Trustee-Manager. He was appointed on 29 April He has since 2011 been the Chairman and an Independent Director of Polaris Ltd., and is also the Chairman of the audit committee and remuneration committee and a member of the nominating committee of Polaris Ltd. Mr. Tan has also since 2008 held the post of Deputy Chief Executive Offi cer of PT Smartfren, and is responsible for products and strategy. In 2008, Mr. Tan held the post of Director of Commerce at PT Telekommunikasi, Indonesia (Telkomsel) where he was responsible for sales and marketing. From 2001 to 2007, Mr. Tan was Vice President (Wholesale) at SingTel Ltd., where he was responsible for the wholesale of voice and data products. Mr. Tan holds a Bachelor of Science in Electrical Engineering (Honours) and Master of Science in Electrical Engineering from the National University of Singapore. 3. Leong Shin Loong Independent Director 7 Leong Shin Loong is an Independent Director of the Trustee- Manager. He was appointed on 29 April He is currently Chief Executive Offi cer of Berca Global Access. From 1997 to 2011, Mr. Leong was a Vice President at Singapore Telecommunications. From 2002 to 2004 and 2008 to 2011, he was seconded to Telkomsel where he was Director of Commerce responsible for sales and marketing. From 2005 to 2006, he was seconded to AIS, Thailand where he was Executive Vice Chairman responsible for investment monitoring. Mr. Leong is also a member of the Singapore Institute of Directors. Mr. Leong holds a Bachelor of Science in Electrical and Electronic Engineering from Northwestern University and a Master of Engineering (Computer and Systems Engineering) from Rensselaer Polytechnic Institute. He has also attended the Advanced Management Program at Harvard Business School. 18 Asian Pay Television Trust ANNUAL REPORT 2013

21 BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE TRUSTEE-MANAGER 4. Tri Luu Pham Independent Director Tri Luu Pham is an Independent Director of the Trustee- Manager. He was appointed on 29 April Mr. Pham is currently Chief Strategy Offi cer at Tata Communications Limited, global communications and enterprise IT service provider that owns and operates the world s most advanced subsea cable network. Previous positions held by Mr. Pham include Principle at Just-In-Tim Consulting from 2012 to 2013, Managing Director of The Hongkong and Shanghai Banking Corporation from 2008 to 2011, where he was head of Telecommunications, Media and Technology (TMT), Asia Pacifi c, Executive Director of ABN AMRO Bank from 2004 to 2008, where he was Co-Head of TMT, Asia Pacifi c and Director at Merrill Lynch International from 1994 to 2003, where he was head of South East Asia TMT. Mr. Pham holds a Bachelor of Science in Electrical Engineering and Master of Science from The Johns Hopkins University and a Master of Business Administration from The Wharton School, University of Pennsylvania. 5. Benjamin lan Way Vice-Chairman and Non-Executive Director Ben Way is a Non-Executive Director and Vice-Chairman of the Trustee-Manager. He was appointed on 17 April Ben is Head of Macquarie s Infrastructure and Real Asset platforms in North Asia and Russia, overseeing approximately US$9 billion of assets under management. Ben joined Macquarie in August 2006 as CEO of Taiwan Broadband Communications (MIRA s largest asset in Asia). Ben has led numerous investments such as Shenyang Shengyuan Water, Kangnam City Gas, Wanna Environmental Protection, Cable & More, Tianjin Huisheng Terminal, Henyang Petrochemical and Yeongyang Wind Farm. Ben has been based in Asia for 14 years. Prior to joining Macquarie, Ben was a Senior Executive with Fairfax Limited and a Management Consultant at Bain & Company. 6. Robert Neale Thorpe Chief Executive Officer and Executive Director Robert Neale Thorpe is the Chief Executive Offi cer and Executive Director of the Trustee-Manager. He was appointed on 17 April Prior to his current role, Robert was the Chief Financial Offi cer, Chief Operating Offi cer and Finance Director for several of Macquarie s infrastructure and private equity funds. This included being responsible for: fund establishment and capital raising; asset acquisitions and management; and other funds management matters. He has been involved in asset acquisitions and disposals covering various sectors such as roads, ports, utilities and telecom towers across several geographies including the United States, Europe, Australia and parts of Asia. Robert joined Macquarie in Sydney in 1999, and has worked across North America, Europe, Australia and Asia. He has over 15 years experience in the fi nance industry. Mr. Thorpe holds a Bachelor of Commerce from University of New South Wales, and has been a member of the Institute of Chartered Accountants, Australia since Brian McKinley Chief Financial Officer Brian McKinley is the Chief Financial Offi cer of the Trustee- Manager. From 2011 to 2012, Brian was Chief Financial Offi cer of Chandler Corporation, where he provided overall fi nancial leadership and oversight of the IT department. From 2009 to 2011, he was Chief Financial Offi cer of the Banking and Financial Services Group, North America of Macquarie Group Limited and from 2006 to 2009, he was Head of Finance of Macquarie Group Limited s MIRA division in Canada. In both roles, he provided overall fi nancial leadership to the respective divisions. Brian began his professional career in 1995 with Pricewaterhousecoopers where he worked for three years prior to moving to industry. Mr. McKinley holds a Bachelor of Commerce (High Honours) from Carleton University, Canada and is a Chartered Accountant of the Institute of Chartered Accountants of Ontario, Canada. ANNUAL REPORT 2013 Asian Pay Television Trust 19

22 CORPORATE INFORMATION Board of Directors Yong Lum Sung Chairman and Independent Director Tan Chung Yaw, Richard Independent Director Leong Shin Loong Independent Director Tri Luu Pham Independent Director Benjamin lan Way Vice-Chairman and Non-Executive Director Robert Neale Thorpe Chief Executive Offi cer and Executive Director Audit Committee Tri Luu Pham Chairman and Independent Director Yong Lum Sung Independent Director Tan Chung Yaw, Richard Independent Director Company Secretary Lee Wai Sum Registered Office Macquarie APTT Management Pte. Limited 10 Marina Boulevard #17-01, Marina Bay Financial Centre Tower 2 Singapore Telephone: Facsimile: contact@aptt.com.sg Web: Trustee-Manager Macquarie APTT Management Pte. Limited 10 Marina Boulevard #17-01, Tower 2 Marina Bay Financial Centre Singapore Company Registration No.: D Unit Registrar and Unit Transfer Office Boardroom Corporate & Advisory Services Pte Ltd 50 Raffl es Place #32-01 Singapore Land Tower Singapore Telephone: Facsimile: Auditors Deloitte & Touche LLP 6 Shenton Way, OUE Downtown 2 #32-00 Singapore Partner in-charge: Ng Peck Hoon Date of appointment: 24 April 2013 Telephone: Facsimile: Stock Information SGX ID: S7OU Bloomberg: APTT SP Reuters: ASIA SI WPK Number: A1WZBD SEDOL1: B6VG8G0 SG ISIN: SG2F Media and Investor Relations Elizabeth Cox Corporate Communications, Asia Telephone: elizabeth.cox@macquarie.com 20 Asian Pay Television Trust ANNUAL REPORT 2013

23 CORPORATE GOVERNANCE STATEMENT LEGAL STATEMENT APTT is a business trust constituted on 30 April 2013 under the laws of the Republic of Singapore by a declaration of trust by Macquarie APTT Management Pte. Limited, as trustee-manager of APTT (Trustee-Manager), under the trust deed dated 30 April 2013 (Trust Deed). APTT is registered under the Business Trusts Act, Chapter 31A of Singapore (BTA) and was listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 29 May The Trustee-Manager is incorporated in Singapore and is a wholly owned subsidiary of Macquarie Capital Group Limited. The Trustee-Manager is responsible for managing the business conducted by APTT. SINGAPORE CODE OF CORPORATE GOVERNANCE In conjunction with the Singapore Code of Corporate Governance 2012 (the Code), the SGX-ST requires all listed issuers to describe their corporate governance practices with specifi c reference to the principles of the Code in their annual report, as part of their continuing obligations under the SGX-ST Listing Rules. APTT s corporate governance practices conform largely to the principles and guidelines of the Code, as well as the BTA and the Business Trusts Regulations Deviations from the Code are noted and explained in the following statement, which outlines APTT s main corporate governance practices as at 31 December The Trustee-Manager operates in accordance with the policies and procedures of Macquarie Group Limited. APTT CORPORATE GOVERNANCE STATEMENT Principle 1: The board s conduct of affairs Every company should be headed by an effective board to lead and control the company. The board is collectively responsible for the long-term success of the company. The board works with management to achieve this objective and management remains accountable to the board. Responsibility for corporate governance and oversight of the internal workings of APTT rests with the board of directors of the Trustee-Manager (Board or Directors). The Board is responsible for the overall corporate governance of the Trustee-Manager including establishing goals for management and monitoring the achievement of these goals. The Board is also responsible for the strategic business direction and risk management of APTT. All Directors participate in matters relating to corporate governance, business operations and risks, fi nancial performance and the nomination and review of Directors. Board meetings are held quarterly and more frequently as required. To facilitate the Board s decision-making processes, the Articles of Association of the Trustee-Manager provide for Directors to participate in board meetings by teleconference or videoconference, and for Board resolutions to be passed in writing including by electronic means. The Board meets to review the key activities and business strategies of the Trustee-Manager, to deliberate on the strategic policies of APTT, approve the budgets and review the performance of APTT. The Board also reviews APTT s key fi nancial risk areas. Having conducted a review of APTT s key fi nancial risk areas, the Board has concluded that there are no fi ndings which are relevant and material to APTT s operations. ANNUAL REPORT 2013 Asian Pay Television Trust 21