Download for those with a head for good investments, think inside the

FOR THOSE WITH A
HEAD FOR GOOD
INVESTMENTS, THINK
INSIDE THE BOX
INVESTMENT STATEMENT AND PROSPECTUS
OFFER OF CAPITAL NOTES BY
SKY NETWORK TELEVISION LIMITED
7 SEPTEMBER 2001
ORGANISING BROKER, LEAD MANAGER
AND UNDERWRITER JBWERE (NZ) LIMITED
JBWere
>
INVESTMENT STATEMENT AND PROSPECTUS
OFFER OF CAPITAL
NOTES BY SKY NETWORK
TELEVISION LIMITED
(“SKY”)
SKY commenced broadcasting in May
1990 as New Zealand’s first pay television service. From its initial offer of
only three channels SKY now offers a
total of 40 channels to over 425,000
subscribers.
SKY’s usage of both UHF and digital
platforms has enabled it to deliver
service to virtually all of New Zealand.
SKY’s digital services have experienced impressive subscriber growth
to over 265,000 in five years.
Following the successful launch of
pay-per-view channels at the end of
2000, SKY plans to introduce additional services to grow subscriber revenues including email access, home
shopping, games, music, interactive
advertising and provision of information.
SKY seeks to raise funds to continue
to expand its subscriber base and to
offer new services to subscribers.
For you this is an opportunity to
invest in a strong New Zealand brand
providing leading edge media technology to New Zealanders.
SKY is the issuer of the Capital Notes.
The Capital Notes are not guaranteed
by any of its subsidiaries.
9.3%
THIS IS AN
IMPORTANT
DOCUMENT
This Offer Document is a combined
MINIMUM
investment statement and
G E N E R A L I N F O R M AT I O N
prospectus for the Offer of Capital
2
Offer Timetable
Notes having an aggregate principal
2
Key Information
4
Chairman’s Letter
6
Main terms of the Offer
entirety. If you have any questions
13
Business Overview
about any part of this document,
28
Directors and Management
please contact the Organising
amount of up to $125 million. This
Offer Document is an important
document and should be read in its
Broker or any other member of the
I N V E S T M E N T S TAT E M E N T
NZSE or your financial or legal
adviser.
I N F O R M AT I O N
30
Answers to Important Questions
It is important that all investors
read the section entitled "What are
O T H E R I N F O R M AT I O N
my risks?" on pages 34 to 37.
39
Conditions of Capital Notes
46
Summary of Trust Deed
49
Trustee’s Statement
50
Shareholders’ Rights
copies of the documents required
51
Prospectus Statutory Information
by section 41 of the Securities Act
54
NZSE Waivers
1978, was delivered to the Registrar
55
Financial Information
of Companies for registration in
76
Auditors’ Report
accordance with section 42 of the
78
Glossary
80
Application Instructions
81
Application Form
This Offer Document is dated and
IBC
Directory
prepared as at 7 September 2001.
A copy of this Offer Document, duly
signed by or on behalf of the
Directors, and having attached to it
Securities Act 1978 on the date of
this Offer Document.
>
OFFER TIMETABLE
INDICATIVE TIMETABLE
>
Opening Date of the Offer
17 September 2001
Final date for Shareholder Preference applications
1 October 2001
Closing Date for applications under Firm Allocations
26 October 2001
Closing Date of the Offer*
26 October 2001
Interest Rate Set Date**
30 October 2001
Expected date of initial quotation and trading on the NZSE
5 November 2001
First interest payment (payable to the initial subscriber)
Subsequent interest payments
15 January 2002
15 April, July, October, January
Initial Election Date
15 October 2006
KEY INFORMATION
>
TYPE OF INSTRUMENT
The Capital Notes are unsecured, subordinated, fixed interest debt securities of SKY.
2
>
CLOSING DATE
*
The Offer will close on the earlier of 26 October 2001 or the date on which subscriptions are
received and accepted for the maximum aggregate principal amount of the Capital Notes. SKY has the
right to otherwise vary the Closing Date.
**
The Interest Rate Set Date is 30 October 2001 but may vary as a consequence of any change in
the Closing Date.
>
MINIMUM APPLICATIONS
Applications for Capital Notes must be for a minimum principal amount of $5,000 and thereafter in
multiples of $1,000.
>
SHAREHOLDER PREFERENCE
A maximum of $15 million of Capital Notes (being up to 12% of the total maximum principal amount
of $125 million of Capital Notes) has been reserved for investors who were registered as shareholders
of SKY on its New Zealand register as at 10 September 2001 (“Eligible Shareholders”). Eligible
Shareholders are eligible to receive a guaranteed minimum allocation of Capital Notes with a principal
amount of $5,000.
>
HOW TO APPLY
Instructions on how to make an application are contained on page 80 of this Offer Document.
>
LEAD MANAGER, UNDERWRITER & ORGANISING BROKER
JBWere (NZ) Limited
Telephone: 0800 555 555
>
OVERSEAS INVESTORS
The Offer is made only to New Zealand resident investors. No offer or invitation is made in any
jurisdiction outside New Zealand.
>
INTEREST RATE
Capital Notes will bear interest payable on a quarterly basis, at a rate fixed on the Interest Rate Set
Date, being the date two business days after the Closing Date, which is the greater of:
•
the Five Year Government Stock Rate plus a margin of 2.75% per annum (adjusted to the
quarterly equivalent rate); and
•
9.30% per annum;
or such higher rate as SKY and the Organising Broker may determine and advise to the market prior
to the Closing Date.
>
TERM OF THE NOTES
The Capital Notes have an initial Election Date of 15 October 2006. Unless SKY has given notice that
it will redeem all Capital Notes, each Noteholder must elect to:
(i) retain some or all of their Capital Notes for a further period on new terms and conditions;
and/or
(ii) convert some or all of their Capital Notes into fully paid ordinary shares in SKY ("Shares").
In any event, and notwithstanding a Noteholder’s election, on the Election Date SKY (at its option)
may purchase for cash some or all of the Capital Notes for their principal amount, together with any
accrued and unpaid interest.
The Capital Notes have no specific redemption or repurchase date and neither the Noteholders nor
the Trustee can require redemption of the Capital Notes for cash other than in limited circumstances.
The only right the Trustee and Noteholders have to require redemption of the Capital Notes is upon
the commencement of liquidation of SKY.
>
GENERAL INFORMATION
This Offer Document is for the issue of Capital Notes of a maximum aggregate principal amount of
$125 million including a pool with a principal amount of up to $15 million that has been reserved for
preferential allocation to shareholders.
>
DEFINITIONS
Capitalised terms used in this Offer Document have a special meaning and are defined in the glossary
on page 78.
>
LISTING
Application has been made to the NZSE for permission to list the Capital Notes and all the requirements
of the NZSE relating thereto that can be complied with on or before the date of this Offer Document
have been duly complied with. However, the NZSE accepts no responsibility for any statement in this
Offer Document. The NZSE has authorised its Members to act in this Offer.
3
7 SEPTEMBER 2001
4
CHAIRMAN’S LETTER
Since commencing broadcasting in May 1990 Sky Network Television Limited has become New
Zealand’s pre-eminent provider of pay television services. Sky’s commencement of its direct
broadcast satellite service in April 1997 has positioned Sky uniquely in the New Zealand media and
television industry. Although Sky continues to report accounting losses, it has a strong operating cash
flow (before expansion capital expenditure) and in the June 2001 fiscal year once again reported
impressive subscriber gains. Sky broke through the 400,000 subscriber mark ending the year with
over 425,000 digital and UHF subscribers.
In the last twelve months Sky has been active in pursuing opportunities to further enhance its digital
offering, including the launch of PPV services and the soon to be rolled out OpenTV interactive
platform. The OpenTV interactive platform is expected to enhance Sky’s subscriber experience and
revenues.
On behalf of the directors of Sky, I am delighted to present investors with the opportunity to subscribe
for capital notes at an attractive interest rate. The funds raised from the capital note issue will assist
Sky to continue with the ongoing capital expenditure programme associated with expanding its
subscriber base.
The capital notes are unsecured, subordinated debt obligations of Sky, which offer investors the
opportunity to enjoy an attractive fixed rate of interest. Interest will be payable quarterly and the
capital notes will have an initial term of five years. This offer document sets out the full details of the
offer and procedures investors must follow to apply for capital notes.
The directors of Sky commend this offer to you and encourage you to take this opportunity to invest
in New Zealand’s pre-eminent pay television company.
Yours faithfully
>
TOM MOCKRIDGE
CHAIRMAN
SKY NETWORK TELEVISION LIMITED
5
MAIN TERMS OF
THE
FOLLOWING
IS
A
SUMMARY
THE OFFER
OF
THE
MAIN
TERMS
OF
THE
OFFER.
INVESTORS SHOULD ALSO REFER TO THE MORE DETAILED INFORMATION IN
THE OTHER SECTIONS OF THIS OFFER DOCUMENT INCLUDING THE SECTIONS
ENTITLED “ANSWERS TO IMPORTANT QUESTIONS” AND “CONDITIONS OF
CAPITAL NOTES”. THE CONDITIONS OF THE CAPITAL NOTES SET OUT IN
T H I S S E C T I O N A R E A P P L I C A B L E O N LY U P U N T I L T H E I N I T I A L E L E C T I O N
DATE OF 15 OCTOBER 2006.
>
ISSUER
The issuer of the Capital Notes is Sky Network Television Limited (“SKY” or the “Company”), which
was incorporated in New Zealand on 26 November 1987.
>
TYPE OF INSTRUMENT
The Capital Notes are unsecured, subordinated, fixed interest debt obligations of SKY.
6
>
OFFER AMOUNT
SKY is offering for subscription Capital Notes with an aggregate principal value of up to $125 million
including a pool with a principal amount of up to $15 million that has been reserved for preferential
allocation to shareholders.
>
OFFER PERIOD
The Offer will be open from 17 September 2001 (the “Opening Date”) until 26 October 2001 (the
“Closing Date”), or such earlier date when the Offer is fully allocated. SKY reserves the right to vary
the Opening Date and Closing Date.
>
INTEREST RATE
Interest will be denominated and payable in NZ dollars. Capital Notes will bear interest on their
principal amount payable on a quarterly basis, at a rate fixed on the Interest Rate Set Date, being the
date two Business Days after the Closing Date, which is the greater of:
•
the Five Year Government Stock Rate plus a margin of 2.75% per annum (adjusted to the
quarterly equivalent rate); and
•
9.30% per annum;
or such higher rate as SKY and the Organising Broker may determine and advise to the market prior
to the Closing Date.
>
PAYMENT OF INTEREST
Interest accrues on the Capital Notes on a daily basis from the date of allotment. The first interest
payment will be made on 15 January 2002. The first payment will be made to the original subscriber
for the Capital Notes (irrespective of any transfer of the Capital Notes prior to 15 January 2002).
Subsequent interest payments will be made quarterly in arrears (on each 15 January, 15 April, 15 July
and 15 October) until the initial Election Date (15 October 2006) and will be made to persons
registered as holders of the Capital Notes on the date for determining the entitlements for interest
payments unless the payment of interest has been suspended (in whole or part) by SKY (see clause
3.2(a) in the section of this Offer Document entitled “Conditions of Capital Notes” on page 39). Nonpayment of interest does not give rise to a right to accelerate payment of the Capital Notes, but the
Interest Rate increases (see heading “Covenants” on page 10).
>
TERM
The Capital Notes have an initial Election Date of 15 October 2006. Prior to the initial Election Date,
SKY will notify Noteholders of the proportion of Capital Notes that it intends to redeem and, if
applicable, the terms and conditions on which Noteholders may elect to roll-over their Capital Notes.
Unless SKY has given notice that it will redeem all Capital Notes, each Noteholder must elect to:
(i) retain some or all of their Capital Notes for a further period on the new terms and conditions;
and/or
(ii) convert some or all of their Capital Notes into Shares.
7
SKY
>
>
In any event, and notwithstanding a Noteholder’s election, on the Election Date SKY (at its option)
may purchase for cash some or all of the Capital Notes for their principal amount, together with any
accrued and unpaid interest.
8
In addition, investors should be aware that there are restrictions on the conversion rights which relate
to circumstances in which SKY is unable to issue a sufficient number of Shares, or if the Shares are
not quoted on the NZSE. For further information in relation to these restrictions and the implications
thereof, and on the election procedure generally, investors should read the section of this Offer
Document entitled “Conditions of Capital Notes” on page 39.
>
FIRM ALLOCATIONS
Capital Notes with an aggregate principal amount of $110 million (being 88% of the Offer amount
including the Shareholder Preference have been reserved for allocation under Firm Allocations or for
clients of the Lead Manager.
>
SHAREHOLDER PREFERENCE
A pool of Capital Notes with a principal amount of up to $15 million (being up to 12% of the total
maximum principal amount of $125 million of Capital Notes) has been reserved for investors who were
registered as shareholders of SKY on its New Zealand register as at 10 September 2001. Eligible
Shareholders are eligible to receive a guaranteed minimum allocation of Capital Notes with a principal
amount of $5,000.
Eligible Shareholders may apply for more Capital Notes but there can be no guarantee that they will
receive any Capital Notes in excess of the guaranteed minimum.
Eligible Shareholders applying under the Shareholder Preference must complete an Application Form
(including details of their existing Computershare Shareholder Number), together with payment of
the application money and forward this so that it is received by the Registry before 5:00pm on
1 October 2001.
Capital Notes issued under the Shareholder Preference will be allotted on or before 5:00pm on
4 October 2001 at which time Eligible Shareholders will be notified of their allocations.
Applications for Capital Notes in excess of the guaranteed minimum allocation may be scaled by SKY,
in consultation with the Organising Broker, on a non-pro-rata basis. SKY and the Organising Broker
reserve the right to refuse all or any part of any application under the Shareholder Preference
without giving a reason.
>
UNDERWRITING
JBWere (NZ) Limited has agreed to underwrite the issue of Capital Notes up to an aggregate principal
amount of $110 million.
>
ALLOTMENT
Allotments will be made daily as applications are received and accepted by SKY. SKY will advise
successful applicants of the allotment of Capital Notes to them as soon as possible after the date of
allotment. SKY reserves the right to refuse all or any part of any application without giving a reason.
The acceptance of applications for, and allotment of, Capital Notes is conditional on approval of SKY’s
shareholders. Application moneys received prior to satisfaction of this condition will be banked into a
special purpose account maintained by the Registrar. Prior to the satisfaction of this condition,
allotments will be made on a conditional basis. Once shareholder approval is obtained, all conditional
allotments will become unconditional.
>
REFUNDS
If SKY accepts an application in part, the balance of the application moneys will be refunded (without
interest) no later than five days after the date of allotment of the Capital Notes to the applicant.
Any applications received after the Closing Date may not be accepted. Any application money
received in respect of applications that are not accepted will be refunded to the applicant no later
than five days after the later of the date of receipt and the Closing Date. No interest will be paid on
refunds.
As mentioned above, the Offer is conditional upon approval by shareholders of SKY, which will be
sought at the shareholders’ meeting (expected to be held on 24 September 2001). If shareholder
approval is not obtained, all application moneys will be returned to applicants as soon as practicable
and, in any event, within five days of the shareholders’ meeting. No interest will be paid on returned
application moneys.
9
>
COVENANTS
SKY covenants that:
(i) if interest on the Capital Notes is not paid within 14 days after the relevant date (including
where interest has been suspended in accordance with the Conditions (see page 40)); and/or
(ii) if SKY is in breach of the financial covenant contained in the Trust Deed for more than 14 days,
then, for so long as (but not including such 14 day periods) such interest remains unpaid and/or such
breach remains unremedied:
(i) it shall not make distributions on its share capital or other securities ranking equally with or
behind the Capital Notes or, without the consent of the Trustee, acquire or redeem or repay, or
provide financial assistance for the acquisition of, any of its shares or other securities ranking
equally with or behind the Capital Notes; and
(ii) interest will accrue on the Capital Notes daily at the Interest Rate plus 2.50% per annum,
compounded on each interest payment date.
SKY also covenants to use reasonable endeavours to ensure the Shares which are issued on any
conversion are entitled to be quoted on the NZSE and that such quotation is maintained.
>
RANKING
On a liquidation of SKY, the Capital Notes cease to be convertible and will be redeemable by SKY and
will rank ahead of any shares in SKY but are subordinated in right of payment to the claims of other
10
creditors of SKY (except those creditors which are subordinated on a similar basis). Further details on
the subordination provisions and limitations on payment and enforcement rights are set out in the
section entitled “Conditions of Capital Notes” on page 39.
>
TRUSTEE
The Trustee is The New Zealand Guardian Trust Company Limited.
>
APPLICATIONS
Applications for Capital Notes must be for a minimum principal amount of $5,000 and thereafter in
multiples of $1,000. Applications must be made on the Application Form contained at the back of this
Offer Document and are to be lodged with SKY, any member of the NZSE, the Organising Broker or
the Registrar before 5pm on the Closing Date.
The aggregate principal amount of the Capital Notes for which an application is made must be paid in
full on application. Cheques should be made payable to “SKY Capital Notes Offer”, should be crossed
“Not Transferable” and must not be post-dated.
>
OVERSEAS OFFERS
This Offer is made only to New Zealand residents. No offer or invitation is made under this Offer
Document in any jurisdiction outside New Zealand. No person may offer, sell or deliver any Capital
Notes or distribute any document (including this Offer Document) to any person in any jurisdiction
outside New Zealand, except in accordance with all of the legal requirements of that jurisdiction.
Unless otherwise agreed with SKY, any person or entity subscribing for Capital Notes will, by virtue of
that subscription, be deemed to represent that he, she or it is not in a jurisdiction that does not
permit the making of an offer or invitation of the kind described in this Offer Document and is not
acting for the account or benefit of a person within such a jurisdiction.
>
BROKERAGE
No brokerage is payable by any subscriber for Capital Notes under the Offer. Brokerage at the rate of
1.25% of the principal amount in respect of allotments is payable by SKY to members of the NZSE in
respect of Capital Notes issued by SKY under valid applications bearing the stamp of the Member,
except for allotments made under the Shareholder Preference. Brokerage at the rate of 1.25% of the
principal amount in respect of allotments made under the Shareholder Preference is payable by SKY
to the Lead Manager.
>
QUOTATION
The Capital Notes will be tradeable and application has been made for them to be quoted on the NZSE.
Quotation of Capital Notes on the NZSE is expected to occur following the Closing Date. However, the
NZSE accepts no liability for any statement made in this Offer Document. The NZSE has authorised
its Members to act in this Offer.
>
FURTHER ISSUES
Subject to NZSE Listing Rules, the ASX Listing Rules (if applicable) and SKY’s Constitution, SKY may
from time to time, without the consent of the holders of Capital Notes, create and issue further capital
notes, Shares or other securities or incur indebtedness or issue obligations ranking equal in all
respects with, junior to, or senior to, the Capital Notes and otherwise on such terms as SKY may
determine. Any further capital notes will be constituted by a deed, in a form agreed to by the Trustee
and SKY and supplemental to the Trust Deed. Alternatively, any such further issue could be made
pursuant to a new trust deed, in which case that issue would be subject to the appointment of a new
trustee (if necessary) in respect of those further capital notes.
>
NZSE WAIVERS
SKY has been granted a series of waivers from the requirements of the Listing Rules relating to
programming transactions, major asset transactions and other material transactions with related
parties. Particulars of these waivers and another waiver granted by the NZSE are set out under the
section entitled “NZSE Waivers” on page 54.
11
BY JUNE 2001, SKY’S SUBSCRIBER BASE HAD REACHED OVER
425,000,
AN
INCREASE
OF
MORE
THAN
53,000
OVER
THE
PREVIOUS YEAR. THIS IS THE GREATEST ANNUAL INCREASE SINCE
SKY BEGAN BROADCASTING IN 1990. SKY IS ESTIMATED TO HAVE
AROUND 95% OF NEW ZEALAND’S PAY TELEVISION SUBSCRIBERS.
TAKE OFF
12
BUSINESS
OVERVIEW
The summary business overview set out in this section should be read in conjunction with the further information
contained in this Offer Document, including the summary financial information set out in the section entitled
“Financial Information”.
> INTRODUCTION
SKY is New Zealand’s pre-eminent pay television company. As at 30 June 2001, SKY had established a subscriber
base of over 425,000 subscribers, an increase of over 53,000 subscribers since 30 June 2000. This is the
greatest annual increase in subscriber numbers since SKY first commenced broadcasts in 1990.
> HISTORY
SKY was established in 1987 by New Zealanders Craig Heatley, Terry Jarvis and Brian Green to investigate pay
television opportunities in New Zealand, following the deregulation of broadcasting in New Zealand. In May 1990
SKY began broadcasting a three-channel UHF subscription service in Auckland, Waikato and Tauranga.
By the end of 1996 SKY’s UHF service had increased to five channels and was broadcast over an area covering
approximately 73% of New Zealand households.
In April 1997 SKY launched its technologically superior nationwide DBS service. This allowed it to offer a greater
number of channels with improved picture and sound quality to virtually every household in New Zealand.
> PROFILE
SKY currently broadcasts a five channel analogue UHF service and a 40 channel digital DBS service, comprising
31 television channels, three radio stations, two information channels and four pay-per-view channels (“PPV”).
SKY’s UHF service, which can be received by approximately 73% of New Zealand households, includes a sports,
movies, news, general entertainment and an educational channel.
The DBS service is broadcast digitally which means that, in addition to offering a far wider range of channels, SKY
is also able to offer digital quality pictures, stereo sound and wide screen options. SKY is currently testing
13
interactive services such as games and weather, which it expects to offer to its DBS subscribers later this year.
SKY’s DBS service, which can be received by virtually all of New Zealand’s estimated 1.35 million households,
includes:
• four sports channels (SKY Sport, SKY Sport 2, Trackside, and ESPN);
• five movie channels (SKY Movies, SKY MovieMax, Hallmark, MGM and the Sundance Channel);
• three 24 hour news channels (CNN, CNBC and SKY News Australia);
• a range of general entertainment and educational channels (SKY 1, Cartoon Network, Discovery, National
Geographic, Animal Planet, Granada UK TV, Fashion TV, Juice TV, J2, the Weather Channel, and Nickelodeon);
• a number of specialist ethnic channels (Phoenix, SETN, Eastern Television, CTV, Arirang and NHK);
• four 24 hour PPV channels;
• free-to-air broadcast channels (TV3, TV4 and Prime); and
• three radio channels (Concert FM, Wolf Radio and National Radio).
In addition SKY’s DBS service offers PPV sporting events.
As at 30 June 2001, SKY had approximately 430,000 subscribers. This means that of New Zealand’s estimated
1.35 million households approximately 32% subscribe to one of SKY’s pay television services. SKY is estimated to
have approximately 95% of New Zealand’s pay television subscribers.
Approximately 62% of SKY’s subscribers receive the DBS service with the remaining 38% receiving the UHF
service.
As a dedicated pay television company, the key success factors for SKY’s business are:
• programming;
• distribution; and
• subscriber management.
The management of these three critical success factors is essential to the achievement of SKY’s business
forecasts and long-term business strategy.
2001
Feb 2001
Apr 2000
Apr 2000
Mar 2000
•
•
•
•
SKY lists on
the ASX.
Jun 2001
>
SKY purchases
an 80% interest
in the Football
Kingz.
SKY forms a new
Technology
Division to focus
on developing
interactive
services on the
digital platform.
•
KEY
MILESTONES
INL increases
its shareholding
in SKY to over
66%.
SKY surpasses
400,000
subscribers. Of
that base SKY’s
multi-channel
digital service has
approximately
224,000
subscribers.
Jul 2001
SKY extends
broadcast rights
to National
Rugby League
competition for
a further five
years.
•
14
SKY’s subscriber numbers have increased consistently since its establishment at an average rate per annum of
11.5% over the past five years. During the last financial year SKY’s subscriber numbers grew by more than ever
before at over 53,000.
>
PROGRAMMING
SKY considers that one of the keys to its success to date has been the ability to offer its subscribers a strong
programme line up. The Company has had considerable success in securing exclusive rights to broadcast most
popular sports and movies in New Zealand.
SKY currently has a very strong position in New Zealand with the exclusive rights to broadcast many leading
sports and events including international and national rugby, rugby league, Australian National Soccer League
and English Premier League Soccer, New Zealand, Australian and English cricket, US PGA Tour and Superbikes.
SKY’s sporting content is further strengthened through its contract with American sports channel ESPN for the
exclusive supply of its sports programming in New Zealand.
Another key element of SKY’s programming content is its specialist movie channels. These channels broadcast
uncut and uninterrupted movies. SKY currently has exclusive distribution arrangements with seven of the eight
15
<1987
Apr 1998
Dec 1997
Aug 1997
Jul 1997
•
•
•
•
SKY reaches
300,000
subscribers.
Dec 1998
INL purchases
a 48% interest
in SKY.
•
SKY successfully
completes
global initial
public offering.
Sep 1999
SKY secures
five-year rights
with New
Zealand Cricket.
•
SKY launches
digital satellite
service.
Mar 2000
SKY secures
right to
re-transmit TV3
and TV4 on
digital satellite
platform.
•
SKY digital
subscriber
numbers reach
110,000.
>
PAY
PER VIEW
16
SKY’S PAY PER VIEW (“PPV”) SERVICE, WHICH INCLUDES PPV SPORTING
EVENTS
AND
NEW
RELEASE
MOVIES,
HAS
GENERATED
$5.2
MILLION
IN
TURNOVER SINCE ITS LAUNCH IN JANUARY 2001 TO THE END OF JUNE 2001,
A N D A T T R A C T E D O V E R 9 7 , 0 0 0 T R A N S A C T I O N S I N J U LY 2 0 0 1 A L O N E .
Jun 1996
Sep 1995
Jun 1993
Mar 1993
May 1990
•
•
•
•
•
SKY secures
broadcasting
rights for
Australian
rugby league.
Mar 1997
SKY reaches
100,000
subscribers
throughout
New Zealand.
•
SKY reaches
200,000
subscribers
within
New Zealand.
Apr 1997
SKY secures
long-term rugby
broadcasting
rights.
SKY’s service to the
Auckland, Waikato
and Tauranga regions
commences with
three channels:
SKY Sport, SKY
Movies and SKY News.
•
SKY launches
analogue
satellite service.
SKY secures a
term loan facility
of NZ$250
million to be
used in part to
fund its satellite
expansion plans.
major Hollywood studios. These arrangements are supplemented by distribution agreements with specialist
movie distribution channels such as Sundance and MGM Movie Channel.
In addition to these major programme offerings, SKY offers broad programming covering 24 hour news
broadcasts, general entertainment and educational programming.
The developing element of SKY’s programme offering is its growing PPV service which offers DBS subscribers the
opportunity to watch selected sporting events and new release movies. SKY expects to complement this service
with an offering of interactive services including weather, games, email, advertising, retailing and gaming which
will begin to be introduced later this year. Experience overseas suggests that these services increase revenue per
subscriber, reduce subscriber churn and further differentiate SKY’s product offer from its pay television and freeto-air competitors. (See the heading below “Future and Strategy” in the section entitled “Business Overview” for
further information).
Programming costs are the single largest operating cost for the Company, representing approximately 48% of
operating expenses. These costs are generally priced in US dollars and, although the Company uses currency
hedging to mitigate the impact of currency movements, each US$0.01 movement in the US$/NZ$ exchange rate
results in a change in SKY’s (pre-tax) programming costs of approximately $3 million per annum (pre-hedging).
The continued growth in SKY’s subscriber base and its position as New Zealand’s pre-eminent pay television
company have resulted in ongoing improvements in the terms of SKY’s programming supply arrangements for
both sport and movies.
>
DISTRIBUTION
SKY currently transmits its analogue UHF services terrestrially on five UHF channels. Transmission and linking
are contracted to Broadcast Communications Limited (“BCL”), a wholly owned subsidiary of Television New
Zealand Limited (“TVNZ”). Under these contracts BCL transmits SKY’s analogue signal to selected population
centres, covering approximately 73% of New Zealand’s total households, using its national distribution
infrastructure. These contracts operate until March 2010, which is also the date SKY’s rights to use the UHF
frequencies expire.
The Company’s digital DBS service is transmitted via satellite. SKY uplinks its digital signals, via a satellite dish
located at SKY’s Mt Wellington studios, to a satellite owned and operated by Cable & Wireless Optus Limited
(“Optus”). The digital signals are then broadcast within a footprint covering the whole of New Zealand. To receive
SKY’s satellite transmissions subscribers require a small satellite dish, decoder and “smartcard”. SKY’s leases, for
three transponders on the Optus satellite, run for approximately five further years.
Mar 1989
Dec 1988
Apr 1988
Nov 1987
•
•
•
•
SKY is founded
by Craig Heatley,
Terry Jarvis and
Brian Green.
Feb 1990
ESPN signs
exclusive
programming
arrangement
with SKY.
•
SKY obtains four
national UHF
networks.
SKY purchases
studios at Mt
Wellington from
Wilson & Horton
and begins a
$12 million
refurbishment.
NZ Government
announces its
intention to
deregulate
broadcasting and
open up the use of
the UHF band for
extra television
services. SKY’s
original plans to
transmit a single
channel via satellite
changes to use the
UHF system to
transmit multichannels
terrestrially.
>
17
Both SKY’s analogue and digital signals are encrypted to combat potential piracy. SKY’s broadcasts can only be
unencrypted by authorised subscribers who have a decoder and “smartcard”. The encryption systems used by
SKY are licensed from News Data Systems Limited, an indirect subsidiary of News Corporation Limited
(“News Corp.”).
>
SUBSCRIBER MANAGEMENT
SKY has an established history of successfully continuing to grow its subscriber base. The Company experienced
its largest ever annual net increase in subscriber numbers in the year to 30 June 2001. Subscriber numbers
increased by more than 53,000 to over 425,000. SKY’s strong subscriber growth for the period came about
without the aid of any major programming initiatives or geographic expansion.
SKY continues to drive growth in subscriber numbers through securing and retaining “must have” programming
rights, extensive advertising, improved product offerings including bundling and special installation rates.
Examples of bundled offerings include the arrangement with Telecom Corporation of New Zealand Limited
(“Telecom”) under which Telecom offers a nationwide “bundled” offer including SKY’s basic service and a range
of telecommunications applications such as mobile phone, home fixed line and internet services. SKY has also
entered into a similar agreement with Meridian Energy Limited in relation to the bundling of SKY’s services with
the provision of electricity services.
These bundled offers are considered by SKY management to be favourable to both SKY and the counter-party.
The benefit to SKY is that the counter-party to the agreement, such as Telecom, has an incentive to secure new
subscribers to SKY’s services while also helping to fund installation costs for new subscribers.
18
CHANNEL
VISION
>
SKYWATCH
Each month SKY publishes a full colour magazine, SkyWatch, which includes a detailed programming guide, as
well as information on current movies and sporting events. SkyWatch is actively marketed to agencies and
advertisers and its high quality print and glossy pages have proved very popular with subscribers with readership
of approximately 737,000 (across all demographics) every month.
SKY also provides its DBS subscribers with an electronic programming guide. This allows subscribers to use the
television to see upcoming programmes and also to search for programmes by category.
>
SET TOP UNITS
To receive either of SKY’s services, subscribers require a set top unit (“STU”). Different types of STU can vary
significantly in cost depending on their features.
Due to the number of SKY’s UHF subscribers transferring to the Company’s DBS service, SKY does not need to
purchase any new analogue units as it is able to reuse returned UHF STUs for new UHF subscribers.
Approximately one third of all new installations completed last year used a UHF STU.
SKY heavily subsidises the cost of each new digital installation in order to encourage growth in subscriber
numbers. Consequently the ongoing growth of SKY’s subscriber base means that the Company’s total annual
capital expenditure on installations averaged approximately $107 million for the past three years.
SKY intends to continue to grow its subscriber base and plans to use the proceeds of the Capital Note issue,
together with the Company’s operating cash flows and Banking Facility, to fund continued expansion.
F R O M I T S I N I T I A L O F F E R O F O N LY T H R E E C H A N N E L S , S K Y N O W O F F E R S A
T O T A L O F 4 0 C H A N N E L S , A N D I S A B L E T O D E L I V E R T H E M T O V I R T U A L LY
EVERY HOUSEHOLD IN NEW ZEALAND THROUGH ITS DIGITAL SERVICE.
19
>
CHURN
Churn is a measure of the proportion of subscribers disconnecting over a given period (excluding subscribers who
move address) expressed as a percentage of the average subscriber base during the period. Since the
introduction of SKY’s DBS service the rate of churn has continually declined and is now at the lowest level of any
time in the history of the Company. The above graph summarises the rate of churn experienced by SKY for the
last five years.
SKY measures churn on a gross basis under which any subscriber to disconnect is included in the measure. An
alternative measure used by pay television companies is net churn which ignores any disconnection where the
subscriber reconnects within a defined period. Were SKY to adopt the net churn measure its reported churn for
the last financial year would have decreased from 22.7% to approximately 14%.
20
>
SUB-LICENSING AGREEMENTS
SKY has recently announced the renewal of its sub-licensing arrangements with TV3. Under this arrangement, in
return for an annual fee, SKY allows TV3 to broadcast on a delayed basis and, in certain circumstances, live some:
•
•
>
rugby games played in New Zealand, Australia and South Africa including all test matches in those countries
involving the All Blacks; and
New Zealand cricket matches particularly those involving the Black Caps.
FUTURE & STRATEGY
SKY believes that the pay television industry in New Zealand offers significant opportunities for continued
growth and plans to capitalise on its position as New Zealand’s pre-eminent pay television operator.
The Company’s primary objectives are to expand its subscriber base, increase its cash flow per subscriber and
capture a greater share of the total New Zealand television market. In order to achieve these objectives, SKY’s
strategy is built around four principal initiatives:
•
•
•
•
continuing to expand its subscriber base through its UHF and DBS platforms as well as through bundling
partnerships;
acquiring the best programming at the best price;
exploiting its current leading position in digital television to deliver enhanced products and services through
its digital satellite platform; and
capitalising on its relationship with Independent Newspapers Limited (“INL”) and News Corp.
SKY’S
DIGITAL
GROWTH
TO
SERVICES
OVER
265,000
HAVE
IN
EXPERIENCED
FIVE
YEARS.
IMPRESSIVE
THE
BENEFITS
SUBSCRIBER
OF
DIGITAL
INCLUDE A FAR WIDER RANGE OF CHANNELS, HIGHER QUALITY PICTURES,
STEREO SOUND AND WIDE SCREEN VIEWING OPTIONS.
DIGITAL
EVOLUTION
21
22
22
GET
INTERACTIVE
FROM AN INITIAL INTERACTIVE TRIAL EXPECTED TO COMMENCE IN SEPTEMBER 2001,
S K Y I N T E N D S T O E V E N T U A L LY O F F E R I N T E R A C T I V E S E R V I C E S I N C L U D I N G W E A T H E R ,
EMAIL, PROGRAMMING, RETAILING, ADVERTISING AND GAMING. EXPERIENCE OVERSEAS
SUGGESTS THAT THESE SERVICES INCREASE REVENUE PER SUBSCRIBER AND RETENTION
OF SUBSCRIBERS.
Two recent initiatives expected to enhance the subscriber experience and revenue are PPV and interactivity.
In late 2000, SKY launched its PPV service. The buy rate for SKY’s PPV service is currently strong with
approximately 97,271 transactions in July 2001 generating turnover of approximately $5.2 million from its launch
in January 2001 to the end of June 2001.
In September 2001, SKY expects to commence a trial rollout of its interactive platform, OpenTV. OpenTV is the
delivery platform for interactive content and is intended to support additional e-commerce applications such as
television based email, interactive weather applications, interactive advertising, interactive programming and
interactive gaming. The next potential interactive revenue stream, following PPV, is expected to come from
downloading games.
In addition to its existing pay television operations PPV and OpenTV provide exciting opportunities for SKY to
pursue further value added service opportunities in the future.
>
COMPETITORS AND SKY’S COMPETITIVE ADVANTAGES
There are approximately 1.35 million households in New Zealand and virtually all are within reach of SKY’s DBS
service and 73% are within reach of SKY’s UHF service. The estimated penetration of the New Zealand pay
television market is 32% as at 30 June 2001, of which 95% are SKY subscribers with the residual mostly
comprising subscribers to the cable television service operated by Telstra Saturn Limited (“TSL”). In August 2001
press reports suggested that TSL had postponed or abandoned its plans to deploy a national satellite pay
television service in competition to SKY.
TSL is currently building a cable network in the major urban centres in New Zealand. To date it has completed
installation of its network in Wellington and is in the process of establishing its network in Christchurch. SKY’s
penetration rates in both of these regions are consistent with penetration rates in comparable regions. Recently,
TSL secured the rights for the All Blacks’ end of year tour to Ireland, Scotland and Argentina, the Six Nations
Championship and the European rugby club championship.
SKY, however, remains at a competitive advantage with exclusive programming rights for key sporting events
including Super 12, Tri Nations and National Provincial Championship rugby competitions, the National Rugby
League, New Zealand, Australian and English cricket, Australian National Soccer League and the English Premier
League soccer. In addition to these events SKY also has coverage of the golf majors, major tennis events and
Superbikes.
SKY’s target market is wider than just pay television and incorporates the entire television broadcasting market.
23
24
WATCH
THIS SPACE
There are currently five nationwide free-to-air channels in New Zealand provided by three broadcasters.
• TVNZ is a government-owned enterprise broadcasting TV1 and TV2.
• Canwest Global Communications of Canada fully owns and operates TV3 and TV4.
• The third participant in the free-to-air market is Prime Television Limited broadcasting under the name Prime.
There are also a number of other regional and special interest channels broadcast on a free-to-air basis in major
metropolitan areas in New Zealand.
>
CORPORATE CITIZENSHIP
At an early stage SKY saw a direct parallel between itself and another start-up enterprise called “Books in
Homes”, a charity aiming to promote reading and to provide books in schools where children are least likely to
have such resources themselves.
SKY is proud to have been the first corporate sponsor of Books in Homes and remains a core sponsor.
SKY has also initiated a nationwide programme to provide educational programmes from its service into
secondary schools.
>
OWNERSHIP
In June 2001, INL increased its shareholding in SKY from 49.9% to 66.3%. SKY is currently discussing with INL a
proposal whereby SKY would benefit by transferring some of its tax losses to INL.
INL is one of New Zealand’s major publishers and printers of newspapers and magazines. A selection of INL’s
newspaper titles include The Dominion, Evening Post, Christchurch Press, Waikato Times, Southland Times,
Nelson Evening Mail and the Taranaki Daily News. INL’s largest shareholder, News Corp., has a shareholding of
44.5% of the issued capital of INL. News Corp. is an international communications company engaged in the
production and distribution of motion pictures, television, satellite and cable broadcasting, newspapers and
magazines. The activities of News Corp. are primarily based in the United States of America, United Kingdom and
Australasia. News Corp. has a total market capitalisation of approximately US$35 billion.
THE CONTINUED GROWTH IN SKY’S SUBSCRIBER BASE AND ITS POSITION
AS
NEW
R E S U LT E D
ZEALAND’S
IN
PRE-EMINENT
ONGOING
PAY
IMPROVEMENTS
TELEVISION
IN
THE
COMPANY
TERMS
OF
HAVE
SKY’S
P R O G R A M M I N G S U P P LY A R R A N G E M E N T S F O R B O T H S P O R T A N D M O V I E S .
25
>
OPERATIONAL AND FINANCIAL PERFORMANCE
The following operating information has been taken from SKY’s records and is not audited. This information may
not be directly comparable with similar information from other pay television companies.
>
AS AT 30 JUNE
2001
2000
1999
1998
1997
1,346,600
1,346,600
1,346,600
1,346,600
1,346,600
992,800
992,800
992,800
992,800
989,650
73.7%
73.7%
73.7%
73.7%
73.5%
159,793
210,374
288,711
306,113
269,956
2,110
2,324
2,520
2,932
2,685
161,903
212,698
291,231
309,045
272,641
264,195
160,245
51,844
17,068
6,547
2,390
1,711
1,181
617
315
266,585
161,956
53,025
17,685
6,862
1,948
1,918
1,306
–
–
Total UHF, DBS and other subscribers
Total number of households in
New Zealand (1)
Number of households within reach of the
SKY UHF network (2)
Percent of households within reach of the
SKY UHF network
Subscribers–UHF:
Residential
Commercial
Total UHF
Subscribers–DBS (Satellite):
Residential
Commercial
Total DBS
Subscribers–Other: (3)
Commercial
Total other
1,948
1,918
1,306
–
–
430,436
376,572
345,562
326,730
279,503
UHF
16.1%
21.2%
29.1%
30.8%
27.3%
DBS
Total subscribers
26
Percent of households within reach
subscribing to the SKY network:
19.6%
11.9%
3.8%
1.3%
0.5%
Total UHF and DBS
31.5%
27.5%
25.3%
24.0%
20.5%
Churn rate
22.7%
26.4%
30.8%
28.3%
32.8%
Average monthly revenue per residential
subscriber:
UHF (4)
$41.42
$42.11
$43.63
$42.82
$43.56
DBS (4)
$54.35
$50.06
$31.44
–
–
(1) Based upon New Zealand Government census data as of March 1996.
(2) Based upon the data referred to in note (1) and information provided by BCL as to metropolitan areas within reach of SKY’s UHF
broadcasts.
(3) Includes subscribers to programmed music, via SKY’s subsidiary company, SKY AEI Music Limited and subscribers receiving SKY
packages via affiliate services.
(4) Exclusive of the 12.5% Goods and Services Tax payable by subscribers. Until January 1999 all DBS subscribers were on an
introductory rate of $15.36 per month.
The following table provides an overview of the key financial information of SKY and its subsidiaries for the 5 years
ended 30 June 2001. SKY had a 31 December balance date for 1997 and 1998 and changed to 30 June in 1999.
Audited financial statements were prepared as at these dates. For the purpose of this summary all information is
based on years ended 30 June. The information has therefore been extracted from unaudited management
accounts unless otherwise indicated. Please note, SKY is the issuer and sole obligor of the Capital Notes and the
financial information of SKY and its subsidiaries is provided only for the information of prospective investors.
SKY NETWORK TELEVISION LIMITED - SUMMARY CONSOLIDATED STATEMENTS OF FINANCIAL PERFORMANCE
>
>
FOR THE YEAR ENDED 30 JUNE
2001
2000
1999
1998
$000
$000
$000
$000
$000
AUDITED
AUDITED
UNAUDITED
UNAUDITED
UNAUDITED
300,386
262,456
236,360
188,252
163,737
151,477
124,563
103,341
83,892
68,141
9,267
9,061
9,305
7,315
6,223
Transmission
17,520
18,787
17,535
16,327
14,579
Selling general and administrative (1)
46,413
35,921
32,450
32,409
24,421
224,677
188,332
162,631
139,943
113,364
75,709
74,124
73,729
48,309
50,373
Total revenues
1997
Operating expenses:
Programming
Subscriber management
Total operating expenses
EBITDA (2)
Less/(Plus):
Depreciation and amortisation
95,387
77,828
55,976
34,792
42,961
Interest and similar charges
21,296
20,976
14,085
9,582
16,785
1,262
2,387
501
Unrealised losses/(gains) on currency
Surplus/(deficit) before income tax
($42,236)
($27,067)
$3,167
(2,167)
$6,102
(76)
($9,297)
27
(1) Exclusive of unrealised losses/(gains) on currency.
(2) EBITDA is defined as net surplus/(deficit) before income tax, interest expense, depreciation and amortisation and unrealised
gains and losses on currency.
SKY NETWORK TELEVISION LIMITED - SUMMARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
>
AS AT 30 JUNE
2001
2000
1999
1998
$000
$000
$000
$000
$000
AUDITED
AUDITED
AUDITED
UNAUDITED
UNAUDITED
Fixed assets
380,957
326,791
266,670
203,602
116,411
Total assets
489,552
412,178
341,128
261,301
168,848
Debt due within one year (1)
Long-term debt and lease obligations
Total liabilities
Total equity surplus/(deficit)
(1) Exclusive of payables and accruals.
1997
12,625
11,535
7,315
4,765
5,441
271,624
260,108
183,541
124,754
167,500
405,646
372,836
276,492
200,897
239,733
83,906
39,342
64,636
60,404
(70,885)
DIRECTORS AND
>
MANAGEMENT
John Fellet
John Fellet joined SKY as Chief Operating Officer in
1991, and was appointed Chief Executive Officer of the
Company in January 2001. John has over 24 years’
experience in the pay television industry, including
ten years with Tele-Communications Inc where he
held various positions including Financial Controller,
Systems Manager and Regional Manager.
DIRECTORS OF SKY NETWORK
TELEVISION LIMITED
Thomas Mockridge (Chairman)
Tom Mockridge was appointed Chief Executive Officer
of INL in March 2001. Tom is Chairman of SKY, a
director of INL, and a director of News Limited
(Australia). Tom began his working life as a journalist
in New Zealand and Australia before joining the staff
of the then Australian Federal Treasurer, Mr Paul
Keating, before leaving to join News Limited in 1991.
Tom holds a BA from Auckland University and an MBA
from Deakin University.
28
John B. Hart
John Hart was appointed as a director of SKY in 1997.
He is also the former Coach of the All Blacks . He was
employed by Fletcher Challenge Limited from 1966 to
1995 in a variety of positions including Employee
Relations Director. He currently manages his own
consultancy business.
Robert W. Bryden (Deputy Chairman)
Robert Bryden is Deputy Chairman of SKY and
managing director of Todd Capital Limited. Robert was
appointed as a director of SKY in 1988 and is also a
director of INL, Walker Wireless Limited, Jump Capital
Limited, Crown Castle Limited and Metlife Limited.
Robert previously held a number of managerial
positions in the meat and primary export industries.
He holds a BCA from Victoria University of Wellington.
Richard (Rick) S. Neville
Rick Neville was appointed to the SKY board in 1997.
He is also a director of INL, the Newspaper Publishers’
Association and New Zealand Press Association. A
former journalist and daily newspaper editor, Rick
joined INL senior management in 1991. He was
appointed INL general manager in 1993, INL chief
operating officer in 1997, and is currently INL’s
Managing Director Publishing. Rick completed an
Advanced Management Program from Harvard
Business School in 1995.
James Blomfield
Jim Blomfield has had an expansive career in
television in various countries spanning over 30 years.
In 1999 Jim became Chief Executive Officer of News
Broadcasting Australia, a division of News Limited. In
March 2000 Jim was appointed Chief Executive
Officer of Foxtel.
Marko Bogoievski
Marko Bogoievski was appointed as a director of SKY
in February 2001 and has been the Chief Financial
Officer of Telecom Corporation of New Zealand
Limited since May 2000. Marko has a BCA from
Victoria University and an MBA from the Harvard
Graduate School of Business.
>
KEY MANAGEMENT
John Fellet, BA, Chief Executive Officer
John Fellet is also a director of SKY.
Kevin Cameron, Director of Sport
Greg Drummond, Director of Studio Operations
Travis Dunbar, BA, Dip Journ, Director of Movies and
Entertainment
Brian Green, AMIEE, NZCE, IPENZ, Director of
Technology & Interactive Broadcasting
Richard Last, Director of Advertising
Albert (Barrie) Downey
Tony O’Brien, Director of Communications
Barrie Downey has been a director of SKY since 1991.
Barrie was Chairman from 1991 to 1997 and is also
chairman of the Audit Committee. He is also a director
of Escalator Advertising Limited, National Property
Trust Limited, and eVentures New Zealand Limited and
is a member of the PA Consulting Group advisory board.
Paul Smart, BBS, CA, CMA, Chief Financial Officer
and Company Secretary
John Simmons, BCom, LLB, General Manager
Mike Watson, Director of Marketing
Martin Wrigley, Manager of Operations
INVESTMENT
STATEMENT AND
OTHER
INFORMATION
>
29
ANSWERS
TO IMPORTANT QUESTIONS
> IMPORTANT INFORMATION
(The information in this section is required
Securities Act 1978)
Investment decisions are very important.
have long-term consequences. Read all
carefully. Ask questions. Seek advice before
yourself.
•
under the
They often
documents
committing
if an investment adviser receives any money or assets
on your behalf, he or she must tell you in writing the
methods employed for this purpose.
Tell the adviser what the purpose of your investment is. This
is important because different investments are suitable for
different purposes.
> WHAT SORT OF INVESTMENT IS THIS?
> CHOOSING AN INVESTMENT
When deciding whether to invest, consider carefully the
answers to the following questions that can be found on the
pages noted below:
30
What sort of investment is this?
30
Who is involved in providing it for me?
31
How much do I pay?
31
What are the charges?
31
What returns will I get?
31
What are my risks?
34
Can the investment be altered?
37
How do I cash in my investment?
37
Who do I contact with enquiries about my investment? 38
Is there anyone I can complain to if I have problems
with the investment?
38
What other information can I obtain about this
investment?
38
In addition to the information set out below in this
document, important information about the investment can
be found in the other sections of this Offer Document.
> CHOOSING AN INVESTMENT ADVISER
You have the right to request from any investment adviser
a written disclosure statement stating his or her experience
and qualifications to give advice. That document will tell
you:
•
whether the adviser gives advice only about particular
types of investments; and
•
whether the advice is limited to the investments offered
by one or more particular financial organisations; and
•
whether the adviser will receive a commission or other
benefit from advising you.
You are strongly encouraged to request that statement. An
investment adviser commits an offence if he or she does not
provide you with a written disclosure statement within five
working days of your request. You must make the request at
the time the advice is given or within one month of
receiving the advice.
In addition:
•
if an investment adviser has any conviction for
dishonesty or has been adjudged bankrupt, he or she
must tell you this in writing; and
SKY is offering for subscription Capital Notes with an
aggregate principal amount of $125 million.
The securities offered are capital notes, which are
unsecured, subordinated, fixed interest debt securities of
SKY. Noteholders do not benefit from any capital growth in
the Shares and will not participate in any dividend, bonus
issue, rights issue or any other distribution made in respect
of the Shares. The Capital Notes will rank equally in all
respects and without preference among themselves.
The Capital Notes offer investors fixed quarterly
interest payments until the initial Election Date. The initial
Election Date will be 15 October 2006.
The subsequent Election Dates (if any) will then be
specified by SKY as part of the revised terms it offers to
holders of the Capital Notes on the relevant Election Date.
Prior to the initial Election Date, SKY will notify
Noteholders of the proportion of Capital Notes that it
intends to redeem and, if applicable, the terms and
conditions on which Noteholders may elect to roll over their
Capital Notes. Unless SKY has given notice that it will
redeem all Capital Notes, each Noteholder must elect to:
(i) retain some or all of their Capital Notes for a further
period on the new terms and conditions; and/or
(ii) convert some or all of their Capital Notes into Shares
in SKY.
In any event, and notwithstanding a Noteholder’s
election, on the Election Date SKY (at its option) may
purchase for cash some or all of the Capital Notes for
their principal amount, together with any accrued and
unpaid interest.
The Capital Notes will remain in existence unless and
until they are either redeemed for cash, converted to
Shares by Noteholders, purchased by SKY and cancelled or,
following a liquidation of SKY, redeemed (either in whole or
in part).
Interest will be payable quarterly in arrears on the
Interest Dates (each 15 January, 15 April, 15 July, 15
October), with the first interest payment due on 15 January
2002 and a final payment on redemption or conversion.
Interest on the Capital Notes will be calculated and accrue
daily from the date of allotment to the Election Date on a
365-day year basis but with the period between Interest
Dates (other than the first interest payment date) deemed
to be exactly one quarter of a year.
If holders of Capital Notes have had their right, or
election, to convert suspended because SKY cannot lawfully
issue Shares or the Shares are not quoted on the NZSE,
then the Capital Notes will, subject to SKY’s right of
compulsory purchase, be rolled over on new terms. See
clause 4.3(b) (“Alternatives to Conversion”) in the section
entitled “Conditions of Capital Notes”. Also see the section
entitled “What are my risks?” below.
The Capital Notes will be constituted by, and issued
under, the Trust Deed. The Capital Notes have the benefit of,
and are subject to, the provisions of the Trust Deed and the
conditions applicable to the Capital Notes. For a more
detailed description of the terms of the Trust Deed and the
conditions applicable to the Capital Notes, see the sections
of this Offer Document entitled “Summary of Trust Deed”
and “Conditions of Capital Notes” respectively. The Capital
Notes are not Shares and the only voting rights which
attach to the Capital Notes are the right to attend and vote
at meetings of the holders of Capital Notes.
This Offer Document also provides information
regarding the Shares that SKY will issue to holders of
Capital Notes if their Capital Notes are converted into
Shares. The Shares are equity securities in SKY and will
rank equally in all respects with all other Shares in SKY on
issue at the time of conversion (except that the Shares
issued on conversion will not participate in any distributions
in respect of Shares in SKY declared or paid or made by
reference to a record date (as defined in the Listing Rules)
prior to the Election Date). For further information on the
rights of shareholders, see the section entitled
“Shareholders’ Rights” on page 50. Also, see the section
entitled “What returns will I get?” below.
> WHO IS INVOLVED IN PROVIDING IT
FOR ME?
Sky Network Television Limited (registered number
AK 373652) is the issuer of the Capital Notes and SKY is the
issuer of the Shares, if any, issued on conversion of the
Capital Notes. SKY was incorporated in New Zealand on
26 November 1987 and can be contacted at:
Sky Network Television Limited
10 Panorama Road
Mt Wellington
Auckland
The trustee in respect of the Capital Notes is The New
Zealand Guardian Trust Company Limited which can be
contacted at Level 7, Royal & SunAlliance Centre,
48 Shortland Street, Auckland.
A directory of the parties involved in this Offer can be
found on the inside of the back cover of this Offer
Document.
SKY has been operating as a provider of subscription
based television services since 1990.
> HOW MUCH DO I PAY?
Investors must pay the Issue Price of $1.00 for each Capital
Note allotted to them. An application cannot be withdrawn
or revoked by the applicant once it has been submitted.
Applications to subscribe for Capital Notes must be for a
minimum principal amount of $5,000 and thereafter in
multiples of $1,000.
Applications must be made on the Application Form
contained at the back of this Offer Document and must be
lodged with SKY, the Registrar (Computershare Registry
Services Limited), any member of the NZSE or the
Organising Broker (JBWere (NZ) Limited).
The aggregate principal amount of the Capital Notes for
which application is made must be paid in full on
application. Cheques should be made payable to “SKY
Capital Notes Offer”, be crossed “Not Transferable” and
must not be post-dated.
Further information on how to apply for Capital Notes is
set out on page 80.
Noteholders do not need to pay any money for the
Shares issued on any conversion of their Capital Notes.
> WHAT ARE THE CHARGES?
Investors are not required to pay any charges to SKY, the
Trustee, the Registrar or any other person in relation to the
Offer, other than the amount subscribed on account of the
Capital Notes allotted to them.
Any fees or expenses payable to the Trustee or the
Registrar and all the expenses of the Offer are to be paid
by SKY.
Details of expenses incurred in respect of the Offer and
payable by SKY are set out on page 52. Those expenses are
estimated to total $4.8 million (exclusive of GST where
applicable).
No brokerage is payable by any subscriber for Capital
Notes under the Offer.
> WHAT RETURNS WILL I GET?
The information set out in this section should be read in
conjunction with the information set out in the section
entitled “What are my risks?” below. Certain events could
reduce or eliminate the returns intended to be derived from
holding the Capital Notes.
The principal factors that will determine the returns to
holders of Capital Notes are:
•
the fixed interest rate attaching to the Capital Notes;
•
the performance by SKY of its obligations as the issuer
of the Capital Notes (including the payment of interest
on the Interest Dates);
•
the new terms offered by SKY prior to each Election
Date, the election made by holders prior to such
Election Date and whether SKY elects to purchase any
or all of the Capital Notes on any Election Date; and
•
each holder’s individual circumstances for tax purposes.
No guarantee
None of the subsidiaries of SKY, the Organising Broker, the
Trustee, nor any of their directors, officers, employees nor
any other person, including for the avoidance of doubt, INL,
guarantees the Capital Notes or the returns that investors
may receive as holders of Capital Notes.
31
Interest Rate
32
The entity legally liable to pay interest on the Capital Notes
to Noteholders is SKY. The Capital Notes will pay a fixed
interest rate from their date of allotment until the initial
Election Date of 15 October 2006. The Interest Rate will be
payable on a quarterly basis and fixed on the Interest Rate
Set Date as the greater of:
•
the Five Year Government Stock Rate plus a margin of
2.75% per annum (adjusted to the quarterly equivalent
rate); and
•
9.30% per annum;
or such higher rate as SKY and the Organising Broker may
determine and advise to the market prior to the Closing
Date.
The Five Year Government Stock Rate means the bid
rate for November 2006 New Zealand Government Stock as
displayed at or about 10.45 am on the Interest Rate Set
Date on page NZMKT of the Reuters Monitor Screen or, if on
the relevant date no such rates are displayed, the bid rates
quoted to SKY on or about 11.00 am on that day by three
registered banks selected by SKY, and if fewer than three
registered banks quote rates, the rates SKY determines to
be the nearest practicable equivalent.
The Interest Rate and Interest Dates will be reset on
each Election Date.
The first interest payment date is 15 January 2002 and
interest on that date will be paid to the original allottee of
each Capital Note, irrespective of whether another person
has subsequently been recorded on the register as the
holder of that Capital Note.
Subsequent interest payments will be made quarterly in
arrears on each interest payment date thereafter (being
each 15 January, 15 April, 15 July, 15 October) until the
initial Election Date (15 October 2006) unless the payment
of interest has been suspended in whole or in part by SKY
(see “Suspension of Interest” below).
Suspension of Interest and Breach of Covenant
SKY may (without prior notice to the holders of Capital
Notes) suspend payments of interest if the directors of SKY
believe on reasonable grounds that:
•
making the payment would, or would be likely to, result
in SKY becoming insolvent;
•
the payment would, or would be likely to, result in SKY
breaching any covenant, warranty or undertaking it has
given to its senior creditors; or
•
the payment would, or would be likely to, breach any
other legal obligation of SKY.
If:
(i) interest on the Capital Notes is not paid within 14 days
after the relevant date (including where interest has
been suspended in accordance with the Conditions (see
page 40)); and/or
(ii) SKY is in breach of the financial covenant contained in
the Trust Deed for more than 14 days,
then, for so long as (but not including such 14 day periods)
such interest remains unpaid and/or such breach remains
unremedied:
(i) SKY shall not make distributions on its share capital or
other securities ranking equally with or behind the
Capital Notes or, without the consent of the Trustee,
acquire or redeem or repay, or provide financial
assistance for the acquisition of, any of its shares or
other securities ranking equally with or behind the
Capital Notes; and
(ii) interest will accrue on the Capital Notes daily at the
Interest Rate plus 2.50% per annum, compounded on
each interest payment date.
Distributions on Shares
Shares issued on conversion of any Capital Notes will rank
equally with and enjoy the same benefits as other Shares
existing at that time, although any such Shares will not
carry any right to any dividends, bonus issues, rights issues
or other distributions made by SKY in respect of its Shares
for any financial periods or parts of financial periods ending
on or prior to the conversion of the Capital Notes.
Returns on Shares may also be by way of capital
appreciation (although share prices may also fall). Whether,
and to what extent, future dividends are paid or SKY’s share
price appreciates will depend on a number of factors,
including, but not limited to, those described under the
section entitled “What are my risks?” on page 34.
The dates and frequency of dividend payments by
SKY is unknown. No amount quantifiable as at the date of
this Offer Document and enforceable by subscribers has
been promised.
Election
SKY ELECTION NOTICE
Not less than 30 Business Days before the relevant Election
Date, SKY must send written notice to each Noteholder
specifying:
•
the proportion of Capital Notes it shall compulsorily
redeem on that date; and
•
if applicable, the new interest rate and interest dates to
apply to the Capital Notes from that Election Date
together with any other variations to the terms and
conditions of the Capital Notes which are also to apply
from that Election Date.
HOLDER ELECTION
Upon receipt of the SKY Election Notice, holders of Capital
Notes may:
•
elect to roll over either some (being Capital Notes
having an aggregate principal amount of not less than
$5,000) or all of their Capital Notes (subject to any
resulting holding of Capital Notes having an aggregate
principal amount of not less than $5,000 and in any
event being a multiple of $1,000) on the new terms
advised by SKY; or
•
elect to convert some or all of their Capital Notes into
Shares on a dollar for dollar basis based on 98% of the
volume weighted average NZ dollar sale price of SKY
shares sold on the NZSE in the ten Business Days prior
to the relevant Election Date (subject to any resulting
holding of Capital Notes having an aggregate principal
amount of not less than $5,000 and in any event being
a multiple of $1,000),
by completing and returning an Election Notice to SKY no
later than 13 Business Days before the Election Date.
Alternatives to Conversion
The right to elect to convert some or all Capital Notes into
Shares may be suspended and any election made may be
void if SKY is unable lawfully to issue Shares or the Shares
cease to be quoted on the NZSE. In such circumstances,
SKY may compulsorily redeem some or all of such Capital
Notes or roll over the affected Capital Notes on new terms
(see the section entitled “Conditions of Capital Notes” on
page 39).
SKY Option to Purchase
No later than 10 Business Days before an Election Date, SKY
may give notice to Noteholders that it will purchase for cash
on that Election Date some or all of their Capital Notes. SKY
can make this election irrespective of whether a Noteholder
has elected to roll over or convert his or her Capital Notes.
Taxation
Resident withholding tax (“RWT”) will be deducted by SKY
from interest paid to or credited to New Zealand resident
Noteholders unless SKY is satisfied that no RWT is payable.
RWT of 19.5% will be deducted if the Noteholder (or
where there is a joint ownership of the Capital Notes, one of
the joint Noteholders) supplies its IRD number to the
Registrar and the Noteholder is not a company (other than
a company that is a trustee). Noteholders (including
company Noteholders) may elect for RWT to be deducted at
a 33% or 39% rate. Where the Noteholder’s IRD number is
not supplied to the Registrar, RWT will be deducted at 39%
from all interest payments.
RWT will not be deducted by SKY where Noteholders
provide a copy of their certificate of exemption to the
Registrar and SKY is satisfied that a deduction on account
of RWT is not required. Noteholders should furnish to SKY
their IRD numbers and copies of certificates of exemption.
SKY will at the time of issue of the Capital Notes be
approved by the New Zealand Inland Revenue Department
as an “approved issuer” for the purposes of the approved
issuer levy regime contained in the Stamp and Cheque
Duties Act 1971. SKY intends to register the Capital Notes
as registered securities for the purposes of the approved
issuer levy regime. SKY also intends to pay approved issuer
levy so that all payments of interest made by SKY to a nonresident of New Zealand for taxation purposes (who is not
engaged in business in New Zealand through a fixed
establishment in New Zealand) can be made without having
to deduct non-resident withholding tax (“NRWT”).
The Capital Notes will be issued in a manner which
enables SKY to pay interest to Noteholders free of
New Zealand NRWT. NRWT is currently levied at a rate of
15%, reducing to 10% under certain double tax agreements
that New Zealand has entered into with other countries.
As SKY intends to make payments of the approved
issuer levy, where applicable, there should be no New
Zealand NRWT imposed on interest payments made under
the Capital Notes. If the Capital Notes are registered, SKY
may upon request agree to reduce NRWT to 0% in
consideration of reducing the interest paid to the investor
by an amount of approximately 2% of the interest (which
reflects the impact of the approved issuer levy). However,
should SKY fail to pay the approved issuer levy on time SKY
will pay sufficient NRWT so that the Noteholder retains the
interest payments clear of New Zealand withholding taxes.
Non-residents who acquire Capital Notes in the
secondary market should advise the Registrar of their
tax position.
SKY will make all the deductions referred to above
unless it is satisfied by the Noteholder of the relevant
Capital Notes that such deductions are not required by law.
In relation to New Zealand investors, on conversion of
the Capital Notes into Shares the redemption for cash or
sale of any Capital Notes will give rise to a base price
adjustment calculation for the Noteholder under the
accrual rules. (Note: the accrual rules apply to New Zealand
residents or non-residents if they carry on a business in
New Zealand through a fixed establishment). The
calculation will include all the consideration received by the
Noteholder (coupon interest and either the value of Shares,
the redemption payment or the sale proceeds, respectively)
less the consideration paid to acquire the Capital Notes. In
the case of the conversion of Capital Notes into Shares the
Inland Revenue Department may take the view that the
discount to market value on conversion should be included
as income from the financial arrangement. An adjustment
will be made for income or expenditure amounts that have
been dealt with for tax purposes in earlier years. The effect
of this is to bring into tax any previously unrecognised gains
on the Capital Notes. Losses may be deductible if the
relevant criteria are met.
No transaction taxes such as stamp duty or goods and
services tax will be applicable upon the receipt of SKY
Shares on conversion of the Capital Notes.
In addition, there may be further tax implications for
investors who dispose of Shares subsequent to conversion.
There are also tax liabilities (including the deduction of
resident or non-resident withholding tax) in relation to any
dividends received on those Shares.
The above statements are based on applicable tax
legislation current at the date of this Offer Document.
All comments in relation to taxation in this Offer
Document are of a general nature only under current
legislation, and are not (and should not be construed as)
legal or tax advice to any investor in Capital Notes.
These comments should therefore be treated with
appropriate caution.
Investors should consult their own taxation or other
financial advisers concerning the taxation implications, in
their particular circumstances, of owning and/or disposing
of Capital Notes or converting the Capital Notes into Shares
or of owning and/or disposing of those Shares.
33
34
> WHAT ARE MY RISKS?
Expectation of Significant Capital Expenditures
The principal risks for investors in the Capital Notes are that:
•
they may not receive timely, or any, interest payments
on the Capital Notes;
•
they may not receive any dividends, or entitlements or
other distributions in respect of Shares issued on any
conversion of the Capital Notes; and
•
they may be unable to recoup their original investment.
This could happen for a number of reasons, including if:
•
SKY suspends interest payments (see the section
entitled “What returns will I get?” on page 31);
•
the price at which investors are able to sell their Capital
Notes is less than the price they paid for them due to
interest rate movements or for other reasons;
•
investors are unable to sell their Capital Notes at all due
to lack of demand;
•
SKY is unable to lawfully issue the Shares, or there is no
market for the Shares into which the Capital Notes can,
in certain circumstances, be converted;
•
SKY becomes insolvent, or otherwise financially unable
to pay interest due on, or other amounts in respect of,
the Capital Notes;
•
SKY pays or makes no dividend or other distribution on
Shares; or
•
the price at which investors are able to sell their Shares
is less than the price they paid for the Capital Notes due
to declines in the SKY Share price.
The Capital Notes have no specific redemption or
repurchase date and neither the Noteholders nor the
Trustee can require redemption of the Capital Notes for
cash, other than in limited circumstances. The only right the
Trustee and Noteholders have to require redemption of the
Capital Notes is upon the commencement of liquidation of
SKY. A breach by SKY of the representations, warranties or
covenants contained in the Trust Deed does not entitle the
Trustee or the Noteholders to require SKY to repay or
redeem the Capital Notes. See the section of this Offer
Document entitled “Conditions of Capital Notes”. The
Trustee and the Noteholders have no remedies against SKY
for breach, except remedies provided at law.
On a liquidation of SKY, the Capital Notes cease to be
convertible and will be redeemable by SKY and will rank
ahead of any shares in SKY but are subordinated in right of
payment to the claims of other creditors of SKY (except
those creditors which are subordinated on a similar basis).
Further details on the subordination provisions and
limitations on payment and enforcement rights are set out
in the section entitled “Conditions of Capital Notes” on
page 39.
The principal factors that may affect the performance
of SKY are summarised below.
As part of its strategy to increase the subscribers to its
digital DBS service throughout New Zealand, the Company
has incurred, and expects to continue incurring, significant
capital and marketing expenditures, relating to purchases
of satellite dishes and digital decoders, and installation and
associated costs. SKY heavily subsidises the cost of each
new digital installation in order to encourage growth in
subscriber numbers. Consequently the ongoing growth of
SKY’s subscriber base means that the Company has
experienced total annual capital expenditure related to
installations averaging approximately $107 million for the
past three years. The Company intends to review from time
to time the installation fee it charges DBS subscribers,
which may be greater or less than the current average
installation fee. There can be no assurance that potential
DBS subscribers will be willing to pay such an installation
fee as well as monthly subscription fees. The Company’s
cash flows will be adversely affected to the extent that the
expenditures incurred in connection with the Company’s
strategy to grow the subscriber base for its digital DBS
service are not more than offset by increased installation
and subscription revenues from the digital DBS service.
To the extent that the Company is unable to finance its
anticipated capital expenditures from the proceeds of the
Capital Notes issue, cash flow from operating activities and
the Banking Facility or should unanticipated changes in
technology result in changes in the Company’s strategy which
necessitate significant additional capital expenditure, the
Company would be required to borrow money from other
sources, raise capital through equity offerings, undertake a
further capital notes issue or otherwise finance those
expenditures. If the Company is unable to raise sufficient
funds from these sources, it will be required to reduce its
planned capital expenditure. Amounts outstanding under the
Banking Facility are required to be reduced to $225 million by
11 March 2002 and $210 million by 11 March 2003 and the
remaining outstanding balance is repayable on 11 March
2004. A reduction in planned capital expenditure may reduce
the Company’s ability to continue to grow its subscriber base.
History of Operating and Net Losses
The Company has experienced significant losses since its
inception. However, as the Company’s subscriber base has
expanded, the Company’s revenues have grown at a greater
rate than its operating expenses. No assurance can be given
that the Company will be profitable in future periods. (See
the section entitled “Summary Financial Statements” on
page 56).
Operation of the Optus Satellite Outside the Control of
the Company
The operation of the Optus satellite is outside the control of
the Company. Several factors impacting on the useful life of the
Optus satellite include, among other things, construction
quality, degradation of solar panels and the durability of its
other component parts. Like all satellites, the Optus satellite is
also subject to the risk of loss, damage or destruction due to
military actions, acts of war, anti-satellite devices, electrostatic
storms or collisions with space debris. The Company does not
own or operate the Optus satellite and does not maintain, nor
does it intend to maintain, insurance with respect to the
transponders it leases, due primarily to the prohibitive cost of
such insurance. Disruption of the Company’s transmissions
from the Optus satellite could have a material adverse effect
on the Company, depending upon the duration of the
disruption and the availability of alternative transponders on
the Optus satellite or other satellites having the ability to
transmit to New Zealand on terms acceptable to the Company.
Priority and Continuity of Service under Transponder
Lease Agreement with Optus
Reliance on Principal Suppliers of Subscriber Digital
Reception Equipment
The Optus satellite has eight transponders on its satellite
available to transmit to New Zealand. Under its lease
with Optus, SKY’s three transponders currently have
the lowest level of priority in the event of any satellite
or transponder malfunction. As a result, in the event of a
satellite or transponder malfunction the Company’s use of
its transponders may be suspended or terminated by
Optus on behalf of another of its transponder lessees
that has a higher priority service. To the extent the
transponders leased by the Company on the Optus
satellite are unavailable to transmit the Company’s
DBS service, the Company would need to obtain alternative
satellite space.
The availability of transponders on satellites currently
in operation with the ability to transmit signals of sufficient
strength that can be received by small consumer satellite
dishes of the size the Company installs at the homes of its
DBS subscribers is extremely limited. Depending upon the
duration of the interruption of its transmission, the
Company’s inability to obtain replacement transponders
could have a material adverse effect on the Company.
Furthermore, the ability of the Company to transmit its
SKY channels by satellite following the expiration of its
transponder lease agreement with Optus (which runs until
the end of the geostationary life of the Optus satellite or 5
December 2006, whichever occurs first) and, if desirable, to
broadcast additional channels and services beyond the
capacity of the three transponders on the Optus satellite,
will depend upon the ability of the Company to obtain rights
to utilise transponders on other satellites. No assurance can
be given that any such transponders will be available to the
Company upon expiration of its lease with Optus.
Should Optus choose to replace the existing satellite
used by SKY at the end of its geostationary life SKY has the
right to lease an equivalent amount of transponder capacity
on similar terms.
The Company has entered into agreements with equipment
suppliers pursuant to which it purchases subscriber
reception equipment for installation at the homes of DBS
subscribers. Should the Company’s principal suppliers fail to
provide such equipment on a timely basis, the Company
may be unable to replace such suppliers without delay or
additional expense. There can be no assurance that
adequate sources of DBS subscriber reception equipment
can be accessed by the Company on a timely basis in the
event that the Company’s principal suppliers fail to supply
such equipment to the Company.
Risk of Business Interruption
SKY’s UHF and DBS services depend heavily on the
equipment and facilities located at SKY’s studios in
Mt Wellington, Auckland, including reception equipment
for overseas programming, programming and subscriber
management systems, encryption and compression systems
and up-linking equipment, much of which is not easy to
quickly replicate or replace. That equipment and
those facilities are subject to the risk of loss, destruction
or damage due to factors outside SKY’s control
such as accidents, fire and acts of God. As a result
these types of factors have the potential to cause
significant interruption to SKY’s business. The risks of this
type of business interruption is mitigated by in-built
redundancy, disaster recovery plans and insurance
maintained by the Company, although these do not remove
the risks completely.
Access to Programming in Offering Competitive Pay
Television Services
The Company’s ability to continue to offer pay television
services competitively is dependent on its ability to renew
its existing programming rights, particularly for local and
international sports such as rugby union and rugby league,
and popular movies produced by the major Hollywood
studios, and to contract for and obtain access to additional
programming. In general, the Company has agreements in
place with key suppliers of sports and movies to supply
programming for approximately the next three to six years.
Failure to renew existing agreements or to continue to
obtain popular programming at competitive prices could
materially adversely affect the Company’s operating results
in future periods.
Possibility of Increased Competition
SKY is currently the most significant pay television
operator in New Zealand. The Company’s existing and
potential competitors comprise a broad range of
communications and entertainment media, including
existing and future free-to-air television channels, cable
operators (which also have the capability to offer PPV and
near video on demand), such as TSL, and other potential
pay television operators. TSL has expanded its cable
network in the Wellington region, has started extending that
network in Christchurch and has also planned to do so in
Auckland. In recent years TVNZ has shown interest in
launching pay television services in competition with SKY.
To date no such service has been launched.
In recent years several new free-to-air television
channels have commenced operation, including Prime and
TV4. The free-to-air television channels and pay television
operators, including the Company, all require movies and
sports, general entertainment and other programming to
attract viewers. This creates the potential for bidding
competition which could have the effect of materially
increasing the Company’s programme acquisition costs. The
extent of competition depends, among other factors, upon
the quantity and popularity of the programming offered, the
price (including the amounts of any up-front installation
and periodic service or subscription costs) and, with respect
to free-to-air and other potential satellite television
services, the quality of the broadcast signal. The Company
is unable to predict what forms of competition will develop
in the future, either from existing technology (such as cable
35
and direct satellite television broadcasting) or future
technology, the extent of such competition or its impact on
the Company’s UHF or DBS services. There can be no
assurance that the New Zealand market will be able to
sustain multiple pay television providers.
Rapid Changes in Technology
The pay television industry throughout the world has
traditionally been, and is likely to continue to be, subject to
rapid and significant changes in available technology. There
can be no assurance that the Company will have the
financial resources to adopt new technologies should such
technologies render the Company’s UHF and DBS
technologies inefficient, uncompetitive or obsolete. The
failure or inability to adopt such new technologies could
materially adversely affect the Company’s financial
condition and operating results.
Potential Increased Regulation
36
SKY is subject to only a limited amount of regulation,
related principally to broadcasting content and competition.
The Government is currently reviewing the regulation of
telecommunications in New Zealand and its broadcasting
policy, and is undertaking a limited review of copyright law.
The review of telecommunications regulation commenced
with a Ministerial Inquiry. This Inquiry recommended,
among other things, the regulation of access for other
broadcasters to SKY’s conditional access system. This
recommendation was not adopted by the Government, and
the Telecommunications Bill that is now before Parliament
does not provide for regulation of STUs. In relation to
broadcasting, among other things, the Government is
reviewing issues relating to local content quota, regulatory
issues relating to digital transmission and reservation of
spectrum for non-commercial purposes. There has been no
indication of what position the Government might adopt on
these issues. In relation to copyright, the Government has
released two discussion papers dealing with digital issues
and performer’s rights. Some proposals discussed in these
papers would benefit SKY, while other proposals might be
detrimental to its interests. Again, there has been no
indication of what position the Government might adopt on
the issues discussed. In addition, the Alliance Party is
promoting a requirement for live free-to-air broadcasts of
significant national sports events, but this does not appear
to be supported by the Labour Party. If changes to current
regulations are introduced that are detrimental to SKY’s
business, the Company’s financial performance could be
materially adversely affected.
In addition, the Commerce Commission has analysed
competition in the television industry on a number of
occasions in recent years. It confirmed in November 1996
that pay television services should be viewed as part of the
total New Zealand market rather than be examined as a
separate market and, as a result, the Company did not have
a dominant position in the New Zealand television industry.
A change in this market analysis by either the Commerce
Commission or the courts could have an adverse impact on
the Company.
Risk of Signal Theft
Theft or “piracy” of the pay television programming signal
is recognised to be a risk to any pay television system. To
combat piracy, the Company currently uses encryption
systems on its UHF and DBS services made by and licensed
from News Data System Limited, an indirect subsidiary of
News Corp. Should these systems prove to be ineffective in
combating piracy of the Company’s UHF and DBS signals,
the Company’s revenues and its ability to contract for
popular programming could be adversely affected.
No Expectation of Dividends for the Foreseeable Future
In light of capital expenditures anticipated over the next
several years principally in connection with growing the
subscriber base for its digital DBS service throughout New
Zealand, the Company does not expect to pay any dividends
on its Shares for the foreseeable future. If, and to the extent
that, it earns any net surplus in the foreseeable future, the
Company anticipates that it will reinvest all such net surplus
into its business. Although there are no limitations on the
payment of dividends with respect to the Shares under the
Company’s Constitution, under New Zealand law the
Company may pay dividends only if the Company will pass
the statutory solvency test immediately after the payment.
In addition, the Banking Facility contains restrictions on the
payment of dividends.
Concentration of Control
INL holds 66.3% of the Shares. As a result, the ability to
direct the business of SKY is, as a practical matter, likely to be
under the control of INL. However, that control is subject to a
number of provisions of the Companies Act and the Listing
Rules that protect the interests of other shareholders.
Adverse Impact of Currency Fluctuations
Although almost all of the Company’s revenues are
denominated in NZ dollars, a significant percentage of the
Company’s operating expenses and capital expenditures are
in US dollars. Decreases in the value of the NZ dollar
relative to the US dollar will increase the Company’s NZ
dollar payments for its operating expenses and capital
expenditures and, therefore, could materially adversely
affect the Company’s operating results, for example each
US$0.01 movement in the US$/NZ$ exchange rate results in
a change in SKY’s (pre-tax) programming costs of
approximately $3 million per annum. The Company enters
into foreign exchange contracts to fix the NZ dollar cost of
a proportion of such operating expenses and capital
expenditures. Although such contracts can mitigate the
effect of short-term fluctuations in exchange rates, there
can be no effective or complete hedge against currency
fluctuations. Such contracts also have their own inherent
risks, such as the risk of counter-party default.
Dependence on Key Management
The Company’s business and its development has, to a large
extent, depended over the past several years on the efforts
and abilities of certain key management personnel. The
Company does not maintain key man life insurance on
behalf of these key management personnel or any other
employee. The loss of the services of these key
management personnel could adversely affect the
Company. The success of the Company will also be
dependent, in part, on the ability to attract and retain
additional or replacement key management personnel.
There is competition for qualified and experienced
management personnel in the television broadcasting
industry. As a result, the inability to attract and retain
sufficient key employees could also have an adverse effect
on the Company.
Taxation
A change of shareholder control could result in some or all
of SKY’s existing or future tax losses being forfeited.
Furthermore, should a change in shareholding result in SKY
being under the control of a non-resident entity for tax
purposes then this may result in a higher taxable income.
> CONSEQUENCES OF INSOLVENCY
No holder of Capital Notes, nor any SKY shareholder who
has received Shares on the conversion of Capital Notes, will
be liable to pay any further amounts to SKY or any other
person in respect of those Capital Notes or Shares if SKY
becomes insolvent.
In the event of the liquidation of SKY, the Capital Notes
will cease to be convertible and the holders will be entitled
to receive from SKY the principal amount of their Capital
Notes plus any accrued and/or unpaid interest. If SKY is
placed in liquidation then the claims of all secured and
unsecured creditors, other than unsecured creditors who
rank equally with or behind the holders of Capital Notes, will
rank ahead of the claims of Noteholders. Noteholders will,
however, rank ahead of shareholders.
> CAN THE INVESTMENT BE ALTERED?
The terms of this Offer and the terms and conditions on
which investors may apply for and purchase Capital Notes
may be altered by an amendment to this Offer Document by
SKY. Any amendment that impacted on the fundamental
terms and conditions of the Offer would be notified to
investors. Details of any such amendment must be filed with
the Registrar of Companies.
On each Election Date, SKY may offer varied terms of
the Capital Notes (including the interest rate payable on
them) at its complete discretion in the manner set out in the
section entitled “Conditions of Capital Notes”.
The terms and conditions of the Trust Deed itself or the
Conditions of the Capital Notes may be altered with the
approval of the Trustee and SKY.
The following amendments do not require Noteholder
consent:
•
if the Trustee is of the opinion that the amendment is
not, or is not likely to become, materially prejudicial to
the interests of Noteholders generally;
•
if the Trustee is of the opinion that the amendment is
made to correct a manifest error, or is of a formal or
technical nature;
•
if it is convenient to obtain or maintain a quotation of
the Capital Notes on the NZSE; and
•
if it is made to comply with the law or the NZSE
Listing Rules.
Other amendments must be approved by an extraordinary
resolution of Noteholders. See under the heading
“Amendment of Trust Deed” in the section entitled
“Summary of Trust Deed”.
The rights of holders of Shares are subject to the
provisions of the Companies Act 1993, SKY’s Constitution,
the NZSE Listing Rules and the ASX Listing Rules (where
applicable).
SKY’s Constitution may be altered by a special
resolution of shareholders, subject to the rights of interest
groups under the Companies Act, or in certain
circumstances by court order. Section 117 of the Companies
Act 1993 restricts a company from taking any action that
affects the rights attached to its shares unless that action
has been approved by a special resolution of shareholders
whose rights are affected by the action. Under certain
circumstances, a shareholder whose rights are affected by a
special resolution may be able to require SKY to purchase
its Shares. However, holders of Capital Notes have no voting
or other rights in relation to SKY’s Constitution until their
Capital Notes have been converted into Shares.
> HOW DO I CASH IN MY INVESTMENT?
Holders of Capital Notes are entitled to sell or transfer their
Capital Notes at any time subject to the terms of the Trust
Deed and applicable securities laws and regulations.
Noteholders have limited rights of repayment and
redemption. See under the heading “Limitation on Rights”
in the section entitled “Summary of Trust Deed”. The Trust
Deed provides that, by being registered as the holder of a
Capital Note, the transferee automatically agrees to be
bound by all of the terms of the Trust Deed.
Capital Notes may be transferred using a transfer
document in the form prescribed by the Trust Deed
or otherwise approved by SKY or by any other method
to transfer securities which is not contrary to any law,
and which may be operated in accordance with the NZSE
Listing Rules.
Applicants should not attempt to sell Capital Notes until
they know whether, and how many, Capital Notes have been
allotted to them. None of SKY, its subsidiaries, the
Organising Broker, the Trustee, nor any of their respective
directors, officers or employees nor any other person
accepts any liability or responsibility should any applicant
for Capital Notes attempt to sell or otherwise deal with
Capital Notes before receiving a FASTER Statement
recording the number of Capital Notes (if any) allotted to
that applicant.
Transactions in the Capital Notes on the NZSE can be
made by contacting a member of the NZSE and supplying
the appropriate FASTER Identification Number, along with
the holder number for the Capital Notes in the case of a sale.
Except as approved by SKY or as required under the
NZSE Listing Rules, no transfer of Capital Notes will be
registered if registration (together with the registration of
all contemporaneous transfers) would result in the vendor
or the purchaser holding a parcel of less than a minimum
holding (currently $5,000) of Capital Notes. SKY may give
notice to any Noteholder holding less than the minimum
holding of Capital Notes requiring the sale of those Capital
Notes in accordance with the Trust Deed.
37
As the Offer is for an initial issue of Capital Notes, there
is no currently established market for sale. However, SKY
has applied for the Capital Notes to be quoted on the NZSE
and is of the opinion that a secondary trading market will
develop over time. Brokerage may be payable by
Noteholders on the transfer of their Capital Notes.
SKY expects the Capital Notes will be quoted on the
NZSE shortly after the Closing Date.
The Shares into which Capital Notes may be converted
are currently quoted on the NZSE and the ASX and may be
traded through those exchanges. SKY is of the opinion that
there is an established market for the sale of Shares.
Shareholders are entitled to sell or transfer Shares subject
to the terms of SKY’s Constitution, the NZSE Listing Rules,
the ASX Listing Rules (where applicable) and applicable
laws (including securities laws). Brokerage may be payable
by shareholders on any transfer of their Shares on the
NZSE or ASX.
> WHO DO I CONTACT WITH ENQUIRIES
ABOUT MY INVESTMENT?
Enquiries about the Capital Notes
Any queries about the offer of Capital Notes or Shares
issued on conversion of the Capital Notes should be
directed to any member of the NZSE or:
38
The Organising Broker
JBWere (NZ) Limited
Level 38, Royal & SunAlliance Centre
48 Shortland Street, PO Box 887
Auckland 1001
Telephone: 0800 555 555
or
The Registrar
Computershare Registry Services Limited
Level 2, 159 Hurstmere Road
Takapuna, North Shore City
Private Bag 92119 Auckland 1020
Telephone:
64 (09) 488 8700
Facsimile:
64 (09) 488 8787
Investor Enquiries: 64 (09) 488 8777
> IS THERE ANYONE I CAN COMPLAIN TO
IF I HAVE PROBLEMS WITH THE
INVESTMENT?
Complaints about the Capital Notes can be made to:
The Trustee
The New Zealand Guardian Trust Company Limited
Level 7, Royal & SunAlliance Centre
48 Shortland Street
Auckland
Telephone: 64 (09) 377 7300
Facsimile: 64 (09) 377 7477
Complaints about the Capital Notes and the Shares issued
on conversion of the Capital Notes can be made to:
The Registrar
Computershare Registry Services Limited
Level 2, 159 Hurstmere Road
Takapuna, North Shore City
Private Bag 92119
Auckland 1020
Telephone:
64 (09) 488 8700
Facsimile:
64 (09) 488 8787
Investor Enquiries: 64 (09) 488 8777
There is no ombudsman for this type of investment and
therefore complaints about the Capital Notes or the Shares
are not able to be made to an ombudsman.
> WHAT OTHER INFORMATION CAN I
OBTAIN ABOUT THIS INVESTMENT?
Other information about Capital Notes, the Shares and SKY
is contained or referred to in this Offer Document, the Trust
Deed and in SKY’s financial statements.
You may obtain copies of this Offer Document, the
Trust Deed, SKY’s most recent financial statements and other
documents of, or relating to, SKY (including SKY’s Constitution
and the material contracts referred to in this Offer Document)
without fee during normal business hours at:
Computershare Registry Services Limited
Level 2, 159 Hurstmere Road
Takapuna, North Shore City
Private Bag 92119
Auckland 1020
You can obtain copies of this Offer Document free of
charge on request in writing or by telephone from the
Organising Broker, members of the NZSE and the Registrar.
These documents are also filed on a public register
which you may inspect for a fee at the Companies Office,
Business and Registries Branch, Ministry of Economic
Development, 3 Kingston Street, Auckland.
The Noteholders (other than those to whom the same
are sent as holders of Shares) will be sent a copy of SKY’s
annual report and a copy of SKY’s interim report each year.
On request information
You may receive copies of:
•
the audited annual consolidated financial statements of
SKY for the financial year ended 30 June 2001; and
•
the Constitution of SKY,
at any time up until the Closing Date, free of charge, by
contacting SKY (telephone number 0800 759 100).
You may also receive copies of:
•
the Trust Deed;
•
this Offer Document; and
•
SKY’s most recent annual or semi-annual financial
statements and annual report,
all free of charge by contacting the Registrar at:
Computershare Registry Services Limited
Level 2, 159 Hurstmere Road
Takapuna, North Shore City
Private Bag 92119
Auckland 1020
CONDITIONS OF
CAPITAL NOTES
>
1.
DEED
This section contains a summary of the Conditions applying
to the Capital Notes. References in this section to clause
numbers and Conditions relate to the clauses and
Conditions as set out in the Trust Deed.
The summaries of the Conditions of Capital Notes set
out below are subject to the detailed provisions of the Trust
Deed. Words and expressions defined in the Trust Deed have
those meanings where they are used in the summaries set
out below, unless they are given different meanings below
or are otherwise defined elsewhere in this Offer Document.
Noteholders are entitled to the benefit of, are bound by,
and are deemed to have notice of, the Trust Deed.
> INTERPRETATION
In the Conditions:
“Accrued Interest” means all interest on the Principal
Amount of the Capital Notes which has accrued (and at the
relevant time is unpaid and has not become due) and is
payable in accordance with the Conditions other than any
such interest which comes within the definition of Unpaid
Interest in Condition 3.2(b);
“Interest Date” means 15 January 2002 and each 15 April,
15 July, 15 October and 15 January thereafter until the Final
Interest Date, or such other dates determined by the
Company pursuant to Condition 4.1(a);
“Interest Period” means the period from and including one
Interest Date to, but excluding, the next Interest Date,
provided that the initial Interest Period will be deemed to be
a period from and including the date of allotment for a
Capital Note to, but excluding, 15 January 2002;
“Interest Rate” means, in respect of a Capital Note and the
period from allotment to the initial Election Date, the
greater of:
(a) 9.30% per annum; or
(b) the rate determined on the Rate Set Date as being the
Five Year Government Stock Rate plus the Margin
(adjusted to the quarterly equivalent rate);
(c) or such higher rate as the Company and the Lead
Manager may agree and, in respect of the period after
the initial Election Date the rate determined by the
Company in accordance with Condition 4.1(a);
“Lead Manager” means JBWere (NZ) Limited;
“Benchmark Stock” means New Zealand Government Stock
(of which there is at least $1 billion nominal value
outstanding);
“Closing Date” means the date the offer of Capital Notes
set out in the Offer Document dated on or about the date of
the Trust Deed is closed to further applications;
“Election Date” means the initial Election Date of
15 October 2006 and each succeeding New Election Date
(as defined in Condition 4.1(a));
“Final Interest Date” means the first to occur of the
Conversion Date, the Cash Redemption Date or the
Redemption Date (in each case, as defined in Condition 3.1);
“Five Year Government Stock Rate” means the bid rate for
November 2006 New Zealand Government Stock as
displayed at or about 10.45 am on the Interest Rate Set
Date on page NZMKT of the Reuters Monitor Screen or, if on
the relevant date no such rates are displayed, the bid rates
quoted to SKY on or about 11.00 am on that day by three
registered banks selected by SKY, and if fewer than three
registered banks quote rates, the rates SKY determines to
be the nearest practicable equivalent.
“Liquidation Amount” means the Principal Amount of the
Capital Notes plus all Accrued Interest and Unpaid Interest
in respect of that amount;
“Margin” means 2.75% per annum or such greater amount
determined by the Company prior to the Rate Set Date and
notified to investors in accordance with Condition 3.1;
“Market Rate” means, on any date, the Stock Rate at that
date plus a margin of 3.75% per annum and adjusted to the
quarterly equivalent rate;
“Rate Set Date” means two Business Days following the
Closing Date or such other date selected by the Company in
consultation with the Lead Manager;
“Senior Creditors” means all creditors of the Company in
relation to obligations of the Company (whether actual or
contingent) other than indebtedness owed by the Company
to Noteholders in respect of Capital Notes or obligations
which are expressed to be subordinate to the obligations of
the Company under or in relation to the Capital Notes, or
equal in all respects with such obligations;
39
“Stock Rate” means the interpolated rate of Benchmark
Stock maturing on the Replacement Election Date (as if
there were such stock on issue) applying on the Election
Date calculated from the rates of Benchmark Stocks with
maturity dates immediately preceding and immediately
succeeding the Replacement Election Date, such rate being
expressed on a percentage yield basis and rounded to one
twentieth of a percent and being based on the bid rate for
the Benchmark Stocks as displayed at or about 10.45am on
the relevant day on page NZMKT on the Reuters Monitor
Screen or, if on the relevant day no such rates are
displayed, the bid rates quoted to the Company on or about
11.00am on that day by three registered banks selected by
the Company and, if fewer than three registered banks
quote rates, the rates the Company determines to be the
nearest practicable equivalent;
“Unpaid Interest” is defined in Condition 3.2(b); and
“Value” means 98% of the volume weighted average sale
prices of a Share of the Company sold on the NZSE during
the period of 10 Business Days immediately prior to the
Election Date on which Shares were bought and sold (and
adjusted to eliminate the effect of any dividend entitlement
reflected in such price to which the Noteholder would not
be entitled).
>
2.
STATUS AND SUBORDINATION OF
THE CAPITAL NOTES
> 2.1 STATUS
40
The Capital Notes constitute unsecured subordinated
obligations of SKY and rank equal in all respects and
without priority or preference among themselves.
> 2.2 SUBORDINATION
The obligations of SKY to the Noteholders under, and the
rights of the Noteholders (or the Trustee on behalf of the
Noteholders) against SKY in respect of, the Principal
Amount of, and Accrued Interest and Unpaid Interest on, the
Capital Notes are subordinated to the claims of Senior
Creditors of SKY in that upon the Commencement of
Liquidation the claims of the Noteholders against SKY
under and in respect of the Capital Notes in such
Liquidation are:
(a) Claims of Senior Creditors
subordinated in point of priority and right of payment to,
and rank behind, the claims of the Senior Creditors; and
(b) Limited to Liquidation Amount
limited to the Liquidation Amount.
> 2.3 RELEVANT PROVISIONS OF DEED
The Trust Deed contains provisions restricting the remedies
of the Trustee and the Noteholders in relation to the Capital
Notes and providing that the Trustee and the Noteholders
must hold on trust various amounts in favour of the Senior
Creditors. These provisions are set out in full at the end of
these summaries. In the event of any conflict between the
Trust Deed and the Conditions, the Trust Deed is to prevail.
>
3.
INTEREST
> 3.1 INTEREST RATE AND CALCULATION
OF INTEREST
Each Capital Note bears interest at the Interest Rate. Prior
to the Rate Set Date, SKY will from time to time advise any
change in the Interest Rate or Margin (as the case may be)
applicable to the Capital Notes. Such details will be notified
by general announcement to the NZSE. Following any such
announcement, such Interest Rate or Margin (as the case
may be) shall apply until any further announcement is made
by SKY. Interest will be calculated on the Principal Amount
of a Capital Note and will accrue daily from the date of
allotment of a Capital Note on the basis of a 365-day year
(subject to Condition 3.2) or such prior date determined by
SKY. Interest will cease to accrue on each Capital Note on
the earliest of:
(a) the date upon which it is converted into Shares (the
“Conversion Date”);
(b) the date on which it is redeemed or purchased for cash
by SKY or any wholly owned subsidiary (the “Cash
Redemption Date”); and
(c) in the event of Liquidation, the date on which the
Capital Note is redeemed by payment of the Liquidation
Amount (the “Redemption Date”).
> 3.2 INTEREST, UNPAID INTEREST AND
BREACH OF COVENANT
(a) Accrued Interest and suspension of interest
Interest accrued during each Interest Period (and any Unpaid
Interest) is payable in arrears on the relevant Interest Date.
SKY may elect to suspend payment of that amount of
Accrued Interest (or Unpaid Interest) or any part of such
interest on the relevant Interest Date if, and to the extent,
the directors of SKY believe on reasonable grounds that:
(i) making the payment of interest, or such part of the
interest (as the case may be), would, or would be likely
to, result in SKY not satisfying the solvency test set out
in section 4 of the Companies Act; or
(ii) the payment of interest, or such part of the interest (as
the case may be), would, or would be likely to, result in
SKY breaching any covenant, warranty or undertaking it
has given to a Senior Creditor; or
(iii) the payment of the interest, or such part of the interest
(as the case may be) would, or would be likely to, breach
any other legal obligation.
(b) Unpaid Interest and Breach of Covenant
If:
(i)
any interest is not paid within 14 days after its due date
(whether due to a suspension pursuant to Condition
3.2(a) or otherwise); and/or
(ii) SKY is in breach of the financial covenant contained in
clause 5.3 of the Trust Deed for more than 14 days,
then, for so long as (but not including such 14 day periods)
such interest remains unpaid and/or such breach remains
unremedied:
(iii) each relevant Capital Note shall bear interest
(“Additional Interest”) at the Interest Rate plus a
margin of 2.50% per annum accruing daily and
compounded on each subsequent Interest Date. SKY
may, at its option and upon giving not more than 14 nor
less than seven days’ notice to Noteholders (which
notice may be accompanied by a post-dated cheque),
pay all or part of such accrued interest and Additional
Interest (together, “Unpaid Interest”) which, if part
only, must be paid on a pro rata basis across all Capital
Notes, but so that no Unpaid Interest relating to any
Interest Period may be paid before the Unpaid Interest
relating to any earlier Interest Period has been paid. All
Unpaid Interest will become due and payable upon the
Commencement of Liquidation, but subject to clause 3
of the Trust Deed and Condition 2.2; and
(iv) SKY may not pay any dividend or interest on, nor make
any distribution in respect of its Shares or any other
shares or other securities issued by it ranking equally
with or behind the claims of Noteholders or, without the
consent of the Trustee, acquire or redeem or repay, or
provide financial assistance for the acquisition of, its
Shares or any other shares or other securities ranking
equally with or behind the claims of Noteholders.
(c) Notice to Trustee
SKY covenants with the Trustee and each Noteholder that it
will promptly notify the Trustee if it will not make a payment
of interest on the Capital Notes when due in accordance with
Condition 3.2(a), including if it intends to suspend payment
of any interest in accordance with that Condition.
Any non-payment of interest on an Interest Date, will
not give rise to any right to accelerate payment of any
amount due under a Capital Note and, in addition, if SKY
has elected to suspend payment of Accrued Interest on any
Interest Date, non-payment of Interest on that Interest Date
does not constitute a default by SKY for any purpose.
paid by SKY, except to the extent that SKY is satisfied that
the Noteholder is exempt from any such tax or is a person in
respect of whom any such withholding, deduction or payment
is not required to be made. Any Noteholder claiming any such
exemption or to be such a person must provide SKY with such
evidence as SKY may from time to time require to satisfy
itself in respect of the validity of that claim.
(b) Approved issuer levy
Noteholders to whom such is relevant may in writing
request SKY to advise the basis, if any, upon which SKY, at
no cost to itself, is prepared from time to time to deduct and
pay an approved issuer levy (within the meaning of section
86F of the Stamp and Cheque Duties Act 1971) as an
alternative to the exercise by SKY of its rights as referred
to in Condition 3.4(a).
(c) Taxation indemnity from Noteholder
If, in relation to any Capital Note, the Trustee or SKY
becomes liable to make any payment of or on account of tax
payable by the Noteholder or in relation to any Capital
Notes, the Trustee and SKY is each indemnified by the
Noteholder and the personal representatives or successor
of that Noteholder, in respect of any such liability, and any
moneys paid by the Trustee and SKY in respect of any such
liability may be recovered by action from such Noteholder
and the personal representatives or successor of the such
Noteholder (as the case may be) as a debt due to the
Trustee or SKY. Nothing in this Condition prejudices or
affects any other right or remedy of the Trustee or SKY.
>
4.
ELECTION TO RETAIN OR
CONVERT CAPITAL NOTES
> 3.3 PAYMENTS
> 4.1 ELECTION NOTICE
All payments in relation to a Capital Note may be satisfied by:
SKY must give to each Noteholder (and send a copy to
the Trustee) not later than three Business Days after
the date (the “Election Record Date”) which is 33 Business
Days before the Election Date a notice (an “Election
Notice”) specifying:
(a) Post
mailing cheques to the address of; or
(b) Direct credit
direct credit to any bank account nominated in writing
(prior to the Record Date) by,
in the case of any payment of Accrued Interest in relation to
the first Interest Period, the subscriber of the Capital Note
regardless of whether another person is subsequently
entered in the Register as the holder of that Capital Note,
and in all other cases, the Noteholder entered in the Register
on the Record Date. Such mailing or direct credit will occur
prior to 5 p.m. on the relevant Interest Date (or, if that date
is not a Business Day, the next Business Day after that date)
or other date on which payment is required to be made.
> 3.4 WITHHOLDING TAX
(a) Deduction for withholding
Subject to Condition 3.4(b), all payments or credits to, or to
the account of, Noteholders (including payments of, and
credits in respect of, interest) will be made net of any tax in
respect thereof required by law to be withheld, deducted or
(a) New Conditions
if applicable, the new Conditions (“New Conditions”) as to
Interest Rate, Interest Dates, Election Date (the “New
Election Date”), and each other modification to the
Conditions to apply to the Capital Notes following the
Election Date; and
(b) Redeem Capital Notes
the proportion of Capital Notes (if any) which it shall
compulsorily redeem in accordance with Conditions 4.5(c)
and (d).
> 4.2 NOTEHOLDER’S ELECTION TO
RETAIN OR CONVERT
Unless SKY has given notice under Condition 4.1(b) that it
will redeem or purchase all Capital Notes on the Election
Date, each Noteholder must complete and sign the Election
Notice and return it to SKY not later than the date (the
“Notification Date”) which is 20 Business Days after the
Election Record Date and must indicate in the Election
41
Notice, in relation to the proportion of Capital Notes he or
she holds which will not be compulsorily redeemed or
purchased by SKY either or both of:
(a) Retain Capital Notes
the Capital Notes in respect of which the Noteholder
accepts the New Conditions with effect from the Election
Date; and
(b) Convert Capital Notes
the Capital Notes which the Noteholder wishes to convert
into Shares on the Election Date.
If, in relation to a Capital Note:
(c) No Election Notice received or Election Notice
incomplete/invalid
(i) SKY does not receive an Election Notice from the
Noteholder on or before the Notification Date; or
(ii) SKY receives an incomplete or otherwise invalid
Election Notice from the Noteholder; or
(d) No election indicated
to the extent that SKY receives an Election Notice, the
Election Notice does not indicate whether or not the
Noteholder elects to convert all or part of the Capital Notes
into Shares; or
(e) Denomination and multiples of Capital Notes
42
to the extent that SKY receives an Election Notice,
implementation of the election made by the Noteholder
would result in him or her remaining a Noteholder of Capital
Notes with a Principal Amount of less than $5,000 or, if
greater than $5,000, in a multiple of other than $1,000,
the Noteholder will be deemed to have accepted the New
Conditions in respect of, in the case of (c) above, all such
Capital Notes, in the case of (d) above, such number of such
Capital Notes in respect of which no such indication has
been given and, in the case of (e) above, all such Capital
Notes (where implementation of the election made by the
Noteholder would result in him or her remaining a
Noteholder of Capital Notes with a Principal Amount less
than $5,000) or such number of Capital Notes as is required
to ensure the Noteholder remains a Noteholder of Capital
Notes with a Principal Amount of greater than $5,000 and
a multiple of $1,000 (where implementation of the election
by the Noteholder would result in him or her remaining a
Noteholder of Capital Notes with a Principal Amount of
greater than $5,000 and other than a multiple of $1,000).
> 4.3 CONVERSION OF CAPITAL NOTES
(a) Basis of conversion
Subject to Conditions 4.3(b) and 4.5(a), SKY must convert
Capital Notes by the issue to the relevant Noteholder on the
Election Date of such number (fractions being rounded down
to the nearest whole number) of Shares as have an aggregate
Value equal to the aggregate as at the Election Date (less any
withholdings or deductions required by law) of the Principal
Amounts of, and Accrued Interest and Unpaid Interest on, any
Capital Notes which are held by the Noteholder which he or
she has elected to convert into Shares.
Each Share issued in accordance with this Condition will
rank equal in all respects with the Shares of SKY then on
issue, except that such Shares will not carry any rights to any
dividend or other distribution declared or paid or made on
such Shares by reference to a record date prior to the
Election Date. Letters of allotment or Certificates in respect
of Shares so issued will be posted to the relevant Noteholders
on, or as soon as practicable after, the Election Date.
(b) Alternatives to Conversion
If, at any time prior to the Election Date, SKY is unable
lawfully to issue Shares to Noteholders in conversion of
Capital Notes in accordance with the Conditions, or the
Shares cease to be eligible to be quoted on the NZSE, the
Capital Notes will be unaffected and continue in force on
their then terms (including as to Interest Rate) until the
Election Date, and, if on the Election Record Date, SKY
remains unable to issue Shares, or its Shares remain
ineligible to be quoted and the Trustee is not satisfied that
such Shares will become eligible to be so quoted within 30
days, all rights of conversion will be suspended and SKY is
to elect (such election to be notified to Noteholders within
the same time periods applicable to Election Notices under
Condition 4.1), whether the Capital Notes or any proportion
of the Capital Notes will be compulsorily redeemed in
accordance with Condition 4.5 or be deemed to be rolled
over on the following terms:
(i) the Interest Rate to apply to the Capital Notes from the
Election Date to the Replacement Election Date (as
determined in Condition 4.3(b)(ii)) will be the Market
Rate as at the Election Date;
(ii) the Election Date will be replaced by a new Election
Date determined by SKY (which must be within five
years from the Election Date (or if that date is not a
Business Day, the next Business Day after that date)
(the “Replacement Election Date”)); and
(iii) otherwise on the Conditions.
If, on the Replacement Election Date, SKY is unable
lawfully to issue Shares to Noteholders in conversion of
Capital Notes in accordance with the Conditions or the
Shares are ineligible to be quoted on the NZSE, Condition
4.3(b) will apply with all necessary modifications.
> 4.4 COMPULSORY REDEMPTION
If, as a result of a general offer to purchase made to some
or all holders of the Shares, any person, whether acting
alone or in concert with any other person:
(a) Shares
is, or is entitled to become, the holder (absolutely or
beneficially and whether directly or indirectly) of all Shares;
or
(b) Voting power
has or will have the right to cast all votes on a poll at a
general meeting of SKY on a matter on which holders of
Shares are entitled to vote, but no offer is made to
Noteholders to purchase all of the Capital Notes, SKY must
give notice prior to the next Election Date to all Noteholders
within the same time period applicable to Election Notices
under Condition 4.1 offering to redeem or purchase all
Capital Notes on that next Election Date and, in addition, at
SKY’s discretion, SKY may also offer New Conditions in
respect of the Capital Notes. If a Noteholder elects that SKY
redeems or purchases (or procures the purchase of) his or
her Capital Notes, such redemption or purchase must occur
on that Election Date at the price calculated in accordance
with Condition 4.5(d).
> 4.5 REDEMPTION OR PURCHASE AT
OPTION OF SKY ON ELECTION
DATES
(a) Notice of election
No later than 10 Business Days before and including the
Election Date, SKY may elect that it redeems, or that it or a
subsidiary compulsorily purchases, for cash some or all of
the Capital Notes which a Noteholder has elected to convert
into Shares or some or all of the Capital Notes which a
Noteholder has elected to renew (or is deemed to have
elected to renew) by giving notice in writing of such
election to Noteholders.
(b) Redemption or purchase for cash
If SKY elects that it will compulsorily redeem, or that it or a
subsidiary will purchase, for cash some or all of the Capital
Notes, SKY must promptly notify Noteholders that such
redemption or purchase of the Capital Notes for cash will
occur on the Election Date, and such redemption or
purchase for cash will be at the price calculated in
accordance with Condition 4.5(d).
(c) Part redemption or purchase
If SKY elects to exercise its rights under Condition 4.1 to
redeem some but not all of the Capital Notes, or to exercise
its or its subsidiary’s rights under Condition 4.5(a) to
redeem or purchase some but not all of the Capital Notes,
then any such redemption or purchase for cash must be on
a pro rata basis across all relevant Capital Notes.
(d) Calculation of redemption or purchase amount
For the purposes of Conditions 4.1, 4.4 and 4.5(b), the
redemption or purchase price, as the case may be, payable
for the Capital Notes will be the amount equal to the
aggregate of:
(i) the Principal Amount of the Capital Notes to be
redeemed or purchased; and
(ii) the Accrued Interest and Unpaid Interest in respect of
such Capital Notes.
> 4.6 SHARE REGISTER
All Shares issued upon the conversion of Capital Notes
will be validly issued and be entered on the share register
of SKY.
> 4.7 SURRENDER OF CERTIFICATES
ON CONVERSION
(a) Conversion into Shares
Every Noteholder must, if and to the extent so required by
SKY, as a condition precedent to the issue of Shares on the
conversion of Capital Notes, surrender the Certificate in
respect of such Capital Notes to SKY.
(b) New Certificate
Every Noteholder must, if and to the extent so required by
SKY, as a condition precedent to the issue of a new
Certificate in accordance with clause 2.5 of the Trust Deed,
surrender the existing Certificate to SKY or the Registrar.
(c) Conversion, purchase or redemption
Every Noteholder must immediately surrender to SKY, or
the Registrar the Certificate in respect of such Capital
Notes to be converted, purchased or redeemed pursuant to
Conditions 4.3 or 4.5.
(d) Cancellation of Certificate not surrendered
The Registrar is entitled, at the option of SKY, to cancel or
to enter SKY in the Register as the Noteholder of, and issue
a substitute Certificate for, any Capital Notes relating to the
Certificate not so surrendered.
> 4.8 CAPITAL NOTES HELD BY
SUBSIDIARIES
Notwithstanding the Conditions, Condition 4 (other than
Condition 4.9) will not apply to any Capital Note already
held by SKY or a wholly-owned subsidiary of SKY on the
Notification Date.
> 4.9 CANCELLATION ON CONVERSION,
REDEMPTION OR PURCHASE
Each Capital Note which is converted into a Share or
redeemed in accordance with the Conditions is and will be
deemed to be cancelled, and neither SKY nor the Trustee
will have any further liabilities or obligations in respect of
that Capital Note or the relevant Noteholder. Each of SKY
and its subsidiaries may at any time purchase a Capital Note
for its own account. Each Capital Note so purchased by SKY
or a wholly owned subsidiary will be cancelled and neither
SKY nor the Trustee will have any further liabilities or
obligations in respect of that Capital Note or the relevant
Noteholder.
>
5.
TRANSFERS AND REPLACEMENTS OF
CAPITAL NOTES
> 5.1 TRANSFERS
The Capital Notes may be transferred in minimum Principal
Amounts of $1,000 or such lesser amount SKY may from
time to time permit subject to Condition 5, provided that,
following any such transfer the transferor and the
transferee hold Capital Notes with a minimum Principal
Amount of $5,000 (the “Minimum Holding”).
43
> 5.2 FORM OF TRANSFER
> 5.6 NOTICE OF REFUSAL TO REGISTER
Subject to the Conditions and the Trust Deed, a Noteholder
may transfer any Capital Note held by him or her by:
Where registration of a transfer of Capital Notes is refused
under Condition 5.5, SKY must direct the Registrar to give
written notice of the refusal and the precise reasons for the
refusal to the party lodging the transfer, if any, within five
Business Days after the date on which the transfer was
lodged. The failure to give such a notice will not invalidate
the decision not to register.
(a) Written instrument
a written instrument of transfer in the usual or common
form signed by the transferor and the transferee; or
(b) FASTER system
> 5.7 RETENTION OF TRANSFERS
means of the FASTER system operated by the NZSE; or
(c) Other method
any other method of transfer of marketable securities
which is not contrary to any law and which may be operated
in accordance with any Listing Rules, and which is approved
by SKY.
> 5.3 REGISTRATION PROCESS
(a) Transfers other than through FASTER
44
The following provisions apply to instruments of transfer
other than any transfer under Condition 5.2(b):
(i) the instrument of transfer must be left at the Registry
accompanied by the Certificate (if any) in respect of the
Capital Notes to be transferred or such other evidence
as the Registrar or the Trustee requires to prove the
transferor’s title to, or right to transfer, the Capital
Notes; and
(ii) on registration of a transfer of a Capital Note, the
Certificate (if any) evidencing that Capital Note will be
cancelled and replaced.
(b) Fees
SKY will direct the Registrar not to charge a fee to any
Noteholder for:
(i) registering transfers of Capital Notes; or
(ii) splitting Certificates in relation to Capital Notes; or
(iii) issuing Certificates (where bound to do so) and
transmission receipts in relation to Capital Notes; or
(iv) using holder or FASTER identification numbers in
relation to Noteholders; or
(v) effecting conversions between sub-registers (if any) of
the Register; or
(vi) noting transfer forms in relation to Capital Notes,
except in the case where Certificates, or any information
necessary to effect a transfer of Capital Notes are issued to
replace lost or destroyed Certificates.
> 5.4 TRANSFERS MUST BE REGISTERED
Subject to Condition 5, SKY must direct the Registrar not to
refuse to register or fail to register or give effect to, a
transfer of Capital Notes.
SKY is to direct the Registrar to retain all instruments
of transfer of Capital Notes which are registered, but
any instrument of transfer of Capital Notes the
registration of which was declined or refused (except on the
ground of suspected fraud) is to be returned to the party
lodging the transfer.
> 5.8 POWERS OF ATTORNEY
Any power of attorney granted by a Noteholder empowering
the donee to deal with, or transfer Capital Notes, which is
lodged, produced or exhibited to the Registrar will be
deemed to continue and remain in full force and effect as
between SKY, the Trustee, the Registrar and the grantor of
that power, and may be acted on, until express notice in
writing that it has been revoked or notice of the death of
the grantor has been received at the Registry.
> 5.9 TRANSMISSION BY OPERATION OF
LAW
Any person becoming entitled to any Capital Note by
operation of law (including the death or bankruptcy of any
Noteholder) may, upon producing such evidence of
entitlement as is acceptable to SKY, obtain registration as
the Noteholder of such Capital Note or execute a transfer of
such Capital Note. This provision includes any case where a
person becomes entitled as a survivor or persons registered
as joint Noteholder.
> 5.10 REPLACEMENT OF CERTIFICATES
If any Certificate is lost, stolen, mutilated, defaced or
destroyed, it may be replaced at the office of the Registrar
upon payment by the claimant of the fees and expenses
incurred in connection with such replacement and on such
terms as to evidence and indemnity as SKY and the
Registrar may require. Mutilated or defaced Certificates
must be surrendered before replacements will be issued.
The Registrar may decline to register any transfer unless
the relevant Certificate is produced, but may in its
discretion dispense with production of the Certificate
subject to production instead of such indemnity or
declaration of loss as it may require.
> 5.11 NOTICES
> 5.5 REFUSAL TO REGISTER TRANSFERS
SKY may direct the Registrar to refuse to register any
transfer of Capital Notes where the Conditions, the Trust
Deed, any Listing Rules or any applicable legislation
permits, or requires SKY to do so.
All notices given by Noteholders in accordance with the
Conditions will be irrevocable.
> 5.12 SALES OF LESS THAN A MINIMUM
HOLDING
The Board of SKY may at any time give notice to any
Noteholder holding less than a Minimum Holding of Capital
Notes that if at the expiration of three months after the
date the notice is given the Noteholder still holds Capital
Notes which are less than a Minimum Holding, the Board
may exercise the power of sale of those Capital Notes set
out below. If the power of sale becomes exercisable:
(a) the Board may arrange for the sale of those Capital
Notes through the NZSE or in some other manner
approved by the NZSE;
(b) the Noteholder shall be deemed to have authorised SKY
to act on the Noteholder’s behalf and to execute all
necessary documents for the purposes of that sale;
(c) SKY shall account to the Noteholder for the net
proceeds of sale of the Capital Notes (after deduction of
reasonable sale expenses), which shall be held on trust
for the Noteholder by SKY and paid to the Noteholder
on surrender of any Certificates for the Capital Notes
sold; and
(d) the title of a purchaser of any Capital Notes sold
pursuant to this Condition shall not be affected by any
irregularity or invalidity in the exercise of the power of
sale or the sale itself.
>
6.
SUBORDINATION PROVISIONS OF
TRUST DEED
These are set out in clause 3 of the Trust Deed and are
quoted below:
“3.2 Subordinated contingent debt:
In a Liquidation, neither the Trustee nor any Noteholder is
entitled to prove for the Principal Amount of nor interest on
any Capital Note except as a debt which is subject to, and
contingent upon, prior payment of the Senior Creditors in full.
3.7 Enforcement by Trustee in Liquidation:
(a) Enforcement by Trustee only: Subject to this clause 3,
only the Trustee may enforce the provisions of the
Capital Notes or this Deed and no Noteholder is entitled
to proceed directly against the Company unless the
Company is in breach of this Deed and the Trustee fails
to act (to the extent it is able under this Deed) with
respect to that breach in a reasonable time.
(b) Claims by Noteholders: No Noteholder may claim or
prove in any Liquidation for any amount owing to him or
her under any Capital Note or this Deed to the extent
that the Trustee has claimed or proved for, or has
determined to claim or prove for, such amount in such
Liquidation on behalf of such Noteholder, and any claim
or proof made contrary to this clause must be
withdrawn by such Noteholder.
(c) Enforcement by Noteholders: No Noteholder may
proceed against the Company or the Trustee for the
enforcement or performance of any provision of this
Deed or the Conditions that is solely for the benefit of
the Trustee.
3.8 Distribution on Liquidation:
Any amount received by the Trustee under or in respect of
this Deed or the Capital Notes in or upon the
Commencement of Liquidation and not paid to the
Liquidator must be applied, and pending such application
must be held by the Trustee upon trust to be applied,
subject to any direction made by any court and except as
required by law:
(a) Trustee’s expenses: first, in payment of all costs,
charges, expenses and liabilities incurred and payments
made by or on behalf of the Trustee (or any officer,
employee or agent of the Trustee) and of all
remuneration, indemnified amounts and other moneys
payable to the Trustee (or any officer, employee or
agent of the Trustee) as provided or referred to in this
Deed;
(b) Senior Creditors’ indebtedness: secondly, in payment
to the Company to be held by it upon trust to apply the
same in or towards the discharge of the indebtedness of
the Company to Senior Creditors according to their
respective rights and interests and, pending payment of
those amounts to the Company, any such amount
received by the Trustee must be held by it on trust to
pay the same to the Company to be held on the trusts
constituted or to be constituted under this clause;
(c) Noteholder’s indebtedness: thirdly, subject to the
indebtedness of the Company to the Senior Creditors
having been paid or satisfied or provided for in full, in
or towards payment to each Noteholder, equal in all
respects in proportion to the Principal Amounts of the
Capital Notes held by him or her, of the aggregate
Liquidation Amount and any interest payable in
accordance with clause 3.14; and
(d) Surplus to Company: fourthly, in payment of the
surplus (if any) of such moneys to the Company, or to
such other person as may otherwise be lawfully entitled
to those moneys.
3.9 Reliance on Liquidator:
Following the Commencement of Liquidation, the Trustee
will be entitled and is authorised to call for and to accept as
conclusive evidence a certificate from the Liquidator for
the time being regarding the amount of indebtedness to
Senior Creditors which has not been satisfied or otherwise
provided for and the Trustee shall be entitled to rely upon a
statement in writing from the Liquidator to the effect that
all such indebtedness has been satisfied or discharged.
3.13 Commencement of Liquidation:
Upon the Commencement of Liquidation the Capital Notes
shall cease to be convertible into Shares and the Principal
Amount of the Capital Notes, together with Accrued
Interest and Unpaid Interest, will become repayable and
each Capital Note will be due to be redeemed for an amount
equal to the Liquidation Amount of the Capital Note.
3.14 Interest payable following Commencement of
Liquidation:
Nothing in this Deed limits the application of section 311 of
the Companies Act and the Trustee and each Noteholder
may, notwithstanding any provision in this Deed, claim for
interest payable thereunder.”
45
SUMMARY OF
TRUST DEED
The Trust Deed, the parties to which are SKY and the
Trustee, is dated 5 September 2001. The Capital Notes are
all subject to the detailed provisions of the Trust Deed.
Noteholders are entitled to the benefit of, are bound by,
and are deemed to have notice of, the provisions of the
Trust Deed.
> INTRODUCTION
46
The Capital Notes offered under this Offer Document will be
constituted by, and issued in accordance with, the Trust
Deed. The Trustee acts as trustee for Noteholders. The
Trust Deed provides for the issue of the Capital Notes by
SKY. The Capital Notes are long-term unsecured
subordinated fixed interest debt securities issued by SKY.
Investors requiring further information should refer
to the Trust Deed, which is available for inspection at
the places referred to under the heading “What
other information can I obtain about this investment?”
in the section entitled “Answers to Important Questions”
on page 30.
> THE RANKING OF THE CAPITAL NOTES
The entitlement of Noteholders on a liquidation of SKY is
described on page 40 under the heading “Status and
Subordination of the Capital Notes” in the section entitled
“Conditions of Capital Notes”.
Under the Trust Deed, the rights of Noteholders in the
event of the liquidation of SKY will rank ahead of the
shareholders of SKY but are subordinated in right of
payment to the claims of all other creditors of SKY other
than creditors whose securities, obligations or
indebtedness are subordinated to the same or to a greater
extent than the Capital Notes. The Capital Notes rank
equally in all respects amongst themselves.
Under the Trust Deed SKY reserves the power to create
and issue additional capital notes with the consent of the
Trustee, though without the consent of the holders of the
Capital Notes and to issue further Shares or securities or
incur indebtedness or issue obligations ranking equally
with, senior to, or junior to, the Capital Notes. Any further
capital notes will be constituted by a deed, in a form agreed
to by the Trustee and SKY and supplemental to the Trust
Deed. Alternatively, any such further issue could be made
pursuant to a new trust deed, in which case that issue would
be subject to the appointment of a new trustee in respect of
those further capital notes.
> RESTRICTIONS ON SKY
The Trust Deed contains no limitations on SKY in relation to
the creation of new mortgages or charges. However,
SKY has covenanted, for so long as any Capital Notes are
outstanding, that unless otherwise permitted by the
Trustee, total debt will be no more than 5.75 times EBITDA.
For the purposes of this calculation SKY’s consolidated
accounts will be used and:
(i) interest will include Capital Note interest and interest
on all other interest-bearing debt including finance
lease payments;
(ii) total debt will include the Capital Notes and all other
interest-bearing debt including the amount recognised
as a liability in respect of finance leases but excluding
indebtedness which is subordinated to the reasonable
satisfaction of the Trustee; and
(iii) EBITDA is earnings of SKY and its subsidiaries before
deducting interest, taxation, depreciation and
amortisation.
This financial covenant will be measured annually and semi
annually. For the purposes of the calculation of EBITDA (for
any 12 month period), values for six months will be doubled.
If SKY breaches this financial covenant for more than 14
days, the interest rate payable on the Capital Notes will
increase and SKY will be restricted from paying dividends or
making other distributions to shareholders (see under the
heading “Interest” in the section entitled “Conditions of
Capital Notes” on page 40).
> ELECTION AND CONVERSION
PROCEDURES
Detailed provisions relating to the conversion of the Capital
Notes are set out under the heading “Election to Retain or
Convert” in the section entitled “Conditions of Capital
Notes” on page 41.
If a general offer is made for the Shares in the Company
which results in a person, or persons acting in concert,
holding or being entitled to hold or to vote all the Shares,
but no offer is made to purchase the Capital Notes, the
Company must offer to purchase or redeem all outstanding
Capital Notes. The Company may also, at its discretion, offer
New Conditions in respect of the Capital Notes, for election
by Noteholders, in each case to take effect from the next
Election Date.
> UNPAID INTEREST
The Trust Deed provides that interest may be suspended in
whole or part in certain circumstances and that the Trustee
will be advised of such suspension.
If interest is not paid within 14 days after its due date
(including where interest has been suspended), then for so
long as (but not including such 14 day period) such interest
remains unpaid, each relevant Capital Note shall bear
interest at the Interest Rate plus a margin of 2.50% per
annum. Such interest shall accrue daily and be compounded
on each Interest Date until payment. Such event does not
give rise to a right to accelerate payment of the Capital
Notes and Noteholders have no claim or other rights of
enforcement other than on a liquidation of SKY as set out in
the Conditions of Capital Notes.
reports of the Board as to various matters relating to the
Capital Notes.
SKY has also covenanted that, at the same time as the
audited consolidated annual accounts of SKY are provided
to the Trustee, it will provide the Trustee with a report by
SKY’s auditors in respect of various matters relating to the
Capital Notes and compliance with the Trust Deed.
> SKY COVENANTS
> THE TRUSTEE’S DUTIES
SKY has covenanted in the Trust Deed (amongst other
things):
•
to notify the Trustee promptly if it intends not to or
does not make payment of interest on a Capital Note, on
a payment date;
•
to use reasonable endeavours to ensure the Capital
Notes, upon their issue, are quoted on the NZSE and
that such quotation is maintained;
•
that if a Capital Note can be transferred, converted or
traded under a Securities Transfer Act 1991 approved
system without a certificate, the Company will use
reasonable endeavours to comply with the
requirements of that system;
•
to advise the Trustee as soon as reasonably practicable
of each decision by the Company to convert, redeem or
compulsorily purchase a Capital Note;
•
that if any interest has not been paid in respect of the
Capital Notes within 14 days of the due date and/or it is
in breach of its financial covenant in the Trust Deed for
more than 14 days, then for so long as (but not including
such 14 day periods) such interest remains unpaid
and/or such breach remains unremedied, the Company
will not pay any dividend or make any other distribution
in respect of, or pay any interest on, any of its share
capital or other securities ranking in liquidation equally
with or behind the Capital Notes or without the consent
of the Trustee acquire or redeem or provide financial
assistance for the acquisition of its share capital or
such other securities;
•
to forward to the Trustee its annual report and interim
report at the same time as those communications are
distributed to SKY shareholders and a copy of each
notice given by it to Noteholders generally;
•
to provide to Noteholders copies of all notices, reports
and financial statements issued generally to
shareholders; and
•
to use its reasonable endeavours to ensure that any
Shares which are issued on conversion of the Capital
Notes are entitled to be quoted on the NZSE and to
maintain such quotation.
As subordinated indebtedness of SKY, the Capital Notes
issued as at the date of this Offer Document have features
which distinguish them from ordinary debt securities,
particularly in their limited payment rights, subordination
and priority, and limitation on rights of enforcement and
the availability of remedies. The Trust Deed reflects these
features. The Trustee’s role may therefore be summarised
as being to act as agent of the holders of Capital Notes in
certain limited circumstances and in particular to carry out
steps necessary to collect or preserve the claims of holders
of Capital Notes to amounts which have become due and
payable and enforceable upon the liquidation of SKY. The
Trustee’s powers and responsibilities are accordingly
circumscribed.
In particular the Trustee does not:
•
initiate any enforcement procedures except following
the commencement of a liquidation of SKY and then
only as is permitted under the Trust Deed and in so far
as may be necessary to preserve a claim to any residue
after senior creditors of SKY have been satisfied; and
•
initiate or press for issue of Shares by SKY if conversion
does not take place in due course, although it may
agree, subject always to the limitations on enforcement
contained in the Trust Deed, to act in accordance with
instructions from holders of Capital Notes if SKY should
fail to convert the relevant Capital Notes when due.
The Trustee may among other things:
•
represent the Noteholders in certain matters or
proceedings concerning them;
•
concur in and execute on its own behalf and on behalf
of Noteholders instruments varying the provisions of
the Trust Deed;
•
make certain waivers and determinations which will be
binding on Noteholders;
•
receive and distribute amounts paid in respect of
Capital Notes (if they are not paid directly to
Noteholders) holding and returning to or for the
account of SKY or senior creditors any amounts
required by the terms of subordination;
•
in the performance of its duties rely on statements or
reports from the Board and auditors and, in the event of
the liquidation of SKY, its liquidator, and the advice or
opinion of professional advisers;
•
notify the Noteholders of matters affecting their
interests, convene meetings or otherwise seek
directions from holders of Capital Notes as to any such
matters, and/or apply to the Court for directions in
respect of any such matters; and
•
decline to act unless protected for its liabilities, costs
and expenses.
In addition, the duties set out in clause 1 of the Fifth
Schedule to the Securities Regulations 1983 are deemed to
> NO GUARANTEE
None of the subsidiaries of SKY, the Organising Broker, the
Trustee, nor any of their directors, officers or employees
nor any other person, including for the avoidance of doubt,
INL, guarantees the Capital Notes or the amount of returns
that investors may receive as holders of Capital Notes.
> PERIODIC REPORTING TO TRUSTEE
In addition to the above covenants, SKY has undertaken to
supply to the Trustee copies of its financial statements and
47
be included in the Trust Deed. Such duties shall, to the
maximum extent permitted at law, be limited and construed
by reference to the special features of the Capital Notes.
Those features are referred to above and elsewhere in this
Offer Document (principally under the headings “Interest”,
“Limitation on Rights” and “The Ranking of the Capital
Notes” on pages 40, 48 and 46 respectively). The Trustee’s
duties and responsibilities are further limited in the Trust
Deed, to the maximum extent permitted at law, by reference
to certain assumptions upon which the Trustee may base
the performance of its duties.
All Noteholders are deemed to have agreed and
accepted, and are bound by, the foregoing limitations.
> AMENDMENT OF TRUST DEED
48
The Trustee is empowered to agree to amendments to the
Trust Deed or the Conditions with SKY, including:
•
an amendment authorised by an extraordinary
resolution of the Noteholders;
•
if the Trustee is of the opinion that the amendment is
not, or is not likely to become, materially prejudicial to
the interests of Noteholders generally;
•
if the Trustee is of the opinion that the amendment is
made to correct a manifest error, or is of a formal or
technical nature;
•
if it is convenient to obtain or maintain a quotation of
the Capital Notes on the NZSE; and
•
if it is made to comply with the law or the NZSE Listing
Rules.
Any such amendment binds the Noteholders.
An extraordinary resolution of Noteholders is binding
on all Noteholders whether or not present or represented at
the meeting and is a resolution supported by a majority of
not less than 75% of the persons voting thereon by a show
of hands or, if a poll is demanded, then by a majority of not
less than 75% of the votes cast on such poll by persons
present or represented at the meeting duly called to
consider such resolution and constituting a quorum. The
quorum necessary for passing an extraordinary resolution
is any two or more Noteholders representing 50% or more
of the Principal Amount of the Capital Notes outstanding. If
a quorum is not present at the first meeting of Noteholders,
the requirements for a quorum at an adjourned meeting
may be satisfied by any two or more Noteholders regardless
of the number of Capital Notes held by them.
> LIMITATION ON RIGHTS
In accordance with their unsecured, subordinated nature,
special terms apply to the Capital Notes that restrict the
rights and powers of the Trustee and the Noteholders to
require redemption of the Capital Notes by SKY.
Prior to the liquidation of SKY, both the Trustee and the
Noteholders have limited rights of recourse against SKY.
The Trustee and the Noteholders have no remedies against
SKY for breach beyond the remedies provided at law.
In addition, only the Trustee is entitled to enforce the
provisions of the Trust Deed (Noteholders will only be
entitled to take proceedings if SKY is in breach and the
Trustee has failed to act within a reasonable time).
Non-payment of interest on the Capital Notes or breach
by SKY of any representation, warranty or covenant
contained in the Trust Deed or the Conditions will not
entitle the Trustee or the Noteholders to accelerate any
payment of the Principal Amount or any interest due on the
Capital Notes. The only right of the Trustee or Noteholders
to require redemption of the Capital Notes is upon the
commencement of the liquidation of SKY (which occurs
when a liquidator or statutory manager is appointed to the
company or the company is otherwise dissolved or removed
from the Register of Companies).
For the purposes of Listing Rule 7.3.3(a), the Company
may issue up to 2,000,000,000 further shares (of any
class) without requiring the consent of the Trustee or
Noteholders.
> OTHER MATTERS
The Trust Deed also contains detailed provisions as to
meetings of Noteholders, registration of Noteholders,
transfer of Capital Notes and various other matters.
The Trustee and SKY are entitled to rely on the Register
as the sole and conclusive record of the Capital Notes.
Neither the Trustee nor the Company is liable to the
other or to any Noteholder for relying on the Register or for
accepting in good faith as valid the details recorded on the
Register if they are subsequently found to be forged,
irregular or not authentic.
TRUSTEE’S
STATEMENT
7 September 2001
TO: THE INVESTORS UNDER THIS OFFER DOCUMENT FOR SKY
Dear Investors
Clause 13(3) of the Second Schedule to the Securities Regulations 1983 requires us to confirm that the offer of
securities (“the Capital Notes”) set out in this Offer Document complies with any relevant provisions of the Trust
Deed between SKY and the Trustee dated 5 September 2001 (the “Trust Deed”). The relevant provisions of the
Trust Deed are those which:
(i) entitle SKY to constitute and issue under the Trust Deed the Capital Notes offered under this Offer Document;
and
(ii) impose restrictions on the right of SKY to offer the Capital Notes;
and are described in the “Summary of Trust Deed” set out on pages 46 to 48 of this Offer Document.
The Auditors have reported on the financial information set out in this Offer Document and our statement does not
refer to that information, or to any other material in this Offer Document which does not relate to the Trust Deed.
We confirm that the offer of Capital Notes set out in this Offer Document complies with any relevant provisions of
the Trust Deed. We have given the above confirmation on the basis:
(a) set out above; and
(b) that the Trustee relies on the information supplied to it by SKY pursuant to the Trust Deed and has not carried
out an independent check of the statements or the figures supplied to it in that information.
The Trustee draws your attention to the explanation of the Trustee’s role described under the heading “The
Trustee’s Duties” on page 47.
The Trustee does not guarantee the repayment, conversion or purchase of the Capital Notes offered or the
payment of interest thereon.
Signed for and on behalf of the Trustee
T H E N E W Z E A L A N D G UA R D I A N T R U ST CO M PA N Y L I M I T E D
D R Church
Chief Manager – Corporate Trusts
The New Zealand Guardian
Trust Company Limited
A member of the
Royal & SunAlliance Group
Corporate Trusts
48 Shortland Street
Auckland 1001
New Zealand
PO Box 1934
Auckland 1015
New Zealand
Telephone
Facsimile
Email
Website
(09) 377 7241
(09) 377 7477
[email protected]
www.guardiantrust.co.nz
49
SHAREHOLDERS’
RIGHTS
The following has been included to provide investors with a
summary of the material rights, privileges, restrictions and
conditions currently attaching to the Shares of SKY which
may be issued upon conversion of the Capital Notes in the
circumstances and in the manner described elsewhere in
this Offer Document.
> DIVIDENDS
Holders of Shares are entitled to dividends as and when
declared, subject only to the rights of holders of any
other Shares from time to time entitled to special or prior
rights to dividends. The directors of SKY may declare
dividends out of the profits available to be distributed as
dividends. Shares issued on conversion of any Capital Notes
will not share in any dividend or other distribution declared
or paid or made on Shares prior to the date of issue of
those Shares.
> VOTING RIGHTS
50
The holder of a Share is entitled on a poll to one vote for
each Share held at general meetings of shareholders, other
than meetings of holders of a specific class of Shares.
However, if a shareholder is exercising any rights it
may have to appoint Directors by virtue of its proportionate
shareholding in SKY as described below, then that
shareholder is not entitled to vote on appointment of
other directors.
Director. At each annual meeting of SKY, one-third of the
Directors on the Board must retire, although they can offer
themselves for re-election. If the Directors who are to retire
at that meeting are appointees of shareholders who have
exercised proportional appointment rights (as above), they
may be re-appointed, in which case the number of Directors
actually retiring will be reduced.
The board of Directors may at any time appoint any
person to be a Director, either to fill a vacancy or in addition
to the existing Directors. A Director appointed by the board
of Directors shall hold office only until the next annual
meeting of SKY but shall be eligible for re-election at that
meeting.
> RIGHT TO PARTICIPATE IN SHARE
ISSUES
Unless otherwise agreed by the members of SKY at a
general meeting, or subject to any waiver granted by the
NZSE or any specific exemptions contained in the
Constitution, any new Shares and any securities convertible
into Shares must be offered on a pro rata basis to existing
holders of Shares in proportion to the number of Shares
held by them. Such offers may be renounceable, in which
case the transfer of the right arising out of the offer will be
subject to any restrictions imposed on the transfer of
Shares under the Constitution.
> BUY-BACKS
> LIQUIDATION
In the event of the liquidation of SKY, after payment of
outstanding debts and subject to the prior rights attaching
to any Shares from time to time ranking in priority to other
Shares, the remaining assets of SKY would be applied in
paying all surpluses to the holders of Shares in proportion
to the number of Shares held by them.
> APPOINTMENT AND RETIREMENT
OF DIRECTORS
The directors of SKY are selected or appointed by its
shareholders. The constitution of SKY provides for the
number of Directors to be ten or such other number as
determined by the board of Directors, with a minimum
number of Directors set at three. The board currently
consists of eight Directors.
Shareholders have the right to appoint Directors
approximately in the same proportion which their voting
Shares bear to the company’s total voting Shares. For
example if the number of Directors is set at ten, any
shareholders holding at least 10% and less than 20% of
total voting Shares will therefore be able to appoint one
The Constitution permits SKY to buy back its Shares in
certain circumstances.
PROSPECTUS STATUTORY
INFORMATION
The following additional information is included in
accordance with the requirements of the Second Schedule
to the Securities Regulations 1983.
> 1. MAIN TERMS OF THE OFFER
The issuer of the Capital Notes is Sky Network Television
Limited, which has its registered office at 10 Panorama
Road, Mt Wellington, Auckland.
A description of the Capital Notes, including the
maximum amount being offered and the price to be paid for
the Capital Notes is set out in the section of this Offer
Document entitled “Main Terms of the Offer” on page 6.
> 2. NAME AND ADDRESS OF OFFEROR
SKY is the offeror of the Capital Notes.
> 3. DETAILS OF INCORPORATION OF
ISSUER
SKY was incorporated on 26 November 1987 under the
Companies Act 1955 and re-registered under the Companies
Act 1993 on 30 June 1997. Its registered number is
AK373652.
The public file relating to the incorporation or
registration of SKY is kept at the office of the Registrar of
Companies, Business and Registries Branch, Ministry of
Economic Development, Level 5, 3 Kingston Street, Auckland.
> 4. GUARANTORS
The repayment of, and the payment of interest on and
any other amounts in connection with, the Capital Notes are
not guaranteed by any subsidiary of SKY, any of SKY’s
directors or any other person, including for the avoidance
of doubt, INL.
> 5. DIRECTORATE AND ADVISERS
The name and technical or professional qualifications (if
any) of every director of SKY are set out in the section of
this Offer Document entitled “Directors and Management”
(page 28). The address at which each director can be
contacted is care of the registered office of SKY.
John Fellet is the only director who is also an employee
of SKY or any of its subsidiaries. John Fellet is the Chief
Executive Officer of SKY.
No director has been adjudged bankrupt during the five
years preceding the date of this Offer Document.
The names of SKY’s secretary, auditor, the securities
registrar, underwriter, Trustee, and of any sharebrokers and
solicitors who have been involved in the preparation of this
Offer Document are set out in the Directory on the inside
back cover of this Offer Document.
> 5A. RESTRICTIONS ON DIRECTORS’
POWERS
The only modifications, exceptions or limitations on the
powers of the Board are that the Board may not cause SKY to:
(a) buy, sell, lease, exchange or otherwise dispose of
assets (other than programming rights) having a value
in excess of 50% of SKY’s market capitalisation at the
relevant date or which would change the essential
nature of SKY’s business;
(b) enter into certain transactions (other than
programming contracts) with related parties having a
value in excess of certain percentages (as specified in
Rule 9.2.2 of NZSE Listing Rules) of SKY’s market
capitalisation; or
(c) issue, buy back or redeem any equity securities, or
give financial assistance in connection with the
acquisition of any equity securities, except in the
circumstances permitted by SKY’s constitution, unless
approved by ordinary resolution of each class of equity
security holders whose rights or entitlements could be
affected by such issue, buy back, redemption or
financial assistance;
without the prior approval of a resolution of shareholders.
The restrictions in (a) and (b) above reflect certain waivers
granted by the NZSE. See the section entitled “NZSE
Waivers” on page 54.
The Companies Act contains a number of other
provisions that could have the effect, in certain
circumstances, of imposing modifications, exceptions or
limitations on the powers of the Board. These provisions
apply to any company registered under the Companies Act.
SKY has applied for the Capital Notes to be quoted on
the NZSE. The NZSE Listing Rules contain a number of
provisions that could have the effect, in certain
circumstances, of imposing modifications, exceptions or
limitations on the powers of the Board. These provisions
apply to any company listed on the NZSE.
> 6. DESCRIPTION OF ACTIVITIES OF
BORROWING GROUP
As no subsidiaries of SKY have guaranteed SKY’s
obligations in respect of the Capital Notes, SKY constitutes
the borrowing group for the purposes of the Securities
Regulations 1983.
During the five years preceding the date of this Offer
Document SKY’s principal activities comprised the provision
of pay television and related services to subscribers in
New Zealand. Further information about SKY is set out in
the section entitled “Business Overview” (page 13).
51
None of SKY’s assets are charged as security for the
Capital Notes.
> 7. SUMMARY OF FINANCIAL
STATEMENTS
Financial statements, in summary form, for SKY in respect
of the five consecutive accounting periods ending on
30 June 2001 are set out in the section of this Offer
Document entitled “Summary of Financial Statements”
(pages 56 and 57). The information contained in
the summary of financial statements has been taken from
the audited financial statements for SKY for each
accounting period.
> 8. ACQUISITION OF BUSINESS OR
SUBSIDIARY
SKY has not acquired any business, subsidiary or body
corporate from any person at any time in the period of two
years immediately preceding the date of this Offer
Document, where the consideration paid or payable for that
business, subsidiary or body corporate was more than onefifth of the amount of the total tangible assets of SKY as at
30 June 2001.
> 9. MATERIAL CONTRACTS
52
SKY has entered into the following material contracts
during the two years preceding the date this Offer
Document was delivered in registrable form to the Registrar
of Companies for registration under the Securities Act (not
being contracts entered into in the ordinary course of
business):
(a) on 6 September 2001, SKY entered into an Underwriting
Agreement with JBWere (NZ) Limited under which
JBWere (NZ) Limited agreed to underwrite the issue of
$110 million of Capital Notes under the offer set out in
this Offer Document;
(b) on 5 September 2001, SKY entered into a Trust Deed
with The New Zealand Guardian Trust Company Limited
relating to the Capital Notes.
> 10. PENDING PROCEEDINGS
There are no legal proceedings or arbitrations that were
pending as at the date this Offer Document was delivered in
registrable form to the Registrar of Companies for
registration under the Securities Act that may have a
material adverse effect on SKY.
> 11. ISSUE EXPENSES
Issue expenses, including underwriting fees, brokerage,
issue management fees, legal and accounting fees, printing,
advertising, distribution and other costs incurred by SKY in
making the offer contained in this Offer Document are
estimated to be $4.8 million (exclusive of GST where
applicable), based on an issue size of $125 million.
This estimate includes:
(a) brokerage of 1.25% payable to members of the NZSE in
respect of Capital Notes allocated;
(b) an underwriting fee payable to JBWere (NZ) Limited;
(c) an issue management fee payable to JBWere (NZ)
Limited as Lead Manager.
> 12. RANKING OF SECURITIES
As an unsecured, subordinated investment, the Capital
Notes will, on the winding up of SKY, rank ahead of all
shareholders of SKY but are subordinated in right of
payment to the claims of all other creditors of SKY, other
than creditors whose securities or rights are expressly
subordinated to the same or to a greater extent than the
Capital Notes. Full details of the ranking of the Capital
Notes and their subordination are set out in the section of
this Offer Document entitled “Conditions of Capital Notes”
(page 39).
The aggregate amount (as at the date of the latest
statement of financial position set out in this Offer
Document) of any securities that are secured by a mortgage
or charge over any of the assets of SKY (other than leased
assets) and that rank in point of security ahead of the
Capital Notes was $215 million.
The aggregate amount (as at the date of the latest
statement of financial position set out in this Offer
Document) of any securities that are secured by a mortgage
or charge over any of the assets of SKY (other than leased
assets) and that rank in point of security equally with the
Capital Notes was $nil.
The aggregate amount (as at the date of the latest
statement of financial position set out in this Offer
Document) owing in respect of assets subject to finance
leases was $68,984,000.
> 13. PROVISIONS OF TRUST DEED AND
OTHER RESTRICTIONS ON
BORROWING GROUP
On 5 September 2001 SKY entered into a Trust Deed with
The New Zealand Guardian Trust Company Limited relating
to the Capital Notes. A summary of Trust Deed is set out in
the section of this Offer Document entitled “Summary of
Trust Deed” (page 46).
The Trust Deed contains no limitations on SKY relating
to the creation of new mortgages or charges ranking in
point of security ahead of or equally with the Capital Notes
or the incurring of further indebtedness ranking senior to,
or equally with, the Capital Notes.
The Trust Deed contains the financial covenant more
fully described under the heading “Restrictions on SKY” in
the section “Summary of Trust Deed” on page 46.
The duties of the Trustee are set out in the section of
this Offer Document entitled “Summary of Trust Deed”
(page 46).
There are no restrictions on the ability of SKY to
borrow, being restrictions that result from any undertaking
given or contract or deed entered into by SKY which are not
elsewhere set out in this Offer Document. Apart from
certain exceptions, SKY is not permitted to borrow without
the prior consent of the lenders under the Banking Facility.
Such consent has been obtained in respect of the borrowing
under the Capital Notes (see the heading “Borrowings” in
the section “Financial Information” on page 66).
The statement required to be made by the Trustee
pursuant to clause 13(3) of the Second Schedule of the
Securities Regulations 1983 is set out in the section of this
Offer Document entitled “Trustee’s Statement” (page 49).
> 14. OTHER TERMS OF OFFER AND
SECURITIES
There are no other terms of the offer, or the Capital Notes,
which are not set out elsewhere in this Offer Document
other than those:
(a) implied by law; or
(b) which are set out in a document that has been registered
with a public official and is available for public
inspection and is referred to in this Offer Document.
> 15.-32. FINANCIAL STATEMENTS
The financial statements of SKY required by clauses 15-32
of the Second Schedule of the Securities Regulations 1983
are set out in the section of this Offer Document entitled
“Financial Statements” (page 57).
> 33. PLACES OF INSPECTION OF
DOCUMENTS
> 36. AUDITORS’ REPORT
The Auditors’ Report required by clause 36 of the Second
Schedule to the Securities Regulation 1983 is set out in the
section of this Offer Document entitled “Auditors’ Report”
(page 76).
This Offer Document has been signed by each director
of Sky Network Television Limited (or by their agent
authorised in writing):
T Mockridge
R W Bryden
J N Blomfield
M Bogoievski
A B Downey
J M Fellet
J B Hart
R S Neville
SKY’s constitution and the material contracts referred to in
clause 9 above may be inspected at the Companies Office,
Business and Registries Branch, Ministry of Economic
Development, Level 5, 3 Kingston Street, Auckland during
normal business hours for a nominal fee or for free at the
registered office of SKY.
> 34. OTHER MATERIAL MATTERS
There are no material matters relating to the offer set out
in this Offer Document, other than those set out elsewhere
in this Offer Document (including in the financial
statements set out in the section of this Offer Document
entitled "Financial Statements" (pages 57 to 75)) and
contracts entered into in the ordinary course of business of
SKY.
> 35. DIRECTORS’ STATEMENT
The Directors, after due enquiry by them in relation to the
period between 30 June 2001 and the date this Offer
Document was delivered in registrable form to the Registrar
of Companies for registration under the Securities Act, are
of the opinion that no circumstances have arisen that
materially adversely affect:
(a) the trading or profitability of SKY;
(b) the value of its assets; or
(c) the ability of SKY to pay its liabilities due within the
next twelve months.
53
NZSE
WAIVERS
> WAIVERS FROM LISTING RULES 9.1.1(B)
AND 9.2
SKY has been granted waivers from Listing Rules 9.1.1(b) and
9.2 on the following basis:
1. PROGRAMMING ARRANGEMENTS:
54
Listing Rule 9.1.1(b) has been waived in relation to the
acquisition and sale of programming rights.
Listing Rule 9.2 has been waived in respect of all Related
Party (as defined in Listing Rule 9.2.3) programming
transactions on the condition that the NZSE must have
from all SKY Directors and any shareholder, whose
relationship or status would otherwise attract application of
Listing Rule 9.2 (presently assumed to be Independent
Newspapers Limited and Telecom Corporation of New
Zealand Limited), enforceable written undertakings to the
NZSE, for the benefit of the NZSE and SKY shareholders
other than those who would be affected Related Parties if
Listing Rule 9.2 had not been waived (a “relevant Related
Party”) that:
•
they will not seek to recover costs against any
shareholder who seeks remedies under any of ss.169,
171, 172 or 174 of the Companies Act in respect of any
Related Party programming transaction which would
have been affected by Listing Rule 9.2 if it had not been
waived (a “Related Party programming transaction”)
where action or application to the Court is not
vexatious or frivolous and has followed consultation
with SKY’s Chairman of Directors or, if the Chairman
considers it necessary, other Directors who are not
associated with the relevant Related Party;
•
they submit to the jurisdiction of the New Zealand
Courts in respect of those remedies; and
•
they will not oppose an application by a shareholder
under s173 of the Companies Act to bring a
representative action in pursuit of any of the remedies
contemplated by those provisions.
For the purposes of those undertakings:
•
s169(2) of the Companies Act would be reversed in
effect, to acknowledge that an action could be brought
in the circumstances described in that subsection; and
•
the duties described in paragraphs (d), (e), (h) and (i) of
s169(3) of the Companies Act are owed to shareholders
as well as to SKY.
2. OTHER TRANSACTIONS:
Listing Rules 9.1.1(b) and 9.2 are waived in relation to
transactions other than Related Party programming
transactions on the basis that the threshold test in both
Rules 9.1.1(b) and 9.2 is based only on the average market
capitalisation of SKY over all the Business Days (as defined
in the Listing Rules) in the month ending before the month
in which the transaction becomes a commitment (whether
conditional or not) of SKY.
CONDITIONS:
As conditions of the waivers of Listing Rule 9.2 granted in
SKY’s favour, and to assist in prompt investigation and
resolution of complaints or allegations about transactions
exempted by the waivers and to protect the reputation for
integrity of the NZSE and listed companies, notwithstanding
the waivers:
•
the persons giving the undertakings referred to in
paragraph (1) above will facilitate and pay for the
appointment and work of an independent person
selected by the NZSE’s Panel to be an appraiser (as if
appointed under Listing Rule 1.2), to report to the
NZSE’s Panel in respect of any such transactions the
NZSE’s Panel considers should be so investigated
following its receipt of any bona fide complaint or
allegation about such transaction;
•
the NZSE’s Panel will, before procuring any such
appointment, consult with SKY’s Chairman or other
Directors as proposed above; and
•
the appraisal of the transactions shall, unless the
appraiser advises that it would be unnecessary or
undesirable from the point of view of the NZSE’s Panel
or complainants, have regard to the measures of
“transfer pricing” used or which may be used by the
Inland Revenue Department to analyse transactions
within trans-national groups of companies. The persons
giving the undertakings for this purpose must
undertake to use their best endeavours to procure for
the appraiser all information relevant to the inquiry.
Upon a breach of conditions, unless the NZSE, with actual
notice of the breach, confirms the waivers, they will lapse
and SKY would become subject to the Listing Rules in the
ordinary way. A breach would not on its own terminate
listing unless that was expressly decided by the NZSE.
> PARTIAL WAIVER FROM RULE 3.3.9
SKY has also been granted a partial waiver from Rule 3.3.9,
to enable the “Directors’ rotation” clauses in its
Constitution to operate (see the section entitled
“Shareholders’ Rights” on page 50).
> WAIVER IN RESPECT OF THE OFFER
SKY has been granted a waiver from Listing Rule 7.1.17 in
respect of the Offer. This waiver allows any statement
required by the Listing Rules to be included in this Offering
Document or any advertisement to be smaller in relative
size than that of text in a 12 point Arial font on an A4 page
provided:
(a) any such statement is no smaller in relative size than
that of text in a 10 point Arial font on an A4 page; and
(b) any such statement is the same size font as the other
text in the body of this document or advertisement (as
the case may be).
FINANCIAL
INFORMATION
>
55
FINANCIAL
INFORMATION
The summary of financial statements for Sky Network Television Limited (the Borrowing Group) is presented below. This information
has been extracted from the financial statements of Sky Network Television Limited and is presented in accordance with the
requirements of the Second Schedule to the Securities Regulations 1983.
Financial statements for Sky Network Television Limited (the Borrowing Group) and for the consolidated group of Sky Network
Television Limited (comprising SKY and its subsidiaries, which are all non-guaranteeing subsidiaries) are presented on pages
57 to 75. The financial statements are presented in accordance with the requirements of the Financial Reporting Act 1993 complying
with New Zealand generally accepted accounting practice and with the requirements of the Second Schedule to the Securities
Regulations 1983.
When reviewing the financial information, investors should bear in mind that for the purposes of the Securities Regulations 1983,
Sky Network Television Limited is the issuer and the borrowing group and is the sole obligor of the Capital Notes. None of SKY’s
subsidiaries guarantees its obligations in respect of the Capital Notes.
Accordingly, the consolidated financial statements for SKY are provided only for the information of prospective investors.
> SUMMARY OF FINANCIAL STATEMENTS
The following summary of financial statements presented for, and as at the end of, each of the accounting periods in the four and
one half year periods ended 30 June 2001 provides information extracted from the audited financial statements of Sky Network
Television Limited (the Borrowing Group), prepared in accordance with the requirements of the Second Schedule to the Securities
Regulations 1983.
SKY NETWORK TELEVISION LIMITED (BORROWING GROUP) – SUMMARY STATEMENTS OF FINANCIAL PERFORMANCE
56
>
Total operating revenues
Total operating expenses
FOR THE YEAR
ENDED 30 JUNE
2001
FOR THE SIX MONTHS
ENDED 30 JUNE
2000
1999
FOR THE YEAR
ENDED 31 DECEMBER
1998
1997
$000
$000
$000
$000
$000
AUDITED
AUDITED
AUDITED
AUDITED
AUDITED
296,873
315,734
262,334
268,072
120,447
117,183
212,420
188,189
176,838
162,015
14,823
14,851
(18,861)
21,425
(5,738)
20,802
3,264
7,635
24,231
8,824
Surplus/(Deficit) before income tax
Income tax expense
(40,286)
0
(26,540)
30
(4,371)
–
15,407
–
(28)
–
Surplus/(Deficit) after income tax
(40,286)
(26,570)
(4,371)
15,407
(28)
Surplus/(Deficit) attributable to shareholders
(40,286)
(26,570)
(4,375)
15,304
Net interest expense
Dividend rate (cents per share)
0.00
0.00
0.00
0.00
(33)
0.00
SKY NETWORK TELEVISION LIMITED (BORROWING GROUP) – SUMMARY STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE
>
2001
2000
AS AT 31 DECEMBER
1999
1998
1997
$000
$000
$000
$000
$000
AUDITED
AUDITED
AUDITED
AUDITED
AUDITED
Total assets
491,656
410,725
341,128
298,511
211,465
Total tangible assets
422,185
358,599
295,762
260,141
170,465
Total liabilities
404,914
370,402
276,492
229,625
160,088
86,742
40,323
64,636
68,886
51,377
Total equity
> FINANCIAL STATEMENTS
Included below are financial statements for Sky Network Television Limited (the Borrowing Group) and the consolidated financial
statements for Sky Network Television Limited and its non-guaranteeing subsidiaries (the Consolidated Group).
For the purposes of the Securities Regulations 1983, Sky Network Television Limited is the issuer and the borrowing group and
is the sole obligor of the Capital Notes. The financial statements for Sky Network Television Limited and its subsidiaries are provided
only for the information of prospective investors.
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – STATEMENTS OF FINANCIAL PERFORMANCE
For the year ended 30 June 2001
NOTE
>
Revenues
Subscriptions
Advertising
Installation, programme sales and other
Total revenues
Operating expenses
Cost of services:
Programming
Subscriber management
Transmission
Selling, general and administrative
Depreciation and amortisation
11
Total operating expenses
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
248,296
12,608
39,482
204,808
11,598
46,050
247,167
12,608
37,098
204,740
11,598
45,996
$300,386
$262,456
$296,873
$262,334
151,477
9,267
17,520
47,675
95,387
124,563
9,061
18,787
38,308
77,828
151,576
9,267
17,520
43,344
94,492
124,559
9,061
18,787
37,778
77,702
$321,326
$268,547
$316,199
$267,887
Operating deficit
Net interest expense and financing charges
11
(20,940)
21,296
(6,091)
20,976
(19,326)
20,960
(5,553)
20,987
Deficit before income tax
Income tax expense
8
(42,236)
42
(27,067)
39
(40,286)
–
(26,540)
30
Deficit after income tax
Minority interest in surplus/(deficit) of subsidiaries
2
(42,278)
59
(27,106)
(138)
(40,286)
–
(26,570)
–
($42,337)
($26,968)
($40,286)
($26,570)
Deficit attributable to shareholders
57
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – STATEMENTS OF FINANCIAL POSITION
As at 30 June 2001
NOTE
>
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
Equity
Share capital
Accumulated deficit
Other reserves
2
2
2
291,018
(206,831)
106
204,341
(164,494)
78
Shareholders’ equity
Minority interest
2
84,293
(387)
39,925
(583)
86,742
–
40,323
–
83,906
39,342
86,742
40,323
121,397
12,625
101,193
11,535
120,930
12,530
99,348
11,358
134,022
112,728
133,460
110,706
271,624
260,108
271,454
259,696
$489,552
$412,178
$491,656
$410,725
5,171
31,536
48,980
1,648
28,322
36,015
5,114
31,315
48,980
1,423
28,123
36,015
85,687
65,985
85,409
65,561
380,957
22,893
–
15
326,791
19,399
–
3
380,742
20,491
609
4,405
326,628
16,111
584
1,841
Total equity
Current liabilities
Payables and accruals
Borrowings
Non-current liabilities
Term borrowings
3
4
4
Total liabilities and equity
Current assets
Cash at bank
Receivables and prepayments
Programming rights
58
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
Non-current assets
Fixed assets
Intangible assets
Investments in subsidiaries
Other non-current assets
6
5
7
9
10
Total assets
291,018
(204,382)
106
204,341
(164,096)
78
403,865
346,193
406,247
345,164
$489,552
$412,178
$491,656
$410,725
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – STATEMENTS OF MOVEMENTS IN EQUITY
For the year ended 30 June 2001
NOTE
>
Equity at the beginning of the year
Deficit for the year
Foreign currency translation reserve movement
Total recognised revenues and expenses
Other movements:
Contributions from owners
Minority interest
Equity at the end of the year
2
2
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2001
2000
2001
2000
$000
$000
$000
$000
39,342
(42,337)
28
(2,967)
2
2
BORROWING GROUP
86,677
196
$83,906
64,636
(26,968)
(47)
37,621
2,304
(583)
$39,342
40,323
(40,286)
28
64,636
(26,570)
(47)
65
38,019
86,677
–
2,304
–
$86,742
$40,323
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – STATEMENTS OF CASH FLOWS
For the year ended 30 June 2001
NOTE
>
Cash flows from operating activities
Cash was provided from:
Customers
Related parties
Interest received
Net GST received
Cash was applied to:
Suppliers and employees
Related parties
Interest paid
Income tax paid
Net GST paid
Net cash inflows from operating activities
Cash flows from investing activities
Cash was provided from:
Proceeds from sale of fixed assets
Cash was applied to:
Purchase of fixed assets & intangibles
Loans and advances
Purchase of investments
Net cash outflows from investing activities
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
297,150
770
554
–
260,227
–
165
136
293,768
766
847
–
260,173
–
150
132
298,474
260,528
295,381
260,455
(168,716)
(63,355)
(21,443)
(64)
(1,039)
(138,345)
(42,627)
(19,956)
(30)
–
(163,134)
(63,662)
(21,399)
–
(1,115)
(137,107)
(42,627)
(19,956)
(30)
–
(254,617)
(200,958)
(249,310)
(199,720)
$43,857
$59,570
$46,071
$60,735
51
919
51
919
(140,691)
–
(25)
(105,735)
(454)
(555)
(140,528)
(2,271)
(25)
(105,070)
(1,824)
(584)
(140,716)
(106,744)
(142,824)
(107,478)
($140,665)
($105,825)
($142,773)
($106,559)
59
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – STATEMENTS OF CASH FLOWS–CONTINUED
For the year ended 30 June 2001
NOTE
>
Cash flows from financing activities
Cash was provided from:
Proceeds from short and long-term debt
Contributions from owners
Contributions from minority interest
2
Cash was applied to:
Repayment of borrowings
Payment of finance lease liabilities
Net cash inflows from financing activities
60
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
95,000
86,677
–
57,651
2,304
5
95,000
86,677
–
57,000
2,304
–
181,677
59,960
181,677
59,304
(70,062)
(11,284)
–
(10,657)
(70,000)
(11,284)
–
(10,657)
(81,346)
(10,657)
(81,284)
(10,657)
$100,331
$49,303
$100,393
$48,647
Net increase in cash held
Opening cash/(overdraft) brought forward
3,523
1,648
3,048
(1,400)
3,691
1,423
2,823
(1,400)
Closing cash carried forward
$5,171
$1,648
$5,114
$1,423
Reconciliation with deficit after tax to cash flow from operating activities
Deficit attributable to shareholders
(42,337)
Minority interest in loss of subsidiaries
2
59
(26,968)
(138)
(40,286)
–
(26,570)
–
(42,278)
(27,106)
(40,286)
(26,570)
95,387
1,262
(168)
(45)
77,828
2,387
375
677
94,492
1,258
(185)
(46)
77,702
2,387
375
745
(3,345)
5,432
(12,965)
290
12,362
(7,006)
(3,593)
6,819
(12,965)
358
12,981
(7,006)
Deficit after tax
Plus non-cash items:
Depreciation and amortisation
Unrealised losses on currency
(Decrease)/Increase in provision for doubtful debts
Other non-cash items
Movement in working capital:
(Increase)/Decrease in receivables
Increase in payables and accruals
(Increase) in programming rights
Items classified as investing activities:
Loss/(Gain) on sale of fixed assets
Net cash inflows from operating activities
11
11
11
577
$43,857
(237)
$59,570
577
$46,071
(237)
$60,735
There were no non-cash investing and financing activities during the year (2000–$33.7 million in relation to the acquisition of satellite
transponders).
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
>
1. STATEMENT OF ACCOUNTING POLICIES
> ENTITIES REPORTING
The financial statements for the “Borrowing Group” are for Sky Network Television Limited as a separate legal entity. The
consolidated financial statements for the “Consolidated Group” are for the economic entity comprising Sky Network Television
Limited and its subsidiaries, which are all non-guaranteeing subsidiaries. For the avoidance of doubt the Consolidated Group
incorporates the Borrowing Group.
> STATUTORY BASE
Sky Network Television Limited is a company registered under the Companies Act 1993 and is an issuer in terms of the Securities
Act 1978. The financial statements have been prepared in accordance with the requirements of the Companies Act 1993, the
Securities Act 1978 and the Financial Reporting Act 1993.
> MEASUREMENT BASE
The measurement base adopted is that of historical cost, as modified by the revaluation of certain assets as identified in specific
accounting policies below.
> SPECIFIC ACCOUNTING POLICIES
The following specific accounting policies have a significant effect on the measurement of results and financial position:
Basis of consolidation
The consolidated financial statements are prepared using the purchase method. Subsidiaries are entities that are controlled either
directly or indirectly by the parent. All material inter-group transactions and balances have been eliminated on consolidation.
Fixed assets
61
Fixed assets are stated at cost less accumulated depreciation. Capitalised aerial and satellite dish installations are represented by
the cost of aerials, satellite dishes and installation overheads. Fixed assets are depreciated using the straight-line method so as to
allocate the cost of assets less their residual value over the following economic lives:
Land
Nil
Buildings
50 years
Studio and broadcasting equipment
10 years
Decoders and associated equipment
5-6 years
Other plant and equipment
3-10 years
Capitalised aerial and satellite dish installations
5 years
Intangible assets
Broadcasting rights, consisting of UHF spectrum licenses, are amortised on a straight-line basis over the lesser of the period of the
license term and twenty years.
New channel development costs are deferred to be matched against future subscription income. This expenditure is amortised
on a straight-line basis over five years.
Renewal rights for programmes are capitalised as incurred. Upon contract renewal, the rights are amortised over the period to
which they relate. If a contract is not expected to be renewed, the costs are expensed.
Costs relating to the establishment of the DBS service have been capitalised and are amortised on a straight-line basis over five
years from the commencement of earning subscription revenue from the service.
The excess of cost over the fair value of net assets of the subsidiaries is recognised as goodwill on consolidation and it is
amortised to the statement of financial performance over the shorter of its estimated useful life and four years.
Purchased goodwill is the excess of cost over the fair value of the net assets acquired and is amortised to the statement of
financial performance over the shorter of its estimated useful life and five years.
Programming rights
Programming rights are recognised in the statement of financial position provided the programme is available and the rights period
has commenced at the balance date. Rights are amortised over the period they relate to, generally not exceeding twelve months.
Any rights not expected to be utilised are written off during the period.
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
Impairment
Annually, the directors assess the carrying value of each asset. Where the estimated recoverable amount of the asset is less than
its carrying amount, the asset is written down. The impairment loss is recognised in the statement of financial performance.
Gross revenues
Revenues represent subscription income, programming revenues, installation income, advertising sales and other sundry revenues.
Revenues received in advance are deferred.
Interest Income
Interest income is accounted for as earned.
Accounts receivable
Accounts receivable are carried at expected realisable value. An estimate is made for doubtful receivables based on a review of all
outstanding amounts at year-end. Bad debts are written off during the year in which they are identified.
Foreign currencies
Transactions in foreign currencies during the year are translated to New Zealand dollars at the rates of exchange ruling at the dates
of the transactions or at forward cover rates where specifically identified.
Amounts receivable and payable in foreign currencies at balance date are translated to New Zealand dollars at rates of
exchange approximating those ruling at the balance date.
Gains and losses arising from exchange fluctuations are taken to the statement of financial performance in the period in which
they arise. Gains and losses arising from items designated as a hedge are taken to the foreign currency translation reserve.
Capitalisation of interest
62
62
Interest incurred in relation to the establishment of non-current assets is capitalised when there is an extended period of time
required to establish the asset. The capitalisation of interest costs ceases once the asset is available for its intended use.
Income tax
The Consolidated Group adopts the liability method of tax effect accounting on a comprehensive basis. The tax effect of temporary
differences, which arise from items recorded in different periods for income tax and accounting purposes, is carried forward on the
statement of financial position as deferred tax assets/liabilities. Deferred tax assets arising from temporary differences are not
recorded unless there is virtual certainty of the realisation of the asset. Deferred tax assets, which include tax losses, are only
recorded when the realisation is certain.
The recovery of deferred tax assets (both recognised and unrecognised) is contingent upon sufficient taxable income being earned
in future periods, continuation of relevant tax laws and the Consolidated Group continuing to comply with the appropriate legislation.
Goods and Services Tax (GST)
The statement of financial performance and statement of cash flows have been prepared so that all components are stated
exclusive of GST. All items in the statement of financial position are stated net of GST, with the exception of receivables and
payables, which include GST invoiced.
Financial instruments
Financial instruments carried on the statement of financial position includes cash and bank balances, accounts receivable, accounts
payable and borrowings. These instruments are, generally, carried at their estimated fair value. For example, accounts receivable
are carried net of the estimated doubtful accounts. The particular recognition methods adopted are disclosed in the individual
policy statements associated with each item. Where possible, financial assets are supported by collateral or other security. These
arrangements are described in the individual policy statements associated with each item.
The Borrowing Group is also a party to financial instruments that reduce exposure to fluctuations in foreign currency exchange
and interest rates and include forward foreign currency contracts and interest rate swap agreements. The Borrowing Group enters
into forward currency contracts to limit the Borrowing Group’s exposure from movements in exchange rates on foreign currency
denominated liabilities. Exchange gains and losses and hedging costs arising on contracts entered into as hedges of future
commitments are deferred until the date of such transactions, at which time they are included in the measurement of the
transaction. All other exchange gains and losses on foreign currency contracts and foreign currency denominated liabilities are
recorded in the statement of financial performance in the period of the exchange rate changes.
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
The Borrowing Group enters into interest rate swap agreements with respect to specific borrowings in which the swap is
designated as, and is, an effective hedge of the underlying borrowing. Differential payments made or received with respect to
interest rate swap agreements are recognised as a component of interest rate expense in the period it relates to. Realised gains or
losses on terminated swap agreements are amortised over the shorter of the remaining period of the swap agreement or the
related borrowing.
Further information about financial instruments to which the Borrowing Group is a party is provided in Note 16.
Investments
Investments in subsidiaries are recorded at cost in the statement of financial position of the Company.
Leases–Finance leases
Assets acquired under finance leases are included as non-current assets in the statement of financial position. Finance leases
effectively transfer from the lessor to the Consolidated Group substantially all the risks and benefits incidental to ownership of the
leased property. Where assets are acquired by means of finance leases, the present value of the minimum lease payments is
recognised as an asset at the beginning of the lease term and amortised on a straight-line basis over the expected useful life of the
leased asset. A corresponding liability is also established and each lease payment is allocated between the liability and interest
expense. The “actuarial” method of finance charge allocation is used to determine the interest expense.
Leases – Operating leases
Leases under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases.
Operating lease payments are recognised as an expense in the periods the amounts are payable.
Issue costs
Costs associated with the issue of shares or debt are recognised as a reduction of the amount raised by the issue. Hence the
proceeds are expressed net of issue expenses. These costs may include those in relation to the preparation of a prospectus,
advertising, professional fees, underwriting premiums and commissions.
Statements of cash flows
The following are the definitions of the terms used in the statement of cash flows:
a.
Operating activities include all transactions and other events that are not investing or financing activities;
b.
Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and
of investments. Investments can include securities not falling within the definition of cash;
c.
Financing activities are those activities that result in changes in the size and composition of the capital structure. This
includes both equity and debt not falling within the definition of cash. Dividends paid in relation to the capital structure are
included in financing activities; and
d.
Cash is considered to be cash on hand and current accounts in banks, net of bank overdrafts.
> CHANGES IN ACCOUNTING POLICIES
There have been no significant changes in accounting policies. All policies have been applied on consistent bases throughout the
periods presented.
63
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
> 2. EQUITY
>
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
204,341
202,037
204,341
202,037
79,392
7,285
–
–
214
2,090
79,392
7,285
–
–
214
2,090
> SHARE CAPITAL
Movements in share capital are summarised as follows:
Balance at the beginning of the year
Contribution from owners:
Share issue made during the year
Shares issued on exercise of options
Partly paid shares paid in full
Balance at the end of the year
86,677
2,304
86,677
2,304
$291,018
$204,341
$291,018
$204,341
On 22 August 2000, 20,000,000 Shares were issued for cash at $3.99 per share. Costs of 2 cents per share were incurred in completing
the issue. The costs were taken as a reduction of the amounts recognised as being generated by the issue. Hence, $3.97 per share has
been recognised as a contribution from shareholders. During the year ended 30 June 2000 1,000,000 shares partly paid to $0.01 were
fully paid to $2.10.
During the year, on exercise of options, 3,300,000 shares were issued for cash at $2.10 per share and 148,000 shares at $2.40 per
share (2000–89,000 shares at $2.40). Refer Note 19–Equity Participation Plan.
64
>
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
365,709,785
20,000,000
3,448,000
365,620,785
–
89,000
365,709,785
20,000,000
3,448,000
365,620,785
–
89,000
389,157,785
365,709,785
389,157,785
365,709,785
> SHARE ISSUE DETAILS
Shares issued during the period are summarised as follows:
Shares on issue at the beginning of the year
Share issue made during the year
Shares issued on exercise of options
Shares on issue at the end of the year
As at 30 June 2001 there were 388,457,785 (2000-365,009,785) shares issued and fully paid. There were 700,000 (2000–700,000)
shares partly paid to $0.01. Refer Note 19–Equity Participation Plan.
Shares rank equally, carry voting rights and participate in distributions.
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
> ACCUMULATED DEFICIT
Movements in accumulated deficit were as follows:
Accumulated deficit at the beginning of the year
Deficit for the year
Accumulated deficit at the end of the year
(164,494)
(42,337)
(137,526)
(26,968)
(164,096)
(40,286)
(137,526)
(26,570)
($206,831)
($164,494)
($204,382)
($164,096)
> FOREIGN CURRENCY TRANSLATION RESERVE
Movements in foreign currency translation reserve were as follows:
Balance at the beginning of the year
Movement for the year
Balance at the end of the year
78
28
$106
125
(47)
$78
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
78
28
125
(47)
$106
$78
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
–
–
–
(450)
5
(138)
–
–
–
–
–
–
(583)
–
–
($583)
–
–
> MINORITY INTEREST
Movements in minority interest were as follows:
Balance at the beginning of the year
Movement for the year:
Acquisition of Football Kings Limited
Incorporation of Sky AEI Music Limited
Share of surplus/(deficit) in subsidiaries
(583)
137
–
59
196
Balance at the end of the year
($387)
3. PAYABLES AND ACCRUALS
>
Trade payables
Due to related parties
Unearned subscriptions
Employee entitlements
Deferred revenue
Accruals and other payables
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
59,125
25,725
19,233
2,407
786
14,121
41,715
24,959
17,730
2,770
–
14,019
58,939
25,725
19,176
2,407
786
13,897
41,394
24,959
17,671
2,770
–
12,554
$121,397
$101,193
$120,930
$99,348
At 30 June 2001 there were amounts totalling $73.3 million which had been converted from US dollars at the year-end rate of NZ$1.00
= US$0.4047.
65
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
> 4. BORROWINGS
>
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
12,530
95
11,358
177
12,530
–
11,358
–
$12,625
$11,535
$12,530
$11,358
215,000
56,454
170
190,000
69,696
412
215,000
56,454
–
190,000
69,696
–
$271,624
$260,108
$271,454
$259,696
19,145
225,598
17,419
9,462
–
13,072
14,119
205,759
17,599
9,559
18,975
225,598
17,419
9,462
–
12,660
14,119
205,759
17,599
9,559
$271,624
$260,108
$271,454
$259,696
12,530
56,454
11,358
69,696
12,530
56,454
11,358
69,696
$68,984
$81,054
$68,984
$81,054
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
19,546
19,546
19,546
19,546
9,774
–
19,748
19,748
19,748
19,748
19,748
9,873
19,546
19,546
19,546
19,546
9,774
–
19,748
19,748
19,748
19,748
19,748
9,873
87,958
108,613
87,958
108,613
Future finance charges on finance leases
(18,974)
(27,559)
(18,974)
(27,559)
Current
Lease liabilities
Other
Non Current
Bank loans
Lease liabilities
Other
Repayment Terms
Non-current borrowings are repayable:
One to two years
Two to three years
Three to four years
Four to five years
More than five years
66
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
Analysis of Finance Lease Liabilities
Current
Non-current
Recognised as a liability
$68,984
$81,054
$68,984
$81,054
Bank loans are all repayable in one to three years (2000 – three to four years). Interest rates on borrowings varied in the range of
5.9% to 7.6% in 2001 (2000 – 5.3% to 7.6%). Interest rates on the transponder finance lease varied in the range of 7.6% to 13%
(2000 – 7.6% to 13%). The lease liabilities are secured by the leased assets.
The foreign currency finance lease liability is designated as an effective hedge of the transponder asset, therefore the balance
will fluctuate with currency changes. At 30 June 2001 the lease liability of $69.0 million had been converted from Australian dollars
at the year-end rate of NZ$1.00 = A$0.7935.
The Borrowing Group and subsidiaries entered into a $250 million loan facility agreement with a consortium of banks for a
period of 7 years commencing 14 March, 1997. Loans drawn under the facility are secured by a debenture over all the assets of the
Borrowing Group and subsidiaries and a mortgage over the Borrowing Group’s and subsidiaries’ land and certain nationwide
broadcasting frequencies.
The Banking Facility includes various restrictions on the Borrowing Group and subsidiaries. Covenants in the Banking Facility:
(i) limit the Borrowing Group’s and subsidiaries’ ability to dispose of assets, although certain disposals are permitted, such as the
disposal of certain assets in the ordinary course of business; (ii) limit the Borrowing Group’s and subsidiaries’ ability to enter into
transactions with related persons; (iii) prohibit the Borrowing Group and subsidiaries from paying dividends or making distributions
unless certain financial and other conditions are satisfied; (iv) prohibit the Borrowing Group and subsidiaries from investing or
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
commencing business outside New Zealand; (v) prohibit the Borrowing Group and subsidiaries from acquiring material capital assets
outside core business activities; (vi) prohibit the Borrowing Group and subsidiaries from materially changing licensing,
programming or exclusivity rights; and (vii) impose limits on additional external borrowings.
The interest rate on this Banking Facility is payable at a floating rate. Amounts outstanding under the Banking Facility are
required to be reduced to $225 million by 11 March 2002 and $210 million by 11 March 2003, and the remaining outstanding balance
is repayable on 11 March 2004.
Furthermore, the Banking Facility also requires: (i) News Corp. to continue to hold at least 35% of the outstanding Shares in the
Borrowing Group; (ii) no other person (acting alone or in concert with other parties) to own more Shares than News Corp. and (iii)
News Corp. to retain effective control over the affairs, policies and governing body of the Borrowing Group. For the purposes of the
Banking Facility, News Corp. includes INL and its wholly owned subsidiaries so long as: (i) at least 40% of the issued voting shares
of INL are held by News Corp. or its wholly owned subsidiaries; (ii) no other person (acting alone or in concert with other parties)
owns more issued voting shares in INL than News Corp. and (iii) no other person (acting alone or in concert with other parties)
exercises any greater effective control than News Corp. over the affairs, policies and governing body of INL. Each of these
conditions is entirely beyond the control of the Borrowing Group. If any of the foregoing conditions is not satisfied, an event of
default would be deemed to have occurred under the Banking Facility and amounts outstanding thereunder could, upon demand by
the banking syndicate, become due and payable by the Borrowing Group.
>
5. FIXED ASSETS
>
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
Land
Accumulated depreciation
1,026
–
1,026
–
1,026
–
1,026
–
Buildings
Accumulated depreciation
1,026
6,998
(1,716)
1,026
6,952
(1,576)
1,026
6,998
(1,716)
1,026
6,952
(1,576)
Broadcasting equipment
Accumulated depreciation
5,282
37,606
(20,263)
5,376
34,796
(17,160)
5,282
37,606
(20,263)
5,376
34,796
(17,160)
Broadcasting equipment subject to finance lease
Accumulated depreciation
17,343
106,060
(38,844)
17,636
107,099
(24,192)
17,343
106,060
(38,844)
17,636
107,099
(24,192)
Studio equipment
Accumulated depreciation
67,216
32,070
(17,669)
82,907
26,764
(15,604)
67,216
32,053
(17,668)
82,907
26,748
(15,605)
Other plant and equipment
Accumulated depreciation
14,401
37,812
(15,589)
11,160
28,654
(11,504)
14,385
37,561
(15,537)
11,143
28,501
(11,497)
Decoders and associated equipment
Accumulated depreciation
22,223
280,554
(133,347)
17,150
207,373
(100,851)
22,024
280,554
(133,347)
17,004
207,373
(100,851)
Capitalised installation costs
Accumulated depreciation
147,207
255,940
(149,681)
106,522
201,203
(116,189)
147,207
255,940
(149,681)
106,522
201,203
(116,189)
Total fixed assets
106,259
85,014
106,259
85,014
$380,957
$326,791
$380,742
$326,628
The broadcasting equipment subject to finance lease is hedged by the foreign currency finance lease liability, therefore the cost will
fluctuate with currency changes.
The latest Government valuation in October 1999 records a value of $3,700,000. Subsequent to the valuation date, there have been
additions costing $46,000.
67
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
6. RECEIVABLES AND PREPAYMENTS
>
Trade receivables
Less estimated doubtful debts
Due from related parties
Other receivables and prepaid expenses
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2001
2000
2001
2000
$000
$000
$000
$000
28,357
(1,521)
414
4,286
$31,536
>
24,104
(1,689)
–
5,907
$28,322
28,183
(1,504)
502
4,134
$31,315
24,050
(1,689)
58
5,704
$28,123
7. INTANGIBLE ASSETS
>
68
BORROWING GROUP
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
Broadcasting rights
Accumulated amortisation
2,309
(1,258)
2,309
(1,140)
2,309
(1,258)
2,309
(1,140)
New channel development
Accumulated amortisation
1,051
7,302
(7,170)
1,169
7,304
(7,085)
1,051
7,302
(7,170)
1,169
7,304
(7,085)
Renewal rights
Accumulated amortisation
132
17,266
(736)
219
12,500
–
132
17,266
(736)
219
12,500
–
Satellite service development
Accumulated amortisation
16,530
3,245
(893)
12,500
2,126
(547)
16,530
3,245
(893)
12,500
2,126
(547)
Other intangibles
Accumulated amortisation
2,352
1,759
(936)
1,579
1,750
(590)
2,352
1,108
(682)
1,579
1,108
(464)
Goodwill on consolidation
Accumulated amortisation
823
2,533
(729)
1,160
2,373
(99)
426
–
–
644
–
–
Purchased goodwill
Accumulated amortisation
1,804
302
(101)
2,274
506
(8)
–
–
–
–
–
–
Total intangible assets
201
498
–
–
$22,893
$19,399
$20,491
$16,111
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
8. INCOME TAX
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
>
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
At 30 June 2001 the Consolidated Group had accumulated tax losses carried forward of approximately $40 million (2000–$25 million).
The income tax expense is calculated as follows:
Deficit before tax
Prima facie tax credit at statutory rate of 33%
Permanent differences
Timing differences not recognised
Over-estimation in prior year
Tax losses not previously recognised
Benefit of tax losses not recognised
(42,236)
(27,067)
(40,286)
(26,540)
(13,938)
371
6,722
(9)
(2)
6,898
(8,932)
226
1,921
–
–
6,824
(13,294)
162
6,722
–
–
6,410
(8,758)
140
1,919
–
–
6,729
Tax expense
$42
$39
–
$30
The tax effects of temporary differences at the New Zealand statutory rate which give rise to significant deferred tax assets or liabilities
are as follows:
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
>
2001
2000
2001
2000
$000
$000
$000
$000
31,622
13,123
22,708
8,494
31,604
12,555
22,706
8,405
44,745
(44,730)
31,202
(31,202)
44,159
(44,159)
Fixed assets and other timing differences
Benefit of tax loss carried forward
Total tax assets–non-current
Less amount not recognised
BORROWING GROUP
Total tax assets recognised
$15
–
31,111
(31,111)
–
–
The Borrowing Group has not recognised net deferred tax assets since realisation of these assets is not virtually certain due to the
Borrowing Group’s history of operating losses.
There are no imputation credits or dividend withholding payment credits available to the shareholders.
Utilisation of carried forward tax losses is subject to meeting income legislation and shareholder continuity requirements.
>
9. INVESTMENTS IN SUBSIDIARIES
The Borrowing Group’s investments in subsidiaries comprise shares at cost. Significant subsidiaries comprise:
NAME OF EQUITY
Football Kings Limited
Sky AEI Music Limited
PRINCIPAL ACTIVITIES
Professional soccer team
Commercial music
All subsidiary entities have a balance date of 30 June.
On 28 July 2000 the Borrowing Group increased its shareholding in Football Kings from 80% to 85.2%.
INTEREST HELD BY GROUP
2001
2000
85.2%
50.5%
80%
50.5%
669
9
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
10. OTHER NON-CURRENT ASSETS
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
>
Advances
Football Kings Limited
Sky AEI Music Limited
Other
Deferred tax
>
2001
2000
2001
2000
$000
$000
$000
$000
–
–
–
15
–
–
3
–
4,293
112
–
–
1,826
12
3
–
$15
$3
$4,405
$1,841
11. OPERATING EXPENSES
>
70
70
BORROWING GROUP
Depreciation and amortisation:
Amortisation of intangible assets
Depreciation
Depreciation on finance leases
Total depreciation and amortisation
Bad and doubtful debts:
Movement in provision
Net write-off
Total bad and doubtful debts
Fees to auditors:
Audit:
NZ services
US services
Total fees to auditors
Interest and financing charges:
Interest expense:
Finance leases
Bank and other loans
Interest income
Bank facility fees
Total interest and financing charges
Directors’ fees
Realised foreign exchange losses/(gains)
Unrealised foreign exchange losses/(gains)
Loss/(Gain) on disposal of fixed assets
Operating lease and rental expense
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
2,355
78,099
14,933
$95,387
2,479
60,457
14,892
$77,828
1,505
78,054
14,933
$94,492
2,356
60,454
14,892
$77,702
(168)
1,520
375
1,395
(185)
1,520
375
1,395
$1,352
$1,770
$1,335
$1,770
78
–
135
58
66
–
120
58
$78
$193
$66
$178
8,338
13,130
(554)
382
$21,296
141
2,471
1,262
577
1,349
9,174
11,631
(165)
336
$20,976
64
644
2,387
(237)
1,164
8,338
13,087
(847)
382
$20,960
141
2,471
1,258
577
1,307
9,174
11,628
(151)
336
$20,987
64
647
2,387
(237)
1,153
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
12. OPERATING LEASE COMMITMENTS
The Borrowing Group and Consolidated Group have operating lease commitments in respect of property and motor vehicles. These
commitments fall due as follows:
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
>
Year 1
Year 2
Year 3
Year 4
Year 5
Later than 5 years
>
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2001
2000
$000
$000
606
507
466
375
316
1,334
518
452
316
241
171
154
$3,604
$1,852
13. OTHER COMMITMENTS
>
Contracts for transmission services payable:
Year 1
Year 2
Year 3
Year 4
Year 5
Later than 5 years
Contracts for future programmes:
Year 1
Year 2
Year 3
Year 4
Year 5
Later than 5 years
Capital expenditure commitments:
Year 1
Later than 1 year
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2001
2000
$000
$000
7,069
5,598
5,598
5,598
5,598
20,695
19,615
5,000
5,000
5,000
5,000
23,484
$50,156
$63,099
111,107
101,012
74,986
55,954
35,496
7,561
101,456
80,739
55,985
35,036
35,181
18,124
$386,116
$326,521
31,715
–
42,849
–
$31,715
$42,849
771
1
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
14. CONTINGENT LIABILITIES
The Borrowing Group’s and Consolidated Group’s contingent liability in respect of undrawn letters of credit at 30 June 2001
amounted to $1,007,352 (2000 – $430,400).
The Borrowing Group and Consolidated Group is party to litigation incidental to its business, none of which is expected to be
material. No provision has been made in the Borrowing Group’s and Consolidated Group’s financial statements in relation to any
current litigation and the Directors believe that such litigation will not have a significant effect on the Borrowing Group’s and
Consolidated Group’s financial position, results of operations or cash flows.
The Borrowing Group has undertaken to continue to provide financial support to its subsidiary, Football Kings Limited, to enable
the subsidiary to meet its financial obligations as they fall due.
>
15. RELATED PARTY TRANSACTIONS
All members of the Consolidated Group are considered to be related parties of Sky Network Television Limited. During the year the
Borrowing Group advanced $2,684,493 to Football Kings Limited and $154,441 to Sky AEI Music Limited. Interest was charged at
normal commercial lending rates.
During the year the Borrowing Group and Consolidated Group had the following significant operating transactions in the normal
course of business with its shareholders and their affiliates:
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
>
Independent Newspapers Limited and affiliated companies:
Programming, smartcard and broadcasting equipment and publishing
Telecom Corporation of New Zealand Limited
Net telecommunications costs
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2001
2000
$000
$000
60,732
50,734
893
–
72
Telecom Corporation of New Zealand Limited became a related party in February 2001 and transactions have been included from
that date.
>
16. FINANCIAL INSTRUMENTS
The following financial assets and financial liabilities have been recognised in the financial statements:
>
Cash and bank
Receivables and prepayments
Payables and accruals
Borrowings
Net amount recognised
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
BORROWING GROUP
2001
2000
2001
2000
$000
$000
$000
$000
5,171
31,536
(121,397)
(284,249)
1,648
28,322
(101,193)
(271,643)
5,114
31,315
(120,930)
(283,984)
1,423
28,123
(99,348)
(271,054)
($368,939)
($342,866)
($368,485)
($340,856)
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
> CREDIT RISK
Credit risk is the risk of loss arising from one party to a contract failing to discharge its obligations under that contract.
Financial instruments, which potentially subject the Borrowing Group and Consolidated Group to credit risk, consist primarily
of cash and bank and trade receivables. Cash and bank balances are placed with high credit quality financial institutions. Credit risk
with respect to trade receivables is limited due to the large number of subscribers included in the Borrowing Group’s and
Consolidated Group’s subscriber base. Accordingly, the Directors believe the Borrowing Group and Consolidated Group have no
significant concentration of credit risk.
With respect to forward foreign exchange contracts, the Borrowing Group’s and Consolidated Group’s exposure is on the full
amount of the foreign currency receivable on settlement. The Borrowing Group and Consolidated Group reduces credit risk by
limiting the counterparties of the Borrowing Group and Consolidated Group to major international banks and does not expect to
incur any losses as a result of non-performance by these counterparties.
> INTEREST RATE RISK
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
At 30 June 2001 the Borrowing Group and Consolidated Group had a number of interest rate swap agreements outstanding,
having a notional principal amount of $160 million in total (2000-$105 million), with major international banks. The agreements
effectively provide the Borrowing Group and Consolidated Group with a fixed interest rate exposure of 5.93% to 6.90%, up to the
maximum of the notional principal amount, for various periods up to May 2008.
> CURRENCY RISK
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
The approximate notional principal amount of forward exchange contracts to buy foreign currencies at 30 June 2001 was
$60,903,000 (2000–$34,064,000). These contracts are primarily denominated in United States and Australian dollars, none of
which have a maturity beyond December 2001. These amounts have been translated using exchange rates of 0.4047 and 0.7935 for
United States and Australian contracts respectively.
> FAIR VALUES
The carrying amount of cash and bank, payables and accruals, receivables and prepayments and current portion of borrowings
approximate fair value due to the short-term maturity of these instruments.
The carrying amount of term borrowings reflects fair value as the borrowing finance rates approximate market rates.
Estimated fair values of the remaining financial instruments are as follows:
>
CONSOLIDATED GROUP (INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2000
2001
2000
$000
$000
$000
$000
CARRYING
FAIR VALUE
AMOUNT
Forward foreign exchange contracts
Interest rate swap agreements
BORROWING GROUP
2001
CARRYING
FAIR VALUE
AMOUNT
CARRYING
FAIR VALUE
AMOUNT
CARRYING
FAIR VALUE
AMOUNT
2,496
2,496
3,157
3,157
2,496
2,496
3,157
3,157
–
1,803
–
2,356
–
1,803
–
2,356
The fair value of forward exchange contracts and interest rate swap agreements has been determined by obtaining the estimated
amount from the Borrowing Group’s and Consolidated Group’s bankers that would be received/(paid) to terminate the contracts. The
credit risk on the derivative contracts is represented by the positive fair values of the contracts.
The Borrowing Group and Consolidated Group does not use derivative financial instruments for speculative purposes.
73
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
17. ACCESS TO PROGRAMMING SUPPLY
The Borrowing Group’s and Consolidated Group’s ability to continue to competitively offer pay television services is dependent on
its ability to contract for and obtain access to programming, particularly local and international sporting events, such as rugby
union and rugby league, and popular movies produced by major film studios. In general, the Borrowing Group and Consolidated
Group has agreements in place with key suppliers of sports and movies to supply programming for periods of up to five years.
Failure to renew such agreements or continue to obtain popular programming at competitive prices could materially adversely
affect the Borrowing Group’s and Consolidated Group’s operating results.
>
18. GOING CONCERN
The Borrowing Group and Consolidated Group expects a continuation of the DBS subscriber growth and a continuation of the
migration from UHF to DBS services as it successfully develops its multi-channel commercial subscription services. This will require
further capital expenditure and may necessitate an increase in funding requirements.
Reliance is placed on the fact that the Borrowing Group and Consolidated Group is a going concern. In determining the
appropriateness of the going concern basis for preparing the financial statements, the Directors have taken into account the
Banking Facility detailed in Note 4 being available for a period of at least twelve months from the date these financial statements
were approved by the Directors and the Borrowing Group’s and Consolidated Group’s ability to obtain further funding and generate
a positive operating cash flow for the same period.
Further, subsequent to the year end, the Borrowing Group is in the process of raising $125 million through an issue of capital
notes that is expected to be completed by November 2001. The issue is underwritten up to $110 million.
74
SKY NETWORK TELEVISION LIMITED AND SUBSIDIARIES – NOTES TO THE FINANCIAL STATEMENTS
>
19. EQUITY PARTICIPATION PLAN
The Borrowing Group has issued 1.7 million shares at $2.10, partly paid to $0.01, to a trust, for purchase by certain Directors and
executives of the Company under an equity participation plan. These options were granted on 9 December 1997 and could not be
exercised during the two-year period which commenced on that date. Those shares are held by Sky Nominees Limited as a trustee
for the trust. The Borrowing Group has the power to control the appointment and/or removal of the trustee. During the year ended
30 June 2000, a former Director of the Borrowing Group, exercised options to purchase 1 million of those shares at an exercise price
of $2.10 per share. The remaining 0.7 million shares are held in trust for possible future allocation. Shares held by the trustee carry
voting rights and represent less than 1% of the total issued capital of the Borrowing Group.
At the end of the financial year the company had also granted the following call options:
GRANT DATE
December 1997
February 1998
February 1998
April 2001
April 2001
EXERCISE PRICE
NUMBER GRANTED
NUMBER EXERCISED
NUMBER FORFEITED
TOTAL OUTSTANDING
$2.10
$2.10
$2.40
$2.80
$3.00
4,200,000
500,000
600,000
1,000,000
100,000
3,200,000
100,000
237,000
–
–
–
–
45,000
–
–
1,000,000
400,000
318,000
1,000,000
100,000
6,400,000
3,537,000
45,000
2,818,000
(1)
(2)
(3)
(4)
(5)
Notes
1. Options are currently exercisable and are to be exercised by December 2007.
2. 200,000 options are currently exercisable; a further 100,000 options are exercisable in both February 2002 and February 2003;
all options are to be exercised by February 2008.
3. 108,000 options are currently exercisable; a further 105,000 options are exercisable in both February 2002 and February 2003;
all options are to be exercised by May 2003.
4. Options are exercisable between November 2003 and November 2010.
5. Options are exercisable between January 2004 and January 2011.
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2001
Number of options:
Balance at the beginning of the year
Exercised during the year
Granted during the year
Forfeited during the year
CONSOLIDATED GROUP
(INCLUDING NON
GUARANTEEING SUBSIDIARIES)
2000
5,211,000
(3,448,000)
1,100,000
(45,000)
5,300,000
(89,000)
Balance at the end of the year
2,818,000
5,211,000
Exercise period: (earliest date)
Currently exercisable
1 July 2001–30 June 2002
1 July 2002–30 June 2003
1 July 2003–30 June 2004
1,308,000
205,000
205,000
1,100,000
4,771,000
220,000
220,000
–
2,818,000
5,211,000
–
75
AUDITORS’
REPORT
The Directors
Sky Network Television Limited
10 Panorama Road
Mt Wellington
AUCKLAND
7 September 2001
PricewaterhouseCoopers
23-29 Albert Street
Private Bag 92162
Auckland
New Zealand
Telephone +64 (09) 355 8000
Facsimile +64 (09) 355 8001
Dear Directors
As auditors of Sky Network Television Limited ( the “Company” and “Borrowing Group”) we have prepared this report
pursuant to clause 36 of the Second Schedule of the Securities Regulations 1983 for inclusion in an offer document to
be dated 7 September 2001.
> DIRECTORS’ RESPONSIBILITIES
76
The Company’s Directors are responsible for the preparation and presentation of:
(a) the financial statements which give a true and fair view of the state of affairs of the Borrowing Group as at 30 June
2001 and its financial performance and cash flows for the year ended on that date, as required by clauses 16 to 32
of the Second Schedule of the Securities Regulations 1983;
(b) the summary of financial statements of the Borrowing Group for the years ended 31 December 1997 and 1998, the
six month period ended 30 June 1999 and the years ended 30 June 2000 and 2001 as required by clauses 7(2) and
7(3) of the Second Schedule of the Securities Regulations 1983;
(c) the amounts in respect of the ranking of securities of the Borrowing Group as at 30 June 2001 as required by clause
12 of the Second Schedule of the Securities Regulations 1983; and
(d) the financial statements which give a true and fair view of the state of affairs of the Company and its subsidiaries,
which are all non-guaranteeing subsidiaries (“Consolidated Group”) as at 30 June 2001 and its financial
performance and cash flows for the year ended on that date, which are provided by the Directors for investors’
information.
> AUDITORS’ RESPONSIBILITIES
We are responsible for expressing an independent opinion on:
(a) the financial statements of the Borrowing Group for the year ended 30 June 2001 presented by the Directors and
reporting our opinion in accordance with clause 36(1) of the Second Schedule of the Securities Regulations 1983;
and
(b) the financial statements of the Consolidated Group presented by the Directors;
and reporting our opinion to you.
We are also responsible for reporting, in accordance with clause 36(1)(g) of the Second Schedule of the Securities
Regulations 1983, on the following matters which have been prepared and presented by the Directors:
(a) the amounts included in the summary of financial statements for the Borrowing Group for the years ended
31 December 1997 and 1998, the six month period ended 30 June 1999 and the years ended 30 June 2000 and 2001;
and
(b) the amounts included in the ranking of securities for the Borrowing Group on page 52, as at 30 June 2001.
We have no relationship with or interests in the Company or any of its subsidiaries other than in our capacity as auditors.
> BASIS OF OPINION ON THE FINANCIAL STATEMENTS
An audit of the financial statements includes examining, on a test basis, evidence relevant to the amounts and
disclosures in the financial statements. It also includes assessing:
(a) the significant estimates and judgements made by the Directors in the preparation of the financial statements; and
(b) whether the accounting policies used and described in pages 61 to 63, are appropriate to the circumstances of the
Borrowing Group and Consolidated Group, consistently applied and adequately disclosed.
We have conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and
performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material
misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the
presentation of the information in the financial statements.
> BASIS OF OPINION ON THE SUMMARY OF FINANCIAL STATEMENTS AND THE
RANKING OF SECURITIES
We have undertaken procedures to provide reasonable assurance that:
(a) the amounts set out under the sub headings Summary Statement of Financial Performance and Summary Statement
of Financial Position on page 56, pursuant to clauses 7(2) and 7(3) of the Second Schedule of the Securities
Regulations 1983, have been correctly taken from the audited financial statements of the Borrowing Group for the
years ended 31 December 1997 and 1998, the six month period ended 30 June 1999 and the years ended 30 June
2000 and 2001; and
(b) the amounts set out in the ranking of securities on page 52, pursuant to clause 12 of the Second Schedule of the
Securities Regulations 1983, have been correctly taken from the audited financial statements of the Borrowing
Group as at 30 June 2001.
> UNQUALIFIED OPINION ON THE FINANCIAL STATEMENTS, THE SUMMARY OF
FINANCIAL STATEMENTS AND THE RANKING OF SECURITIES
We have obtained all the information and explanations we have required.
In our opinion:
(a) proper accounting records have been kept by the Borrowing Group and Consolidated Group as far as appears from
our examination of those records;
(b) the financial statements of the Borrowing Group, on pages 57 to 75 of this prospectus, as required by clauses 16 to
32 of the Second Schedule of the Securities Regulations 1983, and that are required to be audited, have been drawn
up to:
(i) comply with the Securities Regulations 1983;
(ii) subject to those Regulations, comply with generally accepted accounting practice in New Zealand; and
(iii) give a true and fair view of the state of affairs of the Borrowing Group as at 30 June 2001 and its financial
performance and cash flows for the year ended on that date;
(c) the financial statements of the Consolidated Group, on pages 57 to 75 give a true and fair view of the financial
position of the Consolidated Group as at 30 June 2001 and its financial performance and cash flows for the year
ended on that date; and
(d) the amounts set out under the sub headings Summary Statement of Financial Performance and Summary Statement
of Financial Position on page 56 of this prospectus, as required by clauses 7(2) and 7(3) of the Second Schedule of
the Securities Regulations 1983, have been correctly taken from the audited financial statements of the Borrowing
Group for the years ended 31 December 1997 and 1998, the six month period ended 30 June 1999 and the years
ended 30 June 2000 and 2001, from which they were extracted; and
(e) amounts set out in the ranking of securities on page 52 of this prospectus, as required by clause 12 of the Second
Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the
Borrowing Group for the year ended 30 June 2001, from which they were extracted.
Yours faithfully
Chartered Accountants
Auckland
77
GLOSSARY
Application Form
The application form contained in or accompanying this Offer Document.
Analogue
Broadcast technology by which information (i.e. picture, sound and data) is
transmitted by means of a continually variable wave form. The signals are less
efficient in the use of bandwidth than digital broadcast signals.
ASX
Australian Stock Exchange.
Banking Facility
A $250 million revolving credit facility agreement SKY currently has with a
syndicate of five international banks.
78
BCL
Broadcast Communications Limited, a wholly owned subsidiary of TVNZ.
Board
The board of directors of SKY.
Borrowing Group
Sky Network Television Limited.
Business Day
A day on which the NZSE is open for business.
Capital Notes
The capital notes offered for subscription under this Offer Document.
Closing Date
26 October 2001 or such other date as SKY determines.
Companies Act
The Companies Act 1993.
Conditions of Capital Notes
The conditions relating to the Capital Notes set out on pages 39 to 45
or Conditions
of this Offer Document.
Consolidated Group
Sky Network Television Limited and its subsidiaries.
Constitution
The constitution of SKY.
Digital
Broadcast technology by which information (i.e. picture, sound and data) is
transmitted by converting it to a digital data stream and compressing it by
removing redundant information. A special decoder is required to receive such
information. By removing repeated information, digital broadcast technology is
much more efficient than analogue broadcast technology and it allows several
channels to be broadcast in the bandwidth or space normally occupied by one
analogue channel.
DBS
Television broadcast by satellite intended for direct reception by the viewer
through use of a small satellite dish.
Directors
The directors of SKY.
Directory
The directory in this Offer Document on the inside back cover.
Election Date
The date on which holders of Capital Notes may elect to either accept new terms
offered by SKY for their Capital Notes or convert their Capital Notes.
Firm Allocation
The Capital Notes reserved for allocation to clients of members of the NZSE and
invited Financial Institutions.
Five Year Government
Stock Rate
This has the meaning given to it in clause 1.1 of the Conditions of Capital Notes.
Free-to-air
Television broadcast channels that are transmitted in an unencrypted form thereby
allowing anyone with a traditional television set to receive and view the television
broadcast signal.
INL
Independent Newspapers Limited and its subsidiary and associated companies.
Interest Rate
This has the meaning given to it in clause 1.1 of the Conditions of Capital Notes.
Interest Rate Set Date
Two Business Days following the Closing Date, or such other date selected by the
Company and the Organising Broker.
Issue Price
The price at which the Capital Notes are issued.
Lead Manager
JBWere (NZ) Limited.
Listing Rules
The NZSE Listing Rules and/or the ASX Listing Rules.
Member
A member of the NZSE.
News Corp.
News Corporation Limited and its subsidiaries and associated companies.
NRWT
Non-resident withholding tax.
NZSE
New Zealand Stock Exchange.
Noteholders
The holders of Capital Notes.
Offer
The offer of Capital Notes under this Offer Document.
Offer Document
This combined investment statement and prospectus dated 7 September 2001.
Optus
Cable & Wireless Optus Limited.
Organising Broker
JBWere (NZ) Limited.
PPV
Pay-per-view.
Registrar
Computershare Registry Services Limited.
RWT
Resident withholding tax.
STU
Set top unit.
Shares
Fully paid ordinary shares in SKY.
Shareholder Preference
A maximum of $15 million of Capital Notes (being up to 12% of the total maximum
principal amount of $125 million of Capital Notes) which has been reserved for
investors who were registered as shareholders of SKY on its New Zealand register
as at 10 September 2001. Eligible Shareholders are eligible to receive a guaranteed
minimum allocation of Capital Notes with a principal amount of $5,000.
SKY or the Company
Sky Network Television Limited.
Specified Date
The date this Offer Document was delivered in registrable form to the Registrar of
Companies for registration.
Trust Deed
The trust deed dated 5 September 2001 entered into between SKY and the Trustee
in relation to the Capital Notes.
Trustee
The New Zealand Guardian Trust Company Limited.
TSL
Telstra Saturn Limited.
TVNZ
Television New Zealand Limited.
UHF
The electromagnetic wave frequency intermediate between audio frequencies and
infrared frequencies particularly used in the transmission of television and radio
broadcast signals with the range of 300 to 3,000 megahertz.
$
New Zealand dollars.
79
APPLICATION
INSTRUCTIONS
> FILL IN YOUR CONTACT DETAILS
applicant’s cheque does not subsequently clear, SKY reserves
Give your full name(s), address and telephone numbers.
the right to cancel that applicant’s allotment of Capital Notes.
Applications must be in the name(s) of natural persons,
companies or other legal entities, up to a maximum of three
> CLOSING DATE
names per application. At least one full given name and
The Offer, unless closed earlier by SKY, will close on the earlier
surname is required for each natural person. Applications by a
of 26 October 2001 or the date on which applications for the
minor, fund, estate, trust, business, firm or partnership, club or
maximum amount of Capital Notes offered have been received
other unincorporated body cannot be accepted unless they are
and accepted. SKY has the right to vary the Closing Date.
made in the individual name(s) of the person(s) who is (are) the
legal guardian(s), trustee(s), proprietor(s), partner(s) or office
bearer(s) (as appropriate).
> DELIVERY
Applications received cannot be revoked or withdrawn.
Application Forms and your payment may be mailed or
> FILL IN THE APPLICATION DETAILS
(a)
Complete the principal amount of Capital Notes applied for.
Please note the minimum principal amount and minimum
multiples stated on the Application Form.
(b) Provide your IRD number. Elect the rate at which you wish
Resident Withholding Tax to be deducted by ticking the
relevant box.
(c)
Tick the relevant box if you hold a Resident Withholding
80
(NZ) Limited (the Organising Broker).
Computershare Registry Services Limited
Level 2, 159 Hurstmere Road, Takapuna
North Shore City
Private Bag 92 119, Auckland 1020
Telephone: 09 488 8700, Facsimile: 09 488 8787
Tax Exemption Certificate. If you hold a valid exemption
JBWere (NZ) Limited
please attach a photocopy and supply the expiry date.
Level 38, Royal & SunAlliance Centre
(d) If you know your Computershare Registry Services Limited
(e)
delivered to the Registrar, any Member of the NZSE, or JBWere
48 Shortland Street
holder number, please enter it on the Application Form.
P O Box 887 Auckland
If you are applying for Capital Notes as a SKY shareholder
Telephone: 09 357 3200, Facsimile: 09 357 3222
under the SKY shareholder preference you must tick the
Freephone: 0800 555 555
“SKY Shareholder Preferential Application” box and
include your existing Computershare Registry Services
Limited holder number used in respect of your SKY shares.
> INTEREST PAYMENTS
Level 8, State Tower
1 Willis Street, Wellington
Telephone: 04 471 6260, Facsimile: 04 471 6261
Freephone: 0800 555 554
Give your bank account number, or tick the box if interest
Level 1, 141 Cambridge Terrace
payments are to be made by cheque.
Christchurch
Telephone: 03 364 5610, Facsimile: 03 364 5611
> SIGNING AND DATING
Freephone: 0800 555 553
Read the Application Form carefully and SIGN and DATE the
Level 1, Community Trust House
form. It must be signed by the applicant(s) personally, or by two
Cnr Moray & Filleul Street, Dunedin
directors of a company (or one director if there is only one
Telephone: 03 477 8800, Facsimile: 03 477 8639
director whose signature must be witnessed), or in either case
by an attorney. If your Application Form is signed by an
attorney, the power of attorney document is not required to be
lodged, but the attorney must complete the certificate on the
reverse of the Application Form. Joint applicants must each
Applicants should submit applications as soon as possible
following the opening of the Offer as interest will accrue from
allotment.
Applications which are received by the Registrar after the
Closing Date may not be accepted.
sign the Application Form.
> PERSONAL INFORMATION RIGHTS
> PAYMENT
Personal information provided by you will be held by SKY, the
Full payment of the Capital Notes must accompany the
Application Form.
Payment must be in New Zealand dollars for immediate value
and not be post dated. Cheques must be drawn on a registered
New Zealand bank. Cheques must be made out in favour of
“SKY Capital Notes Offer” and crossed “Not Transferable”. If an
Registrar or the Trustee at the addresses shown in the
Directory on the inside back cover of this Document or at such
other place as is notified upon request. This information will be
used for the purpose of managing your investment. Pursuant to
the Privacy Act 1993, you have a right to access and correct any
personal information about you.
APPLICATION
BROKER
STAMP
FORM
( AT TA C H C H E Q U E H E R E )
This Application Form constitutes an offer to acquire the Capital Notes described below. Completed Application Forms, together with
payment of the application money payable in respect of the principal amount of Capital Notes applied for, must be received by
Computershare Registry Services Limited before 5.00pm on the Closing Date. This Application Form must not be issued, circulated or
distributed unless accompanied by the Offer Document dated 7 September 2001. Please refer to the “Main Terms of the Offer” section
of the Offer Document and to the reverse of this Application Form for additional instructions regarding its completion and lodgement.
> APPLICATION DETAILS–PLEASE PRINT IN BLOCK LETTERS
P L E A S E E N T E R N A M E ( S ) I N F U L L ( I N C LU D I N G A L L F I R S T N A M E S ) :
Corporate Name:
Title:
First Names:
Surname:
Title:
First Names:
Surname:
Title:
First Names:
Surname:
Joint Names
Postal Address:
Home Phone No:
(
)
Business Phone No:
(
)
> APPLICATION AMOUNT
Principal Amount of Capital Notes Applied for: NZ$
(Minimum of $5,000, and thereafter in multiples of $1,000).
CHEQUES must be PAYABLE to “SKY CAPITAL NOTES OFFER” and crossed “NOT TRANSFERABLE” and should be FOR
IMMEDIATE VALUE. Payment must be made in NEW ZEALAND DOLLARS and drawn on a New Zealand registered bank.
> IRD NUMBER
If you are a New Zealand resident please enter your IRD number:
Resident Withholding Tax Rate (tick one):
19.5%
33%
39%
If you hold a current Resident Withholding Tax Exemption Certificate please tick (✔) this box
and attach a copy of the Certificate.
> COMPUTERSHARE REGISTRY SERVICES SHAREHOLDER NUMBER
If you already hold shares in a New Zealand company which has Computershare Registry Services Limited as its share registrar,
please enter the shareholder number allocated to you by Computershare Registry Services Limited.
If you are applying for Capital Notes under the SKY Shareholder Preference allocation please tick ( ✔ ) this box
> METHOD OF INTEREST PAYMENT
Direct credit to my bank account
OR
Pay by cheque to my postal address as stated above
New Zealand Account Details:
Bank/Branch
Account Number
Suffix
> AGREEMENT OF TERMS
I/We, irrevocably apply for the Principal Amount of Capital Notes shown above (or such lesser number as SKY may allocate) on the
terms and conditions set out in the Offer Document, the Trust Deed and this Application Form. I/We agree to be bound by the Trust
Deed (as amended from time to time). Signature(s) of Applicant(s) (refer to the terms and conditions on the reverse):
Signature:
Date:
Signature:
Date:
81
> TERMS AND CONDITIONS OF APPLICATION
1.
By signing this Application Form, the applicant acknowledges that this form was distributed with the Offer Document dated
7 September 2001 and that offers to subscribe for Capital Notes are upon and subject to the terms and conditions set out in the
Offer Document, the Trust Deed and this Application Form. The applicant acknowledges that he/she has read and understood
the Offer Document and the section relating to the Privacy Act 1993 in the section of the Offer Document entitled “Application
Instructions”. The applicant also acknowledges that the information supplied by him/her on the Application Form is true.
2.
3.
An application cannot be withdrawn or revoked by the applicant.
Prior to obtaining shareholder approval, application money will be banked to a special purpose account operated by the
Registrar. The banking of such money does not constitute an allotment of any Capital Notes to the applicant. An applicant does
not have any interest in, or right or entitlement to, any Capital Notes unless and until, and then only to the extent that, Capital
Notes are allotted to that applicant by SKY.
4. SKY reserves the right to reject any application in whole or in part without giving any reason.
5.
FASTER statements for the Capital Notes will be dispatched to successful applicants as soon as practicable after allotment, but
in any event no later than 5 Business Days after the allotment.
6. Applications must conform with the Application Instructions in the section of the Offer Document entitled “Application
Instructions”.
7.
A joint application must be signed by all applicants. Only the address of the first named of the joint applicants will be recorded
by the Registrar and all distributions and interest payments, notices, etc, will be sent to the address of the first applicant.
8. Terms defined in the Offer Document have the same meanings in this Application Form. This Application Form, Offer and any
contract arising out of its acceptance is governed by New Zealand law.
> CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
82
I,
(NAME OF ATTORNEY)
of
(ADDRESS AND OCCUPATION OF ATTORNEY)
hereby certify that:
1.
By a Power of Attorney dated
(NAME AND OCCUPATION OF PERSON FOR WHOM ATTORNEY IS SIGNING)
of
(ADDRESS OF PERSON FOR WHOM ATTORNEY IS SIGNING)
(“the Donor”) appointed me his/her/its attorney on the terms and conditions set out in that Power of Attorney.
2.
I have executed the application for Capital Notes on the face of this Application Form as attorney under that Power of Attorney
and pursuant to the powers thereby conferred upon me.
3.
At the date of this certificate I have not received any notice or information of the revocation of that Power of Attorney, whether
by the death or dissolution of the Donor or otherwise.
Signature of Attorney:
Signed at
this
day of
2001
APPLICATION
BROKER
STAMP
FORM
( AT TA C H C H E Q U E H E R E )
This Application Form constitutes an offer to acquire the Capital Notes described below. Completed Application Forms, together with
payment of the application money payable in respect of the principal amount of Capital Notes applied for, must be received by
Computershare Registry Services Limited before 5.00pm on the Closing Date. This Application Form must not be issued, circulated or
distributed unless accompanied by the Offer Document dated 7 September 2001. Please refer to the “Main Terms of the Offer” section
of the Offer Document and to the reverse of this Application Form for additional instructions regarding its completion and lodgement.
> APPLICATION DETAILS–PLEASE PRINT IN BLOCK LETTERS
P L E A S E E N T E R N A M E ( S ) I N F U L L ( I N C LU D I N G A L L F I R S T N A M E S ) :
Corporate Name:
Title:
First Names:
Surname:
Title:
First Names:
Surname:
Title:
First Names:
Surname:
Joint Names
Postal Address:
Home Phone No:
(
)
Business Phone No:
(
)
> APPLICATION AMOUNT
Principal Amount of Capital Notes Applied for: NZ$
(Minimum of $5,000, and thereafter in multiples of $1,000).
CHEQUES must be PAYABLE to “SKY CAPITAL NOTES OFFER” and crossed “NOT TRANSFERABLE” and should be FOR
IMMEDIATE VALUE. Payment must be made in NEW ZEALAND DOLLARS and drawn on a New Zealand registered bank.
> IRD NUMBER
If you are a New Zealand resident please enter your IRD number:
Resident Withholding Tax Rate (tick one):
19.5%
33%
39%
If you hold a current Resident Withholding Tax Exemption Certificate please tick (✔) this box
and attach a copy of the Certificate.
> COMPUTERSHARE REGISTRY SERVICES SHAREHOLDER NUMBER
If you already hold shares in a New Zealand company which has Computershare Registry Services Limited as its share registrar,
please enter the shareholder number allocated to you by Computershare Registry Services Limited.
If you are applying for Capital Notes under the SKY Shareholder Preference allocation please tick ( ✔ ) this box
> METHOD OF INTEREST PAYMENT
Direct credit to my bank account
OR
Pay by cheque to my postal address as stated above
New Zealand Account Details:
Bank/Branch
Account Number
Suffix
> AGREEMENT OF TERMS
I/We, irrevocably apply for the Principal Amount of Capital Notes shown above (or such lesser number as SKY may allocate) on the
terms and conditions set out in the Offer Document, the Trust Deed and this Application Form. I/We agree to be bound by the Trust
Deed (as amended from time to time). Signature(s) of Applicant(s) (refer to the terms and conditions on the reverse):
Signature:
Date:
Signature:
Date:
83
> TERMS AND CONDITIONS OF APPLICATION
1.
By signing this Application Form, the applicant acknowledges that this form was distributed with the Offer Document dated
7 September 2001 and that offers to subscribe for Capital Notes are upon and subject to the terms and conditions set out in the
Offer Document, the Trust Deed and this Application Form. The applicant acknowledges that he/she has read and understood
the Offer Document and the section relating to the Privacy Act 1993 in the section of the Offer Document entitled “Application
Instructions”. The applicant also acknowledges that the information supplied by him/her on the Application Form is true.
2.
3.
An application cannot be withdrawn or revoked by the applicant.
Prior to obtaining shareholder approval, application money will be banked to a special purpose account operated by the
Registrar. The banking of such money does not constitute an allotment of any Capital Notes to the applicant. An applicant does
not have any interest in, or right or entitlement to, any Capital Notes unless and until, and then only to the extent that, Capital
Notes are allotted to that applicant by SKY.
4. SKY reserves the right to reject any application in whole or in part without giving any reason.
5.
FASTER statements for the Capital Notes will be dispatched to successful applicants as soon as practicable after allotment, but
in any event no later than 5 Business Days after the allotment.
6. Applications must conform with the Application Instructions in the section of the Offer Document entitled “Application
Instructions”.
7.
A joint application must be signed by all applicants. Only the address of the first named of the joint applicants will be recorded
by the Registrar and all distributions and interest payments, notices, etc, will be sent to the address of the first applicant.
8. Terms defined in the Offer Document have the same meanings in this Application Form. This Application Form, Offer and any
contract arising out of its acceptance is governed by New Zealand law.
> CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
84
I,
(NAME OF ATTORNEY)
of
(ADDRESS AND OCCUPATION OF ATTORNEY)
hereby certify that:
1.
By a Power of Attorney dated
(NAME AND OCCUPATION OF PERSON FOR WHOM ATTORNEY IS SIGNING)
of
(ADDRESS OF PERSON FOR WHOM ATTORNEY IS SIGNING)
(“the Donor”) appointed me his/her/its attorney on the terms and conditions set out in that Power of Attorney.
2.
I have executed the application for Capital Notes on the face of this Application Form as attorney under that Power of Attorney
and pursuant to the powers thereby conferred upon me.
3.
At the date of this certificate I have not received any notice or information of the revocation of that Power of Attorney, whether
by the death or dissolution of the Donor or otherwise.
Signature of Attorney:
Signed at
this
day of
2001
DIRECTORY
DIRECTORS OF SKY AND PRINCIPAL
PLACE OF RESIDENCE
Tom Mockridge (CHAIRMAN), Auckland
Robert Bryden (DEPUTY CHAIRMAN), Wellington
James Blomfield, Sydney
Marko Bogoievski, Hutt City
Barrie Downey, Auckland
John Fellet, Auckland
John Hart, Auckland
Richard Neville, Wellington
REGISTERED OFFICE
10 Panorama Road
Mt Wellington
Auckland
TRUSTEE
INSIGHT COMMUNICATIONS, AUCKLAND 18991 09/01
The New Zealand Guardian Trust
Company Limited
Level 7
Royal & SunAlliance Centre
48 Shortland Street
PO Box 1934
Auckland
ORGANISING BROKER AND
LEAD MANAGER
JBWere (NZ) Limited
Level 38
Royal & SunAlliance Centre
48 Shortland Street
PO Box 887 Auckland
0800 555 555
Level 8
State Tower
1 Willis Street
Wellington
0800 555 554
REGISTRAR
Level 1
141 Cambridge Terrace
Christchurch
0800 555 553
Computershare Registry Services Limited
Level 2
159 Hurstmere Road
Takapuna, North Shore City
Private Bag 92119
Auckland 1020
Level 1
Community Trust House
Cnr Moray Place & Filleul Street
Dunedin
03 477 8800
AUDITOR
LEGAL ADVISERS TO THE TRUSTEE
PricewaterhouseCoopers
ANZ Centre 23-29
Albert Street
Private Bag 92162
Auckland
Bell Gully
Royal & SunAlliance Centre
48 Shortland Street
PO Box 4199
Auckland
LEGAL ADVISERS TO SKY
Buddle Findlay
Tower One
The Shortland Centre
51-53 Shortland Street
PO Box 1433
Auckland
COMPANY SECRETARY OF SKY
Paul Smart
C/-Sky Network Television Limited
10 Panorama Road
Mt Wellington
Auckland
SKY NETWORK TELEVISION LIMITED
10 PANORAMA ROAD
MT WELLINGTON
AUCKLAND