Offering Circular

GRUPO CLARIN S.A.
Offering of 50,000,000 Class B Common Shares in the form of
Class B Shares and Global Depository Shares
This offering circular (the “Offering Circular”) relates to a global offering (the “Offering”) by Grupo Clarín S.A. (“Grupo
Clarín” or the “Company”), a sociedad anónima organised under the laws of Argentina, and the selling shareholders named
in this Offering Circular (the “Selling Shareholders”) of 50,000,000 class B common shares of the Company, with nominal
value of one (1) Peso (as defined herein) and one vote per share, and with rights to dividends equal to those of the other
outstanding shares of the Company. Of the class B common shares being offered, the Company is selling 15,000,000 class B
common shares (the “New Shares”) and the Selling Shareholders are selling 35,000,000 class B common shares (the
“Selling Shareholder Shares” and together with the New Shares, the “Class B Shares”). The Company will not receive any
proceeds from the sale of the Selling Shareholder Shares.
As part of the Offering, the Company and the Selling Shareholders are offering Class B Shares, in the form of global
depositary shares (“GDSs” and, together with the Class B Shares, the “Securities”) evidenced by global depositary receipts
(“GDRs”) in the United States of America (the “United States”) and other countries outside Argentina through the
international underwriters named in this Offering Circular. Each GDS represents two Class B Shares.
The Company is offering 3,500,000 New Shares in the form of 1,750,000 GDSs in the United States and other
countries outside Argentina through the international underwriters named in this Offering Circular. The Company is
concurrently offering 11,500,000 New Shares in Argentina through the Argentine placement agents named in this Offering
Circular under a Spanish language prospectus. The Selling Shareholders are offering 35,000,000 Selling Shareholder
Shares, in the form of 17,500,000 GDSs in the United States and other countries outside Argentina through the international
underwriters named in this Offering Circular. The total number of Class B Shares in the international tranche of the Offering
and the Argentine tranche of the Offering is subject to reallocation between these tranches. The closings of the international
tranche of the Offering and the Argentine tranche of the Offering will be conditioned upon each other.
AN INVESTMENT IN THE CLASS B SHARES OR GDSs INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY READ THIS OFFERING CIRCULAR WITH SPECIAL ATTENTION TO “RISK
FACTORS”.
Offer Price: Ps.29.14 per Class B Common Share and
U.S.$18.50 per Global Depository Share
The Offering does not constitute an offer to sell, or the solicitation of an offer to buy, securities in any
jurisdiction in which such offer or solicitation would be unlawful. The Offering consists of (a) an offering of GDSs in
the United States to qualified institutional buyers (each a “QIB”) as defined in Rule 144A (“Rule 144A”) under the
United States Securities Act of 1933, as amended (the “Securities Act”) in reliance on Rule 144A (the “Rule 144A
GDSs”), (b) an offering of GDSs outside the United States and Argentina (the “Regulation S GDSs”) in reliance on
Regulation S under the Securities Act (“Regulation S”) and (c) an offering of Class B Shares to investors in
Argentina in reliance on Regulation S. The Class B Shares and the GDSs have not been, and will not be, registered
under the Securities Act or any state securities laws and may not be offered or sold in the United States absent
registration or an exemption from registration under the Securities Act. The Class B Shares and the GDSs are
subject to selling and transfer restrictions in certain jurisdictions. Prospective subscribers of the Class B Shares
and GDSs should read the restrictions described under “Selling and Transfer Restrictions”.
Joint Global Coordinators and International Bookrunners
Goldman Sachs International
Credit Suisse
International Lead Manager
JPMorgan
International Co-Managers
Merrill Lynch International
Itaú Securities
Offering Circular dated 19 October 2007
(continued on next page)
The shareholders meeting of the Company held on 20 July 2007 approved a capital increase of up to Ps.30,000,000 to permit
the issuance of the New Shares and the additional class B common shares corresponding to the Over-allotment Option (as defined
herein) and established the minimum Offer Price (as defined herein) of the New Shares to be issued. The Company is offering
15,000,000 New Shares and up to 2,250,000 additional class B common shares pursuant to the Over-allotment Option. The
Company’s existing shareholders have pre-emptive rights to subscribe New Shares in a number sufficient to maintain their
proportionate holdings in the Company’s total capital stock. In addition, the Company’s existing shareholders have accretion rights,
which permit them to subscribe New Shares and additional class B common shares corresponding to the Over-allotment Option that
are not subscribed by other existing shareholders in proportion with the percentage of shares for which the subscribing existing
shareholder has exercised its pre-emptive rights. In order to permit the Offering, the Company’s existing shareholders, including the
Selling Shareholders, have waived the exercise of their pre-emptive and accretion rights in connection with the offering of the New
Shares and additional class B common shares corresponding to the Over-allotment Option, representing 100% of the pre-emptive
and accretion rights in respect of the Company’s capital increase. New shareholders of the Company will not have such preemptive
and accretion rights in respect of this capital increase. The Company will cancel the portion of the capital increase not sold in the
Offering or the Over-allotment Option.
The Company and certain Selling Shareholders have granted Credit Suisse Securities (Europe) Limited an option (the
“Over-allotment Option”), exercisable for 30 days following the announcement of the definitive Offer Price for the GDSs, to
purchase additional class B shares in the form of GDSs amounting to up to 15% of the total number of Class B Shares sold in the
Offering solely to cover over-allotments, if any. See “Subscription and Sale”.
All information contained in this Offering Circular (including Annex A) other than the section “Unaudited Pro Forma
Consolidated Statement of Income” and all references to that section contained elsewhere in this Offering Circular (the
“Prospectus”) constitute a prospectus relating to the Company prepared in accordance with the prospectus rules (the “Prospectus
Rules”) of the U.K. Financial Services Authority (the “Financial Services Authority”) made under Section 73A of the Financial
Services and Markets Act 2000 (the “FSMA”). See “Subscription and Sale — European Economic Area”. This Offering Circular will
be made available to the public in accordance with the Prospectus Rules.
Prior to the Offering there has been no market for the GDSs or the Class B Shares. Applications have been made (i) to the
Financial Services Authority, in its capacity as competent authority under the FSMA, for a listing of up to 25,000,000 GDSs to be
issued on the GDS Closing Date (as defined below), up to 3,750,000 additional GDSs to be issued pursuant to the Over-allotment
Option, as described herein, and up to 77,015,610 additional GDSs to be issued from time to time against the deposit of Class B
Shares with JPMorgan Chase Bank, N.A. as depositary (the “Depositary”), to be admitted to the official list of the Financial
Services Authority (the “Official List”), and (ii) to the London Stock Exchange plc (the “London Stock Exchange”) for such GDSs to
be admitted to trading on the London Stock Exchange’s EEA Regulated Market (as defined in the Investment Services Directive
93/22/EC) (the “Regulated Market”). Admission of the GDSs to the Official List and to trading on the Regulated Market is expected
to take place on 25 October 2007, following closing and settlement therefor on or around 24 October 2007 (the “GDS Closing
Date”). Conditional trading in the GDSs and the class B common shares on the London Stock Exchange and on the Mercado de
Valores de Buenos Aires, (the “MERVAL”) is expected to commence on a when-and-if-issued basis on 19 October 2007. All
dealings in the GDSs prior to the commencement of unconditional dealings will be of no effect if admission does not take
place and will be at the sole risk of the parties concerned.
We have obtained authorisation to have our class B common shares (including the Class B Shares) and our class C
common shares listed on the Bolsa de Comercio de Buenos Aires, the Buenos Aires Stock Exchange (the “BCBA”) and to have our
class B common shares (including the Class B Shares) admitted to trading on the BCBA under the symbol “GCLA”.
The Securities offered hereby are being offered by Goldman Sachs International and Credit Suisse Securities (Europe) Limited
(the “Joint Global Coordinators and International Bookrunners”), J.P. Morgan Securities Inc. (the “International Lead Manager”) and
Itaú Securities, Inc. and Merrill Lynch International (the “International Co-Managers,” and together with the Joint Global Coordinators
and International Bookrunners and the International Lead Manager, the “International Underwriters”) or through their selling agents,
when, as and if delivered to and accepted by them and subject to their right to reject any order in whole or in part. The Euroclear
System (“Euroclear”) and Clearstream Banking société anonyme (“Clearstream”) are expected to accept the GDSs for settlement in
their respective book-entry settlement systems. The Regulation S GDSs and the Rule 144A GDSs will be evidenced by a Master
Regulation S Global Depository Receipt (the “Master Regulation S GDR”) and a Master Rule 144A Global Depositary Receipt (the
“Master Rule 144A GDR” and, together with the Master Regulation S GDR, the “Master GDRs”) each registered in the name of
Cede & Co., as nominee for The Depository Trust Company (“DTC”) in New York. Except as set forth herein, investors may hold
beneficial interests in and transfer the GDSs only through DTC, Euroclear or Clearstream and their direct and indirect participants, as
applicable. Transfers within Euroclear and Clearstream, or within DTC, will be in accordance with the usual rules and operating
procedures of the relevant system.
This Offering Circular and the financial statements referred herein are available for prospective investors at the legal
domicile of the Company at Piedras 1743, (C1140 ABK) City of Buenos Aires, Argentina, at the domicile of the BCBA at Sarmiento
229 (C1041AAE), City of Buenos Aires, Argentina, and through the Company’s website at www.grupoclarin.com, and the Spanish
language prospectus used in connection with the Argentine tranche of the Offering is also available through the website of the
Comisión Nacional de Valores, the Argentine Securities Commission (the “CNV”) at www.cnv.gov.ar.
The Company expects that delivery of the GDSs will be made through DTC on or about the GDS Closing Date and that
delivery of the Class B Shares will be made on or about 24 October 2007 (the “Class B Share Closing Date”).
IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR
This Offering Circular is issued in compliance with the Prospectus Rules of the FSMA (the
“Listing Rules”), which are compliant with the provisions of the Prospectus Directive. The Company
accepts responsibility for the information provided in this Offering Circular and, having taken all
reasonable care to ensure that such is the case, the Company declares that the information contained
in this Offering Circular is, to the best of the Company’s knowledge, in accordance with the facts and
contains no omission likely to affect its import.
None of the International Underwriters or Selling Shareholders makes any representation or
warranty, express or implied, as to the accuracy or completeness of information set forth in this
Offering Circular. None of the International Underwriters or the Selling Shareholders assumes any
responsibility for the accuracy or completeness of the information set forth in this Offering Circular.
Each person contemplating making an investment in the Securities must make its own investigation
and analysis of Grupo Clarín and its own determination of the suitability of any such investment, with
particular reference to its own investment objectives and experience, and any other factors that may
be relevant to such person in connection with such investment.
The Company has applied to have all of its class B common shares (including the Class B
Shares) and its class C common shares listed on the BCBA and to have all of its class B common
shares (including the Class B Shares) admitted to trading on the BCBA. It has also applied for
admission of all its share capital to the public offering regime and registration of the issuance of the
New Shares with the CNV. The Company expects trading of the Class B Shares to commence on
October 2007.
No prospective investor should consider any information in this Offering Circular to be investment, legal, tax or other advice. Each prospective investor should consult its own counsel, accountant
and other advisers for such advice. None of the Company, the Selling Shareholders or any of the
International Underwriters makes any representation to any offeree or purchaser of the Securities
regarding the legality of an investment in such Securities by such offeree or purchaser.
The contents of the Company’s website do not form any part of this Offering Circular.
Market and other Statistical Data
This Offering Circular is based on information provided by the Company and other sources that
the Company believes to be reliable. The Company has included its own estimates, assessments,
adjustments and judgements in preparing some market information, which has not been verified by an
independent third party. Market information included herein is, therefore, unless otherwise attributed
exclusively to a third party source, to a certain degree subjective. While the Company believes that its
own estimates, assessments, adjustments and judgements are reasonable and that the market
information prepared by the Company appropriately reflects the industry and the markets in which it
operates, there is no assurance that the Company’s own estimates, assessments, adjustments and
judgements are the most appropriate for making determinations relating to market information or that
market information prepared by other sources will not differ materially from the market information
included herein.
Market data used in this Offering Circular, including without limitation under the captions
“Summary”, “Business Description”, “Operating and Financial Review” and “Industry Regulation”, have
been extracted from publicly available information, including industry publications, market research,
press releases, filings under various securities laws and official data published by certain government
and international agencies. Such sources include Convergencia Research, the Instituto Verificador de
Circulaciones, the newspaper and magazine circulation verification institute (“IVC”), IBOPE Argentina
S.A. (“IBOPE”), the Instituto Nacional de Estadísticas y Censos, the Argentine statistical institute
(“INDEC”) and the survey of the Banco Central de la República Argentina, the Argentine Central Bank
(the “Central Bank”) of independent forecasting firms (“REM”). The Company has relied on the
i
accuracy of such information without carrying out an independent verification thereof. Accordingly, the
Company accepts responsibility only for accurately reproducing such information and disclaims
responsibility for the accuracy thereof. As far as the Company is aware and is able to ascertain from
information published by the aforementioned sources, no facts have been omitted which would render
the reproduced information, data and statistics inaccurate or misleading.
Stabilisation
In connection with the Offering, Credit Suisse Securities (Europe) Limited (or persons acting on
its behalf) may over-allot GDSs or effect transactions with a view to supporting the market price of the
GDSs at a level higher than that which might otherwise prevail. However, there is no assurance that
Credit Suisse Securities (Europe) Limited (or persons acting on its behalf) will undertake stabilisation
action. Any stabilisation action may begin on or after the date of adequate public disclosure of the
final price of the Securities and, if begun, may be ended at any time, but it must end no later than
30 days after that date.
The International Underwriters also may impose a penalty bid. This occurs when a particular
International Underwriter repays to the International Underwriters a portion of the discount received by
it because Credit Suisse Securities (Europe) Limited or its affiliates have repurchased Class B Shares
or GDSs sold by or for the account of such International Underwriter in stabilising or short covering
transactions.
Notice to United Kingdom Investors
This Offering Circular is only being distributed to and is only directed at (i) persons who are
outside the United Kingdom, (ii) investment professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) and (iii) high net worth
companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a)
to (d) of the Order (all such persons together being referred to as “Relevant Persons”). The Securities
are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise
acquire such Securities will be engaged in only with, Relevant Persons. Any person who is not a
Relevant Person should not act or rely on this Offering Circular or any of its contents.
Notice to European Economic Area Investors
In any European Economic Area (“EEA”) Member State that has implemented the Prospectus
Directive, this communication is only addressed to, and is only directed at, qualified investors in that
Member State within the meaning of the Prospectus Directive.
This Offering Circular has been prepared on the basis that all offers of Securities will be made
pursuant to an exemption under the Prospectus Directive, as implemented in member states of the
EEA, from the requirement to produce a prospectus for offers of Securities. Accordingly any person
making or intending to make any offer within the EEA of Securities which are the subject of the
placement contemplated in this Offering Circular should only do so in circumstances in which no
obligation arises for the Company, any of the Selling Shareholders or any of the International
Underwriters to produce a prospectus for such offer.
Each person in a Member State of the European Economic Area that has implemented the
Prospectus Directive (each, a “Relevant Member State”) who receives any communication in respect
of, or who acquires any of the Securities under, the offers contemplated in this offering memorandum
will be deemed to have represented, warranted and agreed to and with us and the initial purchaser
that it is a qualified investor within the meaning of the law in that Relevant Member State implementing
Article 2(1)(e) of the Prospectus Directive.
ii
None of the Company, any of the Selling Shareholders or any of the International Underwriters
has authorised, nor do they authorise the making of any offer of Securities through any financial
intermediary, as that term is used in Article 3(2) of the Prospectus Directive, on their behalf, other
than offers made by the International Underwriters which constitute the final placement of Securities
contemplated in this Offering Circular. Accordingly, no purchaser of the Securities, other than the
International Underwriters, is authorised to make any further offer of the Securities on behalf of the
International Underwriters.
For the purposes of this representation, the expression an “offer” in relation to any Securities in
any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and any Securities to be offered so as to enable an investor to
decide to purchase or subscribe for the Securities, as the same may be varied in that Relevant
Member State by any measure implementing the Prospectus Directive in that Relevant Member State.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE, NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE
THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT, NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION, MEANS THAT THE SECRETARY OF STATE OF
NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR
RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
iii
TABLE OF CONTENTS
Page
Cautionary Note Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limitation on Service of Process and Enforcement of Civil Liabilities. . . . . . . . . . . . . . . . . . . . .
Presentation of Financial and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange Rate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Consolidated Financial And Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Argentine Media Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industry Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Pro Forma Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal and Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Share Capital and Applicable Argentine Legislation . . . . . . . . . . . . . . . . . . . . . .
Terms and Conditions of the Global Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subscription and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information Relating to the Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Glossary of Selected Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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F-1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Offering Circular contains “forward-looking statements” regarding our financial condition,
results of operations and business. All statements other than statements of historical facts, including,
without limitation, any statements preceded by, followed by or that include the words “target”, “believe”,
“expect”, “aim”, “intend”, “plan”, “will”, “may”, “anticipate”, “would”, “could” or similar expressions or the
negative thereof are, or may be considered, forward looking statements.
Forward-looking statements involve known and unknown risks, uncertainties and other important
factors beyond our control that could cause our actual results, performance or achievements to be
materially different from future results, performance or achievements expressed or implied by such
forward-looking statements and, thus, an investment decision shall not be based on such forwardlooking statements. Such forward-looking statements are based on numerous assumptions regarding
our present and future business strategies and the environment in which we will operate in the future.
Among the important factors that could cause our actual results, performance or achievements to
differ materially from those expressed in such forward-looking statements are those under the
headings “Summary”, “Risk Factors”, “Operating and Financial Review”, “Business Description” and
elsewhere in this Offering Circular, including, without limitation, (i) economic, political and social
conditions prevailing in Argentina and other countries in which we operate; (ii) reliance on content
produced by third parties; (iii) difficulties arising in our relationship with significant minority investors in
the Company and certain of its subsidiaries; (iv) increasing cost of our supplies; (v) inability to finance
on reasonable terms capital expenditures required to remain competitive; (vi) fluctuations, whether
seasonal or in response to adverse macro-economic developments, in the demand for advertising;
(vii) changes in the regulatory environment in which we operate; (viii) our capacity to compete and
develop our business in the future; and (ix) changes in our business. This list of factors is not
exhaustive. When relying on forward-looking statements, each prospective investor should carefully
consider the foregoing factors and other uncertainties and events, especially in light of the political,
economic, social and legal environment in which the Company operates. We make no representation,
warranty or prediction that the results anticipated by such forward-looking statements will be achieved,
and such forward-looking statements represent, in each case, only one of many possible scenarios
and should not be viewed as the most likely or standard scenario. These forward-looking statements
speak only as at the date of this Offering Circular. We expressly disclaim any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statements contained herein to reflect
any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based unless required to do so by the Listing Rules of
the U.K. Listing Authority (the “UKLA”), the Prospectus Rules, the Disclosure and Transparency Rules
and other applicable laws.
v
AVAILABLE INFORMATION
For so long as any Class B Shares or GDSs representing such Class B Shares are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities Act, we will, during any period in
which we are neither subject to Section 13 or Section 15(d) of the United States Securities Exchange
Act of 1934, as amended (the “Exchange Act”), nor exempt from reporting pursuant to Rule 12g3-2(b)
thereunder, provide to any holder or beneficial owner of such restricted securities or to any prospective purchaser or subscriber of such restricted securities designated by such holder or beneficial
owner upon the request of such holder, beneficial owner or prospective purchaser or subscriber, the
information required to be delivered to such persons pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto).
vi
LIMITATION ON SERVICE OF PROCESS AND
ENFORCEMENT OF CIVIL LIABILITIES
The Company is incorporated in Argentina. All of the Company’s directors and executive officers
named in this Offering Circular reside outside the United Kingdom and the United States except for
Messrs. Muneer Satter, David Castelblanco and Ralph H. Booth II, who reside in the United States.
All or a substantial portion of their and the Company’s assets and the assets of certain Selling
Shareholders are located outside the United Kingdom and the United States, principally in Argentina.
As a result, it may not be possible for you to:
• effect service of process within the United Kingdom or the United States upon most of the
Company’s directors and executive officers named in this Offering Circular; or
• enforce, in the United Kingdom or the United States, court judgements obtained in courts of
the United Kingdom or the United States, as the case may be, against the Company or most
of the Company’s directors and executive officers named in this Offering Circular in any action.
In addition, it may be difficult for you to enforce, in original actions brought in courts in
jurisdictions located outside the United Kingdom and the United States, liabilities predicated upon U.K.
or U.S. securities laws, as the case may be.
The Company and the Local Selling Shareholders (as defined herein) have been advised by their
Argentine counsel, Estudio Sáenz Valiente & Asociados, that judgements of United States courts for civil
liabilities based upon the federal securities laws of the United States may be enforced in Argentina,
provided that the requirements of any applicable treaty for the enforcement of foreign judgements, or, in
the absence of such treaty, Article 517 of the Federal Civil and Commercial Procedure Code (if
enforcement is sought before federal courts) are met. Under Article 517 for a foreign judgement to be
enforced in Argentina in the absence of a treaty, (i) the judgement, which must be final in the jurisdiction
where it was rendered, must have been issued by a competent court in accordance with the Argentine
principles regarding international jurisdiction and resulted from a personal action, or an in rem action with
respect to personal property if such property was transferred to Argentine territory during or after the
foreign proceeding, (ii) the defendant against whom enforcement of the judgement is sought must have
been personally served with the summons and, in accordance with due process of law, must have been
given an opportunity to defend itself against foreign action, (iii) the judgement must be valid in the
jurisdiction where it was rendered and its authenticity must be established in accordance with the
requirements of Argentine law, (iv) the judgement must not violate the principles of public policy of
Argentine law, and (v) the judgement must not be contrary to a prior or simultaneous judgement of an
Argentine court. There are currently no treaties for the enforcement of foreign judgements between
Argentina and the United Kingdom or the United States.
Subject to compliance with Article 517 of the Federal Civil and Commercial Procedure Code
described above, a judgement against us, any of the Local Selling Shareholders or the persons described
above obtained outside Argentina would be enforceable in Argentina without reconsideration of the merits.
The Company and the Local Selling Shareholders have been further advised by their Argentine
counsel that:
• original actions based on the federal securities laws of the United States may be brought in
Argentine courts and that, subject to applicable law, Argentine courts may enforce liabilities in
such actions against the Company, the Company’s directors, the Company’s executive officers,
the Selling Shareholders and the advisors named in this Offering Circular; and
• the ability of a judgement creditor or the other persons named above to satisfy a judgement by
attaching certain assets of ours or any of the Selling Shareholders, respectively, is limited by
provisions of Argentine law.
A plaintiff (whether Argentine or non-Argentine) residing outside Argentina during the course of
litigation in Argentina must provide a bond to guarantee court costs and legal fees if the plaintiff owns
no real property in Argentina that could secure such payment. The bond must have a value sufficient
to satisfy the payment of court fees and defendant’s attorney fees, as determined by the Argentine
judge. This requirement does not apply to the enforcement of foreign judgements.
vii
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Presentation of Financial Information
The Company maintains its financial books and records and publishes its financial statements in
Pesos. The Company’s audited consolidated financial statements as of and for the years ended
31 December 2006, 2005 and 2004 (the “audited consolidated financial statements”) included in this
Offering Circular have been prepared in accordance with accounting principles generally accepted in
the City of Buenos Aires, Argentina (“Argentine GAAP”) and CNV regulations, which differ in certain
significant respects from the accounting principles generally accepted in the United States of America
(“U.S. GAAP”). The Company’s unaudited interim consolidated financial statements as of 30 June
2007 and 2006 and for the six month periods ended 30 June 2007 and 2006 (the “unaudited interim
financial statements”) included in this Offering Circular have been prepared on the basis substantially
consistent with the annual financial statements. In the opinion of the Company’s management, the
unaudited interim financial statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim period. The financial results
for the six month period ended 30 June 2007 are not necessarily indicative of the results for the full
year ending 31 December 2007 or for any other interim period or financial year. Our independent
accountants, Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina (a member firm of
PricewaterhouseCoopers), independent accountants (the “Independent Accountants”), have issued an
opinion over the audited consolidated financial statements that includes the description of an
uncertainty that results from pending regulatory approvals relating to the sale by the Company of its
indirect participation in Primera Red Interactiva de Medios Argentinos (Prima) S.A. (“Prima”) to
Multicanal S.A. (“Multicanal”), the sale of its direct and indirect participation in Multicanal to Cablevisión S.A. (“Cablevisión”) and the indirect acquisition by the Company of additional shares of
Cablevisión necessary to increase its participation in that company to 60% of its outstanding capital
stock and votes. Additionally, in connection with the unaudited interim financial statements of the
Company, the Independent Accountants have issued a limited review report with an observation
relating to the uncertainty mentioned above.
The Company’s audited consolidated financial statements as of and for the years ended
31 December 2006, 2005 and 2004 included in Annex A to this Offering Circular have been prepared
in accordance with U.S. GAAP (the “U.S. GAAP audited consolidated financial statements”). The
Company’s unaudited interim consolidated financial statements as of 30 June 2007 and 2006 and for
the six months ended 30 June 2007 and 2006 included in Annex A (the “U.S. GAAP unaudited interim
financial statements” and, together with the U.S. GAAP audited consolidated financial statements, the
“U.S. GAAP Financial Statements”) to this Offering Circular have been prepared on the basis
substantially consistent with the annual financial statements. In the opinion of the Company’s
management, the U.S. GAAP unaudited interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim
period. The financial results for the six months ended 30 June 2007 are not necessarily indicative of
the results for the full year ending 31 December 2007 or for any other interim period or financial year.
On 26 September 2006, the Company increased its interest in Cablevisión to 60% of Cablevisión’s outstanding shares and Cablevisión acquired, directly and indirectly, 100% of the outstanding
shares of Holding Teledigital Cable S.A. (“Holding Teledigital”), 98.5% of the outstanding shares of
Multicanal and, through Multicanal, 100% of the outstanding shares of Prima, 3% of which were
subsequently transferred to Univent’s S.A. (“Univent’s”) and later to Cablevisión. See “Business
Description — Cable Television and Internet Access — Summary of Ownership Changes and Recent
Acquisitions.”
This Offering Circular also contains audited consolidated financial statements of Cablevisión as
of and for each of the fiscal years ended 31 December 2006 and 2005 prepared in accordance with
Argentine GAAP and CNV regulations (the “Cablevisión Financial Statements”). The Independent
Accountants have issued an opinion over the Cablevisión Financial Statements that includes the
viii
description of an uncertainty that results from pending regulatory approvals relating to the acquisition
of Multicanal by Cablevisión and Prima by Multicanal.
In addition, this Offering Circular contains an unaudited pro forma consolidated statement of
income of the Company for the year ended 31 December 2006 prepared in accordance with Argentine
GAAP and CNV regulations, giving effect to (i) the decrease in our ownership interest in Multicanal to
65% as a result of the restructuring of Multicanal’s financial debt through an acuerdo preventivo
extrajudicial (the “Multicanal APE”) in July 2006 and (ii) the increase in the Company’s interest in
Cablevisión to 60% which, in turn, acquired 100% of the outstanding shares of Holding Teledigital
from one of the former shareholders of Cablevisión and 98.5% of the outstanding shares of Multicanal
from the Company, Arte Gráfico Editorial Argentino S.A. (“AGEA”) and Fintech Energy LLC, an affiliate
of Fintech Advisory, Inc. (together with all of its affiliates, “Fintech”), and the acquisition by Multicanal
of 100% of the outstanding shares of Prima from Primera Red Interactiva de Medios Americanos
(Prima) Internacional S.A. (since 26 September 2007, denominated Compañía de Medios Digitales
(CMD) S.A., hereinafter “Prima Internacional”) in September 2006, as if such transactions had
occurred on 1 January 2006 (the “Unaudited Pro Forma Consolidated Statement of Income”). The
Unaudited Pro Forma Consolidated Statement of Income is presented for informational purposes only
and does not purport to represent what the Company’s results of operations actually would have been
if these acquisitions in fact had occurred on 1 January 2006, or to project the Company’s consolidated
results of operations for any future period.
The Argentine GAAP financial statements of the Company and Cablevisión were prepared in
constant units of currency, reflecting the overall effects of inflation, through 31 August 1995. Argentine
law provided that financial statements were not required to be restated to reflect inflation from
1 September 1995 through 31 December 2001, a period characterised by very low rates of inflation
and, in certain years, deflation. Between 1 January 2002 and 28 February 2003, Argentine law was
amended to require the restatement of financial statements to reflect the effects of inflation, in
recognition of the high rates of inflation that followed the end of the Peso/U.S. dollar parity maintained
under Argentine Law No. 23,928 (as amended), (the “Convertibility Law”). Pursuant to Decree
No. 664/03 of the Argentine executive branch and Resolution No. 441/03 issued by the CNV, the
restatement of financial statements to reflect inflation was discontinued again effective 1 March 2003,
although under Argentine GAAP financial statements would have been required to be restated through
30 September 2003. Accordingly, the Company and Cablevisión are not required to restate and have
not restated their financial statements for inflation after 28 February 2003. As a result, the results of
operations and financial position of the Company and Cablevisión may not be directly comparable
from period to period. The Company cannot assure you that in the future it will not be again required
to record the effects of inflation in its financial statements (including those covered by the financial
statements included in this Offering Circular) in constant Pesos, which may affect the comparability of
its results of operations and financial position to those recorded in prior periods. See Note 2.1 to the
parent company only financial statements that form part of the audited consolidated financial
statements and Note 3.3 of the Cablevisión Financial Statements included in this Offering Circular.
In November 2001, the Federación Argentina de Consejos Profesionales de Ciencias Económicas, the Argentine Federation of Professional Councils in Economic Sciences (“FACPCE”) adopted
Technical Resolution No. 18 which for reporting purposes requires public companies to include
segment reporting information, grouping activities relating to products and services that are subject to
similar risks and profitability. We grouped our operations into four business segments: Cable television
and Internet access, publishing and printing, broadcasting and programming, and other. See Note 3 to
our audited consolidated financial statements. The segment data set forth in this Offering Circular do
not reflect the elimination of intersegment sales and corporate expenses.
Currency conversions, including conversions of Pesos into U.S. dollars, are included for the
convenience of the reader only and should not be construed as a representation that the amounts in
question have been, could have been or could be converted into any particular denomination, at any
particular rate or at all.
ix
Presentation of Certain Terminology
In this Offering Circular, all references to:
• “Argentina” are to the Republic of Argentina;
• “Ps.” or “Pesos” are to the lawful currency of Argentina;
• “U.K.” and “United Kingdom” are to the United Kingdom of Great Britain and Northern
Ireland;
• “U.S. dollar” and “U.S.$” are to the lawful currency of the United States of America;
• “U.S.” and “United States” are to the United States of America;
Definitions of certain terminology associated with the Company’s business and industry are set
forth under “Glossary of Selected Terms”.
In this Offering Circular, except where the context otherwise requires or implies, we use the
words “Grupo Clarín”, “the Company”, “we”, “us”, and “our” to refer to Grupo Clarín S.A. and, when
the context otherwise requires, its consolidated subsidiaries.
Rounding
Certain figures included in this Offering Circular have been subject to rounding adjustments;
accordingly, figures shown for the same category presented in different tables may vary slightly and
figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that
precede them.
x
EXCHANGE RATE INFORMATION
Exchange Rates
On 7 January 2002, the Argentine congress enacted Law No. 25,561, abandoning the currency
board in place for over ten years which set forth Peso-U.S. dollar parity at Ps.1.00 per U.S.$1.00. After
devaluing the Peso and setting the official exchange rate at Ps.1.40 per U.S.$1.00, on 11 February 2002,
the government allowed the Peso to float. The Central Bank, however, continues to intervene in the
foreign exchange market by buying and selling U.S. dollars for its own account on a regular basis. The
shortage of U.S. dollars and their heightened demand caused the Peso to further devalue significantly in
the first half of 2002. After reaching its lowest value of Ps.3.87 per U.S.$1.00 in June 2002, the Peso
appreciated versus the U.S. dollar to an exchange rate of Ps.2.93 per U.S.$1.00 as of 31 December
2003. Since then, the peso has gradually depreciated in nominal terms to an exchange rate of Ps.3.15
per U.S.$1.00 on 30 September 2007. See “Risk Factors — Risks Related to Argentina”.
The table below sets forth, for the periods and dates indicated, certain information regarding the
exchange rate between the Peso and the U.S. dollar, based on the official exchange rate quoted by
the Central Bank. Fluctuations in the exchange rate between the Argentine Peso and the U.S. dollar
in the past are not necessarily indicative of fluctuations that may occur in the future. These rates may
also differ from the actual rates used in the preparation of the Company’s financial statements and
other information presented in this Offering Circular.
Ps. per U.S.$1.00(1)
Year ended
2001 . . . . . . . . . . . . .
2002 . . . . . . . . . . . . .
2003 . . . . . . . . . . . . .
2004 . . . . . . . . . . . . .
2005 . . . . . . . . . . . . .
2006 . . . . . . . . . . . . .
Month ended
31 January 2007 . . . .
28 February 2007 . . .
31 March 2007 . . . . .
30 April 2007 . . . . . .
31 May 2007 . . . . . . .
30 June 2007 . . . . . .
31 July 2007 . . . . . . .
31 August 2007. . . . .
30 September 2007 .
High
Low
Average(2)
Period
End
..
..
..
..
..
..
..
..
..
..
..
..
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..
..
..
..
.
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.
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..
..
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.
.
.
.
.
.
..
..
..
..
..
..
1.00
3.87
3.36
3.07
3.05
3.11
1.00
1.00
2.75
2.80
2.86
3.03
1.00
3.16
2.95
2.95
2.92
3.07
1.00
3.36
2.93
2.97
3.03
3.07
..
..
..
..
..
..
..
..
..
..
..
..
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..
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.
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.
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.
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..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
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..
..
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.
.
.
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..
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..
..
3.11
3.11
3.11
3.10
3.09
3.09
3.17
3.17
3.17
3.06
3.10
3.10
3.08
3.07
3.07
3.09
3.13
3.13
3.09
3.10
3.10
3.09
3.08
3.08
3.11
3.15
3.15
3.11
3.10
3.10
3.09
3.08
3.09
3.12
3.16
3.15
(1) Until June 2002, asked closing quotations as quoted by Banco Nación (as defined herein). Since
July 2002, the reference exchange rate as published by the Central Bank.
(2) In the case of exchange rate averages for a year, represents the average of the exchange rates
on the last day of each month during the year. In the case of exchange rate averages for a period
shorter than a year, represents the average of the lowest and highest daily exchange rates in the
month or period.
This Offering Circular contains translations of certain amounts into U.S. dollars or Pesos at
specified rates solely for the purpose of presentation. These translations should not be construed as
representations that the amounts actually represent such equivalent U.S. dollar or Peso amounts or
could be, or could have been, converted into U.S. dollars or Pesos at the rate indicated as of the
dates mentioned herein or at all.
xi
Exchange Controls
In 2001, due to the deterioration of the economic and financial conditions in Argentina, the
government’s difficulties in dealing with the service of its public foreign debt and the decrease in the
level of deposits in the financial system, the government established a number of monetary and
currency exchange control measures. These included restrictions on the free disposition of funds
deposited in banks and restrictions on the transfer of foreign currency abroad without prior Central
Bank approval. Since 2003, the government has eased these restrictions substantially.
After the repeal of the Convertibility Law and following a brief experience that combined an
official exchange rate with a free rate, in February 2002 the government established a single free
exchange market. The exchange rate of foreign currencies is determined by market forces, but the
Central Bank has the power to intervene by buying and selling foreign currency for its own account, a
practice in which it engages on a regular basis.
The reestablishment of foreign exchange controls in Argentina affected the ability of Argentine
residents and non-residents to purchase foreign currency in the Argentine market and transfer it
abroad, provided for the mandatory repatriation of the foreign currency proceeds of exports of
products and services, as well as foreign debt, and imposed restrictions on payments of profits and
dividends to foreign shareholders of local companies.
On 6 September 2002, the Central Bank imposed limitations on the amount of foreign currency
that Argentine residents and local legal entities could purchase in the foreign exchange market and
transfer abroad to make investments outside of Argentina, such as real estate investments, direct
investments, portfolio investments and other investments made abroad by Argentine residents, without
requiring prior Central Bank approval. The limits have been raised progressively since 2002 and are
currently at U.S.$2 million per month.
Repatriation of funds by non-Argentine residents was also made subject to certain limitations
which the Central Bank eased in July 2007.
Since 2003 Argentine companies may purchase foreign currency in the foreign exchange market
to pay dividends abroad only to foreign shareholders and to the Depositary for the benefit of the
foreign holders of GDSs, provided that such dividends correspond to periods covered by approved
audited annual financial statements. Argentine companies may also make payments of dividends to
foreign shareholders and to the Depositary for the benefit of the foreign holders of GDSs in Pesos in
Argentina. The repatriation of such proceeds by foreign shareholders and the Depositary for the
benefit of the foreign holders of GDSs will be subject to the limitations described below.
On 26 June 2003, the government set restrictions on capital flows into and out of Argentina, which
mainly consisted of a prohibition to transfer any funds out of Argentina until 180 days after their entry into
the country. Portfolio investments, financial loans and repatriation of capital, among others, were subject to
the restriction. Decree 285/03 exempted from this requirement foreign trade transfers (i.e., repatriation of
export proceeds or export financings) and direct investments made in Argentine companies.
On 10 June 2005, the government issued Decree 616/05 (as implemented by Central Bank
regulations), imposing additional restrictions on certain capital flows into and out of Argentina. These
restrictions include increasing from 180 to 365 days the period that incoming funds of all new foreign
indebtedness of Argentine residents, any refinancing of existing foreign debt, portfolio investments by
non-Argentine residents and capital contributions must remain in Argentina. The Decree exempted
certain transactions from this requirement such as import and export transactions and capital inflows
to acquire debt in the context of their initial public offering. However, pursuant to Central Bank
regulations, the 365-day period is still applicable to the repatriation by non-Argentine residents of
certain portfolio investments (including the purchase of the Class B Shares) made and collected in
Argentina, income from such investments or any gains from the sale of such investments, even if the
purchase was made in the context of a public offering.
xii
Decree 616/05 and its implementing regulations also require that 30% of incoming funds be
deposited with a bank in Argentina in a non-interest bearing account for 365 calendar days. The
transactions subject to this requirement include, among others, the incurrence of certain foreign
indebtedness by Argentine residents (unless the debt qualifies for an exemption) and portfolio
investments by non-Argentine residents (except for the initial subscription of debt securities and
shares of local companies which are publicly offered and are listed on self-regulated markets,
provided, however, that initial public offerings of debt securities of financial trusts are subject to the
30% mandatory reserve if an investment in the underlying assets would be subject to such restriction).
These restrictions do not apply to incoming funds of foreign investors to purchase our New Shares in
Argentina in the Offering but do apply to those incoming funds to purchase Selling Shareholder
Shares in Argentina. Sales of New Shares, Selling Shareholder Shares or GDSs outside Argentina by
the International Underwriters, if deposited outside of Argentina, will not involve capital inflows into
Argentina and will therefore not be subject to these restrictions.
Repatriation of funds by Argentine residents is also subject to the mandatory 30% deposit for the
amounts exceeding U.S.$2 million per month. Also, as from July 2007, the Central Bank imposed
additional restrictions aimed at identifying the origin of the funds that are being repatriated. According
to these new rules, unless the transaction falls under one of the specific cases set forth therein, the
Argentine resident must provide the financial entity executing the foreign exchange transaction with
evidence of the funds being maintained abroad for at least 20 business days prior to the execution of
such transaction.
Payments upon redemption of shares by Argentine companies to foreign shareholders may be
made in Pesos in Argentina without restrictions. However, remittance of the proceeds by foreign
shareholders will be subject to the following limitations. As a general rule, purchases of foreign
currency by non-Argentine residents in excess of U.S.$5,000 for their transfer abroad require prior
Central Bank approval, unless the trade qualifies for an exemption. The U.S.$5,000 limit was
increased to U.S.$500,000 per month in the case of repatriation of portfolio investments and their
proceeds, and to U.S.$2 million per month in the case of proceeds of the sale of direct investments. In
both cases, the investments must have remained in Argentina for a mandatory waiting period
(365 days for investments made after June 2005). In 2007 the Central Bank eased certain restrictions
on the repatriation of capital held by non-Argentine residents. Although the general limit of U.S.$5,000
per month was maintained, the Central Bank created additional exemptions including, among others,
the repatriation of capital contributions and results from capital reductions by direct investors in
Argentine companies (investors holding 10% or more of the outstanding capital stock or votes) subject
to compliance with certain requirements. The U.S.$500,000 repatriation limit for portfolio investments
(which include investments in shares of Argentine companies below 10% of the outstanding capital
stock or votes) was maintained. These restrictions would apply to the repatriation of funds collected in
Pesos in Argentina by non-Argentine residents as a result of the sale of the Class B Shares, and may
also apply to the repatriation of dividend payments if collected in Pesos in Argentina.
Moreover, Argentine companies can access the foreign exchange market to make payment upon
redemption of shares to foreign shareholders that qualify as direct investors (10% or more of capital
or votes). Access to the foreign exchange market by Argentine companies to make payment upon
redemption of shares to portfolio investors is restricted and, therefore, payments should be made in
Pesos in Argentina or with freely available funds held by the Argentine company abroad.
From 21 May 2007 to 31 December 2007, Argentine residents may purchase foreign currency in
the foreign exchange market for investment purposes in excess of the U.S.$2 million limit, provided
that the funds are applied within 360 days to make payments to non-Argentine residents of profits and
dividends (subject to certain caps) and imports, or to make direct investments abroad.
xiii
SUMMARY
This summary must be read as an introduction to this Offering Circular. Any decision to invest in
the Securities should be based on consideration of this Offering Circular as a whole including the
documents incorporated by reference. Following the implementation of the relevant provisions of the
Prospectus Directive in each member state of the EEA, no civil liability will attach to the Company in
any such member state solely on the basis of this summary, including any translations thereof, unless
it is misleading, inaccurate or inconsistent when read together with the other parts of this Offering
Circular. Where a claim relating to the information contained in this Offering Circular is brought before
a court in a member state of the EEA, the claimant may, under the national legislation of that member
state where the claim is brought, be required to bear the costs of translating this Offering Circular
before the legal proceedings are initiated.
Definitions of certain terms related to the Company’s business and industry are set forth under
“Glossary of Selected Terms”. Certain statements in this Offering Circular include forward-looking
statements that also involve risks and uncertainties as described under “Cautionary Note Regarding
Forward-Looking Statements”.
Our Company
We are Argentina’s largest and most prominent media company, and the market leader in cable
television and Internet access, printing and publishing, and broadcasting and programming segments.
Our cable television network is the largest in Latin America, we have the largest broadband subscriber
base in Argentina and our flagship newspaper has the highest circulation in Latin America and is the
second-highest circulation Spanish-language newspaper in the world. We are the largest producer of
media content in Argentina. Our content, including news, sports and entertainment, reaches substantially all segments of the Argentine population in terms of wealth, geography and age.
In 2006 and for the six month period ended 30 June 2007, our net sales were Ps.2.8 billion and
Ps.2.0 billion, respectively, our Adjusted EBITDA (as defined herein) was Ps.709.7 million and
Ps.616.6 million, respectively, and our net income was Ps.869.7 million and Ps.103.5 million, respectively. In 2006, on a pro-forma basis after giving effect to the Cablevisión Acquisition (as defined
herein), our net sales were Ps.3.6 billion, our Adjusted EBITDA was Ps.1.0 billion and our net income
was Ps.593.6 million.
Our Business Segments
Through companies we control and joint ventures, we are engaged primarily in cable television
and Internet access, printing and publishing, broadcasting and programming and other related
activities. The chart below illustrates the main companies in which we participate, directly or indirectly,
organised by business segment as of the date of this Offering Circular.
1
The Company
Cable TV and Internet
Access
Cable TV
• Cablevisión
• Multicanal
• Holding Teledigital
Broadband
• Cablevisión
• Prima
Broadcasting &
Programming
Pr
Printing & Publishing
Broadcast TV Channels
Publishing
• AGEA
• Tinta Fresca
• Cimeco – La Voz/Los Andes
Printing
• AGR
• Impripost
Paper Mill
• Papel Prensa
Other
• Oportunidades
• Ferias y Exposiciones
• Unir
• Artear C13
• Telecor C12
• Telba C7
• Bariloche TV C6
Other
Digital Content
• Clarín Global
• Prima Internacional
Other
• GC Gestión Compartida
TV Content Producers
• Pol-Ka
• Ideas del Sur
• IESA
• TRISA
• TSC
• Canal Rural Satelital
Film Producer
• Patagonik Film Group
Radio Broadcasting
• Radio Mitre
Our Strengths
We believe we have the following strengths:
1. We are the Largest and Most Prominent Media Company in Argentina.
leader in Argentina in most of the media segments in which we operate.
We are market
• Largest Cable TV Network in Latin America. We operate the largest cable TV network in
Latin America in terms of subscribers, with approximately 2.9 million as of 30 June 2007.
• Largest Broadband Internet Access Provider in Argentina. We provide broadband
Internet access to approximately 614,800 subscribers in Argentina as of 30 June 2007.
• Largest Newspaper in Latin America. Our flagship newspaper has the highest circulation in
Latin America and is the leading Argentine newspaper in terms of advertising revenues.
• Largest Television Broadcaster in Argentina. We broadcast the leading TV channel in
Argentina in terms of advertising revenues and prime time audience.
• Largest Network of Argentine Internet Portals. We operate the largest network of Argentine-based Internet portals, receiving approximately 298 million page views per month.
2. We Own a Large, High-Quality, High-Capacity Cable Network. Through our highcapacity cable network we can offer basic pay TV, broadband Internet, premium video, telephony and
value added data services to our residential and business customers. 42% of our cable network is
bidirectional. Our cable modem technology competes favourably with ADSL in the provision of
broadband Internet access. The size of our cable TV business allows us to achieve significant
economies of scale, mainly through cost savings and efficient planning of our capital expenditures, in
a largely fixed cost industry.
3. We are the Leading Producer of Media Content in Argentina. We believe that our
longstanding leadership in the media business in Argentina gives us a unique ability to identify
audiences’ tastes and interests and produce content tailored for the Argentine population, such as the
broadcasting of local soccer championships. Our broad content distribution capabilities and critical
mass reinforce our ability to generate high-quality content.
4. We are a Central Point of Reference for Advertisers in Argentina. We have the largest
market share in most segments of the Argentine advertising market. Our leadership position across
2
most content production and distribution platforms allows us to capture a significant share of the
Argentine advertising market.
5. We have Proven Capable of Adapting Our Business Model Over Time. We can
anticipate market trends and changes in our industry, effectively adapt our business models, and take
full advantage of the resulting opportunities. Originally created as a local newspaper, we first became
an integrated player in the printing and publishing business and then successfully expanded into the
broadcast television and radio business. Throughout the last decade, we created the largest cable
television network in Latin America, and most recently we created the most visited network of
Argentine Internet portals. Moreover, we continue to develop new business concepts and
technologies.
6. Our Solid Financial Position. Our strong cash flow generation, supported by the cost
savings we can derive from our economies of scale, as well as our operating margins and limited
capital expenditure needs, provides us financial resources in amounts sufficient to operate our
business efficiently and pursue attractive growth opportunities.
7. Our Proven Management Team and the Commitment of Our Controlling Shareholders.
Our management team has extensive experience in the media industry in Argentina. Its clear vision
prevailed throughout changing environments as we developed into the most prominent and largest
media group in Argentina. Our Controlling Shareholders have been actively involved in the day-to-day
operation of the Company for the past thirty years. Many of our key officers have been with us for
more than a decade.
Our Strategy
We seek to use our leading position and our access to growth opportunities in the media
industry in Argentina and Latin America to create value for our shareholders. We intend to develop
further our cable television business, including digital and premium offerings, and expand our
broadband and advertising business. We expect to strengthen our content production capabilities,
expand our footprint in Argentina and abroad in our core and related businesses, and take advantage
of digital convergence.
We intend to pursue the following strategic initiatives:
• Consolidate Our Cable TV Network. By integrating Cablevisión and Multicanal, we intend
to create value for our shareholders by building on the combined power of the two brands and
reducing costs and capital expenditures through the elimination of overlapping operating
structures and physical networks.
• Expand Our Broadband Internet Access Business. We will seek to expand our broadband
Internet access and gain market share in this growing market through our competitive
advantages over competing ADSL technologies. We intend to rely on the footprint of our
bidirectional network and our cable TV subscriber base to do so.
• Develop High-Growth, High-Margin Businesses. We intend to focus our resources and
capital on high-growth, high-margin businesses and opportunities. We will seek to further
expand our digital subscriber base and premium cable television services, including
pay-per-view programming services. We believe that our state-of-the-art network infrastructure
and broad cable television and Internet customer base can also be leveraged to develop our IP
telephony business.
• Take Full advantage of the Growth of the Argentine Advertising Market. We will seek to
take advantage of the growth of the Argentine economy to increase our advertising revenues.
We intend to use our expertise and current platforms to increase our share of the advertising
market.
3
• Expand Our Footprint in the Interior of Argentina and Pursue Selected Acquisitions
Internationally. We seek to further expand our operations in the interior of the country
through organic growth and opportunistic acquisitions. We will also consider acquisition
opportunities outside Argentina that are consistent with our business strategy. As part of our
ongoing effort to evaluate potential opportunities, we may consider strategic partnerships with
leading international media companies.
• Continue Producing High-Quality Multimedia Content. The production of high-quality
content is one of the cornerstones of our business. We remain committed to investing in the
development of talent and leveraging our knowledge of audiences’ tastes and interests to
continue producing high quality content for distribution through our various platforms. We
expect to further increase our content sales outside of Argentina.
• Take Advantage of Trends and Changes in the Industry to Expand into Related
Businesses. We intend to maintain our leadership in the media industry in Argentina by
capitalising on our ability to identify trends in the industry and to develop new businesses.
Summary Risk Factors
An investment in the Securities involves substantial risks and uncertainties. These risks and
uncertainties include, among others, those listed below:
Risks Related to Our Business
• Uncertainty as to the application of the current legal and regulatory environment that governs
our cable television, telecommunications and Internet and digital content segments and the
adoption of new regulations may be disadvantageous to us or may limit our ability to operate
our business
• Our acquisition of a controlling interest in Cablevisión and its acquisition of Multicanal,
Holding Teledigital and Prima are subject to regulatory approval, which may not be granted
• Our ability to operate effectively depends on maintaining our licenses
• We may not receive all necessary regulatory approvals relating to previous acquisitions
• We are required to divest overlapping broadcasting licenses
• We may not be able to renew some leases of the facilities for the installation of our cable
system
• We may become subject to burdensome government regulations and legal uncertainties
affecting our business segments which could adversely affect our operations
• We cannot assure you that we will be able to maintain certain of our subsidiaries’ telecommunications licenses
• Broadcasting and telecommunications regulations and criteria for their enforcement have
changed over time
• We may fail to realise the anticipated benefits of Cablevisión’s operational consolidation with
Multicanal and Teledigital, and the integration of Multicanal and Teledigital with Cablevisión’s
operations will present significant challenges
• We operate in a highly competitive environment and competition may have a material adverse
effect on our operations
• Our revenues are cyclical and depend upon the condition of the Argentine economy
• The Argentine media industry is a dynamic and evolving industry, and if it does not develop
and expand as we currently expect our business may suffer
4
• The loss of key personnel could disrupt our business and adversely affect our results of
operations
• Our revenues may be adversely affected by subscriber termination
• We may not be able to renew our rights to certain programming
• Investors who purchase shares in this Offering will not be able to exercise control over us since
the Controlling Shareholders will continue to have the power to control us
• Certain of our existing shareholders have approval rights and their interests may be contrary to
yours
Risks Related to Investment in a Foreign Corporation
• Social and political conditions in Latin America may cause volatility in our operations and
materially adversely affect our business
• Fluctuations in exchange rates may adversely affect our business and revenues
• Participation of foreign individuals and entities in media companies is limited by Argentine law
• Non-Argentine companies that own Class B Shares directly and not through GDSs may not be
able to exercise their rights as shareholders unless they are registered in Argentina
• It may be difficult for you to enforce any judgement obtained in the United States or elsewhere
outside Argentina against us or our affiliates
Risks Related to Argentina
• Our financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing in Argentina
• Argentina’s current economic growth and stability may not be sustainable
• Restrictions on the supply of energy could negatively affect Argentina’s economic growth and
negatively impact the Company’s results of operations
• Inflation may continue to increase, causing adverse effects on the Argentine long-term credit
markets as well as the Argentine economy generally
• Argentina’s ability to obtain financing from international markets is limited, which may impair its
ability to implement reforms and foster economic growth
• Significant devaluation of the Peso against the U.S. dollar may adversely affect the Argentine
economy as well as our financial performance
• Significant appreciation of the Peso against the U.S. dollar may adversely affect the Argentine
economy
• Government measures to pre-empt or in response to social unrest may adversely affect the
Argentine economy
• Exchange controls and restrictions on capital inflows and outflows have limited and could be
expected to continue to limit the availability of international credit and the liquidity of the market
for securities of Argentine issuers
• Recurrent shocks to Argentina’s financial sector could threaten the financial system and lead
to renewed political and social tensions, adversely affecting the Argentine economy
• The Argentine economy could be adversely affected by economic developments in other
markets
5
Risks Related to Our Securities
• Restrictions on transfers of foreign exchange and the repatriation of capital from Argentina
may impair your ability to receive dividends and distributions on, and the proceeds of any sale
of, the Class B Shares underlying the GDSs
• Our shareholders’ ability to receive cash dividends may be limited
• Under Argentine law, shareholder rights may be fewer or less well defined than in other
jurisdictions
• Pre-emptive rights may be unavailable to holders of our GDSs
• Your ability to participate in any rights offering of our Company is limited
• Your voting rights with respect to the GDSs are limited by the terms of the Deposit Agreement
• The Offering may not result in an active or liquid market for the GDSs or class B common
shares
• Future sales of securities by our Company or existing shareholders may hurt the price of the
Securities
• Our shareholders may be subject to liability for certain votes of their securities
• Holders of the GDSs will not be able to benefit from certain UK anti-takeover protections
• You will experience immediate and substantial dilution in the book value of the Class B Shares
or the GDSs you purchase in this Offering
6
Corporate Structure
We are a sociedad anónima, a corporation with limited liability, organised, existing and incorporated under the laws of Argentina. We are a holding company and derive our operating income and
cash flow from the operations of our direct and indirect subsidiaries.
The chart below illustrates our organisational structure as of the date of this Offering Circular.
100%
Grupo Clarín
Services LLC
Cablevisión S.A.
60%
Arte Gráfico Editorial
Argentino S.A.
(AGEA)
100%
Holding
Teledigital Cable
S.A.
Teledigital
Cable S.A.
Multicanal S.A.
97%
3%
100%
Artes Gráficas
Rioplatense S.A.
(AGR)
Arte Radiotelevisivo
Argentino S.A.
100%
Unir S.A.
100%
Impripost S.A.
50%
Primera Red
Interactiva de Medios
Argentinos (Prima)
S.A.
Ferias y Exposiciones
S.A.
100%
Oportunidades S.A.
100%
Tinta Fresca Ediciones
S.A.
100%
Clarín Global S.A.
100%
99.2%
TELECOR S.A.C.I.
99.98%
98.5%
GC Gestión
Compartida S.A.
Grupo Clarín S.A.
100%
Radio Mitre S.A.
100%
Primera Red
Interactiva de
Medios Americanos
(Prima)
Internacional S.A.
100%
85.2%
Teledifusora Bahiense
S.A.
100%
Bariloche TV S.A.
100%
Pol-ka Producciones
S.A.
30%
Ideas del Sur S.A.
30%
Patagonik Films Group
S.A.
Inversora de
Eventos S.A.
(IESA)
100%
Televisión Satelital
Codificada S.A.
(TSC)
50%
Tele Red Imagen
S.A. (TRISA)
50%
33.3%
S.A.
Compañía Inversora
en Medios de
Comunicación
(CIMECO) S.A.
Canal Rural Satelital
S.A.
50%
Diario Los Andes
15%
80%
Hermanos Calle S.A.
La Voz del Interior
S.A.
81.3%
12%
37%
Papel Prensa SAICF y
de M
Because Law No. 19,550 (as amended, the “Argentine Corporate Law”) requires that companies
have at least two shareholders, some shares of certain of our subsidiaries are held by GC Minor S.A.,
a company owned by Grupo Clarín (95.3%) and GC Dominio S.A. (“Dominio”) (4.7%). This chart does
not include certain intermediate holding vehicles and subsidiaries that do not have significant assets
or businesses.
On 26 September 2007, the shareholders of Prima Internacional approved the change of that
company’s name to Compañía de Medios Digitales (CMD) S.A. The change in denomination was
registered with the Inspección General de Justicia, the Argentine superintendency of legal entities
(“IGJ”) on 10 October 2007.
7
RISK FACTORS
An investment in the Securities involves a high degree of risk. Investors should carefully consider
the following information about these risks, together with the information contained elsewhere in this
Offering Circular, before they decide to buy any Class B Share or GDS. Each of these risks could
have a material adverse effect on the Company’s business, financial condition, results of operations or
the trading price of the Securities, and investors could lose all or part of their investment.
The Company has described the risks and uncertainties that the Company believes are material,
but these risks and uncertainties may not be the only ones the Company faces. Additional risks and
uncertainties relating to the Company that are not currently known to the Company, or that it currently
deems immaterial, may also have an adverse effect on the Company’s business, financial condition
and operating results. If this occurs, the price of the Securities may decline, and investors could lose
all or part of their investment.
The order in which the risks are presented does not necessarily reflect the likelihood of their
occurrence or the magnitude of their potential impact on the Company’s business, financial condition,
results of operations or the trading price of the Securities.
Investors should consider carefully whether an investment in the Company’s Securities is suitable
for them in light of the information included in this Offering Circular and their personal circumstances.
Risks Related to Our Business
Uncertainty as to the Application of the Current Legal and Regulatory Environment that
Governs Our Cable Television, Telecommunications and Internet and Digital Content Segments
and the Adoption of new Regulations may be Disadvantageous to us or May Limit Our Ability
to Operate Our Business
Our Acquisition of a Controlling Interest in Cablevisión and its Acquisition of Multicanal,
Holding Teledigital and Prima are Subject to Regulatory Approval, Which May not be Granted.
On 26 September 2006, the Company, Fintech, Cablevisión and Multicanal entered into a series of
transactions as a result of which (i) the Company holds indirectly approximately 60% of the capital
stock of Cablevisión, (ii) Fintech holds, directly and indirectly, approximately 40% of the capital stock
of Cablevisión, (iii) Cablevisión, directly or indirectly, owns 98.5% of the capital stock of Multicanal,
100% of the capital stock of Holding Teledigital and 3% of Prima and (iv) Multicanal owns 97% of the
capital stock of Prima. Pursuant to Argentine Law No. 25,156, as amended (the “Argentine Antitrust
Law”) and Law No. 22,285, as amended, and related regulations (the “Broadcasting Law”), these
transactions require authorisation of the Comisión Nacional de Defensa de la Competencia, the
National Antitrust Commission (the “CNDC”) (validated by the Argentine Secretary of Domestic Trade
(the “SDT”)), the Comité Federal de Radiodifusión, the Federal Broadcasting Committee (“Comfer”)
and the Secretaría de Comunicaciones, the Argentine Secretariat of Communications (the “Secom”).
On 4 October 2006, the Company, Vistone LLC, Fintech, VLG Argentina LLC and Cablevisión as
buyers and AMI CV Holdings LLC, AMI Cable Holdings Ltd., and HMTF-LA Teledigital Cable Partners
LP, as sellers, filed for the CNDC’s approval of the acquisitions. The CNDC has a waiting period of
45 business days from the date of filing to authorise the transaction, condition its approval or deny
authorisation. The 45-day period is suspended each time the CNDC requests additional information
from the parties, until such additional information is furnished. On 6 November 2006, the CNDC
notified the Company of its first request for additional information, which was submitted on 26 February
2007. On 22 May 2007, the CNDC made a second request for additional information, which was
submitted on 2 July 2007. On 30 July 2007, the CNDC notified us that the first stage of the procedure
(Form F-1) had been completed and requested that the filing parties submit Form F-2, providing
additional information regarding the impact of the transactions on competition in the relevant markets.
The Form F-2 was filed on 28 August 2007. On 7 September 2007, the CNDC made a second
request for additional information. Until Form F-2 has been completed to the CNDC’s satisfaction, the
8
45-day waiting period remains suspended. Although we believe that the transactions that have been
filed for CNDC approval meet the standards for such approval under the Argentine Antitrust Law, we
cannot assure you that the CNDC will approve the acquisitions or will not impose conditions to their
approval, which could include disposal of a part of our cable operations or not approve one or more of
the transactions. In addition, we can neither exclude that third parties will not challenge the CNDC’s
decision or aspects related to any conditions that the CNDC may impose, which (as a decision not to
approve the transactions) could have a material adverse impact on the Company, nor that the
competitive dynamics of the cable business will not be affected as a consequence of the abovementioned transactions and/or their approval process.
Our Independent Accountants, Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina (a
member firm of PricewaterhouseCoopers), have issued an opinion over the audited consolidated
financial statements of the Company that includes the description of an uncertainty that results from
pending regulatory approvals for the sale by the Company of its indirect participation in Prima to
Multicanal, the sale of its direct and indirect participation in Multicanal to Cablevisión, and the indirect
acquisition by the Company of additional shares in Cablevisión necessary to increase its participation
in that company to 60% of its outstanding capital stock and votes. Additionally, in connection with the
unaudited interim financial statements of the Company, the Independent Accountants have issued a
limited review report with an observation relating to the uncertainty mentioned above.
In addition, in January 2007, Cablevisión and Multicanal were served with an injunction issued by
a provincial court in the province of San Luis at the request of Grupo Radio Noticias S.R.L. (“Grupo
Radio Noticias”), a company alleging to own a broadcast radio station that would arguably be harmed
by the transactions involving Cablevisión, Multicanal, Holding Teledigital and Prima that we consummated in September 2006. Among other measures, the injunction directed Cablevisión, Multicanal and
its controlling shareholders and subsidiaries to refrain from a number of transactions, including mergers,
acquisitions and the issuance of securities. The injunction was inconsistent with an order issued by a
Federal Court in the City of Buenos Aires in 2005, to the effect that the CNDC had jurisdiction to
determine the legality of our acquisition of an ownership interest in Cablevisión without prior judicial
intervention. Accordingly, we took action to have the case initiated by Grupo Radio Noticias removed
from the San Luis court and transferred to the Federal Court in Buenos Aires. The Supreme Court of
Argentina resolved our petition in our favour in June 2007. The Federal Court of Buenos Aires has been
adjudicated jurisdiction to decide the substance of the matter. On 11 September 2007, the Federal
Court of Buenos Aires issued a ruling reversing the injunction and leaving it without effect. On 5 October
2007, the Company was notified of an appeal to such ruling filed by Grupo Radio Noticias on
24 September 2007. While we can give no assurance that we will prevail against Grupo Radio Noticias,
we believe that their claims are unfounded.
Our Ability to Operate Effectively Depends on Maintaining Our Licenses. Our broadcast
and cable television and radio operators are under the supervision of Comfer and are subject to the
Broadcasting Law and its implementing regulations. The broadcasting regime requires the approval of
share transfers and other transactions, and imposes obligations on licensee companies and their
shareholders. We have applied to Comfer for approval of transactions involving broadcast licenses, and
in many instances action by Comfer is pending. In addition, our subsidiaries have failed in certain cases
to comply, or may be deemed to have failed to comply, with certain regulations of the Broadcasting Law.
Among other things, our subsidiaries Cablevisión and Multicanal hold cable television licenses that
overlap geographically, in possible violation of the Broadcasting Law; we did not meet the deadline for
applying for extension of 46 broadcasting licenses, which may result in Comfer not granting the
extension, and we have received multiple fines for the distribution of inappropriate content. As a
consequence of having failed to comply, or being deemed to have failed to comply with the Broadcasting
Law, we may be subject to sanctions ranging from llamados de atención (reprimands) to the revocation
of our broadcasting licenses and invalidation of certain corporate actions.
We May not Receive all Necessary Regulatory Approvals Relating to Previous Acquisitions.
Under Argentine law, any acquisition of shares in a company that holds a broadcasting license is subject
9
to Comfer approval. If Comfer does not approve the transfers of shares of our licensee subsidiaries,
among other matters,
• we may not be able to maintain ownership interests we acquired through those subsidiaries
without prior approval; and
• any resolutions adopted by shareholders or partners of our subsidiaries that Comfer disapproves will be void under the applicable law.
We cannot guarantee that Comfer will grant any or all of the approvals we have applied for or
that our subsidiaries’ title to ownership in licensed companies and our results of operations will not be
affected if Comfer denies these approvals.
We are Required to Divest Overlapping Broadcasting Licenses. A cable television company in Argentina may not hold more than one broadcasting license for a particular service in any
given area. As a result of our acquisitions, we hold broadcasting licenses in overlapping territories. All
cable operators that hold licenses in overlapping territories must forfeit one of the licenses. If cable
operators do not comply with this requirement, Comfer may terminate one or more of our licenses
and/or restrict our ability to obtain another license for a period of five to 30 years. If Comfer terminates
one of our overlapping licenses, we cannot assure you that we will be able to retain the license that is
more desirable, for example, in terms of duration.
We May not be Able to Renew Some Leases of the Facilities for the Installation of Our
Cable System. As a condition to obtaining a broadcasting license to provide services in a given
location, our cable operators must demonstrate that they have received permission from the
municipality to use its airspace or right of way and that they have obtained rights to install their wire
distribution network. Some of our cable operators’ programming is distributed through wire networks
installed in facilities leased from third parties, either through the lease of space on roofs or on utility
poles. Our cable operators are currently renegotiating the renewal of several lease contracts for the
use of poles in different areas of the country. If they are not able to renew some of those lease
contracts, their operations in that area may be suspended if alternative third party facilities, either
spaces on utility poles or underground ducts, are not promptly obtained on a cost-efficient basis. The
underground distribution of their wire network would require the granting of additional governmental
authorisations and significant capital expenditures that they may not be able to afford or they may be
restricted from making such expenditures pursuant to the terms and conditions of their indebtedness
and their existing covenants. We cannot assure you that such renewals of lease contracts will be
granted.
We May Become Subject to Burdensome Government Regulations and Legal Uncertainties
Affecting Our Business Segments Which Could Adversely Affect Our Operations. Since the
deregulation of the telecommunications and media industries in 1990, the Broadcasting Law, the
Telecommunications Law and their implementing regulations have been amended on a number of
occasions, reducing or increasing requirements to hold or transfer broadcasting licenses, to occupy
positions on the boards of directors of broadcasting licensees, and regulating content, advertising and
other aspects of the industry. New regulations may permit other participants, such as providers of public
telecommunications services, to enter the broadcasting or cable television industry.
We cannot Assure You that We will be Able to Maintain Certain of Our Subsidiaries’
Telecommunications Licenses. Cablevisión, Fibertel S.A. (“Fibertel”, now merged into Cablevisión), Multicanal and Prima are telecommunication services licensees. Section 10.1 of the Rules for
Telecommunication Service Licenses (Annex 1 of Decree No. 764/00) provides, among other
obligations, that transfers of shares of telecommunications licensees that result in changes of control
under the Argentine Corporate Law must be approved by the Secom, prior to the transfer that results
in such change of control. The change of control in Cablevisión and Fibertel that resulted from the
series of related transactions whereby the Company and Fintech increased their holdings of Cablevisión’s share capital to approximately 60% and 40%, respectively, and Cablevisión acquired 98.5% of
10
Multicanal, was not approved by Secom prior to the share transfer. Failure to receive Secom approval
could result in the revocation of the telecommunications licenses held by Cablevisión and Fibertel, and
the disqualification for the holder of the license and its affiliates to sustain telecommunication licenses
for the term of five years. We cannot assure you that Secom will approve such changes of control or
that the telecommunications licenses of Cablevisión or Fibertel will not be revoked.
Broadcasting and Telecommunications Regulations and Criteria for their Enforcement
have Changed Over Time. New regulations and uncertainty as to the application of current
regulation could increase our costs of doing business and prevent us from developing our products
and services.
We May Fail to Realise the Anticipated Benefits of Cablevisión’s Operational Consolidation with
Multicanal and Teledigital, and the Integration of Multicanal and Teledigital with Cablevisión’s
Operations will Present Significant Challenges
On 26 September 2006, Cablevisión acquired 98.5% of the capital stock of Multicanal. The
success of the acquisition will depend, in part, on our ability to realise the anticipated growth
opportunities and cost savings from combining Cablevisión’s business with the businesses of
Multicanal, Prima and Teledigital. We face significant challenges in consolidating functions, integrating
organisation, procedures and operations in a timely and efficient manner and retaining key personnel
of each of the companies. The integration of Multicanal, Prima and Teledigital is costly, complex and
time-consuming and management teams have to devote substantial effort to it. The integration
process and other disruptions from the transaction could be more costly than we expect or result in
the loss of key employees, the reduction of profitability, the disruption of our ongoing businesses or
inconsistencies in standards, controls, forms to compile and present information, procedures and
policies that adversely affect our ability to maintain relationships with customers, suppliers, employees
and others who have business dealings with our cable operators, or to achieve the anticipated benefits
of the acquisition or to manage Multicanal’s business with levels of profitability equivalent to those
existing prior to the acquisition.
Some financing and commercial practices used by Multicanal, Prima and Teledigital are different
from the practices used by Cablevisión, and it will be necessary to apply the practices Cablevisión has
been using historically in the operation of Multicanal and Teledigital. The lack of a successful
integration of the operations of Multicanal (including Prima) and Teledigital with those of Cablevisión
could curtail our growth and adversely affect our operations and results.
We Operate in a Highly Competitive Environment and Competition May have a Material
Adverse Effect on Our Operations
We face competition in all segments in which we operate. Our cable television and Internet
access operations are dependent on the continued deployment of technological improvements. Our
ability to compete depends on many factors, many of which are beyond our control. These factors
include:
• timing and market acceptance of new and enhanced products and services;
• sales, marketing and distribution efforts; and
• access to technological and financial resources.
We may face competitors in our different businesses, including most significantly in our cable
television and Internet access operations, that have greater name recognition, larger customer bases,
and significant financial, technical and marketing resources. This may allow them to devote greater
resources than us to the development and promotion of their business. These competitors may also
engage in more extensive research and development, adopt more aggressive pricing policies and
make more attractive offers to advertisers. Competitors may develop products and services that are
equal or superior to those we offer or that achieve greater market acceptance. As a result, we may be
11
required to dedicate additional resources to remain competitive and our results of operations may be
adversely affected.
Our Revenues are Cyclical and Depend Upon the Condition of the Argentine Economy
Revenues generated by our publishing, broadcast television, radio, cable television and Internet
access operations have proven cyclical and dependent upon general economic conditions. A general
economic downturn in the Argentine economy has had in the past and would be expected to have in
the future a negative effect on our revenues and a material adverse effect on our results of operations.
Historically, increases in advertising revenues have corresponded with economic recoveries while
decreases of advertising revenues generally, as well as changes in the mix of advertising revenues
and increases in churn of cable television subscribers, have corresponded with general economic
downturns and regional and local economic recessions. In particular, the 2001/2002 Argentine
economic crisis had a material adverse effect on our advertising revenues as well as on our cable
television revenues.
The Argentine Media Industry is a Dynamic and Evolving Industry, and if it does not Develop
and Expand as We Currently Expect, Our Business May Suffer
We expect to derive an increasing amount of revenues from our cable television and Internet
operations, but we may not do so if these non-traditional media operations do not develop and expand
as we currently expect. The Argentine media industry has traditionally been centred on newspaper
and magazine publishing as well as broadcast television and radio. The role of cable television
became increasingly important in the last fifteen years. More recently, non-traditional technologies and
industries in an earlier stage of development, such as pay-per-view services, satellite television, the
Internet and cellular telephony have come to play a growing role in the Argentine media and
telecommunications industry. We have operations in most of these areas. However, as certain of these
areas are in an early stage of development, we cannot anticipate their prospects or long-term market
acceptance as compared with the traditional Argentine media. Growth in these areas may be inhibited
for a number of reasons, including:
• the cost of connectivity;
• concerns about security, reliability, and privacy;
• unexpected changes in the regulatory framework;
• technological innovations to which we may not access readily;
• ease of use; and
• quality of service.
Our business, financial condition and results of operations will be materially and adversely
affected if these markets do not continue to grow or grow more slowly than we anticipate.
In addition, unlike the Argentine publishing and cable television industries, which have traditionally been dominated by companies located in Argentina, our competitors in these new technologies
and industries may be based outside of Argentina and enjoy certain competitive advantages such as
scale and access to financial resources on better terms than ours.
The Loss of Key Personnel could Disrupt Our Business and Adversely Affect Our Results of
Operations
Our business depends on the continued efforts, abilities and expertise of our senior officers,
senior management and key personnel. The loss of our key personnel could have a material adverse
12
effect on our operations. Competition for qualified management and personnel is intense. We believe
that our future success will depend on our ability:
• to attract and retain highly skilled and qualified management personnel;
• to expand, train and manage our employee base; and
• to develop, attract and retain key personnel.
Our Revenues May be Adversely Affected by Subscriber Termination
Our revenues depend heavily on our ability to retain customers by limiting our churn rates. We
determine our churn rate by calculating the total number of disconnected cable television customers
over a given period as a percentage of the initial number of cable television customers for the same
period. To minimise our annual gross churn rate and to address associated risks, such as the difficulty
in collecting receivables, we pursue a vigorous customer service and retention policy. Cablevisión and
Multicanal had churn rates of approximately 9.8% and 13.8% with respect to each of their cable
television subscriber bases in 2005 and approximately 12.2% and 14.4% in 2006. During 2006,
Cablevisión and Multicanal had churn rates of approximately 33.9% and 29.0% of their respective
broadband subscriber bases. During the six-month period ended 30 June 2007, Cablevisión and
Multicanal had churn rates of approximately 8.0% and 16.2% of their respective cable television
subscriber bases and approximately 26.9% and 40.5% of their respective broadband subscriber
bases.
Economic conditions in Argentina affect our subscribers’ purchasing power and have led to and
may in the future lead to a loss of subscribers. Between 1998 and 2002, Cablevisión and Multicanal
collectively lost approximately 835,000 Argentine subscribers (approximately 30% of their combined
Argentine subscriber base in 1998). While the recovery of the Argentine economy since 2003 has
resulted in a rapid recovery of our subscriber base, if economic conditions in Argentina deteriorate,
our annual gross churn rates would increase rapidly. The continued loss of customers for any reason,
including a deterioration of the current economic conditions or a change in current legislation allowing
telephone companies to offer broadcasting services, would have a direct material adverse effect on
our revenues and results of operations.
We May not be Able to Renew Our Right to Certain Programming
The renewal of our right to transmit soccer/football matches after 2014 is subject to renegotiation
with the Argentine Football Association (“AFA”). The revenues of our broadcasting and programming
segment are largely dependent on sports programming, most importantly soccer/football matches.
Even though Televisión Satelital Codificada S.A. (“TSC”) and Tele Red Imagen S.A. (“TRISA”) have
renewed their agreements with AFA stipulating new economic conditions that will remain in force until
2014, we cannot ensure that TSC and TRISA will be able to renew such rights upon expiration, or do
so on the terms we consider consistent with past experience. Similarly, from time to time we enter into
agreements with producers of other programming that are key to the success of our broadcasting and
programming operations. A failure to renew such rights and agreements would adversely affect the
results of operations of our broadcasting and programming segment. It could also impact adversely on
the results of operations of our cable television and Internet access segment.
Investors who Purchase Shares in this Offering will not be Able to Exercise Control Over us
Since the Controlling Shareholders will Continue to have the Power to Control us
All of our outstanding class A common shares are beneficially owned, directly or indirectly, by the
Controlling Shareholders (as defined herein). Our class A common shares have five votes per share.
As a result, the Controlling Shareholders are entitled to elect a majority of our directors and can
exercise control over other general corporate matters. The interests of these shareholders may differ
from your interests. So long as the Controlling Shareholders hold the class A common shares, they
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will be able to exercise control over our business through their power to elect a majority of our board
of directors, as well as to determine, subject to certain approval rights granted to the GS Investors (as
defined herein) under the terms of the shareholders agreement relating to the Company described
under “Principal and Selling Shareholders”, the outcome of almost all actions that require shareholder
approval. For example, the Controlling Shareholders have the ability to cause us to declare dividends,
subject to the limitations described under “Dividend Policy”, and to control our access to capital. This
concentration of ownership might also prevent or delay a change in control.
Certain of Our Existing Shareholders have Approval Rights and their Interests May be Contrary
to Yours
In December 1999, a group of investors, including four affiliates of The Goldman Sachs Group
Inc. (the “GS Investors”), as well as certain other persons not affiliated with such group, acquired 18%
of our total outstanding shares. The interests of GS Investors may differ from your interests. Under
the shareholders agreement relating to the Company, described under “Principal and Selling Shareholders”, and our Bylaws, the GS Investors have the right to elect two out of our ten board members
and two alternates, so long as they comply with certain conditions and hold class C common shares
representing at least 5% of our total capital and one director and one alternate, so long as they hold
class C common shares representing at least 2% of our total capital. Messrs. Satter and Castelblanco,
members of our board elected by the holders of class C common shares, are employees of affiliates
of the Goldman Sachs Group Inc. and to that extent may have interests that conflict with those of the
Company. After the Offering, the GS Investors will hold class C common shares representing 8.71%
of our total capital and no class B common shares (assuming the Over-allotment Option is exercised
in full). Under our Bylaws, the shareholders agreement relating to the Company and the share
syndication agreement relating to the Company described under “Description of Share Capital and
Applicable Argentine Legislation”, subject to compliance with certain other conditions, the holders of
class C common shares have approval rights relating to certain corporate transactions. The Company
is not a party to the shareholders agreement or the share syndication agreement. These agreements
are not binding on the Company or on any shareholder that is not a party thereto.
Risks Related to Investment in a Foreign Corporation
Social and Political Conditions in Latin America May Cause Volatility in Our Operations and
Materially Adversely Affect Our Business
Social and political conditions in Latin America are volatile and may cause our operations to
fluctuate. This volatility could make it difficult for us to sustain our expected growth in revenues and
earnings, which could have an adverse effect on our stock price. We have and expect to continue to
derive substantially all of our revenues from Argentina and other Latin American markets. Historically,
volatility has been caused by:
• significant governmental influence over many aspects of local economies;
• political instability;
• unexpected changes in regulatory requirements;
• social unrest;
• economic growth or contraction;
• imposition of trade barriers; and
• wage and price controls.
We have no control over these matters. Volatility resulting from these matters may decrease the
availability of materials and infrastructures which are material to our operations, create uncertainty
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regarding our operating climate and adversely affect our customers’ advertising budgets, all of which
may materially adversely affect our operations.
Fluctuations in Exchange Rates May Adversely Affect Our Business and Revenues
While most of our debt and a substantial portion of our operating costs and expenses are
denominated in U.S. dollars, our revenues are generated primarily in Pesos. Therefore we are and will
continue to be exposed to several related risks including, but not limited to, the following:
• Our businesses and revenues are exposed to the risk of harm from currency exchange rate
fluctuations. With the exception of two agreements providing for the swap of certain Pesodenominated negotiable obligations of one of our subsidiaries into U.S. dollars, we do not
currently engage in currency hedging to offset any risk of currency fluctuations. Although we
may enter into transactions to hedge the risk of exchange rate fluctuations, we cannot assure
you that we will engage in these transactions, or that these transactions would be successful
in shielding our financial condition from detrimental exchange rate fluctuations.
• Fluctuations in the exchange rate between the U.S. dollar and the Peso will affect the U.S.
dollar value of our Class B Shares and GDSs, and the value of any cash dividends if
expressed in U.S. dollars.
• The Argentine government may institute more restrictive exchange control practices.
Participation of Foreign Individuals and Entities in Media Companies is Limited by Argentine
Law
Sections 45 and 46 of the Broadcasting Law establish, among other things, that licensed
companies must be organised and existing under the laws of Argentina and may not be affiliates,
subsidiaries or under the control of foreign persons. Law No. 25,750, passed on 18 June 2003,
requires that corporations in media-related businesses belong to Argentine persons and limits foreign
ownership except in the case of transfers of shares executed before the issuance of Law No. 25,750
with the approval of the CNDC. Foreign persons may not own more than 30% of the outstanding
capital stock representing not more than 30% of the voting rights of any media-related company. The
law defines foreign persons as foreign nationals or corporations organised under Argentine or foreign
law that are under direct or indirect control of foreign individuals. The foreign ownership cap may be
raised when the law of, or a treaty with, a foreign jurisdiction grants reciprocal, non-discriminatory
treatment. A treaty between Argentina and the United States grants residents of, or corporations
domiciled in, the United States, Argentine resident status for purposes of such requirement. Even
though we have been advised by our Argentine counsel that there are reasonable grounds to conclude
that the Class B Shares would not count towards the 30% ownership cap set forth under Law
No. 25,750 and that the 30% ownership cap would not be applicable to the Company which, according
to Law No. 25,750, qualifies as a national Argentine company shareholder of media companies, we
cannot assure you that holders of Class B Shares will not be limited in their possibility to increase
their participation in the Company if foreign persons, in the aggregate, would own shares exceeding
the legal threshold.
Non-Argentine Companies that Own Class B Shares Directly and not Through GDSs May not
be Able to Exercise their Rights as Shareholders Unless they are Registered in Argentina
Under Argentine law, foreign companies that own shares in an Argentine corporation are
required to register with the IGJ, in order to exercise certain shareholder rights, including voting rights.
If you own Class B Shares directly (rather than in the form of GDSs) and you are a non-Argentine
company and you fail to register with the IGJ, your ability to exercise your rights as a holder of our
Class B Shares may be limited.
15
It May be Difficult for you to Enforce any Judgement Obtained in the United States or
Elsewhere Outside Argentina Against us or Our Affiliates
We are incorporated under the laws of Argentina. Most of our directors and executive officers
reside outside the United States or elsewhere outside Argentina. In addition, virtually all of our assets
and the assets of those persons are located outside the United States. As a result, it may be difficult for
you to enforce in or out of the United States any judgement obtained in the United States against us or
any of these persons, including judgements based upon the civil liability provisions of the United States
securities laws. In addition, in original actions brought in courts in jurisdictions located outside the
United States, it may be difficult for you to enforce liabilities based upon United States securities laws.
We have been advised by Sáenz Valiente & Asociados, our Argentine legal counsel, that
judgements of U.S. courts based on the civil liability provisions of the federal securities laws of the
United States may not be enforceable in Argentine courts if the judgement does not satisfy the
requirements of Article 517 of the Federal Civil and Commercial Procedure Code. Sáenz Valiente &
Asociados has also advised us that there is doubt as to whether Argentine courts will enter
judgements in original actions brought in Argentine courts based solely upon the civil liability
provisions of the federal securities laws of the United States or other foreign securities laws.
Risks Related to Argentina
Our Financial Condition and Results of Operations Depend to a Significant Extent on
Macroeconomic and Political Conditions Prevailing in Argentina
We are a corporation (sociedad anónima) incorporated under the laws of Argentina and
substantially all of our revenues are earned in Argentina and substantially all of our operations,
facilities, and customers are located in Argentina. Accordingly, our financial condition and results of
operations depend to a significant extent on macroeconomic and political conditions prevailing in
Argentina. For example, lower economic growth or economic recession have led in the past and could
again lead to a decline in purchasing power of our customers, which, in turn, could lead to lower
collections from our clients. Argentine government actions concerning the economy, including decisions with respect to inflation, interest rates, price controls, foreign exchange controls and taxes, have
had and could continue to have a material adverse effect on private sector entities, including us.
During Argentina’s 2001/2002 economic crisis, for example, the Argentine government took measures
to address the crisis, which had a severe effect on our financial condition and led certain of our
subsidiaries to suspend payments on financial debt. We cannot provide any assurance that future
economic, social and political developments in Argentina, over which we have no control, will not
impair our business, financial condition, or results of operations.
Argentina’s Current Economic Growth and Stability May not be Sustainable
During 2001 and 2002, Argentina went through a period of severe political, economic and social
crisis. Although the economy has recovered significantly since 2002, uncertainty remains as to
whether the current growth and relative stability is sustainable. The Argentine economy remains
fragile, including for the following reasons:
• the recovery has depended to some extent on:
• high commodity prices, which are volatile and outside the control of the country, and
• excess capacity, which has been reduced considerably;
• inflation has risen recently and threatens to accelerate;
• the regulatory environment continues to be uncertain;
• the availability of long-term fixed rate credit is scarce;
16
• investment as a percentage of Gross Domestic Product (“GDP”) remains too low to sustain
current growth rates;
• the current fiscal surplus has been decreasing as a percentage of GDP and could reverse into
a fiscal deficit; and
• the country’s public debt remains high and international financing is limited.
Substantially all our operations, properties and customers are located in Argentina. As a result,
our business is to a very large extent dependent upon the economic conditions prevailing in Argentina.
Restrictions on the Supply of Energy could Negatively Affect Argentina’s Economic Growth
and Negatively Impact the Company’s Results of Operations
As a result of several years of recession, the forced conversion into Argentine pesos at the oneto-one exchange rate and the subsequent freeze of gas and electricity tariffs and the significant
devaluation of the Peso, there has been a lack of investment in gas and electricity supply and
transport capacity in Argentina in recent years. Over the course of the last several years, demand for
natural gas and electricity has increased substantially, driven by a recovery in economic conditions
and low prices in comparison with alternative fuel sources.
Although the Argentine government is taking a number of measures to alleviate the short-term
impact of supply restrictions on residential and industrial users (including measures to limit the growth
of residential consumption, to increase the price of compressed natural gas and to import natural gas
from Bolivia, electricity from Brazil and Uruguay and fuel oil from Venezuela) and has announced
several measures intended to address the situation in the medium- and long-term (including creating a
new state-owned energy company to fund, or otherwise promote, investments in expanding existing
pipeline transportation capacity and building new pipelines and additional power generation capacity
and entering into negotiations with electricity and gas producers) supply restrictions and shortages are
likely to continue.
If the measures that the Argentine government is taking to alleviate the short-term impact of the
crisis prove to be insufficient, or if the investment that is required to increase natural gas production
and transportation capacity and energy generation and transportation capacity over the medium- and
long-term fails to materialise on a timely basis, economic activity in Argentina could be curtailed and
we could see our sales and revenues decline and our operations adversely affected.
Inflation May Continue to Increase, Causing Adverse Effects on the Argentine Long-Term
Credit Markets as well as the Argentine Economy Generally
After several years of price stability, the devaluation of the Peso in January 2002 created
pressures on the domestic price system that generated high inflation in 2002 before substantially
stabilizing in 2003. However, consumer prices increased by 6.1% during 2004, by 12.3% in 2005 and
by 9.8% in 2006. Moreover, uncertainty surrounding future inflation could affect adversely the
economic rebound.
In the past, inflation has materially undermined the Argentine economy and the government’s
ability to create conditions that would permit growth. A return to a high inflation environment would
also undermine Argentina’s foreign competitiveness by diluting the effects of the Peso devaluation,
with the same negative effects on the level of economic activity and employment.
Argentina’s Ability to Obtain Financing from International Markets is Limited, Which May
Impair its Ability to Implement Reforms and Foster Economic Growth
In the first half of 2005, Argentina restructured part of its sovereign debt that had been in default
since the end of 2001. As of 30 June 2007, Argentina had approximately U.S.$136.3 billion in total
17
outstanding debt remaining. In addition, creditors that did not participate in the restructuring hold
approximately U.S.$26.5 billion defaulted bonds.
Some bondholders in the United States, Italy and Germany have filed legal actions against
Argentina and have filed claims before the International Center for the Settlement of Investment
Disputes, (“ICSID”), and holdout creditors may initiate new suits in the future. Additionally, foreign
shareholders of certain Argentine companies have filed claims in excess of U.S.$17 billion before the
ICSID, alleging that certain government measures are inconsistent with the fair and equitable
treatment standards set forth in various bilateral treaties to which Argentina is a party. To date, the
ICSID has rendered decisions adverse to Argentina in several cases.
Argentina’s past default and its failure to restructure completely its remaining sovereign debt and
fully negotiate with the holdout creditors may prevent Argentina from re-entering the international
capital markets. Litigation initiated by holdout creditors as well as ICSID claims may result in material
judgements against the Argentine government and could result in attachments of or injunctions
relating to assets of Argentina that the government intended for other uses. As a result, the
government may not have the financial resources necessary to implement reforms and foster growth,
which could have a material adverse effect on the country’s economy and, consequently, our
business.
Significant Devaluation of the Peso Against the U.S. Dollar May Adversely Affect the Argentine
Economy as well as Our Financial Performance
The real depreciation of the Peso in 2002 had positive effects on the competitiveness of certain
sectors of the Argentine economy, but it has also had a far-reaching negative impact on the Argentine
economy and on the financial condition of businesses and individuals. The devaluation of the Peso
had a negative impact on the ability of Argentine businesses to honour their foreign currencydenominated debt, led to very high inflation initially, significantly reduced real wages, had a negative
impact on businesses whose success is dependent on domestic market demand, such as utilities, the
financial industry and other industries such as the media industry, and adversely affected the
government’s ability to honour its foreign debt obligations.
If the Peso devalues significantly, all of the negative effects on the Argentine economy related to
such devaluation could recur, with adverse consequences to our business. Moreover, it would likely
result in a decline in the value of our Class B Shares and the GDSs as measured in U.S. dollars.
Furthermore, substantially all of our liabilities are denominated in U.S. dollars and a substantially
devaluation of the Peso will result in losses for us.
Significant Appreciation of the Peso Against the U.S. Dollar May Adversely Affect the Argentine Economy
A substantial increase in the value of the Peso against the U.S. dollar also presents risks for the
Argentine economy. In the short term, a significant real appreciation of the Peso would adversely
affect exports. This could have a negative effect on GDP growth and employment as well as reduce
the Argentine public sector’s revenues by reducing tax collection in real terms, given its current heavy
reliance on taxes on exports.
Government Measures to Pre-Empt or in Response to Social Unrest May Adversely Affect the
Argentine Economy
During its crisis in 2001 and 2002, Argentina experienced social and political turmoil, including
civil unrest, riots, looting, nationwide protests, strikes and street demonstrations. Despite Argentina’s
ongoing economic recovery and relative stabilisation, the social and political tensions and high levels
of poverty and unemployment continue. Future government policies to pre-empt or in response to
social unrest may include expropriation, nationalisation, forced renegotiation or modification of existing
contracts, suspension of the enforcement of creditors’ rights, new taxation policies, including royalty
18
and tax increases and retroactive tax claims, and changes in laws and policies affecting foreign trade
and investment. Such policies could destabilise the country and adversely and materially affect the
economy, and thereby our business.
Exchange Controls and Restrictions on Capital Inflows and Outflows have Limited and could
be Expected to Continue to Limit the Availability of International Credit and the Liquidity of the
Market for Securities of Argentine issuers
In 2001, due to the deterioration of the economic and financial conditions in Argentina, the
government’s difficulties in dealing with the service of its public foreign debt and the decrease in the
level of deposits in the financial system, the government established a number of monetary and
currency exchange control measures. These included restrictions on the free disposition of funds
deposited in banks and restrictions on the transfer of foreign currency abroad without prior Central
Bank approval. Since 2003, the government has eased these restrictions substantially. However,
Argentina may tighten exchange control or transfer restrictions in the future, among other things, in
response to capital flight or a significant depreciation of the Peso. In addition, the government issued
a decree in June 2005 that established new controls on capital inflows that could result in less
availability of international credit. These restrictions would not affect incoming funds of foreign
investors to purchase the New Shares but may have an impact on (i) incoming funds of foreign
investors to purchase Selling Shareholder Shares and (ii) repatriation of funds by Argentine investors
to purchase New Shares and Selling Shareholder Shares. Exchange controls could have a negative
effect on the economy and our business if imposed in an economic environment where access to local
capital is substantially constrained. In addition, restrictions on the transfers of funds abroad may affect
your ability to receive dividend payments as a holder of GDSs.
Recurrent Shocks to Argentina’s Financial Sector could Threaten the Financial System and
Lead to Renewed Political and Social Tensions, Adversely Affecting the Argentine Economy
In 2001 and the first half of 2002, Argentina experienced a massive withdrawal of deposits from
the Argentine financial system in a short period of time, as depositors lost confidence in the Argentine
government’s ability to repay its foreign debt and maintain the Convertibility regime. This precipitated
a liquidity crisis within the Argentine financial system, which prompted the Argentine government to
impose exchange controls and restrictions on the ability of depositors to withdraw their deposits. In
the event of a future shock, such as the failure of one or more banks or a crisis in depositor
confidence, the Argentine government could impose further exchange controls or transfer restrictions
and take other measures that could lead to renewed political and social tensions and undermine the
Argentine government’s public finances, which could adversely affect Argentina’s economy and
prospects for economic growth.
The Argentine Economy could be Adversely Affected by Economic Developments in Other
Markets
Financial and securities markets in Argentina are influenced, to varying degrees, by economic
and market conditions in other markets. Although economic conditions vary from country to country,
investors’ perception of the events occurring in one country may substantially affect capital flows into
and securities from issuers in other countries, including Argentina. The Argentine economy was
adversely impacted by the political and economic events that occurred in several emerging economies
in the 1990s, including Mexico in 1994, the collapse of several Asian economies between 1997 and
1998, the economic crisis in Russia in 1998 and the Brazilian devaluation in January 1999. In addition,
Argentina continues to be affected by events in the economies of its major regional partners.
Furthermore, the Argentine economy may be affected by events in developed economies which are
trading partners or that impact the global economy.
Shocks of a similar magnitude to the international markets in the future can be expected to affect
adversely the Argentine economy and the financial system and therefore us.
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Risks Related to Our Securities
Restrictions on Transfers of Foreign Exchange and the Repatriation of Capital from Argentina
May Impair Your Ability to Receive Dividends and Distributions on, and the Proceeds of any
Sale of, the Class B Shares Underlying the GDSs
Argentine law currently permits the government to impose restrictions on the conversion of
Argentine currency into foreign currencies and on the remittance to foreign investors of proceeds from
their investments in Argentina (including dividend payments) in circumstances where a serious
imbalance develops in Argentina’s balance of payments or where there are reasons to foresee such
an imbalance. Beginning in December 2001, the Argentine government implemented a number of
monetary and foreign exchange control measures that included restrictions on the free disposition of
funds deposited with banks and on the transfer of funds abroad, including dividends, without prior
approval by the Central Bank, some of which are still in effect. Among the restrictions that are still in
effect are those relating to the payment prior to maturity of the principal amount of loans, bonds or
other securities owed to non-Argentine residents, the requirement for Central Bank approval prior to
acquiring foreign currency for certain types of investments, the payment abroad of advanced dividends
and the repatriation of funds collected in Argentina by non-Argentine residents. In addition, the
government requires that 30% of certain types of capital inflows into Argentina be deposited in a noninterest-bearing account in an Argentine bank for a period of one year. Although the transfer of funds
abroad in order to pay annual dividends only to foreign shareholders and the Depositary for the
benefit of the GDS holders based on approved audited annual financial statements no longer requires
Central Bank approval, other exchange controls could impair or prevent the conversion of anticipated
dividends, distributions, or the proceeds from any sale of Class B Shares, as the case may be, from
Pesos into U.S. dollars and the remittance of the U.S. dollars abroad. We cannot assure you that the
Argentine government will not take further restrictive measures in the future. In such a case, the
Depositary for the GDSs may be prevented from converting Pesos it receives in Argentina for the
account of the GDS holders.
Our Shareholders’ Ability to Receive Cash Dividends May be Limited
Our shareholders’ ability to receive cash dividends may be limited by the ability of the Depositary
to convert cash dividends paid in Pesos into U.S. dollars. Under the terms of our Deposit Agreement
with the Depositary for the GDSs, the Depositary will convert any cash dividend or other cash
distribution we pay on the Class B Shares into U.S. dollars, if it can do so on a reasonable basis and
can transfer the U.S. dollars to the United States. If this conversion is not possible or if any
governmental approval is needed and cannot be obtained, the Deposit Agreement allows the
Depositary to distribute the foreign currency only to those GDS holders to whom it is possible to do
so. If the exchange rate fluctuates significantly during a time when the Depositary cannot convert the
foreign currency, you may lose some or all of the value of the dividend distribution. Also, if payments
cannot be made in U.S. dollars abroad, the repatriation of any funds collected by foreign investors in
Pesos in Argentina may be subject to restrictions.
We are a holding company and our ability to pay dividends depends on the cash flow and
distributable income of our operating subsidiaries, several of which are subject to contractual
limitations on their ability to pay dividends.
Under Argentine Law, Shareholder Rights May be Fewer or Less well Defined than in Other
Jurisdictions
Our corporate affairs are governed by our Bylaws and by the Argentine Corporate Law, which differ
from the legal principles that would apply if we were incorporated in a jurisdiction in the United States
(such as the States of Delaware or New York), in England or in other jurisdictions outside Argentina. We
do not apply or explain against the Combined Code for Corporate Governance of the United Kingdom, or
other corporate governance rules applicable to companies in Western European countries. Thus, your
20
rights or the rights of holders of our common shares under the Argentine Corporate Law to protect your or
their interests relative to actions by our board of directors may be fewer and less well defined than under
the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under
Argentine law, the Argentine securities markets are not as highly regulated or supervised as the U.S.
securities markets or markets in some other jurisdictions. In addition, rules and policies against selfdealing and regarding the preservation of shareholder interests may be less well defined and enforced in
Argentina that in the United States, England or other jurisdictions outside Argentina, putting holders of our
common shares and GDSs at a potential disadvantage.
Pre-emptive Rights May be Unavailable to Holders of Our GDSs
Under Argentine law, our shareholders have pre-emptive rights. This means that in the event that
we issue new shares for cash, our shareholders will have the right to purchase the number of shares
necessary to maintain their existing ownership percentage. U.S. holders of our GDSs cannot exercise
their pre-emptive rights unless we register any newly issued shares under the Securities Act or qualify
for an exemption from registration. If you are a U.S. holder of GDSs who cannot exercise your preemptive rights, your interests would be diluted if we issue new shares. We intend to evaluate at the
time of any offering of pre-emptive rights the costs and potential liabilities associated with registering
any additional shares. We cannot assure you that we will register any new shares that we issue. In
addition, although the Deposit Agreement provides that the Depositary may, after consultation with us,
sell pre-emptive rights in Argentina or elsewhere outside the United States and distribute the proceeds
to holders of GDSs, under current Argentine law these sales are not possible.
Your Ability to Participate in any Rights Offering of Our Company is Limited
We may, from time to time, distribute rights to our shareholders, including rights to acquire
securities under the Deposit Agreement. The Depositary will not offer rights to holders of GDSs or
Class B Shares unless both the rights and the securities to which such rights relate are either exempt
from registration under the Securities Act or are registered under provisions of the Securities Act.
However, we are under no obligation to file a registration statement with respect to any such rights or
underlying securities or to endeavour to cause such a registration statement to be declared effective.
Accordingly, holders of our GDSs or Class B Shares may be unable to participate in rights offerings
by us and may experience dilution of their holdings as a result.
Your Voting Rights with Respect to the GDSs are Limited by the Terms of the Deposit Agreement
Holders may exercise voting rights with respect to the class B common shares in the form of
GDSs represented by GDRs only in accordance with the provisions of the Deposit Agreement. There
are no provisions under Argentine law or under our Bylaws that limit GDS holders’ ability to exercise
their voting rights through the Depositary with respect to the underlying class B common shares,
except if the Depositary is a foreign entity and it is not registered with the IGJ. The Depositary is
registered with the IGJ. However, there are practical limitations upon the ability of GDS holders to
exercise their voting rights due to the additional procedural steps involved in communicating with such
holders. For example, Decree No. 677/01 requires us to notify our shareholders by publications in
certain official and private newspapers at least 20 and no more than 45 days in advance of any
shareholders’ meeting.
GDS holders will not receive any notice of a shareholders’ meeting directly from us. In
accordance with the Deposit Agreement, we will provide the notice to the Depositary, which will in
turn, as soon as practicable thereafter, provide to each GDS holder:
• the notice of such meeting;
• voting instruction forms; and
• a statement as to the manner in which instructions may be given by holders.
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To exercise their voting rights, GDS holders must then provide instructions to the Depositary how
to vote the shares in the form of GDSs represented by GDRs. Because of this additional procedural
step involving the Depositary, the process for exercising voting rights will take longer for GDS holders
than for holders of class B common shares. GDSs for which the Depositary does not receive timely
voting instructions may be voted at any meeting by a person designated by the Company.
Except as described in this Offering Circular, holders will not be able to exercise voting rights
attaching to the GDSs.
The Offering May not Result in an Active or Liquid Market for the GDSs or Class B Common
Shares
Prior to the Offering, there has not been a public market for our GDSs or class B common
shares. We have applied for approval of the GDSs for quotation on the Regulated Market of the
London Stock Exchange and of the class B common shares for quotation on the BCBA. However, we
cannot assure you that an active, liquid public market will develop or be sustained after the Offering.
Active, liquid trading markets generally result in lower price volatility and more efficient execution of
buy and sell orders for investors. Liquidity of a securities market is often a function of the volume of
the underlying shares that are publicly held by unrelated parties. The initial public offering price for the
Class B Shares and the GDSs has been determined by negotiations between us and the representatives of the Joint Global Coordinators and International Bookrunners and may not be indicative of
prices that will prevail in the trading market. Investors may not be able to resell their Class B Shares
or GDSs at or above the initial public offering price. The financial markets in Argentina, England and
other countries have experienced significant price and volume fluctuations. Volatility in the price of our
class B common shares and GDSs may be caused by factors outside of our control and may be
unrelated or disproportionate to our operating results. In the past, following periods of volatility in the
market price of a public company’s securities, securities class action litigation has often been instituted
against that company. Such litigation could result in substantial costs and a diversion of our
management’s attention and resources.
Future Sales of Securities by Our Company or Existing Shareholders May Hurt the Price of the
Securities
The market price of our GDSs could decline as a result of sales of a large number of class B
common shares or GDSs after the Offering or the perception that such sales could occur. Such sales
also might make it more difficult for us to sell class B common shares or GDSs in the future at a time
and at a price that we deem appropriate. Upon completion of the Offering (without exercise of the
Over-allotment Option), we will have an aggregate of 181,782,671 class B common shares issued and
outstanding (including class B common shares in the form of GDSs). The Controlling Shareholders,
the GS Investors, Tinicum (as defined herein) and Farallon (as defined herein) will own, directly and
indirectly, 131,782,671 class B common shares constituting approximately 72.49% of the outstanding
class B common shares. The 50,000,000 Class B Shares sold (without exercise of the Over-allotment
Option) in the Offering (including Class B Shares in the form of GDSs) will be freely tradable. Pursuant
to a registration rights agreement among, inter alia, the Company and the GS Investors, the GS
Investors may require the Company to undertake underwritten offerings of such shareholders’ shares.
We, the Selling Shareholders and other shareholders of the Company have agreed not to offer, sell or
agree to sell, directly or indirectly, or otherwise dispose of any class B common shares or GDSs
without the prior written consent of the Joint Global Coordinators and International Bookrunners for a
period commencing on 4 October 2007 and ending 180 days from the date of the Purchase
Agreement, subject to certain exceptions.
Our Shareholders May be Subject to Liability for Certain Votes of their Securities
Because we are an Argentine corporation, our shareholders have limited liability. Shareholders
are generally liable only for the payment of the shares they subscribe. However, shareholders may be
22
liable under certain circumstances, for example, if they have a conflict of interest with us and do not
abstain from voting at the respective shareholders’ meeting, but only if the transaction would not have
been approved without such shareholders’ votes. Furthermore, shareholders who wilfully or negligently
vote in favour of a resolution that is subsequently declared void by a court as contrary to the law or
our Bylaws may be held jointly and severally liable for damages to us or to other third parties,
including other shareholders.
Holders of the GDSs will not be Able to Benefit from Certain UK Anti-Takeover Protections
Because the Company is incorporated and its management and centre of operations are based
outside the United Kingdom, the Channel Islands and the Isle of Man, the City Code on Takeovers
and Mergers will not apply to the Company, including in the case of a mandatory tender offer upon a
change of control of the Company.
You will Experience Immediate and Substantial Dilution in the Book Value of the Class B
Shares or the GDSs You Purchase in this Offering
Because the Offer Price of the Class B Shares and the GDSs being sold in this Offering will be
substantially higher than the net tangible book value per share, you will experience immediate and
substantial dilution in the book value of these shares. Net tangible book value represents the amount
of our total assets less intangible assets and goodwill, minus our total liabilities and minority interest.
As a result, at the Offer Price of U.S.$18.50 per GDS, you will incur immediate dilution of U.S.$21.57
per GDS you purchase in this Offering.
23
SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The following tables set forth summary consolidated financial and other operating information of
the Company as of and for the years ended 31 December 2006, 2005 and 2004, as of and for the six
months ended 30 June 2007 and 2006.
The summary financial information as of and for the years ended 31 December 2006, 2005 and
2004 was extracted from, and should be read in conjunction with, the Company’s audited consolidated
financial statements and related notes, and the information under “Presentation of Financial and Other
Information”, “Selected Consolidated Financial Information” and “Operating and Financial Review”
included elsewhere in this Offering Circular. The summary financial information as of 30 June 2007
and for the six month periods ended 30 June 2007 and 2006 was extracted from, and should be read
in conjunction with, the unaudited interim financial statements and related notes, and the information
under “Presentation of Financial and other Information”, “Selected Consolidated Financial Information”
and “Operating and Financial Review” included elsewhere in this Offering Circular. The financial
information as of 30 June 2006 was extracted from the unaudited interim financial statements as of
30 June 2006, which are not included in this Offering Circular. Results of operations for the six month
period ended 30 June 2007 are not indicative of results for the full year ending 31 December 2007 or
for any other interim period or for any future financial year. In the opinion of the Company’s
management, the interim financial data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim period.
Our Independent Accountants, Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina (a
member firm of PricewaterhouseCoopers), have issued an opinion over the audited consolidated
financial statements of the Company that includes the description of an uncertainty that results from
pending regulatory approvals relating to the sale by the Company of its indirect participation in Prima
to Multicanal, the sale of its direct and indirect participation in Multicanal to Cablevisión, and the
indirect acquisition by the Company of additional shares in Cablevisión necessary to increase its
participation in Cablevisión to 60% of the outstanding capital stock and votes. Additionally, in
connection with the unaudited interim financial statements of the Company, the Independent Accountants have issued a limited review report with an observation relating to the uncertainty mentioned
above.
Our audited consolidated financial statements have been prepared in accordance with Argentine
GAAP and CNV regulations, which differ in certain significant respects from U.S. GAAP. Our
U.S. GAAP Financial Statements are set forth in Annex A.
Solely for the convenience of the reader, Peso amounts as of and for the year ended 31 December 2006 and as of and for the six months ended 30 June 2007 have been translated into U.S. dollars
at the selling rate for U.S. dollars quoted by Banco de la Nación Argentina (“Banco Nación”) on
31 December 2006 of Ps.3.06 to U.S.$1.00 and on 30 June 2007 of Ps.3.09 to U.S.$1.00,
respectively. The selling rate for U.S. dollars quoted by Banco Nación on 20 September 2007 was
Ps.3.13 to U.S.$1.00. The U.S. dollar equivalent information should not be construed to imply that the
Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or
any other rate. See “Exchange Rate Information.”
In accordance with the Argentine Corporate Law, we may pay dividends in Pesos out of retained
earnings, if any, as set forth in our audited unconsolidated financial statements prepared in accordance with Argentine GAAP and CNV regulations. However, we conduct our operations through our
subsidiaries and our ability to pay dividends depends on us receiving dividends from our subsidiaries.
The terms of the financial debt of certain of our subsidiaries restrict their ability to declare or pay
dividends. See “Operating and Financial Review — Liquidity and Capital Resources — Indebtedness”.
24
Argentine GAAP
Year Ended 31 December
2004
2005
2006
2006
Ps.
Ps.
Ps.
U.S.$
(Millions)
Statement of Operations Data
Net sales . . . . . . . . . . . . . . . . . . . . . .
Cost of sales — excluding
depreciation and amortisation . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . .
Selling expenses — excluding
depreciation and amortisation . . . . .
Administrative expenses — excluding
depreciation and amortisation . . . . .
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . .
Amortisation of intangible assets. . . . .
Depreciation of other investments . . . .
Financing and holding results, net
Generated by assets . . . . . . . . . . . .
Generated by liabilities . . . . . . . . . .
Equity in earnings (losses) from
unconsolidated affiliates and gain
on sale of subsidiaries, net . . . . . . .
Other income (expense), net. . . . . . . .
Income/(loss) for the year/period
before income tax, tax on assets
and minority interest . . . . . . . . . . . .
Income tax and tax on assets . . . . . . .
Minority interest . . . . . . . . . . . . . . . . .
Net income/(loss) for the
year/period . . . . . . . . . . . . . . . . . .
Adjusted EBITDA1(1) . . . . . . . . . . . . .
Pro Forma Adjusted EBITDA(2) . . . . .
1,667.3
1,988.4
2,811.8
Six Months Ended
30 June
2006
2007
2007
Ps.
Ps.
U.S.$
(Unaudited)
(Millions)
918.9 1,141.5 1,993.3
645.1
(842.2) (1,088.5) (1,491.6) (487.5) (638.5) (963.4) (311.8)
825.1
900.0 1,320.2 431.4
503.0 1,029.9 333.3
(192.0)
(227.5)
(290.0) (94.8) (116.9) (203.3) (65.8)
(174.2)
(215.7)
(320.5) (104.7) (117.2) (209.9) (67.9)
(183.9)
(12.0)
(0.3)
(142.7)
(8.7)
(0.3)
(169.3) (55.3)
(38.9) (12.7)
(0.3)
(0.1)
(2.8)
(300.7)
13.1
(354.3)
31.4
(10.1)
15.2
0.3
(66.5) (138.2) (44.7)
(5.1) (57.8) (18.7)
(0.2)
(0.1)
0.0
(4.7)
(1.5)
22.2
(9.3)
(3.0)
924.7 302.2 (259.6) (183.8) (59.5)
224.7
17.5
73.4
5.7
16.0
(1.5)
4.6
(10.3)
1.5
(3.3)
(19.5)
15.3
2.3
(20.7) 1,663.3 543.6
36.0
(490.7) (160.4)
(1.7) (302.9) (99.0)
(25.7)
10.6
(3.0)
221.7
71.7
(85.5) (27.7)
(32.7) (10.6)
(1.9)
458.9
N.A.
13.6
456.7
N.A.
(18.1)
269.0
N.A.
103.5
616.6
N.A.
25
869.7
709.7
1,036.6
284.2
231.9
338.8
33.5
199.5
N.A.
As of 31 December
2004
2005
2006
2006
Ps.
Ps.
Ps.
As of 30 June
2006
2007
2007
U.S.$
Ps.
394.8
1,692.4
2,087.2
421.6
672.5
1,048.0
1,469.7
115.8
501.7
1,272.7
3,616.2
4,888.9
3,589.1
510.6
618.2
4,207.3
35.5
646.1
(Millions)
Balance Sheet Data
Total current assets . . . . . . . . . . . . .
Total non-current assets . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . .
Total non-current liabilities . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . .
Total liabilities, minority interest and
shareholders’ equity . . . . . . . . . . .
1,033.1
3,536.4
4,569.5
3,345.0
427.8
528.6
3,873.6
32.7
663.3
1,208.0
5,178.7
6,386.7
1,290.2
2,057.9
3,206.9
4,497.1
354.4
1,535.2
Ps.
U.S.$
(Unaudited)
(Millions)
.
.
.
.
.
.
.
.
.
849.2
3,209.3
4,058.5
2,712.2
550.2
657.8
3,370.0
40.3
648.2
1,287.4
5,201.5
6,488.9
1,328.1
1,961.5
3,135.3
4,463.4
386.1
1,639.5
416.6
1,683.3
2,100.0
429.8
634.8
1,014.7
1,444.5
124.9
530.6
.
4,058.5 4,569.5 6,386.7 2,087.2 4,888.9 6,488.9 2,100.0
U.S. GAAP(3)
Year Ended 31 December
2004
2005
2006
2006
Ps.
Ps.
Ps.
U.S.$
(Millions)
Statement of Operations Data
Net sales . . . . . . . . . . . . . . . . . . . . . .
Cost of sales — excluding
depreciation and amortisation . . . . .
Selling and administrative
expenses — excluding depreciation
and amortisation . . . . . . . . . . . . . . .
Depreciation and amortisation. . . . . . .
Operating income . . . . . . . . . . . . . . . .
Financial results, net . . . . . . . . . . . . . .
Equity in earnings from
unconsolidated affiliates . . . . . . . . .
Gain on sale of subsidiaries, net . . . . .
Income before income tax, tax on
assets and minority interest . . . . . . .
Income tax and tax on assets —
(expense)/benefit. . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA(4) . . . . . . . . . . . . . .
1,571.2
1,847.6
2,560.5
Six Months Ended
30 June
2006
2007
2007
Ps.
Ps.
U.S.$
(Unaudited)
(Millions)
836.8 1,058.2 1,895.5
613.4
(796.1) (1,002.1) (1,309.6) (428.0) (589.4) (917.2) (296.8)
(349.6)
(93.8)
331.7
284.1
(414.6)
(76.4)
354.5
(305.3)
(569.5)
(136.8)
544.7
939.1
48.3
—
51.9
—
32.0
6.0
10.5
2.0
20.1
—
20.4
—
6.6
—
664.1
101.2
1,521.8
497.3
23.9
275.9
89.3
98.2
(2.2)
760.2
425.5
(28.1) (174.6)
(3.1)
(38.4)
70.0 1,308.7
430.9
681.5
(57.1)
(12.6)
427.7
222.7
205.8
(4.0)
225.7
247.7
26
(186.1) (221.1) (398.7) (129.0)
(44.7) (43.2) (150.1) (48.6)
178.0
204.5
429.5 139.0
306.9 (200.7) (174.0) (56.3)
(80.2) (26.0)
(44.3) (14.3)
151.4
49.0
579.6 187.6
As of 31 December
2004
2005
2006
2006
Balance sheet data
Ps.
ASSETS
Current assets
Cash and cash equivalents . . . . . . .
Trade receivables, net . . . . . . . . . . .
Other receivables, net . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . .
Trade receivables, net . . . . . . . . . . .
Other receivables, net . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated
affiliates . . . . . . . . . . . . . . . . . . . .
Other long-term investments . . . . . .
Property, plant and equipment, net .
Intangible assets, net. . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . .
LIABILITIES
Current Liabilities
Accounts payable . . . . . . . . . . . . . .
Short-term debt and current portion
of long-term debt . . . . . . . . . . . . .
Salaries and social security
payable . . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . .
Total current liabilities. . . . . . . . . .
Accounts payable . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . .
Total Shareholders’ Equity
(Deficit) . . . . . . . . . . . . . . . . . . . .
Total liabilities and Shareholders’
Equity (Deficit) . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Ps.
Ps.
(Millions)
381.4
449.4
326.9
234.6
242.0
410.6
160.6
393.7
321.6
80.9
123.4
126.0
0.9
2.0
2.6
858.4 1,210.5 1,187.7
0.2
0.4
0.3
370.8
203.1
280.6
17.2
21.3
19.7
U.S.$
As of 30 June
2006
2007
2007
Ps.
Ps.
U.S.$
(Unaudited)
(Millions)
106.8
483.0
404.0
134.2
332.6
442.9
105.1
667.1
263.8
41.2
168.6
154.3
0.9
2.3
4.7
388.1 1,653.7 1,269.9
0.1
0.4
0.0
91.7
198.3
284.0
6.4
23.1
19.7
130.8
143.3
85.4
50.0
1.5
411.0
0.0
91.9
6.4
174.0
387.6
235.7
77.0
465.2
244.1
79.0
9.4
47.0
3.3
1.1
17.9
3.2
1.0
398.9
416.9 1,025.3
335.1
461.7 1,107.3
358.4
12.6
17.7
577.6
188.8
16.1
543.4
175.9
1,147.4 1,156.6 2,909.0
950.7 1,155.6 2,905.3
940.2
2,988.8 3,461.0 6,239.3 2,039.0 3,992.2 6,376.9 2,063.7
264.4
404.9
132.3
332.5
436.6
141.3
.
2,283.0 2,783.6
432.3
141.3 2,965.5
464.8
150.4
.
.
.
.
.
.
.
.
.
.
55.3
74.2
110.3
57.3
112.3
168.9
65.4
77.2
120.6
2,731.3 3,311.7 1,237.0
19.9
6.6
10.6
638.6
473.2 2,360.0
2.0
5.6
14.5
31.0
17.1
988.4
40.5
49.6
99.4
34.1
28.2
669.5
36.1
69.5
107.5
55.2
79.2
179.6
39.4
108.6
112.5
404.2 3,555.3 1,301.0
3.5
9.7
13.2
771.2
529.9 2,248.4
4.7
4.7
17.8
323.0
23.7
982.6
32.5
46.4
100.7
218.8
32.0
711.9
34.8
58.1
36.4
421.0
4.3
727.6
5.8
318.0
32.6
230.4
281.1
324.1
.
.
270.3
(508.5) (431.1)
860.0
(209.5) 1,001.4
2,988.8 3,461.0 6,239.3 2,039.0 3,992.2 6,376.9 2,063.7
(1) We define Adjusted EBITDA as net sales minus cost of sales (excluding depreciation and amortisation) and selling and administrative expenses (excluding depreciation and amortisation). We
believe that Adjusted EBITDA is a meaningful measure of our performance because it is commonly used in the industry to analyze and compare media companies. Nonetheless, Adjusted
EBITDA is not a measure of net income or cash flow from operations and should not be considered as an alternative to net income, an indication of our financial performance, an alternative to
cash flow from operating activities or a measure of liquidity. Because Adjusted EBITDA is not an
27
Argentine GAAP nor U.S. GAAP measure, other companies may compute Adjusted EBITDA in a
different manner. Therefore, Adjusted EBITDA as reported by other companies may not be comparable to Adjusted EBITDA as we report it.
2004 = Net sales Ps.1,667.3 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.842.2 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps. 366.2 million.
2005 = Net sales Ps.1,988.4 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,088.5 million; Minus Selling and administrative expenses (excluding depreciation and
amortisation) Ps. 443.2 million.
2006 = Net sales Ps.2,811.8 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,491.6 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps. 610.5 million.
June 2006 = Net sales Ps.1,141.5 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.638.5 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.234.0 million.
June 2007 = Net sales Ps.1,993.3 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.963.4 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.413.3 million.
(2) See “Unaudited Consolidated Pro Forma Statement of Income”.
(3) The summary data presented under U.S. GAAP was derived from and should be read in conjunction with the U.S. GAAP Financial Statements set forth in Annex A.
(4) We define Adjusted EBITDA as sales minus cost of sales and selling and administrative expenses
(excluding depreciation and amortisation). We believe that Adjusted EBITDA is a meaningful measure of our performance because it is commonly used in the industry to analyze and compare
media companies. Nonetheless, Adjusted EBITDA is not a measure of net income or cash flow
from operations and should not be considered as an alternative to net income, an indication of our
financial performance, an alternative to cash flow from operating activities or a measure of liquidity.
Because Adjusted EBITDA is not a U.S. GAAP measure, other companies may compute Adjusted
EBITDA in a different manner. Therefore, Adjusted EBITDA as reported by other companies may
not be comparable to Adjusted EBITDA as we report it.
2004 = Net sales Ps.1,571.2 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.796.1 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.349.6 million.
2005 = Net sales Ps.1,847.6 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,002.1 million; Minus Selling and administrative expenses (excluding depreciation and
amortisation) Ps.414.6 million.
2006 = Net sales Ps.2,560.5 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,309.6 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.569.5 million.
June 2006 = Net sales Ps.1,058.2 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.589.4 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.221.1 million.
June 2007 = Net sales Ps.1,895.5 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.917.2 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.398.7 million.
28
Operating Metrics
As of 31 December
2004
2005
2006
Cable TV Subscribers(1),(2) . . . . .
Cable TV Homes passed(1)
Cablevisión . . . . . . . . . . . . . . . .
Multicanal . . . . . . . . . . . . . . . . .
Cable TV churn rate
Cablevisión . . . . . . . . . . . . . . . .
Multicanal . . . . . . . . . . . . . . . . .
Internet Access Subscribers(1),(3)
Newspaper circulation(4) . . . . . . .
Canal 13 — Audience Share
Prime time(5) . . . . . . . . . . . . . .
Total time(5) . . . . . . . . . . . . . . .
As of 30 June
2006
2007
..
1,057,900
1,145,200
2,837,500
1,218,900
2,903,800
..
..
n/a
4,074,300
n/a
4,286,600
3,767,800
4,381,700
n/a
4,381,700
3,767,800
4,381,700
..
..
..
..
n/a
16.1%
162,500
463,987
n/a
13.8%
229,000
468,433
12.2%
14.4%
587,700
464,180
n/a
14.4%
259,200
475,210
13.1%
16.4%
657,200
451,182
..
..
28.2%
27.2%
27.1%
24.9%
39.4%
30.3%
37.6%
28.3%
39.5%
32.7%
(1) Numbers rounded to nearest hundred. The total homes passed as of 30 June 2007 is 6,753,600 if
overlap among Cablevisión and its subsidiaries (including Multicanal and Teledigital) is eliminated.
(2) Includes Uruguay and Paraguay. Numbers rounded to nearest hundred.
(3) Includes Paraguay. Numbers rounded to nearest hundred.
(4) Average number of copies according to IVC (including Diario Clarín and Olé).
(5) Share of free TV audience according to IBOPE for AMBA (as defined herein). Prime time is
defined as Monday through Friday from 8pm to 12am. Total time is defined as Monday through
Sunday from 12 pm to 12 am.
29
THE OFFERING
The Company
Grupo Clarín S.A, a sociedad anónima existing and organised
under the laws of Argentina.
Selling Shareholders
Mrs. Ernestina L. Herrera de Noble;
Aranlú S.A.;
Corbery S.A.;
GS Unidos, LLC;
GS Private Equity Partners II — Direct Investment Fund, LP;
GS Capital Partners III, LP;
GS Private Equity Partners 1999 — Direct Investment Fund, LP;
Tinicum GC Investors, LLC; and
Farallon GC Investors, LLC.
Joint Global Coordinators and
International Bookrunners
Goldman Sachs International and Credit Suisse Securities
(Europe) Limited.
International Lead Manager
J.P. Morgan Securities Inc.
International Co-Managers
Merrill Lynch International and Itaú Securities, Inc.
The Offering
The Offering consists of an offering of 38,500,000 Class B
Shares in the form of 19,250,000 GDSs in the United States
and other countries outside of Argentina through the International Underwriters and 11,500,000 Class B Shares in Argentina through the Argentine Placement Agents (as defined
herein).
International Tranche of the
Offering
38,500,000 Class B Shares in the form of 19,250,000 GDSs
are being offered to QIBs in the United States under
Rule 144A and to institutional investors outside the United
States under Regulation S. The GDSs will be issued by JP
Morgan Chase Bank, N.A., as Depositary. The international
tranche of the Offering of Class B Shares in the form of GDSs
is made in the United States and elsewhere outside Argentina
solely on the basis of the information contained in this Offering
Circular. Investors should take this into account when making
an investment decision.
Argentine Tranche of the Offering
The concurrent offering of 11,500,000 Class B Shares in
Argentina is being made on the basis of a Spanish-language
prospectus dated as of 11 October 2007. The Argentine prospectus, which has been filed with the CNV, is in a format different from that of this Offering Circular, consistent with CNV
regulations, but contains substantially the same information as
this Offering Circular, other than certain U.S. GAAP information, information relating to the GDSs, U.S. and U.K. taxation
matters and information required under the FSMA.
Preemptive and Accretion Rights
The Company’s existing shareholders have pre-emptive rights
to subscribe New Shares and additional class B common
shares corresponding to the Over-allotment Option in a number sufficient to maintain their proportionate holdings in the
30
Company’s total capital stock. In addition the Company’s
shareholders have accretion rights, which permit them to subscribe New Shares and additional class B common shares
corresponding to the Over-allotment Option that are not subscribed by other shareholders in proportion with the percentage of shares for which the subscribing shareholder has
exercised its pre-emptive rights. In order to permit the Offering, the Company’s existing shareholders, including the Selling
Shareholders, have waived the exercise of their pre-emptive
and accretion rights in connection with the offering of the New
Shares and the additional class B common shares corresponding to the Over-allotment Option, representing 100% of
the pre-emptive and accretion rights in respect of the Company’s capital increase. New shareholders of the Company will
not have such preemptive and accretion rights in respect of
the class B common shares offered in the Offering or the
Over-allotment Option. The Company will cancel the portion
of the capital increase not sold in the Offering or the Overallotment Option.
Over-allotment Option
The Company and certain Selling Shareholders have granted
Credit Suisse Securities (Europe) Limited an Over-allotment
Option to acquire, in the aggregate, up to 7,500,000 additional
class B common shares (15% of the Offering) in the form of
GDSs at the Offer Price for the purposes of meeting overallotments in connection with the Offering. The Over-allotment
Option is exercisable upon written notice by Credit Suisse
Securities (Europe) Limited to the Company and such certain
Selling Shareholders at any time during the Stabilisation
Period. If Credit Suisse Securities (Europe) Limited exercises
this option, the Company and such certain Selling Shareholders will be obligated to sell, and Credit Suisse Securities
(Europe) Limited will be obligated, subject to the conditions
contained in the Purchase Agreement, to purchase or procure
purchases for additional class B common shares in the form
of GDSs.
Stabilisation Period
The period commencing on the date of adequate public disclosure of the Offer Price of the GDSs and ending no later than
30 calendar days thereafter.
Offer Price
Ps.29.14 per Class B Share and U.S.$18.50 per GDS.
GDS Closing Date
On or about 24 October 2007.
Class B Share Closing Date
On or about 24 October 2007.
Class B Shares
Shares of class B common stock of the Company, to be
issued in book entry form with a nominal value of one (1) Peso
per share and one vote per share, and with rights to dividends
equal to those of the outstanding shares of the Company.
GDSs
Each GDS will represent two class B common shares. The
GDSs will be issued and delivered by the Depositary pursuant
to the Deposit Agreement (as defined herein). The Rule 144A
GDSs will be evidenced by the Master Rule 144A GDR, and
31
the Regulation S GDSs will be evidenced by the Master Regulation S GDR. See “Terms and Conditions of the Global
Depositary Shares”. GDSs representing up to
28,750,000 Class B Shares will initially be created for the purpose of the Offering. Pursuant to the Deposit Agreement, the
class B common shares in the form of the GDSs will be held
by Banco Santander Río S.A., as Custodian, for the account
of the Depositary and for the benefit of holders and beneficial
owners of GDSs.
Except in limited circumstances, definitive GDS certificates will
not be issued to holders in exchange for interests in the GDSs
represented by the Master GDRs. Subject to the terms of the
Deposit Agreement, interests in GDSs represented by the
Master Regulation S GDR may be exchanged for interests in
the corresponding number of GDSs represented by the Master Rule 144A GDR and vice versa. See “Terms and Conditions of the Global Depositary Shares”.
Depositary
JPMorgan Chase Bank N.A.
Lock-up
The Company, the Selling Shareholders and certain other
shareholders of the Company have agreed, subject to certain
exceptions, not to issue, offer, sell, contract to sell, pledge,
grant options over or otherwise dispose of any class B common shares of the Company, GDSs or any securities convertible into, or exchangeable or exercisable for, any class B
common shares or GDSs for a period commencing on 4 October 2007 and ending 180 days from the date of the Underwriting Agreement, without the prior written consent of the Joint
Global Coordinators and International Bookrunners.
Use of Proceeds
The gross proceeds to the Company from the Offering will be
U.S.$159.6 million (assuming the total placement of the Securities and that the Over-allotment Option is exercised in full).
The net proceeds to the Company from the Offering will be
U.S.$150.9 million (assuming the total placement of the Securities and that the Over-allotment Option is exercised in full)
after deduction of the estimated underwriting commissions
and other fees and expenses payable by the Company. The
Company intends to use the net proceeds of the Offering primarily in the following ways:
• up to U.S.$80 million, to prepay indebtedness of one of its
subsidiaries; and
• the remainder of the net proceeds it receives from the Offering, to invest in the development of its business, including
through acquisitions of participations in the capital stock of
other companies if and when opportunities arise, and for
general corporate purposes.
The Company will not receive any of the proceeds from the
sale of the Selling Shareholder Shares.
Voting Rights
The Class B Shares are subject to applicable provisions of
Argentine Corporate Law and the Bylaws. The exercise of
32
votes by the holders of GDSs will be effected through the
Depositary pursuant to the terms of the Deposit Agreement.
Existing Shareholders
The following table summarises the percentage of our outstanding class B common shares that will be held by our existing shareholders after giving effect to the Offering:
Over-Allotment Option is
not Exercised Exercised in Full
(Percentage of Class)
Mrs. Ernestina L. Herrera de
Noble
The 1999 Ernestina Laura
Herrera de Noble New York
Trust
HHM Media New York Trust
José Antonio Aranda
The LRP New York Trust
Aranlú S.A.
Corbery S.A.
GS Unidos, LLC
GS Private Equity Partners
II — Direct Investment Fund,
LP GS Capital Partners III,
LP
GS Private Equity Partners
1999 — Direct Investment
Fund, LP
Tinicum GC Investors, LLC
Farallon GC Investors, LLC
1.44%
0.00%
41.66%
18.29%
4.51%
5.19%
0.73%
0.00%
0.00%
0.00%
40.62%
17.83%
4.40%
5.06%
0.72%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.36%
0.31%
0.00%
0.30%
0.26%
In addition, the following table summarises the percentage of
our class A common shares and class C common shares that
will be held by our existing shareholders after giving effect to
the Offering.
Over-allotment Option is
not Exercised Exercised in Full
(Percentage of Class)
Class A common shares
GC Dominio S.A.
Class C common shares
GS Unidos, L.L.C.
GS Private Equity Partners II
Direct Investment Fund L.P.
GS Capital Partners III, L.P.
GS Private Equity Partners
1999 Direct Investment
Fund, L.P.
Dividend Policy
100%
100%
54.71%
54.35%
1.03%
43.42%
1.04%
43.76%
0.84%
0.85%
The Company does not have, and has no current plan to
establish, a formal dividend policy governing the amount and
payment of dividends or other distributions. According to its
Bylaws and the Argentine Corporate Law, the Company may
make one or more declarations of dividends with respect to
33
each fiscal year, including advance dividend payments under
Article 224, second paragraph of the Argentine Corporate
Law, only out of the Company’s retained earnings for such fiscal year, stated in the Company’s interim or annual financial
statements prepared in accordance with Argentine GAAP and
CNV regulations and approved by the board of directors or
the annual ordinary shareholders’ meeting, as the case may
be. Dividends must be payable rateably to all holders of the
Company’s shares of common stock as of the relevant record
date. Pursuant to foreign exchange regulations, an Argentine
company may purchase foreign currency in the foreign
exchange market only to pay dividends abroad to foreign
shareholders and to the Depositary for the benefit of the foreign holders of GDSs, provided that such dividends correspond to periods covered by approved audited annual
financial statements. See “Dividend Policy” and “Exchange
Rate Information — Exchange Controls”.
Share Capital Immediately Prior to
and Following the Offering
Immediately prior to the completion of the Offering after giving
effect to the conversion of our series A preferred shares and
series B preferred shares into 22,693,904 class B common
shares and 18,567,740 class C common shares and the conversion of 16,181,880 class C common shares into class B
common shares, the Company’s authorised and issued share
capital is Ps.270,261,524, and will consist of 75,980,304
class A common shares, 166,782,671 class B common shares
and 27,498,549 class C common shares.
After giving effect to the Offering, (and without giving effect to
the Over-allotment Option) the Company’s authorised and
issued share capital will be Ps.285,261,524, and will consist
of 75,980,304 class A common shares entitled to five votes
per share, 181,782,671 class B common shares entitled to
one vote per share and 27,498,549 class C common shares
entitled to one vote per share.
Taxation
For a discussion of certain U.S. federal income tax, U.K. tax
and Argentine tax consequences of purchasing and holding
the Class B Shares or GDSs, see “Taxation”.
Listing and Trading
Application has been made (i) to the Financial Services
Authority for a block listing of up to 105,765,610 GDSs, consisting of up to 25,000,000 GDSs to be issued on or about the
GDS Closing Date, up to 3,750,000 additional GDSs to be
issued pursuant to the Over-allotment Option, if exercised,
and up to 77,015,610 additional GDSs which may be issued
from time to time against the deposit of class B common
shares with the Depositary, to be admitted to the Official List,
(ii) to the London Stock Exchange for such GDSs to be
admitted to trading on the Regulated Market of the London
Stock Exchange through the regulated market segment of the
International Order Book (the “IOB”) and (iii) to the BCBA for
the listing of all class B and class C common shares of the
Company with an authorisation to trade class B common
shares of the Company (including the Class B Shares).
34
Application has also been made to have the Rule 144A GDSs
designated eligible for trading in PORTAL. The Company
expects that conditional trading through (i) the IOB will commence on a “when and if issued” basis on or about 19 October
2007 and (ii) MERVAL will commence on a “when and if
issued” basis on or about 19 October 2007. The Company
expects that unconditional trading through the BCBA will commence on or about 24 October 2007 and unconditional trading
through the IOB will commence on or about 25 October 2007.
All dealings in the GDSs and Class B common shares prior to
the commencement of unconditional trading will be of no
effect if Admission or the BCBA authorisation do not take
place and will be at the sole risk of the parties concerned.
The Offering is conditional upon all listings becoming effective.
Payment and Settlement
Application will be made to have the Rule 144A GDSs, evidenced by the Master Rule 144A GDR, accepted for clearance through DTC and the Regulation S GDSs, evidenced by
a Master Regulation S GDR, accepted for clearance through
DTC and the book-entry settlement systems of Euroclear and
Clearstream. The Company expects that payment and delivery
of the GDSs will be made through the facilities of DTC on or
about 24 October 2007. Upon acceptance by DTC, a single
Master Rule 144A GDR and a single Master Regulation S GDR
will be issued to DTC and registered in the name of Cede &
Co., as nominee for DTC. Euroclear and Clearstream are
expected to accept the Regulation S GDSs for settlement in
their respective book-entry settlement systems. Except in limited circumstances described herein, investors may hold beneficial interests in the GDSs evidenced by the corresponding
Master GDR only through DTC, Euroclear or Clearstream, as
applicable.
Clearance and Security Numbers
The security identification numbers for the GDSs are as
follows:
Rule 144A GDSs:
ISIN: US40052A1007
CUSIP: 40052A 100
Common Code: 032322441
Regulation S GDSs:
ISIN: US40052A2096
CUSIP: 40052A 209
Common Code: 032363881
LSE trading symbol: “GCLA”
The security identification numbers for the class B common
shares of the Company (including the Class B Shares) are as
follows:
BCBA trading symbol: “GCLA”
35
Transfer Restrictions
See “Selling and Transfer Restrictions” for a detailed description of the restrictions on transfers of the GDSs and the
Class B Shares.
Risk Factors
Prospective investors should consider carefully certain risks
discussed under “Risk Factors”.
Mandatory tender offer regime
Mandatory Tender Offer in the Case of Acquisition of
More than 50% of the Capital Stock or Votes of the Company. We have opted out of the mandatory tender offer rules
set forth in Decree No. 677/01. However, pursuant to our
Bylaws, if a person or a group of persons acting in concert
not owning shares of the Company that represent, in the
aggregate, 50% or more of the Company’s total capital or total
votes (the “Future Holder”) intend to acquire, in a transaction
or a series of related transactions (including by way of merger
or exchange) occurring within a period of 90 days, direct or
indirect title to, or control of, shares of the Company or other
securities convertible into shares of the Company that, when
added to the securities held by the Future Holder prior to the
acquisition, would result in such Future Holder holding or controlling more than 50% of the capital stock or votes of the
Company, then the Future Holder will be required to launch a
mandatory tender offer for all outstanding shares of the Company and all other securities convertible into shares of the
Company. This mandatory tender offer provision does not
apply to acquisitions by Ernestina L. Herrera de Noble, Héctor
Horacio Magnetto, José Antonio Aranda, Lucio Rafael
Pagliaro, certain authorised assignees of the foregoing and
certain of their designated relatives, heirs and successors
(collectively, the “Permitted Shareholders”), as well as corporations controlled by any of them or trusts established for the
benefit of any of the Permitted Shareholders. The Future
Holder may set the price payable to accepting holders of
shares or convertible securities, with the following limitations:
(a) if the Future Holder acquired any shares of the Company
or securities convertible into shares of the Company within the
90 days immediately preceding the notice by the Future
Holder launching the tender offer, the price per share in the
mandatory tender offer may not be lower than the highest
price paid in such acquisitions, and (b) if the Future Holder
has obtained firm sale commitments or has made firm commitments for the direct or indirect purchase of shares of the
Company or securities convertible into shares of the Company
within the 90 days immediately preceding the notice by the
Future Holder launching the tender offer, the price per share
in the mandatory offer or convertible security may not be
lower than the highest price agreed under such commitments.
Mandatory Tender Offer in the Case of a Voluntary Withdrawal from the Public Offering and Listing System.
CNV regulations require publicly traded Argentine companies
that intend to delist or withdraw from Argentina’s public offering and listing system to first undertake a mandatory tender
36
offer (“OPA”) for all of their shares or other rights or securities
convertible into shares. However, such companies are not
required to initiate an OPA for shares held by the shareholders
who voted for such delisting or withdrawal. The price offered
should be a fair price, following the criteria set forth in Decree
No. 677/01, and may differ from the price that would result
from the exercise of appraisal rights by a shareholder under
the Argentine Corporate Law.
Mandatory or Voluntary Tender Offer in the Case of NearTotal Control. If a person holds, directly or indirectly, 95%
or more of the outstanding capital stock of a publicly traded
Argentine company, any minority shareholder may request
that the controlling shareholder launch an OPA for all outstanding shares of such company. In addition, a person that
holds, directly or indirectly, 95% or more of the outstanding
capital stock of a publicly traded Argentine company may
issue a unilateral declaration of its intention to purchase all
outstanding shares of such company within six months following the date of acquisition of near-total control and withdraw
the Company from public offering and its shares from listing
and trading. The price offered should be a fair price, following
the criteria set forth in Decree No. 677/01.
Jurisdiction and Arbitration
Pursuant to article 38 of Decree No. 677/01, companies
whose shares are listed on the BCBA, such as the Company,
are subject to the jurisdiction of the BCBA arbitration court for
all matters concerning such companies’ relationship with
shareholders and investors, without prejudice to the right of
shareholders and investors to submit their claims to the courts
of the City of Buenos Aires.
37
USE OF PROCEEDS
At an Offer Price of U.S.$9.25 per Class B Share (at an exchange rate of Ps. 3.15 per
U.S.$1.00), the gross proceeds to the Company from the Offering will be U.S.$159.6 million (assuming
the total placement of the Securities and that the Over-allotment Option is exercised in full). The net
proceeds to the Company from the Offering will be approximately U.S.$150.9 million (assuming the
total placement of the Securities and that the Over-allotment Option is exercised in full) after deduction
of the estimated underwriting commissions and other fees and expenses payable by the Company.
The Company will not receive any of the proceeds from the sale of Securities by the Selling
Shareholders in the Offering, or any proceeds from the sale of additional Securities by certain Selling
Shareholders pursuant to the exercise of the Over-allotment Option. The Company intends to use the
net proceeds of the Offering primarily as follows:
• up to U.S.$80 million, to make a capital contribution to its subsidiary, Vistone LLC, for the total
prepayment of all outstanding amounts (including interest accrued through the date of prepayment) under Vistone LLC’s outstanding U.S.$100 million Demand Grid Note, dated as of
15 March 2005, as amended on 16 September 2005. The Demand Grid Note accrues interest
at a rate of 90-day LIBOR plus 0.75%, is secured by term deposit pledges and standby letters
of credit and is payable on demand; and
• the balance of the net proceeds it receives from the Offering, to develop its business, including
through acquisitions of participations in the capital stock of other companies if and when
opportunities arise, and for general corporate purposes.
Except for the use of up to U.S.$80 million to prepay indebtedness of Vistone LLC, the Company
has not yet determined the amount of net proceeds to be used specifically for the other purposes
specified above. Accordingly, management will have significant flexibility in applying the net proceeds
of the Offering.
38
BUSINESS DESCRIPTION
Our Company
We are the largest and most prominent media company in Argentina, and are the market leader
in the cable television industry and Internet access, printing and publishing, and broadcasting and
programming segments. Our cable television network is the largest in Latin America, we have the
largest broadband subscriber base in Argentina and our flagship newspaper — Diario Clarín — has
the highest circulation in Latin America and is the second-highest circulation Spanish-language
newspaper in the world. We are the largest producer of media content in Argentina. Our content,
including news, sports and entertainment, reaches substantially all segments of the Argentine
population in terms of wealth, geography and age.
Our leading position in various media market segments is a unique competitive advantage that
allows us to generate significant synergies and cost savings. Our daily reach to substantially all
segments of the Argentine population provides us with a unique knowledge and understanding of the
Argentine media consumer.
In 2006, and for the six-month period ended 30 June 2007, our net sales were Ps.2.8 billion and
Ps.2.0 billion, respectively, our Adjusted EBITDA was Ps.709.7 million and Ps.616.6 million, respectively, and our net income was Ps.869.7 million and Ps.103.5 million, respectively. In 2006, on a proforma basis after giving effect to the Cablevisión Acquisition (as defined herein), our net sales were
Ps.3.6 billion, our Adjusted EBITDA was Ps.1.0 billion and our net income was Ps.593.6 million.
We are a sociedad anónima, a corporation with limited liability, organised, existing and incorporated under the laws of Argentina. As a holding company, we derive our operating income and cash
flow from the operations of our direct and indirect subsidiaries.
Our Strengths
We believe we have the following strengths:
1. We are the Largest and Most Prominent Media Company in Argentina. We are the
market leader in Argentina in most of the media segments in which we operate. We reach
substantially all segments of the Argentine population in terms of wealth, geography and age on
a daily basis, with a particularly strong franchise in the largest and most affluent urban areas of
the country.
• Largest Cable TV Network in Latin America. We operate the largest cable TV network in
Argentina and Latin America in terms of subscribers, with approximately 2.9 million as of
30 June 2007.
• Largest Broadband Internet Access Provider in Argentina. We provide broadband Internet access to approximately 614,800 cable modem and ADSL subscribers in Argentina as of
30 June 2007, the largest broadband subscriber base in the country.
• Largest Newspaper in Latin America. Our flagship newspaper has the highest circulation in
Latin America and is also the leading Argentine newspaper in terms of advertising revenues.
• Largest Television Broadcaster in Argentina. We broadcast the leading TV channel in
Argentina in terms of advertising revenues and prime time audience, and two leading radio
stations in Argentina.
• Largest Network of Argentine Internet Portals. We operate the largest network of Argentine-based Internet portals receiving approximately 298 million page views and 7.7 million
unique visitors per month.
2. We Own a Large, High-Quality, High-Capacity Cable Network. Through our highcapacity cable network we can offer basic pay TV, broadband Internet, premium video, telephony
39
and value added data services to our residential and business customers. 42% of our cable
network is bidirectional. Our cable modem technology competes favourably with ADSL in the
provision of broadband Internet access, as the speed and quality of our service are not affected
by the distance of the subscriber from our headend location. In addition, the size of our cable TV
business allows us to achieve significant economies of scale, mainly through cost savings and
efficient planning of our capital expenditures, in a largely fixed cost industry.
3. We are the Leading Producer of Media Content in Argentina. We believe that our
longstanding leadership in the media business in Argentina gives us a unique ability to identify
audiences’ tastes and interests and produce content tailored for the Argentine population, such
as the broadcasting of local soccer championships. Our broad content distribution capabilities
and critical mass, in turn, reinforce our ability to generate high-quality content, a key competitive
advantage.
4. We are a Central Point of Reference for Advertisers in Argentina. We have the
largest market share in most segments of the Argentine advertising market. Our leadership
position across most content production and distribution platforms allows us to capture a
significant share of the Argentine advertising market. We have a unique ability to position new
brands and products, both for our advertising customers and our own products.
5. We Have Proven Capable of Adapting Our Business Model Over Time. We can
anticipate market trends and changes in our industry, effectively adapt our business models, and
take full advantage of the resulting opportunities. Originally created as a local newspaper, we
developed with the industry. We first became an integrated player in the printing and publishing
business and then successfully expanded into the broadcast television and radio business.
Throughout the last decade, we have created the largest cable television network in Latin
America, and most recently we created the most visited network of Argentine Internet portals.
Moreover, we continue to develop new business concepts and technologies such as e-commerce
platforms, mobile content and web 2.0 capability.
6. Our Solid Financial Position. Our strong cash flow generation, supported by the cost
savings we can derive from our economies of scale, as well as our operating margins and limited
capital expenditure needs, provides us financial resources in amounts sufficient to operate our
business efficiently and pursue attractive growth opportunities.
7. Our Proven Management Team and the Commitment of Our Controlling Shareholders. Our management team has extensive experience in the media industry in Argentina.
Its clear vision prevailed throughout changing environments as we developed into the most
prominent and largest media group in Argentina. Our Controlling Shareholders have been
actively involved in the day-to-day operation of the Company for the past thirty years. Many of
our key officers have been with us for more than a decade.
Our Strategy
We seek to use our leading position and our access to growth opportunities in the media
industry in Argentina and Latin America to create value for our shareholders. We intend to develop
further our cable television business, including digital and premium offerings, and expand our
broadband and advertising businesses. We expect to strengthen our content production capabilities,
expand our footprint in Argentina and abroad in our core and related businesses and take advantage
of digital convergence.
We intend to pursue the following strategic initiatives:
• Consolidate Our Cable TV Network. By integrating Cablevisión and Multicanal, we intend
to create value for our shareholders by building on the combined power of the two brands and
reducing costs and capital expenditures through the elimination of overlapping operating
structures and physical networks.
40
• Expand Our Broadband Internet Access Business. We will seek to expand our broadband
Internet access and gain market share in this rapidly growing market through our competitive
advantages over competing ADSL technologies. We intend to rely on the footprint of our
bidirectional network and our cable TV subscriber base to do so.
• Develop High-Growth, High-Margin Businesses. We intend to continue focusing our
resources and capital on high-growth, high-margin businesses and opportunities. In particular,
we will seek to expand our broadband Internet access business and gain market share in a
rapidly expanding market through our competitive advantages against competing ADSL
technologies. The high quality of our network and our ability to use bandwidth capacity provide
us with a significant advantage with respect to competitors that can only offer ADSL
technology. We will seek to further expand our digital subscriber base and our premium cable
television services, including pay-per-view programming services. We believe that our state-ofthe-art network infrastructure and broad cable television and Internet customer base can also
be leveraged to develop our IP telephony business through an integrated offering of video,
Internet and telephony services (triple play).
• Take Full Advantage of the Growth of the Argentine Advertising Market. By leveraging
our leadership position in content production and distribution, and selectively adding new
publications to our printed media portfolio, we will seek to take advantage of the growth of the
Argentine economy to increase our advertising revenues. We intend to use our expertise and
current platforms to increase our share of the advertising market.
• Expand Our Footprint in the Interior of Argentina and Pursue Selected Acquisitions
Internationally. We will seek to further expand our operations in the interior of the country,
where our presence is more limited than in Buenos Aires and other large urban areas, through
organic growth and opportunistic acquisitions. We may consider expanding our printing and
publishing and broadcasting activities through the acquisition of regional newspapers, broadcast television stations and cable signals. We will also consider acquisition opportunities
outside Argentina that may offer incremental value to our shareholders and are consistent with
our business strategy. As part of our ongoing effort to evaluate potential opportunities, we may
consider strategic partnerships with leading international media companies.
• Continue Producing High-Quality Multimedia Content. The production of high-quality
content is one of the cornerstones of our business. We remain committed to investing in the
development of talent and leveraging our knowledge of audiences’ tastes and interests to
continue producing high quality content for distribution through our various platforms. We seek
to use our production capabilities across the different media segments and present a consistent multimedia product to our target audience. We expect to further increase our content sales
outside of Argentina.
• Take Advantage of Trends and Changes in the Industry to Expand into Related
Business. We intend to maintain our leadership in the media industry in Argentina by
capitalising on our ability to identify trends in the industry and to develop new businesses. We
intend to do so by leveraging the cash flow generation from our existing business as well as
our ability to position new brands and products.
Our History
In 1945, Mr. Roberto Noble launched Diario Clarín, a new morning daily newspaper. By the mid1960s Diario Clarín had become the newspaper with the highest circulation in the City of Buenos
Aires. Mrs. Ernestina L. Herrera de Noble, wife of Mr. Noble, succeeded him in the editorship of Diario
Clarín in 1969. Between 1971 and 1974, Messrs. Magnetto, Aranda and Pagliaro, the current
members of our executive committee, became managers of AGEA. In 1976, AGR began its operations
to meet Diario Clarín’s growing printing and production needs, marking the beginning of our commercial printing operations. Two years later, in 1978, in a joint venture involving AGEA and other
41
newspapers, Papel Prensa S.A.I.C.F. y de M. (“Papel Prensa”) began production as the first Argentine
newsprint producer. By the mid 1980s, Diario Clarín had become the newspaper with the highest
circulation in the Spanish-speaking world. Today, Diario Clarín has the second highest circulation, after
Spanish newspaper El País.
After the Argentine government deregulated the broadcasting industry in 1989, the Controlling
Shareholders began to expand their business into other media platforms. In 1990, they created Arte
Radiotelevisivo Argentino S.A. (“ARTEAR”) and acquired the broadcasting license to operate Canal
13, one of the five broadcast television stations in Buenos Aires. In 1991 they acquired Radio Mitre
S.A. (“Radio Mitre”), founded in 1921. In 1992, they acquired Multicanal, a cable television operator
and entered into a joint venture with Torneos y Competencias S.A. (“TyC”), a producer of sports
programming, expanding into the broadcasting and distribution of sports events.
In the mid-1990s the Controlling Shareholders continued to expand their business by launching
cable television signals, such as TN Todo Noticias, the cable signal with the highest number of
viewers in Argentina today, measured over 24 hours. They also continued to reinforce historically core
business in the printing and publishing sector, launching Viva Magazine, Olé and Genios. In 1996,
Clarín Digital, the first digital edition of Diario Clarín, was published on the Internet. In 1996 and 1997,
Multicanal acquired cable operations in Paraguay and Uruguay, respectively, and in 2000, the
Controlling Shareholders launched Prima, to provide Internet services and digital content.
In 1999, the Controlling Shareholders established the Company and through a series of
transactions contributed their interests in each of the media businesses to the Company, and the
GS Investors, Tinicum and Farallon acquired an 18% interest in the Company.
In 2001, we acquired 75% of the capital of Editorial La Razón S.A. (“La Razón”) publisher of
Diario La Razón, an evening newspaper published in the City of Buenos Aires and its surrounding
areas, which we refer to as the “AMBA Region” and the first free distribution newspaper in Argentina.
After 2000, the Company continued to expand the range of its media-related business. In spite of the
2002 crisis, the Company was able to continue its operations in all business segments and to benefit
from Argentina’s economic recovery and growth. In 2002, AGEA established Ferias y Exposiciones
S.A. (“Ferias y Exposiciones”), a company created to organise trade fairs and exhibitions. In 2004,
AGEA entered the text book publishing industry through Tinta Fresca Ediciones S.A. (“Tinta Fresca”),
which in 2007 launched Contenidos Estudiantiles Mexicanos, S.A. in Mexico, together with Mexican
publishing group, Grupo Milenio.
In 2005, the Company acquired an indirect minority interest in Cablevisión, Argentina’s largest
cable television operator and high-speed Internet access provider. In 2006, it increased its indirect
participation in Cablevisión to 60% and began the integration of Cablevisión’s operations with those of
Multicanal.
Our Business Segments
We have grouped our business into four core segments: cable television and Internet access,
printing and publishing, broadcasting and programming and other related activities. We create media
content, build brand names around the content, and manage the outlets distributing the content. We
deliver the content in various forms and through multiple outlets, including broadcast and cable
television, Internet services, newspapers, magazines and educational books. Substantially all of our
businesses hold leading market positions, and we capitalise on these strong positions when expanding
into new markets. Our most significant operations are located in Argentina, where we generate
substantially all our revenues. We also have operations in Paraguay and Uruguay.
Through companies we control and joint ventures, we are engaged primarily in cable television
and Internet access, printing and publishing, broadcasting and programming and other related
activities. The chart below illustrates the main companies in which we participate, directly or indirectly,
organised by business segment as of the date of this Offering Circular.
42
The Company
Cable TV and Internet
Access
Cable TV
Cablevisión
Multicanal
Holding Teledigital
Broadband
Cablevisión
Prima
Broadcasting &
Programming
Pr
Printing & Publishing
Broadcast TV Channels
Publishing
AGEA
Tinta Fresca
Cimeco – La Voz/Los Andes
Printing
AGR
Impripost
Paper Mill
Papel Prensa
Other
Oportunidades
Ferias y Exposiciones
Unir
Artear C13
Telecor C12
Telba C7
Bariloche TV C6
Other
Digital Content
Clarín Global
Prima Internacional
Other
GC Gestión Compartida
TV Content Producers
Pol-Ka
Ideas del Sur
IESA
TRISA
TSC
Canal Rural Satelital
Film Producer
Patagonik Film Group
Radio Broadcasting
Radio Mitre
Cable Television and Internet Access
Out of our total sales of Ps.2.0 billion in the first six months of 2007, our cable television and
Internet access segment accounted for Ps.1.2 billion, or 61.1% of total sales. This segment derives
revenues primarily from monthly subscription fees for basic cable service and high speed Internet
access. Other sources of revenue include connection fees, advertising and fees for premium and
pay-per-view programming services.
Through our 60% participation in Cablevisión and its subsidiaries (including Multicanal and
Holding Teledigital), we operate the largest network of cable television systems in Argentina and in
Latin America in terms of subscribers. As of 30 June 2007, our cable systems served approximately
2.7 million subscribers in Argentina and 157,900 subscribers in Paraguay and Uruguay. Our cable
television and Internet broadband services businesses include the operations of Cablevisión, as well
as its subsidiaries Multicanal, Teledigital and Prima. The following table shows subscriber and related
data in Argentina as of 30 June 2007, and is based on information published by third parties and our
internally generated market information:
Total(1)
Homes Passed(2),(3) . . . . . . . . .
Cable Television Subscribers(2) .
Cable Television Penetration(4) .
Internet Subscribers(2) . . . . . . .
Internet penetration(5) . . . . . . . .
.
.
.
.
.
6,548,400
2,746,00
41.9%
653,700
23.8%
Cablevisión
3,767,800
1,423,500
37.8%
344,800
24.2%
(1) Eliminates overlaps.
(2) Numbers rounded to nearest hundred.
(3) Homes passed by cable networks.
(4) Subscribers as a percentage of total homes passed.
(5) Subscribers as a percentage of total cable subscribers.
(6) Dial-up, ADSL and corporate clients.
43
Multicanal
4,176,500
1,146,800
27.5
182,000
15.9%
Teledigital
460,500
175,700
38.2
4,700
2.7%
Prima
—
—
—
122,200(6)
—
Our Networks and Operating Regions
Cablevisión’s principal activity is the operation of cable networks in the AMBA Region, as well as
the city of La Plata and other large, medium-sized and small cities in the provinces of Buenos Aires,
Santa Fé, Entre Ríos, Córdoba, Corrientes, Misiones, Salta and Chaco. As of 30 June 2007,
Cablevisión (excluding Multicanal and its subsidiaries) served approximately 1.4 million cable television subscribers and 344,800 Internet subscribers and was organised into five operational regions:
the AMBA Region, the Buenos Aires Province Region, the Central Region, the Litoral Region and the
Southern Region.
Multicanal, Cablevisión’s largest subsidiary acquired by Cablevisión in September 2006, has
operations in Argentina, Paraguay and Uruguay. Multicanal operates cable networks in several regions
of Argentina. As of 30 June 2007, Multicanal served approximately 1.3 million subscribers, of which
approximately 1.1 million reside in Argentina and the balance in Uruguay and Paraguay. Multicanal
has organised its networks into five operational regions: the AMBA Region, the Buenos Aires Province
Region, the Central Region, the Litoral Region and the Southern Region.
The AMBA Region is the region with the highest purchasing power in Argentina and is also the
most densely populated. There are approximately 12 million inhabitants in the region, representing
approximately 33% of the total population of Argentina. Cablevisión has built a fibre optic cable ring
around the City of Buenos Aires that provides network redundancy and improves network reliability.
Multicanal has consolidated the City of Buenos Aires with the surrounding areas using fibre optic
loops. Multicanal’s cable networks in the AMBA Region overlap to a significant extent with Cablevisión’s network in those areas.
Cablevisión’s Buenos Aires Province Region consists of six sub-regions: Lincoln, Azul, Pergamino, Lobos, Tandil and San Nicolás, which include 41 municipalities. Multicanal’s Buenos Aires
Province Region comprises cable systems in Junín, Chivilcoy, San Pedro and Baradero.
Cablevisión’s Central Region includes cable systems located in the provinces of Córdoba and
Salta, including the cities of Córdoba, Río Cuarto, Salta and San Francisco. Multicanal’s Central
Region comprises cable systems in seven of the largest cities in the province of Córdoba, the second
largest province in Argentina in number of inhabitants, and two cities in the province of La Pampa.
Cablevisión’s Litoral Region includes cable systems located in Northeastern Argentina, including,
among others, the cities of Rosario and Santa Fé, in the province of Santa Fé; Paraná, in the province
of Entre Ríos; Posadas, in the province of Misiones; Resistencia, in the province of Chaco; their
respective surrounding populations and other smaller population centres in the province of Corrientes.
Multicanal’s Litoral Region comprises cable systems in five cities in the province of Santa Fé, the third
largest province in Argentina in number of inhabitants, one city in the province of Entre Ríos, the city
of Corrientes in the province of Corrientes, two cities in the province of Chaco and the city of Formosa
in the province of Formosa.
Cablevisión’s Southern Region includes cable systems located mainly in the province of Buenos
Aires, including the cities of Bahía Blanca, La Plata (the capital of the province of Buenos Aires) and
surrounding areas. Multicanal’s Southern Region comprises cable systems in La Plata, Bahía Blanca,
Mar del Plata and other cities on the Atlantic coast.
As of 30 June 2007, Cablevisión’s cable network passed approximately 3.8 million homes, of
which more than 59% were passed by its two-way 750 MHz bandwidth network. In the AMBA Region,
Cablevisión provides two-way 750 MHz bandwidth capacity to 67% of the homes passed by its cable
network. Cablevisión’s two-way 750 MHz networks allow it to offer services and products that generate
additional revenues, such as Internet access and access to premium television signals. As of 30 June
2007, Multicanal’s cable network passed approximately 4.4 million homes, including Uruguay and
Paraguay of which more than 47% were passed by its two-way 750 MHz bandwidth network.
44
The following table shows subscriber and related data for Cablevisión’s five operating regions as
of 30 June 2007, and is based on information published by third parties and our internally generated
market information:
AMBA Region
Homes Passed(1),(2) . .
Cable Subscribers(1) . .
Cable Penetration(3) . .
Internet Subscribers(1)
Internet Penetration(4) .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Buenos Aires
Province
Region
2,131,900
712,600
33.4%
301,300
42.3%
375,400
257,200
68.5%
5,700
2.2%
Central
Region
Litoral
Region
446,800 598,000
163,800 226,600
36.7%
37.9%
18,500
14,900
11.3%
6.6%
Southern
Region
215,700
63,300
29.3%
4,400
7.0%
Total
3,767,800
1,423,500
37.8%
344,800
24.0%
(1) Numbers rounded to the nearest hundred.
(2) Homes passed by cable networks.
(3) Cable subscribers as a percentage of total homes passed.
(4) Internet subscribers as a percentage of total cable subscribers.
The following table shows subscriber and related data for Multicanal’s five operating regions in
Argentina as of 30 June 2007, and is based on information published by third parties and our
internally generated market information:
AMBA Region
Homes Passed(1),(2) . . . .
Cable Subscribers(1) . . . .
Cable Penetration(3) . . . .
Internet Subscribers(1),(4)
Internet Penetration(5) . . .
.
.
.
.
.
.
.
.
.
.
Buenos Aires
Province
Region
2,719,300
588,500
21.6%
101,500
17.2%
70,900
43,400
61.2%
700
1.6%
Central
Region
Litoral
Region
342,500 442,700
133,600 158,200
39.0%
35.7%
14,900
22,000
11.2%
13.9%
Southern
Region
601,100
223,100
37.1%
42,900
19.2%
Total
4,176,500
1,146,800
27.5%
182,000
15.9%
(1) Numbers provided to the nearest hundred.
(2) Homes passed by cable networks.
(3) Cable subscribers as a percentage of total homes passed.
(4) Does not include Prima.
(5) Internet subscribers as a percentage of total cable subscribers.
We acquired Holding Teledigital through Cablevisión on 26 September 2006. Holding Teledigital
owns cable television systems in the provinces of La Pampa, Neuquén, Río Negro, Buenos Aires,
Córdoba, Corrientes, Entre Ríos and Santa Fé.
As of 30 June 2007, Holding Teledigital’s networks passed approximately 460,500 homes and
Teledigital served approximately 175,700 subscribers. Of all homes passed by Holding Teledigital’s
network, 3% were passed by its two-way 750 MHz bandwidth network.
Prima became a subsidiary of Multicanal in September 2006, and provides primarily Internet
connectivity through our cable network as well as those of third parties. In addition, Prima provides
telephony services over the Internet (also known as “voice-over-Internet protocol” or “VoIP”) under the
brand Vontel. As of 30 June 2007, Prima had 122,200 Internet subscribers and our brand Vontel had
7,200 telephony subscribers.
45
Summary of Ownership Changes and Recent Acquisitions
On 20 July 2006, our subsidiary Multicanal completed the restructuring of its financial indebtedness pursuant to the terms of the Multicanal APE. The Multicanal APE provided, among other things,
for the exchange of approximately U.S.$182.0 million of outstanding debt for shares representing
approximately 35% of Multicanal’s total capital and the discharge of approximately U.S.$125.0 million
of outstanding debt for a cash payment of U.S.$37.5 million. After giving effect to the Multicanal APE,
Multicanal’s outstanding financial debt decreased from U.S.$526.4 million to U.S.$223.3 million and
the Company’s ownership interest in Multicanal was diluted to 65%. The consummation of Multicanal’s
APE generated a non-recurrent gain before tax of Ps.1,493.3 million (including Ps.246.8 million
attributable to the dilution for the benefit of existing shareholders — the Company and AGEA —
resulting from the exchange of debt for shares described above).
On 26 September 2006, through a series of related transactions, the Company and Fintech
increased their holdings of Cablevisión’s share of capital to approximately 60% and 40%, respectively.
On the same date, Cablevisión acquired 100% of the capital stock of Holding Teledigital from one of
the prior shareholders of Cablevisión, and 98.5% of the shares of common stock of Multicanal, from
the Company and Fintech. Immediately prior to Cablevisión’s acquisition of Multicanal, Multicanal
acquired 100% of the capital stock of Prima from Prima Internacional. On 22 December 2006,
Multicanal transferred 3% of Prima to our subsidiary Univent’s. In March 2007, Cablevisión acquired
this 3% stake in Prima from Univent’s. On 26 September 2006, Cablevisión paid approximately
U.S.$70 million in cash for Holding Teledigital and agreed to pay Ps.824.8 million for the capital stock
of Multicanal it acquired from the Company, AGEA and Fintech. Additionally, Cablevisión made
irrevocable capital contributions to Holding Teledigital of approximately Ps.76.4 million to permit
repayment of outstanding bank debt and seller financing debt of Holding Teledigital. On 26 September
2006, Multicanal agreed to pay Prima Internacional Ps.77.5 million for the capital stock of Prima. The
chart set forth below reflects our ownership in Cablevisión as of the date of this Offering Circular:
GRUPO CLARÍN S.A.
95,28%
100%
GC Minor S.A.
Vistone LLC
11%
100%
39%
VLG Argentina
LLC
CVB Holding
LLC
51,3%
95%
5%
Compañía
Latinoamericana
de Cable S.A.
3,99%
Southel
Holdings S.A.
28,69%
1,66%
Cablevisión S.A.
46
The Cablevisión Shareholders Agreement
On 26 September 2006, the Company, Fintech, VLG Argentina LLC, Vistone LLC, CVB Holding
LLC and Southtel Holdings S.A. entered into a shareholders agreement relating to Cablevisión (the
“Cablevisión Shareholders Agreement”).
Under the Cablevisión Shareholders Agreement, each shareholder holding 10% or more of
Cablevisión’s shares has the right to nominate one member for election to Cablevisión’s board of
directors for every 10% of Cablevisión’s shares owned, provided that a shareholder holding more than
50% of Cablevisión’s shares shall nominate a majority of the members of the board of directors. The
board of directors shall act by a majority of directors attending the meeting, except with regard to
certain matters, which, unless Cablevisión’s executive committee has approved the action unanimously, shall not be approved without the vote of one or more of the directors nominated by each of
the Company, Fintech and any third party entitled to nominate a director following a transfer of shares
in compliance with the agreement.
The Cablevisión Shareholders Agreement requires the shareholders of Cablevisión to cause the
board of directors to establish an executive committee comprised of the chief executive officer of
Cablevisión, a member of the board designated by Fintech and a member of the board designated by
the Company. The executive committee must meet at least twice a month, and management is
required to submit certain matters to the executive committee, including the strategic plan, the budget
and contracts exceeding U.S.$2 million.
Each shareholder holding at least 20% of the shares of Cablevisión also has the right, at any
time following the first anniversary of the agreement, to require Cablevisión, subject to certain
conditions, to undertake a public offering in Argentina of such shareholder’s shares. In addition, each
shareholder owning more than 20% of Cablevisión’s outstanding shares, until the five-year anniversary
of the agreement, has customary piggyback rights with respect to any public offering of shares
undertaken by Cablevisión in Argentina.
In addition, the Cablevisión Shareholders Agreement provides for certain tag-along rights and
rights of first refusal, except for transfers of shares to affiliates and certain other permitted
transferees.
The Cablevisión Shareholders Agreement requires that any contracts between Cablevisión and a
shareholder of Cablevisión, or affiliates of such shareholder, must be conducted in terms no less
favourable to Cablevisión than arms length terms.
Network Architecture
Cablevisión’s network’s backbone or “trunk” portion in the AMBA Region consists entirely of fibre
optic cable. Video and data signals are transmitted from the main headend to the hubs that provide
services to specific areas. Each hub concentrates and transmits the video and data signals it receives
via fibre optic cable to optical nodes. At each node the signals are converted from optic to electric
codes and are then re-transmitted via coaxial cable to a distribution node. From there, the signal is
transmitted to the subscriber’s domicile along a coaxial or “drop” cable. Cablevisión has deployed a
similar network architecture in Córdoba and Salta, in the Central Region and in the cities of Santa Fé,
Paraná and Rosario in the Litoral Region.
Cablevisión’s cable networks outside of the areas mentioned above are constructed with coaxial
cable architecture. Cablevisión intends to expand the fibre optic cables and other technological
improvements that currently exist in the AMBA Region, into the other operational regions as part of
our long-term plan to expand and improve our network capacity.
Multicanal has relied on a fibre to service area (“FSA”) design to upgrade or rebuild its network
because it permits bi-directional transmission. FSA network architecture is a design of cable network
47
fibre trunks and coaxial cable extensions that connects programming headends to the distribution
network and allows signals to flow both to and from headends and the distribution network.
Multicanal’s FSA network architecture is designed to be used as a platform for additional
services and products, including modems for Internet access and telephony services. It allows
Multicanal to monitor its networks, offer approximately 80 analogue signals and approximately
100 digital signals (assuming an 8-to-1 compression ratio), and offer additional premium and
pay-per-view services. As a result of improvements made in 2005, Multicanal increased network
coverage in order to be in a position to provide high-speed Internet access to more than 670,000
households, and enhanced the reliability of the networks that will not be upgraded in the short- and
medium- term to permit high-speed Internet access.
As part of our efforts to integrate the operations of Cablevisión with those of Multicanal, Holding
Teledigital and Prima, we intend to take steps to unify the cable network, eliminate overlaps and
streamline technical support efforts.
Programming and Services
Cablevisión and Multicanal apply significant resources to obtaining a wide variety of programming
options in order to appeal to potential new subscribers and maintain existing subscribers.
For this purpose, our cable operators purchase basic and premium programming from more than
25 programming providers, as well as all broadcast television channels of Buenos Aires. We have a
controlling stake in ARTEAR and own a 50% interest in TRISA and TSC, all of which are important
programming suppliers in Argentina, including to our cable operators.
Several programming suppliers agreed to volume discount pricing structures because of the
growth and market share of our cable operators. Following Argentina’s economic crisis in 2001/2002,
Cablevisión and Multicanal renegotiated the terms of a majority of their programming contracts to
provide for Peso-denominated pricing formulas generally linked to the number of subscribers and
eliminating minimum fee requirements. However terms were generally shortened and price adjustment
provisions intended to transfer to the programming companies the benefit of increases in the monthly
fee for basic cable television services were included. The new contracts also provided for automatic
termination upon the occurrence of major macroeconomic disruptions.
Total programming costs are largely comprised of costs of programming in key categories such
as sports and movie signals. Programming costs for sports signals (including payments made to
TRISA and TSC) account for approximately 50% of total programming costs. Programming costs for
movie signals account for approximately 30% of total programming costs.
Basic Service. Cablevisión offers subscribers a basic service plan including between 32 and
90 basic programming signals, depending on the capacity of the local networks. As of 30 June 2007,
Cablevisión’s basic service price was Ps.75.50 per month, including Value Added Tax (“VAT”). The
amount charged varies according to the system to which each customer is subscribed, and depends
mainly on the number of signals offered under each system. Similarly, as of 30 June 2007, Multicanal
offers subscribers a basic service plan including between 32 and 90 programming signals depending
on the capacity of the local networks. As of 30 June 2007, Multicanal charged a monthly fee ranging
from Ps.37.50 to Ps.75.90 per month, including VAT.
Premium Services. By paying an additional fee, Cablevisión subscribers may receive premium
packages that include soccer/football broadcasts, additional movie signals, adult programming,
additional sports broadcasting or a combination of the foregoing. The monthly rates for premium
services depend on the package of choice and the operational region in which the subscriber is
located. To receive the service, premium subscribers must rent an addressable set top unit from
Cablevisión. As of 30 June 2007, approximately 132,000 subscribers in all of Cablevisión’s operational
regions were subscribed to at least one of its premium services, resulting in a penetration rate of
48
approximately 9.3% of all subscribers to its basic cable service. Approximately half of its premium
subscribers are located in the AMBA Region.
To receive premium programming, Multicanal subscribers also pay an incremental monthly fee.
Currently Multicanal offers premium services in all regions in which it operates. Its premium services
include programming dedicated to live soccer/football, movies and adult programming. To receive the
service, premium subscribers must either rent or purchase from Multicanal an addressable set top
unit. Approximately 136,500 set tops are currently in use by Multicanal subscribers. As of 30 June
2007, the penetration rate of premium subscribers over Multicanal’s basic subscribers was approximately 11.9%.
In April 2007, our cable operators began deploying digital boxes in the AMBA Region to increase
our premium offerings and to limit programming piracy.
Interactive Services and Internet Access
As of 30 June 2007 we had 657,200 Internet subscribers, of which 536,700 were Internet
broadband subscribers relying on cable modem connectivity, 78,100 relied on ADSL connectivity and
39,700 on dial-up and 2,700 were served with other technologies.
Cablevisión has offered high-speed cable modem access to the Internet through its 750 MHz
networks under the FiberTel brand since September 1997. Cablevisión’s Internet connectivity products
are specially designed for the needs of each residential or corporate user, with specific solutions such
as virtual private network services, or “VPN”, traditional Internet protocol (“IP”) links and corporate
products that include additional services.
Internet access through high-speed cable modem is only available in bi-directional cable systems
with 750 MHz bandwidth. In the AMBA Region, more than 67% of homes passed by Cablevisión and
55% of homes passed by Multicanal are “Internet ready”.
As of 30 June 2007, Cablevisión had approximately 342,100 subscribers to its FiberTel highspeed Internet service and approximately 2,700 with other technologies. Cablevisión provides its
FiberTel’s services primarily in the AMBA Region, where approximately 298,600 of its high-speed
Internet subscribers are located. Through FiberTel, Cablevisión also provides high-speed Internet
services in the cities of La Plata, Córdoba, Rosario, Campana, Río Cuarto, Posadas, Salta, Olavarría,
Pergamino, Bahía Blanca and Santa Fé.
Multicanal’s connectivity products comprise residential products under the brandname “Flash”,
including telephony under the Vontel brand, through Prima. As of 30 June 2007 Multicanal had
approximately 185,400 Internet subscribers. Multicanal offers broadband services in the AMBA
Region, the cities of La Plata, Córdoba, Mar del Plata, Rosario, Santa Fé and in Paraguay.
Holding Teledigital provided cable modem services to 4,700 subscribers as of 30 June 2007.
Prima offers Internet connectivity through Multicanal’s cable networks as well as dial-up, ADSL
and telephony. As of 30 June 2007, Prima provided connectivity relying on dial-up or ADSL systems
to 117,800 subscribers including cable modem services to 4,400 corporate clients through its brand
name “Datamarkets”.
International Operations
Uruguay. Through Telemás S.A. (“Telemás”), a subsidiary of Multicanal, we provide programming and management services to ultra high frequency (“UHF”) systems and to seven cable operators
in Uruguay for a fee relating to programming and management services. As of 30 June 2007,
Multicanal offered services to approximately 80,000 subscribers in Uruguay and passed approximately
100,400 homes. In the cities of Montevideo and Canelones, Telemás offers fifteen signals and
competes with other cable systems offering more than fifty signals. There is no exclusivity. We cannot
49
assure you that the UHF system will be able to compete with the cable systems successfully in the
future.
Paraguay.
Through Multicanal, we own:
• 62.93% of the capital stock of Cablevisión Comunicaciones S.A.E.C.A., which provides cable
television services in Asunción and surrounding areas;
• 62.73% of the capital stock of Televisión Dirigida S.A.E.C.A., which provides UHF services in
Paraguay and, together with Cablevisión Comunicaciones S.A.E.C.A., served approximately
77,900 subscribers in the city of Asunción and surrounding areas as of 30 June 2007; and
• 62.93% of the capital stock of Consorcio Multipunto Multicanal S.A, which provides Internet
services to approximately 3,400 subscribers in the city of Asunción and surrounding areas.
Since 1 September 2004, we have operated in Paraguay under the Multicanal brand name.
The following table is based on information published by third parties and our internally
generated market information and sets forth certain information relating to our cable television
systems in Paraguay and Uruguay as of 30 June 2007:
Homes Passed(1),(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cable Subscribers(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internet Subscribers(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paraguay
Uruguay
104,800
77,900
3,400
100,400
80,000
—
(1) Numbers rounded to nearest hundred.
(2) Homes passed by our cable networks. The number of homes passed is calculated based on figures generated internally, excluding UHF.
Printing and Publishing
Out of our total sales of Ps.2.0 billion in the first six months of 2007, our printing and publishing
segment accounted for Ps.524.4 million, or 26.3% of total sales. The principal sources of revenue for
this segment are:
• Advertising. We sell advertising spaces primarily in our two newspapers, Diario Clarín
(including the magazine Viva) and Olé. Diario Clarín is the leading newspaper in terms of
advertising of display and classified ads. Substantially all of our printed advertising revenues
derive from advertising published in Diario Clarín. Diario Clarín’s advertising revenues peaked
in 1997, at Ps.347.4 million and decreased during the 2001/2002 economic crisis and following
the devaluation of the Argentine Peso, to Ps.196.3 million in 2002. Since then advertising
revenues have increased steadily, reaching Ps.248.2 million in 2003, Ps.365.9 million in 2004,
Ps.444.7 million in 2005 and Ps.532.0 million in 2006. Olé contributed advertising revenues of
Ps.3.9 million in 2002, Ps.5.2 million in 2003, Ps.5.8 million in 2004, Ps.8.1 million in 2005 and
Ps.10.8 million in 2006. Advertising is the main source of income of our printing and publishing
segment, and represented 54% of the total sales of the segment in 2006. From 2002 to 2006,
Diario Clarín’s share of total market spend in advertising in the printing and publishing segment
remained almost constant at 58% to 61% in the AMBA Region.
Our advertising strategy takes advantage of our diversified media portfolio and is based on
integration of our brands and readership across segments, in particular through our paperbased media and our digital content. Our multi-media strategy and leadership position in both
paper-based media and the Internet represent an advantage over our competitors in attracting
advertisers.
• Circulation Revenues. Diario Clarín is the leading newspaper in Argentina in terms of
circulation. According to the statistics published by IVC (adjusted by AGEA in order to include
50
national newspapers that do not verify their circulation, based on figures collected by the
Asociación Argentina de Agentes Distribuidores de Publicaciones, the Argentine Association of
Publication Distributors (“AAADP”)) as of 31 December 2006, Diario Clarín and Olé had a
market share of approximately 50% and 6% respectively in the AMBA Region. Revenues from
circulation of newspapers and other publications dropped during the 2001/2002 economic crisis
from approximately Ps.196.9 million in 2000 to Ps.192.5 million in 2002. Circulation revenues
began to recover as the Argentine economy grew, totalling Ps.198.1 million in 2003,
Ps.227.5 million in 2004, Ps.236.8 million in 2005 and Ps.266.8 million in 2006. Circulation
accounted for 39% of our printing and publishing segment’s total net revenues in 2002, 36% in
2003, 31% in 2004, 29% in 2005 and 27% in 2006. The cover price of the Sunday edition of
Diario Clarín (excluding optionals) has increased from Ps2.80 in January 2004 to Ps.4.00 in
March 2007. The cover price of the Monday edition of Olé has increased from Ps.1.30 in
January 2004 to Ps.1.70 in June 2007.
• Contract Printing Services. Artes Gráficas Rioplatense S.A. (“AGR”), our commercial
printer, meets the printing needs of our other subsidiaries and produces inserts, leaflets and
other printing contracts for third parties.
• Production and Sale of Paper. We also derive income from the production and sale of
newsprint for newspapers, through our 43% indirect participation in Papel Prensa.
Diario Clarín
Diario Clarín is the leading newspaper in Argentina, and is the newspaper with the highest
circulation in Latin America and the second largest circulation in the Spanish speaking world. Diario
Clarín covers local, national and international events and includes daily sections on politics, the
economy, national and international affairs, sports, arts and entertainment and social events, in
addition to its special weekly sections.
The driving force of Diario Clarín’s editorial policy is to offer news and analysis through an easily
accessible format that includes text, photographs and graphics (infographics). As of December 2006,
Diario Clarín had 482 editors, reporters and photographers in its staff, (in addition to 125 interns and
620 freelancers). Diario Clarín covers international news with correspondents in London, Madrid, New
York, Rome, Sao Paulo and Washington, among other cities. Diario Clarín also publishes international
news syndicated by leading international news agencies and information provided by The New York
Times, Le Monde, The Washington Post and Los Angeles Times.
Circulation and Market Share. According to IVC (as adjusted by AGEA to account for
newspapers not covered by IVC and which could, therefore, distort market share), in 2006, Diario
Clarín had a market share of approximately 51% in the AMBA Region and 31.1% nationwide. Our
average daily circulation nationwide in 2006 was of approximately 409,000 copies Monday through
Sunday and an average of approximately 799,000 copies each Sunday. For the same year, La Nación
newspaper (“La Nación”), its closest competitor, had an average daily circulation nationwide of
approximately 168,000 copies Monday through Sunday and an average of approximately 261,000
copies each Sunday.
One of Diario Clarín’s principal strengths is that its readership is distributed almost equally
across all socio-economic levels. Approximately 27% of Diario Clarín’s readers belong to the ABC1/C2
(upper, upper-middle and middle) segment, 29% belong to the C3 (lower middle) segment, 27%
belong to the D1 (upper lower) segment, and 17% belong to the D2/E (lower) segment. This sets
Diario Clarín apart as a “multi-target” medium. La Nación, on the other hand, concentrates 49% of its
readership in the ABC1/C2 segment, and Crónica and Diario Popular, the next two largest newspapers
in the AMBA Region in terms of circulation (excluding our sports daily Olé) concentrate approximately
74% and 76% of their respective readerships in the D1 and D2/E segments.
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Approximately 80% of all copies of Diario Clarín are sold in the AMBA Region, where Diario
Clarín has a market share of 51%. Diario Clarín’s market share is of 20% in the Province of Buenos
Aires, 16% in the northeastern part of the country (including Santa Fé), 11% in the central provinces
of Córdoba and La Pampa, 7% in Patagonia, and 5% in each of the northwestern region and Cuyo.
Advertising. Diario Clarín’s position as a multi-target medium and its large circulation levels
grant it a competitive advantage over other media in attracting advertising investors.
Historically, newspapers have had a significant participation in the total advertising revenues in
Argentina. In 2006, newspapers and magazines received approximately 44% of total advertising
spending, while television (broadcast and pay) received approximately 30%. These percentages have
remained fairly stable since 2002. Our advertising strategy, however, takes advantage of our
diversified media portfolio and is based on integration of our brands and readership across segments,
in particular through our paper-based media and our digital content. Our products, such as specialised
sections for specific audiences, are designed to target segments and cover the readers’ interests
while at the same time addressing the specific objectives of our advertising clients.
Diario Clarín’s advertising is grouped into four main categories: display, classified, grouped ads
and magazine advertising. Display ads are published in the newspaper’s body (excluding the classified
advertising sections). Classified advertising is published daily in the classifieds supplement and is
divided into various sections, notably: employment, automobiles, real estate and opportunities.
Grouped advertising consists of display ads, mainly relating to employment searches and public
auctions. Magazine advertisement includes display advertising in our Sunday magazine, Viva and, to
a lesser extent, in our other magazines: Elle, Genios and Jardín de Genios.
Of Diario Clarín’s total advertising pages in 2006, 18,568 (46%) were classified ads; 17,513
(43%) were display ads; 4,054 (10%) were advertising in magazines and 418 (1%) were grouped ads.
Diario Clarín sells advertising directly to major companies and governmental agencies and
indirectly to other clients through advertising agencies and through a network of independent points of
sale (“receiver agencies”). Receiver agencies may be grouped in networks of several independent
agencies each. Diario Clarín also offers an on-line service to place classified advertisements through
118 receiver agencies, 62 of which are located in the City of Buenos Aires, 53 distributed in the
remainder of the AMBA Region and three in other parts of the country. These receiver agencies are
linked to AGEA’s computer network, which permits advertisements sold to be processed immediately.
We give the receiver agencies discounts of up to 15% for ads sold through them, of up to 6% for
the contracted advertising volume and up to an additional 4% bonus based on the image and
productivity of the agency. Agencies receive a 15% discount and up to an additional 10% discount for
volume. In addition, we offer advertising plans and programs designed to attract new advertisers to
use graphics as a primary tool to reach consumers. These plans are designed as an incentive for
specific advertisers to signal their ads through us and include additional specific discounts.
We are currently working on the development of a new platform for on-line classifieds to
complement our paper-based classifieds advertising that will allow us to integrate and centralise in a
single “hub” the reception of all classified advertisement for the Company (receiver agencies for
newspaper classifieds, mobile, on-line and telephone access points), and their publication in all media
platforms.
We operate under a strict credit policy with our advertisers, experiencing a low level of clients in
arrears. We grant each advertiser credit to sell advertising in our print media up to certain amounts
per month. Money collected by advertisers is paid to AGEA within 12 days of the issuance of the
monthly invoice (14 days in the case of classified advertising). AGEA requires that all of its advertising
agencies, receiver agencies and direct advertisers that are granted credit to sell advertisement, secure
payment of at least 70% of the monthly credit cap, generally by means of a mortgage or bank
guaranty.
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Diario Clarín had an advertising market share in the AMBA Region of approximately 58% in
2002 and 2003, and 61% from 2004 to 2006. The advertising market share of its closest competitor,
La Nación, fluctuated between 24% and 26% in the same periods.
No single customer accounted for more than 3.7% of our total advertising sales in 2006. The 10
largest advertisers accounted for approximately 20% of our total 2006 advertising sales and the 20
largest advertisers accounted for approximately 28.2% of our total 2006 advertising sales.
Distribution Network. Until 2000, the sale and distribution of newspapers and magazines was
regulated by law, with special protections, territorial limitations and other rights for licensed distributors
that restricted access to the distribution market. The share of revenues between publisher, distributor
and final seller was also subject to regulation, with the publisher taking 50% of the cover price, the
distributor 10% and the final seller 40%. Since the sale and distribution market was deregulated our
revenue share has increased to 60% of the cover price, with distributors taking 8% and sellers the
remaining 32%.
We currently operate through a network of 32 independent distributors in the AMBA Region, who
sell Diario Clarín through 6,000 points of sale. We invoice such distributors for all delivered copies and
they, in turn, sell those copies to the final sellers. Distributors and sellers that existed prior to 2000 are
registered with the Ministry of Labour and are entitled, among other things, to return all unsold copies
to the publisher and receive the corresponding reimbursement.
Additional Products and Supplements. Together with Diario Clarín, we offer special supplements and publications that help increase circulation and capture different reader and advertising
niches. Some of these publications are distributed with the newspaper at no cost, while others may be
purchased at the readers’ option for an additional price. Supplements are usually offered on a weekly
basis, on different days of the week to promote circulation.
Our children’s magazine, Genios, has become the magazine with the largest circulation in
Argentina of its kind, growing from 75,960 copies per week sold in 2002 (the lowest level after the
economic crisis) to 107,535 per week in 2006. In 2005, Genios had a 56% market share and its
competitor, Billiken, a 44% market share. In 2006, Genios increased its market share to 64%, reducing
the market share of its competitor to 36%.
In the past, we have also sold collectible book series distributed with Diario Clarín bi-weekly.
Collectible books generally covered topics in history, geography, the environment or consisted of
illustrated dictionaries. Collectible literature books included Fernando Savater’s Siete Pecados
Capitales, a book containing Cien Cartas Memorables, a collection of letters by various authors, and
books by Julio Cortázar, Pablo Neruda and Gabriel García Márquez, the series Argentina Pueblo a
Pueblo and Tango de Colección, a tango CD collection that sold approximately 900,000 copies,
among others.
We also publish district supplements with local news and information that target specific zones of
the AMBA Region where the newspaper is distributed.
Production. AGEA operates its own newspaper printing plant (the “Zepita plant”) in the City of
Buenos Aires. Diario Clarín, Olé and Diario La Razón are printed in the Zepita plant. The printing
facilities have an area of 34,520 square meters.
The plant has six state-of-the-art “computer to plate” machines with a capacity to engrave up to
700 sheets per hour. Once the edited pages are engraved on the aluminium sheets, they are
transmitted to six offset Goss Metrocolor rotary presses. Each rotary press is capable of producing
70,000 copies per hour of a 96-page newspaper in tabloid format, even though the plant generally
operates to an average of 40,000-50,000 copies per hour and machine without interruptions.
The black and white printing of Diario Clarín, Olé, classifieds and other newspaper supplements
was replaced by colour printing and added to the production of colour printing of classifieds, six
weekly district supplements, Diario La Razón, Pymes, Arq and Revista Ñ.
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Olé
In 1996 we launched Olé, the first sports daily of Argentina, to offer a wider and more complete
coverage of all sports events, with a special focus on soccer/football. Olé appeals to a younger
readership, with 63% of its readers between the ages of 15 and 29, compared to 55% of Diario
Clarín’s readers between the ages of 30 and 59.
The staff in the pressroom of Olé is completely independent from that of Diario Clarín and is
organised with a multifunction criterion, team work and flexibility. As of 31 December 2006, Olé had
109 editors, journalists, photographers and designers, 39 interns and 11 freelancers. Although the
press-room staff of Olé is highly independent from that of Diario Clarín, the two newspapers take
advantage of economies of scale as they share the personnel and system of the commercial,
marketing, production, distribution and management areas.
Olé’s daily average circulation (Monday through Sunday) in 2003 was of approximately 47,000
copies, representing a 6.8% growth compared to the approximately 44,000 copies sold in 2002. In
2004, circulation grew by 8.5%, to approximately 51,000 copies. In 2005, circulation fell 2.0% to
approximately 50,000, but increased again in 2006 by 12.0% to 56,000 copies. On days after special
sports events (such as soccer/football cup finals or particularly eventful matches) circulation has
reached 225,000 copies sold.
Based on the information supplied by IVC (adjusted by AGEA in order to include national
newspapers that do not verify their circulation, based on figures collected by the AAADP) Olé is the
fifth newspaper in the AMBA Region, with a market participation of approximately 6.0% as of
31 December 2006.
Olé’s advertising is heavily focused on products and services directly relating to sports, and more
recently, automobiles, whose potential purchasers have demographic profiles that correspond with
those of readers of Olé. Olé had a 3.1% share of the advertising spending in Buenos Aires in 2006 (in
terms of advertising pages). Olé’s advertising revenues were approximately Ps.5.2 million in 2003,
Ps.5.8 million in 2004, Ps.8.1 million in 2005 and Ps.10.8 million in 2006.
Olé also offers additional products such as magazines, collectible series and other supplements.
Other Newspapers
In 2001, we acquired 75% of the capital stock of La Razón, the publisher of Diario La Razón, an
evening newspaper established in 1895. Commencing in 1999, Diario La Razón is distributed for free
in subways, buses, bars, highway tollbooths, malls, supermarkets and other outlets. In 2005, AGEA
acquired the remaining 25% of the capital stock of La Razón, and in December 2006, the shareholders of La Razón approved its merger with AGEA with effect as of 1 January 2007. This merger has
not been registered with the IGJ to date.
All our revenues from Diario La Razón, which has an average circulation of approximately
110,000 copies per day, Monday through Friday, and 50,000 copies on Saturdays, derive from
advertising. Diario La Razón has 20 to 28 pages, depending on advertising sold.
Diario La Razón Has Low Production Costs. A team of 18 journalists are responsible for the
editorial content and page layout. Its news sources, as well as overhead expenses, are shared with
Diario Clarín and Olé, although advertising sales is in the hands of an independent team of 14 people.
Until 28 August 2007, we held 33.3% of the capital stock of Compañía Inversora en Medios de
Comunicación (CIMECO) S.A. (“CIMECO”) through AGEA. On 28 August 2007, AGEA and AGR, on
the one hand, and S.A. La Nación on the other each completed the acquisition from Corporación de
Medios Internacionales de Prensa, S.A. (“COMIP”) of an additional 1/6 interest in CIMECO, bringing
each of their total interest in CIMECO to 50%. As a result of COMIP’s sale of its equity interest in
CIMECO, the Company, through AGEA and AGR, and S.A. La Nación remain the only shareholders
of CIMECO, with a 50% interest each.
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CIMECO currently owns 80.0% of Diario Los Andes — Hermanos Calle S.A. and 81.3% of
La Voz del Interior S.A.
Diario Los Andes is a 124 year-old newspaper published and distributed in the province of
Mendoza. It is the fifth regional newspaper in terms of circulation. In 2004 and 2005 its daily average
circulation (Monday through Sunday) was of 30,600 and 32,801 copies per day, respectively, with
79,200 and 81,939 copies sold on average on Sundays in each of those years. In 2006, Diario Los
Andes had a daily average circulation of 32,965 copies (Monday through Sunday) and sold on
average 84,298 copies on Sundays. In 2006, it had a market share of 57.1% in the province of
Mendoza.
La Voz del Interior is a 103 year-old newspaper published and distributed in the province of
Córdoba. It is the largest regional newspaper in terms of circulation. In 2004 and 2005 its daily
average circulation (Monday through Sunday) was of 59,151 and 59,873 copies per day, respectively,
with 98,576 and 106,468 copies sold on average on Sundays in each of those years. In 2006, La Voz
del Interior had a daily average circulation of 61,636 copies (Monday through Sunday) and sold on
average 108,719 copies on Sundays. In 2006, it had a market share of 48.7% in the province of
Córdoba.
In 2004, La Voz del Interior S.A. launched “Día a Día”, a low-priced newspaper, to capture
additional readers not reached by its main newspaper. In 2006 it was the second largest newspaper in
the province of Córdoba and the tenth largest regional newspaper in terms of circulation, with an
average daily circulation of 16,691 copies.
On 28 August 2007, CIMECO acquired a 12% interest in Papel Prensa from S.A. La Nación
(see “— Paper Mill”). AGEA and S.A. La Nación entered into certain arrangements regarding S.A.
La Nación’s interest in CIMECO. Pursuant to these arrangements, AGEA may be required to make
payments of approximately U.S.$64 million at any time between 1 January 2008 and 31 December
2009 to acquire S.A. La Nación’s 50% interest in CIMECO.
Book Publishing
We also publish school textbooks through our publisher Tinta Fresca. According to data from the
Ministry of Education, Science and Technology, approximately 9.4 million children were enrolled in
regular educational institutions (kindergarten through high school) in 2003, with an average of 1.26
new books purchased per student, per year. According to estimates calculated by distributors, the
current textbook market in Argentina, measured in number of copies sold, is of approximately
10.7 million copies.
In 2007, Tinta Fresca and Mexican publishing group Grupo Milenio launched Contenidos
Estudiantiles Mexicanos S.A., a company that will print and distribute school textbooks in Mexico.
According to the Mexican National Chamber of the Publishing Industry (CANIEM), the current textbook
market in Mexico, measured in number of copies sold, is of approximately 94 million copies, with an
average of 4.7 new books purchased per student, per year.
In 2005, Tinta Fresca published 27 different books in Spanish for grades 1 to 9, selling
approximately 390,000 copies. In 2006, Tinta Fresca expanded the number of books published to 41,
including books for the high school level and English language books. Tinta Fresca was the sixth
largest player in the market in 2006, with approximately 500,000 copies sold and a 10% market share.
In 2007, Tinta Fresca expanded its offer to 91 different titles, with a particular focus on expanding our
high school level publications. In the first six months of 2007, Tinta Fresca sold 497,000 books.
Tinta Fresca promotes its books through a sales force of 278 persons, including supervisors,
temporary and permanent promoting staff and sales personnel hired by distributors outside of the
AMBA Region. In 2006 there were 10 supervisors in the AMBA Region and 11 in the rest of the
country, overseeing the work of 53 permanent and 129 temporary sales personnel. Tinta Fresca’s
55
sales force visit approximately 120,000 teachers during the school season. The books are sold out of
239 points of sale, including distributors, wholesalers and bookstores.
Printing
AGR, a subsidiary of AGEA, prints Viva Magazine, most of our collectible supplements, as well
as supermarket leaflets, other magazines and books for third parties. AGR was created in 1974 as a
back-up plant to meet the production needs of Diario Clarín and has progressively established itself as
a printing company that provides services primarily to third parties. It has a 28% share in the internal
market of commercial leaflets for supermarkets.
One of AGR’s objectives is to continue to increase the percentage of its sales to unrelated thirdparty purchasers. In 2002, approximately 40% of AGR’s total sales of Ps.67.1 million were to Grupo
Clarín affiliates and 60% to unrelated parties. In 2006, sales were of Ps.148.6 million, with sales to
Grupo Clarín affiliates representing approximately 34% of total sales while sales to unrelated parties
represented approximately 66%.
Multi-listing
Through Oportunidades S.A., a wholly owned subsidiary of AGEA, we offer multi-listing services
in the AMBA Region to a network of independent real estate agencies that account for approximately
80% of the real estate market. Relying on our software, real estate agencies have access to virtually
all of the real estate offerings in the Greater AMBA Region, with details of location, size, special
features, price, history and number of ads placed in all media with respect to any given property.
Although Oportunidades S.A.’s contribution to our revenues is not significant, it provides strategic
information that complements our real estate classified advertising business.
Paper Mill
Through AGEA and CIMECO, we own 43% of the capital stock of Papel Prensa, a newsprint
producer that in 2006 supplied approximately 90% of the newsprint needs of AGEA. The shareholders
of Papel Prensa are AGEA (37%), the Argentine federal government (27.5%), S.A. La Nación
(22.5%), CIMECO (12%) and others (1%). CIMECO acquired its 12% interest in Papel Prensa from
S.A. La Nación on 28 August 2007. On 24 September 2007, the acquisition was approved by the
remaining shareholders of Papel Prensa in accordance with Papel Prensa’s bylaws. Papel Prensa
constitutes a key competitive advantage for our printing and publishing business in that it secures the
supply of one of its main raw materials.
Papel Prensa’s plant, located in the Province of Buenos Aires, opened in 1978. It is the first
company wholly owned by Argentine capital dedicated to the production of newsprint. It supplies
approximately 70% of the paper demand of national newspapers, and its production in 2006 was
approximately 167.5 million tons. The remaining 30% of the demand for newsprint paper is satisfied
by imports from Chile (17%), Papelera de Tucumán, a national newsprint paper producer (6%),
imports from Russia (4%), imports from the United States (2%) and other imports (1%).
The plant of Papel Prensa is currently operating at practically full capacity. In 2006 it closed for
10 days for major maintenance and upgrading that caused a production decline of 1.7% compared to
2005. An 18-day shutdown for major maintenance and upgrading is scheduled for 2008 as part of a
medium-term plan to increase production levels by approximately 17% by 2010.
Approximately 30% of the wood needed for the production process of Papel Prensa is supplied
by its own poplar and willow plantations. Out of Papel Prensa’s total sales, approximately 52% were to
AGEA and AGR, 24% to S.A. La Nación, 3% to CIMECO and 21% to other customers.
56
Broadcasting and Programming
In the first six months of 2007, our broadcasting and programming segment had revenues for
Ps.354.9 million (including sales to our other business segments). The main sources of revenues for
this segment are broadcast television advertising, sales of broadcast television programming and radio
advertising, which accounted for approximately Ps.159.4 million, Ps.19.6 million and Ps.18.7 million,
respectively.
Broadcast Television
Our subsidiary ARTEAR holds the license to broadcast Canal 13, with nationwide coverage
through other networks and cable stations. ARTEAR also holds controlling stakes in three broadcast
television stations in Córdoba (Telecor), Bahía Blanca (Telba) and Bariloche (Bariloche TV Río Negro),
which broadcast the Canal 13 signal and receive support from ARTEAR for local programming.
ARTEAR also participates in a joint venture with the government of the province of Rio Negro for the
administration of a state-owned television channel in that province. Each local network includes
national and local advertising. Additionally, ARTEAR has programming arrangements with nine
broadcast television stations in different cities of Argentina. These stations buy programming from
ARTEAR in accordance with Decree No. 1771/91, sell their own advertising and pay variable fees per
purchased program.
Canal 13. Canal 13 is the leading broadcast television channel in Argentina in terms of
advertising share, prime time audience share and overall audience share. The license to broadcast
Canal 13 was first awarded in concession to ARTEAR in 1989 for a term of fifteen years, with an
option to extend such concession for an additional 10-year period. Upon expiration of the extension
period, the concession expires, and the license is renewed — or granted to a new licensee— after a
bidding process in which the original licensee has priority in case of a tie. The expiration date of all
broadcasting licenses existing as of 24 May 2005, including the license for Canal 13, was suspended
for 10 years, subject to certain conditions. On 24 May 2015, license terms will resume without
counting the 10-year suspension towards expiration, subject to certain conditions. See “Industry
Regulation — Broadcast, Cable and Satellite Television and Broadcast Radio — Federal Broadcast
Regulation”.
In 2006, substantially all Argentine households had access to broadcast television. Approximately 54% of those households had access to pay television. Canal 13 reaches an audience of
approximately 5.4 million inhabitants in the AMBA Region every day. According to IBOPE, through the
cable signal Canal 13 Satelital, Canal 13 is transmitted to approximately 5.2 million pay television
subscribers within the AMBA Region as well as in other regions of the country as measured using
Tele Report, an audience measurement software.
Broadcast television is received free of charge in Argentina, pursuant to the Broadcasting Law.
Broadcast television channels and networks derive their revenues mostly from advertising. From 2002
to 2006, Canal 13 ’s share of the free television advertising spend remained relatively stable,
fluctuating from 45% in 2002 to 43% in 2003, 39% in 2004, 38% in 2005 and 44% in 2006.
We sell advertising primarily through advertising agencies or networks of agencies with which we
have standing agreements, or directly to major advertisers. Agreements include an advertising
spending commitment from the client, expressed as a gross amount or net of commissions and
applicable discounts (e.g. volume discounts), which is then allocated according to a price schedule
per show (with different prices for each show) per second. In 2006, prices ranged from Ps.39 per
second to Ps.237 per second, in each case net of discount advertising, depending on the time of day
and the specific show in which the advertising time was purchased.
There is a strong correlation between sale of broadcast television advertising and Argentina’s
GDP. Canal 13 ’s advertising sales have increased steadily since 2003 in line with the country’s
recovery from the 2001-2002 economic crisis.
57
Canal 13’s programming includes news, local and foreign comedy and drama, game shows, talk
shows, sports and films. Its evening news program “Telenoche” is the most awarded and most viewed
television news program in Argentina. Canal 13 produces its own programming content and purchases
some programming content from affiliates and third parties.
Canal 13’s most important provider of locally produced programming other than ARTEAR is Polka Producciones S.A. (“Pol-ka”), in which, as of 30 June 2007, ARTEAR held a 30% interest.
Mr. Adrián Suar, a major shareholder of Pol-ka is also programming manager of Canal 13. ARTEAR,
as of 30 June 2007, held a 50% interest in Patagonik Film Group S.A. (“Patagonik”), an independent
film production company. On 10 July 2007, ARTEAR entered into certain agreements incorporating a
third shareholder to Patagonik and as a result ARTEAR’s ownership interest in that company
decreased to 33.33%.
ARTEAR also holds a 30% interest in Ideas del Sur S.A. (“Ideas del Sur”). Mr. Marcelo Tinelli, a
major shareholder of Ideas del Sur is an exclusive artist of Canal 13. His television program
ShowMatch is among the highest rated programs of Canal 13 and the Argentine market. ARTEAR
supports Ideas del Sur in connection with international sales of television show formats and coproduces content.
ARTEAR has executed shareholders agreements relating to Pol-ka and Ideas del Sur, respectively. Among other provisions, such shareholders agreements include share transfer restrictions,
corporate governance provisions and a dividend policy. Pursuant to the dividend policy, Pol-ka and
Ideas del Sur will only distribute to their shareholders (including ARTEAR) seventy per cent (70%) of
the distributable income. Thirty per cent (30%) of the distributable income will be capitalised in the
companies. ARTEAR has also executed a shareholders’ agreement relating to Patagonik that
includes, among other provisions, share transfer restrictions and corporate governance provisions,
such as special majorities in the board of directors meetings that approve dividend payments.
ARTEAR owns seven television studios where it produces part of Canal 13’s programming, and
a high-tech satellite link centre that broadcasts its signal to repeater stations throughout Argentina.
We installed and own the first mobile ground satellite station in the country. We were the first to
introduce simultaneous audio programming (SAP) and to convert our entire production library to
digital. We were also the first to implement a ghost cancelling system and close captioning. In 1999
we made our first high-definition TV experimental broadcast and are now the first Argentine station to
broadcast an entire show recorded with high-definition technology. In 2006, we introduced new
technology to our news programming department that allows us to edit and broadcast both standard
and high-definition content. We have made substantial investments in energy supplies to minimise
risks of energy failures, purchasing an additional 688 KVA generator. We are also creating a fully
integrated content network (“UNITY”) where digital content may be edited without physical support
and be stored and transmitted to our various studios simultaneously. We continue to invest in highdefinition technology.
Content and Programming
In addition to Canal 13, ARTEAR produces its own cable television signals: TN Todo Noticias
(news), Volver (retro Argentine film classics and shows), Magazine (general interest), Metro (general
interest), Multideportes (sports), and represents Canal Rural Satelital S.A. (“Canal Rural”) (agriculture
and livestock), which it sells to affiliated cable television companies. ARTEAR holds a 15% interest in
Canal Rural. TN, our 24-hour news signal, is the cable signal with the highest audience (measured
over 24 hours in residential households) and the most awarded in the market.
Sports Programming
Soccer/football is the pre-eminent sport in Argentina. Soccer/football matches lead television
ratings, and are broadcasted by substantially all AM radio stations.
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The sports programming industry in Argentina began in the early 1980s when TyC purchased
the rights to produce and distribute soccer/football matches of the leagues organised by the AFA. AFA
represents all Argentine competitive soccer/football teams and the national team, and owns the rights
to broadcast their respective matches. By 1990, TyC had become one of the largest regional
producers of soccer/football programming.
In 1991 we created Inversora de Eventos S.A. (“IESA”), the controlling vehicle for our sports
marketing operations. IESA operates its business directly or through joint ventures. IESA is a party to
two joint ventures with TyC (50% held by each of IESA and TyC):
• TSC, created in 1991, holds exclusively all TV rights of AFA’s Premier League soccer/football
matches for Argentina, and for the rest of the world with respect to certain matches. These
rights include broadcast sounds and images of matches in Argentina and abroad, as well as all
other rights of use, commercialization and distribution.
• TRISA, created in 1991, holds title to broadcast additional national and international soccer/
football tournaments (national team world cup qualifying matches and friendly matches) as well
as other sports such as basketball, tennis, auto racing and boxing. As part of its broadcasting,
production and marketing activities TRISA broadcasts sports events through its cable signal
“TyC Sports” (which has the largest daily pay television audience between noon and midnight
as measured by IBOPE) and “TyC Max” (the sports premium and pay-per-view cable signal of
TRISA).
In June 2007, TSC, TRISA and AFA executed a series of related agreements with respect to the
programming schedule setting a floor to the aggregate annual fees payable to AFA from August 2007
through August 2014 at Ps. 180 million. These agreements provide, in relation to the First Division “A”
matches, that TSC shall pay annual fees to AFA equal to the greater of 50% of TSC’s total revenues
for the 12-month period ending in August of each year and Ps.150 million (subject to certain
adjustments).
TSC pays license fees directly to AFA, which then distributes the fees among the soccer/football
clubs. Payments to AFA represent between 45% and 55% of TSC and TRISA’s combined costs.
As part of its broadcasting, production and marketing activities TRISA:
• sells soccer/football programming such as the weekly show Fútbol de Primera, coproduced by
Canal 13 and TyC in the AMBA Region and by IESA and TyC in the rest of the country;
• broadcasts sports events through its cable signal “TyC Sports”, the first dedicated sports cable
signal in Argentina. As measured by IBOPE, it is the pay television signal with the largest daily
audience between noon and midnight. In 2006, TyC Sports had a cable penetration rate of
78% in Argentina (approximately 4.0 million pay television subscribers) and accounted for 18%
of the entire pay television advertising spend;
• broadcasts live sports events through its premium or pay-per-view cable signal “TyC Max”;
• holds and exercises the commercial rights to certain non-AFA soccer/football games;
• co-produces motor racing events with Canal 13 for open-air broadcasting in the AMBA Region,
and through TyC Max in the rest of Argentina;
• produces a weekly basketball game in the Argentine national “A” league, sold only to cable
operators and broadcast through TyC Max; and
• produces a weekly boxing match sponsored by the Argentine Boxing Federation, sold only to
cable operators and broadcast through TyC Max.
59
TRISA Shareholders Agreement
IESA and TyC are party to a shareholders agreement relating to TRISA (the “TRISA Shareholders Agreement”). Pursuant to the TRISA Shareholders Agreement, as amended, the board of directors
of TRISA shall have six directors and six alternate directors. Each party has the right to appoint three
directors and three alternate directors. The president of the board shall be appointed by IESA. The
president shall not have a casting vote in case of deadlock. The vice-president of the board shall be
appointed and removed by TyC. The directors to be appointed in TRISA’s subsidiaries shall be
appointed by IESA and TyC in the same proportion as those appointed in TRISA. If the number of
directors in a subsidiary of TRISA is one, such director shall be appointed by IESA and shall always
adjust his or her action to the decisions taken by the board of directors of TRISA. If the number of
directors is two, one will be appointed by IESA and the other one by TyC.
The presence and favourable vote of at least four directors is needed to decide certain relevant
matters. Each party shall have the right to submit any proposal to any relevant matter that has not
been approved by the board due to the lack of quorum or majority, to an expert evaluation. If the
expert’s evaluation is favourable to the proposal made by the proposing party, then the board of
directors is entitled to approve such proposal.
To approve certain relevant matters, shareholders meetings require the presence and favourable
vote of holders of at least 70% of all outstanding capital stock in the case of ordinary meetings in first
call and extraordinary meetings in first and second call, or the favourable vote (without minimum
quorum requirements) of holders of at least 70% of all outstanding capital stock present at the meeting
in the case of ordinary meetings in second call.
The chief executive officer of TRISA and special officers subordinated to such chief executive
officer are in charge of the management of TRISA and its subsidiaries. The chief executive officer is
proposed by IESA and appointed by the board of directors.
Pursuant to the TRISA Shareholders Agreement, IESA and TyC shall cause TRISA’s subsidiaries
to declare and distribute annual dividends. In addition, IESA and TyC shall cause TRISA to declare
and pay annual dividends, subject to compliance with certain indebtedness ratio, reflected in the
financial statements of TRISA.
In addition, the TRISA Shareholders Agreement provides for certain preferred negotiation rights,
tag-along rights and rights of first refusal, except in the case of transfers of shares to subsidiaries
under 99.9% ownership of the shareholders and other permitted transferees. Certain rights under the
TRISA Shareholders Agreement may not be transferred, such as: (i) tag along rights, (ii) the right of
IESA to propose a chief executive officer for TRISA and its subsidiaries, (iii) the rights of the parties to
remove managers, (iv) the right of TyC to propose an internal auditor in TRISA, (v) the right of the
parties to remove the internal auditor, and (vi) the right of both parties to request the replacement of
the external auditor of TRISA and its subsidiaries. We cannot make partial transfers of our shares in
TRISA.
Under the TRISA Shareholders Agreement, transactions between TRISA and subsidiaries of the
parties, companies that own 99.9% of the parties, companies of which the parties own 99.9% or
companies under common control of the parties, shall have the approval of a special majority of
directors and shall be conducted on an arms-length basis.
TSC Shareholders Agreement
IESA and TyC are party to a shareholders agreement relating to TSC (the “TSC Shareholders
Agreement”). Pursuant to the TSC Shareholders Agreement, as amended, the board of directors of
TSC shall have six directors and six alternate directors. Each party has the right to appoint and
remove three directors and three alternate directors. The president of the board shall be appointed
and removed by TyC. The president shall not have a casting vote in case of deadlock. The vicepresident of the board shall be appointed and removed by IESA. The directors appointed by TSC in
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TSC’s subsidiaries shall be appointed by IESA and TyC in the same proportion as those appointed in
TSC. If the number of directors in a subsidiary is an odd number higher than two, then the majority
shall be appointed by TyC. If the number is one, the director shall be appointed by TyC and shall
adjust his or her action to the decisions taken by TSC’s board of directors.
Board approval is required to decide certain relevant matters. The parties have the right to
submit any proposal relating to a relevant matter that has not been approved by the board due to the
lack of quorum or majority, to an expert evaluation. If the expert’s evaluation is favourable to the
proposal made by the relevant party, then the board of directors shall approve such proposal.
The chief executive officer of TSC and special officers subordinated to such chief executive
officer are in charge of the management of TSC and its subsidiaries. The chief executive officer is
proposed by IESA and appointed by the board of directors. The chief financial officer is proposed by
TyC and appointed by the board of directors.
Pursuant to the TSC Shareholders Agreement, IESA and TyC shall cause TSC’s subsidiaries to
declare and distribute annual dividends. In addition, IESA and TyC shall cause TSC to declare and
pay annual dividends, subject to compliance with certain indebtedness ratio, reflected in the financial
statements of TSC.
In addition, the TSC Shareholders Agreement provides for certain preferred negotiation rights,
tag-along rights and rights of first refusal, except in the case of transfers of shares to subsidiaries
under 99.9% ownership of the shareholders and other permitted transferees. The shares of TSC can
only be transferred as a block. No partial transfers are allowed. Certain rights under the TSC
Shareholders Agreement may not be transferred, such as: (i) the right of IESA to propose a Chief
Executive Officer for TSC and its subsidiaries, (ii) the right of TyC to propose a Chief Financial Officer
for TSC and its subsidiaries (iii) the right of both parties to remove the Chief Financial Officer and the
Chief Executive Officer, and (iv) the right of both parties to request the replacement of the external
auditor of TSC and its subsidiaries.
Under the TSC Shareholders Agreement, transactions between TSC and subsidiaries of the
parties, companies that own 99.99% of the parties, companies of which the parties own 99.99% or
companies under common control of the parties, shall be conducted on an arms-length basis.
Other Sports-Related Operations. Through other subsidiaries of IESA, we participate in other
sports-related operations, including the management of the rights to broadcast the games of the
national Paraguayan soccer/football league until 2012 through our Paraguayan subsidiary, Teledeportes Paraguay S.A. and the acquisition and commercialisation of national soccer/football television rights to international events.
Broadcast Radio
As Argentina’s most prominent multi-media company, we have acquired interests in two leading
broadcast radio stations.
We own Radio Mitre, holder of the broadcast radio licenses of Mitre AM 790, a leading AM radio
station in existence since 1925, and La 100 (99.9 FM), a leading FM radio station, both of them in
Buenos Aires. In July 2006, Radio Mitre expanded its operations to Córdoba, where it launched
Córdoba Mitre AM 810.
Radio Mitre AM 790 had the second largest audience share in 2006, accounting for average AM
radio audience shares of between 18.5% (Monday — Sunday) and 23.5% (Monday — Friday 6 AM to
9 AM). La 100 (99.9 FM) led the FM radio ratings during most of 2006, accounting for an average FM
radio audience share of 12.1% in 2006. Córdoba Mitre AM 810, in its first year of life, climbed to
second place in Córdoba, with an average audience share of between 22.3% and 30%.
Our main source of revenue from broadcast radio is advertising. Radio Mitre AM 790 and La 100
(99.9 FM) accounted for 19% of total advertising spending in radio in 2006.
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Other
Digital Content
Since 1996, we have been present in the on-line services and new media market in Argentina
through Clarín Global S.A. (“Clarín Global”), a subsidiary of AGEA, and our subsidiary Prima
Internacional (since 26 September 2007, denominated Compañía de Medios Digitales (CMD) S.A.),
that produce digital content for the Internet and mobile digital platforms. The current network of portals
and content of Grupo Clarín is the broadest in Argentina, covering news, entertainment, sports,
classified advertisement, e-commerce, dating, digital photography, video, blogs, chatrooms, music,
mobile content (ringtones, SMS and games) and a browser under an agreement with Google.
The following table shows our available digital content products:
Media Content
Transactional Content
Mobile Content
Web 2.0
Clarin.com
Ciudad.com
TN.com
ARTEAR
Radio Mitre
La 100 FM
La Razón
masoportunidades.com
Ubbi Música
www.inmuebles.clarin.com
www.autos.clarin.com
www.empleos.clarin.com
buscainmueble.com(1)
argenprop.com(1)
ciudad.com — Te Busco
Ubbi SMS
Ubbi Tonos
Ubbi Games
Clarin.com Mobile
Clarin.com SMS
TN.com MMS
VXV.com
Ubbi Fotos
ARTEAR 2.0
www.buscador.clarin.com.ar
Telenoche Blog
Clarin.com Blogs
(1) Content sites accounted directly by AGEA, in our printing and publishing segment.
According to the Argentine Internet Advertising Bureau (“IAB”), as of 30 June 2007, Clarín
Global’s and Prima Internacional’s websites received an average of 7.7 million monthly unique visits
and 298 million monthly page visits. According to the IAB, five of the ten most visited websites in
Argentina (Clarín, Olé, Ciudad, Ubbi and MasOportunidades) are part of our network.
Our website, www.Clarín.com, leads the Argentine Internet news media market with an average
of 611,000 unique visitors per day, representing a 54% share of all visits to news websites in
Argentina in the first six months of 2007. It is the most visited local Argentine website, and the fourth
most visited website in Argentina after MSN, Google and Yahoo! Olé.com.ar (average of 264,000
unique visitors per day), LaRazon.com.ar (average of 30,000 unique visitors per day) and
Genios.com.ar (average of 30,000 unique visitors per day) complement their printed counterparts and
strengthen the Clarín brands.
The revenues for digital content are currently derived from three main sources: advertising,
e-commerce and classified advertising and sale of mobile content (ringtones and SMS). In the short
run we expect these sources to continue their growth trends, particularly due to the natural market
expansion and the maintenance or growth of our market share. We expect the expansion of our
network of portals and our mobile services will also create new market niches, such as mobile
marketing, SEO/SEM or Blackberry mobile systems.
In 2006, Clarín Global’s and Prima Internacional’s websites captured approximately 30% of the
Internet advertising spending in Argentina, with sales of Ps.15.7 million.
Ubbi Tones, a website that sells ringtones for mobile phones, had sales of approximately
Ps.8.5 million in 2006 (22% of all estimated ringtone sales), and was second only to Toing.com, which
accounted for an estimated 23% of all ringtone sales in 2006.
We intend to expand our business in the digital content segment by investing in innovation,
focusing on the development of new products and services, digital portfolios and calendars, video and
photography platforms and the development of a “classifieds hub” that will centralise classified
advertising in a single integrated digital platform that may be accessed from personal computers or
62
mobile technology, or that will serve as a source for the publication of classified advertisement in
traditional media. We also intend to develop interactive community websites and new portals and
content through partnerships with smaller companies and through a strategy of acquisition and
investment throughout Latin America including by:
• entering into partnerships with successful international platforms and customizing them for
their implementation in Argentina and Latin America; and
• developing a new platform for on-line classifieds that will allow us to integrate and centralise in
a single “hub” the reception of all classified advertisement for Grupo Clarín (receiver agencies
for newspaper classifieds, mobile, on-line and telephone access points), and their publication
in all media platforms.
Employees and Labour Relations
The following table sets forth the total number of employees and a breakdown of employees (in
each case including senior management) by our core segments as of the following dates:
Cable Television and Internet Access . . . . . . . . . . .
Printing and Publishing . . . . . . . . . . . . . . . . . . . . . .
Broadcasting and Programming . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total number of employees . . . . . . . . . . . . . . . . .
.
.
.
.
.
31 December
30 June
2004
2005
2006
2007
3,172
3,700
1,242
373
8,487
3,582
3,813
1,397
451
9,243
7,721
3,892
1,537
529
13,679
7,226
3,872
1,572
561
13,231
Part of the employees of the Company and its subsidiaries are members of the following unions:
• the Sindicato Argentino de la Televisión y Servicios Audiovisuales, Interactivos y de Datos, the
Argentine Union of Television and Audiovisual, Interactive and Data Services (“SATSAID”)
which represents employees of our various subsidiaries in the cable television and Internet
access, and the broadcasting and programming segments; and
• the Federación Gráfica Bonaerense, the Buenos Aires Graphic Federation, which represents
employees of our various subsidiaries in the printing and publishing segment.
Our contracts with employees in the cable television industry are generally subject to Collective
Bargaining Agreement No. 223/75 with the SATSAID. Our contracts with employees in the broadcast
television industry are generally subject to Collective Bargaining Agreement No. 131/75 with the
SATSAID. Both agreements are applicable to all the activities of television companies nationwide.
Multicanal entered into a separate collective bargaining agreement with SATSAID, amending the
collective bargaining agreements described. The amendments to Collective Bargaining Agreement
No. 223/75 relating to Multicanal have been approved by the Ministry of Labour.
Broadcast television companies that broadcast news are subject to Law No. 12,908, also known
as the Estatuto Profesional del Periodista, the Journalist’s Professional Statute, and to Collective
Bargaining Agreement No. 124/75 of Broadcast Television Press. Radio announcers are subject to the
Radio Announcers’ Collective Bargaining Agreement.
The employees of AGEA and AGR are subject to Collective Bargaining Agreement No. 60/89
applicable to the print media industry. This agreement is limited to employees rendering services
within the City of Buenos Aires because the union that negotiated the agreement only represented
workers of that jurisdiction.
In addition, AGEA is subject to Law No. 12,908 in its relations with professional journalists and
Law No. 12,921 in its relations with administrative employees. This legislation is applicable nationwide
and applies to all journalists and administrative employees of companies rendering news services.
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Some provincial jurisdictions have local collective bargaining agreements applicable to journalists
employed within such jurisdictions and local correspondents, although in most cases local agreements
are outdated, no longer reflect current professional practices and are generally not applied.
Even though we believe that we have good relations with our labour force and with the
corresponding unions, we cannot assure you that such relations will remain on current terms.
Property, Plant and Equipment
We are a holding company and substantially all of the property used in the operation of each of
our business segments is owned by the subsidiaries acting in such segments. Substantially all of our
subsidiaries’ property and equipment are located in Argentina.
Cable Television and Internet Access. Our cable operators and Internet service providers
own most of the principal fixed assets, which consist of:
• cable television operating plants and equipment, including signal receiving devices, such as
satellite and terrestrial antennae towers and related equipment;
• headends, consisting of associated electronic equipment necessary for the reception and
processing of signals;
• distribution systems, consisting primarily of coaxial and fiber optic cable; and
• customer home drop cables and equipment.
Our cable operators’ cable distribution systems are generally attached to utility poles, which they
either own or lease from public utilities. In addition some of their distribution systems are located on
building rooftops under arrangements with the owners of the buildings, or are located in underground
ducts under lease arrangements with local subway authorities. Cablevisión has entered into an
agreement with a toll road operator, pursuant to which it has the ability to place distributions systems
under certain highways serving Buenos Aires and can thereby avoid locating a significant portion of
these systems in underground conducts, which are less readily accessible. The physical components
of our cable operators’ systems require maintenance and periodic upgrading to keep pace with
technological change. Our cable operators own their service vehicles, data processing facilities and
test equipment and either own or lease their business offices and customer service centre locations.
The management of our cable operators believes that its respective properties, both owned or
leased, are in good operating condition and are suitable and adequate for its business purposes.
Printing and Publishing. AGEA is the owner of most of its fixed assets including plants, its
head office, deposits and other facilities. AGEA is the owner of its printing plant and the building
where its headquarters are located. The physical components of AGEA’s systems require maintenance and periodic upgrading to keep pace with technological change.
The management of AGEA considers that its properties, both owned and leased, are in good
operating condition and are suitable and adequate for their business purposes.
Broadcasting and Programming. ARTEAR is the owner of most of its physical assets,
including seven television studios, a high-tech satellite link centre that broadcasts its signal, a 688
KVA energy generator, deposits and other facilities. The physical components of ARTEAR’s systems
require maintenance and periodic upgrading to keep pace with technological change.
The management of ARTEAR considers that its properties, both owned and leased, are in good
operating condition and are suitable and adequate for their business purposes.
Insurance and Intellectual Property
The Company and its subsidiaries carry or are entitled to the benefits of insurance with respect
to their property and business against loss or damage of the kinds and in the amounts customarily
64
insured against by Argentine companies of established reputation engaged in the same or similar
businesses and similarly situated.
The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate
trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property necessary to conduct the business now operated by them,
or presently employed by them, and have not received any notice of infringement of or conflict with
asserted rights of others with respect to any material intellectual property rights that, if determined
adversely to the Company or any of its subsidiaries, would have an adverse effect on our financial
condition or results of operations.
Legal Proceedings
The Company and its subsidiaries are a party to various legal and administrative proceedings
arising in the ordinary course of their business. Although the outcome of pending actions cannot be
accurately predicted, in our opinion, such proceedings are not reasonably likely to have a material
adverse effect on our financial position or results of operations.
Claims Involving ARTEAR
The Administración Federal de Ingresos Públicos (the Federal Public Revenue Administration or
“AFIP”) has notified ARTEAR of differences between the amount of employer contributions due and
the amount paid by ARTEAR in connection with 205 actors. ARTEAR considered actors to be
independent contractors while according to AFIP they should have been treated as employees. The
original claim of Ps.24 million has been gradually reduced in various administrative instances. As of
30 June 2007, the claim stood at approximately Ps.3.2 million and related to 47 actors of the original
205.
The Administración Nacional de Aduanas, the national customs administration (“ANA”) has
brought a claim against all holders of broadcast and cable television licenses for the payment of tariffs
and customs taxes applicable to the importation of films. According to ANA, television licensees are
liable for customs duties, VAT, and income taxes over the total Peso value of imports. The ANA
alleges that the import value of films includes the value of the intellectual property rights related to
such films. Following its own criterion, which we believe to be reasonably grounded, ARTEAR has
paid other taxes that would not have been payable had ANA’s interpretation been applied. We
understand that if ANA’s interpretation were to prevail, we would be entitled to recover taxes paid in
error. Even though we believe ARTEAR’s interpretation of customs legislation has reasonable legal
grounds, we cannot assure you that the matter will be resolved in our favour. We would not expect an
adverse decision, however, to have a material adverse effect on our financial condition or the results
of our operations.
Claims Involving AGEA
Editorial Atlántida S.A. (“Editorial Atlántida”) has brought a claim against AGEA for plagiarism
and unfair competition in connection with the Genios magazine. Editorial Atlántida alleges that Genios
magazine corresponds to a project initiated by Editorial Atlántida, and claims damages of Ps.5 million,
plus an undetermined amount. In addition to the civil suit for damages, Editorial Atlántida brought
criminal charges against several managers of AGEA, which were dismissed by the criminal court. The
claim for damages is currently at the evidentiary stage. Even though we believe that the evidence
produced in the criminal case is sufficiently favourable to AGEA, we cannot assure that the civil suit
will be resolved in favour of AGEA.
Claims Involving AGEA, ARTEAR and Radio Mitre
AGEA, ARTEAR and Radio Mitre, among other companies in the media industry, relying on
Decree No. 1387/01, which established the so-called “competitiveness regime”, and Decree No. 746/03,
65
credited towards VAT the social security contributions paid over their respective payrolls. This benefit
remained in force from 1 April 2003 to 31 July 2003. Decree No. 746/03, which repealed the benefit,
states that the executive branch will analyse carefully the specific problems of the media industry in
order to find alternative measures that would replace the competitiveness regime.
Certain entities that represent Argentine publishers, such as the Asociación de Editores de
Diarios de Buenos Aires (the Buenos Aires Publishers Association), the Asociación Argentina de
Editores de Revistas (the Argentine Association of Magazine Publishers), the Asociación de Teledifusoras Argentinas (the Argentine Association of Televisión Broadcasters), la Asociación de Radios
Argentinas (the Association of Argentine Radios) and the Asociación de Diarios del Interior de la
República Argentina (the Association of Regional Newspapers Publishers), initiated legal actions
requesting that the competitiveness regime be extended beyond its expiration date and that the
government create a special regime for the media industry.
Relying on an injunction granted by an Argentine court, AGEA and ARTEAR continued to
consider social security contributions paid as VAT credits for each VAT return filed from 1 August 2003
to date.
AGEA, ARTEAR and Radio Mitre have recognised a total liability of approximately Ps.96.4 million
in their financial statements for the amounts that, based on management estimates and the opinion of
their legal advisors, they consider a probable payment due to the AFIP in relation to this
circumstance.
ARTEAR, AGEA and Radio Mitre are also party to several libel proceedings initiated by third
parties in connection with their respective activities. While claims under certain of these proceedings
may be significant, we generally do not believe that these claims are founded or that they will be
awarded in amounts that can have a material adverse effect on our financial condition or results of
operations. Amounts claimed in libel suits are generally high, but the average judgements for libel that
have been rendered against our subsidiaries is of approximately Ps.80,000.
Claims Involving Cablevisión and Multicanal
In January 2007, Cablevisión and Multicanal were served with an injunction issued by a
provincial court in the province of San Luis at the request of Grupo Radio Noticias, a company
alleging to own a broadcast radio station that would presumably be harmed by the transactions
involving Cablevisión, Multicanal, Holding Teledigital and Prima that we consummated in September
2006. Among other measures, the injunction directed Cablevisión, Multicanal and its controlling
shareholders and subsidiaries to refrain from a number of transactions, including mergers, acquisitions
and the issuance of securities. The injunction was inconsistent with an order issued by a Federal
Court in the City of Buenos Aires in 2005, to the effect that the CNDC had jurisdiction to determine
the legality of our acquisition of an ownership interest in Cablevisión without prior judicial intervention.
Accordingly, we took action to have the case initiated by Grupo Radio Noticias removed from the
San Luis court and transferred to the Federal Court of the City of Buenos Aires. The Supreme Court
of Argentina resolved our petition in our favour in June 2007. The Federal Court of the City of Buenos
Aires has been adjudicated jurisdiction to decide the substance of the matter. On 11 September 2007
the Federal Court of Buenos Aires issued a ruling reversing the injunction and leaving it without effect.
On 5 October 2007, the Company was notified of an appeal to such ruling filed by Grupo Radio
Noticias on 24 September 2007. While we can give no assurance that we will prevail against Grupo
Radio Noticias, we believe that their claims are unfounded.
In 2003, ELP Investments filed a criminal action in Argentina against certain individuals related
to the Hicks Muse Tate & Furst Group (“HMTF”), one of the prior indirect shareholders of Cablevisión,
including some who were directors of Cablevisión. The criminal complaint, which was filed by a party
that was not a shareholder or creditor of Cablevisión, challenged certain operations undertaken by
66
Cablevisión. Although Cablevisión believes that there are no legitimate grounds to make the claim,
and the allegations by ELP Investments were false or wrongly presented, the court handling the case
ordered searches of Cablevisión’s offices, as well as the seizure of certain of Cablevisión’s corporate
books. On 27 June 2003, the criminal court appointed an agent to gather information at Cablevisión’s
offices regarding the case within a forty-five day period. On 16 September 2003, this period was
extended for 45 additional days. Cablevisión and the named individuals have each denied the
allegations and have offered supporting evidence and Cablevisión appealed the court’s appointment of
the agent. While Cablevisión succeeded in having the appointment of the court-designated agent
revoked, litigation has continued and several appeals have been filed with the Argentine Supreme
Court. The Argentine Supreme Court has not decided to grant any of the appeals filed to date.
However, on 1 November 2006, the Argentine Supreme Court instructed the Court of Appeals to make
the file of the case available to the Argentine Supreme Court and the Argentine Attorney General. We
can give you no assurance that the complainant will ultimately be defeated and that the criminal
charges will be dropped. If the former directors of Cablevisión are ultimately indicted, they may seek
reimbursement from Cablevisión for damages suffered.
In September 2003, several former sellers of 70% of the capital stock of Televisora La Plata S.A.
brought a claim against Cablevisión asserting that, pursuant to a call option contemplated in the
agreement under which their stock was sold, Cablevisión was obligated to purchase the remaining
30% of the capital stock of Televisora La Plata S.A. for U.S.$4.1 million. As of the date of this Offering
Circular, Cablevisión is a party to arbitration proceedings before the Argentine Center for Mediation
and Arbitration, and cannot guarantee that an arbitration decision will be rendered in its favour or that
the amount that it may be required to pay pursuant to any such decision will not be material.
On 12 December 2001, Supercanal Holdings S.A. initiated a suit against Multicanal for damages
in the amount of Ps.83 million as a result of the enforcement of a preliminary injunction brought by
Multicanal against Supercanal. As of the date of this Offering Circular, the proceeding is at the
discovery stage.
The AFIP has requested Cablevisión to provide information regarding the fulfillment by Cablevisión of the requirements under Argentine Law No. 23,576 (as amended, the “Negotiable Obligations
Law”) for a withholding tax exemption with respect to each of the series of Cablevisión’s negotiable
obligations issued under the Program authorised by the CNV in 1998. Among other requirements,
AFIP has requested information related to the public offering and underwriting process of these notes.
Cablevisión has timely answered each of AFIP’s information requests, and its management believes
that it is in compliance with each of the requirements of the Negotiable Obligations Law. However, if it
were determined by AFIP or the Argentine courts (if Cablevisión challenged AFIP’s determination) that
Cablevisión is not in compliance with the Negotiable Obligations Law, in addition to the applicable
sanctions contemplated under Law No. 11,683 of tax proceedings, the tax benefits may no longer be
available with respect to notes the issued in exchange for such series, and Cablevisión would be liable
for the payment of the relevant taxes.
In April 2005, Cablevisión received notice of a ruling by the Federal Tax Court (Tribunal Fiscal de
la Nación) confirming a prior assessment by the AFIP in connection with the alleged failure to pay VAT
related to advertising in Cablevisión’s magazine for certain periods during the years 1996 through
1998. The amounts claimed by the AFIP adjusted as of 31 December 2006, are estimated to be
approximately Ps.13 million. Cablevisión appealed the Federal Tax Court’s decision before the
Contentious and Administrative Matters Court of Appeals on 24 November 2006. On 6 June 2006,
Cablevisión obtained an injunction whereby the AFIP was ordered to refrain from demanding payment
of such VAT. Although Cablevisión’s management believes it has reasonable grounds to support its
claim, we can give no assurance that the Court of Appeals will decide the substance of the matter in
Cablevisión’s favour.
On 19 June 2007, Cablevisión was notified of an action brought by the Unión de Consumidores
de Argentina, an Argentine consumer protection association, claiming a refund for the benefit of all
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Cablevisión subscribers who have been charged additional fees for overdue payment. Cablevisión
automatically charges an additional late payment fee to all subscribers whose payments are overdue.
According to Unión de Consumidores, such late fees are not included in the form agreement
subscribers execute upon subscription. The claim seeks restitution of all late fees collected by
Cablevisión, plus interest. Cablevisión filed its response to the claim on 27 June 2007.
In June 2006, Defensa de Usuarios y Consumidores, an Argentine consumer protection association, submitted a complaint to the Subsecretaría de Defensa al Consumidor, the Consumer Defense
Undersecretariat, requesting that Multicanal be ordered to refund subscribers any payments made for
that cable operator’s magazine, which was distributed for consideration without prior subscriber
consent. The claim was submitted to a private mediator but the mediation closed without an
agreement between the parties. No judicial claim has been brought against Multicanal to date.
A minority shareholder of Televisora Privada del Oeste S.A. (“TPO”), a subsidiary of Multicanal
having approximately 15,000 subscribers, has filed a claim before a national commercial court
requesting that three members of the board of directors of TPO be removed from their positions
because of alleged conflicts of interest with that company. On 2 July 2007, the commercial court
appointed a supervisor to oversee TPO for sixty days. The supervisor’s powers are limited to oversight
and control, without any say over the TPO’s administration or operations. He has been charged with
presenting monthly reports and a final report at the end of the 60-day term, describing any facts in the
administration of TPO that may relate to the claimant’s allegations. The court-appointed supervisor
accepted his appointment on 7 September 2007.
In addition, several administrative proceedings have been initiated by Comfer against Cablevisión
and Multicanal for alleged violations of the Broadcasting Law. Each company has either paid or
challenged the application of minor fines.
We have contested or intend to contest all such claims vigorously. However, responding to the
demands of litigation may divert significant management time, attention and financial resources.
Additionally, we may suffer reputational damage from perceptions arising from the allegations set forth
in the lawsuits.
Cablevisión’s APE
On 7 October 2005, Cablevisión completed the restructuring of U.S.$754,618,951 aggregate
principal amount of its financial debt, out of a total principal amount of debt subject to restructuring of
U.S.$796,379,951, by paying approximately U.S.$142,800,000 in cash, issuing U.S.$150,077,436
aggregate principal amount of Notes due 2012 and U.S.$235,121,316 aggregate principal amount of
Notes due 2015, authorising a capital increase of Ps.39,465,500 and issuing 39,465,500 new Class
“B” shares of common stock of Cablevisión in consideration for the complete, total and final
cancellation of any and all rights and claims of any nature against Cablevisión, its property or its
assets, by creditors that participated in the restructuring. The terms of Cablevisión’s debt restructuring
are set forth in the APE that was filed for judicial confirmation on 14 May 2004. The above mentioned
creditors executed agreements accepting delivery of such consideration prior to judicial confirmation
and irrespective of whether such judicial confirmation is finally obtained or not. Cablevisión also
completed the restructuring of certain debt with local state-owned banks for an aggregate amount of
approximately Ps.39 million.
After 7 October 2005, creditors holding a principal amount of U.S.$20.9 million of Cablevisión’s
financial debt subject to the terms of Cablevisión’s APE, also executed agreements accepting the
terms of Cablevisión’s restructuring and received cash, new notes and/or Class “B” shares of
Cablevisión in consideration for the complete, total and final cancellation of Cablevisión’s outstanding
obligations to them prior to judicial confirmation of the APE and irrespective of whether such judicial
confirmation is finally obtained or not. Cablevisión’s APE was consented by creditors holding 98.5% of
its debt subject to restructuring and was confirmed by the court of first instance in July 2005. It was
then appealed by holders of U.S.$30,000 in aggregate principal amount of our debt subject to the
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APE. Cablevisión confronted significant delays and litigation in the final decision on such appeals
which is still pending. On 27 April 2007, the representative of the Attorney General office submitted its
brief in the appeal regarding our APE requesting that the decision of the court of first instance be
repealed and that the confirmation of Cablevisión’s APE be denied. Since approximately 97% of
Cablevisión creditors affected by the terms of its APE irrevocably accepted the terms of Cablevisión’s
restructuring on a voluntary basis and irrespective of whether judicial confirmation is obtained or not,
Cablevisión restructured the claims of those creditors even pending final judicial confirmation of its
APE. Accordingly, even if Cablevisión’s APE is not finally judicially confirmed, only approximately
U.S.$20.9 million aggregate principal amount of financial indebtedness subject to the APE would
remain outstanding. If those claims, together with related accrued interest, are successfully enforced
against Cablevisión in accordance with their original terms, it could require payments (net of amounts
escrowed by Cablevisión in anticipation of a closing under its APE, if finally judicially confirmed)
totalling approximately U.S.$19.5 million as of 30 June 2007.
On 1 September 2004, Cablevisión initiated before the Bankruptcy Courts of the Southern
District of New York (the “Bankruptcy Court”), a legal proceeding under Section 304 of Chapter 11 of
the Federal Code of the United States of America, with the purpose of obtaining the judicial
recognition of the APE and of the APE’s effects in the United States. On 9 November 2004, the
Bankruptcy Court granted a temporary preliminary injunction order in favour of Cablevisión, suspending the beginning or continuation of any claim against Cablevisión in the United States. The
preliminary injunction order was granted for six months. However, since 5 May 2005, the Bankruptcy
Court has granted successive six-month extensions to the preliminary injunction order. The preliminary
injunction order has been extended until 14 December 2007 and will expire on that date. We cannot
assure that further extensions of the preliminary injunction order will be granted.
Claims Involving CIMECO
The AFIP challenged CIMECO’s income tax statements for the years 2000 to 2002. According to
AFIP, CIMECO was not entitled to a deduction of interest paid and losses resulting from exchange
rate fluctuation. If the AFIP’s position were to prevail, CIMECO’s tax losses for such periods would be
reduced, resulting in a higher net income. CIMECO responded to the AFIP’s claim but its response
was rejected and the AFIP issued a final tax assessment of income tax due for such periods, plus
interest and fines. The overdue principal amount assessed by the AFIP for the relevant periods is of
approximately Ps.12.3 million. Interest as of 30 June 2007 would be approximately Ps.5.6 million. In
CIMECO’s opinion, its deduction of interest paid and exchange losses is reasonably grounded and
intends to appeal the AFIP’s assessment before the Federal Administrative Tax Court. However, the
Company cannot assure that the Federal Administrative Tax Court or judicial courts hearing the case
in subsequent appeals, if any, will rule in CIMECO’s favour.
Claims Involving Papel Prensa
On 2 November 1984, Papel Prensa brought a claim against the Argentine government, Agua y
Energía Eléctrica (“AEE”), a public utility, and the Dirección de la Energía de la Provincia de Buenos
Aires, the Energy Direction of the Province of Buenos Aires (“DEBA”) challenging an increase in the
tariff applicable to the provision of electricity to Papel Prensa’s paper mill. The 115% increase was
unilaterally decided by DEBA in breach of the contractual arrangement between Papel Prensa, the
government of Argentina and AEE (the latter two assigned their rights under such contractual
arrangement to DEBA). In the fourth quarter of 2005, the discovery stage was closed but a decision
has not yet been rendered by the court. In connection with this claim, as of 30 June 2007, Papel
Prensa has established provisions of approximately Ps.27.3 million.
Antitrust
Our subsidiaries Cablevisión and Multicanal are parties to 13 administrative proceedings under
the Argentine Antitrust Law. Both Cablevisión and Multicanal face charges of anticompetitive conduct,
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including territorial division of markets, price discrimination, abuse of dominant position, refusal to deal
and predatory pricing. See “Industry Regulation — Antitrust Law — Antitrust Legal Proceedings”.
Environmental Matters
In their production processes, AGEA and AGR use inks, solvents (rubber cleaners), ink stained
materials, mineral oils, hydrocarbons, paint thinner, polyethylene, aluminium, cleaning materials and
other substances considered as hazardous disposals under Hazardous Waste Law No. 24,051.
Both companies are registered with the Registro Nacional de Generadores y Operadores de
Residuos Peligrosos, the National Registry of Producers and Operators of Hazardous Waste (the
“National Registry”). They have both received their respective environmental certificates that approve
AGEA and AGR as producers and manipulators of hazardous waste. On 17 January 2007, AGR
requested the renewal of its environmental certificate, which had expired. Renewal is still pending.
Both companies are required to file annual affidavits that include, among other information, a
description of the processes that generate hazardous disposals, the list of substances used in such
processes, the physical, chemical, biological and other characteristics of their hazardous waste
disposals and the annual quantity of disposals.
AGEA and AGR pay an annual fee that is calculated according to a formula that takes into
account the quantity of their respective hazardous disposals and their dangerousness, measured by
pre-established parameters. Fees may not exceed 1% of the average presumed revenues of the
activity to which the hazardous waste relates.
AGEA does not generate gaseous emissions or liquid effluents that are disposed of into public
waters. AGR generates liquid effluents, which are processed in a treatment plant before their disposal
into the local municipal sewage system. AGR also generates gas emissions that are treated before
their release into the atmosphere.
Neither AGEA nor AGR use any products that contain or use asbestos polychlorinated biphenyls
(PCBs) or other substances that may be considered dangerous due to flammability or corrosiveness
in their printing process.
Papel Prensa is subject to the control of the environmental authorities of the Province of Buenos
Aires and is in compliance with the applicable environmental regulation. Papel Prensa is a party to
various administrative proceedings brought by the provincial environmental authorities, the outcome of
which has been favourable to Papel Prensa so far. In connection with the Plan de Reconversión
Productiva de la Industria de Celulosa y Papel, a national recycling plan, Papel Prensa is expected to
enter into an agreement with the Secretaría de Ambiente y Desarrollo Sustentable de la Nación and
other provincial entities, pursuant to which Papel Prensa will commit to making certain environmentalrelated investments. These investments would constitute an adequate response to recent requests by
environmental authorities.
As of the date of this Offering Circular, no claim or complaints had been filed or threatened by
any neighbours, other parties or governing authorities in connection with environmental matters.
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THE ARGENTINE MEDIA INDUSTRY
General
As of 2001, the year of the most recent census, Argentina had a population of approximately
36.6 million inhabitants with an adult literacy rate of 97%. According to the World Bank, the country’s
annual per capita income in 2005 was of U.S.$4,470, the third highest in Latin America, after Mexico
and Chile. Approximately 33% of Argentina’s population lives in the AMBA Region.
Over the years, two key factors have influenced the development of the Argentine media
industry:
• the high level of concentration of the national population with the highest income levels in the
AMBA Region; and
• numerous and cumbersome regulations that restricted foreign or even private ownership in
several segments of the media industry.
In the early 1990’s, the Argentine government took a number of steps designed to reduce state
intervention in the economy and eliminate barriers to foreign investment, some of which had a
significant impact on the Argentine media industry. Among the measures adopted, the Argentine
government:
• liberalised foreign exchange and capital markets;
• launched a process of privatisation of state-owned companies, including radio and television
broadcasters;
• allowed a single person or entity to participate in the ownership of more than one broadcasting
company;
• allowed cross-ownership of broadcast and print media;
• allowed broadcasting companies to have other additional corporate purposes;
• allowed corporations (rather than only individuals) to be shareholders of broadcasting companies, and for the number of shareholders to exceed 20.
As a result of this deregulation of the Argentine economy, media companies’ revenues increased
and domestic and foreign entities increased their capital investment in that industry, leading to
modernisation and, in some cases, towards a gradual convergence within the telecommunications
industry.
The economic and political crisis that affected Argentina in 2001 and 2002 had significant
consequences for the media industry. The steep contraction of revenue streams measured in
U.S. dollars rendered most media companies unable to service their financial debt, substantially all of
which was denominated in that currency, as it became due. Several media industry players, including
Cablevisión and Multicanal, resorted to newly enacted amendments to Argentine insolvency legislation
allowing “pre-packaged” restructuring proceedings, to restructure their financial debts. The adoption of
certain amendments to the Argentine insolvency legislation in 2002 facilitated to some extent the
restructuring of financial debt.
The 1998 — 2002 recession and crisis also led to a reformulation of the role of the public sector
in the economy, with a marked tendency to increased intervention. While there has not been a return
to the state-led capitalism that characterised the Argentine economy prior to the 1990s, the
government identified areas where it has increased state regulation, supervision and involvement or
has protected local industry against foreign ownership. Law No. 25,750 of Cultural Assets, passed on
18 June 2003, for example requires that corporations in media-related businesses be owned by
Argentine persons and limits foreign ownership. Foreign persons may not own more than 30% of the
outstanding capital stock representing 30% of the voting rights of any media-related company. As a
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consequence of the general economic crisis, but also as a consequence of increased state intervention and protectionism, foreign investment in the Argentine media industry has been limited since
2001. See “Industry Regulation”, “Broadcast, Cable and Satellite Television and Broadcast Radio —
Federal Broadcasting Regulation”.
Principal Segments
The Argentine media industry includes the following principal segments:
• cable and other pay television;
• Internet access;
• publishing and printing;
• television and broadcast radio and programming;
• digital content; and
• outdoor advertisement.
The following is a summary description of the development of the Argentine media industry in
each of the principal segments in which we operate.
Cable and other Pay Television in Argentina
Cable television in Argentina originated in the 1960’s when community antenna systems were
built to retransmit television service from Buenos Aires to the rest of the country. The Argentine
government, acting through Comfer, granted non-exclusive licenses to provide cable service which
resulted in the development of a highly fragmented industry with over 1,500 operators. The nonexclusive licensing system also resulted in overlapping cable service areas, particularly in large
markets such as the AMBA Region and the province of Buenos Aires.
Beginning in 1993, in an effort to gain market share in the AMBA Region, the then-existing cable
operators in Argentina began to compete aggressively for subscribers, offering incentives which
included lower basic service rates, free activation and three months of free basic service, leading both
to increased subscriptions and high subscriber termination rates as subscribers switched from one
operator to another. At about the same time, the Argentine cable industry entered into a consolidation
phase which significantly reduced the number of cable operators.
In recent years Cablevisión, Multicanal and several of their largest competitors acquired cable
systems by gaining control of medium and large-sized regional cable systems. Because the cable
industry is capital intensive, the consolidation of various companies has created economies of scale,
allowing multiple system operators to effectively link Argentina’s fragmented systems and expand and
upgrade their networks.
With the end of the convertibility regime and the devaluation of the Peso in January 2002, the
pay television industry experienced a significant decline in the number of subscribers as a consequence of the severe economic crisis. Beginning in 2004, sustained economic recovery and relative
price stability led to a partial recovery of the subscriber base that had disconnected during the crisis.
Since then, Argentine cable operators have benefited from the country’s economic growth, expanding
their services to use currently idle capacity, and upgrading the bandwidth of their networks to 750Mhz.
Advertising revenues in cable television are substantially lower than those in free broadcast
television. They reached a peak of U.S.$70 million in 2000, but decreased dramatically, in part due to
subscriber termination and in part due to devaluation, to only U.S.$10 million in 2002. Since then, they
have gradually recovered, to reach an estimated U.S.$56 million in 2006. Our sports signal,
TyC Sports, holds 18% of the total cable television advertising spending.
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Internet Access in Argentina
As of 30 June 2007, approximately 1.96 million users subscribed to broadband Internet access
services in Argentina. Our FiberTel and Flash brands accounted for a 32% market share, measured in
terms of number of subscribers. Speedy, an affiliate of Telefónica de Argentina S.A., had a market
share of 30%. Arnet, an affiliate of Telecom Argentina S.A., had a 26% market share. The remaining
12% was scattered among over 15 other broadband providers countrywide.
Our FiberTel brand not only competes directly with other cable-modem based Internet service
providers, but also with ADSL technologies. Telefónica de Argentina S.A. and Telecom Argentina S.A.
both offer their ADSL services directly and through third party providers that market their products
jointly with the two telephone companies, thus increasing their distribution, communications and sales
channels. Additionally, though in lower numbers, wireless technologies have captured a portion of the
demand for Internet access.
Our Internet access operations concentrate their subscriber base in the AMBA Region, where
approximately 95% of their subscribers are located.
The Publishing and Printing Industry in Argentina
Newspaper Publishing and Advertising
We participate in several markets within the publishing and printing industry. Through our
subsidiary AGEA and its subsidiaries, we are active in the publication and printing of newspapers,
magazines, directories, commercial inserts, leaflets, booklets and textbooks.
The newspaper market in Argentina is characterised by the presence of approximately 12 paid
newspapers and one major free distribution newspaper, published and distributed primarily in the
AMBA Region, approximately 20 significant regional newspapers and a great number of small local
newspapers sold in the rest of the country. Regional newspapers compete vigorously in each of their
respective regions with so-called “national newspapers”, such as Diario Clarín, which are published in
Buenos Aires and sold throughout Argentina. Based on statistical information compiled by AGEA, in
2006 regional newspapers accounted for approximately 40.2% of the total copies sold in the country.
National newspapers have a large circulation and generally include national and international
news and features. Regional newspapers, on the other hand, generally have smaller circulation, focus
on regional and local news and features and are distributed at the regional or city level. Most of the
advertising in national newspapers targets a wide geographical cross-section of the Argentine
population, whereas advertising in regional newspapers generally focuses on reaching specific
regional audiences. There are three national newspapers with market shares above 10% in the
AMBA Region: Diario Clarín, La Nación and Diario Popular. Except for Diario Clarín and La Voz del
Interior, however, no national or regional newspaper has a market share of more than 10% of copies
sold in Argentina outside of the AMBA Region.
With 12 newspapers published and sold, and one newspaper distributed freely in the AMBA
Region, the newspaper market is more competitive than in other major cities worldwide, where two to
four large newspapers are typically published. This high level of competition coupled with the overall
decrease in circulation levels during the 2002 crisis, has become an entry barrier to new foreign and
domestic competitors. During the 1990s, there were several efforts to launch new newspapers, none
of which gained more than a 4% share of the circulation in the AMBA Region.
Towards the end of 1999 and during the first quarter of 2000, regional newspapers began to
reduce cover prices. This competition-driven phenomenon occurred mainly in cities such as La Plata,
Rosario, Santiago del Estero, Córdoba and Mendoza, where a single newspaper (in some cases, the
only one in the city) that dominated the local market was threatened by the appearance of new or
recently created newspapers that were sold at lower prices to increase their market and circulation.
Regional markets grew as a consequence of price reductions, but profitability fell. We estimate that
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the likelihood of new competitors penetrating the newspaper market with a low-priced newspaper in
the AMBA Region are low, given the strong competition in the AMBA Region. Additionally, low-priced
newspapers tend to focus on readers from lower social strata and are generally unable to obtain the
necessary advertising revenues that would make them sustainable.
Market shares in terms of circulation have remained relatively stable. In the AMBA Region,
Diario Clarín has accounted for 50% to 52% of circulation in the last five years. La Nación has
maintained its market share in the 18% to 20% range and Diario Popular was the only other
newspaper that exceeded a 10% share of the AMBA Region newspaper market, with 10% to 11% of
total circulation in the last five years.
Advertising spending in Argentine newspapers has increased steadily since the beginning of the
country’s recovery in 2003. That year, advertising spending in national and local circulation newspapers totalled approximately Ps.640 million, compared to approximately Ps.422 million the previous
year. In 2004, advertising spending in national and local circulation newspapers increased 33%, to
approximately Ps.851 million. In 2005, advertising spending in national and local circulation newspapers increased an additional 25%, to approximately Ps.1,064 million and in 2006, it increased again
by 16%, to an estimate of approximately Ps.1,235 million. Of the total advertising spending in all
media, national circulation newspaper advertising has consistently represented between 36% and
41% in the last five years. Of that amount, Diario Clarín had a market share in the AMBA Region of
approximately 58% in 2002 and 2003, and 61% from 2004 to 2006. The advertising market share of
its closest competitor, La Nación, fluctuated between 24% and 26% throughout the same period.
The magazine market in Argentina is characterized by a wide range of editions, exceeding
16,000 in 2006, of which approximately 2,150 were serial, including 1,370 Argentine magazines. Total
circulation for 2006 is estimated at 98 million copies, with total sales of approximately U.S.$433 million.
Approximately 80% of the Argentine magazines are edited by seven producers, including AGEA.
Genios, a children’s magazine with an average weekly circulation of 102,000 copies in 2006, is the
magazine with the highest circulation in Argentina, reaching 300,000 copies at the beginning of the
school year. Viva, the magazine distributed with Clarín’s Sunday edition, had an average circulation of
approximately 795,000 copies in 2006.
The Printing Industry
Through AGR we have a 31% share of the Argentine commercial printing market (flyers,
magazines, guides, instalment books, mail and others), which has also recovered steadily from the
2002 crisis, growing from a total market size of approximately U.S.$114 million in 2004 to approximately U.S.$151 million in 2006. Our growth in sales between 2002 and 2007 was of 143%, after a
71% drop from 2001 to 2002.
There are seven major players in the printing market. AGR’s closest competitor,
Anselmo L. Morvillo S.A. has a market share of approximately 19%. Quebecor, which prints flyers,
magazines, guides and instalment books, has a market share of approximately 17%.
Textbook Publishing
We also participate in the school textbook publishing market through Tinta Fresca, a subsidiary
of AGEA. According to data from the Ministry of Education, Science and Technology, approximately
9.4 million children were enrolled in regular educational institutions (kindergarten through high school)
in 2003, with an average of 1.26 new books purchased per student, per year. The average number of
new books purchased per student, per year in Brazil and Mexico is of approximately 5 books.
The current textbook market in Argentina, measured in number of copies sold, is of approximately 10.7 million copies. Ediciones Santillana, the largest private textbook publisher in the market,
sold approximately one million copies in 2006 and had a 21% share of the private market (which
excludes government publications). Its closest competitor, Puerto de Palos, sold approximately
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760,000 copies and had a 16% market share. After only one and a half years in the market, Tinta
Fresca was the sixth largest player in the market in 2006, with approximately 460,000 copies sold and
a 10% market share.
The Broadcasting and Programming Industry in Argentina
Television Broadcasting and Programming
In 2006, approximately 98% of Argentina’s 10.3 million households owned a television set.
Approximately 54% of those households had access to pay television. Television consumption in
Argentina averages 3.4 hours a day, of which an average 2.6 hours are spent watching free broadcast
television.
With the return to democracy in 1983, the Argentine government began to implement the
process of deregulation and privatisation of television broadcasting under the framework that had
been created by the Broadcasting Law in 1980. Four of the five broadcasting channels were
transferred to private ownership and one (Canal 7) remained under the control of the federal
government. Canal 9 and Canal 2 were privatised in 1984 and 1987, respectively. In 1990, the
broadcasting licenses of Canal 11 and Canal 13 were granted in concession to private parties for a
term of fifteen years, with an option to extend such concessions for an additional 10 year period. Upon
expiration of that period, licenses are renewed or granted to a new licensee after a bidding process in
which the original licensee has priority in case of a tie. The expiration term of all broadcasting licenses
existing as of 24 May 2005 was suspended for 10 years, subject to certain conditions. On 24 May
2015, license terms will resume without counting the 10-year suspension towards expiration. See
“Industry Regulation — Broadcast, Cable and Satellite Television and Broadcast Radio”.
There are currently five major free broadcast television networks in Argentina, of which we own
Canal 13. Canal 11, also known as TELEFE, our principal competitor, is part of a network of television
channels controlled by Telefónica Media S.A., a subsidiary of Telefónica S.A., a Spanish telecommunications company that is also active in the Argentine telecommunications market. It includes 12
broadcast television channels outside of Buenos Aires that broadcast TELEFE’s programming
throughout the country. Canal 13 is part of a network that has four broadcast television channels
outside of Buenos Aires, one in Córdoba, two in Río Negro and one in Bahía Blanca. Broadcast
television channels are also transmitted by cable television systems.
Reception of broadcast television by the public is free of charge, pursuant to the Broadcasting
Law. Broadcast television channels and networks derive their revenues mostly from advertising, which
generally accounts for approximately 70% to 75% of total revenues. Total spending in advertising in
free broadcast television stood at 0.18% of GDP in each of 1998 and 1999. As the country’s economic
performance declined, it fell steadily to 0.14% of GDP in 2000, 0.12% of GDP in 2001, and
experienced a sharp decline to 0.08% of GDP in 2002, at the height of the economic crisis. Since
then, advertising spending in free broadcast television has recovered. It increased to approximately
0.10% of GDP in 2003 and 0.12% of GDP in 2004. In 2005 and 2006 it stood at 0.11% of GDP and
0.12% of GDP, respectively.
Approximately 27% of all broadcast television advertising spending in 2006 corresponded to
retail products and services, 13% to financial services, 12% to beverages, 11% to telecommunication
companies, 11% to laboratories and cosmetics, 7% to governmental entities, 4% to supermarkets and
malls, 4% to appliances, 3% to automobiles and 2% to oil companies, among others.
From 2002 to 2006, Canal 13’s share of the advertising spending remained relatively stable,
fluctuating from 45% in 2002 to 43% in 2003, 39% in 2004, 38% in 2005 and an estimated 44% in
2006. TELEFE, its closest competitor fluctuated between a low of 33% in 2005 and 37% in 2006. The
decrease in market share in 2005 resulted from an extraordinary increase in the advertising market
share of Canal 9, which climbed to 20% that year, to return to its traditional 10% to 11% share in
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2006. Canal 2 (América TV) accounted for approximately 8% of the advertising spending in 2006 and
the government’s Canal 7, accounted for 1%.
In terms of audience rating, the tendency in the broadcast television market has been towards
consolidation, with the market shares of TELEFE and Canal 13 gradually increasing, while those of
the other three channels remained substantially lower. TELEFE had an average of 11.1 points of
rating (1 point of rating represents 96,792 viewers) in 2002, 12.5 in 2003, 15.0 in 2004, 14.3 in 2005
and an estimated 14.7 in 2006, in each case measured from noon to midnight in residential
households. Canal 13 averaged 10.0 points in 2002, 10.8 in 2003, 10.9 in 2004, 9.4 in 2005 and an
estimated 11.2 points in 2006, in each case measured from noon to midnight in residential
households. The average for Canal 9 was of 6.2 points in 2002, 6.2 in 2003, 7.2 in 2004, 8.3 in 2005
and an estimated 6.0 in 2006, while América TV averaged 6.2 points in 2002, 5.5 in 2003, 5.5 in
2004, 4.7 in 2005 and an estimated 4.7 in 2006. Prime time (8:00PM to 12:00AM) ratings are even
more concentrated, with Canal 13 and TELEFE averaging 18.1 and 17.8 points, respectively, in 2006.
Prime time television concentrates approximately 76% of all advertising.
Argentine programming in both Canal 13 and TELEFE focuses on news, entertainment, sports,
sitcoms and fiction. These may be produced in-house, by independent producers or as coproductions.
Radio Broadcasting and Programming
Broadcast radio has a strong tradition and high penetration rate in Argentina, reaching approximately 82% in 2005, compared, for example, to a 75% penetration rate in the United States and a
52% penetration rate in Spain. In 2006, approximately 6.8 million people listened to the radio during
any given day in the AMBA Region. Of those, approximately 55% listen only to FM radio, 21% listen
only to AM radio and 24% listen to both.
There are five main players in the broadcast radio market, which account for 67% of the
audience share and 85% of all radio advertising sales. The CIE Group is the largest market competitor
in terms of advertising sales (23%) and second in audience share (16%), controlling four FM stations
and two AM stations. We are the second largest radio broadcaster in terms of advertising sales (21%)
and third largest in terms of audience share (14%), and own Radio Mitre (AM), Radio Mitre Córdoba
(AM810) and La 100 (FM). The Hadad Group controls four FM radio stations and one AM radio
station, is also second in terms of advertising sales (21%) and has the largest audience share (23%).
The PRISA Group owns one AM and one FM radio station and the Narváez-Vila-Manzano Group
owns one AM station.
As in the rest of the media industries discussed herein, advertising spending in radio fell during
the 1998-2002 Argentine crisis from U.S.$140 million in 1998 to a low U.S.$20 million in 2002, and
then recovered gradually, increasing by 60% to U.S.$32 million in 2003, 40% to U.S.$45 million in
2004, 34% to U.S.$61 million in 2005 and 10% to an estimated U.S.$67 million in 2006, of which we
accounted for 9%.
Digital Content in Argentina
Since 1996 we participate in the on-line services and new media market in Argentina through
Clarín Global and Prima Internacional (since 26 September 2007, denominated Compañía de Medios
Digitales (CMD) S.A.). Among other content websites, we have developed three news websites
(Clarin.com, Ole.com.ar and TN.com.ar), classified advertisement (automobiles, real estate and
employment), an auction site, a music download site and several e-commerce websites selling mobile
phone ringtones, photos, games and wallpapers.
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The on-line services and new media market in Argentina is growing together with personal
computer (PC) home penetration and Internet penetration. According to INDEC the number of
Argentine homes with PCs doubled, from approximately 3.1 million (or 30%) in 2002 to an estimated
6.2 million (59%) in 2006. Internet penetration followed a similar pattern, with approximately 1.6 million
households (16%) with Internet access in 2002 to an estimated 3.1 million households (29%) in 2006.
With an average of 611,000 unique visits per day and a 54% share of all visits to news websites
in Argentina, Clarín.com dominates the Argentine Internet new media market. La Nación.com is the
second largest market participant in terms of visitors, with a 21% share, followed by Infobae.com, with
a 17% share of all daily visits.
Aggregate market spending in Internet advertising peaked in 2000 at approximately Ps.10 million,
fell to approximately Ps.1.3 million in 2002 and has increased steadily to an estimated Ps.6.5 million
in 2006.
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INDUSTRY REGULATION
The Argentine media industry is subject to laws and regulations specific to each sector, as well
as more general regulations applicable to the industry as a whole. The following section summarises
the material regulations applicable to each of our business segments as well as to our operations as a
whole.
Broadcast, Cable and Satellite Television and Broadcast Radio
Federal Broadcasting Regulation
The installation, operation and acquisition of cable television services, free broadcast television
and broadcast radio in Argentina are governed by the Broadcasting Law. Our cable television and our
broadcasting business are principally regulated and supervised by Comfer but also fall under the
jurisdiction of the Comisión Nacional de Comunicaciones, the National Communications Commission,
(the “CNC”), for matters related to compliance with technical regulations. Comfer is under the authority
of, and reports directly to, the Secretaría General de Presidencia de la Nación (the “General
Secretariat”), directly under the national presidency. The General Secretariat oversees the general
enforcement of the Broadcasting Law and the regulatory framework for the industry.
Comfer has the authority to:
• manage the public bidding process whereby the executive branch grants operating television
and broadcast radio licenses on a non-exclusive basis;
• grant cable television licenses on a non-exclusive basis;
• extend the terms of broadcasting and cable licenses;
• approve the transfer of shares or other ownership interests in cable television licensees;
• supervise the cultural, artistic and legal content of programming;
• approve amendments to the bylaws of licensed companies; and
• impose penalties on licensed companies for failure to comply with the Broadcasting Law, in the
form of fines, suspension of advertising and the revocation of licenses.
Rates charged by cable television companies are not currently regulated.
Cable and broadcast television and broadcast radio companies in Argentina, which we collectively call “Broadcasting Companies”, are required to obtain a non-exclusive broadcasting license from
the executive branch or Comfer, as the case may be, to carry and distribute programming over their
systems. The CNC monitors the compliance by Broadcasting Companies with technical regulations
through its surveillance of the use of the broadcasting spectrum and the granting of frequencies.
Cable operators are required to submit to Comfer evidence of compliance with municipal regulations
relating to use of airspace and poles and the CNC must approve all technical plans for the cable
service installation. Cable operators are also required to maintain at least one headend and broadcast
one local signal per license.
All Comfer licenses have an initial fifteen-year term. At the end of this term, the licensee may
apply for a one time ten-year extension. If Comfer verifies that the licensee has complied, during the
first term, with all of the requirements and obligations set forth in the Broadcasting Law, it must grant
the extension subject only to verification by Comfer of compliance with the Broadcasting Law. The
Broadcasting Law does not provide for subsequent renewals. Our subsidiaries engaged in broadcast
television and radio must apply for new licenses after the ten-year extension term lapses and undergo
a new public bidding process. Cable licensees whose second (ten-year) term has expired must
purchase new licenses. Pursuant to Resolution No. 726/2000, Comfer suspended the sale of new
cable licenses. The suspension was extended by Comfer through successive resolutions and continues to be in place. In July 2006, Comfer issued new rules for access to, and issuance of, cable
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television licenses and for the provision of cable television services submitted the new rules to a round
of comments by the general public. The sale of cable television licenses will remain suspended until
the final version of such rules has been approved.
Pursuant to the terms of Decree No. 527/05, the expiration of all broadcasting licenses in effect
as of 24 May 2005 was suspended for a period of ten years, subject to certain conditions. In order to
benefit from the ten-year suspension, Broadcasting Companies were granted two years (which were
subsequently extended until 6 July 2007) to submit proposals that will make broadcasting time
available for programming that contributes to the protection of the national culture and the education
of the population and submit a technological investment project to be implemented during the period
of the suspension. All such proposals must be approved by Comfer. Comfer Resolution No. 214/CFR/
07 sets forth the requirements for the ten-year suspension. All of our subsidiaries that have title to a
broadcasting license have submitted the documentation required to comply with Decree No. 527/05
and Resolution No. 214/CFR/07. Our presentations are currently under review. If the suspensions are
granted, all licenses we held as of 24 May 2005 will remain in effect until 24 May 2015, and thereafter
for the remaining term of each license. Our licenses have remaining terms of between one and
17 years that will continue to run after the suspension is lifted. We expect to obtain the ten-year
suspension for each of our licenses, but cannot assure you that Comfer will grant any of the
suspensions for which we have applied. Decree No. 527/05 is an emergency decree that amends a
law and has not been ratified by Congress. Its constitutionality could be challenged on a case by case
basis before a judicial court. To date, there have been no challenges to the constitutional validity of
Decree No. 527/05. We cannot assure you that it will not be challenged in the future or, if challenged,
that its validity will be upheld by a judicial court.
Comfer issues broadcasting licenses upon a review of several qualifications of the applicant and
its shareholders and partners. Under Section 45 of the Broadcasting Law, a licensee’s shareholders
and partners must:
• be Argentine nationals that do not have corporate, legal or other affiliations with foreign media
or broadcasting entities (except as permitted under treaties between Argentina and other
countries, or in the case of transfers of shares agreed before the issuance of Law No. 25,750
with the approval of the CNDC);
• have no criminal record;
• present evidence of their adequate financial condition;
• not be a judge, legislator, public official or a member of the armed forces; and
• not be a public service provider, a director or manager of a public service provider, or hold
10% or more of the voting shares of a public service provider.
When the licensee has more than one corporate shareholder, the above requirements apply only
to the controlling shareholders.
Comfer must be notified within 30 days of the appointment of directors, managers, syndics,
administrative directors and attorneys-in-fact of any licensee, except for attorneys-in-fact for judicial
purposes. As a result of any failure to comply with this requirement, the Comfer may impose fines on
the noncomplying company or order the replacement of such director, manager, syndic, administrative
director or attorney-in-fact.
Prior to a 2005 amendment to Section 45 of the Broadcasting Law, directors of a broadcasting
licensee’s controlling shareholder also had to meet the requirements the Broadcasting Law imposes
on directors of broadcasting licensees. Even though after the amendment such requirement is no
longer in place, regulations governing the transfer of broadcasting licenses still grant Comfer the
authority to control that directors of the controlling shareholder of the licensee meet the same
standards required for directors of licensees. Directors are not required to be Argentine nationals, but
foreign directors must comply with additional certifications. Because several transfers of our licensee
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subsidiaries are currently subject to Comfer approval, our directors must meet the requirements of the
Broadcasting Law.
A single person or entity may not hold more than a total of 24 radio or broadcast television
licenses in different jurisdictions, and may not hold more than one radio, one broadcast television and
one cable television license in any given jurisdiction. We cannot assure you that Comfer will not deem
cable television licenses held by Cablevisión and Multicanal in a single jurisdiction as duplicative
licenses and order that one of them be relinquished.
Section 46 of the Broadcasting Law establishes that licensed companies may not be affiliates,
subsidiaries or under the control of foreign persons. Law No. 25,750, passed on 18 June 2003,
requires that corporations in media-related businesses be owned by Argentine persons and limits
foreign ownership except in the case of transfers of shares executed before the issuance of Law
No. 25,750 with the approval of the CNDC. Foreign persons may not own more than 30% of the
outstanding capital stock representing 30% of the voting rights of any media-related company. The law
defines “foreign persons” as individual foreign nationals, or entities organised under Argentine or
foreign law that are under direct or indirect control of foreign individuals and “national persons” as
individual Argentine nationals, or entities organised under Argentine law, domiciled in Argentina and
under majority control of Argentine individuals or entities organised in Argentina or abroad, under
direct or indirect control of individual Argentine nationals who are domiciled in Argentina. The foreign
ownership cap may be raised when the law of, or a treaty with, a foreign jurisdiction grants reciprocal,
non-discriminatory treatment. A treaty between Argentina and the United States grants residents of, or
corporations domiciled in, the United States, Argentine resident status for purposes of such requirement, with respect to any company, including, for instance, our cable television subsidiaries to the
extent they are subject to Law No. 25,750. There is no express legal provision distinguishing unlisted
shares from listed shares for the purpose of determining the percentage of shares under foreign
ownership pursuant to Law No. 25,750. However, in a non-binding opinion in relation with shares of
Multicanal issued pursuant to its APE, the Argentine Procurador del Tesoro (Attorney General) stated
that listed shares could be transferred freely, without Comfer authorisation or control of their
ownership, as long as the then controlling shareholders, known to and authorised by Comfer,
maintained their control over the company. We have been advised by our Argentine counsel that,
based on that opinion and on Comfer’s practice, it would be reasonable to conclude that the listed
Class B Shares would not count towards the 30% ownership cap set forth under Law No. 25,750.
If a transfer of shares in a licensee is duly notified to Comfer, the transfer can be validly
consummated and title to the shares will transfer, although it will remain subject to Comfer approval.
The notice to Comfer must include documentation setting forth the new shareholder structure and
identifying the directors of the acquiring company. Failure to obtain Comfer’s approval of the transfer
of an ownership interest in a licensed company may result in the unwinding of the transfer. Violation of
Comfer regulations regarding the transfer of an ownership interest in a licensed company may result
in the revocation of the license of the licensee that violated Comfer regulations. Parties responsible for
the revocation are banned from obtaining a new license or being shareholders of a licensee for a
period of five to thirty years.
Under the Broadcasting Law, licenses may be revoked because of, among other things:
• fraud regarding ownership of the licenses;
• approval by a licensed company of any forbidden transfer of its own ownership interests;
• monopolistic behaviour;
• any misrepresentation made by the licensee to Comfer with respect to the assets affected to
the service being provided under the license;
• transfer of the broadcasting license without submission for Comfer’s approval of such transfer
within 180 days of its consummation.
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Comfer also oversees the ongoing operations of broadcasting licensees. The Broadcasting Law
provides basic guidelines regarding the general content of broadcasts, which must contribute to the
common good, serve as a medium for cultural enrichment and education of the population, promote
social communication, participation and democracy, and develop international cooperation. Programming may not violate people’s rights to intimacy and content within certain times of the day must be
approved by Comfer for viewing by all audiences. The Broadcasting Law also provides certain
parameters for the veracity and objectivity of news broadcasts, the protection of national security and
the general decorum and sobriety in reporting. Failure to comply with content regulations may result in
sanctions.
Comfer Resolution No. 830/02, as amended classifies sanctions for violations of the Broadcasting Law as either a falta grave (severe violation) or as a falta leve (minor violation). Minor violations
are sanctioned by llamados de atención (reprimands) and apercibimientos (warnings). Severe
violations, such as the broadcast of obscene programs or the illegal installation and operation of a
cable system, are subject to incremental fines, which may, in the case of numerous severe violations,
eventually lead to the revocation of the license. In the past, the application of the regulatory framework
by Comfer has resulted in numerous and, in the aggregate, substantial fines. We can give no
assurance that we will not receive further sanctions or have any of our licenses revoked under
Resolution No. 830/02 as amended.
Application of the Broadcasting and Telecommunications Laws to Grupo Clarín Licensees
Share Transfers. The Controlling Shareholders were authorised by the executive branch or
Comfer, as the case may be, as shareholders of ARTEAR, Multicanal and Radio Mitre. The executive
branch or Comfer have been notified of the following transactions, among others, which remain
subject to approval:
• the acquisition by the Company of direct and indirect participations in ARTEAR, contributed to
the Company by the Controlling Shareholders in 1999;
• the acquisition by the Company of direct and indirect participations in Radio Mitre, contributed
to the Company by the Controlling Shareholders in 1999;
• the merger of 77 broadcasting licensees into Cablevisión in a series of transactions between
1998 and 2006;
• the merger of 94 broadcasting licensees into Multicanal in a series of transactions between
1995 and 2006;
• the merger of 24 broadcasting licensees into Teledigital in a series of transactions between
2005 and 2007;
• the transfer of 22,321,687 Class A shares of Cablevisión by AMI CV Holding LLC to
VLG Argentina LLC, the current shareholder composition of the holders of Class A shares of
Cablevisión, i.e. VLG Argentina LLC and Southel Holding S.A., and the direct and indirect
participation of the Company and Fintech in Cablevisión;
• the transfer by the Company and AGEA of their shares of Multicanal to Cablevisión; and
• the current shareholder composition of Teledigital, i.e. Holding Teledigital (45,881,541 shares),
Hicks, Muse, Tate, Furst LA Argentina Cable Company LLC (1 share) and Carlos Ramón
Ibáñez (6,969 shares) and the current indirect control of the Company by Cablevisión.
Among other things, the Broadcasting Law provides that any amendments of the bylaws or any
corporate resolutions of licensees, adopted by shareholders that have not been approved by Comfer
are null and void. Comfer Opinion No. 18280 COMFER (DGJN)/94, states that resolutions adopted
pending approval of the shareholder composition by Comfer, will be deemed approved and be valid as
of the date of their adoption, to the extent that they do not contravene the Broadcasting Law, once the
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new shareholder composition is approved by Comfer. We expect that all resolutions and bylaw
amendments adopted pending approval by Comfer of the transactions described above will be valid as
of the dates of their respective adoptions, but we cannot assure you that such transfers, resolutions or
bylaw amendments will be approved by Comfer.
Cablevisión, Fibertel (now merged into Cablevisión), Multicanal and Prima are telecommunication
services licensees. The changes of control of Cablevisión and Fibertel that resulted from the series of
transactions whereby the Company and Fintech increased their holdings of Cablevisión’s share of
capital to approximately 60% and 40%, respectively, and Cablevisión acquired 98.5% of Multicanal,
were not approved by Secom prior to the share transfer. Failure to receive Secom approval
contravenes the Rules for Telecommunication Service Licenses and could result in the revocation of
the telecommunications licenses held by Cablevisión and Fibertel, and disqualify the current holder of
the license and its affiliates under the Rules for Telecommunication Service Licenses for five years.
Broadcast and Cable License Extensions. Our broadcast television, radio and cable television subsidiaries hold 233 licenses, which are subject to extension. Although we expect to receive
these extensions, because we have failed to meet the deadline for applying for extension of 46 of
these licenses, such licenses may not be granted an extension by the Comfer and may terminate
upon expiration of the ten-year suspension period set forth in Decree No. 527/05 if such suspension is
granted. If such suspension is not granted, such licences may be terminated by Comfer. In certain
cases, such licenses will expire immediately upon expiration of the ten-year suspension period. Some
of our licensee subsidiaries hold licenses that have already been granted a first ten-year extension
prior to the suspension period. Once the extended term elapses, the licensee subsidiary will have to
apply for a new license in order to continue providing broadcast or cable television services in the
geographic areas covered by the expired license. We expect but cannot assure you that such licenses
will be granted. In the event that the Comfer denies the extension of our license in a specific
geographic area, we must cease operations in such area, seek to acquire a company that has a valid
license for the area or apply for a new license in our own name.
Overlapping Cable Licenses. Comfer may subject the approval of some of the share transfers
of our licensee subsidiaries to the elimination of multiple overlapping licenses and order a licensee to
relinquish all but one license in a given geographical area. In the past, in connection with transactions
involving the roll-up of subsidiaries, Cablevisión elected to relinquish one of any pair of overlapping
licenses upon the completion of the transaction as a matter of corporate law even pending Comfer’s
approval, while Multicanal informed the Comfer of its decision to relinquish one of the overlapping
licenses upon Comfer’s approval being granted. As a result of the series of transactions whereby the
Company and Fintech increased their holdings of Cablevisión’s share of capital to approximately 60%
and 40%, respectively, and Cablevisión acquired from the Company 98.5% of Multicanal, Cablevisión
and Multicanal hold licenses in overlapping territories. Even though, arguably, Cablevisión and
Multicanal are not a single licensee, we cannot assure you that Comfer will not order that either
company relinquish its license where it overlaps with that of the other cable operator. If Cablevisión or
Multicanal were to relinquish a license, subscribers under the relinquished license would have to be
transferred to the remaining licensee or have their subscriptions cancelled, which could affect the
relinquishing licensee’s revenues and results of operations.
Other Regulatory Compliance Issues. Cablevisión and Multicanal have unified headends in
certain jurisdictions where their respective licenses overlap without Comfer authorisation. Even though
such unifications have not had any effect on the service provided by the cable operators, they may
lead to the imposition of sanctions of Ps.50,000 for first time offenders to the revocation of the cable
license in the case of repeat offenders.
Neither Cablevisión nor Multicanal generate their own local signal in every jurisdiction for which
they hold a license. Comfer may order Cablevisión and Multicanal to generate their own local signal
and impose fines if such requirement is not satisfied. Comfer regulations also provide that a majority
of cable signals on the grid of a cable network be of national origin. The majority of the cable signals
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in Cablevisión’s and Multicanal’s grids are not of national origin. However, Comfer has never objected
to their respective cable grids after successive presentations since 1996.
Even though our broadcasting licensees have received fines in the past for the content of their
broadcasts, such fines have not materially affected our financial conditions or the results of our
operations.
Advertising
The Broadcasting Law sets forth limits and conditions on the number of minutes of advertising
and the periods during which advertising may be transmitted. The limits differ for radio broadcast
stations and television broadcast stations. The Broadcasting Law provides that advertising must be
agreed upon between the owners of the broadcasting services and the advertisers, or with advertising
agencies previously registered with the Comfer acting on account of identified advertisers. Comfer
keeps a register of all advertising companies and organisations which enter into advertising agreements or contract for programs with broadcasting services.
In 2003, Comfer issued Resolution No. 1391/03, providing that feature films transmitted on cable
television could not be interrupted by advertising. Even though Resolution No. 1391/03 is in force, its
application has been suspended by successive Comfer resolutions and remains suspended to date. If
the suspension were lifted, some of ARTEAR’s cable signals and signals owned by third parties that
we transmit over our cable operators’ network may have to restructure their advertising content.
Publishing and Printing
Distribution
Approximately 79% of our publications are sold within the AMBA Region; while the balance is
sold throughout the country. We transport our publications by land, except in the case of the most
distant Argentine regions, which we reach by air.
Prior to 2000, newspaper and magazine distribution and sale in the AMBA Region was regulated
by Decree No. 24,095/45 and Resolutions No. 42/91 and 43/91 of the Ministry of Labour and Social
Security. Even though the activity of newspaper and magazine salesmen was essentially commercial,
the law granted such salesmen and their union certain protections related to the maintenance of their
distribution lines and points of sale or “stops”. Pursuant to Decree No. 24,095/45 and its implementing
regulations, newspaper and magazine publishers were only permitted to sell newspapers through
established distribution channels or “lines” that had their final outlet to readers in newsstands or stops.
Stops were granted by permits issued by the Ministry of Labour and Social Security to registered
distributors and sellers. Sellers also had exclusive rights to make home deliveries within the territory
assigned to them under the permit. In the rest of the country the sale of newspapers and magazines
was regulated by the labour authorities of each province.
Decree No. 1,025/00 deregulated the newspaper and magazine sale and distribution networks,
allowing any distributor or seller freely to distribute or sell print media anywhere in Argentina. However,
it also created a distributors’ and sellers’ registry for the AMBA Region for the distributors and sellers
already in existence under the previous regime. The new registry is under the jurisdiction of the
Ministry of Labour and is regulated by Resolution No. 434/01 of such Ministry. Registered distributors
and sellers are still granted certain territorial protections (although they are subject to competition) and
the right to return unsold copies of publications to publishers, but are required, in order to maintain
their status, to keep their distribution channels open without major interruptions and to receive and sell
any publication offered to them. They may not distribute free publications.
In the AMBA Region, where distribution through traditional channels and sale at newsstands has
been the long-standing practice for the industry, we use the distribution channels organised under
Resolution No. 434/01, except for our free newspaper Diario La Razón. In the rest of the country, we
rely on our own distribution network and other independent distributors.
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Freedom of Expression
Freedom of expression and the content of all publications in Argentina is constitutionally
protected. Even though there have been lawsuits for libel against certain of our publications, these
have not had a material impact on our business. See “Business Description, Legal Proceedings —
Claims involving AGEA, Artear and Radio Mitre”.
Internet and Digital Content
The Secom regulates Internet and telecommunications services. Due to the increasing use of
the Internet, a number of legislative proposals that increase regulatory controls over Internet are under
consideration by various Argentine governmental agencies or bodies.
There are no specific laws or regulations governing on-line content providers in Argentina, but
Internet access providers must hold a telecommunications license from Secom. Access providers are
also required to include a legend on their invoices to clients stating that the national government does
not control or regulate the information on the Internet and to provide contact information for assistance
to subscribers in the blocking of undesirable content.
Section 10.1 of the Rules for Telecommunication Service Licenses (Annex I of Decree
No. 764/00) provides, among other obligations, that transfers of shares of telecommunications
licensees that result in changes of control under the Argentine Corporate Law must be approved by
Secom prior to the transfer that results in such change of control.
The Rules for Telecommunications Service Licenses also provide, among other obligations, that
telecommunications licensees must pay a fee for verification and supervision by Secom and make
contributions to a Universal Telecommunications Service Fund.
The Argentine government is legally constrained from regulating or controlling the information
available on the Internet, and does not intervene in the production, creation or transmission of
information available through the Internet, except for its own institutional sites. However, Argentine
laws and regulations on consumer protection, contracts, competition and advertising generally apply
to portal and electronic commerce service providers in the same way as they would apply to any
provider of services to consumers in Argentina. In addition, the Argentine Constitution protects a
person’s right to know the information that any public or private database contains about him or her,
and grants that person the right to demand that information be changed or removed from the database
if that information is false or discriminatory.
Triple Play
Triple play means the provision of telephony, television and high-speed Internet access services
over a single broadband network. Aspirants to the provision of triple play services must have satisfied
all the requirements described under “Federal Broadcasting Regulations”, above, to obtain broadcasting licenses.
Section 45 of the Broadcasting Law, as amended, sets forth the requirements to obtain a
broadcasting license. Among such requirements, Subsection (h) prohibits companies that provide public
services or holders of 10% or more of the voting shares of such companies from being broadcasting
licensees. The law makes an exception for non-profit entities that are providers of a public service in an
area where there are no other possible providers of broadcasting services. According to Opinion
No. 19,475 GJNR/2003 of the CNC, the public telecommunications services comprise only public
telephony and basic telephony. Basic telephony is defined as the deployment of fixed telecommunications links that are part of the national, public telephony network or that are connected to such network
and the provision through those links of urban, inter-urban and international live voice telecommunications. Public telephony consists in the granting of public access to the national, public telephony network
through points of access (such as payphones) located in public spaces. We have been advised that the
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national, public telephony network is the original network used currently by the two basic telephony
providers, Telefónica de Argentina S.A. and Telecom Argentina S.A.
It must also be noted that the two current public and basic telephony providers in Argentina do
not meet the requirement that corporations in media-related businesses be owned by Argentine
persons, with a maximum potential foreign ownership of 30% of the outstanding capital stock
representing up to 30% of the voting rights, subject to adjustment for reciprocal treatment in other
countries or to the existence of bilateral treaties.
Additionally, Annex I of Decree No. 62/00 sets forth the terms and conditions for the privatisation
and the granting of basic telephony licenses to the two basic telephony providers in Argentina.
Pursuant to Section 7.1.1. of Annex I of Decree No. 62/00, the only corporate purpose of the public
telecommunications service licensees may be the provision of telecommunications services, excluding
broadcasting services. Section 7.1.2 further provides that public telecommunications service licensees
may not amend or broaden the scope of their corporate purpose for so long as their licenses remain
valid.
On 5 September 2007, the Asociación Argentina de Televisión por Cable, the Argentine Cable
Television Association, Cablevisión, Multicanal and Telecentro S.A. (another cable television operator)
filed a claim before a federal court requesting (i) a declaratory judgement that would, among other
things, grant full certitude to their rights as broadcasting licensees and declare that public telecommunication service providers may not interfere with such rights and that the state must grant adequate
protection to broadcasting licensees against potential distortions to market competition that would
result from allowing public telecommunication service providers to also provide broadcasting and cable
television services, and (ii) an injunction preventing certain providers of fixed and mobile telephony
from obtaining broadcasting licenses and providing broadcasting and cable television services, Comfer
from granting any such licenses, or the CNC or Secom from allowing the provision of such services
by way of interpretation and application of telecommunications regulations. On 6 September 2007 the
federal court granted the injunction with respect to Comfer, the CNC and Secom, and on 7 September
2007 it granted the injunction with respect to the fixed and mobile telephony providers. We cannot
assure that such injunctions will not be appealed or lifted, or that the federal court will interpret the law
and issue a declaratory judgement in accordance with the claimants’ petition.
Even though we believe that the legal and regulatory framework that does not permit providers
of basic telephony to be broadcasting licensees and prevents such companies from offering triple play
will remain in place in the short and medium term, we cannot assure that the Argentine government
will maintain such legal and regulatory frameworks.
Antitrust Law
The Argentine Antitrust Law regulates competition in the Argentine market. It is structured on
two basic pillars: a system of sanctions against anti-competitive behaviour, and a pre-emptive
regulation of market concentrations with established pre-merger controls.
The law defines the various acts that constitute anti-competitive behaviour if they restrict
competition and cause harm to the general economic interest, and sets forth applicable fines. Acts
that may give rise to penalties include among other acts:
• fixing, concerting or manipulating market prices, directly or indirectly, or exchanging pricing
information for that purpose;
• limiting or controlling technical developments or investments in the production, distribution or
marketing of goods or services by means of concerted action;
• distributing zones, markets, clientele or sources of supply;
• preventing third parties from entering, hindering their entrance to, or excluding them from, a
given market;
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• subjecting purchases or sales to the condition that the purchaser or seller shall not use,
acquire, sell or supply itself with goods or services of a third party; and
• selling goods or providing services at a price that is below cost without commercial justification,
with the intention of excluding or producing harm to competitors.
Under the Argentine Antitrust Law, penalties can range from Ps.10,000 to Ps.150 million and
may be doubled for repeat violators. The CNDC and the Argentine Secretary of Domestic Trade (the
“SDT”) have the power to order a party to abstain from or cease any activities in violation of the
provisions of the Argentine Antitrust Law, and to request a court with jurisdiction over the company
engaging in such violations to order their liquidation or dissolution. The entity engaged in the
prohibited practice as well as its directors, legal representatives, attorneys-in-fact, managers, statutory
auditors or members of the supervisory committee are jointly and severally liable for any fines
imposed by the CNDC and the SDT under the Argentine Antitrust Law.
The provisions of the Argentine Antitrust Law apply to all individuals and entities that carry out
business activities in Argentina or abroad, to the extent that their acts, activities or agreements affect
the Argentine market.
The CNDC exercises its pre-emptive control over competition by analyzing and approving,
rejecting or conditioning operations of economic concentration, such as mergers, transfers of on-going
concerns, acquisitions of equity, convertible debt instruments or the entering into agreements that
grant control of, or a dominant influence over a company, when the combined volume of business of
the relevant companies exceeds a certain threshold. Companies engaged in operations of economic
concentration must submit to the CNDC a full description of their respective businesses and of the
transaction or series of transactions that give rise to the economic concentration. The CNDC has a
waiting period of 45 business days from the date of filing to approve the transactions, condition their
approval or deny authorisation. The final resolution of the matter is made by the SDT, based on a
technical report by the CNDC. Conditions may include sale to a third party of a part of the operations
or assets of the concentrated companies, or the partial approval of a global operation but rejection of
one or more of the transactions under review. The 45-day period is suspended each time the CNDC
requests additional information from the parties, until such additional information is furnished.
Antitrust Legal Proceedings
Proceedings Relating to Anti-Competitive Behaviour.
Our subsidiaries Cablevisión and Multicanal are parties to 13 administrative proceedings under
the Argentine Antitrust Law. Both Cablevisión and Multicanal face charges of anticompetitive conduct,
including territorial division of markets, price discrimination, abuse of dominant position, refusal to deal
and predatory pricing. All of these proceedings are still pending resolution.
Administrative proceedings under the Argentine Antitrust Law pending against Cablevisión and
Multicanal include the following:
• proceedings relating to allegedly concerted subscriber allocation between Cablevisión and
Multicanal when these were unrelated companies (Multicanal S.A. y otros/Denuncia infracción
Ley 22.262 and Video Cable 6 S.A. y otros/Infracción Ley 22.262);
• a complaint filed by the Santa Fé Commerce Department alleging pricing discrimination
practices by one of Video Cable Comunicación S.A.’s subsidiaries prior to our acquisition of a
50% interest in Fintelco S.A.
• claims filed by different competitors relating to predatory pricing (Cablevisión S.A., Santa Clara
de Asís S.A. y Enlaces S.A. (Ciudad de Salta // C.713) s/ Infracción Ley 25.156; Multicanal
S.A. y Cablevisión S.A. ciudad de Santa Fé s/ Infracción Ley 25.156 (C. 1027) and Cablevisión
S.A., Santa Clara de Asís S.A. y Enlaces S.A. s/ Infracción Ley 25.156 (C. 1026));
86
• proceedings relating to abuse of dominant position and exclusionary practices (Multicanal S.A.
y Cablevisión S.A. (Ciudad de Santa Fé) s/ Infracción Ley 25.156 — (C. 685) and Denuncia
c/ Cablevideo S.A. — (C.752));
• a proceeding relating to refusal to deal (Asociación de Fútbol Argentino, Torneos y Competencias S.A., Enequis S.A., Cablevisión S.A. y Dayco Holdings Ltd. S/ nipersona a Ley 25.156
(C.625));
• claims against Cablevisión relating to excessive pricing (UCR Lobos s/solicitud de intervención
de la CNDC (C.828) and Dirección de Comercio Interior de Misiones s/Solicitud de intervención de la CNDC (C.829));
• a proceeding against Cablevisión and Multicanal relating to price fixing (Cablevisión S.A. y
Multicanal S.A. s/ infracción Ley 25.156 — (C. 1120)); and
• a proceeding filed by the Cámara de Cableoperadores Independientes, the chamber of
independent cable operators, challenging the transactions consummated on 26 September
2006 (C.1169).
The proceedings referred to above to which our subsidiaries are a party will be decided by the
SDT, based on the recommendation of the CNDC, and may be decided by the Tribunal Nacional de
Defensa de la Competencia, a special administrative court created by the Argentine Antitrust Law but
not yet formed. Each of our subsidiaries has responded that the actions under review were taken by
them in compliance with the antitrust laws in effect at that time.
We believe that the administrative proceedings described above may indicate a trend toward
increased litigation in, and heightened regulatory scrutiny of, the cable television industry in Argentina.
While we believe that our conduct has always been within the bounds of the Argentine Antitrust
Law and regulations and that our positions in each of these proceedings are reasonably grounded, we
can give no assurance that any of these cases will be resolved in our favour.
Control of Operations of Economic Concentration.
On 4 October 2006, the Company, Vistone LLC, Fintech Advisory Inc., VLG Argentina LLC and
Cablevisión as buyers and AMI CV Holdings LLC, AMI Cable Holdings Ltd., and HMTF-LA Teledigital
Cable Partners LP, as sellers, filed for the approval of a series of transactions consummated on
26 September 2006 that resulted in an increase in our direct and indirect interest in Cablevisión to
approximately 60%, Cablevisión’s acquisition of 98.5% of Multicanal and 100% of Holding Teledigital
and Multicanal’s acquisition (from Prima Internacional) of Prima. On 6 November 2006, the CNDC
made its first request for additional information, which was submitted on 26 February 2007. On 22 May
2007 the CNDC made a further request for information, which was submitted on 2 July 2007. On
30 July 2007, the CNDC notified us that the first stage of the procedure (Form F-1) had been
completed and requested that the filing parties submit Form F-2. The Form F-2 was filed on 28 August
2007. On 7 September 2007 the CNDC made a further request for information. Until Form F-2 has
been completed to the CNDC’s satisfaction, the 45-day waiting period remains suspended. Although
we believe that the transactions that have been filed for approval meet the standards for such approval
under the Argentine Antitrust Law, we can give you no assurance that they will be approved or that
conditions that could have a material impact on our operations will not be imposed or that the
competitive dynamics of the cable business will not be affected as a consequence of the abovementioned transactions and/or their approval process. See “Risk Factors — The acquisition of Cablevisión by the Company and Fintech and the acquisition of Multicanal and Holding Teledigital by
Cablevisión and the acquisition of Prima by Multicanal are subject to regulatory approval.
In addition, in January 2007, Cablevisión and Multicanal were served with an injunction issued by
a provincial court in the province of San Luis at the request of Grupo Radio Noticias, a company
alleging to own a broadcast radio station that would presumably be harmed by the transactions involving
Cablevisión, Multicanal, Holding Teledigital and Prima that we consummated in September 2006. Among
87
other measures, the injunction directed Cablevisión, Multicanal and its controlling shareholders and
subsidiaries to refrain from a number of transactions, including mergers, acquisitions and the issuance
of securities. The injunction was inconsistent with an order issued by a Federal Court in the City of
Buenos Aires in 2005, to the effect that the CNDC had jurisdiction to determine the legality of our
acquisition of an ownership interest in Cablevisión without prior judicial intervention. Accordingly, we took
action to have the case initiated by Grupo Radio Noticias removed from the San Luis court and
transferred to the Federal Court of the City of Buenos Aires. The Supreme Court of Argentina resolved
our petition in our favour in June 2007. The Federal Court of the City of Buenos Aires has been
adjudicated jurisdiction to decide the substance of the matter. On 11 September 2007 the Federal Court
of Buenos Aires issued a ruling reversing the injunction and leaving it without effect. On 5 October
2007, the Company was notified of an appeal to such ruling filed by Grupo Radio Noticias on
24 September 2007. While we can give no assurance that we will prevail against Grupo Radio Noticias,
we believe that their claims are unfounded.
Environmental Law
Law No. 24,051 (the “Hazardous Wastes Law”) governs the generation, management, transportation, treatment and disposal of hazardous wastes in Argentina. Companies that generate or handle
hazardous wastes must register with the National Registry and file affidavits upon registration and
thereafter on an annual basis that provide information regarding, among other things:
• a description of the processes that generate hazardous wastes;
• the substances used;
• the physical, chemical and/or biological characteristics of each of the wastes generated; and
• the annual estimated volume of the generated wastes.
Upon registration and subject to the filing of affidavits satisfactory to the National Registry,
generators and operators are granted an environmental certificate attesting to the regulatory approval
of their waste management system, including handling, transport, treatment and final disposal. The
certificate has to be renewed on an annual basis.
Registered and certified companies must also pay an annual fee to maintain their status. The fee
is calculated according to a formula that takes into account:
• the quantity of wastes generated; and
• their hazardous nature.
In no event can the fee be higher than 1% of the average presumed income of the activity
resulting in the generation of the hazardous wastes.
Our printing and publishing operations involve the use of inks, solvents (rubber cleaners),
materials stained with inks, mineral oils, thinner, cleaning materials and other substances in their
production systems which are considered hazardous wastes under the Hazardous Wastes Law. Both
companies have registered with the National Registry and have obtained their environmental certificates as generators and operators of residual wastes.
Other
Law No. 20,216, governs national postal services and originally granted the Argentine Administration of Postal Services a legal monopoly over such services. Law No. 20,216 was amended in 1982
to allow the Argentine Administration of Postal Services to entrust private companies with the supply
of postal services. In 1993, Decree No. 1187/93 abolished the state monopoly on postal services and
provided for open competition in the local and international postal markets.
88
Unir S.A., a subsidiary of AGEA, provides courier services within Argentina and is registered as
a courier service with the National Registry of Postal Services Providers kept by the National
Communication Commission.
The terms and conditions, including prices, of services rendered by private postal providers are
freely negotiable by the parties and are not subject to control or regulation by any governmental authority.
Cable Television Regulation in Uruguay and Paraguay
Through Multicanal, we own subsidiaries or participations in companies that provide cable
television services in Uruguay and Paraguay. The following sections summarise certain aspects of the
regulatory framework applicable to our Uruguayan and Paraguayan operations.
Uruguay
Decree No. 349/990 of the Uruguayan president provides that cable television systems may be
operated by individuals and private or public companies, subject to authorisation by the Uruguayan
executive. Authorisations are granted based on the opinion of the Communication Services Regulation Unit (the “URSEC”), which also oversees the conduct and activities of cable television licensees
once authorisation has been granted.
Decree-Law No. 15,671 and Decree No. 349/990 provide that the provision of cable television
services is subject to Uruguayan broadcasting legislation. Until 2000, only Uruguayan nationals or
companies domiciled in Uruguay could be cable television licensees. Decree No. 400/000 repealed the
requirement, allowing foreign nationals and companies to hold cable television licenses in Uruguay.
Paraguay
The installation, operation and acquisition of cable television services and UHF television in
Paraguay are governed by Law No. 642 of 29 December 1995 and related regulations (the “Telecommunications Law”). Our cable television and our UHF television business are regulated and supervised
by the National Telecommunications Commission (“Conatel”), which reports to the President of the
Paraguayan Republic through the Ministry of Public Works and Communications. Conatel oversees
the general enforcement of the Broadcasting Law and the regulatory framework for the industry.
Conatel has the authority to:
• grant operating television and radio broadcasting licenses on a non-exclusive basis and extend
the term of these licenses;
• approve the shareholders of licensed companies and the transfer of shares or other ownership
interests in licensed companies; and
• impose penalties on licensed companies for failure to comply with the Telecommunications
Law, in the form of fines, suspension of licenses and the revocation of licenses.
Rates charged by cable television companies are regulated on the basis of “reasonableness”
criteria applied by Conatel.
Cable and broadcast UHF television companies in Paraguay (“Paraguayan Broadcasting Companies”) are required to obtain a non-exclusive broadcasting license from Conatel to carry and distribute
programming over their systems. Signals from broadcasting stations cannot be transmitted via satellite
without Conatel’s prior authorisation. Conatel also monitors compliance by Paraguayan Broadcasting
Companies with technical regulations.
Cable and broadcast UHF television licenses have an initial ten-year term. At the end of this
term, the licensee may apply for a one time ten-year extension. If Conatel verifies that the licensee
has complied, during the first term, with all of the requirements and obligations set forth in the
Broadcasting Law, it must grant the extension.
89
MARKET INFORMATION
Market Price Of Our Class B Shares And GDSs
Prior to this Offering, there has been no public market for our Class B Shares or our GDSs. We
have applied for listing of our class C common shares, our Class B Shares and all our other class B
common shares, and for admission to trading of all our class B common shares on the BCBA and of
our GDSs on the Regulated Market of the London Stock Exchange. We cannot assure you that an
active trading market will develop for the Class B Shares or the GDSs, or that the Class B Shares or
the GDSs will trade in the public market subsequent to the Offering at or above the Offer Price. Each
GDS will represent two Class B Shares.
Trading In The Argentine Securities Market
The securities market in Argentina is comprised of 11 stock exchanges consisting of the BCBA,
Bahía Blanca, Corrientes, Córdoba, La Plata, La Rioja, Mendoza, Rosario, Santa Fé, Mar del Plata
and Tucumán. Six of these exchanges (Buenos Aires, Rosario, Córdoba, Mendoza, Santa Fé, and
La Rioja) have affiliated stock markets and, accordingly, are authorised to quote publicly offered
securities. Securities listed on these exchanges include corporate equity and bonds and government
securities.
The BCBA is the principal and longest-established exchange in Argentina and is currently the
fourth largest exchange in Latin America in terms of market capitalisation. The BCBA began operating
in 1854 and accounts for approximately 95% of all equity trading in Argentina. Bonds listed on the
BCBA may simultaneously be listed on the Mercado Abierto Electrónico (“MAE”), the Argentine overthe-counter market, pursuant to an agreement between the BCBA and the MAE which stipulates that
equity securities are to be traded exclusively on the BCBA while debt securities (both public and
private) may be traded on both the MAE and the BCBA. In addition, through separate agreements
with the BCBA, all of the securities listed on the BCBA may be listed and subsequently traded on the
Córdoba, Rosario, Mendoza, La Plata and Santa Fé exchanges, by virtue of which many transactions
originating on these exchanges relate to BCBA-listed companies and are subsequently settled in
Buenos Aires. Although companies may list all of their capital stock on the BCBA, controlling
shareholders in Argentina typically retain the majority of a company’s capital stock, resulting in a
relatively small percentage of active trading of the companies’ stock by the public on the BCBA.
Argentina’s equity markets have historically been comprised of individual investors, though in
recent years, there has been an increase in the level of investment by banks and insurance
companies in these markets. The participation of Argentine pension funds represents an increasing
percentage of the BCBA market, while Argentine mutual funds (fondos comunes de inversión)
continue to have very low participation. As of 31 December 2006, 96 companies had equity securities
listed on the BCBA, of which the ten most traded companies accounted for approximately 25.4% of
the total market capitalisation during 2006.
The Buenos Aires Securities Market, or MERVAL is the largest market for securities in Argentina
and is affiliated with the BCBA. MERVAL is a corporation consisting of 133 shareholder members who
are the sole individuals or entities authorised to trade, either as principals or agents, in the securities
listed on the BCBA. Trading on the BCBA is conducted either through the traditional auction system
from 11:00AM to 5:00PM on trading days, or through the Sistema Integrado de Negociación Asistida
por Computación (Computer-Assisted Integrated Negotiation System, or SINAC). SINAC is a computer trading system that permits trading in both debt and equity securities and is accessed by
brokers directly from workstations located in their offices. Currently, all transactions relating to listed
negotiable obligations and listed government securities can be effectuated through SINAC. In order to
control price volatility, MERVAL imposes a 15-minute suspension on trading when the price of a
security registers a variation in price between 10% and 15% and between 15% and 20%. Any
90
additional 5% variation in the price of a security will result in additional 10-minute successive
suspension periods.
Regulation Of The Argentine Securities Market
The Argentine securities market is regulated and overseen by the CNV pursuant to Law
No. 17,811, as amended, which in addition to having created the CNV governs the regulation of
security exchanges, as well as stockbroker transactions, market operations, the public offering of
securities, corporate governance matters relating to public companies and the trading of futures and
options. Argentine pension funds and insurance companies are regulated by separate government
agencies, whereas financial institutions are regulated primarily by the Central Bank.
In Argentina, debt and equity securities traded on an exchange or the over-the-counter market
must, unless otherwise instructed by their shareholders, be deposited with Caja de Valores S.A., a
corporation owned by the BCBA, MERVAL and certain provincial exchanges. Caja de Valores S.A. is
the central securities depositary of Argentina and provides central depositary facilities, as well as
acting as a clearinghouse for securities trading and as a transfer and paying agent for securities
transactions. Additionally, Caja de Valores S.A. handles the settlement of securities transactions
carried out by the BCBA and operates the computerised exchange information system mentioned
above.
Despite a change in the legal framework of Argentine securities trading in the early 1990s, which
permitted the issuance and trading of new financial products in the Argentine capital markets,
including commercial papers, new types of corporate bonds and futures and options, there is still a
relatively low level of regulation of the market for Argentine securities and investors’ activities in such
markets and enforcement of them has been extremely limited. Because of the limited exposure and
regulation in these markets, there may be less publicly available information about Argentine companies than is regularly published by or about companies in the United States and certain other
countries. However, the CNV has taken significant steps to strengthen disclosure and regulatory
standards for the Argentine securities market, including the issuance of regulations prohibiting insider
trading and requiring insiders to report on their ownership of securities, with associated penalties for
non-compliance.
In order to improve Argentine securities market regulation, the Argentine government issued
Decree No. 677/01 on 1 June 2001, which provided certain guidelines and provisions relating to
capital markets transparency and best practices. Decree No. 677/01 applies to individuals and entities
that participate in the public offering of securities, as well as to stock exchanges. Among its key
provisions, the decree broadens the definition of a “security”, governs the treatment of negotiable
securities, obligates publicly listed companies to form audit committees comprised of three or more
members of the board of directors (the majority of whom must be independent under CNV
regulations), authorises market stabilisation transactions under certain circumstances, governs insider
trading, market manipulation and securities fraud and regulates going-private transactions and
acquisitions of voting shares, including controlling stakes in public companies.
Before offering securities to the public in Argentina, an issuer must meet certain requirements
established by the CNV with regard to the issuer’s assets, operating history and management, among
others, and only securities for which an application for a public offering has been approved by the
CNV may be listed on a stock exchange. Despite these requirements imposed by the CNV, CNV
approval does not imply any kind of certification as to the quality of the securities or the solvency of
the issuer, although issuers of listed securities are required to file unaudited quarterly financial
statements and audited annual financial statements and various other periodic reports with the CNV
and the stock exchange on which their securities are listed, as well as to report to the CNV and the
relevant stock exchange any event related to the issuer and its shareholders that may affect materially
the value of the securities traded.
91
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
This section of the Offering Circular does not form part of the Prospectus relating to the
Company prepared in accordance with the Prospectus Rules of the Financial Services Authority.
Our Unaudited Pro Forma Consolidated Statement of Income for the fiscal year ended
31 December 2006 below has been prepared in accordance with Argentine GAAP and CNV
regulations. This Unaudited Pro Forma Consolidated Statement of Income should be read in conjunction with our audited financial statements as of and for the fiscal year ended 31 December 2006,
included elsewhere in this Offering Circular.
On 20 July 2006, our subsidiary Multicanal completed the restructuring of its financial indebtedness pursuant to the terms of the Multicanal APE. The Multicanal APE provided, among other things,
for the exchange of approximately U.S.$182.0 million of outstanding debt for shares representing
approximately 35% of Multicanal’s total capital and the discharge of approximately U.S.$125.0 million
of outstanding debt for a cash payment of U.S.$37.5 million. After giving effect to the Multicanal APE,
Multicanal’s outstanding financial debt decreased from U.S.$526.4 million to U.S.$223.3 million. The
consummation of Multicanal’s APE generated a non-recurrent gain before tax of Ps.1,493.3 million
(including Ps.246.8 million attributable to the dilution for the benefit of existing shareholders — the
Company and AGEA — resulting from the capitalisation described above).
On 26 September 2006, through a series of related transactions, the Company and Fintech
increased their holdings of Cablevisión’s share capital to approximately 60% and 40%, respectively.
We incurred U.S.$157.8 million of seller financing. In a simultaneous transaction, Cablevisión acquired
100% of the capital stock of Holding Teledigital from one of the prior shareholders of Cablevisión.
Cablevisión made irrevocable capital contributions to Holding Teledigital of approximately Ps.76.4 million to permit the immediate prepayment of outstanding bank debt and seller financing debt of Holding
Teledigital. Simultaneously, Multicanal acquired 100% of the capital stock of Prima from Prima
Internacional and incurred seller financing, and Cablevisión acquired 98.5% of the shares of common
stock of Multicanal, from the Company, AGEA and Fintech, and incurred seller financing. The
Company’s consolidated audited financial statements incorporate the results of the businesses
acquired as from 1 October 2006.
The Unaudited Pro Forma Consolidated Statement of Income has been compiled to show what
our financial results for the year ended 31 December 2006 might have been had the following been in
place on 1 January 2006:
• the dilution of our ownership in Multicanal from 100% to 65% that resulted from Multicanal’s
debt restructuring process concluded on 20 July 2006;
• the increase of our ownership interest in Cablevisión to 60% of total capital and the related
incurrence of seller financing;
• the acquisition by Cablevisión of 100% of the share capital of Holding Teledigital;
• the pre-payment by Holding Teledigital of Ps.77.5 million under an outstanding loan in
connection with its acquisition by Cablevisión;
• the acquisition by Multicanal of 100% of the share capital of Prima; and
• the acquisition by Cablevisión of 98.5% of the share capital of Multicanal and the related
incurrence of seller financing.
92
This Unaudited Pro Forma Consolidated Statement of Income is furnished for informational
purposes only and does not purport to reflect our results of operations that would have actually
resulted had each of the transactions and other adjustments above been effected on the dates
indicated. Further, our pro forma results of operations are not necessarily indicative of our results of
operations that may be obtained in the future.
Multicanal Debt
Capitalisation
I
Acquisition Transactions
II
III
IV
V
Through 30 September
2006
Historical
Dilution MC
Ownership
Holding
Cablevisión Teledigital Acquisition
Historical(*) Historical(*) Adjustments
Pro Forma
(In Millions of Ps.)
Net sales . . . . . . . . . . . . . . . . . . . .
Cost of sales (excluding depreciation
and amortisation) . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . .
Selling expenses (excluding
depreciation and amortisation) . .
Administrative expenses (excluding
depreciation and amortisation) . .
Subtotal expenses . . . . . . . . . . . .
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . .
Amortisation of intangible assets . .
Amortisation of other investments. .
Subtotal depreciation and
amortisation . . . . . . . . . . . . . .
Financial and holding results, net . .
Equity in earnings (losses) from
unconsolidated affiliates and gain
on sale of subsidiaries. . . . . . . .
Other income (expense), net . . . . .
..
2,811.8
—
787.1
79.1
(49.1)(3)
3,628.9
(1,491.6)
—
(322.5)
(33.6)
44.8(3)
(1,802.9)
1,320.2
—
464.6
45.5
(4.3)
1,826.0
..
(290.0)
—
(74.2)
(4.9)
..
..
(320.5)
(610.5)
—
—
(86.5)
(160.7)
(17.6)
(22.5)
..
..
..
(169.3)
(38.9)
(0.3)
—
—
—
(98.0)
—
—
(3.0)
—
—
(5.6)(4)
(81.3)(5)
—
(275.9)
(120.2)
(0.3)
..
..
(208.5)
920.0
—
—
(98.0)
(80.4)
(3.0)
(8.9)
(86.9)
(82.0)(6)
(396.4)
748.6
..
..
224.7
17.5
(246.8)(1)
—
—
(6.0)
—
(2.1)
17.1(7)
—
Net income before income tax/tax on
assets and minority interest . . . . . .
Income tax and tax on assets . . . . . .
Minority interest . . . . . . . . . . . . . . .
1,663.3
(490.7)
(302.9)
(246.8)
—
19.5(2)
119.5
(55.5)
(0.1)
9.0
0.5
—
(151.8)
46.0(8)
(16.3)(9)
Net income for the year . . . . . . . . . .
869.7
63.9
9.5
(122.1)
(227.3)
4.3(3)
(364.8)
—
4.3
(424.6)
(789.4)
(5.0)
9.4
1,393.2
(499.7)
(299.9)
593.6
(*) For the nine month period ended 30 September 2006.
Column I
Column I shows historical consolidated income statement data derived from our audited consolidated financial statements for the year ended 31 December 2006.
Column II
As a result of Multicanal’s debt restructuring consummated on 20 July 2006 our interest in
Multicanal decreased from 100% to 65%. Column II shows the following pro forma adjustments:
(1) The elimination of a non-recurring gain of Ps.246.8 million recognised by the Company
in its historical financial statements, to reflect this dilution.
(2) The recognition of the minority interest in Multicanal’s net loss for the period 1 January
2006 through 20 July 2006.
93
Column III
Column III shows historical consolidated income statement data derived from Cablevisión’s
unaudited consolidated financial statements for the nine month period ended 30 September 2006, in
light of the fact that until that date Cablevisión was not consolidated with the Company.
Column IV
Column IV shows historical consolidated income statement data derived from Holding Teledigital’s unaudited financial statements for the nine month period ended 30 September 2006, in light
of the fact that until that date Holding Teledigital was not consolidated with the Company.
Column V
The acquisition of Cablevisión has been accounted for using the purchase method of accounting,
whereby assets acquired and liabilities assumed are recognised by the Company at their respective
fair value at the acquisition date. Column V shows the following pro forma adjustments:
(3) The elimination of all transactions between Grupo Clarín and its subsidiaries that it
either proportionally or entirely consolidates (including mainly the sale of programming rights and
advertising) and Cablevisión and Holding Teledigital from 1 January 2006 to 30 September 2006.
(4) An additional depreciation expense of Ps.5.6 million resulting from the increased basis
in property, plant and equipment (cable network) acquired, based on an estimated useful life of
16 months, computed from 1 January 2006 to the acquisition date (26 September 2006).
(5) An additional amortisation expense of Ps.81.3 million resulting from the amortisation of
identifiable intangible assets (subscriber base) acquired (Ps.1,052.8 million), based on the
estimated useful life of 120 months for Cablevisión and 86 months for Teledigital, computed from
1 January 2006 to the acquisition date (26 September 2006). Goodwill amounting to approximately Ps.900 million resulting from the acquisitions is not amortised, as permitted by Argentine
GAAP.
(6) An additional financial charge of Ps.82.0 million resulting from:
• an interest expense of Ps.87.1 million resulting from the interest charges for the nine
month period ended 30 September 2006 on the notes issued by us and Cablevisión to
Fintech in connection with the acquisition of Cablevisión and Multicanal, net of interest
income derived on the notes issued to us by Cablevisión in connection with the
purchase of our 65% interest in Multicanal and by Multicanal in connection with the
purchase of our 82% interest in Prima. These notes accrue interest at a floating rate.
The effect of a 1/8 percent variance in the interest rate on net income is approximately
Ps.0.9 million;
• the elimination of a loss of Ps.6.1 million recognised by Teledigital in its historical
statement of income for the nine month period ended 30 September 2006 attributable
to interest on a financial loan prepaid in connection with Cablevisión’s acquisition of
Holding Teledigital; and
• the elimination of a gain of Ps.1.0 million recognised by Cablevisión in its historical
statement of income for the nine month period ended 30 September 2006 resulting
from the restructuring of its outstanding debt. Following the purchase method of
accounting assets acquired and liabilities assumed were accounted for at fair value at
the acquisition date.
(7) This gain includes:
• the elimination of a Ps.20.3 million gain recognised on the equity in earnings of
Cablevisión for the period from 1 January 2006 through the acquisition date
94
(26 September 2006) resulting from our indirect minority interest in Cablevisión during
this period; and
• the elimination of the net loss of Ps.37.4 million recognised on the sale of our 65%
ownership interest in Multicanal to Cablevisión and the sale of Prima to Multicanal.
(8) Reduction of the income tax expense resulting from the adjustments described above
based on the statutory rate of 35%. No income tax effect was computed over the elimination of
Ps.20.3 million gain recognised from the equity earnings of Cablevisión described in pro forma
adjustment (7) since this gain is not taxable under Argentine Income Tax Law.
(9) This loss comprises:
• the recognition of the minority interest (40%) in Cablevisión and Holding Teledigital of
Ps.29.4 million (loss) for the nine month period ended 30 September 2006.
• the stake of the minority interest in the formal acquisition adjustments (V) of
Ps.50.2 million (gain).
• the recognition of Ps.37.1 million (loss) on the minority interest associated with the
acquisition of Prima by Multicanal and the simultaneous sale of Multicanal to Cablevisión and the increase of our ownership interest in Cablevisión to 60%.
Pro Forma Adjusted EBITDA
We define Pro Forma Adjusted EBITDA as pro forma net sales minus pro forma cost of sales
and pro forma selling and administrative expenses (excluding pro forma depreciation and amortisation). Nonetheless, Pro Forma Adjusted EBITDA is not a measure of net income or cash flow from
operations and should not be considered as an alternative to net income, an indication of our financial
performance, an alterative to cash flow from operating activities or a measure of liquidity.
For the year ended 31 December 2006, our Pro Forma Adjusted EBITDA totals Ps. 1,036.6 million, determined as follows: Pro Forma Net Sales of Ps.3,628.9 million minus pro forma cost of sales
(excluding depreciation and amortisation) of Ps.1,802.9 million minus pro forma selling and administrative expenses (excluding depreciation and amortisation) of Ps.789.4 million.
95
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth selected consolidated financial and other operating information of
the Company as of and for the years ended 31 December 2006, 2005 and 2004, as of 30 June 2007
and 2006, and for the six months ended 30 June 2007 and 2006. The selected financial information
as of and for the years ended 31 December 2006, 2005 and 2004 was extracted from, and should be
read in conjunction with, the Company’s audited consolidated financial statements and related notes.
The selected financial information as of 30 June 2007 and for the six months ended 30 June 2007
and 2006 was extracted from, and should be read in conjunction with, the unaudited interim financial
statements and related notes. The financial information as of 30 June 2006 was extracted from the
unaudited interim financial statements as of 30 June 2006, which are not included in this Offering
Circular. Results of operations for the six month period ended 30 June 2007 are not indicative of
results for the full year ending 31 December 2007 or for any other interim period or for any future
financial year. In the opinion of the Company’s management, the interim financial data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the
results for the interim period.
The Independent Accountants have issued an opinion over the audited consolidated financial
statements of the Company that includes the description of an uncertainty that results from pending
regulatory approvals relating to the sale by the Company of its indirect participation in Prima to
Multicanal, the sale of its direct and indirect participation in Multicanal to Cablevisión, and the indirect
acquisition by the Company of additional shares in Cablevisión necessary to increase its participation
in Cablevisión to 60% of the outstanding capital stock and votes. Additionally, in connection with the
unaudited interim financial statements of the Company, the Independent Accountants have issued a
limited review report with an observation relating to the uncertainty mentioned above.
Our audited financial statements have been prepared in accordance with Argentine GAAP and
CNV regulations, which differ in certain significant respects from U.S. GAAP. The U.S. GAAP Financial
Statements are set forth in Annex A.
Solely for the convenience of the reader, Peso amounts as of and for the year ended
31 December 2006 and as of and for the six months ended 30 June 2007 have been translated into
U.S. dollars at the selling rate for U.S. dollars quoted by Banco Nación on 31 December 2006 of Ps.3.06
to U.S.$1.00 and on 30 June 2007 of Ps.3.09 to U.S.$1.00, respectively. The selling rate for U.S. dollars
quoted by Banco Nación on 20 September 2007 was Ps.3.13 to U.S.$1.00. The U.S. dollar equivalent
information should not be construed to imply that the Peso amounts represent, or could have been or
could be converted into U.S. dollars at such rates or any other rate. See “Exchange Rate Information”.
In accordance with the Argentine Corporate Law, we may pay dividends in Pesos out of retained
earnings, if any, as set forth in our audited unconsolidated financial statements prepared in accordance with Argentine GAAP and CNV regulations. However, we conduct our operations through our
subsidiaries and our ability to declare or pay dividends depends on us receiving dividends from our
subsidiaries. Under the terms of the financial debt of certain of our subsidiaries, they are subject to
restrictions in their ability to declare and pay dividends under certain circumstances. See “Operating
and Financial Review — Liquidity and Capital Resources — Indebtedness”.
This selected consolidated financial and other information should be read in conjunction with
“Presentation of Financial and Other Information” and “Operating and Financial Review”.
96
Argentine GAAP
Statement of Operations Data
Year Ended 31 December
2004
2005
2006
Ps.
Ps.
Ps.
Six Months Ended 30 June
2006
2006
2007
2007
U.S.$
(Millions)
Net sales . . . . . . . . . . . . . . . . . . . . . .
Cost of sales — excluding
depreciation and amortisation . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . .
Expenses — excluding depreciation
and amortisation
Selling expenses — excluding
depreciation and amortisation . . .
Administrative expenses —
excluding depreciation and
amortisation . . . . . . . . . . . . . . . . .
Expenses subtotal . . . . . . . . . . . . . . .
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . .
Amortisation of intangible assets. . . . .
Depreciation of other investments . . . .
Depreciation and amortisation
subtotal . . . . . . . . . . . . . . . . . . . . . .
Financing and holding results, net
Generated by assets . . . . . . . . . . . .
Generated by liabilities . . . . . . . . . .
Equity in earnings (losses) from
unconsolidated affiliates and gain
on sale of subsidiaries, net . . . . . . .
Other income (expense), net. . . . . . . .
Income/(loss) for the year/period
before income tax, tax on assets
and minority interest . . . . . . . . . . . .
Income tax and tax on assets . . . . . . .
Minority interest . . . . . . . . . . . . . . . . .
Net income/(loss) for the
year/period . . . . . . . . . . . . . . . . . .
Adjusted EBITDA(1) . . . . . . . . . . . . . .
Pro Forma Adjusted EBITDA(2) . . . . .
1,667.3
1,988.4
2,811.8
Ps.
Ps.
(Unaudited)
(Millions)
918.9 1,141.5 1,993.3
U.S.$
645.1
(842.2) (1,088.5) (1,491.6) (487.5) (638.5) (963.4) (311.8)
825.1
900.0 1,320.2 431.4
503.0 1,029.9 333.3
(192.0)
(227.5)
(290.0) (94.8) (116.9) (203.3) (65.8)
(174.2)
(366.2)
(215.7)
(443.2)
(320.5) (104.7) (117.2) (209.9) (67.9)
(610.5) (199.5) (234.0) (413.3) (133.7)
(183.9)
(12.0)
(0.3)
(142.7)
(8.7)
(0.3)
(169.3) (55.3)
(38.9) (12.7)
(0.3)
(0.1)
(66.5) (138.2) (44.7)
(5.1) (57.8) (18.7)
(0.2)
(0.1)
0.0
(196.1)
(151.7)
(208.5) (68.1)
(71.8) (196.1) (63.5)
(2.8)
(300.7)
13.1
(354.3)
31.4
(10.1)
15.2
0.3
(4.7)
(1.5)
22.2
(9.3)
(3.0)
924.7 302.2 (259.6) (183.8) (59.5)
224.7
17.5
73.4
5.7
16.0
(1.5)
4.6
(10.3)
1.5
(3.3)
(19.5)
15.3
2.3
(20.7) 1,663.3 543.6
36.0
(490.7) (160.4)
(1.7) (302.9) (99.0)
(25.7)
10.6
(3.0)
221.7
71.7
(85.5) (27.7)
(32.7) (10.6)
(1.9)
458.9
N.A.
13.6
456.7
N.A.
(18.1)
269.0
N.A.
103.5
616.6
N.A.
97
869.7
709.7
1,036.6
284.2
231.9
338.8
33.5
199.5
N.A.
As of 31 December
2004
2005
2006
Balance Sheet Data
Ps.
Ps.
Ps.
2006
U.S.$
(Millions)
ASSETS
Current assets
Cash and banks . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . .
Trade receivables, net . . . . . . . . . . .
Other receivables, net . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . .
Non-current assets
Trade receivables, net . . . . . . . . . . .
Other receivables, net . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated
affiliates . . . . . . . . . . . . . . . . . . . .
Other long-term investments . . . . . .
Property, plant and equipment, net .
Intangible assets, net. . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . .
Total non-current assets . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . .
LIABILITIES
Current Liabilities
Accounts payable . . . . . . . . . . . . . .
Short-term debt and current portion
of long-term debt . . . . . . . . . . . . .
Salaries and social security
payable . . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . .
Non-current liabilities
Accounts payable . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . .
Salaries and social security
payable . . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . .
Total non-current liabilities . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . .
Total liabilities, minority interest and
shareholders’ equity . . . . . . . . . . .
As of 30 June
2006
2007
2007
Ps.
Ps.
U.S.$
(Unaudited)
(Millions)
.
.
.
.
.
.
.
286.1
175.5
299.1
94.0
311.5
82.1
255.1
276.6
460.6
102.2
108.9
148.3
104.7
152.2
152.7
6.9
8.4
65.2
849.2 1,033.1 1,208.0
.
.
.
14.5
606.9
28.2
12.1
735.8
34.1
.
.
.
.
.
.
.
.
60.4
17.4
808.9
24.9
1,561.2
1,648.1
3,209.3
4,058.5
253.9
54.8
765.7
25.4
1,881.8
1,654.7
3,536.4
4,569.5
.
291.3
283.7
437.4
143.0
347.3
458.5
148.4
.
2,241.3 2,781.6
420.5
137.4 2,966.2
448.0
145.0
.
.
.
.
57.9
78.3
118.4
60.2
118.9
177.4
61.6
82.6
136.5
2,712.2 3,345.0 1,290.2
38.7
73.4
114.8
58.0
84.5
190.3
44.6
117.7
116.5
421.6 3,589.1 1,328.1
37.1
61.6
37.7
429.8
3.5
672.5
4.3
634.8
.
.
14.5
550.2
9.7
151.1
32.9
97.7
173.1
321.4
26.8
357.5
142.6
150.5
364.2
474.2
48.4
176.4
116.4
49.9
193.4
174.8
21.3
8.1
58.0
394.8 1,272.7 1,287.4
3.2
49.4
10.7
12.1
738.4
31.7
72.5
23.7
333.1
7.0
2.3
21.7
1,342.7
438.8
797.4
1,086.6
355.1
21.7
2,702.5
883.2 1,956.2
2,476.2
809.2 1,660.0
5,178.7 1,692.4 3,616.2
6,386.7 2,087.2 4,888.9
5.0
10.6
427.8 2,057.9
9.1
162.2
33.1
104.0
46.2
153.5
37.7
56.6
18.8
416.6
2.9
52.5
10.7
79.7
25.8
7.0
2.3
1,404.1
454.4
1,030.2
333.4
2,725.4
882.0
2,476.1
801.3
5,201.5 1,683.3
6,488.9 2,100.0
9.7
13.2
510.6 1,961.5
.
.
.
.
.
.
.
.
0.0
0.1
0.3
0.1
0.1
0.2
0.1
2.0
5.9
14.8
4.8
4.8
19.0
6.1
32.8
21.0 1,010.4
330.2
25.9 1,027.6
332.5
58.3
68.8
112.9
36.9
67.1
113.9
36.9
657.8
528.6 3,206.9 1,048.0
618.2 3,135.3 1,014.7
3,370.0 3,873.6 4,497.1 1,469.7 4,207.3 4,463.4 1,444.5
40.3
32.7
354.4
115.8
35.5
386.1
124.9
648.2
663.3 1,535.2
501.7
646.1 1,639.5
530.6
.
4,058.5 4,569.5 6,386.7 2,087.2 4,888.9 6,488.9 2,100.0
98
U.S. GAAP (3)
Year Ended 31 December
2004
2005
2006
2006
Statement Of Operations Data
Ps.
Ps.
Ps.
U.S.$
(Millions)
Net sales . . . . . . . . . . . . . . . . . . .
Cost of sales — excluding
depreciation and amortisation. .
Selling and administrative
expenses — excluding
depreciation and amortisation. .
Depreciation and amortisation . . .
Operating income . . . . . . . . . . . .
Financial results, net . . . . . . . . . .
Equity in earnings from
unconsolidated affiliates . . . . . .
Gain on sale of subsidiaries, net .
Income before income tax, tax on
assets and minority interest . . .
Income tax and tax on assets —
(expense)/benefit . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . .
Adjusted EBITDA(4) . . . . . . . . . .
.
1,571.2
1,847.6
2,560.5
Six Months Ended
30 June
2006
2007
2007
Ps.
Ps.
U.S.$
(Unaudited)
(Millions)
836.8 1,058.2 1,895.5
613.4
.
(796.1) (1,002.1) (1,309.6) (428.0)
(589.4)
(917.2) (296.8)
.
.
.
.
(349.6)
(93.8)
331.7
284.1
(414.6)
(76.4)
354.5
(305.3)
(221.1)
(43.2)
204.5
(200.7)
(398.7) (129.0)
(150.1) (48.6)
429.5 139.0
(174.0) (56.3)
.
.
48.3
—
51.9
—
32.0
6.0
10.5
2.0
20.1
—
20.4
—
6.6
—
.
664.1
101.2
1,521.8
497.3
23.9
275.9
89.3
.
.
.
.
98.2
(2.2)
760.2
425.5
(28.1) (174.6) (57.1)
(3.1)
(38.4) (12.6)
70.0 1,308.7 427.7
430.9
681.5 222.7
99
(569.5) (186.1)
(136.8) (44.7)
544.7 178.0
939.1 306.9
205.8
(4.0)
225.7
247.7
(80.2) (26.0)
(44.3) (14.3)
151.4
49.0
579.6 187.6
As of 31 December
2004
2005
2006
2006
Balance Sheet Data
Ps.
Ps.
Ps.
U.S.$
(Millions)
ASSETS
Current assets
Cash and cash equivalents . . . . . . .
Trade receivables, net . . . . . . . . . . .
Other receivables, net . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . .
Trade receivables, net . . . . . . . . . . .
Other receivables, net . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated
affiliates . . . . . . . . . . . . . . . . . . . .
Other long-term investments . . . . . .
Property, plant and equipment, net .
Intangible assets, net. . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . .
LIABILITIES
Current Liabilities
Accounts payable . . . . . . . . . . . . . .
Short-term debt and current portion
of long-term debt . . . . . . . . . . . . .
Salaries and social security
payable . . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . .
Total current liabilities. . . . . . . . . .
Accounts payable . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities. . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . .
Total Shareholders’ Equity
(Deficit) . . . . . . . . . . . . . . . . . . . .
Total liabilities and Shareholders’
Equity (Deficit) . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
381.4
449.4
326.9
234.6
242.0
410.6
160.6
393.7
321.6
80.9
123.4
126.0
0.9
2.0
2.6
858.4 1,210.5 1,187.7
0.2
0.4
0.3
370.8
203.1
280.6
17.2
21.3
19.7
As of 30 June
2006
2007
2007
Ps.
Ps.
U.S.$
(Unaudited)
(Millions)
106.8
483.0
404.0
134.2
332.6
442.9
105.1
667.1
263.8
41.2
168.6
154.3
0.9
2.3
4.7
388.1 1,653.7 1,269.9
0.1
0.4
0.0
91.7
198.3
284.0
6.4
23.1
19.7
130.8
143.3
85.4
50.0
1.5
411.0
0.0
91.9
6.4
174.0
387.6
235.7
77.0
465.2
244.1
79.0
9.4
47.0
3.3
1.1
17.9
3.2
1.0
398.9
416.9 1,025.3
335.1
461.7 1,107.3
358.4
12.6
17.7
577.6
188.8
16.1
543.4
175.9
1,147.4 1,156.6 2,909.0
950.7 1,155.6 2,905.3
940.2
2,988.8 3,461.0 6,239.3 2,039.0 3,992.2 6,376.9 2,063.7
264.4
404.9
132.3
332.5
436.6
141.3
.
2,283.0 2,783.6
432.3
141.3 2,965.5
464.8
150.4
.
.
.
.
.
.
.
.
.
.
55.3
74.2
110.3
57.3
112.3
168.9
65.4
77.2
120.6
2,731.3 3,311.7 1,237.0
19.9
6.6
10.6
638.6
473.2 2,360.0
2.0
5.6
14.5
31.0
17.1
988.4
40.5
49.6
99.4
34.1
28.2
669.5
36.1
69.5
107.5
55.2
79.2
179.6
39.4
108.6
112.5
404.2 3,555.3 1,301.0
3.5
9.7
13.2
771.2
529.9 2,248.4
4.7
4.7
17.8
323.0
23.7
982.6
32.5
46.4
100.7
218.8
32.0
711.9
34.8
58.1
36.4
421.0
4.3
727.6
5.8
318.0
32.6
230.4
281.1
324.1
.
.
270.3
(508.5) (431.1)
860.0
(209.5) 1,001.4
2,988.8 3,461.0 6,239.3 2,039.0 3,992.2 6,376.9 2,063.7
(1) We define Adjusted EBITDA as net sales minus cost of sales (excluding depreciation and amortisation) and selling and administrative expenses (excluding depreciation and amortisation). We
believe that Adjusted EBITDA is a meaningful measure of our performance because it is commonly used in the industry to analyze and compare media companies on the basis of operating
performance, leverage and liquidity. Nonetheless, Adjusted EBITDA is not a measure of net
income or cash flow from operations and should not be considered as an alternative to net
income, an indication of our financial performance, an alternative to cash flow from operating
100
activities or a measure of liquidity. Because Adjusted EBITDA is not an Argentine GAAP measure,
other companies may compute Adjusted EBITDA in a different manner. Therefore, Adjusted
EBITDA as reported by other companies may not be comparable to Adjusted EBITDA as we
report it.
2004 = Net sales Ps.1,667.3 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.842.2 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps. 366.2 million.
2005 = Net sales Ps.1,988.4 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,088.5 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps. 443.2 million.
2006 = Net sales Ps.2,811.8 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,491.6 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps. 610.5 million.
June 2006 = Net sales Ps.1,141.5 million; Minus: Cost of sales (excluding depreciation and
amortisation) Ps.638.5 million; Minus: Selling and administrative expenses (excluding depreciation
and amortisation) Ps.234.0 million.
June 2007 = Net sales Ps.1,993.3 million; Minus: Cost of sales (excluding depreciation and
amortisation) Ps.963.4 million; Minus: Selling and administrative expenses (excluding depreciation
and amortisation) Ps.413.3 million.
(2) See “Unaudited Consolidated Pro Forma Statement of Income”.
(3) The summary data presented under U.S. GAAP was derived from and should be read in conjunction with the U.S. GAAP Financial Statements set forth in Annex A.
(4) We define Adjusted EBITDA as sales minus cost of sales and selling and administrative expenses
(excluding depreciation and amortisation). We believe that Adjusted EBITDA is a meaningful measure of our performance because it is commonly used in the industry to analyze and compare
media companies. Nonetheless, Adjusted EBITDA is not a measure of net income or cash flow
from operations and should not be considered as an alternative to net income, an indication of our
financial performance, an alternative to cash flow from operating activities or a measure of liquidity.
Because Adjusted EBITDA is not a U.S. GAAP measure, other companies may compute Adjusted
EBITDA in a different manner. Therefore, Adjusted EBITDA as reported by other companies may
not be comparable to Adjusted EBITDA as we report it.
2004 = Net sales Ps.1,571.2 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.796.1 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.349.6 million.
2005 = Net sales Ps.1,847.6 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,002.1 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.414.6 million.
2006 = Net sales Ps.2,560.5 million; Minus: Cost of sales (excluding depreciation and amortisation) Ps.1,309.6 million; Minus: Selling and administrative expenses (excluding depreciation and
amortisation) Ps.569.5 million.
June 2006 = Net sales Ps.1,058.2 million; Minus: Cost of sales (excluding depreciation and
amortisation) Ps.589.4 million; Minus: Selling and administrative expenses (excluding depreciation
and amortisation) Ps.221.1 million.
June 2007 = Net sales Ps.1,895.5 million; Minus: Cost of sales (excluding depreciation and
amortisation) Ps.917.2 million; Minus: Selling and administrative expenses (excluding depreciation
and amortisation) Ps.398.7 million.
101
As of 31 December
2004
2005
2006
Operating Metrics
Cable TV Subscribers(1),(2) . . . . .
Cable TV Homes passed(1)
Cablevisión . . . . . . . . . . . . . . . .
Multicanal . . . . . . . . . . . . . . . . .
Cable TV churn rate
Cablevisión . . . . . . . . . . . . . . . .
Multicanal . . . . . . . . . . . . . . . . .
Internet Access Subscribers(1),(3)
Newspaper — Circulation(4) . . . . .
Canal 13 — Audience Share
Prime time(5) . . . . . . . . . . . . . .
Total time(5) . . . . . . . . . . . . . . .
As of 30 June
2006
2007
..
1,057,900
1,145,200
2,837,500
1,218,900
2,903,800
..
..
n/a
4,074,300
n/a
4,286,600
3,767,800
4,381,700
n/a
4,381,700
3,767,800
4,381,700
..
..
..
..
n/a
16.1%
162,500
463,987
n/a
13.8%
229,000
468,433
12.2%
14.4%
587,700
464,180
n/a
14.4%
259,200
475,210
13.1%
16.4%
657,200
451,182
..
..
28.2%
27.2%
27.1%
24.9%
39.4%
30.3%
37.6%
28.3%
39.5%
32.7%
(1) Numbers rounded to nearest hundred. The total homes passed as of 30 June 2007 is 6,753,600 if
overlap among Cablevisión and its subsidiaries (including Multicanal and Teledigital) is eliminated.
(2) Includes Uruguay and Paraguay. Numbers rounded to nearest hundred.
(3) Includes Paraguay. Numbers rounded to nearest hundred.
(4) Average number of copies according to IVC (including Diario Clarín and Olé).
(5) Share of free TV audience according to IBOPE for AMBA. Prime time is defined as Monday
through Friday from 8pm to 12am. Total time is defined as Monday through Sunday from 12 pm to
12 am.
102
OPERATING AND FINANCIAL REVIEW
The following discussion should be read in conjunction with the financial statements and related
notes included elsewhere in this Offering Circular. Except as discussed in the following paragraphs,
financial statements have been prepared in accordance with Argentine GAAP, which differ in certain
respects from U.S. GAAP, and the regulations of the CNV.
This Offering Circular contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results of operations could differ materially from those discussed in the forwardlooking statements. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”.
The discussion of our results of operations and financial condition set forth below for 2006, 2005
and 2004 and the six month periods ended 30 June 2007 and 2006 relates primarily to the Company,
and only includes Cablevisión and Teledigital for any period ending on or after 26 September 2006. In
July 2006, our ownership interest in Multicanal decreased from 100% to 65% as a result of the
capitalisation of U.S.$182.0 million of outstanding debt pursuant to the terms of Multicanal’s APE.
In September 2006, through a series of related transactions, we increased our ownership interest
in Cablevisión to 60%. Cablevisión, in turn, acquired 100% of Holding Teledigital and 98.5% of
Multicanal, who, in turn, acquired from Prima Internacional 100% of Prima (collectively, the “Cablevisión Acquisition”). See “Business Description — Cable Television and Internet Access — Summary
of Ownership Changes and Recent Acquisitions” and “Unaudited Pro Forma Consolidated Statement
of Income”.
Overview
We are an Argentine sociedad anónima (corporation). Substantially all of our assets and
operations and our customers are located in Argentina. Accordingly, our financial condition and results
of operations depend to a significant extent on macroeconomic and political conditions prevailing in
Argentina, and were materially adversely affected by Argentina’s 2001/2002 economic crisis. See
“Risk Factors — Risks Related to Argentina”.
The Company conducts all of its operations through subsidiaries and, accordingly, in addition to
certain management fees that it collects from certain of its subsidiaries, the Company’s main source
of cash to pay dividends are the dividends received from its subsidiaries. As a holding company, the
Company’s ability to pay dividends and obtain financing depends on the results of operations and
financial condition of its subsidiaries and could be restricted by legal, contractual or other limitations
binding upon those subsidiaries. See “— Liquidity and Capital Resources — Indebtedness”. These
dividend payments depend on the Company’s subsidiaries’ results of operations, financial condition,
cash and capital requirements, future growth prospects and other factors deemed relevant by their
respective boards of directors, as well as on any applicable legal restrictions.
Certain of our subsidiaries are subject to certain contractual restrictions on their ability to declare
or pay dividends. See “Risk Factors — Risk Related to our Securities — Our Shareholders’ ability to
receive cash dividends may be limited” and “— Liquidity and Capital Resources — Indebtedness”.
The Argentine Economy
The 2001/2002 Crisis and Recovery in Argentina
Overview
From December 2001 through most of 2002, Argentina experienced an unprecedented crisis that
virtually paralyzed the country’s economy and led to radical changes in government policies. Since
then, the Argentine economy has recovered significantly from the crisis and the business environment
has largely stabilised.
103
Notwithstanding the recent improvements to the Argentine economy and its current prospects for
growth, conditions in Argentina remain subject to significant uncertainties and risks. For more
information, see “Risk Factors — Risks Related to Argentina”.
How the Economic Crisis Developed
From the third quarter of 1998 through the first six months of 2002, Argentina suffered a severe
economic recession. Structural barriers, including the rigidity of the convertibility regime and its fixed
exchange rate system, a public sector deficit that continued to grow as a percentage of GDP and
Argentina’s trade and fiscal deficits limited the Argentine government’s ability to stimulate the
economy. Furthermore, the country’s excessive reliance on foreign capital, combined with its mounting
external debt, resulted in a deep contraction of the economy and banking and fiscal crises when the
debt markets shut down for Argentine issuers, including the Government, and capital flight increased.
In 2001 in particular, economic conditions deteriorated significantly, as capital outflows totalled
U.S.$14 billion and interest payments on public debt equalled 3.8% of GDP, compared to a primary
surplus of only 0.5% at the federal level. In the second half of 2001, the growing perception that a
devaluation of the peso was imminent triggered a massive run on bank deposits and accelerated
capital flight from the Argentine economy. From December 2000 to November 2001, total deposits with
the banking system fell by 21.0%.
In a last bid to safeguard the convertibility regime and avert the collapse of the banking sector, in
December 2001, the Argentine government imposed strict per-person limits on bank withdrawals
(known as the corralito), limiting withdrawals from demand accounts to Ps.250 per week and from
payroll accounts to Ps.1,000 per month. This action fuelled panic, and as a consequence, depositors
seeking a way out of the corralito transferred their funds from matured time deposits to demand
deposits. The total amount of private sector time deposits fell by 36% (Ps.16.4 billion), while private
sector demand deposits increased by 75.6% (Ps.12.3 billion) during December 2001.
The economic crisis and the restrictions on bank withdrawals caused massive social unrest,
which led to a political crisis that resulted in the resignation of President Fernando de la Rúa in
December 2001. Several interim presidents followed until the appointment of Eduardo Duhalde in
January 2002.
The Argentine Government’s Response to the Crisis
In response to the political and economic crisis, the Argentine government undertook a number
of far-reaching initiatives that radically changed the monetary and foreign exchange regime and the
regulatory environment for conducting business in Argentina, creating even greater financial uncertainty and virtually paralyzing all commercial and financial activities in Argentina in 2002.
Sovereign Default
In response to the government’s declining revenues, substantial debt service obligations, growing
deficit and diminishing access to the international capital markets, Argentina suspended payment on a
significant portion of its public debt in December 2001. The government’s default both closed
Argentina’s access to foreign financings and lowered the market value of government bonds.
Peso Devaluation
In January 2002, the Argentine government passed the Public Emergency and Reform Law,
which abolished the fixed parity between the Peso and the U.S. dollar, bringing the convertibility
regime that had been in effect for ten years to an end. The Peso devalued dramatically, reaching its
lowest level on 26 June 2002, when it had lost 74% of its value from Ps.1.00 to Ps.3.87 per dollar.
The devaluation of the peso had a substantial and negative effect on the Argentine economy and on
the financial condition of individuals and businesses, including the media industry. The devaluation
104
resulted in many Argentine businesses defaulting on their foreign currency debt obligations, significantly reduced real wages and crippled businesses that depended on domestic demand, such as
utilities, the financial services industry and the media industry. The devaluation of the peso created
pressure on the domestic pricing system and triggered very high rates of inflation. During 2002,
wholesale inflation reached a rate of 118% and consumer prices rose 41%.
Rescheduling of Deposits and Asymmetric Pesification
From 30 January 2002 to 30 April 2002, as part of the Public Emergency and Reform Law, the
government decreed the mandatory conversion of dollar-denominated deposits and dollar-denominated obligations that were governed by Argentine law into Pesos, in a process known as pesification.
The pesification converted U.S. dollar-denominated obligations and U.S. dollar-denominated deposits
into Pesos at different exchange rates (the so called “asymmetric pesification”). Additional restrictions
were imposed on bank withdrawals (known as the corralón), which effectively froze and rescheduled
all time deposits, including a significant portion that had matured during the time the corralito was in
effect and had been converted into demand deposits.
Asymmetric pesification consisted of two basic elements. First, all foreign currency denominated,
Argentine law governed obligations were converted into Pesos at a rate of Ps.1.00 per U.S.$1.00. The
affected debts were also made subject to adjustment by a coeficiente de variación de salarios,
(“CVS”), a wage inflation coefficient, in the case of certain types of loans to individuals (i.e.,
mortgages, personal loans, etc., in amounts of less than Ps.100,000), and all other debts were subject
to adjustment by the coeficiente de estabilización de referencia, (“CER”), a consumer price inflation
coefficient. The second element of pesification required that all foreign currency denominated deposits
be converted into peso-denominated deposits at an exchange rate of Ps.1.40 per U.S.$1.00, subject
to CER indexation. Asymmetric pesification had dramatic effects on the composition of banks’ balance
sheets.
The Path to Stabilisation
In March 2002, GDP reached its maximum contraction. The economy then started its path to
stabilisation in April 2002 with a clear improvement of economic variables during the second half of
the year, mainly as a result of decreasing imports. While the devaluation of the peso had significant
adverse consequences, it did result in a positive balance for Argentina’s merchandise trade and also
current account balance, which in turn fostered a reactivation of domestic production. The sharp
decline in the Peso’s value against foreign currencies, together with a decline in production costs in
U.S. dollar terms, made Argentine products relatively inexpensive in the export markets. At the same
time, the costs of imported goods increased significantly due to the devaluation of the peso, forcing
Argentine consumers to substitute their purchase of foreign goods with domestic products, substantially boosting domestic demand for domestic products.
Despite the improvement in economic conditions during the second half of 2002, Argentina’s
overall GDP contracted 10.9% for the full year, receding to 1993 values; investment collapsed (with,
for example, negative growth of 36% in the second quarter as compared to the second quarter of
2001, i.e., 3.3 times greater than the decline in GDP); and inflation increased sharply. The main
impact of the crisis was the unprecedented social hardship. Unemployment rates on average rose
from 12.9% to 19.7% between 1998 and 2002, average private and public sector real wages (private
and public sector on average) declined 24% in 2002 (deflected by the CPI), and the nationwide
poverty index increased from 37% of the population in 2001 to 55% in 2002.
105
Economic Recovery
The table below sets forth information about certain economic indicators in Argentina for the
years indicated.
Concept
ECONOMIC ACTIVITY
Real GDP (Pesos of 1993) . . . . . . . .
Nominal GDP in current U.S.$(1) . . .
Per capita GDP . . . . . . . . . . . . . . . .
Real Gross Domestic Investment
(Pesos of 1993) . . . . . . . . . . . . . .
As % of GDP . . . . . . . . . . . . . . . .
PRICE INDEXES AND EXCHANGE
RATE INFORMATION
Consumer Prices Index (CPI) . . . . . .
Wholesale Prices Index (WPI) . . . . .
Nominal Exchange Rate. . . . . . . . . .
EXTERNAL INDICATORS AND
INTERNATIONAL RESERVES
POSITION
Trade Merchandise Balance . . . . . . .
Current Account Balance(2) . . . . . . .
As % of GDP . . . . . . . . . . . . . . . .
BCRA International Reserves(3) . . . .
FISCAL INDICATORS
Federal Fiscal Revenues . . . . . . . . .
As % of GDP . . . . . . . . . . . . . . . .
Federal Primary Expenses . . . . . . . .
As % of GDP . . . . . . . . . . . . . . . .
Federal Primary Fiscal Balance(4) . .
Consolidated Primary Fiscal
Balance(4) . . . . . . . . . . . . . . . . . .
Federal . . . . . . . . . . . . . . . . . . . .
Provinces . . . . . . . . . . . . . . . . . .
Sovereign Public Debt Stock(5). . . . .
As % of GDP . . . . . . . . . . . . . . . .
UNEMPLOYMENT AND POVERTY
Unemployment Rate(6) . . . . . . . . . .
Unit of Measure
2002
2003
2004
2005
2006
% change
Billions of U.S.$
Current U.S.$
% change
(10.9)% 8.8%
9.0%
9.2%
8.5%
95.9 127.3 153.1 181.5 212.5
2,618 3,438 4,090 4,798 5,559
—
(36.4)% 38.2%
11.3% 14.3%
34.4%
17.7%
22.7%
19.8%
18.2%
21.6%
% change Dec/Dec
% change Dec/Dec
Ps./U.S.$ (December)
41.0%
118%
3.36
3.7%
2.0%
2.93
6.1%
7.9%
2.97
12.3%
10.7%
3.03
9.8%
7.1%
3.07
Billions of U.S.$
Billions of U.S.$
16.7
8.7
9.1%
10.5
15.7
8.1
6.3%
14.1
12.1
3.2
2.1%
19.6
11.7
5.7
3.1%
28.1
12.0
8.1
3.8%
32.0
55.1
17.6%
52.8
16.9%
2.3
77.2 105.1 126.4 158.5
20.5% 23.5
23.8% 24.2%
68.5
87.7 106.8 135.4
18.2% 19.6% 20.1% 20.7%
8.7
17.3
19.6
23.2
Billions of U.S.$
Billions of U.S.$
Billions of U.S.$
Billions of U.S.$
As a % of Nominal GDP
As a % of Nominal GDP
As a % of Nominal GDP
Billions of U.S.$
End of year (incl Social Plans)
End of year (excl Social Plans)
Poverty Rate-Total Population . . . . . . Average (% Persons)
0.7%
3.2%
5.3%
4.4%
3.9%
0.7%
2.3%
3.9%
3.7%
3.5%
(0.0)% 0.9%
1.4%
0.7%
0.4%
153.0 178.8 191.3 128.6 136.7
159.5% 140.4% 125.0% 70.9% 64.3%
17.9%
N/A
55.3%
14.5%
19.7%
50.9%
12.1%
16.2%
42.3%
10.1%
12.7%
36.4%
8.7%
10.1%
26.9%
(1) Based on the average nominal Ps./U.S.$ exchange rate for each year.
(2) Earned Basis.
(3) Balances at year end.
(4) Includes automatic and non-automatic transfers to provinces.
(5) Data for December 2006 does not include a total of U.S.$26.1 billion held by creditors that did not
participate in the 2005 restructuring.
(6) Social plans are welfare payments made by the government without demanding compensation to
mitigate the impact of economic crisis on certain segments of the population.
Sources: Ministry of Public Works of Argentina, Central Bank, INDEC and Company estimates.
106
The economy continued to show indications of recovery, as GDP grew at a rate of 8.8% in 2003.
A combination of sound fiscal and monetary policies kept CPI under control at 3.7% in 2003. In
addition, during 2003, Argentina withdrew all the national and provincial governments’ quasi-money
securities from circulation (amounting to Ps.7.8 billion), and eliminated all deposit restrictions. The
merchandise trade balance experienced a second year of sustained surplus, aided by the rise in
commodity prices and export volumes. As a consequence of the trade balance surplus the net amount
of U.S. dollars entering the Argentine economy exceeded the amount of capital leaving the economy,
leading to an appreciation of the Peso. As of 31 December 2003 the Central Bank reference exchange
rate had reached Ps.2.93 per U.S.$1, compared to Ps.3.36 per U.S.$1 as of 31 December 2002.
Meanwhile, social indicators improved. The unemployment rate decreased to 17.3% in 2003 and real
wages began to recover.
GDP grew by 9.0% in 2004, primarily as a result of increases in domestic consumption and
gross domestic investment, continuing the trends that had begun in 2003. Argentina registered net
capital inflows for the first time since 2000, resulting in a surplus in the country’s capital and financial
account of U.S.$2.0 billion. The country’s balance of payments surplus also increased from
U.S.$3.6 billion in 2003 to U.S.$5.3 billion in 2004. The unemployment rate decreased from 14.5%
(including social plans) in the last quarter of 2003 to 12.1% in the last quarter of 2004, and the
underemployment rate also decreased from 16.3% in the last quarter of 2003 to 14.3% in the last
quarter of 2004. The nationwide poverty index decreased from 50.9% of the population in 2003 to
42.3% in 2004. The value of the peso remained stable in 2004, with the exchange rate increasing
from Ps.2.93 per U.S.$1 as of 31 December 2003 to Ps.2.97 per U.S. dollar as of 31 December 2004.
The Argentine economy continued to grow in 2005, with GDP growing by 9.2% and the
Argentine peso remaining stable. As a result of this stable growth, the unemployment rate decreased
from 12.1% in the last quarter of 2004 to 10.1% in the last quarter of 2005 (in both cases, including
social plans), and the underemployment rate also decreased from 14.3% in the last quarter of 2004 to
11.9% in the last quarter of 2005. Economic growth applied upward pressure on the demand for
goods and services, which resulted in an inflation rate of 12.3% in 2005, compared with an inflation
rate of 6.1% in 2004.
In June 2005, the Argentine government restructured the federal government’s public debt, which
had been in default since December 2001. Argentina reduced its outstanding principal amount of
public debt from U.S.$191.3 billion to U.S.$126.6 billion and negotiated lower interest rates and
extended payment terms. Approximately U.S.$26.1 billion of defaulted bonds held by creditors who did
not participate in the exchange offer remain outstanding. In addition, in January 2006, Argentina
prepaid all amounts owing under outstanding credit lines to the International Monetary Fund (“IMF”).
GDP grew at a rate of 8.5% in 2006, fuelled by a favourable international context with high
commodity prices, and an increase in fixed investment and private consumption in Argentina.
Total exports from Argentina increased by 15.1% to U.S.$46,456 million in 2006, mainly driven
by an increase in exports of industrial and agricultural products. Imports rose by 19% due to the
growth in consumption and investment in Argentina. The trade surplus remained high, growing from
U.S.$11,663 million in 2005 to U.S.$12,305 million in 2006.
Consistent with this economic growth, the unemployment rate continued to fall as a consequence
of job growth, both regular and unreported. The data corresponding to the fourth quarter of 2006
showed that 8.7% of the active population is unemployed, compared to 10.1% (including social plans)
in 2005. Average real wages of the economy increased by 8% in 2006
The Central Bank continued its policy of accumulating international reserves during 2006, which
enabled it to recover and surpass the level of January 2006, prior to the cancellation of all financial
obligations to the IMF. Central Bank reserves ended the year at U.S.$32 billion, after the repayment of
approximately U.S.$9.5 billion to the IMF.
107
After appreciating in 2005, the Peso-U.S. dollar exchange rate increased to Ps.3.07 per U.S. dollar
as of December 2006, a 1.3% depreciation compared to December 2005. The real exchange rate of the
Argentine Peso against a basket of currencies remained stable throughout the year.
Federal fiscal revenues increased by 25% in 2006, allowing for a national primary fiscal surplus
of 3.5% of GDP. In relation to public debt, two issues are still pending: (i) a portion of the defaulted
public sector debt was not included in the 2005 debt swap (the debt owed to the so-called “Paris
Club”) and has not yet been restructured, and (ii) holders of approximately U.S.$26.5 billion (as of
30 June 2007) of government bonds did not accept the government’s proposal and in many instances
continue judicial actions against the government.
Additionally, foreign shareholders of several Argentine companies have filed claims in excess of
U.S.$17 billion before the International Center for the Settlement of Investment Disputes (“ICSID”),
alleging that the emergency measures adopted by the Argentine government in response to the
economic crisis since 2001 are inconsistent with the fair and equitable treatment standards set forth in
various bilateral investment treaties to which Argentina is a party. In May 2005, an ICSID tribunal
rendered an award against Argentina in a case brought by CMS Gas Transmission Company, which
was appealed by Argentina. In October 2006, another ICSID tribunal issued a “decision on liability”
that is adverse to Argentina in a case brought by LG&E Energy Corp., LG&E Capital Corp. and LG&E
International Inc. The decision on liability is not the tribunal’s final award and therefore the decision is
not yet subject to appeal. On 22 May 2007, an ICSID tribunal rendered an award against Argentina in
a case brought by Enron Corporation and Ponderosa Assets L.P. Italian holders of defaulted Argentine
government bonds have also filed claims before ICSID.
The CPI increased by 9.8% in 2006, which is an elevated rate compared to international
standards. The government has been reluctant to adopt measures that could result in a reduction in
the rate of economic growth and have attempted to curb inflation through formal and informal price
controls.
The Argentine economy began 2007 with favourable prospects in terms of economic growth, but
with significant concerns over official inflation levels and the lack of investments, in particular in the
energy sector. See “Risk Factors — Risks Related to Argentina — Restrictions on the supply of energy
could negatively affect Argentina’s economic growth and negatively impact the Company’s results of
operations”. We cannot predict the evolution of future macroeconomic events.
The long-term evolution of the Argentine economy, however, remains uncertain. While economic,
political and social conditions have improved, the country still faces significant challenges, including
the need to attract investments in capital goods that will permit sustainable growth and reduce
inflationary pressures, the renegotiation of utility contracts, the resolution of the energy crisis, the
treatment of bondholders who rejected the government’s debt exchange offer, the restructuring of the
financial system and the reform to its tax regime. In light of this uncertain situation, the following
discussion may not be indicative of our current or future results of operations, liquidity or capital
resources and may not contain all of the necessary information to help you understand the information
contained in this discussion with results from previous or future periods. Accordingly, the following
discussion should be read in conjunction with, and is qualified in its entirety by, the risk factors
contained in this Offering Circular.
Factors Affecting the Comparability of Historical Results of Operations and Financial
Condition
Our Cable Television And Internet Access Operations Have Gone Through Important
Transformations In Recent Years:
• In 2005, we acquired a minority interest in Cablevisión, which we recorded under Investments
in affiliates, and accounted for our equity portion of Cablevisión’s net income (loss) under
Equity in earnings (losses) from unconsolidated affiliates and gain on sale of subsidiaries, net.
108
• On 20 July 2006, our subsidiary Multicanal completed the restructuring of its financial
indebtedness pursuant to the terms of the Multicanal APE. The Multicanal APE provided,
among other things, for the exchange of approximately U.S.$182.0 million of outstanding debt
for shares representing approximately 35% of Multicanal’s total capital and the discharge of
approximately U.S.$125.0 million of outstanding debt for a cash payment of U.S.$37.5 million.
After giving effect to the Multicanal APE, Multicanal’s outstanding financial debt decreased
from U.S.$526.4 million to U.S.$223.3 million. The consummation of Multicanal’s APE generated a non-recurrent gain before tax of Ps.1,493.3 million (including Ps.246.8 million attributable to the dilution for the benefit of existing shareholders — the Company and AGEA —
resulting from the capitalisation described above).
• On 26 September 2006, through a series of related transactions, we increased our ownership
interest in Cablevisión to 60%. Cablevisión simultaneously acquired 100% of Holding Teledigital
and 98.5% of Multicanal, and through Multicanal 100% of the outstanding shares of Prima, 3%
of which were subsequently transferred to Univent’s and later to Cablevisión. See “Unaudited
Pro Forma Consolidated Statement of Income”.
In 2005 and 2006, inflation rates (as measured by the CPI) accelerated, reaching 12.3% in 2005,
and 9.8% in 2006. Although under Argentine GAAP currently we are not required to adjust our
financial statements to reflect inflation, our cost of sales, in particular our labour costs, was affected
by the upward pressure on the prices of goods and services. Our future profitability will depend,
among other factors, on our ability to increase the prices of our goods and services to offset increases
in our cost of sales attributable to inflationary pressures.
As of 30 June 2007 our ownership interest in Patagonik Film Group S.A. was 50% and our
ownership interest in CIMECO was 33.33%. We have entered into certain agreements incorporating a
third shareholder to Patagonik and as a result our ownership interest in the company decreased to
33.33%. On 28 August 2007, the Company, through AGEA and AGR, and S.A. La Nación each
completed the acquisition from COMIP of an additional 1⁄6 interest in CIMECO, bringing each of their
total interest in CIMECO to 50%. As a result of COMIP’s sale of its equity interest in CIMECO, the
Company, through AGEA and AGR, and S.A. La Nación remain the only shareholders of CIMECO,
with a 50% interest each.
In addition, immediately after COMIP’s sales, CIMECO acquired a 12% interest in Papel Prensa
from S.A La Nación.
After the consummation of this transaction, the Company holds a 37% interest of Papel Prensa
through AGEA and an additional 6% interest through CIMECO.
As a result of the impact of the factors described above on our businesses, our results of
operations and financial condition for 2004, 2005 and 2006 and for the six months ended 30 June
2006 and 2007 may not be comparable and may not be indicative of our results of operations,
financial condition or business prospects after the dates indicated.
Operating Results
We are a holding company and derive our operating income and cash flow from the operations
of our direct and indirect subsidiaries in the following segments:
• cable television and Internet access;
• printing and publishing;
• broadcasting and programming; and
• other related activities.
Substantially all of our operations and subscribers are located in Argentina, where we generate
substantially all of our revenues. We also have operations in Paraguay and Uruguay. We create and
acquire media content, develop brand names to associate with it, and manage the outlets distributing
109
the content. We distribute content in a variety of forms and through a variety of outlets, including
television networks and stations, Internet services, newspapers, magazines, books and radio stations.
Many of our businesses hold leading market positions, and we capitalise on these strong positions
when expanding into new markets. We prepare our financial statements in accordance with Argentine
GAAP. See “Presentation of Financial and Other Information” and “Selected Consolidated Financial
Information”.
Our operating results are affected by a number of factors, including, the number of households
subscribing to our cable television and Internet access services, the level of advertising across our
various media products, the circulation of newspapers and magazines, the occurrence of major sports
and other entertainment events, seasonality, competition, regulatory developments and fluctuations in
foreign exchange rates. Our results of operations also reflect general economic and political developments in Argentina. Subscription, advertising and circulation revenues in recent years have increased
significantly as the Argentine economy recovered rapidly from its 2001/2002 crisis.
Our revenues are primarily generated in Pesos, while a portion of our expenses and substantially
all of our financial liabilities are denominated in U.S. dollars. Accordingly, our results of operations are
affected by exchange rate volatility. See “Risk Factors — Risks Related to Investments in a Foreign
Corporation — Fluctuations in exchange rates may affect our business and revenues”.
Net Sales
Our net sales comprise cable television and Internet access subscription revenue, advertising
revenue, circulation revenue, revenues from content rights and co-production, printing services
revenue, revenue from the sale of paper and other revenue. Cable television and Internet access
subscription fees are our principal source of revenue. Advertising revenue includes revenues received
for advertising placed in our newspapers, magazines, Internet sites and through our cable, broadcast
television and radio stations. Circulation revenue includes the cover price revenue received from the
sale of newspapers, magazines and other publications. Revenue from content rights and co-production includes fees for programming (including sports). Printing services revenue consists mainly of
fees received from the printing of magazines, books, leaflets and related products. Revenue from the
sale of paper includes revenues from the sale of newsprint to third parties. Other revenue includes
sales of digital content.
Cost of Sales (Excluding Depreciation and Amortisation)
Our cost of sales (excluding depreciation and amortisation) includes salaries, wages and
employer contributions, programming rights, production and co-production costs, and paper and
printing costs. Programming rights include the cost of licensing third party programs. Production and
co-production costs comprise the production cost of programs produced by our subsidiaries and our
share of the costs incurred by joint ventures in which we have an equity interest, as well as the cost of
programming rights for sporting events and films. Printing costs include raw materials such as paper
and ink, and other direct costs relating to the printing process.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) include overhead
costs from various divisions such as our marketing, public relations, warehousing, information
systems, finance, accounting and human resources divisions.
Depreciation and Amortisation
Depreciation and amortisation include charges relating to the depreciation of our tangible
property, plant and equipment (including accounts chargeable to cost of sales, and selling and
administrative expenses) and the amortisation of intangible assets arising primarily from acquisitions.
110
Proportional Consolidation of Certain Investments
Under Argentine GAAP, we are required to proportionally consolidate certain of our minority
investments. Our audited consolidated financial statements as of and for the year ended 31 December
2006 proportionally consolidate Papel Prensa (37% indirect ownership interest), Impripost S.A. (50%
indirect ownership interest), TRISA and TSC (50% indirect ownership interest), Polka S.A. (30%
indirect ownership interest), Ideas del Sur (30% indirect ownership interest), Patagonik Film Group
S.A. (50% indirect ownership interest, which decreased to 33.3% in July 2007) and La Capital Cable
(Multicanal holds a 50% ownership interest).
Critical Accounting Policies
Our audited consolidated financial statements include our consolidated financial position, results
of operations and cash flows. Our financial statements are prepared in conformity with Argentine
GAAP. Argentine GAAP requires management to make estimates that affect the reported amounts of
assets and liabilities, and the reported amounts of revenues and expenses. We evaluate our
estimates, including those related to tangible and intangible assets, bad debts, inventories, provisions
and income taxes, on an ongoing basis. We base our estimates on historical experience and on
various other assumptions that management believes to be reasonable under the circumstances.
These estimates form the basis for making judgements about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
We believe that the following accounting policies used in preparation of our financial statements
prepared in accordance with Argentine GAAP are our critical accounting policies as they require
management to make estimates that affect the reported amounts of assets and liabilities, and the
reported amounts of revenues and expenses.
Recent Acquisitions
Our consolidated financial statements reflect the increase of our ownership interest in Cablevisión to 60% as well as the acquisition by Cablevisión of 98.5% of the outstanding shares of
Multicanal and 100% of the outstanding shares of Holding Teledigital, and Multicanal’s acquisition of
100% of the outstanding shares of Prima 3% of which were subsequently transferred to Univent’s and
later to Cablevisión. To date, those transactions have not received any of the regulatory approvals to
which they are subject. If such approvals were not forthcoming, or were made subject to material
conditions, our future results of operations may be materially adversely affected. See “Risk Factors —
Risks Related to Our Business — The legal and regulatory environment that applies to our cable
television, telecommunications and Internet and digital content segments may change in a manner
which, may be disadvantageous to us, or may limit our ability to operate our business — Our
acquisition of a controlling interest in Cablevisión, and its acquisition of Multicanal, Holding Teledigital
and Prima are subject to regulatory approval”.
Doubtful Accounts
We review our doubtful accounts on a monthly basis for estimated losses resulting from the
inability of our customers to make the required payments. The customer base in the cable television
and Internet segment is primarily residential in nature while the customer base of our publishing and
printing and broadcasting and programming operations involves a wide range of companies and, to a
lesser extent, individuals. Generally, we do not require collateral from our customers, although we do
require that all advertising agencies, receiver agencies and direct advertisers that are granted
financing to sell advertisement in our print media, provide AGEA security with respect to at least 70%
of the payment obligations, in general by means of a mortgage or bank guaranty.
We invoice most of our cable television and Internet access subscribers in advance. A majority
of Argentine cable television subscribers pay their invoices in cash, and encourage them to pay their
111
monthly invoices by automatic credit card or bank account debits. We seek to enforce a strict
disconnection policy. On the third month after non-payment, we discontinue the mailing of bills and the
monthly programming magazine to the subscriber and, if payment is not received, we disconnect the
subscriber as soon as practicable after the expiration of this period. Our efforts to improve customer
retention and collections since 2005 have resulted in a reduction in the lag between invoicing and
collection and, accordingly, a decrease in our charges for doubtful accounts.
In determining the adequacy of our allowances for doubtful accounts, we analyze, among other
things, historic bad debt experience, customer creditworthiness, current economic trends in Argentina
and customer payment history. If the financial condition of our customers deteriorates, and impairs
their ability to make payments, additional charges may be required.
We believe that the accounting estimate relating to doubtful accounts is a critical accounting
estimate because changes in the estimated level of doubtful debts may materially affect net income.
The estimate for doubtful accounts is a critical accounting estimate for all of our business segments.
Under net bad debt expense as of 31 December 2006 we recorded an income of Ps.2.3 million mainly
as a result of recoveries of doubtful accounts in our printing and publishing segment.
Provision for Contingencies
We are involved in legal, fiscal and administrative disputes through our normal course of
business. The outcome of these claims may have a material impact on our balance sheet as well as
on our net income. See “Business Description — Legal Proceedings”. Our management estimates the
potential outcome of these claims based on the most objective evidence on hand from our advisors
until a final resolution is reached. Due to the uncertain nature of these issues, these estimates change
as additional information becomes available and could result in material changes to the financial
statements in subsequent periods. As at 31 December 2006, we had a provision for contingencies of
Ps.112.9 million for pending disputes.
Accounting for Acquisitions
We account for acquisitions under the purchase method of accounting. We allocate the total
value of consideration paid to the underlying net assets acquired, based on their respective estimated
fair values determined by using primarily internal valuations. We use various methods to determine
the fair value of assets and liabilities acquired including discounted cash flows, external market values
and others. Goodwill generated by recent acquisitions is a preliminary estimate, since we are in the
process of compiling the evidence necessary to better estimate the fair market value of assets and
liabilities identifiable at the time of acquisition. Therefore, the value of goodwill and the assets and
liabilities so identified may be modified in the future, as permitted by the prevailing accounting
standards. We believe that the valuation assumptions underlying each of these valuation methods are
based on the current information available including discount rates, cash flow assumptions, market
risk rates and others. We consider our accounting policy for valuation of acquisitions critical because
the judgements made in determining the estimated fair value and expected useful lives assigned to
each class of assets and liabilities acquired can impact the value of the asset or liability, including the
impact on deferred taxes, the respective amortisation periods and ultimately net income. Therefore,
the use of other valuation methods, as well as other assumptions underlying these valuation methods,
could impact the determination of the financial position and results of operations.
Subscriber Portfolio Valuation
We determine the useful life of the acquired subscriber portfolios on the basis of the churn rate
of the acquired portfolio and discounted cash flows. We believe that this determination constitutes a
critical accounting policy because a determination of the estimated useful life of a subscriber portfolio
based on other criteria may result in a material different valuation and, accordingly, a different rate of
depreciation with its related impact on our net income.
112
Impairment of Long-lived Assets and Goodwill
Argentine GAAP requires that we test long-lived assets for impairment whenever indicators of
impairment exist. Additionally, goodwill must be evaluated for impairment at least annually. If any
impairment were indicated as a result of such reviews, we would measure it by comparing the
discounted cash flows of the assets or business to our book value. The amount of impairment to be
recognised is the excess of the reported book value of the assets over the recoverable value of those
assets.
Management has reviewed our long-lived assets, primarily property and equipment to be held
and used in the business, long-term investments and goodwill for the purposes of determining and
measuring impairment. Given the significant negative impact of the devaluation, the pesification and
the macro-economic slowdown in Argentina of 2002 on our operating results, and as management’s
best estimate of discounted future cash flows was below the book value of our long-lived assets, we
recorded in the aggregate impairment charges of Ps.753.4 million on goodwill, Ps.29.1 million on
property, plant and equipment and Ps.0.4 million on intangible assets.
We believe that the accounting estimate related to this asset impairment is a “critical accounting
estimate” because (1) it is highly susceptible to change from period to period, since it requires
management to make assumptions about future revenues and costs; and (2) recognising an
impairment has a material impact on assets reported on our balance sheet as well as our net loss.
Management’s assumption about future revenues, as well as future number of subscribers, operating
costs and selling, general and administrative costs have improved as a result of the recovery of the
Argentine economy and its impact on our industry. In estimating future revenues, as well as future
number of subscribers, operating costs and selling, general and administrative costs, we used internal
projections.
Although we believe our estimates are appropriate, significant differences in the actual performance of the asset or group of assets may materially affect our asset values and results of
operations.
Valuation Allowance on Deferred Income Tax Assets
Deferred income taxes are provided to reflect the net tax effects of temporary differences
between the financial reporting and the tax bases of assets and liabilities and are measured using the
currently enacted tax rates and laws in each of the relevant jurisdictions. Deferred income taxes reflect
management’s assessment of actual future taxes to be paid on items reflected in the financial
statements, giving consideration to both timing and probability of realisation.
Deferred tax assets are reduced by a valuation allowance if, based on the weight of available
evidence, it is more likely than not that some portion or all of the deferred tax assets will not be
realised. Actual income taxes could vary from these estimates due to future changes in income tax
law or the outcome of any review of our and our subsidiaries’ tax returns by the taxing authorities.
We have recorded a valuation allowance under Argentine GAAP of Ps.94.6 million as of
31 December 2006 due to uncertainties related to our ability to utilise certain deferred tax assets,
primarily consisting of tax losses carried forward, before they expire. We have considered the reversal
of the deferred income tax liabilities, tax planning and taxable income projections based on our best
estimates in assessing the need for the valuation allowance. However, in the event management
determined that it would be able to realise its deferred tax assets in the future in excess of its net
recorded amount, it would be required to an adjust the deferred tax asset at the time and for the
period such determination was made.
Accounting for Programming
We produce part of our programming for initial broadcast over our television networks in
Argentina. In-house production cost is fully expensed against the cost of sales after each relevant
113
episode of a program or single program is broadcast or transmitted. Programming purchased from
third parties, from our own producers and co-productions acquired in perpetuity, are expensed against
the cost of sales over its estimated useful life, considering the expected future benefit period over
which a given program will generate revenues (generally, over an eight year period). We then
capitalise the production costs related to a given program over the expected future benefit period.
Under this policy, we generally expense substantially all of the production costs related to a given
program in the year of its initial broadcast and defer and expense the remaining production costs over
the remainder of the expected future benefit period. See Note 1.1.b) to our audited consolidated
financial statements.
Rights related to feature films, series and single programs acquired in perpetuity for broadcasting
by our cable signal Volver are expensed against the cost of sales over their estimated useful life
(generally seven years), with a grace period of four years, amortised on a decreasing basis.
We estimate expected future benefit periods based on past historical revenue patterns for similar
types of programming and any potential future events through which we can exploit or distribute our
programming. To the extent that a given future expected benefit period is shorter than we estimate,
we may have to write off capitalised production costs sooner than anticipated. Conversely, to the
extent that a given future expected benefit period is longer than we estimate, we may have to extend
the amortisation schedule for the remaining capitalised production costs.
We also purchase programming from, and enter into license agreements with, various third party
programming producers and providers, pursuant to which we receive the rights to transmit programming produced by third parties over our television networks in Argentina and/or our pay television and
other media outlets. In the case of programming acquired from third parties, we estimate the expected
future benefit period based on the anticipated number of showings in Argentina over our television
network and/or our pay television and other media outlets. In the case of programming licensed from
third parties, we estimate the expected future benefit period based upon the term of the license. To
the extent that a given future expected benefit period is shorter than we estimate, we may have to
write off the purchase price or the license fee sooner than anticipated. Conversely, to the extent that a
given future expected benefit period is longer than we estimate, we may have to extend the
amortisation schedule for the remaining portion of the purchase price or the license fee.
Provision for Obsolescence of Materials
Provision for potentially obsolete or slow-moving materials is made based on management’s
assumptions about future consumption.
While, based on our experience, losses due to obsolescence of materials have been within
expectations and the provisions established, if circumstances change (i.e., significant changes in
technology) management’s estimates of the recoverability of these materials could be reduced by a
material amount. In this case, our results of operations and financial condition could be materially and
adversely affected.
Valuation of Currency and Interest Rate Swap
We record receivables and liabilities generated by certain currency and interest rate swaps at
their estimated fair value, which we determine by reference to arithmetic models, since the instruments cannot be marked to market. Variations in the estimated fair value are recognised as a gain or
loss for the period. While we believe that management’s determinations of estimated fair value are
reasonable based on their knowledge of current factors, these estimates may be adjusted and result
in future losses.
114
Results of Operations
The following table is derived from our audited consolidated financial statements as of 31 December
2004, 2005 and 2006 and for the years ended 31 December 2004, 2005 and 2006 and from our
unaudited consolidated financial statements as of 30 June 2006 and 2007 and for the six months ended
30 June 2006 and 2007, which have been prepared in accordance with Argentine GAAP, and sets forth
the results of our operations for the periods indicated:
Year Ended 31 December
2004
2005
2006
Six Months
Ended 30 June
2006
2007
(Unaudited)
(In millions of Pesos)
Net Sales:
Cable television and Internet
access. . . . . . . . . . . . . . . . . . . .
Cable TV subscription fees . . . .
Internet access . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
Printing and publishing . . . . . . . . .
Advertising . . . . . . . . . . . . . . . .
Circulation . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
Broadcasting and programming. . .
Other . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Cost of Sales (excluding
depreciation and amortisation):
Cable television and Internet
access. . . . . . . . . . . . . . . . . . . .
Printing and publishing . . . . . . . . .
Broadcasting and programming. . .
Other . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expenses
(excluding depreciation and
amortisation):
Cable television and Internet
access. . . . . . . . . . . . . . . . . . . .
Printing and publishing . . . . . . . . .
Broadcasting and programming. . .
Other . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortisation:(1)
Cable television and Internet
access. . . . . . . . . . . . . . . . . . . .
Printing and publishing . . . . . . . . .
Broadcasting and programming. . .
Other . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . .
642.9
536.5
72.0
34.4
732.1
379.8
227.5
124.8
416.6
57.6
(181.9)
1,667.3
742.8
611.5
97.6
33.7
827.0
458.7
236.8
131.5
499.4
59.8
(140.6)
1,988.4
1,274.8
1,003.2
221.4
50.1
989.4
532.5
266.8
190.0
659.5
102.9
(214.8)
2,811.8
438.1
352.2
61.0
24.9
463.4
231.9
134.0
97.4
279.3
41.6
(80.9)
1,141.5
1,218.9
957.5
239.7
21.8
524.4
273.1
138.5
112.7
354.9
64.9
(169.9)
1,993.3
(306.8)
(361.3)
(250.9)
(15.3)
92.1
(842.2)
(395.8)
(416.4)
(314.7)
(19.2)
57.6
(1,088.5)
(588.7)
(513.3)
(455.0)
(26.0)
91.4
(1,491.6)
(219.6)
(242.3)
(192.1)
(11.7)
27.1
(638.5)
(520.7)
(264.4)
(233.5)
(21.6)
76.8
(963.4)
(160.7)
(178.7)
(94.2)
(22.4)
89.9
(366.2)
(192.2)
(197.1)
(106.9)
(30.1)
83.1
(443.2)
(352.8)
(214.0)
(120.8)
(41.1)
118.3
(610.5)
(112.9)
(99.8)
(57.4)
(17.7)
53.8
(234.0)
(279.2)
(134.4)
(66.4)
(26.3)
93.1
(413.3)
(123.4)
(57.3)
(13.5)
(1.9)
—
(95.9)
(40.5)
(13.1)
(2.1)
—
(150.5)
(38.4)
(17.3)
(2.4)
—
(44.1)
(19.3)
(7.2)
(1.2)
—
(166.8)
(19.6)
(8.5)
(1.2)
—
115
Year Ended 31 December
Six Months
Ended 30 June
2004
2006
2005
2006
2007
(Unaudited)
(In millions of Pesos)
Total . . . . . . . . . . . . . . . . . . . . . .
Financing and holding results, net .
Equity in earnings (losses) from
unconsolidated affiliates and gain
on sale of subsidiaries, net . . . . .
Other net income (expense), net . .
Income before income tax, tax on
assets and minority interest. . . . .
Income tax and tax on assets . . . . .
Minority interest . . . . . . . . . . . . . . .
Net income/(loss) for the
year/period . . . . . . . . . . . . . . . . .
.
.
(196.1)
(303.5)
(151.7)
(341.2)
(208.5)
920.0
(71.8)
(237.4)
(196.1)
(193.1)
.
.
31.4
(10.1)
15.2
0.3
224.7
17.5
16.0
(1.5)
4.6
(10.3)
.
.
.
(19.5)
15.3
2.3
(20.7)
36.0
(1.7)
1,663.3
(490.7)
(302.9)
(25.7)
10.6
(3.0)
221.7
(85.5)
(32.7)
.
(1.9)
13.6
869.7
(18.1)
103.5
(1) Includes amounts chargeable to cost of sales and selling and administrative expenses.
We define Adjusted EBITDA as sales minus cost of sales and selling and administrative
expenses (excluding depreciation and amortisation). We believe that Adjusted EBITDA is a meaningful
measure of its performance because it is commonly used in the industry to analyze and compare
media companies on the basis of operating performance, leverage and liquidity. Nonetheless, Adjusted
EBITDA is not a measure of net income or cash flow from operations and should not be considered
as an alternative to net income, an indication of our financial performance, an alternative to cash flow
from operating activities or a measure of liquidity. Because Adjusted EBITDA is not determined in
accordance with Argentine GAAP, other companies may compute Adjusted EBITDA in a different
manner. Therefore, Adjusted EBITDA as reported by other companies may not be comparable to
Adjusted EBITDA as we report it.
In November 2001, the FACPCE adopted Technical Resolution No. 18, which for reporting
purposes requires public companies to include segment reporting information, grouping activities
relating to products and services that are subject to similar risks and profitability. We grouped our
operations into four business segments: cable television and Internet access, publishing and printing,
broadcasting and programming, and other. See Note 3 to our audited consolidated financial statements. The segment data set forth in this Offering Circular do not reflect the elimination of intersegment sales and corporate expenses.
Total Results
The Six Months Ended 30 June 2007 v. the Six Months Ended 30 June 2006
Net Sales
Our net sales increased by 74.6% to Ps.1,993.3 million in the first six months of 2007, compared
to Ps.1,141.5 million in the six months of 2006. The increase in net sales is largely attributable to
increased net sales by the cable television and Internet segment resulting from the consolidation of
Cablevisión as consequence of the Cablevisión Acquisition. In addition, practically all of our business
segments experienced continued growth during the first six months of 2007.
Cost of Sales (Excluding Depreciation and Amortisation)
Our cost of sales (excluding depreciation and amortisation) increased by 50.9% to Ps.963.4 million
in the first six months of 2007, compared to Ps.638.5 million in the first six months of 2006. The increase
116
was principally due to increased cost of sales (excluding depreciation and amortisation) in our cable
television and Internet segment resulting from the consolidation of Cablevisión as consequence of the
Cablevisión Acquisition. In addition, all of our business segments experienced an increase in cost of sales
(excluding depreciation and amortisation) driven by higher salaries and, in certain cases, a larger payroll.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Our selling expenses (excluding depreciation and amortisation) increased by 74.0% to
Ps.203.3 million in the first six months of 2007, compared to Ps.116.9 million in the first six months of
2006. The increase was principally due to increased selling expenses (excluding depreciation and
amortisation) resulting from the consolidation of Cablevisión as a consequence of the Cablevisión
Acquisition and, to a lesser extent, increases in salaries in all of our business segments.
Our administrative expenses (excluding depreciation and amortisation) increased by 79.2% to
Ps.209.9 million in the first six months of 2007, compared to Ps.117.2 million in the first six months of
2006. The increase was principally due to increased administrative expenses (excluding depreciation
and amortisation) resulting from the consolidation of Cablevisión as a consequence of Cablevisión
Acquisition and, to a lesser extent, increased in salaries in all of our business segments.
Depreciation and Amortisation
Our depreciation and amortisation expenses increased by 173.1% to Ps.196.1 million in the first
six months of 2007, compared to Ps.71.8 million in the first six months of 2006. The increase was
principally due to increased amortisation and depreciation charges (including the amortisation of
additional intangibles generated by the acquisition of the subscriber portfolios of Cablevisión and
Teledigital with an original book value of Ps.1,052.8 million) resulting from the consolidation of
Cablevisión as consequence of the Cablevisión Acquisition.
Financial and Holding Results, Net
Our financial and holding expenses decreased by 18.7% to Ps.193.1 million in the first six
months of 2007, compared to Ps.237.4 million in the first six months of 2006. The decrease was
principally due to the reduction of our outstanding debt resulting from the completion of Multicanal’s
APE in July 2006.
Equity in Earnings (Losses) from Unconsolidated Affiliates and Gain on Sale of Subsidiaries, Net
Our equity in earnings (losses) from unconsolidated affiliates and gain on sale of subsidiaries,
net decreased to Ps.4.6 million for the first six months of 2007 compared to a gain of Ps.16.0 million
for the same period in 2006. The decrease is attributable to the consolidation of Cablevisión as from
26 September 2006.
Income Tax and Tax on Assets
We had charges of Ps.85.5 million on account of income tax and tax on assets for the first six
months of 2007 compared to gains of Ps.10.6 million for the same period in 2006. The gains for the
first six months of 2006 are attributable to the tax loss carryforwards generated by Multicanal’s losses
prior to the completion of its APE in July 2006, while in the same period in 2007 we generated net
taxable income.
Net Income
As a result of the factors described above, we had net income of Ps.103.5 million in the first six
months of 2007, compared to a net loss of Ps.18.1 million in the first six months of 2006.
117
2006 v. 2005
Net Sales
Our net sales increased by 41.4% to Ps.2,811.8 million in 2006, compared to Ps.1,988.4 million
in 2005. The increase in net sales is largely attributable to the consolidation of Cablevisión as
consequence of the increase in our ownership interest in Cablevisión and the acquisition of Teledigital
in September 2006, as well as to the growth of our net sales across all of our business segments.
Cost of Sales (Excluding Depreciation and Amortisation)
Our cost of sales (excluding depreciation and amortisation) increased by 37.0% to Ps.1,491.6 million
in 2006, compared to Ps.1,088.5 million in 2005. The increase was principally due to increased cost of
sales (excluding depreciation and amortisation) in our cable television and Internet segment resulting from
the consolidation of Cablevisión as consequence of the increase in our ownership interest in Cablevisión
and the acquisition of Holding Teledigital in September 2006 and to a lesser extent a general increase in
salaries as well as an increase in the cost of programming rights.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Our selling expenses (excluding depreciation and amortisation) increased by 27.4% to
Ps.290.0 million in 2006, compared to Ps.227.5 million in 2005. The increase was principally due to
the consolidation of Cablevisión as consequence of the increase in our ownership interest in
Cablevisión and the acquisition of Holding Teledigital in September 2006 and, to a lesser extent,
increases in salaries.
Our administrative expenses (excluding depreciation and amortisation) increased by 48.6% to
Ps.320.5 million in 2006, compared to Ps.215.7 million in 2005. The increase was principally due to
the consolidation of Cablevisión as consequence of the increase in our ownership interest in
Cablevisión and the acquisition of Holding Teledigital in September 2006 and, to a lesser extent,
increases in salaries.
Depreciation and Amortisation
Our depreciation and amortisation expense increased by 37.5% to Ps.208.5 million in 2006,
compared to Ps.151.7 million in 2005. The increase was principally due to increased amortisation and
depreciation charges (including the amortisation of an additional Ps.1,052.8 million of intangibles
generated by the acquisition of the subscriber portfolios of Cablevisión and Teledigital) resulting from
the consolidation of Cablevisión as a consequence of the increase in our ownership interest in
Cablevisión and the acquisition of Holding Teledigital.
Financial and Holding Results, Net
We recorded financial and holding gains of Ps.920.0 million in 2006, compared to losses of
Ps.341.2 million in 2005. The gains in 2006 are primarily attributable to the completion of the
restructuring of Multicanal’s financial debt in accordance with Multicanal’s APE in July 2006.
Equity in Earnings (Losses) from Unconsolidated Affiliates and Gain on Sale of Subsidiaries, Net
Our equity in earnings (losses) from unconsolidated affiliates and gain on sale of subsidiaries,
net increased to Ps.224.7 million in 2006 compared to Ps.15.2 million in 2005. The increase is
attributable primarily to the non-recurrent gain of Ps.246.8 million recorded as a result of the dilution
for the benefit of existing shareholders (the Company and AGEA) resulting from the capitalisation of
approximately U.S.$182.0 million of outstanding debt for shares representing approximately 35% of
Multicanal’s total capital pursuant to Multicanal’s APE in July 2006.
118
Income Tax and Tax on Assets
We recorded charges of Ps.490.7 million on account of income tax and tax on assets for 2006
compared to gains of Ps.36.0 million for 2005. The gains for 2005 are attributable to the tax loss
carryforwards generated by Multicanal’s losses prior to the completion of its APE in July 2006, while
in 2006 we generated taxable income primarily from the gains by the consummation of Multicanal’s
APE.
Net Income
As a result of the factors described above, we had net income of Ps.869.7 million in 2006,
compared to net income of Ps.13.6 million in 2005.
2005 v. 2004
Net Sales
Our net sales increased by 19.3% to Ps.1,988.4 million in 2005, compared to Ps.1,667.3 million
in 2004. The increase in net sales is largely attributable to growth in all of our business segments as
well as increases in the prices of our goods and services.
Cost of Sales (Excluding Depreciation and Amortisation)
Our cost of sales (excluding depreciation and amortisation) increased by 29.2% to Ps.1,088.5 million
in 2005, compared to Ps.842.2 million in 2004. The increase was principally due to the increased level of
activity in all of our business segments and the impact of inflation on certain of our costs.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Our selling expenses (excluding depreciation and amortisation) increased by 18.5% to
Ps.227.5 million in 2005, compared to Ps.192.0 million in 2004. The increase was principally due to
increases in salaries, and additional advertising expenses related to Diario Clarín’s 60th anniversary.
Our administrative expenses (excluding depreciation and amortisation) increased by 23.8% to
Ps.215.7 million in 2005, compared to Ps.174.2 million in 2004. The increase was principally due to
increases in salaries and a larger payroll.
Depreciation and Amortisation
Our depreciation and amortisation expenses decreased by 22.7% to Ps.151.7 million in 2005,
compared to Ps.196.1 million in 2004. The decrease was principally due to the full depreciation of
equipment and the reduced level of capital expenditures.
Financial and Holding Results, Net
Our financial and holding losses increased by 12.4% to Ps.341.2 million in 2005, compared to
Ps.303.5 million in 2004. The increase was principally due to the impact of the devaluation of the Peso
on our outstanding stock of foreign-currency denominated debt.
Equity in Earnings (Losses) from Unconsolidated Affiliates and Gain on Sale of Subsidiaries, Net
Our equity in earnings (losses) from unconsolidated affiliates and gain on sale of subsidiaries,
net decreased by 51.6% to Ps.15.2 million in 2005 compared to Ps.31.4 million in 2004. The decrease
is attributable to the impairment of intangibles associated with a minority investment related to our
television broadcasting and programming segment.
119
Income Tax and Tax on Assets
Our gains on account of income tax and tax on assets increased by 135.9% to Ps.36.0 million in
2005 compared to Ps.15.3 million in 2004. The increase is attributable to the reversal of valuation
allowances in deferred income tax assets by Multicanal.
Net Income
As a result of the factors described above, we had net income of Ps.13.6 million in 2005,
compared to a net loss of Ps.1.9 million in 2004.
The following is a discussion of net sales, cost of sales (excluding depreciation and amortisation), selling and administrative expenses (excluding depreciation and amortisation), and depreciation
and amortisation by segment as defined and set out in Note 3 to our audited consolidated financial
statements. The information set forth below is also summarised in the table directly under the heading
“Results of Operations”. The segment data discussed below do not reflect the elimination of intersegment sales and corporate expenses.
Cable Television and Internet Access
Our cable television and Internet access segment generates substantially all of its net sales from
monthly customer charges for basic cable and broadband Internet access services, and the balance
from connection and other fees and advertising.
We operate primarily in Argentina. A principal element of our strategy in the past was to increase
our subscriber base through the acquisition of cable television companies and the expansion of our
existing systems. More recently, we have focused on internal growth of cable television subscribers
and expanding our Internet subscriber base. In addition, we have improved our net sales through
increases in our basic monthly subscription fees at a rate comparable to the annual inflation rate and
the offering of premium programming.
Programming costs (including sports programming rights acquired from our broadcasting and
programming operations) account for a significant portion of cost of sales (excluding depreciation and
amortisation) of the segment. Under the terms of certain of our programming agreements, a decrease
in the number of subscribers also causes a reduction in certain cost of sales (excluding depreciation
and amortisation).
We seek to improve operating performance and cash flow through the consolidation of the
networks of Cablevisión and Multicanal. These efforts have resulted in a significant improvement in
the results of operations since the Cablevisión Acquisition in September 2006. In addition, by
absorbing wholly-owned subsidiaries, Cablevisión and Multicanal eliminate duplicative administrative
functions.
Under selling and administrative expenses (excluding depreciation and amortisation), our cable
television and Internet access segment records charges for wages, salaries and fees as well as
general advertising expenses.
120
The table set forth below presents net sales, cost of sales (excluding depreciation and amortisation), selling and administrative expenses (excluding depreciation and amortisation) and depreciation
and amortisation data for the segment for the periods indicated:
Cable Television and Internet Access
Six Months
Year Ended 31 December
Ended 30 June
Net sales . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (excluding depreciation and
amortisation) . . . . . . . . . . . . . . . . . . . .
as a % of net sales. . . . . . . . . . . . . . . .
Selling and administrative expenses
(excluding depreciation and
amortisation) . . . . . . . . . . . . . . . . . . . .
as a % of net sales. . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . .
as a % of net sales. . . . . . . . . . . . . . . .
2004
2005
2006
2006
2007
(Unaudited)
(Millions of Pesos)
642.9
742.8
1,274.8
438.1
1,218.9
(306.8) (395.8)
48%
53%
(588.7) (219.6)
46%
50%
(520.7)
43%
(160.7) (192.2)
25%
26%
(123.4)
(95.9)
19%
13%
(352.8) (112.9)
28%
26%
(150.5)
(44.1)
12%
10%
(279.2)
23%
(166.8)
14%
The Six Months Ended 30 June 2007 v. the Six Months Ended 30 June 2006 (Cable Television
and Internet Access)
Net Sales
Net sales increased by 178.2% to Ps.1,218.9 million for the six-month period ended 30 June
2007 compared to Ps.438.1 million for the six-month period ended 30 June 2006. The increase in net
sales is principally attributable to the consolidation of Cablevisión as a consequence of the increase in
our ownership interest in Cablevisión and the acquisition of Holding Teledigital on 26 September 2006,
and, to a lesser extent, an increase in the number of subscribers through internal growth, including
additional Internet subscribers, and in average subscription charges for cable television registered in
2006 and in the first six months of 2007.
In addition to the subscribers acquired through Cablevisión and Teledigital, our segment had
1,304,600 cable television basic subscribers as of 30 June 2007 compared to 1,218,900 cable
subscribers as of 30 June 2006, and 305,900 Internet subscribers as of 30 June 2007 compared to
259,200 as of 30 June 2006.
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 137.1% to Ps.520.7 million
for the first six months of 2007, compared to Ps.219.6 million for the same period in 2006. This
increase is mainly due to the consolidation of Cablevisión as a consequence of the increase in our
ownership interest in Cablevisión and the acquisition of Holding Teledigital on 26 September 2006,
and to a lesser extent, the increase in our programming costs attributable to internal growth in our
subscriber base and pricing adjustments linked to basic monthly fee increases contemplated in certain
programming contracts, and the effect of salary increases.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
147.4% to Ps.279.2 million for the first six months of 2007, compared to Ps.112.9 million for the same
period in 2006. This increase is mainly due to the consolidation of Cablevisión as a consequence of
121
the increase in our ownership interest in Cablevisión and the acquisition of Holding Teledigital on
26 September 2006.
Expenses for salaries, wages, social security charges and other personnel expenses increased
primarily as a result of the consolidation of Cablevisión as a consequence of the increase in our
ownership interest in Cablevisión and the acquisition of Holding Teledigital on 26 September 2006,
and the effect of salary increases.
Depreciation and Amortisation
Depreciation expenses of property, plant and equipment increased by 172.3% to Ps.112.2 million
for the six months ended 30 June 2007 from Ps.41.2 million for the same period in 2006. The
increase reflects the consolidation of Cablevisión as a consequence of the increase in our ownership
interest in Cablevisión and the acquisition of Holding Teledigital on 26 September 2006, and additions
of cable and network equipment during 2006 and the first six months of 2007.
We also recorded Ps.54.6 million in amortisation expenses for the six months ended 30 June
2007 compared to Ps.2.9 million for the same period in 2006. The increase is attributable to the
intangible assets related to the purchase of Cablevisión’s and Teledigital’s subscriber portfolios in
September 2006.
2006 v. 2005 (Cable Television and Internet Access)
Net Sales
Net sales increased by 71.6% to Ps.1.274.8 million in 2006 compared to Ps.742.8 million in
2005. The increase in net sales is principally attributable to the consolidation of Cablevisión as a
consequence of the increase in our ownership interest in Cablevisión and the acquisition of Holding
Teledigital on 26 September 2006, the growth during 2006 in the number of subscribers, including
additional subscribers of high-speed Internet, and increases in average subscription charges for cable
television recorded in 2006.
In addition to the subscribers acquired through Cablevisión and Teledigital, as of 31 December
2006 our segment had 1,267,400 basic subscribers, compared to 1,145,200 basic subscribers as of
31 December 2005, and 293,100 Internet subscribers, compared to 229,000 subscribers as of
31 December 2005.
Costs of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 48.7% to Ps.588.7 million
in 2006, compared to Ps.395.8 million in 2005. This increase is mainly attributable to the consolidation
of Cablevisión as a consequence of the increase in our ownership interest in Cablevisión and the
acquisition of Holding Teledigital, and to a lesser extent to the increase in our programming costs
attributable to the internal growth in our subscriber base and pricing adjustments linked to basic
monthly fee increases contemplated in certain programming contracts.
Expenses for salaries, wages, social security charges and other personnel expenses increased
primarily as a result of the consolidation of Cablevisión as a consequence of the increase in our
ownership interest in Cablevisión and the acquisition of Holding Teledigital on 26 September 2006,
and the effect of salary increases.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
83.5% in 2006 to Ps.352.8 million, compared to Ps.192.2 million in 2005. This increase is mainly due
to the consolidation of Cablevisión as a consequence of the increase in our ownership interest in
122
Cablevisión and the acquisition of Holding Teledigital on 26 September 2006 and to a lesser extent an
increase in marketing campaigns.
Expenses for salaries, wages, social security charges and other personnel expenses increased
primarily as a result of the consolidation of Cablevisión as a consequence of the increase in our
ownership interest in Cablevisión and the acquisition of Teledigital on 26 September 2006, and the
effect of salary increases.
Depreciation and Amortisation
Depreciation expenses of property, plant and equipment increased by 28.5% to Ps.115.7 million
in 2006 from Ps.90.1 million in 2005. The increase reflects the consolidation of Cablevisión as a
consequence of the increase in our ownership interest in Cablevisión and the acquisition of Holding
Teledigital on 26 September 2006, as well as additions of cable and network equipment in 2006.
We also recorded Ps.34.8 million in amortisation expenses in 2006, compared to Ps.5.9 million
in 2005. The increase is attributable mainly to the purchase of Cablevisión’s and Teledigital’s
subscriber portfolios.
2005 v. 2004 (Cable Television and Internet Access)
Net Sales
Net sales increased by 15.5% to Ps.742.8 million in 2005 compared to Ps.642.9 million in 2004.
The increase in net sales is attributable to the internal growth in our subscriber base, including
Internet subscribers, and increases in average subscription fees recorded in 2005.
As of 31 December 2005, we had 1,145,200 basic subscribers, an increase of 8.3% from
1,057,900 basic subscribers as of 31 December 2004. In the same period, our Internet subscriber
base increased by 40.9% from 162,500 subscribers as of 31 December 2004 to 229,000 subscribers
as of 31 December 2005.
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased 29.0% to Ps.395.8 million for
the year ended 31 December 2005, from Ps.306.8 million for the year ended 31 December 2004.
Programming costs increased principally due to the internal growth in our subscriber base and
pricing adjustments linked to basic monthly fee increases contemplated in certain programming
contracts.
Expenses for salaries, wages, social security charges and other personnel expenses increased
mainly as a result of salary increases, and to a lesser extent as a result of growth of our payroll in
2005.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
19.6% in 2005 to Ps.192.2 million, compared to Ps.160.7 million in 2004. This increase is mainly due
to increases in salaries, higher commissions and building expenses.
Depreciation and Amortisation
Depreciation and amortisation expenses decreased by 22.3% to Ps.95.9 million in 2005 from
Ps.123.4 million in 2004. The decrease is principally attributable to the full depreciation of certain
equipment in 2004.
123
Printing and Publishing
Sales in our printing and publishing segment are largely derived from four principal sources:
• display and classified advertising sales;
• sales of newspapers, optional products (booklets and magazines) and textbooks;
• printing services; and
• sales of newsprint paper.
Advertising revenues are determined by the prices achieved per single column centimetre (the
advertising yield) and the number of advertising centimetres sold (advertising lineage) in the relevant
period. Circulation revenues reflect the share retained of the cover price of each newspaper and
optional product sold and the number of copies thereof sold in the relevant period, net of copies
returned.
Macroeconomic conditions have a significant impact on advertising revenues and, to a lesser
extent, circulation revenues.
The cost of sales (excluding depreciation and amortisation) of our printing and publishing
segment comprise labour costs, the cost of raw material (primarily paper and ink, which are priced by
reference to the international market) and printing costs, fees and utility costs.
The table set forth below presents net sales (excluding depreciation and amortisation), cost of
sales, selling and administrative expenses (excluding depreciation and amortisation) and depreciation
and amortisation data for the segment for the periods indicated:
Printing and Publishing
Year Ended 31
Six Months
December
Ended 30 June
2004
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (excluding depreciation and
amortisation) . . . . . . . . . . . . . . . . . . . . .
as a % of net sales . . . . . . . . . . . . . . . .
Selling and administrative expenses
(excluding depreciation and
amortisation) . . . . . . . . . . . . . . . . . . . . .
as a % of net sales . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . .
as a % of net sales . . . . . . . . . . . . . . . .
.
732.1
2005
2006
2006
2007
(Unaudited)
(Millions of Pesos)
827.0
989.4
463.4
524.4
.
.
(361.3) (416.4) (513.3) (242.3) (264.4)
49%
50%
52%
52%
50%
.
.
.
.
(178.7) (197.1) (214.0)
24%
24%
22%
(57.3)
(40.5)
(38.4)
8%
5%
4%
(99.8) (134.4)
22%
26%
(19.3)
(19.6)
4%
4%
The Six Months Ended 30 June 2007 v. the Six Months Ended 30 June 2006 (Printing and
Publishing)
Net Sales
Net sales increased by 13.2% to Ps.524.4 million in the first six months of 2007, compared to
Ps.463.4 million in the first six months of 2006. The increase was the result of an increase in
advertising yield, the increase in sales of optionals and in the cover price of newspapers, which more
than offset the decrease in circulation.
124
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 9.1% to Ps.264.4 million in
the first six months of 2007, compared to Ps. 242.3 million in the first six months of 2006. The
increase was primarily the result of an increase of the costs of raw materials (paper and ink), higher
wages and salaries and a larger payroll.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
34.7% to Ps.134.4 million in the first six months of 2007, compared to Ps.99.8 million in the first six
months of 2006. The increase was primarily the result of an increase in wages and salaries, and
advertising expenses.
Depreciation and Amortisation
Depreciation and amortisation expenses increased by 1.5% to Ps.19.6 million in the first six
months of 2007, compared to Ps.19.3 million in the first six months of 2006. The increase reflects
capital expenditures made during 2006 and the first six months of 2007.
2006 v. 2005 (Printing and Publishing)
Net Sales
Net sales increased by 19.6% to Ps.989.4 million in 2006, compared to Ps.827.0 million in 2005.
The increase was primarily the result of an increase in the advertising yield and additional sales of
advertising lineage, as well as additional sales of optionals and an increase in the cover price for
newspapers, which more than offset the decrease in circulation, and increased printing of leaflets and
magazines. In addition, in 2006 we began selling textbooks.
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 23.3% to Ps.513.3 million
in 2006, compared to Ps.416.4 million in 2005. The increase was primarily the result of higher average
prices for raw materials (primarily paper and ink), higher salaries and a larger payroll.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
8.6% to Ps.214.0 million in 2006, compared to Ps.197.1 million in 2005. The increase was primarily
the result of increases in salaries and payroll and higher advertising expenses incurred to promote
new optional products, which were offset by a decrease in general advertising and marketing
expenses incurred in 2005 in connection with Diario Clarín’s 60th anniversary.
Depreciation and Amortisation
Depreciation and amortisation expenses decreased by 5.4% to Ps.38.4 million in 2006, compared to Ps.40.5 million in 2005. The decrease was primarily the result of the full depreciation of
certain equipment in 2005.
2005 v. 2004 (Printing and Publishing)
Net Sales
Net sales increased by 13.0% to Ps.827.0 million in 2005, compared to Ps.732.1 million in 2004.
The increase was primarily the result of increased advertising yield and lineage, an increase in the
cover price of newspapers and in circulation (including as a result of campaigns related to Diario
Clarín’s 60th anniversary, additional printing revenues and higher sales of newsprint paper.
125
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 15.3% to Ps.416.4 million
in 2005, compared to Ps.361.3 million in 2004. The increase was primarily the result of a higher level
of the purchase of greater volumes of raw materials (paper and ink), copyright payments and higher
salaries resulting from wages and payroll increases.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
10.3% to Ps.197.1 million in 2005, compared to Ps.178.7 million in 2004. The increase was primarily
the result of advertising expenses incurred in connection with general advertising and marketing
campaigns related to the 60th anniversary of Diario Clarín.
Depreciation and Amortisation
Depreciation and amortisation expenses decreased by 29.3% to Ps.40.5 million in 2005,
compared to Ps.57.3 million in 2004. The decrease was primarily the result of full depreciation of
certain equipment in 2004.
Broadcasting and Programming
Net sales in the broadcasting and programming segment, which includes our broadcast
television and radio stations, the production of television content for our broadcast channels and cable
signals and sports programming, are largely derived from advertising and the sale of sports and
program signals and events. Cost of sales (excluding depreciation and amortisation) comprise
primarily programming and sports rights, production and co-production costs and salaries.
The table set forth below presents net sales, cost of sales (excluding depreciation and amortisation), selling and administrative expenses (excluding depreciation and amortisation), and depreciation
and amortisation data for the segment for the periods indicated:
Broadcasting and Programming
Year Ended 31
Six Months
December
Ended 30 June
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (excluding depreciation and
amortisation) . . . . . . . . . . . . . . . . . . . . .
as a % of net sales . . . . . . . . . . . . . . . .
Selling and administrative expenses
(excluding depreciation and
amortisation) . . . . . . . . . . . . . . . . . . . . .
as a % of net sales . . . . . . . . . . . . . . . .
Depreciation and amortisation . . . . . . . . . .
as a % of net sales . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
2004
2005
2006
2006
2007
(Unaudited)
(Millions of Pesos)
416.6
499.4
659.5
279.3
354.9
(250.9) (314.7) (455.0) (192.1) (233.5)
60%
63%
69%
69%
66%
(94.2) (106.9) (120.8)
23%
21%
18%
(13.5)
(13.1)
(17.3)
3%
3%
3%
(57.4)
21%
(7.2)
3%
(66.4)
19%
(8.5)
2%
The Six Months Ended 30 June 2007 v. the Six Months Ended 30 June 2006 (Broadcasting and
Programming)
Net Sales
Net sales increased by 27.1% to Ps.354.9 million (including Ps.78.2 million to our other
segments) in the first six months of 2007, compared to Ps.279.3 million (including Ps.28.8 million to
126
our other segments) in the first six months of 2006. The increase was primarily the result of an
increase in advertising sales and the sale of cable signal and sports programming due to pricing
linked to increases in the monthly subscription fees and a larger subscriber base.
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 21.6% to Ps.233.5 million
in the first six months of 2007, compared to Ps.192.1 million in the first six months of 2006. The
increase was primarily the result of an increase in programming costs due to a more active summer
season programming schedule and an increase in salaries and, to a lesser extent, a larger payroll.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
15.6% to Ps.66.4 million in the first six months of 2007, compared to Ps.57.4 million in the first six
months of 2006. The increase was primarily the result of an increase in salaries.
Depreciation and Amortisation
Depreciation and amortisation expenses increased by 17.6% to Ps.8.5 million in the first six
months of 2007, compared to Ps.7.2 million in the first six months of 2006. The increase is attributable
to the amortisation of intangible assets resulting from the acquisition of Ideas del Sur in 2006.
2006 v. 2005 (Broadcasting and Programming)
Net Sales
Net sales increased by 32.0% to Ps.659.5 million (including Ps.100.1 million to our other
segments) in 2006, compared to Ps.499.4 million (including Ps.55.4 million to our other segments) in
2005. The increase was primarily the result of increased advertising sales associated with an
improvement in ratings and the transmission of the soccer/football world cup series as well as
increased sales of programming and sports rights to third party cable operators.
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 44.6% to Ps.455.0 million
in 2006, compared to Ps.314.7 million in 2005. The increase was primarily the result of higher
programming costs and talent fees, as well as additional programming and sports costs associated
with the soccer/football world cup.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
13.1% to Ps.120.8 million in 2006, compared to Ps.106.9 million in 2005. The increase was primarily
the result of a larger payroll.
Depreciation and Amortisation
Depreciation and amortisation expenses increased by 31.8% to Ps.17.3 million in 2006,
compared to Ps.13.1 million in 2005. The increase reflects investment in equipment during 2006.
2005 v. 2004 (Broadcasting and Programming)
Net Sales
Net sales increased by 19.9% to Ps.499.4 million (including Ps.55.4 million to our other
segments) in 2005, compared to Ps.416.6 million (including Ps.91.8 million to our other segments) in
127
2004. The increase was primarily the result of increased advertising sales, and higher revenues on
account of programming and sports from third party cable systems.
Cost of Sales (Excluding Depreciation and Amortisation)
Cost of sales (excluding depreciation and amortisation) increased by 25.4% to Ps.314.7 million
in 2005, compared to Ps.250.9 million in 2004. The increase was primarily the result of higher
programming and sports costs and talent fees, as well as increased salaries and a larger payroll.
Selling and Administrative Expenses (Excluding Depreciation and Amortisation)
Selling and administrative expenses (excluding depreciation and amortisation) increased by
13.4% to Ps.106.9 million in 2005, compared to Ps.94.2 million in 2004. The increase was primarily
the result of increased salaries and a larger payroll, and additional general advertising expenses
during 2005 related to new programming and the 80th anniversary of Radio Mitre.
Depreciation and Amortisation
Depreciation and amortisation expenses decreased by 2.7% to Ps.13.1 million in 2005, compared to Ps.13.5 million in 2004.
Other
Net sales in this segment are derived from the rendering of administrative and corporate services
by the Company and by our subsidiary GC Gestión Compartida S.A. to third parties and subsidiaries
of the Company. Additionally, this segment includes the production of digital content. Net sales to third
parties are largely derived from advertising in our webpages and portals. Cost of sales (excluding
depreciation and amortisation) is driven by salaries and professional fees paid to advisers.
Liquidity and Capital Resources
We are a holding company and derive our operating income and cash flow from the operations
of our direct and indirect subsidiaries, which in certain cases are subject to limitations on their ability
to pay dividends.
Our operations have historically relied on four main sources of liquidity:
(1) equity contributions from our shareholders;
(2) borrowings under bank facilities and debt security issuances;
(3) cash flow from operations; and
(4) seller financing.
The conditions affecting the Argentine economy between 1998 and 2004 and the uncertainties
as to future developments prevented several of our companies from raising the funds required to
discharge their payment obligations under their then-outstanding financial debt as it became due in
and after 2002. As a result, in 2002 each of Cablevisión, Multicanal, AGEA, AGR and ARTEAR
defaulted on their then-outstanding financial debt and focused their efforts and resources on preserving the continuation of their operations. In 2003, Cablevisión, Multicanal, AGEA, AGR and ARTEAR
submitted debt restructuring proposals to their creditors, in certain cases relying on the expedited
reorganisation procedures (APE).
AGEA and AGR completed the restructuring of their financial debt by the beginning of 2004.
Cablevisión and Multicanal, instead, confronted significant opposition to the judicial confirmation of
their respective APEs from certain minority creditors. In the case of Multicanal, its board of directors
sought recognition of its APE in the United States under Section 304 of the U.S. Bankruptcy Code.
Multicanal’s APE was confirmed in Argentina and recognised in the United States, subject to the
128
implementation of certain remedies required by the Argentine court and the U.S. bankruptcy court.
Multicanal consummated the transactions contemplated in its APE on 20 July 2006 and on 13 October
2006, the Argentine Court recognised the compliance by Multicanal of all of the terms and conditions
of its APE. In the case of Cablevisión, however, the judicial confirmation of its APE in Argentina was
appealed by creditors holding approximately U.S.$30,000 in aggregate principal amount of debt
subject to the APE, and such appeal is still pending. Nevertheless, on 7 October 2005 and thereafter,
holders of more than 97% of Cablevisión’s financial indebtedness subject to the terms of the APE
agreed to give effect to the transactions contemplated in Cablevisión’s APE with respect to their
claims, thus allowing Cablevisión effectively to complete the restructuring of substantially all of its
financial debt. Cablevisión also delivered into escrow the consideration that the nonconsenting holders
of its financial debt subject to the APE would be entitled to receive if the APE is finally judicially
confirmed. The principal amount of financial indebtedness held by creditors that have not consented
to the APE totals U.S.$20.9 million and therefore, until final judicial approval of Cablevisión’s APE, that
indebtedness cannot be discharged pursuant to the terms and conditions of Cablevisión’s APE. If
such indebtedness (including accrued interest) were successfully enforced against Cablevisión in
accordance with its terms and conditions, Cablevisión would have to pay (net of all amounts held in
escrow) an approximate amount of U.S.$19.5 million as of 30 June 2007.
In connection with Cablevisión’s APE, its then shareholders contributed U.S.$55 million in equity
on 3 October 2005, together with funds provided by Cablevisión, and made payments with respect to
the cash option under Cablevisión’s APE. In connection with Multicanal’s APE, on 12 December 2003,
we committed to contribute U.S.$15 million in equity, which, together with funds provided by
Multicanal, were applied in June 2006 to make payments on account of the cash option in Multicanal’s
APE.
We expect capital expenditures and the servicing of our financial debt to be our principal uses of
cash. We expect cash flow from operations to be our principal source of liquidity. We also expect to
raise funds through borrowings, if and when the market presents opportunities to do so. In particular,
we will seek to refinance a portion of our outstanding debt through the incurrence of long-term
indebtedness. Although the restructuring of substantially all the debt of our main subsidiaries
outstanding prior to the 2002 crisis has enabled us to access the credit market on a voluntary basis,
the terms of our outstanding debt contains significant restrictions. See “— Indebtedness”.
Certain of our subsidiaries (including Cablevisión, AGEA and Multicanal) are required under the
terms of their indebtedness to apply excess liquidity to prepay their outstanding debt and are subject
to limitations on their ability to declare and pay dividends.
The following table summarises our contractual liabilities and commitments as of 30 June 2007.
All transactions among Grupo Clarín and its consolidated subsidiaries or minority investees have been
eliminated. Peso amounts have been translated from U.S. dollar amounts at the selling rate for
U.S. dollars quoted by Banco Nación on 30 June 2007 of Ps.3.09 to U.S.$1.00:
Total
Long term debt obligations(1,2). . .
Technical and financial assistance
fees(3). . . . . . . . . . . . . . . . . . . .
Lease commitments . . . . . . . . . . .
Purchase obligations(4) . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . .
Payments Due by Period
Less Than
1-3
4-5
1 Year
Years
Years
After
5 Years
1,373.0
—
—
217.0
1,590.0
.
3,325.2
(In millions of Pesos)
367.2
1,165.9
419.1
.
.
.
.
—
6.6
1,394.6
4,726.5
—
5.0
338.4
710.6
—
1.5
542.7
1,710.1
—
0.1
296.6
715.8
(1) See “— Indebtedness” for a description of our long-term debt obligations including amortisation
and interest payment terms and their principal covenants.
129
(2) The data reflects aggregate nominal principal amounts due under the debt instruments. We record
our debt obligations at their net present value in accordance with Argentine GAAP. As a result, the
amounts shown do not reflect the net present value of our long-term debt obligations.
(3) Cablevisión is required to make annual payments to its minority shareholder in amounts equal to
1.2% of the prior fiscal year’s consolidated operating cash flow under a technical assistance
agreement. This agreement expires in 2009.
(4) Includes mainly expenses arising under programming agreements.
The table below reflects our cash position at the dates indicated and the net cash provided by
(used in) operating, investing and financing activities during the periods indicated:
Year Ended 31
December
2004
2005
Six Months
Ended 30 June
2006
2006
2007
(Unaudited)
(In millions of Pesos)
Cash and cash equivalents at the beginning of the
period/year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by operating activities . . . . . . . . . . . . . .
Cash (used in) provided by investing activities. . . . . . . .
Cash (used in) provided by financing activities . . . . . . .
Of which:
Financial interest paid, net of interest capitalised. . . . . .
Financial and holding results generated by cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the end of the
period/year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
464.0
311.5
97.1
(496.6)
424.2
358.3
(320.7)
29.1
487.1
565.4
(208.0)
(472.2)
487.1
149.7
(78.1)
(36.3)
381.2
481.9
(195.1)
(210.7)
(71.3)
(21.8)
(196.7)
(37.3)
(105.6)
4.2
(4.7)
380.2
487.1
9.1
8.3
6.8
381.2
530.6
464.1
The following table sets forth cash flows provided by our operating activities for the six month
periods ended 30 June 2007 and 2006 and the years ended 31 December 2006, 2005 and 2004:
Six Months Ended 30
June
Year Ended 31 December
2004
2005
2006
2006
2007
(Unaudited)
(In millions of Pesos)
311.5
358.3
565.4
149.7
481.9
Cash flows provided by our operating activities increased to Ps.481.9 million in the first six
months 2007, from Ps.149.7 million in the first six months of 2006. The increase in cash flows is
attributable mainly to the consolidation of Cablevisión as a consequence of the increase in our
ownership interest in Cablevisión and the acquisition of Holding Teledigital, and the growth in all our
business segments.
Cash flows provided by our operating activities increased 57.8% to Ps.565.4 million in 2006,
from Ps.358.3 million in 2005. This significant increase in cash flows is attributable mainly to the
consolidation of Cablevisión as a consequence of the increase in our ownership interest in Cablevisión
and the acquisition of Holding Teledigital in September 2006, and the growth in all our business
segments.
Cash flows provided by operating activities increased 15.0% to Ps.358.3 million in 2005 from
Ps.311.5 million in 2004. This increase in cash flows is attributable mainly to the variations in the
working capital due to debt payments related to overdue programming fees and prepayments that
were made during 2004 that were not made in 2005.
130
We believe our working capital is sufficient to meet our present requirements.
The following table sets forth cash used in/provided by our investing activities (net of proceeds
from sales) for the six month periods ended 30 June 2007 and 2006 and the years ended
31 December 2006, 2005 and 2004:
Six Months Ended 30
June
Year Ended 31 December
2004
2005
2006
2006
2007
(Unaudited)
(In millions of Pesos)
97.1
(320.7)
(208.0)
(78.1)
(195.1)
Cash used in investing activities increased by 150.0% to Ps.195.1 million for the first six months
of 2007 compared to Ps.78.1 million for the same period in 2006. This increase is attributable mainly
to the consolidation of Cablevisión as a consequence of the increase in our ownership interest in
Cablevisión and the acquisition of Holding Teledigital, together with higher investments made in cable
networks and set-top boxes.
During 2006, we applied Ps.208.0 million to investing activities, a decrease of 35.1% from
Ps.320.7 million in 2005. While we increased investments related to the acquisition of equipment for
the provision of broadband services, and the construction, expansion and upgrading of existing
systems, including the upgrade of networks to meet higher technological standards throughout the
cable systems, and to offer a broader range of different programming alternatives, as well as
broadband services in certain areas, such increase was more than offset by the decrease in the cash
applied to the acquisition of equity investees which in 2005 included our indirect acquisition of a
minority interest in Cablevisión.
In 2005, we applied Ps.320.7 million to investing activities, compared to Ps.97.1 million generated in 2004 by the sale of a minority equity investment held in a foreign media company.
The following table sets forth the net cash used in financing activities (excluding shareholders’
contributions) for the six months ended 30 June 2007 and 2006 and the years ended 31 December
2006, 2005 and 2004:
2004
Year Ended 31 December
2005
2006
Six Months Ended 30
June
2006
2007
(Unaudited)
(496.6)
29.1
(In millions of Pesos)
(472.2)
(36.3)
(210.7)
In the first six months of 2007, we used Ps.210.7 million for financing activities compared to
Ps.36.3 million used in the first six months of 2006. This variation is mainly attributable to the funds
used in 2007 to cancel part of our debt with JP Morgan (U.S.$8.0 million), payments of interests
related to the increase in our ownership interest in Cablevisión, payments by Cablevisión to cancel its
debt with Banco Nación (Ps.33.8 million), a payment of Ps.18 million in favour of our Controlling
Shareholders on account of dividends declared in 1999 by companies we absorbed in connection with
our organisation and for which we became liable, and payments by Cablevisión and Multicanal under
their outstanding debt instruments. In 2006 we generated funds from the issuance by AGEA of its
Ps. 300 million notes due 2011, and applied funds in connection with cancellations of U.S.$74.8 million
of outstanding debt by AGEA and AGR and short-term financial advances of Ps. 49 million.
We used Ps.472.2 million for financing activities in 2006, compared to Ps.29.1 million generated
in 2005. In 2006, Multicanal used Ps.384.9 million, in connection with the consummation of its APE,
131
including the payment of the cash option, all accrued interest under the terms of the APE and related
fees, and Teledigital used Ps.76.4 million to prepay a bank loan.
Since our establishment in 1999, we have not declared any dividends.
Indebtedness
At 30 June 2007, our consolidated indebtedness was comprised of:
Borrower
Description/
Creditor
Maturity
Interest Rate
Interest
Payments
Material
Covenants/
Events of
Default
Applicable
Law
Semiannual
None
Argentina
Quarterly
(1)
US
Reserve
Account(2)
Semiannual
(3)
US
(4)
Quarterly
None
US
Term deposit
pledges and
standby letters of
credit
—
—
US
—
Semiannual
(7)
US
First priority on
Reserve
Account(8)
Semiannual
(9)
US
First priority on
Reserve
Account(10)
Collateral
Grupo Clarín
U.S.$12 million
Notes/Telefónica
de Contenidos
S.A.
(Unipersonal)
U.S.$32 million
Loan/JP Morgan
Chase Bank
U.S.$157.8
million Note/JP
Morgan Chase
Bank NA
50% in each of Highest of (i)
08/07 and 08/08 Libor + 0.75%
(or) 3.5%
U.S.$16 million
in 2008/ U.S.$16
million in 2009.
September 2009,
with a 1-year
extension option
at maturity if the
outstanding
amount is equal
or lower than
60% of the
original principal
amount, and a
second 1-year
extension option
at extended
maturity if the
outstanding
amount is equal
or lower than
30% of the
original principal
amount
Libor + 2%
Libor + 3.5% up
to September
2009
40% Shares of
IESA
Libor +4.25% up
to September
2010
Libor +5.0% up
to September
2011
In case of
capitalisation of
interests, the
margin increases
0.25 each
period.
Vistone Ltd.
U.S.$79.9 million On demand
Note/HSBC(5)
Libor + 0.75%
US$20.9 million
Notes(6)
U.S.$115.3
million Notes
N/A
—
5% in 2007
10% in 2008
6% until 2010
Cablevisión
15% in 2009
7% from 2011
until maturity
20% in 2010
20% in 2011
U.S.$235.1
million Notes
30% in 2012
3 Instalments of 4% until 2007
U.S.$78.3 million
from 2013 until 5% on 2008
2015
6% on 2009
8% on 2010
9% on 2011 and
2012
11% on 2014
and 2013
12% on 2015
132
Borrower
Description/
Creditor
U.S.$3.5 million
Loan/Banco
Ciudad
Ps.973,000
Maturity
Interest
Payments
Material
Covenants/
Events of
Default
Applicable
Law
Semiannual
(11)
Argentina
—
Monthly
—
Argentina
—
Semiannual
Subordinated to
Cablevisión’s
Notes due 2012
and Notes due
2015
US
—
7%
Semiannual
(12)
US
First priority on
Reserve
Account(13)
2.5% until June
2010
3.5% from July
2010 until July
2014
4.5% from July
2014 until July
2016.
Semiannual
(14)
US
First priority on
Reserve
Account(15)
Semiannual
(16)
Argentina
Interest Rate
5% in 2008,
2009 and 2010
CER + 4% for
the first year
10% in 2011,
2012, 2013 and
2014
CER + 5% for
the second year
15% in 2015,
2016 and 2017
CER + 6% for
the third year
CER + 7% for
the fourth and
fifth year
CER + 8% from
the sixth to the
twelfth year
5%
U.S.$1.7 million
leasing
agreement/The
Capita
Corporation
Collateral
Monthly
instalments of
U.S.$0.1 Million
per month from
July 2007
through
November 2008
Ps.360.9 million September 2009 BADLAR + 6%
(if paid in cash)
note due 2009
or 8% (if
JP Morgan
interests are
Chase NA Bank
capitalised) with
a maximum of
CER + 6%.
Borrower can
choose to
capitalise or pay
in cash except in
case that the
ratio Net
Debt/EBITDA is
higher than 4 to
1 in which case
capitalisation is
mandatory.
Multicanal
U.S.$105.7
million
Notes
5% in 2009
10% in 2010
15% in 2011
20% in 2012
50% in 2013
U.S.$80.3 million 2016
Note
AGEA
Ps. 300 million
Notes
CER plus 4.25%
Eight semiannual
instalments from
June 2008 until
December 2011
133
—
Borrower
Description/
Creditor
Maturity
U.S.$30.6 million 2014
Notes
Interest Rate
2% from
execution until
fourth year
Interest
Payments
Material
Covenants/
Events of
Default
Applicable
Law
Semiannual
(17)
US
Semiannual
—
US
100% of the
shares of TRISA
and 75% of
shares of TyC
Uruguay
—
—
Argentina
Pledge/mortgage
over certain
assets of Ideas
del Sur
Collateral
3% from the
fourth year until
eighth year
4% from eighth
year until
maturity.
TRISA
U.S.$6.5 million
Loan/
December 2007/ LIBOR plus 3%
December 2011
First Overseas
Bank Limited
ARTEAR
U.S.$3.3 million 2007/2013
Seller Notes in
U.S.$ and Ps./
Various Creditors
From 4% to
LIBOR plus
8.5%
(1) Restrictions on debt incurrence, liens, mergers, sale of substantial assets, liquidations, dissolution and winding-up and effecting changes of control.
(2) Grupo Clarín must maintain deposited in the reserve account an amount at least equal to the
aggregate amount payable under this loan on the next interest payment date.
(3) Mandatory prepayment with proceeds paid by Cablevisión to the Company under a
Ps.463.9 million Note due 2009.
(4) Under the terms of the VLG Operating Agreement dated as of 26 September 2006, in the event
that the Company fails to make payment of amounts due under its U.S.$157.8 million Notes,
Fintech (the original holder and assignor of these Notes to JPMorgan Chase Bank NA) would be
entitled to cause Clarín’s interest in VLG to be reduced, thereby causing beneficial ownership of
up to 25.656% of the shares of Cablevisión to be transferred to Fintech.
(5) The maturity and interest rate of this facility is renegotiated on a monthly basis.
(6) These Notes are held by creditors that have not consented to the terms and conditions of
Cablevisión’s APE. If the APE is finally judicially approved, these instruments will be discharged
in accordance with the terms of the APE. The consideration to which the holders of these notes
would be entitled under the APE is being held in escrow for such holders pending final resolution
of Cablevisión’s APE proceeding. If Cablevisión’s APE is not approved by a final court resolution
and these Notes (including accrued interest) were successfully enforced against Cablevisión in
accordance with its terms and conditions, Cablevisión would have to pay (net of all amounts
deposited in escrow) approximately U.S.$19.5 million.
(7) Restrictions on debt incurrence, liens, mergers, sales of substantial assets, capital expenditures
and on transactions with affiliates (including Grupo Clarín); provided that Cablevisión may pay
certain amount of technical assistance fees to Grupo Clarín. Twice a year, Cablevisión is required
to apply its excess cash (as defined in these Notes) to prepay amounts due under these Notes.
Cablevisión can only make dividend payments with amounts available after giving effect to its
excess cash prepayment obligations. Holders of the Notes are entitled to appoint one member
and one alternate member to the Board of Directors of Cablevisión.
(8) Excess cash (as defined in these Notes) must be transferred to the Reserve Account provided
that the balance shall not exceed the greater of: (x) 15% of the initial principal amount of the
Notes or (y) the aggregate amount of the interest and principal payments on the Notes due within
the 12 months following the date of determination. In the event of failure by Cablevisión to make
an interest payment in part or in full on a timely basis, on any of the Notes, the Trustee may draw
134
on any funds deposited in the Reserve Account to cover such payment shortfall pro rata among
any Notes entitled to the benefits of such Reserve Account.
(9) Same as 7, above.
(10) Same as 8, above.
(11) Same as 7, above.
(12) Restrictions on capital expenditures, indebtedness incurrence, transactions with shareholders
and affiliates, repurchase of capital stock, sale of assets, mergers and asset dispositions, payment restrictions by significant subsidiaries, significant subsidiary guarantees, liens and sale and
leasebacks. Twice a year, Multicanal is required to apply a portion of its excess cash (as defined
under these Notes) to prepay amounts due under these Notes.
(13) Excess cash (as defined under these Notes) must be transferred to the Reserve Account so that
the balance is equal to at least the sum of (i) 12 months of interest payments under these Notes
and (ii) any amount of principal under these Notes due within the 12 months following the date of
transfer of the excess cash to the Reserve Account.
(14) Restrictions on indebtedness incurrence, transactions with shareholders and affiliates, payments
to equity, sale of equity in significant subsidiaries, mergers and asset dispositions, payments of
dividends and other payment restrictions by significant subsidiaries, significant subsidiary guarantees, liens and sale and leasebacks.
(15) For so long as Multicanal’s Notes due 2013 are outstanding, in accordance with the terms of
such Notes excess cash (as defined in the Notes due 2013) must be transferred to the Reserve
Account provided that the balance shall not exceed the 12 months of interest payments under
the Notes due 2016.
(16) Restrictions on debt incurrence, liens, mergers, sale of substantial assets and transactions with
affiliates. In addition, AGEA has restrictions to pay dividends or make any other payments to its
shareholders (including payment of management fees to Grupo Clarín) to its shareholders
(including Grupo Clarín) if the ratio of net worth to assets is below 30%.
(17) Restrictions on debt incurrence, liens, sale of assets, transactions with affiliates that are not
arms’ length, provided that payment of management fees to Grupo Clarín for certain amounts is
permitted. AGEA must also apply 14% of any proceeds obtained from the sale of its equity participation (directly or through any of its subsidiaries) in Multicanal to a third party to prepay
amounts due under these Notes. AGEA shall not pay dividends to its shareholders (including
Grupo Clarín) if certain financial ratios are not met or if an event of default under these Notes
has occurred.
In addition, the Company has executed guarantees with the counterparties involved in certain
outstanding interest rate and exchange rates swap agreements entered into by Grupo Clarín Services
LLC (a subsidiary of the Company) relating to a nominal value of approximately Ps.152 million,
whereby Grupo Clarín Services LLC transfers to or receives from the counterparties the net position
resulting from swapping a Ps.152 million payment obligation accruing interest at a floating rate of CER
plus 4.25% into a U.S. dollar obligation accruing interest at a fixed rate. The swap agreements,
executed in January 2006, are effective until December 2011. See Note 7 to the audited consolidated
financial statements included elsewhere in this Offering Circular.
Interest Expense
The following table sets forth our interest expense for the periods indicated:
2004
Year Ended 31 December
2005
2006
Six Months Ended 30 June
2006
2007
(Unaudited)
(In Millions of Pesos)
246.0
264.8
276.5
135
161.0
133.3
DIVIDEND POLICY
Dividend Policy
The Company does not have, and has no current plan to establish, a formal dividend policy
governing the amount and payment of dividends or other distributions. According to the Bylaws and
Argentine Corporate Law, the Company may make one or more declarations of dividends with respect
to any single fiscal year, including advance dividend payments under Article 224 second paragraph of
Argentine Corporate Law, out of the Company’s distributable net income (utilidades realizadas y
líquidas) as reflected in the Company’s consolidated balance sheet prepared in accordance with
Argentine GAAP and CNV regulations as of the last day of such fiscal year, or in consolidated special
or interim balance sheets in the case of advanced or provisional dividends, provided that any such
dividends would be payable rateably to all holders of the Company’s shares of common stock as of
the relevant record date.
Subject to completion of the Offering, and after giving effect to the offering, all shares of our
capital stock rank pari passu with respect to the payment of dividends. See “Description of Share
Capital and Description of Argentine Legislation”.
The Company conducts all of its operations through subsidiaries and, accordingly, in addition to
certain management fees that it collects from certain of its subsidiaries, the Company’s main source
of cash to pay dividends are the dividends received from its subsidiaries. As a holding company, the
Company’s ability to pay dividends and obtain financing depends on the results of operations and
financial condition of its subsidiaries and could be restricted by legal, contractual or other limitations
binding upon those subsidiaries. See “Operating and Financial Review — Liquidity and Capital
Resources — Indebtedness”. These dividend payments depend on the Company’s subsidiaries’ results
of operations, financial condition, cash and capital requirements, future growth prospects and other
factors deemed relevant by their respective boards of directors, as well as on any applicable legal
restrictions.
Certain of our subsidiaries are subject to certain contractual restrictions on their ability to declare
or pay dividends. See “Risk Factors — Risks related to Argentina — Our Shareholders’ ability to
receive cash dividends may be limited” and “Operating and Financial Review — Liquidity and Capital
Resources.”
In 1999, we became liable for dividends of Ps.165 million declared by certain of our predecessor
companies in favour of the Controlling Shareholders, of which Ps.153.9 million were paid in 1999. On
13 June 2007, we paid the Controlling Shareholders the balance, together with Ps.6.9 million in
compensation for the deferral, in total cancellation of such liability. Since our establishment in 1999,
we have not declared any dividends.
The issuance of class “C” common shares and class “A” preferred shares in 1999, resulted in
paid-in-capital of Ps.333,636,239, which were appropriated to a “Class “A” and Class “B” Preferred
shares Paid-in-capital Reserve” that would be irrevocably appropriated as follows: (a) to the payment
of dividends in shares, even if no profits or insufficient profits are generated, to the holders of
preferred shares, in accordance with the terms and conditions for the issuance and the preference of
class “A” preferred shares established in the Sixth section of the bylaws of the Company in force at
that time, and (b) in the first place, with preference, to the payment of class “A” preferred shares
and/or common shares to be delivered as a result of the conversion of class “A” preferred shares and,
in the second place and in a subordinate category, if a reserve remains after all class “A” preferred
shares have been converted, to the payment of class “B” preferred shares and/or common shares to
be delivered through the conversion of class “B” preferred shares, which must be issued in
accordance with the terms and conditions for issuance established by section Sixth of the bylaws of
the Company in force at that time. At a shareholders meeting held on 8 October 2007, our
shareholders voted in favour of reallocating the Ps.333.6 million of the “Class “A” and Class “B”
136
Preferred Shares Paid-in Capital Reserve”, which will be recorded as paid-in capital for the benefit of
all holders of common shares of the Company.
Amount Available for Distribution
Dividends may be lawfully declared and paid only out of the Company’s retained earnings stated
in the Company’s yearly financial statements prepared in accordance with Argentine GAAP and CNV
regulations and approved by the annual ordinary shareholders’ meeting.
According to the Argentine Corporate Law and the Bylaws, the Company is required to maintain
a legal reserve of 20% of its then-outstanding capital stock. The legal reserve is not available for
distribution to shareholders. Under the Argentine Corporate Law and the Bylaws, the Company’s
yearly net income (as adjusted to reflect changes in prior results) is allocated in the following order:
(i) to comply with the legal reserve requirement;
(ii) to pay the accrued fees of the members of the board of directors and supervisory
committee;
(iii) for voluntary or contingent reserves, as may be resolved from time to time by our
shareholders at the annual ordinary shareholders’ meeting; and
(iv) the remainder of the net income for the year may be distributed as dividends on
common shares or as otherwise decided by our shareholders at the annual ordinary shareholders’ meeting.
The board of directors submits our financial statements for the preceding fiscal year, together
with reports thereon by the supervisory committee, at the annual ordinary shareholders’ meeting for
approval. Within four months of the end of each fiscal year, an ordinary shareholders’ meeting must
be held to approve the financial statements and determine the allocation of the Company’s net income
for such year. Under the Bylaws, the Company’s board of directors may distribute advanced or
provisional dividends, or dividends that result from special or interim balance sheets subject to
Argentine Corporate Law, CNV regulations and any other applicable regulations.
Under applicable CNV regulations, cash dividends must be paid to shareholders within 30 days
of the shareholders’ meeting approving such dividends. In the case of stock dividends, shares are
required to be delivered within three months of our receipt of notice of the authorisation of the CNV for
the public offering of the shares so issued. The statute of limitations to the right of any shareholder to
receive dividends declared by the shareholders’ meeting is three years from the date in which they
have been made available to the shareholder.
Foreign exchange regulations impose certain restrictions on the distribution of dividends to
foreign shareholders of Argentine Companies outside of Argentina. Since 2003, Argentine companies
may purchase foreign currency in the foreign exchange market only to pay dividends abroad to foreign
shareholders or to the Depositary for the benefit of the foreign holders of GDSs, provided that such
dividends correspond to periods covered by approved annual audited financial statements. See
“Exchange Rate Information — Exchange Controls”.
137
DILUTION
Dilution in net tangible book value per share represents the difference between the amount per
share paid by purchasers of shares, including in the form of GDSs, in the Offering and the net tangible
book value per share immediately after the issuance of such shares, including in the form of GDSs.
Our net tangible book value at as of 30 June 2007 was a deficit of Ps.1,866.8 million, or negative
Ps.(8.15) per share based on the number of shares outstanding as of 30 June 2007. Our net tangible
book value per share represents the amount of our total assets less intangible assets and goodwill
less total liabilities and minority interest, divided by the number of ordinary shares outstanding as of
30 June 2007.
Following (a) the conversion of all of our outstanding shares of preferred stock into common
stock, and (b) our sale (the sale by the Selling Shareholders of class B common shares in the Offering
or pursuant to the Over-allotment Option has no effect on dilution) of class B common shares in the
Offering and pursuant to the Over-allotment Option (assuming the Over-allotment Option is exercised
in full) at an Offer Price of Ps.29.14 per class B common share set forth below and after deducting
the estimated underwriting commissions and expenses payable by the Company in connection with
the Offering, our net tangible book value at 30 June 2007 would have been a deficit of Ps.1,391.4 million, or negative Ps.(4.84) per share. The conversion of the preferred stock into common stock will
cause an immediate decrease in the negative net tangible book value per share to existing shareholders of Ps.1.24. The sale by the Company of Class B common shares in the Offering and pursuant to
the Over-allotment Option (assuming it is exercised in full) represents an immediate decrease in the
negative net tangible book value per share to existing shareholders of Ps.2.07 and an immediate
dilution of Ps.33.98 per New Share to new investors in the Offering purchasing at an Offer Price of
Ps.29.14 per Class B Share, as illustrated by the table below:
Ps.
Offering price per class B common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net tangible book value per class B common share as of 30 June 2007 . . . . . . . . . .
Increase in net tangible book value per share attributable to conversion of preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in net tangible book value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net tangible book value per class B common share, including in the form of GDSs,
after the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution per New Share attributable to investors purchasing Securities in the
Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Each GDS represents an interest in two Class B Shares.
138
.
.
29.14
(8.15)
.
.
1.24
2.07
.
(4.84)
.
33.98
CAPITALISATION
The following table sets forth, as of 30 June 2007, our capitalisation on an actual and as
adjusted basis. The data set forth under the “As Adjusted” column below, adjusts the actual data to
give effect to the issuance of 15,000,000 New Shares in the Offering (including New Shares in the
form of GDSs), the conversion of our series A preferred shares and series B preferred shares into
22,693,904 class B common shares and 18,567,740 class C common shares, the conversion of
18,624,455 class C common shares into class B common shares in two steps (assuming the Overallotment Option is exercised in full), and the application of the net proceeds we will receive from the
Offering of the New Shares we will issue at an Offering Price of Ps.58.28 per GDS and Ps.29.14 per
Class B Share. None of the proceeds arising from the sale of the Selling Shareholders Shares will be
for us. You should read this information in conjunction with:
• our unaudited consolidated financial statements and the related notes included elsewhere in
this Offering Circular; and
• “Use of Proceeds”.
As of 30 June 2007
Actual
As Adjusted
(Unaudited)
(In millions of Pesos)
Amounts in Accordance with Argentine GAAP
Short-Term Debt:
Short-term Financial Loans and Negotiable Obligations . . . . . . . . . . .
Bank overdraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt from acquisitions . . . . . . . . . . . . . . .
Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Debt:
Long-term Financial Loans and Negotiable Obligations . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt from acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ Equity:
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inflation adjustment on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . .
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative Translation Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
416.5(1)
4.8(3)
23.1(4)
36.9(6)
481.3
172.7(2)
4.8(3)
23.1(5)
36.9(7)
237.5
1,961.5(8) 1,961.5(9)
0.8(3)
0.8(3)
854.3(10) 854.3(11)
2,816.6
2,816.6
3,297.9
3,054.1
386.1
386.1
270.3
309.9
1,364.8
21.7
2.7
(329.8)
1,639.5
5,323.6
287.5
309.9
1,822.9(12)
21.7
2.7
(329.8)
2,114.8
5,555.0
(1) Of which Ps.315.8 million correspond to secured short-term financial loans and Ps.100.7 million
correspond to unsecured short-term financial loans and negotiable obligations.
(2) Of which Ps.72.0 million correspond to secured short-term Financial Loans and Ps.100.7 million
correspond to unsecured short-term financial loans and negotiable obligations.
(3) Unsecured.
139
(4) Of which Ps.20.8 million correspond to secured and Ps.2.3 million correspond to unsecured
accrued interest.
(5) Of which Ps.20.8 million correspond to secured and Ps.2.3 million correspond to unsecured
accrued interest.
(6) Of which Ps.0.5 million correspond to secured and Ps.36.4 million correspond to unsecured current portion of long-term debt from acquisitions.
(7) Of which Ps.0.5 million correspond to secured and Ps.36.4 million correspond to unsecured current portion of long-term debt from acquisitions.
(8) Of which Ps.1,605.2 million correspond to secured long-term financial loans and long-term negotiable obligations secured by reserve accounts created pursuant to the terms of such obligations
and Ps.356.3 million correspond to unsecured long-term financial loans and negotiable
obligations.
(9) Of which Ps.1,605.2 million correspond to secured long-term financial loans and long-term negotiable obligations secured by reserve accounts created pursuant to the terms of such obligations
and Ps.356.3 million correspond to unsecured long-term financial loans and negotiable
obligations.
(10) Of which Ps.487.5 million correspond to secured and Ps.366.8 million correspond to unsecured
long-term debt from acquisitions.
(11) Of which Ps.487.5 million correspond to secured and Ps.366.8 million correspond to unsecured
long-term debt from acquisitions.
(12) At a shareholders meeting held on 8 October 2007, our shareholders voted in favour of reallocating Ps.333.6 million of the “class “A” and class “B” Preferred Shares Paid-in Capital Reserve”,
which are recorded as paid-in capital for the benefit of all holders of common shares of the
Company.
140
RELATED PARTY TRANSACTIONS
The following table details the transactions carried out by the Company (parent only) and all its
related parties, including its consolidated subsidiaries, for each year in the three-year period ended
31 December 2006 and the six months ended 30 June 2007:
Company
Subsidiaries
AGEA . . . . . . . . . . . . . .
ARTEAR . . . . . . . . . . . .
IESA . . . . . . . . . . . . . . .
Radio Mitre . . . . . . . . . .
30 June
2007
Item
Management fees
Sale of long-term
investments
Management fees
Other expenses
Advertising purchases
Services
Management fees
Services
Loan interest
Other expenses
Management fees
Interest income
12,103,657
—
21,600,000
42,338,268
19,200,000
—
2004
16,400,000
—
5,400,000
(25,312)
—
—
1,800,000
—
—
(1,579)
420,000
26,247
11,600,000
(5,347)
—
—
3,450,000
(14,985)
—
—
720,000
—
8,400,000
—
(14,198)
—
2,800,000
(23,290)
—
—
600,000
—
13,433,840
—
—
(13,527)
2,700,000
(20,117)
270,507
—
600,000
—
(420,617)
—
—
—
—
(669,503)
—
—
956,384
31,000,000
(501,489)
—
—
—
—
(349,140)
5,100,000
80,000
—
—
GC Gestión Compartida
S.A. . . . . . . . . . . . . . .
Services
Sale of buildings
Other income
Multicanal. . . . . . . . . . . . Management fees
Disposal of other
investments
Reimbursed expenses
Services
Prima Internacional . . . . . Sale of long-term
investments
Interest income
Compañía de Cable . . . . Sale of long-term
Latinoamericana S.A. . . . investments
Indirectly controlled
companies
AGR . . . . . . . . . . . . . . . Management fees
Sale of long-term
investments
Other expenses
Printing services
Acquisition of real
property
Impripost Tecnologías
S.A. . . . . . . . . . . . . . . Management fees
TRISA . . . . . . . . . . . . . . Maintenance expenses
Management fees
Prima. . . . . . . . . . . . . . . Internet communication
services
31 December
2005
(In Pesos)
2006
—
—
—
2,406
—
440,521
—
—
—
45,535
—
—
—
—
15,000,838
—
—
2,431,844
—
3,765,823
18,086,000
3,000,000
—
2,200,000
—
(631)
—
—
141
—
(40,197)
—
—
(44,199)
—
—
(5,370)
—
—
(19,229)
(2,700,000)
750,000
—
—
900,000
(23,167)
504,000
400,000
—
672,000
—
—
672,000
(68,889)
(163,448)
(134,676)
(130,232)
Company
Teledeportes Paraguay
S.A. . . . . . . . . . . . . . .
Tinta Fresca . . . . . . . . . .
Cablevisión. . . . . . . . . . .
Affiliates
CIMECO . . . . . . . . . . . .
30 June
2007
2006
—
—
28,372,598
22,277,976
—
411,720
—
—
12,224,207
377,739,883
876,441
25,275
—
—
—
735,400
453,536
—
—
—
—
1,382,850
—
—
Item
Management fees
Loans plus interest
Management Fees
Interest income
Sale of long-term
investments
Management fees
31 December
2005
(In Pesos)
2004
In addition, the Company has executed guarantees with the counterparties involved in certain
outstanding interest rate and exchange rates swap agreements entered into by its subsidiary Grupo
Clarín Services LLC, relating to a nominal value of approximately Ps.152 million, whereby Grupo
Clarín Services LLC transfers to or receives from the counterparties the net position resulting from
swapping a Ps.152 million payment obligation accruing interest at a floating rate of CER plus 4.25%
into a U.S. dollar obligation accruing interest at a fixed rate. The swap agreements, executed in
January 2006, are effective until December 2011.
The Company and its consolidated subsidiaries have entered into certain transactions in the
ordinary course of business with unconsolidated affiliates, which are required to be disclosed under
U.S. GAAP and are accounted for under the equity method. These transactions have been executed
on terms comparable to those of unrelated third parties and primarily include:
Year Ended 31 December
2004
2005
2006
Six Months Ended
30 June 2007
Income (Expense) (in Pesos)
Advertising sales . . . . . . . . . . . . .
Cable television signals and
coproduction sales . . . . . . . . . .
2,791,718
6,084,622
7,858,057
6,015,621
14,749,421
8,672,710
10,494,075
7,017,053
Other sales . . . . . . . . . . . . . . . . .
5,346,524
5,639,307
7,070,927
6,361,459
Total sales . . . . . . . . . . . . . . . . .
22,887,663
20,396,639
25,423,059
19,394,133
Cost of sales . . . . . . . . . . . . . . . .
(157,137,281) (180,507,015) (176,206,910)
(231,333,115)
Selling expenses . . . . . . . . . . . . .
Administrative expenses. . . . . . . .
(2,479,591)
—
(3,339,182)
(581,751)
(4,647,634)
(723,854)
(1,402,018)
(628,501)
Financial interest . . . . . . . . . . . . .
(658,822)
(450,009)
(229,086)
(39,303)
(160,275,694) (184,877,957) (181,807,484)
(233,403,337)
Total costs and expenses . . . . .
142
PRINCIPAL AND SELLING SHAREHOLDERS
The following tables set forth information about the ownership of our capital stock immediately
prior to and after completion of the Offering after giving effect to the conversion of our series A
preferred shares and series B preferred shares into 22,693,904 class B common shares and
18,567,740 class C common shares and the conversion of 18,624,454 class C common shares into
class B common shares in two steps (assuming that the Over-allotment Option is exercised in full),
and on the basis of the assumption that all of the Class B Shares and GDSs representing Class B
Shares are placed without exercise of the Over-allotment Option, and on the basis of the assumption
that all of the Class B Shares are placed and that the Over-allotment Option is exercised in full.
Class A Common
Shares
Owned After
the Offering Without
Exercise of
Over-Allotment Option
Class A Common
Shares
Owned
Prior
to the Offering
Percentage of
Total
Owner
Number
Capital Votes
Class A Common
Shares Owned After
the Offering
Including
Full Exercise of
Over-Allotment
Option
Percentage of
Total
Number
Capital Votes
Percentage of
Total
Number
Capital
Votes
GC Dominio S.A.(1) . . . . . . . . . . . 75,980,304 28.11% 66.16% 75,980,304 26.64% 64.48% 75,980,304 26.43% 64.23%
Class B Common
Shares Owned After
the Offering
Without Exercise of
Over-Allotment
Option
Class B Common
Shares
Owned
Prior to
the Offering
Percentage of
Total
Owner
Number
Capital Votes
Percentage of
Total
Number
Ernestina L. Herrera de Noble . . 17,542,646 6.49% 3.06% 2,625,000
The 1999 Ernestina Laura
Herrera de Noble New York
Trust (2) . . . . . . . . . . . . . . . 75,738,549 28.02% 13.19% 75,738,549
HHM Media New York
Trust (3) . . . . . . . . . . . . . . . 33,241,035 12.30% 5.79% 33,241,035
José Antonio Aranda . . . . . . . .
8,197,737 3.03% 1.43% 8,197,737
The LRP New York Trust (4) . . .
9,428,894 3.49% 1.64% 9,428,894
Aranlú S.A(5) . . . . . . . . . . . . .
1,485,278 0.55% 0.26% 1,335,278
Corbery S.A(6) . . . . . . . . . . . .
2,432,354 0.90% 0.42%
0
GS Unidos, L.L.C(7) . . . . . . . .
9,502,270 3.52% 1.65%
0
GS Private Equity Partners IIDirect Investment Fund,
L.P(8) . . . . . . . . . . . . . . . . . .
154,372 0.06% 0.03%
0
GS Capital Partners III, L.P(9) . .
6,501,018 2.41% 1.13%
0
GS Private Equity Partners
1999 — Direct Investment Fund,
L.P(10) . . . . . . . . . . . . . . . . .
126,162 0.05% 0.02%
0
Tinicum GC Investors,
L.L.C(11) . . . . . . . . . . . . . .
1,313,472 0.49% 0.23%
656,736
Farallon GC Investors,
L.L.C(12) . . . . . . . . . . . . . .
1,118,884 0.41% 0.19%
559,442
Freefloat . . . . . . . . . . . . . . . .
0 0.00% 0.00% 50,000,000
Total class B Shares . . . . . . . 166,782,671 61.71% 29.05% 181,782,671
143
Class B Common
Shares Owned After
the Offering
Including
Full Exercise
of Over-Allotment
Option
Capital
0.92%
Votes
0.45%
Percentage
of Total
Number
Capital
0
0.00%
Votes
0.00%
26.55% 12.85% 75,738,549
26.34% 12.81%
11.65%
2.87%
3.31%
0.47%
0.00%
0.00%
11.56%
2.85%
3.28%
0.46%
0.00%
0.00%
5.62%
1.39%
1.59%
0.23%
0.00%
0.00%
5.64% 33,241,035
1.39% 8,197,737
1.60% 9,428,894
0.23% 1,335,278
0.00%
0
0.00%
0
0.00%
0.00%
0.00%
0.00%
0
0
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0
0.00%
0.00%
0.23%
0.11%
558,226
0.19%
0.09%
0.20% 0.09%
475,526
17.53% 8.49% 57,500,000
63.72% 30.85% 186,475,245
0.17% 0.08%
20.00% 9.72%
64.86% 31.53%
Class C Common
Shares Owned After
the Offering
Without Exercise of
Over-Allotment
Option
Class C Common
Shares
Owned
Prior to
the Offering
Percentage of
Total
Owner
Number
Capital Votes
Class C Common
Shares Owned After
the Offering
Including
Full Exercise
of Over-Allotment
Option
Percentage of
Total
Number
Capital Votes
Percentage
of Total
Number
Capital
Votes
GS Unidos, L.L.C(7) . . . . . . . . .
15,043,094
5.57% 2.62% 15,043,094
5.27%
2.55% 13,617,753
4.74%
2.30%
Gs Private Equity Partners II —
Direct Investment Fund,
L.P(8) . . . . . . . . . . . . . . . . .
GS Capital Partners III, LP(9) . . .
283,530
11,940,208
0.10% 0.05%
283,530
4.42% 2.08% 11,940,208
0.10%
4.19%
0.05%
260,374
2.03% 10,965,055
0.09%
3.81%
0.04%
1.85%
0.09% 0.04%
231,717
0.08%
0.04%
212,793
0.07%
0.04%
10.17% 4.79% 27,498,549
9.64%
4.67% 25,055,975
8.71%
4.24%
GS Private Equity Partners
1999 — Direct Investment
Fund, L.P(10) . . . . . . . . . . . .
Total class C common
shares . . . . . . . . . . . . . . . . .
(1)
231,717
27,498,549
GC Dominio is an Argentine corporation owned by The 1999 Ernestina Laura Herrera de Noble
New York Trust (35.555%), HHM Media New York Trust (35.335%), Mr. José Antonio Aranda
(14.555%) and The LRP New York Trust (14.555%). Pursuant to the bylaws of Dominio, except in
the case of transfers to certain family members, trusts established for the benefit of such family
members and affiliates that only hold Dominio shares, transfers of shares in Dominio are subject to
a right of first refusal in favour of all non-selling shareholders (rateable to their ownership interest in
Dominio). Furthermore, any non-selling shareholder is entitled to require that the selling shareholder exchange all or part of the shares in Dominio it proposes to sell for a number of Class B
Shares equal to the percentage ownership interest in the total capital of the Company represented
by the Dominio shares so exchanged. Finally, Dominio retains a residual right of first refusal with
respect to any shares proposed to be sold by any of its shareholders that have not been acquired
or exchanged by its non-selling shareholders. The shares in Dominio owned by The 1999 Ernestina Laura Herrera de Noble New York Trust, HHM Media New York Trust and The LRP New York
Trust are subject to usufructs in favour of Mrs. Noble and certain of her family members and affiliates, Mr. Magnetto and certain of his family members and affiliates, and Mr. Pagliaro and certain of
his family members and affiliates, respectively. Except with respect to matters contemplated in Sections 197 and 244 of the Argentine Corporate Law, decisions are adopted by the simple majority of
the shares of Dominio present or represented at a shareholders meeting.
(2) The 1999 Ernestina Laura Herrera de Noble New York Trust is an irrevocable trust established
under the law of the State of New York, which unless extended will expire on 22 December 2016.
The beneficiaries of the trust are Mrs. Noble and ultimately certain of her family members. The
trust has five trustees, including Messrs. Magnetto, Aranda and Pagliaro as well as Mrs. Noble.
Except for certain decisions that cannot be adopted without the consent of Mrs. Noble, and/or certain of the trustees (including on certain matters the voting of the shares of Dominio and the Company owned by the trust), decisions are adopted by the vote of the majority of the trustees. All
shares in Dominio and the Company currently owned by the trust are currently subject to a usufruct in favour of Mrs. Noble and certain of her family members and affiliates.
(3) The HHM Media New York Trust is an irrevocable trust established under the law of the State of
New York, which unless extended will expire on 21 April 2015. The beneficiaries of the trust are
Mr. Magnetto and ultimately certain of his family members and other persons as may be designated by Mr. Magnetto. The trust has six trustees, including Messrs. Magnetto, Aranda and
Pagliaro. Except for certain decisions that cannot be adopted without the consent of Mr. Magnetto,
and/or certain of the trustees (including on certain matters the voting of the shares of Dominio
144
and the Company owned by the trust), decisions are adopted by the vote of the majority of the
trustees. All shares in Dominio and the Company currently owned by the trust are subject to a
usufruct in favour of Mr. Magnetto and certain of his family members and affiliates.
(4) The LRP New York Trust is an irrevocable trust established under the law of the State of
New York, which unless extended will expire on 29 October 2016. The beneficiaries of the trust
are Mr. Pagliaro and ultimately certain of his family members. The trust has five trustees, including Mr. Pagliaro and two of his family members. Except for certain decisions that cannot be
adopted without the consent of Mr. Pagliaro and/or certain of the trustees (including on certain
matters the voting of the shares of Dominio and the Company owned by the trust), decisions are
adopted by the vote of the majority of the trustees. All shares in Dominio and the Company currently owned by the trust are currently subject to a usufruct in favour of Mr. Pagliaro and certain
of his family members and affiliates.
(5) Aranlú S.A. is an Argentine corporation controlled by Mr. José Antonio Aranda.
(6) Corbery S.A. is a Uruguayan corporation jointly owned by the Controlling Shareholders.
(7) GS Unidos, L.L.C. (“GS Unidos”) is a Delaware Limited Liability Company owned by GS Capital
Partners III Offshore, L.P. (20.64%), Goldman, Sachs & Co. Verwaltungs GmbH (3.47%), GS
Private Equity Partners Connecticut, L.P. (0.63%), GS Private Equity Partners 1999, L.P.
(6.07)%), GS Private Equity Partners 1999 Offshore, L.P. (0.97%), GS Private Equity Partners,
L.P. (3.41%), GS Private Equity Partners Offshore, L.P. (1.64%), GS Private Equity Partners II
L.P. (4.30%), GS Private Equity Partners II Offshore, L.P. (2.23%), GS Private Equity Partners III,
L.P. (4.51%), GS Private Equity Partners III Offshore, L.P. (1.05%), NBK/GS Private Equity Partners, L.P. (0.48%), Booth American Company (19.22%), Rebecca C. Booth and Comerica Bank,
Trustees U/A with John L. Booth, II, dated December 19, 1984 FBO Descendents of John L.
Booth, II (14.13%), John L. Booth, II, (5.09%), Stone Street Fund 2000, L.P. (2.97%), Bridge
Street Special Opportunities Fund 2000, L.P. (8.00%) and DMI Holding, LLC (1.19%). The managing member of GS Unidos is Capital Partners III Offshore, L.P. and its general partner is GS Advisors III, L.L.C. Members of GS Unidos are not allowed to transfer their membership interests
without the consent of the managing member. Prior to the date of this Offering Circular, DMI Holding, LLC transferred a single class B common share of the Company to GS Unidos and ceased
to be a shareholder of the Company.
(8) GS Private Equity Partners II Direct Investment Fund, L.P. (“GS PEP II”) is a Delaware Limited
Partnership due to dissolve upon the later of 31 December 2009 and one year after the date by
which all of its portfolio investments have been liquidated. The general partner of GS PEP II is
GS PEP II Direct Investment Advisors, L.L.C. and its managing member is GSAM Gen-Par,
L.L.C. Limited Partners of GS Unidos are allowed to transfer their membership interests upon
compliance with certain conditions including the provision of an opinion of counsel.
(9) GS Capital Partners III, L.P. (“GSCP III”) is a Delaware Limited Partnership due to dissolve on 4 June
2008, however the general partner may extend the term for up to three successive one year terms
and the term may also be extended upon the agreement of a majority of limited partners. The general
partner of GSCP III is GS Advisors III, L.L.C. Limited partners may only transfer to a “qualified purchaser” within the meaning of Section 2(a) (51) of the United States Investment Company Act and
upon compliance with certain conditions including the provision of an opinion of counsel.
(10) GS Private Equity Partners 1999 Direct Investment Fund, L.P. (“GS PEP 1999”) is a Delaware
Limited Partnership due to dissolve upon the later of 31 December 2010 and one year after the
date by which all of its portfolio investments have been liquidated. The term of the partnership
may also be extended upon the agreement of a majority of limited partners. The general partner
of GS PEP 1999 is GS PEP 1999 Direct Investment Advisors, L.L.C. and its managing member
is GSAM Gen-Par, L.L.C. Limited Partners of GS PEP 1999 are allowed to transfer their
145
membership interests upon compliance with certain conditions including the provision of an opinion of counsel.
(11) Tinicum GC Investors L.L.C. (“Tinicum”) is a Delaware limited liability company.
(12) Farallon GC Investors L.L.C. (“Farallon”) is a Delaware limited liability company.
At the time the GS Investors, Tinicum and Farallon became shareholders in the Company, it
was agreed that to satisfy regulatory requirements, these shareholders would be given access to
certain Company information, from time to time, at their request.
Shareholders Agreement
Dominio, Ernestina Laura Herrera de Noble, The 1999 Ernestina Laura Herrera de Noble New
York Trust, HHM Media New York Trust, The LRP New York Trust, José Antonio Aranda, Aranlú S.A.
and Corbery S.A. and GS Unidos, LLC, GS Private Equity Partners II — Direct Investment Fund, LP,
GS Capital Partners III, LP, GS Private Equity Partners 1999 — Direct Investment Fund, L.P. and the
GS Unidos members listed and defined therein (collectively with GS Unidos, LLC, GS Private Equity
Partners II — Direct Investment Fund, LP, GS Capital Partners III, LP and GS Private Equity Partners
1999-Direct Investment Fund, LP, the “GS Investors”) are party to a shareholders agreement dated as
of 27 December 1999 and amended as of 2 August 2005, 30 May 2007 and further amended as of 19
October 2007, which amendment is subject to completion of the Offering (the “Shareholders
Agreement”) that provides the holders of class C common shares the right to elect two members of
the board of directors of the Company (and their alternate members) for so long as the class C
common shares represent at least 5% or more of the Company’s total capital and one member of the
board of directors of the Company (and one alternate member) for so long as the class C common
shares represent less than 5% but at least 2% of the Company’s total capital.
Under this section, we describe the Shareholders Agreement as it will be in effect upon
completion of the Offering.
Pursuant to the Shareholders Agreement, for as long as the class C common shares represent
5% or more of the fully diluted equity of the Company at the time of voting and the holders of class C
common shares do not hold an investment excluded by the Shareholders Agreement, the Controlling
Shareholders and the GS Investors have agreed that the GS Investors will have approval rights with
respect to any of the following matters:
• certain capital expenditures in connection with the acquisition and development of a new
business by the Company and/or certain of its subsidiaries;
• proposals to effect any merger, spin-off, reorganisation, voluntary dissolution or liquidation of
the Company and/or certain of its subsidiaries, that result in the transfer of a significant amount
of assets to a third party or the significant increase in the participation of third parties in the
Company and/or certain of its subsidiaries;
• acquisitions by the Company or certain of its subsidiaries of assets or stock of other companies
in excess of certain thresholds;
• transfers of assets of the Company or certain of its subsidiaries to third parties, other than in
the ordinary course of business, in excess of certain thresholds;
• agreements, refinancings or other transactions by the Company or certain of its subsidiaries
that would result in an increase in the consolidated indebtedness of the Company beyond
certain thresholds;
• expenses, allowances or other capital expenditures that in the aggregate exceed budgeted
annual capital expenditures by certain amounts;
146
• proposals with respect to the issuance of equity instruments of the Company or certain of its
subsidiaries to persons other than to certain shareholders or in the context of a public offering,
the proceeds of which exceed certain threshold amounts and proposals relating to the
issuance of equity instruments of certain of its subsidiaries exceeding certain thresholds;
• transactions between the Company and/or certain of its subsidiaries and the Company’s
shareholders and/or their affiliates or relatives in excess of certain amounts;
• distributions of dividends other than on a pro-rata basis (other than dividends on preferred
shares, if any);
• compensation or fees payable to officers and managers in excess of certain thresholds; and
• any amendment of the Bylaws.
However, such GS Investors will lose the approval right once the class C common shares
represent less than 5% of the total capital of the Company at the time of voting, and will not be
entitled to prevent the approval of any such matter for so long as any of the holders of class C
common shares holds an investment excluded by the Shareholders Agreement.
Additionally, according to the Shareholders Agreement, the following matters must be submitted
to the consideration of the board of directors and shall not be carried out unless adopted by the board
of directors, without prejudice to the subsequent submission to the shareholders meeting, if
applicable:
• any sale or transfer of assets of the Company, except in the ordinary course of business, in
excess of U.S.$10 million or 0.33% of the equity value of Grupo Clarín;
• any proposal to increase capital and/or to issue equity instruments of the Company; and
• any proposal relating to the distribution of dividends.
The Shareholders Agreement also provides that under certain circumstances, such as conflict of
interest, the directors elected by holders of class C common shares or the holders of class C common
shares, may not vote, either in a board meeting or shareholders meeting, as the case may be, against
the matters described above.
In addition, the Shareholders Agreement provides for certain transfer restrictions including the
following rights of first offer, tag-along rights and drag-along rights:
• the GS Investors may not transfer their shares to certain competitors of the Company without
the prior consent of the Controlling Shareholders;
• the GS Investors’ obligation to first offer its common shares in the Company to certain other
parties to the Shareholders Agreement prior to (and on the same terms as) a proposed
transfer or sale of such common shares to a third party, provided that after a public offering
these restrictions apply only to privately negotiated transactions;
• the right of certain parties to the Shareholders Agreement to request the inclusion of their
common shares in the Company in a proposed sale or transfer of common shares in the
Company; and
• holders of class A common shares are entitled to certain drag along rights in respect of shares
held by other parties to the Shareholders Agreement.
Generally, certain of the transfer restrictions described above do not apply to transfers of shares
made pursuant to any underwritten offer in Argentina, Brazil, the United States or one or more
member states of the European Union, a bona fide sale pursuant to Rule 144A under the Securities
Act, an underwritten offering pursuant to Rule 144A under the Securities Act, or a sale of common
shares (other than in a block trade) over a stock exchange.
147
Registration Rights Agreement
Pursuant to a registration rights agreement among, inter alia, the Company and the GS
Investors, the GS Investors have the right to request, at any time from the completion of the Offering
and subject to certain requirements and conditions, that the Company from time to time assist such
shareholders in connection with underwritten offerings of their shares and include all or a portion of
the common shares in the Company held by the shareholders in any subsequent underwritten offering
that the Company proposes or is required to make.
Selling Shareholder Information
Name
Domicile
Mrs. Ernestina L. Herrera de Noble . . . . . . . . . . .
Piedras 1743, Ciudad Autónoma de Buenos Aires
(C1140ABK), Argentina
Av. Leandro N. Alem 690, piso 17, Ciudad
Autónoma de Buenos Aires (C1001AAO),
Argentina
Av. Gral. Rivera 6329, piso 1, Of. 106,
Montevideo, Uruguay
Av. Del Libertador 498, piso 19, Ciudad
Autónoma de Buenos Aires (C1001AGR),
Argentina
Aranlú S.A.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corbery S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GS Unidos, LLC . . . . . . . . . . . . . . . . . . . . . . . . . .
GS Private Equity Partners II — Direct Investment
Fund, LP.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GS Capital Partners III, LP . . . . . . . . . . . . . . . . . .
GS Private Equity Partners 1999 — Direct
Investment Fund, LP . . . . . . . . . . . . . . . . . . . . .
Tinicum GC Investors, LLC. . . . . . . . . . . . . . . . . .
Farallon GC Investors, LLC . . . . . . . . . . . . . . . . .
Av. Del Libertador 498, piso 19, Ciudad
Autónoma de Buenos Aires (C1001AGR),
Argentina
Av. Del Libertador 498, piso 19, Ciudad
Autónoma de Buenos Aires (C1001AGR),
Argentina
Av. Del Libertador 498, piso 19, Ciudad
Autónoma de Buenos Aires (C1001AGR),
Argentina
800 Third Ave., 40th Floor, New York, NY 10022,
U.S.A.
One Maritime Plaza, Suite 2100 San Francisco,
CA 94111, U.S.A.
Mrs. Ernestina L. Herrera de Noble is the editorial director of Diario Clarín.
148
MANAGEMENT
Board of Directors and Senior Management
This section is a summary of the composition of the Company’s board of directors, audit
committee and supervisory committee and includes a description of the executive officers and the
material provisions of the Bylaws applicable to such corporate bodies, as will be in effect subject to
completion of and after giving effect to the Offering.
According to the Bylaws to be effective as of the Offering our board of directors consists of ten
directors and ten alternate directors. The current board of directors was elected at the shareholders
meeting held on 13 July 2007, for a period of one fiscal year and subject to completion of the Offering.
We are not a party to any employment agreement with any member of our board of directors,
except for Messrs. Héctor H. Magnetto, José A. Aranda, Lucio R. Pagliaro, Alejandro A. Urricelqui,
Jorge Rendo, Pablo C. Casey, Héctor M. Aranda, Lucio A. Pagliaro, Saturnino Herrero Mitjans and
Ignacio Driollet, who occupy various executive and managerial positions.
The following table sets forth the names of the individuals that will form part of our board of
directors upon completion of the Offering, their age, their positions on the board of directors, the class
of shares that elected them at the shareholders meeting held on 8 October 2007, their tenure in
service as directors and whether they qualify as independent directors, as such term is defined under
the CNV regulations.
Name
Héctor Horacio Magnetto . . . . . . . . . . .
José Antonio Aranda . . . . . . . . . . . . . .
Lucio Rafael Pagliaro . . . . . . . . . . . . . .
Alejandro Alberto Urricelqui . . . . . . . . .
Jorge Carlos Rendo . . . . . . . . . . . . . . .
Pablo César Casey . . . . . . . . . . . . . . .
Mario Parrado . . . . . . . . . . . . . . . . . . .
Alberto César José Menzani . . . . . . . .
Muneer Satter . . . . . . . . . . . . . . . . . . .
David Castelblanco . . . . . . . . . . . . . . .
Ignacio José Ma. Sáenz Valiente . . . . .
Héctor Mario Aranda . . . . . . . . . . . . . .
Lucio Andrés Pagliaro . . . . . . . . . . . . .
Saturnino Lorenzo Herrero Mitjans . . . .
José Ma. Sáenz Valiente (h.) . . . . . . . .
Ignacio Rolando Driollet . . . . . . . . . . . .
Sebastián Bardengo . . . . . . . . . . . . . .
Federico Ríos . . . . . . . . . . . . . . . . . . .
Ralph H. Booth (II). . . . . . . . . . . . . . . .
Luis Ma. Blaquier . . . . . . . . . . . . . . . . .
Age
Position
63
65
62
47
54
40
48
66
46
38
32
54
35
74
58
46
40
37
53
41
Chairman
Vice Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Alternate
Alternate
Alternate
Alternate
Alternate
Alternate
Alternate
Alternate
Alternate
Alternate
Current
Elected by Position
Holders of Held Since Independent
Class A
Class A
Class A
Class A
Class A
Class A
Class B
Class B
Class C
Class C
Class A
Class A
Class A
Class A
Class A
Class A
Class B
Class B
Class C
Class C
1999
1999
1999
1999
2005
2006
2007
2007
1999
2007
2005
1999
2006
1999
1999
2007
2007
2007
1999
1999
No
No
No
No
No
No
Yes(1)
Yes(1)
No
No
No
No
No
No
No
No
Yes(1)
Yes(1)
No
No
(1) Meets the requirements of independence set forth in Chapter III, Section 11 of CNV regulations.
Set forth below is a brief biographical description of the members of our board of directors. All of
our directors reside in Argentina except for Messrs. Satter, Castelblanco and Booth, who reside in the
United States and Mr. Parrado, who resides in the Republic of Uruguay.
Héctor Horacio Magnetto joined AGEA as manager in 1972 and soon became general manager.
He later became shareholder of various entities that are now our subsidiaries. He is the chairman of
149
our board of directors elected by the holders of our class A common shares. He has been a member
of our board of directors since 1999. He is also a member of the World Association of Newspapers,
the Sociedad Interamericana de Prensa, the International Press Institute and the International
Advertising Agency among other international organisations, and is vice president of the Asociación
Empresaria Argentina. Mr. Magnetto graduated as a public accountant from the Universidad Nacional
de La Plata.
José Antonio Aranda joined AGEA as financial manager in 1972. He later became a shareholder
of various entities that are now our subsidiaries. Since 1999 he has been a shareholder of Grupo
Clarín and the vice-chairman of our board of directors elected by the holders of our class A common
shares since 1999. He is also secretary of the Noble Foundation, member of the boards of the
Asociación Cristiana de Dirigentes de Empresa and the Instituto para el Desarrollo Empresarial de la
Argentina, and president of the Asociación para el Futuro del Niño. Mr. Aranda graduated as a public
accountant from the Universidad Nacional de La Plata. Mr. Aranda is the brother of Mr. Héctor Mario
Aranda.
Lucio Rafael Pagliaro became a manager of AGEA in 1974, and later a shareholder of various
entities that are now our subsidiaries. In 1990 he became general manager of ARTEAR and is our
operating director of our radio, television, cable and entertainment divisions. He has been a member
of our board of directors elected by the holders of our class A common shares since 1999. He is also
a member of the International Advertising Agency, a former counsellor of the United Nations
development program and Argentine representative to ALALC (Latin American Free Trade Association). In 1996 he was designated member of the international council of the United States Academy of
Television Arts and Sciences. Mr. Pagliaro is the father of Lucio Andrés Pagliaro.
Alejandro Alberto Urricelqui has been a member of our board of directors since 1999, and was
recently re-elected for that position by the holders of our class A common shares. He joined AGEA in
1990, and was its Financial Director until 1994. Between 1994 and 1999 he acted as Financial
Director of the group of corporations that as of 1999 became subsidiaries of Grupo Clarín. Since 1999
he has been our Chief Financial Officer. He is also a member of the boards of directors of Cablevisión,
AGR, Prima, Multicanal and AGEA. Before joining Grupo Clarín, Mr. Urricelqui was Chief Financial
Officer of Grupo Juncal.
Jorge Carlos Rendo has been a member of our board of directors since 2005 and was recently
re-elected for that position by the holders of our class A common shares. He joined AGEA in 1998,
and is currently our Director of External Relations. He graduated with a law degree from Universidad
de Buenos Aires and later obtained an MBA from the Wharton School of the University of
Pennsylvania. Mr. Rendo also serves on the boards of several of our subsidiaries, including
Cablevisión, Papel Prensa, Clarín Global, ARTEAR, AGR and Radio Mitre.
Pablo César Casey has been a member of our board of directors elected by the holders of our
class A common shares since 2006. He has worked with the Company in several capacities since
1986, and currently serves as our Manager of Public Affairs. He served as General Counsel for
Multicanal from 1997 to 2005 and is a member of the board of directors of Cablevisión and Multicanal.
Mr. Casey has a law degree from the Universidad de Buenos Aires and a Master’s degree in Law and
Economics from the Universidad Torcuato di Tella. Mr. Casey is Mr. Magnetto’s nephew.
Mario Parrado is an independent member of our board of directors, elected by the holders of our
class B common shares in October 2007. He graduated from the Business Administration of the
Universidad Argentina de la Empresa. After spending seven years with Credit Lyonnais, Mr. Parrado
joined BankBoston in 1994 and shortly thereafter was appointed managing director for BankBoston’s
investment banking activities in Argentina. From 2001 to 2004, Mr. Parrado led BankBoston’s loan
recovery efforts following Argentina’s economic crisis in 2001, through Fleet International Advisors.
Since 2004, Mr. Parrado renders consulting and investment advisory services through Prisma
Investments.
150
Alberto César José Menzani is an independent member of our board of directors, elected by the
holders of our class B common shares in October 2007. He has a degree in public accounting from
the University of Buenos Aires. From 1964 to 2003, he was a member of Pistrelli, Henry Martin &
Asociados, where he was appointed partner in 1978 and was director of the Audit Department.
Mr. Menzani was also a member of the board of directors of Papel Prensa. On 28 September 2007,
Mr. Menzani tendered his resignation to his board position in Papel Prensa, which resignation was
accepted by the shareholders of that company on 24 September 2007.
Muneer Satter has been a member of our board of directors elected by the holders of our class C
common shares since 1999. He is a Managing Director at Goldman Sachs in the Principal Investment
Area (the “PIA”) where he sits on the Investment Committee of the PIA and is the Global Head of the
Mezzanine Group. Mr. Satter also serves on the Boards of CCC Information Systems, Inc., the Nature
Conservancy, and is the Co-Chair of the boards of directors of Room to Read and Diveo Broadband
Networks. He is also a member of the board of trustees of Northwestern University. He received a
B.A. from Northwestern University, a J.D. from Harvard Law School, and an M.B.A. from the Harvard
Graduate School of Business Administration.
David Castelblanco is a member of our board of directors elected by the holders of our class C
common shares in October 2007. He is a Vice President at Goldman Sachs in PIA, sits on the boards
of American Golf Corporation, National Golf Properties, Leslie’s Poolmart, Inc., and Union Settlement
Association (a non-profit organisation). Mr. Castelblanco is also an observer on the board of the YES
Network, and a term member of the Council on Foreign Relations. He holds a J.D. from Stanford Law
School, an MBA from the Stanford Graduate School of Business and a BA from Brown University.
Ignacio José Ma. Sáenz Valiente has been an alternate member of our board of directors elected
by the holders of our class A common shares since 2005. He has been member of the board of
directors of Southel Holding S.A. since 2006 and member of the board of directors of Multicanal since
2007. He is the son of José María Sáenz Valiente (h).
Héctor Mario Aranda became manager of AGR in 1979. In 1983, he joined AGEA, assuming
responsibility for the administrative and financial divisions of that company. Since 1998 he has been
the general manager of AGEA. He is also a member of the board of AGR and Tinta Fresca. He has
been an alternate member of our board of directors elected by the holders of our class A common
shares since 1999. Héctor Aranda is a public accountant from the Universidad Nacional de La Plata.
Mr. Aranda is a brother of José Antonio Aranda.
Lucio Andrés Pagliaro has been an alternate member of our board of directors elected by the
holders of our class A common shares since 2006. He works at the human resources division of the
Company and has occupied positions in GC Gestión Compartida and Cablevisión. He is the son of
Lucio Rafael Pagliaro.
Saturnino Lorenzo Herrero Mitjans has been an alternate member of our board of directors
elected by the holders of our class A common shares since 1999. He is the chairman of several of our
subsidiaries including AGEA, Radio Mitre and Prima, among others. He was a professor and director
of the School of Management of the Instituto para el Desarrollo Empresarial de la Argentina, and a
professor of various Argentine universities and academic institutions. Mr. Herrero Mitjans holds a
degree in industrial relations from the Universidad Argentina de la Empresa.
José María Sáenz Valiente (h.) has been a member of our board of directors elected by the
holders of our class A common shares since 1999. He has been member of the board of directors of
Multicanal since 1993 and held the position of chairman in 1994. He is currently member of the board
of directors of Southel Holding S.A., CV Berazategui S.A. and AVC Continente Audiovisual S.A. He is
the chairman of IESA. He is an alternate member of the Supervisory Committee of AGEA, ARTEAR
and Pem S.A. He is partner of Sáenz Valiente & Asociados, Argentine legal counsel of the Company.
He is the father of Ignacio José Ma. Sáenz Valiente.
151
Ignacio Rolando Driollet has been an alternate member of our board of directors elected by the
holders of our class A common shares since 2007. Mr. Driollet joined AGEA in 1992, and served until
1994 as Deputy of Institutional Relations. Until December 1997, he led Grupo Clarín’s New Development Projects Group and during 1997, also served as Director of Strategic Analysis. From 1998 to
date, he has been our Director of Corporate Strategy. He is also a member of the board of directors of
Cablevisión. Mr. Driollet graduated with a law degree from Universidad Católica Argentina in 1987.
Sebastián Bardengo is an independent alternate member of our board of directors, elected by
the holders of our class B common shares in October 2007. Mr. Bardengo has a degree in business
administration from the University of Buenos Aires and completed graduate studies at Harvard
University. He has over 15 years of experience in investment and commercial banking, having held
positions at BankBoston, Argentina, and the Argentine subsidiary of Banco Bozano Simonsen. He is a
founding partner of Buenos Aires Advisors, a business consulting and advisory firm. Additionally, he is
treasurer of the Harvard Club of Argentina, and valuation expert for the Republic of Argentina in
several cases filed with ICSID (International Centre for Settlement of Investment Disputes) and
UNCITRAL (United Nations Commission on International Trade Law).
Federico Ríos is an independent alternate member of our board of directors, elected by the
holders of our class B common shares in October 2007. Mr. Ríos graduated as public accountant from
the University of Buenos Aires in 1994. He is chief executive officer of SVECA Vehículos Pesados
S.A., a company established in 2007 and awarded with distribution rights for Volvo trucks for certain
areas of the province of Buenos Aires, and chief executive officer of GESTAGRO S.A., an agricultural
enterprise with activities in the province of Buenos Aires. Until 2005, Mr. Ríos was general manager of
ANDECAM S.A., the official distributor of Volkswagen trucks in Argentina. From 1996 to 1998, Mr. Ríos
was chief financial officer of Andelo S.A.
Ralph H. Booth II has been a member of our board of directors elected by the holders of our
class C common shares since 1999. He has been the Chairman and Chief Executive Officer of Booth
American Company, a private investment concern, since 1995 and is currently a director of Diveo
Broadband Networks, Inc. Previously he was a founder of English Cable Enterprises which merged
into NTL, Inc. in February 1994 and later co-founded European Cable Capital Partners with Goldman
Sachs, which purchased a controlling interest in Diamond Cable Communications, Plc.
Luis Ma. Blaquier has been an alternate member of our board of directors elected by the holders
of our class C common shares since 1999. He is currently a Director of Texas Emerging Energy S.A.
and an independent board member of Transportadora de Gas del Sur S.A. Mr. Blaquier was an
Executive Director at Goldman Sachs & Co. (Investing Banking Division) where he worked for over
13 years in the United States and Latin America. Mr. Blaquier was head of Goldman Sachs’ Southern
Cone office in Buenos Aires from 1998 through 2006. He also worked at Alliance Capital Management
LP, IBM Argentina S.A. and Ledesma S.A.A.I. Mr. Blaquier received a degree in Economics from the
Universidad Católica Argentina in 1988 and a Master in Business Administration — Finance at
Dartmouth College in 1993.
Prior to a 2005 amendment to Section 45 of the Broadcasting Law, directors of a broadcasting
licensee’s controlling shareholder also had to meet the requirements the Broadcasting Law imposes
on directors of broadcasting licensees. Even though after the amendment such requirement is no
longer in place, regulations governing the transfer of broadcasting licenses still grant Comfer the
authority to require that directors of the controlling shareholder of the licensee meet the same
standards required for directors of licensees. Pursuant to the above-mentioned amendment, directors
are no longer required to be Argentine nationals, but foreign directors must comply with additional
certifications. Because several transfers of our licensee subsidiaries are currently subject to Comfer
approval, our directors must meet the requirements of the Broadcasting Law.
There are no conflicts of interest between any duties to us of any of the members of our Board
of Directors and their private interests and/or other duties except for Messrs. Satter and Castelblanco,
who are employees of affiliates of The Goldman Sachs Group, Inc., and to that extent may have
152
interests that conflict with those of the Company. See “Risk Factors — Risks Related to Our
Business — Certain of our Existing Shareholders have Additional Approval Rights and their Interests
May be Contrary to Yours”.
Composition, Election and Replacement
According to our Bylaws, our board of directors consists of ten directors and ten alternate
directors, of which six directors and six alternate directors are elected by the holders of the issued
and outstanding class A common shares, two directors and two alternate directors are elected by the
holders of the issued and outstanding class B common shares and two directors and two alternate
directors are elected by the holders of the issued and outstanding class C common shares. Under our
Bylaws, two directors and two alternate directors elected by the holders of class B common shares
must be independent, as such term is defined under the CNV regulations.
If the participation of the holders of class C common shares in the total issued and outstanding
capital stock of the company is reduced below 5% but is equal to or higher than 2%, then such
holders shall be entitled to elect only one director and one alternate director, and the holders of class B
common shares shall be entitled to elect three directors and three alternate directors. If the
participation of the holders of class C common shares in the total issued and outstanding capital stock
of the company is reduced below 2%, then such holders shall not be entitled to elect any directors or
alternate directors, and the holders of class B common shares shall be entitled to elect four directors
and four alternate directors. The changes in the composition of the board as a consequence of the
reduction in the participation of the holders of class C common shares in the Company have
immediate effect, and the board of directors shall call a special meeting of holders of class B common
shares as soon as reasonably possible to appoint the new directors and accept the resignation of the
corresponding director previously elected by the class C shareholders.
Directors will be elected by the majority of holders of each class of shares present at the meeting
in which directors of such class are to be elected.
According to our Bylaws, if no quorum of a given class of shares exists at a meeting in which
directors of such class are to be elected or no decision is reached, a second meeting must be held no
less than five business days after the first meeting was convened. If no holders of such class of
shares are present at such second meeting, or if they are present at any of the first or second meeting
but do not exercise their right to elect the directors corresponding to their class, such directors will be
elected by the majority of all shareholders present at the meeting acting as a single body. Directors so
elected will be deemed to have been elected by the class originally entitled to such election.
The Directors will hold office for a term of one year, and may be re-elected without limitation.
Except under certain circumstances set forth under Sections 264 and 276 of the Argentine Corporate
Law, directors may only be removed from their position by the holders of the class of shares that
elected them or is deemed to have elected them.
At the first meeting of board of directors of a given term, the directors will appoint a chairman,
and a vice-chairman to replace the chairman in the event of absence or unavailability. The chairman,
or the vice-chairman in the event of absence or unavailability of the chairman, is Grupo Clarín’s legal
representative.
Independence Standards
For a director of the Company to be considered independent under CNV rules, he or she must
not:
• be a member of the board or an employee of a shareholder with a significant participation in
the Company, or of any other company in which such shareholder has a significant participation or over which it has a significant influence;
153
• be an employee of the Company or have been an employee of the Company in the past three
years;
• have a professional relationship with, or belong to, an entity that has a professional relationship
with the Company, or receive fees (other than directors’ fees) from the Company, a shareholder
with a significant participation in, or has a significant influence over, the Company, or any other
company for which such shareholder has a significant influence;
• hold a significant participation in, or have significant influence over, the Company, directly or
indirectly;
• sell goods or services to the Company or to a shareholder with a significant participation in, or
significant influence over, the Company, or such shareholder’s affiliates for amounts that
exceed substantially those received as compensation for his or her services as director; or
• be married to, or a relative of, an individual who would not have been considered independent
had he or she been a member of the board of directors.
Holders of more than 35% of the outstanding capital stock and/or the votes of a company or
entitled to elect one or more directors in a given class, or who are a party to a shareholders’
agreement relating to the governance of the company or of such company’s parent are deemed to
have a “significant participation” in the company.
Meetings, Quorum, Majorities
Our board of directors must hold a minimum of one regularly scheduled meeting every three
months. Meetings must also be convened when called by any member of the board of directors.
Subject to the paragraph below, the quorum for a board of directors’ meeting is the majority of its
members. Pursuant to our Bylaws, and for as long as we are registered with the CNV, our Directors
may participate in a meeting of the board of directors by means of a communication system that
provides for a simultaneous transmission of sound, images or words. Participation in a meeting by
such means will not constitute presence in person at such meeting for quorum purposes, although if
quorum exists, directors who are not physically present are entitled to vote. The board of directors will
resolve by the affirmative vote of the majority of members present. The minutes of such meeting are
to be transcribed into the corporate books and signed by the members present and the members of
our statutory supervisory committee, who are to verify and certify any resolution adopted.
Pursuant to the Shareholders Agreement, for as long as the class C common shares represent
5% or more of the fully diluted equity of the Company or holders of class C common shares do not
hold an investment excluded by the Shareholders Agreement at the time of voting, the Controlling
Shareholders and the GS Investors have agreed that the GS Investors will have approval rights with
respect to any of the following matters:
• certain capital expenditures in connection with the acquisition and development of a new
business by the Company and/or certain of its subsidiaries;
• proposals to effect any merger, spin-off, reorganisation, voluntary dissolution or liquidation of
the Company and/or certain of its subsidiaries, that result in the transfer of a significant amount
of assets to a third party or the significant increase in the participation of third parties in the
Company and/or certain of its subsidiaries;
• acquisitions by the Company or certain of its subsidiaries of assets or stock of other companies
in excess of certain thresholds;
• transfers of assets of the Company or certain of its subsidiaries to third parties, other than in
the ordinary course of business, in excess of certain thresholds;
154
• agreements, refinancings or other transactions by the Company or certain of its subsidiaries
that would result in an increase in the consolidated indebtedness of the Company beyond
certain thresholds;
• expenses, allowances or other capital expenditures that in the aggregate exceed budgeted
annual capital expenditures by certain amounts;
• proposals with respect to the issuance of equity instruments of the Company or certain of its
subsidiaries to persons other than to certain shareholders or in the context of a public offering,
the proceeds of which exceed certain threshold amounts and proposals relating to the
issuance of equity instruments of certain of its subsidiaries exceeding certain thresholds;
• transactions between the Company and/or certain of its subsidiaries and the Company’s
shareholders and/or their affiliates or relatives in excess of certain amounts;
• distributions of dividends other than on a pro-rata basis (other than dividends on preferred
shares, if any);
• compensation or fees payable to officers and managers in excess of certain thresholds; and
• any amendment of the Bylaws.
However, such GS Investors will lose the approval right once the class C common shares
represent less than 5% of the total capital of the Company at the time of voting, and will not be
entitled to prevent the approval of any such matter for so long as any of the holders of class C
common shares hold certain investments.
Additionally, according to the Shareholders Agreement, the following matters must be submitted
to the consideration of the board of directors and shall not be carried out unless adopted by the board
of directors, without prejudice to the subsequent submission to the shareholders meeting, if
applicable:
• any sale or transfer of assets of the Company, except in the ordinary course of business, in
excess of U.S.$10 million or 0.33% of the equity value of Grupo Clarín;
• any proposal to increase capital and/or to issue equity instruments of the Company; and
• any proposal relating to the distribution of dividends.
Executive Committee
Day-to-day decisions relating to our business are taken by an executive committee of our board
of directors formed by three members, appointed by the board of directors from among its own
members. The executive committee acts under the oversight of the board of directors.
The current members of our executive committee are Mr. Héctor H. Magnetto (Chairman),
Mr. José A. Aranda (Vice Chairman) and Lucio R. Pagliaro.
Duties and Liabilities
Our directors have the obligation to perform their duties with the loyalty and diligence of a
prudent business person. Under Section 274 of the Argentine Corporate Law, our directors are jointly
and severally liable to us, our shareholders, and third parties for negligence in discharging their duties,
for violating any law or our Bylaws, and for any other damage caused by wilful misconduct, abuse of
authority or gross negligence. Notwithstanding the foregoing, we may assign certain specific duties to
a director by resolution adopted at a shareholders meeting, and the determination of the director’s
liability for actions taken while performing these specific duties must take into account whether the
actions of the director are within the scope of the director’s authorised duties. However, any
shareholders resolution assigning specific duties to a director must be registered with the IGJ in order
for the director to benefit from this limitation on liability.
155
In general, a director will not be held liable for a decision of the board of directors, even if that
director participated in the decision or had knowledge of the decision, if (i) there is written evidence of
the director’s opposition to the decision and (ii) the director notifies the supervisory committee of that
opposition. However, both conditions must be satisfied before the liability of the director is claimed
before the board of directors, the supervisory committee or the shareholders or relevant authority or
the commercial courts.
Section 271 of the Argentine Corporate Law allows directors to enter into agreements with the
Company that relate to such director’s activity and under arms’ length conditions. Agreements that do
not satisfy any of the foregoing conditions must have prior approval of the board of directors (or the
supervisory committee in the absence of board quorum), and must be notified to the shareholders at
a shareholders’ meeting. If the shareholders reject the agreement, the directors or the members of the
supervisory committee, as the case may be, shall be jointly and severally liable for any damages to
the Company that may result from such agreement. Agreements that do not satisfy the conditions
described above and are rejected by the shareholders are null and void, without prejudice to the
liability of the directors or members of the supervisory committee for any damages to the Company.
We may initiate causes of action against directors if so decided at a meeting of the shareholders.
If a cause of action has not been initiated within three months of a shareholders’ resolution approving
its initiation, any shareholder may start the action on behalf and on our account. A cause of action
against the directors may be also initiated by shareholders who object to the approval of the
performance of such directors if such shareholders represent, individually or in the aggregate, at least
5% of our capital stock.
Except in the event of our mandatory liquidation or bankruptcy, shareholder approval of a
director’s performance, or express waiver or settlement approved by the Shareholders Meeting,
terminates any liability of a director vis-à-vis us, provided that shareholders representing at least 5%
of our capital stock do not object and provided further that such liability does not result from a violation
of law or our bylaws.
Audit Committee
Pursuant to Decree No. 677/2001 and its implementing regulations, we are required to have an
audit committee consisting of at least three members of our board of directors with experience in
business, finance or accounting matters. A majority of the members of the audit committee must be
independent directors, as defined by CNV regulations. The audit committee must also have as many
alternate members as it has full members in order to fill in possible vacancies. Members and alternate
members of the audit committee serve for a period of one fiscal year and may be re-elected. Our
Bylaws provide that our audit committee must meet at least once every three months or at the request
of any member. A quorum for a decision by the audit committee requires the presence of a majority of
its members and matters are decided by the vote of a majority of those present at the meeting. In the
event of an evenly divided vote of directors, the Chairman casts the tie-breaking vote. Decisions of the
audit committee are recorded in a special corporate book and signed by all members of the committee
who were present at the meeting.
Among its duties, the audit committee must:
• advise on the board of directors’ proposal for the designation of external independent accountants and to ensure their independence;
• oversee our internal control mechanisms and administrative and accounting procedures and
assess the reliability of all financial and other relevant information filed with the CNV and other
entities to which we report;
• oversee our information policies concerning risk management;
156
• provide the market with complete information on transactions in which there may be a conflict
of interest with members of our various corporate bodies or controlling shareholders;
• advise on the reasonableness of fees or stock option plans for our directors and managers
proposed by the board of directors;
• advise on our fulfilment of legal requirements and the reasonableness of the terms of the
issuance of shares or other instruments that are convertible into shares in cases of capital
increase in which pre-emptive rights are excluded or limited;
• verify the fulfilment of any applicable rules of conduct; and
• issue grounded opinions on related-party transactions under certain circumstances and file
such opinions with regulatory agencies as required by the CNV in the case of possible conflicts
of interest.
Additionally, the audit committee must prepare an annual working plan and present it to the
board of directors and the supervisory committee. Members of the board, members of the supervisory
committee and external independent accountants must attend the meetings of the audit committee if
the audit committee so requests it, and must grant the audit committee full cooperation and
information. The audit committee is entitled to hire experts and counsel to assist it in its tasks and has
full access to all of our information and documentation.
The members of our audit committee will be designated among the board members to be elected
by the shareholders meeting convened for 8 October 2007, and will include Messrs. Menzani and
Parrado, the independent members of our board. There are no conflicts of interest between any duties
to us of any of the members of our Audit Committee and their private interests and/or other duties.
Compensation of Directors
Our shareholders fix our directors’ compensation, including their salaries and any additional
wages arising from the directors’ permanent performance of any administrative or technical activity.
Compensation of our directors is regulated by the Argentine Corporate Law and the CNV regulations.
Any compensation paid to our directors must previously have been approved at an ordinary
shareholders meeting. Article 261 of the Argentine Corporate Law, along with the CNV regulations,
specify that the maximum amount of compensation that corporate directors may receive, including
salaries and other compensation for the performance of technical or administrative activities, may not
surpass 5% of our “computable income” for the fiscal year if we do not distribute dividends, and may
be increased proportionately up to a cap of 25% of our “computable income” for the fiscal year, to the
extent that dividends are distributed. Computable income is defined to mean income for the fiscal
year, net of taxes, plus (or minus) adjustments from prior fiscal years, and net of accumulated losses,
minus a legal reserve, plus the amount of compensation for the directors corresponding to the fiscal
year. Nonetheless, both the Argentine Corporate Law and the CNV regulations provide that this
percentage amount may be exceeded if that amount is insufficient to cover fixed fees distributed to
directors who carry out specific duties, so long as the fees exceeding the percentage limitation are
expressly approved at an ordinary shareholders meeting where approval of the fees is expressly
included in the published meeting agenda.
According to the Shareholders Agreement, compensations to directors substantially in excess of
(a) those established by the compensation and fee policy adopted by the Company prior to 27 December 1999, and, (b) if no such policy exists, compensations consistent with current market practice, will
not be approved or implemented if a majority of votes of class C common shares present at the
shareholders’ meeting vote against its approval if such majority and the class C shareholders satisfy
certain conditions.
We do not maintain any pension or retirement plans for our directors. In addition, in 2006 our
directors waived their right to compensation.
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Executive Officers
The following table sets forth the names of our executive officers, their corporate positions and
their tenure in service as executive officers.
Name
Current
Position
Held Since
Age
Position(1)
.
.
.
.
.
.
63
54
47
41
46
53
1997
1998
1998
2004
2000
1999
Horacio E. Quirós . . . . . . . . . . . . . . .
Saturnino L. Herrero Mitjans . . . . . . .
Alejandro Mondrzak. . . . . . . . . . . . . .
58
74
44
Chief Executive Officer
Director of Public Affairs
Chief Financial Officer
Director of Corporate Control
Director of Corporate Strategy
Director of Audiovisual
Contents
Director of Human Resources
Director of Corporate Affairs
Director of Digital Contents
Cable Televisión and Internet Access
Carlos Alberto Moltini . . . . . . . . . . . .
46
Chief Executive
Officer — Cablevisión
2006
Printing and Publishing
Héctor M. Aranda . . . . . . . . . . . . . . .
Ricardo L. Kirschbaum . . . . . . . . . . .
54
58
General Manager — AGEA
Editor-in-Chief — Diario Clarín
1998
2003
Broadcasting and Programming
Daniel Zanardi . . . . . . . . . . . . . . . . . .
45
Chief Executive
Officer — ARTEAR
2002
Grupo Clarín
Héctor H. Magnetto . . . . . . . . . . . . .
Jorge C. Rendo . . . . . . . . . . . . . . . .
Alejandro A. Urricelqui . . . . . . . . . . .
Francisco Iván Acevedo. . . . . . . . . .
Ignacio R. Driollet . . . . . . . . . . . . . .
Ricardo Anglada . . . . . . . . . . . . . . .
1997
1999
2006
(1) As used here, the term “Director” is unrelated to the position of director on our board of directors.
Set forth below is a brief biographical description of each of our executive officers, except for
Messrs. Magnetto, Urricelqui, Rendo, Driollet, Herrero Mitjans and Aranda whose biographical
descriptions are included with those of our directors, above. All of our executive officers reside in
Argentina:
Francisco Iván Acevedo joined the Company in 2000 and is currently our Director of Corporate
Control. He graduated from the University of Buenos Aires with a degree in public accounting and
subsequently earned a Master’s degree in Business Management from the Instituto de Altos Estudios
Empresariales of the Universidad Austral. He is also a member of the boards of directors of ARTEAR,
Cablevisión and AGEA. Mr. Acevedo worked for eight years before joining Grupo Clarín at Grupo
Bunge (in Argentina and abroad) and before that for five years with Pistrelli, Díaz y Asociados (Arthur
Andersen).
Ricardo Anglada joined AGEA in 1990 where he worked in several executive positions and is
currently our Director of Audiovisual Contents. Mr. Anglada has developed his executive career in both
Argentine and international companies. He also serves on the boards of other Argentine companies,
including Multicanal, ARTEAR and IESA. Mr. Anglada graduated from the Universidad of Buenos
Aires with a degree in public accounting. He subsequently obtained a Master’s degree in finance from
Columbia University, and participated in executive programs conducted by the Universidad de
San Andrés and the Instituto de Altos Estudios Empresariales. He has lectured at the University of
Buenos Aires teaching on the subject of “Investment Decisions” since 1990.
Horacio E. Quirós has served as Director of Corporate Human Resources at Grupo Clarín since
1999. He is also a member of the boards of directors of Cablevisión, AGR, Multicanal and other
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subsidiaries. Previously he has worked in the human resources area at various businesses in the
automotive, industrial agriculture, and food sectors. He has also served as president to the Amcham
Commission on Industrial Relations and is President of Argentina Association of Human Resources
(or ADRHA) and regional Vice President of the Inter-American Federation of People Management
Associations. Mr. Quirós graduated from the Universidad Argentina de la Empresa in 1972 with a
degree in Industrial Relations.
Alejandro Mondrzak has served as our Director of Digital Contents since 2006 and as general
manager of Clarín Global since 2000. He has a degree in computer systems engineering from the
Universidad de Buenos Aires and has completed courses in management at U.C. Berkeley, Stanford
University and the Massachusetts Institute of Technology.
Carlos Alberto Moltini was appointed Chief Executive Officer of Cablevisión in October 2006.
Mr. Moltini joined Cablevisión after five years as the Chief Executive Officer of Multicanal and, prior to
occupying that position, seven years as the Chief Financial Officer of ARTEAR. Previously, Mr. Moltini
worked at Bagley and at companies in the broadcasting sector. He graduated from the University of
Buenos Aires with a degree in public accounting.
Ricardo L. Kirschbaum is Diario Clarín’s Editor-in-Chief since May 2003. He joined AGEA in
December 1976 and in April 1979 was appointed to the position of Editing Secretary in charge of the
Political Area, where he worked until May 2003, when he was promoted to General Editor. Prior to
joining AGEA, Mr. Kirschbaum worked at the editorial office of El Cronista Comercial. Recently,
Mr. Kirschbaum has become a member of the Academia Nacional de Periodismo (Argentine National
Journalism Academy).
Daniel Zanardi has served as the chief executive officer of ARTEAR since 2002. Mr. Zanardi has a
degree in public accounting from the University of La Plata. Initially he developed his professional career
as an independent advisor for several companies. In 1990, he joined ARTEAR as senior analyst, later
was designated as Financial and Administration Manager and in 2000 he was appointed CFO.
We have compensation arrangements with all of our officers occupying various executive and
managerial positions that contemplate a fixed remuneration as well as a variable component tied to
performance. Aggregate compensation paid to our executive officers in 2006 totalled Ps.16.0 million
(excluding Ps.0.6 million paid by Papel Prensa in 2006). From time to time, Grupo Clarín makes
advances to certain executive officers. As of 31 December 2006, the aggregate amount of advances
to executive officers outstanding totalled Ps.0.24 million. In 2007, Grupo Clarín announced its intention
to establish a long term savings plan that would allow senior management to make annual contributions, to be matched by Grupo Clarín or its subsidiaries and affiliate companies, to a certain portfolio
of investments, which would be held until retirement.
Supervisory Committee
Our Bylaws provide that our supervisory committee (comisión fiscalizadora) shall be comprised
of three members and three alternates elected at an ordinary shareholders meeting. As long as the
participation of the holders of class C common shares in the total issued and outstanding capital stock
of the company is equal to or more than 5%, then the holders of class C common shares shall be
entitled to elect one member and one alternate member of the supervisory committee. Another
member and alternate member of the supervisory committee shall be appointed by the holders of
class A common shares, and the third member and alternate member shall be appointed by the
holders of class A common shares and the holders of class B common shares acting as a single
class. Members and alternate members of the supervisory committee serve for a period of one fiscal
year and may be re-elected.
A quorum for a decision by the supervisory committee requires the presence of a majority of its
members and matters are decided by the vote of a majority of those present at the meeting.
159
Members of the supervisory committee must be lawyers or accountants and be residents of
Argentina. The supervisory committee examines and verifies the corporation’s books and records;
verifies its liquid assets; monitors its compliance with laws, regulations, articles of incorporation,
Bylaws, and shareholder resolutions; attends and voices opinions in shareholders and directors’
meetings; prepares written reports on the corporation’s financial and economic conditions, presenting
these to shareholders at annual meetings; calls extraordinary shareholders meetings whenever
necessary; and performs other duties and has other powers provided for under Article 294 of the
Argentine Corporate Law. Members of the supervisory committee may be liable to shareholders if they
fail to discharge their duties conscientiously and may also be jointly liable with directors if such a
failure results in the directors taking improper actions that otherwise would have been avoided.
The following table sets forth the names of our supervisory committee members, their positions
on the committee and whether they qualify as independent, as such term is defined under the CNV
regulations.
Name
Raúl Antonio Morán . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Carlos A. P. Di Candia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miguel Maxwell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hugo Ernesto López . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martín Guillermo Ríos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alberto López Carnabucci . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
Position
Independent
Member
Member
Member
Alternate
Alternate
Alternate
Yes
Yes
No
Yes
No
No
Raúl Antonio Morán is a Public Accountant from Universidad Nacional de La Plata. He joined
AGEA as senior auditor in 1973 and was a member of AGEA’s control and finance management office
from 1975 until the creation of the Company in 1999. He is also a member of the supervisory
committee of ARTEAR, AGEA, Multicanal, Prima and Impripost Tecnologías S.A. and an alternate
member of the supervisory committee of Prima. Mr. Morán is an independent member of the
committee, as defined by CNV regulations.
Carlos A. P. Di Candia is a Public Accountant from Universidad Nacional de La Plata. He was
appointed as internal auditor of AGEA in 1972 and syndic in 1987. He is also a member of the
supervisory committees of AGEA, ARTEAR, Cablevisión, Multicanal, CIMECO and syndic of AGR,
Prima and Radio Mitre, among others. Mr. Di Candia is an independent member of the committee, as
defined by CNV regulations.
Miguel Maxwell is a Public Accountant from Universidad de Buenos Aires. He is partner of the
audit department of Deloitte & Touche Argentina since 1986, and director of such department since
2005. Mr. Maxwell is not an independent member of the committee, as defined by CNV regulations.
Hugo Ernesto López is a Public Accountant from Universidad de Belgrano. In 1984 he was
appointed as General Accounting Chief of AGEA. In 2000 he joined Grupo Clarín. He is also a
member of the supervisory committees of ARTEAR, Multicanal, Cablevisión and AGEA, an alternate
member of the supervisory committee of Impripost Tecnologías S.A. and alternate syndic of other
companies of Grupo Clarín. Mr. López is an independent alternate member of the committee, as
defined by CNV regulations.
Martín Guillermo Ríos is an attorney with Estudio Sáenz Valiente & Asociados, Argentine legal
counsel to Grupo Clarín. He is also an alternate director of Multicanal. Mr. Ríos is not an independent
member of the committee, as defined by CNV regulations.
Alberto López Carnabucci is a Public Accountant from Universidad de Buenos Aires. He is
partner of the audit department of Deloitte & Touche Argentina, and heads the Media, Technology and
Telecommunications audit department for Latin America. Mr. Lopez Carnabucci is not an independent
alternate member of the committee, as defined by CNV regulations.
160
The aggregate compensation we paid to the members of our supervisory committee for the year
ended 31 December 2006 was Ps.9,000.
Compensation of Officers, Directors and Committee Members
The aggregate compensation we paid to our executive officers, directors as members of the
board and members of our supervisory committee for the year ended 31 December 2006 was
Ps.16.0 million (excluding Ps.0.6 million paid by Papel Prensa). Members of the committees of our
board of directors receive no additional compensation for their capacity as committee members.
Mrs. Ernestina L. Herrera de Noble and Messrs. Héctor H. Magnetto, José Antonio Aranda and
Lucio Rafael Pagliaro, as well as certain members of their families, hold executive positions with the
Company and certain of its subsidiaries and affiliates and are members of the board of certain of
those entities, and in that connection became entitled to aggregate payments of Ps.14.0 million in
2006 (excluding Ps.0.5 million paid by Papel Prensa). In addition, in 2007, they received Ps.11.1 million
corresponding to the balance of dividends declared by certain of our predecessor companies in favour
of the Controlling Shareholders, for which we became liable in 1999, and Ps.6.9 million in compensation for the deferral of such dividends. See “Dividend Policy”.
Litigation Statement About the Company’s Directors and Officers
At the date of this Offering Circular, for at least the previous five years, none of the Company’s
Directors or executive officers:
• has had any convictions in relation to fraudulent offences;
• has held an executive function in the form of a senior executive officer or a member of the
administrative, management or supervisory bodies, of any company at the time of or preceding
any bankruptcy, receivership or liquidation, except for the Multicanal APE and the APE of
Cablevisión and, in the case of Mr. Satter, the Chapter 11 proceeding of Atkins Nutritional,
Inc., a company in which Mr. Satter has served as director since October 2003; or
• has been subject to any official public incrimination and/or sanction by any statutory or
regulatory authority (including any designated professional body) or has ever been disqualified
by a court from acting as a member of the administrative, management or supervisory bodies
of a company or from acting in the management or conduct of the affairs of any company.
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DESCRIPTION OF SHARE CAPITAL AND APPLICABLE ARGENTINE LEGISLATION
This section is a summary of the Company’s share capital and the material provisions of the
Bylaws that will be in effect subject to completion of, and after giving effect to, the Offering. In addition,
we also describe certain requirements of Argentine legislation in effect as of the date of this Offering
Circular applicable to the Class B Shares and their holding and disposal. GDS holders will be able to
exercise their rights with respect to the Class B Shares underlying the GDSs only in accordance with
the provisions of the Deposit Agreement and the relevant requirements of Argentine law. See “Terms
and Conditions of the Global Depositary Shares” for more information.
General
Our authorised capital is Ps.285,261,524 (without exercise of the Over-allotment Option) and
Ps.287,511,524 (if the Over-allotment Option is exercised in full). Upon completion of the Offering, we
will have three classes of common shares consisting of:
• 75,980,304 class A common shares of Ps.1.00 nominal value each and five votes per share,
issued in certificated form;
• 181,782,671 class B common shares (including 22,693,904 class B common shares issued
upon the conversion of 2,063,082 series A preferred shares and 20,630,822 series B preferred
shares, and the class B common shares issued upon conversion of 16,181,880 class C common
shares immediately prior to the consummation of the Offering and upon conversion of all class B
common shares from certificated form in book entry forms) or (if the Over-allotment Option is
exercised in full) 186,475,245 class B common shares (including 22,693,904 class B common
shares issued upon the conversion of 2,063,082 series A preferred shares and 20,630,822
series B preferred shares, and the class B common shares issued upon conversion of
18,624,454 class C common shares (in two steps) immediately prior to the consummation of the
Offering and upon conversion of all class B common shares from certificated form in book entry
forms) of Ps.1.00 nominal value each and one vote per share, issued in book entry form; and
• 27,498,549 class C common shares (including 18,567,740 class C common shares issued
upon the conversion of 18,567,740 series A preferred shares immediately prior to the consummation of the Offering) or 25,055,975 class C common shares (if the Over-allotment Option is
exercised in full) (including 18,567,740 class C common shares issued upon the conversion of
18,567,740 series A preferred shares immediately prior to the consummation of the Offering)
of Ps.1.00 nominal value each and one vote per share, issued in certificated form.
After giving effect to the conversion of our series A preferred shares and the series B preferred
shares in connection with the Offering, our authorised capital will not comprise any shares of preferred
stock. All of the preferred and common stock have the right to one vote per share, except for the
class A common shares, which have the right to five votes per share. Shares issued after the
Company has been admitted to public offering may not carry more than one vote per share unless
otherwise permitted by law. Class A common shares and class C common shares may be converted
into class B common shares at any time, at the holder’s request, except that conversion by holders of
class A common shares is subject to certain conditions.
Corporate purpose
The Company’s Bylaws set forth that our corporate purpose is to carry out only the following
business:
• Investment: to contribute capital to other existing or newly created companies and share
corporations, whatever their purpose, and in particular those relating to communications,
multimedia, broadcasting in general, broadcast, closed circuit, codified air, or cable television,
telephony in its various forms (basic, mobile or of whatever other nature, existing or to be
invented in the future), the graphic industry, the publishing of newspapers, magazines and
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other publications, and telecommunications, as well as investments in equity, notes and other
public or private securities; and
• Financial: to grant loans in Argentine or foreign currencies, issue long and short term
securities, with or without guarantees or collateral, discount, negotiate, accept and sell letters
of credit, promissory notes, pledges, checks, wires and other instruments of credit and grant
guaranties of any kind. Our Bylaws expressly exclude all financial activities regulated under the
Argentine Law No. 21,526 (the “Financial Entities Law”).
Common Stock
Our class A common shares and class C common shares are issued in certificated form and our
class B common shares will be held as of the Offering in book-entry form. Holders of a majority of the
common stock of each class entitled to vote in any election of directors may elect all of the directors
standing for election by that class. Common stock holders are entitled to receive dividends declared
by the shareholders or the board of directors, as the case may be, on a proportionate basis. See
“Dividend Policy”. All outstanding shares of our common stock are fully paid and each shareholder is
registered in our stock registry books.
New Common or Preferred Shares
New common or preferred shares may only be issued with the prior approval in a general
meeting of our shareholders. The approval, if granted, will lapse at the conclusion of the annual
general meeting following the date on which the approval was granted. Shares issued after the
Company has been admitted to public offering may not carry more than one vote per share unless
otherwise permitted by law.
Shareholders
Only persons who are registered in our shareholder register books are recognised as shareholders. We will not, except as required by law, recognise any equitable, contingent, future or partial
interest in any common share or other rights for any common share other than the absolute right
thereto of the registered holder of the common share or of the person whose names is entered in the
shareholder registers for that common share.
Under CNV rules, the names of holders of more than 5% of the votes of the Company should be
disclosed.
Shareholders’ Liability
Shareholder liability for a Company’s losses is limited to the value of the shareholder’s shareholding
in the Company. However, under the Argentine Corporate Law, shareholders who have a conflict of
interest with the Company with respect to certain matters and who do not abstain from voting on such
matters may be held liable for damages to the Company, provided that their votes were necessary for the
adoption of the relevant decision. In addition, shareholders who voted in favour of a resolution that is
subsequently declared void by a court as contrary to the Argentine Corporate Law or the Company’s
Bylaws (or regulations, if any) may be held jointly and severally liable for damages to the Company, other
shareholders or third parties resulting from the resolution. See also “Risk factors — Risks related to our
Securities — Our shareholders may be subject to liability for certain votes of their securities”.
Appraisal Rights
Whenever the Company’s shareholders approve:
• a merger or spin-off in which the Company is not the surviving corporation, unless the
acquiror’s shares are authorised for public offering or listed on any stock exchange;
• a transformation of the Company’s corporate legal status;
• a fundamental change in the Company’s Bylaws;
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• a change in the Company’s domicile outside Argentina;
• a voluntary termination of the public offering or listing authorisation;
• a decision in favour of the Company’s continuation upon delisting or cancellation of the
Company’s public offering authorisation; or
• a total or partial recapitalisation following a mandatory reduction of the Company’s capital or
liquidation
any shareholder that voted against such action or did not attend the relevant meeting may exercise
appraisal rights, that is, the rights to withdraw from the Company and have its shares cancelled in
exchange for the book value of its shares, determined on the basis of our latest balance sheet
prepared, or that should have been prepared, in accordance with Argentine laws and regulations,
provided that such shareholder exercises its appraisal rights within the time frame set forth below.
Appraisal rights must be exercised within five days following the meeting at which the resolution
was adopted in the event of a dissenting shareholder that voted against such resolution, or within
15 days following such meeting in the case of a dissenting shareholder that did not attend the meeting
and who can prove that it was a shareholder at the date of the meeting. In the case of mergers or spinoffs involving an entity authorised to make public offering of its shares, appraisal rights may not be
exercised if the shares to be received as a result of the transaction are listed in any stock exchange.
Appraisal rights are terminated if the resolution giving rise to such rights is overturned at another
shareholders’ meeting held within 60 days as from the meeting at which the resolution was adopted.
Payment of appraisal rights must be made within one year of the date of the shareholders’
meeting at which the resolution was adopted, except where the resolution that gave rise to such rights
was to delist the capital stock of the company or to reject a public offering or listing proposal, in which
case the payment period is reduced to 60 days from the end of the term a shareholder that did not
attend the meeting at which the resolution was adopted to exercise such rights or from the publication
of the notice informing the delisting or rejection of the public offering or listing of the capital stock.
Because of the absence of legal precedent directly on point, there is doubt as to whether holders
of GDSs will be able to exercise appraisal rights either directly or through the Depositary with respect
to Class B Shares in the form of GDSs.
Transfer of Shares
There is no restriction on the transfer of our fully paid shares, except that pursuant to the
Shareholders Agreement and the Bylaws:
• the GS Investors may not transfer their shares to certain competitors of the Company without
the prior consent of the Controlling Shareholders;
• class C common shares must be converted into class B common shares prior to their transfer
to parties that are not affiliates of holders of class C common shares;
• transfers or conversions of class A common shares are subject to a right of first refusal in
favour of all non-selling shareholders of class A common shares (rateable to their ownership
interest in class A common shares) with a right to accrete in case any of the non-selling
shareholders do not exercise their rights. If the non-selling shareholders referred to above do
not exercise their rights, the selling holder of class A common shares shall exchange its class A
common shares into class B common shares, except when such transfer is made in favour of
other holders of class A common shares, and/or family members and affiliates that only hold
class A common shares:
• the GS Investors must first offer their respective common shares in the Company to certain
other parties to the Shareholders Agreement prior to (and on the same terms as) a proposed
transfer or sale of such common shares to a third party; provided that this restriction does not
apply after a public offering other than with respect to privately negotiated transactions;
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• certain parties to the Shareholders Agreement have the right to request the inclusion of their
common shares in the Company in a proposed sale or transfer of common shares in the
Company by any of the GS Investors; and
• holders of class A common shares are entitled to certain drag along rights in respect of shares
held by other parties to the Shareholders Agreement.
Certain of the transfer restrictions described above do not apply to transfers of shares made
pursuant to any underwritten offer in Argentina, Brazil, the United States or one or more member
states of the European Union, a bona fide sale pursuant to Rule 144A under the Securities Act, an
underwritten offering pursuant to Rule 144A under the Securities Act, or a sale of common shares
(other than in a block trade) over a stock exchange.
Meetings of Shareholders and Voting Rights
Notices of Meetings
Notices of shareholders’ meetings are governed by the provisions of our Bylaws and the
Argentine Corporate Law and Decree 677/01. Notice of shareholders’ meetings must be published for
five days in the Official Gazette, in an Argentine newspaper of wide circulation and in the publications
of Argentine exchanges or securities markets in which the shares are traded, at least 20 days but not
more than 45 days prior to the date on which the meeting is to be held and must include information
regarding the type of meeting to be held, the date, time and place of such meeting and the agenda. If
a quorum is not available for such meeting, a notice for a second meeting, which must be held within
30 days from the date on which the first meeting was called, must be published for three days, at
least eight days before the date of the second meeting. The above-described notices of shareholders’
meetings may be effected simultaneously, in the case of ordinary meetings, in order for the second
meeting to be held on the same day as the first meeting except in certain circumstances.
The quorum for an ordinary shareholders’ meeting is the majority of the share capital entitled to
vote. The quorum for an extraordinary meeting is at least 60% of the share capital entitled to vote.
Shareholders may attend in person or by proxy. Directors, syndics, members of the Supervisory
Committee, managers and employees of the Company may not hold proxies in representation of
shareholders. If the quorum is not achieved, meetings may be reconvened with lower quorum
requirements. Decisions at an ordinary or extraordinary shareholders’ meeting require the affirmative
vote of the absolute majority of the present votes. Class B common shares and class C common
shares are entitled to one vote per share. Class A common shares are entitled to five votes per share.
The Argentine Corporate Law requires that certain resolutions, such as early dissolution, major
changes in corporate purpose or the transfer of a company’s legal domicile abroad, be decided by the
majority of all outstanding shares and without allowing multiple votes per share.
The Shareholders Agreement provides that so long as the class C common shares represent at
least 5% or more of the Company’s fully diluted equity and none of the holders of class C common
shares holds an investment excluded by the Shareholders Agreement, the GS Investors will have
approval rights with respect to:
• subject to certain limitations, a merger, spin-off, reorganisation, voluntary dissolution and/or
liquidation of the Company and/or certain of its subsidiaries;
• subject to certain limitations, the issuance of equity instruments of the Company or of certain
of its subsidiaries exceeding certain thresholds;
• distributions of dividends other than on a pro-rata basis (other than dividends on preferred
shares, if any);
• any amendment of the Bylaws; and
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• compensations and fees payable to officers and managers of the Company and/or managers
and directors of certain of the Company’s subsidiaries substantially exceeding certain
thresholds.
In addition, the Controlling Shareholders and the GS Investors have entered into an Acuerdo de
Sindicación de Acciones (the “Share Syndication Agreement”), dated as of 19 October 2007, whereby,
so long as the class C common shares represent at least 5% or more of the Company’s fully diluted
equity and none of the holders of class C common shares holds an investment excluded by the
Shareholders Agreement, whenever one of the matters listed above is brought before the shareholders for approval, the Controlling Shareholders and the GS Investors, must vote the same way or
abstain from voting. The Company is not a party to the Share Syndication Agreement and neither the
Company nor any shareholder that is not a party to the Share Syndication Agreement are bound by
its terms. Notwithstanding the foregoing, the Company has been notified of the existence of the Share
Syndication Agreement.
Our Bylaws require that decisions with respect to any of the matters listed below be adopted by
an extraordinary shareholders meeting with the attendance of holders of voting shares representing at
least 50% of our capital (including on second call), for so long as the class C common shares
represent at least 5% or more of the Company’s equity:
• subject to certain limitations, a merger, spin-off, reorganisation, voluntary dissolution and/or
liquidation of the Company and/or certain of its subsidiaries;
• subject to certain limitations, the issuance of equity instruments of the Company or of certain
of its subsidiaries exceeding certain thresholds;
• any amendment of the Bylaws; and
• compensations and fees payable to officers and managers of the Company and/or managers
and directors of certain of the Company’s subsidiaries substantially exceeding certain
thresholds.
Decisions to be taken by individual classes of shares require the absolute majority of the present
votes of the relevant class. In certain cases, if the relevant class may not make a decision due to lack
of quorum, the decision may be taken by all present votes acting as a single class.
Registration Requirements of Foreign Companies Holding Class B Shares
Under the Argentine Corporate Law, foreign companies that own shares in an Argentine
corporation must be registered with the IGJ in order to exercise certain shareholder rights, including
voting rights. The registration requires the filing of corporate and accounting documents in order to
demonstrate that the foreign shareholder’s principal activity is performed outside Argentina. Therefore,
it will have to prove that it is entitled to conduct business in its place of incorporation and meets
certain foreign assets requirements. If you own Class B Shares directly (rather than in the form of
GDSs) and you are a non-Argentine company and you fail to register with the IGJ, your ability to
exercise your rights as a holder of our Class B Shares may be limited. The Depositary is registered
with the IGJ.
Pre-emptive and Accrual Rights
Shareholders have the right to subscribe for a number of newly issued shares proportionate to
their share ownership prior to a new issuance. If a shareholder does not exercise its pre-emptive
rights, the other existing shareholders may subscribe for the newly issued shares that shareholder
was entitled to subscribe. Pursuant to our Bylaws, for as long as the Company is admitted to public
offering, capital increases may only consist in issuances of Class B Shares unless Argentine law at
the time of any such increase allows the issuance of all other existing classes of shares. If within a
class of shares there are unsubscribed shares, upon termination of the term for exercising pre-emptive
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and accrual rights within the relevant class, all shareholders of other classes of shares are entitled to
subscribe the unsubscribed shares in proportion to their ownership of total capital. Shares subscribed
in this manner will be converted into class B common shares. If the capital increase consists in the
issuance of all classes of shares, each shareholder shall have the right to subscribe a number of
newly issued shares proportionate to their share ownership of each given class prior to the new
issuance. If the capital increase consists in the issuance of class B common shares only, then each
shareholder shall have the right to subscribe a number of class B common shares proportionate to
their ownership of total capital. Holders of class C common shares that exercised their preferential
rights (but not accretion rights) in a capital increase consisting in the issuance of class B common
shares only, shall be entitled to request that the Company convert any class B common shares so
subscribed into class C common shares.
Mandatory Tender Offers
The Company has opted out of the mandatory tender offer rules set forth in Decree No. 677/01.
Mandatory Tender Offer in the case of Acquisition of more than 50% of the Capital Stock or
Votes of the Company.
Pursuant to our Bylaws, if a person (or a group of persons acting in concert) not owning shares
of the Company that represent, in the aggregate, 50% or more of the Company’s total capital or total
votes (the “Future Holder”) intends to acquire, in a transaction or a series of related transactions
(including by way of merger or exchange) occurring within a period of 90 days, direct or indirect title
to, or control of, shares of the Company or other securities convertible into shares of the Company
that, when added to the securities held by the Future Holder prior to the acquisition, would result in
such Future Holder to hold or control more than 50% of the capital stock or votes of the Company,
then the Future Holder will be required to launch a mandatory tender offer for all outstanding shares
of the Company and all other securities convertible into shares of the Company. This mandatory
tender offer provision does not apply in the case of acquisitions by any Permitted Shareholder, as well
as by corporations controlled by any of the Permitted Shareholders or trusts established for the benefit
of any of them.
The Future Holder may set the price payable to accepting holders of shares or convertible
securities in the mandatory tender offer, with the following limitations:
• if the Future Holder acquired any shares of the Company or securities convertible into shares
of the Company within the 90 days immediately preceding the notice by the Future Holder
launching the tender offer, the price per share or convertible security in the mandatory tender
offer may not be lower than the highest price paid in such acquisitions, and
• if the Future Holder has obtained firm sale commitments or has made firm commitments for
the direct or indirect purchase of shares or securities convertible into shares of the Company
within the 90 days immediately preceding the notice by the Future Holder launching the tender
offer, the price per share or convertible security in the mandatory tender offer may not be lower
than the highest price agreed under such commitments.
Tender Offer Regime in the Case of a Voluntary Withdrawal from the Public Offering and Listing System in Argentina
Decree 677/2001 and CNV regulations also established that when a company whose shares are
publicly offered and listed in Argentina agrees to withdraw voluntarily from the public offering and
listing system in Argentina, it must follow the procedures provided for in the CNV’s regulations and it
must likewise launch an OPA for its aggregate shares and/or subscription rights or securities
convertible into shares or stock options under the terms provided for in such regulation. It is not
necessary to extend the public offering to those shareholders that voted for the withdrawal at the
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shareholders’ meeting. The public offering can only be made as a purchase and sale and the
consideration must be cash.
The acquisition of one’s own shares must be made with liquid and realised profits or with free
reserves, whenever paid up in full, and for the amortisation or disposition thereof, within the term set
forth in Section 221 of the Argentine Corporate Law and the company must present the CNV with
evidence that it has the necessary solvency to effect such purchase and that the payment for the
shares will not affect its solvency.
The price offered in the case of a voluntary withdrawal from the public offering and listing system
in Argentina should be equitable and take into account the following relevant criteria:
• The equity value of the shares, taking into account a special financial statement for the
withdrawal from the public offering system and/or listing.
• The value of the company, in accordance with discounted cash flow criteria and/or ratios
applicable to comparable businesses or companies.
• The company’s liquidation value.
• Average quotation prices on the stock exchange where the shares are listed during the sixmonth period immediately preceding the withdrawal application, regardless of the number of
sessions necessary for such negotiation.
• The consideration offered before, or the placement of the new shares, in the event that a
public offering has been made with regard to the same shares or if new shares have been
issued, if applicable, during the last year, to be counted as of the date of the agreement for the
withdrawal application.
Under no circumstances can the price offered be lower than the average quotation price
discussed in this paragraph. The criteria to determine the price per share in the case of withdrawal
from the public offering and listing system in Argentina are set forth in Decree No. 677/01 and may
differ from the price that would result from the application of the Argentine Corporate Law in the case
of exercise of appraisal rights by a shareholder.
Mandatory or Voluntary Tender Offer in the Case of Near-Total Control
If a person holds, directly or indirectly, 95% or more of the outstanding capital stock of a publicly
traded Argentine Company, any minority shareholder may request that the controlling shareholder
launch an OPA for all outstanding shares of such company. In addition, a person that holds, directly or
indirectly, 95% or more of the outstanding capital stock of a publicly traded Argentine company may
issue a unilateral declaration of its intention to purchase all outstanding shares of such company
within six months following the date of acquisition of near-total control and withdraw the Company
from public offering and its shares from listing and trading. The price offered should be a fair price,
following the criteria set forth in Decree No. 677/01.
Shareholder Claims
Pursuant to article 38 of Decree No. 677/01, companies whose shares are listed on the BCBA,
such as the Company, are subject to the jurisdiction of the BCBA arbitration court for all matters
concerning such companies’ relationship with shareholders and investors, without prejudice to the right
of shareholders and investors to submit their claims to the courts of the City of Buenos Aires.
Corporate Governance
The Company complies with the Argentine Corporate Law and will be in compliance with Decree
No. 677/01 and CNV corporate governance regulations upon completion of the Offering.
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TERMS AND CONDITIONS OF THE GLOBAL DEPOSITARY SHARES
JPMorgan Chase Bank, N.A. has agreed to act as the Depositary for the GDSs. The
Depositary’s principal offices are located at 4 New York Plaza, New York, New York 10004. In this
summary, the term “GDSs” refers to the Rule 144A GDSs and to the Regulation S GDSs. GDSs are
represented by certificates that are commonly known as “Global Depositary Receipt Certificates” or
“GDR Certificates”. The GDSs offered and sold in the United States are referred to and will be issued
as the Rule 144A GDSs and the GDSs offered and sold outside the United States are referred to and
will be issued as the Regulation S GDSs. GDSs represent ownership interests in securities, cash or
other property on deposit with the Depositary.
The Depositary has appointed Banco Santander Río S.A. to act as the Custodian for the
safekeeping of the securities, cash or other property on deposit. The Custodian’s principal office is
located at Bartolomé Mitre 480, Buenos Aires, Argentina.
The Company has appointed the Depositary pursuant to a Deposit Agreement for the Rule 144A
GDSs and the Regulation S GDSs. Copies of the Deposit Agreement are available for inspection by
any holder of the GDSs at the principal offices of the Depositary during business hours. This is a
summary description of the material terms of the GDSs and of each holder’s material rights as an
owner of the GDSs. Prospective investors should note that this summary is provided for informational
purposes only, is not exhaustive, and is qualified in its entirety by reference to the terms of the Deposit
Agreement, which determine rights and obligations of holders and beneficial owners of the GDSs.
Each GDS represents two class B common shares of the Company on deposit with the
Custodian. Each GDS will also represent the right to receive cash or any other property received by
the Depositary or the Custodian on behalf of the owner of the GDS but which has not been distributed
to the owners of GDSs due to legal restrictions or practical considerations.
Each owner of a GDS is a party to the Deposit Agreement and is therefore bound by terms of
that Deposit Agreement and by the terms of the GDR Certificate that represents the relevant GDS.
The Deposit Agreement and the GDR Certificate specify the rights and obligations of the Company,
the owner of the GDS represented by the GDR Certificate and the Depositary. Each GDS holder and
beneficial owner appoints the Depositary to act as its attorney-in-fact, with full power to delegate, to
act on its behalf and to take any and all actions contemplated in the Deposit Agreement, to adopt any
and all procedures necessary to comply with applicable laws and to take such action as the
Depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the
Deposit Agreement and the requirements of applicable law.
Initially, GDSs may only be held through a brokerage or safekeeping account. As such, each
GDS owner must rely on the procedures of its broker or bank to assert its rights. Each GDS holder
should consult with its broker or bank to determine what those procedures are.
No temporary master GDSs or other temporary documents of title have been or will be issued in
connection with this Offering.
Distinctions Between Rule 144A GDSs and Regulation S GDSs
The Rule 144A GDSs and the Regulation S GDSs are generally similar except for provisions
designed to meet the requirements of the U.S. securities laws. The Rule 144A GDSs are “restricted
securities” under the U.S. securities laws and as such are subject to limitations on their issuance,
transfer and cancellation. The Regulation S GDSs are not “restricted securities” under the U.S. securities laws, but are subject to certain contractual restrictions in order to prevent the transfer of
Regulation S GDSs in violation of the U.S. securities laws.
Differences between the Regulation S GDSs and the Rule 144A GDSs and the restrictions
imposed on the Rule 144A GDSs and the Regulation S GDSs include the following:
• Eligibility for book-entry transfer. See “— Settlement and Safekeeping”.
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• Restrictions on the transfers, deposits and withdrawals of the Class B Shares underlying the
GDSs. See “— Transfer Restrictions”.
• Special restrictions on deposits and withdrawals that apply to affiliates of the Company.
These differences and the restrictions imposed in accordance with U.S. securities laws may
require the Company and the Depositary to treat the Regulation S GDSs and the Rule 144A GDSs
differently from time to time. There can be no guarantee that holders of Rule 144A GDSs will always
receive the same entitlements as holders of Regulation S GDSs and vice versa.
Settlement and Safekeeping
Rule 144A GDSs
The Depositary has made arrangements with DTC to act as securities depository for the
Rule 144A GDSs. All Rule 144A GDSs issued in the Offering will be registered in the name of Cede &
Co., as DTC’s nominee. One master Rule 144A GDS certificate will represent all Rule 144A GDSs
issued to and registered in the name of Cede & Co. Transfers of ownership interests in Rule 144A
GDSs are accomplished by entries made on the books of DTC and participants in DTC acting on
behalf of Rule 144A GDS owners.
DTC may discontinue providing its services as securities depository with respect to the Rule 144A
GDSs at any time by giving notice to the Depositary. Under such circumstances and in the event a
successor securities depositary cannot be appointed, individual Rule 144A GDS certificates representing the applicable number of Rule 144A GDSs held by each owner of Rule 144A GDSs will be printed
and delivered to the relevant Rule 144A GDS owners. Owners of Rule 144A GDSs will not otherwise
receive physical certificates representing their ownership interests in the Rule 144A GDSs.
Regulation S GDSs
The Depositary has made arrangements with DTC to act as securities depository for the
Regulation S GDSs. One master Regulation S GDS certificate will represent all Regulation S GDSs
issued to and registered in the name Cede & Co., as DTC’s nominee. The Company has also
requested that Euroclear and Clearstream accept to settle trades in the Regulation S GDSs. Transfers
of Regulation S GDSs will be permitted within DTC, Euroclear and Clearstream in accordance with
the usual rules and operating procedures of the relevant system. Transfers of ownership interests in
Regulation S GDSs will be accomplished by entries made on the books of DTC, Euroclear and
Clearstream and of participants in DTC; Euroclear and Clearstream acting in each case on behalf of
Regulation S GDS owners.
If at any time DTC ceases to make its respective book-entry settlement systems available for the
Regulation S GDSs, the Company and the Depositary will attempt to make other arrangements for
book-entry settlement. If alternative book-entry settlement arrangements cannot be made, the Depositary will make Regulation S GDSs available in physical certificated form. Owners of Regulation S
GDSs will not otherwise receive physical certificates representing their ownership interests in the
Regulation S GDSs.
Transfer Restrictions
Subject to restrictions on securities dealers pursuant to Section 4(3) of the Securities Act, during
the 40-day period from date hereof, the GDSs may be reoffered, resold, pledged or otherwise
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transferred only in compliance with the U.S. securities laws and are subject to the following
restrictions:
Restrictions Upon the Transfer of GDSs
Rule 144A GDSs
Regulation S GDSs
The Rule 144A GDSs may be reoffered, resold,
pledged or otherwise transferred only:
(i) outside the United States in accordance with
Regulation S; or
(ii) to a QIB in a transaction meeting the
requirements of Rule 144A under the
Securities Act; or
(iii) pursuant to Rule 144 under the Securities
Act, if applicable; or
(iv) pursuant to an effective registration statement
under the Securities Act.
None
Restrictions Upon Deposit of Class B Common Shares
Rule 144A GDSs
Class B common shares will be accepted for
deposit under the Deposit Agreement in
exchange for Rule 144A GDSs only if delivered
by, or on behalf of, a person that is:
(i) not the Company or an affiliate of the
Company or a person acting on behalf of the
Company or an affiliate of the Company and
(ii) (a) a QIB or (b) a person outside the
United States, as defined in Regulation S
under the Securities Act, and who acquired,
or agreed to acquire and will have acquired,
the class B common shares to be deposited
outside the United States.
Regulation S GDSs
Class B common shares will be accepted for
deposit under the Deposit Agreement only if
delivered by, or on behalf of, a person that is:
(i) not the Company or an affiliate of the
Company or a person acting on behalf of the
Company or an affiliate of the Company and
(ii) not in the business of buying or selling
securities, or if such person is in the business
of buying or selling securities, such person did
not acquire the class B common shares to be
deposited from the Company or an affiliate of
the Company in the initial distribution of class
B common shares and GDSs;
and
(iii) a person outside the United States, as
defined in Regulation S under the Securities
Act, and who acquired, or agreed to acquire
and will have acquired, the class B common
shares to be deposited outside the
United States.
Class B common shares withdrawn from deposit
under the Deposit Agreement by a holder of a
Rule 144A GDS will not be accepted for deposit
pursuant to the Deposit Agreement in exchange
for Regulation S GDSs unless such class B
common shares are not and may not be deemed
to be “restricted securities” within the meaning of
Rule 144(a)(3) under the Securities Act.
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Restrictions Upon the Withdrawal of Class B Shares
Rule 144A GDSs
Regulation S GDSs
Class B common shares may be withdrawn by a
holder of Rule 144A GDS only if such holder is:
(i) a person located outside the United States, as
defined in Regulation S under the Securities
Act, who will be the beneficial owner of the
class B common shares upon withdrawal and
acquired, or agreed to acquire and at or prior
to the time of the withdrawal will have
acquired, the Rule 144A GDSs or the class B
common shares outside the United States; or
(ii) a QIB, as defined in Rule 144A under the
Securities Act, who
(a) a person that has sold the Rule 144A GDSs
to another QIB in a transaction meeting the
requirements of Rule 144A under the
Securities Act, or in accordance with
Regulation S under the Securities Act, or
(b) will be the beneficial owner of the class B
common shares and agrees (1) to observe
the transfer restrictions applicable to Rule
144A GDSs in respect of the class B common
shares so withdrawn and (2) not to deposit
the class B common shares in an unrestricted
depositary receipts facility for so long as the
Class B Shares are “restricted securities”
within the meaning of Rule 144(a)(3) under
the Securities Act.
Class B common shares may be withdrawn by
any holder of a Regulation S GDS.
General Restrictions
Restrictions on Transfer
The Company may restrict transfers of the class B common shares or the GDSs where such
transfer might result in ownership of class B common shares exceeding the limits applicable to
beneficial ownership of class B common shares under applicable law or the Bylaws. The Company
may, in its sole discretion, but subject to applicable law, instruct the Depositary to take action with
respect to the ownership interest of any holder or beneficial owner in excess of the limits set forth in
the preceding sentence, including but not limited to, the imposition of restrictions on the transfer of
GDSs, the removal or limitation of voting rights or the mandatory sale or disposition on behalf of a
holder or beneficial owner of the class B common shares in the form of GDSs held by such holder or
beneficial owner in excess of such limitations, if and to the extent such disposition is permitted by
applicable law and the Bylaws. The Depositary shall have no liability for actions taken in accordance
with such instructions.
The registration of any transfer of GDSs in particular instances may be refused, or the
registration of transfers generally may be suspended, during any period when the transfer books of
the Depositary, the Company, the GDR Register (as defined below) or the Argentine Share Registrar
are closed, or if any such action is deemed necessary or advisable by the Company or the Depositary,
in good faith, at any time or from time to time because of any requirement of law, any government or
governmental body or commission or any securities exchange on which the GDSs or class B common
shares are listed, or
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under any provision of the Deposit Agreement or provisions of, or governing, the class B common
shares, or any meeting of the Company’s shareholders or for any other reason.
The Depositary may close the transfer books with respect to GDR Certificates, at any time or
from time to time, when deemed necessary or advisable by it in good faith in connection with the
performance of its duties hereunder, or at the Company’s reasonable request.
Restrictions on Deposits
The Depositary will refuse to accept class B common shares for deposit whenever it is notified in
writing by the Company that such deposit would result in any violation of applicable laws, including
ownership restrictions under Argentine laws. The Depositary will also refuse to accept certain class B
common shares for deposit under the Deposit Agreement for issuance of Rule 144A GDSs if notified
in writing that the class B common shares or GDS are listed on a U.S. securities exchange or quoted
on a U.S. automated inter-dealer quotation system, unless accompanied by evidence satisfactory to
the Depositary that any class B common shares or GDS presented for deposit are eligible for resale
pursuant to Rule 144A under the Securities Act.
Dividends and Distributions
Generally, each GDS holder has the right to receive distributions made by the Company on the
underlying class B common shares deposited with the Custodian. Receipt of these distributions may
be limited, however, by practical considerations and legal limitations. GDS holders will receive such
distributions under the terms of the Deposit Agreement in proportion to the number of GDSs held as
at a specified GDS record date, which the Depositary will use reasonable efforts to establish as close
as possible to the record date set by the Company for the class B common shares underlying the
GDSs. See “Dividend Policy”.
Distributions of Cash
Whenever the Company makes a cash distribution in respect of class B common shares on
deposit with the Custodian, the Company will transfer the funds in Pesos to the Custodian or, if
permitted by law, in U.S. dollars to the Depositary. In the first case, upon receipt of confirmation from
the Custodian of the deposit of the requisite funds, the Depositary will arrange for the funds to be
converted into U.S. dollars and for the distribution of the U.S. dollars to the GDS holders, if in the
reasonable judgement of the Depositary it is practicable and lawful.
The amounts distributed to holders of GDSs will be net of the fees, charges, expenses, taxes
and governmental charges payable by holders under the terms of the Deposit Agreement. The
Depositary may make adjustments to a distribution if any of the deposited securities is not entitled, by
reason of its date of issuance or otherwise, to receive the full amount thereof.
Distributions of Class B Common Shares
Whenever there is a dividend or free distribution of class B common shares in respect of the
class B common shares on deposit with the Custodian, the Company will deposit the applicable
number of class B common shares with the Custodian. Upon receipt of confirmation of such deposit
from the Custodian, the Depositary will distribute to holders additional GDSs representing the class B
common shares deposited or modify, to the extent permissible by law, the GDS-to-class B common
shares ratio, in which case each GDS will represent rights and interests in the additional class B
common shares so deposited. Only whole GDSs will be issued. Shares that would result in fractional
GDSs will be sold and the proceeds of such sale will be distributed as in the case of a cash
distribution.
The distribution of new GDSs or the modification of the GDS-to-class B common shares ratio
upon a distribution of Class B Shares will be made net of the fees, charges, expenses, taxes and
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governmental charges payable by GDS holders under the terms of the Deposit Agreement. In order to
pay such taxes or governmental charges, the Depositary may sell all or a portion of the additional
class B common shares so distributed.
No such distribution of new GDSs or payments in connection therewith will be made in violation
of applicable laws (including the U.S. securities laws and Argentine foreign exchange regulations) or if
it is not operationally practicable. To the extent holders of GDSs receive a distributed GDS or any
interest therein they will be deemed to have acknowledged that the GDSs and the shares represented
thereby have not been registered under the Securities Act and to comply with any applicable
restrictions on transfer set forth thereon. By holding a GDR or an interest therein, holders of GDSs will
be deemed to have acknowledged that the GDSs and the shares have not been registered under the
Securities Act and to have agreed to comply with any applicable restrictions on transfer set forth in
such GDSs. If the Depositary does not distribute new GDSs as described above, it may sell the
class B common shares received and distribute the proceeds of the sale as in the case of a
distribution of cash. The Depositary will hold and/or distribute any unsold balance in accordance with
the provisions of the Deposit Agreement and applicable law.
Distributions of Rights
In the case of a distribution of rights to purchase additional class B common shares, if the
Company assists the Depositary in determining whether it is lawful and reasonably practicable to
distribute the rights to GDS holders, the Depositary will establish procedures to distribute rights to
purchase additional GDSs to GDS holders and to enable GDS holders to exercise such rights only if
the Depositary shall have determined that it is lawful and reasonably practicable to make the rights
available to GDS holders, and the Company has provided all of the documentation contemplated in
the Deposit Agreement, such as opinions to address the lawfulness of the transaction. Each GDS
holder will be responsible for the related fees, charges, expenses and taxes and other governmental
charges to subscribe for the class B common shares upon the exercise of the rights. The Depositary
is not obligated to establish procedures to facilitate the distribution and exercise by GDS holders of
rights to purchase additional class B common shares other than in the form of GDSs.
The Depositary will not distribute the rights to GDS holders if:
• the Company fails to deliver satisfactory documents, such as opinions of counsel as to
compliance with applicable law, to the Depositary; or
• it is not reasonably practicable or lawful to distribute the rights.
The Depositary will sell the rights that are not exercised or not distributed if such sale is lawful
and reasonably practicable and distribute the proceeds of such sale will be distributed to holders as in
the case of a cash distribution. If the Depositary is unable to sell the rights, it will allow the rights to
lapse.
The Depositary shall not be responsible for (i) any good faith failure to determine whether it may
be lawful or practicable to make such rights applicable to GDS holders in general or to any GDS
holder in particular, (ii) any foreign exchange exposure or loss incurred in connection with any sale or
exercise of rights, or (iii) the content of any materials forwarded to the GDS holders on behalf of the
Company in connection with the rights distribution. There can be no assurance that GDS holders in
general or any GDS holder in particular will be given the opportunity to exercise rights on the same
terms and conditions as the holders of class B common shares or to exercise such rights at all. See
“Risk Factors — Risks Related to Our Securities — Your voting rights with respect to the GDSs are
limited by the terms of the Deposit Agreement”.
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Elective Distributions
Subject to applicable laws, whenever the Company intends to distribute a dividend payable at
the election of shareholders either in cash or in additional class B common shares, it will assist the
Depositary in determining whether such distribution is lawful and reasonably practicable.
The Depositary may make the election available to GDS holders only if it is lawful, reasonably
practicable and if the Company has provided all of the documentation contemplated in the Deposit
Agreement (such as opinions of counsel as to compliance with applicable law). In such case, the
Depositary will establish procedures to enable each GDS holder to elect to receive either cash or
additional class B common shares in the form of GDSs, in each case as described in the Deposit
Agreement.
If the election is not made available to the GDS holders, GDS holders will, to the extent
permitted by law, receive either cash or GDSs, depending on whether a shareholder in Argentina
would receive cash or shares on failing to make an election. The Depositary is not obliged to make
available to GDS holders a method to receive the elective dividend in the form of shares rather than in
the form of GDSs.
There can be no assurance that GDS holders or owners of beneficial interests in GDSs
generally, or any GDS holder in particular, will be given the opportunity to receive elective distributions
on the same terms and conditions as the holders of the Class B Shares.
Other Distributions
Subject to applicable laws, whenever the Company distributes property other than cash,
additional class B common shares or rights to purchase additional class B common shares the
Depositary will distribute the property to the GDS holders in a manner it reasonably deems equitable
and practicable.
The distribution will be made net of fees, charges, expenses, taxes and governmental charges
payable by GDS holders under the terms of the Deposit Agreement. In order to pay such taxes and
governmental charges, if permitted by applicable law the Depositary may sell all or a portion of the
property received.
Any US dollars will be distributed by checks drawn on a bank in the United States for whole
dollars and cents. Fractional cents will be withheld without liability and dealt with by the Depositary in
accordance with its then current practices.
The Depositary may choose any practical method of distribution for any specific GDS holder or
beneficial owner of an interest in a GDS, including the distribution of foreign currency, securities or
property, or it may retain such items, without paying interest on or investing them, on behalf of the
GDR holder as deposited securities.
The Depositary is not responsible if it decides that it is unlawful or impractical to make a
distribution available to any GDR holders or beneficial owners of interests in the GDS.
There can be no assurances that the Depositary will be able to convert any currency at a
specified exchange rate or sell any property, rights, shares or other securities at a specified price, nor
that any of such transactions can be completed within a specified time period.
Redemption
Whenever the Company decides to redeem any of the securities on deposit with the Custodian,
the Company will notify the Depositary in advance in a timely manner. If the Depositary has received
timely notice from the Company, determined that such redemption is practicable and received from
the Company all of the documentation (such as opinions of counsel as to compliance with applicable
175
law) contemplated in the Deposit Agreement, the Depositary will mail notice of the redemption to the
GDS holders.
The Custodian will be instructed to surrender the class B common shares being redeemed
against payment of the applicable redemption price. The Depositary will convert the redemption funds
received into U.S. dollars in accordance with the terms of the Deposit Agreement and will establish
procedures to enable GDS holders to receive the net proceeds from the redemption upon surrender of
the GDSs to the Depositary. The GDS holders will have to pay the fees and charges of, and the
expenses incurred by, the Depositary, and any taxes upon the redemption of the GDSs. If less than all
GDSs are being redeemed, the GDSs to be redeemed will be selected by lot or on a pro rata basis,
as the Depositary may determine.
Changes Affecting Class B Common Shares
The class B common shares held on deposit for the GDSs are subject to change from time to
time. For example, there may be a change in nominal or par value, a split-up, cancellation,
consolidation or reclassification of such class B common shares or a recapitalisation, reorganisation,
merger, consolidation or sale of assets affecting the Company.
If any such change were to occur, any securities which shall be received by the Depositary or
the Custodian in exchange for, or in conversion, replacement or otherwise in respect of, such class B
common shares shall, to the extent permitted by law, be treated as new securities under the Deposit
Agreement, and the GDR Certificates shall, subject to the terms of the Deposit Agreement and
applicable law, evidence the GDSs representing the right to receive such replacement securities. The
Depositary in such circumstances may, after consultation with the Company, execute and deliver
additional GDS Certificates or make appropriate adjustments in its records, or call for the exchange of
existing GDSs for new GDSs. If the Depositary may not lawfully distribute such securities to GDS
holders, the Depositary may with the Company’s approval sell such securities and distribute the net
proceeds to GDS holders as in the case of a cash distribution, and shall do so upon the Company’s
request and if the Company provides the Depositary at the Company’s own expense a satisfactory
opinion of counsel that such action is not in violation of applicable laws or regulations. GDS owners
will have to pay the fees and charges of, and the expenses incurred by, the Depositary, and any taxes
and other governmental charges upon the sale of such securities.
The Depositary shall not be responsible for (i) any good faith failure to determine that it is lawful
or practicable to make such securities available to GDS holders in general or to any GDS holder in
particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or (iii) any
liability to the purchaser of such securities.
Issuance of GDSs Upon Deposit of Class B Common Shares
Subject to the limitations set forth in the Deposit Agreement and the GDSs, the Depositary may
create GDSs on a GDS holder’s behalf if the GDS holder or its broker deposits the class B common
shares with the Custodian. The Depositary will deliver these GDSs to the person indicated by the
GDS holder only after any applicable issuance fees, any charges and any taxes payable for the
transfer of the class B common shares to the Custodian have been paid by the GDS holder and the
applicable deposit certification is provided. Each GDS holder’s ability to deposit class B common
shares and receive GDSs may be limited by U.S. and Argentine legal considerations applicable at the
time of deposit.
The issuance of GDSs may be delayed until the Depositary or the Custodian receives confirmation that all required approvals have been given and that the class B common shares have been duly
transferred to the Custodian. The Depositary will only issue GDSs in whole numbers.
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When class B common shares are deposited to receive Rule 144A GDSs, the prospective GDS
holder will be required to provide the Depositary with a deposit certification stating, among other
things, that:
• it acknowledges that the class B common shares and the Rule 144A GDSs have not been and
will not be registered under the Securities Act or with any securities regulatory authority in any
state or other jurisdiction in the United States;
• it is not an affiliate of the Company and it is not acting on behalf of the Company or one of its
affiliates;
• at the time of issuance of the Rule 144A GDSs it will be the beneficial owner thereof or a
broker acting for the account of such person;
• it is (i) a QIB or (ii) a broker acting for the account of such person; and
• it agrees, as the owner of the Rule 144A GDSs, to offer, sell, pledge and otherwise transfer
the Rule 144A GDSs or the class B common shares represented by the Rule 144A GDSs in
accordance with the applicable U.S. state securities laws and only:
• to a QIB in a transaction meeting the requirements of Rule 144A; or
• outside the United States in accordance with Regulation S; or
• in accordance with Rule 144 under the Securities Act, if available; or
• pursuant to an effective registration statement under the Securities Act.
A copy of the form of deposit certification for Rule 144A GDSs is attached to the Deposit
Agreement and may be obtained from the Depositary upon request.
When class B common shares are deposited to receive Regulation S GDSs, the prospective
GDS holder will be required to provide the Depositary with a deposit certification stating, among other
things, that:
• it acknowledges that the class B common shares and the Regulation S GDSs have not been
and will not be registered under the Securities Act or with any securities regulatory authority in
any state or other jurisdiction in the United States;
• it is not an affiliate of the Company and it is not acting on behalf of the Company or one of its
affiliates;
• it is, or at the time the class B common shares are deposited and at the time the Regulation S
GDSs are issued, will be, the beneficial owner of the class B common shares and the
Regulation S GDSs to be issued upon deposit of such class B common shares;
• it is a person outside the United States and has acquired or has agreed to acquire and will
acquire the class B common shares to be deposited outside the United States; and
• it is not in the business of buying and selling securities or, if it is in such business, it did not
acquire the class B common shares presented for deposit from the Company or any of the
Company’s affiliates; or
• it is a broker acting on behalf of a customer that has confirmed the above.
A copy of the form of deposit certification for Regulation S GDSs is attached to the Deposit
Agreement and may be obtained from the Depositary on request.
Withdrawal of Class B Common Shares Upon Cancellation of GDSs
Subject always to the withdrawal of deposited property being permitted under applicable laws
and the terms of the Deposit Agreement, a GDS holder will be entitled to present its GDSs to the
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Depositary for cancellation and then receive the corresponding number of underlying class B common
shares at the Custodian’s offices. The ability to withdraw the class B common shares may be limited
by U.S. and Argentine law considerations applicable at the time of withdrawal.
In order to withdraw the class B common shares represented by the GDSs, each GDS holder
will be required to pay to the Depositary the fees for cancellation of the GDSs and any changes and
taxes payable upon the transfer of the class B common shares being withdrawn and will be required
to provide to the Depositary the applicable withdrawal certification. Each GDS holder assumes the risk
for delivery of all funds and securities upon withdrawal. Once cancelled, the GDSs will not have any
rights under the Deposit Agreement.
Each GDS holder must, upon the request of the Depositary, provide proof of identity and
genuineness of any signature and such other documents as the Depositary may deem appropriate
before it will cancel the GDSs. The withdrawal of the class B common shares represented by the
GDSs may be delayed until the Depositary receives satisfactory evidence of compliance with all
applicable laws and regulations. The Depositary shall be entitled at all times to sell any fractional
GDSs presented for cancellation and remit the proceeds of such sale to the GDS holder net of fees,
expenses, charges and taxes.
When a GDS holder requests withdrawal of the class B common shares represented by its
Rule 144A GDSs, it will be required to represent and warrant that the withdrawal of the shares
complies with the restrictions on transfer set forth in the legend on GDSs and to provide the
Depositary with a withdrawal certification stating, among other things, that:
(A) it acknowledges that the class B common shares represented by its Rule 144A GDSs
have not been and will not be registered under the Securities Act or with any other securities
regulatory authority in any state or other jurisdiction in the United States; and
(B) it certifies that either:
(1) it is a QIB, as defined under Rule 144A of the Securities Act, acting for its own
account or for the account of one or more other QIBs, who is the beneficial owner of the
Rule 144A GDSs presented for cancellation; and either
• it has sold or agreed to sell the class B common shares to a person outside the
United States in accordance with Regulation S; or
• it has sold or agreed to sell the class B common shares to a QIB in a transaction
meeting the requirements of Rule 144A under the Securities Act; or
• it will be the beneficial owner of the class B common shares upon withdrawal; and
• it, or the person on whose behalf it is acting, will sell the class B common shares
only to another QIB in a transaction meeting the requirements of Rule 144A under
the Securities Act; outside the United States in accordance with Regulation S; in
accordance with Rule 144, if available; or pursuant to an effective registration
statement under the Securities Act; and
• it will not deposit the class B common shares in any Depositary receipts facility
that is not a “restricted” Depositary receipts facility;
or
(2) it is a person located outside the United States and has acquired or agreed to
acquire the class B common shares outside the United States and will be the beneficial
owner of the class B common shares upon withdrawal.
Holders of Regulation S GDSs will be required to provide the Depositary with a withdrawal
certification under the Deposit Agreement during the forty (40) day period ending after the closing of
the Offering.
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Proofs, Certificates and Other Information; Obligations of Owners
Each GDS holder may be required (i) to provide to the Depositary and the Custodian proof of
citizenship or residence, taxpayer status, payment of all applicable taxes or other governmental
charges, exchange control approvals, legal or beneficial ownership of GDSs, compliance with all
applicable laws and the terms of the Deposit Agreement, and (ii) to execute certifications and to make
representations and warranties and to provide such other information and documentation as the
Depositary or the Custodian may deem necessary or proper or as the Company may reasonably
require by written request to the Depositary consistent with its obligations under the Deposit
Agreement. The Depositary may withhold the execution or delivery or registration of transfer or
cancellation of any GDS, or the distribution or sale of any dividend or distribution of rights, until such
proof or other information is filed or such certifications are executed, or such representations are
made, or such other documentation or information is provided, in each case, to the Depositary’s and
the Company’s reasonable satisfaction.
Holders and beneficial owners of GDSs shall make all necessary notifications or filings and shall
obtain, maintain, extend or renew all necessary approvals to, with or from state authorities in
Argentina, and shall take all such other actions as may be required to remain at all times in
compliance with the applicable rules and regulations of Argentina.
Voting Rights
As soon as practicable after receipt from the Company of notice of any meeting or solicitation of
consents or proxies from holders of class B common shares the Depositary will distribute to each
GDS holder any notice of shareholders’ meetings or solicitation of consents or proxies from holders of
class B common shares received from the Company, if any, together with information explaining how
to instruct the Depositary to exercise the voting rights of the class B common shares represented by
the GDSs.
Each GDS holder generally has the right under the Deposit Agreement to instruct the Depositary
to exercise the voting rights for the class B common shares represented by its GDSs.
If the Depositary receives voting instructions in a timely manner from a GDS holder in the
manner specified by the Depositary, it will endeavour — insofar as practicable and permitted under
applicable law, the provisions of the Deposit Agreement, the Bylaws and terms of the class B common
shares — to vote or cause the Custodian to vote the class B common shares represented by the GDS
in accordance with such voting instructions.
Neither the Depositary nor the Custodian will, under any circumstances, exercise any discretion
as to voting. If the Depositary does not secure timely instructions or receives timely voting instructions
from a GDS holder which fail to specify the manner in which the Depositary is to vote the GDS
holder’s underlying class B common shares, the Depositary will (except as otherwise set forth in the
Deposit Agreement) consider the holder of the GDS to have authorised the Depositary to give a
discretionary proxy to a person designated by the Company. The Depositary will give a discretionary
proxy with respect to those class B common shares in those circumstances to the person designated
by the Company to vote on all matters to be voted on.
Notwithstanding anything else contained herein or in the Deposit Agreement, the Depositary
shall not have any obligation to take any action with respect to any meeting, or solicitation of consents
or proxies, of holders of the class B common shares if the taking of such action would violate
Argentine or English laws, rules or regulations, including the rules of the London Stock Exchange and
the rules of any Argentine exchange on which the class B common shares are listed or the provisions
of or governing the class B common shares.
The ability of the Depositary to carry out voting instructions may be limited by practical, legal and
regulatory limitations and the terms of the securities on deposit. GDS holders cannot be assured that
they will receive voting materials in time to enable them to return voting instructions to the Depositary
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in a timely manner. The Company will use its best efforts to provide timely notice to the Depositary of
any meeting or solicitation of consents or proxies from holders of class B common shares.
Fees and Charges
The Depositary shall be entitled to charge the following fees to GDS owners and persons
depositing class B common shares or surrendering GDSs for cancellation:
• for the issue of GDSs (other than upon the issue of GDSs pursuant to the Initial Offering, as
defined in the Deposit Agreement) or the cancellation of GDSs upon the withdrawal of
deposited securities, or for transferring interests from and between the Regulation S GDSs
and the Rule 144A GDSs: up to U.S.$0.05 per GDS issued or cancelled;
• for the issue of GDS Certificates in definitive registered form in replacement of mutilated,
defaced, lost, stolen or destroyed GDS Certificates: a sum per GDS Certificate which is
determined by the Depositary to be a reasonable charge to reflect the work, costs and
expenses involved;
• for any other issue of GDS Certificates in definitive registered form: a sum per GDS Certificate
which is determined by the Depositary to be a reasonable charge to reflect the work, costs
(including, but not limited to, printing costs) and expenses involved;
• for receiving and paying any cash dividend or other cash distribution on or in respect of the
Deposited Securities: a fee of up to U.S.$0.02 per GDS for each such dividend or distribution;
• in respect of any issue of rights or distribution of class B common shares (whether or not
evidenced by GDSs) or other securities or other property (other than cash) upon exercise of
any rights, any free distribution, stock dividend or other distribution (except where converted to
cash): up to U.S.$0.05 per GDS for each such issue of rights, dividend or distribution;
• for the operation and maintenance costs associated with the administration of the GDSs: an
annual fee of U.S.$0.04 per GDS (such fee to be assessed against holders of record as at the
date or dates set by the Depositary as it sees fit and collected at the sole discretion of the
Depositary by billing such holders for such fee or by deducting such fee from one or more
cash dividends or other cash distributions); and
• for the issue of GDSs pursuant to a change for any reason in the number of class B common
shares in the form of GDSs, regardless of whether or not there has been a deposit of class B
common shares to the Custodian or the Depositary for such issuance: a fee of up to U.S.$0.05
per GDS (or portion thereof).
Each such person will also be responsible for paying the following charges incurred by the
Depositary:
• taxes, including applicable interest and penalties, and governmental charges;
• fees for the transfer and registration of class B common shares charged by the Share
Registrar (as defined below) (i.e., upon deposit and withdrawal of class B common shares);
• fees and expenses incurred for converting foreign currency into U.S. dollars and compliance
with exchange control regulations;
• expenses for fax transmissions and for delivery of securities; and
• fees and expenses incurred in connection with the delivery or servicing of class B common
shares on deposit.
The Company has agreed to pay certain other charges and expenses of the Depositary. The
fees and charges that a GDS holder may be required to pay may vary over time and may be changed
by the Company and by the Depositary. Each GDS holder will receive prior notice of such changes.
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Amendments and Termination
The Company may agree with the Depositary to modify the Deposit Agreement at any time
without the consent of the GDS holders. The Company undertakes to give the GDS holders 30 days’
prior notice of any modifications that would materially prejudice any of their substantial rights under
the Deposit Agreement or that shall impose or increase fees or charges, other than charges in
connection with foreign exchange control regulations and taxes and other governmental charges,
delivery expenses and other such expenses. In addition, the Company may not be able to provide the
GDS holders with prior notice of any modifications or supplements that are required to accommodate
compliance with applicable provisions of law.
Each GDS holder will be bound by the modifications to the Deposit Agreement if it continues to
hold its GDSs after the modifications to the applicable Deposit Agreement become effective.
The Deposit Agreement cannot be amended to prevent the GDS holders from withdrawing the
class B common shares represented by the GDSs. Notwithstanding any such restriction on amendments or supplements to the Deposit Agreement, the Company and the Depositary may at any time
amend or supplement the Deposit Agreement or the GDS Certificates in order to comply with
mandatory provisions of applicable laws, rules or regulations, and such amendments or supplements
may become effective before notice thereof is given to GDS holders or within any other period
required to comply with such laws, rules or regulations.
The Company has the right to direct the Depositary to terminate the Deposit Agreement.
Similarly, the Depositary may in certain circumstances on its own initiative terminate the Deposit
Agreement. In addition, the Depositary may resign, with such resignation to take effect upon the
earlier of 90 days’ notice or the acceptance of appointment by a successor Depositary, or the
Company may remove the Depositary, with such removal to take effect upon the later of 90 days’
notice or the acceptance of appointment by a successor Depositary, and if in either such case no
successor Depositary shall have accepted appointment by the Company, then the Depositary may
terminate the Deposit Agreement. In either case, the Depositary must give notice to the holders of the
GDSs at least 30 days before termination.
Upon termination, the following will occur under the Deposit Agreement:
• for a period of six months after termination, each GDS holder will be able to request the
cancellation of its GDSs and the withdrawal of the underlying class B common shares and the
delivery of all other property held by the Depositary in respect of those class B common
shares on the same terms as prior to the termination including the payment of any applicable
taxes or governmental charges. During such six-month period the Depositary will continue to
collect all distributions received on the class B common shares on deposit, such as dividends,
but will not distribute any such property to a GDS holder until it requests the cancellation of its
GDSs.
• after the expiration of such six-month period, the Depositary shall sell the securities held on
deposit. The Depositary will hold the net proceeds from such sale and any other funds then
held for the GDS holder in segregated, non-interest bearing account, without liability for
interest. At that point, the Depositary will have no further obligations to a GDS holder other
than to account for the funds then held for the holders of GDSs still outstanding, net of fees,
expenses, taxes and governmental charges payable by holders under the terms of the Deposit
Agreement, and the Company will have no further obligations to a GDS holder under the
Deposit Agreement.
Books of Depositary
The Depositary will maintain the GDS register at a designated location, initially at its principal
office at 4 New York Plaza, New York, NY 10004, which at all reasonable times will be open for
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inspection by Holders and the Company for the purpose of communication with Holders in the interest
of the business of the Company or a matter relating to the GDSs and the Deposit Agreement.
The Depositary or its agent will keep, at a designated transfer office, (a) a register (the “GDR
Register”) for the registration, registration of transfer, combination and split-up of GDSs, which at all
reasonable times will be open for inspection by holders of GDSs and the Company for the purpose of
communicating with such holders in the interest of the business of the Company or a matter related to
the Deposit Agreement and (b) facilities for the delivery and receipt of GDSs.
Transmission of Notices to Shareholders
The Company will promptly transmit to the Depositary those communications that applicable law
requires the Company to make available to its shareholders. If any communications are not in English,
the Company will translate the communications prior to transmitting them to the Depositary. Upon the
Company’s request and at its expense, the Depositary will arrange for the mailing of copies of such
communications to all GDS holders and will make a copy of such communications available for
inspection at its principal office.
Limitations on Obligations and Liabilities
The Deposit Agreement limits the Company’s obligations and the Depositary’s obligations to the
GDS holders, in particular:
• The Company and the Depositary are obligated only to take the actions specifically stated in
the Deposit Agreement and the GDSs without gross negligence or bad faith.
• Neither the Company nor the Depositary, nor any of their respective agents, shall be under
any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect
to any class B common shares or in respect of the GDS Certificates, which in the case of the
Company and its agents, in the Company’s opinion may involve the Company in expense or
liability, unless an indemnity satisfactory to the Company against all expense (including fees
and disbursements of counsel) and liability be furnished as often as may be required.
• The Depositary and its agents disclaim any liability to any Holder or beneficial holder for any
failure to carry out any voting instructions to vote any class B common shares, or for any
manner in which a vote is cast or for the effect of any vote, provided it acts in good faith.
• The Depositary disclaims any liability for any failure to determine the lawfulness or practicality
of any action, for the content of any document or information forwarded to the GDS holders on
the Company’s behalf or for the accuracy of any translation of such document or information,
for any investment risks associated with acquiring an interest in the class B common shares,
for the validity or worth of the class B common shares, for any tax consequences that result
from the ownership of the shares or the GDSs, for the creditworthiness of any third party, for
allowing any rights to lapse under the terms of the Deposit Agreement or for the failure or
timeliness of any of the Company’s notices.
• The Depositary and the Custodian disclaim any liability with respect to Argentina’s system of
share registration and custody, including any liability in respect of the unavailability of the
class B common shares or other deposited securities, or any distribution in respect thereof.
• The Company and the Depositary agree that neither the Depositary nor the Custodian
assumes any obligation or responsibility to make any payments for, nor shall either of them be
subject to any liability under the Deposit Agreement or otherwise for non-payment for, any
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class B common shares newly issued and placed by the Company or sold by any selling
shareholders in the Offering.
• The Depositary disclaims any liability for any acts or omissions made by a successor
Depositary whether in connection with a previous act or omission of the Depositary or in
connection with any matter arising wholly after the removal or resignation of the Depositary,
provided that in connection with the issue out of which such potential liability arises the
Depositary performed its obligations while it acted as Depositary without negligence or bad
faith.
• The Company, the Depositary, and the Company’s or the Depositary’s affiliates and the
respective officers, directors, employees, agents and advisors of any of the foregoing will not
be obliged to do or perform any act that is inconsistent with the provisions of the Deposit
Agreement.
• The Company, the Depositary, and the Company’s or the Depositary’s affiliates and the
respective officers, directors, employees, agents and advisers of any of the foregoing disclaim
any liability if the Company or the Depositary is prevented or forbidden from or delayed in
doing or performing any act or thing required by the terms of the Deposit Agreement by reason
of any provision of any law or regulation, any provision of its Bylaws, any provision of or
governing any securities on deposit or by reason of any act of God or war or other
circumstances beyond its control, including, without limitation, nationalisation, expropriation,
currency restrictions, work stoppage, strikes, civil unrest, acts of terrorism, revolutions,
rebellions, explosions and computer failure.
• The Company, the Depositary, and the Company’s or the Depositary’s respective agents
disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided
for in the Deposit Agreement or in the GDS or in any provisions of or governing the deposited
securities.
• The Company, the Depositary and their respective agents further disclaim any liability for any
action or inaction in reliance on the advice or information received from legal counsel,
accountants, any person presenting class B common shares for deposit, any GDS holders or
beneficial owners or any other person believed by either of the foregoing in good faith to be
competent to give such advice or information.
• The Company, the Depositary and their respective agents also disclaim liability for the inability
by a GDS holder or any beneficial owner to benefit from any distribution, offering, right or other
benefit which is made available to holders of class B common shares but is not, under the
terms of the Deposit Agreement, made available to holders of GDSs.
• The Company, the Depositary and its agents may rely and shall be protected in acting upon
any written notice, request or other document believed to be genuine and to have been signed
or presented by the proper parties.
• The Company, the Depositary and their respective agents of any of the foregoing also disclaim
any liability for indirect, special, consequential or punitive damages for any breach of the terms
of the Deposit Agreement.
• The Depositary disclaims liability for any actions taken in accordance with the Company’s
instructions to take actions with respect to the ownership interest of any holder or beneficial
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owner in excess of the limits applicable to the class B common shares under applicable law or
the Bylaws.
Indemnification
The Depositary has agreed to indemnify the Company against any loss, liability or expense of
any kind whatsoever, including the reasonable fees and expense of counsel, incurred by the Company
in respect of the Deposit Agreement to the extent such loss, liability or expense is due to the
negligence or bad faith of the Depositary or its agents.
The Company has agreed to indemnify the Depositary and its agents against, and hold each of
them harmless from, any loss, liability or expense including the reasonable fees and expenses of
counsel, that may arise, among other things: (i) out of any offering document in respect thereof,
except to the extent of the information contained in the section “Information Relating to the Depositary”
in this Offering Circular, (ii) out of acts performed or omitted in connection with the provisions of the
Deposit Agreement, in any such case by the Depositary or its agents, except to the extent such loss,
liability, or expense arises directly out of the negligence or bad faith of any of them, or by the
Company or any of its directors, employees, agents or affiliates.
Pre-Release Transactions
The Depositary may, in certain circumstances, to the extent permitted by applicable laws and
regulations, issue GDSs before receiving a deposit of class B common shares or release class B
common shares before receiving GDSs for cancellation, unless requested in writing by the Company
to cease doing so in advance of the proposed deposit. These transactions are commonly referred to
as “pre-release transactions”. The Deposit Agreement limits the aggregate size of pre-release transactions (which in general will not exceed 30% of all GDSs outstanding at any given time (excluding
pre-released GDSs), unless the Depositary elects to disregard such limit from time to time as it deems
reasonably appropriate)) and imposes a number of conditions on such transactions, including
conditions concerning the need to receive collateral, the type of collateral required, the representations
required from brokers. The Depositary may retain the compensation received from the pre-release
transactions.
Taxes
The Company, the Depositary and the Custodian may withhold or deduct from any distribution
the taxes and governmental charges payable by GDS holders and may sell any and all class B
common shares on deposit to pay the taxes and governmental charges payable by GDS holders. The
GDS holders will be liable for any deficiency if the sale proceeds do not cover the taxes that are due.
The Depositary may refuse to issue GDSs, to deliver, transfer, split or combine GDSs or to release
securities on deposit, until all taxes and charges are paid by the GDS holder.
The Company, the Depositary and/or the Custodian and/or their respective agents may, but are
not obligated to, take reasonable administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on a GDS holder’s behalf. However, each GDS holder may be
required to provide to the Depositary and to the Custodian proof of taxpayer status and residence and
such other information as the Depositary and the Custodian may require to fulfil legal obligations.
Each GDS holder and beneficial owner is required to indemnify the Company, the Depositary and the
Custodian and any of their respective agents, officers, employees and affiliates for, and to hold each
of them and the Company harmless from, any claims with respect to taxes, including applicable
interest and penalties thereon, based on any tax benefit obtained for such holder and beneficial
owner.
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The Depositary is under no obligation to provide the GDS holders with any information about the
Company’s tax status. Neither the Depositary nor the Custodian shall incur any liability for any tax
consequences that may be incurred by the GDS holders on account of their ownership of the GDSs,
including, without limitation, by virtue of the Company’s tax status.
Disclosure of Interests
By purchasing GDSs, each GDS holder agrees to comply with requests from the Company or
the Depositary pursuant to Argentine law, the rules and requirements of any stock exchange on which
the class B common shares are, or may be, registered, traded or listed, or the Bylaws, which are
made to provide information, among other things, as to the capacity in which a holder holds or owns a
beneficial interest in the GDSs and the class B common shares, as the case may be, and regarding
the identity of any other person interested in such GDSs, the nature of such interest and various
related matters, whether or not a particular person or entity is a holder or owner of a beneficial interest
in the GDSs at the time of such request.
Foreign Currency Conversion
The Depositary will, or will cause the Custodian to, arrange for the conversion into U.S. dollars of
all foreign currency received if such conversion is in the reasonable judgement of the Depositary
practicable and lawful, and it will distribute the U.S. dollars in accordance with the terms of the Deposit
Agreement. Each GDS holder will have to pay fees and expenses incurred in converting foreign
currency, such as fees and expenses incurred in complying with currency exchange controls and other
governmental requirements.
Governing Laws and Jurisdiction
Although New York law has been chosen to govern the construction and interpretation of the
Deposit Agreement and the GDSs, the rights of holders of the class B common shares and other
deposited securities and the Company’s obligations and duties in respect of such GDS holders shall
be governed by the laws of Argentina, or the laws of such other jurisdiction as may govern the
deposited securities.
Under the terms of the Deposit Agreement, GDS holders agree that any dispute, controversy or
cause of action against the Company and/or the Depositary arising out of the Deposit Agreement or
any transaction contemplated therein, may be instituted in any state or federal court in New York,
New York.
EACH PARTY TO THE DEPOSIT AGREEMENT, INCLUDING HOLDERS AND BENEFICIAL
OWNERS OF GDSs, IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE DEPOSIT AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED UNDER THE DEPOSIT AGREEMENT, WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY.
Argentine Share Register
The Company has appointed Caja de Valores S.A. (the “Share Registrar”) as the Registrar of the
class B common shares in Argentina and the Company has agreed to take any and all action
necessary to continue such appointment or the appointment of another Argentine Share Registrar
reasonably acceptable to the Depositary, for so long as the GDSs remain outstanding or the Deposit
Agreement remains in force.
The Company has agreed in the Deposit Agreement to:
• take any and all actions reasonably required to ensure the accuracy and completeness of all of
the information contained in the register of shareholders maintained by the Share Registrar;
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• provide or use reasonable efforts to cause the Share Registrar to provide unrestricted access
by the Depositary and the Custodian to the register of shareholders regularly, at least monthly,
so as to permit verification of the registration of the class B common shares in the form of the
GDSs in the name of the Depositary or the Custodian or their respective nominees;
• use reasonable efforts to cause the Share Registrar to promptly notify the Depositary of (i) any
material and uncured breaches by the Share Registrar of the terms of the Deposit Agreement,
and (ii) any time the Share Registrar will no longer be able to materially comply with, or has
engaged in conduct that indicates it will not materially comply with, the provisions of the
Deposit Agreement relating to it;
• use reasonable efforts to cause the Share Registrar to promptly re-register the class B
common shares being deposited into or withdrawn from the GDS facilities; and
• use reasonable efforts to cause the Share Registrar to promptly (and, in any event, within
three (3) business days in Buenos Aires, Argentina, of the receipt by the Share Registrar of
such documentation as may be required by applicable law and regulation and the reasonable
and customary internal regulations of the Share Registrar, or as soon as practicable thereafter)
notify the Depositary of (i) any alleged unlawful removal of shareholders from the shareholders’
register, or any alleged unlawful alteration of shareholder records, (ii) any alleged unlawful
refusal to register the class B common shares, and (iii) any time the Share Registrar holds the
class B common shares for its own account.
In the Deposit Agreement, the Company has agreed to assume liability for:
• any act or failure to act of the Share Registrar, other than such act or failure to act arising in
connection with any act or failure to act by the Depositary or the Custodian (or their respective
directors, employees, agents or affiliates); and
• the unavailability of the class B common shares on deposit under the terms of, or the failure of
the Depositary to make any distributions with respect thereto contemplated by, the Deposit
Agreement as a result of any one or more of the following: (i) any act or failure to act by the
Company or its agents, the Argentine Share Registrar (other than such act or failure to act
arising in connection with any act or failure to act by the Depositary or the Custodian (or their
respective directors, employees, agents or affiliates)), or their respective directors, employees,
agents or affiliates, (ii) any provision of the Company’s present or future Bylaws, or other
documents relating to the class B common shares, and (iii) any provisions of any securities the
Company issues or distributes and any related distribution or offering.
Securities Act Legends and Other Legends
Legends for the Regulation S GDR Certificates
Unless this certificate is presented by an authorised representative of The Depository Trust Company, a New York corporation (“DTC”), to the Depository or its agent for registration of transfer,
exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorised representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorised representative of DTC), any
transfer, pledge, or other use hereof for value or otherwise by or to any person is wrongful inasmuch
as the registered owner hereof, Cede & Co., has an interest herein.
NEITHER THIS GDR, NOR THE GDSs EVIDENCED HEREBY, AND THE CLASS B COMMON
SHARES (“SHARES”) REPRESENTED THEREBY HAVE BEEN OR WILL BE REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY
SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE
UNITED STATES AND SUCH SECURITIES MAY ONLY BE RE-OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE
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LAWS OF THE STATES, TERRITORIES AND POSSESSIONS OF THE UNITED STATES GOVERNING THE OFFER AND SALE OF SECURITIES AND, PRIOR TO THE EXPIRATION OF THE
RESTRICTED PERIOD ONLY (1) OUTSIDE THE UNITED STATES TO A PERSON OTHER THAN A
U.S. PERSON (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE SECURITIES
ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) TO A PERSON
WHOM THE HOLDER AND THE BENEFICIAL OWNER AND ANY PERSON ACTING ON THEIR
BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (3) PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; PROVIDED THAT IN CONNECTION WITH ANY
TRANSFER UNDER (2) ABOVE, THE TRANSFEROR SHALL, PRIOR TO THE SETTLEMENT OF
SUCH SALE, WITHDRAW THE SHARES IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OF THE DEPOSIT AGREEMENT AND INSTRUCT THAT SUCH SHARES BE DELIVERED TO THE
CUSTODIAN UNDER THE DEPOSIT AGREEMENT FOR ISSUANCE, IN ACCORDANCE WITH THE
TERMS AND CONDITIONS THEREOF, OF RULE 144A GDSs TO OR FOR THE ACCOUNT OF
SUCH QUALIFIED INSTITUTIONAL BUYER.
UPON THE EXPIRATION OF THE RESTRICTED PERIOD, THIS GDR, THE GDSs EVIDENCED HEREBY AND THE DEPOSITED SECURITIES REPRESENTED BY GDSs SHALL NO
LONGER BE SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED IN THIS LEGEND,
PROVIDED THAT AT THE TIME OF SUCH EXPIRATION THE OFFER AND SALE OF THE GDSs
EVIDENCED HEREBY AND THE DEPOSITED SECURITIES REPRESENTED THEREBY BY THE
HOLDER THEREOF IN THE UNITED STATES WOULD NOT BE RESTRICTED UNDER THE
SECURITIES LAWS OF THE UNITED STATES OR ANY STATE, TERRITORY OR POSSESSION OF
THE UNITED STATES.
EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THIS GDR OR A
BENEFICIAL INTEREST IN THE GDSs EVIDENCED HEREBY, AS THE CASE MAY BE, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS.
EACH PARTY TO THE DEPOSIT AGREEMENT, INCLUDING HOLDERS AND BENEFICIAL
OWNERS OF GDSs, IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE DEPOSIT AGREEMENT; OR
THE TRANSACTIONS CONTEMPLATED UNDER THE DEPOSIT AGREEMENT, WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY.
Legends for the Rule 144A GDR Certificates
Unless this certificate is presented by an authorised representative of The Depository Trust Company, a New York corporation (“DTC”), to the Depository or its agent for registration of transfer,
exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorised representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorised representative of DTC), any
transfer, pledge, or other use hereof for value or otherwise by or to any person is wrongful inasmuch
as the registered owner hereof, Cede & Co., has an interest herein.
THIS MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT, THE RULE 144A GLOBAL
DEPOSITARY SHARES EVIDENCED HEREBY AND THE CLASS B COMMON SHARES (“SHARES”)
OF GRUPO CLARIN S.A. REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT OF 1933”). THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED
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OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER OR ANY
PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT OF 1933 IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT OF 1933, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OF 1933 (IF AVAILABLE), AND (B) IN
EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE SHARES MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY
RECEIPT FACILITY IN RESPECT OF THE SHARES ESTABLISHED OR MAINTAINED BY A
DEPOSITARY BANK, UNLESS AND UNTIL SUCH TIME AS THE SHARES ARE NO LONGER
RESTRICTED SECURITIES UNDER THE SECURITIES ACT OF 1933. NO REPRESENTATION CAN
BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT OF 1933 FOR RESALE OF THE SHARES OR RULE 144A GLOBAL DEPOSITARY SHARES.
EACH PARTY TO THE DEPOSIT AGREEMENT, INCLUDING HOLDERS AND BENEFICIAL
OWNERS OF GDSs, IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE DEPOSIT AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED UNDER THE DEPOSIT AGREEMENT, WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY.
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TAXATION
The following summary of the principal Argentine, United States federal income and U.K. tax
consequences of ownership of the Class B Shares and GDSs is based upon laws, regulations,
decrees, rulings, income tax conventions (treaties), administrative practice and judicial decisions in
effect at the date of this Offering Circular. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming. Any such changes or interpretations could affect the tax
consequences to holders of the Class B Shares or GDSs, possibly on a retroactive basis, and could
alter or modify the statements and conclusions set forth herein. This summary does not purport to be
a legal opinion or to address all tax aspects that may be relevant to a holder of the Class B Shares or
GDSs. Each prospective holder is urged to consult its own tax adviser as to the particular tax
consequences to such holder of the ownership and disposition of the Class B Shares or GDSs,
including the applicability and effect of any other tax laws or tax treaties, of pending or proposed
changes in applicable tax laws as of the date of this Offering Circular, and of any actual changes in
applicable tax laws after such date.
Argentine Tax Considerations
The following discussion is a summary of the material Argentine tax considerations relating to
the purchase, ownership and disposition of the Class B Shares or GDSs.
There is at present no income tax treaty in force between Argentina and the United States,
although there are such treaties in force between Argentina and certain other jurisdictions.
Dividends Tax
Dividends paid on the Class B Shares or GDSs, whether in cash, property or other equity
securities and any other payment in kind, are not subject to income tax withholding, except for
dividends paid in excess of the Company’s taxable accumulated income for the previous fiscal period,
which are subject to withholding at the rate of 35% in respect of such excess. This is a final tax and it
is not applicable if dividends are paid in shares (acciones liberadas) rather than in cash.
With respect to dividends paid to shareholders residing abroad, the above-mentioned withholding
rate may be reduced by a tax treaty between Argentina and the country of the residing shareholder.
Capital Gains Tax
Opinion No. 351 of the National Treasury General Attorney Office clarified the legal status of
certain matters affecting the tax treatment of capital gains, but certain issues still remain unclear. The
following considerations are based on such opinion:
Resident Individuals
Income derived from the sale, exchange or other disposition of the Class B Shares or GDSs by
resident individuals who do not sell or dispose of Argentine shares on a regular basis is not subject to
Argentine income tax. Income derived from the sale, exchange or other disposition of the Class B
Shares or GDSs by resident individuals who sell or dispose of shares on a regular basis are subject
to Argentine income tax.
Foreign Beneficiaries
Capital gains obtained by non residents or foreign entities from the sale, exchange or other
disposition of the Class B Shares or GDSs are exempt from income tax. Such treatment would also
apply to those foreign beneficiaries that qualify as “offshore entities” for purposes of Argentine tax
laws. For this purpose, an offshore entity is any foreign legal entity which pursuant to its by-laws or to
the applicable regulatory framework (i) its principal activity is to invest outside the jurisdiction of its
incorporation and/or (ii) cannot perform certain transactions in such jurisdiction.
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Argentine Entities
Capital gains obtained by Argentine entities (in general, entities organised or incorporated under
Argentine law, certain traders and intermediaries, local branches of non Argentine entities, sole
proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the
sale, exchange or other disposition of the Class B Shares or GDSs are subject to income tax at the
rate of 35%. Losses arising from the sale of the Class B Shares or GDSs can be applied only to offset
such capital gains arising from sales of shares or GDSs within five years of origination.
Personal Assets Tax
Argentine entities, such as the Company, have to pay the personal assets tax corresponding to
Argentine resident individuals, foreign individuals and foreign entities for the holding of shares in the
Company at 31 December of each year. The applicable tax rate is 0.5% and is levied on the equity
value (valor patrimonial proporcional), or the book value, of the shares arising from the latest financial
statements. Pursuant to the Personal Assets Tax Law, the Company is entitled to seek reimbursement
of such paid tax from the applicable foreign shareholders, even by withholding and/or foreclosing on
the shares, or by withholding dividends. Argentine entities, such as the Company, are not obligated to
pay the personal assets tax on shares or participations in their capital owned by foreign individual or
entities located in certain jurisdictions with a tax treaty in force with Argentina (i.e. Chile, Switzerland
and Spain).
Value Added Tax
The sale, exchange or other disposition of the Class B Shares or GDSs and the distribution of
dividends are exempted from the value added tax.
Transfer Taxes
The sale, exchange or other disposition of the Class B Shares or GDSs is not subject to transfer
taxes.
Stamp Taxes
Stamp taxes may apply in certain Argentine provinces in case transfer of the Class B Shares or
GDSs is performed or executed in such jurisdictions by means of written agreements. Transfer of the
Class B Shares or GDSs is exempted from stamp tax in the City of Buenos Aires.
Tax on Debits and Credits in Bank Accounts
There is a tax on debits and credits in Argentine bank accounts. This tax applies to certain
debits and credits in Argentine bank accounts and to other transactions that, due to their special
nature and characteristics, are similar or could be used in lieu of a bank account.
Therefore, any debit or credit in an Argentine bank account or any transaction deemed to be
used in lieu of a bank account would be subject to the tax on debits and credits unless a particular
exemption applies.
The general tax rate is 0.6%. However, 34% of the tax arising from credits in bank accounts can
be used as a payment on account of the taxpayer’s income tax liability.
Other Taxes
There are no Argentine inheritance or succession taxes applicable to the ownership, transfer or
disposition of the Class B Shares or GDSs. In addition, neither the minimum presumed income tax
nor any local gross turnover tax is applicable to the ownership, transfer or disposition of the Class B
Shares or GDSs.
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Tax Treaties
Argentina has signed tax treaties for the avoidance of double taxation with Australia, Austria,
Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, the Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom. There is currently no tax treaty or
convention in effect between Argentina and the United States. It is not clear when, if ever, a treaty will
be ratified or entered into effect. As a result, the Argentine tax consequences described in this section
will apply, without modification, to a holder of the Class B Shares or GDSs that is a U.S. resident.
U.S. Federal Income Tax Considerations
General
TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR 230, PROSPECTIVE HOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL
TAX ISSUES CONTAINED OR REFERRED TO IN THIS OFFERING CIRCULAR OR ANY DOCUMENT REFERRED TO HEREIN IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE
USED, BY PROSPECTIVE HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY
BE IMPOSED ON THEM UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS
INCLUDED HEREIN FOR USE IN CONNECTION WITH THE PROMOTION OR MARKETING
(WITHIN THE MEANING OF CIRCULAR 230) OF THE TRANSACTIONS OR MATTERS
ADDRESSED HEREIN; AND (C) PROSPECTIVE HOLDERS SHOULD SEEK ADVICE BASED ON
THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
The following summary describes certain U.S. federal income tax consequences for a U.S. holder
(as defined below) of purchasing, owning and disposing of Class B Shares or GDSs. This summary
applies only to a U.S. holder that acquires GDSs in the initial offering and holds the Class B Shares or
GDSs as capital assets for U.S. federal income tax purposes. It does not purport to be a comprehensive description of all tax considerations that may be relevant to a decision to purchase GDSs. In
particular, this summary does not address tax considerations applicable to a U.S. holder that may be
subject to special rules, including, without limitation, a dealer in securities or currencies, a trader in
securities that elects to use a mark-to-market method of accounting for securities holdings, a bank or
other financial institution, a life insurance company, a tax-exempt organisation, a person that holds
Class B Shares or GDSs as part of a hedge, straddle, conversion transaction or other integrated
investment for tax purposes, a person who is liable for the alternative minimum tax, a person whose
functional currency for U.S. tax purposes is not the U.S. dollar, or a person that owns or is deemed to
own either 10% or more of any class of the Company’s stock, or 10% or more of the total combined
voting power of all classes of the Company’s stock entitled to vote. In addition, if an entity treated as a
partnership for U.S. federal income tax purposes holds Class B Shares or GDSs, the tax treatment of
each partner of the partnership generally will depend upon the status of the partner and the activities
of the partnership. If you are a partner in a partnership holding the Class B Shares or GDSs, you
should consult your own tax advisors.
This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), its
legislative history, existing and proposed regulations promulgated thereunder, published rulings and
court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive
basis. You should consult your own tax advisors concerning the consequences of purchasing, owning,
and disposing of Class B Shares or GDSs in your particular circumstances, including the possible
application of state, local, non-U.S. or other tax laws.
For purposes of this summary, you are a “U.S. holder” if you are a beneficial owner of a Class B
Share or GDS that is a citizen or resident of the United States, a U.S. domestic corporation, or
otherwise subject to U.S. federal income tax on a net income basis with respect to income from the
Class B Shares or GDSs.
191
In general, if you are the beneficial owner of GDSs you will be treated for U.S. federal income
tax purposes as the beneficial owner of the Class B Shares in the form of those GDSs. No gain or
loss will be recognised upon the exchange of GDSs for Class B Shares in the form of such GDSs.
Dividends
The gross amount of cash dividends that you receive with respect to the Class B Shares or
GDSs (prior to deduction of Argentine taxes) generally will be subject to U.S. federal income taxation
as foreign-source dividend income on a net income basis; provided that the cash dividend does not
exceed our current and accumulated earnings and profits as determined for U.S. federal income tax
purposes. The dividends paid generally will not be eligible for the dividends received deduction
allowed to certain U.S. corporate shareholders in respect of dividends paid by a domestic corporation,
nor will the dividends be eligible for the special reduced dividend rate applicable to qualified dividends.
Dividends paid in Argentine Pesos will be included in your income in a U.S. dollar amount calculated
by reference to the exchange rate in effect on the date of receipt of the dividend by you or, in the case
of shares held in GDS form, by the Depositary, regardless of whether the payment is in fact converted
into U.S. dollars. If such a dividend is converted into U.S. dollars on the date of receipt, you generally
should not be required to recognise foreign currency gain or loss in respect of the dividend income. If
such dividend is not converted from Argentine Pesos into U.S. dollars on the date of receipt, you
generally will have a basis in those Argentine Pesos equal to their U.S. dollar value on that date. You
also generally will be required to recognise foreign currency gain or loss realised on a subsequent
conversion or other disposition of the Argentine Pesos, which will be treated as U.S.-source ordinary
income or loss. Distributions of additional shares in respect of Class B Shares or GDSs that are made
as part of a pro-rata distribution to all of our shareholders generally will not be subject to U.S. federal
income tax.
Sale or Other Taxable Disposition
Upon a sale or other taxable disposition of Class B Shares or GDSs, you will recognise gain or
loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar
value of your amount realised and your tax basis, determined in U.S. dollars, in the Class B Shares or
GDSs. Generally, such gain or loss you realise on the sale or other disposition of Class B Shares or
GDSs will be treated as U.S.-source capital gain or loss, and will be long-term capital gain or loss if
the Class B Shares or GDSs were held for more than one year. Your ability to offset capital losses
against ordinary income is limited. Long-term capital gain recognised by an individual U.S. holder
before 1 January 2011 generally is subject to taxation at a maximum rate of 15%.
Foreign Tax Credit Considerations
You should consult your own tax advisors to determine whether you are subject to any special
rules that limit your ability to make effective use of foreign tax credits. If no such rules apply, you may
claim a credit against your U.S. federal income tax liability for Argentine income taxes withheld from
cash dividends on the Class B Shares or GDSs, so long as you have owned the Class B Shares or
GDSs (and not entered into specified kinds of hedging transactions) for at least a 16-day period that
includes the ex-dividend date. Instead of claiming a credit, you may, at your election, deduct such
Argentine taxes in computing your taxable income, subject to generally applicable limitations under
U.S. tax law. The calculation of foreign tax credits and, in the case of a U.S. holder that elects to
deduct foreign taxes, the availability of deductions, involve the application of complex rules that
depend on a U.S. holder’s particular circumstances. You should consult your own tax advisors
regarding the creditability or deductibility of such taxes.
U.S. Information Reporting and Backup Withholding Rules
Payments of dividends and sales proceeds that are made within the United States or through
certain U.S.-related financial intermediaries generally are subject to information reporting and may be
192
subject to backup withholding unless the holder (1) is a corporation or other exempt recipient or
(2) provides a taxpayer identification number and certifies that no loss of exemption from backup
withholding has occurred. You may obtain a refund of any excess amounts withheld under the backup
withholding rules by timely filing the appropriate claim or refund with the Internal Revenue Service and
filing any required information.
U.K. Tax Considerations
The comments below are of a general nature and are based on current U.K. law and published
HM Revenue & Customs practice as of the date of this Offering Circular, as well as the provisions of
the 1996 double taxation convention between the United Kingdom and Argentina (which the Company
refers to as the “United Kingdom/Argentina double tax treaty”), each of which is subject to change,
possibly with retrospective effect.
The summary only covers the principal U.K. tax consequences for the ultimate beneficial owners
of Class B Shares or GDSs and any dividends paid in respect of them (in circumstances where the
dividends paid are regarded for U.K. tax purposes as that person’s own income, and not the income
of some other person). In addition, the summary: (a) only addresses the principal U.K. tax consequences for holders who hold the Class B Shares or GDSs as capital assets and does not address
the tax consequences which may be relevant to certain other categories of holders, for example,
brokers or dealers; (b) does not address the tax consequences for holders that are banks, financial
institutions, insurance companies, collective investment schemes, tax-exempt organisations or persons
connected with the Company; (c) assumes that the holder does not control or hold, either alone or
together with one or more associated or connected persons, directly or indirectly, 10% or more of the
share capital or voting power of the Company; (d) assumes that the holder does not carry on business
in Argentina through a permanent establishment or fixed base therein; (e) assumes that the holder is,
for U.K. tax purposes, beneficially entitled to the underlying Class B Shares and to the dividends on
those Class B Shares; and (f) assumes that the holder has not (and is not deemed to have) acquired
the Class B Shares or GDSs by virtue of an office or employment.
The following is intended only as a general guide and is not intended to be, nor should it be
considered to be, legal or tax advice to any particular holder. Potential investors should satisfy
themselves as to the overall tax consequences, including, specifically, the consequences under U.K.
law, HM Revenue & Customs practice and the United Kingdom/Argentina double tax treaty, of the
acquisition, ownership and disposal of Class B Shares or GDSs in their own particular circumstances,
by consulting their own tax advisers.
Taxation of Dividends
Individual holders who are resident in the United Kingdom for U.K. tax purposes, and corporate
holders which are resident in the United Kingdom for U.K. tax purposes or which carry on a trade,
profession or vocation in the United Kingdom through a permanent establishment in the United
Kingdom, in connection with which the GDSs or Class B Shares are held, will, in general, be subject
to U.K. income tax or U.K. corporation tax (as applicable) on the gross amount of any dividends paid
on their Class B Shares or GDSs before the deduction of any Argentine withholding taxes, subject to
the availability of any credit for Argentine tax withheld. Special rules may apply to individual holders
who are not ordinarily resident or domiciled in the United Kingdom.
As discussed in “ — Argentine Tax Considerations — Dividends tax”, dividends paid on the
Class B Shares or GDSs are not subject to Argentine withholding taxes other than in the case of
dividends paid in excess of the Company’s taxable accumulated income as of the end of the previous
fiscal period. The excess of any dividends paid over the Company’s taxable accumulated income as of
the end of the previous fiscal period will, under Argentine current law, be subject to withholding at the
rate of 35%. However, the rate of withholding tax applicable to holders that are eligible for the benefits
of the United Kingdom/Argentina double tax treaty is reduced to a maximum of 15% of the gross
193
amount of any dividend. See — Argentine Tax Considerations — Dividends Tax” for a discussion of the
procedures for obtaining such relief.
Holders will in principle be entitled to a tax credit against U.K. income or U.K. corporation tax (as
the case may be) payable in respect of dividends paid on the Class B Shares or GDSs for Argentine
tax withheld from such dividends, up to the maximum rate of Argentine withholding tax permitted
under the United Kingdom/Argentina double tax treaty, subject to the U.K. rules generally governing
the availability of U.K. tax credits for non-U.K. withholding taxes.
For individual holders who are liable to U.K. income tax at the starting or basic rate, and who will
therefore be liable for U.K. income tax on the dividend at the dividend ordinary rate (currently 10%),
the credit for Argentine tax deducted at source may equal or exceed such individual’s U.K. income tax
liability in respect of the dividend, in which case such individual will have no further U.K. income tax to
pay. However, if there is any excess of such Argentine withholding tax over the U.K. tax payable, it is
generally not refundable. For individual holders who are liable to U.K. income tax at the higher rate
and who will therefore be liable to U.K. income tax on the dividend at the dividend upper rate
(currently 32.5%), U.K. income tax will be chargeable on the gross dividend with credit for Argentine
tax deducted at source as described above. Whether a U.K. resident individual holder is liable for U.K.
income tax at the starting, basic or higher rate will depend on the particular circumstances of the
holder.
The Company is not required to make any deduction from payments of dividends on the Class B
Shares or GDSs for or on account of U.K. tax.
Taxation of Capital Gains
The disposal or deemed disposal of Class B Shares or GDSs by a holder that is resident or, in
the case of an individual, ordinarily resident, in the United Kingdom may give rise to a chargeable gain
or an allowable loss for the purposes of U.K. taxation of capital gains (where the holder is an
individual) and U.K. corporation tax on chargeable gains (where the holder is within the charge to U.K.
corporation tax), depending on their circumstances and subject to any available exemption or relief. In
addition, individual holders who dispose of their Class B Shares or GDSs while they are temporarily
not resident or ordinarily resident in the United Kingdom may be treated as disposing of them in the
tax year in which they again become resident or ordinarily resident in the United Kingdom. Any gains
or losses in respect of currency fluctuations over the period of holding the Class B Shares or GDSs
would also be brought into account on the disposal. Special rules may apply to individual holders who
are not domiciled in the United Kingdom.
For individual holders, the factors that will determine the extent to which such gain will be subject
to U.K. capital gains tax include (i) the extent to which they realise any other capital gains in that year,
(ii) the extent to which they have incurred capital losses in that or any earlier year and (iii) the level of
the annual allowance of tax-free gains in the tax year in which the disposal takes place.
A holder that is a company is entitled to an indexation allowance which applies to reduce capital
gains to the extent that (broadly speaking) they arise due to inflation. Indexation allowance may
reduce a chargeable gain but not create any allowable loss.
Stamp Duty and Stamp Duty Reserve Tax
No U.K. stamp duty or stamp duty reserve tax will be payable on the issue of the GDSs and
their delivery into DTC, Euroclear and Clearstream.
No U.K. stamp duty or stamp duty reserve tax will be payable in respect of any dealings in the
GDSs once they are issued into DTC, Euroclear and Clearstream where such dealings are effected in
electronic book entry form in accordance with the procedures of DTC, Euroclear and Clearstream.
194
No U.K. stamp duty reserve tax will be payable in respect of any agreement to transfer the
Class B Shares provided that the Class B Shares are not registered in a register kept in the United
Kingdom. No U.K. stamp duty will be payable in connection with a transfer of Class B Shares where
the instrument of transfer is not executed in the United Kingdom and does not relate to any property
situated, or to any matter or thing done or to be done, in the United Kingdom.
Inheritance Tax
U.K. inheritance tax may be chargeable on the death of, or in certain circumstances on a gift by
the owner of, Class B Shares or GDSs, where the owner is an individual who is domiciled or is
deemed to be domiciled in the United Kingdom. For inheritance tax purposes, a transfer of assets at
less than full market value may be treated as a gift and particular rates apply to gifts where the donor
reserves or retains some benefit.
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SUBSCRIPTION AND SALE
The Offering described in this Offering Circular consists of (i) an international tranche of the
offering of 38,500,000 Class B Shares, in the form of 19,250,000 GDSs, in the United States and
other jurisdictions outside Argentina, and (ii) a tranche of the offering in Argentina of
11,500,000 Class B Shares.
The Company, the Selling Shareholders and the International Underwriters have entered into a
Purchase Agreement with respect to the Class B Shares and GDSs being offered. Subject to certain
conditions, each International Underwriter has severally agreed to purchase, at the Offer Price, the
number of Class B Shares indicated in the following table (all of which will be in the form of GDSs).
Principal Amount
of Class B Shares
International Underwriter
Goldman Sachs International . . . . . . . . . .
Credit Suisse Securities (Europe) Limited .
J.P. Morgan Securities Inc. . . . . . . . . . . . .
Merrill Lynch International . . . . . . . . . . . . .
Itaú Securities, Inc. . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
.
.
.
.
.
.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
16,041,796
16,041,796
3,850,000
1,283,204
1,283,204
38,500,000
The International Underwriters are committed to take and pay for all of the Class B Shares being
offered, if any are taken, other than the Class B Shares covered by the Over-allotment Option unless
and until such option is exercised.
The Company has entered into a placement agreement with JPMorgan Chase S.A. Sociedad de
Bolsa and Merrill Lynch Valores S.A. Sociedad de Bolsa (the “Argentine Placement Agents” and,
together with the International Underwriters, the “Underwriters”) providing for the concurrent offer and
sale of Class B Shares in Argentina. The closings of the international tranche of the offering and the
Argentine tranche of the offering are conditioned upon each other.
Intersyndicate Agreement
The International Underwriters and the Argentine Placement Agents have entered into an intersyndicate agreement which governs matters relating to the Offering. Under this agreement, each
International Underwriter has agreed that, as part of its distribution of GDSs and subject to permitted
exceptions, it has not offered or sold, and will not offer to sell, directly or indirectly, any GDSs or
distribute any prospectus relating to the GDSs to any person in Argentina or to any other dealer who
does not so agree. The Argentine Placement Agents similarly have agreed that, as part of its
distribution of Class B Shares and subject to permitted exceptions, they have not offered or sold, and
will not offer to sell, directly or indirectly, any Class B Shares or distribute any prospectus relating to
Class B Shares to any person outside Argentina or to any other dealer who does not so agree. These
limitations do not apply to transactions between the International Underwriters and the Argentine
Placement Agents, who have agreed that they may sell Class B Shares or GDSs, as the case may
be, between respective syndicates. The number of Class B Shares or GDSs, as the case may be,
actually allocated to each offering may differ from the amount offered due to reallocation between the
international tranche of the Offering and the Argentine tranche of the Offering.
Over-allotment Option
The Company and certain Selling Shareholders have granted Credit Suisse Securities (Europe)
Limited an Over-allotment Option to acquire, in the aggregate, up to 7,500,000 additional Class B
Shares in the form of GDSs at the Offer Price for the purposes of meeting over-allotments in
connection with the Offering. The Over-allotment Option is exercisable upon written notice by Credit
Suisse Securities (Europe) Limited to the Company and such certain Selling Shareholders at any time
during the Stabilisation Period. If Credit Suisse Securities (Europe) Limited exercises this option, the
196
Company and such certain Selling Shareholders will be obligated to sell, and Credit Suisse Securities
(Europe) Limited will be obligated, subject to the conditions contained in the Purchase Agreement, to
purchase or procure purchases for additional shares in the form of GDSs.
Discounts and Commissions
The following tables show the per share and total discounts and commissions to be paid to the
International Underwriters by the Company and the Selling Shareholders. Such amounts are shown
assuming both no exercise and full exercise of the Over-allotment Option.
Paid by the Company
No Exercise
Full Exercise
Per GDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.$ 0.5342
U.S.$934,828
U.S.$ 0.5342
U.S.$1,535,789
Paid by the Selling Shareholders
No Exercise
Full Exercise
Per GDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.$ 0.5342
U.S.$9,348,281
U.S.$
0.5342
U.S.$10,750,523
If all the Class B Shares are not sold at the Offer Price, the International Underwriters may
change the offering price and the other selling terms.
Lock-up Provisions
The Company, the Selling Shareholders and certain other shareholders of the Company have
agreed, subject to certain exceptions, not to issue, offer, sell, contract to sell, pledge, grant options
over or otherwise dispose of any class B common shares of the Company, GDSs or any securities
convertible into, or exchangeable or exercisable for, any class B common shares or GDSs for a period
commencing on 4 October 2007 and ending 180 days from the date of the Purchase Agreement,
without the prior written consent of the Joint Global Coordinators and International Bookrunners.
Listing
Prior to the Offering, there has been no public market for the Class B Shares, whether in the
form of GDSs or otherwise. The Offer Price has been established by the Company. Among the factors
considered in determining the Offer Price of the Class B Shares and GDSs, in addition to prevailing
market conditions, were the Company’s historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company’s management and the
consideration of the above factors in relation to market valuation of companies in related businesses.
The GDSs will be listed on the Regulated Market of the London Stock Exchange under the
symbol “GCLA”. The class B common shares of the Company (including the Class B Shares) are
admitted for trading on the BCBA under the symbol “GCLA”.
Stabilisation
In connection with the Offering, Credit Suisse Securities (Europe) Limited may purchase and sell
Class B Shares and GDSs in the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short sales involve the sale by
Credit Suisse Securities (Europe) Limited of a greater number of Class B Shares or GDSs than they
are required to purchase in the Offering. “Covered” short sales are sales made in an amount not
197
greater than the Over-allotment Option. Credit Suisse Securities (Europe) Limited may close out any
covered short position by either exercising their Over-allotment Option or purchasing Class B Shares
or GDSs in the open market. In determining the source of Class B Shares or GDSs to close out the
covered short position, Credit Suisse Securities (Europe) Limited will consider, among other things,
the price of Class B Shares or GDSs available for purchase in the open market as compared to the
price at which they may purchase additional Class B Shares or GDSs pursuant to the Over-allotment
Option. “Naked” short sales are any sales in excess of such Over-allotment Option. Credit Suisse
Securities (Europe) Limited must close out any naked short position by purchasing Class B Shares or
GDSs in the open market. A naked short position is more likely to be created if Credit Suisse
Securities (Europe) Limited is concerned that there may be downward pressure on the price of the
securities in the open market after pricing that could adversely affect investors who purchase in the
Offering. Stabilizing transactions consist of various bids for or purchases of securities made by Credit
Suisse Securities (Europe) Limited in the open market prior to the completion of the Offering.
The International Underwriters also may impose a penalty bid. This occurs when a particular
International Underwriter repays to the International Underwriters a portion of the discount received by
it because Credit Suisse Securities (Europe) Limited or its affiliates have repurchased Class B Shares
or GDSs sold by or for the account of such International Underwriter in stabilising or short covering
transactions.
In connection with the Offering, Credit Suisse Securities (Europe) Limited (or persons acting on
its behalf) may over-allot GDSs or effect transactions with a view to supporting the market price of the
GDSs at a level higher than that which might otherwise prevail. However, there is no assurance that
Credit Suisse Securities (Europe) Limited (or persons acting on its behalf) will undertake stabilisation
action. Any stabilisation action may begin on or after the date of adequate public disclosure of the
final price of the relevant securities and, if begun, may be ended at any time, but must end no later
than 30 days after that date.
GDSs allocated under the Offering will, following determination of the Offer Price, be fully
underwritten by the International Underwriters. Allocations will be determined at the discretion of the
International Underwriters, following consultation with the Company and the Selling Shareholders,
after the book-building process. Subject to the International Underwriters, there is no minimum or
maximum number of GDSs that can be applied for.
All GDSs offered and sold pursuant to the Offering will be offered and sold at the Offer Price. A
number of factors will be considered in determining the Offer Price and the basis of allocation,
including the objective of establishing an orderly aftermarket in the GDSs, prevailing market conditions
and the level of absolute demand.
The International Underwriters, through their respective affiliates, proposed to sell GDSs in the
United States to QIBs in reliance on Rule 144A under the Securities Act. Any offer or sale of GDSs in
reliance on Rule 144A will be made by broker-dealers who are registered as such under the Exchange
Act.
The Company and the Selling Shareholders have agreed to indemnify the International Underwriters against certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the International Underwriters and their respective affiliates have, from time to time,
performed, and may in the future perform, various financial advisory and investment banking services
for the Company, for which they received or will receive customary fees and expenses.
GS Unidos, LLC, GS Private Equity Partners II — Direct Investment Fund, LP, GS Capital
Partners III, LP and GS Private Equity Partners 1999 — Direct Investment Fund, LP are affiliates of
Goldman Sachs International.
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SELLING AND TRANSFER RESTRICTIONS
Selling Restrictions
United States
The Class B Shares and GDSs have not been and will not be registered under the Securities
Act. Each International Underwriter has agreed that it will only offer or sell the GDSs (A) in the United
States to qualified institutional buyers in reliance on Rule 144A under the Securities Act, or (B) outside
the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. Terms used above have the meanings given to them by Rule 144A and Regulation S
under the Securities Act.
In addition, with respect to GDSs initially sold pursuant to Regulation S, until 40 days after the
period referred to above, an offer or sale of such GDSs within the United States by a dealer that is not
participating in the Offering may violate the registration requirements of the Securities Act.
Argentina
The concurrent offering of 11,500,000 Class B Shares in Argentina is being made on the basis
of a Spanish-language prospectus dated as of 11 October 2007. The Argentine prospectus, which has
been filed with the CNV, is in a format different from that of this Offering Circular, consistent with CNV
regulations, but contains substantially the same information as this Offering Circular, other than certain
U.S. GAAP information, information relating to the GDSs, U.S. and U.K. taxation matters and
information required under the FSMA.
European Economic Area
In relation to each Member State of the EEA which has implemented the Prospectus Directive
(each, a “Relevant Member State”) an offer to the public of any GDSs may not be made in that
Relevant Member State (except in the United Kingdom once the prospectus comprising all information
contained in this Offering Circular (including Annex A) other than the section “Unaudited Consolidated
Pro Forma Statement of Income” and all references to that section contained elsewhere in this
Offering Circular (the “Prospectus”) has been approved by the Financial Services Authority and
published in accordance with the Prospectus Directive as implemented in the United Kingdom) except
that an offer to the public in that Relevant Member State of any GDSs may be made at any time
under the following exemptions under the Prospectus Directive, if they have been implemented in that
Relevant Member State:
(a) to legal entities which are authorised or regulated to operate in the financial markets or,
if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more of (1) an average of at least 250 employees
during the last financial year; (2) a total balance sheet of more than e43,000,000 and (3) an
annual net turnover of more than e50,000,000, as shown in its last annual or consolidated
accounts;
(c) by the International Underwriters to fewer than 100 natural or legal persons (other than
qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent
of Credit Suisse Securities (Europe) Limited for any such offer; or
(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of GDSs shall result in a requirement for the publication by the Company,
Selling Shareholders or any International Underwriter of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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For the purposes of this section, the expression an “offer to the public” in relation to any GDSs
in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and any GDSs to be offered so as to enable an investor to
decide to purchase any GDSs, as the same may be varied in that Relevant Member State by any
measure implementing the Prospectus Directive in that Relevant Member State and the expression
“Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure
in each Relevant Member State.
United Kingdom
Each International Underwriter has represented and agreed that:
• it has only communicated or caused to be communicated and will only communicate or cause
to be communicated an invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the
GDSs in circumstances in which Section 21(1) of the FSMA does not apply to the Company
and the Selling Shareholders; and
• it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the GDSs in, from or otherwise involving the United Kingdom.
This document is for distribution only to persons who (i) have professional experience in matters
relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”), (ii) are persons
falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of
the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an
invitation or inducement to engage in investment activity (within the meaning of section 21 of the
Financial Services and Markets Act 2000) in connection with the issue or sale of any GDSs may
otherwise lawfully be communicated or caused to be communicated (all such persons together being
referred to as “relevant persons”). This document is directed only at relevant persons and must not be
acted on or relied on by persons who are not relevant persons. Any investment or investment activity
to which this document relates is available only to relevant persons and will be engaged in only with
relevant persons.
In connection with the Offering, the International Underwriters are not acting for anyone other
than the Company and the Selling Shareholders and will not be responsible to anyone other than the
Company and the Selling Shareholders for providing the protections afforded to their clients nor for
providing advice in relation to the Offering.
Singapore
This Offering Circular has not been registered as a prospectus with the Monetary Authority of
Singapore. Accordingly, this Offering Circular and any other document or material in connection with
the offer or sale, or invitation for subscription or purchase, of the GDSs may not be circulated or
distributed, nor may the GDSs be offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an
institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore
(the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance
with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in
accordance with the conditions of, any other applicable provision of the SFA.
Where the GDSs are subscribed or purchased under Section 275 by a relevant person which is:
(a) a corporation (which is not an accredited investor) the sole business of which is to hold
investments and the entire share capital of which is owned by one or more individuals, each of whom
is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole
purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and
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units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust
shall not be transferable for 6 months after that corporation or that trust has acquired the GDSs under
Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant
person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified
in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of
law.
Brazil
The GDSs have not been and will not be publicly issued or publicly placed, distributed, offered or
negotiated in the Brazilian capital markets. Neither the Company nor the issuance of any GDSs has
been or will be registered with the Brazilian Securities and Exchange Commission (Comissao de
Valores Mobiliários).
General
No action has been taken or will be taken in any jurisdiction that would permit a public offering of
the Securities, or the possession or distribution of this Offering Circular or any other material relating
to the Offering or the Securities, where action for such purpose is required. Accordingly, the
Securities, may not be offered or sold, directly or indirectly, nor may this Offering Circular or any other
offering material or advertisement in connection with such Securities be distributed or published, in or
from any country or jurisdiction except under circumstances that will result in compliance with any
applicable rules and regulation of any such country or jurisdiction. No dealer, salesperson or other
person has been authorised to give any information or to make any representation not contained in
this Offering Circular, and, if given or made, such information or representation must not be relied
upon as having been authorised by the Company, any Selling Shareholder or any International
Underwriter. This Offering Circular does not constitute an offer to sell or the solicitation of an offer to
buy any Securities other than the Securities to which it relates or an offer to sell or the solicitation of
an offer to buy such Securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this Offering Circular nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the Company’s affairs since
the date hereof or that the information contained in this Offering Circular is correct as of a date after
its date.
Buyer’s Representation
Each subscriber for, or purchaser of, Securities in the Offering located within a Member State of
the EEA will be deemed to have represented, warranted and agreed to and with each International
Underwriter, the Selling Shareholders and the Company that:
(a) it is a qualified investor within the meaning of Article 2(1)(e) of the Prospectus
Directive; and
(b) in the case of any Securities being offered to a financial intermediary, as that term is
used in Article 3(2) of the Prospectus Directive, the Securities acquired by it in the Offering have
not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a
view to their offer or resale to, persons in circumstances which may give rise to an offer of any
Securities to the public other than their offer or resale in a Relevant Member State to qualified
investors, as that term is defined in the Prospectus Directive or in circumstances in which the
prior consent of the International Underwriters has been given to the offer or resale. The
Company, the International Underwriters and their affiliates, and others will rely (and the
Company acknowledges that the International Underwriters and their affiliates, and others will
rely) upon the truth and accuracy of the foregoing representations, acknowledgements, and
agreements. Notwithstanding the foregoing, a person who is not a qualified investor and who
has notified the Joint Global Coordinators and International Bookrunners of such fact in writing
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may, with the consent of the Joint Global Coordinators and International Bookrunners, be
permitted to subscribe for or purchase Securities in the Offering.
The Company, the International Underwriters and their affiliates may rely upon the truth and
accuracy of the aforementioned deemed representations, acknowledgements and agreements and will
not be responsible for any loss occasioned by such reliance.
Transfer Restrictions
None of the Securities have been or will be registered under the Securities Act, and the Class B
Shares and the GDSs may not be offered or sold within the United States except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
Accordingly, the Class B Shares and the GDSs are being offered and sold only:
(a) to QIBs in compliance with Rule 144A; and
(b) in offshore transactions in compliance with Regulation S. As used in this document, the
term “offshore transaction” has the meaning given to it in Regulation S.
Rule 144A Class B Shares and GDSs
Each purchaser of Rule 144A Class B Shares or GDSs in the Offering, by its acceptance
thereof, will be deemed to have represented and agreed as follows (terms used in this paragraph that
are defined in Rule 144A or Regulation S are used herein as defined therein):
1. The purchaser (i) is a QIB, (ii) is aware, and each beneficial owner of such
Rule 144A GDSs or Class B Shares has been advised, that the sale to it is being made in
reliance on Rule 144A and (iii) is acquiring such Rule 144A GDSs or Class B Shares for its own
account or for the account of a QIB.
2. The purchaser is aware that the Rule 144A GDSs and the Class B Shares represented
thereby have not been and will not be registered under the Securities Act and are being offered
in the United States in reliance on Rule 144A only in a transaction not involving any public
offering in the United States within the meaning of the Securities Act and that the GDSs and the
Class B Shares represented thereby are subject to significant restrictions on transfer.
3. If in the future the purchaser decides to offer, resell, pledge or otherwise transfer such
Rule 144A GDSs or the Class B Shares represented thereby, such Rule 144A GDSs and Class B
Shares may be offered, sold, pledged or otherwise transferred only in accordance with the
following legend, which the Rule 144A GDSs will bear unless otherwise determined by the
Company and the Depositary in accordance with applicable law:
Unless this certificate is presented by an authorised representative of The Depository
Trust Company, a New York corporation (“DTC”), to the Depository or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an authorised representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an authorised
representative of DTC), any transfer, pledge, or other use hereof for value or otherwise by or to
any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THIS MASTER RULE 144A GLOBAL DEPOSITARY RECEIPT, THE RULE 144A GLOBAL
DEPOSITARY SHARES EVIDENCED HEREBY AND THE CLASS B COMMON SHARES
(“SHARES”) OF GRUPO CLARIN S.A. REPRESENTED HEREBY HAVE NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT OF 1933”). THESE SECURITIES MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER OR ANY PERSON ACTING ON ITS BEHALF REASONABLY
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BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT OF 1933 IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OF 1933, OR
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT OF 1933 (IF AVAILABLE), AND (B) IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE SHARES MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY
RECEIPT FACILITY IN RESPECT OF THE SHARES ESTABLISHED OR MAINTAINED BY A
DEPOSITARY BANK, UNLESS AND UNTIL SUCH TIME AS THE SHARES ARE NO LONGER
RESTRICTED SECURITIES UNDER THE SECURITIES ACT OF 1933. NO REPRESENTATION
CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT OF 1933 FOR RESALE OF THE SHARES OR RULE 144A
GLOBAL DEPOSITARY SHARES.
EACH PARTY TO THE DEPOSIT AGREEMENT, INCLUDING HOLDERS AND BENEFICIAL OWNERS OF GDSs, IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE
DEPOSIT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED UNDER THE DEPOSIT
AGREEMENT, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY.
4. The purchaser acknowledges that the Depositary will not be required to accept for
registration of transfer any GDSs acquired by such purchaser, except upon presentation of
evidence satisfactory to the Company and the Depositary that the restrictions set forth herein
have been complied with.
Each purchaser of Rule 144A Class B Shares or GDSs will be deemed to have acknowledged
that the Company, the International Underwriters, their respective affiliates and others will rely upon
the truth and accuracy of the foregoing representations and agreements and agrees that if any of the
representations or agreements deemed to have been made by its purchase of the Rule 144A Class B
Shares or GDSs are no longer accurate, it shall promptly notify the Company and the International
Underwriters. If it is acquiring the Rule 144A Class B Shares or GDSs as a fiduciary or agent for one
or more investor accounts, it represents that it has sole investment discretion with respect to each
such account and that it has full power to make the foregoing representations and agreements on
behalf of each account.
Prospective purchasers are hereby notified that sellers of the Rule 144A Class B Shares
or GDSs may be relying on the exemption from the provisions of Section 5 of the Securities
Act provided by Rule 144A.
Regulation S Class B Shares and GDSs
Each purchaser of Regulation S Class B Shares or GDSs in the Offering, by its acceptance
thereof, will be deemed to have represented and agreed as follows (terms used in this paragraph that
are defined in Rule 144A or Regulation S are used herein as defined therein):
1. The purchaser (i) is, and the person, if any, for whose account it is acquiring the
Regulation S GDSs or Class B Shares is, outside the United States, (ii) is not an affiliate of the
Company or a person acting on behalf of such an affiliate and (iii) is not a securities dealer or, if
it is a securities dealer, it did not acquire the Regulation S GDSs or the Class B Shares
represented thereby from the Company or an affiliate thereof in the initial distribution of
Regulation S.
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2. The purchaser is aware that the Regulation S GDSs and the Class B Shares represented thereby have not been and will not be registered under the Securities Act, and are being
offered outside the United States in reliance on Regulation S.
3. If in the future the purchaser decides to offer, resell, pledge or otherwise transfer such
Regulation S GDSs or the Class B Shares represented thereby, such Regulation S GDSs and
Class B Shares may be offered, sold, pledged or otherwise transferred only in accordance with
the following legend, which the Regulation S GDSs will bear unless otherwise determined by the
Company and the Depositary in accordance with applicable law:
Unless this certificate is presented by an authorised representative of The Depository
Trust Company, a New York corporation (“DTC”), to the Depository or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an authorised representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an authorised
representative of DTC), any transfer, pledge, or other use hereof for value or otherwise by or to
any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
NEITHER THIS GDR, NOR THE GDSs EVIDENCED HEREBY, AND THE CLASS B
COMMON SHARES (“SHARES”) REPRESENTED THEREBY HAVE BEEN OR WILL BE
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR
OTHER JURISDICTION OF THE UNITED STATES AND SUCH SECURITIES MAY ONLY BE
RE-OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IN COMPLIANCE
WITH THE SECURITIES ACT AND APPLICABLE LAWS OF THE STATES, TERRITORIES AND
POSSESSIONS OF THE UNITED STATES GOVERNING THE OFFER AND SALE OF SECURITIES AND, PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD ONLY (1) OUTSIDE
THE UNITED STATES TO A PERSON OTHER THAN A U.S. PERSON (AS SUCH TERMS ARE
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) TO A PERSON WHOM THE HOLDER
AND THE BENEFICIAL OWNER AND ANY PERSON ACTING ON THEIR BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (3) PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), OR (4) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT; PROVIDED THAT IN CONNECTION WITH ANY TRANSFER UNDER (2) ABOVE, THE TRANSFEROR SHALL, PRIOR TO
THE SETTLEMENT OF SUCH SALE, WITHDRAW THE SHARES IN ACCORDANCE WITH
THE TERMS AND CONDITIONS OF THE DEPOSIT AGREEMENT AND INSTRUCT THAT
SUCH SHARES BE DELIVERED TO THE CUSTODIAN UNDER THE DEPOSIT AGREEMENT
FOR ISSUANCE, IN ACCORDANCE WITH THE TERMS AND CONDITIONS THEREOF, OF
RULE 144A GDSs TO OR FOR THE ACCOUNT OF SUCH QUALIFIED INSTITUTIONAL
BUYER.
UPON THE EXPIRATION OF THE RESTRICTED PERIOD, THIS GDR, THE GDSs
EVIDENCED HEREBY AND THE DEPOSITED SECURITIES REPRESENTED BY GDSs SHALL
NO LONGER BE SUBJECT TO THE RESTRICTIONS ON TRANSFER PROVIDED IN THIS
LEGEND, PROVIDED THAT AT THE TIME OF SUCH EXPIRATION THE OFFER AND SALE
OF THE GDSs EVIDENCED HEREBY AND THE DEPOSITED SECURITIES REPRESENTED
THEREBY BY THE HOLDER THEREOF IN THE UNITED STATES WOULD NOT BE
RESTRICTED UNDER THE SECURITIES LAWS OF THE UNITED STATES OR ANY STATE,
TERRITORY OR POSSESSION OF THE UNITED STATES.
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EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THIS GDR OR A
BENEFICIAL INTEREST IN THE GDSs EVIDENCED HEREBY, AS THE CASE MAY BE,
REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING
RESTRICTIONS.
EACH PARTY TO THE DEPOSIT AGREEMENT, INCLUDING HOLDERS AND BENEFICIAL OWNERS OF GDSs, IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE
DEPOSIT AGREEMENT; OR THE TRANSACTIONS CONTEMPLATED UNDER THE DEPOSIT
AGREEMENT, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY.
4. The purchaser acknowledges that the Depositary will not be required to accept for
registration of transfer any GDSs acquired by such purchaser, except upon presentation of
evidence satisfactory to the Company and the Depositary that the restrictions set forth herein
have been complied with.
Each purchaser of Regulation S Class B Shares or GDSs will be deemed to have acknowledged
that the Company, the International Underwriters, their respective affiliates and others will rely upon
the truth and accuracy of the foregoing representations and agreements and agrees that if any of the
representations or agreements deemed to have been made by its purchase of the Regulation S
Class B Shares or GDSs are no longer accurate, it shall promptly notify the Company and the
International Lead Manager. If it is acquiring the Regulation S Class B Shares or GDSs as a fiduciary
or agent for one or more investor accounts, it represents that it has sole investment discretion with
respect to each such account and it has full power to make the foregoing representations and
agreements on behalf of each account.
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SETTLEMENT AND TRANSFER
Clearing and Settlement of GDSs
Custodial and depositary links have been established between Euroclear, Clearstream and DTC
to facilitate the initial issue of the GDSs and cross-market transfers of the GDSs associated with
secondary market trading.
The Clearing Systems
Euroclear and Clearstream
Euroclear and Clearstream each hold securities for participating organisations and facilitate the
clearance and settlement of securities transactions between their respective participants through
electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide to
their respective participants, among other things, services for safekeeping, administration, clearance
and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and
Clearstream participants are financial institutions throughout the world, including securities brokers
and dealers, banks, trust companies, clearing corporations and certain other organisations. Euroclear
and Clearstream have established an electronic bridge between their two systems across which their
respective customers may settle trades with each other. Indirect access to Euroclear or Clearstream is
also available to others, such as banks, brokers, dealers and trust companies which clear through or
maintain a custodial relationship with a Euroclear or Clearstream participant, either directly or
indirectly.
Distributions of dividends and other payments with respect to book-entry interests in the GDSs
held through Euroclear or Clearstream will be credited, to the extent received by the Depositary, to the
cash accounts of Euroclear or Clearstream participants in accordance with the relevant system’s rules
and procedures.
DTC
DTC is a limited-purpose trust company organised under the laws of the State of New York, a
“banking organisation” within the meaning of the New York Banking Law, a member of the United
States Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform
Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities for DTC participants and facilitates the clearance and settlement
of securities transactions between DTC participants through electronic computerised book-entry
changes in DTC participants’ accounts. DTC participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organisations. Indirect access to the
DTC system is also available to others such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a DTC participant, either directly
or indirectly.
Holders of book-entry interests in the GDSs holding through DTC will receive, to the extent
received by the Depositary, all distributions of dividends or other payments with respect to book-entry
interests in the GDSs from the Depositary through DTC and DTC participants. Distributions in the
United States will be subject to relevant U.S. tax laws and regulations. See “Taxation — U.S. Federal
Income Tax Considerations”.
As DTC can act on behalf of DTC direct participants only, who in turn act on behalf of DTC
indirect participants, the ability of beneficial owners who are indirect participants to pledge book-entry
interests in the GDSs to persons or entities that do not participate in DTC, or otherwise take actions
with respect to book-entry interests in the GDSs, may be limited.
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Registration and Form
Book-entry interests in the GDSs held through DTC will be represented by the Master Rule 144A
GDR Certificate and the Master Regulation S GDR Certificate, each registered in the name of
Cede & Co. as nominee for DTC, which will be held by the Depositary or its agent as custodian for
DTC. As necessary, the GDR Register will adjust the amounts of GDSs on the relevant register for
the accounts of the nominee to reflect the amounts of GDSs held through DTC. Beneficial ownership
in the GDSs will be held through financial institutions as direct and indirect participants in DTC,
including Euroclear and Clearstream.
DTC and every other intermediate holder in the chain to the beneficial owner of book-entry
interests in the GDSs, including Euroclear and Clearstream, will be responsible for establishing and
maintaining accounts for their participants and customers having interests in the book-entry interests
in the GDSs. The Depositary will be responsible for maintaining a record of the aggregate holdings of
GDSs registered in the name of the nominee for DTC. The Depositary will be responsible for ensuring
that payments received by it from the Company for holders holding through DTC are paid by it to
DTC.
The Company will not impose any fees in respect of the GDSs; however, holders of book-entry
interests in the GDSs may incur fees normally payable in respect of the maintenance and operation of
accounts in Euroclear, Clearstream or DTC and certain fees and expenses payable to the Depositary
in accordance with the terms of the Deposit Agreement.
Global Clearance and Settlement Procedures
Initial Settlement
The GDSs will be in global form evidenced by the two Global Master GDRs. Purchasers electing
to hold book-entry interests in the GDSs through Euroclear and Clearstream accounts will follow the
settlement procedures applicable to depositary receipts. DTC participants acting on behalf of purchasers electing to hold book-entry interests in the GDSs through DTC will follow the delivery practices
applicable to depositary receipts.
Secondary Market Trading
For a description of transfer restrictions relating to the Securities, see “Selling and Transfer
Restrictions — Transfer Restrictions”.
Trading Between Euroclear and Clearstream Participants
Secondary market sales of book-entry interests in the GDSs held through Euroclear or
Clearstream to purchasers of book-entry interests in the GDSs through Euroclear or Clearstream will
be conducted in accordance with the normal rules and operating procedures of Euroclear and
Clearstream and will be settled using the normal procedures applicable to depositary receipts.
Trading Between DTC Participants
Secondary market sales of book-entry interests in the GDSs held through DTC will occur in the
ordinary way in accordance with DTC rules and will be settled using the procedures applicable to
depositary receipts, if payment is effected in U.S. dollars, or free of payment, if payment is not effected
in U.S. dollars. Where payment is not effected in U.S. dollars, separate payment arrangements outside
DTC are required to be made between the DTC participants.
Trading Between DTC Seller and Euroclear/Clearstream Purchaser
When book-entry interests in the GDSs are to be transferred from the account of a DTC
participant to the account of a Euroclear or Clearstream participant, the DTC participant must send to
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DTC a delivery free of payment instruction at least two business days prior to the settlement date.
DTC will in turn transmit such instruction to Euroclear or Clearstream, as the case may be, on the
settlement date. Separate payment arrangements are required to be made between the DTC
participant and the relevant Euroclear or Clearstream participant. On the settlement date, DTC will
debit the account of its DTC participant and will instruct the Depositary to instruct Euroclear or
Clearstream, as the case may be, to credit the relevant account of the Euroclear or Clearstream
participant, as the case may be. In addition, on the settlement date, DTC will instruct the Depositary
to (i) decrease the amount of book-entry interests in the GDSs registered in the name of a nominee
for DTC and represented by the Master Rule 144A GDR Certificate and (ii) increase the amount of
book-entry interests in the GDSs registered in the name of the common nominee for Euroclear and
Clearstream and represented by the Master Regulation S GDR Certificate.
Trading Between Clearstream/Euroclear Seller and DTC Purchaser
When book-entry interests in the GDSs are to be transferred from the account of a Euroclear or
Clearstream participant to the account of a DTC participant, the Euroclear or Clearstream participant
must send to Euroclear or Clearstream a delivery free of payment instruction at least two business
days prior to the settlement date. Separate payment arrangements are required to be made between
the DTC participant and the relevant Euroclear or Clearstream participant, as the case may be. On
the settlement date, Euroclear or Clearstream, as the case may be, will debit the account of its
participant and will instruct the Depositary to instruct DTC to credit the relevant account of Euroclear
or Clearstream, as the case may be, and will deliver such book-entry interests in the GDSs free of
payment to the relevant account of the DTC participant. In addition, Euroclear or Clearstream, as the
case may be, shall on the settlement date instruct the Depositary to (i) decrease the amount of the
book-entry interests in the GDSs registered in the name of the common nominee and evidenced by
the Master Regulation S GDR Certificate and (ii) increase the amount of the book-entry interests in
the GDSs registered in the name of a nominee for DTC and represented by the Master Rule 144A
GDR Certificate.
General
Although the foregoing sets out the procedures of Euroclear, Clearstream and DTC in order to
facilitate the transfers of interests in the GDSs among participants of Euroclear, Clearstream and
DTC, none of Euroclear, Clearstream or DTC are under any obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time. None of the
Company, the International Underwriters, the Depositary, the Custodian or their respective agents will
have any responsibility for the performance by Euroclear, Clearstream or DTC or their respective
participants of their respective obligations under the rules and procedures governing their operations.
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INFORMATION RELATING TO THE DEPOSITARY
The Depositary is JPMorgan Chase Bank, NA. (“JPMCB”), having its address at 4 New York
Plaza, New York, New York 10004. JPMCB is a wholly-owned bank subsidiary of JPMorgan Chase &
Co., a Delaware corporation. JPMCB is a commercial bank offering a wide range of banking services
to its customers both domestically and internationally. It is chartered, and its business is subject to
examination and regulation, by the Office of the Comtroller of the Currency, a bureau of the United
States Department of the Treasury. It is a member of the Federal Reserve System and its deposits
are insured by the Federal Deposit Insurance Corporation.
Effective 1 July 2004, Bank One Corporation merged with and into JPMorgan Chase & Co., the
surviving corporation in the merger, pursuant to the Agreement and Plan of Merger dated as of
14 January 2004.
Prior to 13 November 2004, JPMCB was in the legal form of a banking corporation organized
under the laws of the State of New York and was named JPMorgan Chase Bank. On that date, it
became a national banking association and its name was changed to JPMorgan Chase Bank, National
Association (the “Conversion”). Immediately after the Conversion, Bank One, NA (Chicago) and Bank
One, NA (Columbus) merged into JPMCB.
Additional information, including the most recent Form 10-K for the year ended 31 December
2006, of JPMorgan Chase & Co. and additional annual, quarterly and current reports filed with the
Securities and Exchange Commission by JPMorgan Chase & Co., as they become available, may be
obtained from the Securities and Exchange Commission’s Internet site (http://www.sec.gov), or without
charge by each person to whom this Official Statement is delivered upon the written request of any
such person to the Office of the Secretary, JPMorgan Chase & Co., 270 Park Avenue, New York,
New York 10017.
Such information will be updated as long as the GDSs are admitted to listing on the Official List
and admitted to trading on the Regulated Market of the London Stock Exchange and JPMorgan
Chase Bank, N.A. is the Depositary.
209
GENERAL INFORMATION
Corporate Information
The Company was organised in Buenos Aires, Argentina as Grupo Clarín S.A. The Company
was registered with the Public Registry of Commerce of the City of Buenos Aires on 30 August 1999
under No. 12,574, Book 3, Volume of “Sociedades Anónimas”. The Company’s duration is 99 years.
The principal legislation under which the Company operates is the legislation of Argentina, and the
regulations and orders made thereunder. The registered address and the principal place of business
of the Company is at Piedras 1743, (C1140ABK) Ciudad Autónoma de Buenos Aires, Argentina (Tel.
No. +54 11 4309 7500).
Legal Matters
Certain legal matters in connection with the Offering will be passed upon for the Company with
respect to Argentine law by Sáenz Valiente & Asociados and with respect to U.S. law by Cleary
Gottlieb Steen & Hamilton LLP. Certain legal matters in connection with the Offering will be passed
upon for the Joint Global Coordinators, International Bookrunners, the International Lead Manager
and the International Co-Managers with respect to Argentine law by Marval, O’Farrell & Mairal and
with respect to U.S. law by Shearman & Sterling LLP.
Independent Accountants
The audited consolidated financial statements included in this Offering Circular, have been
audited by Price Waterhouse & Co. S.R.L. Buenos Aires, Argentina (a member firm of PricewaterhouseCoopers), independent accountants, domiciled at Bouchard 557, piso 7, Ciudad de Buenos Aires,
as stated in their report, which includes the description of an uncertainty that results from pending
regulatory approvals for the sale by the Company of its indirect participation in Prima to Multicanal,
the sale of its direct and indirect participation in Multicanal to Cablevisión, and the indirect acquisition
by the Company of additional shares in Cablevisión necessary to increase its participation in that
company to 60% of its outstanding capital stock and votes, appearing herein.
With respect to the unaudited interim financial statements, included in this Offering Circular,
Price Waterhouse & Co. S.R.L. Buenos Aires, Argentina (a member firm of PricewaterhouseCoopers),
independent accountants, reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate report dated
5 September 2007 appearing herein, states that they did not audit and they do not express an opinion
on that unaudited financial information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review procedures applied.
The consolidated financial statements of Cablevisión as of and for the years ended 31 December
2006 and 2005, included in this Offering Circular, have been audited by Price Waterhouse & Co.
S.R.L. Buenos Aires, Argentina (a member firm of PricewaterhouseCoopers), independent accountants, as stated in their report, which includes the description of an uncertainty that results from
pending regulatory approvals relating to the acquisition by Cablevisión of Multicanal and by Multicanal
of Prima, appearing herein.
Consent
Price Waterhouse & Co. S.R.L. Buenos Aires, Argentina (a member firm of PricewaterhouseCoopers), independent accountants, has given and not withdrawn its written consent to the inclusion
of its audit report in Annex A to this Offering Circular in the context in which it is included and has
authorised the content of that part of the Offering Circular to which it consents for the purposes of
item 5.5.4R(2)(f) of the Prospectus Rules.
210
Significant Subsidiaries
The following table sets forth certain information with respect to the Company’s significant
subsidiaries:
Entity
Cablevisión S.A.
Arte Gráfico Editorial
Argentino S.A.
Arte Radiotelevisivo
Argentino S.A.
Inversora de Eventos
S.A.
Radio Mitre S.A.
Registered office
Address
Activity
Cuba 2370,
(C1428AEL) Ciudad
Autónoma de Buenos
Aires, Argentina
Piedras 1743,
(C1140ABK), Ciudad
Autónoma de Buenos
Aires, Argentina
Lima 1261(C1138ACA),
Ciudad Autónoma de
Buenos Aires,
Argentina
Av. San Juan 1170
(C1147AAW), Ciudad
Autónoma de Buenos
Aires, Argentina
Mansilla 2668, 3™ piso
(C1425BPD), Ciudad
Autónoma de Buenos
Aires, Argentina
211
Operator of video and
data cable transmission
systems
Percentage Interest
Owned by Company
60%
Newspaper publishing
and commercial
printing
100%
Broadcasting TV
99.2%
Sports marketing
operations
100%
Broadcasting Radio
100%
Property
The material properties owned or leased by the Company and its subsidiaries are as follows:
Property
Production plant
Vacant
Raw material deposit. Partially
vacant
Production plant
Offices and parking
Vacant lot
AGEA commercial offices
ARTEAR commercial offices,
TV studios
Cablevisión head offices
Cablevisión head offices
Cablevisión offices
Multicanal commercial offices
GC Gestión Compartida head
offices
TRISA/TSC head offices
Pol-Ka head offices
Ideas del Sur head offices
Papel Prensa head offices
Paper mill offices
Willow plantation
Address
Av. Del Barco Centenera 2880,
Ciudad Autónoma de Buenos
Aires
Av. Del Barco Centenera 2650,
Ciudad Autónoma de Buenos
Aires
Av. Del Barco Centenera 2750,
Ciudad Autónoma de Buenos
Aires
Zepita 3220, Ciudad Autónoma
de Buenos Aires
Piedras 1731 / 1733 / 1783 /
1785 / 1787 ; Ituzaingo 647 /
651 Y 675 ; Tacuarí 1830/32 /
1872 / 1874 ; Finochietto 736 /
738 / 762 / 770, Ciudad
Autónoma de Buenos Aires
Ituzaingo 678/80, Ciudad
Autónoma de Buenos Aires
Av. Corrientes 526 SS al 3™
piso, Ciudad Autónoma de
Buenos Aires
Lima 1261, Ciudad Autónoma
de Buenos Aires
Cuba 2370 and 2376, Ciudad
Autónoma de Buenos Aires
Cuba 2368, Ciudad Autónoma
de Buenos Aires
General Hornos 690, Ciudad
Autónoma de Buenos Aires
San Juan 2520, Ciudad
Autónoma de Buenos Aires
San Juan 1170, Ciudad
Autónoma de Buenos Aires
San Juan 1130/32, Ciudad
Autónoma de Buenos Aires
Jorge Newbery 3449, Ciudad
Autónoma de Buenos Aires
Olleros 3551, Ciudad Autónoma
de Buenos Aires
Bartolomé Mitre 739, 4th floor,
Ciudad Autónoma de Buenos
Aires
Parque Industrial, San Pedro,
Provincia de Buenos Aires
“Las Carabelas” field, on the
bank of the Carabelas river,
Provincia de Buenos Aires
212
Owned by AGR
Owned by AGR
Owned by AGR
Owned by AGEA
Owned by AGEA
Owned by AGEA
Owned by AGEA
Owned by ARTEAR
Owned by Cablevisión
Owned by Cablevisión
Owned by Multicanal
Owned by Multicanal
Owned by GC Gestión
Compartida
Owned by TRISA
Owned by Pol-Ka(1)
Owned by Ideas del Sur(1)
Owned by Papel Prensa(1)
Owned by Papel Prensa(1)
Property
Willow plantation
Willow plantation
Willow plantation
Radio Mitre head offices
Prima head offices
Clarín Global head offices
Address
“Las Animas” field, Arroyo
Martínez, Islas Ibicuay,
Provincia de Entre Ríos
“María Dolores” field, Bragado,
Provincia de Buenos Aires
“El Gazapo” field, Teodelina,
Provincia de Sante Fe
Mansilla 2668, Ciudad
Autónoma de Buenos Aires
La Rioja 301, Ciudad Autónoma
de Buenos Aires
La Rioja 301, Ciudad Autónoma
de Buenos Aires
Owned by Papel Prensa(1)
Owned by Papel Prensa(1)
Owned by Papel Prensa(1)
Leased By Radio Mitre
Leased By Prima
Leased By Clarín Global
(1) Under Argentine GAAP, consolidated proportionally. Under U.S. GAAP, the Company is an equity
investee.
Significant Change
Save as disclosed in “Operating and Financial Review — Factors affecting the comparability of
historical results of operations and financial condition” of this Offering Circular, there has been no
significant change in the financial or trading position of the Company since 30 June 2007, the date of
the Company’s latest interim consolidated financial statements.
Litigation
From time to time, the Company is involved in litigation in the ordinary course of its business
activities such as tax disputes, labour disputes, disputes with other companies, etc. See “Business
Description — Legal Proceedings” (pages 65-70 of this Offering Circular). However, the Company
believes that such ordinary course litigation is immaterial and is unlikely to affect Company’s operating
results or financial position significantly. Neither Company nor any subsidiary of the Company is or
has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the 12 months preceding
the date of this Offering Circular which may have, or have had a significant effect on the financial
position or profitability of the Company.
Material Contracts
The following contracts (not being contracts entered into in the ordinary course of business) have
been entered into by a member of the Company and its subsidiaries within the two years immediately
preceding the date of this Offering Circular and are, or may be, material or have been entered into at
any time by any member of the Company and its Subsidiaries and contain provisions under which any
member of the Company and its Subsidiaries has an obligation or entitlement which is, or may be,
material to the Company and its Subsidiaries as at the date of this Offering Circular:
Agreements in Connection With the Offering
• Purchase Agreement
The Purchase Agreement dated 19 October 2007 among the Company, the Selling Shareholders
and the International Underwriters providing for, inter alia, the underwriting of the international tranche
of the Offering, and described in “Subscription and Sale”.
213
• Placement Agreement
The placement agreement dated 19 October 2007 among the Company and the Argentine
Placement Agents providing for, inter alia, the placement of the New Shares in Argentina, and
described in “Subscription and Sale”.
• Deposit Agreement
The Deposit Agreement dated 23 October 2007 among the Company, the Depositary and the
holders of GDSs. See “Terms and Conditions of the Global Depositary Shares”.
Financing and Indebtedness
See “Operating and Financial Review — Liquidity and Capital Resources — Indebtedness”.
Related Party Transactions
See “Related Party Transactions”.
Authorisation
The issuance of the Securities was approved by the shareholders of the Company and the board
of directors of the Company pursuant to resolutions adopted on 20 July 2007 and 8 October 2007,
respectively. The entry into the Purchase Agreement, the Placement Agreement and the Deposit
Agreement was approved by the board of directors of the Company pursuant to a resolution adopted
on 12 October 2007.
Listing
Application has been made to the UKLA for the GDSs to be admitted to the Official List.
Application has been made to the London Stock Exchange for the GDSs to be admitted to trading on
the Regulated Market through IOB. It is expected that admission of the GDSs to the Official List of the
UKLA and admission to trading of the GDSs on the Regulated Market of the London Stock Exchange
will be granted on or around 24 October 2007, subject to the issue of the GDSs. It is expected that
dealings in the GDSs will commence on 25 October 2007. Application has been made for the class B
common shares (including the Class B Shares) and the class C common shares of the Company to
listing on the BCBA and for the class B common shares of the Company (including the Class B
Shares) to be admitted to trading on the BCBA.
Expense of Admission to Trading
Expenses related to admission of the Class B Shares and the GDSs to trading on the London
Stock Exchange and the BCBA will be approximately U.S.$17.3 million.
Clearing Reference Numbers
The Regulation S GDSs have been accepted for clearance through the Clearstream, Luxembourg and Euroclear systems with a Common Code of 032363881 and CUSIP number 40052A209.
The International Securities Identification Number for the Regulation S GDSs is US40052A2096. The
address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium, and the address of
Clearstream, Luxembourg is 42 Avenue JF Kennedy, L-1855, Luxembourg. The Rule 144A GDSs, with
CUSIP number 40052A100, have been accepted for clearance with The Depository Trust Company,
whose address is 55 Water Street, New York, NY 10041, United States.
Interests of Persons Involved in the Issue
None of the directors of the Company, the members of the executive committee of the board of
directors of the Company, the members of our supervisory committee, the members of the audit
214
committee of our board of directors and our executive officers has any interest in any contract,
arrangement or transaction entered into by the Company which is or was unusual in its nature or
conditions or significant in relation to the business of the Company and which was effected during the
current or immediately preceding financial year or which was effected during an earlier financial year
and remains in any respect outstanding or unperformed. There are no potential conflicts of interest
between any duties of the directors of the Company, the members of the executive committee of the
board of directors of the Company, the members of our supervisory committee, the members of the
audit committee of our board of directors and our executive officers and their private interests and
other duties, except for Messrs. Satter and Castelblanco, who are employees of affiliates of The
Goldman Sachs Group, Inc., and to that extent may have interests that conflict with those of the
Company. See “Risks Factors — Risks Related to Our Business — Certain of Our Existing Shareholders have Approval Rights and their Interests May Be Contrary to Yours” (page 14 of this Offering
Circular).
Save for the fees payable to the Joint Global Coordinators, the International Bookrunners, the
International Lead Manager, the International Co-Managers and the Depositary, so far as the
Company is aware no person involved in the issue of the Securities has an interest that is material to
the issue of the Securities.
Documents for Inspection
So long as the GDSs are admitted to listing on the Official List and the rules of the Financial
Services Authority shall so require, copies of the following documents (together with English translations, where applicable) may be inspected during normal business hours at the registered office of the
Company:
• the Bylaws of the Company;
• the audited consolidated financial statements of the Company for the three years ended
31 December 2006, 2005 and 2004;
• the unaudited interim financial statements as of 30 June 2007 and for the six month periods
ended 30 June 2007 and 2006;
• this Offering Circular; and
• the Deposit Agreement.
215
GLOSSARY OF SELECTED TERMS
AAADP
means the Asociación Argentina de Agentes Distribuidores de
Publicaciones, the Argentine Association of Publication
Distributors.
Adjusted EBITDA
means net sales minus cost of sales (excluding depreciation
and amortisation) and selling and administrative expenses
(excluding depreciation and amortisation).
ADSL
means asymmetrical digital subscriber line.
AFA
means the Asociación del Fútbol Argentino, the Argentine
Football Association.
AFIP
means the Administración Federal de Ingresos Públicos, the
Argentine Federal Revenue Service.
AGEA
means Arte Gráfico Editorial Argentino S.A.
AGR
means Artes Gráficas Rioplatense S.A.
AMBA Region
means the City of Buenos Aires and its surrounding areas.
ANA
means the Administración Nacional de Aduanas, the National
Customs Administration.
Antitrust Tribunal
means the Tribunal Nacional de Defensa de la Competencia.
Argentine Antitrust Law
means Argentine Law No. 25,156, as amended.
Argentine Corporate Law
means Argentine Law No. 19,550, as amended.
Argentine GAAP
means the accounting principles generally accepted in the
City of Buenos Aires, Argentina.
Argentine Placement Agents
means JP Morgan Chase S.A. Sociedad de Bolsa and
Merrill Lynch Valores S.A. Sociedad de Bolsa.
ARTEAR
means Arte Radiotelevisivo Argentino S.A.
Banco Nación
means the Banco de la Nación Argentina.
BCBA
means the Bolsa de Comercio de Buenos Aires, the Buenos
Aires Stock Exchange.
Broadcasting Law
means Argentine Law No. 22,285, as amended, and related
regulations.
Bylaws
means the bylaws of the Company (estatutos sociales), as
registered with the IGJ on 30 August 1999, as amended from
time to time and as will be amended as of the date of the
completion of the Offering.
Cablevisión
means Cablevisión S.A.
Canal Rural
means Canal Rural Satelital S.A.
Central Bank
means the Banco Central de la República Argentina, the
Argentine central bank.
Clarín Global
means Clarín Global S.A.
Class B Share Closing Date
means 24 October 2007.
216
Class B Shares
means 50,000,000 class B common shares of the Company
offered in the Offering, with nominal value of Ps.1.00 and 1
(one) vote per share, and with equal rights to dividends as the
outstanding shares of the Company.
Clearstream
means Clearstream Banking, société anonyme.
CIMECO
means Compañía Inversora en Medios de Comunicación
(CIMECO) S.A.
CNC
means the Comisión Nacional de Comunicaciones, the
National Communications Commission.
CNDC
means the Comisión Nacional de Defensa de la Competencia,
the National Antitrust Commission.
CNV
means the Comisión Nacional de Valores, the Argentine
Securities Commission.
Comfer
means the Comité Federal de Radiodifusión, the Federal
Broadcasting Committee.
COMIP
means Corporación de Medios Internacionales de Prensa,
S.A.
Controlling Shareholders
means, collectively, Mrs. Ernestina Laura Herrera de Noble,
Mr. Héctor Horacio Magnetto, Mr. José Antonio Aranda and
Mr. Lucio Rafael Pagliaro and/or any of their affiliates, family
members or trusts under which they, their family members or
affiliates are beneficiaries.
Convertibility Law
means Argentine Law No. 23,928, as amended.
Custodian
means Banco Santander Río S.A.
Deposit Agreement
means the deposit agreement among the Company, the
Depositary and the holder of GDSs.
Depositary
means JPMorgan Chase Bank, N.A.
Dominio
means GC Dominio S.A.
DTC
means The Depository Trust Company.
Editorial Atlántida
means Editorial Atlántida S.A.
EEA
means the European Economic Area.
Euroclear
means Euroclear Bank S.A./N.V. as operator of the
Euroclear System.
Exchange Act
means the United States Securities Exchange Act of 1934, as
amended.
FACPCE
means the Federación Argentina de Consejos Profesionales
de Ciencias Económicas, the Argentine Federation of Professional Councils in Economic Sciences.
Farallon
means Farallon GC Investors, LLC.
Ferias y Exposiciones
means Ferias y Exposiciones S.A.
217
Financial Entities Law
means Argentine Law No. 21,526.
Financial Services Authority
means the U.K Financial Services Authority.
Fintech
means Fintech Energy LLC, an affiliate of Fintech Advisory,
Inc., together with its affiliates.
FSMA
means the Financial Services and Markets Act 2000.
GDS Closing Date
means 24 October 2007.
GDSs
means, collectively, the Rule 144A GDSs and the Regulation S
GDSs.
GS Investors
means, collectively, GS Unidos, LLC, GS Private Equity Partners II — Direct Investment Fund LP, GS Capital Partners III,
LP, GS Private Equity Partners 1999 — Direct Investment
Fund, LP, and the GS Unidos members listed and defined in
the Shareholders Agreement.
GS Selling Shareholders
means GS Unidos, LLC; GS Private Equity Partners II —
Direct Investment Fund, LP; GS Capital Partners III, L.P.; GS
Private Equity Partners 1999 — Direct Investment Fund, L.P.;
Tinicum GC Investors, LLC and Farallon GC Investors, LLC.
GS Unidos
means GS Unidos, LLC.
Hazardous Wastes Law
means Argentine Law No. 24,051.
HMTF
means Hicks Muse Tate & Furst Group
Holding Teledigital
means Holding Teledigital Cable S.A.
IBOPE
means IBOPE Argentina S.A.
IESA
means Inversora de Eventos S.A.
Ideas del Sur
means Ideas del Sur S.A.
IGJ
means the Inspección General de Justicia, the Argentine
Superintendency of Legal Entities.
Independent Accountants
means Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina (a member firm of PricewaterhouseCoopers), independent
accountants.
International Co-Managers
means Merrill Lynch International and Itaú Securities, Inc.
International Lead Manager
means J.P. Morgan Securities Inc.
International Underwriters
means, collectively, the Joint Global Coordinators and International Bookrunners, the International Lead Manager and the
International Co-Managers.
IVC
means the Instituto Verificador de Circulaciones, the newspaper and magazine circulation verification institute.
Joint Global Coordinators and
International Bookrunners
Local Selling Shareholders
means Goldman Sachs International and Credit Suisse Securities (Europe) Limited.
means Mrs. Ernestina L. Herrera de Noble, Aranlú S.A. and
Corbery S.A.
218
MAE
means the Mercado Abierto Electrónico, S.A., the Argentine
over-the-counter market.
Master GDRs
means, collectively, the Master Rule 144A GDR and the Master Regulation S GDR.
Master Regulation S GDR
means the Master Regulation S Global Depositary Receipt,
which will be issued by the Depositary, registered in the name
of Cede & Co., as nominee of DTC in New York.
Master Rule 144A GDR
means the Master Rule 144A Global Depositary Receipt registered in the name of Cede & Co., as nominee for DTC in
New York.
MERVAL
means the Mercado de Valores de Buenos Aires, the Buenos
Aires Securities Market.
Multicanal
means Multicanal S.A.
National Registry
means the Registro Nacional de Generadores y Operadores
de Residuos Peligrosos, the National Registry of Producers
and Operators of Hazardous Waste.
Negotiable Obligations Law
means Argentine Law No. 23,576, as amended.
New Shares
means 15,000,000 Class B Shares sold by the Company in
the Offering.
Offer Price
means Ps.29.14 per Class B Share and U.S.$18.50 per GDS.
Offering
means the global offering by the Company and the Selling
Shareholders of the class B common shares.
Official List
means the official list of the Financial Services Authority.
Over-allotment Option
means the option, exercisable for 30 days following the
announcement of the definitive Offer Price for the GDSs, to
acquire up to 7,500,000 additional Class B Shares (15% of
the Offering) in the form of GDSs at the Offer Price for the
purposes of meeting over-allotments in connection with the
Offering, granted to Credit Suisse Securities (Europe) Limited
by the Company and certain Selling Shareholders.
Papel Prensa
means Papel Prensa S.A.I.C.F. y de M.
Permitted Shareholder
means Ernestina L. Herrera de Noble, Héctor Horacio
Magnetto, José Antonio Aranda, Lucio Rafael Pagliaro, certain
authorised assignees of the foregoing and certain of their designated relatives, as well as corporations controlled by any of
them or trusts established for the benefit of any of them.
Pol-ka
means Pol-ka Producciones S.A.
Prima
means Primera Red Interactiva de Medios Argentinos
(Prima) S.A.
Prima Internacional
means Primera Red Interactiva de Medios Americanos
(Prima) Internacional S.A., since 26 September 2007, denominated Compañía de Medios Digitales (CMD) S.A.
Prospectus
means all information contained in this Offering Circular
(including Annex A) other than the section “Unaudited Pro
219
Forma Consolidated Statement of Income” and all references
to that section contained elsewhere in this Offering Circular.
Prospectus Directive
means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
Prospectus Rules
means the prospectus rules of the Financial Services Authority made under Section 73A of the FSMA.
QIB
means a qualified institutional buyer as defined in Rule 144A.
Radio Mitre
means Radio Mitre S.A.
Regulation S
means Regulation S under the Securities Act.
Regulation S GDSs
means the global depository receipts offered outside the
United States and Argentina in reliance on Regulation S.
Relevant Member State
means each member state of the EEA which has implemented
the Prospectus Directive.
Rule 144A
means Rule 144A under the Securities Act.
Rule 144A GDSs
means the global depository receipts offered in the
United States to certain QIBs in reliance on Rule 144A.
SATSAID
means the Sindicato Argentino de la Televisión y Servicios
Audiovisuales, Interactivos y de Datos, the Argentine Union of
Television and Audiovisual, Interactive and Data Services
Secom
means the Secretaría de Comunicaciones, the Argentine Secretariat of Communications.
Securities
means, collectively, the Class B Shares and the GDSs.
Securities Act
means the United States Securities Act of 1933, as amended.
Selling Shareholder Shares
means 35,000,000 Class B Shares sold by the Selling Shareholders in the Offering.
Selling Shareholders
means, collectively, Mrs. Ernestina L. Herrera de Noble,
Aranlú S.A. Corbery S.A. and the GS Selling Shareholders.
Share Registrar
means Caja de Valores S.A.
Share Syndication Agreement
means the Acuerdo de Sindicación de Acciones relating to the
Company dated on or about 19 October 2007 among the Controlling Shareholders and the GS Investors.
Shareholders Agreement
means the shareholders agreement relating to the Company,
dated as of 27 December 1999, as amended on 2 August
2005 and 30 May 2007 and further amended as of
19 October 2007, subject to completion of the Offering,
among GC Dominio S.A., Ernestina Laura Herrera de Noble,
The 1999 Ernestina Laura Herrera de Noble New York Trust,
HHM Media New York Trust, The LRP New York Trust, José
Antonio Aranda, Aranlú S.A., Corbery S.A., GS Unidos, LLC,
GS Private Equity Partners II — Direct Investment Fund, LP,
GS Capital Partners III, LP, GS Private Equity Partners
1999 — Direct Investment Fund, L.P., and the GS Unidos
members listed therein.
220
Stabilisation Period
means the period beginning on the date of adequate public
disclosure of the Offer Price and ending no later than 30 calendar days thereafter.
Teledigital
means Teledigital Cable S.A.
Tinicum
means Tinicum GC Investors, LLC.
Tinta Fresca
means Tinta Fresca Ediciones S.A.
TPO
means Televisora Privada del Oeste S.A.
TRISA
means Tele Red Imagen S.A.
TSC
means Televisión Satelital Codificada S.A.
TyC
means Torneos y Competencias S.A.
UKLA
means the U.K. Listing Authority.
Underwriters
means, collectively, the Argentine Placement Agents and the
International Underwriters.
Univent’s
means Univent’s S.A.
U.S. GAAP
means the accounting principles generally accepted in the
United States of America.
221
INDEX TO FINANCIAL STATEMENTS
Page
ARGENTINE GAAP
Financial Statements of the Company as of and for the six-month Period ended
June 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 . . . . . . . . . . . . . .
Consolidated Statements of Operations for the six-month periods ended June 30, 2007 and
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2007 and
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheets as of June 30, 2007 and December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations for the six-month periods ended June 30, 2007 and the year
ended December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Changes in the Shareholders’ Equity for the six-month periods ended June 30,
2007 and the year ended December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows for the six-month periods ended June 30, 2007 and the year
ended December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Unaudited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements of the Company for the Years Ended December 31, 2006, 2005
and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2006, 2005 and 2004 . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheets as of December 31, 2006, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations for the years ended December 31, 2006, 2005 and 2004 . . . . . . . .
Statements of Changes in Shareholders’ Equity for the years ended December 31, 2006,
2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 . . . . . . .
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements of Cablevisión for the Years Ended December 31, 2006 and
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet as of December 31, 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Income for the years ended December 31, 2006 and 2005 . . . . . .
Consolidated Statement of Cash Flows for the years ended December 31, 2006 and 2005 . .
Notes and Exhibits to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet as of December 31, 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Income for the years ended December 31, 2006 and 2005 . . . . . . . . . . . . . . . .
Statement of Changes in Shareholders’ Equity for the years ended December 31, 2006 and
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Cash Flows for the years ended December 31, 2006 and 2005 . . . . . . . . . . . . .
Notes and Exhibits to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-1
F-3
F-6
F-7
F-8
F-9
F-33
F-34
F-35
F-36
F-37
F-60
F-62
F-65
F-66
F-67
F-69
F-92
F-93
F-94
F-95
F-96
F-118
F-120
F-123
F-124
F-125
F-126
F-139
F-140
F-141
F-142
F-143
Page
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. GAAP (ANNEX A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating and Financial Review — U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected consolidated financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Argentine economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factors affecting the comparability of historical results of operations and financial condition . .
Operating results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cable television and Internet access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Printing and publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broadcasting and programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity and capital resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements of the Company for the Years Ended December 31,
2006, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2006, 2005 and 2004 . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years ended December 31, 2006, 2005 and
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows for the Years ended December 31, 2006, 2005 and
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Shareholders’ Equity (Deficit) and Other Comprehensive (Loss)
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Condensed Consolidated Financial Statements of the Company as of June 30, 2007
and December 31, 2006 and for the six-month Periods ended June 30, 2007 and
December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 . . . . . . . . . . . . . .
Consolidated Statements of Operations for the six-months Periods ended June 30, 2007 and
December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows for the six-months Periods ended June 30, 2007 and
December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Shareholders’ Equity (Deficit) and Other Comprehensive (Loss)
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-2
F-171
A-1
A-2
A-2
A-4
A-5
A-5
A-5
A-7
A-11
A-12
A-16
A-20
A-22
A-24
A-24
A-26
A-26
A-27
A-27
A-27
A-F-1
A-F-2
A-F-3
A-F-4
A-F-6
A-F-7
A-F-48
A-F-49
A-F-50
A-F-51
A-F-52
A-F-54
A-F-55
A-F-69
GRUPO CLARIN S.A.
Financial Statements as of June 30, 2007
and for the Six-Month Period Ended on Such Date
Presented Comparatively With the Prior Year’s Financial Statements
F-3
GRUPO CLARIN S.A.
Financial Statements as of June 30, 2007
and for the Six-Month Period Ended on Such Date
Presented Comparatively with the Prior Year’s Financial Statements
CONTENTS
Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit F Consolidated — Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit H Consolidated — Information required under Section 64, subsection b) of Act
No. 19,550 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent Company Only Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit A — Property, plant & equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit C — Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit D — Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit E — Allowances and Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit G — Foreign Currency Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit H — Information required under Section 64, b) of Act No. 19,550 . . . . . . . . . . . . . . . .
Limited Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-4
F-6
F-7
F-8
F-9
F-31
F-32
F-33
F-34
F-35
F-36
F-37
F-53
F-54
F-56
F-57
F-58
F-59
F-60
GRUPO CLARIN S.A.
Financial Statements as of June 30, 2007
and for the Six-Month Period Ended on Such Date
Presented Comparatively with the Prior Year’s Financial Statements
In Argentine Pesos (Ps.) — Note 2.1 to the parent company only financial statements
Registered office: Piedras 1743, Buenos Aires, Argentina
Main corporate business: Investing and financing
Date of incorporation: July 16, 1999
Date of registration with the Public Registry of Commerce:
• Of the by-laws: August 30, 1999
• Of the latest amendment: April 21, 2004 (see Note 12 to the parent company only financial
statements)
Registration number with the Inspección General de Justicia (“IGJ”), the Regulatory Authority for
non-public companies in Argentina: 1.669.733
Expiration of articles of incorporation: August 29, 2098
Information on Parent company:
Name: GC Dominio S.A.
Registered office: Piedras 1743, Buenos Aires
Information on subsidiaries in Exhibit C
CAPITAL STRUCTURE (See Note 12 to the parent company only financial statements)
Capital
Number of Votes
per Share
Type
Class “A” Common shares, Ps.1 par value
Class “B” Common shares, Ps.1 par value
Class “C” Common shares, Ps.1 par value
Class “A” Preferred shares, Ps.1 par value
Class “B” Preferred shares, Ps.1 par value
Total as of June 30, 2007 . . . . . . . . . . . . .
......
......
......
......
......
......
.
.
.
.
.
.
Total as of December 31, 2006 . . . . . . . . . . . . . . . .
F-5
5
1
1
1
1
Subscribed,
Registered and
Paid-in Ps.
70,880,304
133,006,887
25,112,689
20,630,822
20,630,822
270,261,524
270,261,524
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
CONSOLIDATED BALANCE SHEETS
As of June 30, 2007 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
As of
June 30, 2007
December 31, 2006
ASSETS
CURRENT ASSETS
Cash and banks . . . . . . . . . . . . . . .
Short-term investments — Note 2.a) .
Trade receivables, net — Note 2.b) . .
Other receivables, net — Note 2.c) . .
Inventories — Note 2.d) . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
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.
321,424,341
142,647,114
474,201,832
116,362,538
174,811,458
57,959,330
299,100,551
82,142,004
460,608,164
148,251,933
152,704,766
65,235,709
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,287,406,613
1,208,043,127
NON-CURRENT ASSETS
Trade receivables, net — Note 2.b) . . . . . . . . . . . .
Other receivables, net — Note 2.c) . . . . . . . . . . . .
Inventories — Note 2.d) . . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated affiliates — Note 2.e)
Other long-term investments . . . . . . . . . . . . . . . .
Property, plant and equipment, net — Note 2.f) . . .
Intangible assets, net — Note 2.g) . . . . . . . . . . . .
.
.
.
.
.
.
.
9,107,729
162,217,676
33,148,574
79,680,378
6,962,088
1,404,117,195
1,030,161,266
9,741,215
151,084,555
32,850,180
72,521,864
7,031,748
1,342,725,846
1,086,559,244
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill — Note 2.h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,725,394,906
2,476,128,098
2,702,514,652
2,476,156,285
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Total non-current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,201,523,004
5,178,670,937
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,488,929,617
6,386,714,064
.
.
.
.
.
458,492,966
448,005,752
114,771,918
190,302,511
116,496,778
437,439,485
420,508,325
118,426,541
177,406,201
136,463,000
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,328,069,925
1,290,243,552
NON-CURRENT LIABILITIES
Accounts payable — Note 2.i). . . . . .
Long-term debt — Note 2.j) . . . . . . .
Salaries and Social Security payable
Taxes payable . . . . . . . . . . . . . . . . .
Other liabilities — Note 2.k) . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . .
13,152,316
1,961,508,264
199,132
18,983,875
1,027,563,374
113,890,483
10,640,522
2,057,858,346
309,668
14,759,728
1,010,446,297
112,879,172
LIABILITIES
CURRENT LIABILITIES
Accounts payable — Note 2.i). . . . . . . . . . . . . .
Short-term debt and current portion of long-term
Salaries and Social Security payable . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities — Note 2.k) . . . . . . . . . . . . . . .
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.............
debt — Note 2.j) .
.............
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Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,135,297,444
3,206,893,733
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,463,367,369
4,497,137,285
MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
386,092,220
1,639,470,028
354,381,111
1,535,195,668
Total liabilities, minority interest and shareholders’ equity . . . . . . . . . . . .
6,488,929,617
6,386,714,064
The accompanying notes 1 to 9 are an integral part of these consolidated financial statements.
F-6
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six-Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
As of
June 30, 2007 June 30, 2006
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (excluding depreciation and amortization) — Exhibit F
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses (excluding depreciation and amortization)
Selling expenses — Exhibit H Consolidated . . . . . . . . . . . . . . . . .
Administrative expenses — Exhibit H Consolidated . . . . . . . . . . .
Expenses subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, plant and equipment(1) . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of other investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization subtotal . . . . . . . . . . . . . . . . . . . . . .
Financing and holding results
Generated by assets
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other taxes and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding (gains) losses on inventories . . . . . . . . . . . . . . . . . . . .
Inventories impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding (gains) losses on financial instruments . . . . . . . . . . . .
Effect of financial discounts on assets . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Generated by liabilities
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other taxes and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of financial discounts on liabilities . . . . . . . . . . . . . . . . . .
Fees and other financial expenses . . . . . . . . . . . . . . . . . . . . . .
CER restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding gains (losses) on financial instruments . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from unconsolidated affiliates and gain on sale
of subsidiaries, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income/(loss) before income tax, tax on assets and minority
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax and tax on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Chargeable to:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,993,263,083
1,141,498,163
(963,393,585)
1,029,869,498
(638,502,707)
502,995,456
(203,344,282)
(209,935,992)
(413,280,274)
(138,227,229)
(57,777,691)
(69,993)
(196,074,913)
(116,868,411)
(117,167,382)
(234,035,793)
(66,485,085)
(5,115,619)
(196,369)
(71,797,073)
12,158,994
(25,689,424)
3,993,909
1,134,015
—
326,871
214,072
(1,443,737)
15,850,722
(10,997,416)
14,111,425
2,938,403
(120,000)
—
—
390,644
(133,349,362)
(1,390,089)
(21,118,166)
(22,243,714)
—
(2,771,556)
4,410,490
(7,372,455)
(160,999,985)
(5,181,153)
(58,199,476)
—
(2,202,374)
(6,570,672)
(16,890,657)
(9,548,804)
4,622,188
(10,308,417)
16,026,031
(1,465,086)
221,687,930
(85,485,099)
(32,692,783)
103,510,048
(25,695,808)
10,600,951
(2,955,629)
(18,050,486)
(125,237,662)
(7,986,147)
(5,003,420)
(58,702,796)
(3,130,736)
(4,651,553)
The accompanying notes 1 to 9 are an integral part of these consolidated financial statements.
F-7
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six-Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
As of
June 30, 2007 June 30, 2006
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax and tax on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income/(loss) for the period to cash provided by operating activities:
Depreciation of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Setting up / (Reversal) of allowances for doubtful accounts . . . . . . . . . . . . . . . . . . . . .
Setting up of provision for contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange difference and other financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from unconsolidated affiliates and gain on sale of subsidiaries, net . . .
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding gains on financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding gains on inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for impairment in value of inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and Social Security payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax and tax on assets payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
.....
.....
103,510,048
85,485,099
121,190,368
(18,050,486)
(10,600,951)
145,149,263
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138,227,229
57,777,691
69,993
11,199,132
6,527,453
38,393,671
(4,622,188)
32,692,783
(4,737,361)
(1,134,015)
(170,326)
—
66,485,085
5,115,619
196,369
(7,577,809)
5,944,089
51,696,903
(16,026,031)
2,955,629
16,890,657
(2,938,403)
—
120,000
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(28,013,645)
23,505,731
(21,438,486)
(1,569,286)
25,446,064
(3,657,819)
(3,053,691)
(23,682,570)
(5,441,732)
(64,627,614)
481,876,529
(80,237,880)
(42,921,393)
(41,169,531)
223,632
92,467,602
(4,872,729)
22,912,049
27,580,621
(7,720,512)
(55,968,803)
149,652,990
CASH USED IN INVESTING ACTIVITIES
Payment for the acquisition of property, plant and equipment . . . .
Payment for the acquisition of intangible assets . . . . . . . . . . . . .
Payment for the acquisition of subsidiaries . . . . . . . . . . . . . . . .
Payment for the acquisition of other investments . . . . . . . . . . . .
Collection for proceeds from sale of property, plant and equipment
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection of interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . .
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(200,085,461)
(1,234,445)
—
—
635,394
—
5,543,789
—
(195,140,723)
(82,182,349)
(778,855)
(27,180,467)
(14,719,018)
—
45,750,000
504,601
548,800
(78,057,288)
CASH USED IN FINANCING ACTIVITIES
Loans obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of loans — Principal . . . . . . . . . . . . . . . . .
Payment of interest . . . . . . . . . . . . . . . . . . . . . . . . .
Net collections (payments) of financial instruments . . . . .
Financial advances. . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of fees on bank and financial debt restructuring .
Sellers financing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve account . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . .
Payments to minority shareholders . . . . . . . . . . . . . . .
Cash used in financing activities . . . . . . . . . . . . . . . . .
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1,650,000
(70,827,762)
(105,626,295)
5,481,971
—
—
(5,695,973)
(14,379,385)
(18,000,000)
(3,301,578)
(210,699,022)
308,688,824
(224,703,844)
(37,271,254)
(6,796,629)
(48,596,728)
(24,158,238)
(3,096,546)
—
—
(410,284)
(36,344,699)
FINANCING AND HOLDING RESULTS GENERATED BY CASH AND CASH EQUIVALENTS .
Net Increase in cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at period end(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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6,792,116
82,828,900
381,242,555
464,071,455
8,288,786
43,539,789
487,052,926
530,592,715
(1) It includes:
Cash and banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments with maturities of less than three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
321,424,341
142,647,114
173,138,757
357,453,958
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The accompanying notes 1 to 9 are an integral part of these consolidated financial statements.
F-8
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2007, 2006 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements,
Unless Otherwise Specifically Indicated
NOTE 1 — BASIS FOR THE PREPARATION AND PRESENTATION OF THE CONSOLIDATED
FINANCIAL STATEMENTS
The consolidated financial statements of Grupo Clarín S.A. (hereinafter indistinctively referred to
as “Grupo Clarín” or “the Company”) as of June 30, 2007 have been prepared in accordance with
Argentine Federation of Professional Councils in Economic Sciences (“FACPCE” for its Spanish
acronym) Technical Resolution No. 21, incorporating all companies in which the Company has a direct
or indirect controlling interest.
Below is a detail of the most relevant subsidiaries consolidated by applying the line-by-line
method, together with the direct and indirect interest the Company holds in each subsidiary:
As of
June 30,
2007
Cablevisión S.A. (“Cablevisión”) . . . . . . . . . . . . . . . .
Multicanal S.A. (“Multicanal”) . . . . . . . . . . . . . . . . . .
Teledigital Cable S.A. (“Teledigital”). . . . . . . . . . . . . .
Primera Red Interactiva de Medios Argentinos S.A.
(“PRIMA”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arte Gráfico Editorial Argentino S.A. (“AGEA”) . . . . .
Artes Gráficas Rioplatense S.A. (“AGR”) . . . . . . . . .
Editorial La Razón S.A. (“La Razón”) . . . . . . . . . . . .
Arte Radiotelevisivo Argentino S.A. (“ARTEAR”) . . . .
Inversora de Eventos S.A. (“IESA”) . . . . . . . . . . . . . .
Radio Mitre S.A. (“Radio Mitre”) . . . . . . . . . . . . . . . .
GC Gestión Compartida (“GCGC”) . . . . . . . . . . . . . .
Primera Red Interactiva de Medios Americanos
Internacional S.A. (“PRIMA Internacional”) . . . . . . . .
Clarín Global S.A. (“Clarín Global”) . . . . . . . . . . . . . .
Grupo Clarín Services LLC (“GC Services”) . . . . . . .
Vistone LLC (“Vistone”) . . . . . . . . . . . . . . . . . . . . . .
......
......
......
December 31,
2006
June 30,
2006
60.0%
59.1%
60.0%
60.0%
59.1%
60.0%
(1)
100.0%
—
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
59.1%
100.0%
100.0%
(2)
99.2%
100.0%
100.0%
100.0%
59.1%
100.0%
100.0%
100.0%
99.2%
100.0%
100.0%
100.0%
82.4%
100.0%
100.0%
100.0%
99.2%
100.0%
100.0%
100.0%
..
..
..
..
..
..
..
..
..
..
..
..
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
82.0%
100.0%
100.0%
100.0%
(1) Non-consolidated company as of June 30, 2006.
(2) Company merged with AGEA as from January 1, 2007.
Furthermore, the proportional consolidation method was applied to those subsidiaries where
Grupo Clarín exercises common control (either directly or indirectly). The most significant of such
companies are Papel Prensa S.A.I.C.F. y de M. (“Papel Prensa”), Tele Red Imagen S.A. (“TRISA”),
Televisión Satelital Codificada S.A. (“TSC”), Ideas del Sur S.A. (“Ideas del Sur”), Pol-ka Producciones
S.A. (“Pol-ka”) and La Capital Cable S.A.
Finally, the Company recorded in its consolidated financial statements, applying the equity
method, its holding of long-term investments on which it exerts significant influence, either directly or
indirectly, being Medios de Comunicación (CIMECO) S.A. (“CIMECO”) the most relevant of those.
F-9
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The financial statements used for consolidation purposes bear the same closing date as the
consolidated financial statements, comprise the same periods and have been prepared under similar
accounting policies as those used by the Company, which are described in the notes to the parent
company only financial statements or, as the case may be, adjusted as applicable.
1.1.
Summary of Significant Accounting Policies
Following is a description of the most significant accounting policies applied in the preparation of
the consolidated financial statements in addition to those discussed in Note 2.2 to the parent company
only financial statements.
a) Trade Receivables, Net
Trade receivables have been valued as of each period-end or year-end at their estimated
realization value net, where applicable, of an allowance for doubtful accounts, which was considered
to be sufficient to absorb future losses from uncollectible of receivables.
b) Inventories
Inventories have been valued at the latest purchase price, latest production cost, replacement or
reproduction cost, as applicable. The value of these assets does not exceed their estimated recoverable value.
The criterion followed by certain subsidiaries to expense these items is as follows:
• Film rights:
The cost of programs, series and soap operas is fully expensed against the cost of sales on the
exhibition date or upon expiry of exhibition rights, whichever occurs first.
The remaining film rights (films) are amortized on a decreasing-balance basis, based on the
number of showings granted by those rights.
Rights related to features, series and single programs acquired in perpetuity for broadcasting by
the Volver channel are expensed against the cost of sales over seven years, with a grace period of
four years. They are subsequently amortized on a decreasing basis over the next three years.
• Programs:
In-house production cost is fully expensed against the cost of sales after broadcasting of the
chapter or program.
Programs purchased, co-production and in-house production on which the Company has
perpetuity rights are expensed against the cost of sales over eight years, with a grace period of three
years. Subsequently, they are amortized on a straight-line basis over the following five years.
• Events:
The cost of events is fully expensed against the cost of sales at the time of broadcasting.
c)
Other Assets
Deferred charges have been valued at the amounts actually disbursed, while real property has
been valued at acquisition cost. The value of these assets does not exceed their recoverable value.
F-10
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Investments subject to restrictions on disposition denominated in foreign currency have been
valued at face value plus interest accrued as of each period-end or year-end.
d) Long-Term Investments
Long-term investments over which the Company does not exert significant influence have been
valued at cost.
Long-term investments in Radio Mitre have been carried at zero value, based on Management’s
expectations for its subsidiaries.
e) Property, Plant and Equipment and Intangible Assets
Improvements that extend the lives of the assets have been capitalized. Other repair and
maintenance expenses have been expensed as incurred.
Intangible assets have been valued at acquisition cost, restated as set forth in Note 2.1 to the
parent company only financial statements, net of the related accumulated amortization. Intangible
assets are amortized on a straight line basis, taking into account their estimated useful lives.
Subscriber portfolio has been valued based on the estimated cash flows for such portfolios and
amortized on a straight line basis, taking into account the estimated useful lives and subscriber
portfolio turnover, between 7 and 10 years.
The book value of intangible assets does not exceed their estimated recoverable value.
f)
Derivatives
Receivables and liabilities generated by derivatives have been valued at their estimated fair
value. Changes in fair value have been recognized as result for the period.
g) Allowances
• For doubtful accounts: comprises doubtful accounts estimated by Management at period-end
or year-end, based on the opinion of legal counsel, where appropriate.
• For inventories, property, plant and equipment and obsolescence of materials: determined
based on the estimates of each company’s management, where appropriate, regarding the
future consumption of potentially obsolete or slow-moving assets.
• For contingencies: estimated based on the evaluation of existing claims at the end of each
period or year, according to the reports of the legal counsel, where applicable.
h) Foreign Exchange Differences
Pursuant to Professional Council in Economic Sciences of the City of Buenos Aires (“CPCECABA” for its Spanish acronym) Resolution MD No. 3/02, foreign exchange differences occurring on
or after January 6, 2002 arising from the devaluation of the Argentine currency and other associated
effects related to liabilities denominated in foreign currency as of such date must be charged to the
cost of assets acquired or built through such financing, provided such link is direct (the “direct
method”). As an alternative criterion, companies may opt to give a similar treatment to exchange
differences arising from indirect financing (the “indirect method”).
F-11
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Subsequently, the CPCECABA issued Resolution CD No. 87/03 which suspended that accounting treatment of foreign exchange differences and required exchange differences to be charged to
income for the period as from July 29, 2003.
In that sense, AGEA has capitalized exchange differences in its goodwill as of December 31,
2002, which were determined in accordance with the direct method. The residual value of such
capitalizations as of June 30, 2007 and December 31, 2006 amounts to approximately 22.7 million.
Furthermore, AGR has capitalized exchange differences in its property, plant and equipment,
Intangible assets and Goodwill, determined in accordance with the indirect method. The residual value
of such capitalizations amounts to approximately 1.6 million and 2.4 million, respectively.
i) Revenue Recognition
Sales of cable or Internet services subscriptions were recognized as revenues for the period in
which the services were rendered.
Advertising sales revenues were recognized for the period in which advertising is published
(printing media and Internet) or broadcast (cable, television and radio).
j) Barter Transactions
The Company sells advertising spaces in exchange for goods or services. These barter
transactions were booked at the value of the goods or services received. Revenues were booked
when the advertisement was made, and the goods or expenses were booked when the goods were
received or the services were used. The goods or services owed to the Company for the advertisements made are shown as trade receivables. The advertisements to be made in exchange for the
goods and services provided to the Company are shown as accounts payable.
1.2.
Additional Consolidated Cash Flow Statements Information
In the periods ended June 30, 2007 and 2006, the following significant transactions were carried
out, which did not have an impact on consolidated cash and cash equivalents:
As of
June 30,
June 30,
2007
2006
Interest paid from the reserve account — Note 4.a) . . . . . . . . . . . . .
F-12
25,296,777
—
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 2 — BREAKDOWN OF MAIN ACCOUNTS
June 30, 2007
a) Short-term investments
Current
Financial instruments .
Securities . . . . . . . .
Mutual funds . . . . . .
Other . . . . . . . . . .
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b) Trade receivables, net
Current
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
December 31, 2006
79,816,976
13,749,826
44,816,538
4,263,774
142,647,114
55,558,418
—
9,220,018
17,363,568
82,142,004
558,665,309
(84,463,477)
474,201,832
544,242,165
(83,634,001)
460,608,164
9,122,729
(15,000)
9,107,729
9,756,215
(15,000)
9,741,215
c) Other receivables, net
Current
Tax credits . . . . . . . . . . . . . . . . .
Court-ordered and guarantee deposits
Prepaid expenses . . . . . . . . . . . . .
Advance payments . . . . . . . . . . . .
Dividends receivable . . . . . . . . . . .
Related parties . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
Allowance for other doubtful accounts.
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29,387,374
8,964,248
15,042,839
21,476,402
4,787,353
2,818,243
10,723,655
25,726,905
(2,564,481)
116,362,538
26,708,273
8,212,920
11,147,999
20,894,478
4,787,355
41,878,665
9,843,189
27,258,717
(2,479,663)
148,251,933
Non-Current
Net deferred tax assets . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . .
Guarantee deposits . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . .
Transmission rights to be accrued . . .
Loans granted . . . . . . . . . . . . . . .
Advances to personnel . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
Allowance for other doubtful accounts.
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49,003,404
99,861,338
165,774
3,666,448
128,867
1,419,003
848,024
5,385,868
5,106,472
(3,367,522)
162,217,676
45,419,228
87,364,293
192,343
3,811,809
1,606,325
1,372,267
524,281
6,963,398
7,042,434
(3,211,823)
151,084,555
d) Inventories
Current
Raw materials and supplies . . . . . . . .
Products-in-process. . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . .
Film products and rights . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . .
Advances to suppliers . . . . . . . . . . .
Allowance for impairment of inventories
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90,902,832
827,441
11,134,837
51,907,835
3,546,566
158,319,511
16,975,262
(483,315)
174,811,458
91,019,419
1,838,890
7,684,403
43,617,712
4,147,337
148,307,761
4,709,646
(312,641)
152,704,766
2,209,269
4,573,195
26,366,110
33,148,574
2,092,843
4,602,310
26,155,027
32,850,180
71,304,884
8,553,935
13,007,007
(13,185,448)
79,680,378
68,223,619
4,476,686
12,938,007
(13,116,448)
72,521,864
Non-Current
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film products and rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e) Investment in unconsolidated affiliates
CIMECO . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . .
Advances for future acquisitions of investments .
Allowance for investment impairment . . . . . . .
.
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F-13
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GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
f)
Property, Plant and Equipment, Net
Net Book Value as
of June 30, 2007
Main Account
Real property . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . .
Telecommunication, audio and video
equipment. . . . . . . . . . . . . . . . . . . . . .
External network and broadcasting
equipment. . . . . . . . . . . . . . . . . . . . . .
Computer equipment and software . . . . .
Technical equipment. . . . . . . . . . . . . . . .
Workshop machinery . . . . . . . . . . . . . . .
Tools . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spare parts . . . . . . . . . . . . . . . . . . . . . .
Installations . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . .
Plots . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased assets . . . . . . . . . . . . . . . . . . . .
Other materials and equipments. . . . . . .
Works-in-progress . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . .
Advances to suppliers . . . . . . . . . . . . . .
Net Book Value as
of December 31, 2006(1)
.
.
344,011,142
8,025,072
351,810,372
8,387,306
.
13,238,120
28,670,375
.
.
.
.
.
.
.
.
.
.
.
.
.
.
455,754,167
46,495,829
20,923,598
63,923,796
6,495,502
3,492,210
127,408,424
12,222,411
3,813,166
5,303
240,594,445
76,963,493
3,916,574
2,327,402
554,563,362
45,113,287
6,582,224
72,044,911
7,337,039
3,677,042
13,215,306
13,894,273
3,924,432
5,309
194,370,354
60,518,548
4,447,708
3,311,322
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for property, plant and
equipment impairment and
obsolescence of materials. . . . . . . . . . .
1,429,610,654
1,371,873,170
Total as of June 30, 2007 . . . . . . . . . . . . .
1,404,117,195
(25,493,459)
Total as of December 31, 2006. . . . . . . . .
(29,147,324)
1,342,725,846
(1) It includes the amount of 447,709,863 arising from the acquisition and consolidation of companies.
F-14
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
g) Intangible Assets, Net
Net Book Value as
of June 30, 2007
Main Account
Organizational expenses, pre-operating
costs and licenses . . . . . . . . . . . . . . .
Editing and exploitation rights . . . . . . . . .
Network acquisition rights. . . . . . . . . . . .
Subscriber portfolio acquired . . . . . . . . .
Trademarks and patents . . . . . . . . . . . . .
Deferred charges . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Book Value as
of December 31, 2006(1)
.
.
.
.
.
.
.
6,391,819
38,749,019
1,510,754
976,895,450
2,549,756
2,966,530
1,390,389
8,286,378
40,623,735
1,618,665
1,029,291,621
935,960
3,366,484
2,833,241
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for intangible assets
impairment . . . . . . . . . . . . . . . . . . . . . .
1,030,453,717
1,086,956,084
Total as of June 30, 2007 . . . . . . . . . . . . .
1,030,161,266
(292,451)
Total as of December 31, 2006. . . . . . . . .
(396,840)
1,086,559,244
(1) It includes the amount of 267,457,037 arising from the acquisition and consolidation of companies.
h) Goodwill
Net Book Value
Before Impairment
Main Account
Comercializadora de Produtos
Gráficos Brasileiros Ltda. . .
Telecor S.A.C.I. (“Telecor”) . . .
Teledifusora Bahiense S.A.
(“Telba”) . . . . . . . . . . . . . . .
Patagonik Film Group S.A. . . .
Cablevisión . . . . . . . . . . . . . .
Teledigital . . . . . . . . . . . . . . .
Pol-ka . . . . . . . . . . . . . . . . . .
Multicanal and subsidiaries . . .
Primera Red Interactiva de
Medios Argentinos S.A.
(“PRIMA”) . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . .
Impairment
Allowance
.
.
19,913,038
39,173,062
—
—
.
.
.
.
.
.
3,774,071
6,197,435
741,521,336
201,910,249
16,130,769
2,195,374,234
.
.
2,272,319
3,285,248
Total as of June 30, 2007 . . . . .
3,229,551,761
(753,423,663)
Total as of December 31,
2006 . . . . . . . . . . . . . . . . . .
3,229,579,948
(753,423,663)
—
—
—
—
(6,850,727)
(746,572,936)
—
—
F-15
Balances as of
June 30, 2007
Balances as of
December 31, 2006
19,913,038
39,173,062
19,947,800
39,173,062
3,774,071
6,197,435
741,521,336
201,910,249
9,280,042
1,448,801,298
3,774,071
6,197,435
748,609,297
201,910,249
9,280,042
1,442,395,735
2,272,319
3,285,248
2,272,319
2,596,275
2,476,128,098
2,476,156,285
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of
June 30, 2007 December 31, 2006
i) Accounts payable
Current
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
j) Short-term and long-term debt
Current
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negotiable obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
Non-Current
Financial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negotiable obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Measurement at fair value . . . . . . . . . . . . . . . . . . . . . . . . .
k) Other liabilities
Current
Related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sellers financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances from clients . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current
Sellers financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-16
.
.
.
.
.
.
.
.
.
.
432,076,554
26,416,412
417,185,185
20,254,300
458,492,966
437,439,485
13,152,316
10,640,522
13,152,316
10,640,522
4,775,431
318,071,094
98,396,304
23,069,264
3,693,659
—
5,707,822
300,349,298
59,307,498
52,643,707
—
2,500,000
448,005,752
420,508,325
91,800,851
1,963,990,103
(94,282,690)
174,979,771
1,998,550,151
(115,671,576)
1,961,508,264
2,057,858,346
993,381
36,876,073
3,930,395
52,271,941
22,424,988
6,171,009
41,171,557
15,026,649
50,514,512
23,579,273
116,496,778
136,463,000
854,300,768
840,290
169,663,112
1,714,219
1,044,985
850,590,278
—
156,104,142
1,697,806
2,054,071
1,027,563,374
1,010,446,297
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 3 — SEGMENT INFORMATION
The Company is mainly engaged in media and entertainment activities, which are carried out
through the companies in which it holds a participating interest. Based on the nature, clients, and risks
involved, the following business segments have been identified, which are closely related to the way in
which the Company’s management assesses its business performance:
• Cable television & Internet access: it is basically comprised by the operations of its subsidiary
Cablevisión together with its subsidiaries, mainly Multicanal, Teledigital and PRIMA.
• Printing & publishing: it is basically comprised by the operations of its subsidiary AGEA and its
subsidiaries AGR, Tinta Fresca Ediciones S.A., Papel Prensa and its equity interest in
CIMECO.
• Broadcasting and programming: it is basically comprised by the operations of its subsidiaries
ARTEAR, IESA and Radio Mitre, and their respective subsidiaries, including Telecor, Telba,
Radio Televisión Río Negro Sociedad del Estado LU 92 Canal 10 — UTE, and the companies
under common control, such as Pol-Ka, Ideas del Sur, TRISA and TSC.
Additionally, the Company is engaged in other related business, which was included under
“Other”. These segments fundamentally include the Company’s own operations (particular to a holding
company) and those carried out by its (directly or indirectly) subsidiaries GCGC, PRIMA Internacional
and Clarín Global.
F-17
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
There follows the information as of June 30, 2007 and 2006 and as of December 31, 2006 for
each of the business segments identified by the Company:
Cable Television Printing &
& Internet Access Publishing
INFORMATION ARISING FROM
CONSOLIDATED INCOME
STATEMENTS AS OF JUNE 30,
2007
Net sales to third parties . . . . . . . .
Intersegment net sales . . . . . . . . .
Broadcasting and
Programming
Other
Deletions
Total
1,215,997,695
2,949,846
478,814,732
45,540,819
276,756,223
78,182,778
21,694,433
— 1,993,263,083
43,240,933 (169,914,376)
—
1,218,947,541
524,355,551
354,939,001
64,935,366 (169,914,376) 1,993,263,083
(520,717,230)
(264,365,09)
(233,530,839)
(21,578,388)
76,797,966
.
698,230,311
259,990,457
121,408,162
43,356,978
(93,116,410) 1,029,869,498
.
.
(145,079,095)
(134,167,245)
(73,023,901)
(61,389,569)
(29,494,969)
(36,912,841)
(6,548,236)
(19,780,828)
50,801,919
42,314,491
(203,344,282)
(209,935,992)
.
.
.
(112,217,305)
(54,612,041)
—
(17,842,259)
(1,672,565)
(69,993)
(7,009,267)
(1,485,488)
—
(1,158,398)
(7,597)
—
—
—
—
(138,227,229)
(57,777,691)
(69,993)
.
.
(3,120,488)
(145,784,577)
9,731,263
(23,560,800)
(2,831,007)
(5,429,887)
.
.
2,941,418
(5,691,066)
2,546,557
544,290
797,195
(976,562)
(1,662,982)
(4,185,079)
—
—
4,622,188
(10,308,417)
Income for the period before
income tax, tax on assets and
minority interest . . . . . . . . . . . .
Income tax and tax on assets . . . .
Minority interest . . . . . . . . . . . . .
100,499,912
(30,749,283)
(32,101,791)
95,253,480
(33,622,276)
—
38,065,336
(13,460,566)
(594,842)
(12,130,798)
(7,652,974)
3,850
—
—
—
221,687,930
(85,485,099)
(32,692,783)
Net income (loss) for the period . . .
37,648,838
61,631,204
24,009,928
(19,779,922)
—
103,510,048
4,997,617,347
3,164,896,142
1,016,122,976
648,261,337
597,258,047
373,477,394
177,836,928
—
(14,036,008)
14,961,105
1,092,601
229,319
6,306,872
141,844
(3,503,229)
Net sales . . . . . . . . . . . . . . . . . .
Cost of sales (excluding
depreciation and amortization) . .
Subtotal . . . . . . . . . . . . . . . . .
Expenses (excluding depreciation
and amortization)
Selling expenses . . . . . . . . . .
Administrative expenses . . . . .
Depreciation of property, plant and
equipment . . . . . . . . . . . . . .
Amortization of intangible assets .
Depreciation of other investments .
Financing and holding results
Generated by assets . . . . . . . .
Generated by liabilities . . . . . .
Equity in earnings (losses) from
unconsolidated affiliates, net . . .
Other income (expense), net . . . .
INFORMATION ARISING FROM
CONSOLIDATED BALANCE
SHEETS AS OF JUNE 30, 2007
Total Assets . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . .
ADDITIONAL CONSOLIDATED
INFORMATION AS OF JUNE 30,
2007
Acquisition of property, plant and
equipment . . . . . . . . . . . . . . .
Acquisition of intangible assets . . . .
Non-cash expenses . . . . . . . . . . .
F-18
(963,393,585)
27,620,059 (40,705,127)
(9,305,300)
(49,764,715) 40,705,127 (183,834,852)
518,534,219 (640,602,972) 6,488,929,617
917,335,468 (640,602,972) 4,463,367,369
980,556
—
(416,667)
—
—
—
200,085,461
1,234,445
(17,726,585)
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cable Television Printing &
& Internet Access Publishing
INFORMATION ARISING FROM
CONSOLIDATED INCOME
STATEMENTS AS OF JUNE 30,
2006
Net sales to third parties . . . . . . . .
Intersegment net sales . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . . .
Cost of sales (excluding
depreciation and amortization) . .
Broadcasting and
Programming
Other
Deletions
Total
434,025,949
4,081,570
446,995,891
16,363,929
250,554,415
28,762,246
9,921,908
31,656,820
— 1,141,498,163
(80,864,565)
—
438,107,519
463,359,820
279,316,661
41,578,728
(80,864,565) 1,141,498,163
(219,605,301)
(242,285,209)
(192,058,262)
(11,667,486)
27,113,551
(638,502,707)
.
218,502,218
221,074,611
87,258,399
29,911,242
(53,751,014)
502,995,456
.
.
(65,568,606)
(47,302,533)
(44,977,370)
(54,816,890)
(25,533,593)
(31,904,117)
(4,205,048)
(13,478,650)
23,416,206
30,334,808
(116,868,411)
(117,167,382)
.
.
.
(41,206,172)
(2,895,475)
—
(17,347,737)
(1,868,711)
(78,019)
(6,997,390)
(228,993)
—
(933,786)
(122,440)
(118,350)
—
—
—
(66,485,085)
(5,115,619)
(196,369)
.
.
18,900,533
(187,670,171)
(1,067,446)
(28,620,985)
(659,548)
(4,214,841)
5,000,239
(39,087,124)
—
—
22,173,778
(259,593,121)
.
.
355,858
1,153,149
2,005,592
(834,929)
(713,389)
1,022,216
14,377,970
(2,805,522)
—
—
16,026,031
(1,465,086)
Income for the period before
income tax, tax on assets and
minority interest . . . . . . . . . . . .
Income tax and tax on assets . . . .
Minority interest . . . . . . . . . . . . .
(105,731,199)
42,602,481
(2,689,795)
73,468,116
(27,187,613)
—
18,028,744
(6,554,010)
(265,834)
(11,461,469)
1,740,093
—
—
—
—
(25,695,808)
10,600,951
(2,955,629)
Net income (loss) for the period . . .
(65,818,513)
46,280,503
11,208,900
(9,721,376)
—
(18,050,486)
4,955,393,637
3,113,127,203
973,256,081
632,653,517
553,607,304
334,585,519
68,278,174
—
(3,293,208)
29,280,502
778,855
9,748,813
8,104,392
—
(4,385,803)
Subtotal . . . . . . . . . . . . . . . . .
Expenses (excluding depreciation
and amortization)
Selling expenses . . . . . . . . . .
Administrative expenses . . . . .
Depreciation of property, plant and
equipment . . . . . . . . . . . . . .
Amortization of intangible assets .
Depreciation of other investments .
Financing and holding results
Generated by assets . . . . . . . .
Generated by liabilities . . . . . .
Equity in earnings (losses) from
unconsolidated affiliates, net . . .
Other income (expense), net . . . .
INFORMATION ARISING FROM
CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
2006
Total Assets . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . .
ADDITIONAL CONSOLIDATED
INFORMATION AS OF JUNE 30,
2006
Acquisition of property, plant and
equipment . . . . . . . . . . . . . . .
Acquisition of intangible assets . . . .
Non-cash expenses . . . . . . . . . . .
F-19
434,506,716 (530,049,674) 6,386,714,064
946,820,720 (530,049,674) 4,497,137,285
681,270 (24,161,989)
—
—
(556,082)
—
82,182,349
778,855
1,513,720
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 4 — COMMITMENTS AND CONTINGENCIES
a) Restrictions, surety and guarantees
IESA has contractual restrictions on the transfer of its equity interest in TRISA and Tele Net
Image Corp.
Furthermore, TRISA’s equity interest in Torneos y Competencias S.A. (Uruguay) is pledged as
collateral for a credit line.
AGEA, TRISA, Cablevisión and Multicanal have financial indebtedness outstanding, involving
certain restrictions, including but not limited to, the distribution of dividends.
Pursuant to the terms and conditions of Cablevisión’s outstanding Negotiable Obligations issued
on October 7, 2005 (see Note 5), as of June 30, 2007, Cablevisión holds 33.6 million in a reserve
account to guarantee the payment of interest on the agreed-upon terms. Should Cablevisión default,
either partially or totally, on the payment of amounts due under the Negotiable Obligations abovementioned, the trustee shall promptly apply the funds deposited in the reserve account the amounts to
settle principal or interest and cure the default. To the extent Cablevisión has not defaulted on its
obligations under the Negotiable Obligations issued on October 7, 2005, it may instruct the Trustee to
transfer amounts deposited for the sole purpose of applying them to service debt or to pay the
purchase or redemption price of such Negotiable Obligations, acquired in the over-the-counter market
or redeemed by Cablevisión.
Furthermore, pursuant to the terms and conditions of the Negotiable Obligations issued by
Multicanal on July 20, 2006, such subsidiary set up a reserve account, which amounted to 14.4 million
as of June 30, 2007. Such funds are restricted to the payment of interest and principal of the above
securities.
b)
Pending authorizations from the Federal Broadcasting Committee (“COMFER”)
Authorizations regarding the elimination of signal distribution modems by Multicanal, share
transfers in its favor and company reorganizations are pending with the COMFER.
Furthermore, the requests for transfer of licenses filed in favor of Cablevisión related to certain
acquisitions and reorganization processes, including the acquisitions of Multicanal and Hicks, Muse,
Tate & Furst, LA Argentina Cable Company, LLC (“Hicks LLC”) (Teledigital) mentioned in Note 10 to
the parent company only financial statements and in Note 7, are also pending approval by the
COMFER.
While the subsidiaries expect to obtain such approvals, no assurance can be given that the
COMFER will grant them.
c) Broadcasting licenses
Broadcasting licenses are granted for an initial period of 15 years, allowing for a one-time
extension of 10 years. Applicable legislation sets forth that the COMFER shall grant the extension,
provided it can be proved that the licensee has complied with the effective applicable legislation,
bidding terms and conditions and undertakings in their proposals during the first period of the license
in question.
On May 24, 2005, Decree 527/05 provided for a 10-year-suspension of the terms then effective
of broadcasting licenses or its extensions, subject to certain conditions. Calculation of the terms shall
be automatically resumed upon expiration of the suspension term. The Decree requires that
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GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
companies seeking to rely on the extension subject to it submit for the COMFER’s approval, within
2 years of the date of the Decree: i) a programming project contributing to the preservation of the
national culture and the education of the population; and ii) a project to invest in technology.
All the broadcasting services licensee subsidiaries have submitted both projects in due time and
form. ARTEAR and its subsidiaries Telecor and Telba have obtained the COMFER’s approval of the
projects submitted. The projects submitted by Radio Mitre, as well as Cablevisión, Multicanal and its
subsidiaries are still pending approval from the COMFER. Although no assurance can be given, these
subsidiaries expect that their respective licenses will be timely extended or renewed.
Additionally, the COMFER notified Televisora La Plata S.A., a Cablevisión’s subsidiary, of an
alleged breach of the terms and conditions of its broadcasting license. The COMFER indicated that it
may impose penalties, including fines or even the revocation of such broadcasting license. Although
no assurance can be given as to the final outcome of this matter, the subsidiary and its legal counsel
consider that the probability that it will have a significant adverse impact on Cablevisión’s financialeconomic situation is remote.
d)
Antitrust considerations
The National Committee for the Defense of Competition (“CNDC” for its Spanish acronym)
received several complaints against Cablevisión, Multicanal and their subsidiaries prior to the increase
of our ownership interest in Cablevisión in September 26, 2005, alleging, among other issues,
divisions of areas among these companies, imposition of predatory prices, price discrimination among
areas, minimum pricing for the trading of channels and other anti-competitive practices.
Although no assurance can be given as to the final outcome of the above-mentioned cases,
Cablevisión, Multicanal and its legal counsel believe, based on the available information, that the
probability of these issues having a significant adverse impact on the financial-economic situation of
these companies is remote.
e) Other regulatory matters
Multicanal and Cablevisión
In January 2006, the Government of the City of Buenos Aires enacted Act 1,877, which provides
for a 15-year-term to regularize the authorization to install cable television networks in the thoroughfare on a single-column. It also provides for a one-year-term in order to remove posts in the area
known as “historical part of town”. Finally, the new Act sets forth a 3-year-term for regularizing on a
single column basis the avenues of the City of Buenos Aires. The related works have already been
scheduled and budgeted to be executed in the forthcoming years.
Furthermore, the Government of the City of Mar del Plata enacted Ordinance No. 9163,
governing the installation of cable television networks. Such ordinance was amended and restated by
Ordinance No. 15981 dated February 26, 2004, providing for a term due December 31, 2007 for cable
companies to convert their cable networks.
f)
Commitments to make capital contributions to subsidiaries
Fintelco S.A. (“Fintelco”) reported negative balance in its shareholders’ equity as of November 30,
2006. Under the Argentine Business Associations Act, this event could bring about its dissolution due
to capital loss, unless the shareholders agree to its total or partial repayment or a capital increase.
Cablevisión and Multicanal hold each 50% of Fintelco’s capital stock. In March 2007, both companies
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GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
made irrevocable contributions to Fintelco. in the amount of 12.4 million each, in order to restore the
financial position of such company.
g)
Claims brought by the COMFER
ARTEAR
On December 9, 2002, ARTEAR adhered to the payment facilities regime established by
Executive Power Decree No. 2362/02 to comply with fines already imposed or that could be imposed
due to infringement of effective broadcasting regulations between January 1, 2001 and October 31,
2002, inclusive, and opted to recognize the total amount to be settled by granting advertising seconds
in favor of the COMFER.
In addition, between November 1, 2002 and June 30, 2007, the COMFER applied fines to
ARTEAR under the new regime in effect, amounting to 1.2 million, which have been provisioned.
ARTEAR has appealed the decisions imposing those fines.
Radio Mitre
Radio Mitre records an outstanding balance to be settled with advertising in favor of TELAM,
arising from fines imposed by the COMFER.
Cablevisión
The COMFER gave Cablevisión notice of 415 administrative summary proceedings for alleged
infringements of the Broadcasting Law, occurring between November 1, 2002 and June 30, 2007.
Cablevisión replied to such proceedings. The COMFER has rendered decisions in more than 231 of
these summary proceedings, imposing fines in the amount of approximately 1.5 million. Cablevisión
appealed such penalties and the rest of the summary proceedings are pending of resolution.
Multicanal
The COMFER has initiated summary administrative proceedings against Multicanal for infringements of regulations regarding the content of programming. The COMFER has ruled on some of
these summary proceedings and as of the date of these financial statements, it imposed fines in the
amount of 0.2 million, which are still outstanding and may not be challenged before this organism. As
regards the rest of the summary proceedings, Multicanal has presented its defense and appealed
those fines that are not as yet final before this organism.
h)
Lawsuits and /or Claims
CIMECO
Argentine Tax Authorities (“AFIP” for its Spanish acronym) sent CIMECO a notice challenging
the income tax assessment for the fiscal periods 2000, 2001 and 2002. In such communication, the
AFIP challenged mainly the deduction of interest and exchange differences in the tax returns filed for
those years.
Even though such challenge does not generate final tax liabilities for the above periods, CIMECO
would have had to reduce the accumulated tax loss amounts that were used to offset taxable income
in subsequent years. In the event AFIP’s position prevailed, CIMECO’s contingency as of June 30,
2007 would amount to approximately 12.3 million for tax and 5.6 for interest.
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GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CIMECO presented its defense before the AFIP. It was dismissed by the tax authorities, which
issued an official assessment and imposed the respective penalties. Due to the above dismissal,
CIMECO, pursuant to section 76 of the Tax Proceedings Act, appealed such resolution before the Tax
Court on August 15, 2007.
CIMECO and its legal and tax advisors believe it has sound grounds to defend its position, for
which it believes AFIP’s challenge shall not prevail. Accordingly, it has not booked an allowance as of
June 30, 2007 for the impact such challenge might have on CIMECO.
ARTEAR
There has been a recent dispute between broadcast TV operators and the National Customs
Administration (“ANA” for its Spanish acronym) in connection with the import value of film materials.
As a consequence of the criterion followed by the broadcast TV operators, ARTEAR paid other taxes
which, if ANA’s position prevails, should not have been paid. Since the amount of taxes paid exceeds
those claimed by the ANA, in the opinion of the subsidiary and its legal advisors, this situation would
not have a material economic adverse impact and, therefore, no provision has been recorded.
TRISA
The Argentine Association of Songwriters and Composers (“SADAIC” for its Spanish acronym)
filed a claim against TRISA, a company in which IESA holds 50% interest and exercises control jointly
with Torneos y Competencias S.A., for the payment of royalties on musical works used in TyC Sports
programs, which are broadcast nationwide via satellite. The claim is equivalent to 1% on TRISA’s
gross sales since 1993.
In August 2006, TRISA reached a settlement with SADAIC with respect to the claim. The
agreement contemplates a payment of a 0.3% royalty over TRISA’s turnover as from June 2006,
payable monthly. In addition, the parties agreed on the payment of a lump sum to discharge any and
all amounts allegedly owed to TRISA for the whole period elapsed through May 2006.
As of the date of these financial statements, TRISA has fulfilled all the obligations arising from
such settlement.
GCGC
During the year ended December 31, 2005, GCGC recorded a provision amounting to approximately 2.3 million based on a potential claim that could arise from different interpretations made by
the AFIP of Act No. 25,250 and application assumptions.
Although GCGC and its legal advisors consider that the original interpretation was technically
correct and duly supported, following a conservative criterion, such subsidiary decided to set up a
provision. During the year ended December 31, 2006, the subsidiary voluntarily paid 2.3 million for
differences between its original calculations and the various interpretations of the AFIP of Act
No. 25,250, plus the related interest and fines. GCGC reserves the right to apply for a refund of
amounts paid.
Cablevisión
On April 20, 2005, Cablevisión was served notice of the ruling from the National Tax Court,
which provided for the confirmation of AFIP’s official assessment concerning the alleged failure to pay
Value Added Tax (“VAT”) on sales of advertising in magazines for certain periods of the years 1996
F-23
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
through 1998. As of June 30, 2007, the restated amounts are estimated at approximately 13 million.
Cablevisión appealed such ruling. On June 6, 2006, Cablevisión obtained a preliminary injunction
pursuant to which the AFIP shall refrain from claiming the VAT payment mentioned above. Cablevisión
and its legal counsel consider that it may be possible to obtain a favorable judicial resolution and,
therefore, that the probability of this issue having a significant adverse impact on Cablevisión’s
financial-economic situation is remote.
In January 2007, Cablevisión and Multicanal were served with an injunction issued by a
provincial court in the province of San Luis, at the request of Grupo Radio Noticias S.R.L. (hereinafter,
“Grupo Radio Noticias”). Such company alleged being the owner of a broadcast radio station that
would arguably be harmed by the transactions involving Cablevisión, Multicanal, Holding Teledigital
Cable S.A. (“Holding Teledigital”) and PRIMA, and the Company that would be consummated in
September 2006.
Pursuant to such injunction, Cablevisión, Multicanal and its controlling shareholders and subsidiaries, and certain regulatory agencies shall, among other things, refrain from carrying out or
authorizing, respectively, certain corporate operations, including, but not limited to, mergers, acquisitions and issuance of securities. Cablevisión and Multicanal appealed such injunction, but yet no
decision has been rendered as of the date of these financial statements. Furthermore, a direct request
for the case to be transferred to the Superior Court of the Province of San Luis was filed, which was
considered unfounded pursuant to the resolution referred to below.
Pursuant to the request for dismissal due to lack of jurisdiction filed by the Company in the case
entitled “Multicanal S.A. and other versus/ CONADECO Decree 527/5 and Other over/ proceeding to
decide on a legal issue” (whereby the CNDC was ordered to assume, in exercise of its legal and
regulatory power, pre-judicial intervention in relation to the acquisition of Cablevisión’s capital stock, in
the event it were under its jurisdiction), the Supreme Court of Justice determined that the San Luis
Court lacked jurisdiction and adjudicated jurisdiction with respect to the proceedings “Grupo Radio
Noticias” to the Federal Administrative Court in Buenos Aires. Pursuant to this ruling, such file is
subject to the jurisdiction of the Federal Administrative Court No. 2, Secretariat No. 4.
On July 19, 2007, the Federal Administrative Court No. 2 indicated that the preliminary injunction
issued by San Luis Court is not binding upon the Company and Multicanal and ruled that the previous
preliminary injunction imposed on the Company is legally binding on any public or private entity that
has any legal interest in the merger subject to CNDC assessment. Even though the Company cannot
give assurance that it will prevail as to the claims filed by Grupo Radio Noticias, it considers such
claims to be unfounded.
Multicanal
Multicanal brought several claims against Grupo Supercanal, including an action to declare null
and void the resolutions adopted during the Extraordinary Shareholders’ Meeting of Supercanal
Holding S.A. held on January 25, 2000. The mentioned resolutions were intended to reduce the
capital stock of Supercanal Holding S.A. to 12,000 and subsequently increase such capital to
83,012,000. The Court approved the preliminary injunction requested by Multicanal for the suspension
of the effects of such Extraordinary Shareholders’ Meeting, but required that Multicanal post bond for
22 million for potential damages that could be assessed against the defendant, should the complaint
be dismissed. The remedy was granted against the issue of a surety bond. The Court of Appeals
revoked the preliminary injunction. Multicanal filed an extraordinary appeal against that resolution,
claiming it is both “arbitrary” and “damaging to the institution”. On October 1, 2004, Multicanal was
served notice of the dismissal of its extraordinary appeal.
F-24
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As a result of the revocation of the preliminary injunction mentioned above, on December 12,
2001, Multicanal was served notice of the filing of a claim by Supercanal Holding S.A. for damages
caused by the granting of the preliminary injunction that was subsequently revoked. It has been
claimed that the suspension of the effects of the meeting held on January 25, 2000 resulted in the
default by Supercanal Holding S.A. on its outstanding financial debt.
Multicanal answered the complaint and rejected the liability attributed to it based on the fact that
the default had taken place before the date of the meeting that was suspended by the preliminary
injunction, according to documentation provided by the plaintiff itself. Furthermore, the suspension of
the meeting did not prevent the capitalization of Supercanal Holding S.A. through other means.
Based on de jure and de facto records of the case, Multicanal believes that the claim filed should
be rejected in its entirety, and the legal costs should be borne by the plaintiff. There is no certainty
that Multicanal will obtain an economic or financial gain as a result of these actions.
i)
Other undertakings
ARTEAR
Upon ARTEAR acquisition of its subsidiary Telecor in 2000, it maintains an irrevocable put option
of 755,565 common, nominative, non-endorsable shares, representing 14.815% of the capital stock
and votes of Telecor, agreed in favor of the sellers, for a 16-year term as from March 16, 2010 at a
price of USD3 million and an irrevocable call option of such shares agreed in favor of ARTEAR, and
the latter at 26 years as from March 16, 2000 for USD4.8 million, which will be adjusted at a nominal
annual rate of 5% as from April 16, 2016.
NOTE 5 — BORROWINGS
Besides the disclosures in Note 7 to the financial statements, consolidated Loans include, mainly,
the following:
AGEA
On January 28, 2004, AGEA issued 10-year Series C Negotiable Obligations in the amount of
USD30.6 million, which accrue interest at an incremental rate (2% from December 17, 2003 to
January 28, 2008; 3% from January 29, 2008 to January 28, 2012; and 4% from January 29, 2012 up
to the total repayment of the bonds), payable semiannually. Principal is due in full at maturity on
January 28, 2014. As of June 30, 2007, the outstanding principal amounts to 94.6 million and accrued
and unpaid interest totals 0.8 million.
Furthermore, on January 25, 2006, AGEA issued Series D Negotiable Obligations in the amount
of 300 million, which accrue interest at a variable rate equal to the sum of the CER variation for the
period, plus a 4.25% margin, payable semiannually commencing June 15, 2006. Principal will be
repaid in 8 equal and consecutive semiannual installments as from June 15, 2008. As of June 30,
2007, the outstanding principal amounts to 300 million and outstanding accrued and unpaid interest
totals 1.1 million.
TRISA
TRISA holds USD11.6 million, under a loan with First Overseas Bank Limited payable in 16
semiannual installments, the first one of which was due on June 28, 2004. The agreed-upon interest
rate is Libor plus 3%. As of June 30, 2007, the outstanding principal totaled USD6.5 million.
F-25
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Radio Mitre
As of June 30, 2007, Radio Mitre holds loans and bank overdraft, having an aggregate principal
amount outstanding of approximately 4.7 million, of which 1.7 million are repaid in monthly installments. Such loans accrue interest at an average fixed rate of 13%.
Vistone
As of June 30, 2007, Vistone holds short-term financial debts for a total principal amount of
USD79.9 million, which accrue interest at Libor plus 0.75%.
Cablevisión
On October 7, 2005, Cablevisión concluded the financial debt restructuring of approximately
USD755 million principal amount out of the USD796 million debt subject to restructuring, through the
issuance of 7-year Negotiable Obligations for a total amount of USD150,077,436, which accrue
interest at an annual rate of 6% for the first 5 years and 7% for the remaining 2 years, and 10-year
“Step up” Negotiable Obligations for a total amount of USD235,121,316, which accrue interest at an
annual incremental rate of 3% up to 12%. Furthermore, it made available to all creditors approximately
142,800,000 under the cash buyback option. Finally, in accordance with the resolution of the
Extraordinary Shareholders’ Meeting and pursuant to the capital option, the Company increased its
capital stock by 39,465,500, through the issuance of 39,465,500 Class B shares, with a par value of 1
each and one voting right per share, with additional paid-in capital.
Cablevisión also completed the restructuring of certain debts held with public sector banks for a
total amount of approximately 39 million, out of which, on June 11, 2007, it repaid an original principal
amount of 17 million restated applying the CER, plus interest accrued as of repayment date.
After October 7, 2005, the holders of approximately USD20.9 of Cablevisión’s financial debt
subject to the APE entered into exchange agreements and received their consideration in exchange
for the irrevocable discharge of all their claims under the refinanced debt.
On October 7, 2005 and September 29, 2006, Cablevisión repaid USD6,732,569 and
USD28,084,054 of the 7-year Negotiable Obligations, respectively.
As of June 30, 2007, out of the total amount of Negotiable Obligations issued by Cablevisión,
USD881,141 and USD14,963,121 principal amount of 7-year and 10-year Negotiable Obligations,
respectively, account for the consideration that, under the APE, is applicable to those creditors who
had not executed exchange agreements up to such date and are being held in escrow pending final
confirmation of the APE.
Multicanal
During the year ended December 31, 2002, Multicanal suspended payments on its financial debt
as a result of the economic situation in Argentina.
In 2003, Multicanal submitted to its creditors a proposal for the restructuring of its financial debt
through an APE, comprising three options: a cash buyback option at 30 cents per USD1, a 10-year
bond exchange option and a combined exchange option (including 7-year bonds and common
shares). Each of these options was subject to a ceiling. On December 13, 2003, Multicanal announced
that the required majority of affected creditors had consented to the restructuring set forth in the APE.
F-26
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On June 29, 2006, Multicanal’s Board of Directors approved the issuance of 15 million registered
non-endorsable Class A common shares at a par value of 1 each and entitled to 5 voting rights per
share. The difference between the funds contributed by the Company (USD15 million) and the nominal
value of the shares issued was allocated to paid-in capital.
On July 7, 2006, in contemplation of the completion of its APE, Multicanal approved a capital
increase from 386,635,103 to 594,911,263. The new shares were offered to the holders that exercised
or were deemed to have exercised the combined option in exchange for the cancellation of
USD181.9 million of outstanding debt. Multicanal issued 208,276,160 Class C common shares at a
par value of 1 each and entitled to 1 vote per share. Therefore, the direct holding of the Company in
Multicanal decreased to 45.13%. Together with its indirect holding, the Company’s interest in
Multicanal was 65%.
On July 20, 2006, after having obtained the authorizations from the Argentine Securities and
Exchange Commission (CNV) and the Buenos Aires Stock Exchange, Multicanal delivered to its
Exchange Agent: a) 10-year Series A Negotiable Obligations for USD80,325,000, which accrue
interest at an annual rate of 2.5% until the fourth year as from their issuance, 3.5% as from the fourth
year and up to the eighth year, and 4.5% as from the eighth year and up to maturity; and 7-year
Series B Negotiable Obligations for USD142,966,475, out of which USD139,869,850 accrue interest
at an annual rate of 7% and 3,096,625 accrue interest at three-month Libor plus 1.325%, in order for
the Exchange Agent, in its capacity as such, to deliver them to the holders entitled to receive them
according to their options under the APE, b) aggregate interest accrued on those securities from
December 10, 2003, until June 19, 2006 and c) purchase price for the old bonds and interest accrued
thereon from December 10, 2003 until July 19, 2006 to those who opted for the cash option.
Effective July 20, 2006, after having exchanged the securities and paid the cash amount
mentioned above, Multicanal’s entire debt subject to the APE was discharged. Accordingly, Multicanal
booked the repayment of the existing debt and the effects of its restructuring, which resulted in a gain
of 1,246.5 million for the year ended December 31, 2006.
On September 20, 2006, Multicanal repaid all of its Series B Negotiable Obligations (floating
interest rate, 7-year maturity) in the amount of USD3,096,625 plus accrued interest as of such date.
Furthermore, on September 27 and 28, 2006, the Company repurchased Series B Negotiable
Obligations (fixed rate bonds, 7-year maturity) for a nominal value of USD34,144,281 plus accrued
interest as of such dates.
On October 13, 2006, the Argentine Court confirmed the completion of Multicanal’s APE.
NOTE 6 — DERIVATIVE FINANCIAL INSTRUMENTS
The amounts of 5.4 million and 0.8 million are included under Other non-current receivables and
Other non-current liabilities, respectively. These figures represent the net amounts of certain outstanding interest rate and exchange rates swap agreements, relating to a nominal value of approximately
152 million, whereby one of the Company’s subsidiaries transfers to or receives from the counterparts,
the net position resulting from swapping a 152 million payment obligation accruing interest at a
variable Ps. rate into a USD obligation accruing interest at a fixed rate.
These transactions generated a gain of 4.7 million as of June 30, 2007. The swap agreements,
executed in January 2006, are effective until December 2011.
F-27
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 7 — ACQUISITION AND REORGANIZATION OF COMPANIES
In addition to the transactions detailed in Note 10 to the financial statements, on September 26,
2006 the following transactions were carried out:
• Vistone purchased Cablevisión’s Class B shares in cash. These shares account for a 1.66%
participating interest in the capital stock of the latter.
• VLG Argentina LLC (“VLG”) increased its participating interest in Cablevisión by 11.312%.
• Cablevisión executed share purchase agreements whereby it acquired 100% interest in Hicks
LLC, indirect controlling company of Teledigital, for a cash payment of approximately
USD70 million. Teledigital provides cable television services in several provinces of Argentina.
Additionally, on September 28 and 29, 2006, Cablevisión made irrevocable capital contributions
to Hicks LLC in the amount of 76,410,880, which were allocated to the repayment of such
debts.
• Cablevisión acquired a 98.54% interest in Multicanal’s capital stock, including 65% interest
from the Company as described in Note 10.b) to the financial statements. Cablevisión’s debt
with third parties amounts to 280.8 million, has the same characteristics as those described in
the above Note and its payment is subordinated to the repayment of the Negotiable Obligations
issued by Cablevisión in October, 2005.
• Multicanal acquired 100% of PRIMA’s capital stock.
As a result of these transactions, the Company became the holder of indirect interests,
accounting for 60% of Cablevisión’s and Teledigital’s capital stock, and of 59.12% of Multicanal’s and
60% of PRIMA’s capital stock.
On October 4, 2006, the Company and the parties to the above-mentioned transactions
requested CNDC’s approval of the acquisition. On November 6, 2006, the CNDC notified the
Company about its first request for additional information, which was submitted on February 26, 2007.
On May 22, 2007, the CNDC sent another request for information, which was submitted on July 2,
2007.
On July 30, 2007, the CNDC notified the Company about the completion of the first stage of the
operation review procedure (form F-1), and requested the parties to submit form F-2 with additional
information about the effects of the transactions on the competition in the relevant markets. Even
though the Company believes that the transactions subject to the CNDC’s approval comply with the
requirements for obtaining the approval in accordance with the local Antitrust Act, it cannot be
ascertained whether such approval will be granted, or that the CNDC will not impose conditions for its
approval, including annulling the operations or transferring certain assets to third parties or the nonapproval of one or more transactions. On the other hand, the Company may not ensure that affected
third parties will not challenge CNDC’s decision or those aspects related to any of the conditions that
the CNDC may impose.
On August 22, 2006, ARTEAR acquired a 30% interest in Ideas del Sur’s capital stock, a TV
programming producer. The transaction cost amounted to USD6.5 million, out of which USD2 million
were settled in cash and the outstanding balance through the assumption of debts.
On December 22, 2006, Multicanal sold 3% of PRIMA’s capital stock to a Cablevisión’s
subsidiary. On March 27, 2007 Cablevisión acquired such interest.
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GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On December 26, 2006, Hicks LLC transferred to Cablevisión 100% of the equity interest the
former held in Holding Teledigital. In March 2007, Cablevisión transferred to a subsidiary 2% of the
equity interest in Holding Teledigital.
On December 28, 2006, Vistone acquired 18% of PRIMA Internacional’s capital stock for the
amount of USD15.1 million.
Mergers
On December 22, 2006, AGEA and its subsidiary La Razón approved a merger, whereby AGEA
would be the absorbing company and would continue La Razón’s operations. The above merger
became effective on January 1, 2007. Furthermore, on March 27, and April 26, 2007, AGEA Board of
Directors and the Shareholders’ Meeting, respectively approved the Preliminary Merger Commitment
between such company and La Razón and the consolidated merger balance sheet as of December 31,
2006.
On December 29, 2006, Cablevisión and its subsidiary Cablevisión Federal S.A. approved a
merger, whereby Cablevisión would be the absorbing company and would continue Cablevisión
Federal S.A.’s operations. The above merger became effective on January 1, 2007. Furthermore, on
March 29, 2007, Cablevisión Board of Directors approved the Preliminary Merger Commitment
between such company and Cablevisión Federal S.A.
Joint ventures
On November 8, 2006, AGEA executed an agreement with S.A. La Nación to set up a joint
venture, for the purposes of the joint organization, execution and exploitation of stockbreeding shows.
AGEA holds a 50% participating interest in this joint venture. The first show carried out by the joint
venture took place from March 14 through March 17, 2007.
NOTE 8 — AGREEMENTS EXECUTED WITH THE ARGENTINE SOCCER ASSOCIATION (“AFA”)
On June 22, 2007 TRISA and TSC executed supplementary agreements with AFA applicable
from the 2007/2008 until the 2013/2014 soccer seasons for broadcasting the Argentine soccer first
division official tournament matches (in the case of TSC) and National B and metropolitan first B
categories (in the case of TRISA). Under such agreements, TRISA and TSC expanded their services
in exchange for a new programming schedule that basically implies the live broadcasting of all soccer
matches of each season.
NOTE 9 — SUBSEQUENT EVENTS
On July 4, 2007 ARTEAR acquired 100% of the shares of capital stock of Bariloche TV S.A. The
price for the acquisition of Bariloche TV S.A. capital stock was approximately USD1.1 million.
In August 2007 AGEA incorporated a new company, in which it holds 51% interest. Such
subsidiary acquired a classified advertisements Internet portal dedicated to the purchase and sale of
automobiles and motorcycles, partially financed with a loan granted by the Company.
F-29
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Upon closing, the Company subscribed, through one of its subsidiaries, options with a third party
over a participating interest in one of its affiliates in the Printing and Publishing segment. These
options, which are not subject to certain terms set forth in the respective agreements, would involve, if
executed, payments to be made by the Company in the amount of approximately USD64 million.
On August 27, the Company indirectly increased its equity interest in CIMECO from 33.33% to
50% for a total amount of USD18 million paid in cash.
On August 28, 2007, the Company made an irrevocable contribution to CIMECO, thus acquiring
a 50% indirect interest for a total amount of USD6 million. Such affiliate thus repaid a debt arising
from a recent acquisition.
F-30
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT F
Consolidated
COST OF SALES
For the Six-Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
As of
Inventories at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . .
Purchases for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production expenses — Exhibit H Consolidated . . . . . . . . . . . . . . . . .
Holding gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-31
June 30,
2007
June 30,
2006
181,110,526
206,717,132
765,899,997
1,134,015
(191,468,085)
173,857,720
173,282,357
481,027,082
2,938,403
(192,602,855)
963,393,585
638,502,707
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT H
Consolidated
INFORMATION REQUIRED BY SECTION 64, SUBSECTION b) OF ACT No. 19,550
For the Six Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
Production
Expenses
Item
Fees for services . . . . . . . . .
Salaries and Social
Security . . . . . . . . . . . . . .
Advertising and promotion
expenses . . . . . . . . . . . . .
Taxes, rates and
contributions . . . . . . . . . .
Doubtful accounts . . . . . . . .
Travel expenses. . . . . . . . . .
Maintenance expenses . . . .
Distribution expenses . . . . .
Communication expenses . .
Contingencies . . . . . . . . . . .
Stands assembly . . . . . . . . .
Stationery and office
supplies . . . . . . . . . . . . . .
Commissions. . . . . . . . . . . .
Productions and coproductions . . . . . . . . . . .
Printing expenses . . . . . . . .
Rights . . . . . . . . . . . . . . . . .
Services and satellites . . . . .
Non-computable VAT . . . . . .
Rentals . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . .
.
Selling
Expenses
Administrative
Expenses
Total as of
June 30, 2007
91,348,937
Total as of
June 30, 2006
31,318,668
14,045,312
45,984,957
37,969,060
. 248,817,105
63,811,599
98,078,971
.
73,435
47,669,469
131,591
47,874,495
32,668,907
.
.
.
.
.
.
.
.
34,170,726
—
9,437,967
50,091,189
2,423,683
3,259,542
3,784,485
875,588
28,985,430
11,199,132
3,058,529
2,624,225
4,098,795
1,390,449
131,669
—
7,503,759
—
2,906,086
15,891,901
5,778
3,174,615
2,611,299
—
70,659,915
11,199,132
15,402,582
68,607,315
6,528,256
7,824,606
6,527,453
875,588
27,460,515
(7,577,809)
14,595,232
49,330,826
6,960,567
3,519,717
5,944,089
1,053,350
.
.
641,316
639,628
497,090
18,053,467
4,827,793
12,717,942
5,966,199
31,411,037
3,236,046
17,426,995
. 67,685,749
. 26,591,499
. 203,515,189
. 41,444,962
.
5,353,133
. 23,543,223
. 12,232,910
460,005
34,162
—
196,673
—
850,096
6,238,180
1,010,199
90,518
—
1,772,530
—
3,600,470
9,627,583
410,707,675 254,309,580
69,155,953 48,449,304
26,716,179 20,988,599
203,515,189 132,485,237
43,414,165 33,563,334
5,353,133
4,727,066
27,993,789 14,175,599
28,098,673 13,776,661
Total as of June 30, 2007 . . . 765,899,997 203,344,282 209,935,992 1,179,180,271
Total as of June 30, 2006 . . . 481,027,082 116,868,411 117,167,382
F-32
715,062,875
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
BALANCE SHEETS
As of June 30, 2007 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1
As of
June 30,
2007
ASSETS
CURRENT ASSETS
Cash and banks — Note 3.a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments — Exhibit D. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables, net — Note 3.b) . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2006
.
.
.
.
17,169,742
13,502,797
30,157,612
60,830,151
13,011,513
9,130,760
42,305,098
64,447,371
NON-CURRENT ASSETS
Other receivables, net — Note 3.b) . . . . . . . . . . . . . . . . . . . . . . . . .
Investments — Exhibit C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net — Exhibit A . . . . . . . . . . . . . . . .
338,147,974
1,889,323,050
830,430
355,302,129
1,811,570,666
845,250
Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,228,301,454
2,289,131,605
2,167,718,045
2,232,165,416
.
.
.
.
.
.
.
1,866,422
71,085,247
3,001,518
3,845,834
—
14,379,065
94,178,086
2,268,366
45,583,415
7,430,419
9,172,591
11,077,731
15,688,123
91,220,645
NON-CURRENT LIABILITIES
Long-term debt — Note 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities — Note 3.e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,980,000
487,503,491
116,280,000
489,469,103
Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
555,483,491
605,749,103
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHAREHOLDERS’ EQUITY (as per corresponding
statements). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
649,661,577
696,969,748
1,639,470,028
1,535,195,668
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . .
2,289,131,605
2,232,165,416
LIABILITIES
CURRENT LIABILITIES
Accounts payable — Note 3.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term debt and current portion of long-term debt — Note 7 . .
Salaries and Social Security payable . . . . . . . . . . . . . . . . . . . . . . .
Taxes payable — Note 3.d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities — Note 3.e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The accompanying Notes 1 to 12 and Exhibits A, C, D, E, G and H are an integral part of these financial
statements.
F-33
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
STATEMENTS OF OPERATIONS
For the Six-Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1
As of
June 30,
2007
June 30,
2006
99,941,054
51,278,099
(15,874,092)
(196,342)
—
—
(20,956,391)
21,702,270
(13,328,137)
(132,190)
(118,350)
(109,993)
Equity in earnings (losses) from affiliates and subsidiaries — Note 3.f) . .
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses — Exhibit H . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, plant and equipment — Exhibit A . . . . . . . . . . .
Depreciation of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing and holding results
Generated by assets
Exchange differences and restatements. . . . . . . . . . . . . . . . . . . . . .
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Generated by liabilities
Exchange differences and restatements. . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income for the period before income tax . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax — Note 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189,970
(1,024,291)
22,685,587
575,333
(395,741)
3,140,530
(13,425,549)
(30,572,728)
(3,547,753)
109,453,955
(5,943,907)
(3,924,959)
(6,399,961)
(747,099)
(20,694,688)
2,644,202
Net income (loss) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103,510,048
(18,050,486)
Basic net income/(loss) per common share. . . . . . . . . . . . . . . . . . . . . . .
Diluted net income/(loss) per common share — Note 4 . . . . . . . . . . . . . .
0.45
0.38
(0.08)
(0.07)
The accompanying Notes 1 to 12 and Exhibits A, C, D, E, G and H are an integral part of these financial
statements.
F-34
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the six-month periods ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1
Inflation
Adjustment on
Capital Stock
Capital
Stock
Balances as of
December 31, 2005 . .
Cumulative translation
adjustment for the
period . . . . . . . . . . .
Net loss for the period . .
Balances as of June 30,
2006 . . . . . . . . . . .
Balances as of
December 31, 2006 . .
Cumulative translation
adjustment for the
period . . . . . . . . . . .
Net income for the
period . . . . . . . . . . .
Balances as of June 30,
2007 . . . . . . . . . . .
. 270,261,524
.
.
309,885,253
—
—
—
—
. 270,261,524
. 270,261,524
Paid-in
Capital(1)
Special
Reserves
Cumulative
Total
Translation Accumulated Shareholders’
Adjustment
Deficit
Equity
Subtotal
1,364,811,675 21,671,615 1,966,630,067
—
—
—
—
(352,489) (1,303,009,145)
—
—
892,913
—
—
(18,050,486)
309,885,253
1,364,811,675 21,671,615 1,966,630,067
540,424
(1,321,059,631)
309,885,253
1,364,811,675 21,671,615 1,966,630,067
1,903,783
663,268,433
892,913
(18,050,486)
646,110,860
(433,338,182) 1,535,195,668
.
—
—
—
—
—
764,312
—
764,312
.
—
—
—
—
—
—
103,510,048
103,510,048
. 270,261,524
309,885,253
1,364,811,675 21,671,615 1,966,630,067
2,668,095
(329,828,134) 1,639,470,028
(1) Includes 333,636,239 corresponding to Class “A” and “B” preferred shares (Note 4).
The accompanying Notes 1 to 12 and Exhibits A, C, D, E, G and H are an integral part of these financial
statements.
F-35
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
STATEMENTS OF CASH FLOWS
For the Six-Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1
June 30,
2007
June 30,
2006
.....................
.....................
.....................
cash provided by operating
103,510,048
5,943,907
7,887,141
(18,050,486)
(2,644,202)
3,259,431
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
.
196,342
—
—
(99,941,054)
2,752
13,235,579
132,190
109,993
118,350
20,956,391
5,505
3,349,626
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
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.
.
.
.
(7,980,885)
(401,944)
(4,428,901)
(1,013,093)
(6,768,694)
(4,313,664)
5,927,534
(2,650,221)
2,873,692
(2,181,388)
1,215,678
(1,323,877)
(284,648)
4,886,034
CASH PROVIDED BY INVESTING ACTIVITIES
Capital contributions in subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
Dividends collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the disposal of long-term investments . . . . . . . . . .
Collection for proceeds from the disposal of long-term investments .
Proceeds from the disposal of other investments. . . . . . . . . . . . . .
Acquisition of other investments . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of property, plant and equipment . . . . . . . . . . . . . . . . .
Collection of interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . .
.
.
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.
.
(3,827,750)
50,390,004
—
440,421
—
—
(181,522)
23,293,105
70,114,258
(46,901,476)
8,643,128
42,338,268
—
23,975,623
(14,699,247)
(248,227)
77,069
13,185,138
CASH USED IN FINANCING ACTIVITIES
Payment of loans . . . . . . . . . . . . . . . . . .
Payment of interest . . . . . . . . . . . . . . . . .
Payment of dividends and restatements . . .
Cash used in financing activities . . . . . . . .
.
.
.
.
.
.
.
.
.
.
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.
.
.
(24,800,000)
(24,901,496)
(18,000,000)
(67,701,496)
(12,280,000)
(6,466,175)
—
(18,746,175)
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) for the period . . . . . . . . . . . . . . . . . . . .
Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income / (loss) for the period to
activities:
Depreciation of property, plant and equipment . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . .
Depreciation of other investments . . . . . . . . . . . . . . . . .
Equity in earnings (losses) from affiliates and subsidiaries
Setting up of provisions . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences and restatements . . . . . . . . . . . . .
Changes in assets and liabilities:
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and Social Security payable . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax on assets payments . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by operating activities . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
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.
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.
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.
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.
.
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.
.
.
.
.
.
.
.
.
.
.
.
.
.
FINANCING AND HOLDING GAINS (LOSSES) GENERATED BY CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189,970
779,272
Net Increase in cash flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at period end(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,530,266
22,142,273
30,672,539
104,269
1,060,565
1,164,834
(1) It includes:
Cash and banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments with original maturities of less than three months . . . . . . . . . . . . . . . . . . .
17,169,742
13,502,797
685,866
478,968
The accompanying Notes 1 to 12 and Exhibits A, C, D, E, G and H are an integral part of these financial
statements.
F-36
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS
As of June 30, 2007, 2006 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1, unless otherwise specifically indicated
NOTE 1 — THE COMPANY
Grupo Clarín is a holding company that operates in the Media industry. Its operating income and
cash flows derive from the operations of its subsidiaries in which, directly or indirectly, participates.
These operations include cable television and Internet access services, newspaper and other
printing and publishing activities, broadcast television, radio operations and television content production, on-line and new media services, and other media related activities. A substantial portion of its
revenues is generated in Argentina. Through controlled companies and joint ventures, it is engaged in
primarily in the following business segments:
• Cable television and Internet access, consisting of the largest cable network in Latin
America in terms of subscribers, operated by its subsidiary Cablevisión and its subsidiaries
Multicanal and Teledigital Cable S.A. (“Teledigital”), with operations in Argentina and neighbouring countries, and the provision of high-speed Internet access mainly through its brands
FiberTel and Flash.
• Printing and publishing, consisting of national and regional newspapers, sports daily and
magazine publishing as well as commercial printing. Diario Clarín, the flagship national
newspaper, is the newspaper with the second largest circulation in the Spanish-speaking
world. The sports daily Olé is the only newspaper of its kind in the Argentine market. The
evening newspaper La Razón is the largest free newspaper in Argentina. The children’s
magazine Genios is the children magazine in Argentina with the highest circulation. AGR is its
printing company.
• Broadcasting and programming, consisting of the broadcast television station with the
highest share of prime time audience (Canal 13) and the AM/FM radio broadcast stations
(Radio Mitre and La 100), as well as the production of television, film and radio programming
content, including cable television signals and sports programming; and
• Other, consisting principally of digital and Internet content and horizontal portals as well as its
subsidiary GCGC, its share service center.
NOTE 2 — BASIS FOR THE PREPARATION AND PRESENTATION OF THE FINANCIAL
STATEMENTS
The Company’s financial statements have been prepared in accordance with generally accepted
accounting standards effective in the City of Buenos Aires, Argentine, and in accordance with the
Argentine Securities and Exchange Commission (CNV) rules. Such standards have been applied
consistently to the information presented for comparative purposes.
In order to properly understand the financial position and the changes in the results of the
Company and its subsidiaries, the Company’s management recommends that the financial statements
should be read together with the consolidated financial statements, which are presented as supplementary information and are an integral part of the financial statements.
Certain reclassifications had been made over the comparatives figures so they can be consistent
to the disclosure of the amounts of the present fiscal period.
In August 2005, the CPCECABA approved Resolution CD No. 93/2005, whereby it introduced
some changes to its accounting standards, as a result of the agreement entered into with the FACPCE
F-37
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
for the harmonization of Argentina’s professional accounting standards. Such Resolution has become
effective for the Company since January 1, 2006. The CNV, through General Resolutions No. 485/05
and 487/06 issued on December 29, 2005 and January 26, 2006, respectively, adopted the new
accounting standards issued by the CPCECABA, with certain amendments, effective for the years
beginning as from January 1, 2006.
The main changes arising from the application of the new standards that have had a significant
effect on the Company’s financial statements are the following: the disclosure of certain additional
information related to deferred taxes and the recognition of the cumulative translation adjustment as
an integral part of shareholders’ equity.
2.1.
Presentation of Financial Statements In Constant Argentine Pesos
These financial statements have been prepared in constant currency, pursuant to the restatement method set forth by FACPCE’s Technical Resolution No. 6, whereby the effects of the changes
in the currency purchasing power are to be comprehensively recognized during inflationary periods.
Furthermore, it establishes that the adjustment for inflation shall not be applied during monetary
stability periods.
2.2.
Summary of Significant Accounting Policies
The significant accounting policies applied to the preparation of these financial statements are
detailed below:
a) Cash and Banks
•
In local currency: at face value.
• In foreign currency: translated at the exchange rates prevailing at the end of each period or
year for the settlement of these transactions. Foreign exchange differences were charged to
income for each period. The respective breakdown is shown in Exhibit G.
b) Other Investments
•
c)
Valued at face value plus accrued interest, where applicable, and translated to the exchange
rate prevailing at the end of each period or year. Foreign exchange differences were charged
to income for each period. The respective breakdown is shown in Exhibit D.
Other receivables, Net and Liabilities
• In local currency: valuation has been determined by calculating the discounted value of cash
flows to be generated by such receivables and liabilities, except for deferred tax assets and
liabilities which have not been discounted. Such receivables and liabilities which discounted
value does not materially differ from their face value have been valued at the transaction face
value.
• In foreign currency: have been valued as mentioned above, taking into account the exchange
rates prevailing as of each period end. Foreign exchange differences were charged to income
for each period. The respective breakdown is disclosed in Exhibit G.
Accounts receivable and liabilities include the accrued portion of the respective financing gains
(losses) as of each period end. Documented debts were restated applying the CER established by
Executive Power Decree No. 214.
F-38
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
The caption “Other receivables, net” is net of the allowance for doubtful accounts, which is
determined as of each period end, based on the individual analysis of the several receivables
comprising the item; of the allowance for unrecoverable guarantee deposits, which includes the portion
of such deposits estimated to be used in pending lawsuits and other expenses eventually incurred
(see Note 8), and of the valuation allowance on deferred tax net assets (see Note 9). The changes in
such allowances are disclosed in Exhibit E.
d) Long-term investments In Affiliates and Subsidiaries — Goodwill
Long-term investments in subsidiaries and affiliates were valued by applying the equity method
as established by FACPCE Technical Resolution No. 21 (“TR 21”).
The accounting criteria used by the subsidiaries and affiliates are similar to those used by the
Company; in those cases in which they differed, the corresponding adjustments were made. A
breakdown of the Company’s interest in these companies is shown in Exhibit C.
The financial statements of foreign companies considered as integrated were translated pursuant
to the provisions of TR 18. Accordingly, amounts measured in foreign currency were translated to
Argentine pesos, applying the exchange rate prevailing on the date in which purchasing power each
amount measured was stated.
The financial statements of non-integrated foreign companies, which are indirectly controlled by
the Company, have been translated to Argentine pesos, pursuant to the provisions of TR 18, applying
one of the methods applicable to non-integrated companies (current exchange rate). The resulting
translation differences as of June 30, 2007 and 2006 were allocated to the Statements of Changes in
Shareholders’ Equity, under “Cumulative translation adjustment”.
Goodwill is the difference between the cost and the fair market value of acquired and identifiable
net assets. Goodwill was restated following the guidelines of Note 2.1.
The goodwill generated by recent acquisitions is a preliminary estimate, since the Company and
its subsidiaries are in the process of compiling the evidence necessary to better estimate the fair
market value of assets and liabilities identifiable at the time of acquisition. Therefore, these values
may be modified in the future, as permitted by the prevailing accounting standards.
The Company amortized Goodwill over a 20-year period until December 31, 2002. As from
January 1, 2003, the Company ceased to apply such amortization criterion and adopted the one
established by the prevailing accounting standards, since it considered goodwill with an indefinite
useful life as being directly related to the business of the respective investments.
The Company periodically assesses the goodwill recoverable value, based on the projected
discounted cash flows and other information available as of the date of each financial statement.
The carrying value of long-term investments and goodwill, net of the booked allowances, does
not exceed their recoverable value as of each period end.
e) Property, Plant and Equipment
Property, plant and equipment and other investments have been valued at acquisition cost,
restated as set forth in Note 2.1, net of the respective accumulated depreciation as of each period
end. These assets are depreciated on a straight line basis, applying rates that are sufficient to
extinguish their values at the end of their estimated useful lives.
F-39
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
The value of these assets does not exceed their recoverable value. Changes in property, plant
and equipment are shown in Exhibit A.
f)
Shareholders’ Equity
Capital stock has been maintained at face value. As stated in Note 2.1, the restatement
adjustment is shown under the item Inflation Adjustment on Capital Stock.
The other shareholders’ equity accounts are stated at their historical value, restated as set forth
in Note 2.1.
The balances of the shareholders’ equity accounts do not reflect the potential effect of the
options related to preferred stock described in Note 4, until a decision is made as to such options.
The preferred stock dividends mentioned in Note 4 shall be accrued, if applicable, once the
Company reports positive retained earnings.
g) Income Statement Accounts
The charges for consumption and depreciation of non-monetary assets were calculated based
on the adjusted amounts of such assets, as indicated in Note 2.1. The other income statement
accounts are stated at face values.
h) Income Tax and Tax On Assets
The Company accounts for income tax using the deferred tax method. Such method consists of
recognizing the tax effects of the temporary differences between the accounting and tax valuation of
assets and liabilities and the subsequent charge to income in the years where such differences are
reversed. Furthermore, it provides for the possibility of using tax losses in the future. In conformity
with the CPCECABA standards, deferred tax assets and liabilities have not been discounted. The
differences arising from restating the historical cost of property, plant and equipment in constant
currency, the deduction of which is not recognized for tax purposes, have been considered as
permanent differences. Therefore, no deferred taxes should be recognized. As of June 30, 2007, the
Company’s property, plant and equipment balances were not adjusted for inflation.
The Company has examined the recoverable value of deferred assets, based on its business
plans and has booked a valuation allowance, in order for the deferred tax asset net position to reflect
the probable recoverable value. The changes in such allowance are shown in Exhibit E. Note 9
contains further information on deferred taxes.
Tax on assets is supplementary to income tax. While income tax is levied on the taxable income
for the year, tax on assets is imposed on the potential income from certain productive assets at the
rate of 1%. Therefore, the Company’s tax liability shall be equal to the higher of both taxes. However,
if tax on assets exceeds income tax in any given fiscal year, the excess may be creditable against any
excess of income tax over tax on assets in any of the following ten years.
Tax on assets balance has been capitalized under Other non-current receivables, since the
Company has estimated, based on its current business plans, that the amounts paid for this tax will
be recoverable within the statute of limitations.
F-40
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
2.3. Use of Estimates
The preparation of the financial statements in conformity with professional accounting standards
effective in the City of Buenos Aires, Argentina, requires Company’s management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities as of the date of the financial statements and the reported amounts of revenues
and expenses for each period. Actual results could differ from these estimates.
2.4. Additional Cash Flow Statements Information
In the periods ended on June 30, 2007 and 2006, the following significant transactions were
carried out and did not have an impact on consolidated cash and cash equivalents:
As of
June 30,
June 30,
2007
2006
Capitalization of receivables held with subsidiaries . . . . . . . . . .
Distribution of unpaid subsidiaries dividends at closing . . . . . . .
15,000,838
4,000,000
—
98,223,981
NOTE 3 — BREAKDOWN OF THE ACCOUNTS
Balance Sheets
As of
June 30,
December 31,
2007
2006
a) Cash and banks
Petty cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Banks accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-41
46,327
17,123,415
46,327
12,965,186
17,169,742
13,011,513
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
As of
June 30,
December 31,
2007
2006
b) Other receivables, net
Current
Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to personnel . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current
Related parties — Note 10 . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets — Note 9 . . . . . . . . . . . . . . .
Tax on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee deposits — Note 8 . . . . . . . . . . . . . . . . . .
Allowance for unrecoverable guarantee deposits —
Exhibit E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts — Exhibit E . . . . . . .
.
.
.
.
.
.
.
c) Accounts payable
Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d) Taxes payable
Tax on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VAT payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Turnover tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e) Other liabilities
Current
Sellers financing — Note 10 and Exhibit G . . . . . . . . .
Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current
Investment in affiliates — Exhibit C . . . . . . . . . . . . . . .
Sellers financing — Note 10 and Exhibit G . . . . . . . . .
F-42
27,390,165
2,550,371
95,886
121,190
39,988,060
29,976
2,200,364
86,698
30,157,612
42,305,098
297,659,811
15,285,818
25,120,626
361,560
313,101,070
21,229,725
20,860,419
388,004
(279,841)
845,206
(845,206)
(277,089)
845,206
(845,206)
338,147,974
355,302,129
649,768
1,216,654
1,039,196
1,229,170
1,866,422
2,268,366
2,372,432
655,188
136,460
681,754
4,114,731
370,071
—
4,687,789
3,845,834
9,172,591
12,042,512
—
2,336,553
10,995,097
76,887
4,616,139
14,379,065
15,688,123
—
487,503,491
6,698,656
482,770,447
487,503,491
489,469,103
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
Statements of Operations
As of
June 30,
June 30,
2007
2006
f) Equity in earnings (losses) from affiliates and subsidiaries
AGEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Radio Mitre. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GCGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRIMA Internacional. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multicanal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,365,640
9,090,087
16,419,641
(1,737,440)
(383,663)
1,120,984
—
10,065,805
99,941,054
26,137,013
3,095,287
9,093,141
(1,099,825)
1,414,564
(1,821,027)
(42,067,849)
(15,707,695)
(20,956,391)
NOTE 4 — PREFERRED SHARES
The main terms and conditions of the preferred shares, which refer to dividends payments, the
preference among the different classes of preferred shares and between them and common shares,
and its redemption, according to the Company’s by-laws and the respective documents and agreements are as follows:
a. On December 27, 1999 two classes of preferred shares were issued: “A” and “B”
(“preferred shares”). Those preferred shares accrue an annual dividend of 7%, payable quarterly
as from the quarter ended on March 31, 2003. The Company can pay 5% of that dividend in
cash, and the remaining 2% in kind. If, in any given year, the Company fails to pay dividends in
cash, the annual dividend will be increased to 9% on a cumulative basis, until the Company pays
them. The Company’s shareholders’ meetings held on August 29, 2005 and July 13, 2007
approved the following decisions, among others: (a) the waiver by the holders of preferred shares
of their right to collect the total preferred dividends accrued before January 1, 2005; (b) the
suspension of dividends between that date and June 30, 2008; and (c) the extension to June 30,
2008 of the date when, subject to compliance with certain conditions, the mandatory conversion
of preferred shares into common shares takes place. If these conditions are not met within the
agreed-upon terms, suspended dividends will be considered as accrued.
b. Preferred shares may be redeemed until December 27, 2009 (“redemption date”), at
12.117792 times (“Payment Preference”) the face value of the shares as determined by the
Board of Directors’ resolution dated December 27, 1999, plus accrued and unpaid dividends.
Class “A” preferred shares will have redemption preference over Class “B” preferred shares. If
the shares are not redeemed at the redemption date, the annual dividend will be increased to
13%, 50% of which may be payable in cash and 50% in kind.
c. Subject to compliance with certain conditions, class “A” preferred shares may be
converted into class “C” common shares, and class “B” preferred shares into class “B” common
shares. The terms and conditions for the issuance establish a Conversion Price as well as an
adjustment to the Conversion Price subject to certain assumptions. In both cases, these prices
are agreed-upon based on the subscription price of the shares, plus amounts due corresponding
to unpaid and recognized dividends.
d. The right to redeem such preferred shares may only be exercised by the Company.
F-43
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
e. In the event of liquidation or merger of the Company, preferred shares have certain
preferential rights to receive an amount equivalent to the “Payment Preference” per share plus
the amount of quarterly dividends and accumulated unpaid dividends.
f. In accordance with the terms and conditions for the issuance of preferred shares set
forth in the Company’s by-laws and until such time as the Company has carried out an Initial
Public Offering of Shares or until January 1, 2010, whichever takes place first, the Company is
subject to certain restrictions on the payment of dividends to the holders of common shares.
Basically, those restrictions establish that: (i) the Company can only pay dividends to holders of
common shares as from the end of fiscal year 2002; (ii) the payment of dividends to the holders
of common shares is subordinated to the preferential and priority rights of the holders of
preferred shares established in the terms and conditions for the issuance of those shares;
(iii) subject to the restriction stated in paragraph (i) above, the maximum distribution of dividends
to the holders of common shares amounts to USD40 million per each year; (iv) in addition to the
distributions mentioned above, after the year ended December 31, 2003, the Company may
distribute additional earnings to the holders of outstanding common shares for up to a total of
USD60 million on one or more occasions.
g. If at the redemption date, the Company has not redeemed all the preferred shares, it will
be unable to declare or pay distribution of dividends on common shares in excess of USD15 million per year.
h. After the Initial Public Offering of shares and, if that event has not taken place before
the redemption date; as from January 1, 2010, provided that the Company has redeemed all its
preferred shares, any decision related to dividends and distribution of profits on common shares
will be exclusively subject to the approval of the Company’s Board of Directors and Shareholders’
meeting, following the majorities established by law.
i. The paid-in-capital that resulted from the issuance of class “C” common shares and class
“A” preferred shares amounting to 333,636,239 is appropriated to a “Class “A” and Class “B”
Preferred shares Paid-in-capital Reserve”, which will be irrevocably appropriated as follows: (a) to
the payment of dividends in shares, even if no profits or insufficient profits are generated, to the
holders of preferred shares, in accordance with the terms and conditions for the issuance and
the preference of class “A” preferred shares established in the Sixth section of the by-laws, and
(b) in the first place, with preference, to the payment of class “A” preferred shares and/or
common shares to be delivered as a result of the conversion of class “A” preferred shares and,
in the second place and in a subordinate category, if a reserve remains after all class “A”
preferred shares have been converted, to the payment of class “B” preferred shares and/or
common shares to be delivered through the conversion of class “B” preferred shares, which must
be issued in accordance with the terms and conditions for issuance established by section Sixth
of the by-laws.
See Note 12 for subsequent events that would affect preferred stock.
F-44
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 5 — TRANSACTIONS WITH RELATED PARTIES
The following table details the transactions carried out by the Company its related parties for the
six-month periods ended June 30, 2007 and 2006:
As of
June 30,
2007
June 30,
2006
Management fees
Sale of long-term investments
Management fees
Other expenses
Services
Management fees
Services
Other expenses
Management fees
Interest income
Services
Interest income
12,103,657
—
5,400,000
(25,312)
—
1,800,000
—
(1,579)
420,000
26,247
(420,617)
45,535
10,800,000
42,338,268
4,800,000
—
(259)
1,500,000
(15,110)
—
360,000
—
(325,187)
—
Management fees
Other expenses
Sale of long-term investments
Printing services
Management fees
Management fees
Internet communication services
Management fees
Interest income
Reimbursed expenses
Management fees
2,431,844
(631)
—
—
750,000
—
(68,889)
28,372,598
22,277,976
—
—
1,800,000
—
18,086,000
(12,095)
450,000
336,000
(73,749)
—
—
2,405
273,420
Company
Subsidiaries
AGEA . . . . . . . . . . . . . . . . . . . . . . . . .
ARTEAR . . . . . . . . . . . . . . . . . . . . . . .
IESA . . . . . . . . . . . . . . . . . . . . . . . . . .
Radio Mitre . . . . . . . . . . . . . . . . . . . . .
GCGC . . . . . . . . . . . . . . . . . . . . . . . .
PRIMA Internacional . . . . . . . . . . . . . .
Indirectly controlled
AGR . . . . . . . . . . . . . . . . . . . . . . . . . .
Impripost Tecnologías S.A. . . . . . . . . .
Primera Red Interactiva de Medios . . .
Cablevisión . . . . . . . . . . . . . . . . . . . . .
Multicanal . . . . . . . . . . . . . . . . . . . . . .
Teledeportes Paraguay S.A. . . . . . . . .
Affiliates
CIMECO . . . . . . . . . . . . . . . . . . . . . . .
Item
Management fees
—
1,382,850
NOTE 6 — RESTRICTIONS ON RETAINED EARNINGS
The Company’s by-laws sets forth that realized and liquid profits should be appropriated as
follows: (i) in accordance with the Argentine Business Associations Act, 5% until reaching 20% of the
capital stock to the legal reserve; (ii) to pay for the Board of Directors’ and Statutory Auditing
Committee’s fees; (iii) to dividends on preferred shares, giving priority to unpaid accumulated
dividends; and (iv) the balance, in whole or in part, to an additional stake in preferred shares and
dividends on common shares or to voluntary reserves or to a provision or to a new account, or as
otherwise determined by the Shareholders’ meeting.
See Note 4 for additional restrictions related to terms and conditions for issuance of preferred
shares.
F-45
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 7 — FINANCIAL LOANS
7.1. Debt Transfer
The Company held a debt with Telefónica Internacional de España S.A. in the principal amount
of USD89,027,741, plus the agreed-upon interest. On November 21, 2000, Telefónica Internacional de
España S.A. notified the Company of the assignment of such receivable to Telefónica Media S.A.
On September 29, 2003, the parties agreed upon a fair readjustment under Section 8 of Decree
214/02, setting the sale price at USD36 million (this amount embraced all concepts). Out of that total,
the amount of USD6 million was paid within 7 days from execution of the settlement agreement. The
balance of USD30 million would be paid in 5 annual, consecutive and equal installments of USD6 million each, falling due on August 31, 2004, 2005, 2006, 2007 and 2008, respectively. The balances
shall accrue interest to be paid every six month. Such interest is calculated at (a) a 3.5% annual rate
or (b) at LIBOR + a 0.75% annual spread, whichever is higher at the beginning of each interest
period.
Such debt was collaterized by an original pledge on Multicanal’s common shares. On September 26, 2006, the Company agreed upon with Telefónica de Contenidos S.A. Unipersonal (former
Telefónica Media S.A.) to substitute the existing pledge on the remaining pledged shares by a new
pledge on 49,828 common shares of IESA, which are owned by the Company. Upon payment of the
fourth installment, the release of the pledge on one third of the total amount of new pledged shares
shall take place automatically and as a matter of law. Upon payment of the fifth installment and the
related interest, the release of the pledge on the remaining new pledged shares shall take place
automatically and as a matter of law.
As of June 30, 2007 and December 31, 2006, the Company owed principal and interest in the
amounts of 37,080,000 and 36,720,000, and 790,428 and 718,605, respectively.
As of the date of these financial statements, the Company has made all due and payable
payments.
7.2. Financial Loans
On July 26, 2001, the subsidiary Raven Media Investments LLC executed a loan agreement with
JP Morgan Chase Bank (“Chase”) in the amount of USD194.8 million.
During fiscal year 2004, Chase assigned to the Company its rights under the loan agreement
executed with Raven for up to USD75 million, as a result of the settlement of certain guarantees.
Furthermore, in February 2004, Raven and DirecTV Latin America, LLC (“DTVLA”), among other
companies, executed an agreement whereby Raven received USD56 million as payment of the
receivable arising from the acceleration of the put option under the “Put Agreement”. Then, Raven
partially settled its debts with Chase and the Company. Thus, the unpaid balances amounted to
USD40 million and USD54 million, respectively.
In May 2004, Chase transferred its receivable with Raven, assigning to the Company the balance
of such receivable in exchange for the payment of an equivalent amount.
The remaining balance of the price referred to above (USD40 million) was refinanced through an
agreement between the Company and Chase on May 3, 2004. Such agreement sets forth the accrual
of interest at LIBOR plus a 2% spread, payable quarterly and the annual repayment of the remaining
principal on an annual basis.
F-46
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
In March 2006, the Company paid the first installment of the loan for USD4 million.
In August 2006, the Company executed an addendum to such refinancing agreement, whereby
Chase reimbursed the USD4 million paid by the Company and the repayment of principal was
rescheduled as follows:
Payment Date
Repayment of Principal
March 17, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 17, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD 8 million
USD 16 million
March 17, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD 16 million
Furthermore, the agreement sets forth several commitments and restrictions, including but not
limited to: i) the creation and maintenance of a reserve account for the amount of interest to be paid
quarterly, ii) indebtedness restrictions; and iii) restrictions on the creation of encumbrances. After
June 30, 2007, under a new addenda to the refinancing agreement, the guarantees timely granted by
the Company’s shareholders have ceased to be in effect.
The balances of USD54 and USD40 million that Raven owed to the Company were condoned by
means of the agreements dated February 6 and May 4, 2004, respectively.
Subsequently the Company, the sole Raven’s shareholder, decided to wind up and liquidate that
company at the Board’s meeting held on July 31, 2004.
As of June 30, 2007 and December 31, 2006, the Company owed principal and interest in the
amounts of 98,880,000 and 122,400,000, and 651,619 and 361,610, respectively.
As of the date of these financial statements, the Company has made all due and payable
payments.
7.3. Other Loans
As of June 30, 2007 and December 31, 2006, the Company owed 1,663,200 for a loan granted
by one of its subsidiaries.
NOTE 8 — COMMITMENTS AND CONTINGENCIES
As of June 30, 2007 and December 31, 2006, and in accordance with the contract entered into
to sell its equity interest in Activa Anticipar A.F.J.P. S.A., the Company holds a guarantee deposit
amounting to USD26,793 (net of provisions) recoverable under certain conditions and within specified
terms (provided by Jupenhold S.A., a company absorbed by Grupo Clarín) to cover potential liabilities
and the payment of all ongoing lawsuits, and to guarantee labor and social security obligations arising
before the date of that sale. The amount of the deposit does not limit the amount of the Company’s
guarantees. The Company estimates that the guarantee fund is sufficient, based on the legal advisors’
opinion.
The Company has executed guarantees with the banks involved in the swap contracts specified
in Note 7 to the consolidated financial statements in order to fully, unconditionally and irrevocably
guarantee the timely payment of all obligations arising from said contracts.
In October 2003, the Company approved a USD15 million contribution in favor of its subsidiary
Multicanal, to be paid in and applied to the Cash Option Payment set forth in the APE (see Muticanal
in Note 5 to the consolidated financial statements). To that end, in December 2003, the Company
F-47
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
entered into a trust agreement with JPMorgan Chase Bank and made a deposit in that entity for that
amount. The contribution was made in fiscal year 2006.
NOTE 9 — INCOME TAX
The following table shows the breakdown of net deferred tax assets as of June 30, 2007 and
December 31, 2006, respectively (amounts stated in thousands of Argentine Pesos):
As of
June 30,
2007
December 31,
2006
Tax loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Specific tax loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,898
51,822
28,903
51,822
Other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,633
314
8,633
316
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85,667
89,674
(70,381)
(68,444)
15,286
21,230
Assets
Allowance for deferred tax asset — Exhibit E . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of June 30, 2007, the Company’s net deferred tax assets amount to approximately
15.3 million. This figure represents the temporary differences and the tax losses the Company’s
management estimates to be recoverable, based on its current business plans.
F-48
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
There follows the reconciliation between the income tax charged to income for the six-month
period ended June 30, 2007 and 2006 and the income tax liability that would result from applying the
current tax rate on income before income and assets taxes and the income tax liability assessed for
each period (amounts stated in thousands of Argentine Pesos):
As of
Income tax assessed at the current tax rate (35%) on income before income
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences:
Equity in earnings (losses) from affiliates and subsidiaries . . . . . . . . . . . . . .
Tax result arising from the disposal of long-term investments and other
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30,
2007
June 30,
2006
(38,309)
7,243
34,979
(7,335)
—
(4,692)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(677)
(354)
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,007)
(5,138)
Changes in the valuation allowance of net deferred tax asset — Exhibit E . . . .
(1,937)
7,782
Income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,944)
2,644
Deferred income tax income (expense) for the period . . . . . . . . . . . . . . . . . . . .
(5,944)
2,644
Deferred current income tax income (expense) for the period . . . . . . . . . . . . . .
Income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(5,944)
—
2,644
As of June 30, 2007, the Company’s accumulated tax losses amount to approximately 219 million, which calculated at the current tax rate, represent deferred tax assets in the amount of
approximately 77 million.
There follows the statute of limitations of the accumulated tax losses (amounts stated in
thousands of Argentine Pesos):
Year for Expiry
Amount of Tax Loss
Carryforward
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,960
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,707
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,355
10,178
219,200
F-49
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 10 — ACQUISITION AND SALE OF COMPANIES
The Company carried out the following transactions by the end of September 2006:
a) Sale of its equity interest in PRIMA to PRIMA Internacional for 440,421. The transaction
was carried out by issuing corporate debt securities with a 3-year maturity, which accrue interest
payable every six months as from March 26, 2007, at a variable rate established by the BADLAR
plus a fixed 6% spread, subject to certain ceilings. In the event PRIMA Internacional decides to
capitalize such interest, such spread may rise to 8% under certain circumstances. Principal will
be repaid in a lump sum on September 26, 2009.
b) Sale of its equity interest in Multicanal to Cablevisión for 377.7 million, in exchange for
corporate debt securities with a 3-year maturity, which accrue interest payable every six months
as from March 26, 2007, at a variable rate established by the BADLAR plus a fixed 6% spread,
subject to certain ceilings. In the event Cablevisión decides to capitalize such interest, such
spread may rise to 8% under certain circumstances. Principal will be repaid in a lump sum on
September 26, 2009.
c) Acquisition of a 100% interest in Southtel Holdings S.A. (“SHOSA”) capital stock and
votes for USD161.3 million to be paid as follows:
i. USD126 million in debt securities, issued for a total amount of USD157.8 million,
maturing on September 26, 2009 and accruing interest payable every six month as from
March 26, 2007, at 6-month LIBOR plus a 3.75% spread. The original maturity of these
securities may be extended until September 26, 2010 or September 26, 2011, under
certain circumstances.
ii. Delivery of the debt securities issued by Cablevisión mentioned in b) above for an
amount of 80.1 million.
iii. Delivery of equity securities in the amount of USD9.5 million.
d) Acquisition of an 11% interest in VLG capital stock and votes for USD31.8 million, to be
paid by means of the remaining corporate debt securities described in c) i. above. The Company
regained its 50% interest in VLG through this acquisition. Pursuant to the VLG Operating
Agreement executed on September 26, 2006, in case the Company failed to honor any payment
due under the above USD157.8 million debt security, Fintech Media LLC (“Fintech”), original
holder of such security, shall be empowered to reduce Grupo Clarín’s interest in VLG, which
would cause the transfer to Fintech of up to a 25.656% interest the Company holds in
Cablevisión capital stock.
Furthermore, by the end of December 2006, the Company sold 3% of SHOSA’s shares to a
subsidiary for 15 million, in exchange for corporate debt securities under similar conditions as those
detailed in items a) and b) of this Note. On March 21, 2007, the Company capitalized the balance of
such receivable.
F-50
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 11 — TERMS AND INTEREST RATES OF INVESTMENTS, RECEIVABLES AND
LIABILITIES
As of June 30,
2007
Other investments
Without any established term(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net(2)
Without any established term(3) . . . . . . . . . . . . . .
To fall due
Within three months(3). . . . . . . . . . . . . . . . . . . .
Over than six months and up to nine months(3) .
Over than two years and up to three years(4) . .
13,502,797
..........................
43,942,987
..........................
..........................
..........................
205,117
11,211,853
297,659,811
309,076,781
353,019,768
Liabilities
Without any established term(3) . . . . . . . . . . . . . .
To fall due
Within three months(3). . . . . . . . . . . . . . . . . . . .
Over than three months and up to six months(3)
Over than six months and up to nine months(3) .
Over than nine months and up to twelve months
Over than two years and up to three years(4) . .
..........................
.........................
.........................
.........................
.........................
.........................
.
.
.
.
.
2,197,264
13,857,776
525,996
1,812,818
4,698,985
487,503,491
508,399,066
510,596,330
Short-term and long-term debt(5)
Without any established term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
To fall due
Within three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over than three months and up to six months . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over than six months and up to nine months . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over than one year and up to two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
1,663,200
.
.
.
.
19,191,619
790,428
49,440,000
67,980,000
137,402,047
139,065,247
(1) Bearing interest at a variable rate.
(2) Not including 15,285,818 corresponding to net deferred tax assets (see Note 9).
(3) Non-interest bearing.
(4) Bearing interest as detailed in Note 10.
(5) Bearing interest as detailed in Note 7.
F-51
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 12 — SUBSEQUENT EVENTS
On July 16, 2007 the Company approved the conversion of 5,100,000 Class B common shares
at a par value of 1 each and entitled to 1 voting right per share into 5,100,000 Class A common
shares at a par value of 1 each and entitled to 5 voting rights per share.
On July 20, 2007, Grupo Clarín Shareholders Meeting decided:
• To authorize the Company’s public offering and request the authorization of the public offering
of all of its capital stock in Argentina and in foreign markets, and the listing in the Buenos Aires
Stock Exchange and/or in foreign stock exchanges and/or self-regulated markets.
• To increase the capital stock up to 30,000,000, through the issuance of up to 30,000,000
Class B common shares at a par value of 1 each and entitled to 1 voting right per share
subject to public offering in Argentina and foreign markets. The Board of Directors shall be
empowered to eventually fix the subscription price of the new shares to be issued, as well as
the exact amount of the capital stock increase.
• To fully modify its bylaws, which shall come into effect as from the date of the resolution
regarding the Company’s public offering. Such changes contemplate, among others, changes
in the structure and election of the directors and statutory auditing committee, the conversion
of preferred stock issued by the Company into common shares and the setup of an auditing
committee.
During August and September 2007, the Company made contributions to one of its subsidiaries
in the amount of approximately USD2.3 million.
F-52
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT A
PROPERTY, PLANT AND EQUIPMENT, NET
As of June 30, 2007 and 2006, and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1
Historical value
Main Account
Furniture and
fixtures . . . . . . .
Audio and video
equipment . . . . .
Telecommunication
equipment . . . . .
Computer
equipment and
software . . . . . .
Total as of June 30,
2007 . . . . . . . .
Total as of June 30,
2006 . . . . . . . .
Depreciation
Net Book Value as of
At the
At the
Beginning of
At the End of Beginning of For the At the End of June 30, December 31,
the Year
Increases the Period
the Year
Period the Period
2007
2006
127,747
7,556
135,303
38,767
5,027
43,794
91,509
88,980
19,560
33,064
52,624
18,621
1,784
20,405
32,219
939
34,275
—
34,275
31,262
548
31,810
2,465
3,013
1,514,610
140,902
1,655,512
762,292
188,983
951,275
704,237
752,318
1,696,192
181,522
1,877,714
850,942
196,342
1,047,284
830,430
845,250
987,317
248,227
1,235,544
562,736
132,190
694,926
540,618
F-53
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT C
Page 1 of 2
INVESTMENTS
Equity Interest in Other Affiliates
as of June 30, 2007 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1
Type of Shares
Number
Par Value
Common
Common
Common
Common
Common
Common
Common
Common
Common
141,199,126
53,186,347
124,545
20,464,454
6,999,880
48,745,147
1,254,123
16,136
4
$1.00
$1.00
$0.10
$0.01
$1.00
$1.00
$1.00
$1.00
$1.00
539,522,170
152,243,761
48,085,768
47,593,113
9,427,041
102,175,302
2,644,874
14,988,883
1
465,658,800
152,183,738
58,264,253
5,160,306
7,095,890
64,582,849
1,318,546
71,947
2
Common
—
Common
66,880
—
123,284,255
$1.00
—
$1.00
359,593
4,710,205
497,341,592
—
—
—
—
—
—
71,884,310
97,947,290
355,799
5,026,085
220,046,295
478,116,832
212,992,738
44,329,295
94,439,518
—
—
—
38,624,593
70,724,797
Common
15,019,838
$1.00
15,019,838
8,955,360
Total as of June 30, 2007 . .
1,642,568,334
1,889,323,050
Total as of December 31,
2006 . . . . . . . . . . . . . . . .
1,623,720,746
1,811,570,666
Long-term investments
AGEA . . . . . . . . . . . . . . . . .
ARTEAR. . . . . . . . . . . . . . .
IESA . . . . . . . . . . . . . . . . .
Radio Mitre . . . . . . . . . . . . .
GCGC . . . . . . . . . . . . . . . .
PRIMA Internacional . . . . . .
AGR . . . . . . . . . . . . . . . . . .
Clarín Global . . . . . . . . . . .
Pem S.A. . . . . . . . . . . . . . .
GC Minor S.A. (“GC
Minor”) . . . . . . . . . . . . . .
GC Services . . . . . . . . . . . .
SHOSA . . . . . . . . . . . . . . .
Goodwill. . . . . . . . . . . .
Vistone . . . . . . . . . . . . . . . .
VLG . . . . . . . . . . . . . . . . . .
Goodwill. . . . . . . . . . . .
CV B Holding LLC
(“CVB”) . . . . . . . . . . . . . .
Compañía Latinoamericana
de Cable S.A. (“CLC”) . . .
Cost Value
Type of Shares Number Par Value
Book Value(1)
Cost Value
Book Value
Other non-current liabilities
Total as of June 30, 2007 . . . . . . . .
—
—
Total as of December 31, 2006. . . .
19,000
6,698,656
(1) In certain cases the equity value does not correspond with the related shareholders’ equity since:
a) equity value was adjusted to the Company’s accounting policies, as required by the professional
accounting standards, b) the elimination of goodwill generated by transactions between companies
under the Company’s common control, and c) the existence of irrevocable contributions.
F-54
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT C
Page 2 of 2
INVESTMENTS
Equity Interest in Other Affiliates
As of June 30, 2007 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1
Issuer’s Information
As per Financial Statements as of June 30, 2007
Main Business
Activity
Long-term
investments
AGEA . . . . . . . .
ARTEAR. . . . . .
IESA . . . . . . . . .
Radio Mitre . . . .
GCGC . . . . . . .
PRIMA
Internacional
AGR . . . . . . . . .
Clarín Global . .
Pem S.A. . . . . .
GC Minor . . . . .
GC Services . . .
SHOSA. . . . . . .
Vistone . . . . . . .
VLG . . . . . . . . .
CVB . . . . . . . . .
CLC . . . . . . . . .
Printing and Publishing
Broadcasting services
Investing and financing
Broadcasting services
Services
Investing and financing
Graphic press
Telecommunications
Investing
Investing and financing
Investing and financing
Investing and financing
Investing
Investing and financing
Investing and financing
Investing and financing
Participation
in Capital
and Votes
Capital
99.99%
141,199,151
96.95%(1) 54,859,553
99.98%
12,457
99.99%
204,645
99.99%
7,000,000
82.00%
0.90%
0.79%
0.00%
95.00%
100.00%
97.00%
100.00%
11.00%
100.00%
99.99%
(1) % in votes amounts to 99.36%.
F-55
59,445,301
138,865,295
2,046,662
13,558,511
70,400
—
127,097,171
—
—
—
15,020,838
Income / (Loss) Shareholders’
For the Period
Equity
65,591,390
9,421,925
17,900,287
(1,737,440)
(323,429)
417,604,616
158,411,214
58,275,910
5,160,309
7,096,012
1,287,693
5,781,855
3,499,541
820,061
(76,992)
4,081,616
19,726,196
6,013,159
37,357,310
3,082,375
58,363
78,680,212
154,292,191
9,125,637
25,266,209
312,294
5,026,085
543,939,042
162,717,438
1,021,902,012
61,456,937
15,020,838
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT D
OTHER INVESTMENTS
As of June 30, 2007 and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1
Main Account and Securities Characteristics
Book Value As of
June 30,
December 31,
2007
2006
Other current investments:
Financial instruments — Exhibit G . . . . . . . . . . . . . . . . . . . . . . . . . . .
382,465
351,097
Financial instruments — Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market — Exhibit G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,399,200
11,721,132
—
8,779,663
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,502,797
9,130,760
F-56
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT E
ALLOWANCES AND PROVISIONS
As of June 30, 2007 and 2006, and December 31, 2006
In Argentine Pesos (Ps.) — Note 2.1
Balance at the
Balances as of
Beginning of
Balances as of December 31,
the Year
Increases Decreases June 30, 2007
2006
DEDUCTED FROM NONCURRENT ASSETS
Other receivables
For doubtful accounts . .
For unrecoverable
guarantee deposits . .
Allowance for net
deferred tax asset . . .
Investments
For goodwill
impairment . . . . . . . .
.
845,206
—
—
845,206
845,206
.
277,089
2,752(1)
—
279,841
277,089
.
68,443,727
1,937,040(2)
—
70,380,767
68,443,727
.
28,432,495
—
—
28,432,495
28,432,495
Total as of June 30, 2007 . .
97,998,517
1,939,792
—
99,938,309
97,998,517
Total as of June 30, 2006 . .
193,203,205
5,505
47,702,499
145,506,211
(1) Charged to the Statements of Operations under Financing and holding results as of June 30,
2007.
(2) Charged to the Statements of Operations under Income tax as of June 30, 2007.
F-57
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT G
FOREIGN CURRENCY ASSETS AND LIABILITIES
As of June 30, 2007 and December 31, 2006
Effective Amount in Ps. Amount in Ps. as
Foreign Currency Exchange as of June 30, of December 31,
2006
2007
Rate
Type and Amount
ASSETS
CURRENT ASSETS
Banks accounts . . . . . . . . . . . . . . . . . . USD
Other investments
Financial instruments . . . . . . . . . . . . . USD
Money Market . . . . . . . . . . . . . . . . . . USD
Total current assets . . . . . . . . . . . . . . .
NON-CURRENT ASSETS
Other receivables
Guarantee deposits . . . . . . . . . . . . . . USD
Total non-current assets . . . . . . . . . . . .
37,968
3.05
115,802
—
125,398
3,842,994
3.05
3.05
382,465
11,721,132
351,097
8,779,663
12,219,399
9,130,760
81,719
81,719
80,915
80,915
26,793
3.05
Total assets as of June 30, 2007 . . . . . .
12,301,118
Total assets as of December 31, 2006 . .
9,211,675
LIABILITIES
CURRENT LIABILITIES
Long-term debt. . . . . . . . . . . . . . . . . . . USD
Other liabilities . . . . . . . . . . . . . . . . . . . USD
Total current liabilities . . . . . . . . . . . . . .
22,466,682
3,897,253
3.09
3.09
69,422,047
12,042,512
81,464,559
43,920,215
10,995,097
54,915,312
NON-CURRENT LIABILITIES
Long-term debt. . . . . . . . . . . . . . . . . . . USD 22,000,000
Other liabilities . . . . . . . . . . . . . . . . . . . USD 157,768,120
3.09
3.09
67,980,000
487,503,491
116,280,000
482,770,447
555,483,491
636,948,050
599,050,447
Total non-current liabilities . . . . . . . . . . .
Total liabilities as of June 30, 2007. . . . .
Total liabilities as of December 31, 2006 . .
653,965,759
USD: United States dollars
F-58
GRUPO CLARIN S.A.
Registration with the IGJ: 1.669.733
EXHIBIT H
INFORMATION REQUIRED BY SECTION 64, SUBSECTION b) OF ACT No. 19,550
For the Six-Month Periods Ended June 30, 2007 and 2006
In Argentine Pesos (Ps.) — Note 2.1
Administrative Expenses as of
Item
Salaries and Social Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statutory Auditing Committee’s fees . . . . . . . . . . . . . . . . . . . . . . .
Fees for services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes, rates and contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IT expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal fees and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Travel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stationery and office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-59
.
.
.
.
.
.
.
.
.
.
.
.
.
.
June 30, 2007
June 30, 2006
10,300,013
4,500
2,707,371
1,123,117
140,539
152,635
35,303
147,282
113,171
25,416
527,987
22,151
574,607
15,874,092
8,973,364
1,500
1,933,439
956,959
80,802
134,223
68,809
571,900
115,640
31,503
296,185
7,388
156,425
13,328,137
LIMITED REVIEW REPORT
To the Shareholders, President and Directors of
Grupo Clarín S.A.
Piedras 1743
Autonomous City of Buenos Aires
CUIT No. 30-70700173-5
1. We have reviewed the balance sheets of Grupo Clarín S.A. as of June 30, 2007, and the
related statements of operations, changes in shareholders’ equity and cash flows for the six-month
periods ended June 30, 2007 and 2006, and complementary Notes 1 to 12 and Exhibits A, C, D, E, G
and H. Furthermore, we have performed a limited review of the consolidated balance sheet of Grupo
Clarín S.A. as of June 30, 2007, and the consolidated statements of operations and consolidated cash
flows for the six-month periods ended June 30, 2007 and 2006 with its controlled subsidiaries and
other legal entities controlled jointly with other companies, which are presented as complementary
information. The preparation and issuance of these financial statements are the responsibility of the
Company.
2. We conducted our review in accordance with standards established by Technical Resolution
No. 7 of the Argentine Federation of Professional Councils of Economic Sciences for limited reviews
of financial statements. A review of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries to persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such an opinion.
3. As mentioned in Note 10 to the Parent Company Only Financial Statements and in Note 7 to
the Consolidated Financial Statements, in the year ended December 31, 2006 the Company sold its
indirect equity interest in the Company Primera Red Interactiva de Medios Argentinos S.A. to
Multicanal S.A. and its direct and indirect equity interest in Multicanal S.A. to Cablevisión S.A.; in
addition, Grupo Clarín S.A. indirectly purchased the remaining percentage to reach 60% of the interest
in the capital stock and voting rights of Cablevisión S.A. These transactions are subject to the
pertinent authorities approvals.
4. Based on the work and examinations of the financial statements of the Company and the
consolidated financial statements for the years ended December 31, 2006, 2005 and 2004, on which
we issued our report on July 19, 2007 with qualifications because of the circumstances described in
point 3 of this report, we report that:
a) the June 30, 2007 financial statements of Grupo Clarín S.A. and its consolidated
financial statements at those dates, set out in point 1, prepared in accordance with accounting
standards prevailing in the Autonomous City of Buenos Aires (Argentina), include all significant
facts and circumstances which are known to us and that, in relation to them, we have no further
observations to make other than those mentioned in point 3;
b) the comparative information included in the parent company only and consolidated
balance sheets and in the complementary notes and exhibits to the attached financial statements, derives from the financial statements of the Company at December 31, 2006.
5. In compliance with current regulations, we report that:
a) The financial statements of Grupo Clarín S.A. and its consolidated financial statements
have been recorded in the “Inventory and Balance Sheet” legal book and, insofar as concerns
our field of competence, are in compliance with the requirements of Commercial Companies Law
and pertinent Comisión Nacional de Valores (Argentine Security Commission) resolutions;
F-60
b) The financial statements of Grupo Clarín S.A. arise from accounting records. As of the
date of issuance of these financial statements, the approval of the certification related to
Resolution 7/2005, Article 287-I, is still pending;
c) As of June 30, 2007, the debt of Grupo Clarín S.A. accrued in its accounting records, in
favor of the Local Pension Systems, amounted to $322,462.40, none of which was claimable at
that date.
Autonomous City of Buenos Aires, September 5, 2007
PRICE WATERHOUSE & CO. SRL
by
/s/
Carlos A. Rebay (Partner)
Carlos A. Rebay
F-61
GRUPO CLARIN S.A.
Financial Statements as of and for the years ended December 31, 2006, 2005 and 2004
F-62
GRUPO CLARIN S.A.
Financial Statements as of and for the Years Ended December 31, 2006, 2005 and 2004
CONTENTS
Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent Company Only Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit A — Property, plant & equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit B — Intangible Assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit C — Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit D — Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit E — Allowances and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit G — Foreign Currency Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit H — Information required under Section 64, b) of Act No. 19,550 . . . . . . . . . . . . . . .
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-63
F-65
F-66
F-67
F-69
F-92
F-93
F-94
F-95
F-96
F-110
F-111
F-112
F-114
F-115
F-116
F-117
F-118
GRUPO CLARIN S.A.
Financial Statements as of and for the Years Ended December 31, 2006, 2005 and 2004
In Argentine Pesos (Ps.) — Note 2.1 to the parent company only financial statements
Registered office: Piedras 1743, Buenos Aires, Argentina
Main corporate business: Investing and financing
Date of incorporation: July 16, 1999
Date of registration with the Public Registry of Commerce:
• Of the by-laws: August 30, 1999
• Of the latest amendment: April 21, 2004
Registration number with the Inspección General de Justicia (“IGJ”), the Regulatory Authority for
non-public companies in Argentina: 1.669.733
Expiration of articles of incorporation: August 29, 2098
Information on Parent company:
Name: GC Dominio S.A.
Registered office: Piedras 1743, Buenos Aires
Information on subsidiaries in Exhibit C
CAPITAL STRUCTURE (See Note 12 to the parent company only financial statements)
Capital
Type
Class “A” Common shares, Ps.1 par value . . . . . . . . .
Class “B” Common shares, Ps.1 par value . . . . . . . . .
Class “C” Common shares, Ps.1 par value. . . . . . . . .
Class “A” Preferred shares, Ps.1 par value . . . . . . . .
Class “B” Preferred shares, Ps.1 par value . . . . . . . .
Total as of December 31, 2006, 2005 and 2004 . . . . .
F-64
Number of Votes
per Share
Subscribed, Registered
and Paid-In Ps.
5
1
1
1
1
70,880,304
133,006,887
25,112,689
20,630,822
20,630,822
270,261,524
GRUPO CLARIN S.A.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2006, 2005 and 2004
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
As of December 31,
2006
2005
2004
ASSETS
CURRENT ASSETS
Cash and banks . . . . . . . . . . . . . . .
Short-term investments — Note 2.a) .
Trade receivables, net — Note 2.b) . .
Other receivables, net — Note 2.c) . .
Inventories — Note 2.d) . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . .
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175,532,841
311,520,085
276,611,408
108,857,712
152,197,654
8,365,511
286,148,975
94,040,789
255,132,169
102,249,428
104,748,573
6,875,850
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,208,043,127 1,033,085,211
849,195,784
NON-CURRENT ASSETS
Trade receivables, net — Note 2.b) . . . . . . . . . . . . .
Other receivables, net — Note 2.c) . . . . . . . . . . . . .
Inventories — Note 2.d) . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated affiliates — Note 2.e).
Other long-term investments . . . . . . . . . . . . . . . . .
Property, plant and equipment, net — Note 2.g) . . . .
Intangible assets, net — Note 2.h) . . . . . . . . . . . . .
14,472,495
606,871,539
28,186,861
60,433,842
17,393,002
808,900,017
24,927,677
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.
299,100,551
82,142,004
460,608,164
148,251,933
152,704,766
65,235,709
.
9,741,215
.
151,084,555
.
32,850,180
.
72,521,864
.
7,031,748
. 1,342,725,846
. 1,086,559,244
12,124,327
735,793,668
34,067,425
253,909,849
54,777,966
765,693,403
25,394,203
Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,702,514,652 1,881,760,841 1,561,185,433
Goodwill — Note 2.f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,476,156,285 1,654,659,420 1,648,077,012
Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,178,670,937 3,536,420,261 3,209,262,445
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,386,714,064 4,569,505,472 4,058,458,229
LIABILITIES
CURRENT LIABILITIES
Accounts payable — Note 2.i) . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term debt and current portion of long-term debt — Note 2.j) .
Salaries and Social Security payable . . . . . . . . . . . . . . . . . . . . .
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities — Note 2.k) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
437,439,485
283,693,952
291,281,126
420,508,325 2,781,551,009 2,241,290,056
118,426,541
78,323,318
57,884,980
177,406,201
118,874,324
60,171,818
136,463,000
82,569,342
61,550,071
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,290,243,552 3,345,011,945 2,712,178,051
NON-CURRENT LIABILITIES
Accounts payable — Note 2.i) . . . . .
Long-term debt — Note 2.j) . . . . . . .
Salaries and Social Security payable
Taxes payable . . . . . . . . . . . . . . . .
Other liabilities — Note 2.k) . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . .
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10,640,522
. 2,057,858,346
.
309,668
.
14,759,728
. 1,010,446,297
.
112,879,172
4,987,241
427,792,561
81,810
5,875,542
20,970,404
68,843,761
14,511,121
550,224,807
—
2,003,997
32,784,378
58,288,218
Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,206,893,733
528,551,319
657,812,521
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,497,137,285 3,873,563,264 3,369,990,572
MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
354,381,111
SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,535,195,668
32,673,775
663,268,433
40,312,958
648,154,699
Total Liabilities, Minority Interest and Shareholders’ Equity . . . . 6,386,714,064 4,569,505,472 4,058,458,229
The accompanying notes 1 to 9 are an integral part of these consolidated financial statements.
F-65
GRUPO CLARIN S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2006, 2005 and 2004
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
For the Years Ended December 31,
2006
2005
2004
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (excluding depreciation and amortization) . . . .
2,811,793,032
(1,491,628,105)
1,988,424,640
(1,088,461,709)
1,667,332,685
(842,196,680)
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses (excluding depreciation and amortization)
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . .
1,320,164,927
Expenses subtotal . . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, plant and equipment(1) .
Amortization of intangible assets . . . . . . . . . . . .
Depreciation of other investments . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Depreciation and amortization subtotal . . . . . . . . . . . . . .
Financing and holding results
Generated by assets
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other taxes and expenses . . . . . . . . . . . . . . . . . . .
Exchange differences . . . . . . . . . . . . . . . . . . . . . . .
Impairment of investments . . . . . . . . . . . . . . . . . . .
Holding gains on inventories . . . . . . . . . . . . . . . . . .
Effect of financial discounts on assets . . . . . . . . . . .
Inventories impairment . . . . . . . . . . . . . . . . . . . . . .
Holding gains on financial instruments . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Generated by liabilities
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences . . . . . . . . . . . . . . . . . . . . . . . .
Income from repurchase and debt restructuring . . . .
Effect of financial discounts on liabilities . . . . . . . . . .
Fees and other financial expenses . . . . . . . . . . . . . .
CER restatement . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding losses on financial instruments . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings (losses) from unconsolidated affiliates
and gain on sale of subsidiaries, net . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . .
899,962,931
825,136,005
(289,985,969)
(320,526,202)
(227,545,393)
(215,668,875)
(192,037,190)
(174,192,254)
.
.
.
.
(610,512,171)
(169,318,902)
(38,882,648)
(328,050)
(443,214,268)
(142,722,126)
(8,655,321)
(274,667)
(366,229,444)
(183,894,855)
(11,966,301)
(274,665)
..
(208,529,600)
(151,652,114)
(196,135,821)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
28,063,611
(41,541,812)
8,174,091
(161,000)
2,014,852
(1,414,102)
(120,000)
366,519
(117,046)
13,856,093
(24,963,785)
15,554,683
(648,130)
9,373,425
481,153
(158,158)
—
(431,343)
8,106,531
(21,292,284)
11,234,379
(5,789,927)
2,807,884
2,106,697
—
—
43,161
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(276,480,371)
(16,805,486)
1,249,944,385
(708,718)
(14,598,181)
(13,590,505)
(2,957,037)
(74,217)
(264,791,552)
(60,303,737)
6,118,406
(2,237,705)
(20,344,570)
(14,386,172)
—
1,648,127
(246,005,217)
(41,995,348)
23,281,948
608,648
(30,027,443)
(6,596,654)
—
—
224,673,371
17,486,169
15,214,380
269,444
31,409,897
(10,138,564)
Income/(loss) for the year before income tax, tax on assets
and minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax and tax on assets . . . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,663,277,679
(490,694,643)
(302,912,073)
(20,652,892)
35,972,723
(1,745,809)
(19,475,552)
15,252,326
2,327,028
Net income/(loss) for the year . . . . . . . . . . . . . . . . . . . . . .
869,670,963
13,574,022
(1,896,198)
(1) Chargeable to:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . .
(150,223,445)
(9,317,275)
(9,778,182)
(125,773,460)
(10,450,664)
(6,498,002)
..
..
(165,879,282)
(12,006,362)
(6,009,211)
The accompanying notes 1 to 9 are an integral part of these consolidated financial statements.
F-66
GRUPO CLARIN S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2006, 2005 and 2004
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
For the Years Ended December 31,
2006
CASH PROVIDED BY OPERATING ACTIVITIES
Net income/(loss) for the year . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax and tax on assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income/(loss) for the year to cash
provided by operating activities:
Depreciation of property, plant and equipment . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . .
Depreciation of other investments . . . . . . . . . . . . . . . . . . . . .
(Reversal)/ Setting up of allowances for doubtful accounts . . . .
Setting up of provision for contingencies . . . . . . . . . . . . . . . . .
Impairment of investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange difference and other financial results . . . . . . . . . . . .
Equity in (earnings) losses from unconsolidated affiliates and
gain on sale of subsidiaries, net . . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Holding losses on financial instruments . . . . . . . . . . . . . . . . .
Holding gains on inventories . . . . . . . . . . . . . . . . . . . . . . . . .
(Gains) losses on sale of property, plant and equipment . . . . . .
Income from repurchase and debt restructuring . . . . . . . . . . . .
Allowance for impairment in value of inventories . . . . . . . . . . .
Changes in assets and liabilities:
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and Social Security payables . . . . . . . . . . . . . . . . .
Taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax and tax on assets payments . . . . . . . . . . . . . . . . .
2004
.
.
.
869,670,963
490,694,643
248,416,760
13,574,022
(35,972,723)
250,935,459
(1,896,198)
(15,252,326)
237,898,686
.
.
.
.
.
.
.
169,318,902
38,882,648
328,050
(2,296,159)
6,408,564
161,000
17,034,872
142,722,126
8,655,321
274,667
(179,948)
21,994,510
648,130
50,076,815
183,894,855
11,966,301
274,665
15,132,228
23,851,893
5,789,927
27,884,035
.
(224,673,371)
.
302,912,073
.
2,590,518
.
(2,014,852)
.
(24,998)
. (1,249,944,385)
.
120,000
(15,214,380)
1,745,809
—
(9,373,425)
(1,289,207)
(6,118,406)
158,158
(31,409,897)
(2,327,028)
—
(2,807,884)
174,834
(23,281,948)
—
.
.
.
.
.
.
.
.
.
.
(125,209,755)
(125,737,911)
6,721,455
11,425,993
53,086,095
17,746,784
55,947,404
138,914,329
(17,068,783)
(117,987,226)
(38,565,512)
22,460,689
(42,215,879)
(1,705,311)
6,643,948
19,480,527
15,131,286
13,848,884
(15,604,109)
(43,850,774)
(30,501,773)
3,131,591
(26,524,153)
(2,692,984)
(50,778,376)
6,747,846
(659,569)
9,142,023
(8,685,660)
(17,550,849)
565,423,613
358,260,677
311,520,239
(253,586,347)
15,945,485
(14,719,018)
(2,882,290)
(101,794,923)
(226,858,606)
—
(1,597,968)
(68,935,252)
(8,097,107)
—
(1,883,978)
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
Payment for the acquisition of property, plant and equipment . . . . .
Payment for the acquisition of subsidiaries, net of cash acquired . .
Payment for the acquisition of other investments . . . . . . . . . . . . . .
Payment for the acquisition of intangible assets . . . . . . . . . . . . . .
Collection for proceeds from sale of property, plant and equipment
and other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection for proceeds from the disposal of long-term
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital contribution received by subsidiaries . . . . . . . . . . . . . . . . .
Collection of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection of interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used in) provided by investing activities . . . . . . . . . . . . . . .
F-67
2005
148,368
3,044,712
12,038,018
—
45,750,000
548,800
754,478
—
—
2,985,551
3,509,859
161,280,000
—
2,051,472
652,033
(208,040,524)
(320,711,375)
97,105,186
GRUPO CLARIN S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
For the Years Ended December 31,
2006
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
Loans obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of loans — Principal . . . . . . . . . . . . . . . . . . . .
Payment of fees on bank and financial debt restructuring. . .
Net payments for financial instruments. . . . . . . . . . . . . . . .
Payment of debts due to purchase of investments. . . . . . . .
Changes in minority interest . . . . . . . . . . . . . . . . . . . . . . .
Payment of interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2005
2004
.
.
.
.
.
.
.
474,329,218
(706,526,560)
(32,670,018)
(9,431,983)
—
(1,256,381)
(196,688,824)
226,465,472
(158,868,437)
—
—
(9,824,050)
(6,897,166)
(21,802,929)
114,932,888
(525,793,268)
—
—
(9,987,505)
(4,488,037)
(71,287,781)
Cash (used in) provided by financing activities . . . . . . . . . . . . . . .
(472,244,548)
29,072,890
(496,623,703)
FINANCING AND HOLDING RESULTS GENERATED BY CASH
AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease)/ Increase in cash . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in funds from acquisitions . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at the beginning of the year. . . . .
9,051,088
(105,810,371)
—
487,052,926
.
.
.
.
(4,699,408)
4,167,316
61,922,784
(83,830,962)
935,719
630
424,194,423(2) 464,020,096
Cash and cash equivalents at the end of the year(1) . . . . . . . .
381,242,555
487,052,926
380,189,764
(1) It includes:
Cash and banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments with maturities of less than three months . . . . . . . .
(2) It includes funds arising from Vistone LLC consolidation.
299,100,551
82,142,004
175,532,841
311,520,085
286,148,975
94,040,789
The accompanying notes 1 to 9 are an integral part of these consolidated financial statements.
F-68
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2006, 2005 and 2004
In Argentine Pesos (Ps.) — Note 2.1 to the Parent Company Only Financial Statements
Unless Otherwise Specifically Indicated
NOTE 1 — BASIS FOR THE PREPARATION AND PRESENTATION OF THE CONSOLIDATED
FINANCIAL STATEMENTS
The consolidated financial statements of Grupo Clarín S.A. (hereinafter indistinctively referred to
as “Grupo Clarín” or “the Company”) as of December 31, 2006, 2005 and 2004 have been prepared
in accordance with Argentine Federation of Professional Councils in Economic Sciences (“FACPCE”
for its Spanish acronym) Technical Resolution No. 21, incorporating all companies in which the
Company has, directly or indirectly, a controlling interest by applying the line-by-line consolidation
method, except as otherwise expressly indicated.
The subsidiaries directly controlled by the Company are as follows:
As of December 31,
2006 2005 2004
Arte Gráfico Editorial Argentino S.A. (“AGEA”) . . . . . . . . .
Multicanal S.A. (“Multicanal”) . . . . . . . . . . . . . . . . . . . . . .
Primera Red Interactiva de Medios Americanos (PRIMA)
Internacional S.A. (“PRIMA Internacional”) . . . . . . . . . . . .
Arte Radiotelevisivo Argentino S.A. (“ARTEAR”) . . . . . . .
Inversora de Eventos S.A. (“IESA”) . . . . . . . . . . . . . . . . .
GC Gestión Compartida S.A. (“GCGC”) . . . . . . . . . . . . . .
Clarín Global S.A. (“Clarín Global”) . . . . . . . . . . . . . . . . .
Editorial La Razón S.A. (“La Razón”) . . . . . . . . . . . . . . . .
Radio Mitre S.A. (“Radio Mitre”) . . . . . . . . . . . . . . . . . . . .
Grupo Clarín Services LLC (“GC Services”) . . . . . . . . . . .
Southtel Holdings S.A. (“SHOSA”) . . . . . . . . . . . . . . . . . .
Vistone LLC (“Vistone”) . . . . . . . . . . . . . . . . . . . . . . . . . .
VLG Argentina LLC (“VLG”) . . . . . . . . . . . . . . . . . . . . . . .
CVB Holding LLC (“CVB”) . . . . . . . . . . . . . . . . . . . . . . . .
GC Minor S.A. (“GC Minor”) . . . . . . . . . . . . . . . . . . . . . . .
Compañía Latinoamericana de Cable S.A. (“CLC”) . . . . .
................
................
X
(1)
X
X
X
X
..
..
..
..
..
..
..
..
..
..
..
..
..
..
X
X
X
X
(1)
(1)
X
X
X
X
(2)
X
X
X
X
X
X
X
X
X
X
—
—
X
(2)
—
X
—
X
X
X
X
X
X
X
—
—
—
—
—
X
—
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
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..
..
..
..
..
..
.
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.
.
.
.
.
.
.
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.
.
.
.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
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..
..
..
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..
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.
.
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.
.
.
.
(1) Indirectly consolidated subsidiaries as of December 31, 2006.
(2) Proportionally consolidated subsidiary as of December 31, 2006, and indirectly and proportionally
consolidated as of December 31, 2005.
The financial statements used for consolidation purposes bear the same closing date as the
consolidated financial statements, comprise the same periods and have been prepared under
substantially the same accounting policies as those used by the Company, which are described in the
notes to the parent company only financial statements or, as the case may be, adjusted as applicable.
1.1. Summary of Significant Accounting Policies
Following is a description of the most significant accounting policies applied in the preparation of
the consolidated financial statements in addition to those discussed in Note 2.2. to the parent
company only financial statements.
F-69
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
a) Trade Receivables, net
Trade receivables have been valued as of each year-end at their estimated realization value net,
where applicable, of an allowance for doubtful accounts, which was considered to be sufficient to
absorb future losses from uncollectible receivables.
b) Inventories
Inventories have been valued at the latest purchase price, latest production cost, replacement or
reproduction cost, as applicable. The value of these assets does not exceed their estimated recoverable value.
The criterion followed by certain subsidiaries to expense these items is as follows:
• Film rights:
The cost of programs, series and soap operas is fully expensed against the cost of sales on the
exhibition date or upon expiry of exhibition rights, whichever occurs first.
The remaining film rights are amortized on a decreasing-balance basis, based on the number of
showings granted by those rights.
Rights related to features, series and single programs acquired in perpetuity for broadcasting by
the Volver channel are expensed against the cost of sales over seven years, with a grace period of
four years. They are subsequently amortized on a decreasing basis over the next three years.
• Programs:
In-house production cost is fully expensed against the cost of sales after broadcasting of the
chapter or program.
Programs purchased, co-production and in-house production on which the Company has
perpetuity rights are expensed against the cost of sales over eight years, with a grace period of three
years. Subsequently, they are amortized on a straight-line basis over the following five years.
• Events:
The cost of events is fully expensed against the cost of sales at the time of broadcasting.
c)
Other Assets
Deferred charges have been valued at the amounts actually disbursed, while real property has
been valued at acquisition cost. The value of these assets does not exceed their recoverable value.
Investments subject to restrictions on disposition denominated in foreign currency have been
valued at face value plus interest accrued as of each year-end.
d) Long-Term Investments
Long-term investments over which the Company does not exert significant influence have been
valued at cost.
Long-term investments in Radio Mitre have been carried at zero value, based on Management’s
expectations for its subsidiaries.
F-70
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
e) Property, Plant and Equipment and Intangible Assets
Improvements that extend the lives of the assets have been capitalized. Other repair and
maintenance expenses have been expensed as incurred.
Intangible assets have been valued at acquisition cost, restated as set forth in Note 2.1 to the
parent company only financial statements, net of the related accumulated amortization. Intangible
assets are amortized on a straight line basis, taking into account their estimated useful lives.
Subscriber portfolio has been valued based on the projected cash flows estimated for such portfolio.
The book value of intangible assets does not exceed their estimated recoverable value.
f)
Derivatives
Receivables and liabilities generated by derivatives have been valued at their estimated fair
value. Changes in fair value have been recognized as result for the year.
g) Allowances
• For doubtful accounts: comprises doubtful accounts estimated by Management at year-end,
based on the opinion of legal counsel, where appropriate.
• For inventories, property, plant and equipment and obsolescence of materials: determined
based on the estimates of each company’s management, where appropriate, regarding the
future consumption of potentially obsolete or slow-moving assets.
• For contingencies: estimated based on the evaluation of existing claims at the end of each
year, according to the reports of the legal counsel, where applicable.
h) Foreign Exchange Differences
Pursuant to Professional Council in Economic Sciences of the City of Buenos Aires (“CPCECABA” for its Spanish acronym) Resolution MD No. 3/02, foreign exchange differences occurring on
or after January 6, 2002 arising from the devaluation of the Argentine currency and other associated
effects related to liabilities denominated in foreign currency as of such date must be charged to the
cost of assets acquired or built through such financing, provided such link is direct (the “direct
method”). As an alternative criterion, companies may opt to give a similar treatment to exchange
differences arising from indirect financing (the “indirect method”).
Subsequently, the CPCECABA issued Resolution CD No. 87/03 which suspended that accounting treatment of foreign exchange differences and required exchange differences to be charged to
income for the year as from July 29, 2003.
In that sense, AGEA has capitalized exchange differences in its goodwill as of December 31,
2002, which were determined in accordance with the direct method. The residual value of such
capitalizations as of December 31, 2006, 2005 and 2004 amounts to approximately 22.7 million,
37.8 million and 38.4 million, respectively.
Furthermore, Artes Gráficas Rioplatense S.A. (“AGR”) has capitalized exchange differences in
its property, plant and equipment, Intangible assets and Goodwill, determined in accordance with the
indirect method. The residual value of such capitalizations as of December 31, 2006, 2005 and 2004,
amounts to approximately 2.4 million, 3.9 million and 6.0 million, respectively.
F-71
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
i) Circulation and Advertising Sales in Subsidiaries
Advertising and circulation sales revenues are presented net of returns, discounts and rebates.
j) Barter Transactions
The Company sells advertising spaces in exchange for goods or services. These barter
transactions were booked at the value of the goods or services received. Revenues were booked
when the advertisement was made, and the goods or expenses were booked when the goods were
received or the services were used. The goods or services owed to the Company for the advertisements made are shown as trade receivables. The advertisements to be made in exchange for the
goods and services provided to the Company are shown as accounts payable.
1.2.
Additional Consolidated Cash Flow Statements Information
As a result of the financing for the purchases and sales of the companies mentioned in Note 10
to the parent company only financial statements and in Note 8, there was an increase of 858.3 million
in the balance of “Other liabilities” as of December 31, 2006. Furthermore, there was a decrease of
approximately 560.4 million in Loans, as a result of the capitalization of Multicanal’s debt securities, as
disclosed in Note 5 — Multicanal. These transactions did not have an impact on consolidated cash
and cash equivalents.
NOTE 2 — BREAKDOWN OF MAIN ACCOUNTS
2006
a) Short-term investments
Current
Financial instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) Trade receivables, net
Current
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . .
Non-Current
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . .
F-72
As of December 31,
2005
2004
55,558,418
9,220,018
17,363,568
82,142,004
280,244,075
10,235,278
21,040,732
311,520,085
83,485,267
40,167
10,515,355
94,040,789
544,242,165
(83,634,001)
360,554,590
(83,943,182)
353,070,830
(97,938,661)
460,608,164
276,611,408
255,132,169
9,756,215
(15,000)
12,133,327
(9,000)
14,472,495
—
9,741,215
12,124,327
14,472,495
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31,
2006
c) Other receivables, net
Current
Tax credits . . . . . . . . . . . . . . . . . . . . . .
Court-ordered and guarantee deposits .
Prepaid expenses. . . . . . . . . . . . . . . . .
Advance payments . . . . . . . . . . . . . . . .
Related parties . . . . . . . . . . . . . . . . . . .
Dividends receivable . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for other doubtful accounts .
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
...
...
...
...
...
...
...
...
...
26,708,273
8,212,920
11,147,999
20,894,478
41,878,665
4,787,355
9,843,189
27,258,717
(2,479,663)
148,251,933
Non-Current
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transmission rights to be accrued . . . . . . . . . . . . . . .
Loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to personnel . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for other doubtful accounts . . . . . . . . . . . .
d) Inventories
Current
Raw materials and supplies . . . . . . . . . . . . . . . . . . . .
Products-in-process . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film products and rights . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for impairment of inventories . . . . . . . . . . .
Non-Current
Raw materials and supplies . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Film products and rights . . . . . . . . . . . . . . . . . . . . . . .
F-73
2005
12,692,421
13,930,340
8,216,470
19,471,978
18,011,283
3,538,300
5,091,924
28,196,434
(291,438)
2004
16,329,513
17,253,917
8,348,222
18,549,619
10,584,362
499,595
7,397,137
23,540,372
(253,309)
108,857,712
102,249,428
629,370,784
40,924,621
45,500,903
12,481,270
1,901,764
1,299,808
1,083,408
—
5,479,696
(2,248,586)
508,736,847
30,849,112
44,778,420
19,847,204
1,477,358
—
583,708
—
1,444,096
(845,206)
151,084,555
735,793,668
606,871,539
91,019,419
1,838,890
7,684,403
43,617,712
4,147,337
83,503,424
1,792,586
9,136,170
43,724,972
1,633,143
57,094,777
1,588,305
5,157,740
38,684,943
217,995
148,307,761
4,709,646
(312,641)
139,790,295
12,600,000
(192,641)
102,743,760
2,039,296
(34,483)
152,704,766
152,197,654
104,748,573
2,092,843
4,602,310
26,155,027
32,850,180
27,149,710
—
6,917,715
34,067,425
2,476,329
—
25,710,532
28,186,861
45,419,228
87,364,293
192,343
3,811,809
1,606,325
1,372,267
524,281
6,963,398
7,042,434
(3,211,823)
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31,
e) Investments in unconsolidated affiliates
Compañía Inversora de Medios de Comunicación
(CIMECO) S.A. (“CIMECO”) . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances for future acquisitions of investments . . . . .
Cablevisión S.A. (“Cablevisión”) . . . . . . . . . . . . . . . . .
Allowance for investment impairment . . . . . . . . . . . . .
f)
2006
2005
2004
68,223,619
4,476,686
12,938,007
—
(13,116,448)
62,595,341
4,812,137
13,309,460
186,240,359
(13,047,448)
57,414,600
8,506,560
6,912,000
—
(12,399,318)
72,521,864
253,909,849
60,433,842
Goodwill
Main Account
Comercializadora de Productos
Gráficos Brasileros Ltda. . . .
Telecor S.A.C.I. (“Telecor”) . . . .
Teledifusora Bahiense S.A.
(“Telba”) . . . . . . . . . . . . . . . .
Patagonik Film Group S.A. . . . .
Cablevisión S.A. . . . . . . . . . . .
Teledigital Cable S.A.
(“Teledigital”) . . . . . . . . . . . .
Pol-Ka Producciones S.A. (“PolKa”) . . . . . . . . . . . . . . . . . . .
Multicanal and subsidiaries . . . .
Primera Red Interactiva de
Medios Argentinos S.A.
(“PRIMA”) . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . .
Net Book
Value
Before
Impairment
Impairment
Allowance
Balance as of December 31,
2006
2005
2004
19,947,800
39,173,062
—
—
19,947,800
39,173,062
—
39,173,062
—
39,173,062
3,774,071
6,197,435
748,609,297
—
—
—
3,774,071
6,197,435
748,609,297
3,774,071
4,114,311
—
3,774,071
4,114,311
—
201,910,249
—
201,910,249
—
—
16,130,769
(6,850,727)
9,280,042
9,280,042
9,280,042
2,160,536,176 (718,140,441) 1,442,395,735 1,592,864,197 1,587,283,544
2,272,319
2,596,275
—
—
2,272,319
2,596,275
Total as of December 31,
2006 . . . . . . . . . . . . . . . . . .
3,201,147,453 (724,991,168) 2,476,156,285
Total as of December 31,
2005 . . . . . . . . . . . . . . . . . .
2,543,859,745 (889,200,325)
Total as of December 31,
2004 . . . . . . . . . . . . . . . . . .
2,556,193,805 (908,116,793)
F-74
2,272,319
3,181,418
2,272,319
2,179,663
1,654,659,420
1,648,077,012
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
g) Property, plant and equipment, net
Cost of
Accumulated
Acquisition(1) Depreciation(1)
Main Account
Real property . . . . . . . . . .
Furniture and fixtures . . . .
Telecommunication, audio
and video equipment . . .
External network and
broadcasting equipment .
Computer equipment and
software . . . . . . . . . . . .
Technical equipment . . . . .
Workshop machinery. . . . .
Tools . . . . . . . . . . . . . . . .
Spare parts . . . . . . . . . . .
Installations . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . .
Plots . . . . . . . . . . . . . . . .
Leased assets . . . . . . . . .
Other materials and
equipments . . . . . . . . . .
Works-in-progress . . . . . .
Leasehold improvements. .
Advances to suppliers . . . .
Net Book Value as of December 31,
2006
2005
2004
.
.
570,374,832
112,347,557
(218,564,460)
(103,960,251)
.
300,483,653
(271,813,278)
.
3,108,126,843
(2,553,563,481)
.
.
.
.
.
.
.
.
.
369,619,594
35,155,142
679,671,681
34,407,099
24,008,607
104,167,419
93,816,140
10,639,531
152,697
(324,506,307)
(28,572,918)
(607,626,770)
(27,070,060)
(20,331,565)
(90,952,113)
(79,921,867)
(6,715,099)
(147,388)
45,113,287
6,582,224
72,044,911
7,337,039
3,677,042
13,215,306
13,894,273
3,924,432
5,309
26,064,184
3,583,315
78,513,343
1,407,923
3,098,431
18,485,754
5,096,136
3,510,579
6,950
35,622,027
9,371,518
88,079,932
748,722
3,368,262
23,824,088
3,824,978
2,755,612
20,232
.
.
.
.
194,370,354
60,518,548
42,733,688
3,311,322
—
—
(38,285,980)
—
194,370,354
60,518,548
4,447,708
3,311,322
75,338,511
27,728,866
3,273,805
7,507,715
55,967,095
16,363,972
133,216
2,496,751
Subtotal . . . . . . . . . . . . . . .
Allowance for property, plant
and equipment
impairment and
obsolescence of
materials . . . . . . . . . . . .
5,743,904,707
(4,372,031,537)
(29,147,324)
—
Total as of December 31,
2006 . . . . . . . . . . . . . . .
5,714,757,383
(4,372,031,537)
Total as of December 31,
2005 . . . . . . . . . . . . . . .
3,360,688,540
(2,594,995,137)
Total as of December 31,
2004 . . . . . . . . . . . . . . .
3,270,433,632
(2,461,533,615)
351,810,372 277,365,700 291,516,715
8,387,306
5,442,276
6,658,015
28,670,375
17,311,403
3,553,498
554,563,362 227,200,769 278,358,091
1,371,873,170 780,935,660 822,662,724
(29,147,324) (15,242,257) (13,762,707)
1,342,725,846
765,693,403
808,900,017
(1) It includes historical value and accumulated depreciation in the amount of 2,171,211,222 and
1,723,501,359, respectively, arising from the acquisition and consolidation of companies as of
December 31, 2006.
F-75
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
h) Intangible Assets, net
Cost of
Acquisition(1)
Main Account
Organizational expenses, preoperating costs and licenses . .
Editing/exploitation rights . . . . . .
Network acquisition rights . . . . .
Subscriber portfolio acquired . . .
Trademarks and patents . . . . . .
Deferred charges . . . . . . . . . . .
Advances to suppliers . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
Accumulated
Amortization(1)
.
.
.
.
.
.
.
.
42,800,486
47,107,819
4,339,331
1,057,401,271
2,675,777
5,449,239
—
28,166,831
(34,514,108)
(6,484,084)
(2,720,666)
(28,109,650)
(1,739,817)
(2,082,755)
—
(25,333,590)
Subtotal . . . . . . . . . . . . . . . . . . .
Allowance for intangible assets
impairment . . . . . . . . . . . . . . .
1,187,940,754
(100,984,670)
Total as of December 31, 2006 . .
1,187,543,914
(100,984,670)
Total as of December 31, 2005 . .
90,436,238
(65,042,035)
Total as of December 31,2004 . . .
93,917,095
(68,989,418)
(396,840)
—
Net Book Value as of December 31,
2006
8,286,378
40,623,735
1,618,665
1,029,291,621
935,960
3,366,484
—
2,833,241
2005
2004
6,001,719
6,774,532
4,348,388
3,098,212
1,975,015
2,378,200
5,789,578
350,179
1,052,820
1,147,274
114,494
125,485
439,416
—
9,773,622 11,450,634
1,086,956,084 29,495,052 25,324,516
(396,840) (4,100,849)
(396,839)
1,086,559,244
25,394,203
24,927,677
(1) Include historical value and accumulated amortization in the amount of 388,691,442 and
121,234,405, respectively, arising from the acquisition and consolidation of companies as of
December 31, 2006.
F-76
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance as of December 31,
2006
i) Accounts payable
Current
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related parties . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related parties . . . . . . . . . . . . . . . . . . . . . . . . .
j) Short-term and long-term debt
Short-term debt and current portion of longterm debt
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . .
Financial loans . . . . . . . . . . . . . . . . . . . . . . . .
Negotiable obligations . . . . . . . . . . . . . . . . . . .
Accrued Interest . . . . . . . . . . . . . . . . . . . . . . .
Related parties . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
Long-term debt
Financial loans . . . . . . . . . . . . . . . . . . . . . . . . .
Negotiable obligations . . . . . . . . . . . . . . . . . . . .
Measurement at fair value . . . . . . . . . . . . . . . . .
2005
2004
417,185,185
20,254,300
245,582,428
38,111,524
284,694,403
6,586,723
437,439,485
283,693,952
291,281,126
10,640,522
—
3,118,675
1,868,566
6,215,646
8,295,475
10,640,522
4,987,241
14,511,121
5,707,822
300,349,298
59,307,498
52,643,707
2,500,000
257,418
327,467,128
1,538,791,560
912,534,903
2,500,000
193,832
69,679,523
1,513,398,960
658,017,741
—
420,508,325
2,781,551,009
2,241,290,056
174,979,771
1,998,550,151
(115,671,576)
146,530,443
301,747,913
(20,485,795)
206,549,876
366,455,369
(22,780,438)
2,057,858,346
427,792,561
550,224,807
k) Other liabilities
Current
Related parties . . . . . . . . . . . . . . . . . . . . . . . .
Sellers financing . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . .
Advances from clients . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
6,171,009
41,171,557
15,026,649
50,514,512
23,579,273
136,463,000
4,489,780
12,303,712
14,473,674
31,010,539
20,291,637
82,569,342
1,815,223
9,623,021
13,338,357
14,881,477
21,891,993
61,550,071
Non-Current
Sellers financing . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liabilities. . . . . . . . . . . . . . . . .
Guarantee deposits . . . . . . . . . . . . . . . . . . . . .
Long-term investments . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
850,590,278
156,104,142
1,697,806
—
2,054,071
1,010,446,297
2,236,718
242,386
1,617,153
13,748,722
3,125,425
20,970,404
15,711,541
60,328
—
11,112,484
5,900,025
32,784,378
NOTE 3 — SEGMENT INFORMATION
The Company is mainly engaged in media and entertainment activities, which are carried out
through the companies in which it holds a participating interest. Based on the nature, clients, and risks
F-77
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
involved, the following business segments have been identified, which are closely related to the way in
which the Company’s management assesses its business performance:
• Cable television & Internet access: it is basically comprised by the operations of its subsidiary
Cablevisión together with its subsidiaries, mainly Multicanal, Teledigital and PRIMA.
• Printing & publishing: it is basically comprised by the operations of its subsidiary AGEA and its
subsidiaries AGR, CIMECO, Tinta Fresca Ediciones S.A. (“Tinta Fresca”), Papel Prensa
S.A.I.C.F. y de M., La Razón, Ferias y Exposiciones Argentinas S.A. and Oportunidades S.A.
• Broadcasting and programming: it is basically comprised by the operations of its subsidiaries
ARTEAR, IESA and Radio Mitre, and their respective subsidiaries, including Telba, Radio
Televisión Río Negro Sociedad del Estado LU 92 Canal 10 — UTE, and the companies under
common control, such as Pol-Ka, Ideas del Sur S.A., Tele Red Imagen S.A. (“TRISA”) and
Televisión Satelital Codificada S.A. (“TSC”).
Additionally, the Company is engaged in other related business, which were included under
“Other”. These segments fundamentally include the Company’s own operations (particular to a holding
company) and those carried out by its (directly or indirectly) subsidiaries GCGC and Clarín Global.
F-78
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
There follows the information as of December 31, 2006, 2005 and 2004 for each of the business
segments identified by the Company:
Cable
Television &
Broadcasting
Internet
Printing &
and
Access
Publishing Programming
INFORMATION ARISING FROM
CONSOLIDATED INCOME
STATEMENTS AS OF
DECEMBER 31, 2006
Net sales to third parties . . . . . . . 1,226,309,460
Intersegment net sales . . . . . . . .
48,474,550
947,247,552
42,111,043
Net sales . . . . . . . . . . . . . . . . . 1,274,784,010 989,358,595
Cost of sales (excluding
depreciation and amortization) . . (588,742,474) (513,306,404)
Subtotal . . . . . . . . . . . . . . . . . .
686,041,536 476,052,191
Expenses (excluding depreciation
and amortization)
Selling expenses. . . . . . . . . . . (178,687,981) (103,065,779)
Administrative expenses . . . . . . (174,124,724) (110,974,392)
Depreciation of property, plant
and equipment . . . . . . . . . . (115,707,061) (35,622,297)
Amortization of intangible
assets . . . . . . . . . . . . . . . .
(34,798,158)
(2,580,385)
Depreciation of other
investments . . . . . . . . . . . .
—
(156,036)
Financing and holding results
Generated by assets . . . . . . . .
4,904,240
87,106
Generated by liabilities . . . . . . . 1,001,081,365
(49,120,604)
Equity in earnings (losses) from
unconsolidated affiliates and
gain on sale of subsidiaries,
net . . . . . . . . . . . . . . . . . . . .
254,091,313
(25,365,788)
Other income (expense), net . . . .
11,501,040
(3,977,734)
Income for the year before income
tax, tax on assets and minority
interest . . . . . . . . . . . . . . . . . 1,454,301,570 145,276,282
Income tax and tax on assets . . (415,773,903) (64,817,688)
Minority interest . . . . . . . . . . . (301,993,864)
68,428
Net income for the year . . . . . . . .
—
INFORMATION ARISING FROM
CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
2006
Total Assets . . . . . . . . . . . . . . . 4,955,393,637
Total Liabilities. . . . . . . . . . . . . . 3,113,127,203
ADDITIONAL CONSOLIDATED
INFORMATION AS OF
DECEMBER 31, 2006
Acquisition of property, plant and
equipment . . . . . . . . . . . . . . .
224,430,307
Acquisition of intangible assets . . .
14,364,252
Non-cash expenses . . . . . . . . . .
(20,929,065)
Other
Deletions
Total
559,404,817
100,060,949
78,831,203
— 2,811,793,032
24,117,553 (214,764,095)
—
659,465,766
102,948,756 (214,764,095) 2,811,793,032
(454,968,953)
204,496,813
(26,008,876)
91,398,602 (1,491,628,105)
76,939,880 (123,365,493) 1,320,164,927
(50,185,834)
(70,659,039)
(8,225,007)
(32,850,830)
50,178,632
68,082,783
(289,985,969)
(320,356,202)
(15,988,620)
(2,000,924)
—
(169,318,902)
(1,316,759)
(187,346)
—
(38,882,648)
(172,014)
—
(328,050)
—
(7,111,874)
(5,453,484)
(102,587)
2,892,641
16,508,377 (19,122,736)
(40,730,202) 18,952,795
(3,949,567)
1,796,203
—
5,274,019
(4,734,887)
924,729,870
224,673,371
17,486,169
56,571,257
(19,969,225)
(1,198,748)
7,128,570
9,866,173
212,111
—
—
1,663,277,679
(490,694,643)
(302,912,073)
80,527,022
35,403,284
17,206,854
—
869,670,963
973,256,081
632,653,517
553,607,304
334,585,519
44,500,416
2,679,644
11,756,098
17,278,575
35,770,509
4,956,756
F-79
434,506,716 (530,049,674) 6,386,714,064
946,820,720 (530,049,674) 4,497,137,285
1,529,705
—
16,194
(34,152,656)
—
—
253,586,347
52,814,405
(4,232,405)
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cable
Television &
Broadcasting
Internet
Printing &
and
Access
Publishing Programming
INFORMATION ARISING FROM
CONSOLIDATED INCOME
STATEMENTS AS OF
DECEMBER 31, 2005
Net sales to third parties . . . . . . .
Intersegment net sales . . . . . . . .
Net sales . . . . . . . . . . . . . . . . .
Cost of sales (excluding
depreciation and amortization) . .
Subtotal . . . . . . . . . . . . . . . . .
Expenses (excluding depreciation
and amortization)
Selling expenses. . . . . . . . . .
Administrative expenses . . . . .
Depreciation of property, plant
and equipment . . . . . . . . .
Amortization of intangible
assets . . . . . . . . . . . . . . .
Depreciation of other
investments . . . . . . . . . . .
Financing and holding results
Generated by assets . . . . . . .
Generated by liabilities . . . . . .
Equity in earnings (losses) from
unconsolidated affiliates and
gain on sale of subsidiaries,
net . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . .
.
.
.
Other
Deletions
Total
733,894,382
8,891,031
798,921,729
28,110,728
443,999,881
55,422,761
11,608,648
— 1,988,424,640
48,209,918 (140,634,438)
—
742,785,413
827,032,457
499,422,642
59,818,566 (140,634,438) 1,988,424,640
(395,794,280) (416,385,976)
346,991,133
410,646,481
(106,286,095) (101,106,688)
(85,931,323) (96,031,301)
(314,674,979)
(19,179,276)
184,747,663
40,639,290
(83,061,636)
57,572,802 (1,088,461,709)
899,962,931
(53,140,812)
(53,721,058)
(3,550,876)
(26,507,751)
36,539,078
46,522,558
(227,545,393)
(215,668,875)
.
(90,065,103)
(38,544,662)
(12,399,035)
(1,713,326)
.
(5,858,058)
(1,829,004)
(727,116)
(241,143)
—
(8,655,321)
(118,631)
—
(274,667)
.
.
.
.
.
—
13,532,461
(303,191,178)
7,860,226
4,763,084
(156,036)
—
(142,722,126)
3,293,173
(20,000,236)
(4,628,649)
(2,359,528)
866,953
(28,746,261)
—
—
13,063,938
(354,297,203)
777,859
(696,399)
(271,439)
1,083,799
6,847,734
(4,881,040)
—
—
15,214,380
269,444
Income for the year before income
tax, tax on assets and minority
interest . . . . . . . . . . . . . . . . .
Income tax and tax on assets . .
Minority interest . . . . . . . . . . .
(218,184,853)
118,197,673
(141,581)
156,353,187
(62,256,888)
(643,777)
58,583,825
(19,877,432)
(922,515)
(17,405,051)
(90,630)
(37,936)
—
—
—
(20,652,892)
35,972,723
(1,745,809)
Net (loss) income for the year . . . .
(100,128,761)
93,452,522
37,783,878
(17,533,617)
—
13,574,022
757,249,323
535,836,152
474,719,843
289,419,710
INFORMATION ARISING FROM
CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
2005
Total Assets . . . . . . . . . . . . . . .
Total Liabilities. . . . . . . . . . . . . .
ADDITIONAL CONSOLIDATED
INFORMATION AS OF
DECEMBER 31, 2005
Acquisition of property, plant and
equipment . . . . . . . . . . . . . . .
Acquisition of intangible assets . . .
Non-cash expenses . . . . . . . . . .
3,336,085,132
2,702,517,166
72,128,951
896,859
(15,073,740)
17,348,490
—
(1,010,521)
F-80
11,341,282
661,189
(6,284,090)
111,741,980 (110,290,806) 4,569,505,472
456,081,042 (110,290,806) 3,873,563,264
976,200
39,920
(252,499)
—
—
—
101,794,923
1,597,968
(22,620,850)
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cable
Television &
Broadcasting
Internet
Printing &
and
Access
Publishing Programming
INFORMATION ARISING FROM
CONSOLIDATED INCOME
STATEMENTS AS OF
DECEMBER 31, 2004
Net sales to third parties . . . . . . .
Intersegment net sales . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . .
Cost of sales (excluding
depreciation and amortization) . .
Subtotal . . . . . . . . . . . . . . . . . .
Expenses (excluding depreciation
and amortization)
Selling expenses . . . . . . . . . . .
Administrative expenses . . . . . .
Depreciation of property, plant
and equipment . . . . . . . . . . .
Amortization of intangible
assets . . . . . . . . . . . . . . . .
Depreciation of other
investments . . . . . . . . . . . . .
Financing and holding results
Generated by assets. . . . . . . . .
Generated by liabilities . . . . . . .
Equity in earnings (losses) from
unconsolidated affiliates and gain
on sale of subsidiaries, net. . . . .
Other income (expense) net . . . . .
Other
Deletions
Total
632,836,030
10,033,983
703,075,993
29,022,301
324,856,730
91,776,138
6,563,932
— 1,667,332,685
51,085,163 (181,917,585)
—
642,870,013
732,098,294
416,632,868
57,649,095 (181,917,585) 1,667,332,685
(306,762,511) (361,263,476)
(250,932,717)
(15,292,291)
92,054,315
(842,196,680)
336,107,502
370,834,818
165,700,151
42,356,804
(89,863,270)
825,136,005
(82,179,572)
(78,531,509)
(99,090,269)
(79,638,302)
(46,601,959)
(47,604,013)
(2,017,440)
(20,429,650)
37,852,050
52,011,220
(192,037,190)
(174,192,254)
(116,028,708)
(54,227,309)
(12,082,289)
(1,556,549)
—
(183,894,855)
(7,369,415)
(2,954,602)
(1,408,878)
(233,406)
—
(11,966,301)
(118,629)
—
(274,665)
—
(156,036)
—
13,180,240
(273,012,030)
(11,188,936)
(6,710,178)
(7,332,228)
(970,096)
2,557,365
(20,041,762)
—
—
(2,783,559)
(300,734,066)
1,533,494
(3,574,385)
26,944,162
(1,259,216)
(159,875)
(3,028,254)
3,092,116
(2,276,709)
—
—
31,409,897
(10,138,564)
Income for the year before income
tax, tax on assets and minority
interest . . . . . . . . . . . . . . . . .
Income tax and tax on assets . . .
Minority interest . . . . . . . . . . . .
(209,874,383)
65,906,396
1,587,961
142,554,132
(26,009,600)
1,123,129
46,512,559
(17,239,813)
(244,295)
1,332,140
(7,404,657)
(139,767)
—
—
—
(19,475,552)
15,252,326
2,327,028
Net (loss) income for the year . . . .
(142,380,026)
117,667,661
29,028,451
(6,212,284)
—
(1,896,198)
693,194,612
567,206,642
407,724,536
244,954,580
11,343,231
—
(22,325,952)
12,659,235
88,268
(18,922,976)
INFORMATION ARISING FROM
CONSOLIDATED BALANCE
SHEETS AS OF DECEMBER 31,
2004
Total Assets . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . .
ADDITIONAL CONSOLIDATED
INFORMATION AS OF
DECEMBER 31, 2004
Acquisition of property, plant and
equipment . . . . . . . . . . . . . .
Acquisition of intangible assets . .
Non-cash expenses . . . . . . . . . .
.
.
.
.
.
2,907,636,818
2,392,316,325
43,375,535
1,786,879
(1,536,099)
114,599,620
230,210,382
4,557,251
8,831
(237,613)
(64,697,357) 4,058,458,229
(64,697,357) 3,369,990,572
(3,000,000)
—
—
68,935,252
1,883,978
(43,022,640)
NOTE 4 — COMMITMENTS AND CONTINGENCIES
a) Restrictions, Surety and Guarantees
IESA has contractual restrictions on the transfer of its equity interest in TRISA and Tele Net
Image Corp.
Furthermore, TRISA’s equity interest in Torneos y Competencias S.A. (Uruguay) is pledged as
collateral for a credit line.
F-81
GRUPO CLARIN S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
AGEA, TRISA, Cablevisión and Multicanal have financial indebtedness outstanding involving
certain restrictions, including but not limited to, the distribution of dividends.
Pursuant to the terms and conditions of Cablevisión’s outstanding Negotiable Obligations issued
on October 7, 2005 (see Note 5), as of December 31, 2006, Cablevisión holds 56,838,603 in a
reserve account to guarantee the payment of interest on the agreed-upon terms.
Should Cablevisión default, either partially or totally, on the payment of amounts due under the
Negotiable Obligations above-mentioned, the trustee shall promptly a