SOURCE: China Media Group Corporation

January 04, 2007 08:36 ET

China Media Group Corporation Chairman of the Board Issues Letter to Shareholders

SAN ANTONIO, TX -- (MARKET WIRE) -- January 4, 2007 -- China Media Group Corporation (OTCBB: CHMD) announces that the Chairman of the Board of Directors, Mr. Con Unerkov, has released the following letter to shareholders:

Dear Fellow Shareholders:

I am pleased to share with you our review of fiscal year 2006. Positive features of the year included ongoing development of our operations and strengthening of our financial position going forward to take full advantage of the complex but rewarding Chinese advertising/media markets. None more important than our recent signing of an Equity Line of Credit for USD 2,500,000 and a Debenture Purchase Agreement for USD 125,000 both with an Israeli company affiliated with a privately owned asset management and investment banking firm based in Israel.

The purpose of this letter is to provide you with an update on our business and the market we operate in, our highlights in the past 12 months, and the future prospects for the Company.

Company Overview

Firstly I would like to restate our mission statement which is to become one of China's leading new age advertising and media companies through the use of new technologies and devices combined with traditional media of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. China's advertising and media markets operate in a complex and tightly controlled and regulated environment. We have in the past 12 months mainly focused on positioning the Company in China's growing advertising and new age media markets due to the increase in consumer spending power in a rapidly growing economy.

The Company identified this opportunity and embarked on this mission in late 2005, and accordingly changed its name to China Media Group Corporation.

Our registered office in the United States is at 9901 I.H. 10 West, Suite 800 San Antonio, TX, 78230. Operationally, we have offices in the United States (San Antonio), China (Beijing and Zhuhai), Hong Kong, Malaysia and Australia.

The Company's board and management are focused in 4 specific sectors:

--  Advertising -- Focus on advertising through Billboards (Outdoor /
    Indoor), Television, Radio, Short Message Services, Newspaper, Magazine,
--  Television -- Focus on providing solutions to both the Mobile and
    Internet (IP) TV markets. Will evaluate additional opportunities when and
    if they become available.
--  Print -- We are still evaluating our strategy/entry in this area.  We
    have a number of initiatives with a focus on Newspapers and Magazines (on-
    line and print).
--  Telecom & Mobile Computing -- Focus on Convergent Devices and
    Application Services.
Market Snapshot -- China

The market and the business segments we operate in are statistically very significant thus bodes well for our future prospects. Some of the key statistical indicators from industry sources are highlighted below:

--  The Chinese economy contributed to USD 1,953 billion of the world's
    economy in 2005 and is forecasted to contribute USD 2,194 billion and USD
    2,404 billion in 2006 and 2007, respectively, moving it into one of the
    largest economies in the world.
--  It is forecasted that in 2006 and 2007 the Nominal GDP would grow at
    12.3% and 9.6%, respectively, thus leading many of the world economies in
    forecasted growth percentage.
--  China has a population of 1,307 million in 2005 and is forecasted to
    slightly increase to 1,313 million representing about 30% of the world's
    population by the end of 2006.
--  The number of cell phone users in February 2006 was about 404 million
    representing a penetration rate of 31% of China's population.  This
    represents a significant opportunity for growth in this area and the
    related services especially as the telecommunications market is also a
    tightly controlled market.
--  The number of "Internet Users" as at January 2006 was about 111
    million representing a penetration rate of 8% of which about 71 million
    were broadband users representing a penetration rate of 5% of its
    population.  These numbers show the potential future growth of on-line
    services, especially advertising which are forecasted to boom in China.
--  In 2005 there was an estimated 367.5 million households in China of
    which 39.8 million were connected to high speed broadband representing a
    penetration rate of 11% of the total number of households.  Cable TV homes
    were estimated to be 114.7 million representing a penetration rate of 31%.
    Satellite TV home connections are prohibited.
--  The Chinese media market is currently experiencing a rapid phase of
    growth.  In the year 2005 the Chinese media market contributed USD 14,787
    million to its economy and is forecasted to grow to USD 19,091 million in
    2006 and USD 22,594 million in 2007.
--  In the years 2000 to 2005, the Total Media Spend increased yearly by
    53.5%, 25.3%,  37.4%, 40.9%, 31.5%, 22.0%, respectively. It is forecasted
    to increase at 29.1% and 18.4% in 2006 and 2007, respectively.  These
    figures are well above the average increase experienced worldwide.  For
    example, the average media growth percentage worldwide in 2005 was 5.4%
    whereas China experienced a 22.0% growth.  This shows an opportunistic
    market that is performing well beyond the average worldwide indicators.
--  Based on the information above, the Media market in China is growing
    at a higher rate than their Nominal GDP rate.  For example in the year 2003
    Nominal GDP was 11.6% whereas Media growth was 40.9%.  In the year 2004
    Nominal GDP was 16.6% whereas Media growth was 31.5%.  In the year 2005
    Nominal GDP was 14.4% whereas Media growth was 22.0%.
--  The forecast year on year growth in 2007 year is expected to be TV at
    20.0%, Radio at 39.2%, Newspapers at 5.0%, Magazines at 12.0%, Outdoor at
    26.0%, Internet at 17.5% and Other Digital including screens at 21.7% for a
    total combined average increase of 18.4%.
--  The top advertising categories in 2005 were Communication Equipment &
    Services, Professional Services, Chinese Remedies, Residential Estate-
    Sale/Rental, Shampoo & Conditioner, Skincare, Tonics & Vitamins, Toothpaste
    & Oral Hygiene and Passenger Vehicles.
--  Some of the principal advertising restrictions are Tobacco
    (prohibited), Alcohol (limited in print and TV -- no cover ads), Political
    (use of national symbols banned), Children (ads targeting children must be
    consistent with improving moral character) and Pharmaceutical (prescription
    medicines may only be advertised in official magazines).

As the above statistics indicate, there is substantial growth in China and its media and advertising sectors. With China's forecasted economic growth and increase in per capita income and consumer spending, China's advertising and media sectors will continue to experience double-digit growth in the near future. Strategically, we are positioned to participate in these growth industries.


The Company had many developments during the past year. Listed below are some of the more significant milestones / developments during the last 12 months:

--  Secured an Equity Line of Credit for USD 2,500,000 and entered into a
    Debenture Purchase Agreement for USD 125,000.
--  Appointment of Mr. LUO Qiang and Mr. ZHANG Guosheng to the Board of
    Directors as Independent Non-Executive Directors.
--  Acquired the rights to be the sole distributor for the M.A.G.I.C.
    Convergent Communication device for Hong Kong and China.
--  Chinese hospital advertising focus with Beijing No. 6 Hospital.
--  Appointment as advertising placement agent for Beijing Ren Ren Health
    Culture Promotion Limited.
--  Advertising placement agent at Beijing ChaoYang district for Beijing
    Ren Ren.
--  Delivery of "prototype" of M.A.G.I.C. Communication Device.
--  Letter of Intent with DreamWorks Movie & TV Culture Media Co. Limited
    to jointly develop the Mobile TV network in Hunan Province, China and the
    associated advertising on the network.
Beijing Ren Ren Health Culture Promotion Limited

The Company has entered into a conditional non binding agreement to acquire Good World Investments Limited, a company that holds 50% interest in Beijing Ren Ren Health Culture Promotions Limited. Beijing Ren Ren has undertaken on behalf of the Chinese Government to manage the project named, "Great Wall of China Project."

Background of Beijing Ren Ren:

--  The Chinese Government has undertaken to the United Nations that it
    will promote health education and awareness on certain health issues to 85%
    of its citizens by 2015. Issues such as Aids, Hepatitis, Disease
    Prevention, Children's Health etc. and more recently, bird flu highlight
    the importance of health education.
--  The Chinese Central Government has set up an association to oversee
    this commitment made to the UN. The association has appointed Beijing Ren
    Ren to perform this benevolent work on behalf of the Chinese Government.
    Accordingly Beijing Ren Ren applied for and has received the nationwide
    advertising license from the Chinese Central Government.

Key Points on the License:

--  The license is applicable nationwide covering the media: billboards,
    television, newsprint, magazines and Internet.
--  License permits advertising both inside and outside of hospitals in a
    controlled market.
--  License permits advertising in all residential estates in China.
--  License permits advertising on mobile devices.
--  License is "exclusive to Beijing Ren Ren" to perform and achieve this
    milestone for the Chinese Government.

United Nations Millennium Development Goals Program:

--  Beijing Ren Ren has been granted the task of promoting health
    awareness and health education to the Chinese people under the United
    Nations Millennium Development Goals Program. This program has been named
    in China "Great Wall of China Project." -- UN Project website
The Company is still very committed to the closure of this acquisition, which has taken longer than was anticipated, but the Board believes it is now in a position where we can move towards a full audit of the financial accounts. Our past dealings and cooperation with Good World Investments Limited / Beijing Ren Ren have been excellent and we do not anticipate any problems to the closure of this transaction.

In terms of the timing for the closure of this transaction, the Board is currently in discussion with our attorney and auditors and at this stage we anticipate the closure to be during the 1st quarter of the fiscal year 2007. We will endeavor to keep you informed as new information becomes available.


On the 25th January 2006, witnessed by some 100 VIPs and the press, a joint signing ceremony was held in the grand ballroom of the Mandarin Oriental Hotel, Kuala Lumpur, Malaysia. At the signing ceremony, China Media Group Corporation and Advance Tech Sdn Bhd executed the M.A.G.I.C. Distribution Agreement granting China Media Group Corporation sole distribution rights in China and Hong Kong.

The Board believes that Mobile Advanced Global Integrated Communicator (M.A.G.I.C.) is one of the world's first true convergent devices for the ubiquitous platforms of today. M.A.G.I.C. is a laptop computer miniaturized to the size of a handheld device, and incorporates a mobile phone, digital camera and global positioning device, and which we believe to be one of the most powerful true convergent multimedia devices of its kind in the world today.

It is important that shareholders understand that we are not part of the design and manufacturing process for M.A.G.I.C. This responsibility falls completely with Advance Tech and our role is simply to be a distributor for the Hong Kong and Chinese markets. Our reputation is extremely important to us and we will be more aggressive on our distribution once it has successfully passed all phases of our own internal testing standards and has been approved to a satisfactory level through our potential resellers. We have received a considerable amount of interest in M.A.G.I.C. not just from Hong Kong and China but also throughout North America and Europe.

M.A.G.I.C. and other convergent products are an important part of our strategy in achieving our mission statement. We envision that the fiscal year 2007 will be a significant year not just for the product but also for its commercial distribution. We will endeavor to keep shareholders updated as soon as any new information comes to hand.


The Company has been busy on a number of initiatives and projects. Listed below are some of the projects that the Company is currently working on that we anticipate will be further advanced in the 1st half of the fiscal year 2007:

--  Beijing ChaoYang District -- Approval to roll out over 600 outdoor
    billboards/signs in this very high profile district where the majority of
    foreign consulates, ministries and the 2008 Olympic Village are located.
--  Beijing No. 6 Hospital -- Outdoor advertising initially for 20 light
    boxes at Beijing No. 6 Hospital situated in the prestigious Dongcheng
    district which includes the Central Government of China, more than 20 State
    Departments, over 100 Bureau Departments, 200 Beijing City Committee and
    City Governmental Divisions.
--  Light Boxes located near Russian Embassy -- Outdoor advertising in one
    of the most prosperous areas in Beijing on Dong-Zhi-Men-Bei-Zhong Road in
    the district of Dongcheng.  Initially to modify the existing 12 light boxes
    and to build another 12 on the adjacent side of the road.
--  M.A.G.I.C. -- Distribution in Hong Kong and China.
--  Dalian Goal Media Limited -- Magazine advertising for the Chinese
    magazine "iVogue."
--  DreamWorks Movie & TV Culture Media Co. Ltd -- Mobile TV and
    advertising in the Chinese province of Hunan.
--  Harbin Shengdong Advertising Co. Ltd -- Outdoor advertising in the
    city of Harbin.

Our aim through the 2007 year is to grow both organically and through acquisitions. The Board has identified and is in discussion with a number of companies that it believes will be complementary to our strategy moving forward. We are targeting existing profitable companies that are strategically located throughout China and ones we believe have growth potential.

All discussions are at an early stage and these comments should not be construed as an indication that the discussions will lead to any successful acquisition(s). We will endeavor to keep you abreast of any new information as it comes to hand.

Closing Remarks

The management team and our Board of Directors are committed to building a strong brand and we believe the investments and steps we have made in 2006 will help build greater wealth for all shareholders in the years ahead.

In the coming year we will continue to focus on building our business operations, increasing our sales efforts and increasing our profile within the investment community.

Much progress has been made in our Company this year and as always we would like to thank our employees for their commitment and our investors for their continued support.

Con Unerkov
Chairman of the Board of Directors

About China Media Group Corporation:

China Media Group Corporation (OTCBB: CHMD) is a "Next Generation" advertising / media company focusing on the very lucrative Chinese market. It has offices in China, Hong Kong and Texas, USA. The company was incorporated in Texas on October 1, 2002. The Company is currently entering the fast growing advertising industry in China and plans to expand its offices in key cities such as Shanghai, Guangzhou and Shenzhen. The Company will also cooperate with strategic partners in other cities to serve our clients for nationwide advertising coverage.

Additional information concerning other areas and topics of China Media Group can be found on our web site at

A number of statements contained in this Report are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Certain written statements in this press release constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Words or phrases such as "should result," "are expected to," "we anticipate," "we estimate," "we project," "we intend," or similar expressions are intended to identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include demand for our services, product development, our ability to maintain acceptable margins and control costs, the impact of federal, state and local regulatory requirements on our business, the impact of competition and the uncertainty of economic conditions in general, including the timely development and market acceptance of products, competitive market conditions, successful integration of acquisitions, the ability to secure additional sources of financing, the ability to reduce operating expenses, and other factors. The actual results that the Company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made, and we undertake no obligation to publicly update these statements based on events that may occur after the date of this document.

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