As
filed
with the Securities and Exchange Commission on September 29, 2006.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________________
FORM
20-F
(Mark
one)
o |
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b)
OR
(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
OR
|
|
x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
for
the fiscal year ended: March 31, 2006
|
|
|
OR
|
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________
to
__________
|
|
|
OR
|
|
o
|
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT 0F 1934
Date
of event requiring this shell company report __________
COMMISSION
FILE NUMBER 1-14917
|
|
____________________
NASPERS
LIMITED
(Exact
name of Registrant as specified in its charter)
Republic
of South Africa
(Jurisdiction
of incorporation or organization)
40
Heerengracht
Cape
Town, 8001
The
Republic of South Africa
(Address
of principal executive offices)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act.
N/A
(Title
of Class)
|
N/A
(Name
of each exchange on which registered)
|
|
|
Securities
registered or to be registered pursuant to Section 12(g) of the
Act.
Class
N ordinary shares, nominal value Rand 0.02 per share*
American
Depositary Shares, each representing one Class N ordinary share, nominal value
Rand 0.02 per share
(Title
of
Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act.
None
(Title
of
Class)
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report.
315,113,700
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes
X
No
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes
X
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act:
Large
Accelerated filer x Accelerated
filer o Non-Accelerated
filer o
Indicate
by check mark which financial statement item the Registrant has elected to
follow.
Item
17
Item 18
X
If
this
is an annual report, indicate by check mark if registrant is a shell company
(as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [
] No
[X]
*Not
for
trading, but only in connection with registration of American Depositary
Shares.
TABLE
OF CONTENTS
|
Page
No.
|
Our
Use of Terms and Conventions in this Annual Report
|
1
|
|
|
Accounting
Periods and Principles
|
1
|
|
|
Forward
Looking Statements
|
1
|
|
|
PART
I |
|
|
|
|
|
ITEM
1.
|
Identity
of Directors, Senior Management and Advisers
|
3 |
ITEM
2.
|
Offer
Statistics and Expected Timetable
|
3 |
ITEM
3.
|
Key
Information
|
3 |
ITEM
4.
|
Information
on the Company
|
17 |
ITEM
5.
|
Operating
and Financial Review and Prospects
|
53 |
ITEM
6.
|
Directors,
Senior Management and Employees
|
82 |
ITEM
7.
|
Major
Shareholders and Related Party Transactions
|
94 |
ITEM
8.
|
Financial
Information
|
97 |
ITEM
9.
|
The
Offer and Listing
|
101 |
ITEM
10.
|
Additional
Information
|
102 |
ITEM
11.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
114 |
ITEM
12.
|
Description
of Securities Other than Equity Securities
|
115 |
|
|
|
PART
II
|
|
|
|
|
|
ITEM
13.
|
Defaults,
Dividend Arrearages and Delinquencies
|
116
|
ITEM
14.
|
Material
Modification to the Rights of Security Holders and Use of
Proceeds
|
116
|
ITEM
15.
|
Disclosure
Controls and Procedures
|
116
|
ITEM
16A.
|
Audit
Committee Financial Expert
|
116
|
ITEM
16B.
|
Code
of Ethics
|
116
|
ITEM
16C.
|
Principal
Accountant Fees and Services
|
117
|
ITEM
16E.
|
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
|
118
|
|
|
|
PART
III
|
|
|
|
|
|
ITEM
17.
|
Financial
Statements
|
118
|
ITEM
18.
|
Financial
Statements
|
118
|
ITEM
19.
|
Exhibits
|
E-1
|
OUR
USE OF TERMS AND CONVENTIONS IN THIS ANNUAL REPORT
Unless
otherwise specified or the context requires otherwise in this annual report
on
Form 20-F:
|
·
|
references to “Naspers”, “Naspers group”,
“group”, “we”, “us” and “our” are to Naspers Limited together with its
subsidiaries, unless the context suggests otherwise; |
|
|
|
|
·
|
references
to “MIH Limited” are to MIH Limited together with its subsidiaries with
respect to any period prior to December 20, 2002, and to MIH (BVI)
Limited
together with its subsidiaries thereafter;
|
|
|
|
|
·
|
references to “Rand” and “R” are to South
African Rand, the currency of South Africa; |
|
|
|
|
·
|
references to “U.S. dollar(s)”, “dollar(s)”,
“U.S. $” and “$” are to United States dollars and cents, the currency of
the United States; |
|
|
|
|
|
references to “Euro” and “€” are to the
currency introduced at the start of the third stage of the European
Economic and Monetary Union pursuant to the Treaty establishing the
European Economic Community, as amended by the Treaty on the European
Union; |
|
|
|
|
·
|
references
to “Pound sterling” are to United Kingdom pounds sterling, the currency of
the United Kingdom;
|
|
|
|
|
·
|
references
to “Renminbi” are to Chinese Renminbi, the currency of the People’s
Republic of China;
|
|
|
|
|
·
|
references
to “Naira” are to Nigerian Naira, the currency of Nigeria;
and
|
|
|
|
|
·
|
references
to “Brazilian Real” and “Real” are to Brazilian Real, the currency of
Brazil. |
ACCOUNTING
PERIODS AND PRINCIPLES
Unless
otherwise specified, all references in this annual report to a “fiscal year” and
“year ended” of Naspers refer to a twelve-month financial period. All references
in this annual report to fiscal 2006, fiscal 2005, fiscal 2004, fiscal 2003
or
fiscal 2002 refer to Naspers’ twelve-month financial periods ended on March 31,
2006, March 31, 2005, March 31, 2004, March 31, 2003 or March 31, 2002,
respectively. References in this annual report to fiscal 2006 refer to the
period beginning April 1, 2005 and ending March 31, 2006. Our group consolidated
financial statements included elsewhere in this annual report have been prepared
in conformity with International Financial Reporting Standards (“IFRS”), which
differ in certain respects from accounting principles generally accepted in
the
United States (“U.S. GAAP”). See note 39 to Naspers’ audited consolidated
financial statements included elsewhere in this annual report.
During
the year ended March 31, 2006, the group adopted IFRS for the first time in
accordance with the JSE Limited (formerly the JSE Securities Exchange South
Africa) (“JSE”) Listing Requirements. Financial information provided in this
annual report and in our audited consolidated financial statements included
elsewhere in this annual report have been presented in accordance with IFRS
as
required in terms of the requirements of the JSE and the Securities and Exchange
Commission in the United States of America (“SEC”). Previously the group
prepared its financial statements under South African Statements of Generally
Accepted Accounting Practice (“SA GAAP”) as effective at that time. For a
description of the impact of the first time adoption of IFRS on the Group’s
reported results of operations and financial position, see note 2 to our annual
financial statements. Additionally, the US GAAP reconciliation as of and for
fiscal year ended March 31, 2005 has also been adjusted to reflect the
adjustments between IFRS and the previously reported SA GAAP
information.
The
SEC
encourages companies to disclose forward looking information so that investors
can better understand a company’s future prospects and make informed investment
decisions. This annual report contains historical and forward looking statements
concerning the financial condition, results of operations and business of
Naspers. All statements other than statements of historical fact are, or may
be
deemed to be, forward looking statements.
Forward
looking statements are statements of future expectations that are based on
management’s current expectations and assumptions and involve known and unknown
risks and uncertainties that could cause actual results, performance or events
to differ materially from those expressed or implied in these statements.
Forward looking statements include, among other things, statements concerning
the potential exposure of Naspers to market risks and statements expressing
management’s expectations, beliefs, estimates, forecasts, projections and
assumptions.
These
forward looking statements are identified by their use of terms and phrases
such
as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”,
“plan”, “objectives”, “outlook”, “probably”, “project”, “will”, “seek”, “target”
and similar terms and phrases. These statements are contained in the sections
entitled “Key Information”, “Risk Factors”, “Information on the Company”, and
“Operating and Financial Review and Prospects”, and in other sections of this
annual report. The following factors, among others, could affect the future
operations of Naspers and could cause those results to differ materially from
those expressed in the forward looking statements included in this annual
report:
|
·
|
economic, political and social risks
which
exist in all countries in which Naspers, its associated companies
and
joint ventures operate; |
|
|
|
|
·
|
adverse
regulatory developments;
|
|
|
|
|
·
|
market risks related to fluctuations
in the
exchange rates and interest rates in all countries in which Naspers,
its
associated companies and joint ventures operate; |
|
|
|
|
·
|
the level of Naspers’ debt (including finance
leases) and funding difficulties Naspers may face; |
|
|
|
|
|
restrictions
imposed by exchange control regulations and the possibility that
Naspers
may not be able to access cash flows from its subsidiaries, associated
companies and joint ventures;
|
|
|
|
|
·
|
difficulties
associated with successfully completing acquisitions and integrating
acquired companies;
|
|
|
|
|
·
|
the
lack of control we have over companies we
make minority investments in and other risks associated with such
investments;
|
|
|
|
|
·
|
dependence
on suppliers and partners for the
provision of services and expertise and on local
governments;
|
|
|
|
|
·
|
the possibility that satellites used
by
Naspers, or its printing equipment or facilities, may fail to perform
or
may be damaged; |
|
|
|
|
· |
competitive
pressures which may result in declining subscriber and circulation
levels;
|
|
|
|
|
· |
unauthorized
access to Naspers’ programming signals;
|
|
|
|
|
·
|
trade union activity and labour
instability; |
|
|
|
|
·
|
the
ability to enforce foreign judgments against Naspers and its
directors and
officers;
|
|
|
|
|
·
|
cyclical
fluctuations in the demand for advertising;
|
|
|
|
|
·
|
the
rapid pace of technological change;
|
|
|
|
|
|
reliance
on software and hardware systems, which are susceptible to
failure;
|
|
|
|
|
·
|
reliance
on content developed by third parties and susceptibility to
claims made in
connection with such content;
|
|
|
|
|
·
|
the
degree to which our intellectual property rights are protected;
and
|
|
|
|
|
·
|
changes
in accounting standards.
|
All
subsequent forward looking statements are expressly qualified in their entirety
by the cautionary statements contained or referred to in this section. You
should not place undue reliance on forward looking statements. Each forward
looking statement speaks only as of the date of the particular statement.
Naspers undertakes no obligation to publicly update or revise any forward
looking statement as a result of new information, future events or other
information. In light of these risks, Naspers’ results could differ materially
from the forward looking statements contained in this annual report.
PART
I
ITEM
1. IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not
applicable.
ITEM
2. OFFER
STATISTICS AND EXPECTED TIMETABLE
Not
applicable.
ITEM
3. KEY
INFORMATION
3.A.
Selected Financial Data
The
following tables show selected consolidated financial data for Naspers as of
and
for the fiscal years ended March 31, 2005 and 2006 under IFRS and as of and
for
the fiscal years ended March 31, 2002 through 2006 under U.S. GAAP. We derived
the selected consolidated financial data from our audited consolidated financial
statements. You should read this selected consolidated financial data together
with “Operating and Financial Review and Prospects” and Naspers’ audited
consolidated financial statements and the notes thereto appearing elsewhere
in
this annual report.
In
accordance with the JSE Listing Requirements, Naspers was required to prepare
its first annual consolidated financial statements in accordance with IFRS
for
the year ended March 31, 2006. As Naspers publishes comparative information
in
its financial statements, the date for transition to IFRS is April 1, 2004,
which represents the beginning of the earliest period of comparative information
to be presented pursuant to the requirements of the JSE and the
SEC.
Naspers’
audited consolidated financial statements have been prepared in Rand. Amounts
shown in U.S. dollars have been translated for convenience from Rand amounts
to
U.S. dollars at the noon buying rate on September 15, 2006 of Rand 7.38 per
U.S.
$1.00. You should not view such translations as a representation that such
Rand
amounts actually represent such U.S. dollar amounts, or could be or could have
been converted into or at any other rate.
|
|
Year
ended March 31
|
|
|
|
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2006
|
|
|
|
Rand
in millions, except per share data
|
U.S.
$ in millions, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue,
net
|
|
|
|
|
|
|
|
|
|
|
|
13,517.9
|
|
|
15,706.4
|
|
|
2,128.2
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of providing services and sale of goods
|
|
|
|
|
|
|
|
|
|
|
|
(7,725.8
|
)
|
|
(8,753.7
|
)
|
|
(1,186.1
|
)
|
Selling,
general and administration
|
|
|
|
|
|
|
|
|
|
|
|
(3,311.5
|
)
|
|
(3,948.7
|
)
|
|
(535.1
|
)
|
Other
losses, net
|
|
|
|
|
|
|
|
|
|
|
|
(11.7
|
)
|
|
—
|
|
|
—
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
2,468.9
|
|
|
3,004.0
|
|
|
407.0
|
|
Financial
costs, net(1)
|
|
|
|
|
|
|
|
|
|
|
|
(217.0
|
)
|
|
(11.4
|
)
|
|
(1.5
|
)
|
Share
of equity accounted results
|
|
|
|
|
|
|
|
|
|
|
|
88.6
|
|
|
151.3
|
|
|
20.5
|
|
Profit/(loss)
on sale of investments
|
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
74.4
|
|
|
10.1
|
|
Dilution
profits
|
|
|
|
|
|
|
|
|
|
|
|
368.0
|
|
|
—
|
|
|
—
|
|
Profit
before tax and minorities
|
|
|
|
|
|
|
|
|
|
|
|
2,708.2
|
|
|
3,218.3
|
|
|
436.1
|
|
Profit
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
2,334.8
|
|
|
2,126.3
|
|
|
288.1
|
|
Profit
from discontinuing operations
|
|
|
|
|
|
|
|
|
|
|
|
50.0
|
|
|
31.8
|
|
|
4.3
|
|
Profit
arising on discontinuance of operations
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
1,032.1
|
|
|
139.9
|
|
Net
profit attributable to equity holders of the group
|
|
|
|
|
|
|
|
|
|
|
|
2,384.8
|
|
|
3,190.2
|
|
|
432.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
8.42
|
|
|
7.49
|
|
|
1.01
|
|
Profit
from discontinuing operations
|
|
|
|
|
|
|
|
|
|
|
|
0.18
|
|
|
0.11
|
|
|
0.01
|
|
Profit
arising on discontinuance of operations
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
3.64
|
|
|
0.49
|
|
Net
profit attributable to equity holders of the group
|
|
|
|
|
|
|
|
|
|
|
|
8.60
|
|
|
11.24
|
|
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
7.97
|
|
|
7.08
|
|
|
0.96
|
|
Profit
from discontinuing operations
|
|
|
|
|
|
|
|
|
|
|
|
0.17
|
|
|
0.11
|
|
|
0.01
|
|
Profit
arising on discontinuance of operations
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
3.44
|
|
|
0.47
|
|
Net
profit attributable to equity holders of the group
|
|
|
|
|
|
|
|
|
|
|
|
8.14
|
|
|
10.63
|
|
|
1.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
277,293,544
|
|
|
283,718,859
|
|
|
283,718,859
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
293,126,268
|
|
|
300,242,781
|
|
|
300,242,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
per A ordinary share (cents)(2)
|
|
|
|
|
|
|
|
|
|
|
|
7.0
|
|
|
14.0
|
|
|
1.9
|
|
Dividend
per N ordinary share (cents)(2)
|
|
|
|
|
|
|
|
|
|
|
|
38.0
|
|
|
70.0
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue,
net
|
|
|
9,861.4
|
|
|
11,208.6
|
|
|
11,526.1
|
|
|
13,189.4
|
|
|
15,751.3
|
|
|
2,134.3
|
|
Operating
profit / (loss)
|
|
|
(2,355.8
|
)
|
|
(63.0
|
)
|
|
1,042.6
|
|
|
2,463.7
|
|
|
3,076.7
|
|
|
416.9
|
|
Profit
/ (loss) from continuing operations
|
|
|
(2,582.0
|
)
|
|
(889.6
|
)
|
|
495.3
|
|
|
2,243.9
|
|
|
1,801.0
|
|
|
244.0
|
|
Profit
/ (loss) from discontinued operations
|
|
|
(2,665.0
|
)
|
|
528.0
|
|
|
—
|
|
|
42.0
|
|
|
715.8
|
|
|
97.0
|
|
Cumulative
effect of change in accounting principle
|
|
|
18.4
|
|
|
(531.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net
profit / (loss)(3)
|
|
|
(5,228.5
|
)
|
|
(893.1
|
)
|
|
495.3
|
|
|
2,285.9
|
|
|
2,516.8
|
|
|
341.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
/ (loss) from continuing operations
|
|
|
(17.73
|
)
|
|
(5.04
|
)
|
|
1.92
|
|
|
8.10
|
|
|
6.36
|
|
|
0.86
|
|
Discontinued
operations
|
|
|
(18.29
|
)
|
|
2.99
|
|
|
—
|
|
|
0.15
|
|
|
2.53
|
|
|
0.34
|
|
Cumulative
effect of change in accounting principle(4)
|
|
|
0.13
|
|
|
(3.01
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net
profit / (loss)
|
|
|
(35.89
|
)
|
|
(5.06
|
)
|
|
1.92
|
|
|
8.25
|
|
|
8.89
|
|
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
/ (loss) from continuing operations
|
|
|
(17.73
|
)
|
|
(5.04
|
)
|
|
1.87
|
|
|
7.63
|
|
|
5.98
|
|
|
0.81
|
|
Profit
/ (loss) from discontinued operations
|
|
|
(18.29
|
)
|
|
2.99
|
|
|
—
|
|
|
0.14
|
|
|
2.38
|
|
|
0.32
|
|
Cumulative
effect of change in accounting principle(4)
|
|
|
0.13
|
|
|
(3.01
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net
profit / (loss)
|
|
|
(35.89
|
)
|
|
(5.06
|
)
|
|
1.87
|
|
|
7.77
|
|
|
8.36
|
|
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
|
|
|
|
|
|
14,042.6
|
|
|
17,339.4
|
|
|
2,349.5
|
|
Net
assets
|
|
|
|
|
|
|
|
|
|
|
|
5,093.3
|
|
|
7,290.0
|
|
|
987.8
|
|
Share
capital(5)
|
|
|
|
|
|
|
|
|
|
|
|
5,391.2
|
|
|
5,561.3
|
|
|
753.6
|
|
Total
long-term debt(6)
|
|
|
|
|
|
|
|
|
|
|
|
2,275.6
|
|
|
2,355.6
|
|
|
319.2
|
|
Minority
interests
|
|
|
|
|
|
|
|
|
|
|
|
227.3
|
|
|
171.5
|
|
|
23.2
|
|
Capital
and reserves attributable to the company’s equity holders
|
|
|
|
|
|
|
|
|
|
|
|
4,866.0
|
|
|
7,118.4
|
|
|
964.6
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
23,750.5
|
|
|
12,896.2
|
|
|
11,318.1
|
|
|
16,190.1
|
|
|
19,707.4
|
|
|
2,670.4
|
|
Net
assets
|
|
|
11,116.8
|
|
|
3,306.5
|
|
|
3,376.1
|
|
|
6,570.4
|
|
|
8,989.5
|
|
|
1,218.1
|
|
Total
long-term debt(6)
|
|
|
5,742.6
|
|
|
3,843.9
|
|
|
2,815.6
|
|
|
2,675.9
|
|
|
2,590.0
|
|
|
350.9
|
|
Minority
interests
|
|
|
7,967.6
|
|
|
257.4
|
|
|
187.3
|
|
|
295.9
|
|
|
281.0
|
|
|
38.1
|
|
Total
shareholders’ equity
|
|
|
3,149.2
|
|
|
2,779.1
|
|
|
3,188.9
|
|
|
6,274.5
|
|
|
8,708.5
|
|
|
1,180.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
2,367.9
|
|
|
3,166.4
|
|
|
429.1
|
|
Cash
utilized in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
(877.1
|
)
|
|
(335.4
|
)
|
|
(45.4
|
)
|
Cash
(utilized in)/from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
(513.7
|
)
|
|
24.5
|
|
|
3.3
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
(utilized in)/from operating activities
|
|
|
(346.1
|
)
|
|
1,128.9
|
|
|
1,692.3
|
|
|
2,347.0
|
|
|
3,393.0
|
|
|
459.8
|
|
Cash
(utilized in)/from investing activities
|
|
|
(1,088.0
|
)
|
|
42.5
|
|
|
(534.1
|
)
|
|
(683.6
|
)
|
|
(133.6
|
)
|
|
(18.1
|
)
|
Cash
from/(utilized in) financing activities
|
|
|
768.0
|
|
|
(942.6
|
)
|
|
(1,332.6
|
)
|
|
(364.3
|
)
|
|
(420.4
|
)
|
|
(57.0
|
)
|
______________
(1)
|
Includes
interest expense, interest income, preference dividend income, foreign
exchange gains and losses and fair value adjustments on derivative
instruments.
|
(2)
|
Based
on the U.S. dollar exchange rate at the respective payment dates
of the
2006, 2005, 2004, 2003 and 2002 dividends, the U.S. dollar equivalent
of
the dividend per Class N ordinary share was U.S $0.09, U.S. $0.06,
U.S.
$0.04, U.S. $0.03 and U.S. $0.02, respectively. The dividend per
Class A
ordinary share amounted to U.S. $0.03 or less at these respective
dates.
|
(3)
|
For
U.S. GAAP reporting purposes, effective April 1, 2002, Naspers adopted
Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (“SFAS No. 142”). Under SFAS No. 142, goodwill and intangible
assets with indefinite useful lives are not amortized but rather
are
tested at least annually for impairment. If this standard would have
been
adopted for fiscal year 2002 the adjusted net loss would have been
Rand
3,842,228 and basic and diluted earnings per share for fiscal 2002
would
have been Rand 26.37 and Rand 26.37,
respectively.
|
(4)
|
The
cumulative effect of change in accounting principle for fiscal 2003
relates to the adoption of SFAS 142. Upon completion of the transitional
test, Naspers recorded an initial goodwill impairment of Rand 531.5
million. The cumulative effect of change in accounting principle
for
fiscal 2002 of Rand 18.4 million relates to the fair value of fair
value
hedges recorded on adoption of SFAS 133 “Accounting for Derivative
Instruments and Hedging Activities”.
|
(5)
|
Excludes
treasury shares and redeemable preferred
stock.
|
(6)
|
Includes
long-term liabilities in respect of capitalized finance leases, concession
liabilities, interest-bearing loans, program and film rights liabilities
and non-interest bearing loans.
|
Exchange
Rate Information
The
following tables show, for the periods and dates indicated, certain information
regarding the U.S. dollar/Rand exchange rate. The information is based on the
noon buying rate in the City of New York for cable transfers in Rand as
certified for United States customs purposes by the Federal Reserve Bank of
New
York. On September 15, 2006, the rate was Rand 7.383 per U.S.
$1.00.
Year
ended March 31,
|
Average
Rate(1)
(Rand
per U.S. $1.00)
|
|
|
2002
|
9.643
|
2003
|
9.572
|
2004
|
7.161
|
2005
|
6.253
|
2006
|
6.398
|
________________
(1)
|
The
average rate is calculated as the average of the noon buying rate
on the
last day of each month during the
period.
|
|
High
|
Low
|
|
(Rand
per U.S. $1.00)
|
March
2006
|
6.335
|
6.136
|
April
2006
|
6.166
|
5.985
|
May
2006
|
6.706
|
5.999
|
June
2006
|
7.430
|
6.634
|
July
2006
|
7.230
|
6.830
|
August
2006
|
7.198
|
6.723
|
September
2006 (until September 15, 2006)
|
7.433
|
7.163
|
For
other
important information, you should read the discussion of South African exchange
controls in Item 10 of this annual report under the heading “Exchange Controls”.
3.D.
Risk Factors
Risks
relating to
countries in which Naspers and its joint ventures operate
Naspers’
multinational operations expose it to a variety of economic, social and
political risks
There
is
an element of risk in all countries in which Naspers operates. Naspers may
be
affected by political, social and economic changes in countries where the group
has operations. The incidence of HIV/AIDS infection in a number of markets
in
which Naspers operates is high and may increase. Those at risk may include
both
Naspers’ employees, giving rise to increased sickness and disability costs, and
its customers, resulting in a reduction in sales and an inability to grow
Naspers’ revenue base.
A
majority of Naspers’ revenue comes from its operations in South Africa. There
has been a period of significant change in South Africa since the democratic
government came to power in 1994. The Government continues to introduce policies
designed to alleviate or redress inequalities suffered by the majority of
citizens under the previous government. It is not possible to predict to what
extent the government will continue introducing legislation or other measures
designed to empower previously disadvantaged groups nor can it assess the
potential impact of these reforms. MultiChoice South Africa and Media24 are
preparing for broad-based Black Economic Empowerment (BEE) share schemes,
aligned to the BEE legislation and the draft codes of good practice applicable
to South Africa. These codes are not final yet and, although work has started
in
the South African companies of the Naspers Group to ensure compliance with
these
draft codes, Naspers can only assess its compliance once the codes are final.
Many emerging
market countries have experienced high levels of unemployment and crime in
recent years. These problems have impeded inward investment into these countries
and have prompted some emigration of skilled workers. As a result, attracting
and retaining suitably qualified employees in these countries may be difficult.
Against the background of political tensions and the current transition to
stable democratic governments, it is not possible to predict the future economic
or political direction of these countries. Matters that may affect emerging
market countries’ future economic and political direction include whether their
governments can address the various political, social and economic challenges
and the effect of the continuing integration of these economies both regionally
and with the economies of the rest of the world.
Naspers
operates in emerging economies, including many African countries, China, Brazil
and more recently India and Russia. Naspers’ operations in these markets may
involve economic and operating risks. Many countries in emerging markets have
in
the past experienced difficulties resulting from currency fluctuations, high
interest rates, increases in corporate bankruptcies, stock market declines,
terrorist attacks, threats and ransom, epidemics and other factors that may
materially and adversely affect Naspers’ business. Although governments in many
of these countries have taken steps toward addressing these problems, it is
not
possible to predict whether or to what extent these steps will succeed in
achieving their objectives.
South
Africa’s
economy has recently experienced periods of moderate growth and inflation and
high unemployment but growth could slow and inflation could
increase
The
South
African economy has recently been growing at a moderate rate, and inflation
has
been relatively low. The growth in South Africa’s GDP was 2.8% for 2003, 3.7%
for 2004 and 4.9% for 2005. South Africa’s unemployment rate was 26.7% in
September 2005. The depreciation in value of the Rand against the U.S. dollar
during the latter part of 2001 put upward pressure on South Africa’s inflation
rate (CPIX) during the 2002 calendar year, peaking at 11.3%. Since 2003, the
inflation rate
decreased
as the Rand appreciated in value against the U.S. dollar. The South African
Reserve Bank has stated that it targets South Africa’s inflation rate at between
3% and 6% per year. Despite such intentions, there can be no assurance that
these inflation targets will be met. A future increase in inflation would
increase financing and other costs in a manner that could adversely affect
Naspers’ profitability.
South
African exchange control restrictions could hinder Naspers’ normal corporate
functioning
South
Africa’s exchange control regulations provide for a common monetary area
consisting of South Africa, the Kingdom of Lesotho, the Kingdom of Swaziland
and
the Republic of Namibia. Exchange controls may continue to operate in South
Africa for the foreseeable future. As a consequence of these exchange controls,
an acquisition of shares or assets of a South African company by a non-resident
purchaser will require exchange control approval if the payment for the
acquisition is in the form of shares of a non-resident company or if the
acquisition is financed by a loan from a South African resident. Denial of
any
required regulatory approval may result in the acquisition not
occurring.
South
Africa’s interest rates may increase Naspers’ borrowing
costs
The
volatility of the Rand in the past has impacted the inflation rate in South
Africa, causing the South African Reserve Bank to respond by using interest
rates to manage inflation. The depreciation of the Rand has therefore resulted
in interest rates being higher in South Africa than in most developed countries.
The prime lending rate (the benchmark rate used by South African banks to
determine lending rates for their customers) reached a high of 25.5% in 1998.
The prime lending rate of 10.5% on September 15, 2005 was at its lowest level
over the past 20 years, mainly due to the strengthening of the Rand against
most
major currencies over the past three years. The prime lending rate as at
September 15, 2006 was 11.5%. An increase in interest rates in South Africa
would increase Naspers’ cost of borrowings and hence the cost of
capital.
Naspers
could suffer losses as a result of fluctuations in foreign currency exchange
rates
Naspers’
reporting currency is the Rand. Naspers will continue to conduct business
transactions in currencies other than its reporting currency. Approximately
23.6% of Naspers’ revenue was generated outside South Africa during fiscal 2006.
Naspers is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the U.S. dollar, the Naira, the Renminbi,
the Euro and the Brazilian Real against the Rand, which have in the past
affected and could in the future affect Naspers’ revenues, financing costs and
general business and financial condition. In addition, fluctuations in the
exchange rate of these currencies could affect the comparability of Naspers’
performance between financial periods, since a portion of Naspers’ sales are in
currencies other than Rand while Naspers’ financial statements are stated in
Rand.
A
significant portion of Naspers’ cash obligations, including payment obligations
under satellite transponder leases and contracts for pay-television programming
and channels, are denominated in the currencies of countries in which Naspers
has limited operations, such as U.S. dollars. Where Naspers’ revenue is
denominated in local currency, a depreciation of the local currency against
the
U.S. dollar adversely affects Naspers’ earnings and Naspers’ ability to meet its
cash obligations. Many of Naspers’ operations are in countries or regions where
there has been depreciation of the local currency against the U.S. dollar in
recent years. Naspers cannot provide assurances that the hedge transactions
that
Naspers enters into to mitigate currency risk will fully protect it against
currency fluctuations or that Naspers will be able to hedge effectively against
these risks in the future. Naspers can in most instances only hedge its foreign
currency exposures for a limited period, therefore Naspers can not hedge 100%
of
its exposure.
The
Rand,
the Renminbi, the Naira and the Brazilian Real have at times in the past
depreciated against the currencies of their major trading partners by more
than
the inflation rate differential between South Africa, China, Nigeria and Brazil
and their major trading partners. Historically, the performance of the Rand
against other currencies has been characterized by periods of rapid depreciation
followed by periods of stability. In particular, the Rand rapidly depreciated
against the U.S. dollar and other major currencies during the latter part of
2001. The value of the Rand against the U.S. dollar remains difficult to predict
and vulnerable to depreciation. Since December 2001, the Rand has appreciated
against the U.S. dollar, ending fiscal 2006 at Rand 6.15. The Rand depreciated
after March 31, 2006 to Rand 7.38 on September 15, 2006. Any strengthening
of
the Rand will have a negative impact on the U.S. dollar based earnings of the
group, but a positive impact on its dollar based expenses. Collectively, a
strengthening of the Rand against the U.S. dollar has a positive net profit
impact on Naspers. Naspers cannot predict the future relative strength of the
Rand, Renminbi, Naira or Brazilian Real against the U.S. dollar and expects
that
these currencies will remain volatile against major currencies like the U.S.
dollar and the Euro.
In
addition, fluctuations in the exchange rate between the Rand and the U.S.
dollar
could adversely affect the market value of Naspers American Depositary Shares
(“ADSs”) in the United States and the real value of dividends paid on Naspers’
ADSs.
The
activity of trade unions could adversely affect Naspers’
business
As
of
March 31, 2006, trade unions represented some of Naspers’ employees. In the
past, trade unions have had influence as vehicles for social, economic and
political reform and in the collective bargaining process. The cost of complying
with labor laws may adversely affect Naspers’ operations. The risks and
associated costs with labor strikes are difficult to manage and
predict.
Because
Naspers is a South African company, you may not be able to enforce judgments
against Naspers and its directors and officers that are obtained in U.S.
courts
Naspers
is incorporated in South Africa. Most of Naspers’ directors and executive
officers reside outside the United States. Substantially all the assets of
Naspers, its directors and executive officers are located outside the United
States. As a result, it may not be possible for investors to effect service
of
process within the United States upon Naspers or its directors or executive
officers, or to enforce against such persons judgments of the United States
courts based upon the civil liability provisions of the Federal securities
laws
or other laws of the United States or any of its states. Although foreign
judgments are recognized by South African courts, they are generally not
directly enforceable in South Africa and can only be enforced by way of
execution of an order to that effect made by a competent South African court,
the latter court basing its order upon the judgment of the foreign
court.
The
policy of South African courts is to award compensation only for loss or damage
actually sustained by the person claiming the compensation. The award of
punitive damages is generally not recognized by the South African legal system,
on the grounds that such awards are contrary to public policy. Whether a
judgment is contrary to public policy depends on the facts of each case.
Exorbitant, unconscionable or excessive awards will generally be contrary to
South African public policy. South African courts cannot consider the merits
of
a foreign judgment and cannot act as a court of appeal or review over the
foreign court. South African courts will usually observe their own procedural
laws and, where an action based on a contract governed by a foreign law is
brought before a South African court, the capacity of the parties to contract
may under certain circumstances be determined in accordance with South African
law. A plaintiff who is not resident in South Africa may be required to provide
security for costs where proceedings are initiated in South Africa. In addition,
the Rules of the High Court of South Africa require that documents executed
outside South Africa must be authenticated by way of the apostille procedure
in
terms of the Hague Convention 1961 before they are used in South Africa. Also,
foreign judgments concerning the ownership, use or sale of any matter or
material connected with South African commerce (such as production, import
and
export) require consent from the South African Minister of Trade and Industry
to
be enforced in accordance with the South African Protection of Business Act,
1978. Naspers has been advised by Webber Wentzel Bowens, its South African
counsel, that there is doubt as to the enforceability against Naspers and its
directors and officers in South Africa of liabilities predicated solely upon
the
Federal securities laws of the United States.
Risks
relating to Naspers’ business
Naspers’
level of debt could adversely affect its business and competitive
position
Naspers
has an amount of debt that may adversely affect its business in numerous ways.
As of March 31, 2006, Naspers had total debt (including finance leases and
debt
in respect of program and film broadcasting rights) of approximately Rand 4.42
billion, or U.S. $598.9 million. On the same basis, Naspers’ ratio of total debt
to equity would have equaled 0.61. Naspers’ debt could, among other things:
|
·
|
increase its vulnerability to adverse
economic conditions or increases in prevailing interest rates,
particularly where borrowings are or will be made at variable interest
rates; |
|
|
|
|
·
|
limit its ability to obtain additional
financing that may be necessary to operate, develop or expand its
business; |
|
|
|
|
· |
require Naspers to dedicate a portion
of its
cash flow from operations to service its debt, which in turn reduces
the
funds available for operations, future business opportunities and
dividends; and |
|
|
|
|
· |
potentially place Naspers at a competitive
disadvantage relative to competitors with less
debt. |
Naspers’
ability to make payments on its debt will depend upon its future operating
performance, which is subject to general economic and competitive conditions,
many of which are outside Naspers’ control. If the cash flow from Naspers’
business and its operating subsidiaries is insufficient to make payments on
its
debt or is otherwise unavailable, Naspers may have to delay or reduce capital
expenditures, attempt to restructure or refinance its debt, sell assets or
raise
additional equity capital. Naspers may not be able to take these actions on
satisfactory terms, in a timely manner or at all. The sale of additional shares,
or the possibility of such a sale, may adversely affect the price of our
outstanding shares, including the Class N Shares.
Naspers
depends on access to cash flows from its subsidiaries,
associated companies and joint ventures, and limitations on accessing the cash
flow may adversely affect Naspers’ business operations and financial
condition
Naspers
Limited has no significant business operations or assets other than its
interests in its subsidiaries, associated companies, joint ventures and other
investments. Accordingly, Naspers relies upon distributions from its
subsidiaries, associated companies, joint ventures and other investments to
generate the funds necessary to meet the obligations and other cash flow
requirements of the combined group. Naspers’ subsidiaries, associated companies,
and joint ventures are separate and distinct legal entities that have no
obligation to make any funds available to Naspers, whether by intercompany
loans
or by the payment of dividends. The ability of Naspers to utilize the cash
flows
from some of its subsidiaries, associated companies and joint ventures is
subject, in South Africa, China, Brazil and other countries, to foreign
investment and exchange control laws and also to the availability of a
sufficient quantity of foreign exchange. In particular, substantially all the
cash flow generated by Naspers’ South African businesses cannot be currently
utilized outside South Africa without exchange control approval. Naspers’
non-South African subsidiaries may be subject to similar restrictions imposed
by
their respective home countries. In addition, because the consent of some of
Naspers’ joint venture partners is required for distributions from Naspers’
joint ventures, Naspers’ ability to receive distributions from the joint
ventures is dependent on the co-operation of its joint venture partners. The
interests of the minority shareholders of some of Naspers’ subsidiaries and
associates must be considered when those subsidiaries and associates make
distributions. Accordingly, Naspers may not be able to obtain cash from its
subsidiaries, associated companies, joint ventures and other investments at
the
times and in the amounts required by Naspers. Any failure by Naspers to receive
distributions from its businesses could restrict Naspers’ ability to provide
adequate funding to the combined group and otherwise meet its obligations.
Naspers’ business units may face funding and liquidity difficulties under the
terms of the financing arrangements upon which they depend. Each Naspers
business relies on its own separate credit facility and financing, to the extent
necessary. Naspers has not to date provided any parent company guarantees in
respect of bank borrowings. Several of the credit facilities and other financing
arrangements contain financial covenants and other similar undertakings and
requirements. If these covenants, undertakings or requirements are violated,
the
financing may not be available and the relevant business unit could face
liquidity difficulties. In addition, many of the different group credit
facilities must be renewed annually by the relevant lenders.
Naspers
has only limited influence over its minority investments and the value of
Naspers stake in such investments could decrease
Naspers
holds minority stakes in a number of companies, including a 36.1% interest
in
Tencent Holdings Limited (“Tencent”) and a 30% interest in Abril S.A. Although
Naspers exercises influence with respect to certain of the affairs of these
and
other companies in which it holds a minority stake, Naspers’ minority
voting
position has and may continue to have several important consequences for
Naspers, including precluding us from controlling the businesses, limiting
our
ability to implement strategies we favor and allowing the business to adopt
strategies and take actions which may in some cases be contrary to our preferred
strategies and actions. As with many minority investments, differences in views
among the principal shareholders may result in delayed decisions or in failures
to agree on major matters, potentially adversely affecting the business and
operations of the joint venture and in turn Naspers business and
operations.
The
acquisitions and investments that Naspers has made and may make in the future
may not be successful and may create unanticipated problems
Naspers
has experienced growth and development through successful acquisitions and
investments in the past and intends to continue to pursue acquisitions in order
to meet its strategic objectives. Integrating the operations and personnel
of
acquired businesses is a complex process. Naspers may not be able to integrate
the operations of its acquired businesses with its operations rapidly or without
encountering difficulties. The diversion of the attention of management to
the
integration effort and any difficulties encountered in combining operations
could adversely affect Naspers’ business and operations. In addition, although
Naspers has grown through successful acquisitions in the past, no assurance
can
be given that it will be able to identify, acquire and
successfully
integrate additional companies in the future. Future acquisitions Naspers
does
undertake could result in potentially dilutive issuances of additional equity
and the incurrence of debt and contingent liabilities.
Naspers’
businesses operate in highly competitive and rapidly changing industries and
increased competition could adversely affect Naspers’ results of operations and
financial condition
Pay-television.
Although
Naspers is currently the leading provider of pay-television services in most
of
its markets, Naspers competes directly with both state owned and private
national free-to-air broadcast networks and regional and local broadcast
stations for audience share, programming and advertising revenue and indirectly
with motion picture theatres, video rental stores, mobile telephones, lotteries,
gaming and other entertainment and leisure activities for general leisure
spending. Naspers cannot determine the nature or extent of future competition
it
may face in the pay-television market. In South Africa licenses will be granted
in the future to other operators. In Sub-Saharan Africa and Cyprus various
competitors have entered the pay-television market. The entry of additional
competitors into any of the pay-television markets where Naspers operates
remains a continuous possibility. In addition, the sale of DVDs, ADSL broadband,
mobile and wireless technologies providing digital pay-television content may
erode Naspers’ pay-television subscriber base.
Internet.
The
market for internet access, communication, portal and related services is highly
competitive. Naspers anticipates that competition will continue to intensify
as
the use of the internet grows. The African and Asian internet markets are
characterized by an increasing number of entrants. Naspers’ competitors will
compete in these markets. Many of these competitors have longer operating
histories and substantially greater financial, technical, marketing and
personnel resources and better recognized brand names than Naspers. Some of
Naspers’ internet businesses may therefore never reach profitability.
Newspapers,
Magazines and Printing.
Revenues
in the print media industry are dependent primarily upon paid circulation,
advertising and printing revenues. Competition for circulation and advertising
revenue comes from local, regional and national newspapers, magazines, radio,
television, direct mail and other communications and advertising media that
operate in the same markets. In addition, the rapid development of online
internet advertising could have a negative impact on print media advertising.
The extent and nature of such competition is, in large part, determined by
the
location and demographics of the markets and the number of media alternatives
available in these markets. Naspers may face increased competition as both
local
and international publishers introduce new niche titles. Internationally
recognized titles also continue to be introduced in South Africa. Many of the
print media markets are overpopulated, with too many titles relative to the
size
of the readership base. Competitors that are active in the same markets as
Naspers attempt to increase their market share, circulation and advertising
revenues by changing the style and layout of their publications to win new
customers at the expense of Naspers’ magazines and newspapers and by launching
new titles. In addition, Naspers’ competitors may reduce the cover prices of
their publications to increase their circulation. Naspers may be forced to
decrease the prices it charges for magazines and newspapers in response or
make
other changes in the way it operates. Naspers’ business and results of
operations may be harmed as a result.
Other
businesses.
The
markets for the products and services currently offered by Irdeto, Naspers’
conditional access technology business, Entriq, Mediazone and Naspers’ book
publishing and education businesses are highly competitive. All these businesses
operate in fragmented markets and some compete with large international players.
Irdeto competes with numerous entities, including subsidiaries of other
pay-television providers, many of which have greater financial resources than
Naspers. Entriq and Mediazone compete with a variety of players. Via Afrika
Limited (“Via
Afrika”), the
book publishing subsidiary of Media24 Limited (“Media24”), faces competition
from several South African publishers as well as large international publishing
houses, which have substantially greater resources and strong brand names.
Educor Holdings Limited (“Educor”),
the private
education subsidiary of Media24, faces competition from many different South
African public universities and private educators, as well as from international
educators, many of whom have substantially greater resources and better
recognized brand names than Educor.
MultiChoice
South Africa has applied for a broadcast license and the level of competition
emanating from the license application process has
increased
The
Independent Communications Authority of South Africa (ICASA) issued its
invitation to apply for satellite and cable licenses on January 31, 2006 and
indicated that it expected to license new operators by mid 2007. The closing
date for applications was July 31, 2006 which date was later extended to August
31, 2006. MultiChoice Africa (Proprietary) Limited (“MultiChoice”) submitted its
application for a subscription broadcasting license on 31 August 2006.
ICASA has received a number of applications including applications from
traditional telecommunications operators and existing broadcasters, as well
as
potential new entrants.
Steady
or declining subscriber levels may prevent further growth of some of or all
of
Naspers’ businesses
Naspers’
largest businesses are generally in mature markets and may face difficulties
in
maintaining or growing the number of subscribers. Naspers’ pay-television
business in Greece has in the past experienced high levels of annual subscriber
churn. High levels of churn and decreasing or flat subscriber numbers may
be
caused by competition from new entrants to the pay-television
market and from other sources competing for discretionary income, economic
and
other local difficulties, the loss of popular sports and movie programming
content and seasonality associated with the markets in which Naspers operates.
Increases in prices can also lead to churn and subscriber terminations.
Declining subscriber levels also adversely affect Irdeto, because Naspers’
pay-television operators constitute some of Irdeto’s primary customers. Naspers’
print media business has experienced declining circulation of some of its
more
established publications due to the maturity of some of its magazine titles
and
newspapers in South Africa and the introduction into the market of a large
number of competing magazines and newspapers. Steady or declining subscriber
levels make it difficult for Naspers to grow its businesses.
A
reduction in demand for advertising may adversely affect Naspers’ businesses and
revenues
A
large
portion of Naspers’ revenue is generated by advertising revenues. Advertising
revenues are cyclical and are dependent upon general economic conditions.
Traditionally, spending by companies on advertising and other marketing
activities, and hence Naspers’ advertising and commercial printing revenue,
decreases significantly in times of economic slowdown or recession. In
particular, Naspers’ advertising revenues are subject to risks arising from
adverse changes in domestic and global economic conditions and fluctuations
in
consumer confidence and spending. Consumer confidence and spending may decline
as a result of numerous factors outside of Naspers’ control, such as terrorist
attacks or acts of war. Global economic downturns and declining levels of
business activity of Naspers’ advertisers have in the past and could in the
future adversely affect Naspers’ results of operations. Newspaper and magazine
advertising may decline relative to television, radio and outdoor advertising.
Such trends would adversely affect Naspers’ results and financial condition.
Increases
in newsprint and magazine paper costs could adversely affect Naspers’
results
Newsprint
and magazine paper costs represent the single largest raw material expense
for
Naspers’ print media businesses and are among Naspers’ most significant
operating costs. Newsprint and magazine paper costs fluctuate from time to
time
due to numerous factors beyond Naspers’ control, especially due to demand and
supply forces, and exchange rate fluctuations between the Rand and other
currencies such as the U.S. dollar and the Euro. An increase in newsprint and
magazine paper costs will adversely affect Naspers’ earnings and cash
flow.
Naspers’
business environment is subject to rapid technological change which could render
Naspers’ products and services obsolete
Naspers
operates pay-television and technology businesses through its holding in MIH
Holdings Limited (“MIH Holdings”) and internet businesses through Media24 and
its holding in MIH Holdings. The rate of technological change currently
affecting the pay-television and internet industries is rapid compared to other
industries. Trends, such as the migration of television from analog to digital
transmission and the convergence of television, the internet, mobile telephones
and other media, are creating an unpredictable environment. New technologies
or
industry standards have the potential to replace or provide lower-cost
alternatives to products and services sold by Naspers. Naspers’ print media,
publishing and education businesses also operate in markets that continue to
change in response to technological innovations and other factors. In
particular, the means of delivering Naspers’ products, and the products
themselves, may be subject to rapid technological change.
Naspers
cannot predict whether technological innovations will, in the future, make
some
of its products and services wholly or partially obsolete or adversely affect
the competitiveness of its businesses. Naspers may be required to continue
to
invest significant resources to further adapt to changing technologies, markets
and competitive environments.
Naspers’
substantial investment in internet
related business may not produce positive returns
A
part of
Naspers’ strategy is to further develop its internet businesses. Naspers has
invested, and will continue to invest, significant amounts to develop and
promote its internet initiatives and electronic platforms. Naspers has made
these investments through Media24 and through its shareholding in MIH Holdings.
The provision of products and services over the internet and otherwise in
electronic form is highly competitive and is in relatively early stages of
development.
Naspers
may experience difficulties developing this aspect of its business due to a
variety of factors, many of which are beyond Naspers’ control. These factors may
include:
|
· |
the extent of acceptance of Naspers’ internet
initiatives and related electronic platforms by
customers; |
|
|
|
|
· |
competition from comparable and new
technologies; |
|
|
|
|
· |
government
regulation and control of the content and medium;
|
|
|
|
|
· |
customers not accepting or not continuing
to
use the internet and electronic media; and |
|
|
|
|
· |
failures or difficulties with the
data
networks and infrastructures upon which Naspers
depends. |
Moreover,
Naspers relies on third parties for the provision of local and international
bandwidth.
Naspers’
long-term success depends on the continued development of the internet as a
commercial medium. As a result of rapidly changing technology, developing
industry standards and frequent new product and service introductions, demand
and market acceptance for recently introduced products and services on the
internet are subject to uncertainty. Critical issues concerning the commercial
use of the internet, including the perceived lack of security of commercial
data, such as credit card numbers, and capacity constraints resulting in delays,
transmission errors and other difficulties may impact the growth of internet
use. These and other issues affecting the internet industry may be aggravated
in
countries with less developed internet cultures and infrastructures in which
Naspers currently conducts or may in the future conduct its internet business,
including South Africa, Thailand, China and Brazil. If the market for internet
access services develops more slowly than expected or becomes saturated with
competitors, or if the internet access and services offered by Naspers are
not
broadly accepted, Naspers’ growth strategy could be adversely affected.
Naspers’
business interests in China are dependent upon indirect relationships with
third
parties and mobile operators which are subject to various operational and
competitive risks
Companies
in which MIH Holdings has invested, including Tencent, provide internet, mobile
and telecommunications value-added services to subscribers in China through
a
series of contracts with companies, which are licensed to operate these
services. MIH Holdings, however, does not hold any direct or indirect
equity interests in the licensed operating companies and instead relies on
a
series of contracts in order to recognize and receive the economic benefit
of
the business and operations of these companies. As a result, MIH Holdings may
not be able to fully recognize and receive the economic benefits of the China
business and operations and may not be able to effectively control the China
operations.
The
revenue generated by services provided over mobile telephone networks or fixed
line networks are principally recognized and received under contracts with
Chinese mobile telephony and network operators. If these operators commit errors
in recording revenue or fail to pay fees due to service providers, or if
existing contracts are not renewed or less favorable terms are imposed, the
financial condition, results of operations and profitability of the companies
in
which MIH Holdings has invested would be adversely affected. Also, if the
business conditions of the mobile telephony operators deteriorate or if these
mobile operators impose penalties or restraints on service providers, the
business operations and financial condition of the companies in which MIH
Holdings has invested may be materially and adversely affected.
The
Chinese
mobile telecommunications markets are highly competitive, rapidly developing
and
subject to economic, regulatory and other uncertainties. The size of the future
customer base and user activity will be affected by a number of factors, many
of
which are outside of Naspers’ control, such as the regulatory regime governing
the provision of telecommunication services in China and the general economic
conditions in the region.
Naspers’
businesses rely on software and hardware systems that are susceptible to
failure
Interruptions
to the availability of Naspers’ internet services or increases in the response
times of Naspers’ services caused by the failure of Naspers’ software or
hardware systems could reduce user satisfaction, the amount of internet traffic
and Naspers’ attractiveness to advertisers and consumers. Naspers’ publishing
business also depends upon the timely functioning of software and hardware
used
to print newspapers and magazines and to publish books. Naspers is also
dependent upon web browsers, telecommunication systems and other aspects of
the
internet infrastructure that have experienced system failures and electrical
outages in the past. Naspers’ operations are susceptible to outages due to fire,
floods, power loss,
telecommunications
failures, break-ins, industrial actions and similar events. Despite Naspers
implementing network security measures, Naspers’ servers are vulnerable to
computer viruses, break-ins and similar disruptions from unauthorized tampering
with its computer systems.
Naspers’
business may suffer if it
cannot obtain attractive programming or if the cost of television receivers
increases
The
continued success of Naspers’ pay-television business depends upon its ability
to continue to obtain attractive film, sports and other programming on
commercially reasonable terms. For most of the programming, Naspers
contracts with
suppliers who in turn purchase programming from content providers. Much of
Naspers’ premium programming is sourced through Electronic Media Network Limited
(“M-Net”) and SuperSport International Holdings Limited (“SuperSport”). Naspers’
film studio and sport programming contracts are up for renewal from time to
time. In the event the supply contracts or underlying programming arrangements
are not renewed or are cancelled, Naspers will be required to seek alternative
programming from other sources. Naspers cannot be sure whether alternative
programming would be available on commercially reasonable terms or whether
the
alternative programming would appeal to Naspers’ subscribers. Naspers’ business
strategy also depends on its ability to offer attractive programming on an
exclusive basis. Political, regulatory and competitive pressures may make it
more difficult to maintain exclusive rights to programming.
Naspers’
growth depends in part upon its ability to attract new pay-television customers.
Many new customers are required to purchase the equipment necessary to receive
Naspers’ broadcasts. The cost of this equipment may discourage potential
subscribers, and Naspers’ market penetration and growth may be impeded if the
cost of this equipment increases.
Satellite
failures could adversely affect Naspers’
business and ability to grow
Naspers’
digital programming is transmitted to its customers through different satellites
around the world, and in some regions Naspers’ terrestrial analog signal is also
transmitted to regional broadcast points through satellites. In addition,
Naspers receives a significant amount of its programming through satellites.
Satellites are subject to significant risks such as defects, launch failure,
incorrect orbital placement and destruction and damage that may prevent or
impair proper commercial operations. All satellites have limited useful lives,
which vary as a result of their construction, the durability of their
components, the capability of their solar arrays and batteries, the amount
of
fuel remaining once in orbit, the launch vehicle used and the accuracy of the
launch. The operation of satellites is beyond Naspers’ control. Future launch
failures or disruption of the transmissions of satellites that are already
operational could adversely affect Naspers’ operations. Some satellites used by
Naspers’ pay-television operations have experienced technical failures in the
past. In addition, Naspers’ ability to transmit its programming following the
end of the expected useful lives of the satellites Naspers currently uses and
to
broadcast additional channels in the future will depend upon Naspers’ ability to
obtain rights to utilize transponders on other satellites. In the event of
a
satellite failure, Naspers would need to make alternative arrangements for
transponder capacity. Naspers may not be able to obtain alternative capacity
rights on commercially reasonable terms or at all. In the event that Naspers
has
to obtain alternative transponder capacity, it may need customers to realign
their satellite dishes to receive the broadcasting signals, which could prove
impractical and very expensive to implement.
Naspers’
business may suffer if its printing equipment or facilities are damaged or
fail
to perform
Some
of
Naspers’ newspapers, magazines and educational textbooks, and a number of third
party publications, are printed on printing equipment and facilities owned
by
the group. If printing facilities were damaged or if operations were interrupted
due to a natural disaster or otherwise, the publication of some titles or
textbooks could be interrupted and Naspers’ operating results could be adversely
affected. In the event of such damage or destruction, Naspers would need to
make
alternative arrangements for printing to be outsourced. Naspers may not be
able
to obtain alternative printing services on commercially reasonable terms or
at
all.
Unauthorized
access to Naspers’ programming signals may adversely affect Naspers’ revenues
and programming arrangements
Naspers
faces the risk that its programming signals will be accessed by unauthorized
users. The delivery of subscription programming requires the use of encryption
technology to prevent unauthorized access to programming, or “piracy”. Naspers
currently utilizes encryption technology supplied by Irdeto. This encryption
technology, to remain effective in preventing unauthorized access, needs to
continually be updated or replaced with newer technology. Naspers will continue
to incur substantial expenditures to replace or upgrade its encryption
technology in the future. Encryption technology cannot completely prevent all
piracy, and virtually all pay-television markets are characterized by varying
degrees of piracy that manifest themselves in different
ways.
In
addition, encryption technology cannot completely prevent the illegal
retransmission or sharing of a television signal once it has been decrypted.
If
Naspers fails to adequately prevent unauthorized access to its transmissions,
its ability to contract for programming services could be adversely affected
and
in any event it will lose subscribers who can then receive pirated signals.
Government
regulations may adversely affect Naspers’ ability to conduct its businesses and
generate operating profits
All
media
operations are subject to governmental regulation in the countries in which
Naspers operates. Governmental regulation can take the form of price controls,
service requirements, programming content restrictions, ownership restrictions,
licensing requirements and restrictions on the amount of fees paid for
advertising. Failure or delays in obtaining or renewing
any necessary regulatory approvals could adversely affect Naspers’ ability to
offer some of or all its services. In most of the countries in which Naspers
conducts its pay-television businesses, it operates under licenses obtained
from
governmental or quasi governmental agencies. These licenses are subject to
periodic renewal, and Naspers may not be able to renew the licenses on terms
as
favorable as the existing licenses or at all. Adverse changes in the regulatory
framework of any country in which Naspers operates may occur in the short or
long term. The media and competition regulatory frameworks everywhere are
subject to change, and the relevant regulatory authorities may increase their
regulation of Naspers’ businesses in these countries. Naspers cannot predict the
likely impact that any such action by applicable competition and regulatory
authorities could have on the operation of its businesses. In addition, there
are several legislative proposals and other initiatives underway in some markets
that could materially impact how Naspers conducts its business.
Failure
to maintain Naspers’ relationships with its partners, suppliers and local
governments could disrupt Naspers’ businesses
Many
of
Naspers’ operations have been developed in cooperation or partnership with key
parties. With regard to these operations, Naspers is dependent on its partners
to provide knowledge of local market conditions and to facilitate the
acquisition of any necessary licenses and permits. Any failure by Naspers to
form alliances with such partners, or the disruption of existing alliances,
could adversely affect Naspers’ ability to penetrate and compete successfully in
many important markets. Naspers’ businesses are dependent on their relationships
with international suppliers, including major film studios and book
publishers.
Some
of
Naspers’ businesses may also be vulnerable to local governmental or quasi
governmental entities or other third parties who wish to renegotiate the terms
and conditions of their agreements or other understandings with Naspers or
who
wish to terminate these agreements or understandings. Adverse developments
with
respect to Naspers’ relationships with its partners or with local governmental
or quasi governmental entities could adversely affect Naspers’ business strategy
and results of operations in important markets. Such developments could also
lead to the introduction of additional taxes.
Consolidation
in the markets in which Naspers operates could place it at a competitive
disadvantage
Some
of
the markets in which Naspers operates have experienced consolidation. In
particular, the combinations of traditional media content companies and new
media distribution companies have resulted in new valuation methods, business
models and strategies. Naspers cannot predict the extent to which these types
of
business combinations may continue to occur in the future or the success that
these combined businesses may achieve. The on-going consolidation could
potentially place Naspers at a competitive disadvantage with respect to scale,
resources and its ability to develop and exploit new media technologies.
Naspers’
intellectual property rights may not be adequately protected under current
laws
in some jurisdictions, which may adversely affect its results and ability to
grow
Naspers’
products are largely comprised of intellectual property content that is
delivered through a variety of media, including magazines, newspapers, books,
television and the internet. Naspers relies on trademark, copyright, trade
secret and other intellectual property laws and employee and third party
non-disclosure agreements to establish and protect its proprietary rights in
these products. Naspers conducts business in some countries where the extent
of
the legal protection for its intellectual property rights is not
well-established or is uncertain.
Even
where the legal protection for Naspers’ intellectual property rights is
well-established, Naspers intellectual property rights may be challenged,
limited, invalidated or circumvented. Despite patent, trademark and copyright
protection, third parties may be able to copy, infringe or otherwise profit
from
Naspers’ intellectual property rights without its authorization. The lack of
internet specific legislation relating to trademark and copyright protection
creates a further challenge for Naspers to protect content delivered through
the
internet and electronic platforms. If unauthorized copying or misuse of Naspers’
products were to
occur
to
any substantial degree, Naspers’ business and results of operations could be
adversely affected. Litigation may be necessary to protect Naspers’ intellectual
property rights, which could result in substantial costs and the diversion
of
Naspers’ efforts away from operating its business.
Legal
claims in connection with content that Naspers distributes may require Naspers
to incur significant costs or to enter into royalty or licensing agreements,
which could adversely affect Naspers’ competitive position
The
content Naspers makes available to customers through its publishing,
pay-television and internet businesses could result in claims against it based
on a variety of grounds, including defamation, negligence, copyright or
trademark infringement, obscenity or facilitating illegal activities. In
particular, Naspers expects that software developers will increasingly be
subject
to claims asserting the infringement of other parties’ proprietary rights as the
number of products and competitors providing software and services
increases.
Any
such
claim, with or without merit, could result in costly litigation or might require
Naspers to enter into royalty or licensing agreements. These royalty or
licensing agreements, if required, may not be available on terms acceptable
to
Naspers or at all. As a result of infringement claims, a court could also issue
an injunction preventing the distribution of certain products. Naspers may
incur
significant costs defending these claims.
Naspers
may need to improve its internal controls over financial reporting and Naspers’
independent auditors may not be able to attest to their effectiveness, which
could adversely affect Naspers’ business operations, reputation and
profitability
Section
404 of the Sarbanes-Oxley Act of 2002 requires that Naspers document its
internal control systems and processes over financial reporting, evaluate the
adequacy of the design of these respective controls and test that these controls
are operating effectively. Naspers is currently evaluating its internal controls
over financial reporting in order to allow management to report on, and its
independent auditors to attest to, the effectiveness of internal control over
financial reporting, as required by Section 404. Naspers is still in the process
of evaluating the adequacy of design and testing the effectiveness of these
various internal control activities over financial reporting. Certain potential
significant deficiencies and material weaknesses have been identified to date
which, if not remedied, could adversely impact our reporting obligations under
Section 404.
If
Naspers is not able to implement the requirements of Section 404 by March 31,
2007, its independent auditors may not be able to attest to the adequacy and
effectiveness of the internal controls over its financial reporting. In such
an
instance, Naspers may be subject to sanction or investigation by regulatory
authorities, such as the SEC. As a result, there could be a negative reaction
in
the financial markets due to a loss of confidence in the reliability of Naspers’
financial statements. In addition, Naspers may be required to incur costs in
improving its internal control systems. Any such action could negatively affect
Naspers’ results and have an adverse effect on its business operations,
reputation and profitability.
Changes
in accounting standards or interpretations issued by standard-setting bodies
for
IFRS and U.S. GAAP may adversely affect Naspers’ reported revenues,
profitability and financial results
Our
financial statements are subject to the application of IFRS and U.S. GAAP,
which
are periodically revised. The application of accounting principles is also
subject to varying interpretations over time. In particular, IFRS, as a
relatively new set of accounting principles, is subject to further change.
Accordingly, Naspers is required to adopt new or revised accounting standards
or
comply with revised interpretations that are issued from time to time by the
relevant authoritative bodies. Those changes could adversely affect Naspers’
reported revenues, profitability and financial results. For example, with the
increased focus on fair value accounting, changes in the market valuation of
certain financial instruments will be reflected in the reported results before
those gains or losses are actually realized and this could have a significant
impact on the income statement. IFRS standards now also require certain items
that previously had no income statement impact to be expensed through the income
statement . This can in some instances cause the reported financial results
to
not reflect what Naspers’ believes is the economic reality of its
business.
Naspers
believes that it complies with the appropriate regulatory requirements
concerning its financial statements and disclosures. However, other companies
have experienced investigations into potential non-compliance with accounting
and disclosure requirements that have resulted in significant penalties.
Risks
relating to the Class N ordinary shares and Naspers ADSs
Existing
Class A ordinary shares of Naspers have more voting rights than, and a
liquidation preference over, the Class N ordinary shares and ADSs of Naspers
Naspers’
issued capital at March 31, 2006 consists of 712,131 Class A ordinary shares
and
315,113,700 Class N ordinary shares. The Class N ordinary shares are listed
on
the JSE and on a poll carry one vote per share. The Class A ordinary shares
are
not listed on a stock exchange and on a poll carry 1,000 votes per share.
Naspers, through Heemstede Beleggings (Proprietary) Limited, a wholly owned
subsidiary of Naspers, holds 49% of Naspers Beleggings Limited which, in turn,
holds 49.15% of the Class A ordinary shares, which carry approximately 34.09%
of
the total voting rights in respect of Naspers’ ordinary shares. Keeromstraat 30
Beleggings Limited holds 30.80% of the Class A ordinary shares, which represents
21.36% of the total voting rights in respect of Naspers’ ordinary shares. Some
members of the board of directors of Keeromstraat 30 Beleggings Limited, Naspers
Beleggings Limited and Heemstede Beleggings (Proprietary) Limited are also
members of the board of directors of
Naspers Limited. As a result, the controlling shareholders and these directors
significantly influence the outcome of any action requiring approval of
shareholders, including amendments to Naspers’ memorandum and articles of
association for any purpose, the issuance of additional Class A or Class N
ordinary shares, and mergers and other business combinations. If the interests
of Naspers’ controlling shareholders and directors diverge from the interests of
other shareholders, they may be in a position to cause or require Naspers to
act
in a way that is inconsistent with the general interests of holders of Class
N
ordinary shares and ADSs.
If
Naspers is liquidated, holders of Class A ordinary shares will be paid the
nominal value of such shares before any payment is made to holders of Class
N
ordinary shares or ADSs. Based on the outstanding Class A ordinary shares,
this
amounted to approximately Rand 14.2 million as of March 31, 2006.
In
terms of South
African company law, resolutions passed by Naspers’ shareholders and the lower
voting rights of the Class N ordinary shares relative to Class A ordinary shares
could deter a change in control and may adversely affect Naspers’ share
price
Some
of
the provisions of the South African Companies Act, 1973 (the “Companies
Act”) and some
of the
resolutions passed annually by Naspers’ shareholders in general meeting may
discourage attempts by other companies to acquire or merge with Naspers, which
could reduce the market value of Class N ordinary shares and ADSs. The Companies
Act requires that 75% of the total votes exercisable by all shareholders at
a
meeting (subject to a quorum of shareholders holding at least 25% of the total
number of votes present, in person or by proxy, at the meeting) approve changes
to certain provisions of Naspers’ memorandum and articles of association. In
addition, Naspers’ shareholders in general meeting may annually pass resolutions
that authorize Naspers’ board of directors to issue certain Class N ordinary
shares and certain Class A ordinary shares without the specific approval of
the
holders of Class N ordinary shares.
The
lower
voting rights of the Class N ordinary shares relative to Class A ordinary shares
could prevent or hinder a merger, takeover or other business combination
involving Naspers or discourage a potential acquirer from otherwise attempting
to obtain control of Naspers.
Your
ability to sell a substantial number of ADSs may be restricted by the liquidity
of shares traded on the Nasdaq
The
only
trading market for Class N ordinary shares is the JSE. The only trading market
for Naspers ADSs is the Nasdaq Stock Market (“Nasdaq”). Trading volumes of
Naspers ADSs on Nasdaq have been low. As a result, the ability of a holder
to
sell a substantial number of ADSs on Nasdaq in a timely manner may be
restricted. From July 1, 2005 through June 30, 2006, 220.1 million Class N
ordinary shares (70% of the total issued) were traded on the JSE and 3.7 million
ADSs were traded on Nasdaq.
ITEM
4. INFORMATION ON
THE COMPANY
4.A. History
and Development
Naspers
was incorporated in Cape Town on May 12, 1915 under the laws of the then Union
of South Africa as a public limited liability company. Naspers conducts its
operations primarily through its subsidiaries and other affiliates. Its
principal executive offices are located at 40 Heerengracht, Cape Town, 8001,
South Africa (telephone: +27 21 406 2121).
Naspers
started as a printer and publisher of newspapers and magazines in 1915. Later,
book publishing operations were founded. Naspers’ print media operations
developed of such an extent over the years that Naspers is now one of the
leading media groups in Africa.
With
the
advent of electronic media, Naspers expanded its activities in the 1980s to
incorporate pay-television and later internet platforms. In 1985, Naspers and
several other South African media companies formed an electronic pay-media
business, M-Net. M-Net was listed on the JSE in 1990. In October 1993, M-Net
was
divided into two companies. The subscriber management, signal distribution
and
cellular telephone businesses, together with a holding in FilmNet (a
pay-television operator in Europe) were placed into a new company called
MultiChoice Limited (later named MIH Holdings Limited).
In
December 2002, Naspers conducted a reorganization pursuant to which the minority
interests in MIH Holdings and MIH Limited were swapped for shares in Naspers
itself. Holders of MIH Limited shares, resident in any country other than South
Africa, received their interest in Naspers shares in the form of Naspers ADSs.
MIH Holdings shares were delisted from the JSE and MIH Limited’s shares were
delisted from Nasdaq. At the same time, Naspers’ ADSs were listed on
Nasdaq.
In
May
2001, the group acquired a 46.5% interest in Tencent, the operator of an instant
messaging platform in China called QQ. The business developed into the leading
instant messaging business in China. Tencent listed on the Hong Kong Stock
Exchange in June 2004, whereafter Naspers’ interest decreased to
36.1%.
Naspers
acquired an additional interest in M-Net and SuperSport and subsequently they
were both delisted from the JSE and Nigerian Stock Exchange with effect from
April 15, 2004.
In
December 2004, Naspers acquired a 9.9% interest in the Beijing Media Corporation
(“BMC”) for a cash consideration of Rand 273.2 million. BMC is a media company
principally engaged in the sale of advertising space for the Beijing
Youth Daily,
production of newspapers and trading of print-related materials. On December
22,
2004 BMC listed its shares on the Hong Kong Stock Exchange.
On
March
31, 2005, Naspers consolidated all its print media, book publishing (Via Afrika)
and private education (Educor) assets under the Media24 umbrella in order to
simplify the group structure.
In
January 2006, Naspers sold its entire interest in United Broadcasting
Corporation plc (“UBC”), Thailand’s leading pay-television operator, and MKSC
World Dot Com Co.(“MKSC”), a leading Thai ISP, and recognized a profit on
discontinuance of operations of Rand 1,032.2 million on the transaction. Details
relating to this transaction are highlighted in note 28 to Naspers’ audited
consolidated financial statements.
In
April
2006, Naspers acquired, through Irdeto, the CryptoTec Conditional Access
business from Koninklijke Philips Electronics NV for a cash consideration of
Rand 230.7 million. The business is involved in the development and selling
of
content security systems.
In
May
2006, Naspers acquired a 30% interest in Abril S.A. (“Abril”) for a cash
consideration of Rand 2,557.3 million. Abril is the largest magazine publisher
in Brazil and one of the largest media companies in Latin America. In addition,
Abril owns the country’s leading educational book publisher and a pay-television
network.
In
August
2006, MIH Print Media Holdings Limited (“MIH Print Media”) acquired a 20.2%
interest in Titan, a leading company in the field of Chinese sports publishing,
for a cash consideration of approximately Rand 114.5 million. It is anticipated
that through a further acquisition MIH Print Media’s shareholding will increase
to 37%.
In
September 2006, Naspers announced that, in furtherance of its empowerment
objectives, the group intends to implement a Broad-Based Black Economic
Empowerment ownership initiative in relation to Media24 Limited (“Media24”) and
MultiChoice South Africa (“MCSA”).
The
BEE
transactions are expected to result in the acquisition by qualifying Black
Persons and Black Groups of ordinary shares in the issued share capital of
Welkom Yizani Investments Limited (“Welkom Yizani”), which will hold ordinary
shares in the issued share capital of Media24 Holdings (Proprietary) Limited
(“Media24 Holdings”), the holding company of Media24 as well as Phuthuma Nathi
Investments Limited (“Phuthuma Nathi”), which will hold ordinary shares in the
issued share capital of MultiChoice South Africa Holdings (Proprietary) Limited
(“MCSA Holdings”), the holding company of MCSA.
Naspers
will sell up to 14.6 million shares in Media24 Holdings to Welkom Yizani for
a
consideration of approximately Rand 730 million. Welkom Yizani will fund the
acquisition through cash and the issuance of preference shares to Naspers.
MIHH
will sell up to 45 million shares in MCSA Holdings to Phuthuma Nathi, for a
consideration of approximately Rand 2,250 million. Phuthuma Nathi will fund
the
acquisition through cash and the issuance of preference shares to
MIHH.
The
empowerment transactions are subject to Welkom Yizani and Phuthuma Nathi
undertaking the public offers to the General Black Public to subscribe for
ordinary shares in Welkom Yizani and Phuthuma Nathi. The number of Media24
Holdings and MCSA Holdings ordinary shares to be acquired by Welkom Yizani
and
Phuthuma Nathi will depend on the amount raised by Welkom Yizani and Phuthuma
Nathi in terms of the public offers. The closing date for the public offers
is
expected to be at the end of October 2006. The public offers may not ultimately
be undertaken and the final terms of the empowerment transactions are subject
to
change.
For
information on Naspers’ principal investments and capital expenditures and
divestitures, see the description of Naspers’ business in “Item 4.B. Business
Overview” and “Item 5. Operating and Financial Review and
Prospects”.
4.B. Business
Overview
Overview
Naspers
is a multinational media company with principal operations in electronic media
(including pay-television, internet and instant-messaging subscriber platforms
and the provision of related technologies) and print media (including the
publishing, distribution and printing of magazines, newspapers and books, and
the provision of private education services). Naspers’ most significant
operations are located in South Africa, where it generates approximately 76.4%
of its revenues, with other operations located elsewhere in Sub-Saharan Africa,
Greece, Cyprus, the Netherlands, the United States, Thailand and China. Naspers
creates media content, builds brand names around it, and manages the platforms
distributing the content. Naspers delivers its content in a variety of forms
and
through a variety of channels, including television platforms, internet
services, newspapers, magazines and books. Many of Naspers’ businesses hold
leading market positions, and Naspers capitalizes on these strong positions
when
expanding into new markets.
Naspers’
business comprises two core segments:
Electronic
Media
The
electronic media segment comprises pay-television, internet and related
technology activities and is operated principally through MIH Holdings. MIH
Holdings owns or operates pay-television and internet subscriber platforms
in
Africa, Greece, Cyprus, Thailand and China. This segment contributed
approximately 65.1% (2005: 64.6%) to Naspers’ total revenue and 82.1% (2005:
77.6%) of operating profit in fiscal 2006 before the elimination of
inter-company transactions.
Print
Media
Media24
encompasses the newspaper and magazine publishing and printing interests of
Naspers. It also includes the internet activities of Media24 Digital. Media24
is
a large publisher of magazines and newspapers as well as one of the largest
printers and distributors of magazines and related products in Africa.
Via
Afrika is a leading African book publisher, seller and distributor of innovative
and quality reading, learning, listening, and viewing products in various
formats. Educor is a leading provider of private education in South Africa.
It
offers face-to-face full-time, part-time and block release programs, as well
as
distance learning education and training programs. The print
media
segment contributed approximately 35.0% (2005: 35.4%) to Naspers’ total revenue
and 19.8% (2005: 24.5%) to operating profit in fiscal 2006 before the
elimination of inter-company transactions.
Strategy
Naspers
focuses on media businesses in growing markets in which it has attained or
hopes
to attain sustainable market positions. Geographically the group is focused
on
the BRICSA countries (Brazil, Russia, India, China, South and sub-Saharan
Africa), which we believe present above-average growth opportunities. During
the
current fiscal year, Naspers acquired a 30% equity stake in a leading Brazilian
media company, Abril, and also established development offices in Russia and
India. Naspers uses content, brands and distribution channels from existing
businesses to grow in other markets and to develop new businesses. Naspers
has
integrated the internet into each of its businesses to better reach customers
and increase the value of its content. Naspers’ key objectives are as follows:
· |
Focus
on Investments and Technology.
Naspers has made substantial investments in recent years to upgrade
and
enhance its subscriber platforms. Naspers intends to consolidate
the
leading positions it holds in many markets and to expand into new
ones.
Most of Naspers’ pay-television platforms offer digital subscriptions and
feature interactive or enhanced services. Naspers is presently researching
the opportunity of broadcasting television channels to mobile devices.
Naspers has expanded its printing facilities by investing in advanced
printing and related facilities. Additional newspaper and magazine
titles
have been launched when market opportunities present themselves.
Naspers
has further launched several internet related businesses.
|
· |
Build
Digital Subscriber Base.
Naspers seeks to continue to expand MIH Holdings’ digital pay-television
subscriber base, both by converting its current analog customers
to the
digital service and by gaining new digital customers. MIH Holdings
offers
subscribers movie and sports programming, and is adding interactive
services to its bouquets (the term used to describe the channels
offered
by a pay-television provider on a given platform).
|
· |
Grow
Internet Businesses.
Naspers intends, by offering content and superior service, to grow
M-Web
Holdings as an internet service provider and content portal in Africa.
Naspers is also focused on e-commerce opportunities and on internet
service provider (“ISP”)
operations. Naspers has an interest in the operations of China’s leading
instant messaging platform, Tencent. It will continue to develop
such
interests in China and elsewhere. Naspers’ print media and book publishing
businesses are using their core competencies to create new business
opportunities over the internet.
|
· |
Maintain
Local Approach.
Naspers has a track record of establishing or acquiring businesses
in
developing markets such as Africa, the Mediterranean, Asia and, more
recently, Brazil. Naspers believes that a component of its success
in
these markets is its emphasis on taking a local approach. This may
involve
local partners and management teams and incorporating linguistically
and
culturally tailored local content in its service offerings. Naspers’
strategy is to continue to take a local approach to content as it
expands
its pay-television and internet businesses.
|
· |
Provide
Quality Service.
Naspers views its subscriber platform business primarily as a service
business and, accordingly, places emphasis on providing customer
service.
Naspers believes that this helps build customer loyalty and reduce
“churn”
(a term used to describe subscriber loss). Naspers seeks to achieve
quality customer service by operating service centers and utilizing
advanced computer systems, which allow customer service representatives
to
address customer concerns more
quickly.
|
Segments
Naspers’
business is comprised of two core segments - Electronic Media and Print Media.
The following table shows revenues, revenues expressed as a percentage of total
revenues and the percentage change in revenues from the prior period for
Naspers’ core business segments for the last two fiscal years:
|
|
|
|
|
|
Revenue
(Rand millions except percentages)
|
|
|
|
R
Millions
|
|
2006 %
of revenues
|
|
%
change
from
2005
|
|
2005 R
millions
|
|
%
of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic
Media
|
|
|
|
|
|
|
|
|
|
|
|
—
Pay-television
|
|
8,903
|
|
56.7
|
|
14.9
|
|
7,747
|
|
57.3
|
|
—
Internet
|
|
898
|
|
5.7
|
|
29.0
|
|
696
|
|
5.1
|
|
—
Conditional access
|
|
|
352
|
|
|
2.2
|
|
|
38.0
|
|
|
255
|
|
|
1.9
|
|
—
Entriq
|
|
|
66
|
|
|
0.4
|
|
|
94.1
|
|
|
34
|
|
|
0.3
|
|
Print
Media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
Newspapers, magazines and printing
|
|
|
3,983
|
|
|
25.4
|
|
|
18.0
|
|
|
3,374
|
|
|
25.0
|
|
—
Books
|
|
|
981
|
|
|
6.2
|
|
|
13.9
|
|
|
861
|
|
|
6.4
|
|
—
Education
|
|
|
536
|
|
|
3.4
|
|
|
(2.0
|
)
|
|
547
|
|
|
4.0
|
|
Corporate
services
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
The
following table shows operating profit/(loss) and the percentage change in
operating profit/(loss) from the prior period for Naspers’ business segments for
the last two fiscal years:
|
Operating
profit/(loss) (Rand millions except percentages) |
|
|
2006 R
millions
|
|
%
change from 2005
|
|
2005 R
millions
|
|
Electronic
Media
|
|
|
|
|
|
|
|
—Pay-television
|
|
2,785
|
|
31.4
|
|
2,120
|
|
—Internet
|
|
(153)
|
|
125.0
|
|
(68)
|
|
—Conditional
access
|
|
—
|
|
—
|
|
(47)
|
|
—Entriq
|
|
(165)
|
|
85.4
|
|
(89)
|
|
Print
Media
|
|
|
|
|
|
|
|
—Newspapers,
magazines and printing
|
|
612
|
|
15.9
|
|
528
|
|
—Books
|
|
|
67
|
|
|
26.4
|
|
|
53
|
|
—Education
|
|
|
(84
|
)
|
|
—
|
|
|
23
|
|
Corporate
services
|
|
|
(58
|
)
|
|
13.7
|
|
|
(51
|
)
|
The
following table shows revenues, revenues expressed as a percentage of total
revenues and the percentage change in revenues from the prior period by
geographic market for the last two fiscal years:
|
|
|
|
|
|
|
|
|
|
Revenue (Rand
millions except percentages)
|
|
|
|
2006
|
|
2005
|
|
|
|
R
Millions
|
|
%
of revenues
|
|
%
change
from
2005
|
|
R
millions
|
|
%
of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South
Africa
|
|
11,994
|
|
76.4
|
|
18.3
|
|
10,140
|
|
75.0
|
|
Rest
of Sub-Saharan Africa
|
|
1,838
|
|
11.7
|
|
19.0
|
|
1,545
|
|
11.4
|
|
Greece
and Cyprus
|
|
|
1,469
|
|
|
9.4
|
|
|
2.5
|
|
|
1,433
|
|
|
10.6
|
|
Asia
|
|
|
78
|
|
|
0.5
|
|
|
(66.1
|
)
|
|
230
|
|
|
1.7
|
|
United
States
|
|
|
49
|
|
|
0.3
|
|
|
4.3
|
|
|
47
|
|
|
0.3
|
|
Other
|
|
|
278
|
|
|
1.8
|
|
|
126.0
|
|
|
123
|
|
|
0.9
|
|
Electronic
Media
Overview
The
electronic media segment comprises pay-television platforms, internet operations
and instant messaging services and related technologies, and is principally
operated through MIH Holdings. These businesses do not all develop at the same
rate and are at varying stages of growth. The internet is already providing
much
of the content and services that are available through interactive enabled
television sets and mobile devices and will effectively become a backbone to
the
delivery of these services. The electronic media activities are conducted
through various subsidiaries, joint ventures and associated companies primarily
in Africa, Greece, Cyprus, the United States and China.
Pay-television
The
following table sets out the services offered and subscriber numbers for the
group’s pay-television subsidiaries and joint ventures by region and service as
at the end of fiscal 2006:
|
LAUNCH
DATE
|
SERVICE
|
SUBSCRIBERS
AS
AT
MARCH 31, 2006
|
|
AFRICA
|
|
|
|
|
South
Africa
|
1986
|
M-Net
(analog)
|
217,440
|
|
|
1995
|
DStv
(digital)
|
1,033,093
|
|
Rest
of Sub-Saharan Africa
|
1991
|
M-Net
(analog)
|
819
|
|
|
1996
|
DStv
(digital)
|
384,216
|
|
MEDITERRANEAN
|
|
|
|
|
Greece
|
1994
|
FilmNet/SuperSport
(analog)
|
71,994
|
|
|
1999
|
NOVA
(digital)
|
239,536
|
|
Cyprus
|
1993
|
Ltv
& Alpha (analog)
|
42,552
|
|
|
2004
|
NOVA
Cyprus (digital)
|
20,369
|
|
From
fiscal 2002 to fiscal 2006, on a comparable basis, the group increased the
total
number of subscribers under management from 1,598,563 to 2,010,019, or 25.7%.
Over the same period, the group’s digital subscribers as a percentage of its
total subscribers increased from 56% to 83%. During fiscal 2006, the digital
subscriber base increased by 229,956 to 1,677,214 subscribers, representing
16%
growth. The group continues to migrate subscribers from the analog service
to
the higher revenue and higher margin digital service. The South African
pay-television market is relatively mature, and the group does not expect the
total number of subscribers in that market to increase substantially.
The
following table shows the growth of subscribers in each of the group’s markets:
|
|
March
31,
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
CAGR(1)
|
SUBSCRIBERS
(THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFRICA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South
Africa
|
|
1,251
|
|
1,148
|
|
1,076
|
|
1,045
|
|
1,057
|
|
4.30
|
% |
Rest
of Sub-Saharan Africa
|
|
385
|
|
336
|
|
292
|
|
260
|
|
224
|
|
14.50
|
% |
Total
Africa
|
|
|
1,636
|
|
|
1,484
|
|
|
1,368
|
|
|
1,305
|
|
|
1,281
|
|
|
6.31
|
%
|
MEDITERRANEAN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greece
|
|
|
311
|
|
|
304
|
|
|
291
|
|
|
256
|
|
|
265
|
|
|
4.08
|
%
|
Cyprus
|
|
|
63
|
|
|
60
|
|
|
60
|
|
|
54
|
|
|
53
|
|
|
4.42
|
%
|
Total
Mediterranean
|
|
|
374
|
|
|
364
|
|
|
351
|
|
|
310
|
|
|
318
|
|
|
4.14
|
%
|
Total
Subscribers
|
|
|
2,010
|
|
|
1,848
|
|
|
1,719
|
|
|
1,615
|
|
|
1,599
|
|
|
5.89
|
%
|
___________
(1)
|
Compounded
annual growth rate calculated from March 31, 2002 until March 31,
2006.
|
Africa
The
African business is operated through MultiChoice and MultiChoice Subscriber
Management Service (Proprietary) Limited (“MSMS”) (collectively “MultiChoice
South Africa”), and MultiChoice Africa Limited (“MultiChoice Africa”), each an
indirect wholly owned subsidiary of Naspers Limited. The African business
provides pay-television and subscriber management services in 48 countries
throughout Africa and the adjacent Indian Ocean islands. The group has ownership
interests through MultiChoice South Africa and MultiChoice Africa in
subsidiaries and joint ventures operating in Kenya, Ghana, Uganda, Nigeria,
Tanzania, Zambia, Namibia and Botswana. In many other Sub-Saharan African
nations, MultiChoice Africa operates through agents or franchisees. The agents
and franchisees conduct marketing and advertising activities to build
MultiChoice Africa’s subscriber base and collect subscription revenues on behalf
of MultiChoice Africa. They retain a portion of the subscription revenues they
collect as compensation for their services and remit the balance to MultiChoice
Africa.
The
pay-television service consists of terrestrial analog networks as well as
direct-to-home digital satellite television (“DStv”)
bouquets on four
separate satellites: Eutelsat W4 KU-band, Eutelsat SESAT Ku-Band, PAS 10 C-band
and PAS 7 KU-band. In Namibia, the terrestrial analog network was replaced
with
a Digital Terrestrial Transmission (“DTT”) network.
South
Africa
MultiChoice
South Africa offers customized M-Net premium analog terrestrial services
consisting of sport and movies, as well as the premium DStv digital bouquet
consisting of 74 video channels (including 6 Indian and 3 Portuguese), 8 data
channels, 40 audio music channels and 25 radio channels. Viewer favorites are
M-Net (Africa’s premier pay-television channel), the SuperSport channels, M-Net
Movies 1 & 2, M-Net Series, Discovery Channel, National Geographic
Channel and Animal Planet. During fiscal 2006, enhancements to the DStv bouquet
in South Africa included the addition of 5 video channels to the DStv digital
bouquet - MK 89 (Afrikaans Youth Music Channel), Boomerang (Kids animation
channel), The Home Channel (Lifestyle Channel broadcasting on weekends only),
CCTV 9 (English-language 24-hour news channel with a Chinese perspective) and
SuperSport 8 (Portuguese Soccer Channel). In addition to 5 permanent video
channels, DStv also broadcasted Events Channels (M-Net Holiday Channel, CNN/
MultiChoice Africa Journalist of the Year and Idols) and made enhancements
to
the Travel Channel, M-Net’s Academy Awards Broadcasts, Temptation and Carte
Blanche as well as M-Net Series, BBC Food and Mindset Learn.
MultiChoice
South Africa’s aggregate subscriber base in South Africa as of March 31, 2006
was 1,250,533 subscribers, an increase of 102,662 or 8.9% from 1,147,871
subscribers at March 31, 2005. The digital subscriber base in South Africa
grew
by 137,747 subscribers during fiscal 2006 (from 895,346 to 1,033,093
subscribers) and as of March 31, 2006 accounted for 83% of the total number
of
pay-television subscribers in South Africa. The lower priced bouquet aimed
at
the emerging market (“DStv
Compact”)
grew to
42,000 subscribers. MultiChoice launched a personal video recorder (“PVR”) in
October 2005 and sold 27,500 units during fiscal 2006 which contributed to
the
growth in the digital subscriber base. The analog subscriber base declined
to
217,440 subscribers during the same period, primarily due to subscribers
upgrading from the analog to the digital platform. As of March 31, 2006,
MultiChoice South Africa’s subscriber base represented approximately 17% of
South Africa’s television households.
South
Africa is Africa’s largest economy, with a population of approximately 44
million people, and is Africa’s third largest television market, with
approximately 7.5 million television households. The South African market is
relatively mature. The joint venture companies M-Net and SuperSport continue
to
play a role in growing the subscriber base through the delivery of premium
thematic channels and exclusive content. M-Net provides premium entertainment
channels and SuperSport provides sports channels carried by MultiChoice South
Africa and MultiChoice Africa on their pay-television platforms in Africa.
Naspers owns directly or indirectly 60.1% of each of M-Net and
SuperSport.
M-Net
has
output deals with all the major film and television studios, enabling it to
screen quality movies, series and miniseries. M-Net compiles 15 entertainment
channels for broadcast across the African continent. These channels are carried
on various satellite platforms all of which are operated by MultiChoice Africa
under the DStv brand.
SuperSport
produces nine sports channels for distribution across Sub-Saharan Africa. These
comprise three primarily live 24-hour channels, including a dedicated
pan-African football channel (football is also known as soccer), a sports update
channel, a 24-hour highlights channel, a dedicated interactive sports channel
and three ad hoc sports channels, covering more than 100 different genres of
sport. The football channel screens South African Premier Football League and
various Confederation of African Football games, extensive live English Premier
League games, Italian Serie A and Bundesliga football. Extensive coverage of
South African and international cricket, rugby, golf and tennis are also offered
on other SuperSport
channels.
The SuperSport Zone channel provides information, live scores and statistics
on
specific sporting events. SuperSport has recently launched a 3G mobile service
to South African mobile service providers.
MultiChoice
South Africa services its South African subscriber base through its customer
care and billing center in Johannesburg and branches in Durban and Cape Town.
The center in Johannesburg provides customers with walk-in and phone-in service,
while the branches provide customers with a walk-in service.
The
analog service is sent to transmission towers either terrestrially over fiber
optic cables or microwave links, or via satellite. The towers transmit the
signal to MultiChoice South Africa’s customers’ homes, where it is received by
an antenna and decrypted by a set-top box. A satellite transmits the digital
satellite signal. MultiChoice South Africa leases 9 KU-band (KU-band refers
to a
frequency range used for satellite downlink transmissions that falls within
the
12 to 14 GHz range of the electromagnetic spectrum) transponders on this
satellite, and its uplink facilities are provided by Orbicom (Proprietary)
Limited and British Telecom. Digital customers receive the signal from this
satellite using a 90 cm satellite dish located on or near their homes. The
signal is then descrambled and decompressed for viewing using a conditional
access system, set-top box and smart card. MultiChoice Africa and MultiChoice
South Africa utilize the Irdeto conditional access system and third party
set-top box technology that incorporates Irdeto’s software for their analog and
digital platforms. Smart cards are credit card-sized devices that have embedded
processors that provide entitlement functions and store decryption keys and
digital signatures. MultiChoice Africa and MultiChoice South Africa utilize
the
Irdeto encryption and set-top box technology for their analog and digital
platforms.
During
the year ended March 31, 2006, MultiChoice South Africa experienced an average
monthly net churn (net churn is the percentage of customers who terminate their
subscription in a given period minus the number of former customers who
reconnect in that period) of approximately 1.92% on its analog subscriber base
and 1.2% on its digital subscriber base. This compares to an average monthly
net
churn of approximately 2.02% on its analog subscriber base and 0.96% on its
digital subscriber base during fiscal 2005. The net churn for the analog
subscriber base excludes customers who upgraded to the digital service.
MultiChoice
South Africa bills its subscribers monthly, in advance, in Rand. The following
table sets forth certain pricing information for the South African businesses:
|
Subscribers
|
Monthly
Subscription
Price
|
Equipment
Price(1)
(4)
Purchase
|
|
March
31,
|
|
2006
|
2005
|
2004
|
Rand
|
U.S.
$(3)
|
Rand
|
U.S.
$(3)
|
|
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Analog
|
217
|
253
|
301
|
229.00(2)
|
31.03
|
550
|
74.53
|
Digital
|
1,033
|
895
|
775
|
419.00(2)
|
56.78
|
650
|
88.08
|
___________
(1)
|
Excludes
price of satellite receiver in the case of digital
service.
|
(2)
|
Includes
price increase that occurred in April
2006.
|
(3)
|
Converted
at the noon buying rate at September 15, 2006. (U.S. $1 = Rand
7.38)
|
(4)
|
In
October 2005, MultiChoice launched a dual-view personal video recorder
which retails at Rand 2,999.00. (U.S. Dollar
406.37)
|
Rest
of Sub-Saharan
Africa
The
group
offers terrestrial analog, digital terrestrial and digital satellite
pay-television services to Sub-Saharan Africa through MultiChoice Africa and
various subsidiaries, joint ventures, agents and franchises. MultiChoice Africa
offers many of the same premium channels in Sub-Saharan Africa as MultiChoice
South Africa offers in South Africa, including those broadcasting exclusive
premium films and popular sports. MultiChoice Africa’s digital service features
various bouquets with some 75 video channels (including the customized M-Net
channel and many major international network channels), 8 data channels and
up
to 65 audio channels, which are transmitted to 48 countries in Sub-Saharan
Africa, and adjacent islands. As of March 31, 2006, MultiChoice Africa and
its
subsidiaries and joint ventures had 384,216 Sub-Saharan African subscribers
to
its DStv digital satellite and terrestrial services and 819 Sub-Saharan African
subscribers to its terrestrial analog service, compared to 333,781 digital
and
2,373 analog subscribers as of March 31, 2005. This represents an increase
of
14.5% from fiscal March 2005 to March 2006.
The
marketing efforts of MultiChoice Africa’s Sub-Saharan pay-television business
are focused on the major cities in each of the countries served on the basis
that households in these major metropolitan areas are more likely to be able
to
afford its services than rural households. In line with the focus on serving
niche markets, a new satellite, SESAT, was introduced during fiscal 2005 to
accommodate the expansion of the digital subscriber base for the French and
Portuguese bouquets. A dedicated sports channel for the Portuguese bouquet
was
introduced during the year to further cater for the Portuguese market. The
addition of a number of new English language channels has allowed the premium
DStv bouquet to maintain its position as the leading offering in the market.
The
company has intensified its focus on providing localized programming to
subscribers especially in Africa - this includes the enhancement of the Africa
Magic channel and the addition of free-to-air channels in Zambia, Zimbabwe,
Mozambique, Uganda and Botswana.
During
fiscal 2006, its Sub-Saharan African operations experienced an average monthly
net churn of approximately 1.46% on the digital subscriber base, as compared
to
average monthly net churn of approximately 1.65% on the digital subscriber
base
for fiscal 2005.
The
following table sets out certain pricing information for MultiChoice Africa’s
Sub-Saharan African businesses:
|
Subscribers
|
Monthly
Subscription
Price(1)
|
Equipment
Price(2)
|
|
March
31,
|
|
2006
|
2005
|
2004
|
|
(thousands)
|
|
|
|
|
|
|
|
|
Analog
|
1
|
2
|
9
|
U.S.$
35.00
|
N/A
|
Digital
|
384
|
334
|
283
|
U.S.$
58.00
|
U.S.
$ 200
|
___________
(1)
|
Represents
the average price across all of MultiChoice Africa’s Sub-Saharan African
businesses.
|
(2)
|
Includes
the price of the satellite
receiver.
|
MultiChoice
Africa’s digital service is transmitted direct-to-home, on PAS10 C-band
satellite transponders (C-band refers to the frequency range of the
electromagnetic spectrum used for satellite transmission, having an uplink
frequency at 6 GHz and a downlink frequency at 4 GHz), the Eutelsat W4 KU-band,
Eutelsat SESAT KU-band and PAS7 KU-band transponders. Customers receive these
signals on a satellite dish mounted on or near their homes. The signal is then
descrambled and decompressed for viewing using a conditional access system,
set-top box and smart card. MultiChoice Africa utilizes the Irdeto conditional
access system and third party set-top box technology that incorporates Irdeto’
software for both its analog and digital platforms. Smart cards are credit
card-sized devices that have embedded processors that provide entitlement
functions and store decryption keys and digital signatures. The smart cards
are
inserted in a set-top box to gain access to encrypted digital
programming.
MultiChoice
Africa delivers analog services terrestrially to Sub-Saharan Africa by
transmitting its programming signal by satellite to local receiving stations
in
two countries. These stations relay the signal to a broadcast tower that
transmits it as a standard encrypted scrambled television signal. When received
by a customer, a decoder in a set-top box descrambles the signal and provides
it
to the customer’s television receiver. MultiChoice Africa is systematically
shutting down its analog terrestrial networks on a country by country basis
as
more and more analog subscribers migrate to digital, making the terrestrial
analog networks uneconomical on a selective basis. The analog transmission
network will be closed down completely during the 2006 calendar year. In
Namibia, the analog service was replaced with an innovative new Digital
Terrestrial Transmission (“DTT”) service. Subscribers are now able to receive
multiple channels in digital quality.
Mediterranean
Naspers
offers terrestrial analog and digital pay-television services in Greece
and digital satellite pay-television in Cyprus through its subsidiary NetMed
NV
(“NetMed”). At March 31, 2006 Naspers owned 74.9% of NetMed. Global Capital
Investors II LP (“Global”), an investment fund managed by Global Finance SA,
owned 8.5% of
NetMed,
Antenna Pay-TV Limited (“Antenna”), a subsidiary of Antenna SA, owned 4.1% of
NetMed, and Teletypos owned 12.5% of NetMed. In terms of Agreements with Global
and Antenna, Global and Antenna exercised their right to put their shares to
MIH
BV. After an extended valuation and negotiation process, MIH acquired from
Global and Antenna their shares in NetMed for the sum of Euro 67.3 million
on
July 19, 2006. Naspers now owns 87.5% of NetMed with the remaining 12.5% owned
by Teletypos.
NetMed
manages its Mediterranean pay-television business through the following
operating subsidiaries:
· |
MultiChoice
Hellas and MultiChoice Cyprus Limited manage the subscriber base
and
market and sell pay-television services in Greece and Cyprus,
respectively. NetMed, through Myriad Development B.V., controls 96.4%
of
MultiChoice Hellas. The remaining shares of MultiChoice Hellas are
held by
Lumiere Television Limited (“LTV”).
|
· |
NetMed
owns 69.04% of MultiChoice Cyprus Holdings Limited and the remaining
30.96% is held by LTV. MultiChoice Cyprus Holdings owns 50.9% of
MultiChoice (Cyprus) Public Company Limited (“MCC”), a company listed on
the Cypriot Stock Exchange. Following a public offer in February
2006, LTV
holds a further 32% direct stake in MCC. The remaining shares are
publicly
held.
|
· |
NetMed,
directly and indirectly through its subsidiary, Myriad Development
BV,
owns 100% of NetMed Hellas SA (“NetMed
Hellas”).
NetMed
Hellas operates the FilmNet and SuperSport premium pay-television
channels
in Greece.
|
· |
Synergistic
Network Development S.A. is 100% owned by NetMed and is responsible
for
signal transmission and distribution.
|
NetMed’s
Nova bouquet includes 50 channels, of which 44 are Greek channels or foreign
channels dubbed or sub-titled in Greek. Subscribers also get access to more
than
250 other European channels which are available on the same satellite as the
Nova bouquet. The Greek language channels that are included in the Nova service
(such as FilmNet, SuperSport and those of the Greek commercial and state
broadcasters) are either produced in Greece or are foreign thematic channels
customized for this market. These include Discovery, MGM, TCM, National
Geographic, Animal Planet, Jetix Kids and E! entertainment. SuperSport features
exclusive sporting events for the Greek and Cypriot markets.
FilmNet
provides a combination of exclusive, first run movies, along with some original
and imported series. NetMed’s analog service consists of three channels;
FilmNet, SuperSport and Jetix Kids transmitted on two analog frequencies.
Greece
has a population of approximately 10.9 million people and approximately 3.5
million television households, giving NetMed’s pay-television services a market
penetration of approximately 9% of television households.
The
total
number of the group’s pay-television subscribers for the Mediterranean region
was 374,451 households at the end of fiscal 2006, up from 363,739 at the end
of
fiscal 2005, an increase of 2.9%. During fiscal 2006, the analog subscriber
base
in Greece declined by 22,732 to 71,994 households, while Nova (the digital
satellite television service) maintained its leading position in the region
by
adding 30,224 digital subscribers to end the fiscal year with 239,536
subscribers. As of March 31, 2006, NetMed had 62,921 subscribers in Cyprus.
During fiscal 2006, NetMed experienced an average monthly net churn of
approximately 1.4% (2005: 1.1%) on its total subscriber base in
Greece.
NetMed
experienced a decline in subscribers from 2001 to 2003 due to market confusion
as a result of the launch and subsequent
liquidation of a competing pay-television service in Greece, Alpha Digital
Synthesis S.A. (“Alpha Digital”). In September 2002, Alpha Digital entered into
liquidation. Recent events have also seen the emergence of a new administration
for the A Division of Greek football league, which has been renamed the
SuperLeague. Despite the new administration, further turmoil is expected in
future seasons.
NetMed
has secured the rights to a significant volume of games (112 of a total of
125
games per season) of Europe’s premier football club competition, The Champions
League, for the next three seasons commencing, 2006/07. The remaining thirteen
games (per season) will be broadcast by the Greek state broadcaster. The
acquisition of The Champions League programming rights should help reduce
NetMed’s dependence on Greek football although complete success will be
dependent on the participation of Greek teams, whose performance tends to be
erratic. NetMed secured the television rights to 13 of the 16 Greek football
teams for the 2006/07 season. The Greek state broadcaster has entered the market
and secured the rights to 3 teams, including the rights to the top team in
Greece, for the next three seasons. The status of football in Greece, however,
remains uncertain, with several clubs, including one of the four most popular,
facing financial difficulties. Despite these difficulties, clubs have received
no tax relief from the Greek government and are unlikely to do so in the near
future. NetMed has withdrawn from all court cases pertaining to the broadcasting
rights of football teams, but continues to pursue teams for damages where they
have breached their broadcasting agreements, although there is no certainty
as
to the outcome and the legal process is proving to be extremely lengthy.
NetMed
markets its Nova digital service as an upscale alternative to the premium analog
package. It expects the majority of the growth in its digital platform to come
from new subscribers supported by the acquisition of the critical mass of the
SuperLeague and Champions League. Previously digital growth has come largely
from subscribers that upgrade from the analog service. Through March 31, 2006,
approximately 20% of the growth in NetMed’s Greek digital subscriber base
comprised analog subscribers who converted to the digital service. Overall,
32%
of the total current Greek digital subscriber base was analog subscribers in
the
past.
In
February 2006, the attention of NetMed was drawn to press reports in Cyprus
of
negotiations between LTV and the large Cyprus telecommunications provider
(“CYTA”) for the supply of channels by LTV to CYTA for distribution on its
broadband network. At the time,
LTV was
a 30.96% shareholder in MultiChoice Cyprus Holdings and 10.98% shareholder
in
MCC. NetMed was of the view that the proposed arrangements with CYTA would
be in
breach of a number of agreements between LTV and NetMed and/or
its
affiliates, including MCC. Various legal proceedings, including arbitration
proceedings under the London Court of International Arbitration (“LCIA”),
injunction proceedings in the Cyprus courts and complaints to the Cyprus
Commission for the Protection of Competition (“CPC”), have been initiated in
order to protect the interests of MCC and its affiliates, and some of these
proceedings are continuing. On February 28, 2006, LTV made a public offer for
the shares in MCC which it did not already own.
On
June
1, 2006, LTV announced that this Offer had been accepted by 27% of the
shareholders of MCC, resulting in LTV becoming the direct owner of 32% of the
shares of MCC.
On
July
7, 2006, LTV withdrew the carriage of its channel on the Nova Cyprus platform
thus depriving Nova Cyprus of one of its premium channels. Nova Cyprus in turn
has added elements of the premium Nova Greece channels (FilmNet and SuperSport)
to its platform. However without the main driver of Cyprus football and other
European football championships on the platform, churn is expected on the Nova
Cyprus platform at the commencement of the various football championships during
August 2006. As at August 31, 2006 Nova Cyprus had 20,947
subscribers.
On
July
19, 2006, MCC began to experience difficulty in administering its analog
subscriber base. MCC subsequently discovered that communications links between
MCC and its subscribers had been severed by LTV. Attempts by MCC to gain access
to its equipment located on LTV’s premises were refused and MCC was notified by
LTV that it had terminated its analog channel carriage arrangement with MCC.
MCC
does, therefore, not provide analog service anymore.
MultiChoice
Hellas has entered into a three year Agreement with Sigma in Cyprus for the
carriage of Sigma Sports 1 & 2 channels, specializing in the broadcast of
The Champions League.
Thailand
MIH
disposed of its shares in UBC and MKSC for a total cash consideration of Rand
999.3 million, effective January 6, 2006. MIH’s
sale of its shareholding in UBC to True Corp., which was already UBC’s largest
shareholder, is in line with Naspers’ strategy to focus on its core competencies
and allowed True Corp. to fully integrate UBC into its existing
business.
Competitors
and Competitive Position
MultiChoice
South Africa’s digital and analog platforms in South Africa compete directly
with the four free-to-air television channels in South Africa (which are also
carried on MultiChoice South Africa’s digital bouquet) and indirectly with the
internet, all live sporting events, motion picture theatres, video rental
stores, mobile telephones, lotteries, gaming and other forms of
entertainment.
MultiChoice
Africa is the leading provider of pay-television services in Sub-Saharan Africa.
In the countries in which MultiChoice Africa broadcasts, however, there are
numerous public and private free-to-air television stations, as well as,
localized pay-television operations (both licensed and unlicensed). Digital
direct-to-home (“DTH”), Cable, Digital Terrestrial (“DTT”) and Internet Protocol
Television (“IPTV”) competitors have launched or are expected to launch
pay-television operations across Sub-Saharan Africa. During the course of fiscal
2005, three DTH competitors launched their services in Nigeria. A new
continental operator, MyTV, has launched a DTH service in Sub-Sahara Africa.
We
also saw the launch of some country specific cable and DTT pay-television
operations. MultiChoice Africa believes that its wide selection of programming,
distributed both terrestrially and on DStv, appeals to the broader African
market.
MultiChoice
South Africa recently lodged its application for a broadcasting license. The
regulations applicable to this license have been finalized and the due date
for
all license applicants was August 31, 2006. The process of evaluating and
granting
of the license may take some time to conclude. At the conclusion of this process
additional conditions may be imposed. The impact of these conditions will only
be known at the time of granting of the license. Several other organizations
will also be applying for a license. The number of broadcasting competitors
will
only be known at the conclusion of the licensing process.
In
Greece
and Cyprus, NetMed competes directly with free-to-air broadcast channels,
including national Greek networks (such as ERT, Mega, Antenna, Alpha and Star)
and four national Cypriot networks (Cyprus Broadcasting Corp., Sigma, Mega
and
Antenna).
Greek
media law allows multiple licenses to be granted for satellite pay-television
platforms, and two other entities, Intersat SA and Alpha Digital, had been
granted licenses. Both had their licenses revoked, as Intersat failed to launch
a digital television platform and Alpha Digital entered into liquidation. The
Greek Post, Telecommunication & Telegraph (“PTT”)
company, OTE
launched a national satellite called HellasSat, serving Greece, the Balkans
and
greater Europe. The Greek regulatory process for issuing terrestrial licenses
has been frozen for more than five years, a fact that may continue to retard
the
development of commercial opportunities for NetMed. ERT has launched DTT
including a free-to-air movie channel and sports channel. This could dampen
demand for pay-television movie and sports channels offered by NetMed if ERT
deploys its channels commercially and further create pressure on rights
acquisitions as ERT seeks content for these channels. Delays in acquiring DTT
frequencies for pay television could also prevent NetMed from developing other
TV distribution platforms which would form a natural extension.
New
technologies have been adopted in Cyprus where a broadband network has been
laid
down by CYTA. A further independent broadband platform, Primetel, has also
launched a package consisting of basic and premium pay-television channels
as
well as high speed internet and bundled telephony services. A rival digital
satellite pay-television operation on HellasSat, named AthinaSat, launched
in
May 2005, with a basic and premium package of 12 channels. In
addition, over the last few months LTV has begun offering its premium channel
(including exclusive Cypriot football) to CYTA and PrimeTel, a DSL operator,
and
deals with other satellite and cable operators are pending. Since the carriage
of LTV’s premium channel on MCC’s bouquets was terminated in June 2006 (digital)
and July 2006 (analog), discussions have taken place about the renewed carriage
of such channel by MCC, but no agreement has been reached.
Seasonality
The
group’s pay-television business experiences an increase in the level of
subscriber churn during the respective summer holiday seasons, particularly
in
Greece and Cyprus where the conclusion of the football and basketball seasons
coincide with summer,
when
many subscribers travel away from their primary residence and engage in other
forms of leisure. In Africa, the start of the European Football season is
normally characterized by subscriber growth.
Technology
Irdeto
The
group’s subsidiary, Irdeto, provides content protection solutions to subscriber
platform operators and other providers of valuable digital content. Irdeto
products enable pay-media operators and corporate users to encrypt and decrypt
their broadcast or multicast signals. The products control subscriber access
to
content, services and events across all media platforms, including digital
television, internet protocol (IP) streaming media and delivery of video
services on mobile platforms. Irdeto offers customers over 40 years of
experience in the pay-media industry and a range of skilled resources and
properties.
As
at
March 31, 2006, Irdeto had 194 customers (including the affiliated companies
MultiChoice South Africa, MultiChoice Africa and NetMed) in more than 40
countries. During the year ended March 31, 2006, Irdeto sold approximately
5.8
million personalized digital smart cards and other devices with a total of
approximately 21 million shipped to date since 1995 when digital smart cards
were first launched. Smart cards are credit card-size devices with embedded
processors that provide entitlement functions and store decryption keys and
digital signatures that are inserted in set-top boxes for access to subscription
television services. During the year, Irdeto acquired 50 new customers in all
regions of the world.
Irdeto
continues to innovate and improve the security-related aspects of its products.
On-going action against pirate networks continued to deter pirates from
attempting to compromise Irdeto technology.
In
April
2006, Irdeto acquired a competitor, Philips CryptoTec, which was the conditional
access business of Philips, based in Eindhoven, The Netherlands. The acquisition
brought expert staff and market share, increasing Irdeto’s customers to 300 in
60 countries.
Entriq
Entriq
is
investing in content protection and subscriber management services for new
broadband markets. Consumption of broadband media on the internet continues
to
grow and in some markets like Korea and China, is now the dominant form of
internet usage. During the last year, Entriq continued to invest in content
protection, subscriber management technologies and ASP services for broadband
markets including a turnkey digital store solution.
Entriq
made further progress on the development of its global network for media
authorization. This is a secure, reliable service for distribution and selling
media online and across platforms including PC, mobile telephones and extending
into IPTV.
Entriq’s
clients are in three major market sectors: sports, music and entertainment.
Some
of Entriq’s clients include: The Winter Olympics by nbcolympics.com and Intel
ViiV platform, Viacom for Comedy Central, Channel 4 for Big Brother in the
UK,
Pro Sieben for distribution of content in Germany, UEFA for European Champions
League, MTV US (radio channels on Sprint) and MTV UK integrating with major
UK
carriers.
MediaZone
Broadband
presents an opportunity to reach small audiences not otherwise serviced through
traditional distribution channels. Mediazone has invested in building web
portals where niche content is aggregated and offered via subscription packages.
These channel categories include sports (e.g. rugby), international (e.g.
ChinaPortal and KuduClub) and lifestyle. Current events covered include
Wimbledon, Fiba Basketball Championship and Super 14 Rugby.
Competitors
and Competitive Position
The
extent and nature of competition among smart card manufacturers is in large
part
determined by the ability to provide secure products that effectively combat
piracy at competitive prices, the ability to offer superior customer service
and
the ability to acquire new clients, as the cost of switching for existing
customers can be high. Irdeto’s main competitors are NDS Group plc and
Nagravision S.A., which provide conditional access systems to operators
utilizing a range of platforms.
Competition
for Entriq’s products and services are determined by the ability to provide
content protection and subscriber management services to enable customers to
sell pay media online and to mobile devices. Entriq faces competition in all
the
individual elements of its overall service offering such as DRM, billing and
subscriber management, mobile content management and rendering. Entriq’s
competitors include companies like The Platform, Extend Media and Brightcove.
It
is expected that new competition could enter the market as forecasts continue
to
grow, especially for delivery of pay media over broadband and media rich content
to mobile devices. Entriq’s license billing and subscriber software competes
with products from companies such as CSG Systems.
MediaZone
competitors for consumer-facing aggregated paid video service include JumpTV,
Setanta, RooTV, TotalVid, PlanetVu. On a more generalized “video content
aggregation & delivery to consumers” level, competition would include
traditional cable and satellite providers such as Comcast and Dish, especially
those offering a Video on Demand model.
Internet
Naspers’
approach to the internet is to draw on its existing strengths and areas of
expertise. Naspers continues to regard internet technology as important. It
has
impacted traditional ways of doing business, including the relationship between
clients and suppliers, and has transformed the competitive landscape in many
industries. Naspers believes in an “anytime, anywhere” philosophy, which enables
its subscribers to access its content platforms via television, internet and
wireless technologies. In the future, the group expects to deploy its expertise
in order to manage interactive services.
South
Africa
Naspers
conducts most of its internet business in South Africa through its indirect
wholly owned subsidiary, M-Web Holdings. M-Web Holdings provides the
infrastructure for MultiChoice South Africa’s interactive platform.
The
South
African internet market currently has approximately 3.6 million internet users
and between 800,000 and 1 million dial-up subscriber homes. Growth in the
dial-up internet market has slowed dramatically. Broadband access has shown
some
growth in recent years and there are currently about 175,000 broadband users
in
South Africa but the number of users lags comparable economies.
M-Web
Holdings had approximately 300,000 dial-up subscribers and 44,000 broadband
ADSL
subscribers at March 31, 2006, which translates to an approximate 37% market
share of the internet subscription market in South Africa.
The
following table summarizes subscriber numbers and subscription fees for M-Web
Holdings’ dial-up, ADSL broadband and web hosting services.
|
|
Subscribers
|
|
Monthly
Subscription
Price
|
|
|
|
March
31,
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Rand
|
|
|
U.S.
$(1)
|
|
|
|
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dial-up
|
|
|
299.6
|
|
|
324.0
|
|
|
242.0
|
|
|
145
|
|
|
20
|
|
ADSL
Broadband
|
|
|
44.4
|
|
|
19.4
|
|
|
4.6
|
|
|
258
|
|
|
35
|
|
Web
and server hosting
|
|
|
7.5
|
|
|
7.5
|
|
|
2.1
|
|
|
316
|
|
|
43
|
|
___________
(1)
|
Converted
at the noon buying rate at September 15, 2006. (U.S. $1=Rand 7.38)
|
M-Web
Holdings is also active in the business-to-business (“B2B”)
and
business-to-consumer (“B2C”)
e-commerce
markets. The business division of M-Web Holdings offers integrated commerce
solutions to retailers and is a leader in the B2C e-commerce market. It offers
various on-line services to large corporations and to the small and medium
enterprise (“SME”)
and
small-office-home-office (“Soho”)
markets. These
services include web and server hosting, business mail solutions, domain name
registrations, leased line access, application service provision, web
development and e-commerce solution development.
Commercezone,
a division of M-Web Holdings, is active in the B2B e-commerce market with
products ranging from strategic sourcing to e-procurement platforms for the
group and external customers. The on-line advertising and e-commerce markets
are
at an early stage of development in South Africa. M-Web Holdings estimates
that
neither is likely to start emerging as a significant generator of revenue in
the
near future. On-line consumer retail and true retail e-commerce will only
develop once the necessary financial infrastructure and consumer markets mature.
The business division of M-Web Holdings offers support to the increasing number
of e-commerce web sites by making its portal and its dial-up subscriber base
available to corporate customers.
Thailand
During
the year ending March 31, 2006, the group disposed of its ISP assets, comprising
62.5% interest in Internet Knowledge Service Center Company, an entity that
holds a majority stake in KSC Commercial Internet Company. The group’s internet
investments in Thailand now comprise M-Web (Thailand) Limited (“M-Web
(Thailand)”). As of March 31, 2006, the group held an effective economic
interest of 100% in M-Web (Thailand).
The
group
believes that there are approximately seven million consumer internet users
in
Thailand and that advertising and on-line consumer retail e-commerce will only
develop once the necessary financial infrastructure and consumer markets mature.
Revenue from these sources in Thailand will not be significant for some years.
M-Web
(Thailand) provides a comprehensive internet experience in the Thai language,
which is tailored to the Thai culture via the portal Sanook! (www.sanook.com).
M-Web
(Thailand) extended its operations during the year ended March 31, 2006 through
the introduction of broadband streaming services offering both audio and video
content. The business also
extended
its search capabilities via a commercial
arrangement with Google. Significant revenues from these sources are not
expected in the medium term.
China
Tencent
As
at
March 31, 2006, Naspers had a 36.1% interest in Tencent. Tencent is a provider
of services based on the “QQ” instant messaging platform to Tencent Computer and
Shiji Kaixuan, the licensed instant messaging operator in China. Tencent’s core
market is mainland China, with QQ services also deployed in Taiwan, Japan,
Thailand and South Africa.
Tencent
is a leading provider of internet services and mobile value-added services
in
China, with the largest instant messaging (“IM”) community in China, according
to iResearch. Tencent’s IM platform, branded QQ, allows users to communicate in
real-time across the internet as well as mobile and fixed line
telecommunications networks using various terminal devices. Tencent has
attracted internet and mobile users to pay for its consumer-oriented internet
and mobile value-added services and products, including the download of avatars
(images representing a user’s virtual identity) and the participation in online
casual games. As of March 31, 2006, Tencent had 220.5 million active user
accounts. In addition, Tencent has been able to leverage the traffic in its
online community to market online advertising services to its corporate
clients.
Tencent
provides services and products which have evolved into a variety of value-added
services for IM users, including various fee-based IM service packages,
entertainment and information content services, e-mail, chat rooms, dating
services, casual games, massive multiple-player online games and user home
pages. Tencent’s QQ Game Portal has become the leading casual game portal in
China. Tencent’s mobile and telecommunications value-added services include
mobile chat, Interactive Voice Response services, ringback tones, mobile
music
and pictures, mobile news and information content services, mobile games
and
other telecommunications value-added services.
In
early
2005, revenues from Tencent’s IM services were negatively affected by the
deactivation and related fee reversal of inactive customer accounts undertaken
by Chinese mobile operators. In addition, revenues from mobile chat services
declined as a result of the termination of the fee sharing arrangement with
China Mobile for Tencent’s 161 Mobile Chat service, which was finalized in the
quarter ended June 30, 2005.
The
operation of telecommunications businesses in China, including Tencent’s
internet related IM, internet content provision, online entertainment, online
advertising businesses and other telecommunications value-added services,
is
subject to extensive regulation by the Chinese government. Due to such
regulation, the internet services and mobile and telecommunications value-added
services are provided by Tencent’s wholly-owned subsidiaries in China, pursuant
to contractual arrangements with Tencent and two domestic Chinese companies
wholly-owned by Tencent’s founding shareholders. In compliance with both IFRS
and U.S. GAAP, Tencent consolidates the financial statements of these two
domestic companies because, in substance, the contractual arrangements give
Tencent control over the voting rights of these domestic companies.
Tencent
currently has three principal lines of business: Internet value-added services,
mobile and telecommunications value-added services and online
advertising.
Internet
value-added services provide the main platform on which Tencent’s user community
is built. IM is at the core of Tencent’s internet value-added service platform.
QQ is a comprehensive service platform that utilizes IM and other value-added
services to create an online community. Internet value-added services also
include community services such as the QQ.com portal and entertainment services
such as casual games, avatars, massive multiple-player online games, electronic
pets and user home pages that include blogs and photo albums. For the quarter
ended March 31, 2006, the peak number of simultaneous online user accounts
was
19.6 million, and during the 16-day period ended March 31, 2006, the average
number of daily user hours was 272.2 million and the average number of messages
sent daily was 2,883.8 million.
Mobile
and telecommunications value-added services are also an important segment
of
Tencent’s business. Mobile QQ is a mobile based extension of Tencent’s QQ
service, which allows its users to access the QQ network via their mobile
phones
and communicate in real-time with other QQ users. Value-added services include
Mobile chat, ringback tones, mobile music, image and picture download services,
mobile news and mobile games. As of March 31, 2006, there were approximately
9.5
million registered subscriptions for fee-based mobile and telecommunication
value-added services provided directly by Tencent or through mobile
operators.
On
July
6, 2006 China Mobile, one of China’s largest mobile operators, announced new
regulations regarding the provision of Mobile value added services (“MVAS”) to
its users. These new regulations require MVAS providers to give new subscribers
one month’s free trial of their services and obtain double confirmation of new
subscriptions. They also require fixed fee subscriptions in place of pay
per
message billings for existing subscribers and MVAS providers to send monthly
reminders to existing subscribers that the service is still active, giving
them
the opportunity to cancel. These regulations may impact Tencent’s MVAS revenues
going forward.
Online
advertising has been growing as well. Tencent sells advertising space on
its QQ
software client and websites that generate significant impressions daily.
The QQ
software client enables targeted advertisements such as “log-in flashes” and
“system messages” to deliver high resolution images to the end user’s PC screen.
Tencent began generating advertising revenues relating to Internet searching
functions in recent periods.
Competitors
and Competitive Position
In
South
Africa, M-Web Holdings’ main competitors in the internet access business are
Telkom SA, ABSA and various other ISPs that operate in this market. The
country’s main mobile operators, Vodacom and MTN, have also begun to offer
internet access subscription services through their 3G networks. Telkom SA
is
pursuing customers before a second network operator becomes operational. Once
operational, the second network operator may enter the residential and corporate
access internet market with competitive pricing. A number of companies offer
e-commerce solutions to retailers. In the hosting and web development market,
the competition is strong with some well-known companies, including UUNet and
Internet Solutions, a subsidiary of Dimension Data.
Regulatory
developments, including the granting of licenses to new operators, may affect
the competitive position of Naspers’ internet operators and must be taken into
consideration when evaluating competitive positions. You should read
“—Regulation” for more information about the regulatory environment in Naspers’
key markets.
The
market for internet and telecommunications value-added services in China is
highly competitive and competition is expected to increase continuously. As
the
industry is relatively new and is rapidly evolving, the basis of competition
is
expected to shift frequently, offering opportunities for new competitors to
enter our markets. In addition, as China continues to open its
telecommunications value-added services market to foreign investors, Tencent
may
face increased competition from international competitors that may establish
joint venture companies with local companies to provide services based on the
foreign investors’ technology and experience developed in overseas markets.
Several of Tencent’s existing competitors, as well as a number of new potential
competitors, may have significantly greater financial, technical and marketing
resources than Tencent.
Tencent’s
main competitors in the overall internet and telecommunications value-added
services market in China are local internet portals. Tencent competes directly
with these portals to provide comprehensive Internet and mobile and
telecommunications value-added services to Chinese consumers. In addition to
these horizontal portals, other foreign competitors such as MSN, Yahoo and
AOL,
which have substantial brand recognition and large user bases outside China,
may
leverage such strengths to increase their market position in the China Instant
Messaging (IM) market. Some of China’s domestic telecommunications operators may
have plans to launch their own branded mobile chat or IM services with the
telecommunications services they are currently offering, further increasing
the
level of competition in this sphere. In the area of mobile and
telecommunications value-added services, Tencent also faces competition from
a
large number of competitors that provide an expanding range of product offering.
Tencent believes the visibility for this highly competitive sector is
still low due to the recent policy changes introduced by the mobile operators,
and local players may market their services more aggressively to increase their
market share thereafter. In the online entertainment market, Tencent also faced
competition from a number of local game developers and operators in the mini
casual games, advanced casual games and massive multiplayer online game (“MMOG”)
market.
The
enterprise IM market in China is in an early stage of development. MSN, AOL
and
Yahoo may have plans to enter the enterprise market upon interoperability.
Enterprise software companies in China may also provide IM functionality in
their products in the future.
Print
Media
Overview
Media24
is a leading print media concern in Africa, with its main operations in South
Africa. The Media24 group is a large publisher of magazines and newspapers
and a
printer and distributor of magazines, newspapers and related products in Africa.
In addition, Media24 is establishing internet businesses that compliment and
draw from existing strengths and areas of expertise and are rapidly evolving
as
leaders in their specific segments. Media24 is also the holding company for
Via
Afrika, the book publishing and distribution business, and the group’s private
education business, Educor. The print media segment consists of three
sub-segments, namely Newspapers, Magazines and Printing, Books and
Education.
Newspapers,
Magazines and Printing
Media24’s
current newspaper portfolio consists of more than 50 titles and the magazine
publishing division publishes approximately 57 titles. At March 31, 2006 Naspers
owned a 92.1% interest in the Paarl Media group, which is engaged in providing
a
printing service to both our own magazines as well as third party magazine
publishers. NND24 does most of the distribution of the magazines for the group,
as well as for external customers. Approximately 17% of total newspaper
circulation revenue and 6% of total magazine circulation is generated from
subscribers; the balance is achieved via delivery to a wide network of retail
and smaller merchandisers.
Media24
acquired an additional interest of 7.5% in Paarl Media Holdings (Proprietary)
Limited (“Paarl Media Holdings”) for a cash consideration of Rand 180.0 million
during April 2005. Media24 now has an interest of 92.1% in Paarl Media Holdings.
The
print
media industry in South Africa is fairly mature. Media24 has expanded its
business over the past few years by adding a series of new titles to its stable
and through a series of small acquisitions.
Media24
streamlined its printing operations in 2000 by merging with the Paarl Post
Web
group to establish Paarl Media Holdings. Media24 has established new
infrastructure and production resources and buildings as part of a comprehensive
replacement and refurbishment program. A new litho web printing plant costing
approximately Rand 175 million was commissioned in September 2005 in Gauteng.
This plant will concentrate on commercial printing and some magazine printing.
Further
capital investments of approximately Rand 120 million and Rand 40 million will
be incurred over the next eighteen months at the newspaper printing presses
in
Johannesburg and Cape Town, respectively, to provide additional capacity for
the
circulation of the recently launched tabloids, Daily
Sun
and
Son.
Newspapers
Media24
conducts its newspaper publishing and printing business through its newspaper
division. The current newspaper portfolio consists of more than 50 titles.
A
number of new titles were added to the portfolio in recent years.
The
five
Media24 daily newspapers, Die
Burger,
Beeld,
Volksblad,
The
Natal Witness (50%
shareholding) and the Daily
Sun,
provide
regional news coverage. The Daily
Sun,
based
in Gauteng and now the largest selling daily in South Africa, was rolled out
into the Free State, KwaZulu Natal and the Eastern Cape in the latter half
of
2003. The Afrikaans tabloid Son
is now
published every weekday in the Western Cape. The Sunday papers, Rapport,
City
Press
and
Sunday
Sun,
are
printed in three cities and distributed nationally. Media24 also has a strong
group of regional and community newspapers.
The
significant newspaper titles and related information published by Media24 are
summarized below:
Newspaper
|
Circulation(1)
|
Year
Established
|
Region
|
Language
|
|
|
|
|
|
Dailies
|
|
|
|
|
Daily
Sun
|
463,691
|
2002
|
Gauteng
Eastern
Cape
KwaZulu
Natal
Free
State
|
English
|
Beeld
|
105,114
|
1974
|
Gauteng
|
Afrikaans
|
|
|
|
Mpumalanga
Limpopo
|
|
Die
Burger
|
99,288
|
1915
|
Eastern
Cape
Western
Cape
|
Afrikaans
|
Volksblad
|
27,669
|
1904
|
Free
State
North
West
|
Afrikaans
|
Natal
Witness
|
23,603
|
1846
|
KwaZulu
Natal
|
English
|
|
|
|
|
|
|
|
|
|
|
Weeklies
|
|
|
|
|
Soccer
Laduuma
|
295,833
|
1997
|
National
|
English
|
Son
|
184,179
|
2003
|
Eastern
Cape
Gauteng
|
Afrikaans
|
Sunday
|
|
|
|
|
Rapport
|
313,528
|
1970
|
National
|
Afrikaans
|
Sunday
Sun
|
195,850
|
2001
|
National
|
English
|
City
Press
|
187,741
|
1982
|
National
|
English
|
Community
Newspapers
|
|
|
|
|
Paarl
Post
|
17,006
|
1905
|
Paarl
|
Afr/Eng
|
District
Mail
|
13,855
|
1926
|
Somerset
West
|
Afr/Eng
|
Worcester
Standard
|
10,338
|
1880
|
Worcester
|
Afr/Eng
|
Weslander
|
10,175
|
1972
|
Vredenburg
|
Afr/Eng
|
Vaalweekblad
|
10,100
|
1964
|
Vanderbijlpark
|
Afrikaans
|
Vaal
Weekly
|
9,981
|
1998
|
Vanderbijlpark
|
English
|
Eikestadnuus
|
8,266
|
1950
|
Stellenbosch
|
Afr/Eng
|
Hermanus
Times
|
7,319
|
1949
|
Hermanus
|
Afr/Eng
|
Potchefstroom
Herald
|
7,209
|
1908
|
Potchefstroom
|
Afr/Eng
|
Carltonville
Herald
|
5,480
|
1966
|
Carltonville
|
Afr/Eng
|
Vrystaat
|
4,423
|
1975
|
Bethlehem
|
Afr/Eng
|
Freesheets
|
|
|
|
|
City
Vision (Johannesburg)
|
272,617
|
1992
|
Johannesburg
|
English
|
TygerBurger
|
268,122
|
1972
|
Cape
Town
|
Afr/Eng
|
PE
Express
|
89,798
|
1983
|
Port
Elizabeth
|
Afr/Eng
|
MetroBurger
|
83,340
|
1980
|
Cape
Town
|
Afr/Eng
|
City
Vision (Cape Town)
|
70,000
|
1992
|
Khayalitsha
|
English
|
Vaal
Vision
|
64,850
|
1989
|
Vanderbijlpark
|
Afr/Eng
|
Express
|
50,210
|
1991
|
Bloemfontein
|
English
|
Bloemnuus
|
42,342
|
1982
|
Bloemfontein
|
Afr/Eng
|
Vista
|
37,601
|
1971
|
Welkom
|
Afr/Eng
|
Ons
Stad
|
37,196
|
1983
|
Bloemfontein
|
Afr/Eng
|
Noordwes
Gazette
|
30,000
|
1997
|
Potchefstroom
|
Afr/Eng
|
UD
Nuus
|
29,911
|
1971
|
Uitenhage
|
Afr/Eng
|
Vanderbijl
Ster
|
24,544
|
1980
|
Vanderbijlpark
|
Afr/Eng
|
Goudveld
Forum
|
23,178
|
1983
|
Welkom
|
Afr/Eng
|
Vereeniging
Ster
|
22,306
|
1980
|
Vereeniging
|
Afr/Eng
|
Noordkaap
|
22,079
|
1982
|
Kimberley
|
Afr/Eng
|
Sasolburg
Ster
|
11,601
|
1996
|
Sasolburg
|
Afr/Eng
|
Kroonnuus
|
8,462
|
1986
|
Kroonstad
|
Afr/Eng
|
Maluti
|
7,939
|
1991
|
Bethlehem
|
Afr/Eng
|
Meyerton
Ster
|
7,193
|
1997
|
Meyerton
|
Afr/Eng
|
Noord
Vrystaat Gazette
|
6,457
|
2000
|
Parys
|
Afr/Eng
|
__________
(1)
|
Audited
Bureau for Circulation (“ABC”) figures: average per issue, last three
months (above: April - June 2006).
|
The
newspaper division is equipped with a modern network of newsprint facilities.
All five of the major print facilities have been upgraded or completely replaced
since 1997. These projects, which required significant capital expenditures,
are
expected to yield advantages over the lifetime of the printing presses due
to
expected lower future operating costs, improved quality and an increase in
third
party commercial work. Further capital investments are planned to provide
additional capacity.
Magazine
Publishing
Media24
is a leading publisher of consumer magazines in South Africa. This division
publishes
a
portfolio of consumer magazines in South Africa which
include the family magazines Huisgenoot,
You,
Drum, tvplus
and
Move!,
the
women’s magazines Sarie,
Fairlady
and
True
Love,
the
creative living magazines, Ideas
(formerly known as Woman’s
Value
and
Dit),
Tuis
and
Home,
as well
as the leading financial magazine, Finweek.
The
Touchline-subsidiary with its magazines, such as Men’s
Health,
Shape,
Sports
Illustrated,
Golf
Digest,
Kick
Off,
Bicycling
SA
and
Runner’s
World
also
forms part of this segment. This division has entered into partnerships with
international partners such as Emap plc to publish international titles, such
as
FHM
and
Heat.
In 2005
they entered into a license agreement to publish Readers
Digest.
In
fiscal 2006 new title launches included Go!
(which
was launched due to the success of the Afrikaans outdoor magazine, Weg!),
Shop
and
Lééf
met hart en siel,
Your
Child, Men’s Health Living, Real Simple
(under
license from Time Inc) and MaxPower
(under
license from Emap plc). In July 2006, Media24 acquired the motoring portfolio
of
magazines including TopCar,
TopDeal
and
TopBike
titles
as well as a television magazine
program TopCar
for Rand
15.5 million. The existing titles are being repositioned and TopCar
was
relaunched with an Afrikaans language edition called TopMotor.
The
following is a summary of the significant titles published by Media24’s magazine
division:
Magazine
|
Circulation(2)
|
Year
Established
|
Frequency
|
Language
|
|
|
|
|
|
Finance
|
|
|
|
|
Finweek
|
29,457
|
1979/1984
|
Weekly
|
English/
Afrikaans
|
|
|
|
|
|
General
interest
|
|
|
|
|
Huisgenoot
|
354,266
|
1916
|
Weekly
|
Afrikaans
|
You
|
227,879
|
1987
|
Weekly
|
English
|
tvplus
|
164,626
|
1999
|
Fortnightly
|
English/
Afrikaans
|
Heat
|
78,429
|
2004
|
Weekly
|
English
|
Drum
|
75,367
|
1951
|
Weekly
|
English/Zulu
|
Reader’s
Digest
|
62,399
|
2005
|
Monthly
|
English
|
Landbouweekblad
|
42,164
|
1919
|
Weekly
|
Afrikaans
|
Insig
|
14,044
|
1987
|
Monthly
|
Afrikaans
|
|
|
|
|
|
Men’s
|
|
|
|
|
FHM
|
111,260
|
1999
|
Monthly
|
English
|
Men’s
Health
|
89,249
|
1997
|
Monthly
|
English
|
|
|
|
|
|
Parenting
|
|
|
|
|
Your
Pregnancy(3)
|
30,058
|
1998
|
Alternate-monthly
|
English
|
Baba
& Kleuter
|
25,463
|
2000
|
Monthly
|
Afrikaans
|
Your
Baby
|
24,609
|
1995
|
Monthly
|
English
|
Your
Child(3)
|
15,133
|
2005
|
Alternate-monthly
|
English
|
|
|
|
|
|
Sport
|
|
|
|
|
Kick
Off SA
|
62,113
|
1994
|
Fortnightly
|
English
|
Sports
Illustrated
|
37,806
|
1986
|
Monthly
|
English
|
Golf
Digest
|
28,821
|
1995
|
Monthly
|
English
|
Bicycling
SA(3)
|
20,347
|
2002
|
Alternate-monthly
|
English
|
Runner’s
World
|
18,702
|
1993
|
Monthly
|
English
|
Zigzag
Surfing Magazine(3)
|
15,282
|
1976
|
Monthly
|
English
|
The
Wisden Cricketer(3)
|
10,728
|
2004
|
Alternate-monthly
|
English
|
|
|
|
|
|
Teen
/Youth
|
|
|
|
|
Saltwater
Girl(3)
|
45,360
|
2001
|
Monthly
|
English
|
Seventeen
|
39,546
|
2003
|
Monthly
|
English
|
National
Geographic Kids
|
27,695
|
2004
|
Monthly
|
English
|
Blunt(3)
|
13,207
|
1997
|
Monthly
|
English
|
|
|
|
|
|
Women’s
|
|
|
|
|
Sarie
|
131,280
|
1949
|
Monthly
|
Afrikaans
|
True
Love
|
117,819
|
1972
|
Monthly
|
English
|
Cosmopolitan
|
114,340
|
1984
|
Monthly
|
English
|
Fair
Lady
|
82,881
|
1965
|
Monthly
|
English
|
Move!
|
72,208
|
2005
|
Fortnightly
|
English
|
Shape
|
46,975
|
2000
|
Monthly
|
English
|
Leef
|
43,794
|
2005
|
Monthly
|
Afrikaans
|
Real
Simple
|
34,502
|
2005
|
Monthly
|
English
|
|
|
|
|
|
Creative
Living
|
|
|
|
|
Tuis/Home
|
86,933
|
2004
|
Monthly
|
Afrikaans/
English
|
Idees
(formerly Dit)
|
79,097
|
2001
|
Monthly
|
Afrikaans
|
Ideas
(formerly Woman’s Value)
|
56,349
|
1980
|
Monthly
|
English
|
|
|
|
|
|
Other
niche
|
|
|
|
|
Weg
|
95,054
|
2004
|
Monthly
|
Afrikaans
|
|
|
|
|
|
(2)
|
ABC
figures: average per issue, last three months (above: April - June
2006).
|
(3)
|
ABC
figures: average per issue, last six months (above: January - June
2006).
|
Printing
and Distribution
Media24
has a 92.1% interest in Paarl Media Holdings. Media24’s printing interests are
divided into its newspaper print facilities (which are included in and managed
as part of the newspaper business) and Paarl Media Holdings (which encompasses
all print interests other than newspapers).
Paarl
Media (Proprietary) Limited, a wholly-owned subsidiary of Paarl Media Holdings,
specializes in publication of
gravure
and
litho-web magazines, brochures and advertising material printing at its advanced
facilities in Montague Gardens, Cape Town (called Paarl Gravure), Paarl (called
Paarl Web and Paarl Print) and the newly commissioned Paarl Web Gauteng facility
in Johannesburg. Gravure is a printing process mainly used for high-speed
production of large print runs at constant speed and of high-quality. It closely
resembles the photographic process. Litho-web presses use a photo chemical
process based on the principle that water and oil do not mix. In respect of
all
publication gravure and heatset web printing work performed by the facilities,
including pamphlets, inserts and advertising material, Paarl Media Holdings
processes an estimated 40% of such printing work in the South African market.
All four plants (Paarl Gravure, Paarl Web, Paarl Web Gauteng and Paarl Print)
are able to process digital material. Paarl Print offers, in addition to the
printing of books, diaries and magazines, heatset web print for commercial
work,
labels (UV flexo, self-adhesive and litho), and specialized bindery services.
This includes luxury binding for bibles, hard and soft cover/sewing/PUR
binding/perfect binding/saddle stitching.
With
respect to books, Paarl Print holds an estimated 25% share of the South African
book printing market.
Media24’s
business also incorporates distribution networks, which complement the editorial
and printing functions. NND24, a division of Media24, distributes Media24 and
third party magazines and newspapers.
24.com
The
group’s position has enabled it to establish several consumer related internet
businesses. These businesses command a large proportion of South Africa’s
internet traffic although many of them are still in a start up phase. The most
popular properties draw as many as 2.5 million unique visitors per month.
The group’s key consumer related internet businesses have now been combined,
together with the development expertise within MWEB into a single unit known
as
24.com.
24.com
is
a general consumer portal offering various consumer and e-commerce services
and
is underpinned by an array of special interest properties which provide
services and content relating to news; women’s interest; motoring;
property; health; finance and food.
Seasonality
Media24’s
business performance is stronger during the Christmas season. Advertising
revenues accelerate from October to December and then decrease in January and
February, normally recovering in March. Similarly, in the rush to prepare for
the Christmas season, printing and distribution activities build up from October
to November, before slowing down in January. As Naspers’ fiscal year ends on
March 31, the financial results for the second six months are typically stronger
than those for the first six months, barring contrary general economic
trends.
Raw
Materials
Paper
and
ink (and related chemicals) are the principal raw materials required for
publishing activities. Media24 has not experienced and does not anticipate
severe difficulties in obtaining adequate supplies of paper or ink and chemicals
for its operations,
with sourcing available from suppliers, locally and internationally. Prices,
however, do fluctuate as is the case with most commodities. For Media24, pricing
can be affected by the volatility of the Rand and in some respects the price
of
international crude oil since the key ingredients for manufacturing the ink
(or,
if the ink is imported as a finished product, the ink itself) are sourced from
outside of South Africa and because some inks are oil based. Media24 therefore
expects production costs to be impacted by the volatility of the Rand and the
increase in the oil price. Contracts with the two main newsprint suppliers
are
typically for two or three years. One contract will be renewed in calendar
2006
and the other in calendar 2007.
Competitors
and Competitive Position
Media24’s
main competitors in South Africa include:
· |
Caxton
Printing and Publishing Limited (“Caxton”), a JSE listed company, with
significant interests in newspaper, magazine and book printing facilities,
magazine publishing and some newspapers.
|
· |
Independent
Group—part of Independent plc (Ireland), a large newspaper publisher and
printer in South Africa with multiple titles, including The
Star,
Business
Report,
The
Argus
and Cape
Times.
It recently launched a daily tabloid in the Western Cape, the Daily
Voice,
which competes directly with Media24’s Son
product. Independent plc (Ireland) also publishes two Conde Nast
titles in
South Africa under license (GQ
and Conde
Nast House & Garden).
|
· |
Johnnic
Communications Limited (“Johncom”), a JSE listed company, with newspaper
and magazine publishing interests, owns the Sunday
Times and
50% of the Financial
Mail
and Business
Day.
They have acquired the Sowetan
and the Sunday
World
from New Africa Investments Limited.
|
The
two
key indicators of competitive position are circulation and advertising revenue.
Competition for circulation and advertising revenue comes from local, regional
and national newspapers, magazines, radio, television, direct mail and other
communications and advertising media that operate in the same markets as
Media24. The extent and nature of such competition is, in large part, determined
by the location and demographics of the markets and the number of media
alternatives available in these markets. Media24 competes for advertising
revenue with other forms of media based on the ability to offer an effective
means for advertisers to reach their target audience.
In
the
printing market, competitive factors include the quality and location of
printing presses, distribution capabilities and technological advancements.
In
printing, Caxton, Interpak and Intrepid Printers (Proprietary) Ltd are the
main
competitors.
Books
Overview
Via
Afrika is a leading African book publisher, seller and distributor of innovative
and quality reading, learning, listening and viewing products in various
formats. Via Afrika controls a number of different businesses operating as
independent business units in two segments as follows:
· |
Publishers
and agents: including general, religious, educational and academic
publishers as well as digital content
providers.
|
· |
Retail
and distribution: traditional niche academic bookstores, book and
music
clubs and warehousing and distribution
services.
|
The
following provides a brief summary of Via Afrika’s various book related business
units:
Business
Unit |
Nature
of Business |
Brand
Names and Imprints |
Publishing
and Agencies
|
|
|
NB
Publishers
|
General
publishing in Afrikaans and English
|
Tafelberg,
Human & Rousseau, Pharos, Kwela and Best Books |
Jonathan
Ball Publishers
(including
Book Promotions and Horizon Library Services)
|
Publishing
and distribution of general English books
|
Jonathan
Ball, AD Donker, Sunbird
Agent
and distributor for Harper Collins, Hodder Headline, Simon & Schuster,
Orion, Bloomsbury, Scholastic and others
|
Lux
Verbi.BM (50%)
|
Publisher
of Christian books and products
|
Lux
Verbi.BM, NG Kerk Uitgewers, Protea, Hugenote and
Waterkant.
|
Nasou
Via Afrika (70%)
|
Publishing
of educational school text books
|
Nasou,
Via Afrika, Action, Juta Gariep and Idem.
|
Collegium
(Botswana) (55%)
|
Publishing
of educational school text books in Botswana
|
Collegium
|
Van
Schaik Publishers (70%)
|
Publishing
of academic text books
|
Van
Schaik Publishers
|
Future
Entrepreneurs (70%)
|
Publishing
of learning and teaching support materials for schools in digital
formats
|
Future
Entrepreneurs
|
|
|
|
Retail
and Distribution
|
|
|
Afribooks
(40%)
|
Retail
distributor of school text books and stationery
|
Afribooks
|
Van
Schaik Bookstores
|
Academic
book retail and content manager
|
Van
Schaik Bookstores
|
|
|
|
|
|
|
Leisure
Books and Leserskring
|
Direct
marketing clubs for books, music, videos, DVD’s and related
products
|
Leisure
Books, Leserskring
|
On
the Dot Distribution
|
Distribution
of books, music, stationery and certain electronic
products
|
On
the Dot Distribution
|
Content
Solutions
|
Print-on-demand
service provider of customized academic course packs.
|
Content
Solutions
|
During
February 2005, Nasou Via Afrika (Proprietary) Limited acquired the publishing
rights and author contracts of Juta Gariep for a consideration of Rand 26.0
million. The publishing rights were mainly for school text books, but also
included some educational products and toys, branded Idem.
During
July 2005, Via Afrika sold the entire issued share capital of its wholly owned
subsidiary Computicket (Proprietary) Limited to Shoprite (Proprietary) Limited
for a purchase price of approximately Rand 69.0 million.
On
June
1, 2006, Via Afrika acquired a 70% interest in Ailenroc Bemarking en Opleiding
(Proprietary) Limited which trades under the name Future Entrepreneurs. The
purchase consideration consisted of an upfront cash payment of Rand 12.3 million
and an additional Rand 6.5 million that is contingent on whether the business
achieves certain earn-out targets over the next two years. Future Entrepreneurs
produces learning and teaching support material for the school market in
electronic and other formats.
During
June 2006, Via Afrika closed its religious book retail division, Lux Verbi
Retail, as it was no longer economically viable.
Seasonality
Via
Afrika’s book businesses are seasonal. The production and sale of learning
support materials for primary, secondary and tertiary education occurs mostly
from January to March, the beginning of the South African academic year.
Accordingly, most revenues are generated at the beginning of the calendar year,
which is Naspers’ fiscal fourth quarter. The fiscal third and fourth quarters
also are favorably affected by the usual increase in general book publishing
driven by the Christmas and Easter holidays.
Raw
Materials
Like
most
businesses in the media sector, Via Afrika is indirectly exposed to rising
paper
and ink costs. In addition, the Van Schaik Bookstore and Jonathan Ball
businesses import most of their products, making them further susceptible to
the
volatility of the Rand versus pound sterling and U.S. dollar exchange rates.
Competitors
and Competitive Position
Publishers
compete by developing a portfolio of books that are in demand by continually
seeking out and promoting talented writers and by offering their works at
competitive prices. Via Afrika mainly competes with other publishers of fiction
and non-fiction books, including international publishers with a presence in
South Africa such as Random House, Penguin and MacMillan as well as with South
African publishers, most notably Maskew Miller Longman, jointly owned by
Pearsons and Caxton, the leading school textbook publishers in South
Africa.
Private
Education
Educor
is
the leading provider of private education in South Africa. It offers programs
ranging from adult basic education and training to higher education and
corporate training. Educor is primarily involved in the delivery of further
education and training and higher education in South Africa. The further
education and training programs provide the foundation for higher education
and
focus on the returning adult and not just the school leaver. Educor operates
its
private education business through a number of subsidiaries, the large majority
of which are wholly owned, and is structured in two divisions as
follows:
Damelin
(face to face education)
Educor’s
key brand Damelin is represented in all major South African business centers
and
has over 45 campuses throughout South Africa. Educor’s programs are delivered in
three principal ways: face-to-face in the classroom and on campus, via
supplementary distance learning and through corporate on-site executive
education.
Damelin
focuses on higher education and further education and training for full and
part
time learners. Damelin also focuses on higher education and further education
and training, providing programs such as sound engineering, game ranging and
sports club management. The Graduate Institute of Management and Technology
(“GIMT”) offers customized education for corporate executives and runs public
programs for management.
Midrand
Graduate Institute (“MGI”) provides higher education covering the arts, commerce
and technology fields as well as the Cambridge A and O level programs to prepare
learners for higher education programs. Milpark Business School provides both
undergraduate and post-graduate education such as masters in business
administration (“MBAs”).
International
Colleges Group (“ICG”) (distance education)
ICG
provides vocational education to over 50,000 students. ICG specializes in
distance education, sometimes enhanced by contact sessions. ICG operates
traditional distance learning colleges Intec and Damelin, as well as Academy
for
Mathematics and Lyceum College.
The
private education sector in South Africa is increasingly subject to government
regulation. Some of the changes will negatively affect Educor’s business. The
Department of Education, for instance, is imposing stricter controls on the
accreditation and registration of private education programs and courses. The
Department of Education has, in particular, expressed concerns regarding the
number of MBAs offered in South Africa and has recently revoked accreditation
of
a number of institutions. Educor’s MBA program, offered by Milpark Business
School, has been provisionally accredited. Educor and the other institutions
that have been provisionally accredited have been given two years to introduce
some specified changes to the programs to ensure that the accreditation becomes
unconditional.
Seasonality
Educor’s
business is seasonal as approximately 60% of its students sign up in the first
three calendar months of the year (the beginning of the South African academic
year). Marketing plans and sales initiatives need to be prepared by October
of
the prior year, meaning that operating costs leading up to that period are
typically higher than during the remainder of the year.
Competitors
and Competitive Position
Educor
competes with international and local universities and creators of educational
materials. Competition is based on the ability to deliver quality products
at
competitive prices that appeal to the school boards, educators and government
officials making purchasing decisions. Public universities are Educor’s main
competitors in South Africa. International competitors include Bond University
and the University of Southern Queensland. Some of the international
competitors’ MBA programs have recently lost their accreditation and the
indicators are that some of them will exit the South African market. Local
competitors include Adcorp Holdings Limited, Advtech Limited and Privest Group
Limited.
MIH
Print Media24
The
print
media investments outside of South Africa are conducted by MIH Print Media,
a
division of the MIH group.
China
MIH
Print
Media has a 9.9% interest in BMC. BMC is a media company principally engaged
in
the sale of advertising space, production of newspapers and trading of
print-related materials. BMC’s revenue is mainly derived from the sale of
advertising space in Beijing
Youth Daily,
Beijing’s second largest newspaper in terms of circulation. BMC also performs
the layout and arranges for the printing of Beijing
Youth Daily
and
supplies paper and other print-related materials to printers of Beijing
Youth Daily
and
other publications.
BMC’s
revenue depends substantially on the demand for advertising space in
Beijing
Youth Daily,
which
is driven by readership profile and circulation figures. These in turn depend
on
readers’ satisfaction with the content of the
Beijing Youth Daily,
over
which BMC has no control. Advertisements in Beijing
Youth Daily
are
derived, amongst others, from the Beijing real estate market. A downturn in
the
Beijing real estate market or stricter regulation of it would adversely affect
BMC’s advertising revenue.
Subsequent
to the year end, MIH Print Media acquired a 20.2% interest in Titan, a leading
company in the field of Chinese sports publishing. It is anticipated that
through a further acquisition MIH Print Media’s shareholding will increase to
37%.
Rest
of Sub-Saharan Africa
MIH
Print
Media trades in Africa as Media24 Africa. It has a 50% interest in East Africa
Magazines, a joint venture magazine publisher with the Kenyan Nation Media
group. The products published in Kenya include True
Love East Africa
and
Drum.
In
Nigeria Media24 Africa has been publishing Kick
Off Nigeria
since
2002 and True
Love West Africa since
2005. A
weekly
soccer newspaper, Goal,
was
recently launched in Nigeria. Servicing the Angolan market, Media24 Africa
recently launched a television magazine called TV24.
Brazil
In
May
2006, MIH acquired, through its offshore subsidiary MIH B.V., a 30% stake in
the
leading Brazilian media company, Abril, for a cash consideration of Rand 2,557.3
million. The transaction provides Naspers with an opportunity to participate
in
the growing Brazilian media market through a leading enterprise.
Abril
is
the largest magazine publisher in Brazil and one of the largest media companies
in Latin America. It has a 54% share of magazine circulation and 58% of magazine
advertising revenues in Brazil. It publishes five of the top ten magazine titles
in Brazil. Its flagship newsweekly, Veja,
is the
fourth highest selling weekly in the world, has a weekly circulation of
approximately 1.1 million and an average readership of 8 million, the largest
of
any magazine globally not owned by a US-based group. In addition, Abril owns
the
country’s leading educational book publisher.
Intellectual
Property
Naspers
relies on a combination of patents, licensing arrangements, trade names,
trademarks, copyrights and proprietary technology to protect its intellectual
property rights. Naspers or its subsidiaries own, or have been assigned or
licensed, the rights to several patents and have several patent applications
in
various jurisdictions relating to their proprietary technology. In addition,
Naspers or its subsidiaries currently have numerous trademarks (pending and
registered) in countries where they conduct business
or could potentially conduct business in the future. Some of Naspers’ major
trademarks include the names and logos of DStv, M-Net, SuperSport, MultiChoice,
M-Web, QQ, Entriq and Irdeto. In respect of the internet, a number of domain
registrations have been secured, also as a mechanism to protect print brands.
The publishing activities of Media24, Via Afrika and Educor generally enjoy
copyright protection. Naspers believes it has taken appropriate available legal
steps to protect its intellectual property in the relevant jurisdictions.
Naspers
may file additional patent and trademark applications in the future, although
there can be no assurance that Naspers will be successful in obtaining patents
or trademark registrations based upon these applications. Naspers intends to
vigorously protect its intellectual property rights. It may be possible,
however, for a third party to copy or otherwise obtain and use its content
and
technology without authorization or to develop similar technology independently.
Furthermore, the laws of certain countries in which Naspers sells its products
and services do not protect Naspers’ intellectual property rights to the same
extent as do the laws of the United States.
Regulation
Naspers
is subject to laws which regulate its business practices in the different
jurisdictions in which it operates. The following discussion focuses on South
Africa, Greece, Thailand and China, the principal countries in which Naspers
conducts its operations. For a discussion of the regulation of education in
South Africa and its impact on Educor, you should review “ —Private Education
(Educor)” above. Broadcasting is also regulated in some countries in Sub-Saharan
Africa in which the group conducts pay-television activities. For more
information please see “- Sub-Saharan Africa” below.
South
Africa
Regulation
of Anti-Competitive Practices in South Africa
The
Competition Act 1998 regulates anti-competitive practices in South Africa.
The
Competition Act also places emphasis on ensuring that opportunity exists for
historically disadvantaged persons to participate in the South African economy.
The
Competition Act created a Competition Commission, a Competition Tribunal (which
has the status of a High Court) and a Competition Appeal Court. The prohibitions
against restrictive horizontal practices, restrictive vertical practices, the
prohibitions against abuse of positions of dominance and the provisions
regulating mergers are the main prohibitions in the Competition Act which may
affect Naspers.
The
Competition Act provisions may be enforced by:
· |
injunctions
in respect of contraventions of the Competition Act;
|
· |
orders
against third parties to remedy anti-competitive activity;
|
· |
the
imposition of administrative fines;
|
· |
orders
for divestment of assets or businesses; and
|
· |
claims
for damages by persons injured by a contravention of the Competition
Act.
|
The
impact of the Competition Act on Naspers is difficult to predict, although
it
may make completing acquisitions in South Africa more difficult, and in many
cases not feasible, for Naspers. Any action taken by the Competition Commission
against Naspers could have a material impact on Naspers’ operations in South
Africa.
The
Independent Communications Authority of South Africa (“ICASA”) and the
Competition Commission have concurrent jurisdiction over the investigation,
evaluation and analysis of mergers, acquisition transactions and
competition-related complaints involving telecommunications and broadcasting
matters, and have published a Memorandum of Understanding to regulate the manner
in which they will cooperate on such issues.
Print
and Electronic Media Regulation in South Africa
The
Independent Communications Authority of South Africa Act, 2000 created ICASA.
ICASA regulated broadcasting under the Independent Broadcasting Authority Act
(the “IBA Act”) and the Broadcasting Act, 1999 and telecommunications under the
Telecommunications Act, 1996 (“Telecoms Act”).
The
Electronic Communications Act 36 of 2005 (“ECA”) became effective on July 19,
2006. The new law was intended to usher in further liberalization, competition
and convergence. It repealed the IBA Act, most of the Broadcasting Act and
Telecommunications Act. Both broadcasting and telecommunications are now
predominantly regulated in terms of a single statute, though broadcasting still
has a distinct chapter. The ECA substantially alters the current licensing
framework and regulatory regime. Previously frequency was assigned together
with
the broadcasting license. Now the frequency will be licensed separately to
the
broadcasting service license. There are two additional license categories.
These
are electronic communications services and electronic communication networks.
Licenses will be converted into the new framework. M-Net will therefore get
a
broadcasting and a frequency license. Orbicom’s broadcasting signal
distributor’s license will be converted into an electronic communications
network license. MultiChoice Subscriber Management Services’ (“MSMS”) value
added network service (“VANS”) license will be converted into an electronic
communications service license. The ECA also divides licenses into individual
and class licenses. Individual licenses are expected to be more heavily
regulated than class licenses which merely require registration. We expect
that
all the licenses currently held within the Naspers group will be converted
into
individual licenses.
The
ECA
also vests ICASA with the power to impose additional conditions on operators
who
have significant market power. It is difficult to predict the impact this may
have on licenses within the Naspers group. The ECA introduced new levies for
broadcasters that did not exist previously. Broadcasters are now required to
make a contribution to the Universal Service and Access Fund, but are allowed
to
offset the annual Media Development and Diversity Agency (“MDDA”) contributions
they make.
The
IBA
Act stipulated that no person may provide a broadcasting service except under
and in accordance with a broadcasting license issued by ICASA under that Act.
The jurisdiction of the IBA Act in relation to broadcasting was limited to
broadcasting frequency bands and therefore excludes the regulation of satellite
broadcasting which operates in a telecommunications frequency band. However,
the
Broadcasting Act provided for the regulation of satellite broadcasting and
required satellite broadcasters to obtain a broadcasting license and
authorization of all channels included in their service prior to such inclusion.
In
order
to accommodate satellite broadcasters operating prior to the enactment of this
legislation, such as MultiChoice South Africa, the Broadcasting Act provided
that a satellite broadcasting service which existed at the date of the
commencement of that Act (June 30, 1999) would, on application for a
broadcasting license in respect of that service, be deemed to have the necessary
permission to continue broadcasting until such time as ICASA decided on that
application. Prior to the Broadcasting Act coming into effect, MultiChoice
South
Africa submitted an application for a license. ICASA at that time indicated
that
they were expecting amendments to the legislation and would not consider
applications until after such amendments had been effected.
The
Broadcasting Amendment Act, 2002 made certain amendments to these provisions.
Persons who, immediately before the commencement of this Act, provided a
broadcasting service, were deemed to have permission to continue such service
if
such persons applied to ICASA for the necessary license within six months after
the commencement of the Broadcasting Amendment Act 2002. MultiChoice South
Africa applied for such license, and ICASA confirmed in writing that MultiChoice
South Africa had satisfied the requirements in the Broadcasting Amendment Act
and was deemed to have the necessary permission to provide its broadcasting
service. The Broadcasting Amendment Act further provided that any person who
immediately before the commencement of that Act provided an unlicensed
broadcasting service consisting of more than one channel, was deemed to have
permission to continue to include all such channels in its service, provided
that the broadcaster applied to ICASA for authorization of the channels within
three months after the publication of regulations prescribing the procedure
and
the conditions for channel authorization. ICASA has not as yet published these
regulations. The ECA has in its transitional provisions protected these
permissions.
ICASA
released a Discussion Paper on Subscription Broadcasting on April 23, 2004.
The
Discussion Paper commenced the inquiry to determine the appropriate licensing
and regulatory framework for subscription broadcasting services. ICASA requested
commentary on how best to regulate subscription broadcasting services. The
discussion paper covered a variety of issues relating to, amongst others, local
content, license fees, duration of the license and must carry rules. MultiChoice
South Africa made written representations in response to the discussion paper.
On June 1, 2005, ICASA published its Position Paper on Subscription Broadcasting
which set out its policy on the regulations on local content, a code of conduct
for subscription broadcasters,
license fees, advertising limits and the process for authorizing channels.
ICASA
further indicated that it would not regulate technology standards, packaging
of
bouquets, electronic program guides (“EPGs”), conditional access systems and the
exclusive acquisition of content, as they believed general competition law
would
suffice.
ICASA
issued its invitation to apply for satellite and cable licenses on January
31,
2006. The closing date for applications was July 31, 2006 which date was later
extended to August 31, 2006. MultiChoice South Africa submitted its application
before this deadline. MultiChoice expects a number of players, including
traditional telecommunications operators, to apply.
M-Net’s
broadcasting license was renewed on June 1, 2002 on substantially the same
terms
and conditions as its previous license. The new license expires on March 31,
2010.
On
June
9, 2004 ICASA gave notice in the Government Gazette that it was considering
the
amendment of the subscription television broadcasting service license of M-Net.
The amendments under consideration were the closure of open-time and the
re-wording of the ownership and control clause. M-Net made written
representations opposing these amendments. Subsequently, ICASA confirmed the
closure of open time, but did not proceed with any changes to the ownership
and
control provision. The amendment will take effect on April 1, 2007.
In
2002
ICASA reviewed the existing limitations on control of broadcasting services.
The
IBA Act prohibits one or more foreign persons from, directly or indirectly,
exercising control (as defined) over, or having an interest in excess of 20%
in,
a commercial broadcasting licensee. In addition, no person may, directly or
indirectly, exercise control over more than one commercial television
broadcasting license. The Act also prohibits a person in a position to control
a
newspaper from controlling a television license, in cases where the newspaper
has a circulation of 20% of the total newspaper readership in an area that
overlaps substantially with the relevant television license area. ICASA has
considered these rules in respect of commercial broadcasters (other than
multi-channel broadcasters). ICASA has recommended that the percentage
limitation on foreign ownership should be raised to 25%. While relaxing the
rules in respect of radio, no material changes were made for television or
the
cross media control rules except to tighten the drafting in respect of the
latter. The Minister has yet to table these recommendations in
Parliament.
In
respect of multi-channel broadcasters such as M-Net and MultiChoice South
Africa, the Broadcasting Act mandates ICASA to assess whether these rules should
be applicable to multi-channel broadcasters. ICASA may make recommendations
for
the amendment of these provisions to the Minister of Communications, who has
to
table them in the South African Parliament. Until such recommendations have
been
adopted by Parliament they do not apply to multi-channel broadcasters. ICASA
is
considering this question as part of the subscription inquiry referred to above.
ICASA, in the aforementioned Position Paper on Subscription Broadcasting, made
the recommendation that these rules should not apply to subscription
broadcasters (such as M-Net and MultiChoice South Africa). These recommendations
have been sent to the Minister of Communications for tabling in Parliament.
The
Minister has yet to table these recommendations in Parliament.
The
Broadcasting Act provides that subscription broadcasting services may not
acquire exclusive rights for the broadcast of national sporting events
identified by ICASA in consultation with the Ministers of Communications and
Sport. In July
2003 ICASA
published a position paper and regulations on sports broadcasting rights. The
regulations identify national sporting events which cannot be acquired
exclusively for broadcasting by subscription television broadcasting licensees,
and which are required to be broadcast live or delayed live or delayed by
free-to-air television broadcasting licensees. This prohibition has been
retained in the ECA.
In
terms
of the Telecoms Act, the provider of a VANS (defined as a telecommunication
service provider to one or more customers concurrently, during which value
is
added for the benefit of customers), is required to hold a license to provide
such service. This includes internet service providers. In terms of the Act,
a
VANS may not be used for the carriage of voice and may only be provided by
means
of facilities provided by Telkom SA, the incumbent fixed-line operator or the
second national operator (“SNO”). The SNO has now been licensed but has yet to
launch commercially. The prohibition on VANS providing voice service has been
lifted in the ECA, provided the VANS provider obtains the necessary license.
MSMS,
as
an internet service provider, is required to hold a VANS license under the
Telecoms Act. Nevertheless, Section 40(1)(b) of the Telecoms Act provides that
any person who, immediately prior to May 20, 1996, provided a VANS in terms
of
certain agreements, is deemed to be a holder of a license to provide such
services, provided that such person applies to the Authority within six months
or such extended period as the Authority may allow, for a license in terms
of
the Act. In addition, this section of the Telecoms Act provides that the
Authority must grant the application and issue a license to such person. In
accordance with the aforesaid legislation, and after repeatedly extending the
period within which deemed VANS licensees would have to apply for a VANS
license, ICASA notified all affected parties during the first quarter of 2004
of
a three month period
within which VANS providers would have to reapply for their licenses. On May
20,
2005, the Minister of Communications published regulations for VANS services.
The regulations require VANS operators to pay a variable license fee of 0.1%
of
their license fee income and to have 15% equity ownership by historically
disadvantaged individuals within one year and 30% equity ownership in 2 years,
from the date of the issuance of the license. ICASA has since issued MSMS a
VANS
license which is valid for a period of 10 years and may be renewed.
Sentech
Ltd (a parastatal entity) became the first entrant into the fixed mobile
broadband internet provision market when it began offering its MyWireless
service. Sentech derives its regulatory entitlement from a Multimedia Service
license which it was granted in 2002. Sentech could therefore become a
competitor to MultiChoice South Africa and MSMS.
The
Regulation of Interception of Communications and Provision of
Communication-Related Information Act, 70 of 2002 (“the Interception Act”) was
passed on January 22, 2003, but is yet to come into effect. The Interception
Act
imposes requirements on telecommunication service providers (such as M-Web
Holdings) licensed under the Telecoms Act to provide telecommunication services
which have the capability to be intercepted and to store communication-related
information. The cost incurred in enabling this telecommunications service
of
being intercepted and the storage of the communication-listed information must
be borne by the telecommunications service provider concerned. The Interception
Act also requires telecommunications service providers, at their own cost,
to
acquire facilities and devices, determined in terms of a directive, with the
capability to intercept and store communication-related information.
Telecommunication service providers must also contribute to an ISP assistance
fund. For approximately 12 months, Telkom, the mobile operators and the ISPs,
either individually or by way of their industry bodies, have been engaged in
a
consultation process with the government in an attempt to agree on regulations
setting the parameters of their obligations in terms of the Interception Act.
Technical standards, data storage periods and costs have been some of the issues
under discussion.
The
Electronic Communications and Transactions Act of 2002 intended, among other
things, to facilitate and regulate electronic communications and transactions
and e-commerce. The Act’s effects include, but are not limited to:
· |
providing
for the recognition of electronic records, data messages and electronic
signatures, the admissibility of data messages as evidence and
facilitation of electronic contracting;
|
· |
requiring
the registration of cryptography providers, which would appear to
include
any provider of encryption services and products, such as MSMS; MSMS
has
now registered as a cryptography provider;
|
· |
providing
for the voluntary registration of authentication service providers,
which
would include products relating to electronic signatories and digital
certificates, and may have an impact on M-Web Holdings;
|
· |
providing
for consumer protection in relation to electronic transactions, including
providing certain information and ensuring payment systems are secure;
|
· |
establishing
voluntary personal data protection provisions and the requirement
for
registration of critical databases;
|
· |
establishing
a .za internet domain name authority by the Minister of Communications;
|
· |
providing
for the limitation of liability of service providers, including ISPs,
in
certain circumstances; and
|
· |
providing
for “cyber inspectors”, with powers, among other things, to monitor and
inspect web sites or information systems and to investigate the activities
of cryptography service providers. The cyber inspectors will have
fairly
extensive powers of search and seizure.
|
The
Media
Development and Diversity Agency Act, 2002 establishes an agency which, among
other things, aims to support media development and diversity projects.
Depending on the content of future regulations under this Act, participants
in
the media industry will make agreed contributions for this purpose. Media24
has
agreed to contribute Rand 1.2 million per year for the next four years. In
addition, MultiChoice South Africa, M-Net and SuperSport have agreed to
collectively contribute Rand 1.2 million per year for the next four years.
The
Information Communications Technology (“ICT”) sector has submitted a draft
charter to the Minister of Communications. In order to be published as a Code
of
Good Practice, the draft charter must be published in the Government Gazette
for
public comment for a period of 60 days. Thereafter the charter will be finalized
as a Code of Good Practice. The draft charter has yet to be published in the
Gazette. Naspers will comment on the charter when it is published in the
Gazette. The ICT draft charter has set targets in respect of ownership,
management and control, human resource development, procurement, enterprise
development, corporate social investment and access to ICTs. The primary objects
of the charter are to enable the meaningful participation of black people in
the
sector. The charter, once finalized, is likely to have a material impact on
ICT
companies within the Naspers group.
As
in
other countries, the print media is governed by a number of laws which restrict
the content of published information.
Rest
of Sub-Saharan
Africa
Regulation
of Pay-Television in Sub-Saharan Africa
MultiChoice
Africa is licensed to operate terrestrial rebroadcast pay-television services
in
Botswana, Ghana, Malawi, Namibia, Nigeria, Uganda and Zambia, either directly
or
through a local joint venture partner or representative. In a number of these
countries the regulatory systems are undergoing change, thereby imposing new
compliance obligations on the group.
Pay-television
services are licensed in Nigeria and Ghana. Namibia and Uganda operate on the
basis of authorization granted by the regulatory authorities. In Ethiopia,
Kenya
and Tanzania discussions are underway with the relevant regulatory authorities
concerning the licensing and regulation of pay-television services. In Zambia,
the Independent Broadcasting Authority Act was passed in December 2002, but
the
regulatory authority set up in terms of that Act, is yet to be established.
MultiChoice Africa has, in terms of the Act, applied for authorization of its
pay-television services and continues to operate legally until such time as
the
regulatory authority is established and pronounces on its
application.
In
Botswana, following extensive discussions with the regulatory authorities,
MultiChoice Africa has instituted review proceedings against the terms of the
broadcasting license issued by the authorities to the joint venture operation
in
Botswana. In Angola, the government has promulgated a Press Law which could
have
foreign ownership limitation implications for MultiChoice Africa. MultiChoice
Africa is currently engaging with the regulators in each of these territories
on
the appropriateness of such regulation to pay television and specifically to
a
multi-channel satellite operator.
We
expect
other countries on the continent, where MultiChoice Africa has not previously
been regulated, to follow suit and start regulating pay television.
Greece
Regulation
of Pay-Television in Greece
Overview.
The
regulatory framework governing the establishment and operation of free-to-air
television stations in Greece is provided by Law 2328/95 on the “Legal Status of
Private Television and Local Radio, Regulation of Several Issues related to
the
Radio Television Market and Other Provisions”, as modified by Law 3166/2003,
(the “Free-to-Air Law”) and by Law 2863/2000 “National Radio and Television
Council and other Authorities and Bodies of the Audiovisual Services Sector”
(the “RTC Law”). The pay-television regulatory framework is governed by Law
2644/98 on “The provision of pay-television and radio services and other
provisions”, as modified by Law 3166/2003, which regulates the issue of
pay-television licenses (via satellite, terrestrial relays or cable) by the
use
of analog or digital methods of transmission (the “Pay-Television Law”). Prior
to the enactment of the Pay-Television Law, pay-television was regulated by
the
Free-to-Air Law, some provisions of which survive, as described
below.
The
Free-To-Air Law.
Before
the enactment of the Pay-Television Law, the Free-to-Air Law granted Greek
Radio
Television SA, the state owned broadcasting entity, the exclusive right to
broadcast encrypted television signals in Greece. Greek Radio Television was
permitted to further assign such rights to third parties. Based on this
legislation, NetMed Hellas entered into an agreement with Greek Radio Television
on October 15, 1994, pursuant to which NetMed Hellas’ encrypted service was
transmitted on frequencies allocated by Greek Radio Television. This agreement
has been approved by a joint decision of the Minister of Press and Mass Media
and the Minister of Finance and ratified by Law 2328/95. The October 1994
agreement was extended and supplemented by a further agreement dated December
29, 1995, which relates to the transmission of a second encrypted service on
frequencies allocated by Greek Radio Television and was also approved by a
joint
ministerial decision. These agreements require NetMed Hellas to pay certain
fees
to Greek Radio Television equal to 6.5% of subscription fees payable by
subscribers who subscribe to only
one
service and 5.0% of subscription fees payable by subscribers who subscribe
to
both services. NetMed Hellas is required to provide a bank guarantee in an
amount of approximately Euro 2.9 million each year to secure these
payments.
While
the
cooperation agreements between NetMed Hellas and Greek Radio Television are
in
force, regulations concerning the share capital composition of free-to-air
television companies are not applicable to NetMed Hellas, which, instead is
subject to the terms of the aforementioned agreements. Additionally, NetMed
Hellas must obtain Greek Radio Television’s approval to transfer a majority of
its shares and must notify Greek Radio Television of its intention to transfer
any shares which are less than a majority of its shares. Greek Radio Television
also has the right to be provided with detailed information if new shareholders
enter or new share capital is invested into NetMed Hellas. These provisions
are
applicable for the entire term of the agreements. The regulations under the
cooperation agreements ensure that NetMed and NetMed Hellas (or any other
company which has the control of the group of companies to which NetMed Hellas
belongs) shall be liable to Greek Radio Television for the fulfillment of the
obligations of NetMed Hellas in accordance with the cooperation agreements.
Pay-Television
Law.
Under
the Pay-Television Law and the RTC law, the rights to provide pay-television
through terrestrial, satellite or cable broadcast can be secured either by
obtaining a license directly from the RTC or by signing a cooperation agreement
with any holder of a license. The existing agreements between NetMed Hellas
and
Greek Radio Television have been extended until the licenses for the provision
of terrestrial pay-television services have been granted in accordance with
the
Pay-Television Law and the RTC law. The Minister of Press announced the
frequencies to be used for providing terrestrial pay-television services and
MultiChoice Hellas submitted an application for such license on February 1,
2000, and again in November 2001, after the first licensing procedure was
cancelled. In September 2002, pursuant to Law 3051/2002, all the pending license
applications were cancelled on the ground that, after the review of the Greek
Constitution, the relevant authority to grant licenses had been transferred
to
the RTC. The same law provides that until terrestrial pay-television licenses
are provided by the RTC, the agreements that Greek Radio Television has drawn
up
continue in force. The extension of these agreements was approved by the
Minister of Press and Mass Media. Pursuant to this Law, an agreement was signed
between Greek Radio Television and NetMed Hellas on July 9, 2003. This agreement
extends the arrangements between the parties until the terrestrial
pay-television licenses are granted by the RTC. This extension was approved
by
the Minister of Press. Should terrestrial licenses be granted in the future,
NetMed Hellas could elect to cooperate with a license holder instead of seeking
a license directly. Under the pay-television law and the RTC Law, no single
shareholder of a company having a terrestrial license may hold more than 40%
of
the share capital of such company.
A
15-year
digital transmission license for the provision of pay-television and radio
services via satellite was granted to MultiChoice Hellas on July 15, 1999.
On
December 20, 1999, MultiChoice Hellas and the Greek government completed the
concession agreement required by the terms of the digital transmission license.
Synergistic
Network Development S.A., a wholly owned subsidiary of NetMed, acquired a
ten-year telecommunications license in December 1999 to uplink data and video
from Greece..
Digital
Terrestrial TV and new rules. The
Greek
Government has announced that it will propose a new law for media which will
govern digital terrestrial television, the licensing of terrestrial free to
air
television stations, the shareholding structure of media companies and the
transmission of television on new media networks dedicated to
television.
The
draft
bill has not been officially circulated yet and the new regulations will affect
the business of NetMed and the competitive environment in which it
operates.
EU
Regulation.
The EU
Broadcasting Without Frontiers Directive of October 3, 1989, as amended by
EC
Directive 97/36 of June 30, 1997, established the basic principles for the
regulation of broadcasting activity in the EU. In essence, it provides that
each
EU broadcasting service should be regulated by the authorities of one member
state and that certain minimum standards should be required by each member
state
of all broadcasting services regulated by that state’s authorities. Currently,
the directive requires member states to ensure, “where practicable and by
appropriate means,” that the broadcasters reserve “a majority proportion of
their transmission time” for programs produced in Europe. In applying this rule,
broadcast time for news, games, advertisements, sports events, infomercials
and
teletext services are excluded. The directive recognizes that member states
are
to move progressively towards requiring their broadcasters to devote a majority
of relevant transmission time to programs produced in Europe, having regard
to
the broadcaster’s informational, educational, cultural and entertainment
responsibilities to the viewing public.
China
Regulation
of the internet in China
Overview.
The
operation of telecommunications businesses, including internet related
businesses, in the People’s Republic of China is subject to regulation by the
government. The Ministry of Information Industry is the primary regulator of
internet businesses, with other government authorities also participating in
the
regulation of foreign investment, advertising, security, encryption and
content.
Internet
Access and Information Services.
Both
internet access and internet information services in China are governed by
the
Telecommunications Regulations. The Catalog of Classes of Telecommunications
Businesses is part of the Telecommunications Regulations and provides that
internet access and internet information services are value added
telecommunications businesses. Internet access services can be operated by
any
non-foreign invested domestic Chinese company, regardless of whether such
company is state owned, as long as such company has received a permit from
the
Ministry of Information Industry or its relevant local counterpart.
Internet
information service provider is defined by the Administrative Measures on
internet Information Services as an entity that engages in “providing
information to on-line users through the internet.” Internet information service
providers who are compensated for their services are required to obtain a permit
from the Ministry of Information Industry or its relevant local counterpart.
Those who provide such services without compensation are required to file with
the appropriate governmental authority; “without compensation” has been narrowly
interpreted by officials to apply only to not-for-profit governmental or
charitable organizations.
The
Administrative Measures on Internet Information Services also set forth a list
of prohibited types of content. Internet information service providers are
required to monitor their websites, including chat rooms and electronic bulletin
boards, for prohibited content and remove any such content that they discover
on
their websites. Some of the specific types of prohibited content are vague
and
subject to interpretation and, therefore, the potential liability of internet
information service providers is unclear.
Internet
information service providers are subject to an array of other regulations
with
respect to types of content and services, for which providers must obtain
approval from various agencies. In particular, in June 2002 the State Press
and
Publication Administration and the Ministry of Information Industry issued
the
Interim Regulations on internet Publishing, requiring all entities engaging
in
internet publishing to be approved by the General Administration Press and
Publication Administration (“GAPP”). Internet publishing is broadly defined in
the interim regulations, and it is currently unclear whether all internet
information service providers will require approval from GAPP. Also, internet
information service providers that provide a range of “cultural activities” for
profit must obtain approval from the Ministry of Culture pursuant to the Interim
Regulations on the Administration of Internet Culture, which were promulgated
in
2003 and amended on July 1, 2004. Those who provide cultural activities not
for
profit only need to file with the local counterpart of the Ministry of Culture.
“Internet cultural activities” are broadly defined to include, inter alia,
producing, reproducing, importing, wholesaling, retailing, leasing and
coordinating internet cultural products. These products include audio-visual
products, game products, art products and other cultural products.
Furthermore,
the State
Administration of Radio, Film and Television (“SARFT”) issued the revised
Administrative Measures on the Dissemination of Audio-visual Programs through
Information Networks such as the internet in 2004 (the “SARFT Administrative
Measures”), providing that enterprises which engage in disseminating
audio-visual programs through the internet to various devices, including
computers, television sets and mobile phones, should obtain a permit from SARFT.
Audio-visual programs, as defined by the SARFT Administrative Measures, include
programs with a similar manifestation as radio or television programs or films,
i.e. they are composed of successively moving images or sounds that can be
successively listened to. Dissemination is broadly defined to include launch,
live or on-demand broadcasting, integration, transmission and downloading.
In
addition, on April 13, 2005, SARFT issued a notice to provide that only
state-owned entities are permitted to launch audiovisual program services or
news websites. As new regulations about specific types of content are still
being issued, certain types of content for which approval is not now required
may require approval in the future. In addition, because of the lack of
specificity in some of these regulations, it is not always clear if the activity
engaged in by a specific internet information service provider actually requires
approval.
Foreign
Investment.
Foreign
investment is governed by the Provisions on the Administration of Foreign
Invested Telecommunications Enterprises and restrictions that comply with the
commitments made are set forth in the Foreign Investment Industrial Guidance
Catalog (the “Catalog”) issued by the former State Development Planning
Commission and the former Ministry of Foreign Trade and Economic Cooperation
on
March 11, 2002. Foreign investors are permitted to own up to 50% equity in
value
added telecommunications services enterprises which provide services committed
by China in connection with its WTO accession and as specified in the
Catalog.
The
Provisions on the Administration of Foreign Invested Telecommunications
Enterprises set forth the minimum capital requirements and approval procedures
for establishing a foreign invested telecommunications enterprise. A foreign
invested telecommunications enterprise providing value added telecommunications
services in more than one province must have a registered capital of at least
Renminbi (“Rmb”) 10 million. If a foreign invested telecommunications enterprise
provides value added telecommunications services only within one province,
the
minimum registered capital is Rmb 1 million. “Within one province”, as
interpreted by officials, apply to the providers who own servers located in
only
one province. The establishment of a foreign invested telecommunications
enterprise must be approved by the Ministry of Information Industry. In
addition, approval from the Ministry of Commerce or its relevant local
counterpart is also required for such establishment.
All
value
added telecommunication service providers, whether foreign invested
telecommunication enterprises or domestic companies, must obtain an operating
permit from the Ministry of Information Industry or its relevant local
counterpart. In July 2006, the Ministry of Information Industry issued a notice
to regulate the cooperation between foreign investors and domestic operators
of
value-added telecommunications services (“Operating Companies”). The notice
prohibits Operating Companies from leasing, transferring or reselling operating
permits or provide resources, premises or facilities to foreign investors in
any
disguised form. Pursuant to the notice, the Operating Company or its
shareholders must own the domain names and trademarks used in a value-added
telecommunications business. The premises and infrastructure (such as servers),
which the Operating Company requires for its business, must be located within
the geographic area for which the Operating Company has obtained its permit
to
operate value-added telecommunications services.
Regulation
of Publishing in China
The
publication of print media (including newspapers, periodicals and books) is
regulated in China. Different regulatory requirements apply to the editorial,
publishing, advertising and distribution functions of print media. GAPP is
the
primary regulator for print media, but the State Administration of Industry
and
Commerce (“SAIC”) authorizes publishing houses to disseminate advertisements and
regulates advertising agencies.
Publishing.
Publishers of newspapers and periodicals must obtain a publication permit from
GAPP before conducting publishing business. Newspaper and periodical publishers
must be wholly state-owned entities; foreign investment is not permitted.
For
each
newspaper or periodical a publisher wishes to publish, it must obtain a
“publication number” or kan
hao.
Such
publication number will only be issued after examination and approval by GAPP.
Pursuant to the publication number, the periodical would be permitted for
publication and for domestic circulation and, in certain circumstances, for
circulation overseas. Each kan
hao is
issued
by GAPP for a particular publication for a specified frequency of publication,
number of pages and circulation. A publisher may not change any of these
elements without GAPP’s approval.
Foreign
publishers are permitted to enter into copyright cooperation agreements with
Chinese publishers. Under such agreements, the Chinese publisher, as holder
of
the kan
hao,
remains
the publisher of the periodical and exercises a final review right with regard
to all content included in the periodical. The foreign party to the cooperation
agreement may provide
content
to the Chinese publisher and license the foreign title to the Chinese publisher
for inclusion on the cover page of the periodical. Copyright cooperation is
not
permitted for newspapers and for all other periodicals must be approved by
GAPP.
The legal framework for copyright cooperation is currently under review by
the
Chinese government.
Advertising.
Publishers must obtain an advertising operating license from SAIC to be
permitted to publish advertisements in newspapers or periodicals. Publishers
may
sell advertising space to advertisers either directly or through advertising
agents. Advertising agency companies in China must be approved by SAIC. Foreign
investors with two years operating history who conduct advertising operations
may hold up to 70% equity interest in a Chinese advertising company. After
December 11, 2005, foreign investors with three years operating history whose
principal business is advertising may establish wholly foreign-owned advertising
companies in China.
The
Advertising Law of China requires that advertisements must be true and lawful
and must not contain false information or deceive or mislead consumers.
Advertisements must include specific information, which is listed in the
Advertising Law, regarding the products or services they promote. Publishers
and
advertising agents are required to verify the content of advertisements and
may
be held liable for damages incurred by consumers as a result of deceptive or
misleading information contained in advertisements. Publishers and advertising
agents may also be subject to fines and confiscation of revenue by SAIC in
relation to the publication of advertisements that violate the requirements
under the Advertising Law.
Printing.
Foreign
investors are allowed to set up joint venture enterprises in China to engage
in
the business of the printing, packaging and decoration of publications and
other
printing products, provided that the enterprises must be majority-owned
and
controlled by the Chinese investors. For the investment to be approved, the
foreign investor must be able to provide advanced printing methods and
experience, advanced printing technology and equipment, and substantial funding.
The Chinese investor must have direct or indirect printing operation management
experience. If foreign-invested printing companies are commissioned by
publishers to print publications, they must verify whether the publishing of
such publications has been approved by the appropriate authorities; if they
are
commissioned to print publications intended to be distributed outside of China,
such publications must be for export only and are not permitted to be
distributed within China.
Distribution.
Chinese
law distinguishes between “general”, wholesale and retail distribution of print
media. In principle, the publisher is also authorised to act as general
distributor of the periodicals it publishes, or it may appoint a licensed
general distribution company to exercise the right for it. The publisher may
also appoint wholesale or retail distributors to perform all distribution
functions on an exclusive or non-exclusive basis. Foreign-invested enterprises
are allowed to engage in wholesale or retail distribution of books, newspapers
and periodicals, but not in general distribution. To be authorized to establish
distribution enterprises, both foreign and Chinese investors must have the
capacity to distribute books, newspapers and periodicals. In April 2005, the
Chinese government issued a notice permitting enterprises in which the State
has
at least 51-percent equity to engage in distribution. In August 2006, a notice
issued jointly by several Chinese government departments, including GAPP,
reiterated that foreign investment is prohibited in the general distribution
of
publications. Foreign investors must not disguise its investments in publishing
or other propaganda-related businesses by operating activities such as
publication distribution, printing or advertising.
4.C.
Organizational
Structure
Naspers
Limited is the ultimate parent of the Naspers group. Its shares are listed
on
the JSE under the symbol “NPN”, and its ADSs are listed on the Nasdaq Stock
Market under the symbol “NPSN”.
The
following organizational chart presents a Naspers’ group structure and the legal
ownership of some of Naspers’ significant subsidiaries, associated companies and
joint ventures, by economic interest (excluding interests held by employee
share
trusts) as at September 15, 2006.
(1)
|
MultiChoice
Africa (Proprietary) Limited is held directly by MIH Holdings. The
pay-television operations in South Africa are conducted through
MultiChoice Africa (Proprietary)
Limited.
|
(2)
|
MultiChoice
Africa Limited is held through MIH BV, a wholly-owned subsidiary
of MIH
Holdings, and owns interests in various subsidiaries that operate
pay-television businesses in Sub-Saharan
Africa.
|
(3)
|
The
operations in Greece are conducted through NetMed Hellas and MultiChoice
Hellas. NetMed Hellas is an indirectly owned subsidiary of MIH Holdings.
NetMed, through Myriad Development BV, owns 96.4% of MultiChoice
Hellas.
|
(4)
|
The
operations in Cyprus are conducted through MultiChoice (Cyprus) Public
Company Limited, of which 50.9% is owned by MultiChoice Cyprus Holdings
Limited. NetMed has a 69.04% interest in MultiChoice Cyprus Holdings
Limited.
|
(5)
|
M-Web
(Thailand) is an indirect wholly-owned subsidiary of MIH Holdings.
|
(6)
|
During
July 2006, MIH acquired from Global and Antenna their shares in Netmed.
MIH now owns 87.5% of Netmed and the remaining 12.5% is owned by
Teletypos.
|
The
following table presents each of Naspers’ significant subsidiaries (including
direct and indirect holdings), the area of business, the country of
incorporation and percentage of shares of each subsidiary owned by Naspers
as of
March 31, 2006.
Name
of Subsidiary
|
Percentage
Ownership(1)
|
Business
|
Country
of Incorporation
|
Electronic
Media
|
|
|
|
MIH
Investments (Proprietary) Limited
|
100.0
|
Holding
company
|
South
Africa
|
MIH
Holdings Limited
|
100.0
|
Holding
company
|
South
Africa
|
MIH
(BVI) Limited
|
100.0
|
Holding
company
|
British
Virgin Islands
|
Myriad
International Holdings BV
|
100.0
|
Holding
company
|
The
Netherlands
|
MultiChoice
Africa (Proprietary) Limited
|
100.0
|
Pay-television
operator in South Africa
|
South
Africa
|
MultiChoice
Africa Limited
|
100.0
|
Pay-television
operator in Sub-Saharan Africa
|
Mauritius
|
NetMed
NV
|
74.9(2)
|
Holding
company in the Mediterranean
|
The
Netherlands
|
NetMed
Hellas SA
|
74.9(2)
|
Content
provider in Greece
|
Greece
|
MultiChoice
Hellas SA
|
44.9
|
Pay-television
operator in Greece
|
Greece
|
MultiChoice
Cyprus Holdings Limited
|
51.7
|
Holding
company in Cyprus
|
Cyprus
|
MultiChoice
(Cyprus) Public Company Limited
|
26.4
|
Pay-television
operator in Cyprus
|
Cyprus
|
M-Web
Holdings (Proprietary) Limited
|
100.0
|
Internet
content provider in Africa
|
South
Africa
|
M-Web
(Thailand) Limited
|
100.0
|
Internet
service provider in Thailand
|
Thailand
|
Shanghai
Sportscn.com Information Technology Company Limited
|
87.7
|
Online
sport content provider in China
|
China
|
Irdeto
Access BV
|
100.0
|
Pay-television
content protection technology
|
The
Netherlands
|
Entriq
Inc.
|
100.0
|
Media
management and protection technology
|
United
States of America
|
Print
Media
|
|
|
|
Media24
Limited
|
100.0
|
Print
media
|
South
Africa
|
Paarl
Media Holdings (Proprietary) Limited
|
92.1
|
Printing
|
South
Africa
|
Touchline
Media (Proprietary) Limited
|
100.0
|
Magazine
publishing
|
South
Africa
|
Boland
Newspapers (Proprietary) Limited
|
75.0
|
Newspaper
publishing
|
South
Africa
|
Via
Afrika Limited
|
100.0
|
Book
publishing
|
South
Africa
|
Educor
Holdings Limited
|
100.0
|
Adult
training and higher education
|
South
Africa
|
___________
(1) |
The
percentage ownership refers to the effective ownership percentage
of the
group, excluding any shares held by stock compensation plans in the
group.
|
(2) |
During
July 2006, MIH acquired from Global and Antenna their shares in NetMed.
MIH now owns 87.5% of NetMed and the remaining 12.5% is owned by
Teletypos.
|
The
following table presents each of Naspers’ significant joint ventures (including
direct and indirect holdings), the area of business, the country of
incorporation and percentage of shares in the joint venture owned by Naspers
as
of March 31, 2006.
Name
of Joint Venture
|
Percentage
Ownership(1)
|
Business
|
Country
of Incorporation
|
Electronic
Media
|
|
|
|
MNH
Holdings (1998) (Proprietary) Limited
|
50.0
|
Holding
company
|
South
Africa
|
Electronic
Media Network Limited
|
60.1
|
Pay-television
content provider in Africa
|
South
Africa
|
SuperSport
International Holdings Limited
|
60.1
|
Pay-television
content provider in Africa
|
South
Africa
|
Myriad
International Programming Services BV
|
80.0
|
Programme
content acquisition
|
The
Netherlands
|
|
|
|
|
Print
Media
|
|
|
|
The
Natal Witness Printing and Publishing Company (Proprietary)
Limited
|
50.0
|
Newspaper
publishing and printing
|
South
Africa
|
___________
(1)
|
The
percentage ownership refers to the effective ownership percentage
of the
group, excluding any shares held by stock compensation plans in
the
group.
|
4.D. Property,
Plant and Equipment
Naspers,
Media24 and Via Afrika have their corporate offices in Cape Town. MIH Holdings
has principal corporate offices in Hoofddorp (The Netherlands) and Johannesburg
(South Africa).
The
following table summarizes certain information regarding the principal
facilities of the Naspers group as of August 31, 2006:
Description/Use
|
Location
(In
South Africa, unless noted)
|
Size
m
sqr
|
Owned/Leased
|
|
|
|
|
General
& technology office (MIH & Irdeto)
|
Hoofddorp,
the Netherlands
|
7,136
|
Leased
|
Subscription
television office (MultiChoice)
|
Johannesburg
|
24,000
|
Leased
|
Subscription
television decoder warehouse (MultiChoice)
|
Johannesburg
|
5,500
|
Leased
|
Subscription
television regional office (MultiChoice)
|
Cape
Town and Durban
|
4,380
|
Leased
|
Subscription
television office (MultiChoice Cyprus)
|
Nicosia,
Cyprus
|
1,265
|
Leased
|
Subscription
television office (NetMed)
|
Athens,
Greece
|
13,555
|
Leased
|
Corporate
office (MIH China)
|
Beijing,
China
|
881
|
Leased
|
Subscriber
Internet Office (M-Web South Africa)
|
Cape
Town
|
9,765
|
Leased
|
Subscriber
Internet Office (M-Web Thailand)
|
Bangkok,
Thailand
|
2,330
|
Leased
|
Subscriber
Internet Office (Tencent)
|
Shenzhen,
China
|
39,904
|
Leased
|
Subscriber
Internet Office (Tencent)
|
Beijing,
China
|
8,308
|
Owned
|
Technology
Office (Entriq)
|
Carlsbad,
USA
|
2,893
|
Leased
|
Technology
Office (MediaZone)
|
Redwood
City, USA
|
757
|
Leased
|
Technology
Office (Irdeto)
|
Seattle,
USA
|
2,062
|
Leased
|
Technology
Office (Irdeto)
|
Seoul,
Korea
|
945
|
Leased
|
Technology
Office (Irdeto)
|
Beijing,
China
|
2,379
|
Leased
|
General
offices (Media24/Via Afrika)
|
Cape
Town
|
32,500
|
Owned
|
Head
office (Media24)
|
Auckland
Park, Johannesburg
|
5,500
|
Owned
|
Printing
- City Deep (Media24)
|
Johannesburg
|
8,835
|
Owned
|
Printing
& offices (Media24)
|
Milnerton,
Cape Town
|
31,263
|
Owned
|
Printing
& offices (Media24)
|
Paarl
|
22,000
|
Owned
|
Printing
& offices (Media 24)
|
Paarl
|
25,370
|
Owned
|
Printing
& offices (Media 24)
|
Sandton
|
16,000
|
Owned
|
Printing
& offices (Media 24)
|
Marlboro
|
16,500
|
Owned
|
Warehouse
(On the Dot, Via Afrika)
|
Bellville,
Cape Town
|
25,973
|
Owned
|
Warehouse
(Via Afrika)
|
Umtata
|
4,875
|
Owned
|
Damelin
Braamfontein (Educor)
|
Johannesburg
|
10,569
|
Leased
|
Damelin
Randburg (Educor)
|
Johannesburg
|
35,000
|
Leased
|
ICG
offices (Educor)
|
Cape
Town
|
6,000
|
Owned
|
Milpark
Business School (Educor)
|
Johannesburg
|
14,479
|
Owned
|
ICG
Gauteng (Educor)
|
Braamfontein
|
5,935
|
Leased
|
Environmental
Matters
Naspers’
operations are subject to various environmental laws and regulations.
Environmental legislation authorizes administrative bodies to impose certain
control measures and may require businesses whose activities may have an impact
on the environment, to obtain permits to legalize those activities.
Non-compliance with such control measures and permits will generally lead to
criminal or civil liability, as the case may be. In addition, South African
environmental management legislation imposes a duty of care and remediation
of
environmental damage on every person who causes, has caused or may cause
significant pollution or degradation of the environment, requiring these persons
to take reasonable measures to prevent pollution or
degradation
of the environment from occurring, continuing or recurring. Naspers has
developed an environmental management policy that is applicable to all its
business units, with the objectives of implementing and integrating an
environmental management system in all of Naspers’ business activities. The
policy provides for the compliance with all existing environmental legislation
and internal standards. Naspers is in compliance in all material respects with
all applicable environmental requirements. However, certain Naspers ongoing
operations, particularly the printing business, may expose it to the risk of
liabilities with respect to environmental matters, and material costs may be
incurred in connection with such liabilities, if Naspers fails to comply with
applicable environmental requirements.
While
Naspers is not aware of any material environmental claims pending or threatened
against it, and Naspers does not believe that it is subject to any material
environmental remediation obligations, it cannot provide assurances that a
material environmental claim or compliance obligation will not arise in the
future.
ITEM
5. OPERATING AND
FINANCIAL REVIEW AND PROSPECTS
The
following discussion and analysis of Naspers’ financial condition and results of
operations should be read in conjunction with Naspers’ consolidated financial
statements and related notes included elsewhere in this annual report.
The
Naspers consolidated financial statements have been prepared in accordance
with
IFRS, which differ in certain respects from U.S. GAAP. See note 39 to Naspers’
consolidated financial statements for a reconciliation between IFRS and U.S.
GAAP with regard to Naspers’ net profit/(loss) and shareholders’ equity, and the
related description of the principal differences between IFRS and U.S. GAAP
as
they relate to Naspers.
Factors
affecting comparability of historical results of operations and financial
condition
For
the
year ended March 31, 2005 Naspers prepared its financial statements under SA
GAAP as effective at that date. In accordance with the JSE Listing Requirements,
the group was required to prepare its first annual consolidated financial
statements in accordance with IFRS for the year ended March 31, 2006. As the
group publishes comparative information in its financial statements, the date
for transition to IFRS is April 1, 2004, which represents the beginning of
the
earliest period of comparative information to be presented as required in terms
of the requirements of the JSE and the SEC.
In
order
to describe the impact of IFRS on the group’s reported results of operations and
financial position, the group has restated information previously published
under SA GAAP to the equivalent basis under IFRS. This restatement is described
in note 2 of the annual financial statements and follows the guidelines set
out
in IFRS 1. Accordingly, the US GAAP reconciliation of and for fiscal year ended
March 31, 2005 has also been adjusted to reflect the adjustments between IFRS
and the previously reported SA GAAP information.
5.A.
Operating Results
Introduction
Naspers
was incorporated in 1915 under the laws of the Republic of South Africa. Naspers
is a multinational media company with principal operations in electronic media
(including pay-television, internet and instant-messaging subscriber platforms
and the provision of related technologies) and print media (including the
publishing, distribution and printing of magazines, newspapers and books, and
the provision of private education services). Naspers’ activities are conducted
through subsidiaries, joint ventures and associated companies. Naspers’ most
significant operations are located in South Africa, with other operations
located in Sub-Saharan Africa, Greece, Cyprus, China, Brazil, The Netherlands
and the United States. The activities undertaken by Naspers’ business segments
are described below.
Electronic
Media
Pay-television
In
Africa, MultiChoice Africa and MultiChoice South Africa provide television
and
subscriber management services to analog and digital pay-television platforms
in
countries throughout Africa and the adjacent Indian Ocean islands, and South
Africa, respectively. The pay-television services comprise a variety of DTH
digital satellite television (DStv) bouquets (the term used to describe the
channels offered by a pay-television provider on a given platform) and
terrestrial analog networks. The digital service in South Africa consists of
approximately 74 video channels, eight data channels, 40 audio music channels
and 25 radio channels. The digital service in Sub-Saharan Africa and adjacent
islands consists of approximately 75 video channels, eight data channels and
up
to 65 audio channels.
The
aggregate subscriber base in Africa (including South Africa) was approximately
1.64 million as of March 31, 2006 (2005: 1.48 million). The pay-television
market in South Africa is now relatively mature, with approximately 1.25 million
households as of March 31, 2006 (2005: 1.14 million). The digital base in Africa
(including South Africa) grew by 188,182 subscribers to 1,417,309 in fiscal
2006
and now accounts for 87% of the total number of our subscribers on the African
continent. Growth in revenue from digital subscribers was in part offset by
the
churn in analog subscribers.
M-Net
and
SuperSport continue to play a role in growing the subscriber base through the
delivery of premium thematic channels and exclusive content. M-Net has output
deals with film and television studios, enabling it to screen the best quality
movies, series and miniseries. M-Net compiles 15 channels for broadcast across
the African continent. SuperSport produces
three
24
hour-a-day channels for DStv, covering more than 100 genres of sport. SuperSport
has a pan-African sports channel, focusing mainly on football. The channel
screens South African Premier Football League and various Confederation of
African Football games, English Premier League, Italian Serie A and Bundesliga
football. Extensive coverage of South African and international rugby, cricket,
golf and tennis is offered on other SuperSport channels.
MultiChoice
Africa also has direct investments with fully staffed offices for pay-television
services in Zambia, Nigeria, Ghana, Uganda, Kenya and Tanzania, and MultiChoice
South Africa in Namibia and Botswana.
In
the
Mediterranean, NetMed operates analog and digital platforms in Greece and
Cyprus. The total number of pay-television subscribers for the Mediterranean
region amounted to 374,451 households as of March 31, 2006 compared to 363,739
households as of March 31, 2005. In October 2001, Alpha Digital entered the
pay-television market in Greece and launched a 20-channel digital pay-television
service. This contributed to the decline in the analog subscriber base in Greece
during fiscal 2002 and 2003. In September 2002, Alpha Digital entered
liquidation leaving NetMed as the sole pay-television operator in Greece.
However, NetMed’s subscriber numbers did not fully recover when the commercial
television company, AST, took over Alpha Digital’s contract with the majority of
A Division Greek football teams. During fiscal 2006, the analog base in Greece
declined by 22,732 to 71,994 households, while, Nova (the digital television
service), maintained its leading position in the region by increasing its
subscriber base from 209,312 as of March 31, 2005 to 239,536 as of March 31,
2006.
Technology
Naspers’
subsidiary, Irdeto, provides content protection solutions to subscriber platform
operators and other providers of valuable digital content. Irdeto has been
providing encryption technology for more than 30 years, and specializes in
designing, developing and marketing end-to-end solutions to manage and protect
content from unauthorized access in both the television broadcast and internet
environments. Irdeto provides conditional access products to 194 customers
in
more than 40 countries, and has issued approximately 21 million smartcards
to
subscribers. Smartcards are credit card-size devices with embedded processors
that provide entitlement functions and store decryption keys and digital
signatures that are inserted in set-top boxes for access to subscription
television services.
Naspers’
subsidiary Entriq, which is in the early phase of development, offers products
and services to fill the needs of pay media clients while guiding them into
broadband and attracting the business of new broadband-specific players. Entriq
is actively pursuing customers looking to sell and protect content on the
internet. As broadband penetration increases and related access prices decrease,
the opportunities in this sector will grow.
Internet
M-Web
Holdings has developed a leading position in the African internet market, ending
fiscal 2006 with approximately 300,000 dial-up subscribers, 44,000 ADSL
broadband subscribers and 1,262 leased-line clients. M-Web Holdings’ “anytime,
anywhere” philosophy enables its subscribers to access its content platforms via
television, internet and wireless technologies.
M-Web
(Thailand), Naspers’ internet platform in Thailand, is the leading local content
service provider in Thailand and consists of nine consumer focused web sites.
Naspers’
principal investment in China is a 36.1% interest in Tencent, a provider of
innovative community, real-time communications, entertainment, content and
wireless and professional services based on the market leading consumer instant
messaging platform known as “QQ”. Platform services are also deployed in Taiwan,
Hong Kong, Macau, Japan and Thailand.
Print
media
Newspapers,
magazines and printing
Media24,
Naspers’ print media subsidiary, publishes, prints and distributes a large
number of newspapers and magazines in Southern Africa. Media24 has office and
printing facilities in Cape Town, Bloemfontein, Port Elizabeth, Paarl and
Johannesburg, and distribution facilities and infrastructure located throughout
South Africa. Media24 publishes more than 50 newspaper and 57 magazine
titles.
Books
Via
Afrika is a leading South African book publisher, seller and distributor of
innovative and quality reading, learning, listening and viewing products in
various formats and provider of private education services. Via Afrika controls
a number of different businesses operating as independent business units in
three segments. The publishers and agents division includes general, religious,
educational and academic publishers as well as digital content providers. The
traders and distributors division includes traditional niche academic and
religious bookstores, book and music clubs, online retailing as well as
warehousing and distribution services.
Private
education
The
education segment includes Damelin and ICG, who offer face-to-face full-time,
part-time and block release educational programs, as well as e-learning and
distance learning education and training programs at its campuses and training
centers across South Africa. These services are available for distance,
secondary and higher education learning and corporate training.
Operating
Results
A
key
strategy of the Naspers group over the past years has been to seek opportunities
in global markets to ensure growth in its electronic media platform business
segment for television, internet and interactive services. Consequently, losses
have been incurred as MIH Holdings invested heavily in these businesses in
an
effort to increase growth. Naspers incurred operating losses for each of the
four fiscal years ended March 31, 2002. In fiscal 2003, Naspers returned to
profitability with an operating profit of Rand 226.3 million, and during fiscal
2005 and 2006 Naspers made further progress with operating profits of Rand
2,469
million and Rand 3,004 million, respectively, as the profitability of Naspers’
pay-television businesses in its electronic media segment improved. Global
or
local economic challenges may impact the level of future operating
profits.
Naspers’
operating results are affected by a number of factors, including the number
of
households subscribing to its pay-television platform and internet access
services, the circulation of its newspapers and magazines, the number of
students enrolling for educational courses, the level of advertising across
its
various media products, the number of books published and sold, seasonality,
general economic conditions, competition, regulatory developments and
fluctuations in foreign exchange rates. Foreign exchange rates can have an
effect on Naspers’ reported earnings as it generates revenues predominantly in
the local currencies of the countries in which it operates, while a substantial
portion of its expenses are incurred in U.S. dollars and Euros.
Revenues.
Revenues
comprise pay-television and internet subscription revenue (52.4%), hardware
sales (3.2%), technology revenue (2.5%), circulation revenue (5.8%), advertising
revenue (15.9%), printing and distribution fees (5.7%), revenue from the
publishing and sale of books (5.5%), tuition fees (3.1%), e-Commerce revenue
(1.9%) and other revenues (4.0%). Naspers’ primary source of revenue is
pay-television services, internet services and the advertising in and selling
of
magazines and newspapers. Hardware sales relate to revenue generated from the
sale and maintenance of set-top boxes. Technology revenues include revenue
generated from conditional access systems. Circulation revenue includes the
cover price revenue received from the sale of newspapers and magazines.
Advertising revenues include revenue received for advertisements placed in
Naspers’ newspapers, magazines, internet sites and on its pay-television
platforms. Printing and distribution revenue consists mainly of fees received
from the printing and distribution of newspapers, magazines, books and related
products. Tuition fees include the course fees paid by students to participate
in the various educational courses and programs offered by Educor. Other
revenues include mainly revenue relating to the sale of rights to backhaul
charges and certain e-commerce services.
Cost
of Providing Services and Sales.
The cost
of providing services and sales includes programming content, editorial and
content, subscriber management, set-top box purchase, transmission, printing,
distribution and teaching costs. Programming costs include the cost of licensing
third party programs and the production cost of programs produced by the Naspers
group, as well as the amortization of programming rights for sporting events
and
films. Editorial and content costs include the cost of acquiring content from
third party content providers for the Naspers group’s internet services, books,
magazines and newspapers, as well as the employment and related costs of
journalists employed by Naspers and other content creators. Subscriber
management costs include the direct cost of servicing and maintaining equipment
installed at subscribers’ homes and the cost of providing customer service.
Set-top box purchase costs include the purchase of set-top boxes by Naspers
for
use or resale to customers. Transmission costs consist of transmission,
uplinking and backhauling charges paid by subsidiaries in the Naspers group
to
various satellite vendors under operating lease agreements. Printing costs
include raw materials such as paper and ink, and other direct costs relating
to
the printing process. Distribution costs include storage costs and the costs
relating to operating a large delivery vehicle
fleet.
Teaching costs include mainly employment and related costs of Educor’s lecturers
and teachers who run Educor’s educational programs and courses, and the related
course material costs.
Selling,
General and Administration Expenses.
These
costs include overhead costs from various departments such as marketing, public
relations, subscriber sales, warehousing, information systems, finance and
accounting, accounts receivable, accounts payable and human resources
departments.
Depreciation
and Amortization.
These
costs include charges relating to the amortization of intangible assets arising
from acquisitions and the depreciation of Naspers’ tangible property, plant and
equipment, including buildings, transponders, set-top boxes, manufacturing
plant
and equipment, vehicles and office equipment and assets under capital leases
(mainly satellite leases). These charges are allocated between cost of providing
services and sales and selling, general and administration
expenses.
Critical
Accounting Policies
Naspers’
consolidated financial statements include the financial position, results of
operations and cash flows of Naspers and its subsidiaries. These financial
statements are prepared in conformity with IFRS and include a reconciliation
of
consolidated net profit and consolidated shareholders’ equity to their
equivalents under U.S. GAAP. IFRS and U.S. GAAP require management to make
estimates that affect the reported amounts of assets and liabilities, and the
reported amounts of revenues and expenses. Naspers evaluates its estimates,
including those related to tangible and intangible assets, bad debts,
inventories, provisions and income taxes, on an ongoing basis. Naspers bases
its
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 judgments 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.
Naspers
believes that the following accounting policies used in preparation of its
financial statements prepared in accordance with IFRS are its 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. All of these critical accounting policies have been discussed
with
the audit committee.
Revenue
recognition
Subscription
fees.
Pay-television and Internet subscription fees are earned over the period the
services are provided. Subscription revenue arises from the monthly billing
of
subscribers for pay-television and internet services provided by the Group.
Revenue is recognized in the month the service is rendered. Any subscription
revenue received in advance of the service being provided is recorded as
deferred revenue and recognized in the month the service is provided. Naspers
believes that the accounting policy relating to the recognition of subscription
fees is a critical accounting policy as subscription related revenue accounts
for approximately 52.4% of Naspers’ total revenue.
Software
Development Contracts.
Revenue
from software development contracts of less than six months’ duration is
recognized using the completed contract method and for longer-term contracts
generally using the percentage of completion method. Under the percentage of
completion method, the extent of progress towards completion is measured based
on actual costs incurred as a proportion of total estimated costs which are
based on the total cost of previous projects. Provisions for estimated losses
on
uncompleted contracts are made in the period in which estimated losses are
determined. Revenues from integration services and software development
contracts are included in other revenues.
Licenses.
Naspers
recognizes product license revenue upon shipment of the related product to
a
third-party if a signed contract exists, delivery has occurred, the fee is
fixed
and determinable and collection of the resulting receivable is
probable.
Mobile
and Telecommunications Value-added Services.
Naspers
recognizes mobile and telecommunications value-added services revenues based
on
the full amount of fees charged to end-users by mobile operators after the
operators’ adjustments for uncollectible fees and after deducting the applicable
business tax and related taxes. In general, uncollectible fees arise due to
end-user payment delinquencies or “dropped messages”. We recognize revenue from
mobile and telecommunications value-added services on an accrual basis as the
services are rendered. As noted below, Naspers relies on information provided
by
mobile operators in their periodic statements for final billing, settlement
and
collection of revenues, which is normally received between 15 and 90 days after
each month-end. For revenues not supported by final confirmation from the mobile
operators at the time of reporting our financial results, we estimate the
amounts based on the number of subscriptions and the volume of data transmitted
between our network gateway and the mobile operators’ network gateways as
confirmed by the operators. Management estimates
utilize
the most recent three-month history of revenues actually derived from the
operations and incorporate developing trends in customer payment delinquencies.
Specifically, management estimates revenue performance based on the following
factors:
· |
the
operational raw data captured by the network gateway, which is the
system
capturing the transaction flows, and the server capturing the subscriber
database maintained by the group. The gateway records each single
transaction processed by the mobile operators while the database
maintains
the number of subscribers of the
group;
|
· |
the
monthly fixed subscription rates for certain
services;
|
· |
the
expected billable transaction volume;
and
|
· |
the
expected delinquency rates experienced in the most recent three month
period.
|
Based
on
these factors, if revenues are not supported by the periodic final confirmations
received from network operators, management estimates the amount of revenues
for
services rendered in a reporting period. The revenue estimation procedures
are
applied by management for each province or city in which the group has
operations.
If
actual
revenues based on the final confirmations subsequently received from the mobile
operators are higher or lower than the estimated amounts, due to routine
adjustments or deactivation of customer accounts, adjustments are made in
revenue in the period the final confirmations are received. To date, Naspers
has
not experienced any material discrepancies between the estimated revenues and
the actual revenues. The actual remittance to us by mobile operators of our
shares of the fees after all adjustments is typically 30 to 90 days after
services are rendered.
Internet
Value-added Services.
Naspers
recognizes revenue from internet value-added services similar to revenue from
Mobile and Telecommunications Value-added Services described above. With respect
to revenues collected for pre-paid services, revenues are deferred and
recognized over the estimated consumption period on a straight-line
basis.
Naspers
believes that its revenue recognition policies are critical accounting policies
as the recognition of revenue involves in many instances estimates and
assumptions to be made.
Doubtful
accounts
Naspers
reviews its doubtful accounts on a monthly basis for estimated losses resulting
from the inability of its customers to make the required payments. The Naspers
group’s customer base is dispersed across many geographic areas and is primarily
residential in nature. Naspers generally does not require collateral from its
customers.
The
Naspers group analyzes, among other things, historic bad debt experience,
customer credit worthiness, current economic trends in each country where its
customers are located and customer payment history when evaluating the adequacy
of the allowance for doubtful accounts. If the financial condition of the
Naspers group’s customers was to deteriorate, resulting in an impairment in
their ability to make payments, additional charges may be required. The estimate
may also change if the Naspers group experiences service failures or the number
of disputes with customers increases.
Naspers
believes 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 profit. The estimate for doubtful accounts
is a
critical accounting estimate for all of Naspers’ businesses. The net bad debt
expense as a percentage of sales over the last couple of fiscal years was
approximately 0.5%. A 0.1% increase in bad debt expense as a percentage of
sales
would decrease operating profit by approximately Rand 15.7 million.
Useful
lives of property, plant and equipment
Naspers
calculates depreciation of property, plant and equipment on a straight-line
basis so as to write off the cost of the assets over their expected useful
lives
less the residual value. The economic life of an asset is determined based
on
existing physical wear and tear, economic and technical ageing, legal or other
limits on the use of the asset and obsolescence. If some of these factors were
to deteriorate materially, impairing the ability of the asset to generate future
cash flows, Naspers may accelerate depreciation charges to reflect the remaining
useful life of the asset or record an impairment loss.
Leased
transponders and transmitters, which are held in the electronic
media—pay-television segment, represent approximately 32.8% (2005: 39.8%) of
Naspers’ property, plant and equipment as of March 31, 2006. All of the Naspers
group’s
current
transponder leases are capitalized and amortized over their expected useful
life
because the term of the lease covers at least 75% of the transponder’s estimated
useful life.
The
useful life of satellite transponders depends upon various factors. These
factors include the success of the launch and the amount of fuel required for
the satellite to be placed in the correct orbital location. In addition, various
factors can impact on a transponder satellite’s useful life once it is in orbit.
Satellites are, however, designed with operational redundancies that may
minimize or eliminate service disruptions if a critical system fails. These
may
include backup and separate on-board propulsion systems, backup transponders
and
conservative system margins. Naspers obtains information on the satellites’
useful lives from information provided publicly by the satellite service
providers and this information forms the basis for determination of potential
impairment. However, in most cases contractual terms in the satellite lease
agreements stipulate remedial measures that should be taken by the provider
should a satellite fail to operate as intended.
Naspers
considers this to be a critical accounting policy because any material change
in
the useful lives of Naspers’ property, plant and equipment would impact Naspers’
ability to generate future cash flows, depending on the asset, would have a
material impact of the value of the property, plant and equipment stated on
Naspers’ balance sheet and may decrease Naspers’ profitability. Naspers has had
no significant changes in useful lives or book values of property, plant and
equipment in recent years.
Valuation
of goodwill and intangible assets
Naspers
amortizes intangible assets with finite useful lives on a straight-line basis
so
as to write off the cost of the assets over their expected useful life. Goodwill
is tested annually for impairment and allocated to cash-generating units for
the
purpose of impairment testing. The Naspers group also evaluates the carrying
value of its tangible and intangible assets whenever indicators of impairment
exist.
Naspers
believes that the accounting estimate relating to asset impairment is a critical
accounting estimate because it is highly susceptible to change from period
to
period because it requires Naspers’ management to make assumptions about future
sales volumes and the cost of providing services over the life of the asset
and
discount rates for media-based businesses in emerging markets and recognizing
an
impairment could have a material impact on the value of the intangible assets
reported on the Naspers group’s balance sheet and the level of its net profit.
Management’s assumptions about future sales volumes, prices and discount rates
involve significant judgment as some of Naspers’ businesses are in the start-up
phase and consequently actual sales prices and volumes have fluctuated in the
past and are expected to continue to do so in the future.
Goodwill
is tested annually for impairment under both IFRS and U.S. GAAP. The goodwill
impairment test under U.S. GAAP is performed by comparing the carrying value
of
each reporting unit to its fair value, which is based on discounted cash flows
or market value of listed companies, whereas under IFRS, impairment is
determined by comparing the carrying value of the cash-generating unit with
its
recoverable amount. The discount rates applied to the cash flows, the growth
rate to extrapolate the cash flows and the basis for determining the recoverable
amount are disclosed per cash-generating unit in note 6 to the consolidated
annual financial statements. Naspers believes that the accounting estimate
relating to goodwill impairment is a critical accounting estimate because,
similar to the assessment of other intangible assets, the discounted cash flows
are highly susceptible to change from period to period because it requires
Naspers’ management to make assumptions about future sales volumes and the cost
of providing services over the life of the goodwill and discount rates for
media-based businesses in emerging markets and recognizing an impairment could
have a material impact on the value of the goodwill reported on the Naspers
group’s balance sheet and the level of its net profit.
Business
acquisitions
Naspers
accounts for its business acquisitions under the purchase method of accounting.
The total value of consideration paid for acquisitions is allocated to the
underlying net assets acquired, based on their respective estimated fair values
determined by the group using internal or external valuations. The Naspers
group
uses a number of valuation methods to determine the fair value of assets and
liabilities acquired including discounted cash flows, external market values
and
others and believes that it uses the most appropriate measure or combination
of
measures to value each asset or liability. In addition, the group believes
that
it uses the most appropriate valuation assumptions underlying each of these
valuation methods based on the current information available including discount
rates, market risk rates, entity risk rates, cash flow assumptions and others.
The accounting policy for valuation of business acquisitions is considered
critical because the judgments 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 amortization periods and ultimately net profit. 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.
Inventory
obsolescence
Naspers
values its inventories, which consist mainly of raw materials (paper and ink),
finished products (books) and set-top boxes and associated components, at the
lower of cost or expected net realizable value, based on assumptions about
future demand, market conditions and the useful life of the set-top boxes used
by the Naspers group. Naspers monitors inventory levels periodically based
on
the expected usage of such inventory. If actual market conditions prove to
be
less favorable than those projected by management, additional inventory write
downs may be required. No significant inventory write downs were made during
the
financial years ended March 31, 2006 or 2005. Naspers believes that its policy
relating to inventory write downs is a critical accounting policy due to the
assumptions and estimates that management is required to make in the
determination of the expected realizable value of inventories.
Income
taxes
Naspers
records the estimated future tax effect of temporary differences between the
tax
bases of its assets and liabilities and the amounts reported in Naspers’
consolidated balance sheet for such assets and liabilities, as well as the
future tax effect of operating losses and tax credit carry forwards. The Naspers
group follows specific and detailed guidelines regarding the recoverability
of
any tax assets recorded on the balance sheet. Naspers assesses the probability
that there will be adequate future taxable income generated to utilize the
benefits relating to the deferred tax assets. If circumstances change, or if
the
expected level of future taxable income is not generated, Naspers would reassess
the recoverability of the deferred tax assets recorded in its balance sheet,
which could lead to a write-down of such assets.
A
valuation allowance is recorded to reduce deferred tax assets to the amount
that
is probable to be realized. Naspers considers future taxable income, ongoing
prudent and feasible tax strategies and the timing of reversals of assets and
liabilities in determining the need for a valuation allowance. If Naspers
determines that in the future it will be able to realize deferred tax assets
in
excess of the net recorded amount of deferred tax assets stated on its balance
sheet, the resulting adjustment to the stated amount of deferred tax assets
would increase income in the period that such determination was made.
Naspers
considers this to be a critical accounting policy because if in the future
the
value of the deferred tax asset is determined to be less than or exceeds the
recorded amount, there could be a material adjustment to the deferred tax asset
stated on Naspers’ balance sheet as well as a material impact on Naspers’ net
profit.
During
fiscal 2005, Naspers released valuation allowances against certain deferred
tax
assets in its Greek pay-television and South African book publishing operations,
since it determined that the underlying future expected profitability will
be
such that it is probable that the deferred tax assets will be realized. The
release of valuation allowances during fiscal 2005 resulted in the creation
of
additional net deferred taxation assets in the Greek pay-television business
and
South African book publishing operations of Rand 412.9 million and Rand 56.7
million, respectively. This did not recur to the same extent during fiscal
2006.
As at March 31, 2006, Naspers has raised an aggregate valuation allowance
against deferred taxation assets of Rand 727.4 million (2005: Rand 919.1
million). The timing and the amounts to be released from the valuation allowance
or the creation of additional valuation allowances in the future is uncertain,
as it mainly depends on the future profitability of the various business units
to which these allowances relate.
Legal
matters
Naspers
is involved in legal disputes through its normal course of business. The outcome
of these legal claims can have a material impact on Naspers’ balance sheet as
well on Naspers’ net income. Naspers’ management estimates the potential outcome
of these legal claims based on the most objective evidence on hand from internal
and external legal advisors until such time that ultimate legal resolution
has
been finalized. Due to the uncertain nature of these issues, any changes in
these estimates based on additional information as it becomes available could
result in material changes to the financial statements in subsequent periods.
As
at March 31, 2006, Naspers has provided Rand 24.5 million (2005: Rand 25.9
million) for pending litigation matters. For more detail on these matters refer
to “Item 8.A. - Legal Proceedings”.
Post-retirement
medical liability
The
group
operates a number of post-retirement medical benefit schemes. The group provides
for post-retirement medical aid benefits using the Projected Unit Credit method
prescribed by IAS19,“Employee benefits”. Future benefits valued are projected
using specific actuarial assumptions and the liability for in-service members
is
accrued over expected working lifetime. The liability is calculated by
considering some key actuarial assumptions such as (1) the rate of healthcare
cost inflation, (2) discount
rate, (3) percentage members continuing after retirement and (4) average
retirement age of members. The key actuarial assumptions made are disclosed
in
note 18 to the consolidated financial statements.
Any
change in these assumptions could result in a material adjustment to the
post-retirement medical liability stated on Naspers’ balance sheet as well as a
material impact on Naspers’ net profit. A one percentage point increase in the
rate of health care cost inflation would increase the post-retirement medical
liability by approximately Rand 25.1 million, where as a one percentage point
reduction in the rate of health care cost inflation would decrease the liability
by Rand 17.6 million as at March 31, 2006. An average retirement age of one
year
younger than the assumed average retirement age will increase the liability
by
Rand 1.8 million, where as a one year older average age would result in a
reduction of Rand 1.7 million in the liability at March 31, 2006.
Equity
compensation benefits
The
group
grants share options/share appreciation rights (SARs) to its employees under
a
number of equity compensation plans. In accordance with IFRS 2, the group has
recognised an employee benefit expense in the income statement, representing
the
fair value of share options/SARs granted to the group’s employees. A
corresponding credit to equity has been raised for equity-settled plans, whereas
a corresponding credit to liabilities has been raised for cash-settled plans.
The fair value of the options/SARs at the date of grant under equity-settled
plans is charged to income over the relevant vesting periods, adjusted to
reflect actual and expected levels of vesting. For cash-settled plans, the
group
re-measures the fair value of the recognised liability at each reporting date
and at the date of settlement, with any changes in fair value recognised in
profit or loss for the period
Naspers
considers this to be a critical accounting policy because any material change
in
the assumptions used to estimate the fair value of the share options/SARs issued
could have a material impact on the value of the equity reserve or share-based
payment liability stated on Naspers’ balance sheet as well as a material impact
on Naspers’ net profit. Naspers has had no significant changes in the
assumptions used to estimate the fair value of share options/SAR’s issued since
the adoption of IFRS 2.
Currency
policies
Naspers’
functional currencies are generally the local currencies of the countries in
which it operates (currency of the primary economic environment), except for
pay-television businesses in certain African countries where the functional
currency is the U.S. dollar. Monetary assets and liabilities in currencies
other
than functional currencies are translated based on the exchange rates prevailing
at year-end. Any resulting exchange rate gains or losses are included in current
results. Exchange rate gains and losses relating to hedge transactions are
recognized in net earnings in the same period as the exchange differences on
the
items covered by the hedge transactions. Hedged items that meet the hedging
criteria set forth in IAS 39 and FAS 133 receive similar treatment under both
IFRS and U.S. GAAP. Gains and losses on transactions that do not meet the
hedging criteria are marked-to-market and reflected in the profit or loss for
each respective period.
On
consolidation, assets and liabilities of subsidiaries denominated in foreign
currencies are translated to Rand based on the exchange rates prevailing at
fiscal year-end. Income and expense items are translated using annual weighted
average rates of exchange or, where known or determinable, at the exchange
rate
on the date of the transaction.
Goodwill
and fair value adjustments arising on the acquisition of a foreign entity are
treated as local currency assets and liabilities of the foreign entity and
are
translated at exchange rates prevailing at the time the transaction is
completed. Adjustments arising from currency translations are recorded in
shareholders’ equity and are reflected in net earnings only upon sale or
liquidation of the underlying investments.
Naspers
operates internationally and is exposed to foreign exchange risk arising from
various currency exposures primarily with respect to the Rand and Euro against
the U.S. dollar. Although a substantial portion of the Naspers group’s revenue
is denominated in the currencies of the countries in which it operates, a
significant portion of the group’s cash obligations, including payment
obligations under satellite transponder leases and contracts for pay-television
programming and channels, are denominated in U.S. dollars. Where Naspers’
revenue is
denominated
in local currency such as Rand or Euro, a depreciation of the local currency
against the U.S. dollar adversely affects Naspers’ earnings and its ability to
meet its cash obligations.
Historically,
the performance of the Rand against other currencies has been characterized
by
periods of rapid depreciation (by more than the inflation rate) followed by
periods of stability. In particular, the Rand rapidly depreciated against the
U.S. dollar and other major currencies during the latter part of 2001. Since
December 2001, the Rand appreciated against the U.S. dollar and at March 31,
2006, the exchange rate was Rand 6.15 per U.S. $1.00. At September 15, 2006,
the
exchange rate was Rand 7.38 per U.S. $1.00.
Some
companies in the Naspers group use forward contracts to hedge their exposure
to
foreign currency risk in the local reporting currencies. At the Naspers group
level, external foreign exchange contracts are designated as hedges of foreign
exchange risk on specific assets, liabilities or future transactions.
The
Naspers group hedges the foreign currency exposure of its contractual
commitments to purchase goods, services and film rights mainly in U.S. dollars
and Euros. The forward contracts typically expire within one to two years,
consistent with the related contractual commitments. Naspers generally hedges
all major exposures in foreign currencies to an amount between 80% and 100%
of
the contract value.
Results
of Operations
The
following table is derived from our audited consolidated financial statements
as
at and for the years ended March 31, 2006 and 2005 which have been prepared
in
accordance with IFRS, and sets forth the results of Naspers’ operations for the
periods indicated:
|
|
Year
ended March 31
|
|
|
|
|
|
2005
|
|
2006
|
|
|
|
(Rand
in millions)
|
|
Revenues:
|
|
|
|
|
|
|
|
Electronic
media
|
|
|
|
|
|
|
|
Pay-television
|
|
|
|
7,746.6
|
|
8,903.3
|
|
Internet
|
|
|
|
696.3
|
|
898.0
|
|
Conditional
access
|
|
|
|
255.3
|
|
352.3
|
|
Entriq
|
|
|
|
|
|
33.9
|
|
|
65.9
|
|
Print
media
|
|
|
|
|
|
|
|
|
|
|
Newspapers,
magazines and printing
|
|
|
|
|
|
3,374.1
|
|
|
3,983.1
|
|
Books
|
|
|
|
|
|
860.6
|
|
|
980.9
|
|
Education
|
|
|
|
|
|
547.2
|
|
|
536.3
|
|
Corporate
services
|
|
|
|
|
|
3.9
|
|
|
(13.4
|
)
|
Total
revenues, net
|
|
|
|
|
|
13,517.9
|
|
|
15,706.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost
of providing services and goods
|
|
|
|
|
|
(7,725.8
|
)
|
|
(8,753.7
|
)
|
Selling,
general and administrative
|
|
|
|
|
|
(3,311.5
|
)
|
|
(3,948.7
|
)
|
Other
gains/(losses) - net
|
|
|
|
|
|
(11.7
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
2,468.9
|
|
|
3,004.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit/(loss) analyzed by business segment:
|
|
|
|
|
|
Electronic
media
|
|
|
|
|
|
Pay-television
|
|
2,119.9
|
|
2,785.4
|
|
Internet
|
|
(67.6)
|
|
(152.6)
|
|
Conditional
access
|
|
(46.5)
|
|
(0.4)
|
|
Entriq
|
|
|
(89.2
|
)
|
|
(165.2
|
)
|
Print
media
|
|
|
|
|
|
|
|
Newspapers,
magazines and printing
|
|
|
528.2
|
|
|
612.1
|
|
Books
|
|
|
52.8
|
|
|
66.8
|
|
Education
|
|
|
22.6
|
|
|
(83.8
|
)
|
Corporate
services
|
|
|
(51.3
|
)
|
|
(58.3
|
)
|
Operating
profit
|
|
|
2,468.9
|
|
|
3,004.0
|
|
|
|
|
|
|
|
|
|
Finance
costs, net
|
|
|
(217.0
|
)
|
|
(11.4
|
)
|
Share
of equity accounted results
|
|
|
88.6
|
|
|
151.3
|
|
Profit/(loss)
on sale of investments
|
|
|
(0.3
|
)
|
|
74.4
|
|
Dilution
profits
|
|
|
368.0
|
|
|
—
|
|
Profit
before tax
|
|
|
2,708.2
|
|
|
3,218.3
|
|
Taxation
|
|
|
(256.5
|
)
|
|
(934.8
|
)
|
Profit/(loss)
after tax
|
|
|
2,451.7
|
|
|
2,283.5
|
|
Minority
interest
|
|
|
(116.9
|
)
|
|
(157.2
|
)
|
Profit/(loss)
from continuing operations
|
|
|
2,334.8
|
|
|
2,126.3
|
|
Loss
from discontinuing operations
|
|
|
50.0
|
|
|
31.8
|
|
Profit
arising on discontinuing of operations
|
|
|
—
|
|
|
1,032.1
|
|
Net
profit for the year
|
|
|
2,384.8
|
|
|
3,190.2
|
|
Results
of Operations: 2006 Compared to 2005
Revenues
Total
revenues increased by Rand 2,188.5 million, or 16.2%, to Rand 15,706.4 million
during fiscal 2006 from Rand 13,517.9 million in fiscal 2005. The increase
in
revenues arose mainly as a result of increased subscription revenues,
advertising revenues and book publishing and sales. The depreciation of the
Rand
in fiscal 2006 against the U.S. dollar had a positive impact on Naspers’ revenue
earned outside of South Africa when reported in Rand. The Rand appreciated
against the U.S. dollar from Rand 6.211 at March 31, 2005 to Rand 6.149 at
March
31, 2006, a 1.0% appreciation. The average exchange rate between the Rand and
the U.S. dollar for fiscal 2006 was approximately Rand 6.392 compared to Rand
6.215 for fiscal 2005, representing a depreciation against the dollar of 2.8%.
The
table
below sets out revenues by revenue type:
|
|
Year
ended March 31,
|
|
|
|
2005
|
|
2006
|
|
|
|
(Rand
in millions)
|
|
|
|
|
|
|
|
Subscription
|
|
7,136.2
|
|
8,236.7
|
|
Hardware
sales
|
|
|
436.6
|
|
|
510.3
|
|
Technology
|
|
|
280.9
|
|
|
390.7
|
|
Circulation
|
|
|
796.8
|
|
|
915.1
|
|
Advertising
|
|
|
2,035.9
|
|
|
2,489.9
|
|
Printing
and
distribution
|
|
|
752.3
|
|
|
891.2
|
|
Book
publishing and sales
|
|
|
709.8
|
|
|
856.9
|
|
Tuition
fees
|
|
|
480.4
|
|
|
485.9
|
|
e-Commerce
revenue
|
|
|
229.7
|
|
|
304.3
|
|
Other
revenue
|
|
|
659.3
|
|
|
625.4
|
|
Total
revenues, net
|
|
|
13,517.9
|
|
|
15,706.4
|
|
Subscription
revenues.
Subscription revenues increased by Rand 1,100.5 million, or 15.4%, from Rand
7,136.2 million in fiscal 2005 to Rand 8,236.7 million in fiscal 2006. The
increase was mainly a result of growth in the number of subscribers to the
group’s pay-television services, an increase in subscription prices and the
continued migration of pay-television subscribers from the analog system to
the
higher margin digital system.
Naspers’
digital pay-television subscribers in South Africa increased by 137,747, or
15.4%, to 1,033,093 subscribers at March 31, 2006 from 895,346 subscribers
at
March 31, 2005. The analog pay-television subscribers in South Africa decreased
by 35,085 subscribers, or 13.9%, from 252,525 at the end of fiscal 2005 to
217,440 subscribers at March 31, 2006. The reduction in the number of analog
subscribers in fiscal 2006 resulted primarily from Naspers’ strategy of
migrating customers from analog to digital service. Where an analog subscriber
converts to the digital service, the subscriber must purchase a digital signal
set-top box, a smartcard and a satellite dish. Naspers estimates that
approximately 11.2% of the connections to digital pay-television service in
South Africa in fiscal 2006 resulted from subscribers migrating from analog
to
digital service. An increasing number of first-time pay-television customers
purchase the digital service rather than purchasing analog service initially
and
then subsequently migrating to digital service.
The
growth in digital subscriber numbers, the migration from the analog to digital
service and a subscription price increase were the main factors allowing the
South African region to grow its subscription revenues by Rand 694.4 million,
or
17.6%, during fiscal 2006 from Rand 3,950.1 million to Rand 4,644.5 million.
Prices of pay-television subscriptions were increased during fiscal 2006. This
increase in subscription prices increased revenues by approximately Rand 205.6
million, or 5.2%. The increase in revenue derived from the migration of
subscribers from analog to digital service, without taking account of any
incremental price increase, is approximately Rand 31.3 million, or 0.8%. The
increase in the number of new digital subscribers contributed approximately
Rand
216.0 million or 5.5% to the increased level of subscription revenue.
Digital
pay-television subscribers in Sub-Saharan Africa increased by 50,435, or 15.1%,
during fiscal 2006 from 333,781 to 384,216 subscribers at the end of fiscal
2006. The analog pay-television subscription base in Sub-Saharan Africa
decreased by 1,554 subscribers during fiscal 2006 to 819. Subscription revenue
increased by Rand 255.6 million, or 19.3%, to Rand 1,583.1 million in fiscal
2006 from Rand 1,327.5 million in fiscal 2005. Subscription prices in
Sub-Saharan Africa are either charged in U.S. dollars or its equivalent in
the
respective local currencies, and therefore, the depreciation in the average
Rand
exchange rate against the U.S. dollar during fiscal 2006 by 2.8% had a positive
impact on subscription revenues when reported in Rand. In U.S. dollar terms
subscription revenue in the Sub-Saharan Africa region increased by 15.9%.
Pay-television
subscribers for the Mediterranean region (Greece and Cyprus) amounted to 374,451
households at the end of fiscal 2006 compared to 363,739 households at the
end
of fiscal 2005. The analog subscriber base in Greece showed a decline of 22,732
subscribers, or 23.9%, to 71,994 from 94,726 subscribers at the end of fiscal
2005, mainly due to the migration of analog subscribers to the digital service.
The digital service maintained its leading position in the region by increasing
its subscriber base by 14.4%, or by 30,224 subscribers, from 209,312 subscribers
at March 31, 2005 to 239,536 at March 31, 2006. The subscribers to the analog
service in Cyprus decreased by 8,330 subscribers, or 16.4%, to 42,552 at March
31, 2006 from 50,882 at March 31, 2005. This decrease in the analog base is
mainly the result of the launch in fiscal 2005 of a digital service in Cyprus.
The subscribers to the digital service increased by 131.0%, or by 11,550
subscribers, from 8,819 subscribers at March 31, 2005 to 20,369 at March 31,
2006.
Subscription
revenue for the Mediterranean region increased by Rand 63.6 million, or 5.2%,
to
Rand 1,283.1 million for fiscal 2006 from Rand 1,219.5 million for fiscal 2005.
This increase was mainly caused by the growth in digital subscribers, as well
as
a subscription price increase in October 2005, but was dampened by the
appreciation of the Rand against the Euro during fiscal 2006. Subscription
prices in Greece and Cyprus are charged in Euro and Cypriot pound, respectively,
and therefore, the appreciation in the average Rand to Euro exchange rate during
fiscal 2006 by 1.1% had a negative impact on subscription revenues when reported
in Rand. In Euro terms, the subscription revenue in the Mediterranean region
increased by 6.4%.
In
South
Africa, the number of internet subscribers remained static at approximately
344,000. In general, the number of internet subscribers in South Africa has
shown slow growth due to high telephone costs and the high cost of broadband
services. Subscription revenues in South Africa increased in fiscal 2006 by
Rand
194.6 million, or 46.1%, to Rand 616.5 million from Rand 421.9 million at the
end of fiscal 2005. This increase was mainly attributable to the acquisition
of
the additional subscribers from the Tiscali internet business during the latter
portion of fiscal 2005.
Subscription
revenue relating to subscribers of the group’s magazines and newspapers
increased in fiscal 2006 by Rand 7.1 million, or 6.4%, from Rand 110.4 million
in fiscal 2005 to Rand 117.5 million. This increase was mainly due
to circulation
growth achieved by the group’s newspapers and magazines, cover price increases
and an increased marketing focus on new newspaper and magazine subscriptions.
Hardware
sales.
Hardware
sales increased by Rand 73.7 million, or 16.9%, to Rand 510.3 million during
fiscal 2006 from Rand 436.6 million in fiscal 2005. Hardware sales were
primarily generated in Africa and the Mediterranean region. Hardware sales
in
Africa increased by Rand 84.2 million, or 23.0%, to Rand 450.1 million in fiscal
2006 from Rand 365.9 million in fiscal 2005. Hardware sales in the Mediterranean
region decreased by Rand 10.6 million, or 15.0%, to Rand 60.1 million in fiscal
2006 from Rand 70.7 million in fiscal 2005. The decrease in this region is
due
to lower selling prices as a result of outsourcing digital installations. The
South African Revenue Service (“SARS”) is currently investigating the base costs
used by MultiChoice South Africa in determining its ad valorem taxes payable
to
the SARS for set-top boxes. The case is pending at the High Court and the
outcome of this investigation is still uncertain.
Technology
revenues.
Technology revenues increased by Rand 109.8 million, or 39.1%, to Rand 390.7
million during fiscal 2006 from Rand 280.9 million in fiscal 2005. This increase
was mainly due to Irdeto increasing its revenues from Rand 255.3 million in
fiscal 2005 to Rand 352.3 million in fiscal 2006 due to the increase in volume
of both smartcard shipments and new customer growth. Naspers expects market
conditions to remain highly competitive in the near future with continued
pressure on technology margins and revenues.
Circulation
revenues.
Circulation revenues from newspaper and magazine sales increased by Rand 118.3
million, or 14.8%, to Rand 915.1 million in fiscal 2006 from Rand 796.8 million
in fiscal 2005. The increase in revenue was mainly due to increases in the
cover
prices of newspapers and magazines and due to the growth in recently launched
magazine and newspaper titles.
Circulation
revenue from Naspers’ newspapers increased by Rand 137.6 million, or 38.9%, from
Rand 353.4 million in fiscal 2005, to Rand 491.0 million in fiscal 2006.
Circulation revenue increased mainly due to the growth in circulation of the
daily tabloid newspaper, Daily
Sun,
as well
as, Soccer
Laduuuuuma. Daily
Sun
reached
an average circulation figure for the period July 2005 to December 2005 of
444,061 copies per day, up from an average circulation figure of 364,356 per
day
in the corresponding period in the prior year. Soccer
Laduuuuuma
increased its circulation over the same period to an average of 288,882 per
week, from an average of 244,509 in the corresponding period in the prior year.
Naspers expects the circulation of its titles aimed at the emerging black market
in South Africa, Daily
Sun
and
Sunday
Sun,
to
continue their growth path in the foreseeable future, albeit at a slower rate
of
growth. Circulation of the established Afrikaans daily newspapers Die
Burger
and
Volksblad,
and the
Afrikaans Sunday title, Rapport,
remained fairly stable.
Circulation
revenue from Naspers’ magazines increased by Rand 60.6 million, or 13.7%, from
Rand 443.4 million in fiscal 2005 to Rand 504.0 million in fiscal 2006. Although
there was a slight decline in circulation numbers of the mass-market general
interest family titles (e.g., Huisgenoot
and
You),
these
titles still have the highest circulation of all Naspers’ magazine titles. New
niche magazine titles Leef
met hart en siel,
tuis/home
and
Move!
grew
circulation and contributed positively towards circulation revenue in fiscal
2006.
Advertising
revenues.
The
Naspers group increased advertising revenues by Rand 454.0 million, or 22.3%
from Rand 2,035.9 million in fiscal 2005 to Rand 2,489.9 million in fiscal
2006.
In fiscal 2006, approximately 50.8% and 25.4% of the Naspers group’s advertising
revenues were earned by its newspapers and magazines. The Naspers group’s
newspapers increased advertising revenue by 23.2% in fiscal 2006 to Rand 1,265.0
million and magazines increased advertising revenue for the same period by
14.2%
to Rand 633.0 million. Advertising revenue from newspapers and magazines is
expected to remain fairly stable in the near future. Advertising revenues from
television increased during fiscal 2006 by 23.4% to Rand 539.6 million.
Television advertising revenue is expected to remain stable in the foreseeable
future. The closure of the open-time window of M-Net from April 1, 2007 could
however negatively impact advertising revenue in fiscal 2008. Advertising
revenues from the internet reached Rand 24.0 million in fiscal 2006, mainly
from
advertising revenue earned from Media24 Digital.
Printing
and distribution revenue.
Revenue
from the printing and distribution of magazines, newspapers and related products
increased by Rand 138.9 million, or 18.5%, to Rand 891.2 million for fiscal
2006
from Rand 752.3 million for fiscal 2005. Growth in revenue is mainly due to
increases in printing rates and increased volumes of magazine printing. Printing
revenue on its own increased to Rand 751.4 million in fiscal 2006 from Rand
654.8 million in fiscal 2005. Media24 increased its distribution revenue from
Rand 97.5 million in fiscal 2005 to Rand 139.8 million in fiscal 2006.
Distribution revenue increased with the increase in the distribution of external
publications and the growth in the On the Dot distribution
division.
Book
publishing and sales revenue.
Revenue
earned from the publishing and sale of books increased by Rand 147.1 million
to
Rand 856.9 million in fiscal 2006 from Rand 709.8 million in fiscal 2005. This
increase in revenue was mainly due to increased sales of educational material
and improved sales at the academic retail outlets.
Tuition
fees.
Tuition
fees from private education programs and courses increased by Rand 5.5 million,
or 1.1%, from Rand 480.4 million in fiscal 2005 to Rand 485.9 million in fiscal
2006. This was mainly due to a decline in student numbers in the face-to-face
business, as the business repositioned itself in the market away from higher
education to further education and training.
e-Commerce
revenue. e-Commerce
revenues increased by Rand 74.6 million or 32.5% from Rand 229.7 million in
fiscal 2005 to Rand 304.3 million for the year ended March 31, 2006. The
internet businesses saw growth in e-commerce related products, hosting services,
mail services and mobile content revenues.
Other
revenues.
Other
revenues decreased by Rand 33.9 million, or 5.1%, to Rand 625.4 million in
fiscal 2006 from Rand 659.3 million in fiscal 2005. Other revenue mainly
consists of revenue earned from selling excess satellite capacity, set-top
box
repair and maintenance, ticket sales, sale of scrap paper and student financing
services.
The
following is a discussion of revenues by segment as defined and set out in
the
notes to Naspers’ consolidated financial statements included elsewhere in this
annual report. The analysis is based on Naspers’ primary reporting format under
IFRS. Naspers’ method of internal reporting disaggregates its businesses by
service or product. The information set forth below is also summarized in the
table directly under the heading “Results of Operations”.
Electronic
Media—Pay-television.
Revenues increased by Rand 1,156.7 million, or 14.9%, from Rand 7,746.6 million
in fiscal 2005 to Rand 8,903.3 million for the year ended March 31, 2006. Growth
in subscription revenue was mainly driven by the continued migration of
subscribers from analog to digital service, subscription price increases and
the
overall growth in the number of subscribers by 162,255 across the various
pay-television platforms. The Electronic Media—Pay-television segment’s revenues
were further increased by the growth in advertising revenue in the year ended
March 31, 2006 by Rand 102.3 million, or 23.4%, from Rand 437.3 million in
fiscal 2005 to Rand 539.6 million.
Electronic
Media—Internet.
Revenues increased by Rand 201.7 million, or 28.9%, to Rand 898.0 million in
fiscal 2006 from Rand 696.3 million in fiscal 2005. This increase is mainly
a
result of the acquisition of the South African internet business of Tiscali
International BV on February 1, 2005. M-Web South Africa increased its revenue
contribution by Rand 327.2 million, or 60.5%, to Rand 868.4 million in fiscal
2006 from Rand 541.2 million in fiscal 2005. During fiscal 2005, the group
changed the accounting for its interest in Tencent from proportionate
consolidation to equity accounting. Tencent contributed Rand 106.9 million
to
the segment’s revenue in fiscal 2005.
Electronic
Media—Conditional access.
Irdeto,
the content security solution business, reported record shipments of almost
six
million units leading to revenues increasing by Rand 97.0 million, or 38.0%,
from Rand 255.3 million during fiscal 2005 to Rand 352.3 million for the year
ended March 31, 2006. Irdeto recently acquired a competitor, Philips CryptoTec
and continued its expansion into the rapidly developing mobile TV segment.
Its
agreement with TU Media in Korea is the first such mobile TV service launched
in
the world. Irdeto will capitalize on its lead by further developing its
technology for safeguarding content in the broadband, internet and mobile
environment.
Electronic
Media—Entriq. The
consumption of broadband media on the internet is becoming the dominant form
of
internet use. This has lead to Entriq’s revenue increasing by Rand 32.0 million,
or 94.4%, from Rand 33.9 million during fiscal 2005 to Rand 65.9 million for
the
year ended March 31, 2006. Major clients that Entriq has secured include NBC,
Viacom, MTV, ProSieben and the Intel ViiV-platform. Entriq has also developed
a
broadband product, MediaZone, which aggregates and offers niche content to
the
market for subscription.
Print
Media—Newspapers, Magazines and Printing.
Revenues increased from Rand 3,374.1 million for the year ended March 31, 2005
to Rand 3,983.1 million for the year ended March 31, 2006, which represents
a
Rand 609.0 million, or 18.0%, increase. The increase in revenue was mainly
due
to increased advertising revenue, which increased by Rand 351.7 million, or
22.0%, to Rand 1,950.3 million in fiscal 2006 from Rand 1,598.6 million in
fiscal 2005. Circulation revenue increased by Rand 118.4 million, or 14.9%,
from
Rand 796.7 million in fiscal 2005 to Rand 915.1 million in fiscal 2006. The
net
additional contribution in fiscal 2006 of printing and distribution revenue,
e-Commerce revenue and other revenue, mainly being revenue from ad-hoc contract
publishing, amounted to Rand 131.5 million.
Print
Media—Books.
Revenues increased by Rand 120.3 million, or 14.0%, from Rand 860.6 million
in
the year ended March 31, 2005 to Rand 980.9 million in fiscal 2006. This growth
in revenue was mainly due to increased sales volumes achieved by Via Afrika’s
school book publisher, Nasou Via Afrika.
Print
Media—Education.
Revenues decreased from Rand 547.2 million in fiscal 2005 to Rand 536.3 million
in fiscal 2006, which represents a Rand 10.9 million, or 2.0%, decrease. This
was mainly due to reduced student numbers as the business repositioned itself
in
the market.
Operating
expenses
The
cost
of providing services and goods increased by Rand 1,027.9 million, or 13.3%,
from Rand 7,725.8 million for the year ended March 31, 2005 to Rand 8,753.7
million in fiscal 2006. The increase relates mainly to the growth in revenues
of
16.2% which was offset by costs decreasing in the electronic media - pay
television and electronic media - conditional access segments.
Programming
costs for MultiChoice South Africa increased by Rand 277 million, or 14.3%,
from
Rand 1,935.9 million in fiscal 2005 to Rand 2,212.9 million for the year ended
March 31, 2006. This increase was mainly due to the increase in digital
subscribers in South Africa to 1,033,093 as at March 31, 2006 from 895,346
as at
March 31, 2005. The programming costs per digital subscriber are higher than
per
analog subscriber, due to the fact that a digital subscriber receives many
more
channels than an analog subscriber. In Sub-Saharan Africa programming costs
increased by Rand 105.1 million, or 21.5%, from Rand 488.8 million in fiscal
2005 to Rand 593.9 million in fiscal 2006. The increase was mainly due to
increased programming costs relating to the growth in digital subscribers from
333,781 subscribers at the end of fiscal 2005 to 384,216 at the end of fiscal
2006. Future trends in these costs will depend largely on the foreign currency
exchange rate between the Rand and the U.S. dollar and the growth in the number
of subscribers and the subscription rate payable per subscriber.
In
the
Mediterranean region, programming costs increased by Rand 20.9 million, or
3.6%,
to Rand 600.3 million in fiscal 2006 from Rand 579.4 million in fiscal 2005.
This increase was offset by other costs of providing services that decreased
by
Rand 36.2 million, or 11.5%, to Rand 279.7 million in fiscal 2006 from Rand
315.9 million in fiscal 2005. This decrease relates mainly to Euro 6.5 million
costs awarded in the settlement of litigation.
The
cost
of set-top box sales in South Africa increased by Rand 112.5 million, or 36.5%,
to Rand 420.8 million in fiscal 2006 from Rand 308.3 million in fiscal 2005.
This increase was due to sales of the personal video recorder (PVR) which was
introduced into the market in October 2005. In Sub-Saharan Africa the cost
of
set-top box sales decreased by Rand 12.1 million during fiscal 2006 to Rand
110.7 million. This was mainly due to a reduction in the cost of set-top boxes.
In the Mediterranean region the cost of set-top box sales decreased to Rand
81.8
million in fiscal 2006 from Rand 86.8 million in fiscal 2005. This 5.8% decrease
is due to the outsourcing of digital installations.
Irdeto’s
cost of providing services in the electronic media segment increased by 21.7%,
or Rand 22.0 million, from Rand 101.4 million in fiscal 2005 to Rand 123.4
million in fiscal 2006, predominantly due to an increase in the volume of units,
both smart cards and surface mounted (smart cards in a microchip form)
sold.
Entriq’s
cost of providing services in the electronic media segment more than doubled
from Rand 11.7 million in fiscal 2005 to Rand 25.2 million in fiscal 2006 with
selling, general and administration costs increasing from Rand 132.1 million
in
fiscal 2005 to Rand 213.3 million in fiscal 2006 mainly as a result of increased
development activity. Substantial investment is expected in the short term
to
consolidate on the progress that Entriq has achieved in its
technologies.
Cost
of
providing services in the print media - newspapers, magazines and printing
segment increased during the financial year ended March 31, 2006 by Rand 1,195.5
million or 56.5% from Rand 2,114.4 million for the financial year ended March
31, 2005 to Rand 3,309.9 million. This increase is mainly due to the increase
in
circulation of new newspaper and magazine titles launched during the last couple
of years, such as the Daily
Sun, Son and
Weg.
Editorial costs also increased due to the increase in the number of titles
published by Media24.
Book
publishing costs increased by 14.9% to Rand 620.6 million due to strong growth
in sales volumes of school text books during fiscal 2006.
Costs
to
provide tuition services increased by Rand 19.4 million, or 7.5%, to Rand 277.0
million in fiscal 2006 mainly due to increased regulatory costs associated
with
accrediting institutions as well as registration of courses.
Selling,
general and administrative costs increased by Rand 637.2 million, or 19.2%,
from
Rand 3,311.5 million in fiscal 2005 to Rand 3,948.7 million in fiscal 2006.
This
increase was primarily due to staff costs which increased by Rand 459.6 million
or 18.5% from Rand 2,487.5 million in fiscal 2005 to Rand 2,947.1 million in
fiscal 2006. The depreciation in the value of
the
average Rand exchange rate against the U.S. dollar further increased the costs
denominated in U.S. dollar when translated into Rand.
Depreciation,
amortization and impairment charges increased in the aggregate by Rand 129.5
million, or 20.6%, to Rand 758.9 million in fiscal 2006 from Rand 629.4 million
in fiscal 2005.
Depreciation
expense increased by Rand 40.0 million from Rand 555.5 million to Rand 595.5
million. Amortization expense for other intangible assets increased by Rand
38.3
million to Rand 95.7 million for fiscal 2006 from Rand 57.4 million in fiscal
2005. This is mainly as a result of the reassessment of the carrying values
of
individual items of property, plant and equipment and other intangible assets
in
terms of the requirements of IFRS 1 at the date of transition to IFRS. These
adjustments have changed the previously recorded carrying values and subsequent
depreciation and amortization charges for fiscal 2006 and fiscal 2005. A new
printing plant was also commissioned during fiscal 2006.
Naspers
recognized impairment losses on goodwill of Rand 69.0 million during fiscal
2006
compared to Rand 8.0 million during fiscal 2005. The impairment charges were
due
to the fact that the recoverable amounts of certain cash-generating units that
were based on value-in-use discounted cash flow calculations were less than
their carrying amounts. The goodwill impairments related to the electronic
media
- pay television segment (Rand 9.1 million) and the print media - books (Rand
4.0 million) and education segments (Rand 55.9 million). Similar impairments
relating to other intangible assets amounted to Rand 0.8 million during fiscal
2006 compared to Rand 5.0 million for fiscal 2005.
Operating
profit
An
operating profit of Rand 3,004.0 million was achieved during fiscal 2006
compared to Rand 2,468.9 million for fiscal 2005. This is a result of the
combined effect of the foregoing factors.
Electronic
Media—Pay-television.
Operating profit amounted to Rand 2,785.4 million in fiscal 2006, which
represented an increase of Rand 665.5 million, or 31.4%, over operating profit
of Rand 2,119.9 million in fiscal 2005. This increase is primarily a result
of
the continued growth in the digital subscriber base together with price
increases and cost reduction initiatives. The pay-television platform in the
Mediterranean more than doubled operating profits from Rand 169.6 million in
fiscal 2005 to an operating profit of Rand 344.2 million in fiscal 2006.
Electronic
Media—Internet.
Operating losses increased by Rand 85.0 million, or 125.7%, from Rand 67.6
million in fiscal 2005 to Rand 152.6 million for fiscal 2006. The internet
segmental results for the current year exclude Tencent as this investment is
now
equity accounted. The prior year figures included Tencent’s operations for three
months to June 2004. The increase in operating losses can mostly be attributed
to the development of the internet portal business in Thailand and Sportscn
in
China. The internet operation in South Africa remains profitable.
Electronic
Media—Conditional access.
Operating losses decreased by Rand 46.1 million from Rand 46.5 million during
fiscal 2005 to Rand 0.4 million in fiscal 2006, mainly due to record shipments
reported of approximately six million units.
Electronic
Media—Entriq. Operating
losses increased by Rand 76.0 million from Rand 89.2 million during fiscal
2005
to Rand 165.2 million in fiscal 2006, mainly due to extensive investment in
content protection, subscriber management technologies and application service
provider services for broadband markets. Substantial investment is expected
in
the short term to consolidate on the progress that Entriq has achieved in its
technologies.
Print
Media—Newspapers, Magazines and Printing. Operating
profit increased from Rand 528.2 million for fiscal 2005 to Rand 612.1 million
in fiscal 2006, which represents a Rand 83.9 million, or 15.9%, increase. This
increase in profitability was mainly due to strong growth in advertising revenue
generated by the newspaper and magazine divisions and increased profitability
in
the printing division.
Print
Media—Books.
Operating profits increased by Rand 14.0 million from Rand 52.8 million in
fiscal 2005 to Rand 66.8 million in fiscal 2006. The increase in profitability
was mainly due to improved trading conditions experienced in the school text
book market.
Print
Media—Education.
Operating profit of Rand 22.6 million for fiscal 2005 decreased to an operating
loss of Rand 83.8 million for the year ended March 31, 2006, mainly as a result
of goodwill impairment of Rand 55.9 million and the repositioning of
Damelin.
Finance
costs, net
Net
finance costs include interest paid on borrowings and finance leases, interest
received on cash balances, preference dividends received, profits and losses
on
foreign exchange transactions and fair value adjustments on derivative
instruments (mainly foreign exchange contracts). Net finance costs decreased
by
Rand 205.6 million, or 94.7%, to Rand 11.4 million during fiscal 2006 from
Rand
217.0 million in fiscal 2005.
This
decrease is primarily a result of the decrease in fair value adjustments on
derivative financial instruments and the increase in interest received on cash
balances. Naspers uses foreign exchange contracts to hedge mainly U.S. dollar
and Euro programming, satellite leases and paper costs of its South African
businesses. Where foreign exchange contracts entered into by Naspers do not
meet
the criteria for hedge accounting as stipulated by IAS39 under IFRS, changes
in
the fair value are calculated at each balance sheet date and any changes in
their fair values are accounted for through the income statement. These fair
value adjustments relating to foreign exchange contracts amounted to a loss
of
Rand 57.7 million in fiscal 2006 compared to a loss of Rand 167.7 million in
the
year ended March 31, 2005. The reason for the decrease is mainly due to the
reduction in the volatility of the Rand exchange rate against the U.S. dollar
during fiscal 2006. The average exchange rate between the Rand and the U.S.
dollar amounted to 6.392, 6.215 and 7.161 for the fiscal years 2006, 2005 and
2004, respectively, therefore reducing the change in the fair value of the
foreign exchange contracts year to year. The level of foreign exchange contracts
entered into by Naspers also decreased during fiscal 2006 from U.S. dollar
159.5
million as at March 31, 2005 to U.S. dollar 150.4 million as at March 31, 2006.
This will continue to decrease in fiscal 2007 as certain of the major
programming contracts are now Rand denominated. The profit relating to the
fair
value adjustments for embedded derivatives within the group’s programming
contracts increased from a profit of Rand 58.8 million in fiscal 2005 to a
profit of Rand 63.9 million in fiscal 2006, due to the reduction in the
volatility of the Rand exchange rate against most major currencies like the
U.S.
dollar and the Euro. Overall the impact of fair value adjustments on derivative
instruments changed to a profit of Rand 6.2 million in fiscal 2006 from a loss
of Rand 108.9 million in fiscal 2005.
Included
in finance costs are also net profits on foreign exchange transactions relating
to the capitalization of finance leases in the electronic media—pay-television
segment of Rand 49.2 million. Naspers capitalizes lease obligations where they
meet certain capitalization criteria including where the term of the lease
is
greater than 75% of the leased asset’s useful life. The result of this
accounting treatment is that a liability equal to the present value of the
future lease payments is stated on the balance sheet, and at the inception
of
the lease an equivalent asset is stated on the balance sheet and depreciated
over its estimated useful life. These lease liabilities are mostly denominated
in U.S. dollars or Euro. Naspers accounted for a net profit on foreign exchange
transactions relating to such transponder leases, due to the fact that the
exchange losses relating to lease payments made during fiscal 2006 were less
than the aggregate unrealized translation exchange gains on the capital
outstanding over the period. Net foreign exchange differences increased by
Rand
23.9 million from a profit of Rand 2.1 million during fiscal 2005 to a loss
of
Rand 21.8 million in fiscal 2006. This increase in foreign exchange losses
was
mainly due to the fact that the Rand depreciated against the U.S. dollar during
fiscal 2006 and appreciated against the U.S. dollar in fiscal 2005.
Interest
paid decreased from Rand 286.3 million in fiscal 2005 to Rand 275.3 million
in
fiscal 2006. This decrease was mainly due to lower levels of borrowings by
the
South African operations. Imputed interest charges on the capitalized finance
lease liabilities increased by Rand 3.3 million, due to the depreciation in
value of the Rand against the U.S. dollar during fiscal 2006 compared to fiscal
2005. The average level of bank overdrafts and interest-bearing loans during
fiscal 2006 was also lower than in fiscal 2005.
Interest
received increased by Rand 103.4 million from Rand 176.1 million for fiscal
2005
to Rand 279.5 million in fiscal 2006, mainly due to higher average cash balances
during fiscal 2006.
Share
of equity accounted results
Naspers’
equity results in associated companies increased by Rand 62.7 million to Rand
151.3 million during fiscal 2006 from Rand 88.6 million in fiscal 2005. The
increase relates mainly to the change in accounting for the group’s interest in
Tencent. Naspers proportionately consolidated its interest in Tencent until
June
16, 2004, the date of Tencent’s IPO when the group’s ownership percentage was
diluted, and subsequently equity accounted for its stake. Tencent contributed
Rand 150.2 million to the equity accounted results during fiscal 2006.
Profit/(loss)
on sale of investments and dilution profits
Profit
on
sale of investments consists mainly of the sale of the group’s investment in
Computicket that realized a profit of Rand 56.7 million. There were no
transactions of a dilutive nature during fiscal 2006.
Taxation
Income
tax increased by Rand 678.3 million to Rand 934.8 million during fiscal 2006
from Rand 256.5 million in fiscal 2005. The increase relates partly to the
increased profitability of the group and partly to the creation of deferred
taxation assets in fiscal 2005 of Rand 469.6 million which reduced the taxation
charge in that year. During fiscal 2005, due to improved profitability and
expected future taxable profit, valuation allowances against deferred taxation
assets of Rand 412.9 million and Rand 56.7 million relating to the
pay-television business in Greece and the South African book publishing business
respectively, were released against income. The valuation allowance against
deferred taxation assets decreased by Rand 191.7 million from Rand 919.1 million
in fiscal 2005 to Rand 727.4 million in fiscal 2006 mainly due to the release
of
the valuation allowance related to UBC in Thailand which was sold during fiscal
2006. Secondary taxation on companies decreased from Rand 37.8 million in fiscal
2005 to Rand 21.2 million in fiscal 2006, due to the increase in dividend income
for the group.
Minority
interest
Minority
interest was a charge of Rand 157.2 million for the year ended March 31,
2006 compared to a charge of Rand 116.9 million in fiscal 2005. The increase
in
the minority interest charge relates mainly to the Sub-Saharan pay-television
businesses and the South African print media operations.
Discontinued
operations
During
fiscal 2006, the group sold its entire interest in UBC and MKSC to True Corp.
for a cash consideration of approximately Rand 999.3 million. A profit on
discontinuance of operations of Rand 1,032.1 million was realized on the
transaction. The results of these operations were previously included in the
pay-television and internet segments of the group. Total profit from
discontinuing operations during fiscal 2006 amounted to Rand 31.8 million and
Rand 50.0 million in fiscal 2005.
Net
profit
As
a
result of the foregoing factors, Naspers recorded a net profit of Rand 3,190.2
million during fiscal 2006, compared with a profit of Rand 2,384.8 million
for
fiscal 2005.
5.B.
Liquidity and Capital Resources
Naspers’
business and growth strategy has in the past required substantial capital for
acquisitions, expansion of services, the financing of operating losses and
working capital in the internet businesses and technology businesses. The
requirement for externally generated funding has reduced substantially over
fiscal 2006 as the profitability and cash generation of the group’s
subscriber-based businesses increased.
Naspers
relies upon distributions from its subsidiaries, associated companies, joint
ventures and other investments to generate the funds necessary to meet the
obligations and other cash flow requirements of the combined group. The ability
of Naspers to utilize the cash flows from some of its subsidiaries, joint
ventures and associated companies is subject, in South Africa and other
countries, to foreign investment and exchange control laws and also the
availability of a sufficient quantity of foreign exchange. In particular, the
cash flow generated by the Naspers group’s South African pay-television and
other businesses cannot currently be utilized outside South Africa without
exchange control approval. While such restrictions have been liberalized in
recent years, the ability of a South African company to raise and deploy capital
outside South Africa remains subject to restrictions.
The
operations of Naspers were funded in various ways in past fiscal years. The
internet and technology businesses were primarily funded by cash generated
by
the pay-television businesses, and some debt financing. Media24 used its balance
sheet and its capacity to generate cash to incur debt to finance its property,
plant and equipment refurbishment and certain acquisitions. Via Afrika and
Educor used their respective balance sheets to fund operations via debt. Naspers
has also provided funding to Educor and Via Afrika, to assist those businesses
through the seasonal nature of their operations and the resulting inconsistent
cash flows.
Naspers
and its subsidiaries did not undertake any major capital raisings in the past
two fiscal years. As of March 31, 2006, Naspers had total debt (including
finance leases and program and film broadcasting rights) of approximately Rand
4.42 billion, or U.S. $598.9 million. Naspers’ ratio of debt to equity as of
that date was 0.61.
Naspers’
general business approach has been to acquire developing businesses and inject
cash into those businesses sufficient to meet the cash needs of the business
until it can, within a predictable period of time, become self-funding. This
general approach was especially evident during fiscal 2002 in the technology
and
internet businesses. The focus since the 2003 fiscal year was more on increasing
profitability and cash generation and with less of an emphasis on developing
new
business initiatives. The focus on increased profitability and cash flow
generation will continue in the foreseeable future, although Naspers will
continue to actively evaluate potential growth opportunities within its areas
of
expertise. Naspers may grow its business in the future through the acquisition
of developing companies and making equity investments in developing companies.
Naspers anticipates that it may fund future acquisitions and investments through
issuances of debt or equity and available cash resources.
The
Naspers group’s print media business is currently self-funding. The group’s book
publishing and private education businesses are expected to only require modest
levels of working capital funding from Media24 due to the seasonality of those
businesses. The pay-television businesses in South Africa and Sub-Saharan Africa
are currently self-funding. The pay-television businesses in Greece returned
to
profitability in fiscal 2005 and generated positive free cash flow for the
first
time. The pay-television business in Greece should not require any additional
funding in the next year based on its current business plans. The technology
businesses will require additional funding during fiscal 2007, due to increased
development activities within Irdeto and Entriq. The internet businesses in
Thailand, Africa and China continued to require funding in fiscal 2006 and
are
expected to require further funding during fiscal 2007. Tencent completed an
IPO
during June 2004, is profitable and generates free cash flow and will therefore
not require any additional funding in the foreseeable future.
The
Naspers group’s net cash from operating activities increased by Rand 798.5
million to Rand 3,166.4 million for fiscal 2006 from Rand 2,367.9 million for
fiscal 2005. The improvement relates mostly to the increased cash generated
by
the pay-television businesses in South Africa, Sub-Saharan Africa and Greece
and
the print media businesses in South Africa.
Cash
from
operating activities (after working capital) increased to Rand 4,019.9 million
in fiscal 2006 from Rand 3,051.3 million for fiscal 2005. The increase was
driven by the increase in profitability of the pay-television and print media
businesses as well as a decrease in the investment in working capital of Rand
336.5 million during fiscal 2006 when compared to fiscal 2005. The movement
in
working capital items like accounts receivable, inventory, program and film
rights and accounts payable can have a significant influence on the level of
cash generated from operations during a fiscal year.
Operating
cash flows in the group are mainly derived from underlying subscription
revenues, circulation, distribution and printing revenues and advertising
revenues. Such subscription revenues represent 52.4% of the group’s revenue.
Because the group currently has a growing level of subscribers and low churn
in
its pay-television and internet businesses, it provides a solid and predictable
base for future operating cash flows. The overall circulation levels of
newspapers and magazines in South Africa have been stable, thus providing solid
cash flows from circulation, printing and distribution activities (11.5% of
revenue). Advertising revenue is a much more volatile source of operating cash
flow, as it is generally much more sensitive to changes in economic conditions.
Advertising revenue, however, only amounts to 15.9% of the group’s total
revenue, and therefore, the group’s exposure to advertising revenue volatility
is somewhat limited.
Net
finance costs paid during the year ended March 31, 2006 were reduced to Rand
78.5 million, compared to Rand 214.9 million in the financial year ended March
31, 2005. The reduction was mostly due to increased levels of cash on hand
in
the group which increased by Rand 2,741.7 million from March 31, 2005 to March
31, 2006. Interest received on loans and bank balances increased by Rand 103.4
million from fiscal 2005 to fiscal 2006 and interest paid decreased by Rand
11.0
million over the same period. Bank overdrafts were reduced by Rand 68.6 million
over the same period.
Dividends
paid by Naspers to its shareholders increased to Rand 208.9 million in fiscal
2006 from Rand 105.6 million in fiscal 2005. This was due to the increase in
the
dividend per Class N ordinary share to 70 cents in fiscal 2006 from 38 cents
in
the previous year. Dividends paid by subsidiaries to minority shareholders
in
the group increased in fiscal 2006 to Rand 127.0 million from Rand 98.4 million
in fiscal 2005. The shareholders of Naspers approved a dividend of 120 cents
per
Class N ordinary share and 24 cents per Class A ordinary share at the annual
general meeting on August 25, 2006. The dividend payable to Naspers shareholders
during fiscal 2007 is therefore expected to be approximately Rand 378.3
million.
Taxation
paid during fiscal 2006 increased by Rand 347.2 million to Rand 821.7 million.
This increase in tax paid is due to the increased profitability of the
pay-television and print media segments.
In
the
year ended March 31, 2006, net cash used in investing activities amounted to
Rand 335.4 million compared to Rand 877.1 million in the corresponding period
ended March 31, 2005. The decrease of Rand 541.7 million is due mainly to the
net effect of an increase in capital spending of Rand 232.1 million less
proceeds from the sale of UBC and MKSC of Rand 751.8 million. Naspers engaged
in
the following major cash investing activities during fiscal 2006:
Naspers
invested Rand 809.7 million on property, plant and equipment during fiscal
2006,
mainly relating to the acquisition of printing equipment in the print media
-
newspapers, magazines and printing segment (Rand 587.1 million) and computer
and
other equipment in the electronic media - pay-television segment (Rand 220.9
million). Currently budgeted capital expenditure (including commitments under
contracts already in place at March 31, 2006 of Rand 445.4 million) amounts
to
Rand 1,094.8 million for the year ended March 31, 2007. The capital expenditure
relates mainly to increasing the printing capacity and the establishment of
new
printing facilities in South Africa and elsewhere on the continent. Naspers
does
not expect to incur any other significant additional capital expenditures,
other
than those already budgeted for, during the next twelve months or the
foreseeable period thereafter based on its current business plans.
An
amount
of Rand 180 million was used to acquire an additional 7.5% interest in Paarl
Media Holdings (Proprietary) Limited. The group also used approximately Rand
44.2 million to acquire 100% of the equity of Orbicom (Proprietary) Limited
during fiscal 2006.
The
group
disposed of its investment in Computicket (Proprietary) Limited for a cash
consideration of approximately Rand 69.0 million during fiscal 2006. The group
also sold its entire interest in UBC and MKSC during January 2006 for a cash
consideration of approximately Rand 999.3 million.
Included
in the investing activities cash flows, is an outflow of Rand 106.8 million
relating to the acquisition of certain intangibles assets during fiscal 2006
and
a cash inflow of Rand 46.0 million from the sale of certain items of property,
plant and equipment.
Net
cash
from financing activities was Rand 24.5 million for the financial year ended
March 31, 2006 compared to net cash utilized of Rand 513.7 million in fiscal
2005. The repayment of capitalized finance leases, mostly satellite lease
liabilities, amounted to Rand 268.1 million for the year ended March 31, 2006,
compared to Rand 369.0 million in fiscal 2005. Naspers received approximately
Rand 167.0 million during fiscal 2006 from the sale of Naspers Class N ordinary
shares by its equity compensation plans to participants of the plans. Naspers
raised approximately Rand 460.9 million through long-term debt during fiscal
2006 compared to Rand 29.7 million in fiscal 2005.
At
March
31, 2006 and March 31, 2005, Naspers had combined cash balances of Rand 6,775.5
million and Rand 4,033.8 million, respectively, and available unused overdraft
borrowing facilities of Rand 1,806.7 million as at March 31, 2006. Some of
these
cash balances are restricted from immediate use according to agreements with
banks and other financial institutions. A total amount of Rand 237.8 million
was
restricted at March 31, 2006, compared to Rand 58.1 million at the same time
during fiscal 2005. Bank overdrafts and short-term loans decreased from Rand
433.3 million at the end of fiscal 2005 to Rand 364.8 million at March 31,
2006.
Naspers is further restricted by exchange control regulations in various
countries that it operates in, which can prohibit it from transferring its
cash
from one country to another. Most of the bank overdraft facilities and call
loans in the group are subject to annual review and renewal by the various
banks
and financial institutions. Naspers expects that all of its current bank
overdraft facilities will be renewed.
In
May
2006, Naspers acquired a 30% interest in Abril for a cash consideration of
Rand
2,557.3 million. The acquisition was funded from existing cash resources.
Although
Naspers anticipates continuing to use further amounts of cash in connection
with
the operation of some of its businesses, Naspers believes that its cash and
cash
equivalents, and the expected cash inflows and other funding described above,
will be sufficient to satisfy its expected needs for working capital and capital
expenditure through March 31, 2007. In addition, several of Naspers’
subsidiaries have working capital bank facilities. Naspers anticipates funding
its future operations and obligations through a combination of cash on hand,
internally generated cash flows (primarily from the African pay-television
and
newspapers, magazines and printing businesses), the utilization of existing
credit facilities and potential future equity raisings. Naspers’ liquidity
resources are subject to change as market and general economic conditions
change. Increases in liquidity could result from an increase in cash flows
from
operations or from a divestiture of assets. Decreases in liquidity could result
from weaker than expected cash flow from operations caused by lower subscriber
numbers and lower demand for the services Naspers offers, from exchange rate
fluctuations which have been and are expected to be significant, or from lower
prices for its products.
In
addition, any potential acquisitions in which all or a portion of the
consideration would be payable in cash could reduce Naspers’ liquidity
resources.
5.C. Research
and Development
Naspers
expenses research and development costs in the financial period during which
they are incurred. The amounts spent by Naspers on research and development
do
not materially affect Naspers’ results of operations. The research and
development costs amounted to Rand 54.9 million and Rand 10.1 million during
fiscal 2006 and 2005, respectively.
5.D. Trend
Information
The
growth rate in subscribers to Naspers’ television platforms has slowed over the
past couple of years. Total subscribers increased from 1,847,764 at March 31,
2005 to 2,010,019 at March 31, 2006. The number of subscribers to Naspers’
analog service continues to decrease. However, migration of subscribers from
Naspers’ analog service to its digital service has increased the number of
subscribers to Naspers’ digital platforms. Digital subscriber numbers now
significantly exceed analog subscriber numbers. The Naspers group derives a
higher revenue and profit margin per subscriber from digital subscribers than
from analog subscribers. Accordingly, increasing the number of digital
subscribers as a proportion of total subscribers improves the profitability
of
Naspers’ pay-television operations. However, the migration rate from analog to
digital service has slowed and will continue to slow as fewer subscribers remain
on the analog service. This may cause the digital subscriber base to grow at
a
slower rate than it has in the past.
In
South
Africa the total pay-television subscriber base has grown from 1,060,202
subscribers at March 31, 2001 to 1,250,533 subscribers at March 31, 2006, which
represents annual compounded growth of 3.36% over the past five years. During
this period the digital subscriber base has increased from 502,198 subscribers
at March 31, 2001 to 1,033,093 subscribers at March 31, 2006, growing at an
average growth rate of 15.5%. The analog subscriber base has decreased over
this
period from 558,004 subscribers to 217,440 subscribers in March 31, 2006. This
decrease has been the result of the migration from the analog to the digital
service.
The
Sub-Saharan Africa pay-television business also tends to be somewhat seasonal,
with a decrease in subscribers during the winter season when the European
football season ends. Once the European football season starts again in August,
there is an increase in the subscriber base as subscribers reconnect. During
fiscal 2006, the digital subscriber base has increased from 333,781 subscribers
at March 31, 2005 to 384,216 subscribers at March 31, 2006.
In
the
Mediterranean region, the broadcast television business tends to be seasonal,
with a decrease in viewership occurring in the summer, when Greek viewers
traditionally enjoy outdoor activities and travel, and when the football and
basketball seasons have ended. The analog subscriber base declined by 24.0%
to
71,994 households in the period between March 31, 2005 and March 31, 2006.
Nova
(the digital television service) maintained its leading position in the region
by adding 30,224 digital subscribers, or 14.4%, to end fiscal 2006 with 239,536
subscribers. The rate of increase in the digital subscribers is slowing as
the
digital penetration rate increases in the Greece market.
Political
and regulatory pressures are making it increasingly difficult to maintain
exclusive rights to sports programming.
Advertising
revenues from newspapers and magazines should remain robust if the strong
performance of the South African economy continues. Advertising revenues from
newspapers have increased over the last fiscal year from Rand 1,026.7 million
to
Rand 1,265.0 million. This growth represents an annual growth rate of 23.2%.
Similarly the advertising revenue from magazines has increased over the same
period from Rand 554.4 million to Rand 633.0 million, a growth of 14.2% per
annum. Naspers does not expect its advertising revenue to be able to maintain
these growth rates during fiscal 2007. Advertising revenues from television
increased by an exceptional 23.4% during fiscal 2006 to Rand 539.6 million,
which contributed to the overall increase in advertising revenue. Television
advertising revenue is expected to remain stable in the foreseeable future,
but
it is unlikely that a similar increase will be experienced in fiscal 2007.
Naspers does expect some growth in internet advertising in the foreseeable
future.
Although
the growth in e-commerce revenues experienced by the Naspers group’s internet
platforms is encouraging, total e-commerce revenues remain low. Naspers expects
e-commerce revenues to remain low until user acceptance of e-commerce
initiatives accelerate.
Irdeto
increased its revenues from Rand 255.3 million in fiscal 2005 to Rand 352.3
million in fiscal 2006. Overall volumes were higher in both smartcard shipments
and new customer growth. Naspers expects market conditions to remain highly
competitive in the near future with continued pressure on technology margins
and
revenues.
According
to long term data from the Audited Bureau for Circulation, or “ABC”, the
newspaper market in South Africa is relatively mature and stable. Until the
late
1980’s when Media24 acquired City
Press,
the
Sunday newspaper title, Media24’s portfolio consisted mainly of Afrikaans
titles. Over the last few years, Media24’s product mix has been broadened by
strategic acquisitions and new launches and the English portion has increased
with the launch and growth of the English language daily tabloid, the
Daily
Sun.
A
number
of titles have also been added to Media24’s magazine portfolio over the last
couple of years. Media24 added these titles to its portfolio due to specific
trends in the international magazine market that also were evident in South
Africa. There has been a marked worldwide decline in the circulation levels
of
general interest, broad based magazines, and a fragmentation of the magazine
market. The number of consumer titles available in South Africa has more than
doubled over this period to in excess of 400 titles and an increasing number
of
international titles have become available in South Africa.
Media24
sold more than 900,000 copies of general interest magazines (Huisgenoot,
You
and
Drum)
per
week during the July-December 1996 ABC period. That circulation has declined
to
657,512 in the April-June 2006 ABC period.
To
compensate for the decline in the circulation of general interest magazines,
Media24 started a number of international titles in South Africa, some in
partnership with other companies, or on a license or set fee basis. These
include magazines such as Men’s
Health,
FHM,
Golf
Digest,
Cosmopolitan,
Shape,
Runner’s
World,
heat,
Seventeen and
Bicycling
SA.
Book
publishing revenues were under pressure during fiscal 2003, but resumed growth
during fiscal 2005 and 2006. However, the Naspers group is not expecting
significant growth in the foreseeable future, mainly due to the fact that the
market is quite mature in South Africa and highly competitive.
Private
education revenues have remained fairly steady over the last couple of fiscal
years. Naspers expects at best moderate growth in the future as student numbers
are currently under pressure. Course fees should grow in line with South African
inflation.
5.E. Off-Balance
Sheet Arrangements
Naspers
has no significant off-balance sheet arrangements.
5.F.
Tabular Disclosure of Contractual
Obligations
The
table
below sets forth Naspers’ known contractual obligations as of March 31,
2006.
|
|
|
|
Payments
due by period
|
|
Contractual
obligations
|
|
Note
to consolidated financial statements
|
|
Total
|
|
Less
than
1
year
|
|
1-3
years
|
|
3-5
years
|
|
More
than
5 years
|
|
|
|
|
|
|
(Rand
in millions)
|
Long-Term
Debt Obligations (1)
|
|
|
19
|
|
|
2,323
|
|
|
1,412
|
|
|
653
|
|
|
178
|
|
|
80
|
|
Capital
(Finance) Lease Obligations(2)
|
|
|
19
|
|
|
2,327
|
|
|
407
|
|
|
757
|
|
|
595
|
|
|
568
|
|
Operating
Lease Obligations(3)
|
|
|
22(e)
|
|
|
359
|
|
|
135
|
|
|
165
|
|
|
44
|
|
|
15
|
|
Purchase
Obligations(4)
|
|
|
22(a)
- (d)
|
|
|
2,501
|
|
|
1,605
|
|
|
661
|
|
|
220
|
|
|
15
|
|
Foreign
exchange contracts
|
|
|
36
|
|
|
1,419
|
|
|
847
|
|
|
572
|
|
|
—
|
|
|
—
|
|
Other
Long-Term Liabilities Reflected on the Company’s Balance Sheet under
IFRS(5)
|
|
|
18
|
|
|
162
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
154
|
|
Total
|
|
|
|
|
|
9,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Long-term
debt obligations include interest bearing loans of Rand 1,053.3 million,
program and film rights obligations of Rand 636.8 million and non-interest
bearing loans of Rand 633.2 million. It excludes bank overdrafts
of Rand
364.8 million. Interest-bearing loans have been disclosed net of
preference share investments and the right to subscription shares
as per
Naspers’ structured finance
arrangements.
|
(2)
|
Capitalized
finance leases include lease obligations relating to land and buildings,
transmission equipment and satellites and vehicles, computers and
office
equipment.
|
(3)
|
Operating
lease obligations includes future operating lease payments relating
to
land and buildings, satellites and transponders and other
equipment.
|
(4)
|
Purchase
obligations include committed future expenditure under contracts
entered
into by the group. These include contracts for capital expenditure,
program and film rights, set-top boxes and various service agreements.
|
(5)
|
Other
long-term liabilities reflected on the balance sheet include
post-retirement medical benefit
obligations.
|
At
March
31, 2006 Naspers had gross long-term loans and liabilities of Rand 4,055.1
million (2005: Rand 3,193.2 million). Of these obligations, Rand 1,731.7 million
(2005: Rand 1,983.1 million) consist of finance lease commitments, with Rand
1,507.9 million (2005: Rand 1,748.5 million) relating to transmission equipment,
including satellites, transponders and transmitters, used by pay-television
operations in Africa and the Mediterranean. The transmission equipment finance
lease obligation decreased by Rand 240.6 million mainly due to the translation
of the U.S. dollar and Euro denominated finance lease commitments to Rand and
the repayments made during fiscal 2006. At March 31, 2006 these finance lease
commitments were translated at Rand 6.15 (2005: Rand 6.21) to the U.S. dollar
and Rand 7.46 (2005: 8.05) to the Euro. These leases have fixed implicit
interest rates.
Other
long-term debt increased to Rand 2,323.3 million as at March 31, 2006,
consisting of interest bearing liabilities of Rand 1,053.3 million (2005: Rand
636.2 million), non-interest bearing liabilities of Rand 633.2 million (2005:
Rand 99.7 million), concession liability of nil (2005: Rand 15.6 million) and
program and film rights of Rand 636.8 million (2005: Rand 458.6 million). The
increase in non-interest bearing liabilities is due mainly to the NetMed put
option to purchase an additional interest from the minority shareholders (Rand
593.1 million).
Included
in the interest bearing liabilities of the Naspers group are certain structured
finance arrangements with a total gross value of Rand 305.8 million (2005:
Rand
469.8 million). Since 1997, the Naspers group has replaced a significant amount
of infrastructure, especially in its print media segment. The financing for
the
acquisition of various items of printing equipment and buildings has been
completed by raising external debt from banks. The Naspers group has however
structured these financing arrangements to provide a beneficial after-tax
interest cost, as well as repayment terms that will allow the Naspers group
to
match future expected cash flows from these assets with such repayment terms.
All the structured finance liabilities of the Naspers group have been reflected
on Naspers’ balance sheet under both IFRS and U.S. GAAP. For IFRS purposes,
certain assets have been presented net against the debt incurred to acquire
the
asset.
The
South
African Revenue Service (“SARS”) has adopted an aggressive approach to
structured finance arrangements. The deductions and allowances that Naspers
has
taken in the past and may anticipate taking in the future in connection with
some or all of these structured finance transactions may not be allowed by
SARS.
Any liability Naspers may incur as a result of the disallowance of such
deductions or allowance claimed by Naspers is not expected to have a material
adverse effect on the financial position of Naspers.
Media24
entered into a Rand 116.5 million syndicated loan agreement with CommerzBank
and
Futuregrowth in January 2004. This loan was utilized to reduce bank overdrafts
as part of Media24’s drive to restructure its short-term debt profile. The loan
is for a three year term and is repayable in 12 equal quarterly installments.
The loan bears interest at a fixed rate of 10.5%.
Naspers
Limited entered into a Rand 110.0 million loan agreement with FirstRand Bank
Limited during April 2003. The proceeds of this loan were utilized to fund
the
repayment of bank overdrafts of Educor. The loan was a three year amortizing
loan and was repaid during fiscal 2006.
MultiChoice
Africa (Proprietary) Limited, the operating company for the South African
pay-television businesses, entered into a loan agreement with Investec Bank
Limited on April 16, 2004. The loan facility is for an amount of Rand 400
million as a general purpose facility. The loan is repayable in six equal
monthly installments, starting September 30, 2004 until March 31, 2008. The
company has pledged its 30.0% interest in M-Net and SuperSport as security
against the loan facility. The facility bears interest at the Johannesburg
inter-bank agreed rate (“JIBAR”) plus 2.8% and is subject to certain debt
covenants. The loan has been fully settled subsequent to March 31, 2006 from
available cash resources.
MultiChoice
Africa Limited, the operating company for the Sub-Saharan pay-television
businesses, entered into a loan agreement with ABSA Bank Limited on March 4,
2005. The agreement is for a revolving loan facility in an initial maximum
amount of US$50 million that may be utilized by the Naspers group to fund the
acquisition costs of businesses, interests in companies, intellectual
property rights and rights to technology. If the Naspers group uses the facility
to acquire businesses then it may
also
utilize the facility to fund the general corporate purposes of such businesses.
The amount that may be drawn down under the facility reduces by approximately
US$7 million every six months starting on March 4, 2007, until March 3,
2010 (when the then reduced facility ceases to be available). MultiChoice
Africa Limited is required to repay any utilization of the facility in excess
of
the reduced level at the start of each such six month period. The
Naspers group has pledged 185,000,000 shares in Tencent Holdings Limited as
security for the loan facility. The facility bears interest at the London
Interbank Offer Rate (“LIBOR”) plus 2% and is subject to certain undertakings
concerning debt and interest cover.
Liabilities
in respect of program and film broadcasting rights increased from Rand 458.6
million in fiscal 2005 to Rand 636.8 million at March 31, 2006. Program and
film
broadcasting rights are non-interest bearing liabilities. In addition, Naspers
had future commitments relating to program and film broadcasting rights of
Rand
1,425.9 million at March 31, 2006. Although these commitments arise out of
contracts entered into by the Naspers group, any future payments under those
contracts are conditional on the occurrence of certain future events.
Naspers
utilized overdraft of Rand 364.8 million at March 31, 2006, compared to Rand
433.3 million in fiscal 2005. As part of the process of managing the Naspers
group’s mix of fixed and floating rate borrowings, the interest rate
characteristics of new borrowings and the refinancing of existing borrowings
are
considered based on expected movements in interest rates. Where appropriate,
the
group uses derivative instruments, such as interest rate swap agreements, for
hedging purposes. As at March 31, 2006, 50.5% of the long-term liabilities
of
Rand 4,055.1 million had fixed interest rate profiles, 18.2% of these
liabilities were floating and 31.3% of these liabilities were interest-free.
The
Naspers group had undrawn banking facilities of Rand 1,806.7 million as at
March
31, 2006. Facilities which are on-call represented Rand 252.2 million and the
balance of these undrawn facilities of Rand 1,554.5 million expire within one
year. These facilities are in most instances subject to review and renewal
within annual cycles. The Naspers group is in constant discussions with various
financial institutions concerning changes to the terms of its existing
facilities and future funding requirements.
Acquisitions
and Dispositions
Year
ended March 31, 2006
On
April
1, 2005, Media24 acquired an additional interest of 7.5% in its subsidiary,
Paarl Media Holdings (Proprietary) Limited (“Paarl Media”), for a cash
consideration of Rand 180 million. This increased Media24’s effective financial
interest in Paarl Media to 92.11%. This transaction was accounted for as a
common control transaction, and the excess of the purchase consideration over
the net asset value was recognized in equity.
During
October 2005, Media24 disposed of its investment in Computicket (Proprietary)
Limited for a cash consideration of approximately Rand 69.0 million. A profit
on
sale of investments of Rand 56.7 million was realized on this transaction and
is
included in profit from continuing operations.
On
November 7, 2005, the Group publicly announced that it had entered into an
agreement pursuant to which it would sell its entire interest in UBC and MKSC
to
True Corp. for a cash consideration of approximately Rand 999.3 million. A
profit on the discontinuance of operations of Rand 1,032.2 million was realized
on the transaction. Details relating to this transaction are highlighted in
note
28 to the consolidated financial statements included elsewhere in this annual
report.
During
December 2005, MIH acquired 100% of the equity of Orbicom (Proprietary) Limited
(“Orbicom”) from MTN Group Limited (“MTN”) for a cash consideration of Rand 44.2
million. The total purchase consideration was allocated based upon an appraisal,
as follows: net assets (Rand 35.1 million) and goodwill (Rand 9.1 million).
During
February 2006, MIH QQ (BVI) Limited acquired a 25% interest in ChineseAll for
a
cash consideration of Rand 24.6 million. The total purchase consideration was
allocated based upon an appraisal, as follows: net assets (Rand 1.7 million)
and
goodwill (Rand 22.9 million).
In
April,
2006, Irdeto Eindhoven B.V. acquired the Cryptotec Conditional Access business
from Koninklijke Philips Electronics NV for a cash consideration of Rand 230.7
million. MIH subscribed for new shares equal to a 25% interest in Tixa Tech
Group Inc. for a cash consideration of Rand 60.5 million.
In
May,
2006, Naspers Limited acquired, through its offshore subsidiary MIH B.V., a
30%
stake in the leading Brazilian media company, Abril, for a cash consideration
of
Rand 2,557.3 million.
In
August
2006, MIH Print Media Holdings Limited (“MIH Print Media”) acquired a 20.2%
interest in Titan, a leading company in the field of Chinese sports publishing,
for a cash consideration of approximately Rand 114.5 million. It is anticipated
that through a further acquisition MIH Print Media’s shareholding will increase
to 37%.
In
September 2006, Naspers announced that, in furtherance of its empowerment
objectives, the group intends to implement a Broad-Based Black Economic
Empowerment ownership initiative in relation to Media24 Limited (“Media24”) and
MultiChoice South Africa (“MCSA”).
The
BEE
transactions are expected to result in the acquisition by qualifying Black
Persons and Black Groups of ordinary shares in the issued share capital of
Welkom Yizani Investments Limited (“Welkom Yizani”), which will hold ordinary
shares in the issued share capital of Media24 Holdings (Proprietary) Limited
(“Media24 Holdings”), the holding company of Media24 as well as Phuthuma Nathi
Investments Limited (“Phuthuma Nathi”), which will hold ordinary shares in the
issued share capital of MultiChoice South Africa Holdings (Proprietary) Limited
(“MCSA Holdings”), the holding company of MCSA.
Naspers
will sell up to 14.6 million shares in Media24 Holdings to Welkom Yizani for
a
consideration of approximately Rand 730 million. Welkom Yizani will fund the
acquisition through cash and the issuance of preference shares to Naspers.
MIHH
will sell up to 45 million shares in MCSA Holdings to Phuthuma Nathi, for a
consideration of approximately Rand 2,250 million. Phuthuma Nathi will fund
the
acquisition through cash and the issuance of preference shares to
MIHH.
The
empowerment transactions are subject to Welkom Yizani and Phuthuma Nathi
undertaking the public offers to the General Black Public to subscribe for
ordinary shares in Welkom Yizani and Phuthuma Nathi. The number of Media24
Holdings and MCSA Holdings ordinary shares to be acquired by Welkom Yizani
and
Phuthuma Nathi will depend on the amount raised by Welkom Yizani and Phuthuma
Nathi in terms of the public offers. The closing date for the public offers
is
expected to be at the end of October 2006. The public offers may not ultimately
be undertaken and the final terms of the empowerment transactions are subject
to
change.
Year
ended March 31, 2005
On
April
1, 2004, Media24 acquired the remaining 50% interest it did not already own
in
Alchemy Publishing (Proprietary) Limited for a cash consideration of Rand 4.6
million. The total purchase consideration of Rand 4.6 million was allocated
based upon an appraisal, as follows: net assets (Rand 0.7 million) and goodwill
(Rand 3.9 million).
On
April
13, 2004, Johnnic Communications Limited (“Johncom”) exercised a call option on
Naspers relating to 39.1% of the M-Net and SuperSport ordinary shares acquired
from minority shareholders in terms of Section 311 schemes of arrangement
concluded during March 2004. Naspers sold 33 686 280 M-Net and
SuperSport shares respectively for a total cash consideration of Rand 286.3
million resulting in a loss of Rand 27.9 million on disposal. Naspers retained
an effective 60.12% interest in both M-Net and SuperSport.
Tencent
completed an initial public offering of shares on June 16, 2004 and listed
on
the Hong Kong Stock Exchange. The Group’s interest in Tencent was diluted from
50% to approximately 36.1%. Tencent’s net proceeds were approximately HK$1.64
billion. The Group realized a dilution profit of Rand 358.4 million. The Group
exercised joint control over the operations of Tencent until June 16, 2004
and
therefore proportionately consolidated the results of Tencent until that date.
After the listing of Tencent the Group retained significant influence over
Tencent’s financial and operating policies, therefore Tencent was equity
accounted by the Group from June 16, 2004.
NetMed
announced on June 19, 2003, that, subject to the fulfilment of certain
conditions precedent, it had reached an agreement with Teletypos SA
(“Teletypos”), in terms of which Teletypos would exchange its interest in
MultiChoice Hellas SA for approximately €6.6 million in cash and a 12.5% equity
interest in NetMed. On September 22, 2004 the last regulatory approvals and
conditions precedent were fulfilled, therefore this transaction was accounted
for in the year ended March 31, 2005.
The
Group
realized a profit of Rand 215.7 million on the dilution of its interest in
NetMed. Goodwill of Rand 312.9 million was accounted for on the acquisition
of
the remaining interest that the Group did not already own in MultiChoice Hellas.
Beijing
Media Corporation Limited (“BMC”) completed an initial public offering of shares
on December 22, 2004 and listed on the Hong Kong Stock Exchange. Naspers
acquired an interest of 9.9% in BMC through its participation in the initial
public offering. The group paid Rand 273.2 million in cash for its interest.
The
Group has classified the investment as an available-for-sale investment and
is
carrying it on its balance sheet at fair value.
On
February 1, 2005, M-Web Holdings (Proprietary) Limited acquired from Tiscali
International BV its South African ISP business (“Tiscali”) for a purchase
consideration of Rand 309.3 million in cash. The purchase agreement stipulated
that any net asset value acquired greater than Rand 44.5 million would be
payable on a rand for rand basis to the seller. The group accordingly paid
an
additional Rand 11.7 million on closing of the transaction. This was recorded
as
an adjustment to goodwill. Included in the goodwill recognized are certain
intangible assets that cannot be individually separated and reliably measured
due to their nature, such as synergy benefits.
During
the 2005 financial year the company disposed of the balance of its investment
in
Liberty Media Corporation for a consideration of Rand 141.6 million. A profit
on
sale of investments of Rand 18.7 million was realized on this
transaction.
U.S.
GAAP Reconciliation
Financial
statements prepared in accordance with IFRS differ in certain material respects
from financial statements prepared in accordance with U.S. GAAP. The principal
differences between IFRS and U.S. GAAP relating to Naspers’ consolidated
financial statements for the periods presented include:
Business
combinations - Certain
differences between IFRS and U.S. GAAP in the application of the purchase method
of accounting for business combinations include:
· |
Date
of acquisition—
prior to December 20, 2002, the date on which earnings of an acquired
entity were included in the Group’s consolidated results of operations
could be based on an effective date identified in the acquisition
agreement when management control is ceded. Under US GAAP, when regulatory
approval or other substantive conditions precedent exist, the consummation
of the acquisition is not considered effective until such conditions
are
satisfied and irrevocable control of the company is obtained or
consideration is exchanged.
|
· |
Value
of purchase consideration—
previously,
the value of the purchase consideration was determined based on the
market
or fair value of the shares issued or cash paid on the date the
transaction was consummated, normally the date the shares were exchanged
or cash was paid. The purchase consideration did not include the
fair
value of options issued to replace vested options of the acquired
company.
Under US GAAP, the value of the purchase consideration, using shares,
is
determined by using the average market value of the shares a few
days
before and after the announcement date. In addition, under US GAAP,
the
fair value of options issued to replace vested options of the acquired
company are also recorded as part of the purchase consideration based
on
the fair market value of the vested options outstanding at the acquisition
date.
|
· |
Exchange
of non-monetary assets— in
prior years the Group has undertaken a number of transactions involving
the exchange of non-monetary assets, normally the exchange or swap
of
shares. Previously, the gain recorded and cost of investments acquired
were based on the value of the shares received. Under US GAAP, the
gain
recorded and cost of the investments acquired were based on the market
value of the shares surrendered on the dates that the exchanges were
consummated.
|
Goodwill
- Goodwill
recorded on acquisitions prior to April 1, 2000 was written off against retained
earnings in the year of acquisition. For purposes of US GAAP prior to the
adoption of FAS 142, “Goodwill and other intangible assets”, all goodwill
written off against retained earnings has been reinstated as an asset on the
balance sheet and amortized. Upon adoption of FAS 142 on April 1, 2002, the
Group no longer amortizes goodwill and annually tests goodwill, by reporting
unit, for impairment. Under IFRS, prior to April 1, 2004, goodwill was amortized
over an estimated useful life not exceeding 20 years. As of April 1, 2004,
the
Group adopted IAS 36, “Impairment of Assets” and IFRS 3, “Business
Combinations”, with retrospective application to December 20, 2002, and
discontinued the amortization of goodwill which is consistent with the
accounting treatment under US GAAP.
Although
the statements are similar, the difference
in the prospective adoption dates will give rise to a continuing equity
difference between IFRS and US GAAP.
Intangibles
assets - Patents,
trademarks, title rights, subscriber bases and similar other intangible assets
acquired before April 1, 2000 were written off against retained earnings in
the
year of acquisition. Under US GAAP, all other intangible assets written off
against retained earnings have been reinstated as assets on the balance sheet
and are being amortized using the straight-line method over a range of estimated
useful lives of three to eight years. Upon adoption of FAS 142 on April 1,
2002,
these intangible assets were determined to have a finite useful life and
therefore continue to be amortized over their remaining estimated useful lives.
Under
both IFRS and US GAAP, the carrying value of other intangible assets is assessed
for impairment whenever changes in circumstances indicate that the historical
carrying value may not be appropriate.
Purchase
of minority interests (successive acquisition), net - Under
IFRS, when undertaking transactions with minorities in successive acquisitions,
the entire difference between the purchase consideration and the net assets
acquired of the remaining interest in an entity that it did not own was included
within minority interests within equity. The minority interest is recorded
at
the minority’s proportion of the net fair value of the net assets acquired.
Under US GAAP transactions with minorities are treated as a purchase business
combination. The minority interest is valued at its historical cost book value
and fair values are assigned upon the step up purchase of the minority
interest.
Share
based compensation - The
Group
accounts for its share options in accordance with IFRS 2, “Share-based Payments”
and has recognized compensation expense in the income statement, representing
the fair value of share options granted to employees. For US GAAP purposes,
the
Group accounts for its share options granted to employees based on the intrinsic
value of the option in accordance with Accounting Principles Board Opinion
No.
25 “Accounting for Stock Issued to Employees” (“APB 25”), as permitted by
Statement of Financial Accounting Standards No. 123 “Accounting for Stock Based
Compensation” (“FAS 123”).
Put
option liability - During
fiscal 2006, minorities of NetMed NV exercised a put on their shares to the
Group, requiring the Group to purchase a specified number of NetMed NV shares.
Under US GAAP, the transaction was accounted for as a step acquisition at the
time the option was exercised by recording the fair value of the put option
liability and the percentage of the assets and liabilities acquired were
increased to their current fair value. Under IFRS this put option with minority
shareholders was considered outstanding from the time it was entered into,
based
on the amended guidance in IAS 32R. However, the Group elected the IFRS 1
allowance to present comparative information for IAS 32 and 39 in accordance
with former GAAP and therefore this derivative liability has been recorded
as of
April 1, 2005 with a corresponding adjustment to shareholders’ equity since it
is treated as a successive acquisition. The fair value movement between April
1,
2005 and March 31, 2006 has been recorded in the income statement. The movement
between April 1, 2005 and January 2006 has been reversed for US
GAAP.
Media24
entered into a contract containing a put option whereby the option holder can
require Media24 to purchase the option holder’s remaining 7.5% interest. For
IFRS purposes, the put option has been considered outstanding from the time
that
it was entered into and has been recorded as a derivative financial instrument
liability in the financial statements. For US GAAP purposes, the
transaction will not be accounted for until the option is exercised.
Please
refer to note 39 of Naspers’ consolidated financial statements and related notes
included elsewhere in this annual report for the effect of the above differences
between IFRS and U.S. GAAP, as well as other less significant differences,
on
total shareholders’ equity as of March 31, 2006 and 2005 and the consolidated
net (loss)/income for the two years in the period ended March 31,
2006.
Initial
Adoption of Accounting Policies
For
the
year ended March 31, 2005 Naspers prepared its financial statements under South
African GAAP as effective at that date. In accordance with the JSE Limited
(“JSE”) Listing Requirements the Group is required to prepare its first annual
consolidated financial statements in accordance with IFRS for the year ended
March 31, 2006.
As
the
Group publishes comparative information in its financial statements, the date
for transition to IFRS is April 1, 2004, which represents the beginning of
the
earliest period of comparative information to be presented as required in terms
of the requirements of the JSE and the SEC. In
order
to describe the impact of IFRS on the Group’s reported results of operations and
financial position, the Group has restated information previously published
under South African GAAP to the equivalent basis under IFRS. This restatement
is
described in note 2 of the consolidated annual financial statements and follows
the guidelines set out in IFRS 1 “First-time Adoption of International Financial
Reporting Standards” (“IFRS 1”).
New
Accounting Standards
IFRS
NEW
STANDARDS ADOPTED:
The
amendment to IAS 19 - “Employee Benefits”, has been issued to allow the option
of recognizing actuarial gains and losses in full in the period in which they
occur, outside profit or loss, in a statement of recognized income and expenses.
The
amendment was issued during December 2004 with immediate effect. The Group
will
continue to apply option of recognizing the actuarial gains in losses in the
income statement.
The
amendments that have been made to IAS 39 included amendments to the accounting
of Cash Flow Hedges of Forecasted Intragroup Transactions, the scope of IAS
39
to include Financial Guarantee Contracts and the amendment to the Fair Value
Option. These amendments were made during April, August and June 2005 with
immediate effect.
The
amendment to IAS 1 - “Presentation of Financial Statements: Capital Disclosures”
states that an entity shall disclose information that enables users of its
financial statements to evaluate the entity’s objectives, policies and processes
for managing capital.
NEW
STANDARDS ISSUED, BUT NOT YET ADOPTED:
IFRS
7 -
“Financial Instruments: Disclosures” was issued August 18, 2005, with an
effective date of January 1, 2007. This new standard adds certain new
disclosures about financial instruments to those currently required by IAS
32 -
Financial Instruments: Presentation.
The
IASB
has also amended the accounting treatment of monetary items in IAS 21 - “The
Effect of Changes in Foreign Exchange Rates” during December 2005 with immediate
effect. The amendment stated that if a monetary item forms part of an entity’s
investment in a foreign operation, the accounting treatment in the consolidated
financial statements should not be dependent on the currency of the monetary
item. Also, the accounting should not depend on which entity within the Group
conducts a transaction with the foreign operation.
IFRIC
Interpretation 4 - “Determining whether an Arrangement contains a Lease” was
issued by the IASB and is effective for annual periods beginning on or after
January 1, 2006, and the Interpretation specifies that an arrangement that
meets
certain criteria is, or contains, a lease that should be accounted for in
accordance with IAS 17 - “Leases”.
IFRIC
Interpretation 6 - “Liabilities arising from Participating in a Specific Market
- Waste Electronic and Electronic Equipment” clarifies when certain producers of
electrical goods are required to recognise a liability under IAS 37 for the
cost
of waste management relating to the decommissioning of waste electrical and
electronic equipment supplied to private households. IFRIC 6 is effective for
annual periods beginning on or after December 1, 2005.
IFRIC
Interpretation 8 - “Scope of IFRS 2” clarifies that IFRS 2 - “Share-based
Payment” applies to arrangements where an entity makes share-based payments for
apparently nil or inadequate consideration. IFRIC 8 is effective for annual
periods beginning on or after May 1, 2006.
IFRIC
Interpretation 9 - “Reassessment of Embedded Derivatives” clarifies that an
entity shall assess whether an embedded derivative is required to be separated
from the host contract and accounted for as a derivative when the entity first
becomes a party to the contract. Subsequent reassessment is prohibited unless
there is a change in the terms of the contract that significantly modifies
the
cash flows that otherwise would be required under the contract, in which case
reassessment is required. IFRIC 9 is effective for annual periods beginning
on
or after June 1, 2006.
AC
503 -
“Accounting for Black Economic Empowerment (“BEE”) Transactions” states that if
equity instruments are granted at a discount to a BEE partner, this must be
expensed. BEE credentials acquired as part of a business combination shall
be
subsumed in goodwill and not recognized as a separate intangible asset. Where
the BEE transaction includes service conditions, the fair value of the equity
instruments shall be measured at grant date and the expense should be recognized
over the period of the service conditions. Where the BEE transaction includes
no
service conditions, the fair value of the equity instruments shall be measured
at grant date and the expense should be recognized immediately on grant date.
AC
503 is effective for annual periods beginning on or after May 1, 2006.
U.S.
GAAP
In
December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” (“SFAS
123R”) which is a revision of SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). Statement 123R supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement
of Cash Flows.” Generally, the approach in SFAS 123R is similar to the approach
described in SFAS 123. SFAS 123R requires all share-based payments to employees
to be recognized in the income statement based on their grant date fair values
over the corresponding service period and also requires estimation of
forfeitures when calculating compensation expense. In April of 2005 the FASB
revised the adoption date
of
this revised statement effective the first annual reporting period that begins
after June 15, 2005. Accordingly, the Group will adopt this revised statement
on
April 1, 2006 using the modified prospective application approach. The Group
is
currently evaluating the impact of SFAS 123R on its financial position and
results of operations.
In
December 2004, the FASB issued SFAS No. 153 “Exchanges of Non-monetary Assets -
An Amendment of APB Opinion No. 29”. SFAS No. 153 eliminates the exception to
fair value accounting for exchanges of similar productive assets contained
in
APB Opinion No. 29 and replaces it with a general exception for exchange
transactions that do not have commercial substance. The exception in APB Opinion
No. 29 required certain non-monetary asset exchanges to be recorded on a
carryover basis with no gain or loss recognition. Under SFAS No. 153, exchange
transactions with commercial substance are required to be accounted for at
fair
value with gain or loss recognition on assets surrendered in exchange
transactions. The group will be required to adopt SFAS No. 153 on April 1,
2006,
and believes the adoption of this standard will not have a material impact
on
the Group’s financial statements.
In
May
2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections - a
replacement of APB Opinion No. 20 and FASB Statement No.3”. Among other things,
SFAS 154 requires voluntary changes in accounting principle to be
retrospectively applied in the financial statements. It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. When a
pronouncement includes specific transition provisions, those provisions should
be followed. The Group will be required to adopt SFAS 154 on April 1, 2006.
The
Group is currently evaluating the impact of SFAS 154 on its financial position
and results of operations.
In
November 2005, the FASB issued FSP Nos. FAS 115-1 and FAS 124-1, The Meaning
of
Other-Than-Temporary Impairment and Its Application to Certain Investments
(FSP
115-1 and 124-1). This statement amends FASB Statements No. 115, Accounting
for
Certain Investments in Debt and Equity Securities, and No. 124, Accounting
for
Certain Investments Held by Not-for-Profit Organizations, and APB Opinion No.
18, The Equity Method of Accounting for Investments in Common Stock. The
guidance addresses the determination as to when an investment is considered
impaired, whether that impairment is other than temporary, and the measurement
of an impairment loss. The guidance also includes accounting considerations
subsequent to the recognition of an other-than-temporary impairment and requires
certain disclosures about un losses that have not been recognized as
other-than-temporary impairments. The guidance includes three steps in
determining when an investment is considered impaired, whether that impairment
is other than temporary, and the measurement of an impairment loss. FSP 115-1
and 124-1 is effective for reporting periods beginning after December 15, 2005
and will be adopted by the group on April 1, 2006 and believes it will not
have
a material impact on the Group’s financial statements.
In
April
2006, the FASB issued FASB Staff Position 46(R)-6 (FSP FIN 46(R)-6) to address
how a reporting enterprise should determine the variability to be considered
in
applying FASB Interpretation No. 46 (revised December 2003), Consolidation
of
Variable Interest Entities, (FIN 46(R)).
The
variability that is considered in applying FIN 46(R) affects the determination
of (a) whether the entity is a variable interest entity (VIE), (b) which
interests are variable interests in the entity, and (c) which party, if any,
is
the primary beneficiary of the VIE. That variability will affect any calculation
of expected losses and expected residual returns, if such a calculation is
necessary. The variability to be considered in applying FIN 46(R) is based
on an
analysis of the design of the entity by a) analyzing the nature of the risks
in
the entity and b) determining the purpose(s) for which the entity was created
and determine the variability the entity is designed to create and pass along
to
its interest.
After
determining the variability to consider, the reporting enterprise can determine
which interests are designed to absorb that variability. FSP FIN 46(R)-6
provides examples of the cash flow and fair value methods that can be used
to
measure the amount of variability (that is, expected losses and expected
residual returns) of an entity. However, a method that is used to measure the
amount of variability does not provide an appropriate basis for determining
which variability should be considered in applying FIN 46(R).
FSP
FIN
46(R)-6 is effective the first day of the first reporting period beginning
after
June 15, 2006. The Group will adopt the provisions of this statement on April
1,
2007. The Group is evaluating the impact of this statement and believes that
it
will not have a material impact on our financial statements.
In
June
2006 the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
in
Income Taxes (FIN 48) to clarify the accounting for uncertainty in income taxes
recognized in an entity’s financial statements in accordance with FASB Statement
No. 109, Accounting for Income Taxes. The guidance requires an entity to
determine whether it is more likely than not that a tax position will be
sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. In
evaluating whether a tax position has met the more-likely-than-not
recognition threshold,
the enterprise should presume that the position will be examined by the
appropriate taxing authority that has full knowledge of all relevant
information. A tax position that meets the more-likely-than-not recognition
threshold is measured to determine the amount of benefit to recognize in the
financial statements. The tax position is measured at the largest amount of
benefit that is greater than 50 percent likely of being realized upon ultimate
settlement.
Tax
positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first subsequent financial reporting
period in which that threshold is met. Previously recognized tax positions
that
no longer meet the more-likely-than-not recognition threshold should be
derecognized in the first subsequent financial reporting period in which that
threshold is no longer met. Use of a valuation allowance as described in
Statement 109 is not an appropriate substitute for the derecognition of a tax
position. The Group will be required to adopt FIN 48 on April 1, 2007 and is
evaluating the expected impact on the financial statements.
In
September 2006, The FASB issued SFAS No. 157 , Fair Value Measurements, (“SFAS
157”). This
Statement
defines fair value, establishes a framework for measuring fair value and
expands
disclosures about fair value measurements. This Statement does not require
any
new fair value measurements, it emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. SFAS 157 expands
disclosures about the use of fair value to measure assets and liabilities
in
interim and annual periods subsequent to initial recognition. This statement
applies for derivatives and other financial instruments measured at fair
value
under SFAS No. 133, “Derivative
Financial Instruments” at initial
recognition and in all subsequent periods. The group will be required to
adopt
SFAS 157 on April 1, 2008, and is currently evaluating the impact of SFAS
157 on
its financial position and results of operations.
In
September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”).
The interpretations in SAB 108 express the staff's views regarding the
process
of quantifying financial statement misstatements. The staff believes registrants
must consider the impact of correcting all misstatements, including the
effect
of misstatements that were not corrected at the end of the prior year.
These
prior year misstatements should be considered in quantifying misstatements
in
current year financial statements. Thus, a registrant's financial statements
would require adjustment when the assessment in the current year or in
prior
years results in quantifying a misstatement that is material, after considering
all relevant quantitative and qualitative factors. The group will be required
to
adopt SAB 108 on April 1, 2007, and is currently evaluating the impact
of SAB
108 on its financial position and results of
operations.
ITEM
6. DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES
6.A. Directors
and Senior Management
The
articles of association of Naspers provide that the board of directors must
consist of not less than 4 members, nor more than 15 members at any time. The
board currently consists of 12 members. In accordance with the JSE’s listing
requirements, one-third of the non-executive directors comprising Naspers’ board
are, on a rotating basis, obliged to retire and are eligible for re-election
at
each annual general meeting of shareholders. The business address for all the
directors is 40 Heerengracht, Cape Town, 8001, South Africa. All the directors
are South African citizens. All the directors are non-executive directors except
for Koos Bekker and Steve Pacak.
As
of
September 1, 2006, the directors and senior management of Naspers, their
respective ages, their position, the year in which they were first appointed
and
the year in which their current term expires, where applicable, are as
follows:
Name
|
Age
|
Position
|
Year
First Appointed
to
Current Position
|
Expiration
of
current term
|
Naspers
directors:
|
|
|
|
|
Ton
Vosloo
|
69
|
Chairman
of the Board of Directors
|
1997
|
2006
|
Koos
Bekker
|
53
|
CEO
Naspers and Director
|
1997
|
2007
|
Steve
Pacak
|
51
|
CFO
Naspers and Director
|
1998
|
—
|
Boetie
van Zyl
|
67
|
Director
|
1988
|
2008
|
Lourens
Jonker
|
67
|
Director
|
1996
|
2007
|
Neil
van Heerden
|
67
|
Director
|
1996
|
2007
|
Ben
van der Ross
|
59
|
Director
|
1999
|
2008
|
Prof.
Jakes Gerwel
|
60
|
Director
|
1999
|
2007
|
Prof.
Hein Willemse
|
49
|
Director
|
2002
|
2006
|
Adv.
Francine-Ann du Plessis
|
51
|
Director
|
2003
|
2006
|
Prof.
Rachel Jafta
|
45
|
Director
|
2003
|
2006
|
Fred
Phaswana
|
62
|
Director
|
2003
|
2006
|
|
|
|
|
|
Senior
Management:
|
|
|
|
|
Cobus
Stofberg
|
55
|
CEO
MIH Group
|
1998
|
—
|
Steve
Ward
|
52
|
CFO
MIH Group
|
2000
|
—
|
Andre
Coetzee
|
54
|
General
Counsel MIH Group
|
1999
|
—
|
Mark
Sorour
|
44
|
Chief
Investment Officer
|
2002
|
—
|
Jim
Volkwyn
|
48
|
CEO
Pay-television Platforms
|
2000
|
—
|
Antonie
Roux
|
48
|
CEO
Internet Operations
|
2002
|
—
|
Jan
Steenkamp
|
43
|
CEO
Entriq
|
2002
|
—
|
Graham
Kill
|
41
|
CEO
Irdeto
|
1998
|
—
|
Nolo
Letele
|
56
|
CEO
MultiChoice South Africa
|
1999
|
—
|
Kim
Reid
|
36
|
CEO
M-Web South Africa
|
2003
|
—
|
Glen
Marques
|
46
|
CEO
M-Net
|
2000
|
—
|
Heinrich
Enslin
|
44
|
CEO
SuperSport International
|
2000
|
—
|
Hein
Brand
|
41
|
CEO
Print Media Operations
|
2005
|
—
|
Francois
Groepe
|
36
|
CFO
Media24
|
2003
|
—
|
Jan
Malherbe
|
58
|
CEO
Media24 Newspapers
|
1983
|
—
|
Patricia
Scholtemeyer
|
44
|
CEO
Media24 Magazines
|
2000
|
—
|
Stephen
van der Walt
|
37
|
CEO
Paarl Media
|
2005
|
—
|
Musa
Shezi
|
46
|
MD
Via Afrika
|
2005
|
—
|
Sheryl
Raine
|
49
|
CEO
NetMed
|
1997
|
—
|
Imtiaz
Patel
|
42
|
CEO
SuperSport South Africa
|
2005
|
—
|
Eben
Greyling
|
38
|
CEO
MultiChoice Africa
|
2005
|
—
|
Directors
Ton
Vosloo
became
the chief executive officer of Naspers in 1984 and subsequently served as
executive chairman from 1992 to 1997. Mr. Vosloo was a journalist from 1956
to
1983 and editor of the daily newspaper Beeld
from
1977 to 1983. Mr. Vosloo is chairman of Media24, MIH BV, MIH Holdings and
independent non-executive chairman of the board of Naspers, a position he has
held since 1977. He is also a former chairman of the World Wide Fund for Nature
in South Africa, a director of the Cape Philharmonic Orchestra and a
trustee for the Stigting vir Bemagtiging deur Afrikaans. He is also a
former chairman of Sanlam.
Koos
Bekker
led the
founding team of M-Net in 1985 and was chief executive officer of MIH Holdings.
Mr. Bekker was a founding director of MTN and served as chief executive officer
of NetHold until 1997. He is a director of Media24, MIH BV, MIH Holdings,
SuperSport, M-Net and other companies within the group. Mr. Bekker has been
the
chief executive officer of Naspers since 1997.
Steve
Pacak
joined
the Naspers group in 1988 as chief financial officer of M-Net Limited.
Currently, he is a director of Media24, MIH BV, MIH Holdings, SuperSport, M-Net
and other companies within the group. In 1998, Mr. Pacak was appointed as
executive director and CFO of Naspers.
Boetie
van Zyl
joined
the Naspers group as director in 1988. Mr. van Zyl is a member of the board
of
directors of amongst others MIH BV, MIH Holdings, Sanlam and Murray &
Roberts and a trustee of the Peace Parks Foundation in South Africa. He is
a
director of Media24, chairman of the audit and risk management committee and
a
member of the executive, human resources and nomination committee.
Lourens
Jonker
joined
the Naspers group in 1996. Mr. Jonker, the owner of the Weltevrede wine estate
near Bonnievale, is a member of the board of directors of ABSA. He is a former
chairman of the KWV group.
Neil
van Heerden
joined
the Naspers group in 1996. Mr. van Heerden is a trustee of the University of
the
Western Cape, former executive director of the South Africa Foundation,
councilor of Business Unity South Africa and a member of the boards of directors
of BMW (SA) and various other companies.
Ben
van der Ross
joined
the Naspers group in 1999. Mr. van der Ross is the chairman of Bonatla Property
Holdings and a member of the boards of directors of Momentum, FirstRand and
Pick
‘n Pay Stores Limited. He is a former chief executive officer of Business South
Africa. He is currently the chairman of the Naspers Welkom share scheme.
Prof.
Jakes Gerwel
joined
the Naspers group in 1999. He is a previous director general in the office
of
former president Nelson Mandela, secretary to the cabinet and rector of the
University of the Western Cape. Professor Gerwel, who is chancellor of Rhodes
University, is chairman of Brimstone Investment Corporation, South African
Airways and Educor. He is also a director of Media24, and a member of the
executive and human resources and nomination committees of Naspers.
Prof.
Hein Willemse
joined
the Naspers group as director in August 2002. He is a member of the boards
of
trustees of various organizations and community bodies, including the Shoma
Education Trust and the Welkom share scheme. He is the head of the Department
of
Afrikaans at the University of Pretoria.
Advocate
Francine-Ann du Plessis joined
the Naspers group in 2003. She is a director of Loubser Du Plessis Inc, a firm
of chartered accountants, the Industrial Development Corporation (IDC) of South
Africa, the KWV group, Sanlam and Findevco. Advocate Du Plessis is also a member
of the Naspers and Media24 audit and risk management committees.
Fred
Phaswana joined
the Naspers group in 2003. He is a director of Anglo American plc. He is
chairman of BP Southern Africa, Transnet, the South African Energy Association,
the Cape Town Graduate School of Business Board of Advisors and the South
African Institute of International Affairs. Mr. Phaswana is vice chairman of
the
Business Leadership and honorary president of the Cape Town Press Club.
Prof. Rachel
Jafta,
who
joined the Naspers group in 2003, is a senior lecturer in economics at the
University of Stellenbosch. She is a member of the South African Economic
Society and the New York Academy of Science. Professor Jafta is also a
trustee of the Don Caldwell Trust and the Helen Suzman Foundation and a member
of the South African Institute of Race Relations.
Senior
Management
Cobus
Stofberg
began
his affiliation with the Naspers group in 1985. He has held a variety of
positions, including chief operating officer, within the MIH Holdings group
of
companies. Prior to this, Mr. Stofberg served as director of NetHold, NetMed
and
NetHold group companies. Currently, he is chief executive officer and a director
of MIH BV.
Steve
Ward
joined
the Naspers group in 2000. Prior to this, Mr. Ward was a partner with
PricewaterhouseCoopers for 13 years, where he advised multinational companies.
He is a Fellow of the Institute of Chartered Accountants in England and Wales
and is a Dutch Registered Accountant. Mr. Ward is chief financial officer of
MIH
Holdings and a director of MIH BV and several other group companies, and serves
as an alternate director for SuperSport and M-Net.
Andre
Coetzee
has been
a legal advisor to the MIH group and associated companies since 1985. Before
joining the Naspers group, Dr. Coetzee was a partner at Mallinicks Attorneys
from 1984 to 1999. In June 1999 he became the MIH group’s general
counsel.
Mark
Sorour
began
his career with the Naspers group in 1994 involved with corporate finance.
Prior
to joining the Naspers group, Mr. Sorour was an investment banker with Hill
Samuel and Banque Indosuez and held various positions in the audit and corporate
finance division of PricewaterhouseCoopers. Currently, he is chief investment
officer.
Jim
Volkwyn
began
his career with the Naspers group in 1993 as finance manager of M-Net, where
he
remained until 1995. From 1996 to 1997, he was chief operating officer and
finance manager of MultiChoice Africa. Subsequently, Mr. Volkwyn was chief
executive officer of MultiChoice Africa for three years, where he remains on
the
board of directors. In 2000, he was appointed chief executive officer of MIH’s
pay-television platforms.
Antonie
Roux
joined
the Naspers group in 1979 and was a founding member of M-Net in 1985. In 1997,
Mr. Roux was appointed chief executive officer of M-Web South Africa. Currently,
he is chief executive officer of internet operations, a position he has held
since 2002.
Jan
Steenkamp
has been
with the Naspers group since 1985 serving in various management positions until
he became chief executive officer of OpenTV in 1997. Mr. Steenkamp served as
chairman of OpenTV until the group sold its interest in OpenTV in August 2002.
Currently, he is the CEO of Entriq.
Graham
Kill
expanded
his responsibilities from chief financial officer and operations director of
Irdeto to chief executive officer in August 1998. Previous positions include
business development associate at NetHold and FilmNet, and various management
positions in UK-based companies.
Nolo
Letele
joined
M-Net in 1990 and has held a number of senior positions within the MIH group.
Prior to that he was a broadcasting engineer at the Lesotho National
Broadcasting Service. Currently he is CEO of MultiChoice South
Africa.
Kim
Reid began
his
career with Naspers in 2000. He was the chief financial officer of MultiChoice
before being appointed the chief executive officer of M-Web in 2003. Prior
to
joining the Naspers group, he held managerial positions at Barlows Limited,
the
Gary Player group and Sony Music.
Glen
Marques began
his
career with the Naspers group in 1997 as director of business development for
SuperSport International Holdings Limited and in 1999 he was appointed chief
operations officer of SuperSport. Prior to joining the group, he worked as
senior legal adviser to the South African Independent Broadcasting Authority
and
executive director of the National Association of Broadcasters. He was appointed
as M-Net chief executive officer in May 2000.
Heinrich
Enslin joined
M-Net in 1990 and was appointed as the MIH group management accountant in 1997.
In 1998 he was appointed as the chief financial officer of SuperSport and
assumed his current position as chief executive officer of SuperSport in
2000.
Hein
Brand
joined
the Naspers group in 1998 as finance executive. He is a former financial
director of Bonnita (Proprietary) Ltd. He is a former chief executive officer
of
Via Afrika and financial director of Media24. He was appointed as chief
executive of Media24 in April 2005.
Francois
Groepe joined
the Anglovaal Group in 1992. In 1995 he joined the South African subsidiary
of
the international re-insurer, Swiss Re and was later appointed as CFO. In 2002
he was transferred to the company’s head-office in Zurich,
Switzerland, where he was senior group controller for the Life and Health
Business Group. In August 2003 he returned to South Africa to take up the
position of CFO at Media24. In 2004 he was appointed as an executive director
of
Media24.
Jan
Malherbe joined
the Naspers group in 1983 as Group Human Resource Manager, and has held a number
of senior positions within the Media24 group. He is a director of Media24 and
other companies within the group. Currently he is CEO of Media24
Newspapers.
Patricia
Scholtemeyer
began
her career with the Naspers group in 2000 as the publisher of Media24’s woman’s
magazines. Prior to joining the Naspers group, she was chief executive of trade
and business titles at Johnnic Communication Limited. Currently she is CEO
of
Media24 Magazines, a division of Media24.
Stephen
van der Walt
began
his career with the Naspers group in 2000 as group financial director of Paarl
Media Holdings. In 2004 he was appointed chief operating officer of Paarl Media
Holdings, and in 2005 chief executive officer of Paarl Media Holdings.
Musa
Shezi joined
the Naspers group in 2000, when he was appointed managing director of the
National Education Group (NEG). Dr. Shezi started his career as a teacher in
KwaZulu-Natal, subsequently becoming headmaster and executive president of
the
KwaZulu-Natal National Teachers’ Union. He is a member of several boards of
directors, including vice president of the South African Institute of Race
Relations. He was appointed managing director of the Via Afrika group in
2005.
Sheryl
Raine began
her
affiliation with the Naspers Group in 1991 when she was appointed programme
director of M-Net. She then moved to The Netherlands where she held the position
of managing director of NetHold Electronic Media. She moved to Greece in 1997,
first as CEO of the Digital Pay-TV Platform and was appointed CEO of the overall
NetMed operations in Greece and Cyprus in October 1997.
Imtiaz
Patel joined
SuperSport in 2000 as Director of Enterprises. Prior to joining the group he
was
Director of Professional Cricket at the United Cricket Board (UCB), having
held
several positions at the UCB since 1991. He serves on the boards of Natal
Sharks, Free State Rugby and Griqualand West Rugby, as well as Centurion Park
Investments, Dolphins and Western Province Cricket. He is chief executive
officer of SuperSport United Football Club and a member of the Premier Soccer
League board. He is also secretary of the National Transformation Monitoring
Committee of the United Cricket Board. In March 2005 he was appointed CEO of
SuperSport South Africa.
Eben
Greyling joined
the MIH group in 1996 as group financial manager of MultiChoice. In 1997 he
was
appointed general manager operations and in 1999 CFO of MultiChoice. In 2000
he
became CFO of MIH pay-television platforms, a position he held until his
appointment as CEO of MultiChoice Sub-Saharan Africa in 2005. Eben is a
Chartered Accountant and completed his articles at PricewaterhouseCoopers.
He
held various positions in the audit and corporate finance division of
PricewaterhouseCoopers until 1995.
6.B. Compensation
Directors
The
individual non-executive directors of Naspers received the following
compensation during fiscal 2006:
Non-executive
Directors
|
Directors
fees
|
Committee(1)
and
trustee(2)
fees
|
Total
|
|
R’000
|
R’000
|
R’000
|
|
|
|
|
Ton
Vosloo(3),(4),(5)
|
1,863
|
—
|
1,863
|
Boetie
van Zyl(3),(5)
|
535
|
460
|
995
|
Prof.
Elize Botha
|
157
|
—
|
157
|
Lourens
Jonker
|
175
|
—
|
175
|
Neil
van Heerden
|
175
|
—
|
175
|
Ben
van der Ross
|
175
|
4
|
179
|
Prof.
Jakes Gerwel(3),
(6)
|
435
|
60
|
495
|
Prof.
Hein Willemse
|
175
|
3
|
178
|
Adv.
Francine-Ann du Plessis
|
175
|
220
|
395
|
Prof.
Rachel Jafta
|
175
|
150
|
325
|
Fred
Phaswana
|
175
|
—
|
175
|
Total
|
4,215
|
897
|
5,112
|
___________
(1)
|
Committee
fees include fees for the attendance at the audit committee, the
human
resources and nomination committee, the budget committee and the
executive
committee meetings of the board.
|
(2)
|
Trustee
fees include fees for attendance of the various retirement fund trustee
meetings of the group’s retirement funds, as well as for the attendance at
Welkom trustee meetings.
|
(3)
|
Directors’
fees include fees for services as directors of
Media24.
|
(4)
|
Directors’
fees include fees for services as directors of Via
Afrika.
|
(5)
|
Directors’
fees include fees for services as directors of MIH Holdings and MIH
BV.
|
(6)
|
Directors’
fees include fees for services as directors of Educor Holdings
Limited.
|
The
individual executive directors of Naspers received the following salary, bonuses
and related benefits compensation during fiscal 2006:
Executive
directors
|
Salary
|
Bonuses
|
Pension
and medical benefits
|
Total
|
|
|
|
|
|
|
R’000
|
R’000
|
R’000
|
R’000
|
|
|
|
|
|
Koos
Bekker(1)
|
—
|
—
|
—
|
—
|
Steve
Pacak
|
1,957
|
2,200
|
196
|
4,353
|
Mr.
Pacak
qualifies for salary and bonuses, as well as share allocations under the
Naspers’ share incentive scheme. Details in respect of the participation by the
executive directors of Naspers in scheme shares not yet released in the Naspers
share incentive scheme are as follows:
Name
|
Date
of Grant
|
Number
of
Class
N
ordinary
shares
|
Purchase
Price
Per
Share
(Rand)
|
Future
Vesting Date
|
|
|
|
|
|
Koos
Bekker(1)
|
October
1, 2002
|
817,470
|
23.35
|
October
1, 2006
|
|
October
1, 2002
|
817,471
|
24.50
|
October
1, 2007
|
|
December
17, 2002
|
745,426
|
30.37
|
December
17, 2006
|
|
December
17, 2002
|
745,428
|
31.54
|
December
17, 2007
|
Steve
Pacak
|
January
2, 2003
|
166,666
|
23.50
|
January
7, 2007
|
|
January
2, 2003
|
166,668
|
23.50
|
January
7, 2008
|
|
September
9, 2004
|
33,333
|
50.00
|
September
9, 2007
|
|
September
9, 2004
|
33,333
|
50.00
|
September
9, 2008
|
|
September
9, 2004
|
33,334
|
50.00
|
September
9, 2009
|
(1)
Mr. Bekker has allocations, as indicated above, in the share incentive
scheme, in terms of which Naspers Class N ordinary shares can be acquired at
certain prices, with vesting of three tranches taking place over periods of
five
years. The purchase prices relating to the allocations were set at the middle
market price of the shares on the purchase date, but increased by anticipated
inflation over the course of the vesting periods of three, four and five years
respectively for each of the tranches. Inflation expectations were calculated
by
the Bureau for Economic Research of Stellenbosch University. Mr. Bekker does not
earn any remuneration from the group, in particular no salary, bonus, car
scheme, medical or pension contributions of any nature whatever are payable.
Mr.
Bekker’s current contract was approved by the shareholders in general meeting on
August 30, 2002, and will expire on September 30, 2007.
No
compensation will be payable upon termination.
Senior
Management
The
aggregate salary, bonus and related benefits compensation paid by Naspers and
the amount set aside by Naspers to provide pension, retirement and similar
benefits to the named senior management as a group during fiscal 2006, was
as
follows:
|
Rand
(thousands)
|
|
|
Short-term
employee benefits
|
61,243
|
Post-employment
benefits
|
5,259
|
Share-based
payment charges
|
24,032
|
Total
|
90,534
|
___________
The
human
resources and nomination committee of the Naspers board have approved a bonus
incentive scheme for senior executives of Naspers. These bonus payments are
based on performance objectives and are formally authorized by this
committee.
6.C.
Board Practices
See
“Item
6.A. Directors and Senior Management” for a description of the terms for which
the individual directors have held office.
Non-executive
directors that are not re-elected will receive no additional benefits upon
the
termination of their appointment. The directors’ service contracts, as well as
Mr. Bekker’s contract, do not provide for any pre-determined compensation as a
result of termination.
Audit
and risk management committee
The
members of the audit and risk management committee during fiscal 2006 were
Mr.
JJM van Zyl (Chair), Advocate F-A du Plessis, Dr. RCC Jafta and Mr. T Vosloo
(appointed on November 25, 2005). During fiscal 2006, the audit and risk
management committee held four meetings.
The
responsibilities of this committee also include risk management, as well as
compliance with the JSE, the SEC and the Nasdaq requirements. A board-approved
charter, which defines the committee’s mandate and responsibilities, has been
adopted. The main responsibilities of the committee are to:
|
|
review and recommend to the board the
company’s annual reports, including the annual report on Form 20-F,
interim and provisional reports; |
|
|
review and make recommendations to the board
relating to
the viability of the group companies and the group as an ongoing
concern;
|
|
|
receive, review and discuss the external auditors’
reports;
|
|
|
evaluate and approve the external auditors’ plans, scope
of findings and reports;
|
|
|
evaluate
the effectiveness of the internal auditing function, including its
purpose, activities, scope, adequacy and costs, and approve the annual
internal audit plan and any material changes thereto;
|
|
|
evaluate procedures and systems (including, without
limitation, internal controls, financial reporting and disclosure
controls
and procedures, and information systems) introduced by management,
ensuring that these are functioning effectively;
|
|
|
review and approve the activities, scope, adequacy
and
effectiveness of the company’s risk management and associated regulatory
procedures;
|
|
|
ensure compliance with the group’s code of ethics as
well as the code for financial officers (as
applicable);
|
|
|
determine the principles for the use of the external
auditors for non-audit services;
|
|
|
evaluate
legal matters which may affect the financial statements,
and
|
|
|
establish procedures for the receipt,
retention and treatment of complaints received by the company regarding
accounting, internal control or auditing
matters. |
The
chairman and members of this committee are all non-executive directors. The
committee meets at least three times a year with members of executive
management, as well as with the internal and external auditors. Both the
internal and external auditors have unrestricted access to this committee.
It is
a duty of the audit committee to ensure that the independence of the external
auditor is not impaired. A policy regulating non-audit services provided by
the
external auditors has been adopted. An annual self-evaluation on the functioning
of the committee is also performed.
6.D. Employees
General
As
of
March 31, 2006, Naspers and its subsidiaries had 12,067 full-time employees
and
3,643 part-time employees. As of March 31, 2006, approximately 9.5% of Naspers’
employees in South Africa were represented by trade unions. Naspers believes
that its labor relations are satisfactory. The following table relates to the
employees employed by Naspers and its subsidiary companies.
|
|
2005
|
|
2006
|
|
|
|
Permanent
|
|
Temporary
|
|
Permanent
|
|
Temporary
|
|
Electronic
media
|
|
|
|
|
|
|
|
|
|
- Pay-television
|
|
|
1,458
|
|
|
281
|
|
|
2,110
|
|
|
1,065
|
|
-
Technology
|
|
|
427
|
|
|
19
|
|
|
298
|
|
|
45
|
|
- Internet
|
|
|
1,079
|
|
|
213
|
|
|
1,406
|
|
|
210
|
|
Print
media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Newspapers, magazines and printing
|
|
|
5,172
|
|
|
352
|
|
|
6,542
|
|
|
897
|
|
-
Education
|
|
|
1,364
|
|
|
663
|
|
|
854
|
|
|
1,280
|
|
-
Books
|
|
|
1,317
|
|
|
200
|
|
|
857
|
|
|
146
|
|
Total
|
|
|
10,817
|
|
|
1,728
|
|
|
12,067
|
|
|
3,643
|
|
Regulation
of the South African Labor Market
In
1994,
the South African government embarked on a program to reform South African
labor
laws. The primary purpose of the reforms was to secure greater protection for
employees. The core of the new labor law framework is the Labour Relations
Act,
1995 (the “Labour Relations Act”) which governs relations between employees and
management.
The
Labour Relations Act provides for more expansive rights of union organizations,
wide powers to strike and the establishment of workplace forums. These reforms
have promoted decentralization of day-to-day decision making to workplace and
company levels while centralizing the major collective bargaining issues at
industry sector levels. The Labour Relations Act has established simpler and
more effective procedures for conciliation, mediation and arbitration and
encourages employers to reach collective agreements with recognized union
organizations. In the absence of any collective agreement between the union
and
the employer regulating collective bargaining issues, the provisions of the
Labour Relations Act apply and provide specific requirements to allow for
participative management between employers and employees.
The
Labour Relations Act also seeks to protect employees from unfair dismissal.
It
specifies what types of conduct constitute unfair conduct on the part of an
employer towards an employee and provides for specific rules relating to the
relief an employee is entitled to in the event the employee is unfairly
dismissed. Finally, in the context of a transfer of a business, the Labour
Relations Act seeks to protect employees by providing for the automatic transfer
of their employment contracts to the new owner of the business.
The
Labor
Relations Act has been extensively amended with effect from August 1, 2002.
The
most notable amendments are the right to strike in opposition of large
retrenchment exercises and a more employer-friendly dispensation on compensation
for unfair dismissal. The amendments also create presumptions in favor of
“independent contractors”, making it possible for them to claim rights as
employees. The amendments also seek to clarify the transfer of contracts of
employment in the case of transfers of a business, trade or undertaking as
a
going concern.
In
December 1998, new minimum labor standards legislation in the form of the Basic
Conditions of Employment Act, 1997 came into force in South Africa. The most
important rights granted to employees by the Basic Conditions are:
· |
the
reduction of maximum ordinary hours of work from 48 to 45 hours per
week;
|
· |
the
increase in the rate of pay for overtime from time plus one-third
to time
plus one-half, except on Sundays and public holidays where the rate
is
doubled;
|
· |
the
introduction of minimum daily (12 continuous hours) and weekly (36
continuous hours) rest periods;
|
· |
the
requirement that night workers should receive a special night shift
allowance or other compensation and transport facilities;
|
· |
the
increase of the minimum annual period of paid leave to 15 working
days;
|
· |
the
increase of maternity leave to 4 consecutive months (the payment
of
maternity benefits are determined by the Minister of Labor subject
to the
provisions of the Unemployment Insurance Act 1966);
|
· |
the
requirement that employees be granted family responsibility leave
(in the
event of a birth or death in the immediate family or illness of a
child)
of at least three days per year; and
|
· |
the
introduction of minimum notice periods for termination of employment.
|
The
Basic
Conditions of Employment Act also provide for mandatory compensation in the
event of termination of employment for operational reasons. This Act was amended
with effect from August 1, 2002, to
· |
regulate
the extension of overtime by collective agreement;
|
· |
regulate
the payment of contributions to benefit funds;
|
· |
provide
for the determination of categories of payment to calculate remuneration;
|
· |
provide
for employees whose contracts of employment terminate due to insolvency
to
receive severance pay; and
|
· |
specify
circumstances under which ordinary hours of work can be
varied.
|
On
March
24, 2003, the threshold of earnings for employees outside the scope of the
Acts
was increased to Rand 115,572. In addition, in a new regulation published on
July 1, 2003, the term ‘remuneration’ is redefined to include certain benefits
and allowances, thereby increasing the levels of notice pay, leave pay and
severance pay payable under this Act.
The
Employment Equity Act, 1998 (the “Employment Equity Act”) requires certain
designated employers, including employers who employ 50 or more employees,
to
promote equal opportunity and fair treatment by eliminating unfair
discrimination and to implement affirmative action measures designed to ensure
that suitably qualified persons from previously disadvantaged groups have equal
employment opportunities and are equitably represented in the workforces of
the
designated employers. Designated employers are required to implement an
employment equity plan designed to achieve reasonable progress
towards
such employment equity. The Employment Equity Act empowers the Director General
of the Department of Labour and labor inspectors, through inspections, reviews
and the referral of contraventions to the Labour Court, to enforce the
employment equity obligations contained in the Employment Equity Act. In the
event of a referral to the Labour Court, the Labour Court may make any
appropriate order including an order:
· |
requiring
the employer to comply with the provisions of the Employment Equity
Act,
|
· |
requiring
the employer to pay compensation or damages by an employer to an
employee
in certain circumstances; and
|
· |
imposing
monetary fines up to a maximum of Rand 900,000 for contraventions
of
certain provisions of the Employment Equity Act.
|
The
Skills Development Act, 1998 and the Skills Development Levies Act, 1999 provide
for compulsory contributions by employers to Sector Educational and Training
Authorities at a rate of 1.0% of an employer’s total expenditure on wages and
salaries.
The
Compensation for Occupational Injuries and Diseases Act 130 of 1993 (“COIDA”)
covers injuries, disablement, disease and death caused by work-related
activities. COIDA applies to most employment relationships, where either casual
or full-time employees are as a result of a workplace accident or work-related
disease, injured, disabled, or killed; or become ill. COIDA does not apply
to
workers who are, amongst others, totally or partially disabled for less than
3
days; domestic workers, anyone receiving military training; persons employed
outside the RSA for 12 or more continuous months.
Unlike
COIDA the Unemployment Insurance Fund Act 63 of 2001 (“UIF”), which provides
compensation and relief to unemployed workers, applies to nearly all employment
relationships. The only exclusions are persons working less then 24 hours a
month, public servants, foreign nationals working on contract, persons who
receive a State (old age) pension and those who only earn commission. Domestic
workers are included in terms of the UIF since the amendments of April
2003.
6.E.
Share Ownership
Almost
all of Naspers’ executive directors and senior management participate in the
Naspers share incentive scheme. A number also participate in one or more of
the
various share incentive schemes Naspers operates at a subsidiary level, most
notably the MIH Holdings and MIH (BVI) Limited share incentive schemes. Pursuant
to a resolution of Naspers shareholders taken on September 3, 2004, the total
number of Class N ordinary shares, having regard to the number of Class N
ordinary shares allocated to but not yet released to participants under the
various share incentive schemes, shall not in the aggregate at any given time
exceed 11% of the total issued Class N ordinary shares then in
issue.
The
trustees of the share incentive schemes may at any time, with the agreement
of
the beneficiaries, cancel any acquisition of scheme shares to the extent that
delivery of the scheme shares has not yet occurred. In circumstances where
the
acquisition price (as defined in the share scheme) of scheme shares is
substantially higher than the current market price thereof, the trustees may
in
their discretion determine that the current awards no longer serve as an
incentive to beneficiaries and that they should be cancelled as permitted by
the
share scheme.
Upon
the
completion of the Naspers reorganization in 2002 (see “Item 4.A. History and
Development”), the rights previously granted to employees to purchase MIH
Limited Class A ordinary shares under the MIH Limited Share Trust were converted
into a right to purchase 3.5 Class N ordinary shares or 0.35 Naspers ADSs,
as
the case may be, for each MIH Limited Class A ordinary share an employee would
otherwise have been entitled to acquire. In addition, upon completion of the
scheme of arrangement between Naspers and MIH Holdings (see “Item 4.A. History
and Development”), the rights granted to employees to purchase MIH Holdings
ordinary shares under the MIH Holdings Limited Share Trust were converted into
a
right to purchase one Class N ordinary share for every 2.25 MIH Holdings
ordinary shares an employee would otherwise have been entitled to acquire.
The
MIH Limited and MIH Holdings trust deeds have been amended to reflect the
changes to each share scheme resulting from the reorganization.
In
April
2004, upon completion of the schemes of arrangement between Naspers, M-Net
and
SuperSport, the rights granted to employees to purchase M-Net and SuperSport
ordinary shares under the Electronic Media Network Limited Share Trust and
SuperSport International Holdings Limited Share Trust respectively, were
converted into a right to purchase one Class N ordinary share for every 4.5
M-Net/SuperSport linked unit an employee would otherwise have been entitled
to
acquire. The
Electronic Media Network Limited Trust and SuperSport
International Holdings Limited Share Trust deeds have been amended to reflect
the changes to each share scheme resulting from the scheme of arrangement.
The
aggregate number of Class N ordinary shares allocated to the executive directors
and senior management, participating in the group’s share incentive plans at
March 31, 2006 was 13,200,771 at purchase prices ranging from Rand 28.81 to
Rand
123.50 and vesting periods until March 22, 2011.
Naspers
Share Incentive Scheme
Pursuant
to the deed constituting the Naspers Limited Share Trust, Naspers established
the Naspers Limited Share Scheme on August 14, 1987, and appointed trustees
to
administer the share scheme. The share scheme is intended to provide an
incentive to Naspers’ employees, by giving them an opportunity to acquire Class
N ordinary shares. Voting control for the Naspers Share Trust is exercised
by
two trustees. They are non-executive directors of Naspers and are not allowed
to
participate in the share incentive scheme. Naspers may allocate to the Naspers
Limited Share Trust a number of Class N ordinary shares which represent in
aggregate, no more than 11% of the total number of issued Class N ordinary
shares. These shares become “scheme shares” for the purpose of the share scheme
and an amount equal to the total consideration payable in respect of the scheme
shares is advanced by Naspers to the trust on the basis of an interest-free
loan.
Under
the
share scheme, the trustees may make offers or grant options in respect of scheme
shares to selected employees at a price equal to the higher of the nominal
value
or market price, or a price determined by the trustees within the Rules of
the
JSE. The employees are selected and the number of shares offered per participant
are determined by the trustees within an allotment structure approved by the
human resources and nomination committee of the Naspers board. Each offer sets
forth the terms on which it may be accepted. The time period for acceptance
is
usually within 30 days from the date of the offer, and the maximum period which
may be allowed for the payment of the purchase price is not later than 10 years
after the effective date of the offer. Under the share scheme, irrespective
of
whether the purchase price has been paid or not, the shares will generally
not
be released before the third, fourth and fifth anniversaries of the effective
date of the offer. The trustees may, however, in their discretion allow earlier
release dates.
MIH
Limited Share Incentive Scheme
Pursuant
to the deed constituting the MIH Limited Share Trust, MIH Limited established
the MIH Limited share scheme on March 25, 1999, and appointed trustees to
administer the share scheme. MIH Limited could allocate to the trust a number
of
Class A Ordinary Shares which represented, in aggregate, no more than 10% of
the
total issued share capital of MIH Limited. Voting control for the trust was
exercised by the trustees who were independent of the Naspers group. Class
A
ordinary shares which were allotted to the Trust for the purpose of the share
scheme become “scheme shares” and an amount equal to the total consideration
payable in respect of the scheme shares was advanced by MIH Limited to the
Trust
as an interest-free loan. Under the share scheme, the trustees offered or
granted options in respect of MIH Limited shares to selected employees at a
price determined by the trustees in accordance with the provisions of the trust
deed, which price was the market value on the day on which an offer was made
to
an employee. The employees were selected and the number of shares was determined
by the compensation committee of the MIH Limited board, which advised the
trustees accordingly.
Each
offer set forth the terms on which it could be accepted. The time period for
acceptance was usually within 14 days from the date of the offer, and the
maximum period which could be allowed for the payment of the purchase price
was
5 years and 105 days from the effective date of the offer (where a beneficiary
was a resident, for taxation purposes, in the Netherlands) or not later than
10
years after the effective date of the offer (in the case of all other
beneficiaries). Under the share scheme, the purchase price could not be paid
before the third and fourth anniversaries, respectively, of the date on which
the offer was made and then not in respect of more than one-third and two-thirds
respectively of the shares subject to the offer. After the fifth anniversary
of
the offer date, the purchase price could be paid in respect of all the shares
subject to the offer. The trustees could, however, in their discretion allow
earlier payment dates.
Similarly,
each option set out the terms on which it could be exercised. The maximum period
which could be allowed for the exercise of an option was 5 years and 105 days
from the date the option was granted (where the beneficiary is a resident,
for
taxation purposes, in the Netherlands) or not later than 10 years after the
date
the option was granted (in the case of all other beneficiaries). However,
options were generally exercisable immediately on (or within a short period
after) the date on which they were granted. The implementation of the resulting
contract (being the payment of the purchase price against delivery) could not
be
effected before the third and fourth anniversaries, respectively, of the grant
date and then not in respect of more than one-third and two-thirds,
respectively, of the shares subject to the option. After the fifth anniversary
of the option date, the contract
could
be
implemented in respect of all the shares subject to the option. The trustees
could, however, in their discretion allow earlier implementation.
Upon
completion of the merger between MIH Limited and MIH (BVI) Limited as part
of
Naspers’ 2002 reorganization, the share scheme and the underlying trust deed
were amended so that, among other things, the shares in MIH Limited held by
the
trustees were exchanged for Class N ordinary shares and Naspers ADSs, and the
name of the trust was changed to the MIH (BVI) Limited Share Trust. The rights
of participating employees to acquire Class A ordinary shares in MIH Limited
have been substituted by rights to acquire either Class N ordinary shares or
Naspers ADSs in the manner set out above. The trustees may offer or grant
options in respect of Class N ordinary shares or Naspers ADSs to selected
qualifying employees.
On
July 1, 2003 the trustees gave all MIH Limited share scheme participants an
opportunity to convert their Naspers ADSs, listed on Nasdaq and payable in
U.S.
dollars, to Class N ordinary shares listed on the JSE and payable in Rand,
and
their Class N ordinary shares payable in U.S. dollar to being payable in
Rand.
MIH
Holdings Share Incentive Scheme
The
MIH
Holdings share scheme, which operates in a similar manner to the MIH (BVI)
Limited share scheme, was amended upon completion of the Naspers 2002
reorganization so that the shares underlying the scheme are currently Class
N
ordinary shares in Naspers rather than shares in MIH Holdings.
The
MIH
Holdings share trust has three trustees; one is a non-executive director of
Naspers, one is an executive director of Naspers and one is independent of
the
Naspers group. Voting control is exercised by the trustees.
Historically
Mr. Pacak has been a participant under the MIH Holdings Share Incentive Scheme.
In December 2002, Naspers Limited acquired all the MIH Holdings ordinary shares
held by the MIH Holdings Share Trust in exchange for Naspers Class N ordinary
shares. Participants exchanged their rights to MIH Holdings shares for Naspers
Class N ordinary shares. On July 22, 2005, 44,444 Naspers Class N ordinary
shares were delivered to Mr. Pacak upon payment of the amount at an average
price of Rand 13.64 per share and on the same day, 5,333 Naspers N ordinary
shares were delivered to Mr. Pacak upon payment of the amount at an average
price of Rand 20.05 per share (the original average offer prices based on the
listed market prices of MIH Holdings shares on the date of the offers) due
to
the MIH Holdings Share Trust. The closing price of a Naspers share on July
22,
2005 was Rand 92.35. Mr. Pacak still owns these shares. At March 31, 2006,
a
total of 66,531 (2005: 116,308) Naspers Class N ordinary shares had been
allocated to Mr. Pacak with vesting periods until February 18,
2007.
SuperSport
Share Incentive Scheme
Pursuant
to the Naspers 2002 reorganization, SuperSport received Class N ordinary shares
which it distributed to its shareholders by way of a capital reduction, in
the
ratio of 4.2365 Class N ordinary shares for every 100 SuperSport shares.
SuperSport share incentive scheme participants also participated in the
distribution of Class N ordinary shares in proportion to the SuperSport options
they already held on the distribution date.
The
SuperSport Share Incentive Scheme was amended upon completion of the scheme
of
arrangement in April 2004, so that the shares underlying the scheme are
currently Class N ordinary shares in Naspers rather than shares in SuperSport
International Holdings Limited.
The
SuperSport Share Trust has two trustees; one is an executive director of Naspers
and one is independent of Naspers. Voting control is exercised by the
trustees.
Historically
Mr. Pacak has been a participant under the SuperSport Share Incentive Scheme.
In
March 2003 SuperSport completed a capital reduction, in terms of which Naspers
Class N ordinary shares were distributed to its shareholders, including the
SuperSport Share Incentive Trust. In terms of his participation in the
SuperSport Share Incentive Scheme, 2,119 Naspers Class N ordinary shares have
been allocated to Mr. Pacak with vesting periods until August 26,
2004.
In
March
2004 Naspers Limited acquired all the SuperSport ordinary shares held by the
SuperSport Share Incentive Trust in exchange for Naspers Class N ordinary
shares. Participants could exchange their rights to SuperSport shares for
Naspers Class N ordinary shares. A total of 5,305 Naspers Class N ordinary
shares have been allocated to Mr. Pacak with vesting periods until August 26,
2004.
M-Net
Share Incentive Scheme
The
M-Net
Share Incentive Scheme was amended upon completion of the scheme of arrangement
in April 2004, so that the shares underlying the scheme are currently Class
N
ordinary shares in Naspers rather than shares in M-Net.
The
M-Net
Share Trust has three trustees; one is a non-executive director of Naspers,
one
an executive director of Naspers and one is independent of Naspers. Voting
control is exercised by the trustees.
Historically
Mr. Pacak has been a participant under the M-Net Share Incentive Scheme. In
March 2004 Naspers Limited acquired all the M-Net ordinary shares held by the
M-Net Share Incentive Trust in exchange for Naspers Class N ordinary shares.
Participants could exchange their rights to M-Net shares for Naspers Class
N
ordinary shares. A total of 5,805 Naspers Class N ordinary shares have been
allocated to Mr. Pacak with vesting periods until August 26, 2004.
Share
Holdings
The
directors of Naspers beneficially and non-beneficially owned the following
interests in Class A and Class N ordinary shares as of March 31,
2006:
|
|
Class
N ordinary shares
|
|
Class
A ordinary shares
|
|
|
|
|
|
|
|
Ton
Vosloo
|
|
275,000
|
|
—
|
|
Koos
Bekker
|
|
4,917,316(1)
|
|
—
|
|
Steve
Pacak
|
|
508,484(2)
|
|
—
|
|
Boetie
van Zyl
|
|
|
224,154
|
|
|
745
|
|
Lourens
Jonker
|
|
|
68,000
|
|
|
—
|
|
Neil
van Heerden
|
|
|
1,300
|
|
|
—
|
|
Ben
van der Ross
|
|
|
—
|
|
|
—
|
|
Prof.
Jakes Gerwel
|
|
|
—
|
|
|
—
|
|
Prof.
Hein Willemse
|
|
|
—
|
|
|
—
|
|
Adv.
Francine-Ann du Plessis
|
|
|
500
|
|
|
—
|
|
Prof.
Rachel Jafta
|
|
|
—
|
|
|
—
|
|
Fred
Phaswana
|
|
|
630
|
|
|
—
|
|
Directors
as a group
|
|
|
10,634,889(3)
|
|
|
570,089(4)(5)
|
|
__________
(1) |
Vested
Class N ordinary shares in the Naspers Share Incentive Scheme which
have
reached a vesting date.
|
(2) |
This
includes 266,666 vested Class N ordinary shares in the Naspers Share
Incentive Scheme which have reached a vesting
date.
|
(3) |
This
includes 4,639,505 Class N ordinary shares (excluding the shareholdings
listed in note 1 and 2 above) held by the Naspers Share Incentive
Trust,
which shares may be considered to be beneficially owned by two directors
of Naspers since these directors are also trustees of the Naspers
Share
Incentive Trust. In terms of the regulations of the JSE, the Naspers
Share
Incentive Trust is prohibited from voting in respect of certain types
of
shareholder resolutions.
|
(4) |
This
includes the 569,344 Class A ordinary shares held by Naspers Beleggings
Limited and Keeromstraat 30 Beleggings Limited, which shares may
be
considered to be beneficially owned by certain directors of Naspers
since
those directors are also directors of such entities and have voting
power over these shares.
|
(5) |
As
publicly announced, an agreement was reached in terms of which Sanlam
Limited (“Sanlam”) sold 168,605 Naspers Beleggings Limited ordinary
shares, 16,860,500 Keeromstraat 30 Beleggings Limited ordinary shares
and
133,350 Naspers Class A ordinary shares into a new entity,
Wheatfields 221 (Proprietary) Limited (“Wheatfields”). Sanlam owns 50% of
Wheatfields, while Mr JP Bekker acquired an indirect 25% interest
in
Wheatfields.
|
ITEM
7. MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS
7.A.
Major Shareholders
Naspers’
capital stock consists of Class A ordinary shares and Class N ordinary shares.
Certain Class N ordinary shares are represented by ADSs. As of March 31, 2006,
Naspers had 712,131 Class A ordinary shares outstanding and 315,113,700 Class
N
ordinary shares outstanding.
The
Class
N ordinary shares are listed on the JSE and carry one vote per share on a poll.
Naspers ADSs are listed on the Nasdaq Stock Market in the United States, and
holders of ADSs are entitled to the voting rights of the underlying Class N
ordinary shares, subject to certain terms of the ADSs relating to voting
procedures. From July 15, 2005, 1 ADS represents 1 class N ordinary share.
The
Class A ordinary shares are not listed on any stock exchange and carry 1,000
votes per share on a poll. The holders of the Class A ordinary shares
collectively hold 69.3% of Naspers’ total voting rights. Naspers, through
Heemstede Beleggings (Proprietary) Limited, a wholly owned subsidiary of
Naspers, holds 49% of Naspers Beleggings Limited which, in turn, holds 49.15%
of
Class A ordinary shares. Keeromstraat 30 Beleggings Limited holds 30.80% of
Class A ordinary shares. The members of the boards of directors of Keeromstraat
30 Beleggings Limited, Naspers Beleggings Limited and Heemstede Beleggings
(Proprietary) Limited are mostly also members of the board of directors of
Naspers Limited. Therefore, Naspers’ board will determine to a large extent the
outcome of any shareholder votes.
The
following table presents, as of June 30, 2006, the beneficial ownership of
each
class of Naspers’ ordinary shares by each person or entity which, to Naspers’
knowledge, owns more than 5% or more of either class of its ordinary shares,
and
all of Naspers’ directors as a group.
Unless
otherwise indicated, to Naspers’ knowledge, all persons listed below have sole
voting and investment power with respect to their ordinary shares, except to
the
extent applicable law gives spouses shared authority.
BENEFICIAL
OWNER
|
|
NUMBER
OF
CLASS
A
ORDINARY
SHARES
|
|
PERCENTAGE
OF
CLASS A
ORDINARY
SHARES
|
|
NUMBER
OF
CLASS
N
ORDINARY
SHARES
|
|
PERCENTAGE
OF
CLASS N
ORDINARY
SHARES
|
|
TOTAL
VOTING
PERCENTAGE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coronation
Fund Managers(1)
|
|
|
—
|
|
|
—
|
|
|
37,595,752
|
|
|
12.20
|
%
|
|
3.66
|
%
|
Old
Mutual Asset Managers(1)
|
|
|
—
|
|
|
—
|
|
|
30,996,810
|
|
|
10.06
|
%
|
|
3.02
|
%
|
RMB
Asset Management(1)
|
|
|
—
|
|
|
—
|
|
|
22,588,646
|
|
|
7.33
|
%
|
|
2.20
|
%
|
Investec
Asset Management(1)
|
|
|
—
|
|
|
—
|
|
|
19,304,489
|
|
|
6.26
|
%
|
|
1.88
|
%
|
Allan
Gray Ltd(1)
|
|
|
—
|
|
|
—
|
|
|
18,709,851
|
|
|
6.07
|
%
|
|
1.82
|
%
|
Sanlam
Investment Management(1)(2)(3)
|
|
|
—
|
|
|
—
|
|
|
9,240,306
|
|
|
3.00
|
%
|
|
0.90
|
%
|
Wheatfields(3)
|
|
|
133,350
|
|
|
18.73
|
%
|
|
—
|
|
|
—
|
|
|
12.98
|
%
|
Naspers
Beleggings Limited(4)
|
|
|
350,000
|
|
|
49.15
|
%
|
|
—
|
|
|
—
|
|
|
34.07
|
%
|
Keeromstraat
30 Beleggings Limited(4)
|
|
|
219,344
|
|
|
30.80
|
%
|
|
—
|
|
|
—
|
|
|
21.35
|
%
|
Directors
as a group
|
|
|
745
|
|
|
0.10
|
%
|
|
11,830,434
|
|
|
3.75
|
%
|
|
1.22
|
%
|
Total
|
|
|
703,439
|
|
|
98.78
|
%
|
|
150,266,288
|
|
|
47.69
|
%
|
|
82.03
|
%
|
___________
(1)
|
Asset
managers whose shareholdings vary between fiscal years based upon
their
own portfolio management
activities.
|
(2)
|
Mr. Boetie
van Zyl and Adv. F du Plessis, both Naspers directors, are also
directors of Sanlam Limited, the holding company of Sanlam Life Insurance
Limited of which Sanlam Investment Management (Proprietary) Limited
is a
wholly-owned subsidiary. Five directors of Sanlam Limited are also
directors of Sanlam Investment Management (Proprietary) Limited whilst
four directors of Sanlam Life Insurance Limited. are also directors
of
Sanlam Investment Management (Proprietary) Limited. Both Mr Van Zyl
and
Adv. F du Plessis are directors of Sanlam Life Insurance Limited,
as well
as Dr Wilmot James who is a director of Media24 Limited, a major
subsidiary of Naspers Limited. Adv. F-A du Plessis is a former director
of
Sanlam Investment Management (Proprietary) Limited.
|
(3)
|
During
the year, as publicly announced, a transaction took place in terms
of
which Sanlam sold its holding of Naspers Class A ordinary shares
to
Wheatfields. Sanlam owns 50% of Wheatfields which holds 18.73% of
the
Naspers Class A ordinary shares.
|
(4)
|
Naspers
directors also serve on the boards of these public
companies.
|
The
shareholders listed above do not have different voting rights than other
shareholders of the same respective class.
The
Public Investment Commission reduced their shareholding in Naspers over the
last
year. The Public Investment Commission is therefore not listed as a shareholder
holding more than 5% of Naspers’ Class N ordinary share capital. Corronation
Fund Managers and Allan Gray Limited increased their interests in Naspers during
the past year to in excess of 5% of the Class N ordinary share capital of the
group.
The
board
of directors of Naspers is not currently aware of any arrangements which may
result in a change of control of Naspers.
As
at the
end of June 2006, as far as it has been practicable for Naspers to ascertain,
there were no beneficial U.S. holders of Class A ordinary shares and there
were
342 beneficial U.S. holders of Class N ordinary shares, totaling 53,623,891
Class N ordinary shares.
7.B. Related
Party Transactions
Channel
Distribution Arrangements
Pursuant
to channel distribution agreements between MultiChoice South Africa, MultiChoice
Africa and M-Net, MultiChoice South Africa and MultiChoice Africa have the
rights to distribute the M-Net channels by analog and digital distribution
systems and the right to license the reception and distribution of, and to
market, the M-Net channels by terrestrial analog and digital satellite
distribution systems. M-Net, a joint venture company of Naspers, provides the
M-Net, KykNET, K-TV, Channel O and Movie Magic channels and has obtained the
rights to pay-television broadcast in many areas of Africa of movies from major
movie studios, including Disney, Warner Brothers, Columbia Pictures, Sony,
Miramax, Fox, Universal, MCA, Paramount, MGM and DreamWorks. Pursuant to the
M-Net channel distribution agreements, MultiChoice South Africa and MultiChoice
Africa pay M-Net fees based on subscriber numbers. Through the M-Net channel
distribution agreements, MultiChoice South Africa and MultiChoice Africa also
have the rights to distribute one of the sports channels and certain sports
programming which are provided by SuperSport. SuperSport provides its remaining
channels directly to MultiChoice South Africa and MultiChoice Africa. SuperSport
has obtained the rights to broadcast certain South African cricket leagues,
major international cricket events and the English FA Premier League. SuperSport
has also obtained rights to broadcast the South African rugby leagues and major
international rugby events. Cricket, rugby and football are three of the most
popular sports in South Africa. Pursuant to the channel distribution agreements,
MultiChoice South Africa and MultiChoice Africa pay SuperSport fees based on
subscriber numbers. During the fiscal years ended March 31, 2006 and 2005,
these
amounts paid to M-Net and SuperSport totaled approximately Rand 2,182.7 million
and Rand 1,909.9 million, respectively.
Tencent
Holdings Limited
The
group
entered into a number of intellectual property and know-how licensing agreements
with Tencent. On June 27, 2002, Tencent granted a sole and exclusive license
to
a group company to use, and to authorize its affiliates (“the operators”) which
carry on business in sub-Saharan Africa (including South Africa), Indonesia,
Thailand, Greece and Cyprus to use, certain proprietary intellectual property
and know-how of Tencent for a license fee computed at 40% of gross revenue
derived by the operators by using this proprietary information. The agreement
is
for a term of 15 years and expires in 2017.
Loans
On
September 28, 2004, MultiChoice Africa entered into a Consolidated Loan
Agreement, a Sales of Shares Agreement in MultiChoice Nigeria Limited and a
Pledge and Cession Agreement with Mr. Ogunsanya, a shareholder and director
of
MultiChoice Nigeria Limited, whereby MultiChoice Africa has lent Naira 689.6
million (approximately U.S. dollar 5.2 million) to Mr. Ogunsanya to facilitate,
amongst other things, the purchase of a further 10% shares in MultiChoice
Nigeria Limited. The loan bears interest at a rate of 10.22% per annum.
The
Consolidated Loan Agreement supersedes the Loan Agreement of June 14, 2002
between the parties. Mr. Ogunsanya has ceded all future dividends relating
to
his shares in MultiChoice Nigeria Limited (which represent a 21% interest in
MultiChoice Nigeria Limited) as security for the repayment of such loans. An
impairment charge of Rand 30.9 million was raised during fiscal 2006 against
the
outstanding balance of Rand 39.0 million as this was not deemed recoverable.
The
remaining balance of Rand 8.1 million is due by March 31, 2007.
An
advance of U.S. $0.4 million was made during the 2004 financial year to a
minority shareholder in MultiChoice Ghana Limited (“MGL”). The MGL minority
shareholders’ loan bears interest at 1% above LIBOR and is secured by a pledge
of such shareholders’ shares in MGL. There was no outstanding balance on this
advance at March 31, 2006.
M-Net
and SuperSport
On
March
31, 2003, M-Net and SuperSport ceded forward exchange contracts (“FECs”)
totaling U.S. $49.9 million at no consideration to the group. The FECs ceded
are
at an average rate of Rand 12.16 to the U.S. dollar and matured between November
28, 2003 and March 31, 2005.
M-Net
and
SuperSport reduced their capital by paying a total of Rand 84.3 million and
Rand
62.4 million respectively to their shareholders in March 2006. The group
participated in this transaction to the extent of its shareholding in M-Net
and
SuperSport.
Antenna
TV (Antenna)
In
prior
years, NetMed NV entered into agreements with Antenna for the purchase of a
5%
interest (plus a 10% option) in NetMed NV and for the right to distribute three
Antenna channels. In October 2001, Antenna completed the acquisition of 5%
of
the shares in NetMed NV for a consideration of approximately Rand 94.7 million.
Two Antenna channels were aired in the current year. On January 2, 2006, Antenna
exercised a put option to sell its stake in NetMed N.V. to Myriad International
Holdings BV at a price equal to the fair value per share. The valuation process
in respect of determining the fair value of each share was completed in July
2006.
Sanlam
In
addition to being a director of Naspers, Mr. van Zyl and Adv. du Plessis are
non-executive directors of Sanlam Limited. Sanlam Limited has three operating
subsidiaries, Santam Limited, Sanlam Life Insurance Limited and Sanlam
Investment Management (Proprietary) Limited, which provide certain services
to
Naspers in the ordinary course of business. Santam Limited provides reinsurance
services in respect of insurance policies taken out by Naspers to cover general
business risks and certain motor vehicle insurances. Sanlam Investment
Management (Proprietary) Limited indirectly holds 18.73% of Class A ordinary
shares through Wheatfields. Sanlam Investment Management (Proprietary) Limited
provides asset management services in respect of some of Naspers’ pension funds.
Mr. van Zyl and Adv du Plessis are not directors of Santam Limited nor of Sanlam
Investment Management (Proprietary) Limited. Mr. Van Zyl, Adv. du Plessis as
well as Dr. Wilmot James, who is a director of Media24, are directors of Sanlam
Life Insurance Limited. Mr. Vosloo, the chairman of Naspers, was previously
also
non-executive chairman of Sanlam Limited, but resigned on June 2, 2004. No
material services are provided by Sanlam Life Insurance Limited to
Naspers.
ABSA
In
addition to being a director of Naspers, Mr. Jonker is also a non-executive
director of ABSA Bank Limited. ABSA provides certain banking services, including
the granting of facilities and loans, to Naspers. The services provided are
neither material to Naspers nor to ABSA and are provided on customary
terms.
FirstRand
Limited
In
addition to being a director of Naspers, Mr. Van der Ross is also a
non-executive director of FirstRand Limited. FirstRand provides certain banking
services, including the granting of facilities and loans, to Naspers. The
services provided are neither material to Naspers nor to FirstRand and are
provided on customary terms.
Atlas
Properties
In
addition to being a director of Naspers, Mr. Van Zyl is also a non-executive
director of Atlas Properties Limited (“Atlas”). Atlas provides certain property
services to Naspers. The services provided are neither material to Naspers
nor
to Atlas and are provided on customary terms.
Other
In
addition to the foregoing, the Naspers group has entered into other transactions
and has other balances with related parties, including equity investors,
directors, shareholders and entities under common control. These transactions
are summarized in note 14 to Naspers’ audited consolidated financial statements.
ITEM
8. FINANCIAL
INFORMATION
8.A. Consolidated
Statements and Other Financial Information
See
“Item
18 for Naspers’ consolidated financial statements”.
Legal
Proceedings
Except
as
described below or elsewhere in this annual report, there are no legal or
arbitration proceedings pending or threatened of which Naspers is aware
involving Naspers which may have or have had a significant effect on the
financial position of Naspers taken as a whole.
In
December 2000, MultiChoice Hellas SA (“MCH”) received a tax assessment from the
Greek tax authorities for approximately €5.4 million relating to the tax
treatment of advertising and marketing costs and municipal duties. MCH
challenged the assessment and the Court of First Instance found against the
company. MCH appealed the decision and the Appeal Court found in favour of
MCH.
The tax authorities did not lodge a further appeal within the time permitted.
However, in February 2006 the tax authorities sent MCH a further assessment
for
the same amount plus arrear interest amounting to approximately €8 million. MCH
has advised the tax authorities that their claim is legally unjustified and,
in
any case, filed too late. Nevertheless, the authorities have indicated that
they
intend to pursue their claim in the Greek courts.
On
November 22, 2001 David Zietsman, Gameplan International SA (Proprietary)
Limited and Richard Clark launched proceedings against MultiChoice Africa,
M-Net
and Vodacom (Proprietary) Limited (the “Defending Companies”), for interdicts
and damages arising from alleged breaches by the Defending Companies of
confidentiality agreements relating to information which the plaintiffs maintain
had been disclosed to MultiChoice Africa. MIH Holdings was joined as a defendant
at a later stage in the proceedings. In the course of the litigation, the
plaintiffs alleged that MultiChoice Africa personnel passed information to
M-Net, MIH Holdings and OpenTV and that these companies used this information
for their own benefit and to the detriment of the plaintiffs. The plaintiffs
notified the Defending Companies on June 6, 2002 that they intend to increase
the amount claimed from approximately Rand 2.9 million to approximately Rand
118
million. If such increase is formally effected and the claimants are fully
successful in their action, then these proceedings may have a significant effect
on the financial position of Naspers. However, the proposed increase has not
yet
been formally effected and no further steps have been taken in the proceedings
by the plaintiff.
On
July
26, 2002, NetMed, Myriad International Holdings BV (“MIH BV”) and Fidelity,
among others, entered into a share subscription agreement and a share sale
agreement under which Fidelity would have acquired a 22% interest in NetMed,
for
a cash purchase price of U.S. $5 million plus a cash payment equal to an amount
which was to be calculated with reference to the value of a subscriber base
to
be acquired by NetMed. The completion of this transaction was subject to the
unconditional approval of the Greek Competition Committee before a stipulated
date. The required approval was not received within the contractually agreed
upon period and accordingly NetMed and MIH BV believe that the agreements ceased
to have any force or effect. As Fidelity disputed this, NetMed and MIH BV
initiated arbitration proceedings under the auspices of the London Court of
International Arbitration seeking confirmation from the tribunal that the
agreements had lapsed. Fidelity counterclaimed for loss and damages allegedly
suffered as a result of the actions of NetMed and MIH BV. Fidelity also
initiated legal proceedings in the South African courts against Naspers, MIH
Holdings and an employee of MIH BV claiming approximately U.S. $62 million
(alternatively, approximately U.S. $114 million) on the grounds that these
parties unlawfully caused NetMed to terminate its agreements with Fidelity,
thereby causing Fidelity financial loss. The arbitration hearings were completed
in September 2004 and an award was given in favor of NetMed and MIH BV in
December 2004. Fidelity challenged the award in the English courts, but the
challenge was dismissed on June 13, 2005. The South African proceedings have
been withdrawn.
On
March
12, 2003, Liberty Media Corporation advised the group that it is seeking
indemnification under the agreement dated August 27, 2002 whereby the group
sold
its shares in OpenTV to Liberty in respect of a claim made against OpenTV by
Thomas Weisel Partners LLC (“Weisel”). Weisel has claimed that OpenTV Inc. was
required to pay Weisel a fee of approximately U.S. $1.9 million in connection
with OpenTV’s acquisition of Wink Communications Inc.
A
claim,
first raised during fiscal 2003, from the Kenyan tax authorities that
MultiChoice Kenya should have paid VAT on its agreements with subscribers
(involving an amount of approximately U.S. $4.1 million) has been settled on
the
basis that MultiChoice Kenya pays the tax authorities 62.5 million Kenyan
Schillings (approximately U.S. $800,000).
PaySmart
Africa (Proprietary) Limited (“PaySmart”) has claimed approximately Rand 10.4
million from M-Net and Endemol South Africa Limited (“Endemol”) alleging that it
would have this amount if M-Net and Endemol had granted it the rights to provide
an SMS voting system for Big Brother Africa and Idols, two television shows,
as
allegedly contemplated in the Heads of Agreement executed by the parties in
April 2003. In February 2004, M-Net and Endemol objected to PaySmart’s
particulars of claim and since then PaySmart has not taken the proceedings
any
further.
In
late
December 2004, David Zietsman instituted an action in the South African Patent
Court against Endemol South Africa (Proprietary) Limited, M-Net, MultiChoice
South Africa, Vodacom and I-Touch South Africa (Proprietary) Limited
for
unquantified damages based on the alleged infringement by the defendants of
one
of Mr. Zietsman’s patents in the course of the Big Brother reality shows. The
defendants are all defending the action.
Call
Centre Nucleus (Proprietary) Limited (“CCN”) has claimed approximately Rand 13.5
million from M-Web Holdings arising out of the purchase by M-Web Holdings of
a
subscriber base from CCN. The matter has been referred to arbitration, but
no
further steps have been taken by CCN to proceed with the matter.
Three
former employees of the group have made claims against the Royal Bank of Canada
Trustees Limited, being the trustees of the Mindport Share Trust, alleging
that
the trustees used an incorrect valuation methodology in valuing their scheme
shares at the time of the cessation of their employment. Since these claims
were
made, one of these former employees has started legal proceedings against the
Royal Bank of Canada Trustees Limited, which proceedings are being
defended.
The
South
African Revenue Service (the “SARS”) has alleged that participants in the
Naspers and Media24 share incentive schemes should have paid additional income
taxes on gains flowing from such participation and maintained that the employer
companies in the group should have withheld such taxes. The group has operated
deferred delivery employee share incentive schemes in a consistent manner for
approximately 15 years. Based on the allegation to date, assessments have
been raised by SARS on various Naspers group companies totaling approximately
Rand 13.6 million including interest charges. Based on the facts and legal
advice received, Naspers believes that the claims of SARS are unfounded
and that no adjustment to the Naspers and Media24 share incentive schemes is
required. Naspers therefore intends to vigorously defend the assessments raised
in relation to the Naspers and Media24 share schemes, in court, if
necessary.
In
2005
MCC instituted action against Lefkoniko, a Cypriot financial institution, to
recover monies that it had invested with Lefkoniko. In order to expedite
proceedings, MCC applied for summary judgment, alleging that Lefkoniko did
not
have a proper defence to its claim. The application was heard in October 2005
and on November 11, 2005 the court gave judgment in MCC’s favour. Since then,
further proceedings have been instituted in the Cypriot courts to give effect
to
the summary judgment against Lefkoniko.
In
September 2005, Malivision SARL instituted proceedings against MultiChoice
Africa in Mali on the basis of an alleged breach by MultiChoice Africa of an
exclusive distribution contract between them. Despite the fact that the contract
stipulates South African law to govern the contract and the South African courts
to handle any disputes, the Mali court heard the matter on June 14, 2006 and
ordered MultiChoice Africa to pay Malivision CFA 400,000,000 (approximately
U.S.
$730,000). The court’s decision has been appealed and the matter is
pending.
Akani
Egoli (Proprietary) Ltd has instituted action against M-Net and Combined
Artistic Productions in the High Court of South Africa for damages of Rand
10.6
million allegedly suffered by the plaintiff as a result of an alleged defamation
in a television broadcast. On February 15, 2006, the defendants filed their
plea
and pleadings are now closed. The matter has been referred to M-Net’s
insurers.
In
February 2006, NetMed became aware of the fact that LTV, its co-shareholder
in
MultiChoice Holdings (Cyprus) Limited (“Holdings”) (which, in turn, owns the
majority of the shares in a listed entity, MCC), had entered into arrangements
with CYTA (the Cyprus Telecommunications Authority) which NetMed believed were
in conflict with LTV’s contractual obligations to NetMed, Holdings, MCC and
certain of NetMed’s affiliates, specifically such obligations as flowed from a
Shareholders’ Agreement dated June 23, 2000 between NetMed, LTV and Holdings
(“The Shareholders Agreement”), a Channel Distribution Agreement of June 21,
2004 between MCC and LTV (the “CDA”) and a programme supply agreement dated
January 1, 2004 between LTV and affiliates of NetMed ) (the “PSA”). Pursuant to
these facts various legal proceedings have been instituted against LTV in the
London Court of International Arbitration (LCIA”) and in the Cypriot courts and
are continuing.
In
March
2006, LTV proposed a public offer offering the shareholders of MCC to acquire
their shares in MCC either for cash or for shares in LTV. The public offer
was
conditional, inter alia, upon the Competition Commission of Cyprus (“CPC”)
declaring the CDA and the non-compete provisions in the Shareholders’ Agreement
to be invalid. On June 2, 2006 the CPC duly declared the entire Shareholders
Agreement and the CDA invalid. As the conditions were fulfilled, the public
offer became effective and acceptances from minority shareholders have resulted
in LTV having an effective economic interest of more than 48% in
MCC.
On
February 23, 2006, NetMed Hellas Pay TV SA filed a request for arbitration
under
the auspices of the LCIA against the Greek football club PAE Akratitos
(“Akratitos”) on the basis that Akratitos had breached its TV Rights Agreement
with NetMed Hellas. The claimant maintains that Akratitos has breached the
agreement and seeks specific performance and damages from
Akratitos.
MCA
is
pursuing a claim against four former employees who defrauded the company through
manipulating the IBS Billing System and collecting subscriptions for their
own
account – the
amount claimed is approximately Rand 11 million. Bank accounts of the defendants
in the United Kingdom and Jersey have been frozen. The matter is
pending.
Touchline
Media (Proprietary) Ltd, a subsidiary of Media24, is a defendant in a defamation
claim for damages for an amount of Rand 12 million (increased from a previous
Rand 8 million). The claim results from articles and statements published in
a
magazine. The action is currently pending before a South African
court.
Onshelf
Trading Forth Floor (Proprietary) Ltd t/a Mail and Guardian Online (“Onshelf”)
in which M-Web South Africa has a 65% shareholding, which had sold its Q
business to Q-Online (Proprietary) Ltd, issued summons in the South African
High
Court against Q-Online for the payment of an outstanding portion of the purchase
price of Rand 200,000. Q-Online then instituted a counterclaim for specific
performance of the sale agreement and damages of between Rand 11.0 million
and
Rand 13.0 million. The litigation has reached the stage where the parties have
exchanged discovery affidavits. M-Web believes that the damages claim is grossly
inflated.
Dividend
Policy
Either
Naspers’ shareholders in general meeting or its board of directors may from time
to time declare that final dividends and interim dividends are to be paid to
one
or more class or classes of shareholders. Naspers’ shareholders in general
meeting may not declare a dividend in excess of the amount recommended by the
board of directors.
Dividends
are payable to persons registered as shareholders on a date determined by
Naspers’ shareholders in a general meeting or by the board. This date may not be
less than 14 days after the date of the publication of the announcement of
the
dividend, provided that the record date to receive the dividend is a Friday
or,
if the relevant Friday is not a business day, on the last preceding business
day. Any dividend may be paid or satisfied, either in whole or in part, by
the
distribution of specific assets as the board may determine and direct.
Any
dividend or other sum payable to a shareholder in respect of its shareholding
may be transmitted by ordinary post to the address of the shareholder recorded
in the register of shareholders or any other address provided in writing to
Naspers by the shareholder. Naspers is not responsible for any loss that may
occur when the dividend or other sum payable is transmitted to a shareholder.
Any
unclaimed dividends may be invested or otherwise utilized by the board for
Naspers’ benefit until claimed by the shareholder entitled to payment of the
dividend. Unpaid dividends do not accrue interest. The board may declare
forfeited any dividends not claimed after a period of 12 years or, if Naspers
is
to be liquidated or deregistered, a period of three years. Forfeited dividends
revert to Naspers or its nominee.
Holders
of Class A ordinary shares are entitled to nominal dividends as determined
by
the board from time to time. However, dividends declared to holders of Class
A
ordinary shares may not exceed more than one-fifth of the dividends declared
to
holders of Class N ordinary shares for the same period.
Naspers’
articles of association allow payments to be made to shareholders out of
profits, share capital or share premium, subject to certain solvency and
liquidity requirements being met by Naspers after such payment is made.
8.B. Significant
Changes
Except
as
otherwise disclosed in this annual report, no significant change in our business
or financial condition has occurred since April 1, 2006.
ITEM
9. THE
OFFER
AND LISTING
9.A.
Offer
and
Listing details
The
following table presents the high and low closing sales prices and the average
daily trading volume of Class N ordinary shares on the JSE, and Naspers ADSs
on
Nasdaq in the United States for the periods indicated.
|
|
|
|
|
Class
N Ordinary Shares
JSE
|
|
|
ADSs
Nasdaq
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Average
dailytrading volume
|
|
|
High
|
|
|
Low
|
|
|
Average
daily trading volume
|
|
|
|
|
(Rand)
|
|
|
(Rand)
|
|
|
|
|
|
(U.S.
$)
|
|
|
(U.S.
$)
|
|
|
|
|
Fiscal
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended March 31, 2002
|
|
|
33.15
|
|
|
11.90
|
|
|
294,149
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Fiscal
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended March 31, 2003
|
|
|
26.50
|
|
|
12.50
|
|
|
637,512
|
|
|
30.00
|
|
|
23.80
|
|
|
21,033
|
|
Fiscal
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter ended June 30, 2003
|
|
|
29.20
|
|
|
19.35
|
|
|
844,906
|
|
|
36.28
|
|
|
24.57
|
|
|
6,553
|
|
Second
Quarter ended September 30, 2003
|
|
|
30.00
|
|
|
25.49
|
|
|
650,814
|
|
|
40.61
|
|
|
34.00
|
|
|
4,402
|
|
Third
Quarter ended December 31, 2003
|
|
|
46.00
|
|
|
27.75
|
|
|
1,108,681
|
|
|
69.55
|
|
|
42.00
|
|
|
4,863
|
|
Fourth
Quarter ended March 31, 2004
|
|
|
47.00
|
|
|
41.10
|
|
|
1,382,428
|
|
|
69.44
|
|
|
56.44
|
|
|
4,728
|
|
Year
ended March 31, 2004
|
|
|
47.00
|
|
|
19.35
|
|
|
995,765
|
|
|
69.55
|
|
|
24.57
|
|
|
5,161
|
|
Fiscal
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter ended June 30, 2004
|
|
|
49.50
|
|
|
40.00
|
|
|
955,356
|
|
|
74.69
|
|
|
61.00
|
|
|
1,247
|
|
Second
Quarter ended September 30, 2004
|
|
|
52.00
|
|
|
42.00
|
|
|
600,736
|
|
|
80.60
|
|
|
68.50
|
|
|
1,207
|
|
Third
Quarter ended December 31, 2004
|
|
|
75.45
|
|
|
51.21
|
|
|
620,415
|
|
|
134.15
|
|
|
79.01
|
|
|
1,184
|
|
Fourth
Quarter ended March 31, 2005
|
|
|
82.00
|
|
|
65.85
|
|
|
692,910
|
|
|
138.99
|
|
|
104.00
|
|
|
2,238
|
|
Year
ended March 31, 2005
|
|
|
82.00
|
|
|
40.00
|
|
|
713,826
|
|
|
138.99
|
|
|
61.00
|
|
|
1,499
|
|
Fiscal
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter ended June 30, 2005
|
|
|
80.21
|
|
|
76.90
|
|
|
540,655
|
|
|
123.08
|
|
|
122.14
|
|
|
1,767
|
|
Second
Quarter ended September 30, 2005 (1)
|
|
|
99.85
|
|
|
97.01
|
|
|
726,081
|
|
|
29.08
|
|
|
28.61
|
|
|
5,128
|
|
Third
Quarter ended December 31, 2005
|
|
|
105.78
|
|
|
102.43
|
|
|
809,825
|
|
|
16.26
|
|
|
15.85
|
|
|
5,292
|
|
Fourth
Quarter ended March 31, 2006
|
|
|
126.53
|
|
|
122.37
|
|
|
1,187,107
|
|
|
20.51
|
|
|
20.00
|
|
|
10,043
|
|
Year
ended March 31, 2006
|
|
|
103.09
|
|
|
99.68
|
|
|
815,917
|
|
|
19.54
|
|
|
19.17
|
|
|
5,558
|
|
April
2006
|
|
|
134.44
|
|
|
129.95
|
|
|
1,118,913
|
|
|
22.10
|
|
|
21.54
|
|
|
23,543
|
|
May
2006
|
|
|
129.49
|
|
|
124.45
|
|
|
1,488,333
|
|
|
20.53
|
|
|
19.88
|
|
|
15,324
|
|
June
2006
|
|
|
122.18
|
|
|
115.69
|
|
|
1,579,986
|
|
|
17.97
|
|
|
16.79
|
|
|
17,148
|
|
July
2006
|
|
|
119.70
|
|
|
115.84
|
|
|
962,412
|
|
|
16.94
|
|
|
16.33
|
|
|
20,867
|
|
August
2006
|
|
|
121.67
|
|
|
118.60
|
|
|
825,264
|
|
|
17.35
|
|
|
16.96
|
|
|
4,095
|
|
September
2006 (until September 15, 2006)
|
|
|
125.23
|
|
|
121.24
|
|
|
766,973
|
|
|
17.19
|
|
|
16.65
|
|
|
4,447
|
|
(1) The
ratio
of Naspers Class N ordinary shares to each ADR was changed from 10 Naspers
Class
N ordinary shares for each Naspers ADR to one Naspers Class N ordinary share
for
each Naspers ADR on July 15, 2005.
9.C.
Markets
See
“-9.A. Offer and Listing Details” above.
The
principal trading market for Naspers’ Class N ordinary shares is the JSE where
the shares trade under the symbol “NPN”. ADSs, each representing ten Class N
ordinary shares, nominal value Rand 0.02 per share, were listed on Nasdaq on
December 27, 2002 and trade under the symbol “NPSN”. This ratio has been changed
to one ADS representing one Class N ordinary share on July 15,
2005.
ITEM
10. ADDITIONAL
INFORMATION
10.B. Memorandum
and Articles of Association
Naspers
incorporates by reference the information called for by Item 10.B. set forth
under “Description of Naspers Capital Stock” in its Registration Statement on
Form F-4 (Registration number 333-100938) filed on November 1, 2002. Set forth
below is additional information required by Item 10.B.
Naspers’
Purposes and Objects
Clause
2
of Naspers’ memorandum of association provides: “The main business which the
Company is to carry on is: ‘investment
in
entities with interests in print and electronic media, affiliated technological
systems and in education’”. Clause
3 of the
Memorandum of Association further provides: “The main object of the Company is:
‘to invest
in
entities with interests in print and electronic media, affiliated technological
systems and in education’”.
Conflict
of Interest
Article
49 of Naspers’ articles of association provides that a director who discloses a
material interest in a contract or arrangement with the company may, in
accordance with the Companies Act, vote with respect to such contract or
arrangement, provided that it does not relate to the regulation of an office
held by the director for remuneration, or of a position held by the director
with the company or a subsidiary of the Company.
Directors
Directors
are granted the power to borrow from the company under Article 46 of Naspers’
articles of association. Under Article 50, Directors appointed prior to October
26, 2000 are required to vacate their offices upon reaching the age of seventy
five years, and directors appointed after this date are required to vacate
their
offices upon reaching the age of seventy years. In each case the vacation of
office is effective from the date of the annual general meeting held in the
relevant year. All internal appointments must also be re-appointed by the
shareholders at the subsequent annual general meeting.
Dividends
For
information on dividends, see “Item 8.A. Financial Information - Consolidated
Statements and Other Financial Information”.
The
Shares
Shareholders’
Meetings
Under
South African law, Naspers is required to hold an annual general shareholder
meeting not more than nine months after the end of each financial year and
not
later than 15 months after the date of it’s most recent annual general
shareholder meeting. The Listing Rules of the JSE require that notice of an
annual general shareholder meeting, accompanied by the consolidated financial
statements to be considered at such meeting, be distributed to shareholders
not
later than six months after the end of each financial year. Nasdaq listing
rules
also require an annual shareholder meeting.
The
board
has the power to convene a general shareholder meeting at any time. In addition,
the board must convene a meeting upon the request of at least 100 shareholders
entitled to vote at general meetings or upon the request of shareholders holding
not less than 5% of the votes entitled to be cast at general meetings. If the
board fails to give notice of such meeting to shareholders within 14 days of
receipt of the notice, the shareholders that requisitioned the general meeting
or any portion of them numbering more than 50 or representing more than half
of
the total voting rights of all shareholders that requisitioned the meeting,
may
themselves on no less than 21 days’ notice convene a general meeting. Any two or
more shareholders holding 10% or more of the total voting rights of Naspers
as
of the date of the request may convene a general meeting of Naspers’
shareholders without reference to the directors.
Naspers
is required to provide at least 21 days’ notice of any annual general
shareholder meeting or any general shareholder meeting where a special
resolution is to be voted upon, and at least 14 days’ notice of all other
general shareholder meetings.
Naspers’
articles of association require that any notice of general shareholder meetings
be in writing and specify the place, date and time of the meeting and the
matters to be considered. For such time as Naspers is primarily listed on the
JSE, any notice to shareholders must be given simultaneously to the Manager
(Listings) of the JSE.
A
shareholder is entitled to appoint a proxy (which person is not required to
be
another shareholder) to represent and vote on behalf of the shareholder at
any
general shareholder meeting, including the annual general shareholder meeting
of
Naspers in accordance with South African law.
Business
may not be transacted at any general shareholder meeting, including the annual
general meeting, unless a quorum is present. Unless the shareholders at a
general meeting resolve that a higher quorum is required, under South African
law shareholders holding not less than 25% of the total votes entitled to be
cast at the general meeting are required to be present, in person or by proxy,
to constitute a quorum for passing special resolutions, provided that if the
rights of any specific class of share are amended or canceled, at least three
shareholders holding at least one-third of the issued shares of that class
must
be present to constitute a quorum at a meeting of shareholders of that class
called to approve such amendment or cancellation. In all other cases, three
shareholders entitled to vote at the general meeting must be personally present
at the general meeting to form a quorum.
Naspers
applied for and received exemption from Nasdaq Marketplace Rule 4350(f) relating
to quorum requirements, as Rule 4350(f) is contrary to generally accepted
business practices in South Africa. The listing requirements of the JSE rely
on
the quorum requirements for public companies as set out in the Companies Act,
which requirements are set out in the paragraph above.
If
a
quorum is not present within 30 minutes from the time appointed for the general
shareholder meeting to commence, the general meeting will stand adjourned to
the
same calendar day in the next week, or if that day is a public holiday, the
next
calendar day which is not a public holiday, at the same time and place.
Voting
Rights
Under
South African law, subject to any rights or restrictions attached to any class
of ordinary shares, every shareholder present and entitled to vote as a member
or as proxy or as a representative in the case of a body corporate member,
at
any shareholders’ meeting will have one vote if the vote is conducted by way of
a show of hands. In the case of a poll, any holder of Class N ordinary shares
present, in person or by proxy, will have one vote for each Class N ordinary
share held by such shareholder, and holders of Class A ordinary shares present,
in person or by proxy, will have 1,000 votes for every Class A ordinary share
held by such shareholder. A “poll” is voting by means of a ballot where the
number of shares held by each voting shareholder is counted, as opposed to
voting by way of a show of hands where the actual number of shares held by
voting shareholders is not taken into account.
Voting
will take place by way of a show of hands unless a poll is demanded. A poll
may
be demanded by the chairman, by not less than five shareholders having the
right
to vote at such meeting, by shareholders representing not less than one-tenth
of
the total voting rights of all shareholders having the right to vote at the
meeting or by shareholders entitled to vote at the meeting and holding in the
aggregate not less than one-tenth of the issued share capital of the company.
Holders
of Class A ordinary shares and Class N ordinary shares vote together as a single
class, unless the relevant resolution affects the rights of the holders of
the
Class N ordinary shares or Class A ordinary shares as a separate class, in
which
case, at least 75% of the holders of the relevant class present or represented
at any meeting called to vote on such resolution must approve the resolution.
Dividends
Either
Naspers’ shareholders in general meeting or its board of directors may from time
to time declare that final dividends and interim dividends are to be paid to
one
or more class or classes of shareholders. Naspers’ shareholders in general
meeting may not declare a dividend in excess of the amount recommended by the
board.
Dividends
are payable to persons registered as shareholders on a date determined by
Naspers’ shareholders in a general meeting or by the board. This date may not be
less than 14 days after the date of the publication of the announcement of
the
dividend, provided that the record date to receive the dividend is a Friday
or,
if the relevant Friday is not a business day, on the last preceding business
day. Any dividend may be paid or satisfied, either in whole or in part, by
the
distribution of specific assets as the board may determine and direct.
Any dividend or other sum payable to a shareholder in respect of its
shareholding may be transmitted by ordinary post to the address of the
shareholder recorded in the register of shareholders or any other address
provided in writing to Naspers by the shareholder. Naspers is not responsible
for any loss that may occur when the dividend or other sum payable is
transmitted to a shareholder.
Any
unclaimed dividends may be invested or otherwise utilized by the board for
Naspers’ benefit until claimed by the shareholder entitled to payment of the
dividend. Unpaid dividends do not accrue interest. The board may declare
forfeited any dividends not claimed after a period of 12 years or, if Naspers
is
to be liquidated or deregistered, a period of three years. Forfeited dividends
revert to Naspers or its nominee.
Holders
of Class A ordinary shares are entitled to nominal dividends as determined
by
the board from time to time. However, dividends declared to holders of Class
A
ordinary shares may not exceed more than one-fifth of the dividends declared
to
holders of Class N ordinary shares for the same period.
Naspers’
articles of association allow payments to be made to shareholders out of
profits, share capital or share premium, subject to certain solvency and
liquidity requirements being met by Naspers after such payment is made.
Changes
in Share Capital
Subject
to the provisions of the Companies Act, Naspers’ shareholders may by special
resolution:
·
|
|
increase
Naspers’ share capital by creating new shares having a stated par value,
or increase the number of no par value shares by creating new no
par value
shares;
|
|
|
|
·
|
|
increase
Naspers’ share capital constituted by no par value shares by transferring
profits or reserves to the stated capital, with or without a distribution
of shares;
|
|
|
|
·
|
|
consolidate
and divide all or any part of Naspers’ share capital into shares of a
larger amount than its existing shares, or consolidate and reduce
the
number of the issued no par value shares;
|
|
|
|
·
|
|
increase
the number of Naspers’ issued no par value shares without an increase of
its stated capital;
|
|
|
|
·
|
|
sub-divide
all or some of Naspers’ shares into shares of a smaller amount than is
fixed by Naspers’ memorandum of association;
|
|
|
|
·
|
|
convert
all Naspers’ ordinary or preference share capital consisting of par value
shares into stated capital constituted by no par value shares;
|
|
|
|
·
|
|
convert
Naspers’ stated capital constituted either by ordinary or preference no
par value shares into share capital consisting of par value shares;
|
|
|
|
·
|
|
cancel
shares which, as of the date of the resolution in respect thereof,
have
not been taken up by or agreed to be taken up by any person, and
diminish
the amount of Naspers’ authorized share capital by the amount of the
shares cancelled;
|
|
|
|
·
|
|
cancel
no par value shares which have not been taken up or agreed to be
taken up
by any person;
|
|
|
|
·
|
|
convert
any of Naspers’ shares, whether or not issued, into shares of another
class;
|
|
|
|
·
|
|
subject
to the Listing Rules of the JSE, decrease its share capital, any
share
premium account, stated capital or capital redemption reserve fund;
and
|
|
|
|
·
|
|
convert
all or any of its paid-up shares into stock and reconvert such
stock into
paid-up shares.
|
|
|
|
The
Listings Rules impose a number of requirements on Naspers to remain listed
on
the Main Board of the JSE. The requirements mean, among other things that:
· |
the
subscribed capital, including reserves, must amount to at least Rand
25
million;
|
· |
not
less than 25 million equity shares must be in issue;
|
· |
20%
of each class of listed equity shares must be held by the public
(as
defined); and
|
· |
the
number of public shareholders (as defined), excluding employees,
directors
and their associates, of listed securities must be at least 500 for
equity
shares, 50 for preference shares and 25 for debentures.
|
The
Nasdaq Stock Market listing rules further require that shareholder approval
for
the issuance of shares is generally required with respect to the
following:
· |
for
the establishment or material amendment of stock option or purchase
plans
for the benefit of officers, directors, employees or
consultants
|
· |
when
the issuance or potential issuance will result in a change of control
of
Naspers
|
· |
the
acquisition of stock or assets of another company if (i) a director,
officer or 5% shareholder of Naspers has an interest in 5% or more
of the
target company or consideration to be paid for the target company,
and the
issuance of securities will increase outstanding ordinary shares
or voting
power by 5% or more; or (ii) the proposed issuance constitutes an
increase
of greater than 20% in the voting power or number of ordinary shares
|
· |
private
placements of greater than 20% of the voting power or number of ordinary
shares conducted for a price at less than the greater of either market
or
book value.
|
Liquidation
Rights
If
Naspers is liquidated, whether voluntarily or compulsorily, the assets remaining
after the payment of all Naspers’ liabilities and the cost of winding up shall
be distributed among the shareholders as follows:
· |
holders
of Class A ordinary shares and the holders of Class N ordinary shares
will
be entitled to receive payment out of the surplus of an amount equal
to
the nominal value of the Class A ordinary shares and Class N ordinary
shares held by them; and
|
· |
thereafter,
holders of Class A and Class N ordinary shares in Naspers will rank
equally with each other and any remaining surplus will be distributed
among them in proportion to the number of shares respectively held
by
them.
|
Any
such
distribution will be subject to the rights of any shareholders to whom shares
have been issued on special conditions and subject to Naspers’ right to set-off
against the liability, if any, of shareholders for unpaid capital or premium.
The
liquidator may distribute among Naspers’ shareholders, in specie or in kind, all
or any part of the assets of Naspers, whether or not those assets consist of
different types of property.
For
additional information on Naspers’ shares see “Item 6. Directors, Senior
Management and Employees”.
10.C. Material
Contracts
Investment
in Abril SA
On
May 5,
2006 MIH (UBC) Holdings BV (now renamed MIH Brazil Holdings BV) (“MBH”), a
wholly owned indirect subsidiary of Naspers, acquired an equity stake of 30%
in
Abril SA, a Brazilian media company, for a total consideration in Brazilian
Reais equivalent to approximately Rand 2,557.3 million, through a combination
of
a subscription for newly issued shares
of
common stock and shares of preferred stock and the purchase of shares of common
stock and shares of preferred stock from Ativic SA, certain individual
shareholders and two subsidiaries of Capital International, being Brazil April
LLC and Brazil May LLC. The acquisition was implemented through (i) a
Subscription Agreement between Abril SA, MBH, Mr Roberto Civita and Mr Giancarlo
Civita, (ii) a Stock Purchase Agreement between MBH, Mr Roberto Civita, Mr
Giancarlo Civita, Mr Victor Civita and Ms Roberta Civita, and (iii) a Stock
Purchase Agreement, between MIH Brazil Participacoes Ltda (a wholly owned
indirect subsidiary of Naspers) (“MBPL”), Brazil LLC and Brazil May
LLC.
10.D. Exchange
Controls
The
following discussion summarizes exchange controls in force in South Africa
as of
the date of this annual report. South Africa’s exchange controls may change at
any time. Naspers cannot predict whether the existing exchange controls will
be
continued, amended or abolished by any future South African government. You
are
urged to consult a professional adviser about the effect of exchange controls
on
your investment in Class N ordinary shares or Naspers ADSs.
The
Currency and Exchanges Act, 1933 empowers the South African President to make
regulations concerning any matter directly or indirectly affecting or relating
to currency, banking or stock exchanges in South Africa. South African exchange
control regulations are administered by the South African Reserve Bank acting
through its Exchange Control Department (“Excon”). Excon’s stated objective is
to achieve equality of treatment between residents and non-residents in relation
to the flow of capital in and out of South Africa. The exchange control
regulations provide for a common monetary area consisting of South Africa,
the
Kingdom of Lesotho, the Kingdom of Swaziland and the Republic of Namibia. The
regulations restrict the export of capital from the common monetary area.
The
purpose of the exchange controls is to mitigate the decline in foreign capital
reserves in South Africa and the devaluation of the Rand against the U.S. dollar
and South Africa’s other principal trading currencies. Although the South
African government has committed itself to gradually relaxing exchange controls
and has recently reaffirmed this commitment, it is likely that exchange controls
will continue to operate in South Africa for the foreseeable future.
An
acquisition of shares or assets of a South African company by a non-resident
purchaser solely for cash consideration would not generally be subject to review
by Excon under the exchange control regulations. An acquisition of shares or
assets of a South African company by a non-resident purchaser will require
prior
approval from Excon if the consideration paid for the acquisition is in the
form
of shares of a non-resident company or if the acquisition is financed by a
loan
from a South African resident. Denial of Excon approval may result in the
acquisition of shares or assets of a South African company by a non-resident
purchaser not being completed. There are no other exchange control restrictions
on non-residents making equity investments in South African companies; however,
there are local borrowing restrictions on controlled foreign companies.
Under
South African exchange control regulations, Class N ordinary shares and Naspers
ADSs are freely transferable outside of South Africa between non-residents
of
the common monetary area. Also, when ordinary shares are sold on the JSE on
behalf of Naspers shareholders who are not resident in the common monetary
area,
the proceeds of such sales will be freely exchangeable into foreign currency
and
may be remitted to them outside the common monetary area. Any share certificates
held by Naspers shareholders not resident in the common monetary area will
be
endorsed with the words “non-resident”. The same endorsement will not be
applicable to Naspers ADSs held by non-resident shareholders.
There
are
currently no exchange control restrictions which prevent Naspers from remitting
dividends declared out of operating profits or trading profits to non-residents
of the common monetary area. Naspers cannot, in general, remit capital profits
without prior Excon approval.
10.E. Taxation
United
States Tax Considerations
This
section sets forth the material United States Federal income tax consequences
to
U.S. Holders as they relate to the ownership and disposition of Class N ordinary
shares or Naspers ADSs.
This
section is based on the Internal Revenue Code of 1986, as amended (the “Code”),
its legislative history, existing final, temporary and proposed Treasury
Regulations, rulings and judicial decisions, all as currently in effect and
all
of which are subject to prospective and retroactive rulings and
changes.
For
purposes of this section, beneficial owners of Class N ordinary shares or
Naspers ADSs are “U.S. Holders” if they are:
· |
a
citizen or resident of the United States;
|
· |
a
corporation, or any other entity taxable as a corporation, created
under
the laws of the United States (Federal, state or District of Columbia);
|
· |
an
estate the income of which is subject to United States Federal income
tax
regardless of its source; or
|
· |
a
trust if a court within the United States is able to exercise primary
supervision over its administration and one or more United States
persons
have the authority to control all substantial decisions of the trust.
|
If
a
partnership holds Class N ordinary shares or Naspers ADSs, the tax treatment
of
a partner will generally depend upon the status of the partner and upon the
activities of the partnership. Partners of partnerships holding Class N ordinary
shares or Naspers ADSs should consult their own tax advisors.
A
holder
of Class N ordinary shares or Naspers ADSs is a “Non-U.S. Holder” if the holder
is not a U.S. Holder. Non-U.S. Holders should consult their own tax advisors
with respect to the tax consequences of ownership and disposition of Class
N
ordinary shares or Naspers ADSs.
This
section does not purport to address all United States Federal income tax
consequences that may be relevant to a particular shareholder and holders are
urged to consult their own tax advisors regarding their specific tax situation.
This section applies only to shareholders who hold their Class N ordinary shares
or Naspers ADSs as “capital assets” (generally, property held for investment)
under the Code, and does not address the tax consequences that may be relevant
to shareholders in special tax situations including, for example:
· |
tax-exempt
organizations;
|
· |
traders
in securities that elect to mark to market;
|
· |
banks
or other financial institutions;
|
· |
shareholders
whose functional currency is not the U.S. dollar;
|
· |
United
States expatriates;
|
· |
shareholders
that hold their shares as part of a hedge, straddle, constructive
sale or
conversion transaction;
|
· |
shareholders
that own, directly, indirectly, or constructively 10% or more of
the total
combined voting power of Naspers; or
|
· |
shareholders
that are subject to the alternative minimum tax.
|
This
section expressly assumes that Naspers is not a passive foreign investment
company for United States Federal income tax purposes. Please see the discussion
under “Passive Foreign Investment Company Rules” below.
In
general, for United States Federal income tax purposes and for purposes of
income tax treaties, beneficial owners of Naspers ADSs will be treated as the
beneficial owners of the Class N ordinary shares represented by those ADSs.
This
section does not address the state, local and non-United States tax consequences
relating to shares. You should consult your own tax advisor regarding the United
States Federal, state, local and foreign and other tax consequences of share
ownership in your particular circumstances.
Ownership
and Disposition of Class N Ordinary Shares or Naspers ADSs
Taxation
of Dividends.
The
gross amount of a distribution made by Naspers, including any amounts of South
African tax withheld, will be taxable to a U.S. Holder to the extent that such
distribution is paid out of Naspers’ current or accumulated earnings and profits
(“E&P”), as determined for United States Federal income tax purposes. Under
recently enacted legislation, if these dividends constitute qualified dividend
income (“QDI”), individual United States Holders will generally pay tax on such
dividends received during taxable years prior to 2011 at a maximum rate of
15%,
provided that certain holding period requirements are satisfied. Dividends
paid
by Naspers will be QDI if Naspers is a Qualified Foreign Corporation (“QFC”) at
the time the dividends are paid. Naspers believes that it is currently, and
will
continue to be, a QFC so as to allow all dividends paid to be QDI for United
States Federal income tax purposes. Corporate U.S. Holders receiving dividends
paid by Naspers will not benefit from the reduced tax rate on dividends
available to individual U.S. Holders. Because Naspers is not a United States
corporation, dividends paid will not be eligible for the dividends received
deduction generally allowable to corporations under the Code.
To
the
extent that distributions by Naspers exceed E&P, such distributions will be
treated as a tax-free return of capital, to the extent of each U.S. Holder’s
basis in Class N ordinary Shares or Naspers ADSs, and will reduce such U.S.
Holder’s basis in the Class N ordinary Shares or Naspers ADSs on a U.S.
dollar-for-U.S. dollar basis (thereby increasing any gain or decreasing any
loss
on a disposition of the Class N ordinary Shares or Naspers ADSs). To the extent
that the distributions exceed the U.S. Holder’s basis in the Class N ordinary
Shares or Naspers ADSs, each such holder will be taxed as having recognized
gain
on the sale or disposition of the Class N ordinary Shares or Naspers ADSs (see
“Tax on Sale or Exchange of Ordinary Shares or ADSs” below).
The
amount of a distribution will be the U.S. dollar value of the Rand payment,
determined at the spot Rand/U.S. dollar rate on the date the dividend is
includible in a U.S. Holder’s income, regardless of whether the payment in fact
is converted into U.S. dollars. Generally, any gain or loss resulting from
currency fluctuations during the period from the date a U.S. Holder includes
the
dividend in income to the date such U.S. Holder (or a third party acting for
such U.S. Holder) converts the payment into U.S. dollars will be treated as
ordinary income or loss. Any such income or loss generally will be income or
loss from sources within the United States for foreign tax credit purposes.
A
U.S.
Holder will be entitled to claim a foreign tax credit with respect to
distributions received from Naspers for foreign taxes (such as South African
withholding taxes) imposed on dividends paid to such U.S. Holder but not for
taxes imposed on Naspers or on any entity in which Naspers has made an
investment. As discussed below, under current South African legislation, no
South African tax will be withheld from dividends paid to non-residents of
South
Africa. Please see the discussion under “South African Tax
Considerations—Ownership and Disposition of Class N Ordinary Shares and Naspers
ADSs—Tax on Dividends” below.
Tax
on Sale or Exchange of Ordinary Shares or ADSs.
A U.S.
Holder will recognize gain or loss on a sale, exchange or other disposition
of
the Class N ordinary shares or ADSs, unless a specific nonrecognition provision
applies. That gain or loss will be measured by the difference between the U.S.
dollar value of the amount of cash, and the fair market value of any other
property received, and the U.S. Holder’s tax basis in the Class N ordinary
shares or ADSs as determined in U.S. dollars. A U.S. Holder’s tax basis in the
Class N ordinary shares or ADSs will generally equal the amount paid by the
U.S.
Holder for the ordinary shares or ADSs. Gain or loss arising from a sale or
exchange of Class N ordinary shares or ADSs will be capital gain or loss and
will be long-term capital gain or loss if the holding period of the U.S. Holder
for the Class N ordinary shares or ADSs exceeds one year. Recently enacted
legislation also generally provides that long-term capital gains by individuals,
trusts and estates are subject to Federal income taxes at a maximum rate of
15%
for taxable years beginning before January 1, 2011 (20% thereafter). In general,
gain from a sale or exchange of shares by a U.S. Holder will be treated as
United States source income for foreign tax credit purposes.
Passive
Foreign Investment Company Rules.
U.S.
Holders might be subject to a special, adverse tax regime that would differ
in
certain respects from the tax treatment described above, if Naspers is, or
were
to become, a passive foreign investment company (“PFIC”) for United States
Federal income tax purposes. Although the determination of whether a corporation
is a PFIC is made annually, and therefore is subject to change, Naspers does
not
believe that it is, nor does Naspers expect to become, a PFIC for United States
Federal income tax purposes. You should consult your own tax advisor regarding
the adverse tax consequences of owning the ordinary shares or ADSs of a PFIC
and
making certain elections designed to ameliorate those adverse
consequences.
U.S.
Backup Withholding and Information Reporting.
Proceeds from the sale of, and dividends, on Class N ordinary shares or ADSs
paid within the United States or through certain U.S. related financial
intermediaries are subject to information reporting and may be subject to backup
withholding at a rate currently equal to 28% unless the U.S.
Holder:
· |
is
a corporation or other exempt recipient; or
|
· |
provides
a taxpayer identification number and properly certifies that no loss
of
exemption from backup withholding has occurred on an IRS Form W-9.
|
Any
amount withheld from a payment to a U.S. Holder under the backup withholding
rules will be allowable as a credit against such U.S. Holder’s United States
Federal income tax liability, provided that the required information is
furnished to the IRS.
South
African Tax Considerations
This
section sets forth the material South African income tax (including capital
gains tax) consequences for South African resident holders of Class N ordinary
shares and Naspers ADSs in relation to the ownership and disposition of Class
N
ordinary shares and Naspers ADSs.
This
section is based on the South African Income Tax Act, No. 58 of 1962 (as
amended) (“the Act”), various other taxing statutes in South Africa, rulings and
judicial decisions, all as currently in effect and all of which are subject
to
prospective and/or retroactive rulings and changes.
For
the
purposes of this section, the term “South African resident” includes:
· |
any
natural person who is ordinarily resident in South Africa;
|
· |
a
natural person who is not ordinarily resident in South Africa, but
satisfies a physical presence test, which involves being present
in South
Africa for certain prescribed periods of time; and
|
· |
a
person other than a natural person, which is incorporated, established
or
formed in South Africa, or which has its place of effective management
in
South Africa.
|
A
South
African resident, as defined in the Act, excludes any person that is deemed
to
be exclusively resident in another country in terms of a double taxation treaty
between South Africa and such other country.
This
section does not purport to address all South African income tax (including
capital gains tax) consequences that may be relevant to a particular
shareholder. This section applies only to shareholders who are not share traders
and who hold the Class N ordinary shares and Naspers ADSs as “capital assets”
under South African law. You
should consult your own tax advisor regarding the South African income tax
(including capital gains tax) and other tax consequences to you resulting from
the ownership and disposition of Class N ordinary shares or Naspers
ADSs.
Ownership
and Disposition of Class N Ordinary Shares and Naspers
ADSs
Tax
on Dividends
Dividends
declared by a South African resident company to resident shareholders are
generally exempt from income tax in South Africa with a few exceptions none
of
which are relevant in respect of the Naspers shares. For non-residents, only
dividends from a South African source are included in gross income, but they
are
generally exempt from tax.
Naspers
will not be obliged to withhold any form of non-resident withholding tax on
dividends paid to non-residents of South Africa in terms of South African tax
legislation. However, in future a decision might be taken to re-impose a
withholding tax on dividends paid by South African resident companies to
non-resident shareholders. Should this happen the reciprocal tax treaty entered
into between South Africa and the United States, in general, limits the
withholding tax as follows:
· |
to
5% of the gross amount of the dividends if the beneficial owner of
the
shares is a company holding directly at least 10% of the voting stock
of
the company paying the dividends;
and
|
· |
to
15% of the gross amount of the dividends in all other cases.
|
Tax
on sale or exchange of Class N ordinary shares by shareholders resident in
South
Africa
South
African resident holders of Class N ordinary shares, who hold the shares as
capital assets, will realize a taxable capital gain or a capital loss on the
sale, exchange or other disposition of Class N ordinary shares, unless that
shareholder is entitled at the time of such sale, exchange or other disposition
to defer the capital gain by virtue of “roll over” relief provided by the Act or
is obliged to limit, exclude or defer the capital loss. The capital gain or
loss
will be the difference between the base cost to the holders of the Class N
ordinary shares, and the proceeds received for the sale, exchange or other
disposition of any Class N ordinary shares. The base cost of an asset acquired
on or after October 1, 2001 is generally its acquisition cost and certain
further expenditure allowable in terms of the Act. The base cost of an asset
acquired before October 1, 2001 is determined in accordance with specific
formulas and rules in the Act. The proceeds in respect of the disposal of any
asset are generally the amount received by or accrued to the seller in respect
of such disposal. Where the proceeds constitute an amount other than cash,
the
proceeds will equal the fair value of the asset received.
In
general, roll-over relief from capital gains tax only applies in relation to
company formation transactions, share-for-share transactions, amalgamation
transactions, intra group transactions, unbundling transactions and transactions
relating to liquidation, winding up and de-registration, all as defined in
the
Act. The Act also provides for the roll-over of capital gains in respect of
certain involuntary disposals under certain circumstances, at the election
of
the taxpayer.
Tax
consequences of the ownership and disposition of Class N ordinary shares or
Naspers ADSs by shareholders not resident in South Africa
Shareholders
not resident in South Africa are liable for South African income tax in respect
of income derived by them from a source within or deemed to be within South
Africa. Shareholders not resident in South Africa are generally not liable
for
South African capital gains tax unless the assets disposed of forms part of
a
permanent establishment of such non-resident in South Africa. Profits derived
from the sale of shares in a South African company by a non-resident will be
subject to income tax in South Africa if the seller carries on business in
South
Africa as a share dealer and the profits are in the ordinary course of that
business. For more information, please see the below section called “—Taxation
of South African Corporations—Capital Gains Tax.”
Stamp
Duty
Stamp
duty is no longer payable on the original issue of any shares (apart from
certain exceptional instances dealing with tax avoidance) with effect from
January 1, 2006.
On
any
subsequent registration of transfer of shares in a South African company, South
African stamp duty is payable at 0.25% of the higher of the consideration paid
or the market value of the share concerned on the date of the transaction.
South
African stamp duty is payable regardless of whether the instrument of transfer
is executed in or outside South Africa. In respect of transactions involving
dematerialized shares, uncertificated securities tax will be payable at the
same
rate instead of stamp duty.
There
are
certain exemptions to the payment of stamp duty where, for example, the
instrument of transfer is executed outside South Africa and registration of
transfer is effected in any branch register kept by the relevant company outside
of South Africa, subject to certain provisions set forth in the South African
Stamp Duties Act, 1968. Exemption from stamp duty is also available on the
registration of transfer of shares acquired in terms of a transaction qualifying
for roll-over relief (see the reference above to company formation transactions,
share-for-share transactions, amalgamation transactions, intra group
transactions, unbundling transactions and transactions relating to liquidation,
winding up and de-registration), provided certain formal requirements have
been
met.
Transfers
of ADSs between non-residents of South Africa will not attract South African
stamp duty. If shares are withdrawn from the deposit facility or the relevant
deposit agreement is terminated, stamp duty will however be payable on the
subsequent registration of transfer of the shares. An acquisition of shares
from
the depositary in exchange for ADSs representing the shares will also render
an
investor who has been registered as the holder of shares in the company’s
register liable to South African stamp duty at the same rate on a subsequent
registration of transfer of the shares.
Taxation
of South African Corporations
Basis
of Income Taxation
The
South
African income tax system was originally based primarily on the source basis
of
taxation. Under this system, income sourced or deemed to be sourced in South
Africa was taxable in South Africa. A residence based system of taxation was
introduced in 2000, under which South African residents are taxed on their
worldwide income. Certain categories of income and activities undertaken outside
of South Africa are however exempt from taxation. The source basis of taxation
is, however, still applicable to non-residents. Non-residents are therefore
taxed on income from a source within or deemed to be from a source within South
Africa.
A
South
African tax resident must include in its taxable income an amount equal to
the
proportional amount (calculated in terms of a formula) of all controlled foreign
companies’ net income, as defined, for its tax year that ends during the
resident’s year of assessment. A “controlled foreign company” is defined as a
foreign company in which the relevant South African residents, directly or
indirectly, hold more than 50% of the rights to participate (directly or
indirectly) in the share capital, share premium, profits or reserves of that
foreign company or more than 50% of the voting rights in the foreign company,
subject to certain exceptions in as far as the voting rights criteria is
concerned (e.g. no regard is had to voting rights in a listed foreign company
or
its subsidiary).
The
term
“foreign company” means an association, corporation, company, arrangement or
scheme (as contemplated in the definition of “company” in the Act) which is not
a resident in South Africa.
The
exemptions from the taxation of income from controlled foreign companies for
years of assessment commencing prior to June 1, 2004, include:
·
|
the
designated country exemption;
|
·
|
the
business establishment exemption;
|
·
|
amounts
to the extent that is already taxed in South
Africa;
|
·
|
certain
foreign dividend income;
|
·
|
capital
gains in certain circumstances;
|
·
|
certain
amounts of interest, royalties, rentals and similar income;
and
|
·
|
certain
amounts received as dividends and from the disposal of
interests.
|
Changes
to the controlled foreign company rules, arising as a consequence of the changes
to the taxation of foreign dividends, were introduced for years of assessment
commencing on or after June 1, 2004. In this regard, the designated country
exemption and the exemption of certain amounts received as dividends and from
the disposal of interests have been removed.
All
foreign dividends received by or accruing to South African residents are
currently, with certain exceptions, subject to income tax. A foreign dividend
includes a dividend received by or which accrued to any person from any company,
which is either a foreign company or a resident in South Africa to the extent
that the dividend is declared from profits derived by such company before such
company became a resident.
The
Minister of Finance announced in his budget speech in February 2003, however,
that in the future South African residents who hold a “meaningful interest” in a
foreign company will not be subject to tax on the dividends declared by the
company. In this regard, for years of assessment commencing on or after June
1,
2004, new exemptions apply to the taxation of foreign dividends. These
include:
·
|
foreign
dividends to the extent that it relates to any amount already taxed
in
South Africa;
|
·
|
foreign
dividends to the extent that it relates to any amount that was declared
by
a listed company of which more than 10% of its equity share capital
is at
the time of the declaration held collectively by
residents;
|
·
|
foreign
dividends to the extent that it is paid out of profits attributed
to the
shareholder as “net income” in terms of the controlled foreign companies
provisions of the Act; and
|
·
|
foreign
dividends that accrued to a person when he (for a company, together
with
any other company in the same group of companies) holds more than
20% of
the total equity share capital and voting rights in the company declaring
the dividend, subject to certain
provisos.
|
Taxable
foreign dividends are taxed at the taxpayer’s marginal tax rate which, in the
case of a company, is 29%.
Capital
Gains Tax
Capital
Gains Tax was introduced in South Africa with effect from October 1, 2001 by
way
of the addition of the Eighth Schedule to the Act. Under the Eighth Schedule,
all natural persons, legal persons and trusts resident in South Africa are
liable to pay capital gains tax on capital gains resulting from the disposal
or
deemed disposal of a capital asset. The definition of an asset is very wide
and
includes assets that are movable, immovable, corporeal or incorporeal, but
excludes certain limited items.
Non-residents
of South Africa will not be subject to capital gains tax except in respect
of
the disposal of immovable property situated in South Africa or any interest
or
right in immovable property situated in South Africa and any assets of a
permanent establishment of the non-resident in South Africa.
A
total
of 50% of net capital gains on the disposal of capital assets is included in
a
company’s taxable income from October 1, 2001. At the current corporate tax rate
of 29%, the effective tax rate on a capital gain will therefore be 14.5%.
Secondary
Tax on Companies
Secondary
Tax on Companies (“STC”), is paid by South African resident companies at the
flat rate of 12.5% in respect of the net amount of dividends (i.e. the amount
of
dividends declared by the company less all dividends which accrue to the
company, subject to certain exclusions, during its relevant “dividend cycle”). A
“dividend cycle” is the period commencing on the date following the date of
accrual to a company’s shareholders of the last dividend declared by that
company and ending on the date on which the dividend in question accrues to
the
shareholder concerned. Up to May 31, 2004, when a company declared a dividend
out of profits derived from sources within and outside of South Africa, STC
on
the dividend was calculated on the amount which bore to the net amount of the
dividend, the same ratio as the sum of the net annual profits of the company
from South African actual or deemed sources and from sources outside South
Africa (which were not deemed to be from a South African source and which were
not exempt from tax under section 10(1)(kA) of the Income Tax Act), bore to
its
total net annual profits from all sources. However, with effect from June 1,
2004, the STC exemption in respect of foreign sourced profits has been withdrawn
from the Act. Any excess of dividends accruing to a company over dividends
paid
may be carried forward to subsequent dividend cycles as an STC credit.
The
levying of STC effectively means that a dual corporate tax system exists in
South Africa comprising a normal income tax and STC. It should be noted that
STC
is a tax on the company and is not a withholding tax on dividends. Liability
for
STC is determined independently from normal income tax. Accordingly, a company
without a normal tax liability may have a liability for STC, and vice versa,
or
a company may be liable for both normal tax and STC. Capitalization shares
distributed to shareholders in lieu of cash dividends are generally not regarded
as dividends and are not subject to STC. No South African tax (including
withholding tax) is payable in respect of the receipt of these shares by the
recipients. For capital gains tax purposes, capitalization shares are treated
as
having been acquired for zero expenditure by the holder. If the issue of the
capitalization shares constitute a dividend, the holder will be treated to
acquire the shares at an expense equal to the amount of the dividend. Subject
to
certain exceptions, foreign dividends no longer qualify as a deduction to
calculate the net amount of dividends for STC purposes.
Transfer
Pricing
Section
31 of the Act sets out rules dealing with transfer pricing and thin
capitalization. Section 31 provides (in respect of transfer pricing) that when
goods or services are supplied or acquired under any “international agreement”,
if the acquirer is a “connected person” in relation to the supplier, and the
goods or services are supplied or acquired at a price which is
not
at
arm’s length, the Commissioner for the SARS is entitled, for the purposes of
assessing the taxable income of the supplier or acquirer, to adjust the
consideration to reflect an arms’ length price.
Thin
capitalization rules were enacted to reduce the incidence of capital structuring
by a company with a relatively small equity capital as compared to its debt
capital. The intention of the provisions dealing with thin capitalization is
to
disallow interest deductions on excessive financial assistance between connected
parties in calculating a taxpayer’s taxable income. The term “financial
assistance” is widely defined and includes loans, advances, debts and the
provision of any security or guarantee.
10.H.
Documents on Display
Naspers
is subject to the informational reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and files reports and
other information with the SEC. You may examine the documents that are exhibits
to this annual report, reports and other information filed by Naspers, without
charge, at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C., 20549. For more information on the public
reference rooms, call the SEC at 1-800-SEC-0330. Naspers’ reports and other
information filed with the SEC are also available to the public from commercial
document retrieval services and the website maintained by the SEC at
http://www.sec.gov.
ITEM
11. Quantitative and Qualitative Disclosures
About Market Risk
Naspers
is exposed to market risks, including interest rate and foreign currency
exchange rate risk associated with underlying assets, liabilities and
anticipated transactions. Following the evaluation of these exposures, Naspers
selectively enters into derivative financial instruments to manage the related
risk exposures pursuant to its policies in areas such as counterparty exposure
and hedging practices. These policies have been approved by Naspers’ senior
management and Naspers does not hold or issue derivative financial instruments
for trading or speculative purposes.
The
following discussion and analysis, which constitute forward looking statements
that involve risk and uncertainties, summarizes Naspers’ market sensitive
financial instruments including their fair value, maturity and contract terms.
The discussion addresses market risk only and does not address other risks
which
Naspers faces in the normal course of business, including country risk, credit
risk and legal risk.
Interest
Rate Sensitivity
Naspers
undertakes from time to time specific actions to cover its exposure to interest
rate risk. These actions include entering into interest rate swap agreements
and
other similar derivative instruments to manage the Naspers group’s exposure to
movements in interest rates. As at March 31, 2006, Naspers’ liabilities included
certain short-term fixed or variable interest rate instruments. The fair value
of these instruments will not change significantly as a result of changes in
interest rates due to their short-term nature and the variable interest rates.
Naspers only hedges against the cash flow risk relating to interest rate
movements and does not generally hedge against potential fair value changes.
As
at
March 31, 2006, 31.3% of the Naspers group’s long-term liabilities were interest
free. Accordingly, any movement in interest rates will not impact the cashflows
related to these liabilities. An additional 50.5% of the Naspers group’s long
term liabilities were at fixed interest rates, and only an additional 18.2%
had
floating interest rates. As at March 31, 2006, the Naspers group also had bank
overdrafts at floating interest rates of Rand 364.8 million. Total liabilities
(including overdrafts) at floating interest rates as at March 31, 2006 amounted
to Rand 1,100.8 million. These liabilities at floating rates were unhedged
at
March 31, 2006. The floating interest rates are, however, linked to various
international interest rates, such as LIBOR in the United Kingdom, the prime
banking rate in South Africa (which increased from 10.5% in September 2005
to
11.5% in September 2006) and the prime banking rate in Greece. Fluctuations
in
interest rates in these jurisdictions vary from time to time. Based on the
amount of Naspers’ liabilities linked to floating rates as at March 31, 2006, an
average 1% increase in interest rates across the various jurisdictions would
increase Naspers group’s interest charges by approximately Rand 11.01 million
per annum.
As
part
of the process of managing Naspers’ fixed and floating interest rate borrowing
profile, the interest rate characteristics of new borrowings and the refinancing
of existing borrowings are positioned according to expected movements in
interest rates. Where appropriate, Naspers uses derivative instruments, such
as
interest rate swap agreements, purely for hedging purposes. As at March 31,
2006
Naspers had not entered into any significant interest rate swap agreement or
similar derivative instruments.
Foreign
Currency
Management
Naspers’
functional currencies are generally the local currencies in the countries in
which it operates. Monetary assets and liabilities in currencies other than
Naspers’ functional currencies are translated based on the exchange rates
prevailing at fiscal year-end. Any resulting exchange rate gains or losses
are
included in current results.
On
consolidation, assets and liabilities of subsidiaries denominated in foreign
currencies are translated to Rand based on exchange rates prevailing at
year-end. Income and expense items are translated using annual weighted average
rates of exchange or, where known or determinable, at the exchange rate on
the
date of the transaction.
Adjustments
arising from currency translations are recorded in shareholders’ equity and are
reflected in net earnings only upon the sale or liquidation of the underlying
investments.
Naspers
operates internationally and is exposed to foreign exchange risk arising from
various currency exposures. Although a substantial portion of Naspers’ revenue
is denominated in the currencies of the countries in which it operates, a
significant portion of Naspers’ cash obligations, including payment obligations
under satellite transponder leases and contracts for pay-television programming
and channels, are denominated in U.S. dollars. Where Naspers’ revenue is
denominated in local currency such as Rand or Euro, depreciation of the local
currency against the U.S. dollar adversely affects Naspers’
earnings
and its ability to meet cash obligations. Companies in the Naspers group use
forward exchange contracts to hedge their exposure to foreign currency risk
in
the local reporting currency. It is not the policy of the group to trade in
forward contracts for economic speculative purposes.
Naspers’
South African businesses hedge the foreign currency exposure of their
contractual commitments to purchase goods, services and film rights mainly
in
U.S. dollars and Euros. The forward exchange contracts typically expire within
one to two years, consistent with the related contractual commitments. The
Naspers group generally hedges all major exposures in foreign currencies to
an
amount of approximately 80% to 100% of the contract value. This strategy is
consistent with the strategy followed in prior years. Naspers hedges against
the
potential change in future cash flows for forecasted and committed purchase
transactions in foreign currencies. Some foreign exchange contracts are also
entered into to hedge against the change in fair value of a foreign creditor.
Forward
exchange contracts are recognized in the balance sheet at fair value. The method
of recognizing the resulting gain or loss is dependent on the nature of the
item
being hedged. Changes in the fair value of forward exchange contracts that
are
designated and qualify as fair value hedges and that are highly effective,
are
recorded in the income statement, along with changes in the fair value of the
hedged asset or liability that is attributable to the hedged risk.
Changes
in the fair value of forward contracts that are designated and qualify as cash
flow hedges, and that are highly effective, are recognized in equity, and the
ineffective part of the hedge is recognized in the income statement. Where
the
forecasted transaction or firm commitment of which the foreign currency risk
is
being hedged results in the recognition of an asset or a liability, the gains
and losses previously deferred in equity are transferred from equity and
included in the initial measurement of the cost of the asset or liability.
Otherwise, amounts deferred in equity are transferred to the income statement
and classified as income or expense in the same periods during which the hedged
transaction affects the income statement.
Certain
derivative transactions, while providing effective economic hedges under the
group’s risk management policies, do not qualify for hedge accounting. Changes
in the fair value of any derivative instrument that do not qualify for hedge
accounting are recognized immediately in the income statement.
When
a
hedging instrument expires or is sold, or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain or loss existing in equity
at
that time remains in equity and is recognized when the committed or forecasted
transaction ultimately is recognized in the income statement. When a committed
or forecasted transaction is no longer expected to occur, the cumulative gain
or
loss that was reported in equity is immediately transferred to the income
statement.
Naspers’
forward exchange contracts are used primarily to hedge the Rand against the
U.S.
dollar. During fiscal 2006, the average value of the U.S. dollar increased
against the Rand by approximately 2.8%. The value of Naspers’ future hedged
foreign currency commitments was approximately Rand 157.0 million less at March
31, 2006 than it was at the end of fiscal 2005 as a result of new forward
currency contracts entered into by Naspers during fiscal 2006 at a lower U.S.
dollar rate then in fiscal 2005. The total value of hedged foreign currency
commitments at March 31, 2006 amounted to Rand 1,418.5 million compared to
Rand
1,575.5 million at March 31, 2005. At March 31, 2006, the Naspers group’s net
monetary liability position of U.S. dollars and Euros, which is subject to
risk
of foreign currency exchange rate fluctuations, amounted to U.S. dollar 58.1
million and Euro 58.4 million, respectively. The exposure amount primarily
reflects U.S. dollar and Euro denominated debt relating to finance lease
commitments and program and film rights. The aggregate hypothetical loss in
earnings on an annual basis that would result from a hypothetical appreciation
of 10% of the U.S. dollar and Euro against the South African Rand is estimated
to be Rand 85.9 million. The Naspers group’s exposure to exchange rate
fluctuations in currencies other than the U.S. dollar and Euro is not
material.
Naspers
does not currently hold or issue derivative financial or interest rate
instruments for trading purposes, but intends to continue to use forward
exchange contracts to limit exposure to expected depreciation of some of its
functional currencies relative to foreign currencies in which Naspers incurs
a
significant portion of its costs.
ITEM
12. DESCRIPTION OF SECURITIES
OTHER THAN EQUITY SECURITIES
Not
applicable.
PART
II
ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
None.
ITEM
14. MATERIAL MODIFICATION TO THE
RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM
15. DISCLOSURE CONTROLS AND
PROCEDURES
As
of the
end of the period covered by this report, the company conducted an evaluation
(under the supervision and with the participation of the company’s management,
including the chief executive officer and chief financial officer), pursuant
to
Rule 13a-15 promulgated under the Exchange Act, of the effectiveness of the
design and operation of the company’s disclosure controls and procedures. Based
on this evaluation, the company’s chief executive officer and chief financial
officer concluded that, solely because of the material weaknesses described
below, such disclosure controls and procedures were not effective to provide
reasonable assurance that information required to be disclosed by the company
in
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms
of the SEC.
A
material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of our annual financial statements would not have been detected
or
prevented. During the course of the year-end substantive audit, and in
anticipation of implementation of the reporting required pursuant to Section
404
of the U.S. Sarbanes-Oxley Act, our independent auditors noted material
weaknesses relating to our U.S. GAAP reconciliation processes and our contract
review procedures (for potential accounting implications and embedded
derivatives). This led to a further management investigation to evaluate the
weaknesses. The full impact and nature of the weaknesses were subsequently
reported to our Audit Committee.
As
discussed with the Audit Committee, we will implement appropriate changes to
our
internal control structure to remedy these weaknesses. In particular, a new
group accountant has been appointed. This accountant will be responsible for
compiling the U.S. GAAP reconciliation and related disclosure and ensuring
that
all supporting documentation exists for the adjustments recorded at corporate
level. The group financial manager will review the reconciliation, disclosure
and supporting documents to ensure the completeness and accuracy of the
reconciliation. In addition, an agreement has been put in place with an external
professional services firm to provide technical expertise and guidance on
matters relating to the U.S. GAAP reconciliation. New contract review procedures
are also being implemented, including a requirement that each new material
contract be reviewed by a technically proficient accountant and that existing
material contracts be reviewed upon any relevant changes in accounting policies.
The foregoing steps may be supplemented by additional measures as necessary
to
remedy the material weaknesses.
There
has
been no change in our internal controls over financial reporting that occurred
during the period covered by this Report that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
As
mentioned above, we are currently evaluating our internal controls over
financial reporting in order to allow management to complete its assessment
of ,
and our independent registered accounting firm to attest to and report on,
the
effectiveness of internal control over financial reporting for the fiscal year
ending March 31, 2007, as required by Section 404 of the U.S. Sarbanes-Oxley
Act. Please see “Risk Factors -- Naspers may need to improve its internal
controls over financial reporting and Naspers’ independent auditors may not be
able to attest to their effectiveness, which could adversely affect Naspers’
business operations, reputation and profitability”. We are undertaking remedial
measures to address certain significant deficiencies and material weaknesses
which have been identified to date and which, if not remedied, could adversely
impact our reporting obligations under Section 404.
ITEM
16.
16.A. AUDIT
COMMITTEE FINANCIAL EXPERT
The
board
of directors of Naspers has determined that Boetie van Zyl, a member of Naspers’
audit committee and risk management committee, qualifies as an “audit committee
financial expert” for purposes of the U.S. Sarbanes-Oxley Act. Mr. van Zyl is a
former chief executive officer and has served on audit committees of other
companies. He is an independent director in accordance with applicable Nasdaq
and JSE requirements.
16.B.
CODE OF ETHICS
The
Naspers board approved a revised code of ethics on June 25, 2004. This code
of
ethics applies to directors, financial officers and staff appointed under the
group’s standard service conditions. Nasdaq and SEC rules, among others, were
considered in developing the content of the code of ethics. This code is
available on the company’s website (www.naspers.com)
and a
copy will be provided to any person without charge upon request.
16.C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
following table presents fees for professional audit services rendered by
PricewaterhouseCoopers Inc. for the audit of the group’s consolidated financial
statements for the years ended March 31, 2006, and March 31, 2005, and fees
billed for other services rendered by PricewaterhouseCoopers Inc. during those
periods.
Principal
accountant fees
|
|
|
2006
|
|
2005
|
|
|
|
|
Rand
in
Thousands
|
Percentage
approved by audit committee pre-approval policy
|
|
Rand
in thousands
|
Percentage
approved by
audit
committee pre-approval
policy
|
|
|
|
|
|
|
|
|
|
|
Audit
fees
|
|
|
33,028
|
|
|
23,937
|
|
|
Audit
related fees(1)
|
|
|
4,092
|
100%
|
|
8,679
|
100%
|
Tax
fees(2)
|
|
|
4,167
|
100%
|
|
6,043
|
100%
|
All
other fees(3)
|
|
|
8,496
|
100%
|
|
5,539
|
100%
|
|
|
|
|
|
|
|
|
|
Total
fees
|
|
|
49,783
|
|
|
44,198
|
|
|
(1) |
Audit
related fees consist of assurance and related services that are reasonably
related to the performance of the audit or review of the group’s financial
statements. This category includes fees related to the performance
of
audits and attest services not required by statute or regulation
and
accounting consultations regarding the application of GAAP to proposed
transactions.
|
(2) |
Tax
fees consist of the aggregate fees billed for professional services
rendered by PricewaterhouseCoopers Inc. for tax compliance, tax advice,
and tax planning both domestic and
international.
|
(3) |
All
other fees include, among other things, fees relating to financial
information technology services and advice with the implementation
of the
requirements of section 404 of the Sarbanes-Oxley
Act.
|
The
various audit and risk management committees of the group have concluded that
the provision of the non-audit services listed above is compatible with
maintaining the independence of PricewaterhouseCoopers Inc.
The
various audit and risk management committees of the group are directly
responsible for the appointment, compensation, retention and oversight of the
work of PricewaterhouseCoopers Inc. All audit, review, attest and allowable
non-audit services provided by PricewaterhouseCoopers Inc. are required to
undergo a pre-approval process.
The
group’s audit and risk management committees are structured in such a way that
Naspers’ audit and risk management committee is ultimately responsible for the
oversight of the work performed by PricewaterhouseCoopers Inc. Audit and risk
management committees also have been established at each main subsidiary and
joint venture. MIH Holdings and Media24 have separate audit and risk management
committees. Further audit and risk management committees within such main
subsidiaries and joint ventures have been established where there are outside
shareholders involved with group companies. Naspers’ audit and risk management
committee, therefore, has overall responsibility for services provided by
PricewaterhouseCoopers Inc. to group companies and will rely on such subsidiary
and joint venture audit and risk management committees to take primary
responsibility for the approval of all engagements performed by its
auditors.
Pursuant
to the pre-approval policies of the group, all requests for the approval of
non-audit services must be directed to Naspers’ CFO or MIH’s CFO, respectively,
to ensure that the necessary pre-approval procedures are followed and to ensure
that the specific type of non-audit service is a permissible non-audit service.
Naspers’ audit and risk management committee has authorized Naspers’ CFO to
approve certain non-audit services for Naspers Limited and Media24 up to an
aggregate of Rand 1,000,000 per annum. MIH Holdings’ audit and risk management
committee has authorized MIH’s CFO to approve certain non-audit services for the
MIH group up to an aggregate of U.S. dollar 500,000 per annum. The approval
documentation of all such non-audit services approved by the respective CFO’s
are tabled at each audit and risk management committee meeting for review.
All
anticipated recurring non-audit services and all non-audit services outside
of
the respective CFO’s authorized aggregate limits are tabled to the full audit
and risk management committee for their pre-approval or to the chairman of
the
audit and risk management committee if such approval is required before the
next
audit and risk management committee meeting.
Any
services not specifiscally pre-approved, or which do not fall within the general
pre-approvals or which are in excess of the general pre-approval limit must
be
pre-approved by the chairman of the respective audit and risk management
committee.
The audit and risk management committee will be informed of such pre-approvals
at its next audit and risk management committee meeting.
ITEM
16.E PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS
Neither
Naspers nor any affiliated purchasers acquired any of Naspers’ shares during
fiscal 2006.
PART
III
ITEM
17. FINANCIAL
STATEMENTS
Naspers
is furnishing financial statements pursuant to the instructions of Item 18
of
Form 20-F.
ITEM
18. FINANCIAL
STATEMENTS
See
pages
F-1 through F-125.
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing
on
Form 20-F and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.
|
|
|
|
NASPERS
LIMITED |
|
|
|
|
By: |
/s/ Koos
Bekker |
|
Name:
Koos
Bekker Title: Chief Executive
Office |
|
|
|
|
By: |
/s/ Steve
Pacak |
|
Name: Steve
Pacak
Title: Chief
Executive Office
|
Date:
September 29, 2006
ITEM
19. EXHIBITS
The
following exhibits are filed as exhibits to this annual report:
Exhibit
Number
|
Description
|
Page
No.
|
1.1+
|
Memorandum
and Articles of Association of Naspers Limited (English
translation).
|
|
2.1+
|
Form
of Deposit Agreement among the Bank of New York, as depository, Naspers
Limited, and all owners and beneficial owners from time to time of
American Depositary Shares issued thereunder.
|
|
2.2+
|
Form
of American Depositary Agreement.
|
|
|
|
|
4.1++
|
Stock
Purchase Agreement dated as of May 8, 2002, among MIH Limited, OTV
Holdings Limited, Liberty Media Corporation and LDIG OTV,
Inc.
|
|
4.2*
|
Amendment
to Stock Purchase Agreement dated as of August 27, 2002, among MIH
Limited, OTV Holdings Limited, Liberty Media Corporation and LDIG
OTV,
Inc.
|
|
4.3**
|
Channel
Distribution Agreement dated June 18, 1998, between MultiChoice Africa
(Proprietary) Limited and Electronic Media Network Limited.
|
|
4.4**
|
Analog
Agreement dated March 31, 1995, between MultiChoice Africa (Proprietary)
Limited and Electronic Media Network Limited.
|
|
4.5+
|
Agreement
dated October 1, 2002 between Naspers Limited and Mr. T. Vosloo (English
translation).
|
|
4.6
|
Stock
Purchase Agreement dated as of May 5, 2006 among MIH (UBC) Holdings
BV,
Roberto Civita, Giancarlo Francesco Civita, Victor Civita and Roberta
Anamaria Civita.
|
|
|
|
|
4.7
|
Stock
Purchase Agreement dated as of May 5, 2006 among MIH Brazil Participacoes
LTDA, Brazil April LLC and Brazil May LLC.
|
|
|
|
|
4.8
|
Subscription
Agreement dated as of May 5, 2006 among Abril S.A. and MIH (UBC)
Holding
BV, Roberto Civita and Giancarlo F. Civita.
|
|
|
|
|
8.1
|
List
of Naspers’ significant subsidiaries.
|
E-3
|
12.1
|
Section
302 Certification of Koos Bekker, Chief Executive Officer.
|
E-4
|
12.2
|
Section
302 Certification of Steve Pacak, Chief Financial Officer.
|
E-5
|
13.1
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
E-6
|
________________
+
|
Incorporated
by reference from Naspers’ registration statement on Form F-4 (No.
333-10098) filed on November 1,
2002.
|
++
|
Incorporated
by reference from the report on Schedule 13D (No. 005-58285) filed
by
Liberty Media Corporation on July 22, 2002 in respect of OpenTV Corp.
Portions of this exhibit have been omitted pursuant to a request
for
confidential treatment.
|
*
|
Incorporated
by reference from Amendment No. 1 to the registration statement on
Form
S-3 (No. 333-98817) filed by Liberty Media Corporation on September
16,
2002. Portions of this exhibit have been omitted pursuant to a request
for
confidential treatment.
|
**
|
Incorporated
by reference from the registration statement on Form F-1 (No. 333-74227)
filed by MIH Limited on November 3, 1999. Portions of some of these
exhibits have been omitted pursuant to requests for confidential
treatment.
|
INDEX
TO ANNUAL FINANCIAL STATEMENTS
Naspers
Limited - Consolidated Annual Financial Statements for the year ended
March 31,
2006
|
F-2
|
Consolidated
balance sheets
|
F-3
|
Consolidated
income statements
|
F-4
|
Consolidated
cash flow statements
|
F-5
|
Consolidated
statements of changes in shareholders’ equity
|
F-6
|
Notes
to the consolidated annual financial statements
|
F-8
|
Reg.
no. 1998/012055/21
No
1 Waterhouse Place
Century
City 7441
P
O
Box 2799
Cape
Town 8000
Telephone
+27 (21) 529 2000
Facsimile
+27 (21) 529 3300
www.pwc.com/za |
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Shareholders of Naspers Limited
We
have
audited the accompanying consolidated balance sheets of Naspers Limited
and its
subsidiaries (“the Company”) as of March 31, 2006 and March 31, 2005, and the
related consolidated income statements, changes in shareholders’ equity and cash
flows for each of the two years in the period ended March 31, 2006.
These
financial statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on these financial statements
based on
our audits.
We
conducted our audits in accordance with International Standards on
Auditing and
the standards of the Public Company Accounting Oversight Board (United
States).
These standards require that we plan and perform the audit to obtain
reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting
the amounts and disclosures in the financial statements. An audit also
includes
assessing the accounting principles used and significant estimates
made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of the Company at
March 31,
2006 and March 31, 2005, and the results of its operations and its
cash flows
for the two years in the period ended March 31, 2006 in accordance
with
International Financial Reporting Standards.
International
Financial Reporting Standards vary in certain significant respects
from
accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is
presented
in note 39 to the consolidated financial statements.
PricewaterhouseCoopers
Inc
Director:
Brendan Deegan
Registered
Auditor
Cape
Town, South Africa
September
29, 2006
C
Beggs
|
Chief
Executive Officer
|
M
J
B Kitshoff
|
Chief
Operating Officer
|
T
D
Petersen
|
Chairman
Western Cape region
|
D
J
Fölscher
|
Chief
Executive Officer Western Cape region
|
Resident
Directors
|
Z
Abrahams, J F Basson, T Blok, J Bouwer, C J Bredenhann,
E Brink, J M
Calitz, M N Campbell, E Carelse, P M Cromhout,
|
|
C
G
de Wet, B M Deegan, N H Döman, C P du Toit, T C Esau, D M Fairbank, D J
Fölscher, H Griffiths, A C Legge, D G Malan,
|
|
E
A
Maritz, J R Mettler, H D Nel, T D Petersen, S M Roberts,
A Stemmet, P A L
Strauss, C van den Heever, J P van Wyk,
|
|
M
Vilakazi, A Wentzel, V Wiese, J L
Wilkinson
|
The
Company's principal place of business is at 2 Eglin Road,
Sunninghill
where a list of directors' names is available for inspection.VAT
reg.no.
4950174682 |
CONSOLIDATED
BALANCE SHEETS |
|
|
|
|
|
|
AT
MARCH 31, 2006 AND 2005
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
|
|
|
|
|
|
|
|
Notes
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
ASSETS
|
|
|
|
|
|
|
Non-current
assets |
|
|
|
7,272,262
|
|
6,838,739
|
Property,
plant and equipment |
|
5
|
|
3,688,509
|
|
3,444,663
|
Goodwill
|
|
6
|
|
789,735
|
|
859,034
|
Other
intangible assets |
|
7
|
|
369,449
|
|
367,343
|
Investments
in associates |
|
8
|
|
1,308,165
|
|
837,688
|
Investments
and loans |
|
8
|
|
74,863
|
|
393,160
|
Programme
and film rights |
|
9
|
|
171,145
|
|
47,558
|
Derivative
financial instruments |
|
36
|
|
32,647
|
|
32,572
|
Deferred
taxation |
|
10
|
|
837,749
|
|
856,721
|
|
Current
assets |
|
|
|
10,067,144
|
|
7,203,821
|
Inventory
|
|
11
|
|
504,476
|
|
383,467
|
Programme
and film rights |
|
9
|
|
596,033
|
|
719,006
|
Trade
receivables |
|
12
|
|
1,536,844
|
|
1,412,573
|
Other
receivables |
|
13
|
|
499,727
|
|
410,247
|
Related
party receivables |
|
14
|
|
19,839
|
|
66,911
|
Investments
and loans |
|
8
|
|
–
|
|
8,111
|
Derivative
financial instruments |
|
36
|
|
134,683
|
|
169,710
|
Cash
and deposits |
|
34
|
|
6,775,542
|
|
4,033,796
|
TOTAL
ASSETS |
|
|
|
17,339,406
|
|
14,042,560
|
|
EQUITY
AND LIABILITIES |
|
|
|
|
|
|
Capital
and reserves attributable to the company’s equity
holders |
|
|
|
7,118,436
|
|
4,865,965
|
Share
capital and premium |
|
15
|
|
5,561,320 |
|
5,391,151
|
Other
reserves |
|
16
|
|
(3,316,706)
|
|
(2,417,691)
|
Retained
earnings |
|
17
|
|
4,873,822 |
|
1,892,505
|
|
Minority
interest |
|
|
|
171,547 |
|
227,328
|
TOTAL
EQUITY |
|
|
|
7,289,983 |
|
5,093,293
|
|
Non-current
liabilities |
|
|
|
3,372,397 |
|
2,967,890
|
Post-retirement
medical liability |
|
18
|
|
153,465 |
|
161,298
|
Long-term
liabilities |
|
19
|
|
2,355,561 |
|
2,275,648
|
Capitalized
finance leases |
|
19
|
|
1,443,636 |
|
1,723,656
|
Concession
liabilities |
|
19
|
|
– |
|
15,489
|
Interest-bearing
loans |
|
19
|
|
722,006 |
|
423,160
|
Programme
and film rights |
|
19
|
|
149,971 |
|
53,925
|
Non-interest-bearing
loans |
|
19
|
|
39,948 |
|
59,418
|
Cash-settled
share-based payment liability |
|
38
|
|
108,371 |
|
36,158
|
Provisions
|
|
20
|
|
39,659 |
|
17,057
|
Derivative
financial instruments |
|
36
|
|
212,664 |
|
9,642
|
Deferred
taxation |
|
10
|
|
502,677 |
|
468,087
|
|
Current
liabilities |
|
|
|
6,677,026 |
|
5,981,377
|
Current
portion of long-term debt |
|
19
|
|
1,699,542 |
|
917,516
|
Provisions
|
|
20
|
|
28,390 |
|
82,015
|
Post
retirement medical liability |
|
18
|
|
8,164 |
|
–
|
Trade
payables |
|
|
|
1,118,353 |
|
1,133,246
|
Accrued
expenses and other current liabilities |
|
21
|
|
2,914,208 |
|
2,792,581
|
Related
party payables |
|
14
|
|
104,438 |
|
86,394
|
Taxation
|
|
|
|
346,292 |
|
250,310
|
Derivative
financial instruments |
|
36
|
|
92,862 |
|
285,976
|
Bank
overdrafts and call loans |
|
34
|
|
364,777 |
|
433,339
|
TOTAL
EQUITY AND LIABILITIES |
|
|
|
17,339,406 |
|
14,042,560
|
The
accompanying notes are an integral part of these consolidated annual
financial statements.
CONSOLIDATED
INCOME STATEMENTS |
|
|
|
|
|
|
FOR
THE YEARS ENDED MARCH 31, 2006 AND 2005
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
|
Notes
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
Revenue
|
|
23
|
|
15,706,424
|
|
13,517,847
|
Cost
of providing services and sale of goods |
|
24
|
|
(8,753,690)
|
|
(7,725,819)
|
Selling,
general and administration expenses |
|
24
|
|
(3,948,677)
|
|
(3,311,485)
|
Other
(losses)/gains - net |
|
25
|
|
(7)
|
|
(11,702)
|
Operating
profit |
|
|
|
3,004,050
|
|
2,468,841
|
Finance
costs - net |
|
26
|
|
(11,432)
|
|
(217,004)
|
Share
of equity-accounted results |
|
8
|
|
151,277
|
|
88,597 |
Profit/(loss)
on sale of investments |
|
|
|
74,366
|
|
(311)
|
Dilution
profits |
|
|
|
–
|
|
368,036
|
Profit
before taxation |
|
|
|
3,218,261
|
|
2,708,159
|
Taxation
|
|
27
|
|
(934,813)
|
|
(256,462)
|
Profit
after taxation |
|
|
|
2,283,448
|
|
2,451,697
|
Profit
from discontinued operations |
|
28
|
|
31,816
|
|
50,042
|
Profit
arising on discontinuance of operations |
|
28
|
|
1,032,160
|
|
–
|
Profit
for the year |
|
|
|
3,347,424
|
|
2,501,739
|
|
Attributable
to: |
|
|
|
|
|
|
Equity
holders of the Group |
|
|
|
3,190,188
|
|
2,384,762
|
Minority
interest |
|
|
|
157,236
|
|
116,977
|
|
|
|
|
3,347,424
|
|
2,501,739
|
Earnings
per N ordinary share (cents) |
|
|
|
|
|
|
Basic
|
|
29
|
|
1,124
|
|
860
|
Fully
diluted |
|
29
|
|
1,063
|
|
814
|
Headline
earnings per N ordinary share (cents) |
|
|
|
|
|
|
Basic
|
|
29
|
|
756
|
|
730
|
Fully
diluted |
|
29
|
|
715
|
|
690
|
Dividend
paid per A ordinary share (cents) |
|
|
|
14
|
|
7
|
Dividend
paid per N ordinary share (cents) |
|
|
|
70
|
|
38
|
Proposed
dividend per A ordinary share (cents) |
|
|
|
24
|
|
14
|
Proposed
dividend per N ordinary share (cents) |
|
|
|
120
|
|
70
|
|
The
accompanying notes are an integral part of these consolidated
annual financial statements. |
|
|
|
|
CONSOLIDATED
CASH FLOW STATEMENTS |
|
|
|
|
|
|
FOR
THE YEARS ENDED MARCH 31, 2006 AND 2005 |
|
|
|
|
|
|
|
|
|
|
March
31
|
|
|
Notes
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
Cash
flows from operating activities |
|
|
|
|
|
|
Cash
from operating activities |
|
30
|
|
4,019,905 |
|
3,051,265
|
Investment
income received |
|
|
|
2,170
|
|
430
|
Dividends
received from equity-accounted companies |
|
|
|
44,589
|
|
5,632
|
Cash
generated from operating activities |
|
|
|
4,066,664
|
|
3,057,327
|
Net
finance costs paid |
|
|
|
(78,480) |
|
(214,923)
|
Taxation
paid |
|
|
|
(821,737)
|
|
(474,462)
|
Net
cash from operating activities |
|
|
|
3,166,447
|
|
2,367,942
|
|
Cash
flows from investment activities |
|
|
|
|
|
|
Property,
plant and equipment acquired |
|
|
|
(809,661) |
|
(577,542)
|
Proceeds
from sale of property, plant and equipment
|
|
|
|
46,025
|
|
28,120
|
Intangible
assets acquired |
|
|
|
(106,805) |
|
(63,384)
|
Acquisition
of subsidiaries |
|
31
|
|
(42,919) |
|
(270,845)
|
Disposal
of subsidiaries |
|
32
|
|
36,726
|
|
7,847
|
Additional
investment in existing subsidiaries |
|
|
|
(193,280) |
|
(66,879)
|
Partial
disposal of interest in subsidiaries |
|
|
|
10,000
|
|
–
|
Partial
disposal of interest in joint ventures |
|
33
|
|
751,845
|
|
(188,097)
|
Net
investment in associated companies |
|
|
|
(23,212) |
|
(1,004)
|
Net
cash movement in other investments and loans |
|
|
|
(741) |
|
98,335
|
Disposal
of available-for-sale investments |
|
|
|
– |
|
429,587
|
Acquisition
of available-for-sale investments |
|
|
|
(3,417) |
|
(273,245)
|
Net
cash utilized in investing activities |
|
|
|
(335,439
|
|
(877,107)
|
Cash
flows from financing activities |
|
|
|
|
|
|
Long
term loans raised |
|
|
|
460,916
|
|
29,684
|
Repayments
of capitalized finance lease liabilities
|
|
|
|
(268,052) |
|
(368,976)
|
Proceeds
from share issue |
|
|
|
166,951
|
|
26,372
|
Contributions
by minority shareholders |
|
|
|
583
|
|
8,357
|
Dividend
paid by subsidiaries |
|
|
|
(127,005) |
|
(98,356)
|
Dividend
paid by holding company |
|
|
|
(208,871) |
|
(105,645)
|
Other
|
|
|
|
–
|
|
(5,120)
|
Net
cash from/(utilized in) financing activities
|
|
|
|
24,522
|
|
(513,684)
|
Net
increase in cash and cash equivalents |
|
|
|
2,855,530
|
|
977,151
|
Forex
translation adjustments on cash and cash
equivalents |
|
|
|
(45,222) |
|
7,696
|
Cash
and cash equivalents at beginning of the year |
|
|
|
3,600,457
|
|
2,615,610
|
Cash
and cash equivalents at end of the year
|
|
34
|
|
6,410,765
|
|
3,600,457
|
|
|
The
accompanying notes are an integral part of these consolidated
annual financial statements |
|
|
|
|
FOR THE YEARS ENDED MARCH 31, 2006 AND 2005
|
|
Share
capital and
premium
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A
|
|
|
|
Foreign
currency
translation
reserve
|
|
reserve
|
|
reserve
|
|
Existing
control
business
combination
reserve
|
|
Share-based
compen-
sation
reserve
|
|
earnings
|
|
interest
|
|
Total
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
Balance
at April 1, 2004 |
|
14,243
|
|
4,577,786
|
|
–
|
|
(40,099) |
|
(16,945) |
|
(2,404,797) |
|
21,965
|
|
(385,799) |
|
245,369
|
|
2,011,723
|
Share
capital movements |
|
–
|
|
760,985
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
760,985
|
Treasury
share movements |
|
–
|
|
38,137
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
38,137
|
Share-based
compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
movements
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
28,591
|
|
–
|
|
–
|
|
28,591
|
Foreign
currency translation effect |
|
–
|
|
–
|
|
(5,984) |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,652
|
|
(4,332) |
Share
in equity-accounted direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
reserve
movements |
|
–
|
|
–
|
|
568
|
|
1,024
|
|
–
|
|
–
|
|
5,818
|
|
–
|
|
–
|
|
7,410
|
Net
fair value gains |
|
–
|
|
–
|
|
–
|
|
47
|
|
12,846
|
|
–
|
|
–
|
|
–
|
|
–
|
|
12,893
|
-
Fair value adjustment to available- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for-sale
investments, gross |
|
–
|
|
–
|
|
–
|
|
66
|
|
18,095
|
|
–
|
|
–
|
|
–
|
|
–
|
|
18,161
|
-
Fair value adjustment to available- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for-sale
investments, tax portion |
|
–
|
|
–
|
|
–
|
|
(19) |
|
(5,249) |
|
–
|
|
–
|
|
–
|
|
–
|
|
(5,268) |
Cash
flow hedges |
|
–
|
|
–
|
|
–
|
|
20,108
|
|
–
|
|
–
|
|
–
|
|
–
|
|
2,429
|
|
22,537
|
-
Net fair value gains, gross |
|
–
|
|
–
|
|
–
|
|
(4,642) |
|
–
|
|
–
|
|
–
|
|
–
|
|
2,429
|
|
(2,213) |
-
Net fair value gains, tax portion |
|
–
|
|
–
|
|
–
|
|
1,346
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,346
|
-
Derecognized and added to asset, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gross
|
|
–
|
|
–
|
|
–
|
|
11,690
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
11,690
|
-
Derecognized and added to asset, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tax
portion |
|
–
|
|
–
|
|
–
|
|
(3,390) |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(3,390) |
-
Derecognized and reported in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
when recognition criteria |
|
–
|
|
–
|
|
–
|
|
21,273
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
21,273
|
failed,
gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Derecognized and reported in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
when recognition criteria |
|
–
|
|
–
|
|
–
|
|
(6,169) |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(6,169) |
failed,
tax portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
movements |
|
–
|
|
–
|
|
–
|
|
–
|
|
27,895
|
|
(68,728) |
|
–
|
|
(813) |
|
(42,782) |
|
(84,428) |
Release
of fair value reserve |
|
–
|
|
–
|
|
–
|
|
–
|
|
27,895
|
|
–
|
|
–
|
|
–
|
|
–
|
|
27,895
|
Transactions
with minorities and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
successive
acquisitions |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(68,728) |
|
–
|
|
–
|
|
–
|
|
(68,728)
|
Other
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
|
–
|
|
(813) |
|
(42,782) |
|
(43,595)
|
Profit
for the year |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
2,384,762
|
|
116,977
|
|
2,501,739
|
Dividends
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(105,645) |
|
(102,380) |
|
(208,025) |
Other
minority interest movements |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
6,063
|
|
6,063
|
Balance
at March 31, 2005 |
|
14,243
|
|
5,376,908
|
|
(5,416) |
|
(18,920) |
|
23,796
|
|
(2,473,525) |
|
56,374
|
|
1,892,505
|
|
227,328
|
|
5,093,293
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
FOR
THE YEARS ENDED MARCH 31, 2006 AND 2005 (continued) |
|
|
Share
capital and
premiun
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A
|
|
Class N
|
|
Foreign
currency
translation
reserve
|
|
reserve
|
|
reserve
|
|
Existing
control
business
combination
reserve
|
|
reserve
|
|
earnings
|
|
interest
|
|
Total
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000 |
|
R’000
|
|
R’000
|
Balance
at April 1, 2005 |
|
14,243
|
|
5,376,908
|
|
(5,416) |
|
(18,920)
|
|
23,796
|
|
(2,473,525)
|
|
56,374
|
|
1,892,505
|
|
227,328
|
|
5,093,293
|
Share
capital movements |
|
–
|
|
69,723
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
69,723
|
Treasury
share movements |
|
–
|
|
64,537
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
64,537
|
Share-based
compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
movements
|
|
–
|
|
35,909
|
|
–
|
|
–
|
|
–
|
|
–
|
|
134,808
|
|
–
|
|
–
|
|
170,717
|
Foreign
currency translation effect |
|
–
|
|
–
|
|
18,223
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,010
|
|
19,233
|
Purchase
in existing subsidiary |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,028,058)
|
|
–
|
|
–
|
|
(49,592)
|
|
(1,077,650)
|
Sale
of existing subsidiary |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
908
|
|
–
|
|
–
|
|
–
|
|
908
|
Net
fair value gains |
|
–
|
|
–
|
|
–
|
|
–
|
|
(23,623) |
|
–
|
|
–
|
|
–
|
|
–
|
|
(23,623)
|
-
Fair value adjustment to available- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for-sale
investments, gross |
|
–
|
|
–
|
|
–
|
|
–
|
|
(17,849) |
|
–
|
|
–
|
|
–
|
|
–
|
|
(17,849)
|
-
Fair value adjustment to available- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for-sale
investments, tax portion |
|
–
|
|
–
|
|
–
|
|
–
|
|
5,176 |
|
–
|
|
–
|
|
–
|
|
–
|
|
5,176
|
-
Realization of fair value on sale of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
investments, gross |
|
–
|
|
–
|
|
–
|
|
–
|
|
(15,422) |
|
–
|
|
–
|
|
–
|
|
–
|
|
(15,422)
|
|
|
-
Realization of fair value on sale of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
investments, tax |
|
–
|
|
–
|
|
–
|
|
–
|
|
4,472 |
|
–
|
|
–
|
|
–
|
|
–
|
|
4,472
|
portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges |
|
–
|
|
–
|
|
–
|
|
(1,273)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,109)
|
|
(2,382)
|
-
Net fair value gains, gross |
|
–
|
|
–
|
|
–
|
|
19,917
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(317)
|
|
19,600
|
-
Net fair value gains, tax portion |
|
–
|
|
–
|
|
–
|
|
(5,776)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
98
|
|
(5,678)
|
-
Derecognized and added to asset, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gross
|
|
–
|
|
–
|
|
–
|
|
(9,837)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,153)
|
|
(10,990)
|
-
Derecognized and added to asset, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tax
portion |
|
–
|
|
–
|
|
–
|
|
2,853
|
|
–
|
|
–
|
|
–
|
|
–
|
|
263
|
|
3,116
|
-
Derecognized and reported in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income,
gross |
|
–
|
|
–
|
|
–
|
|
(11,873)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(11,873)
|
-
Derecognized and reported in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income,
tax portion |
|
–
|
|
–
|
|
–
|
|
3,443
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
3,443
|
Profit
for the year |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
3,190,188
|
|
157,236
|
|
3,347,424
|
Dividends
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(208,871) |
|
(127,514)
|
|
(336,385)
|
Other
minority interest movements |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(35,812)
|
|
(35,812)
|
Balance
at March 31, 2006 |
|
14,243
|
|
5,547,077
|
|
12,807
|
|
(20,193)
|
|
173
|
|
(3,500,675)
|
|
191,182
|
|
4,873,822
|
|
171,547
|
|
7,289,983
|
|
The
accompanying notes are an integral part of these consolidated
annual financial statements. |
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
1.
|
NATURE
OF OPERATIONS |
|
|
Naspers
Limited was incorporated in 1915 under the laws of the
Republic of South Africa. The principal activities of Naspers and
its
operating subsidiaries, joint ventures and associated companies
(collectively, “the group”) are the operation of pay television, internet
and instant messaging subscriber platforms and the provision of
related
technologies, the publishing, distribution and printing of magazines,
newspapers and books, and the provision of private education services.
These activities are conducted primarily in South Africa, sub-Saharan
Africa, Greece, Cyprus, Thailand, China, the Netherlands and the
United
States of America. |
|
2.
|
TRANSITION
TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRS”) |
|
|
A.
|
Introduction |
|
|
|
For
the year ended March 31, 2005 the Naspers Limited group
(“Naspers” or “the group”) prepared its financial statements under South
African Statements of Generally Accepted Accounting Practice (“SA GAAP”)
as effective at that date. In accordance with the JSE Limited (“JSE”)
Listing Requirements the group is required to prepare its first
annual
consolidated financial statements in accordance with IFRS for the
year
ended March 31, 2006. |
|
|
|
As
the group publishes comparative information in its financial
statements, the date for transition to IFRS is April 1, 2004, which
represents the beginning of the earliest period of comparative
information
to be presented as required in terms of the requirements of the
JSE
Limited and the Securities and Exchange Commission in the United
States of
America. |
|
|
|
In
order to describe how Naspers’s reported results of operations
and financial position are impacted by IFRS, the group has restated
information previously published under SA GAAP to the equivalent
basis
under IFRS. This restatement follows the guidelines set out in
IFRS 1
“First-time Adoption of International Financial Reporting Standards”
(“IFRS 1”). |
|
|
B.
|
Transitional
arrangements |
|
|
|
The
date of transition to IFRS for the group is April 1, 2004 and
therefore, as required by IFRS 1, the group’s opening balance sheet at
April 1, 2004 has been restated to reflect all existing IFRS statements
and interpretations effective at March 31, 2006. However, IFRS
1 allows
for a number of exemptions and exceptions from full retrospective
application of IFRS. |
|
|
|
The
group has adopted the following exemptions in accordance with
IFRS 1: |
|
|
|
|
(a) |
Business combinations
|
|
|
|
|
|
The group has applied IFRS 3 “Business Combinations”
(“IFRS 3”) to all business combinations that have occurred since April
1,
2004 (the date of transition to IFRS). In addition, the group
has elected
to apply IFRS 3 retrospectively to all business combinations
that occurred
between December 20, 2002 and the date of transition to IFRS.
The group
therefore applied the principles of IFRS 3 with effect from December
20,
2002. This retrospective application of IFRS 3 ensured that all
the
significant business combination transactions entered into by
the group
over the past three years have been treated in a consistent
manner.
|
|
(b) |
Fair value as deemed
cost |
|
|
|
|
|
The group has elected to measure certain
items of
property, plant and equipment at fair value and to use these
fair values
as the items’ deemed costs as at April 1, 2004. These items relate mainly
to land and buildings in the group’s private education
segment.
|
|
(c) |
Cumulative translation
differences |
|
|
|
|
|
Naspers has elected not to apply the requirements
of IAS
21 “Effects of Changes in Foreign Exchange Rates” (“IAS 21”)
retrospectively for cumulative translation differences of all
foreign
operations. The group therefore set the cumulative translation
differences
to zero at April 1, 2004 and applied IAS 21 from this
date.
|
|
(d) |
Exemption from restatement
of
comparatives for IAS 32 and IAS 39 |
|
|
|
|
|
The group has elected to apply the exemption
that allows
it to apply the previous SA GAAP principles under AC 125 “Financial
Instruments: Disclosure and Presentation (“AC 125”) and AC 133 “Financial
Instruments: Recognition and Measurement” (“AC 133”) to derivatives,
financial assets and financial liabilities and to hedging relationships
for its comparative information relating to the financial year
ended March
31, 2005. It therefore only applied IAS 32 and IAS 39 with effect
from
April 1, 2005.
|
|
(e) |
Share-based payment
transactions |
|
|
|
|
|
The group has applied the share-based payment
exemption,
therefore IFRS 2 “Share-based payments” (“IFRS 2”) was only applied to
equity instruments that were granted after November 7, 2002 but
that have
not vested by January 1, 2005. Naspers also did not apply IFRS
2 to
liabilities arising from share-based payment transactions that
were
settled before January 1, 2005. For instruments vesting on or
after
January 1, 2005, the amortization of the fair value charge has
been
recorded as an expense in the income statements in the respective
periods
and the cumulative effect of prior years in equity.
|
|
(f) |
Decommissioning liabilities
included in
property, plant and equipment |
|
|
|
|
|
The group has elected in terms
of IFRS 1 not
to apply the requirements of IFRIC 1 “Changes in Existing Decommissioning,
Restoration and Similar Liabilities” (“IFRIC 1”) for changes in such
liabilities that occurred before April 1,
2004. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
TRANSITION
TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS
(continued)
|
B. |
Transitional
arrangements (continued) |
|
|
|
|
The group has applied
the following
exceptions from retrospective application in accordance with IFRS
1: |
|
|
|
|
(a) |
Derecognition
of financial assets and liabilities |
|
|
|
|
|
The
application of the exemption from restating comparatives for
IAS 32 “Financial Instruments: Disclosure and Presentation” (“IAS 32”) and
IAS 39 “Financial Instruments: Recognition and Measurement” (“IAS 39”)
means that the group’s effective date for these standards was April 1,
2005. Financial assets and liabilities derecognized before April
1, 2005
have not been re- recognized under IFRS.
|
|
(b) |
Hedge
accounting |
|
|
|
|
|
On
adoption of IFRS the group is not allowed to designate a
transaction as a hedge, if such transaction was not designated
as a hedge
and it qualified for hedge accounting in terms of AC 133 under
SA
GAAP.
|
|
(c) |
Estimates |
|
|
|
|
|
Estimates
under IFRS at April 1, 2004 are consistent with the
estimates made at the same date under SA GAAP. Naspers therefore
did not
adjust any estimates it had made under SA GAAP for information
it received
subsequent to the date of transition to IFRS.
|
|
(d) |
Assets
held for sale and discontinued operations |
|
|
|
|
|
The
group has applied IFRS 5 “Non-current Assets Held for Sale and
Discontinued Operations” (“IFRS 5”) prospectively from April 1, 2005 to
all non-current assets held for sale and/or discontinued
operations.
|
|
C. |
Reconciliation
of Net Profit and Equity from SA GAAP to
IFRS |
The
reconciliations of Net Profit and Equity below present the impact of the
various
adjustments on the group’s financial position and financial performance. The
numbering of the adjustments corresponds with the numbering used in section
D
“IFRS adjustments and reclassifications”.
|
Reconciliation
of Net Profit
|
|
|
|
Year
ended |
|
|
|
|
|
March
31, 2005 |
|
|
|
|
|
R’m
|
|
|
|
As
previously reported under SA GAAP |
|
|
|
|
|
-
Attributable to Naspers shareholders |
|
|
|
2,600
|
|
-
Attributable to minority shareholders |
|
|
|
120
|
|
|
|
|
|
2,720
|
|
Adjusted
for: |
|
|
|
|
|
-
share-based payments |
|
1
|
|
(128) |
|
-
amortization of goodwill and intangible assets |
|
2
|
|
-
|
|
-
transactions with minority shareholders |
|
3
|
|
(59) |
|
-
recognition of intangible assets |
|
4
|
|
(20) |
|
-
property, plant and equipment |
|
5
&
6
|
|
(11) |
|
-
currency translation differences |
|
7
|
|
4
|
|
-
operating leases |
|
8
|
|
(4) |
|
-
decommission liabilities |
|
9
|
|
-
|
|
-
discounting of financial liabilities |
|
10
|
|
(1) |
|
As
reported under IFRS |
|
|
|
2,501
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS |
|
|
(CONTINUED)
|
|
|
|
|
|
|
|
TRANSITION
TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (continued)
|
|
|
|
C.
Reconciliation of Net Profit and Equity from SA GAAP to IFRS
(continued)
|
|
|
|
|
|
|
Reconciliation
of Equity |
|
|
|
March
31, 2005 |
|
April
1, 2004 |
|
|
|
|
R’m
|
|
R’m
|
|
As
previously reported under SA GAAP |
|
|
|
|
|
|
-
Naspers shareholders’ interest |
|
|
|
6,630
|
|
3,231
|
-
Minority shareholders’ interest |
|
|
|
223
|
|
237
|
|
|
|
|
6,853
|
|
3,468
|
|
Adjusted
for: |
|
|
|
|
|
|
-
share-based payments |
|
1
|
|
(155)
|
|
(62)
|
-
amortization of goodwill and intangible assets |
|
2
|
|
219
|
|
219
|
-
transactions with minority shareholders |
|
3
|
|
(1,956)
|
|
(1,782)
|
-
recognition of intangible assets |
|
4
|
|
40
|
|
61
|
-
property, plant and equipment |
|
5
&
6
|
|
116
|
|
128
|
-
currency translation differences |
|
7
|
|
-
|
|
-
|
-
operating leases |
|
8
|
|
(21)
|
|
(18)
|
-
decommission liabilities |
|
9
|
|
(2)
|
|
(2)
|
-
discounting of financial liabilities |
|
10
|
|
(1)
|
|
-
|
As
reported under IFRS |
|
|
|
5,093
|
|
2,012
|
|
D. |
IFRS
adjustments and
reclassifications |
|
|
|
|
The group made the
following
adjustments to its SA GAAP financial statements in order to restate
the
information in terms of IFRS: |
|
|
|
|
(1) |
IFRS
2: Share-based payments |
|
|
The group grants share options to its employees
under a
number of equity compensation plans. In terms of SA GAAP, these
equity
compensation plans did not result in any expense being recorded
by the
group, other than costs incurred in administering the schemes
and a
dilution in earnings per share when the shares were delivered
to the
employee.
|
|
|
In
accordance with IFRS 2, the group has recognized a compensation
expense in the income statement, representing the fair value
of share
options granted to the group’s employees. A corresponding credit to equity
has been raised for equity-settled plans, whereas a corresponding
credit
to liabilities has been raised for cash-settled plans. The
fair value of
the options at the date of grant under equity-settled plans
is charged to
income over the relevant vesting periods, adjusted to reflect
actual and
expected levels of vesting. For cash-settled plans, the group
remeasures
the fair value of the liability at each reporting date and
at the date of
settlement, with any changes in fair value recognized in
income for the
period.
|
|
(2) |
IAS 38: Amortization of goodwill and
intangible
assets with indefinite useful lives
|
|
|
The group has adopted IFRS 3 “Business Combinations”
(“IFRS 3”), IAS 36 “Impairment of Assets” (“IAS 36”) and IAS 38
“Intangible Assets” (“IAS 38”) on April 1, 2004. As discussed previously
the group elected to apply IFRS 3 with effect from December
20, 2002 in
terms of the exemption provided under IFRS 1. Owing to this
application of
IFRS 3, the group has also applied the principles of IAS 36
and IAS 38
from that date.
|
|
|
|
|
(3) |
IFRS 3: Transactions with
minority
shareholders |
|
|
As discussed above the group has
elected to
apply the principles of IFRS 3 to all business combinations as
from
December 20, 2002. Under SA GAAP, before the adoption of AC 140
“Business
Combinations” (“AC 140”), the group accounted for transactions with
minority shareholders by allocating the cost of the transaction
to
identifiable tangible and intangible assets at their fair values
at the
transaction date and recognizing goodwill relating to the excess
of the
cost over the acquirer’s interest in the net fair value of the
identifiable assets and liabilities. After the adoption of AC
140 on April
1, 2004, the group applied the modified parent company model
and allocated
the full excess of the cost of the transaction with minority
shareholders
over the acquirer’s interest in previously recognized assets and
liabilities to goodwill under SA GAAP. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
TRANSITION
TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS
(continued)
|
D. |
IFRS
adjustments and reclassifications (continued) |
|
|
|
|
(3) |
IFRS 3: Transactions with
minority
shareholders (continued) |
|
|
In
terms of IFRS 3, the group has elected to account for
transactions with minority shareholders as equity transactions
in terms of
the economic entity model. Under this model, any excess of
the cost of the
transaction over the acquirer’s interest in previously recognized assets
and liabilities is allocated to a separate component of
equity.
The
impact of the adoption of IFRS 3 as from December 20, 2002
has
led to the derecognition of all intangible assets, all adjustments
to the
fair value of tangible assets and all goodwill accounted
for under SA GAAP
that resulted from transactions with minority shareholders
since that
date. |
|
(4) |
IAS
38: Recognition of intangible assets |
|
|
Before the adoption of AC 131 “Business Combinations”
and AC 128 “Intangible Assets” on April 1, 2000, the group accounted for
all intangible assets purchased and acquired in business
combinations
against shareholders’ equity. In terms of the requirements of IFRS 1, IAS
38 should be applied retrospectively, requiring the group
to recognize all
intangible assets that have previously been recognized in
the group’s
financial statements and that meet the recognition and measurement
criteria of IAS 38. On transition to IFRS the group has therefore
re-instated all such intangible assets which were previously
accounted for
against shareholders’ equity under SA GAAP.
|
|
(5) |
IAS 16: Useful lives and residual
values
|
|
|
IAS 16 “Property, plant and equipment” (“IAS 16”)
differs in certain respects from the previous SA GAAP equivalent,
AC
123 “Property, plant and equipment” (“AC
123”), applied by the group until March 31, 2005. IAS 16 states
that an
entity is required to measure the residual value of an item
of property,
plant and equipment as the amount the entity estimates it
would receive
currently for the asset if the asset were already of the
age and in the
condition expected at the end of its useful life. The group
has previously
under SA GAAP accounted for residual values based on the
requirement of AC
123 that regards residual value as the net amount that the
entity expected
to obtain for the asset at the end of its useful life. The
group has
therefore reviewed its residual values for individual items
of property,
plant and equipment and adjusted the carrying value of some
items at the
date of transition accordingly in terms of the requirements
of IAS
16.
|
|
|
IAS 16 further requires that the useful
lives of the
individual components of property, plant and equipment items
be reviewed
at least annually, whereas the requirement under the previous
SA GAAP
equivalent, AC 123, has been to review the useful lives of
items of
property, plant and equipment on a non-mandatory periodic
basis. The group
has reassessed the useful lives of all individual components
of property,
plant and equipment and adjusted the carrying value of some
items at the
date of transition accordingly.
|
|
|
The adjustments to the residual values
and useful lives
of certain items of property, plant and equipment and the
corresponding
change in their carrying values at April 1, 2004 has also
impacted
depreciation charges subsequent to April 1, 2004.
|
|
(6) |
IFRS 1 and IAS 16: Fair
value as deemed
cost |
|
|
In terms of the requirements of IFRS
1 the group is
required to apply IAS 16 retrospectively. As explained in
the transitional
arrangements section, the group has elected to apply the
exemption under
IFRS 1 whereby the fair value of certain assets at April
1, 2004 is used
as its deemed cost on the transition date. The group adjusted
the carrying
values of the individual items of property, plant and equipment
for those
items to which the exemption was applied. The aggregate of
these fair
values were Rand 89.6 million and the total adjustment to
the carrying
amounts was Rand 36 million.
|
|
(7) |
IFRS 1 and IAS 21: Reset of cumulative
translation
differences
|
|
|
In terms of the requirements of IFRS
1 the group is
required to apply IAS 21 “The Effects of Changes in Foreign Exchange
Rates” (“IAS 21”) retrospectively. As explained in the transitional
arrangements section, the group has elected to apply the
exemption under
IFRS 1 whereby all cumulative translation differences for
all foreign
operations are deemed to be zero at the date of transition.
The group has
therefore reset its cumulative translation differences relating
to foreign
entities as previously recognized under SA GAAP. A corresponding
entry was
made to retained earnings.
|
|
(8) |
IAS 17: Operating
leases |
|
|
The South African Institute
of Chartered
Accountants issued Circular 7/2005
during
August 2005. The purpose of the circular was to clarify the
requirements
of IAS 17 “Leases” (“IAS 17”) in respect of operating leases, which
include fixed rental increases. IAS 17 and its SA GAAP equivalent
standard
AC 105 “Leases” (“AC 105”) require that lease payments under an operating
lease should be recognized as an expense on a straight-line
basis over the
lease term unless another systematic basis is more representative
of the
time pattern of the user’s benefit. In South Africa most lessees,
including Naspers, have in the application of AC 105 recognized
rental
expenses with fixed rental increases on the basis of the cash
flow in the
lease agreements, interpreting that such an approach represented
“another
systematic basis” that was “more representative of the time pattern of the
user’s benefits”. Circular 7/2005,
however, clarified that the way many South African entities,
including
Naspers, applied the “other systematic basis” in terms of AC 105 was not
consistent with the requirements of IAS 17 and AC as applied
internationally. IAS 17 only permits a treatment other than
straight-line
recognition when another basis is more representative of the
time
pattern of
the user’s benefit, which is unaffected by the timing of
payments. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
TRANSITION
TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS
(continued)
|
D. |
IFRS adjustments and
reclassifications (continued) |
|
|
|
|
(8) |
IAS 17: Operating leases
(continued) |
|
|
Naspers
applied the principles of IAS 17, as clarified by Circular
7/2005,
to all its lease agreements with fixed rental increases on
adoption of IFRS. The requirements of IAS 17 were applied
retrospectively
and an adjustment to retained earnings at the transition
date was
accounted for. The net profit for the year ended March 31,
2005 was
adjusted accordingly.
|
|
(9) |
IFRIC 1: Decommissioning,
restoration and
similar liabilities |
|
|
IFRS 1 requires that the group apply the
requirements of
IFRIC 1 retrospectively. As explained in the transitional arrangements
section, the group has elected to apply the exemption under
IFRS 1,
whereby the group need not account for changes in decommissioning,
restoration and similar liabilities that occurred before the
date of
transition to IFRS. The group identified only one such liability,
pertaining to leasehold premises and related improvements.
The value of
the assets are immaterial to the group.
|
|
(10) |
IAS 39: Discounting of programme
and film
rights liabilities |
|
|
The group has certain programme and film
rights
liabilities that are classified as financial liabilities in
terms of IAS
39. IAS 39 requires that financial liabilities be measured
at amortized
cost using the effective interest method. Certain programme
and film
rights liabilities have settlement dates that are not short
term in
nature, therefore these liabilities have been discounted in
terms of IAS
39. These liabilities were not previously discounted in terms
of the
group’s SA GAAP reporting.
|
|
|
|
|
In
the process of transition to IFRS, the group identified
instances where reclassifications were required between certain
balance
sheet items compared with the classifications that were previously
presented under SA GAAP. The following reclassifications were
made by the
group in restating its balance sheet under IFRS.
|
|
(11) |
Reclassification of computer
software
from property, plant and equipment to intangible assets |
|
|
The group reclassified certain computer
software from
“property, plant and equipment” to “intangible assets” on its balance
sheet. Computer software is required to be classified as an
intangible
asset in terms of IAS 38, unless the software is an integral
part of the
related hardware. This adjustment had no impact on the group’s income
statements or its net equity.
|
|
(12) |
Reclassification between
non-current and
current assets and liabilities |
|
|
The group reclassified certain assets and
liabilities
from non-current assets and liabilities to current assets and
liabilities,
respectively. The reason for these reclassifications was to
accurately
reflect the nature of certain assets and liabilities between
its current
and non-current portions as required by IAS 1. Certain derivative
financial assets were reclassified from current assets to non-current
assets. This reclassification had no impact on the group’s income
statements or its net equity.
|
|
(13) |
Reclassification of deferred
income and
provisions |
|
|
The group reclassified credit balances
relating to
deferred income that were included under “accounts receivable” to “accrued
expenses” on its balance sheet. This reclassification had no impact on
the
group’s income statements or its net equity. A reclassification was
also
made between “accrued expenses” and “provisions” on the balance sheet
relating to a warranty provision.
|
|
The
following represent the significant presentation adjustments
that have been made to the group’s income statement:
|
|
(1) |
Presentation of
expenses |
|
|
The
group previously applied the provisions of AC 101 “Presentation of
Financial Statements” (“AC 101”) under SA GAAP to present its expenditure
items on the face of its income statement. IAS 1 “Presentation of
Financial Statements” (“IAS 1”) provides additional guidance relating to
the presentation of expenditure in its income statement. In
applying this
guidance certain reclassifications were made between “cost of providing
services and sale of goods”, “selling, general and administration
expenses” and “other (losses) / gains - net”.
|
|
(2) |
Reallocation of depreciation,
amortization and impairment captions |
|
|
Depreciation and amortization expenses
that were
separately disclosed on the face of the SA GAAP income statement
have been
reallocated to “cost of providing services and sale of goods” and
“selling, general and administration expenses” on the face of the IFRS
income statement. Impairments and adjustments to goodwill and
other
intangible assets have been reallocated to the caption “other (losses) /
gains - net”.
|
|
(3) |
Share of equity accounted
results
presented net of taxation |
|
|
Under SA GAAP the group previously presented
its share
of equity-accounted results gross of its share of the associated
companies’ taxation charges, which were included under “taxation” in the
group’s income statement. In terms of IAS 1, the group is required
to
present its share of equity-accounted results relating to associated
companies after taxation and minority interests in the associates.
The
group therefore reclassified these taxation expenses from “taxation” to
“share of equity- accounted results” to reflect a post-taxation
result.
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
TRANSITION
TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS
(continued)
|
D. |
IFRS adjustments and
reclassifications (continued) |
|
|
|
|
(4) |
Exceptional items |
|
|
|
|
|
Under
SA GAAP the group previously presented certain items that are
of such nature or incidence that their separate disclosure
is relevant to
explain the group’s performance and make comparisons of operating margins
more meaningful under a heading “exceptional items” on the face of its
income statement. Under IFRS the group is not allowed to aggregate
such
items under “exceptional items”, therefore such items have been presented
separately on the face of the income statement under headings
such as
“profit on sale of investments” and “dilution profits” to provide a
description of each item’s nature. Certain items previously included under
“exceptional items” that are of an operational nature have been
reclassified to “other (losses) / gains - net” and are therefore included
in operating profit under IFRS.
|
|
|
Certain
presentation changes have been made to the group’s cash
flow statement. The most significant adjustment related to
the
classification of dividends paid by the group. Under SA GAAP
the group
previously presented dividends paid to shareholders as part
of its
operating activities, as it assisted readers of the financial
statements
to determine the ability of the group to pay dividends out
of operating
cash flows. Under IFRS the group elected to present dividends
paid as part
of financing activities in terms of IAS 7 “Cash Flow Statements” (“IAS 7”)
as it is a cost to obtain financial resources. Dividends paid
of Rand 204
million for the year ended March 31, 2005 have been reclassified
from
operating to financing activities. A number of additional immaterial
adjustments and reclassifications were also made to the group’s SA GAAP
cash flow statement in order to present it on an IFRS
basis. |
3.
|
PRINCIPAL
ACCOUNTING
POLICIES
|
|
The consolidated annual financial statements
of
the group are presented in accordance with, and comply with,
International
Financial Reporting Standards (“IFRS”) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations
issued and
effective at the time of preparing these financial statements.
The
disclosure required by IFRS1 “First time adoption of IFRS” concerning the
transition from SA GAAP to IFRS is provided in note 2. The
consolidated
financial statements are prepared according to the historic
cost
convention as modified by the revaluation of available-for-sale
financial
assets and financial assets and liabilities (including derivative
instruments) at fair value through profit or loss.
The preparation of the consolidated financial
statements
necessitates the use of estimates, assumptions and judgments.
These
estimates and assumptions affect the reported amounts of assets,
liabilities and contingent liabilities at the balance sheet
date as well
as affecting the reported income and expenses for the year.
Although
estimates are based on management’s best knowledge and judgment of current
facts as at the balance sheet date, the actual outcome may
differ from
these estimates, possibly significantly. Refer to the individual
notes for
details of estimates, assumptions and judgments used.
|
|
(a)
|
Basis of consolidation
|
|
|
The consolidated annual financial statements
include the
results of Naspers Limited and its subsidiaries, associates,
joint
ventures and related share incentive trusts.
|
|
|
Subsidiaries
|
|
|
The consolidated annual financial statements
include the
results Naspers Limited and its subsidiaries. Subsidiaries
are those
companies in which the group, directly or indirectly, has an
interest of
more than half of the voting rights, or otherwise has the power
to
exercise control over their operations. The existence and effect
of
potential voting rights that are presently exercisable or convertible
without restriction are considered when assessing whether the
group
controls another entity. Subsidiaries are consolidated from
the date that
effective control is transferred to the group and are no longer
consolidated from the date that effective control ceases. Similarly,
the
results of a subsidiary divested during an accounting period
are included
in the consolidated financial statements only to the date of
disposal. For
certain entities, the group has entered into contractual arrangements
(such as nominee relationships and escrow arrangements) which
allow the
group, along with its direct interests in such entities, to
control a
majority of the voting rights or otherwise have power to exercise
control
over the operations of such entities. Because the group controls
such
entities in this manner they are considered to be subsidiaries
and are
therefore consolidated in the annual financial statements.
All intergroup transactions and balances
are eliminated
as part of the consolidation process. The interests of minority
shareholders in the consolidated equity and results of the
group are shown
separately in the consolidated balance sheet and income statement,
respectively. Where the losses attributable to the minority
shareholders
in a consolidated subsidiary exceed their interest in that
subsidiary, the
excess, and any further losses attributable to them, are recognized
by the
group and allocated to those minority interests only to the
extent that
the minority shareholders have a binding obligation and are
able to fund
the losses. Where the group previously did not recognize the
minority
shareholders’ portion of losses and the subsidiary subsequently turns
profitable, the group recognizes all the profits until the
minority
shareholders’ share of losses previously absorbed by the group has been
recovered.
The
purchase method of accounting is used to account for the
acquisition of subsidiaries by the group. The cost of an
acquisition is
measured as the fair value of the assets given, equity instruments
issued
and liabilities incurred or assumed at the date of exchange,
plus costs
directly attributable to the acquisition. Identifiable assets
acquired and
liabilities and contingent liabilities assumed in a business
combination
are measured initially at their fair values at the
acquisition date, irrespective of the extent
of any minority
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING
POLICIES (continued)
|
|
(a)
|
Basis of consolidation
(continued)
|
|
|
|
|
|
Subsidiaries
(continued)
|
|
|
interest.
The excess of the cost of acquisition over the fair value
of the group’s share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the
fair value of the
net assets of the subsidiary acquired, the difference is
recognized
directly in the income statement.
The
group applies the economic entity model in accounting for
transactions with minority shareholders. In terms of this
model, minority
shareholders are viewed as equity participants of the group
and all
transactions are therefore accounted for as equity transactions
and
included in the statement of changes in equity. On acquisition
of an
interest from a minority shareholder, any excess of the cost
of the
transaction over the acquirer’s proportionate share of the net asset value
acquired is allocated to a separate component of equity.
Dilution profits
and losses relating to non-wholly owned subsidiary entities
are similarly
accounted for in the statement of changes in equity in terms
of the
economic entity model.
Where
necessary, accounting policies for subsidiaries have been
changed to ensure consistency with the policies adopted by
the
group.
|
|
|
Associated companies
|
|
|
Investments
in associated companies are accounted for under the
equity method. Associated companies are those companies in
which the group
generally has between 20% and 50% of the voting rights, or
over which the
group exercises significant influence, but which it does
not control.
Equity-accounting
involves recognizing in the income statement the
group’s share of the associate’s post-acquisition results net of taxation
and minority interests in the associate. The group’s share of
post-acquisition movements in reserves is accounted for in
the reserves of
the group. The group’s interest in the associate is carried on the balance
sheet at cost, adjusted for the group’s share of the change in
post-acquisition net assets, and inclusive of goodwill and
other
identifiable intangible assets recognized on acquisitions.
Where the
group’s share of losses exceeds the carrying amount of its investment,
the
carrying amount of the investment as well as any loans to
the associate
are reduced to nil and no further losses are recognized,
unless the group
has incurred obligations to the associate or the group has
guaranteed or
committed to satisfy obligations of the associate. Unrealized
gains and
losses on transactions between the group and its associates
are eliminated
to the extent of the group’s interest in the associates, unless the loss
provides evidence of an impairment of the asset transferred.
|
|
|
Joint ventures
|
|
|
The
group’s interest in jointly controlled entities is accounted
for by way of proportionate consolidation. The group combines
its share of
the joint ventures’ individual income and expenses, assets and liabilities
and cash flows on a line-by-line basis with similar items
in the group’s
financial statements. The group recognizes the portion of
gains or losses
on the sale of assets by the group to the joint venture that
is
attributable to the other venturers. The group does not recognize
its
share of gains or losses from the joint venture that result
from the
purchase of assets by the group from the joint venture until
it resells
the assets to an independent third party. However, if a loss
on the
transaction provides evidence of a reduction in the net realizable
value
of current assets or an impairment loss, the loss is recognized
immediately.
|
|
(b) |
Investments |
|
|
|
|
|
The
group classifies its investments in debt and equity securities
into the following categories: at fair value through profit
and loss,
held-to-maturity, available-for-sale and loans and receivables.
The
classification is dependent on the purpose for which the investments
were
acquired. Management determines the classification of its investments
at
the time of purchase and re-evaluates such designation on an
annual
basis.
At
fair value through profit and loss assets has two
sub-categories: financial assets held for trading and those
designated at
fair value through profit or loss at inception. A financial
asset is
classified into this category at inception if acquired principally
for the
purpose of selling in the short term, if it forms part of a
portfolio of
financial assets in which there is evidence of short term profit-taking,
or if so designated by management. For the purpose of these
financial
statements short-term is defined as a period of three months
or less. The
group does not hold financial assets for trading, therefore
assets held as
at fair value through profit and loss are designated as such
on initial
recognition. Derivatives are also classified as held for trading
unless
they are designated as hedges.
Investments
with a fixed maturity that management has the intent
and ability to hold to maturity are classified as held-to-maturity
and are
included in non-current
assets, except for maturities within 12 months from the
balance sheet date, which are classified as current assets.
Loans and
receivables are non-derivative financial assets with fixed
or determinable
payments that are not quoted in an active market other than
those that the
group intends to sell in the short term or that it has designated
as at
fair value through income or available-for-sale. All other
investments,
including those that are intended to be held for an indefinite
period of
time, which may be sold in response to needs for liquidity,
changes in
fair value or interest rates, are classified as available-for-sale.
Available for sale assets are included in non-current assets
unless
management has the express intention of holding the investment
for less
than 12 months from the balance sheet date or unless they
will need to be
sold to raise operating capital, in which case they are included
in
current assets.
|
3.
|
PRINCIPAL
ACCOUNTING
POLICIES (continued)
|
|
(b)
|
Investments
(continued)
|
|
|
|
|
|
Purchases
and sales of investments are recognized on the trade
date, which is the date that the group commits to purchase
or sell the
asset. Investments are initially recognized at fair value
plus, in the
case of all financial assets not carried at fair value
through profit or
loss, transaction costs that are directly attributable
to their
acquisition. At fair value through profit and loss and
available-for-sale
investments are subsequently carried at fair value. Held-to-maturity
investments and loans and receivables are carried at
amortized cost using
the effective yield method. Realized and unrealized gains
and losses
arising from changes in the fair value of at fair value
through profit and
loss investments are included in the income statement
in the period in
which they arise. Unrealized gains and losses arising
from changes in the
fair value of investments classified as available-for-sale
are recognized
in equity.
The
fair values of investments are based on quoted bid prices
or
amounts derived from cash flow models. Fair values for
unlisted equity
securities are estimated using applicable price/earnings
or price/cash
flow ratios refined to reflect the specific circumstances
of the issuer.
Equity securities for which fair values cannot be measured
reliably are
recognized at cost less impairment. When securities classified
as
available-for-sale are sold or impaired, the accumulated
fair value
adjustments are included in the income statement as “profit / loss on sale
of investments”
Investments
are derecognized when the rights to receive cash flows
from the investments have expired or where they have
been transferred and
the group has also transferred substantially all risks
and rewards of
ownership.
|
|
(c) |
Property, plant and
equipment
|
|
|
|
|
|
Property,
plant and equipment are stated at cost, being the
purchase cost plus any cost to prepare the assets for their
intended use,
less accumulated depreciation and any accumulated impairment
losses. Cost
includes transfers from equity of any gains/losses on qualifying
cash flow
hedges of foreign currency purchase costs. Property, plant
and equipment,
with the exception of land, are depreciated in equal annual
amounts over
each asset’s estimated useful economic life. Land is not depreciated
as it
is deemed to have an indefinite life. Depreciation periods
vary in
accordance with the conditions in the relevant industries,
but are subject
to the following maximum
limits:
|
|
Land
&
Buildings:
|
|
Factory
buildings |
|
50
years |
|
|
|
Other
buildings |
|
50
years |
|
Manufacturing
equipment: |
|
Printing
presses |
|
25
years |
|
|
|
Production
equipment |
|
25
years |
|
Office
equipment: |
|
|
|
20
years |
|
Furniture:
|
|
|
|
20
years |
|
Computer
equipment: |
|
Manufacturing
|
|
20
years |
|
|
|
Office
|
|
20
years |
|
Vehicles:
|
|
|
|
12
years |
|
Transmission
equipment: |
|
Set-top
boxes |
|
20
years |
|
|
|
Transponders
and transmitters |
|
20
years |
|
|
Major
leasehold improvements are amortized over the shorter of
their respective lease periods and estimated useful economic
life.
Concession
assets are capitalized and depreciated over the shorter
of their useful life of five years and the remaining concession
period.
Borrowing
costs directly attributable to the acquisition,
construction or production of qualifying assets are capitalized
as part of
the cost of those assets. Capitalization of such borrowing
costs ceases
when the assets are substantially ready for their intended
use or sale.
All other borrowing costs are expensed in the period in which
they are
incurred.
Subsequent
costs are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when
it is probable
that future economic benefits associated with the item will
flow to the
group and the cost of the item can be measured reliably.
All other repairs
and maintenance are charged to the income statement during
the financial
period in which they are incurred. The cost of major renovations
is
included in the carrying amount of the asset when it is probable
that
future economic benefits will flow to the group and the cost
can be
reliably measured. Major renovations are depreciated over
the remaining
useful economic life of the related
asset.
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(c)
|
Property,
plant and equipment (continued) |
|
|
|
The
carrying values of property, plant and equipment are reviewed
periodically to assess whether or not the net recoverable amount
has
declined below the carrying amount. In the event of such impairment,
the
carrying amount is reduced and the reduction is charged as an expense
against income. |
|
|
|
The
assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at each balance sheet date.
Gains
and losses on disposals are determined by comparing the proceeds
with the
asset’s carrying amount. |
|
|
(d)
|
Leased
assets |
|
|
|
Leases
of property, plant and equipment, except land, are
classified as finance leases where, substantially all risks and
rewards
associated with ownership of an asset are transferred from the
lessor to
the group as lessee. Assets classified as finance leases are capitalized
at the lower of the fair value of the leased asset and the estimated
present value of the underlying minimum lease payments, with the
related
lease obligation recognized at the estimated present value of the
minimum
lease payments. Bank rates are used to calculate present values
of minimum
lease payments. Capitalized leased assets are depreciated over
their
estimated useful lives, limited to the duration of the lease
agreement. |
|
|
|
Each
lease payment is allocated between the liability
and finance charges so as to achieve a constant rate on the finance
balance outstanding. The corresponding rental obligations, net
of finance
charges, are included in other long-term payables. The interest
element of
the finance cost is charged to the income statement over the lease
period
so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. |
|
|
|
Leases
of assets under which substantially all the risks and
rewards of ownership are effectively retained by the third-party
lessor
are classified as operating leases. Operating lease rentals (net
of any
incentives received from the lessor) are charged to the income
statement
on a straight-line basis over the period of the lease. |
|
|
(e)
|
Goodwill
and other intangible assets |
|
|
|
Goodwill
represents the excess of the cost of an
acquisition over the fair value of the group’s share of the net
identifiable assets of the acquired subsidiary, associate or joint
venture
at the date of acquisition. Goodwill on acquisition of subsidiaries
and
joint ventures is included in “goodwill” on the balance sheet. Goodwill on
acquisitions of associates is included in ‘investments in associates’.
Separately recognized goodwill is tested annually for impairment
and
carried at cost less accumulated impairment losses. Impairment
losses on
goodwill are not reversed. Gains and losses on the disposal of
an entity
include the carrying amount of goodwill relating to the entity
sold. |
|
|
|
Goodwill
is allocated to cash-generating units for the purpose of
impairment testing. Impairment is determined by assessing the recoverable
amount of the cash-generating unit to which the goodwill relates.
Where
the recoverable amount of the cash-generating unit is less than
the
carrying amount, an impairment loss is recognized. |
|
|
|
Patents,
brand names, trademarks, title rights, concession rights,
software and other similar intangible assets acquired are capitalized
at
cost. Intangible assets with indefinite useful lives are not amortized,
but tested annually for impairment and carried at cost less accumulated
impairment losses. Intangible assets with finite useful lives are
being
amortized using the straight-line method over their estimated useful
lives. The carrying amount of each intangible asset is reviewed
annually
and adjusted for impairment where the carrying amount exceeds the
recoverable amount. The useful lives and residual values of intangible
assets are reassessed on an annual basis. Amortization periods
for
intangible assets with finite useful lives vary in accordance with
the
conditions in the relevant industries, but are subject to the following
maximum limits: |
|
|
Patents
|
|
5
years |
|
Title
rights |
|
10
years |
|
Brand
names & trademarks |
|
20
years |
|
Software
|
|
5
years |
|
Intellectual
property rights |
|
7
years |
|
Concession
rights |
|
20
years |
|
Subscriber
base |
|
8
years |
No
value is attributed to internally developed trademarks or similar rights
and
assets. The costs incurred to develop these items are charged to the income
statement
in the period in which they are incurred.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(f)
|
Programme
and film rights |
|
|
|
Purchased
programme and film rights are stated at acquisition costs
less accumulated amortization. The group has certain programme
and film
rights liabilities that are classified as financial liabilities
in terms
of IAS 39 which requires that financial liabilities be measured
at
amortized cost using the effective interest method. Certain programme
and
film rights liabilities have settlement dates that are long term
in
nature; therefore these liabilities are recorded as non-current
liabilities and have been discounted in terms of IAS 39. Licenses
are
recorded as assets and liabilities for rights acquired, and obligations
incurred under license agreements when the license period begins
and the
cost of each programme is known or reasonably determinable. Sports
rights
are written off on initial broadcasting of the event whereas general
entertainment and films are amortized either on a straight- line
basis
over the duration of the license or based on broadcasts where the
number
of screenings are restricted. Amortization of programme and film
rights is
included in the cost of providing services and sale of goods. The
costs of
in-house programmes are expensed as incurred. |
|
|
(g)
|
Impairment |
|
|
|
Financial
assets |
|
|
|
The
group assesses at each balance sheet date whether there is any
objective evidence that an investment or group of investments is
impaired.
If any such evidence exists, the entity applies the following principles
for each class of financial assets to determine the amount of any
impairment loss: |
|
|
|
Financial
assets carried at amortized cost |
|
|
|
If
there is objective evidence that an impairment loss on loans and
receivables or held-to-maturity investments carried at amortized
cost has
been incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not
been
incurred) discounted at the financial asset’s original effective interest
rate (ie the effective interest rate computed at initial recognition).
The
carrying amount of the asset is reduced directly through profit
and loss.
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring
after
the impairment was recognized, the previously recognized impairment
loss
shall be reversed through profit and loss. The reversal shall not
result
in a carrying amount of the financial asset that exceeds what the
amortized cost would have been had the impairment not been recognized
at
the date the impairment is reversed. The reversal is recognized
in the
income statement in the same line as the original impairment
charge. |
|
|
|
Available-for-sale
financial assets |
|
|
|
When
a decline in the fair value of an available-for-sale financial
asset has been recognized directly in equity and there is objective
evidence that the asset is impaired, the cumulative loss that had
been
recognized directly in equity shall be removed from equity and
recognized
in profit or loss even though the financial asset has not been
derecognized. |
|
|
|
Impairment
losses recognized in profit or loss for an investment in
an equity instrument classified as available for sale shall not
be
reversed through profit or loss. |
|
|
|
If,
in a subsequent period, the fair value of a debt instrument
classified as available for sale increases and the increase can
be
objectively related to an event occurring after the impairment
loss was
recognized in profit or loss, the impairment loss shall be reversed,
with
the amount of the reversal recognized in profit or loss. |
|
|
|
Long
lived assets |
|
|
|
The
group evaluates the carrying value of assets with finite useful
lives annually and when events and circumstances indicate that
the
carrying value may not be recoverable. Indicators of possible impairment
include, but are not limited to: significant underperformance relative
to
expectations based on historical or projected future operating
results;
significant changes in the manner of use of the assets or the strategy
for
the group’s overall business; significant negative industry or economic
trends; a significant and sustained decline in an investment’s share price
or market capitalization relative to its net asset value. Assets
that have
an indefinite useful life are not subject to amortization and are
tested
annually for impairment. |
|
|
|
An
impairment loss is recognized in the income statement when the
carrying amount of an asset exceeds its recoverable amount. An
asset’s
recoverable amount is the higher of the amount obtainable from
the sale of
an asset in an arm’s length transaction between knowledgeable willing
parties, or its value in use. Value in use is the present value
of
estimated future cash flows expected to arise from the continuing
use of
an asset and from its disposal at the end of its useful life. The
estimated future cash flows are discounted to their present value
using a
pre-tax discount rate that reflects current market assessments
of the time
value of money and the risks specific to the asset. For the purposes
of
assessing impairment, assets are grouped at the lowest levels for
which
there are separately identifiable cash flows. |
|
|
|
An
impairment loss recognized for an asset in prior years is
reversed if there has been a change in the estimates used to determine
the
asset’s recoverable amount since the last impairment loss was recognized
and the recoverable amount exceeds the new carrying amount. The
reversal
of the impairment is limited to the carrying amount that would
have been
determined (net of depreciation or |
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(g)
|
Impairment
(continued) |
|
|
|
Long
lived assets (continued) |
|
|
|
amortization)
had no impairment loss been recognized in prior
years. The reversal of such an impairment loss is recognized in
the income
statement in the same line item as the original impairment
charge. |
|
|
(h)
|
Development
activities |
|
|
|
Research
and development costs |
|
|
|
Research
expenditure is recognized as an expense as incurred. Costs
incurred on development projects (relating to the design and testing
of
new or improved products) are recognized as intangible assets when
it is
probable that the project will be profitable considering its commercial
and technical feasibility and its costs can be measured reliably.
Other
development expenditures that do not meet these criteria are recognized
as
an expense as incurred. Development costs previously recognized
as an
expense are not recognized as an asset in a subsequent period.
Capitalized
development costs are recorded as intangible assets and amortized
from the
point at which the asset is ready for use on a straight-line basis
over
its useful life, not exceeding the limits stated in note (e). Development
assets are tested for impairment annually, and the impairment loss
is
recognized in the income statement when the carrying amount of
the asset
exceeds its recoverable amount. This loss is also reversed if there
has
been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized and the recoverable
amount exceeds the new carrying amount. The reversal of the impairment
is
limited to the carrying amount that would have been determined
(net of
depreciation or amortization) had no impairment loss been recognized
in
prior years. The reversal of such an impairment loss is recognized
in the
income statement in the same line item as the original impairment
charge. |
|
|
|
Software
development costs |
|
|
|
Costs
that are directly associated with the production of
identifiable and unique software products controlled by the group,
and
that will probably generate economic benefits exceeding costs beyond
one
year, are recognized as intangible assets. Direct costs include
the
software development
team’s employee costs and an appropriate
portion of relevant overheads. All other costs associated with
developing
or maintaining computer software programmes are
recognized as an expense as incurred. |
|
|
|
Website
development costs |
|
|
|
Website
development costs are capitalized as intangible assets if
it is probable that the expected future economic benefits attributable
to
the asset will flow to the group, and its cost can be measured
reliably,
otherwise these costs are charged against operating profit as the
expenditure is incurred. |
|
|
(i)
|
Inventory |
|
|
|
Inventory
is stated at the lower of cost or net realizable value.
The cost of inventory is determined by means of the first-in-first-out
basis or the weighted average method. The majority of inventory
is valued
using the first-in-first-out basis, but for certain inventories
with a
specific nature and use which differs significantly from other
classes of
inventory, the weighed average is used. The cost of finished products
and
work-in-progress comprises raw materials, direct labour, other
direct
costs and related production overheads, but excludes finance costs.
Costs
of inventories include the transfer from equity of any gains or
losses on
qualifying cash flow hedges relating to inventory purchases. Net
realizable value is the estimate of the selling price, less the
costs of
completion and selling expenses. Provisions are made for obsolete,
unusable and unsaleable inventory and for latent damage first revealed
when inventory items are taken into use or offered for sale. |
|
|
(j)
|
Trade
receivables |
|
|
|
Trade
receivables are recognized at fair value less provision made
for impairment. A provision for impairment of trade receivables
is
established when there is objective evidence that the group will
not be
able to collect all amounts due according to the original terms
of
receivables. The amount of the provision is the difference between
the
carrying amount and the estimated recoverable amount. |
|
|
(k)
|
Cash
and cash equivalents |
|
|
|
Cash
and cash equivalents are carried in the balance sheet at cost.
Cash and cash equivalents comprise cash on hand, deposits held
at call
with banks and investments in money market instruments with maturities
of
three months or less at the date of purchase. Certain cash balances
are
restricted from immediate use according to terms with banks or
other
financial institutions. For cash flow purposes, cash and cash equivalents
are presented net of bank overdrafts. |
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(l)
|
Borrowings |
|
|
|
Borrowings
are recognized initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated
at
amortized cost using the effective yield method; any difference
between
proceeds and the redemption value is recognized in the income statement
over the period of the borrowings. |
|
|
(m)
|
Provisions |
|
|
|
Provisions
are recognized when the group has a present legal or
constructive obligation as a result of past events, it is probable
that an
outflow of resources embodying economic benefits will be required
to
settle the obligation and a reliable estimate of the amount of
the
obligation can be made. |
|
|
|
The
group recognizes the estimated liability on all products still
under warranty at the balance sheet date. The group recognizes
a provision
for onerous contracts when the expected benefits to be derived
from a
contract are less than the unavoidable costs of meeting the obligations
under the contract. Restructuring provisions are recognized in
the period
in which the group becomes legally or constructively committed
to payment.
Costs related to the ongoing activities of the group are not provided
in
advance. |
|
|
(n)
|
Taxation |
|
|
|
Taxation
rates |
|
|
|
The
normal South African company tax rate used for the year ending
March 31, 2006 is 29% (2005: 30%). Deferred tax assets and liabilities
for
South African entities at March 31, 2006 have been calculated using
this
rate, being the rate that the group expects to apply to the periods
when
the assets are realized or the liabilities are settled. Secondary
tax on
companies is calculated at 12,5%, and capital gains tax is calculated
at
50% of the company tax rate. International tax rates vary from
jurisdiction to jurisdiction. |
|
|
|
Deferred
taxation |
|
|
|
Deferred
taxation is provided in full, using the balance sheet
liability method, for all timing differences arising between the
tax bases
of assets and liabilities and their carrying values for financial
reporting purposes. Currently enacted, or where appropriate, substantially
enacted tax rates are used to determine deferred taxation. |
|
|
|
Using
this method, the group is required to make provision for
deferred taxation, in relation to an acquisition, on the difference
between the fair values of the net assets acquired and their tax
base.
Provision for taxes, mainly withholding taxes, which could arise
on the
remittance of retained earnings, is only made if there is a current
intention to remit such earnings. |
|
|
|
The
principal timing differences arise from depreciation on
property, plant and equipment, other intangibles, provisions and
other
current liabilities, income received in advance and tax losses
carried
forward. Deferred taxation assets are recognized to the extent
that it is
probable that future taxable profit will be available against which
timing
differences and unused tax losses can be utilized. |
|
|
|
Deferred
taxation is provided on temporary differences arising on
investments in subsidiaries and associates, except where the timing
of the
reversal of the temporary difference is controlled by the group
and it is
probable that the temporary difference will not reverse in the
foreseeable
future. |
|
|
|
Secondary
tax on companies (“STC”) |
|
|
|
Dividends
declared by South African companies are subject to STC,
but the STC liability is reduced by dividends received during the
dividend
cycle. Where the dividends received exceed dividends declared within
a
cycle, there is no liability to pay STC. The potential tax benefit
related
to excess dividends received are carried forward to the next dividend
cycle. Where dividends declared exceed the dividends received during
a
cycle, STC is payable at the current STC rate. The STC expense
is included
in the taxation charge in the income statement in the period that
the
dividend is paid. Deferred tax assets are recognized on unutilized
STC
credits to the extent that it is probable that the group will declare
future dividends to utilize such STC
credits. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(o)
|
Foreign
currencies |
|
|
|
The
consolidated financial statements are presented in Rands which
is the Company’s functional and presentation currency. However, the group
separately measures the transactions of each of its material operations
using the functional currency determined for that specific entity,
which
in most instances, but not always, is the currency of the primary
economic
environment in which the operation conducts its business. |
|
|
|
For
transactions and balances |
|
|
|
Foreign
currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the
settlement of such transactions and from the translation at year-
end
exchange rates of monetary assets and liabilities denominated in
foreign
currencies are recognized in the income statement, except when
deferred in
equity as qualifying cash flow hedges and qualifying net investment
hedges. |
|
|
|
Translation
differences on non-monetary items, such as equities
held at fair value through profit or loss, are reported as part
of the
fair value gain or loss. Translation differences on non-monetary
items,
such as equities classified as available-for-sale financial assets,
are
included in the fair value reserve in equity. |
|
|
|
For
translation of group companies |
|
|
|
The
results and financial position of all the group entities (none
of which has the currency of a hyperinflationary economy) that
have a
functional currency different from the presentation currency are
translated into the presentation currency as follows: |
|
|
|
(i)
|
assets
and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet; |
|
|
|
(ii)
|
income
and expenses for each income statement are translated at
average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing
on the
transaction dates, in which case income and expenses are translated
at the
dates of the transactions); and |
|
|
|
(iii)
|
all
resulting exchange differences are recognized as a separate
component of equity. |
|
|
|
On
consolidation, exchange differences arising from the translation
of the net investment in foreign entities, and of borrowings and
other
currency instruments designated as hedges of such investments,
are taken
to shareholders’ equity. When a foreign operation is sold, such exchange
differences are recognized in the income statement as part of the
gain or
loss on sale. |
|
|
|
Goodwill
and fair value adjustments arising on the acquisition of a
foreign entity are treated as the foreign entity’s assets and liabilities
and are translated at the closing rate. |
|
|
(p)
|
Derivative
financial instruments |
|
|
|
The
group uses derivative instruments to reduce exposure to
fluctuations in foreign currency exchange rates and interest rates.
These
instruments mainly comprise foreign exchange contracts, interest
rate caps
and interest rate swap agreements. Foreign exchange contracts protect
the
group from movements in exchange rates by fixing the rate at which
a
foreign currency asset or liability will be settled. Interest rate
caps
and swap agreements protect the group from movements in interest
rates. It
is the policy of the group not to trade in derivative financial
instruments for economically speculative purposes. |
|
|
|
The
group documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as well
as its
risk management objective and strategy for undertaking various
hedge
transactions. The group also documents its assessment, both at
hedge
inception and on an ongoing basis, of whether the derivatives that
are
used in hedging transactions are expected to be and have been highly
effective in offsetting changes in fair values or cash flows of
hedged
items. The fair values of various derivative instruments used for
hedging
purposes are disclosed in note 37. Movements on the hedging reserve
are
shown in the statement of changes in shareholders’ equity. |
|
|
|
Derivative
financial instruments are recognized in the balance
sheet at fair value. The method of recognizing the resulting gain
or loss
is dependent on the nature of the item being hedged. The group
designates
derivatives as either (1) a hedge of the fair value of a recognized
asset
or liability or firm commitment (fair value hedge), or (2) a hedge
of a
forecasted transaction or of the foreign currency risk of a firm
commitment (cash flow hedge), or (3) a hedge of a net investment
in a
foreign entity on the date a derivative contract is entered
into. |
|
|
|
Changes
in the fair value of derivatives that are designated and
qualify as fair value hedges and that are highly effective, are
recorded
in the income statement, along with changes in the fair value of
the
hedged asset or liability that is attributable to the hedged
risk. |
|
|
|
Changes
in the fair value of derivatives that are designated and
qualify as cash flow hedges and that are highly effective are recognized
in equity, and the ineffective part of the hedge is recognized
in the
income statement. Where the forecasted
transaction |
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(p)
|
Derivative
financial instruments (continued) |
|
|
|
or
firm commitment of which the foreign currency risk is being
hedged results in the recognition of an asset or a liability, the
gains
and losses previously deferred in equity are transferred from equity
and
included in the initial measurement of the cost of the asset or
liability.
Otherwise, amounts deferred in equity are transferred to the income
statement and classified as income or expense in the same periods
during
which the hedged transaction affects the income statement. |
|
|
|
Certain
derivative transactions, while providing effective economic
hedges under the group’s risk management policies, do not qualify for
hedge accounting. Changes in the fair value of any derivative instrument
that do not qualify for hedge accounting are recognized immediately
in the
income statement. |
|
|
|
When
a hedging instrument expires or is sold, or when a hedge no
longer meets the criteria for hedge accounting, any cumulative
gain or
loss existing in equity at that time remains in equity and is recognized
when the committed or forecasted transaction ultimately is recognized
in
the income statement. When a committed or forecasted transaction
is no
longer expected to occur, the cumulative gain or loss that was
reported in
equity is immediately transferred to the income statement. |
|
|
|
Hedges
of net investments in foreign entities are accounted for
similarly to cash flow hedges. Where the hedging instrument is
a
derivative, any gain or loss on the hedging instrument relating
to the
effective portion of the hedge is recognized in equity; the gain
or loss
relating to the ineffective portion is recognized immediately in
the
income statement. However, where the hedging instrument is not
a
derivative, all foreign exchange gains and losses arising on translation
are recognized in the income statement. |
|
|
|
Embedded
derivatives are derivative instruments that are embedded
in another contract or host contract. The group separates an embedded
derivative from its host contract and accounts for it separately,
when its
economic characteristics are not clearly and closely related to
those of
the host contract. These separated embedded derivatives are classified
as
trading assets or liabilities and marked to market through the
income
statement, provided that the combined contract is not measured
at fair
value with changes through the income statement. |
|
|
(q)
|
Revenue
recognition |
|
|
|
Product
sales |
|
|
|
Sales
are recognized upon delivery of products and customer
acceptance, net of sales taxes, VAT and discounts, and after eliminating
sales within the group. |
|
|
|
Subscription
fees |
|
|
|
Pay-television
and Internet subscription fees are earned over the
period the services are provided. Subscription revenue arises from
the
monthly billing of subscribers for pay-television and internet
services
provided by the group. Revenue is recognized in the month the service
is
rendered. Any subscription revenue received in advance of the service
being provided is recorded as deferred revenue and recognized in
the month
the service is provided. |
|
|
|
Advertising
revenues |
|
|
|
The
group mainly derives advertising revenues from advertisements
published in its newspapers and magazines, broadcasted on its pay
television platforms and shown online on its websites and instant
messaging windows. Advertising revenues from pay television and
print
media products are recognized upon showing or publication over
the period
of the advertising contract. Publication is regarded to be when
the print
media product has been delivered to the retailer and is available
to be
purchased by the general public. Online advertising revenues are
recognized over the period in which the advertisements are
displayed. |
|
|
|
Printing
and distribution |
|
|
|
Revenues
from print and distribution services are recognized upon
completion of the services and delivery of the related product
and
customer acceptance, net of taxes, VAT and discounts, and after
elimination of sales within the group. The recognition of print
services
revenue is based upon delivery of the product to the distribution
depot
and acceptance by the distributor of the client, or where the customer
is
responsible for the transport of the customers’ products, acceptance by
the customer or its nominated transport company. Revenues from
distribution services are recognized upon delivery of the product
to the
retailer and acceptance thereof. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(q)
|
Revenue
recognition (continued) |
|
|
|
Printing
and distribution (continued) |
|
|
|
Print
and distribution services are separately provided by
different entities within the group and separately contracted for
by third
party customers. Where these services are provided to the same
client, the
terms of each separate contract are consistent with contracts where
an
unrelated party provides one of the services. Revenue is recognized
separately for print and distribution services as the contracts
are
separately negotiated based on fair value for each service. |
|
|
|
Technology
contracts and licensing |
|
|
|
For
contracts with multiple obligations (e.g. maintenance and other
services), and for which vendor-specific objective evidence of
fair value
for the undelivered elements exists, revenue from product licenses
are
recognized when delivery has occurred, collection of the receivables
is
probable, the fee is fixed or determinable and objective evidence
exists
to allocate the total fee to all delivered and undelivered elements
of the
arrangement. Generally, the group has vendor-specific objective
evidence
of the fair value of the maintenance element of software arrangements
based on the renewal rates for maintenance in future years as specified
in
the contracts. In such cases, the maintenance revenue is deferred
at the
outset of the arrangement and is recognized rateably over the period
during which the maintenance is to be provided. That period generally
commences on the date that the software is delivered. Vendor-specific
objective evidence of fair value for the service element is determined
based on the price charged when those services are sold separately.
The
group recognizes revenue allocated to maintenance and support fees,
for
ongoing customer support and product updates rateably over the
period of
the relevant contracts. Payments for maintenance and support fees
are
generally made in advance and are non-refundable. For revenue allocated
to
consulting services and for consulting services sold separately,
the group
recognizes revenue as the related services are performed. |
|
|
|
The
group enters into arrangements with network operators whereby
application software is licensed to network operators in exchange
for a
percentage of the subscription revenue they earn from their customers.
Where all of the software under the arrangement has been delivered,
the
revenue is recognized as the network operator reports to the group
its
revenue share, which is generally done on a quarterly basis. Under
arrangements where the group has committed to deliver unspecified
future
applications, the revenue earned on the delivered applications
is
recognized on a subscription basis over the term of the
arrangement. |
|
|
|
Instant
messaging services |
|
|
|
The
group’s activities include operating instant messaging
platforms from which it derives revenues from provision of mobile
and
telecommunications value-added services and internet value-added
services. |
|
|
|
Mobile
and telecommunication value-added services revenues are
derived principally from providing users with mobile instant messaging
services, mobile chat services and other mobile value-added services.
These services are substantially billed on a monthly subscription
basis
with certain portions billed on a per message basis (“Mobile and Telecom
Service Fees”). These services are predominantly delivered through the
platforms of various mobile operators and they also collect the
Mobile and
Telecom Service Fees on behalf of the group. Mobile and Telecom
Service
Fees are recognized at the amount invoiced to the group’s customers by the
various mobile operators, less any sales taxes. Fixed commissions,
other
expenses and bad debt expenses are recorded as an element of cost
of
providing services. |
|
|
|
Revenue
from internet value-added services (“Internet Service
Fees”) are derived from subscriptions received or receivable from the
provision of a comprehensive customer service platform that utilizes
instant messaging and online entertainment services. Similar to
mobile and
telecommunication value-added services these services are substantially
delivered to the group’s customers through the platforms of various mobile
operators with monthly subscriptions paid or payable by the users.
In
addition, a small portion of the Internet Service Fees is prepaid
by the
customers to the group in the form of prepaid point cards. Revenue
related
to these prepaid services are recorded as deferred revenue and
amortized
on a straight-line basis into income over the estimated usage
period. |
|
|
|
Tuition
fees |
|
|
|
Tuition
fees are non-refundable and are recognized on a percentage
of completion method over the term of the applicable course for
face to
face learning, and for distance learning it is recognized as a
percentage
of cost. |
|
|
(r)
|
Other
income |
|
|
|
Interest
and dividends received on available for sale financial
assets are included in investment income and not as part of the
fair value
movement in equity. |
|
|
|
Interest
income |
|
|
|
Interest
is accrued on a time-proportion basis, recognizing the
effective yield on the underlying assets. |
|
3.
|
PRINCIPAL
ACCOUNTING POLICIES (continued) |
|
|
(r)
|
Other
income (continued) |
|
|
|
Dividend
income |
|
|
|
Dividends
are recognized when the right to receive payment is
established. |
|
|
(s)
|
Employee
benefits |
|
|
|
Retirement
benefits |
|
|
|
The
group provides retirement benefits for its full-time employees,
primarily by means of monthly contributions to a number of defined
contribution pension and provident funds in the countries in which
the
group operates. The assets of these funds are generally held in
separate
trustee-administered funds. The group’s contributions to retirement funds
are recognized as an expense in the period in which employees render
the
related service. |
|
|
|
Medical
aid benefits |
|
|
|
The
group’s contributions to medical aid benefit funds for
employees are recognized as an expense in the period during which
the
employees render services to the group. |
|
|
|
Post-retirement
medical aid benefit |
|
|
|
Some
group companies provide post-retirement health-care benefits
to their retirees. The entitlement to post-retirement health-care
benefits
is based on the employee remaining in service up to retirement
age and
completing a minimum service period. The expected costs of these
benefits
are accrued over the period of employment, using an accounting
methodology
similar to that for defined benefit pension plans. Independent
qualified
actuaries carry out annual valuations of these obligations. All
actuarial
gains and losses are recognized immediately in the income statement.
The
actuarial valuation method used to value the obligations is the
Projected
Unit Credit Method. Future benefits are projected using specific
actuarial
assumptions and the liability to in-service members is accrued
over their
expected working lifetime. These obligations are unfunded. |
|
|
(t)
|
Equity
compensation benefits |
|
|
|
The
group grants share options/share appreciation rights (SARs) to
its employees under a number of equity compensation plans. In accordance
with IFRS 2, the group has recognized an employee benefit expense
in the
income statement, representing the fair value of share options/SARs
granted to the group’s employees. A corresponding credit to equity has
been raised for equity-settled plans, whereas a corresponding credit
to
liabilities has been raised for cash-settled plans. The fair value
of the
options/SARs at the date of grant under equity-settled plans is
charged to
income over the relevant vesting periods, adjusted to reflect actual
and
expected levels of vesting. For cash-settled plans, the group re-measures
the fair value of the recognized liability at each reporting date
and at
the date of settlement, with any changes in fair value recognized
in
profit or loss for the period. A share option scheme/SAR is considered
equity-settled when the option/gain is settled by the issue of
a Naspers N
share. They are considered cash-settled when they are settled in
cash or
any other asset, ie not by the issue of a Naspers N share. |
|
|
(u)
|
Segment
reporting |
|
|
|
The
primary segmental reporting has been prepared based on the
group’s method of internal reporting, which disaggregates its business
by
service or product. The secondary segmental reporting has been
prepared on
a geographical basis. Inter-segment transfers or transactions are
entered
into under normal commercial terms and conditions that would also
be
available to unrelated third parties. These inter- and intra group
transactions are eliminated on consolidation. |
|
|
(v)
|
Discontinuing
operations |
|
|
|
A
discontinuing operation results from the sale or abandonment of
an operation that represents a separate, major line of business
and for
which the assets, net profits or losses and activities can be
distinguished physically, operationally and for reporting purposes.
The
results of discontinuing operations up to the point of sale or
abandonment, net of taxation, are separately disclosed. |
|
|
(w)
|
Advertising
expenses |
|
|
|
Advertising
expenses are expensed in the financial period in which
they are incurred. |
|
|
(x)
|
Treasury
shares |
|
|
|
|
|
Where
subsidiaries hold shares in the holding company’s equity
share capital, the consideration paid to acquire these shares
including
any attributable incremental external costs is deducted from
total
shareholders’ equity as treasury shares. Where such shares are
subsequently sold or reissued, any consideration received is
included in
shareholders’ equity. Shares issued to or held by share incentive plans
within the group are treated as treasury shares until such time
when
participants pay for and take delivery of such shares.
The same applies to treasury shares held by joint
ventures.
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
3.
|
PRINCIPAL
ACCOUNTING POLICIES
(continued) |
|
|
(y)
|
Recently
issued accounting standards |
|
|
|
The
International Accounting Standards Board (“IASB”) issued a
number of standards, amendments to standards and interpretations
during
2005 and 2006. These amendments will therefore be implemented by
the group
during the financial year starting April 1, 2006. |
|
|
|
The
amendment to IAS 19 – “Employee Benefits”, has been issued to
allow the option of recognizing actuarial gains and losses in full
in the
period in which they occur, outside profit or loss, in a statement
of
recognized income and expenses. The amendment was issued during
December
2004 with immediate effect. The group will continue to apply option
of
recognizing the actuarial gains in losses in the income
statement. |
|
|
|
The
amendments that have been made to IAS 39 included amendments to
the accounting of Cash Flow Hedges of Forecasted Intragroup Transactions,
the scope of IAS 39 to include Financial Guarantee Contracts and
the
amendment to the Fair Value Option. These amendments were made
during
April, August and June 2005 with immediate effect. The group will
adopt
these amendments during its financial year ending March 31, 2007
and is
currently evaluating the effects of these amendments. |
|
|
|
The
amendment to IAS 1 – “Presentation of Financial Statements:
Capital Disclosures” states that an entity shall disclose information that
enables users of its financial statements to evaluate the entity’s
objectives, policies and processes for managing capital. The group
will
adopt these amendments during its financial year ending March 31,
2007 and
is currently evaluating the effects of these amendments. |
|
|
|
IFRS
7 – “Financial Instruments: Disclosures” was issued August 18,
2005, with an effective date of January 1, 2007. This new standard
adds
certain new disclosures about financial instruments to those currently
required by IAS 32 - Financial Instruments: Presentation. The group
will
adopt these amendments during its financial year ending March 31,
2007 and
is currently evaluating the effects of these amendments. |
|
|
|
The
IASB has also amended the accounting treatment of monetary
items in IAS 21 – “The Effect of Changes in Foreign Exchange Rates” during
December 2005 with immediate effect. The amendment stated that
if a
monetary item forms part of an entity’s investment in a foreign operation,
the accounting treatment in the consolidated financial statements
should
not be dependent on the currency of the monetary item. Also, the
accounting should not depend on which entity within the group conducts
a
transaction with the foreign operation. The group will adopt these
amendments during its financial year ending March 31, 2007 and
is
currently evaluating the effects of the standard. |
|
|
|
IFRIC
Interpretation 4 - “Determining whether an Arrangement
contains a Lease” was issued by the IASB and is effective for annual
periods beginning on or after January 1, 2006, and the Interpretation
specifies that an arrangement that meets certain criteria is, or
contains,
a lease that should be accounted for in accordance with IAS 17
– “Leases”.
The group will adopt these amendments during its financial year
ending
March 31, 2007 and is currently evaluating the effects of the
standard. |
|
|
|
IFRIC
Interpretation 6 – “Liabilities arising from Participating in
a Specific Market – Waste Electronic and Electronic Equipment” clarifies
when certain producers of electrical goods are required to recognize
a
liability under IAS 37 for the cost of waste management relating
to the
decommissioning of waste electrical and electronic equipment supplied
to
private households. IFRIC 6 is effective for annual periods beginning
on
or after December 1, 2005. The group will adopt these amendments
during
its financial year ending March 31, 2007 and is currently evaluating
the
effects of the standard. |
|
|
|
IFRIC
Interpretation 8 – “Scope of IFRS 2” clarifies that IFRS 2 –
“Share-based Payment” applies to arrangements where an entity makes
share-based payments for apparently nil or inadequate consideration.
IFRIC
8 is effective for annual periods beginning on or after May 1,
2006, and
the group will adopt these amendments during its financial year
ending
March 31, 2007 and is currently evaluating the effects of the
standard. |
|
|
|
IFRIC
Interpretation 9 – “Reassessment of Embedded Derivatives”
clarifies that an entity shall assess whether an embedded derivative
is
required to be separated from the host contract and accounted for
as a
derivative when the entity first becomes a party to the contract.
Subsequent reassessment is prohibited unless there is a change
in the
terms of the contract that significantly modifies the cash flows
that
otherwise would be required under the contract, in which case reassessment
is required. IFRIC 9 is effective for annual periods beginning
on or after
June 1, 2006, and the group will adopt these amendments during
its
financial year ending March 31, 2007 and is currently evaluating
the
effects of the standard. |
|
|
|
AC
503 – “Accounting for Black Economic Empowerment (“BEE”)
Transactions” states that if equity instruments are granted at a discount
to a BEE partner, this must be expensed. BEE credentials acquired
as part
of a business combination shall be subsumed in goodwill and not
recognized
as a separate intangible asset. Where the BEE transaction includes
service
conditions, the fair value of the equity instruments shall be measured
at
grant date and the expense should be recognized over the period
of the
service conditions. Where the BEE transaction includes no service
conditions, the fair value of the equity instruments shall be measured
at
grant date and the expense should be recognized immediately on
grant date.
AC 503 is effective for annual periods beginning on or after May
1, 2006,
and the group will adopt these amendments during its financial
year ending
March 31, 2007 and is currently evaluating the effects of the
standard. |
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
4.
|
SIGNIFICANT
ACQUISITIONS AND
DIVESTITURES |
|
|
Financial
year ended March 31, 2006: |
|
|
On
April 1, 2005, Media24 Limited (“Media24”) acquired an
additional interest of 7.5% in its subsidiary, Paarl Media Holdings
(Proprietary) Limited (“Paarl Media”), for a purchase consideration of
Rand 180 million in cash. This increased Media24’s effective financial
interest in Paarl Media to 92.11%. This transaction was accounted
for as a
common control transaction, and the excess of the purchase consideration
over the net asset value was recognized in equity. |
|
|
During
February 2006, MIH QQ (BVI) Limited acquired a 25% interest
in ChineseAll for a cash consideration of Rand 24.6 million. The
total
purchase consideration was allocated based upon an appraisal, as
follows:
net assets (Rand 1.7 million) and goodwill (Rand 22.9 million). |
|
|
|
|
During
October 2005, the company disposed of its investment in
Computicket (Proprietary) Limited for a cash consideration of Rand
67.5 million. A profit on sale of
investments of Rand 56.7 million was realized on this transaction
and is
included in profit from continuing
operations. |
|
|
|
On
November 7, 2005, the group publicly announced that it had
entered into an agreement in terms of which it would sell its entire
interest in United Broadcasting Corp. and MKSC World Dot Com Co.
to True
Corp. for a consideration of approximately US$164 million. A profit
on
discontinuance of operations of Rand 1,032.2 million was realized
on the
transaction. Details relating to this transaction are highlighted
in note
28 to the consolidated annual financial statements. |
|
|
During
December 2005 the company acquired 100% of the equity of
Orbicom (Proprietary) Limited (“Orbicom”) from MTN Group Limited (“MTN”)
for a cash consideration of Rand 44.2 million. The total purchase
consideration was allocated based upon appraisal, as follows: net
assets
(Rand 35.1 million) and goodwill (Rand 9.1 million). |
|
|
Subsequent
to March 31, 2006, Naspers Limited acquired, through its
offshore subsidiary MIH B.V., a 30% stake in leading Brazilian
media
company Abril S.A. (“Abril”), for a cash consideration of Rand 2,557.3
million. Irdeto Eindhoven B.V. acquired the Cryptotec Conditional
Access
business from Koninklijke Philips Electronics NV for a cash consideration
of Rand 230.7 million. MIH subscribed for new shares equal to a
25%
interest in Tixa Tech Group Inc. for a cash consideration of Rand
60.5
million. |
|
|
Financial
year ended March 31, 2005: |
|
|
On
April 1, 2004, Media24 Limited acquired the remaining 50%
interest it did not already own in Alchemy Publishing (Proprietary)
Limited for a cash consideration of Rand 4.6 million. The total
purchase
consideration of Rand 4.6 million was allocated based upon an appraisal,
as follows: net assets (Rand 0.7 million) and goodwill (Rand 3.9
million). |
|
|
On
April 13, 2004, Johnnic Communications Limited (“Johncom”)
exercised a call option on Naspers relating to 39.1% of the M-Net
and
SuperSport ordinary shares acquired from minority shareholders
in terms of
the Section 311 schemes of arrangement concluded during March 2004.
Naspers sold 33,686,280 M-Net and SuperSport shares respectively
for a
total cash consideration of Rand 286.3 million resulting in a loss
of Rand
27.9 million on disposal. Naspers retained an effective 60.12%
interest in
both M-Net and SuperSport. |
|
|
Tencent
Holdings Limited (“Tencent”) completed an initial public
offering of shares on June 16, 2004 and listed on the Hong Kong
Stock
Exchange. The group’s interest in Tencent was diluted from 50% to
approximately 36.1%. Tencent’s net proceeds were approximately HK$1.64
billion. The group realized a dilution profit of Rand 358.4 million.
The
group exercised joint control over the operations of Tencent until
June
16, 2004 and therefore proportionately consolidated the results
of Tencent
until that date. After the listing of Tencent the group retained
significant influence over Tencent’s financial and operating policies,
therefore Tencent was equity accounted by the group from June 16,
2004. |
|
|
NetMed
NV (“NetMed”) announced on June 19, 2003, that subject to
the fulfillment of certain conditions precedent, it had reached
an
agreement with Teletypos SA (“Teletypos”), in terms of which Teletypos
will exchange its interest in MultiChoice Hellas SA for approximately
€6.6
million in cash and a 12.5% equity interest in NetMed. On September
22,
2004 the last regulatory approvals and conditions precedent were
fulfilled, therefore this transaction was accounted for in the
year ended
March 31, 2005. The group realized a profit of Rand 215.7 million
on the
dilution of its interest in NetMed. Goodwill of Rand 312.9 million
was
accounted for on the acquisition of the remaining interest that
the group
did not already own in MultiChoice Hellas. |
|
|
Beijing
Media Corporation Limited (“BMC”) completed an initial
public offering of shares on December 22, 2004 and listed on the
Hong Kong
Stock Exchange. The group acquired an interest of 9.9% in BMC through
its
participation in the initial public offering. The group paid Rand
273.2
million in cash for its interest. The group has classified the
investment
as an available-for-sale investment and is carrying it on its balance
sheet at fair value. |
|
|
On
February 1, 2005, MWEB Holdings (Proprietary) Limited (“MWEB”)
acquired from Tiscali International BV its South African ISP business
(“Tiscali”) for a purchase consideration of Rand 309.3 million in
cash. |
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
4. |
SIGNIFICANT
ACQUISITIONS AND DIVESTITURES
(continued) |
|
|
|
|
The
fair value of the identifiable assets and liabilities of
Tiscali as at the date of the acquisition
were: |
|
|
|
|
|
|
Recognized
|
|
Carrying
|
|
|
|
|
|
|
on
acquisition
|
|
value
|
|
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
|
|
6,368
|
|
30,079
|
Subscriber
base
|
|
|
|
224,013
|
|
-
|
Deferred
tax
|
|
|
|
(49,831)
|
|
10,260
|
Cash
and cash deposits
|
|
|
|
39,160
|
|
39,160
|
Other
current assets
|
|
|
|
3,633
|
|
3,633
|
Current
liabilities
|
|
|
|
(52,622)
|
|
(60,511)
|
Fair
value of net assets
|
|
|
|
170,721
|
|
22,621
|
Goodwill
arising on acquisition
|
|
|
|
138,579
|
|
|
Purchase
consideration
|
|
|
|
309,300
|
|
|
|
|
|
|
|
|
|
|
|
The
cash outflow on acquisition is as follows:
|
|
|
|
|
|
R’000
|
|
|
|
|
|
|
|
|
|
Net
cash acquired with the Tiscali business
|
|
|
|
|
|
39,160
|
Cash
paid
|
|
|
|
|
|
(309,300)
|
Net
cash outflow
|
|
|
|
|
|
(270,140)
|
The
purchase agreement contained terms where any excess
in net
asset value acquired greater than Rand 44.5 million
would be payable on a
rand for rand basis to the seller. The group paid
an additional Rand 11.7
million on closing of the transaction. This was recorded
as an adjustment
to goodwill. Included in the goodwill recognized
are certain intangible
assets that cannot be individually separated and
reliable measured from
the acquiree due to their nature. These assets consist
of synergy
benefits. benefits
|
|
|
During
the 2005 financial year the company disposed of the
balance
of its investment in Liberty Media Corporation for
a consideration of Rand
141.6 million. A profit on sale of investments of Rand
18.7 million was
realized on this transaction. |
Subsequent
events disclosure
|
|
During
August 2006, MIH Print Media Holdings Limited (“MIH Print Media”) acquired
a 20.2% interest in Titan, a leading company in the
field of Chinese
sports publishing, for a cash consideration of approximately
Rand 114.5
million. It is anticipated that through a further
acquisition MIH Print
Media’s shareholding will increase to 37%.
|
|
In
September 2006, Naspers announced that, in furtherance
of its empowerment
objectives, the group intents to implement a Broad-Based
Black Economic
Empowerment ownership initiative in relation to Media24
Limited
(“Media24”) and MultiChoice South Africa
(“MCSA”).
|
|
The
BEE transactions are expected to result in the acquisition
by qualifying
Black Persons and Black Groups of ordinary shares
in the issued share
capital of Welkom Yizani Investments Limited (“Welkom Yizani”), which will
hold ordinary shares in the issued share capital
of Media24 Holdings
(Proprietary) Limited (“Media24 Holdings”), the holding company of
Media24 as well as Phuthuma Nathi Investments Limited
(“Phuthuma Nathi”),
which will hold ordinary shares in the issued share
capital of MultiChoice
South Africa Holdings (Proprietary) Limited (“MCSA Holdings”), the holding
company of MCSA.
|
|
Naspers
will sell up to 14.6 million shares in Media24 Holdings
to Welkom Yizani
for a consideration of approximately Rand 730 million.
Welkom Yizani will
fund the acquisition through cash and the issuance
of preference shares to
Naspers. MIHH will sell up to 45 million shares in
MCSA Holdings to
Phuthuma Nathi, for a consideration of approximately
Rand 2,250 million.
Phuthuma Nathi will fund the acquisition through
cash and the issuance of
preference shares to MIHH.
|
|
The
empowerment transactions are subject to Welkom Yizani
and Phuthuma Nathi
undertaking public offers to the General Black Public
to subscribe for
ordinary shares in Welkom Yizani and Phuthuma Nathi.
The number of Media24
Holdings and MCSA Holdings ordinary shares to be
acquired by Welkom Yizani
and Phuthuma Nathi will depend on the amount raised by
Welkom Yizani
and Phuthuma Nathi in terms of the public offers.
The closing date for the
public offers is expected to be at the end of October
2006. The public
offers may not ultimately be undertaken and the final
terms of the
empowerment transactions are subject to change.
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
|
|
|
|
March
31
|
5.
|
|
PROPERTY,
PLANT & EQUIPMENT |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Land
and buildings - owned |
|
648,013
|
|
571,547
|
|
|
Cost
price |
|
744,504
|
|
668,664
|
|
|
Accumulated
depreciation |
|
96,491
|
|
97,117
|
|
|
|
Land
and buildings - leased |
|
128,047
|
|
95,621
|
|
|
Cost
price |
|
157,581
|
|
116,363
|
|
|
Accumulated
depreciation |
|
29,534
|
|
20,742
|
|
|
|
Manufacturing
equipment - owned |
|
847,715
|
|
520,885
|
|
|
Cost
price |
|
1,303,009
|
|
973,918
|
|
|
Accumulated
depreciation |
|
455,294
|
|
453,033
|
|
|
|
Manufacturing
equipment - leased |
|
69,811
|
|
76,323
|
|
|
Cost
price |
|
148,768
|
|
149,819
|
|
|
Accumulated
depreciation |
|
78,957
|
|
73,496
|
|
|
|
Transmission
equipment - owned |
|
99,625
|
|
105,936
|
|
|
Cost
price |
|
356,374
|
|
555,464
|
|
|
Accumulated
depreciation |
|
256,749
|
|
449,528
|
|
|
|
Transmission
equipment - leased |
|
1,211,234
|
|
1,369,372
|
|
|
Cost
price |
|
2,689,472
|
|
2,734,447
|
|
|
Accumulated
depreciation |
|
1,478,238
|
|
1,365,075
|
|
|
|
Vehicles,
computer and office equipment - owned |
|
596,413
|
|
545,016
|
|
|
Cost
price |
|
1,769,894
|
|
1,724,852
|
|
|
Accumulated
depreciation |
|
1,173,481
|
|
1,179,836
|
|
|
|
Vehicles,
computer and office equipment - leased |
|
6,367
|
|
11,365
|
|
|
Cost
price |
|
9,359
|
|
22,055
|
|
|
Accumulated
depreciation |
|
2,992
|
|
10,690
|
|
|
Subtotal
|
|
3,607,225
|
|
3,296,065
|
|
|
Work-in-progress
|
|
81,284
|
|
148,598
|
|
|
Net
book value |
|
3,688,509
|
|
3,444,663
|
|
|
|
Total
cost price |
|
7,260,245
|
|
7,094,180
|
|
|
Total
accumulated depreciation |
|
3,571,736
|
|
3,649,517
|
|
|
Net
book value |
|
3,688,509
|
|
3,444,663
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS |
|
|
|
|
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
PROPERTY,
PLANT & EQUIPMENT (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vehicles,
|
|
|
|
|
|
|
|
|
Land
&
|
|
Manufacturing
|
|
Transmission
|
|
computers
|
|
Total
|
|
Total
|
|
|
|
|
Buildings
|
|
equipment
|
|
equipment
|
|
office
equipment
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
785,027
|
|
1,123,737
|
|
3,289,911
|
|
1,746,907
|
|
6,945,582
|
|
6,508,523
|
Disposal
of interest in joint ventures |
|
(10,453) |
|
(25,629) |
|
(326,207) |
|
(66,377) |
|
(428,666) |
|
(53,977) |
Foreign
currency translation effects |
|
(2,052) |
|
(1,708) |
|
(104,170) |
|
(26,535) |
|
(134,465) |
|
27,403
|
Reallocation
|
|
(7,505) |
|
129
|
|
30,715
|
|
(23,339) |
|
-
|
|
-
|
Impairment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(4,748) |
Acquisition
of subsidiaries |
|
6
|
|
-
|
|
3,248
|
|
27,631
|
|
30,885
|
|
7,588
|
Disposal
of subsidiaries |
|
-
|
|
-
|
|
-
|
|
(16,896) |
|
(16,896) |
|
(2,419) |
Acquisitions
|
|
148,413
|
|
401,956
|
|
196,397
|
|
281,647
|
|
1,028,413
|
|
606,369
|
Disposals
|
|
(11,351) |
|
(46,708) |
|
(44,048) |
|
(143,785) |
|
(245,892) |
|
(143,157) |
Closing
balance |
|
902,085
|
|
1,451,777
|
|
3,045,846
|
|
1,779,253
|
|
7,178,961
|
|
6,945,582
|
Work-in-progress
March 31, 2006 |
|
|
|
|
|
|
|
|
|
81,284
|
|
148,598
|
TOTAL
COST |
|
|
|
|
|
|
|
|
|
7,260,245
|
|
7,094,180
|
Accumulated
depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
117,859
|
|
526,529
|
|
1,814,603
|
|
1,190,526
|
|
3,649,517
|
|
3,197,386
|
Disposal
of interest in joint ventures |
|
(9,820) |
|
(25,629) |
|
(250,131) |
|
(52,848) |
|
(338,428) |
|
(11,488) |
Foreign
currency translation effects |
|
(1,949) |
|
(1,700) |
|
(76,997) |
|
(22,266) |
|
(102,912) |
|
30,405
|
Reclassifications
|
|
726
|
|
(470) |
|
10,220
|
|
(10,476) |
|
-
|
|
-
|
Impairment
|
|
-
|
|
-
|
|
-
|
|
326
|
|
326
|
|
(1,270) |
Reversal
of previous impairment |
|
(673) |
|
-
|
|
-
|
|
(1,402) |
|
(2,075) |
|
-
|
Acquisition
of subsidiaries |
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
543
|
Disposal
of subsidiaries |
|
-
|
|
-
|
|
-
|
|
(12,968) |
|
(12,968) |
|
(745) |
Depreciation
|
|
25,168
|
|
81,479
|
|
281,697
|
|
207,202
|
|
595,546
|
|
555,533
|
Disposals
|
|
(5,286) |
|
(45,958) |
|
(44,405) |
|
(121,621) |
|
(217,270) |
|
(120,847) |
Closing
balance |
|
126,025
|
|
534,251
|
|
1,734,987
|
|
1,176,473
|
|
3,571,736
|
|
3,649,517
|
|
Cost
|
|
902,085
|
|
1,451,777
|
|
3,045,846
|
|
1,779,253
|
|
7,178,961
|
|
6,945,582
|
Accumulated
depreciation |
|
126,025
|
|
534,251
|
|
1,734,987
|
|
1,176,473
|
|
3,571,736
|
|
3,649,517
|
Net
book value |
|
776,060
|
|
917,526
|
|
1,310,859
|
|
602,780
|
|
3,607,225
|
|
3,296,065
|
Work-in-progress
|
|
|
|
|
|
|
|
|
|
81,284
|
|
148,598
|
Total
Net book value |
|
|
|
|
|
|
|
|
|
3,688,509
|
|
3,444,663
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
5. |
PROPERTY,
PLANT & EQUIPMENT (continued) |
|
|
|
|
In
terms of IAS 8 “Accounting Policies, Changes in Accounting
Estimates and Errors” an assessment of the expected future benefits
associated with property, plant and equipment was determined.
Based on the
latest available and reliable information there was a
change in the
estimated useful life and residual value which resulted
in a decrease in
depreciation of Rand 0.3 million (2005: increase of Rand
13.3
million).
During
the financial year ended March 31, 2006, the group
recognized an impairment of property, plant and equipment
with a net book
value of Rand 0.3 million (2005: Rand 3.5 million).
The impairment loss
has been included in “other (losses) / gains - net” in the income
statement. The recoverable amount has been determined
based on a value in
use calculation. The impairment resulted from the recoverable
amount of
the assets being lower than the carrying value thereof.
The
group has pledged property, plant and equipment with
a carrying
value of Rand 452.4 million at March 31, 2006 (2005:
Rand 464.9 million)
as security against certain term loans and overdrafts
with
banks.
Registers
containing additional information on land and buildings
are available for inspection at the registered
offices of the respective
group companies. The directors are of the opinion
that the recoverable
amount of each class of property exceeds the carrying
amount at which it
is included in the balance
sheet.
|
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
867,045
|
|
813,528
|
|
|
Foreign
currency translation effects |
|
(3,736) |
|
(1,704) |
|
|
Acquisitions
|
|
2,500
|
|
3,578
|
|
|
Disposal
of subsidiaries |
|
-
|
|
(356) |
|
|
Disposal
of interest in joint ventures |
|
(2,284) |
|
(96,360) |
|
|
Acquisition
of subsidiaries |
|
9,145
|
|
150,662
|
|
|
Successive
acquisition |
|
(5,915) |
|
(2,303) |
|
|
Closing
balance |
|
866,755
|
|
867,045
|
|
|
Accumulated
impairment |
|
|
|
|
|
|
Opening
balance |
|
8,011
|
|
-
|
|
|
Impairment
|
|
69,009
|
|
8,011
|
|
|
Closing
balance |
|
77,020
|
|
8,011
|
|
|
|
|
|
|
|
|
|
Net
book value |
|
789,735
|
|
859,034
|
|
|
|
|
The
group recognized impairment losses on goodwill of
Rand 69.0
million (2005: Rand 8.0 million) during the financial
year ended March 31,
2006, due to the fact that the recoverable amount
of certain
cash-generating units were less than their carrying
value. The impairment
charges have been included in “other (losses) / gains - net” in the income
statement. The recoverable amounts have been based
on value in use
calculations.
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
6. |
GOODWILL |
|
|
|
|
The
changes in the carrying amount of goodwill on a segmental
basis
for the year ended March 31, 2006 are as
follows: |
|
|
Electronic
media
|
|
Print
media
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conditional
|
|
Newspapers, |
|
|
|
|
|
|
Pay
|
|
|
|
Access
|
|
magazines
and |
|
|
|
|
|
|
television
|
|
Internet
|
|
Systems
|
|
printing
|
|
Books
|
|
Education
|
|
Total
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
Net
book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
375,546
|
|
258,791
|
|
54,618
|
|
75,089
|
|
11,536
|
|
83,454
|
|
859,034
|
Foreign
currency translation effects |
|
(3,005)
|
|
–
|
|
(731)
|
|
–
|
|
–
|
|
–
|
|
(3,736) |
Impairment
|
|
(9,144)
|
|
–
|
|
–
|
|
–
|
|
(3,980)
|
|
(55,885)
|
|
(69,009)
|
Acquisitions
|
|
–
|
|
–
|
|
–
|
|
–
|
|
2,500
|
|
–
|
|
2,500
|
Acquisition
of subsidiaries |
|
9,145
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
9,145
|
Successive
acquisition |
|
–
|
|
(7,889)
|
|
–
|
|
1,974
|
|
–
|
|
–
|
|
(5,915) |
Disposal
of interest in joint ventures |
|
(2,284)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(2,284) |
Closing
balance |
|
370,258
|
|
250,902
|
|
53,887
|
|
77,063
|
|
10,056
|
|
27,569
|
|
789,735
|
Impairment
testing of
goodwill |
The
group has allocated its goodwill to various cash-generating units. The
recoverable amounts of these cash-generating units have been determined
based on
either a value in use calculation or on a fair value less costs to sell
basis.
The value in use is based on discounted cash flow calculations. The group
based
its cash flow calculations on three to five year budgeted and forecasted
information approved by senior management and the various boards of directors
of
group companies. Long-term average growth rates for the respective countries
in
which the entities operate were used to extrapolate the cash flows into
the
future. Where fair value was used to calculate recoverable amounts, it
is based
on publicly traded market prices. The group allocated goodwill to the following
cash-generating units:
|
|
|
|
Basis
of
|
|
Discount
|
|
Growth
rate
|
|
|
Net
book
|
|
determination
|
|
rate
|
|
used
to
|
|
|
value
|
|
of
recoverable
|
|
applied
to
|
|
extrapolate
|
|
|
R’000
|
|
amount
|
|
cash
flows
|
|
cash
flows
|
Cash-generating
unit |
|
|
|
|
|
|
|
|
Multichoice
Cyprus Limited |
|
42,388
|
|
Value
in use |
|
14.0%
|
|
3.6%
|
Electronic
Media Network Limited & SuperSport
International |
|
|
|
|
|
|
|
|
Holdings
Limited |
|
327,870
|
|
Value
in use |
|
16.6%
|
|
4.0%
|
Irdeto
Access BV |
|
53,887
|
|
Value
in use |
|
10.7%
|
|
2.5%
|
M-Web
Holdings Limited |
|
250,902
|
|
Value
in use |
|
20.7%
|
|
4.0%
|
Boland
Newspapers (Proprietary) Limited |
|
23,581
|
|
Value
in use |
|
13.5%
|
|
4.0%
|
Paarl
Media Holdings (Proprietary) Limited |
|
34,669
|
|
Value
in use |
|
13.5%
|
|
4.0%
|
Natal
Witness Printing and Publishing Company
(Proprietary) |
|
|
|
|
|
|
|
|
Limited
|
|
14,370
|
|
Value
in use |
|
13.5%
|
|
4.0%
|
Educor
Holdings Limited |
|
27,569
|
|
Value
in use |
|
16.5%
|
|
4.0%
|
Via
Afrika Limited |
|
8,056
|
|
Value
in use |
|
14.2%
|
|
4.0%
|
Various
other units |
|
6,443
|
|
Value
in use |
|
various
|
|
various
|
|
|
789,735
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
7. |
OTHER
INTANGIBLE
ASSETS |
|
|
|
|
|
|
|
Intellectual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
property
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
|
|
|
|
rights
&
|
|
Subscriber
|
|
names
and
|
|
Concession
|
|
|
|
Total
|
|
Total
|
|
|
|
|
patents
|
|
base
|
|
title
rights
|
|
rights
|
|
Software
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
119,055
|
|
226,340
|
|
203,954
|
|
12,579
|
|
76,243
|
|
638,171
|
|
356,888
|
|
|
Disposal
of interest in joint |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ventures
|
|
-
|
|
-
|
|
-
|
|
(11,792) |
|
-
|
|
(11,792) |
|
-
|
|
|
Foreign
currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
effects
|
|
(1,029) |
|
-
|
|
-
|
|
(787) |
|
-
|
|
(1,816) |
|
(1,825) |
|
|
Acquisition
of subsidiaries |
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
246,806
|
|
|
Disposal
of subsidiaries |
|
(1,000) |
|
-
|
|
-
|
|
-
|
|
(2,578) |
|
(3,578) |
|
-
|
|
|
Acquisitions
|
|
27,830
|
|
1,387
|
|
5,443
|
|
-
|
|
66,221
|
|
100,881
|
|
52,650
|
|
|
Disposals
|
|
527
|
|
-
|
|
97
|
|
-
|
|
(7,803) |
|
(7,179) |
|
(16,348) |
|
|
Work
in Progress |
|
-
|
|
-
|
|
-
|
|
-
|
|
8,102
|
|
8,102
|
|
-
|
|
|
Closing
balance |
|
145,383
|
|
227,727
|
|
209,494
|
|
–
|
|
140,185
|
|
722,789
|
|
638,171
|
|
|
Accumulated
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
82,300
|
|
8,845
|
|
141,811
|
|
5,819
|
|
32,053
|
|
270,828
|
|
226,631
|
|
|
Disposal
of interest in joint |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ventures
|
|
–
|
|
–
|
|
–
|
|
(5,852) |
|
–
|
|
(5,852) |
|
–
|
|
|
Foreign
currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
effects
|
|
(358) |
|
–
|
|
–
|
|
(390) |
|
–
|
|
(748) |
|
(1,878) |
|
|
Impairment
|
|
131
|
|
–
|
|
707
|
|
–
|
|
–
|
|
838
|
|
4,992
|
|
|
Reversal
of previous |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
impairment
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(413) |
|
(413) |
|
–
|
|
|
Disposal
of subsidiaries |
|
(50) |
|
–
|
|
10
|
|
–
|
|
(899) |
|
(939) |
|
–
|
|
|
Disposals
|
|
527
|
|
–
|
|
97
|
|
–
|
|
(6,710) |
|
(6,086) |
|
(16,348) |
|
|
Amortization
|
|
10,530
|
|
45,741
|
|
11,023
|
|
423
|
|
27,995
|
|
95,712
|
|
57,431
|
|
|
Closing
balance |
|
93,080
|
|
54,586
|
|
153,648
|
|
–
|
|
52,026
|
|
353,340
|
|
270,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value |
|
52,303
|
|
173,141
|
|
55,846
|
|
–
|
|
88,159
|
|
369,449
|
|
367,343
|
|
The
group recognized impairment losses on other intangible
assets
of Rand 0.8 million (2005: Rand 5.0 million) during
the financial year
ended March 31, 2006, due to the fact that the recoverable
amounts of
certain cash-generating units were less than their
carrying values. The
impairment charges have been included in “other (losses) / gains - net” on
the income statement. The recoverable amounts have
been based on value in
use calculations with discount rates comparable to
those used in assessing
the impairment of goodwill.
In
terms of IAS 8 “Accounting Policies, Changes in Accounting
Estimates and Errors” an assessment of the expected future benefits
associated with other intangible assets were determined.
Based on the
latest available and reliable information there was
a change in the
estimated useful life which resulted in a decrease
in amortization of Rand
12.6 million (2005: nil).
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Investments
in associates |
|
|
|
|
|
|
Listed
|
|
1,249,055
|
|
805,048
|
|
|
Unlisted
|
|
59,110
|
|
32,640
|
|
|
|
|
1,308,165
|
|
837,688
|
|
|
|
Investments
and loans |
|
|
|
|
|
|
Loans
to related parties |
|
|
|
|
|
|
Unlisted
|
|
23,114
|
|
24,779
|
|
|
At
fair value through profit & loss
investments |
|
|
|
|
|
|
Listed
|
|
–
|
|
8,111
|
|
|
Unlisted
|
|
32,031
|
|
30,458
|
|
|
|
|
32,031
|
|
38,569
|
|
|
Available-for-sale
investments |
|
|
|
|
|
|
Listed
|
|
–
|
|
313,763
|
|
|
Unlisted
|
|
387
|
|
1,033
|
|
|
|
|
387
|
|
314,796
|
|
|
Originated
loans |
|
|
|
|
|
|
Unlisted
|
|
19,331
|
|
23,127
|
|
|
|
|
|
|
|
|
|
|
Total
investments and loans |
|
74,863
|
|
401,271
|
|
|
|
Investments
classified on balance sheets |
|
|
|
|
|
|
Non-current
|
|
74,863
|
|
393,160
|
|
|
Current
|
|
–
|
|
8,111
|
|
|
|
|
74,863
|
|
401,271
|
|
The
market value of the group’s listed investments at March 31,
2006 amounted to Rand 6,505.5 million (2005: Rand
3,208.0 million).
Tencent Holdings Limited contributed Rand 6,309.5
million (2005: Rand
2,886.1 million) and Beijing Media Corporation Limited
Rand 196.0 million
(2005: Rand 313.8 million). The valuation of total
unlisted investments
and loans, as approved by the director’s of the respective group companies
amounted to Rand 134.0 million (2005: Rand 112.0
million).
During
the financial year ended March 31, 2005, the investment
in
Beijing Media Corporation Limited was held as an
Available-for-sale
investment, at a value of Rand 313.8 million. This
investment was
reclassified to Investments in associates during
the financial year ended
March 31, 2006, as significant influence is established
through
co-operation agreements, board representation,
and the placement
of key management. Unrealized gains and losses,
to the
value of Rand 41.7 million, that arose from the
changes in the fair value
of this investment were previously accounted for
in equity, but have been
transferred to the carry value of the investment
in
associate.
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
8. |
INVESTMENT
AND LOANS
(Continued) |
|
The
following information relates to Naspers Limited’s financial
interest in its significant subsidiaries, over
which the group has voting
control through its direct and indirect interests
in respective
intermediate holding companies and other
entities:
|
|
|
|
|
|
Effective
|
|
|
|
|
|
|
|
|
|
|
percentage
|
|
|
|
Country
of
|
|
Functional
|
|
|
Name
of subsidiary
|
|
interest*
|
|
Nature
of business |
|
incorporation
|
|
currency
|
|
D
or I
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
LISTED
COMPANIES |
|
|
|
|
|
|
|
|
|
|
|
|
MultiChoice
Cyprus Limited |
|
26.4
|
|
26.4
|
|
Subscription
Television |
|
Cyprus
|
|
CYP
|
|
I
|
|
UNLISTED
COMPANIES |
|
|
|
|
|
|
|
|
|
|
|
|
Media24
Limited |
|
100.0
|
|
100.0
|
|
Print
media Company |
|
South
Africa |
|
ZAR
|
|
D
|
Paarl
Media Holdings (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
92.1
|
|
83.8
|
|
Printing
|
|
South
Africa |
|
ZAR
|
|
I
|
Touchline
Media (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
100.0
|
|
100.0
|
|
Publishing
of magazines |
|
South
Africa |
|
ZAR
|
|
I
|
|
Boland
Koerante (Proprietary) Limited |
|
75.0
|
|
75.0
|
|
Publishers
of newspapers |
|
South
Africa |
|
ZAR
|
|
I
|
Via
Afrika Limited |
|
100.0
|
|
100.0
|
|
Publishing
of books |
|
South
Africa |
|
ZAR
|
|
I
|
|
Educor
Holdings (Proprietary) Limited |
|
100.0
|
|
100.0
|
|
Education
|
|
South
Africa |
|
ZAR
|
|
I
|
MIH
Investments (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
100.0
|
|
100.0
|
|
Investment
Holding company |
|
South
Africa |
|
ZAR
|
|
D
|
MIH
Holdings Limited |
|
100.0
|
|
100.0
|
|
Holding
Company |
|
South
Africa |
|
ZAR
|
|
I
|
MultiChoice
Africa (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
100.0
|
|
100.0
|
|
Subscription
Television |
|
South
Africa |
|
ZAR
|
|
I
|
M-Web
Holdings (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
100.0
|
|
100.0
|
|
Internet
content provider |
|
South
Africa |
|
ZAR
|
|
I
|
MIH
(BVI) Limited |
|
100.0
|
|
100.0
|
|
Investment
Holding |
|
British
Virgin Islands |
|
USD
|
|
I
|
Myriad
International Holdings BV |
|
100.0
|
|
100.0
|
|
Investment
Holding |
|
The
Netherlands |
|
EUR
|
|
I
|
MultiChoice
Africa Limited |
|
100.0
|
|
100.0
|
|
Investment
Holding |
|
Mauritius
|
|
USD
|
|
I
|
NetMed
NV |
|
74.5
|
|
74.5
|
|
Investment
Holding |
|
The
Netherlands |
|
EUR
|
|
I
|
NetMed
Hellas SA |
|
74.5
|
|
74.5
|
|
Subscription
Television |
|
Greece
|
|
EUR
|
|
I
|
MultiChoice
Hellas SA |
|
44.9
|
|
44.9
|
|
Subscription
Television |
|
Greece
|
|
EUR
|
|
I
|
Entriq
Inc. |
|
100.0
|
|
100.0
|
|
Technology
development |
|
USA
|
|
USD
|
|
I
|
Irdeto
Access BV |
|
100.0
|
|
100.0
|
|
Technology
development |
|
The
Netherlands |
|
USD
|
|
I
|
M-Web
(Thailand) Limited |
|
100.0
|
|
100.0
|
|
Internet
content provider |
|
Thailand
|
|
THB
|
|
I
|
|
MultiChoice
Cyprus Holdings Limited |
|
51.7
|
|
51.7
|
|
Holding
Company |
|
Cyprus
|
|
CYP
|
|
I
|
Shanghai
Sportcn.com Information |
|
|
|
|
|
|
|
|
|
|
|
|
Technology
Company Limited |
|
87.7
|
|
87.7
|
|
Online
sport content |
|
China
|
|
CNY
|
|
I
|
D
|
–
Direct
interest |
I
|
–
Combined
direct and indirect effective interest |
* |
–
The
percentage interest shown is the financial effective
interest, after adjusting for the interests of the group’s equity
compensation
plans
treated as treasury
shares.
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
8. |
INVESTMENT
AND LOANS
(Continued) |
|
The
following information relates to Naspers Limited’s financial
interest in its significant joint ventures, over
which the group has joint
voting control through its direct and indirect
interests in respective
intermediate holding companies and other
entities:
|
|
|
|
|
|
Effective
percentage |
|
|
|
Country
of
|
|
Functional
|
|
D
or
|
Name
of joint venture |
|
interest*
|
|
Nature
of business |
|
incorporation
|
|
currency
|
|
I
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
%
|
|
%
|
|
|
|
|
|
|
|
|
|
LISTED
COMPANIES |
|
|
|
|
|
|
|
|
|
|
|
|
United
Broadcasting Corporation Public |
|
|
|
|
|
|
|
|
|
|
|
|
Company
Limited |
|
–
|
|
30.6
|
|
Subscription
television |
|
Thailand
|
|
THB
|
|
I
|
|
UNLISTED
COMPANIES |
|
|
|
|
|
|
|
|
|
|
|
|
MNH
Holdings (1998) (Proprietary) Limited |
|
50.0
|
|
50.0
|
|
Investment
Holding Company |
|
South
Africa |
|
ZAR
|
|
D
|
Electronic
Media Network Limited |
|
60.1
|
|
60.1
|
|
Pay
TV content provider |
|
South
Africa |
|
ZAR
|
|
I
|
SuperSport
International Holdings Limited |
|
60.1
|
|
60.1
|
|
Pay
TV content provider |
|
South
Africa |
|
ZAR
|
|
I
|
MultiChoice
Supplies (Proprietary) Limited |
|
50.0
|
|
50.0
|
|
Set-top
box rentals |
|
South
Africa |
|
ZAR
|
|
I
|
|
|
|
|
|
|
|
|
Thailand
|
|
|
|
|
KSC
Commercial Internet Company Limited |
|
–
|
|
40.6
|
|
Internet
service provider |
|
|
|
THB
|
|
I
|
|
Myriad
International Programming Services BV |
|
80.0
|
|
80.0
|
|
Programme
and Film Rights |
|
Netherlands
|
|
EUR
|
|
I
|
The
Natal Witness Printing and Publishing |
|
|
|
|
|
Publishing
and printing of |
|
|
|
|
|
|
Company
(Proprietary) Limited |
|
50.0
|
|
50.0
|
|
newspapers
|
|
South
Africa |
|
ZAR
|
|
I
|
D
|
–
Direct
interest |
|
I
|
–
Combined
direct and indirect effective interest |
* |
– The percentage interest shown is
the
financial effective interest, after adjusting for the interests
of the
group’s equity compensation plans treated as treasury
shares. |
The
group has pledged a 29.98% interest in Electronic Media Network
Limited and SuperSport International Holdings Limited as security
with a
bank against a term
loan.
|
Additional
joint venture
disclosure |
The
following is the group’s interest in the combined summarized balance sheets and
income statements of the joint ventures as per their financial
statements:
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
|
|
|
|
|
Balance
sheet
information |
|
|
|
|
Non-current
assets |
|
340,680
|
|
391,918
|
Current
assets |
|
879,660
|
|
1,119,611
|
Non-current
liabilities |
|
64,184
|
|
420,078
|
Current
liabilities |
|
813,915
|
|
838,182
|
|
Income
statement information |
|
|
|
|
Revenue
|
|
2,277,088
|
|
1,992,190
|
Net
profit |
|
356,060
|
|
211,199
|
The
group’s interest in the joint ventures’ capital commitments and contingent
liabilities at March 31, 2006 amounted to Rand 78.4 million (2005: Rand
36.8
million) and Rand 3.0 million (2005: Rand 5.5 million)
respectively.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
8. |
INVESTMENT
AND LOANS
(Continued) |
|
The
following information relates to Naspers
Limited’s financial
interest in its significant associated
companies:
|
|
|
|
Name
of associated company |
|
Effective
percentage
|
|
Nature
of business
|
|
Country
of
incorporation
|
|
Functional
currency
|
|
D
or I
|
|
|
2006
%
|
|
2005
%
|
|
|
|
|
|
|
|
|
LISTED
COMPANIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peoples
Republic |
|
|
|
|
Tencent
Holdings Limited |
|
36.1
|
|
35.6
|
|
Instant-messaging
services |
|
of
China |
|
CNY
|
|
I
|
|
|
|
|
|
|
Print
media advertising and print |
|
Peoples
Republic |
|
|
|
|
Beijing
Media Corporation Limited |
|
9.9
|
|
9.9
|
|
related
services |
|
of
China |
|
HKD
|
|
I
|
|
|
UNLISTED
COMPANIES |
|
|
|
|
|
|
|
|
|
|
|
|
The
Hometrader (Eastern Cape) (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
25.0
|
|
25.0
|
|
Production
of newspaper inserts |
|
South
Africa |
|
ZAR
|
|
I
|
Alibiprops
12 (Proprietary) Limited |
|
19.6
|
|
49.0
|
|
Educational
book retailer |
|
South
Africa |
|
ZAR
|
|
I
|
|
|
|
|
|
|
|
|
Peoples
Republic |
|
|
|
|
Chinese
All |
|
25.0
|
|
0.0
|
|
Internet
related services |
|
of
China |
|
CNY
|
|
I
|
Internet
Music Company (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
34.0
|
|
0.0
|
|
Internet
related services |
|
South
Africa |
|
ZAR
|
|
I
|
|
Free
State Cheetahs (Proprietary) Limited |
|
14.7
|
|
14.7
|
|
Rugby
operations |
|
South
Africa |
|
ZAR
|
|
I
|
Griqualand
West Rugby (Proprietary) |
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
14.7
|
|
14.7
|
|
Rugby
operations |
|
South
Africa |
|
ZAR
|
|
I
|
Natal
Sharks (Proprietary) Limited |
|
24.0
|
|
24.0
|
|
Rugby
operations |
|
South
Africa |
|
ZAR
|
|
I
|
I
–
Combined direct and indirect effective interest
*
–
The effective percentage interest shown is the financial effective interest,
after adjusting for the interests of the group’s equity compensation plans
treated as treasury shares.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
8. |
INVESTMENT
AND LOANS
(Continued)
|
|
|
|
|
|
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
Investments
in associated companies |
|
R’000
|
|
R’000
|
|
|
|
Opening
balance |
|
837,688
|
|
29,438
|
|
|
Associated
companies acquired - gross consideration
|
|
325,404
|
|
729,413
|
|
|
Net
assets acquired |
|
–
|
|
659,881
|
|
|
Goodwill
and intangibles recognized |
|
383,688
|
|
68,347
|
|
|
Deferred
taxation recognized |
|
(61,642)
|
|
–
|
|
|
Other
|
|
3,358
|
|
1,185
|
|
|
Associated
companies sold |
|
(1,388) |
|
(10,084) |
|
|
Share
of current year other reserve movements |
|
(50) |
|
4,415
|
|
|
Share
of equity-accounted results |
|
154,155
|
|
88,597
|
|
|
Net
income before amortization |
|
145,984
|
|
93,583
|
|
|
Net
(loss) before amortization |
|
(269)
|
|
–
|
|
|
Taxation
|
|
8,440
|
|
(4,986) |
|
|
Equity
accounted results due to purchase accounting
|
|
(2,878) |
|
–
|
|
|
Amortization
of other intangible assets |
|
(3,184) |
|
–
|
|
|
Realization
of deferred taxation |
|
306
|
|
–
|
|
|
Dividends
received |
|
(44,589) |
|
(4,091) |
|
|
Foreign
currency translation adjustments |
|
39,823
|
|
–
|
|
|
Closing
balance |
|
1,308,165
|
|
837,688
|
|
|
|
|
|
|
|
|
|
The
group recognized Rand 151.3 million (2005: Rand 88.6 million)
as its’ share of equity-accounted results in the income
statement.
|
|
|
Additional
associate disclosure |
|
|
|
|
|
The
following are the combined summarized balance sheets and income
statements
of the associated companies as per their financial
statements: |
|
|
|
March
31
|
|
|
|
2006
|
|
2005
|
|
Balance
sheet information |
|
R’000
|
|
R’000
|
|
Non-current
assets |
|
882,808
|
|
307,076
|
|
Current
assets |
|
3,488,656
|
|
1,963,300
|
|
Total
assets |
|
4,371,464
|
|
2,270,376
|
|
|
|
Non-current
liabilities |
|
124,503
|
|
205,669
|
|
Current
liabilities |
|
848,425
|
|
5,931
|
|
Total
liabilities |
|
972,928
|
|
211,600
|
|
Total
shareholders’ equity |
|
3,398,536
|
|
2,058,776
|
|
Total
equity and liabilities |
|
4,371,464
|
|
2,270,376
|
|
|
|
Income
statement information |
|
|
|
|
|
Revenue
|
|
1,764,681
|
|
703,389
|
|
Operating
profit |
|
495,013
|
|
231,470
|
|
Net
profit |
|
484,477
|
|
244,929
|
|
|
|
|
|
|
|
|
The
group discontinued the recognition of its share of losses of some associated
companies. The accumulated unrecognized portion of the group’s share of losses
amounted to Rand 1.3 million at March 31, 2006 (2005: Rand 1.2 million).
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
8. |
INVESTMENT
AND LOANS
(Continued)
|
|
The
following are entities with more than 50% ownership,
which are
not consolidated due to immaterial operations:
|
|
|
|
Name
of entity |
|
Effective
percentage interest %
|
|
Country
of incorporation |
M-Web
Zimbabwe (Proprietary) Limited |
|
70.0
|
|
Zimbabwe
|
Betung
Cable (China) Limited |
|
100.0
|
|
Hong
Kong |
The
following entities are consolidated due to management control through
shareholder agreements even though ownership is less than 50%. These entities
would normally be accounted for as associates, but are now
consolidated:
Name
of entity |
|
Effective
percentage interest %
|
|
Country
of incorporation |
MultiChoice
Namibia (Proprietary) Limited |
|
49.0
|
|
South
Africa |
Details
Nigeria (Proprietary) Limited |
|
49.0
|
|
Nigeria
|
Multichoice
Hellas SA |
|
44.9
|
|
Greece
|
Afribooks
(Proprietary) Limited |
|
40.0
|
|
South
Africa |
MultiChoice
Cyprus Limited |
|
26.4
|
|
Cyprus
|
The
following entity has less than 20% ownership, but is classified as an associate
as significant influence is established through co-operation agreements,
board
representation, and the placement of key management:
Name
of entity |
|
Effective
percentage interest %
|
|
Country
of incorporation |
Beijing
Media Corporation Limited |
|
9.9
|
|
China
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
8.
|
INVESTMENT
AND LOANS
(Continued)
|
|
March
31
|
|
|
Investments
and
loans |
|
2006
|
|
2005
|
|
|
Loans
to related
parties |
|
R’000
|
|
R’000
|
|
|
Uppercase
Media (Proprietary) Limited |
|
6,733
|
|
9,504
|
|
|
Natal
Witness Printing and Publishing Company (Proprietary)
Limited |
|
5,000
|
|
5,000
|
|
|
8
Ink Publishing (Proprietary) Limited |
|
6,642
|
|
3,629
|
|
|
KSC
Commercial Internet Company Limited |
|
–
|
|
4,269
|
|
|
Shape
SA (Proprietary) Limited |
|
1,050
|
|
200
|
|
|
East
African Magazines (Proprietary) Limited |
|
2,706
|
|
–
|
|
|
Other
|
|
983
|
|
2,177
|
|
|
Total
loans to related parties |
|
23,114
|
|
24,779
|
|
|
|
At
fair value through profit & loss
investments |
|
|
|
|
|
|
Sanlam
Dividend Income Fund |
|
32,029
|
|
30,458
|
|
|
Andreou
&
Paraskevaides
Enterprises Limited |
|
–
|
|
7,151
|
|
|
Other
|
|
2
|
|
960
|
|
|
Total
at fair value through profit & loss
investments |
|
32,031
|
|
38,569
|
|
|
Less:
Short term portion |
|
–
|
|
(8,111) |
|
|
Long
term at fair value through profit & loss
investments |
|
32,031
|
|
30,458
|
|
|
|
Available-for-sale
investments and loans |
|
|
|
|
|
|
Beijing
Media Corporation Limited |
|
–
|
|
313,763
|
|
|
Other
|
|
387
|
|
1,033
|
|
|
Long-term
available for sale investments and loans
|
|
387
|
|
314,796
|
|
|
|
Originated
loans |
|
|
|
|
|
|
Thebe
Scitech (Proprietary) Limited |
|
13,000
|
|
15,000
|
|
|
Other
|
|
6,331
|
|
8,127
|
|
|
Total
originated loans |
|
19,331
|
|
23,127
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
|
|
|
|
March
31
|
9.
|
|
PROGRAMME
AND FILM
RIGHTS |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Cost
price |
|
|
|
|
|
|
-
programme rights |
|
1,015,155
|
|
722,104
|
|
|
-
film rights |
|
504,365
|
|
559,702
|
|
|
|
|
1,519,520
|
|
1,281,806
|
|
|
|
Accumulated
amortization |
|
|
|
|
|
|
-
programme rights |
|
(518,732) |
|
(296,430) |
|
|
-
film rights |
|
(233,610) |
|
(218,812) |
|
|
|
|
(752,342) |
|
(515,242) |
|
|
|
Net
book value |
|
|
|
|
|
|
-
programme rights |
|
496,423
|
|
425,674
|
|
|
-
film rights |
|
270,755
|
|
340,890
|
|
|
|
|
767,178
|
|
766,564
|
|
|
|
Classified
on the balance sheet as
follows: |
|
|
|
|
|
|
-
non-current assets |
|
171,145
|
|
47,558
|
|
|
-
current assets |
|
596,033
|
|
719,006
|
|
|
|
|
767,178
|
|
766,564
|
|
|
10.
|
|
DEFERRED
TAXATION |
|
|
|
|
|
|
|
Opening
balance |
|
388,634
|
|
428,879
|
|
|
Acquisition
of subsidiaries and joint ventures |
|
(5,087) |
|
(49,833) |
|
|
Disposal
of subsidiaries and joint ventures |
|
(7,677) |
|
(1,280) |
|
|
Accounted
for in income statement |
|
(29,450) |
|
8,388
|
|
|
Accounted
for against reserves |
|
10,687
|
|
2,281
|
|
|
Foreign
currency translation effects |
|
(22,035) |
|
199 |
|
|
Closing
balance |
|
335,072
|
|
388,634
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
10. |
DEFERRED
TAXATION
(Continued)
|
|
The
deferred tax assets and liabilities and movement
thereon are
attributable to the following items:
|
|
|
|
|
|
|
|
April
1, 2005
|
|
Charged
to
income
|
|
Charged
to
equity
|
|
Acquisition
of
subisidiary
and
joint
venture
|
|
Disposal
of
subsidiary
and
joint
venture
|
|
Foreign
exchange
adjustment
|
|
March
31,
2006
|
|
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
|
Deferred
taxation assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment |
|
51,825
|
|
48,896
|
|
–
|
|
–
|
|
1,514
|
|
(10,161) |
|
92,074
|
|
|
Intangible
assets |
|
13,926
|
|
(693) |
|
–
|
|
–
|
|
278
|
|
16,775
|
|
30,286
|
|
|
Receivables
and current assets |
|
47,875
|
|
(8,267) |
|
–
|
|
12,485
|
|
12,895
|
|
(21,585) |
|
43,403
|
|
|
Provisions
and other current liabilities |
|
188,196
|
|
2,068
|
|
–
|
|
(11,505) |
|
(182) |
|
52,717
|
|
231,294
|
|
|
Programme
and film rights |
|
69,555
|
|
44,357
|
|
–
|
|
–
|
|
–
|
|
(81,343) |
|
32,569
|
|
|
Income
received in advance |
|
81,373
|
|
20,781
|
|
–
|
|
–
|
|
745
|
|
(946) |
|
101,953
|
|
|
Tax
losses carried forward |
|
998,597
|
|
(210,101) |
|
–
|
|
–
|
|
(9,011) |
|
(108,691) |
|
670,794
|
|
|
Capitalized
finance leases |
|
252,325
|
|
(19,575) |
|
–
|
|
–
|
|
–
|
|
(22,276) |
|
210,474
|
|
|
Derivative
assets |
|
(21,807) |
|
49,343
|
|
–
|
|
–
|
|
–
|
|
–
|
|
27,536
|
|
|
Hedging
reserve |
|
–
|
|
(23) |
|
10,224
|
|
–
|
|
–
|
|
–
|
|
10,201
|
|
|
STC
credits |
|
93,989
|
|
14,862
|
|
–
|
|
–
|
|
–
|
|
–
|
|
108,851
|
|
|
Other
|
|
–
|
|
(3,490) |
|
–
|
|
–
|
|
–
|
|
9,250
|
|
5,760
|
|
|
|
|
1,775,854
|
|
(61,842) |
|
10,224
|
|
980
|
|
6,239
|
|
(166,260) |
|
1,565,195
|
|
|
Valuation
allowance |
|
919,133
|
|
(49,733) |
|
–
|
|
–
|
|
1,460
|
|
(143,414) |
|
727,446
|
|
|
|
|
856,721
|
|
(12,109) |
|
10,224
|
|
980
|
|
4,779
|
|
(22,846) |
|
837,749
|
|
|
|
Deferred
taxation liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment |
|
307,944
|
|
26,035
|
|
–
|
|
6,067
|
|
–
|
|
(6,596) |
|
333,450
|
|
|
Intangible
assets |
|
65,431
|
|
2,595
|
|
–
|
|
56
|
|
–
|
|
(65,398) |
|
2,684
|
|
|
Receivables
and current assets |
|
6,891
|
|
(8,454) |
|
–
|
|
(56) |
|
12,456
|
|
64,403
|
|
75,240
|
|
|
Provisions
and other current liabilities |
|
519
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
519
|
|
|
Capitalized
finance leases |
|
68,796
|
|
(6,198) |
|
–
|
|
–
|
|
–
|
|
(6,014) |
|
56,584
|
|
|
Derivative
assets |
|
4,543
|
|
16,878
|
|
–
|
|
–
|
|
–
|
|
–
|
|
21,421
|
|
|
Hedging
reserve |
|
1,744
|
|
–
|
|
(463) |
|
–
|
|
–
|
|
–
|
|
1,281
|
|
|
Programme
and film rights |
|
20,403
|
|
(10,032) |
|
–
|
|
–
|
|
–
|
|
–
|
|
10,371
|
|
|
Other
|
|
(8,184) |
|
(3,483) |
|
–
|
|
–
|
|
–
|
|
12,794
|
|
1,127
|
|
|
|
|
468,087
|
|
17,341
|
|
(463) |
|
6,067
|
|
12,456
|
|
(811) |
|
502,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred taxation |
|
388,634
|
|
(29,450) |
|
10,687
|
|
(5,087) |
|
(7,677) |
|
(22,035) |
|
335,072
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
10. |
DEFERRED
TAXATION
(Continued)
|
|
Valuation
allowances are created against the net deferred
tax
assets, when it is probable that the deferred
tax assets will not be
realized in the near future, due to the timing
on available tax loss
carry-forwards that arose on these losses.
Further valuation allowances
have been raised when it is uncertain if future
taxable profits will be
available to utilize unused tax losses and
timing differences:
|
|
|
|
|
|
South
Africa
R’000
|
|
Rest
of
Africa
R’000
|
|
Greece
and
Cyprus
R’000
|
|
Thailand
R’000
|
|
Netherlands
R’000
|
|
USA
R’000
|
|
Total
R’000
|
Valuation
allowance |
|
362,306
|
|
6,470
|
|
101,620
|
|
33,278
|
|
63,876
|
|
159,896
|
|
727,446
|
|
The group has tax loss
carry-forwards of approximately Rand 2,313.1 million (2005: Rand
3,345.9
million). A
summary of the tax loss carry-forwards at March 31, 2006 by tax
jurisdiction and the expected expiry dates are set out below: |
|
|
|
South
|
|
Rest
of
|
|
Greece
|
|
|
|
|
|
|
|
|
|
|
Africa
|
|
Africa
|
|
and
Cyprus
|
|
Thailand
|
|
Netherlands
|
|
USA
|
|
Total
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
Expires
in year one |
|
–
|
|
–
|
|
30,410
|
|
11,565
|
|
–
|
|
–
|
|
41,975
|
Expires
in year two |
|
–
|
|
–
|
|
67,978
|
|
9,265
|
|
–
|
|
–
|
|
77,243
|
Expires
in year three |
|
–
|
|
–
|
|
22
|
|
7,081
|
|
–
|
|
–
|
|
7,103
|
Expires
in year four |
|
–
|
|
19,898
|
|
33,776
|
|
5,356
|
|
–
|
|
–
|
|
59,030
|
Expires
in year five |
|
–
|
|
–
|
|
9
|
|
11
|
|
–
|
|
–
|
|
20
|
Expires
after year five |
|
1,265,101
|
|
143,259
|
|
–
|
|
–
|
|
309,606
|
|
409,746
|
|
2,127,712
|
|
|
1,265,101
|
|
163,157
|
|
132,195
|
|
33,278
|
|
309,606
|
|
409,746
|
|
2,313,083
|
The
ultimate outcome of additional taxation assessments may vary
from the amounts accrued. However, management believes that
any additional
taxation liability over and above the amount accrued would
not have a
material adverse impact on the group’s income statement and balance
sheet.
|
Deferred
tax assets and liabilities are offset when the income tax
relates to the same fiscal authority and there is a legal right
to offset
at settlement. The following amounts are shown in the consolidated
balance
sheets:
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
Classification
on balance sheet |
|
|
|
|
Deferred
tax assets |
|
837,749
|
|
856,721
|
Deferred
tax liabilities |
|
(502,677)
|
|
(468,087)
|
Net
deferred tax assets |
|
335,072
|
|
388,634
|
The
group charged deferred income tax of Rand 10.7 million (2005:
Rand 2.3 million) to equity as a result of changes in the
fair value of
derivative financial instruments where the forecasted transaction
or
commitment has not resulted in an asset or
liability.
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
11. |
|
INVENTORY |
|
March
31
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Carry
value |
|
|
|
|
|
|
Raw
materials |
|
157,809
|
|
101,126
|
|
|
Finished
products, trading inventory and consumables
|
|
302,783
|
|
216,244
|
|
|
Work-in-progress
|
|
26,136
|
|
17,824
|
|
|
Decoders,
internet and associated components |
|
136,383
|
|
170,028
|
|
|
Gross
Inventory |
|
623,111
|
|
505,222
|
|
|
Provision
for slow-moving and obsolete inventories |
|
(118,635)
|
|
(121,755)
|
|
|
Net
Inventory |
|
504,476
|
|
383,467
|
The
total impairment charged to write inventory down to net realizable value
in the
income statement amounted to Rand 34.2 million (2005: Rand 16.1 million), and reversals of these impairments
amounted to Rand 24.8
million (2005: Rand 8.2 million).
Carry
value
|
|
|
|
|
Trade
accounts receivable, gross
|
|
1,747,922
|
|
1,651,260
|
Less:
provision for impairment of receivables
|
|
(211,078) |
|
(238,687) |
|
|
1,536,844
|
|
1,412,573
|
Included
in trade receivables are Rand 949.5 million at March 31, 2006
(2005: Rand 837.1 million), pre-billed to customers and credit balances,
which
have been included in deferred income (see note 21). The group has pledged
accounts receivable with a carrying value of Rand 2.5 million at March
31, 2006
(2005: Rand 15.8 million) as security against certain term loans and overdrafts
with banks.
13.
|
|
OTHER
RECEIVABLES |
|
|
|
|
|
|
|
Prepayments
and accrued income |
|
237,042
|
|
235,060
|
|
|
Receivables
from minority shareholders |
|
8,917
|
|
851
|
|
|
Staff
debtors |
|
8,587
|
|
9,226
|
|
|
VAT
and related taxes receivable |
|
28,821
|
|
30,808
|
|
|
Other
receivables |
|
216,360
|
|
134,302
|
|
|
|
|
499,727
|
|
410,247
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
14. RELATED
PARTY
TRANSACTIONS AND BALANCES |
The
group entered into transactions and has balances with a number of related
parties, including equity investees, directors, shareholders and entities
under
common control. Transactions that are eliminated on consolidation are not
included. The transactions and balances with related parties are summarized
below:
|
|
|
|
March
31
|
|
|
|
|
2006
|
2005
|
|
|
|
|
R’000
|
R’000
|
Sale
of goods and services to related parties
|
|
Notes
|
|
|
|
Electronic
Media Network Limited |
|
[a]
|
|
50,431
|
43,212
|
Supersport
International Holdings Limited |
|
[a]
|
|
3,490
|
15,673
|
Myriad
International Programming Services BV |
|
[a]
|
|
–
|
2,615
|
United
Broadcasting Corporation Public Company Limited
|
|
[a]
|
|
159
|
6,361
|
Jane
Raphaely & Associates (Proprietary) Limited
|
|
[b]
|
|
13,405
|
10,252
|
New
Media Publishers (Proprietary) Limited |
|
[b]
|
|
39,702
|
32,885
|
East
African Magazines (Proprietary) Limited |
|
[b]
|
|
204
|
1,016
|
8
Ink (Proprietary) Limited |
|
[b]
|
|
4,939
|
2,455
|
Capital
Media (Proprietary) Limited |
|
[b]
|
|
1,822
|
2,183
|
Rodale
&
Touchline
Publishers (Proprietary)
Limited |
|
[b]
|
|
11,336
|
12,214
|
Shape
(Proprietary) Limited |
|
[b]
|
|
3,956
|
4,854
|
Uppercase
Media (Proprietary) Limited |
|
[b]
|
|
17,120
|
10,244
|
CTP
Limited |
|
[b]
|
|
13,334
|
–
|
Associated
Magazines (Proprietary) Limited |
|
[b]
|
|
1,722
|
–
|
|
|
|
|
161,620
|
143,964
|
[a]
Sale of goods and services to M-Net, Supersport, United Broadcasting Corporation
Public Company Limited and Myriad International Programming Services
BV.
[b]
Media 24 Limited receives revenue from a number of its related parties
mainly
for the printing and distribution of magazines and newspapers.
|
|
Purchase
of goods and services |
|
|
|
|
|
|
|
|
Electronic
Media Network Limited and Supersport
International |
|
|
|
|
|
|
|
|
Holdings
Limited |
|
[a]
|
|
2,182,677
|
|
1,909,895
|
|
|
CTP
Limited |
|
[b]
|
|
12,897
|
|
–
|
|
|
New
Media Publishers (Proprietary) Limited |
|
[b]
|
|
5,513
|
|
4,292
|
|
|
Natal
Witness Printing and Publishing Company
(Propietary) |
|
|
|
|
|
|
|
|
Limited
|
|
[b]
|
|
4,672
|
|
1,365
|
|
|
|
|
|
|
2,205,759
|
|
1,915,552
|
Notes:
[a]
|
Channel
and programming rights purchased by MultiChoice Africa
(Proprietary) Limited. |
[b]
|
Media
24 Limited purchases goods and services from a number of its
related parties mainly for the printing and distribution of magazines
and
newspapers. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
14.
|
RELATED
PARTY TRANSACTIONS AND BALANCES (continued) |
|
|
Other
transactions with related parties |
|
|
Tencent
Holdings Limited (“Tencent”) |
|
The
group entered into a number of intellectual property and
know-how licensing agreements with Tencent. On June 27, 2002, Tencent
granted a sole and exclusive license to a group company to use,
and to
authorize its affiliates (“the operators”) which carry on business in
sub-Saharan Africa (including South Africa), Indonesia, Thailand,
Greece
and Cyprus to use certain proprietary intellectual property and
know-how
of Tencent for a license fee computed at 40% of gross revenue derived
by
the operators by using this proprietary information. The agreement
is for
a term of 15 years and expires in 2017. |
|
|
MultiChoice
Nigeria Limited (MCN) |
|
The
group has a loan of Rand 39.0 million (2005: Rand 35.6 million)
with MCN’s minority shareholder which bears interest at 10.22%. An
impairment charge of Rand 30.9 million was raised during the year
against
the outstanding balance as this was not deemed recoverable. The
remaining
balance of Rand 8.1 million is due by March 31, 2007. |
|
|
MultiChoice
Ghana Limited (MGL) |
|
An
advance of US$0.4 million was made during the 2004 financial
year to a minority shareholder in MGL. The MGL minority shareholders’ loan
bears interest at 1% above LIBOR and is secured by a pledge of
shares in
MGL. There was no outstanding balance on this advance at March
31,
2006. |
|
|
Antenna
TV (Antenna) |
|
In
prior years, NetMed NV entered into agreements with Antenna for
the purchase of a 5% interest (plus a 10% option) in NetMed NV
and for the
right to distribute three Antenna channels. In October 2001, Antenna
concluded the transaction for the acquisition of 5% of the shares
in
NetMed NV for a consideration of approximately Rand 94.7 million
(US$12
million). Two channels were aired in the current year. On January
2, 2006,
Antenna exercised a put option to sell the above stake to Myriad
International Holdings BV at a price equal to the fair value of
each
share. At March 31, 2006, the valuation process in respect of determining
the fair value of each share, was still in progress. |
|
|
Electronic
Media Network Limited (M-Net) |
|
M-Net
reduced its capital by paying a total of Rand 84.3 million to
its shareholders in March 2006. The group participated in this
transaction
to the extent of its shareholding in M-Net. |
|
|
SuperSport
International Holdings Limited
(SuperSport) |
|
SuperSport
reduced its capital by paying a total of Rand 62.4
million to its shareholders in March 2006. The group participated
in this
transaction to the extent of its shareholding in SuperSport. |
|
|
M-Net
and SuperSport ceded forward exchange contracts (FEC’s)
totaling US$49.9 million on March 31, 2003 at no consideration
to the
group. The FEC’s ceded are at an average rate of Rand 12.16 and matured
between November 28, 2003 and March 31,
2005. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
March
31
|
14.
|
|
RELATED
PARTY TRANSACTIONS AND BALANCES (continued)
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
The
balances of advances, deposits, receivables and payables
between |
|
|
|
|
|
|
the
group and related parties are as follows: |
|
|
|
|
|
|
|
Receivables
|
|
|
|
|
|
|
Electronic
Media Network Limited |
|
2,176
|
|
2,477
|
|
|
SuperSport
International Holdings Limited |
|
1,301
|
|
–
|
|
|
United
Broadcasting Corporation Public Company Limited
|
|
–
|
|
7,432
|
|
|
KSC
Commercial Internet Company Limited |
|
–
|
|
2,082
|
|
|
Capital
Media (Proprietary) Limited |
|
–
|
|
487
|
|
|
Jane
Raphaely & Associates (Proprietary) Limited
|
|
2,381
|
|
1,984
|
|
|
New
Media Publishers (Proprietary) Limited |
|
8,096
|
|
6,315
|
|
|
Rodale
&
Touchline
Publishers (Proprietary)
Limited |
|
3,246
|
|
2,554
|
|
|
Shape
(Proprietary) Limited |
|
965
|
|
728
|
|
|
East
African Magazines (Proprietary) Limited |
|
–
|
|
2,008
|
|
|
Associated
Magazines (Proprietary) Limited |
|
1,517
|
|
2,056
|
|
|
Minority
shareholder loans |
|
–
|
|
37,555
|
|
|
Other
related parties |
|
157
|
|
1,233
|
|
|
|
|
19,839
|
|
66,911
|
|
|
|
Payables
|
|
|
|
|
|
|
Electronic
Media Network Limited |
|
84,270
|
|
72,613
|
|
|
SuperSport
International Holdings Limited |
|
3,476
|
|
2,934
|
|
|
Alibiprops
12 (Proprietary) Limited |
|
586
|
|
3,673
|
|
|
Natal
Witness Printing and Publishing Company (Propietary)
Limited |
|
7,925
|
|
–
|
|
|
Jane
Raphaely & Associates (Proprietary) Limited
|
|
1,238
|
|
1,043
|
|
|
Rodale
&
Touchline
Publishers (Proprietary)
Limited |
|
–
|
|
1,241
|
|
|
Multichoice
Eastern Cape (Proprietary) Limited
(Transkei) |
|
–
|
|
1,358
|
|
|
Uppercase
Media (Proprietary) Limited |
|
2,544
|
|
–
|
|
|
CTP
Limited |
|
1,857
|
|
–
|
|
|
New
Media Publishers (Proprietary) Limited |
|
1,709
|
|
–
|
|
|
Other
related parties |
|
833
|
|
3,532
|
|
|
|
|
104,438
|
|
86,394
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS |
|
|
(CONTINUED)
|
|
|
|
|
14.
|
|
RELATED
PARTY TRANSACTIONS AND BALANCES
(continued)
|
|
|
|
|
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Directors’
emoluments
|
|
|
|
|
|
|
|
Executive
directors: |
|
|
|
|
|
|
Remuneration
for other services paid by subsidiary
companies |
|
314
|
|
4,023
|
|
|
|
Non-executive
directors: |
|
|
|
|
|
|
Fees
for services as directors |
|
3,082
|
|
2,805
|
|
|
Fees
for services as directors of subsidiary companies
|
|
2,030
|
|
2,120
|
|
|
|
|
5,426
|
|
8,948
|
No
director has a notice period of more than one year.
No
director’s service contract includes pre-determined compensation as a result of
termination that would exceed one year’s salary and benefits.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
14.
|
RELATED
PARTY TRANSACTIONS AND BALANCES
(continued)
|
Directors’
emoluments
(continued)
|
The
individual directors received the following remuneration and
emoluments during the current financial year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
directors |
|
|
|
|
|
Salary
R’000
|
|
Bonuses
and
performance
related
fees
R’000
|
|
Pension
Contributions
R’000
|
|
Total
R’000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
JP
Bekker |
|
|
|
|
|
|
|
–
|
|
–
|
|
–
|
|
–
|
SJZ
Pacak |
|
|
|
|
|
|
|
1,957
|
|
2,200
|
|
196
|
|
4,353
|
|
|
|
|
|
|
|
|
1,957
|
|
2,200
|
|
196
|
|
4,353
|
2005
|
JP
Bekker |
|
|
|
|
|
|
|
–
|
|
–
|
|
–
|
|
–
|
SJZ
Pacak |
|
|
|
|
|
|
|
1,846
|
|
2,000
|
|
177
|
|
4,023
|
|
|
|
|
|
|
|
|
1,846
|
|
2,000
|
|
177
|
|
4,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-executive
directors |
|
R’000
|
|
Committee1
and
trustee2
fees
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T
Vosloo3,4,5
|
|
1,863
|
|
–
|
|
1,863
|
|
1,788
|
|
–
|
|
1,788
|
JJM
van Zyl3,4,5
|
|
535
|
|
460
|
|
995
|
|
629
|
|
355
|
|
984
|
E
Botha4
|
|
157
|
|
–
|
|
157
|
|
265
|
|
–
|
|
265
|
LN
Jonker |
|
175
|
|
–
|
|
175
|
|
130
|
|
–
|
|
130
|
NP
van Heerden |
|
175
|
|
–
|
|
175
|
|
130
|
|
105
|
|
235
|
BJ
van der Ross |
|
175
|
|
4
|
|
179
|
|
130
|
|
39
|
|
169
|
GJ
Gerwel3,4,6
|
|
435
|
|
60
|
|
495
|
|
570
|
|
51
|
|
621
|
HSS
Willemse |
|
175
|
|
3
|
|
178
|
|
130
|
|
3
|
|
133
|
F
du Plessis |
|
175
|
|
220
|
|
395
|
|
140
|
|
155
|
|
295
|
FTM
Phaswana |
|
175
|
|
–
|
|
175
|
|
130
|
|
–
|
|
130
|
RCC
Jafta |
|
175
|
|
150
|
|
325
|
|
140
|
|
35
|
|
175
|
|
|
|
|
4,215
|
|
897
|
|
5,112
|
|
4,182
|
|
743
|
|
4,925
|
|
Notes
on non-executive directors’
remuneration
|
Note
1:
|
|
Committee
fees include fees for the attendance of the audit
committee, the human resources committee, the budget
committee and the executive committee
meetings of the board.
|
|
Note
2:
|
|
Trustee
fees include fees for the attendance of the various
retirement fund trustee meetings of the group’s retirement funds,
as well as for the attendance of
Welkom trustee meetings.
|
|
Note
3:
|
|
Directors
fees include fees for services as directors of Media24
Limited.
|
Note
4:
|
|
Directors
fees includes fees for services as directors of Via
Afrika Limited.
|
Note
5:
|
|
Directors
fees includes fees for services as directors of MIH
Holdings Limited and MIH BV.
|
Note
6:
|
|
Directors
fees include fees for services as directors of Educor
Holdings Limited. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
14. RELATED
PARTY
TRANSACTIONS AND BALANCES (continued)
Directors’
interests
in scheme shares of the Naspers Share Incentive
Scheme
The
executive directors of Naspers are allowed to participate in the Naspers
Share
Incentive Scheme. Details in respect of their participation in scheme shares
not
yet released are as follows:
|
|
Purchase
|
|
Number
of
|
|
Purchase
|
|
Release
|
Name
|
|
date
|
|
N
- shares
|
|
price
|
|
period
|
|
JP
Bekker ¹ |
|
01/10/2002
|
|
1,634,941
|
|
R22,39
-
|
|
01/10/2006
-
|
|
|
|
|
|
|
R24,50
|
|
01/10/2007
|
|
|
17/12/2002
|
|
1,490,854
|
|
R29,09
-
|
|
17/12/2006
-
|
|
|
|
|
|
|
R31,54
|
|
17/12/2007
|
|
|
SJZ
Pacak |
|
02/01/2003
|
|
333,334
|
|
R23,50
|
|
02/01/2007
- |
|
|
|
|
|
|
|
|
02/01/2008
|
|
|
09/09/2004
|
|
100,000
|
|
R50.00
|
|
09/09/2007
- |
|
|
|
|
|
|
|
|
09/09/2009
|
1.
|
The
managing director of Naspers has allocations, as indicated
above, in the share incentive scheme, in terms of which Naspers
Class N
ordinary shares can be acquired at certain prices, with vesting
of three
tranches taking place over periods of five years. The purchase
prices
relating to the allocations were set at the middle market price
of the
shares on the purchase date, but increased by anticipated inflation
over
the course of the vesting periods of three, four and five years
respectively for each of the tranches. Inflation expectations were
calculated by the Bureau for Economic Research of the University
of
Stellenbosch. The managing director does not earn any remuneration
from
the group, in particular no salary, bonus, car scheme, medical
or pension
contributions of any nature whatever are payable. The managing
director’s
contract is for a five-year period starting on October 1, 2002.
No
compensation will apply to termination. |
|
On
July 22, 2005, 50,000 released Naspers N ordinary shares were sold by SJZ
Pacak
upon payment of the amount of an average price of Rand 21.22 per share
(the
original average offer prices based on the listed market prices of Naspers
Limited N ordinary shares on the dates of the offers) due to the Naspers
Share
Incentive Trust, at an average selling price of Rand 92.12 per Naspers
N
ordinary share.
On
July 29, 2005, 50 000 released Naspers N ordinary shares were sold by SJZ
Pacak
upon payment of the amount of an average price of Rand 21.22 per share
(the
original average offer price based on the listed market price of Naspers
Limited
N ordinary shares on the dates of the offer) due to the Naspers Share Incentive
Trust, at an average selling price of Rand 97.07 per Naspers N ordinary
share.
Directors’
interest
in MIH Holdings Share Incentive
Scheme |
Historically
SJZ Pacak has been a participant under the MIH Holdings
Share Incentive Scheme. In December 2002, Naspers Limited acquired all
the MIH
Holdings ordinary shares held by the MIH Holdings Share Trust in exchange
for
Naspers Class N ordinary shares. Participants exchanged their rights to
MIH
Holdings shares for Naspers Class N ordinary shares. On July 22, 2005,
44,444
Naspers N ordinary shares were delivered to SJZ Pacak upon payment of the
amount
of an average price of Rand 13.64 per share and, on the same day, 5,333
Naspers
N ordinary shares were delivered to SJZ Pacak upon payment of the amount
of an
average price of Rand 20.05 per share (the original average offer prices
based
on the listed market prices of MIH Holdings Limited shares on the dates
of the
offers) due to the MIH Holdings Share Trust. The closing price of a Naspers
N
ordinary share on July 22, 2005 was Rand 92.35. SJZ Pacak still owns these
shares. At March 31, 2006, a total of 66,531 (2005: 116,308) Naspers N
ordinary
shares have been allocated to SJZ Pacak with vesting periods until February
18,
2007.
Directors’
interest
in SuperSport Share Incentive
Scheme |
Historically
SJZ Pacak has been a participant under the SuperSport Share
Incentive Scheme. In March 2003, SuperSport completed a capital reduction,
in
terms of which Naspers Class N ordinary shares were distributed to its
shareholders, including the SuperSport Share Incentive Trust. In terms
of his
participation in the SuperSport Share Incentive Scheme, 2,119 Naspers Class
N
ordinary shares have been allocated to SJZ Pacak with vesting periods until
August 26, 2004.
In
March 2004 Naspers Limited acquired all the SuperSport ordinary shares
held by
the SuperSport Share Incentive Trust in exchange for Naspers Class N ordinary
shares. Participants could exchange their rights to SuperSport shares for
Naspers Class N ordinary shares. A total of 5,305 Naspers Class N ordinary
shares have been allocated to SJZ Pacak with vesting periods until August
26,
2004.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
14. RELATED
PARTY
TRANSACTIONS AND BALANCES (continued)
Directors’
interest
in M-Net Share Incentive
Scheme |
Historically
SJZ Pacak has been a participant under the M-Net Share
Incentive Scheme. In March 2004, Naspers Limited acquired all the M-Net
ordinary
shares held by the M-Net Share Incentive Trust in exchange for Naspers
Class N
ordinary shares. Participants could exchange their rights to M-Net shares
for
Naspers Class N ordinary shares. A total of 5,805 Naspers Class N ordinary
shares have been allocated to SJZ Pacak with vesting periods until August
26,
2004.
Directors’
interests
in Naspers
shares |
The
directors of Naspers had the following interest in Naspers A ordinary shares
as
at March 31, 2006:
|
|
|
|
March
31, 2006
|
|
|
|
|
|
March
31, 2005
|
|
|
|
|
|
|
Naspers
A ordinary shares
|
|
|
|
|
|
Naspers
A ordinary shares
|
|
|
|
|
Beneficial
|
|
Non-beneficial
|
|
Beneficial
|
|
Non-beneficial
|
Name
|
|
Direct
|
|
Indirect
|
|
Direct
|
|
Indirect
|
|
Direct
|
|
Indirect
|
|
Direct
|
|
Indirect
|
|
JJM
van Zyl |
|
745
|
|
–
|
|
–
|
|
–
|
|
745
|
|
–
|
|
–
|
|
–
|
On
January 25, 2006, an agreement was reached in terms of which Sanlam Limited
sold
168,605 Naspers Beleggings Limited ordinary shares, 16,860,500 Keeromstraat
30
Beleggings Limited ordinary shares and 133,350 Naspers ‘A’ shares into a new
entity, Wheatfields 221 (Proprietary) Limited (Wheatfields). Sanlam owns
50% of
Wheatfields, while Mr JP Bekker acquired an indirect 25% interest in
Wheatfields.
No
other director of Naspers had any interest in Naspers A ordinary shares
at March
31, 2006 or March 31, 2005.
The
directors of Naspers had the following interest in Naspers N
ordinary shares as at 31 March:
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Naspers
N ordinary shares
|
|
Naspers
N ordinary shares
|
|
|
Beneficial
|
|
Non-beneficial
|
|
Beneficial
|
|
Non-beneficial
|
Name |
|
Direct
|
|
Indirect
|
|
Direct
|
|
Indirect
|
|
Direct
|
|
Indirect
|
|
Direct
|
|
Indirect
|
|
T
Vosloo |
|
25,000
|
|
250,000
|
|
–
|
|
–
|
|
25,000
|
|
300,000
|
|
–
|
|
–
|
JP
Bekker |
|
–
|
|
–
|
|
–
|
|
4,917,316
|
|
314,754
|
|
–
|
|
–
|
|
3,532,756
|
SJZ
Pacak |
|
94,510
|
|
291,267
|
|
–
|
|
122,707
|
|
44,733
|
|
262,078
|
|
–
|
|
135,007
|
JJM
van Zyl |
|
50,361
|
|
173,793
|
|
–
|
|
–
|
|
50,361
|
|
173,793
|
|
–
|
|
–
|
E
Botha |
|
–
|
|
–
|
|
–
|
|
–
|
|
15,332
|
|
–
|
|
–
|
|
–
|
LN
Jonker |
|
1,000
|
|
–
|
|
–
|
|
67,000
|
|
1,000
|
|
–
|
|
–
|
|
67,000
|
NP
van Heerden |
|
–
|
|
1,300
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
2,300
|
BJ
van der Ross |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
GJ
Gerwel |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
HSS
Willemse |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
F
du Plessis |
|
–
|
|
–
|
|
–
|
|
500
|
|
–
|
|
–
|
|
–
|
|
500
|
FTM
Phaswana |
|
630
|
|
–
|
|
–
|
|
–
|
|
630
|
|
–
|
|
–
|
|
–
|
RCC
Jafta |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
14. RELATED
PARTY
TRANSACTIONS AND BALANCES (continued)
Key
management remuneration and participation in share-based incentive
plans
Comparatives
have not been restated to account for the change in the
composition of key management.
The
total of executive directors’ and key management emoluments amounted to Rand
97.2 million (2005: Rand 76.1 million); comprising short-term employee
benefits
of Rand 65.4 million (2005: Rand 50.5 million), post-employment benefits
of Rand
5.4 million (2005: Rand 5.4 million), and share-based payment charge of
Rand
26.4 million (2005: Rand 20.2 million). The aggregate number of share options
granted to the executive directors and key management during the 2006 financial
year and the number of shares allocated to the executive directors and
key
management at March 31, 2006 respectively are:
For
shares listed on a recognised stock exchange as follows: 794,678 (2005:
559,652)
Naspers Limited Class N ordinary shares were allocated during the 2006
financial
year and an aggregate of 13,200,771 (2005: 15,256,032) Class N ordinary
shares
were allocated as at March 31, 2006.
For
shares in unlisted companies as follows: 17,238 (2005: 45,399) Media24
Limited
ordinary shares were allocated during 2006 and an aggregate of 487,977
(2005:
635,039) ordinary shares were allocated as at March 31, 2006; nil (2005:
192,780) Via Afrika Limited ordinary shares were allocated during 2006
and
243,840 (2005: 192 780 ) ordinary shares were allocated as at March 31,
2006;
50,000 (2005: 150,000) Irdeto Access BV ordinary shares were allocated
during
2006 and an aggregate of 207,500 (2005: 157,500) ordinary shares were allocated
as at March 31, 2006; nil (2005: 45,000) Paarl Media Holdings (Proprietary)
Limited ordinary shares were allocated during 2006 and 185,000 (2005: 185,000)
ordinary shares were allocated as at March 31, 2006; 18,250 (2005: 5,000)
MIH QQ
(BVI) Limited ordinary shares were allocated during 2006 and an aggregate
of
32,625 (2005: 20,000) shares were allocated as at March 31, 2006; nil (2005:
2,080,000) Entriq (Mauritius) Limited shares were allocated during 2006
and an
aggregate of 2,200,000 (2005: 2,200,000) shares were allocated as at March
31,
2006.
During
the year, three share appreciation rights plans (SARs) were introduced.
The
number of SARs allocated to the executive directors and key management
at March
31, 2006 are: 1,182,923 Media24 SARs; 928,213 MCA SARs; and 1,793,890 M-Net/SS
SARs.
These
shares and SARs were granted on the same terms and conditions as those
offered
to employees of the group.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
|
|
|
March
31
|
15.
|
|
SHARE
CAPITAL AND PREMIUM |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Authorized |
|
|
|
|
|
|
1,250,000
Class A ordinary shares of R20 each |
|
25,000
|
|
25,000
|
|
|
500,000,000
Class N ordinary shares of 2c each |
|
10,000
|
|
10,000
|
|
|
|
|
35,000
|
|
35,000
|
|
|
Issued
|
|
|
|
|
|
|
712,131
Class A ordinary shares of R20 each (2005:
712,131) |
|
14,243
|
|
14,243
|
|
|
315,113,700
Class N ordinary shares of 2c each (2005:
314,548,700) |
|
6,302
|
|
6,291
|
|
|
|
|
20,545
|
|
20,534
|
|
|
Share
premium |
|
6,278,880
|
|
6,173,258
|
|
|
|
|
6,299,425
|
|
6,193,792
|
|
|
Less:
24,558,886 Class N ordinary shares held as treasury
shares |
|
|
|
|
|
|
(2005:
31,959,017 Class N ordinary shares) |
|
(738,105) |
|
(802,641) |
|
|
|
|
5,561,320
|
|
5,391,151
|
Treasury
shares
The
group holds a total of 24,558,886 Class N ordinary shares (2005: 31,959,017),
or
7.8% of the gross number in issue (2005: 10,2%) at March 31, 2006 as treasury
shares. Equity compensation plans hold 19,849,615 of the Class N ordinary
shares
(2005: 27,249,746) and the remaining 4,709,271 Class N ordinary shares
(2005:
4,709,271) are held by various group companies.
Voting
and dividend rights
The
Class A ordinary shareholders are entitled to 1,000 votes per share and
may
receive nominal dividends as determined from time to time by the board
of
directors, but always limited to one fifth of the dividend to which Class
N
ordinary shareholders are entitled. The Class A ordinary shareholders do
not
have a right to receive a dividend when dividends are declared to Class
N
ordinary shareholders, although a dividend to Class A ordinary shareholders
could be proposed by the Board. In respect of all other rights, the Class
A
ordinary shares rank pari passu with the Class N ordinary shares of the
company.
Naspers
Beleggings Limited holds 350,000 Class A ordinary shares (2005:
350,000) and Keeromstraat 30 Beleggings Limited holds 219,344 Class A ordinary
shares (2005: 219,344) of the total 712,131 Class A ordinary shares in
issue at
the year-end. As a result of the voting rights attached to these shares,
the
companies have significant influence over the group.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
15.
|
SHARE
CAPITAL AND PREMIUM (continued) |
|
|
Unissued
share capital |
|
|
The
directors of the company have unrestricted authority until
after the following annual general meeting to allot and issue the
unissued
537,869 Class A ordinary shares and 184,886,300 Class N ordinary
shares in
the company, subject to the provisions of section 221 of the Companies
Act, 1973, and the JSE Listing Requirements. |
|
|
Share
Incentive Plans holding Naspers Class N ordinary
shares |
Directors
may, from time to time, instruct the trustees of the Naspers
Limited Share Incentive Trust to offer employees options and / or contracts
relating to such number of Class N ordinary shares in the company which
in
total, together with the shares already in the existing scheme, shall not
exceed
11% of the company’s issued shares. With the acquisition of the minority
interests in MIH Holdings Limited and MIH Limited in December 2002, the
MIH
Holdings Share Incentive Plan and the MIH (BVI) Plan received Naspers N
ordinary
shares. The SuperSport Share Incentive Plan received Naspers Class N ordinary
shares in February 2003 from the distribution of Naspers Class N ordinary
shares
by SuperSport as part of a capital reduction exercise. The SuperSport Share
Incentive Plan and the M-Net Share Incentive Plan received Naspers Class
N
ordinary shares in April 2004 from the acquisition of the minority interests
in
Electronic Media Network Limited and SuperSport International Holdings
Limited
by Naspers. Aggregate information on Naspers Class N ordinary shares held
by the
Naspers, MIH Holdings, MIH (BVI), M-Net and SuperSport plans are as
follows:
|
|
N
shares
|
|
N
shares
|
Movement
in Class N ordinary shares in issue during the
year |
|
|
|
|
Shares
in issue at April 1 |
|
314,548,700
|
|
296,816,639
|
Shares
issued to acquire M-Net/SuperSport shares from minority
shareholders |
|
–
|
|
17,532,061
|
Shares
issued to Share Incentive Trusts |
|
565,000
|
|
200,000
|
Shares
in issue at March 31 |
|
315,113,700
|
|
314,548,700
|
|
Movement
in Class N ordinary shares held as treasury shares during
the year |
|
|
|
|
Shares
held as treasury shares at April 1 |
|
31,959,017
|
|
35,197,406
|
Shares
acquired by M-Net and SuperSport equity compensation
plans |
|
–
|
|
1,089,686
|
Shares
issued to Share Incentive Trusts |
|
565,000
|
|
200,000
|
Shares
acquired by entities in the group |
|
–
|
|
86,573
|
Shares
sold in open market |
|
(486,972) |
|
–
|
Shares
acquired by participants from equity compensation
plans |
|
(7,478,159) |
|
(4,614,648) |
Shares
held as treasury shares at March 31
|
|
24,558,886
|
|
31,959,017
|
|
|
|
|
|
Net
number of shares in issue at March 31 |
|
290,554,814
|
|
282,589,683
|
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
Share
premium |
|
|
|
|
Balance
at April 1 |
|
6,173,258
|
|
5,412,628
|
Share
premium on share issues |
|
69,766
|
|
762,574
|
Share
issue expenses |
|
(53) |
|
(1,944) |
On
vesting of shares - transfer to share premium |
|
35,909
|
|
-
|
Balance
at March 31 |
|
6,278,880
|
|
6,173,258
|
Shares
allocated to participants of the incentive schemes vest in equal numbers
after
respectively three, four and five years after the date of allocation. The
plans
are obliged to deliver the shares to the participants at any time after
vesting
up to a maximum of 10 years after the allocation date, when participants
request
and pay for the shares.
Share
options outstanding
In
terms of the Welkom Trust share scheme, share options were issued to the
participants to subscribe for 5,605,236 Naspers Class N ordinary shares
at a
subscription price of Rand 31.96 per Class N ordinary share during the
30-day
period from September 9, 2006.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
March
31
|
16.
|
|
OTHER
RESERVES |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Other
reserves on the balance sheet comprise: |
|
|
|
|
|
|
Fair
value reserve |
|
173
|
|
23,796
|
|
|
Hedging
reserve |
|
(20,193) |
|
(18,920) |
|
|
Foreign
currency translation reserve |
|
12,807
|
|
(5,416) |
|
|
Other
reserves |
|
(3,500,675) |
|
(2,473,525) |
|
|
Share-based
compensation reserve |
|
191,182
|
|
56,374
|
|
|
|
|
(3,316,706) |
|
(2,417,691) |
The
fair value reserve relates to unrealized profits and losses arising from
changes
in the fair value of investments classified as available-for-sale.
The
hedging reserve relates to the changes in the fair value of derivative
financial
instruments that hedges forecasted transactions or the foreign currency
part or
firm commitments. The changes in fair value are recorded in the hedging
reserve
until the forecasted transaction or firm commitment results in the recognition
of an asset or liability, when such deferred gains or losses are then included
in the initial measurement of the asset or liability.
The
foreign currency translation reserve relates to exchange differences arising
from the translation of foreign subsidiaries’ and joint ventures’ income
statements at average exchange rates for the year and their balance sheets
at
the ruling exchange rates at the balance sheet date if the functional currency
differs.
The
other reserves are used to account for transactions with minority shareholders
in terms of the economic entity model, whereby the excess of the cost of
the
transactions over the acquirer’s interest in previously recognized assets and
liabilities is allocated to this reserve in equity.
The
fair value of options issued to employees is accounted for in the share-based
compensation reserve over the vesting period. The reserve is adjusted when
the
entity revises its estimates of the number of share options that are expected
to
become exercisable. It recognizes the impact of the revision of original
estimates, if any, in the income statement, with a corresponding adjustment
to
this reserve in equity for equity-settled plans.
17. RETAINED
EARNINGS
Any
future dividends declared from the distributable reserves of the company
or its
subsidiaries, which are not wholly-owned subsidiaries of the company and
are
incorporated in South Africa, may be subject to secondary taxation on companies
(“STC”) at a rate of 12.5% of the dividends declared. Dividends received by
group companies during their various dividend cycles can be carried forward
as
unutilized STC credits. These STC credits can then be utilized to reduce
any STC
payable on future dividends declared by group companies. The group’s total
unutilized STC credits at March 31, 2006 amounted to Rand 870,8 million
(2005:
Rand 751.9 million). The group has no unutilized STC credits at March 31,
2006
(2005: Rand 243.3 million) on which deferred tax assets have not been raised
,
due to uncertainties relating to the utilization of these credits.
The
board of directors has proposed that a dividend of 120 cents (2005: 70
cents)
per N ordinary share and 24 cents (2005: 14 cents) per A ordinary share
be paid
to shareholders on September 11, 2006. If approved by the shareholders
of the
company at its annual general meeting, the company will pay a total dividend
of
Rand 378.3 million based on the number of shares in issue at March 31,
2006. The
company has enough STC credits carried-forward to cover such a dividend.
The
utilization of these STC credits will however lead to the realization of
a
deferred tax asset of Rand 47.3 million that will be charged to the income
statement during the 2007 financial year.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
18.
|
POST-RETIREMENT
LIABILITIES |
|
|
18.1
Medical liability |
|
|
The
group operates a number of post-retirement medical benefit
schemes. The obligation of the group to pay medical aid contributions
after retirement is no longer part of the conditions of employment
for new
employees. A number of pensioners and current employees, however,
remain
entitled to this benefit. The entitlement to this benefit for current
employees is dependent upon the employees remaining in service
until
retirement age and completing a minimum service period. The group
provides
for post-retirement medical aid benefits on the accrual basis determined
each year by an independent actuary. The directors believe that
adequate
provision has been made for future liabilities. |
|
|
Media24
Limited and Via Afrika Limited entered into agreements
during the year ended March 31, 2004 with certain employees to
terminate
their future participation in the post-retirement medical aid benefits
plan, in exchange for certain future contributions to endowment
policies
for these employees. At March 31, 2006 the group had a liability
of Rand
17.9 million (2005: Rand 21.6 million) relating to these future
contributions to be made in a further three installments over the
next
three years. |
|
|
March
31
|
Post-retirement
medical liability: |
|
2006
|
|
2005
|
|
R’000
|
|
R’000
|
|
Opening
balance |
|
161,298
|
|
171,070
|
Additional
provisions charged to income statement |
|
20,689
|
|
3,894
|
Provisions
reversed to income statement |
|
(3,019) |
|
(693) |
Provisions
credited/charged to other accounts |
|
-
|
|
(6,661) |
Provisions
utilized |
|
(12,953) |
|
(6,256) |
Partial
disposal of interest in joint venture |
|
(4,026) |
|
-
|
Foreign
currency translation effect |
|
(360) |
|
(56) |
|
|
161,629
|
|
161,298
|
Less:
Short-term portion |
|
(8,164) |
|
-
|
Closing
balance |
|
153,465
|
|
161,298
|
|
The
principal actuarial assumptions used for accounting purposes
were: |
|
|
|
|
Health
care cost inflation |
|
6.5%
|
|
7.0%
|
Discount
rate |
|
7.5%
|
|
8.5%
|
Continuation
at retirement |
|
100%
|
|
100%
|
Average
retirement age |
|
60
|
|
60
|
|
18.2
Pension and provident
benefits |
The
group provides retirement benefits for its full-time employees by way of
various
separate defined contribution pension and provident funds. All full-time
employees have access to these funds. Contributions to these funds are
paid on a
fixed scale. The South African retirement funds of the group are governed
by the
Pension Fund Act of South Africa. Substantially all the group’s full-time
employees are members of either one of the group’s retirement benefit plans or a
third-party plan.
An
amount of Rand 178.7 million (2005: Rand 172.8 million) was recognized
as an
expense in relation to the group’s retirement funds.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
March
31
|
19.
|
|
LONG-TERM
LIABILITIES |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Interest-bearing:
Capitalized finance leases
|
|
1,443,636
|
|
1,723,656
|
|
|
Total
liabilities |
|
1,731,711
|
|
1,983,108
|
|
|
Less:
current
portion |
|
(288,075)
|
|
(259,452)
|
|
|
|
Interest-bearing:
Concession liabilities |
|
–
|
|
15,489
|
|
|
Total
liabilities |
|
–
|
|
15,559
|
|
|
Less:
current
portion |
|
–
|
|
(70)
|
|
|
|
Interest-bearing:
Loans and other |
|
722,006
|
|
423,160
|
|
|
Total
liabilities |
|
1,053,326
|
|
636,199
|
|
|
Less:
current
portion |
|
(331,320)
|
|
(213,039)
|
|
|
|
Non-interest-bearing:
Programme and film
rights |
|
149,971
|
|
53,925
|
|
|
Total
liabilities |
|
636,827
|
|
458,575
|
|
|
Less:
current
portion |
|
(486,856)
|
|
(404,650)
|
|
|
|
Non-interest-bearing:
Loans and other |
|
39,948
|
|
59,418
|
|
|
Total
liabilities |
|
633,239
|
|
99,723
|
|
|
Less:
current
portion |
|
(593,291)
|
|
(40,305)
|
|
|
Net
long-term liabilities |
|
2,355,561
|
|
2,275,648
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
19.
|
|
LONG-TERM
LIABILITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing:
Capitalized finance leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
of
|
|
|
|
|
|
|
|
|
|
|
|
|
final
|
|
Year-end
|
|
2006
|
|
2005
|
|
|
Type
of lease |
|
Currency
|
|
repayment
|
|
interest
rate
|
|
R’000
|
|
R’000
|
|
|
Land
and buildings |
|
ZAR
|
|
2010
|
|
14.0%
|
|
14,262
|
|
15,869
|
|
|
|
|
ZAR
|
|
2007
|
|
21.5%
|
|
26,925
|
|
35,795
|
|
|
|
|
ZAR
|
|
2012
|
|
17.0%
|
|
52,808
|
|
53,133
|
|
|
|
|
ZAR
|
|
2023
|
|
10.5%
|
|
123,742
|
|
119,503
|
|
|
|
|
|
|
|
|
|
|
217,737
|
|
224,300
|
|
|
|
Manufacturing
equipment |
|
ZAR
|
|
2007
|
|
10.0%
|
|
–
|
|
2,462
|
|
|
|
|
ZAR
|
|
2008
|
|
10.0%
|
|
–
|
|
2,991
|
|
|
|
|
ZAR
|
|
2010
|
|
10.9%
|
|
1,714
|
|
–
|
|
|
|
|
|
|
|
|
|
|
1,714
|
|
5,453
|
|
|
Transmission
equipment and satellites |
|
EUR
|
|
various
|
|
5.0%
|
|
68
|
|
6,637
|
|
|
|
|
THB
|
|
various
|
|
various
|
|
–
|
|
1,781
|
|
|
|
|
USD
|
|
2012
|
|
8.2%
|
|
537,287
|
|
613,738
|
|
|
|
|
EUR
|
|
2013
|
|
9.0%
|
|
268,754
|
|
322,660
|
|
|
|
|
EUR
|
|
2013
|
|
4.0%
|
|
59,153
|
|
72,071
|
|
|
|
|
USD
|
|
2013
|
|
4.0%
|
|
219,873
|
|
249,753
|
|
|
|
|
EUR
|
|
2011
|
|
4.0%
|
|
94,385
|
|
117,696
|
|
|
|
|
EUR
|
|
2010
|
|
10.0%
|
|
274,542
|
|
296,212
|
|
|
|
|
USD
|
|
2012
|
|
6.5%
|
|
53,864
|
|
67,958
|
|
|
|
|
|
|
|
|
|
|
1,507,926
|
|
1,748,506
|
|
|
Vehicles,
computers and office equipment |
|
ZAR
|
|
various
|
|
10.5%
|
|
3,040
|
|
3,567
|
|
|
|
|
ZAR
|
|
various
|
|
various
|
|
1,294
|
|
1,282
|
|
|
|
|
|
|
|
|
|
|
4,334
|
|
4,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
capitalized finance leases |
|
|
|
|
|
|
|
1,731,711
|
|
1,983,108
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
19.
|
|
LONG-TERM
LIABILITIES (continued)
|
|
|
|
|
|
|
|
Interest-bearing:
Capitalized finance leases
(continued) |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Minimum
installments |
|
|
|
|
|
|
Payable
within year one |
|
407,545
|
|
415,457
|
|
|
Payable
within year two |
|
383,943
|
|
415,419
|
|
|
Payable
within year three |
|
373,141
|
|
386,239
|
|
|
Payable
within year four |
|
323,619
|
|
375,127
|
|
|
Payable
within year five |
|
271,344
|
|
324,355
|
|
|
Payable
after year five |
|
567,699
|
|
847,897
|
|
|
|
|
2,327,291
|
|
2,764,494
|
|
|
Future
finance costs on finance leases |
|
(595,580) |
|
(781,386) |
|
|
Present
value of finance lease liabilities |
|
1,731,711
|
|
1,983,108
|
|
|
|
Present
value |
|
|
|
|
|
|
Payable
within year one |
|
288,075
|
|
259,452
|
|
|
Payable
within year two |
|
288,945
|
|
277,245
|
|
|
Payable
within year three |
|
301,468
|
|
273,935
|
|
|
Payable
within year four |
|
273,757
|
|
287,294
|
|
|
Payable
within year five |
|
240,527
|
|
256,931
|
|
|
Payable
after year five |
|
338,939
|
|
628,251
|
|
|
Present
value of finance lease liabilities |
|
1,731,711
|
|
1,983,108
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
19.
|
|
LONG-TERM
LIABILITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing:
Concession liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
of final |
|
Year-end
|
|
2006
|
|
2005
|
|
|
Type
of concession liability |
|
Currency
|
|
repayment
|
|
interest
rate |
|
R’000
|
|
R’000
|
|
|
Licence
concession liability |
|
THB
|
|
2014
|
|
13.0%
|
|
–
|
|
6,546
|
|
|
Licence
concession liability |
|
THB
|
|
2019
|
|
13.0%
|
|
–
|
|
9,013
|
|
|
|
|
|
|
|
|
|
|
–
|
|
15,559
|
Concession
obligations pertain to United Broadcasting Corporation which
was disposed of during the year ended March 31, 2006.
|
|
Asset
|
|
|
|
Year
of final
|
|
Year-end
|
|
2006
|
|
2005
|
Loan
|
|
secured
|
|
Currency
|
|
repayment
|
|
interest
rate
|
|
R’000
|
|
R’000
|
Secured
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
loan: Investec Bank Limited |
|
Investments
|
|
ZAR
|
|
2008
|
|
9.0%
|
|
400,098
|
|
300,000
|
Term
loan: ABSA Bank Limited |
|
Investments
|
|
USD
|
|
2011
|
|
6.9%
|
|
309,208
|
|
–
|
Term
loan: Nedbank Limited |
|
Receivables
|
|
ZAR
|
|
2006
|
|
15.5%
|
|
–
|
|
244,382
|
Installment
sale: Wesbank Limited |
|
Machinery
|
|
ZAR
|
|
2010
|
|
11.0%
|
|
446
|
|
9,242
|
Hire
purchase: Nedbank Limited |
|
Vehicles
|
|
ZAR
|
|
2008
|
|
9.5%
|
|
35
|
|
–
|
Bond
finance: Nedbank Limited |
|
Land
|
|
ZAR
|
|
2012
|
|
9.4%
|
|
5,990
|
|
–
|
Loan
from minority shareholders |
|
Land
|
|
ZAR
|
|
2012
|
|
12.9%
|
|
–
|
|
6,699
|
|
Unsecured
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
loan: FirstRand Bank Limited |
|
|
|
ZAR
|
|
2006
|
|
10.2%
|
|
–
|
|
68,768
|
Term
loan: CommerzBank and Futuregrowth |
|
ZAR
|
|
2007
|
|
10.5%
|
|
35,143
|
|
77,931
|
Term
loan: ABSA Bank Limited |
|
|
|
ZAR
|
|
2009
|
|
15.6%
|
|
195,295
|
|
183,200
|
Term
loan: Nedbank Limited |
|
|
|
ZAR
|
|
2012
|
|
14.7%
|
|
43,279
|
|
42,194
|
Term
loan: Rand Merchant Bank, Commerz Bank and |
|
ZAR
|
|
2009
|
|
8.9%
|
|
196,844
|
|
–
|
Standard
Bank |
|
|
|
|
|
|
|
|
|
|
|
|
Term
loan: Bangkok Bank plc |
|
|
|
THB
|
|
2008
|
|
4.8%
|
|
–
|
|
2,834
|
Loan:
Afrinacol Investment Limited |
|
|
|
ZAR
|
|
None
|
|
11.0%
|
|
7,314
|
|
7,314
|
Other
loans |
|
|
|
various
|
|
various
|
|
various
|
|
1,226
|
|
1,751
|
Loans
from minority shareholders |
|
|
|
ZAR
|
|
various
|
|
various
|
|
23,184
|
|
26,782
|
Preference
share investments |
|
|
|
ZAR
|
|
2012
|
|
14.7%
|
|
(16,532) |
|
(28,068) |
Right
to subscription shares |
|
|
|
ZAR
|
|
various
|
|
various
|
|
(148,204) |
|
(306,830) |
|
|
|
|
|
|
|
|
|
|
1,053,326
|
|
636,199
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
19.
|
|
|
LONG-TERM
LIABILITIES (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing: Programme and film
rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
of final
|
|
2006
|
|
2005
|
|
|
Liabilities
|
|
Currency
|
|
repayment
|
|
R’000
|
|
R’000
|
|
|
Unsecured
|
|
|
|
|
|
|
|
|
|
|
Programme
and film rights liabilities |
|
EUR
|
|
2009
|
|
302,403
|
|
214,633
|
|
|
|
|
|
|
USD
|
|
Various
|
|
334,424
|
|
243,942
|
|
|
|
|
|
|
|
|
|
|
636,827
|
|
458,575
|
|
|
|
|
Non-interest-bearing:
Loans and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
|
|
2006
|
|
2005
|
|
|
Loans
and liabilities |
|
Currency
|
|
repayment
|
|
R’000
|
|
R’000
|
|
|
Gordon
Sports Properties |
|
ZAR
|
|
2013
|
|
683
|
|
783
|
|
|
Tiscali
International BV |
|
ZAR
|
|
2006
|
|
–
|
|
40,114
|
|
|
Customer
deposit |
|
THB
|
|
–
|
|
–
|
|
36,909
|
|
|
Service
Leaving Indemnity |
|
EUR
|
|
–
|
|
10,398
|
|
9,272
|
|
|
Loans
from minority shareholders |
|
various
|
|
various
|
|
29,068
|
|
12,645
|
|
|
NetMed
shareholders’ liability |
|
EUR
|
|
–
|
|
593,090
|
|
–
|
|
|
|
|
|
|
|
|
|
|
633,239
|
|
99,723
|
|
|
|
Total
long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
Repayment
terms of long-term liabilities (excluding capitalised
finance leases) |
|
|
|
|
|
|
-
|
|
payable
within year one |
|
|
|
|
|
1,411,467
|
|
657,994
|
|
|
-
|
|
payable
within year two |
|
|
|
|
|
420,036
|
|
255,390
|
|
|
-
|
|
payable
within year three |
|
|
|
|
|
233,344
|
|
104,413
|
|
|
-
|
|
payable
within year four |
|
|
|
|
|
89,200
|
|
71,111
|
|
|
-
|
|
payable
within year five |
|
|
|
|
|
89,261
|
|
1,299
|
|
|
-
|
|
payable
after year five |
|
|
|
|
|
80,084
|
|
119,849
|
|
|
|
|
|
|
|
|
|
|
2,323,392
|
|
1,210,056
|
|
|
Interest
rate profile of long-term liabilities (Long- and
short-term portion, including capitalised finance leases)
|
|
|
|
|
-
Loans at fixed rates: 1 - 12 months |
|
|
|
|
|
211,811
|
|
132,656
|
|
|
-
Loans at fixed rates: more than 12 months |
|
|
|
|
|
1,837,197
|
|
2,081,435
|
|
|
-
Interest free loans |
|
|
|
|
|
1,270,066
|
|
558,298
|
|
|
-
Loans linked to variable rates |
|
|
|
|
|
736,029
|
|
420,775
|
|
|
|
|
|
|
|
|
|
|
4,055,103
|
|
3,193,164
|
In
accordance with IFRS 1, Naspers elected not to restate its comparative
information for the year ended March 31, 2006 in terms of IAS 39 and IAS
32.
Information for the year ended March 31, 2005 is therefore prepared based
on AC
133 Financial
Instruments: Recognition and Measurement (Revised September
2002)
and
AC 125 Financial
Instruments: Disclosure and Presentation (Issued August
1997)
(“AC
125”) as applicable under SA GAAP. The effective date for the application of
IAS
32 and IAS 39 for the group is April 1, 2005 and the group therefore applied
these standards in accounting for financial instruments for the year ended
March
31, 2006.
IAS
32
provides additional guidance on the classification of derivatives based
on an
entity’s own shares. The standard specifies that where an issuer has an
obligation to purchase its own shares for cash or another financial asset,
this
will result in the recognition of a liability for the amount that the issuer
is
obliged to pay. In the application of AC 125 under SA GAAP, the raising
of such
a liability was not required.
On
application of IAS 32 in the current year, put options as described above
were
identified at subsidiary entities within the group. As required by IFRS
1, the
resulting liabilities were recognized at their fair value on April 1, 2005
directly in equity. Corresponding adjustments were made to long-term derivatives
(Rand 203 million) and the current portion of non-interest bearing long-term
liabilities (Rand 593 million), respectively. The movement in the fair
value for
the year ended March 31, 2006 is reflected in the income statement in “other
(losses) / gains – net” (refer to note 25).
NOTES TO THE CONSOLIDATED
ANNUAL
FINANCIAL STATEMENTS
|
20. PROVISIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following account balances have been determined based on
management’s estimates and assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
April
1,
2005
R’000
|
|
Additional
provisions
raised
R’000
|
|
Unutilized
provisions
reversed
to
income
R’000
|
|
Credited/
charged
to
other
accounts
R’000
|
|
Provisions
utilized
R’000
|
|
Foreign
currency
translation
R’000
|
|
March
31,
2006
R’000
|
|
Less
short-term
portion
R’000
|
|
Long-term
portion
R’000
|
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranties
|
|
3,889
|
|
–
|
|
(247)
|
|
–
|
|
(626)
|
|
(13)
|
|
3,003
|
|
(3,003) |
|
–
|
Pending
litigation |
|
25,862
|
|
7,622
|
|
(8,107)
|
|
1,683
|
|
(2,429)
|
|
(83) |
|
24,548
|
|
(16,337) |
|
8,211
|
Discontinued
operations |
|
4,267
|
|
–
|
|
–
|
|
–
|
|
(4,267)
|
|
–
|
|
–
|
|
–
|
|
–
|
Reorganization
|
|
808
|
|
–
|
|
–
|
|
–
|
|
(808)
|
|
–
|
|
–
|
|
–
|
|
–
|
Onerous
contracts |
|
27,016
|
|
2,224
|
|
(11,257) |
|
(1,494) |
|
(4,158)
|
|
(891) |
|
11,440
|
|
(6,640) |
|
4,800
|
Ad
valorem duties |
|
23,100
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
23,100
|
|
–
|
|
23,100
|
Redundancy
|
|
583
|
|
–
|
|
–
|
|
–
|
|
(577)
|
|
(6) |
|
–
|
|
–
|
|
–
|
Contract
dispute |
|
9,316
|
|
|
|
–
|
|
(9,921) |
|
–
|
|
605
|
|
–
|
|
–
|
|
–
|
Decommissioning
costs |
|
2,556
|
|
1,058
|
|
–
|
|
–
|
|
–
|
|
(66) |
|
3,548
|
|
–
|
|
3,548
|
Other
|
|
|
|
1,675
|
|
–
|
|
–
|
|
–
|
|
–
|
|
735
|
|
2,410
|
|
(2,410) |
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,072
|
|
10,904
|
|
(19,611) |
|
(9,732) |
|
(12,865) |
|
281
|
|
68,049
|
|
(28,390) |
|
39,659
|
|
|
April
1,
2004
|
|
Additional
provisions
raised
|
|
Unutilized
provisions
reversed
to
income
|
|
Provisions
utilized
|
|
Foreign
currency
translation
|
|
March
31,
2005
|
|
Less
short-term
portion
|
|
Long-term
portion
|
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
|
R’000
|
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranties
|
|
3,891
|
|
247
|
|
–
|
|
(188)
|
|
(61)
|
|
3,889
|
|
(3,889)
|
|
–
|
Pending
litigation |
|
22,341
|
|
9,163
|
|
(4,065)
|
|
(1,445)
|
|
(132)
|
|
25,862
|
|
(21,830)
|
|
4,032
|
Discontinued
operations |
|
20,786
|
|
–
|
|
–
|
|
(16,519)
|
|
–
|
|
4,267
|
|
(4,267)
|
|
–
|
Reorganization
|
|
871
|
|
808
|
|
–
|
|
(871)
|
|
–
|
|
808
|
|
(808)
|
|
–
|
Onerous
contracts |
|
14,514
|
|
14,868
|
|
–
|
|
(2,141)
|
|
(225)
|
|
27,016
|
|
(18,222)
|
|
8,794
|
Ad
valorem duties |
|
23,100
|
|
–
|
|
–
|
|
–
|
|
–
|
|
23,100
|
|
(23,100)
|
|
–
|
Redundancy
|
|
592
|
|
9
|
|
–
|
|
–
|
|
(18)
|
|
583
|
|
(583)
|
|
–
|
Contract
dispute |
|
9,465
|
|
–
|
|
–
|
|
–
|
|
(149)
|
|
9,316
|
|
(9,316)
|
|
–
|
Decommissioning
costs |
|
2,415
|
|
–
|
|
–
|
|
–
|
|
141
|
|
2,556
|
|
–
|
|
2,556
|
Other
|
|
4,990
|
|
–
|
|
(3,315)
|
|
–
|
|
–
|
|
1,675
|
|
–
|
|
1,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,965
|
|
25,095
|
|
(7,380)
|
|
(21,164)
|
|
(444)
|
|
99,072
|
|
(82,015)
|
|
17,057
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
20.
|
PROVISIONS
(continued) |
|
|
Further
details describing the provisions at March 31, 2006 are
included below: |
|
|
Irdeto
provides a 12 month warranty on all hardware
provided. |
|
|
The
group is currently involved in various litigation matters. The
litigation provision has been made based on legal counsel and management’s
estimates of costs and claims relating to these actions (refer
note
22). |
|
|
The
provision for onerous contracts relates to obligations that the
group has in terms of lease agreements, but the premises have been
vacated. The group is liable for the rent under these contracts.
The
obligation will be settled over the remaining lease periods until
2010. |
|
|
The
provision of Ad Valorem relates to an investigation by tax
authorities in to the value ascribed to digital satellite decoders
purchased for onward sale to major retailers. The provision was
raised for
the payment of these duties. |
|
|
The
provision for decommissioning relates to the estimated costs of
decommissioning rented buildings. The lease agreements require
that we
return the rented buildings in the original state. |
|
|
Other
provisions relate to various liabilities of the group with
uncertain timings and amounts. |
|
21.
|
|
ACCRUED
EXPENSES AND OTHER CURRENT
LIABILITIES |
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Deferred
income |
|
949,503
|
|
837,100
|
|
|
Accrued
expenses |
|
1,052,584
|
|
1,106,737
|
|
|
Amounts
owing in respect of investments acquired |
|
44,370
|
|
55,674
|
|
|
Taxes
and social security |
|
245,742
|
|
199,595
|
|
|
Bonus
provision |
|
142,488
|
|
59,813
|
|
|
Provision
for leave |
|
110,235
|
|
83,192
|
|
|
Other
personnel provisions |
|
41,749
|
|
27,514
|
|
|
Cash-settled
share-based payment liability
(short-term) |
|
23,191
|
|
107,030
|
|
|
Other
current liabilities |
|
304,346
|
|
315,926
|
|
|
|
|
2,914,208
|
|
2,792,581
|
22.
|
COMMITMENTS
AND CONTINGENCIES |
|
|
The
group is subject to contingencies, which occur in the normal
course of business including legal proceedings, and claims that
cover a
wide range of matters. These contingencies include contract and
employment
claims, product liability and warranty. None of these claims are
expected
to result in a material gain or loss to the group. |
|
|
(a)
|
Capital
expenditure |
|
|
Commitments
in respect of contracts placed for capital expenditure
at March 31, 2006 amounted to Rand 445.4 million (2005: Rand 446.5
million). |
|
|
(b)
|
Programme
and film rights |
|
|
At
March 31, 2006 the group had entered into contracts for the
purchase of programme and film rights. The group’s commitments in respect
of these contracts amounted to Rand 1,425.9 million (2005: Rand
1,483.1
million). |
|
|
(c)
|
Set-top
boxes |
|
|
At
March 31, 2006 the group had entered into contracts for the
purchase of set-top boxes (decoders). The group’s commitments in respect
of these contracts amounted to Rand 265.7 million (2005: Rand 97.5
million). |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
22.
|
COMMITMENTS
AND CONTINGENCIES (continued) |
|
|
(d)
Other commitments |
|
|
At
March 31, 2006 the group had entered into contracts for the
receipt of various services. These service contracts are for the
receipt
of advertising, security, cleaning, computer support services and
contractual relationships with customers, suppliers and employees.
The
group’s commitments in respect of these agreements amounted to Rand 363.7
million (2005: Rand 358.3 million). |
|
(e)
Operating lease commitments
|
|
March
31
|
The
group has the following operating lease liabilities at 31 March
2006 and 2005: |
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
Minimum
operating lease payments |
|
|
|
|
Payable
in year one |
|
134,501
|
|
312,161
|
Payable
in year two |
|
103,783
|
|
285,472
|
Payable
in year three |
|
61,572
|
|
247,499
|
Payable
in year four |
|
28,855
|
|
184,718
|
Payable
in year five |
|
15,487
|
|
163,581
|
Payable
after five years |
|
14,864
|
|
317,966
|
|
|
359,062
|
|
1,511,397
|
The
group leases office, manufacturing and warehouse space under various
non-cancellable operating leases. Certain contracts contain renewal options
and
escalation clauses for various periods of time.
(f)
Litigation claims
Call
Centre Nucleus (Proprietary) Limited
Call
Centre Nucleus (Proprietary) Limited (“CCN”) has claimed approximately Rand 13.5
million from MWEB Holdings Limited arising out of the purchase of MWEB
of a
subscriber base from CCN. The matter has been referred to arbitration,
but no
further steps have been taken by CCN to proceed with the matter.
PaySmart
Africa (Proprietary) Limited
PaySmart
Africa (Proprietary) Limited (“Paysmart”) has claimed
approximately Rand 10.4 million from Electronic Media Network Limited (“M-Net”)
and Endemol South Africa Limited (“Endemol”) (in its capacity as producer of
Big
Brother Africa).
Paysmart alleges that it would have realized this amount of M-Net and Endemol
had granted to it the rights to provide an SMS voting system for Big
Brother Africa and
Idols,
as
allegedly contemplated in Head of Agreement executed by the parties in
April
2003. Paysmart has not taken the proceedings any further at this
stage.
Taxation
matters
In
December 2000, MultiChoice Hellas SA (“MCH”) received a tax assessment for
approximately €5.4 million flowing from the tax treatment of advertising and
marketing costs and municipal duties. The company challenged the assessment
and
the Court of First Instance found against the company. MCH appealed the
decision
and the Appeal Court found in favour of MCH. The tax authorities had a
certain
period of time within which to lodge a further appeal – this they failed to do.
However, in February 2006 the tax authorities sent MCH a further assessment
for
the same amount plus arrear interest amounting to approximately € 8.0 million.
MCH has advised the tax authorities that their claim is legally unjustified
and,
in any case, out of time. Nevertheless, the authorities have indicated
that they
intend pursuing their claim in the Greek courts.
Onshelf
Trading Forth Four (Proprietary) Limited t/a Mail and Guardian
Online (“Onshelf”) vs. Q-Online (Proprietary) Limited
(“Q-Online”)
Onshelf
(in which MWEB South Africa (“MWEB”)has a 65% shareholding),
which had sold its Q business to Q-Online, issued summons against Q-Online
for
the payment of an outstanding portion of the purchase price of Rand 200,000.
Q-Online then instituted a counterclaim for specific performance of the
sale
agreement and damages of between Rand 11.0 million and Rand 13.0 million.
The
litigation has reached the stage where the parties have exchanged discovery
affidavits. MWEB believes that the damages claim is hugely
inflated.
Equity
compensation claims
Three
former employees of the group have made claims against the Royal Bank of
Canada
Trustees Limited, being the trustees of the Mindport Share Trust, alleging
that
the trustees used an incorrect valuation methodology in valuing their scheme
shares at the time of the cessation of their employment. Since these claims
were
made, one of these former employees has started legal proceedings against
the
Royal Bank of Canada Trustees Limited, which proceedings are being defended.
A
provision of Rand 8.8 million has been raised, and is included in the total
provision in note 20.
22.
|
COMMITMENTS
AND CONTINGENCIES (continued) |
|
|
(f)
Litigation claims (continued) |
|
|
Cyprus |
|
|
A.
Lumiere TV Public Company Limited |
|
|
In
February 2006, NetMed NV (“NetMed”) became aware of the fact
that Lumiere TV Public Company Limited (“LTV”), its co-shareholder in
MultiChoice Holdings (Cyprus) Limited (“Holdings”) (which, in turn, owns
the majority of the shares in a listed entity, MultiChoice (Cyprus)
Public
Company Limited (“MCC”)) , had entered into arrangements with CYTA (the
Cyprus Telecommunications Authority) which NetMed believed were
in
conflict with LTV’s contractual obligations to NetMed, Holdings, MCC and
certain of NetMed’s affiliates, specifically such obligations as flow from
a Shareholders’ Agreement dated June 23, 2000 between NetMed, LTV and
Holdings (“the Shareholders Agreement”), a Channel Distribution Agreement
of June 21, 2004 between MCC and LTV (the “CDA”) and a programme supply
agreement dated January 1, 2004 between LTV and affiliates of NetMed
(the
“PSA”). |
|
|
Pursuant
to the abovementioned facts the following proceedings have
been instituted: |
|
1.
|
NetMed
and Holdings have commenced arbitration proceedings under
the auspices of the London Court of International Arbitration (“LCIA”)
against LTV, claiming, inter alia, an injunction to restrain LTV
from
breaching its contractual obligations under the Shareholders Agreement
as
well as damages for breach of contract. |
|
2.
|
MCC
and NetMed are also participating in an enquiry launched by the
CPC (the Cypriot Competition Protection Committee) as to the validity,
from a competition law perspective, of the proposed arrangements
between
LTV and CYTA. |
|
3.
|
Holdings
and MCC have instituted legal proceedings against LTV’s
erstwhile nominees on the Holdings and MCC boards of directors
(who had
resigned in February when news of the proposed arrangements with
CYTA
became public) on the basis that they had breached their fiduciary
duties
as directors. |
|
4.
|
Holdings
and NetMed have instituted injunction proceedings against
LTV in Cyprus in support of the Arbitration referred to in 1
above. |
|
5.
|
In
March 2006, LTV proposed a public offer in terms whereof it
offered the shareholders of MCC to acquire their shares in MCC
either for
cash or for shares in LTV. The Public Offer is conditional, inter
alia,
upon the CPC declaring the CDA and the non-compete provisions in
the
Shareholders’ Agreement to be invalid. The validity of these agreements is
currently being reviewed by the CPC and NetMed, MCC and Holdings
are
participating in the hearings relating thereto. The public offer
terminated on June 5, 2006. |
|
B.
Lefkoniko
In
2005 MCC instituted action against Lefkoniko, a Cypriot financial institution,
to recover monies that it had invested with Lefkoniko. In order to expedite
proceedings, MCC applied for summary judgment alleging that Lefkoniko did
not
have a proper defense to its claim. The application was heard in October
and on
November 11, the court gave judgment in MCC’s favour. Since then further
proceedings have been instituted in the Cypriot courts to give effect to
the
summary judgment against Lefkoniko. A provision for this claim has been
raised
during 2005.
Greece
On
February 23, 2006, NetMed Hellas Pay TV SA filed a request for arbitration
under
the auspices of the LCIA against the Greek football club PAE Akratitos
(“Akratitos”) on the basis that Akratitos had breached its TV Rights Agreement
with NetMed Hellas. The claimant is claiming a declaration that Akratitos
had
breached the agreement, specific performance and damages from
Akratitos.
Electronic
Media Network Limited (“M-Net”)
Gold
Reef City has instituted a claim for damages of Rand 10.6 million against
M-Net
arising from a statement in a Carte Blanche programme that the Gold Reef
City
amusement rides were not safe. The matter is proceeding.
MultiChoice
South Africa (“MCSA”)
MCSA
has recently appealed to the High Court against an ad valorem tariff
determination on decoders made by the South African Revenue Services (“SARS”) in
2004. SARS have given notice that they will defend the application. A provision
of Rand 23.1 million has been raised, and is included in the total provision
in
note 20.
Zietsman
Patent Infringement
In
December 2004, DW Zietsman instituted action against Endemol South Africa,
M-Net, Multichoice Africa (Pty) Ltd, Vodacom and iTouch alleging that the
defendants had, in the course of certain Big Brother television shows,
infringed
a patent belonging to him and that he had, as a result of such infringement,
suffered unspecified damages. The defendants are defending the action and
the
matter is proceeding.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
22.
|
COMMITMENTS
AND CONTINGENCIES (continued) |
|
|
(g)
|
Guarantees |
|
|
At
March 31, 2006 the group had provided guarantees of Rand 26.0
million (2005: Rand 33.3 million) mainly in respect of office rental,
services and other contracts. |
|
|
(h)
|
Assets
pledged as security |
|
|
The
group pledged property, plant and equipment, investments, cash
and cash equivalents and accounts receivable with a net carrying
value of
Rand 1,562.0 million at March 31, 2006 (2005: Rand 538.8 million)
to a
number of banks as security for certain term loans and bank
overdrafts. |
|
|
The
group plans to fund the above commitments and liabilities out
of existing loan facilities and internally generated funds. |
|
|
|
|
|
March
31
|
23.
|
|
REVENUE
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Revenues
- continuing operations |
|
|
|
|
|
|
Subscription
revenue |
|
8,236,706
|
|
7,136,234
|
|
|
Hardware
sales |
|
510,325
|
|
436,646
|
|
|
Technology
revenue |
|
390,714
|
|
280,872
|
|
|
Circulation
revenue |
|
915,077
|
|
796,745
|
|
|
Advertising
revenue |
|
2,489,890
|
|
2,035,946
|
|
|
Distribution
revenue |
|
139,765
|
|
97,452
|
|
|
Printing
revenue |
|
751,476
|
|
654,824
|
|
|
Book
publishing & book sales revenue |
|
856,858
|
|
709,822
|
|
|
Tuition
fees |
|
485,943
|
|
480,381
|
|
|
e-Commerce
revenue |
|
304,253
|
|
229,645
|
|
|
Other
revenue |
|
625,417
|
|
659,280
|
|
|
|
|
15,706,424
|
|
13,517,847
|
|
|
|
Revenue
- discontinuing operations |
|
|
|
|
|
|
United
Broadcasting Corporation |
|
307,163
|
|
374,238
|
|
|
MKSC
World Dot Com Company |
|
51,510
|
|
66,663
|
|
|
|
|
358,673
|
|
440,901
|
|
|
|
Other
revenues include revenues from decoder maintenance, backhaul
charges and financing service fees. |
|
|
|
|
|
|
Barter
revenue |
|
|
|
|
|
|
Amount
of barter revenue included in total revenue |
|
47,239
|
|
38,430
|
|
|
|
Amount
of barter revenue included in deferred income
|
|
9,106
|
|
4,457
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
March
31
|
24.
|
|
EXPENSES
BY NATURE |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Operating
profit includes the following items: |
|
|
|
|
|
|
|
Depreciation
classification |
|
|
|
|
|
|
Cost
of providing services and sale of goods |
|
411,653
|
|
366,676
|
|
|
Selling,
general and administration expenses |
|
157,186
|
|
148,765
|
|
|
|
|
568,839
|
|
515,441
|
|
|
Amortization
classification |
|
|
|
|
|
|
Cost
of providing services and sale of goods |
|
59,625
|
|
6,380
|
|
|
Selling,
general and administration expenses |
|
35,664
|
|
50,512
|
|
|
|
|
95,289
|
|
56,892
|
|
|
Operating
leases |
|
|
|
|
|
|
Buildings
|
|
113,035
|
|
120,686
|
|
|
Satellite
and transponders |
|
5,940
|
|
35,102
|
|
|
Other
equipment |
|
23,070
|
|
21,985
|
|
|
|
|
142,045
|
|
177,773 |
|
|
Transportation
|
|
|
|
|
|
|
Net
transportation costs (including fuel) |
|
222,635
|
|
77,416
|
|
|
|
Auditors’
remuneration
|
|
|
|
|
|
|
Audit
fees |
|
33,028
|
|
23,937
|
|
|
Audit
related fees |
|
4,092
|
|
8,679
|
|
|
Tax
fees |
|
4,167
|
|
6,043
|
|
|
All
other fees |
|
8,496
|
|
5,539
|
|
|
|
|
49,783
|
|
44,198
|
|
|
Forex
profits/(losses) |
|
|
|
|
|
|
On
capitalization of forward exchange contracts in hedging
transactions |
|
5,069
|
|
2,525
|
|
|
On
derecognition of embedded derivatives |
|
(127,822) |
|
(204,726)
|
|
|
Other
|
|
4,043
|
|
(485)
|
|
|
|
|
(118,710)
|
|
(202,686)
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
March
31
|
24.
|
|
EXPENSES
BY NATURE (continued)
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Staff
costs |
|
|
|
|
|
|
As
at March 31, 2006, the group had 12,067 (2005: 12,072) permanent
employees. |
|
|
|
|
|
|
|
The
total cost of employment of all employees, including directors,
was as follows: |
|
|
|
|
|
|
|
Salaries,
wages and bonuses |
|
2,434,244
|
|
2,025,953
|
|
|
Retirement
benefit costs (defined contribution plan)
|
|
177,937
|
|
170,414
|
|
|
Retirement
benefit costs (defined benefit plan) |
|
764
|
|
2,431
|
|
|
Medical
aid fund contributions |
|
153,434
|
|
125,189
|
|
|
Post-retirement
benefits |
|
19,007
|
|
6,706
|
|
|
Training
costs |
|
26,179
|
|
26,819
|
|
|
Share-based
compensation charges |
|
135,494
|
|
129,989
|
|
|
Total
staff costs |
|
2,947,059
|
|
2,487,501
|
|
|
|
Fees
paid to non-employees for |
|
|
|
|
|
|
administration,
management and technical |
|
|
|
|
|
|
services
|
|
201,093
|
|
137,367
|
|
|
|
Research
and development costs |
|
54,921
|
|
10,104
|
|
|
|
Advertising
expenses |
|
491,091
|
|
443,056
|
|
|
|
Programme
&
film
rights directly expensed
|
|
3,205,132
|
|
3,273,609
|
|
|
|
Amortization
of programme & film rights
|
|
1,125,783
|
|
1,114,939
|
|
|
|
Cost
of inventories recognized as expense in ’providing
services’ |
|
2,226,031
|
|
1,091,570
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
|
|
|
|
March
31
|
25.
|
|
OTHER
(LOSSES) / GAINS - NET |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
|
|
|
|
|
|
|
Dividends
- listed investments |
|
574
|
|
–
|
|
|
|
Dividends
- unlisted investments |
|
1,596
|
|
780
|
|
|
|
Profit
on sale of assets |
|
15,370
|
|
7,392
|
|
|
|
Fair
value adjustment for shareholders’
liabilities |
|
49,764
|
|
–
|
|
|
|
Impairment
losses |
|
(69,152)
|
|
(20,045)
|
|
|
Impairment
of goodwill and other intangible assets |
|
(69,847)
|
|
(13,003)
|
|
|
Impairment
of property, plant & equipment and other
assets |
|
(326)
|
|
(5,333)
|
|
|
Reversal
of impairment of property, plant & equipment and other
assets |
|
2,488
|
|
–
|
|
|
Other
impairments |
|
(1,467)
|
|
(1,709)
|
|
|
|
Compensation
received from third parties for
property, |
|
|
|
|
|
|
plant
&
equipment
impaired, lost or
stolen |
|
1,841
|
|
171
|
|
|
|
Other
(losses) / gains - net |
|
(7)
|
|
(11,702)
|
|
|
|
|
|
|
|
|
26.
|
|
FINANCE
COSTS - NET |
|
|
|
|
|
|
|
Interest
paid |
|
|
|
|
|
|
Loans
and overdrafts |
|
212,056
|
|
216,004
|
|
|
Finance
lease equipment |
|
176,601
|
|
173,296
|
|
|
Other
|
|
9,164
|
|
23,921
|
|
|
|
|
397,821
|
|
413,221
|
|
|
Interest
capitalized to fixed assets |
|
(4,074)
|
|
–
|
|
|
Preference
dividends and rights |
|
(118,451)
|
|
(126,920)
|
|
|
|
|
275,296
|
|
286,301
|
|
|
Interest
received |
|
|
|
|
|
|
Loans
and bank accounts |
|
(279,458)
|
|
(176,056)
|
|
|
|
Net
(profit) / loss from foreign exchange
translation |
|
21,819
|
|
(2,100)
|
|
|
On
translation of normal assets and liabilities |
|
72,034
|
|
(27,335)
|
|
|
On
translation of transponder leases |
|
(49,164)
|
|
25,950
|
|
|
On
translation of loans |
|
(1,051)
|
|
(715)
|
|
|
Net
(profit) / loss from fair value adjustments on
derivative |
|
|
|
|
|
|
financial
instruments |
|
(6,225)
|
|
108,859
|
|
|
On
translation of forward exchange contracts |
|
57,682
|
|
167,703
|
|
|
On
accounting for embeddeded derivatives |
|
(63,907)
|
|
(58,844)
|
|
|
|
Finance
costs - net |
|
11,432
|
|
217,004
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
March
31
|
27.
|
|
TAXATION
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Normal
taxation |
|
|
|
|
|
|
South
Africa |
|
726,067
|
|
211,004
|
|
|
Current
year |
|
739,734
|
|
265,051
|
|
|
Prior
year |
|
(13,667)
|
|
(54,047)
|
|
|
Foreign
taxation |
|
158,066
|
|
16,006
|
|
|
Current
year |
|
153,563
|
|
105,025
|
|
|
Prior
year |
|
4,503
|
|
(89,019)
|
|
|
Secondary
taxation on companies |
|
21,230
|
|
37,840
|
|
|
Income
taxation for the year |
|
905,363
|
|
264,850
|
|
|
Deferred
taxation |
|
29,450
|
|
(8,388)
|
|
|
Current
year |
|
(20,519)
|
|
286,888
|
|
|
Change
in rate |
|
35,472
|
|
(5,829)
|
|
|
Prior
year |
|
(73,495)
|
|
(391,825)
|
|
|
Foreign
|
|
87,992
|
|
102,378
|
|
|
Total
tax per income statement |
|
934,813
|
|
256,462
|
|
|
|
Reconciliation
of taxation |
|
|
|
|
|
|
Taxation
at statutory rates |
|
1,061,313
|
|
674,899
|
|
|
Adjusted
for: |
|
|
|
|
|
|
Non-deductable
expenses |
|
47,037
|
|
138,218
|
|
|
Non-taxable
income |
|
(124,086)
|
|
(172,977)
|
|
|
Unprovided
timing differences |
|
5,433
|
|
161,631
|
|
|
Assessed
losses utilized |
|
(120,748)
|
|
(29,095)
|
|
|
Assessed
losses expired |
|
–
|
|
(4,049)
|
|
|
Prior
year adjustments |
|
(82,659)
|
|
(534,890)
|
|
|
Other
taxes |
|
113,051
|
|
28,555
|
|
|
Changes
in taxation rates |
|
35,472
|
|
(5,829)
|
|
|
Taxation
provided in income statement |
|
934,813
|
|
256,462
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
28.
DISCONTINUING
OPERATIONS |
United
Broadcasting Corporation Public Company Limited and MKSC World Dot
Com Co. Limited
On
November 7, 2005, the group publicly announced that it had entered into
an
agreement in terms of which it would sell its entire interest in United
Broadcasting Corporation and MKSC World Dot Com Company to True Corporation
for
a gross amount of approximately US$164 million. This transaction was concluded
on January 6, 2006. The results of these operations were previously included
in
the pay television and internet segments of the group.
Selected
financial information relating to these
operations: |
|
|
|
|
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
Profit
from discontinued operations |
|
|
|
|
Revenue
|
|
358,673
|
|
440,901
|
Cost
of providing services and sale of goods |
|
(249,416)
|
|
(316,908)
|
Selling,
general
and administration expenses |
|
(43,244)
|
|
(56,697)
|
Other
(losses)/gains - net |
|
5,710
|
|
(441)
|
Operating
profit |
|
71,723
|
|
66,855
|
Finance
Costs - net |
|
(8,476)
|
|
(16,809)
|
Profit
before taxation |
|
63,247
|
|
50,046
|
Taxation
|
|
(19,029)
|
|
(4)
|
Net
profit for the year |
|
44,218
|
|
50,042
|
|
Attributable
to: |
|
|
|
|
Equity
holders of the Group |
|
43,107
|
|
50,352
|
Minority
interest |
|
1,111
|
|
(310)
|
|
|
44,218
|
|
50,042
|
|
Profit
arising on discontinuance of
operations |
|
|
|
|
Profit
on disposal of United Broadcasting Corporation
|
|
972,882
|
|
–
|
Profit
on disposal of MKSC World Dot Com Company |
|
59,278
|
|
–
|
|
|
1,032,160
|
|
–
|
|
Cash
flow information |
|
|
|
|
Amounts
of net cash flow relating to the discontinued
operation: |
|
|
|
|
|
Operating
cash flow |
|
79,104
|
|
98,311
|
Investing
activities |
|
(33,015)
|
|
(31,730)
|
Financing
activities |
|
(6,247)
|
|
(8,636)
|
Net
cash flow |
|
39,842
|
|
57,945
|
Effective
as at the end of September 2001, the group terminated the
operations of Lyceum College, a distance-learning operation. The decision
was
taken to embark on a teach-out programme for students enrolled under current
course programmes. Current students were allowed to complete their current
courses, but no new enrolments were allowed. During the current year, the
group
utilized the remaining provision for discontinued operations of Rand 4.3
million
and incurred additional net teach-out and other related closure costs of
approximately Rand 12.4 million. The results of this operation were previously
included in the group’s private education segment. Total revenue for the year
amounted to Rand 7.8 million (2005: Rand 14.1 million).
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
|
|
|
|
|
|
|
|
|
March
31
|
29.
|
|
EARNINGS
PER SHARE |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Earnings
|
|
|
|
|
|
|
Net
profit attributable to shareholders |
|
3,190,188
|
|
2,384,762
|
|
|
Headline
adjustments |
|
|
|
|
|
|
Profits
|
|
(82,836) |
|
(375,425)
|
|
|
Reversal
of impairment charge |
|
(1,473) |
|
–
|
|
|
Disposal
of investments and businesses |
|
(65,821) |
|
(440)
|
|
|
Profit
on sale of assets |
|
(15,542) |
|
(6,949)
|
|
|
Dilution
profits |
|
–
|
|
(368,036)
|
|
|
Losses
|
|
2,023
|
|
7,042
|
|
|
Impairment
of assets |
|
225
|
|
3,716
|
|
|
Impairment
of associates |
|
–
|
|
1,709
|
|
|
Impairment
of investments |
|
1,467
|
|
–
|
|
|
Impairment
of other assets |
|
331
|
|
1,617
|
|
|
Impairment
and reversal of impairment of goodwill |
|
69,009
|
|
8,011
|
|
|
Profit
arising on discontinuance of operations |
|
(1,032,160) |
|
–
|
|
|
Headline
earnings |
|
2,146,224
|
|
2,024,390
|
|
|
Headline
profit from discontinued operations |
|
(31,816) |
|
(50,042) |
|
|
Headline
earnings from continuing operations
|
|
2,114,408
|
|
1,974,348
|
|
|
|
|
Number
of N ordinary shares in issue at year end |
|
290,554,814
|
|
282,589,683
|
|
|
Adjusted
for movement in shares held by share trusts
|
|
(6,835,955)
|
|
(5,296,139)
|
|
|
Weighted
average number of N ordinary shares in issue during the
year |
|
283,718,859
|
|
277,293,544
|
|
|
Adjusted
for effect of future share based compensation
payments |
|
16,523,922
|
|
15,832,724
|
|
|
Diluted
weighted average number of N ordinary shares in issue
during the year |
|
300,242,781
|
|
293,126,268
|
|
|
|
|
Earnings
per N ordinary share (cents) |
|
|
|
|
|
|
Basic
|
|
1,124
|
|
860
|
|
|
Fully
diluted |
|
1,063
|
|
814
|
|
|
Headline
earnings per N ordinary share (cents) |
|
|
|
|
|
|
Basic
|
|
756
|
|
730
|
|
|
Fully
diluted |
|
715
|
|
690
|
|
|
|
Discontinuing
operations |
|
|
|
|
|
|
Headline
earnings per N ordinary share (cents) |
|
|
|
|
|
|
Basic
|
|
11
|
|
18
|
|
|
Fully
diluted |
|
11
|
|
17
|
NOTES
TO
THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
|
|
|
|
March
31
|
30.
|
|
CASH
FROM OPERATING ACTIVITIES |
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Operating
profit per income statement |
|
3,004,050
|
|
2,468,841
|
|
|
Operating
profit from discontinued operations |
|
59,311
|
|
66,855
|
|
|
|
|
3,063,361
|
|
2,535,696
|
|
|
Adjustments:
|
|
|
|
|
|
|
-
Non-cash and other |
|
832,854
|
|
728,425
|
|
|
Profit
on sale of property, plant and equipment |
|
(21,079) |
|
(6,949) |
|
|
Depreciation
and amortization |
|
691,258
|
|
612,964
|
|
|
Share-based
compensation expenses |
|
112,560
|
|
129,989
|
|
|
Other
|
|
50,115
|
|
(7,579) |
|
|
-
Working capital |
|
123,690
|
|
(212,856) |
|
|
Cash
movement in trade and other receivables |
|
(389,247) |
|
(147,026) |
|
|
Cash
movement in payables, provisions and accruals |
|
479,272
|
|
(138,785) |
|
|
Cash
payments for programme and film rights |
|
171,781
|
|
90,019
|
|
|
Cash
movement in inventories |
|
(138,116) |
|
(17,064) |
|
|
|
|
|
|
|
|
|
Cash
from operating activities |
|
4,019,905
|
|
3,051,265 |
|
31.
|
|
ACQUISITION
OF SUBSIDIARIES |
|
|
|
|
|
|
|
Fair
value of assets and liabilities acquired: |
|
|
|
|
|
|
Property,
Plant and Equipment |
|
30,885
|
|
7,045 |
|
|
Intangible
assets |
|
–
|
|
246,806 |
|
|
Net
current assets/(liabilities) |
|
21,036
|
|
(39,600) |
|
|
Deferred
taxation |
|
(5,087) |
|
(49,833) |
|
|
Long-term
liabilities |
|
– |
|
(885) |
|
|
|
|
46,834
|
|
163,533
|
|
|
Minority
shareholders’ interest |
|
–
|
|
(5,000) |
|
|
Goodwill
|
|
9,145
|
|
152,365
|
|
|
Purchase
consideration |
|
55,979
|
|
310,898
|
|
|
Cash
in subsidiaries acquired |
|
(13,060) |
|
(40,053) |
|
|
Net
cash outflow from acquisition of subsidiaries |
|
42,919
|
|
270,845
|
|
32.
|
|
DISPOSAL
OF SUBSIDIARIES |
|
|
|
|
|
|
|
Book
value of assets and liabilities: |
|
|
|
|
|
|
Property,
Plant and Equipment |
|
3,928
|
|
1,674
|
|
|
Goodwill
and intangible assets |
|
2,639
|
|
1,680
|
|
|
Net
current assets |
|
11,956
|
|
1,691
|
|
|
Deferred
taxation |
|
(7,677) |
|
(1,274) |
|
|
Long-term
liabilities |
|
–
|
|
(619) |
|
|
|
|
10,846
|
|
3,152
|
|
|
Minority
shareholders’ interest |
|
–
|
|
(5,017) |
|
|
Profit
on sale |
|
56,663
|
|
9,349
|
|
|
Selling
price |
|
67,509
|
|
7,484
|
|
|
Cash
in subsidiaries disposed of |
|
(30,783) |
|
363
|
|
|
Net
cash inflow from disposal of subsidiaries |
|
36,726
|
|
7,847
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
33.
PARTIAL
DISPOSAL OF
INTEREST IN JOINT VENTURES
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
Property,
plant and equipment |
|
90,238
|
|
42,489
|
|
|
Investments
and loans |
|
5,097
|
|
–
|
|
|
Goodwill
and intangible assets |
|
8,224
|
|
96,360
|
|
|
Net
current assets |
|
86,210
|
|
–
|
|
|
Long-term
liabilities |
|
(118,174) |
|
–
|
|
|
Foreign
currency translation release |
|
–
|
|
(23,197) |
|
|
|
|
71,595
|
|
115,652 |
|
|
Minority
shareholders’ interest |
|
(5,789) |
|
(483,244) |
|
|
Profit
on sale |
|
933,472
|
|
367,592
|
|
|
Selling
price |
|
999,278
|
|
–
|
|
|
Cash
in joint ventures disposed of |
|
(247,433) |
|
(188,097) |
|
|
Net
cash inflow / (outflow) on disposal of interest in joint
ventures |
|
751,845
|
|
(188,097) |
|
|
34.
|
|
CASH
AND CASH EQUIVALENTS |
|
|
|
|
|
|
Cash
and deposits |
|
6,775,542
|
|
4,033,796
|
|
|
Bank
overdrafts and call loans |
|
(364,777) |
|
(433,339) |
|
|
|
|
6,410,765 |
|
3,600,457
|
Restricted cash
The
following cash balances are restricted from immediate use according to
agreements with banks and other financial institutions:
|
|
|
South
Africa |
|
- |
|
52,139 |
|
|
Meditteranean |
|
212 |
|
1,163 |
|
|
Netherlands |
|
233,085 |
|
1,922 |
|
|
China
|
|
- |
|
8 |
|
|
Thailand
|
|
484 |
|
1,293 |
|
|
USA |
|
3,987 |
|
1,145 |
|
|
Total
restricted cash |
|
237,768 |
|
58,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
35.
|
BUSINESS
AND GEOGRAPHICAL SEGMENTS |
|
|
Primary
reporting format – business segments |
|
|
The
group has determined that its primary reporting format for
segments is based on its method of internal reporting that disaggregates
its businesses by service or product. The group’s reportable business
segments are electronic media, print media and corporate services.
Electronic media is further disaggregated into pay television,
internet,
conditional access systems and Entriq. The print media segment
is further
disaggregated into newspapers, magazines and printing, books and
education. The group’s business is conducted in the following main
business segments: |
|
|
Electronic
media |
|
|
|
Pay
television -
through the group’s subsidiaries, associated companies and joint
ventures based in South Africa, sub-Saharan Africa, Cyprus and
Greece,
which generate revenue mainly from local customers. |
|
|
|
Internet
-
through the group’s subsidiaries, associated companies and joint
ventures based in South Africa, sub-Saharan Africa, Thailand and
China
which generate revenue mainly from local customers. |
|
|
|
Conditional
access systems – through
Irdeto provides digital content management and protections
systems to customers globally. |
|
|
|
Entriq
–
to
protect, manage and monetize all digital media worldwide on
any platform. |
|
|
Print
media |
|
|
|
Newspapers,
magazines and printing -
through the group’s subsidiaries, joint ventures and associated
companies in Southern Africa, which publish, print and distribute
various
newspapers and magazines for the local market. |
|
|
|
Books
-
through the group’s subsidiaries in Southern Africa, which
generate income mainly from local customers. |
|
|
|
Private
education -
through the group’s subsidiaries in South Africa, which generate
income mainly from local customers. |
|
|
Corporate
services –
represent
the group’s holding company and head office
infrastructure. |
|
|
The
accounting policies applied by the reportable segments are
consistent with the accounting policies applied in the consolidated
financial statements, as described in note 3. |
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS |
|
|
|
|
|
|
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.
|
|
BUSINESS
AND GEOGRAPHICAL SEGMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic
media
|
|
Print
media
|
|
|
|
|
|
|
March
2006 |
|
Pay television
R’000
|
|
Internet R’000
|
|
Conditional access systems R’000
|
|
Entriq R’000
|
|
Newspapers, magazines
& printing R’000
|
|
Books R’000
|
|
Private education R’000
|
|
Corporate services R’000
|
|
Eliminations R’000
|
|
Consolidated total R’000
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
8,903,324
|
|
897,992
|
|
352,320
|
|
65,864
|
|
3,983,131
|
|
980,933
|
|
536,338
|
|
9,805
|
|
(23,283)
|
|
15,706,424
|
Intersegmental
|
|
8,280
|
|
31,301
|
|
112,965
|
|
7,538
|
|
885,790
|
|
21,971
|
|
773
|
|
73,944
|
|
(1,142,562)
|
|
–
|
Total
revenue |
|
8,911,604
|
|
929,293
|
|
465,285
|
|
73,402
|
|
4,868,921
|
|
1,002,904
|
|
537,111
|
|
83,749
|
|
(1,165,845)
|
|
15,706,424
|
Cost
of providing services and sale of goods |
|
(4,863,668)
|
|
(501,503)
|
|
(123,419)
|
|
(25,244)
|
|
(3,309,974)
|
|
(620,570)
|
|
(277,032)
|
|
(67,364)
|
|
1,035,084
|
|
(8,753,690)
|
Selling,
general and administration expenses |
|
(1,296,260)
|
|
(578,832)
|
|
(342,653)
|
|
(213,325)
|
|
(960,790)
|
|
(311,765)
|
|
(301,043)
|
|
(74,770)
|
|
130,761
|
|
(3,948,677)
|
Other
(losses) / gains - net |
|
33,768
|
|
(1,548)
|
|
411
|
|
(2)
|
|
13,937
|
|
(3,800)
|
|
(42,799)
|
|
26
|
|
–
|
|
(7)
|
Operating
profit/(loss) |
|
2,785,444
|
|
(152,590)
|
|
(376)
|
|
(165,169)
|
|
612,094
|
|
66,769
|
|
(83,763)
|
|
(58,359)
|
|
–
|
|
3,004,050
|
Finance
costs - net |
|
(106,029)
|
|
70,254
|
|
7,716
|
|
6,124
|
|
(69,113)
|
|
68
|
|
(29,347)
|
|
108,895
|
|
–
|
|
(11,432)
|
Share
of equity accounted results |
|
3,755
|
|
150,264
|
|
–
|
|
–
|
|
(2,791)
|
|
49
|
|
–
|
|
–
|
|
–
|
|
151,277
|
Profit
/ (loss) on sale of investments |
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,133)
|
|
56,772
|
|
334
|
|
18,393
|
|
–
|
|
74,366
|
Profit/(loss)
before taxation |
|
2,683,170
|
|
67,928
|
|
7,340
|
|
(159,045)
|
|
539,057
|
|
123,658
|
|
(112,776)
|
|
68,929
|
|
–
|
|
3,218,261
|
Taxation
|
|
(790,098)
|
|
(59,706)
|
|
(4,912)
|
|
698
|
|
(76,201)
|
|
1,309
|
|
93
|
|
(5,996)
|
|
–
|
|
(934,813) |
Net
profit/(loss) from continuing operations
|
|
1,893,072
|
|
8,222
|
|
2,428
|
|
(158,347) |
|
462,856
|
|
124,967
|
|
(112,683)
|
|
62,933
|
|
–
|
|
2,283,448
|
Profit/(loss)
from discontinued operations |
|
43,810
|
|
408
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(12,402)
|
|
–
|
|
–
|
|
31,816
|
Profit
arising on discontinuance of operations |
|
972,882
|
|
59,278
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,032,160
|
Net
profit/(loss) |
|
2,909,764
|
|
67,908
|
|
2,428
|
|
(158,347)
|
|
462,856
|
|
124,967
|
|
(125,085)
|
|
62,933
|
|
–
|
|
3,347,424
|
Attributable
to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
holders of the group |
|
2,822,897
|
|
54,277
|
|
2,428
|
|
(158,347)
|
|
419,679
|
|
111,567
|
|
(125,352)
|
|
63,039
|
|
–
|
|
3,190,188
|
Minority
interest |
|
86,867
|
|
13,631
|
|
–
|
|
–
|
|
43,177
|
|
13,400
|
|
267
|
|
(106)
|
|
–
|
|
157,236
|
|
|
|
|
2,909,764
|
|
67,908
|
|
2,428
|
|
(158,347)
|
|
462,856
|
|
124,967
|
|
(125,085)
|
|
62,933
|
|
–
|
|
3,347,424
|
|
Segment
assets |
|
7,907,837
|
|
1,659,436
|
|
509,396
|
|
89,894
|
|
3,286,504
|
|
553,396
|
|
514,438
|
|
9,961,390
|
|
(7,980,634)
|
|
16,501,657
|
Investments
in associates |
|
32,378
|
|
773,064
|
|
–
|
|
–
|
|
292,887
|
|
3,956
|
|
–
|
|
205,880
|
|
–
|
|
1,308,165
|
Segment
liabilities |
|
10,161,933
|
|
2,138,130
|
|
617,814
|
|
870,961
|
|
2,373,326
|
|
304,970
|
|
781,630
|
|
(504,143)
|
|
(7,544,167)
|
|
9,200,454
|
Capital
expenditure |
|
285,643
|
|
69,298
|
|
17,286
|
|
27,905
|
|
535,555
|
|
45,044
|
|
38,649
|
|
5,360
|
|
–
|
|
1,024,740
|
Amortisation
of programme and film rights* |
|
1,125,783
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,125,783
|
Depreciation
of property, plant and equipment |
|
344,748
|
|
63,854
|
|
13,026
|
|
12,291
|
|
130,118
|
|
9,082
|
|
20,368
|
|
2,059
|
|
–
|
|
595,546
|
Amortisation
of intangible assets |
|
9,075
|
|
53,411
|
|
6,267
|
|
–
|
|
17,225
|
|
4,018
|
|
2,543
|
|
3,173
|
|
–
|
|
95,712
|
Impairment
of tangible assets |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
326
|
|
–
|
|
–
|
|
–
|
|
326
|
Impairment
of intangible assets |
|
9,144
|
|
95
|
|
–
|
|
–
|
|
557
|
|
4,166
|
|
55,885
|
|
–
|
|
–
|
|
69,847
|
Reversal
of impairment of tangible assets |
|
–
|
|
–
|
|
–
|
|
–
|
|
1,706
|
|
369
|
|
–
|
|
–
|
|
–
|
|
2,075
|
Reversal
of impairment of intangible assets |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
413
|
|
–
|
|
–
|
|
–
|
|
413
|
*
- Included in operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS |
|
|
|
|
|
|
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.
BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic
media
|
|
Print
media
|
|
|
|
|
|
|
March
2005 |
|
Pay television R’000
|
|
Internet R’000
|
|
Conditional access systems R’000
|
|
Entriq R’000
|
|
Newspapers, magazines
& printing R’000
|
|
Books R’000
|
|
Education R’000
|
|
Corporate services R’000
|
|
Eliminations R’000
|
|
Consolidated total R’000
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
7,746,628
|
|
696,265
|
|
255,330
|
|
33,877
|
|
3,374,106
|
|
860,581
|
|
547,186
|
|
3,889
|
|
(15)
|
|
13,517,847
|
Intersegmental
|
|
23,938
|
|
13,680
|
|
78,667
|
|
20,514
|
|
86,750
|
|
22,629
|
|
449
|
|
62,227
|
|
(308,854)
|
|
–
|
Total
revenue |
|
7,770,566
|
|
709,945
|
|
333,997
|
|
54,391
|
|
3,460,856
|
|
883,210
|
|
547,635
|
|
66,116
|
|
(308,869)
|
|
13,517,847
|
Cost
of providing services and sale of goods |
|
(4,378,632)
|
|
(362,864)
|
|
(101,355)
|
|
(11,745)
|
|
(2,114,382)
|
|
(539,691)
|
|
(257,645)
|
|
(58,648)
|
|
99,143
|
|
(7,725,819)
|
Selling,
general and administration expenses |
|
(1,273,513)
|
|
(410,853)
|
|
(279,628)
|
|
(132,131)
|
|
(821,709)
|
|
(288,529)
|
|
(264,338)
|
|
(50,510)
|
|
209,726
|
|
(3,311,484)
|
Other
(losses) / gains - net |
|
1,429
|
|
(3,852)
|
|
454
|
|
250
|
|
3,485
|
|
(2,181)
|
|
(3,051)
|
|
(8,236)
|
|
–
|
|
(11,702)
|
Operating
profit/(loss) |
|
2,119,850
|
|
(67,624)
|
|
(46,532)
|
|
(89,235)
|
|
528,250
|
|
52,809
|
|
22,601
|
|
(51,278)
|
|
–
|
|
2,468,841
|
Finance
costs - net |
|
(249,772)
|
|
64,575
|
|
17,866
|
|
10,926
|
|
(49,552)
|
|
(12,721)
|
|
(23,349)
|
|
25,023
|
|
–
|
|
(217,004)
|
Share
of equity accounted results |
|
4,558
|
|
83,878
|
|
–
|
|
–
|
|
161
|
|
–
|
|
–
|
|
–
|
|
–
|
|
88,597
|
Profit
/ (loss) on sale of Investments |
|
15
|
|
–
|
|
18,659
|
|
–
|
|
–
|
|
(1,074)
|
|
9,350
|
|
(27,261)
|
|
–
|
|
(311)
|
Dilution
profits / (losses) |
|
–
|
|
374,501
|
|
–
|
|
–
|
|
(3,007)
|
|
(3,097)
|
|
–
|
|
(361)
|
|
–
|
|
368,036
|
Profit/(loss)
before taxation |
|
1,874,651
|
|
455,330
|
|
(10,007)
|
|
(78,309)
|
|
475,852
|
|
35,917
|
|
8,602
|
|
(53,877)
|
|
–
|
|
2,708,159
|
Taxation
|
|
(80,959)
|
|
(107,510)
|
|
(1,834)
|
|
(2,019)
|
|
(88,220)
|
|
30,132
|
|
(2,610)
|
|
(3,442)
|
|
–
|
|
(256,462)
|
Net
profit/(loss) from continuing operations
|
|
1,793,692
|
|
347,820
|
|
(11,841)
|
|
(80,328)
|
|
387,632
|
|
66,049
|
|
5,992
|
|
(57,319)
|
|
–
|
|
2,451,697
|
Profit/(Loss)
from discontinued operations |
|
54,342
|
|
(4,300)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
50,042
|
Net
profit/(loss) |
|
1,848,034
|
|
343,520
|
|
(11,841)
|
|
(80,328)
|
|
387,632
|
|
66,049
|
|
5,992
|
|
(57,319)
|
|
–
|
|
2,501,739
|
|
Attributable
to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
holders of the Group |
|
1,780,080
|
|
343,212
|
|
(11,841)
|
|
(80,328)
|
|
354,019
|
|
50,906
|
|
5,992
|
|
(57,278)
|
|
–
|
|
2,384,762
|
Minority
interest |
|
67,954
|
|
308
|
|
–
|
|
–
|
|
33,613
|
|
15,143
|
|
–
|
|
(41)
|
|
–
|
|
116,977
|
|
|
1,848,034
|
|
343,520
|
|
(11,841)
|
|
(80,328)
|
|
387,632
|
|
66,049
|
|
5,992
|
|
(57,319)
|
|
–
|
|
2,501,739
|
|
Segment
assets |
|
8,670,585
|
|
6,134,569
|
|
1,807,057
|
|
57,564
|
|
2,491,980
|
|
680,506
|
|
528,388
|
|
1,199,380
|
|
(8,384,190)
|
|
13,185,839
|
Investments
in associates |
|
21,412
|
|
805,114
|
|
–
|
|
–
|
|
1,586
|
|
3,907
|
|
–
|
|
5,669
|
|
–
|
|
837,688
|
Segment
liabilities |
|
11,465,857
|
|
4,507,198
|
|
407,329
|
|
704,231
|
|
1,498,068
|
|
656,270
|
|
656,773
|
|
(3,263,507)
|
|
(8,401,349)
|
|
8,230,870
|
Capital
expenditure |
|
142,243
|
|
74,182
|
|
40,922
|
|
18,532
|
|
299,603
|
|
29,419
|
|
24,339
|
|
11,143
|
|
–
|
|
640,383
|
Amortization
of programme and film rights* |
|
1,151,538
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
1,151,538
|
Depreciation
of property, plant and equipment |
|
331,389
|
|
63,132
|
|
11,511
|
|
4,486
|
|
115,402
|
|
11,423
|
|
16,955
|
|
1,235
|
|
–
|
|
555,533
|
Amortization
of intangible assets |
|
15,520
|
|
11,365
|
|
–
|
|
–
|
|
25,291
|
|
4,359
|
|
896
|
|
–
|
|
–
|
|
57,431
|
Impairment
of tangible assets |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
3,069
|
|
409
|
|
–
|
|
–
|
|
3,478
|
Impairment
of intangible assets |
|
–
|
|
12,495
|
|
–
|
|
–
|
|
–
|
|
508
|
|
–
|
|
–
|
|
–
|
|
13,003
|
*
- Included in operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
35.
|
BUSINESS
AND GEOGRAPHICAL SEGMENTS (continued) |
|
|
Secondary
reporting format – geographical
segments |
|
|
The
group operates in five main geographical areas: |
|
|
Africa
-
The
group derives revenues from television platform services, print
media activities, internet services, technology products and services,
book publishing and private education. The activities in the Republic
of
South Africa are the most significant in this segment and therefore
South
Africa has been presented separately. |
|
|
United
States of America -
The
group’s activities comprise a portion of services and goods
rendered by the technology operations, based in the United States
of
America. |
|
|
Greece
and Cyprus -
The
group generates revenue from television platform services with
operations in Greece and Cyprus. |
|
|
Asia
-
The
group’s activities comprise its interest in internet activities
based in Thailand and China. Furthermore, the group generates revenue
from
interactive television and technology products and services, provided
by
subsidiaries based in the Netherlands. |
|
|
Other
-
Includes
the group’s provision of interactive television and
technology products through subsidiaries, located mainly in the
Netherlands. |
|
|
|
Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Africa R’000
|
|
Rest
of Africa R’000
|
|
USA R’000
|
|
Greece
and Cyprus R’000
|
|
Asia R’000
|
|
Other R’000
|
|
Eliminations R’000
|
|
|
|
Consoli- dated total R’000
|
March
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
revenue |
|
11,993,868
|
|
1,837,828
|
|
48,825
|
|
1,469,148
|
|
77,977
|
|
278,778
|
|
–
|
|
|
|
15,706,424
|
Segment
assets |
|
19,095,383
|
|
2,310,481
|
|
108,479
|
|
1,155,227
|
|
1,347,838
|
|
15,551,875
|
|
(23,067,626)
|
|
(a)
|
|
16,501,657
|
Capital
expenditure |
|
806,074
|
|
16,007
|
|
29,049
|
|
109,563
|
|
50,463
|
|
13,584
|
|
–
|
|
|
|
1,024,740
|
Impairment
of tangible assets |
|
326
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
|
326
|
Impairment
of intangible assets |
|
69,847
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
|
69,847
|
March
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
revenue |
|
10,140,059
|
|
1,545,290
|
|
46,871
|
|
1,432,795
|
|
229,721
|
|
123,111
|
|
–
|
|
|
|
13,517,847
|
Segment
assets |
|
10,675,600
|
|
2,046,555
|
|
114,622
|
|
1,120,533
|
|
6,081,407
|
|
12,297,664
|
|
(19,150,542)
|
|
(a)
|
|
13,185,839
|
Capital
expenditure |
|
456,215
|
|
25,464
|
|
18,532
|
|
11,242
|
|
71,047
|
|
57,883
|
|
–
|
|
|
|
640,383
|
Impairment
of tangible assets |
|
3,478
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
|
3,478
|
Impairment
of intangible assets |
|
508
|
|
–
|
|
–
|
|
–
|
|
12,495
|
|
–
|
|
–
|
|
|
|
13,003
|
(a)
|
Represents
adjustments to the assets and liabilities of the segments relating
to
intersegment loans and investments that eliminate on
consolidation. |
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
36. FINANCIAL
RISK
MANAGEMENT |
The
group’s activities expose it to a variety of financial risks, including the
effects of changes in debt and equity markets, foreign currency exchange
rates
and interest rates. The group’s overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimize the potential
adverse effects on the financial performance of the group. The group uses
derivative financial instruments, such as forward exchange contracts and
interest rate swaps, to hedge certain risk exposures. The group does not
speculate with, or engage in the trading of financial instruments.
Risk
management is carried out by the management of the group under policies
approved
by the board of directors. Management identifies, evaluates and hedges
financial
risks. The various boards of directors within the group provide written
policies
covering specific areas, such as foreign exchange risk, interest rate risk,
credit risk, the use of derivative instruments and the investment of excess
liquidity.
The
group operates internationally and is exposed to foreign exchange risk
arising
from various currency exposures, primarily with respect to the US dollar.
Entities in the group use forward exchange contracts to hedge their exposure
to
foreign currency risk in connection with their functional currencies. Management
is responsible for hedging the net position in each foreign currency by
using
forward currency contracts. The group generally covers forward 80% to 100%
of
firm commitments in foreign currency for up to two years.
The
group has classified some of its forward exchange contracts relating to
forecasted transactions and firm commitments as cash flow hedges, and states
them at fair value. The transactions relate mainly to programming costs,
transponder lease installments and the acquisition of inventory items.
An after
tax loss of Rand 20.2 million (2005: Rand 18.9 million loss) has been deferred
in a hedging reserve at March 31, 2006. This amount is expected to realize
as an
expense over the next two years. Changes in the fair value of forward exchange
contracts that economically hedge monetary liabilities in foreign currencies
and
for which no hedge accounting is applied, are recognized in the income
statement. Both the changes in fair value of the forward contracts and
the
foreign exchange gains and losses relating to the monetary items are recognized
as part of “finance costs - net” (see note 26).
The
fair
value of all forward exchange contracts at March 31, 2006 was a net liability
of
Rand 101.9 million (2005: Rand 273.2 million), comprising assets of Rand
0.3
million (2005: Rand 10.3 million) and liabilities of Rand 102.2 million
(2005:
Rand 283.5 million), that were recognized as derivative financial instruments.
The fair value of embedded derivative instruments, mainly relating to
programming contracts with content providers, at March 31, 2006 was a net
asset
of Rand 166.5 million (2005: Rand 179.9 million), comprising assets of
Rand
167.1 million (2005: Rand 192.0 million) and liabilities of Rand 0.6 million
(2005: Rand 12.1 million), that were recognized in derivative assets and
liabilities.
Receivables
consist primarily of invoiced amounts from normal trading
activities. The group has a large diversified customer base across many
geographical areas. Strict credit control is exercised through monitoring
customers’ payment history and when necessary, provision is made for specific
doubtful accounts. As at March 31, 2006, the directors were unaware of
any
significant unprovided or uninsured concentration of credit risk.
The
group is exposed to certain concentrations of credit risk relating to its
cash
and current investments. It places its cash and current investments mainly
with
major banking groups and high-quality institutions that have high credit
ratings. The group’s policy is designed to limit exposure to any one institution
and invests its excess cash in low-risk investment accounts. The counterparties
that are used by the group are evaluated on a continuous basis. At March
31,
2006 cash and current investments were held with numerous financial
institutions.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
36.
|
FINANCIAL
RISK MANAGEMENT (continued) |
|
|
Liquidity
risk |
|
|
Prudent
liquidity risk management implies maintaining sufficient
cash and marketable securities, the availability of funding through
an
adequate amount of committed credit facilities and the ability
to close
out market positions. In terms of the articles of association of
the
company, no limitation is placed on its borrowing capacity. The
facilities
expiring within one year are subject to renewal at various dates
during
the next year. The group had the following unutilized banking facilities
as at March 31, 2006 and 2005: |
|
|
|
March
31 |
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
|
On
call |
|
252,200
|
|
944,313
|
Expiring
within one year |
|
1,554,539
|
|
4,339
|
|
|
1,806,739
|
|
948,652
|
|
The
facilities expiring within one year are annual facilities
subject to review at various dates during the next year. |
|
|
|
|
As
part of the process of managing the group’s fixed and floating borrowings mix,
the interest rate characteristics of new borrowings and the refinancing
of
existing borrowings are positioned according to expected movements in interest
rates. Where appropriate, the group uses derivative instruments, such as
interest rate swap agreements, purely for hedging purposes. The interest
rate
profile of the loans as at March 31, 2006 was as follows:
|
|
Interest-free R’000
|
|
Floating R’000
|
|
Fixed
- 12 months R’000
|
|
Fixed
more than 12 months R’000
|
|
Total R’000
|
|
Loans
|
|
1,270,066
|
|
736,029
|
|
211,811
|
|
1,837,197
|
|
4,055,103
|
%
of loans |
|
31%
|
|
18%
|
|
5%
|
|
46%
|
|
100%
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
36.
|
FINANCIAL
RISK MANAGEMENT (continued)
Foreign
exchange rates
|
|
|
The
exchange rates used by the group to translate foreign entities’
income statements and balance sheets are as follows: |
|
|
|
March
31, 2006
|
|
March
31, 2005
|
Currency
(1FC = ZAR) |
|
Average rate
|
|
Closing rate
|
|
Average rate
|
|
Closing rate
|
|
USA
dollar |
|
6.3915
|
|
6.1490
|
|
6.2146
|
|
6.2114
|
Cyprus
pound |
|
13.0127
|
|
12.9453
|
|
13.5045
|
|
13.7862
|
Euro
|
|
7.7570
|
|
7.4636
|
|
7.8428
|
|
8.0539
|
Nigerian
naira |
|
0.0478
|
|
0.0482
|
|
0.0464
|
|
0.0467
|
Thai
baht |
|
0.1581
|
|
0.1583
|
|
0.1546
|
|
0.1583
|
Chinese
yuan renminbi |
|
0.7871
|
|
0.7671
|
|
0.7507
|
|
0.7505
|
The
average rates listed above are only approximate average rates for the year.
The
group measures separately the transactions of each of its material operations
using the particular currency of the primary economic environment in which
the
operation conducts its business, translated at the prevailing exchange
rate on
the transaction date.
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Assets R’000
|
|
Liabilities R’000
|
|
Assets R’000
|
|
Liabilities R’000
|
Derivative
financial instruments |
|
|
|
|
|
|
|
|
|
Current
portion |
|
|
|
|
|
|
|
|
Foreign
exchange contracts |
|
279
|
|
92,337
|
|
9,326
|
|
283,492
|
Embedded
derivatives |
|
134,404
|
|
525
|
|
160,384
|
|
2,484
|
|
|
134,683
|
|
92,862
|
|
169,710
|
|
285,976
|
|
Non-current
portion |
|
|
|
|
|
|
|
|
Foreign
exchange contracts |
|
–
|
|
9,908
|
|
941
|
|
-
|
Embedded
derivatives |
|
32,647
|
|
122
|
|
31,631
|
|
9,642
|
Paarl
Media shareholders’ liability (1)
|
|
–
|
|
202,634
|
|
–
|
|
-
|
|
|
32,647
|
|
212,664
|
|
32,572
|
|
9,642
|
Total
|
|
167,330
|
|
305,526
|
|
202,282
|
|
295,618
|
|
Note:
|
|
|
|
|
|
|
|
|
(1)
Refer to note 19 for additional information |
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
36.
FINANCIAL RISK MANAGEMENT
(continued)
|
|
March
31, 2006
|
|
|
|
|
Foreign
currency amount ’000
|
|
R’000
|
|
Foreign
currency amount ’000
|
|
|
Foreign
currency exchange commitments The
group had
the following forward foreign currency
exchange contract commitments: |
|
|
|
|
|
|
|
|
USA
dollar |
|
150,430
|
|
979,205
|
|
159,512
|
|
1,186,736
|
Sterling
|
|
4,871
|
|
53,796
|
|
7,114
|
|
82,970
|
Euro
|
|
47,544
|
|
376,435
|
|
33,749
|
|
274,373
|
Swiss
franc |
|
1,259
|
|
6,357
|
|
5,013
|
|
30,968
|
Hong
Kong dollar |
|
191
|
|
157
|
|
–
|
|
–
|
Singapore
dollar |
|
322
|
|
1,282
|
|
128
|
|
441
|
Australian
dollar |
|
284
|
|
1,277
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
Uncovered
foreign liabilities
The
group had the following uncovered
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA dollar |
|
58,142 |
|
422,564 |
|
74,952 |
|
465,553 |
Sterling
|
|
3,353 |
|
35,627 |
|
3,213 |
|
37,684 |
Chinese
yuan renminbi |
|
– |
|
– |
|
8,266 |
|
6,204 |
Euro |
|
58,377 |
|
436,547 |
|
72,576 |
|
584,513 |
Swiss
francs |
|
10 |
|
47 |
|
160 |
|
833 |
Austrialian dollar |
|
880 |
|
4,197 |
|
1,073 |
|
5,149 |
Cyprian
pound |
|
228 |
|
2,960 |
|
– |
|
– |
South
Korean Kwon |
|
482,739 |
|
5,009 |
|
– |
|
– |
Foreign
exchange contracts are entered into to manage the exposure to
movements in exchange rates on specific transactions.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
37.
|
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS |
|
|
|
|
|
|
|
|
|
|
|
The
fair values together with the carrying amounts of financial
instruments are as follows:
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Carrying value R’000
|
|
Fair
value R’000
|
|
Carrying value R’000
|
|
Fair
value R’000
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Investments
and loans |
|
1,383,027
|
|
6,639,451
|
|
1,238,959
|
|
3,320,060
|
|
|
Receivables
and loans |
|
2,027,589
|
|
2,027,589
|
|
1,858,923
|
|
1,858,923
|
|
|
Derivative
financial instruments |
|
167,330
|
|
167,330
|
|
202,282
|
|
202,282
|
|
|
Cash
and cash deposits |
|
6,775,542
|
|
6,775,542
|
|
4,033,796
|
|
4,033,796
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities |
|
2,617,395
|
|
2,621,547
|
|
2,473,104
|
|
2,528,014
|
|
|
Payables
and loans |
|
5,598,967
|
|
5,599,343
|
|
4,730,142
|
|
4,742,867
|
|
|
Derivative
financial instruments |
|
305,526
|
|
305,526
|
|
295,618
|
|
295,618
|
|
|
Bank
overdrafts |
|
364,777
|
|
364,777
|
|
433,339
|
|
433,339
|
The
fair values of financial instruments were calculated using market information
and other relevant valuation techniques, and do not necessarily represent
the
values that the group will realize in the normal course of business. The
carrying amounts of cash and cash deposits, bank overdrafts, receivables
and
payables are deemed to reflect fair value due to the short maturities of
these
instruments. The fair values of forward exchange contracts and embedded
derivative instruments are based on quoted market prices. The fair values
of
interest-bearing loans are calculated based on discounted expected future
principal and interest cash flows.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS |
The
following share incentive plans were in operation during the financial
year:
On
August 14, 1987, the group established the Naspers Share Incentive Trust
(“the
Naspers Plan”) under which it may award options for no more than 11% of the
total number of N ordinary shares in issue. Share options may be granted
with an
exercise price of not less than 100% of the market value of the shares
at the
time of the grant. One third of the share options generally vest at the
anniversary of each of the third, fourth and fifth years after the grant
date of
the share options and expire after ten years. Unvested share options are
subject
to forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as equity-settled.
Movements
in terms of the Naspers Plan are as
follows: |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
Outstanding
at April 1 |
|
10,522,517
|
|
26.92
|
|
10,912,637
|
|
26.35
|
Granted
|
|
–
|
|
-
|
|
217,817
|
|
48.17
|
Exercised
|
|
(655,496) |
|
24.07
|
|
(567,831) |
|
24.07
|
Forfeited
|
|
(44,284) |
|
27.56
|
|
(40,106) |
|
27.56
|
Outstanding
at March 31 |
|
9,822,737
|
|
27.06
|
|
10,522,517
|
|
26.92
|
|
Available
to be implemented at March 31 |
|
5,604,438
|
|
26.46
|
|
4,309,745
|
|
36.23
|
No
share options expired or were cancelled during the years ended March 31,
2006
and March 31, 2005.
Taken
up during the year: |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
|
Weighted average
share price of options |
|
|
|
|
|
|
|
|
taken up
during the year |
|
655,496
|
|
102.30
|
|
567,831
|
|
63.89
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
Naspers
Limited (continued)
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
Range
of exercise prices (Rand)
|
|
Number outstanding
at 31 March 2006
|
|
Weighted average remaining contractual
life (years)
|
|
Weighted average
exercise price
(Rand)
|
|
Exercisable
at 31 March 2006
|
|
Weighted average
exercise price
(Rand)
|
10.00
|
|
–
|
|
15.00
|
|
1,500
|
|
5.92
|
|
13.65
|
|
1,000
|
|
13.65
|
15.01
|
|
–
|
|
20.00
|
|
112,005
|
|
6.51
|
|
18.44
|
|
16,665
|
|
18.50
|
20.01
|
|
–
|
|
25.00
|
|
3,309,347
|
|
6.14
|
|
23.19
|
|
1,340,938
|
|
22.22
|
25.01
|
|
–
|
|
30.00
|
|
4,605,286
|
|
3.79
|
|
27.67
|
|
4,156,573
|
|
27.72
|
30.01
|
|
–
|
|
35.00
|
|
1,570,707
|
|
6.55
|
|
30.98
|
|
79,853
|
|
31.40
|
35.01
|
|
–
|
|
40.00
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
40.01
|
|
–
|
|
45.00
|
|
53,359
|
|
7.36
|
|
42.94
|
|
5,859
|
|
43.65
|
45.01
|
|
–
|
|
50.00
|
|
100,000
|
|
8.45
|
|
50.00
|
|
–
|
|
–
|
50.01
|
|
–
|
|
60.15
|
|
70,533
|
|
8.21
|
|
50.82
|
|
3,550
|
|
57.84
|
|
|
|
|
|
|
9,822,737
|
|
|
|
27.06
|
|
5,604,438
|
|
26.46
|
Grants
made during the year: |
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
Weighted
average fair value at measurement date |
|
-
|
|
21.96
|
|
This
weighted average fair value has been calculated using
the |
|
|
|
|
Bermudan
Binomial option pricing model, using the following
inputs |
|
|
|
|
and
assumptions: |
|
|
|
|
|
Weighted
average share price (Rand) |
|
-
|
|
48.74
|
Weighted
average exercise price (Rand) |
|
-
|
|
48.74
|
Weighted
average expected volatility (%) * |
|
-
|
|
27.1%
|
Weighted
average option life (years) |
|
-
|
|
10.0
|
Weighted
average dividend yield (%) |
|
-
|
|
1.2%
|
Weighted
average risk-free interest rate (%) (based on zero rate
bond |
|
|
|
|
yield
at perfect fit) |
|
-
|
|
9.6%
|
Weighted
average in-the-money rate (%) |
|
-
|
|
56.0%
|
Weighted
average vesting period (years) |
|
-
|
|
4.0
|
|
Expectations
of early exercise are not considered due to
the |
|
|
|
|
unpredictability
of early exercise scenarios. |
|
|
|
|
*
The expected weighted average volatility is determined
using |
|
|
|
|
historical
daily share prices. |
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
On
August 31, 2000 the group established the Media24 Share Trust (“the Media24
Plan”) in terms of which it may award options for no more than 15% of the total
number of ordinary shares in issue. Share options may be granted with an
exercise price of not less than 100% of the fair value of the share options
at
the time of the grant. One third of the options generally vest at the
anniversary of each of the third, fourth and fifth years after the grant
date of
the share options and expire after ten years. Unvested share options are
subject
to forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as cash-settled.
Movements
in terms of the Media 24 Plan is as
follows: |
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
|
Shares
|
|
Weighted average exercise
price
(Rand)
|
Outstanding
at April 1 |
|
6,100,496 |
|
7.18
|
|
6,676,862 |
|
6.80
|
Granted
|
|
71,235 |
|
19.35
|
|
522,591 |
|
11.46
|
Exercised
|
|
(1,416,300)
|
|
6.83
|
|
(761,587) |
|
6.81
|
Forfeited
|
|
(190,775) |
|
7.34
|
|
(337,370) |
|
7.03
|
Outstanding
at March 31 |
|
4,564,656 |
|
7.50
|
|
6,100,496 |
|
7.18
|
|
Available
to be implemented at March 31 |
|
3,183,823
|
|
6.77
|
|
2,772,577
|
|
6.82
|
No
share options expired or were cancelled during the years ended March 31,
2006
and March 31, 2005.
Taken
up during the
year:
|
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
|
Shares
|
|
Weighted average exercise price
(Rand)
|
|
Weighted
average share price of options |
|
|
|
|
|
|
|
|
taken
up during the year |
|
1,416,300
|
|
20.13
|
|
761,587
|
|
10.89
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
Media24
Limited (continued)
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
Share
options outstanding
|
|
Share
options currently available
|
Exercise
price (Rand) |
|
Number outstanding
at March 31, 2006
|
|
Weighted average remaining contractual
life (years)
|
|
Weighted average exercise
price (Rand)
|
|
Exercisable
at
March
31, 2006
|
|
Weighted average exercise
price (Rand)
|
6.04
|
|
957,127
|
|
5.70
|
|
6.04
|
|
541,757
|
|
6.04
|
6.90
|
|
202,479
|
|
6.69
|
|
6.90
|
|
54,872
|
|
6.90
|
6.92
|
|
2,591,484
|
|
4.75
|
|
6.92
|
|
2,587,194
|
|
6.92
|
8.12
|
|
258,953
|
|
7.71
|
|
8.12
|
|
–
|
|
–
|
11.63
|
|
488,998
|
|
8.50
|
|
11.63
|
|
–
|
|
–
|
20.42
|
|
65,615
|
|
9.46
|
|
20.42
|
|
–
|
|
–
|
|
|
4,564,656
|
|
|
|
7.50
|
|
3,183,823
|
|
6.77
|
Grants
made during the year: |
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
Weighted
average fair value at measurement date |
|
12.24
|
|
10.73
|
|
This
weighted average fair value has been calculated using
the |
|
|
|
|
Bermudan
Binomial option pricing model, using the following
inputs |
|
|
|
|
and
assumptions: |
|
|
|
|
|
Weighted
average share price (Rand) |
|
28.74
|
|
20.35
|
Weighted
average exercise price (Rand) |
|
20.42
|
|
11.63
|
Weighted
average expected volatility (%) * |
|
15.3%
|
|
20.0%
|
Weighted
average option life (years) |
|
9.8
|
|
9.9
|
Weighted
average dividend yield (%) |
|
-
|
|
- |
Weighted
average risk-free interest rate (%) (based on zero rate
bond |
|
|
|
|
yield
at perfect fit) |
|
7.4%
|
|
8.5%
|
Weighted
average in-the-money rate (%) |
|
89.5%
|
|
57.0%
|
Weighted
average vesting period (years) |
|
4.0
|
|
4.0
|
|
|
|
|
|
Expectations
of early exercise are not considered due to
the |
|
|
|
|
unpredictability
of early exercise scenarios. |
|
|
|
|
*
The weighted average expected volatility is determined using
both |
|
|
|
|
historical
and future annual (bi-annual) company
valuations. |
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued)
Paarl
Media Holdings (Proprietary) Limited
|
On
May
29, 2001, the group established the Paarl Media Holdings Share Trust (“the Paarl
Media Plan”) in terms of which it may award options for no more than 5% of the
total number of ordinary shares in issue. Share options may be granted
with an
exercise price of not less than 100% of the fair value of the shares at
the time
of the grant. One third of the shares generally vest at the anniversary
of each
of the third, fourth and fifth years after the grant date of the share
options
and expire after ten years. Unvested shares are subject to cancellation
upon
expiration or termination of employment. This plan is classified as
cash-settled.
Movements
in terms of the Paarl Media Plan are as
follows: |
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted average exercise
price (Rand)
|
|
Shares
|
|
Weighted average
exercise price
(Rand)
|
Outstanding
at April 1 |
|
4,146,535
|
|
7.23
|
|
3,580,200
|
|
5.18
|
Granted |
|
-
|
|
-
|
|
1,305,000
|
|
11.50
|
Exercised |
|
(1,053,466)
|
|
4.81
|
|
(667,109)
|
|
4.83
|
Forfeited |
|
(329,000)
|
|
8.32
|
|
(71,556)
|
|
5.24
|
Outstanding
at March 31 |
|
2,764,069
|
|
7.23
|
|
4,146,535
|
|
7.23
|
|
Available
to be implemented at March 31 |
|
182,937
|
|
4.80
|
|
1,733,935
|
|
4.80
|
Taken
up during the year: |
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted average exercise
price (Rand)
|
|
Shares
|
|
Weighted average
exercise price
(Rand)
|
Weighted
average share price of options taken up during the
year |
|
1,053,466
|
|
16.59
|
|
667,109
|
|
11.50 |
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
Share
options outstanding
|
|
Share
options currently available
|
Exercise
price
(Rand)
|
|
Number
outstanding
at
March 31, 2006
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
Weighted
average
exercise
price
(Rand)
|
|
Exercisable
at
March
31, 2006
|
|
Weighted
average
exercise
price (Rand)
|
4.80
|
|
1,001,936
|
|
5.61
|
|
4.80
|
|
182,937
|
|
4.80
|
6.93
|
|
1,116,000
|
|
7.75
|
|
6.93
|
|
-
|
|
6.93
|
11.50
|
|
646,133
|
|
9.00
|
|
11.50
|
|
-
|
|
11.50
|
|
|
2,764,069
|
|
|
|
7.23
|
|
182,937
|
|
4.80
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
On
November 21, 2003 the group established the Via Afrika Share Trust (“the Via
Afrika Plan”) in terms of which it may award options for no more than 10% of the
total number of ordinary shares in issue. Share options may be granted
with an
exercise price of not less than 100% of the fair value of the shares at
the time
of the grant. One third of the shares generally vest at the anniversary
of each
of the third, fourth and fifth years after the grant date of the share
options
and expire after ten years. Unvested share options are subject to forfeiture
upon termination of employment. Cancelled options are options cancelled
by
mutual agreement between the employer and employee. This plan is classified
as
cash-settled.
Movements
in terms of the Via Afrika Limited Plan is as
follows: |
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand) |
Outstanding
at April 1 |
|
3,972,226
|
|
5.00
|
|
–
|
|
–
|
Granted
|
|
–
|
|
–
|
|
4,012,606
|
|
5.00
|
Forfeited
|
|
(575,435) |
|
5.00
|
|
(40,380) |
|
5.00
|
Outstanding
at March 31 |
|
3,396,791
|
|
5.00
|
|
3,972,226
|
|
5.00
|
|
Available
to be implemented at 31 March |
|
–
|
|
–
|
|
–
|
|
–
|
No
share options expired or were cancelled or exercised during the years ended
March 31, 2006 and March 31, 2005.
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
|
|
outstanding
at
|
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
Exercise
price (Rand) |
|
March
31, 2006
|
|
(years)
|
|
price
(Rand)
|
|
March
31, 2006
|
|
price
(Rand)
|
5.00
|
|
3,396,791
|
|
8.43
|
|
5.00
|
|
–
|
|
–
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
Via
Afrika Limited (continued)
Grants
made during the year:
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
-
|
|
2.04
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the Bermudan
Binomial option pricing model, using the following inputs and
assumptions:
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
-
|
|
5.00
|
|
Weighted
average exercise price (Rand)
|
|
-
|
|
5.00
|
|
Weighted
average expected volatility (%) *
|
|
-
|
|
20.0
|
%
|
Weighted
average option life (years)
|
|
-
|
|
10.0
|
|
Weighted
average dividend yield (%)
|
|
-
|
|
-
|
|
Weighted
average risk-free interest rate (%) (based on zero rate bond yield at
perfect fit)
|
|
-
|
|
8.5
|
%
|
Weighted
average in-the-money rate (%)
|
|
|
|
57.0
|
%
|
Weighted
average vesting period (years)
|
|
-
|
|
4.0
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the unpredictability of
early exercise scenarios.
|
|
|
|
|
|
*
The weighted average expected volatility is determined using
both historical and future annual (bi-annual) company valuations.
|
|
|
|
|
|
In
terms of the plan, MIH Holdings may grant options to its employees for
up to
26.4 million shares of MIH Holdings ordinary share capital. Share options
may be
granted with an exercise price of not less than 100% of the fair value
of the
shares at the time of the grant. One third of the shares generally vest
at the
anniversary of each of the third, fourth and fifth years after the grant
date of
the share options and expire after ten years. Unvested share options are
subject
to forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as equity-settled.
In
terms of a section 311 scheme of arrangement, Naspers Limited offered one
Naspers Class N ordinary share to all the minority shareholders of MIH
Holdings
Limited, including the MIH Holdings Plan, for every 2.25 MIH Holdings shares
that it held. All the MIH Holdings shares were exchanged for Naspers Class
N
ordinary shares on December 20, 2002. Unvested share options are subject
to
forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as equity-settled.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS |
(CONTINUED)
|
|
|
|
|
|
|
|
|
38.
|
|
EQUITY
COMPENSATION BENEFITS (continued)
|
|
|
|
|
|
|
MIH
Holdings Limited (continued)
|
|
|
|
|
|
|
|
|
Movements
in terms of the MIH Holdings Plan are as
follows: |
|
|
|
|
|
|
NASPERS
N (Rand) |
|
March
31, 2006
|
|
March
31, 2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
Outstanding
at April 1 |
|
3,417,626 |
|
25.77
|
|
4,910,162
|
|
25.49
|
Granted
|
|
259,908 |
|
104.97
|
|
12,742
|
|
19.60
|
Exercised
|
|
(1,530,111) |
|
24.18
|
|
(1,329,861)
|
|
24.62
|
Forfeited
|
|
(97,440) |
|
30.33
|
|
(175,417) |
|
26.22 |
Outstanding
at March 31 |
|
2,049,983
|
|
36.77
|
|
3,417,626
|
|
25.77
|
|
Available
to be implemented at March 31 |
|
454,373
|
|
23.20
|
|
1,376,154
|
|
25.06
|
No
share options expired or were cancelled during the years ended March 31,
2006
and March 31, 2005.
Taken
up during the year: |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
share
|
|
|
|
share
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
|
Weighted
average share price of options
taken up during the year
|
|
1,530,111
|
|
114.92
|
|
1,329,861
|
|
63.89
|
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
|
|
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
Range
of exercise
prices
(Rand)
|
|
Number
outstanding
at
March
31, 2006
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
Weighted
average
exercise
price
(Rand)
|
|
Exercisable
at
March
31, 2006
|
|
Weighted
average
exercise
price
(Rand)
|
6.91
|
|
–
|
|
20.00
|
|
356,317
|
|
5.90
|
|
13.97
|
|
146,903
|
|
14.05
|
20.01
|
|
–
|
|
40.00
|
|
1,045,697
|
|
5.89
|
|
25.50
|
|
301,060
|
|
26.11
|
40.01
|
|
–
|
|
60.00
|
|
385,118
|
|
7.90
|
|
41.58
|
|
1,227
|
|
50.54
|
60.01
|
|
–
|
|
130.50
|
|
262,851
|
|
9.36
|
|
105.49
|
|
5,183
|
|
106.98
|
|
|
|
|
|
|
2,049,983
|
|
|
|
36.77
|
|
454,373
|
|
23.20
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
MIH
Holdings Limited (continued)
Grants
made during the year:
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
41.13
|
|
17.78
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the
|
|
|
|
|
|
Bermudan
Binomial option pricing model, using the following
|
|
|
|
|
|
inputs
and assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
105.35
|
|
45.25
|
|
Weighted
average exercise price (Rand)
|
|
105.35
|
|
45.25
|
|
Weighted
average expected volatility (%) *
|
|
25.8
|
%
|
29.2
|
%
|
Weighted
average option life (years)
|
|
9.0
|
|
9.9
|
|
Weighted
average dividend yield (%)
|
|
0.9
|
%
|
1.2
|
%
|
Weighted
average risk-free interest rate (%) (based on zero rate
|
|
|
|
|
|
bond
yield at perfect fit)
|
|
8.0
|
%
|
10.2
|
%
|
Weighted
average in-the-money rate (%)
|
|
26.6
|
%
|
110.0
|
%
|
Weighted
average vesting period (years)
|
|
4.0
|
|
4.0
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
*
The weighted average expected volatility is determined using
both
historical and future annual (bi-annual) company
valuations.
|
|
|
|
|
|
On
March 25, 1999 the group established the MIH Limited Share Scheme (“the MIH
Limited Plan”) in terms of which it may award options for no more than 10% of
the total number of ordinary shares. Share options may be granted with
an
exercise price of not less than 100% of the fair value of the shares at
the time
of the grant. One third of the shares generally vest at the anniversary
of each
of the third, fourth and fifth years after the grant date of the share
options
and expire after ten years. Unvested share options are subject to forfeiture
upon termination of employment. Cancelled options are options cancelled
by
mutual agreement between the employer and employee. This plan is classified
as
equity-settled.
As
part of the merger between MIH Limited and MIH (BVI) Limited, Naspers offered
3.5 Naspers Class N ordinary shares for each MIH Limited share held by
minority
shareholders, including the MIH Limited Plan. The MIH Limited Plan was
converted
into the MIH (BVI) Limited Plan at which time all its MIH Limited shares
were
exchanged for Naspers Class N ordinary shares and Naspers ADS’s.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION BENEFITS (continued)
|
|
|
|
|
|
MIH
(BVI) Limited (continued)
|
|
|
|
|
|
|
|
|
|
Movements
in terms of the MIH (BVI) Limited Plan are as
follows: |
|
|
|
|
NASPERS
N (US$) |
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
Outstanding
at April 1 |
|
1,578,462
|
|
2.65
|
|
2,364,490
|
|
2.73
|
Granted
|
|
–
|
|
–
|
|
–
|
|
–
|
Exercised
|
|
(573,591) |
|
2.94
|
|
(726,659) |
|
3.08
|
Forfeited
|
|
(103,959) |
|
2.43
|
|
(59,369) |
|
0.60
|
Outstanding
at March 31 |
|
900,912
|
|
2.61
|
|
1,578,462
|
|
2.65
|
|
Available
to be implemented at March 31 |
|
256,692
|
|
2.65
|
|
136,597
|
|
2.32
|
|
NASPERS
N (Rand) |
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
Outstanding
at April 1 |
|
10,008,128
|
|
23.33
|
|
11,030,434
|
|
21.59
|
Granted
|
|
975,958
|
|
104.97
|
|
856,804
|
|
45.86
|
Exercised
|
|
(4,495,479) |
|
24.18
|
|
(1,825,918) |
|
23.64
|
Forfeited
|
|
(56,831) |
|
30.33
|
|
(53,192) |
|
15.35
|
Outstanding
at March 31 |
|
6,431,776
|
|
39.55
|
|
10,008,128
|
|
23.33
|
|
Available
to be implemented at March 31 |
|
711,343
|
|
20.36
|
|
2,254,940
|
|
21.01
|
No
share
options expired or were cancelled during the years ended March 31, 2006
and
March 31, 2005.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION BENEFITS (continued)
|
|
|
|
|
MIH
(BVI) Limited (continued)
|
|
|
|
|
|
|
|
|
Taken
up during the year: |
|
|
|
|
|
|
|
|
NASPERS
N (US$) |
|
March
31, 2006
|
|
March
31, 2005 |
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
share
|
|
|
|
share
|
|
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
|
Weighted
average share price of options
taken up during the year
|
|
573,591
|
|
14.40
|
|
726,659
|
|
10.03
|
|
NASPERS
N (Rand) |
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
share
|
|
|
|
share
|
|
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
|
Weighted
average share price of options
taken up during the year
|
|
4,495,479
|
|
114.13
|
|
1,825,918
|
|
68.71
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
MIH
(BVI) Limited (continued)
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
NASPERS
N (US$) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
average
|
|
|
|
average
|
Range
of exercise
|
|
outstanding
at
|
|
contractual
life
|
|
exercise
price
|
|
Exercisable
at
|
|
exercise
price
|
prices
(US$)
|
|
March
31, 2006
|
|
(years)
|
|
(US$)
|
|
March
31, 2006
|
|
(US$)
|
1.10
|
|
–
|
|
2.50
|
|
356,522
|
|
5.24
|
|
1.90
|
|
135,782
|
|
1.99
|
2.51
|
|
–
|
|
5.00
|
|
537,120
|
|
6.76
|
|
3.00
|
|
113,640
|
|
3.04
|
5.01
|
|
–
|
|
7.50
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
7.51
|
|
–
|
|
9.97
|
|
7,270
|
|
3.81
|
|
8.65
|
|
7,270
|
|
8.65
|
|
|
|
|
|
|
900,912
|
|
|
|
2.61
|
|
256,692
|
|
2.65
|
|
|
NASPERS
N (Rand) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
average
|
|
|
|
average
|
Range
of exercise
|
|
outstanding
at
|
|
contractual
life
|
|
exercise
price
|
|
Exercisable
at
|
|
exercise
price
|
prices
(Rand)
|
|
March
31, 2006
|
|
(years)
|
|
(Rand)
|
|
March
31, 2006
|
|
(Rand)
|
8.19
|
|
–
|
|
15.00
|
|
491,713
|
|
6.00
|
|
8.19
|
|
109,667
|
|
8.19
|
15.01
|
|
–
|
|
40.00
|
|
3,702,949
|
|
6.53
|
|
22.02
|
|
592,616
|
|
21.79
|
40.01
|
|
–
|
|
65.00
|
|
1,272,194
|
|
8.00
|
|
44.17
|
|
–
|
|
–
|
65.01
|
|
–
|
|
75.00
|
|
9,060
|
|
4.00
|
|
74.22
|
|
9,060
|
|
74.22
|
75.01
|
|
–
|
|
100.00
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
100.01
|
|
–
|
|
125.00
|
|
955,860
|
|
9.65
|
|
117.14
|
|
–
|
|
–
|
|
|
|
|
|
|
6,431,776
|
|
|
|
39.55
|
|
711,343
|
|
20.36
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
MIH
(BVI) Limited (continued)
Grants
made during the year:
NASPERS
N (US$)
There
were no new grants of Naspers N shares in US$ for the years ended March
31, 2006
and 2005
NASPERS
N (Rand)
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
42.44
|
|
20.09
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the
|
|
|
|
|
|
Bermudan
Binomial option pricing model, using the following inputs
|
|
|
|
|
|
and
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
105.37
|
|
45.86
|
|
Weighted
average exercise price (Rand)
|
|
105.37
|
|
45.86
|
|
Weighted
average expected volatility (%) *
|
|
25.8
|
%
|
29.0
|
%
|
Weighted
average option life (years)
|
|
9.3
|
|
8.1
|
|
Weighted
average dividend yield (%)
|
|
0.9
|
%
|
1.2
|
%
|
Weighted
average risk-free interest rate (%) (based on zero rate bond
|
|
|
|
|
|
yield
at perfect fit)
|
|
8.0
|
%
|
9.9
|
%
|
Weighted
average in-the-money rate (%)
|
|
78.5
|
%
|
54.5
|
%
|
Weighted
average vesting period (years)
|
|
4.0
|
|
4.0
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
*
The expected weighted average volatility is determined using
|
|
|
|
|
|
historical
daily share prices.
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
On
October 14, 1999 Mindport Holdings Limited established the Irdeto Access
Share
Scheme. In terms of the schemes, options of no more than 10% of the total
number
of issued ordinary shares of Irdeto Access BV may be awarded. Share options
may
be granted with an exercise price of not less than 100% of the fair value
of the
shares at the time of the grant. One third of the shares generally vest
at the
anniversary of each of the third, fourth and fifth years after the grant
date of
the share options and expire after ten years. Unvested share options are
subject
to forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as cash-settled.
Movements
in terms of the Irdeto Access BV Plan are as
follows: |
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
Outstanding
at April 1 |
|
739,974
|
|
7.38
|
|
288,167
|
|
9.05
|
Granted
|
|
166,509
|
|
7.90
|
|
516,610
|
|
6.70
|
Forfeited
|
|
(47,278)
|
|
7.65
|
|
(64,803)
|
|
9.33
|
Outstanding
at March 31 |
|
859,205
|
|
7.47
|
|
739,974
|
|
7.38
|
|
Available
to be implemented at March 31 |
|
89,363
|
|
10.24
|
|
35,458
|
|
11.87
|
No
share options expired or were cancelled or exercised during the years ended
March 31, 2006 and March 31, 2005.
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
Range
of exercise
|
|
outstanding
at
|
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
prices
(US$)
|
|
March
31, 2006
|
|
(years)
|
|
price
(US$)
|
|
March
31, 2006
|
|
price
(US$)
|
6.70
|
|
–
|
|
7.89
|
|
496,839
|
|
8.00
|
|
6.70
|
|
–
|
|
–
|
7.90
|
|
–
|
|
8.29
|
|
321,396
|
|
7.56
|
|
7.90
|
|
51,584
|
|
7.90
|
8.30
|
|
–
|
|
12.00
|
|
3,170
|
|
3.16
|
|
8.88
|
|
3,170
|
|
8.88
|
12.01
|
|
–
|
|
14.80
|
|
37,800
|
|
5.19
|
|
13.80
|
|
34,609
|
|
13.85
|
|
|
|
|
|
|
859,205
|
|
|
|
7.47
|
|
89,363
|
|
10.24
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
Irdeto
Access BV (continued)
Grants
made during the year:
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
1.62
|
|
1.40
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the
|
|
|
|
|
|
Bermudan
Binomial option pricing model, using the following inputs
|
|
|
|
|
|
and
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
7.90
|
|
6.70
|
|
Weighted
average exercise price (Rand)
|
|
7.90
|
|
6.70
|
|
Weighted
average expected volatility (%) *
|
|
20.0
|
%
|
23.0
|
%
|
Weighted
average option life (years)
|
|
5.3
|
|
5.3
|
|
Weighted
average dividend yield (%)
|
|
-
|
|
-
|
|
Weighted
average risk-free interest rate (%) (based on zero rate bond
|
|
|
|
|
|
yield
at perfect fit)
|
|
4.6
|
%
|
4.2
|
%
|
Weighted
average in-the-money rate (%)
|
|
141.0
|
%
|
54.5
|
%
|
Weighted
average vesting period (years)
|
|
3.8
|
|
3.8
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
*
The weighted average expected volatility is determined using
both
|
|
|
|
|
|
historical
and future annual (bi-annual) company valuations.
|
|
|
|
|
|
On
February 23, 2003 MIH QQ (BVI) Limited established the MIH QQ (BVI) Limited
Share Trust (“the MIH QQ Plan”), in terms of which it can award options, but for
no more than 10% of the total number of ordinary shares. Share options
may be
granted with an exercise price of not less than 100% of the fair value
of the
shares at the time of the grant. One quarter of the shares generally vest
at the
anniversary of each of the first, second, third and fourth years after
the grant
date. The share options expire after ten years. Unvested share options
are
subject to forfeiture upon termination of employment. Cancelled options
are
options cancelled by mutual agreement between the employer and employee.
This
plan is classified as equity-settled.
On
September 30, 2005 MIH QQ (BVI) Limited established the 2005 MIH QQ (BVI)
Limited Share Trust (“the 2005 MIH QQ Plan”), in terms of which it can award
options, provided that when added to the reserved shares and unreserved
shares
already held by the trustees of the 2005 MIH QQ plan, or by the trustees
of any
other share trust, including the MIH QQ (BVI) Limited Share Trust, they
represent no more than 10% of the greater of the MIH QQ (BVI) Limited’s (MIH QQ)
total issued share capital at the time of such acquisition, or, if applicable,
MIH QQ’s subsequently increased issued share capital. Share options may be
granted with an exercise price of not less than 100% of the fair value
of the
shares at the time of the grant. One quarter of the shares generally vest
at the
anniversary of each of the first, second, third and fourth years after
the grant
date. The share options expire after five years. Unvested share options
are
subject to forfeiture upon termination of employment. Cancelled options
are
options cancelled by mutual agreement between the employer and employee.
This
plan is classified as equity-settled.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
MIH
QQ (BVI) Limited (continued)
Movements
in terms of the MIH QQ (BVI) and 2005 MIH QQ (BVI) Plans are as
follows:
MIH
QQ (BVI) Limited Share Trust
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
Outstanding
at April 1 |
|
34,124
|
|
120.96
|
|
34,500
|
|
34.00
|
Granted
|
|
–
|
|
–
|
|
8,874
|
|
368.41
|
Exercised
|
|
(7,850) |
|
34.00
|
|
(9,250) |
|
34.00
|
Forfeited
|
|
(1,250) |
|
368.41
|
|
–
|
|
–
|
Outstanding
at March 31 |
|
25,024
|
|
127.53
|
|
34,124
|
|
120.96
|
|
Available
to be implemented at March 31 |
|
12,585
|
|
118.63
|
|
8,000
|
|
34.00
|
|
|
2005
MIH QQ (BVI) Limited Share Trust |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
Outstanding
at April 1 |
|
–
|
|
–
|
|
–
|
|
–
|
Granted
|
|
28,497
|
|
613.69
|
|
–
|
|
–
|
Outstanding
at March 31 |
|
28,497
|
|
613.69
|
|
–
|
|
–
|
|
Available
to be implemented at March 31 |
|
–
|
|
–
|
|
–
|
|
–
|
No
share options expired or were cancelled during the years ended March 31,
2006
and March 31, 2005.
Taken
up during the year: |
|
|
|
|
|
|
|
|
MIH
QQ (BVI) Limited Share Trust |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
share
|
|
|
|
share
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
|
Weighted
average share price of options taken
up
during the year
|
|
7,850
|
|
940.67
|
|
9,250
|
|
349.75
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
MIH
QQ (BVI) Limited (continued)
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
MIH
QQ (BVI) Limited Share Trust
|
|
Share
options
outstanding
|
|
Share
options currently
available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
|
|
outstanding
at
|
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
Exercise
price (US$)
|
|
March
31, 2006 |
|
(years)
|
|
price
(US$)
|
|
March
31, 2006
|
|
price
(US$)
|
34.00
|
|
18,025
|
|
7.00
|
|
34.00
|
|
9,400
|
|
34.00
|
368.41
|
|
6,999
|
|
8.00
|
|
368.41
|
|
3,185
|
|
368.41
|
|
|
25,024
|
|
|
|
127.53
|
|
12,585
|
|
118.63
|
MIH
QQ (BVI) Limited Share Trust
|
|
Share
options
outstanding
|
|
Share
options currently
available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
|
|
outstanding
at
|
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
Exercise
price (US$)
|
|
March
31, 2006 |
|
(years)
|
|
price
(US$)
|
|
March
31, 2006
|
|
price
(US$)
|
612.75
|
|
27,850
|
|
9.00
|
|
612.75
|
|
–
|
|
–
|
654.02
|
|
647
|
|
9.00
|
|
654.02
|
|
–
|
|
–
|
|
|
28,497
|
|
|
|
613.69
|
|
–
|
|
–
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
MIH
QQ (BVI) Limited (continued)
Grants
made during the year:
MIH
QQ (BVI) Limited Share Trust
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
-
|
|
189.99
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the
|
|
|
|
|
|
Bermudan
Binomial option pricing model, using the following inputs
|
|
|
|
|
|
and
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
-
|
|
458.31
|
|
Weighted
average exercise price (Rand)
|
|
-
|
|
368.41
|
|
Weighted
average expected volatility (%) *
|
|
-
|
|
44.0
|
%
|
Weighted
average option life (years)
|
|
-
|
|
10.0
|
|
Weighted
average dividend yield (%)
|
|
-
|
|
-
|
|
Weighted
average risk-free interest rate (%) (based on zero rate
bond
|
|
|
|
|
|
yield
at perfect fit)
|
|
-
|
|
4.2
|
%
|
Weighted
average in-the-money rate (%)
|
|
-
|
|
158.0
|
%
|
Weighted
average vesting period (years)
|
|
-
|
|
4.0
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
*
The weighted average expected volatility is determined
using both
|
|
|
|
|
|
historical
and future annual (bi-annual) company valuations.
|
|
|
|
|
|
2005
MIH QQ (BVI) Limited Share Trust |
|
|
|
|
|
|
March
31, 2006 |
|
March
31, 2005 |
Weighted
average fair value at measurement date |
|
359.81
|
|
-
|
|
This
weighted average fair value has been calculated using
the |
|
|
|
|
Bermudan
Binomial option pricing model, using the following
inputs |
|
|
|
|
and
assumptions: |
|
|
|
|
|
Weighted
average share price (Rand) |
|
743.64
|
|
-
|
Weighted
average exercise price (Rand) |
|
612.75
|
|
-
|
Weighted
average expected volatility (%) * |
|
47.5
|
% |
-
|
Weighted
average option life (years) |
|
7.5
|
|
-
|
Weighted
average dividend yield (%) |
|
-
|
|
-
|
Weighted
average risk-free interest rate (%) (based on zero rate
bond |
|
|
|
|
yield
at perfect fit) |
|
4.0
|
% |
-
|
Weighted
average in-the-money rate (%) |
|
73.0
|
% |
-
|
Weighted
average vesting period (years) |
|
4.0
|
|
-
|
|
|
|
|
|
Expectations
of early exercise are not considered due to
the |
|
|
|
|
unpredictability
of early exercise scenarios. |
|
|
|
|
*
The weighted average expected volatility is determined using
both |
|
|
|
|
historical
and future annual (bi-annual) company
valuations. |
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
Entriq
(Mauritius)
Limited
|
On
May
6, 2003 Entriq (Mauritius) Limited established the Entriq Share Trust (“the
Entriq Plan”), in terms of which it can award options, but for no more than 15%
of the total number of ordinary shares. Share options may be granted with
an
exercise price of not less than 100% of the fair value of the shares at
the time
of the grant. One quarter of the shares generally vest at the anniversary
of
each of the first, second, third and fourth years after the grant date.
The
share options expire after ten years. Unvested share options are subject
to
forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as cash-settled.
Movements
in terms of the Entriq (Mauritius) Limited Plan are as
follows: |
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
Shares
|
|
price
(US$)
|
|
Shares
|
|
price
(US$)
|
Outstanding
at April 1 |
|
4,395,200
|
|
0.65
|
|
104,600
|
|
1.30
|
Capitalisation
split - March 11, 2005 |
|
–
|
|
–
|
|
104,000
|
|
–
|
Granted
|
|
1,115,900
|
|
0.65
|
|
4,187,200
|
|
0.65
|
Forfeited
|
|
(110,100) |
|
0.65
|
|
(600) |
|
1.30
|
Outstanding
at March 31 |
|
5,401,000
|
|
0.65
|
|
4,395,200
|
|
0.65
|
|
Available
to be implemented at March 31 |
|
2,717,950
|
|
0.65
|
|
104,000
|
|
0.65
|
No
share options expired or were cancelled or exercised during the years ended
March 31, 2006 and March 31, 2005.
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
|
|
outstanding
at |
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
Exercise
price (US$)
|
|
March
31, 2006 |
|
(years)
|
|
price
(US$)
|
|
March
31, 2006
|
|
price
(US$)
|
0.65
|
|
5,401,000
|
|
8.93
|
|
0.65
|
|
2,717,950
|
|
0.65
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
Entriq
(Mauritius) Limited (continued)
Grants
made during the year:
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
0.27
|
|
0.32
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the
|
|
|
|
|
|
Bermudan
Binomial option pricing model, using the following inputs
|
|
|
|
|
|
and
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
0.65
|
|
0.65
|
|
Weighted
average exercise price (Rand)
|
|
0.65
|
|
0.65
|
|
Weighted
average expected volatility (%) *
|
|
50.0
|
%
|
50.0
|
%
|
Weighted
average option life (years)
|
|
9.5
|
|
8.6
|
|
Weighted
average dividend yield (%)
|
|
-
|
|
-
|
|
Weighted
average risk-free interest rate (%) (based on zero rate bond
|
|
|
|
|
|
yield
at perfect fit)
|
|
4.6
|
%
|
4.4
|
%
|
Weighted
average in-the-money rate (%)
|
|
141.0
|
%
|
54.5
|
%
|
Weighted
average vesting period (years)
|
|
3.8
|
|
3.8
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
*
The weighted average expected volatility is determined using
both
|
|
|
|
|
|
historical
and future annual (bi-annual) company valuations.
|
|
|
|
|
|
Electronic
Media Network
Limited |
|
|
|
|
On
June 12, 1991 M-Net established the M-Net Share Trust (“the M-Net plan”), under
which it may award shares or options for no more than 10% of the total
number of
ordinary shares. Shares or options may be granted with an exercise price
of not
less than 100% of the market value of the shares or options at the time
of the
grant. One third of the shares or options generally vest at the anniversary
of
each of the third, fourth and fifth years after the grant date of the shares
or
options and expire after ten years. Unvested share options are subject
to
forfeiture upon termination of employment. Cancelled options are options
cancelled by mutual agreement between the employer and employee. This plan
is
classified as equity-settled.
In
terms of a section 311 scheme of arrangement, Naspers Limited offered one
Naspers Class N ordinary share to all the minority shareholders of M-Net,
including the M-Net Plan, for every 4.5 M-Net/SuperSport linked unit that
it
held, or Rand 8.50 per M-Net/SuperSport linked unit. The transaction became
unconditional on March 24, 2004. The linked units were exchanged for 574,726
Naspers Class N ordinary shares during April 2004.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION BENEFITS (continued)
|
|
|
|
|
Electronic
Media Network Limited
(continued)
|
|
|
|
|
|
|
Movements
in terms of the M-Net Plan are as
follows: |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
Outstanding
at April 1 |
|
488,805
|
|
13.30
|
|
574,726
|
|
8.39
|
Granted
|
|
–
|
|
–
|
|
40,000
|
|
64.20
|
Exercised
|
|
(161,143) |
|
2.90
|
|
(119,367)
|
|
6.96
|
Forfeited
|
|
(45,679) |
|
57.35
|
|
(6,554) |
|
8.64
|
Outstanding
at March 31 |
|
281,983
|
|
8.72
|
|
488,805
|
|
13.30
|
|
Available
to be implemented at March 31 |
|
73,564
|
|
8.93
|
|
109,439
|
|
9.25
|
No
share options expired or were cancelled during the years ended March 31,
2006
and March 31, 2005.
Taken
up during the year: |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
share
|
|
|
|
share
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
|
Weighted
average share price of options |
|
|
|
|
|
|
|
|
taken
up during the year |
|
161,143
|
|
111.60
|
|
119,367
|
|
56.12
|
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
Range
of exercise
|
|
outstanding
at
|
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
prices
(Rand)
|
|
March
31, 2006
|
|
(years)
|
|
price
(Rand)
|
|
March
31, 2006
|
|
price
(Rand)
|
4.01
|
–
|
8.50
|
|
36,089
|
|
3.70
|
|
6.36
|
|
24,479
|
|
5.79
|
8.51 |
–
|
13.50
|
|
235,861
|
|
6.81
|
|
8.74
|
|
39,052
|
|
8.87
|
13.51 |
–
|
30.50
|
|
10,033
|
|
1.24
|
|
16.82
|
|
10,033
|
|
16.82
|
|
|
|
|
281,983
|
|
|
|
8.72
|
|
73,564
|
|
8.93
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION
BENEFITS (continued)
Electronic
Media Network Limited (continued)
Grants
made during the year:
|
|
March
31, 2006
|
|
March
31, 2005
|
|
Weighted
average fair value at measurement date
|
|
-
|
|
24.36
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using the
|
|
|
|
|
|
Bermudan
Binomial option pricing model, using the following inputs
|
|
|
|
|
|
and
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share price (Rand)
|
|
-
|
|
64.20
|
|
Weighted
average exercise price (Rand)
|
|
-
|
|
64.20
|
|
Weighted
average expected volatility (%) *
|
|
-
|
|
24.9
|
%
|
Weighted
average option life (years)
|
|
-
|
|
10.0
|
|
Weighted
average dividend yield (%)
|
|
-
|
|
1.2
|
%
|
Weighted
average risk-free interest rate (%) (based on zero rate bond
|
|
|
|
|
|
yield
at perfect fit)
|
|
-
|
|
8.8
|
%
|
Weighted
average in-the-money rate (%)
|
|
-
|
|
46.0
|
%
|
Weighted
average vesting period (years)
|
|
-
|
|
4.0
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
*
The weighted average expected volatility is determined using
both
|
|
|
|
|
|
historical
and future annual (bi-annual) company valuations.
|
|
|
|
|
|
SuperSport
International Holdings
Limited |
|
|
|
|
On
June 12, 1991 SuperSport established the SuperSport Share Trust (“the SuperSport
plan”), under which it may award shares or options for no more than 10% of the
total number of ordinary shares. Shares or options may be granted with
an
exercise price of not less than 100% of the market value of the shares
or
options at the time of the grant. One third of the shares or options generally
vest at the anniversary of each of the third, fourth and fifth years after
the
grant date of the shares or options and expire after ten years. Unvested
share
options are subject to forfeiture upon termination of employment. Cancelled
options are options cancelled by mutual agreement between the employer
and
employee. This plan is classified as equity-settled.
In
terms of a section 311 scheme of arrangement, Naspers Limited offered one
Naspers Class N ordinary share to all the minority shareholders of SuperSport,
including the SuperSport Plan, for every 4.5 M-Net/SuperSport linked unit
that
it held, or Rand 8.50 per M-Net/SuperSport linked unit. The transaction
became
unconditional on March 24, 2004. The linked units were exchanged for 525,228
Naspers Class N ordinary shares during April 2004.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION BENEFITS (continued)
|
|
|
|
|
SuperSport
International Holdings Limited
(continued)
|
|
|
|
|
|
|
Movements
in terms of the SuperSport Plan are as
follows: |
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
Outstanding
at April 1 |
|
579,329
|
|
32.20
|
|
742,326
|
|
30.25
|
Exercised
|
|
(211,367)
|
|
8.88
|
|
(154,051)
|
|
22.83
|
Forfeited
|
|
(7,694) |
|
32.85
|
|
(8,946) |
|
31.69
|
Outstanding
at March 31 |
|
360,268
|
|
33.83
|
|
579,329
|
|
32.20
|
|
Available
to be implemented at March 31 |
|
96,287
|
|
29.17
|
|
145,206
|
|
41.78
|
No
share options expired or were cancelled during the years ended March 31,
2006
and March 31, 2005.
Taken
up during the year: |
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
share
|
|
|
|
share
|
|
|
Shares
|
|
price
(Rand)
|
|
Shares
|
|
price
(Rand)
|
|
Weighted
average share price of options |
|
|
|
|
|
|
|
|
taken
up during the year |
|
211,367
|
|
111.60
|
|
154,051
|
|
55.12
|
Share
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
|
|
|
|
Share
options outstanding
|
|
Share
options currently available
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
remaining
|
|
Weighted
|
|
|
|
Weighted
|
Range
of exercise
|
|
outstanding
at
|
|
contractual
life
|
|
average
exercise
|
|
Exercisable
at
|
|
average
exercise
|
prices
(Rand)
|
|
March
31, 2006
|
|
(years)
|
|
price
(Rand)
|
|
March
31, 2006
|
|
price
(Rand)
|
–
|
|
–
|
|
102,502
|
|
6.11
|
|
–
|
|
28,984
|
|
–
|
10.00 |
– |
25.00
|
|
884
|
|
2.93
|
|
24.51
|
|
884
|
|
24.51
|
25.01
|
– |
40.00
|
|
34,143
|
|
2.74
|
|
32.47
|
|
30,607
|
|
31.89
|
40.01 |
– |
55.00
|
|
220,028
|
|
6.80
|
|
49.54
|
|
33,101
|
|
49.90
|
55.01
|
– |
60.00
|
|
2,711
|
|
3.95
|
|
58.66
|
|
2,711
|
|
58.66
|
|
|
|
|
360,268
|
|
|
|
33.83
|
|
96,287
|
|
29.17
|
|
Grants
made during the year: |
|
|
|
|
|
|
|
|
There
were no new grants made for the years ended March 31, 2006
and 2005. |
|
|
|
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION BENEFITS (continued) |
On
June 12, 2001, the group established the Educor Share Incentive Scheme
(“the
Educor Plan”) in terms of which it may award options for no more than 20% of the
total number of ordinary shares in issue. Share options may be granted
with an
exercise price of not less than 100% of the fair value of the shares at
the time
of the grant. One third of the shares generally vest at the anniversary
of each
of the third, fourth and fifth years after the grant date of the share
options
and expire after ten years. Unvested shares are subject to cancellation
upon
expiration or termination of employment. At March 31, 2005 no shares were
allocated under the Educor Plan, and the plan was terminated during
2006.
Movements
in terms of the Educor Plan are as
follows:
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted
average
exercise
price
(Rand)
|
|
Shares
|
|
Weighted
average
exercise
price
(Rand)
|
Outstanding
at April 1 |
|
–
|
|
–
|
|
11,462,505
|
|
0.96
|
Exercised
|
|
–
|
|
–
|
|
(7,972,855)
|
|
0.98
|
Forfeited
|
|
–
|
|
–
|
|
(3,489,650)
|
|
0.90
|
Outstanding
at March 31 |
|
–
|
|
–
|
|
–
|
|
–
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
38. EQUITY
COMPENSATION BENEFITS (continued) |
United
Broadcasting Corporation Public Company Limited
(“UBC”)
On
December 12, 2000 UBC established the UBC Employee Securities Option Plan
(“the
UBC plan”), in terms of which it can award options, but for no more than 3,95%
of the total number of ordinary shares in issue. Share options may be granted
with an exercise price of not less than 100% of the fair value of the shares
at
the time of the grant. One third of the shares generally vest at the anniversary
of each of the first, second and third years after the grant date. The
share
options expire after nine years. Unvested shares are subject to cancellation
upon expiration or termination of employment. At March 31, 2005 there were
14,879,000 options outstanding and exercisable under the UBC plan with
a
remaining weighted average contractual life of 5.75 years and an exercise
price
of 10 baht per share.
On
November 7, 2005, the group publicly announced that it had entered into
an
agreement in terms of which it would sell its entire interest in UBC and
this
transaction was concluded on January 6, 2006.
Movements
in terms of the UBC Plan are as
follows:
|
|
|
|
|
|
|
|
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted
average
exercise
price
(THB)
|
|
Shares
|
|
Weighted
average
exercise
price
(THB)
|
Outstanding
at April 1 |
|
–
|
|
–
|
|
17,103,200
|
|
10.00
|
Exercised |
|
–
|
|
–
|
|
(2,172,400)
|
|
10.00
|
Forfeited |
|
–
|
|
–
|
|
(51,800)
|
|
10.00
|
Outstanding
at March 31 |
|
–
|
|
–
|
|
14,879,000
|
|
10.00
|
On
July 27, 2001 Tencent Holdings Limited established a share option scheme
(“the
Tencent plan”), in terms of which it can award options, but for no more than 5%
of the total number of ordinary shares in issue. Share options may be granted
with an exercise price of not less than 100% of the fair value of the shares
at
the time of the grant, unless agreed otherwise by the Tencent board of
directors. One third of the shares generally vest at the anniversary of
each of
the first, second and third years after the grant date. The share options
expire
after nine years. Unvested shares are subject to cancellation upon expiration
or
termination of employment.
During
the year ended March 31, 2005 Tencent also issued Hong Kong dollar share
options. At March 31, 2005 a total of 27 065 604 Hong Kong dollar options
were
outstanding at a weighted average exercise price of HKD4,40.
At
March 31, 2005 there were 46,545,508 US dollar options outstanding, with
exercise prices between US$0.05 and US$0.44, with remaining contractual
lives of
between 6.48 and 8.99 years. There were also 27 065 604 Hong Kong dollar
options
outstanding with exercise prices of between HKD3.67 and HKD5.55 with remaining
contractual lives of between 9.46 and 9.98 years. At March 31, 2005 there
were
23,530,004 US dollar options exercisable at exercise prices between US$0.05
and
US$0.44. No Hong Kong dollar options were exercisable at March 31,
2005.
During
2005, the group changed it’s accounting for Tencent from consolidation to
equity-accounting. As it is not required to disclose share-based compensation
information for associate entities, the 2005 information is shown for
comparative purposes only.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
Tencent Holdings
Limited
(continued)
Movements in terms of the Tencent Plan are
as
follows:
|
|
March
31, 2006
|
|
March
31, 2005
|
|
|
Shares
|
|
Weighted
average
exercise
price
(US$)
|
|
Shares
|
|
Weighted
average
exercise
price
(US$)
|
Outstanding
at April 1 |
|
–
|
|
–
|
|
72,491,650
|
|
0.08
|
Exercised
|
|
–
|
|
–
|
|
(24,786,254)
|
|
0.05
|
Forfeited
|
|
–
|
|
–
|
|
(1,159,888)
|
|
0.13
|
Outstanding
at March 31 |
|
–
|
|
–
|
|
46,545,508
|
|
0.09
|
Share
appreciation rights
schemes |
On
September 20, 2005 the group established the Media24 Limited, Electronic
Media
Network Limited/SuperSport International Holdings Limited (M-Net/SS) and
MultiChoice Africa (Proprietary) Limited (MCA) share appreciation rights
plans.
The aggregate number of scheme shares in respect of which they may award
share
appreciation rights (SARs) is no more than 10% of the total number of ordinary
shares in issue in the respective companies. SARs may be granted with an
exercise price of not less than 100% of the fair value of the SARs at the
time
of the grant. One third of the SARs generally vest at the anniversary of
each of
the third, fourth and fifth years after the grant date of the SARs and
expire
after five years and fourteen days. Unvested SARs are subject to forfeiture
upon
termination of employment. Cancelled SARs are SARs cancelled by mutual
agreement
between employer and employee. These plans are classified as
equity-settled.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
Share appreciation
rights schemes
(continued)
Movements in terms of the SAR Plan are
as
follows:
|
|
|
|
Media24
March
31, 2006
|
|
MCA
March
31, 2006
|
|
M-Net/SS
March
31, 2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
exercise
|
|
|
|
|
SARs
|
|
price
(Rand)
|
|
SARs
|
|
price
(Rand)
|
|
SARs
|
|
price
(Rand)
|
Outstanding
at April 1 |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
Granted
|
|
10,637,655 |
|
21.55
|
|
5,375,529
|
|
23.70
|
|
5,922,318
|
|
9.00
|
Forfeited |
|
(52,865) |
|
21.55
|
|
(80,941) |
|
23.70
|
|
(2,965) |
|
9.00
|
Outstanding
at March 31 |
|
10,584,790 |
|
21.55
|
|
5,294,588
|
|
23.70
|
|
5,919,353
|
|
9.00
|
|
Available
to be implemented at 31 March |
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
No
SARs expired or were cancelled during the year ended March 31,
2006.
SAR
option allocations outstanding and currently available to be
implemented at March 31, 2006 by exercise price:
Media24
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
outstanding
|
|
SARs
currently available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Number
|
|
average
|
|
Weighted
|
|
|
|
|
|
|
outstanding
at
|
|
remaining
|
|
average
|
|
|
|
Weighted
average
|
|
|
March
31,
|
|
contractual
life
|
|
exercise
price
|
|
Exercisable
at
|
|
exercise
price
|
Exercise
price (Rand) |
|
2006
|
|
(years)
|
|
(Rand)
|
|
March
31, 2006
|
|
(Rand)
|
21.55
|
|
10,584,790
|
|
4.50
|
|
21.55
|
|
–
|
|
–
|
|
|
MCA
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
outstanding
|
|
SARs
currently available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Number
|
|
average
|
|
Weighted
|
|
|
|
|
|
|
outstanding
at
|
|
remaining
|
|
average
|
|
|
|
Weighted
average
|
|
|
March
31,
|
|
contractual
life
|
|
exercise
price
|
|
Exercisable
at
|
|
exercise
price
|
Exercise
price (Rand) |
|
2006
|
|
(years)
|
|
(Rand)
|
|
March
31, 2006
|
|
(Rand)
|
23.70
|
|
5,294,588
|
|
4.50
|
|
23.70
|
|
–
|
|
–
|
|
|
M-Net/SS
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs
outstanding
|
|
SARs
currently available
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Number
|
|
average
|
|
Weighted
|
|
|
|
|
|
|
outstanding
at
|
|
remaining
|
|
average
|
|
|
|
Weighted
average
|
|
|
March
31,
|
|
contractual
life
|
|
exercise
price
|
|
Exercisable
at
|
|
exercise
price
|
Exercise
price (Rand) |
|
2006
|
|
(years)
|
|
(Rand)
|
|
March
31, 2006
|
|
(Rand)
|
9.00
|
|
5,919,353
|
|
4.50
|
|
9.00
|
|
–
|
|
–
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
38. EQUITY
COMPENSATION BENEFITS (continued) |
Share appreciation
rights schemes
(continued)
Grants
made during the year
|
|
Media24
|
|
MCA
|
|
M-Net/SS
|
|
|
|
March
31, 2006
|
|
March
31, 2006
|
|
March
31, 2006
|
|
Weighted
average fair value at measurement date
|
|
7.37
|
|
6.88
|
|
2.95
|
|
|
|
|
|
|
|
|
|
This
weighted average fair value has been calculated using
|
|
|
|
|
|
|
|
the
Bermudan Binomial option pricing model, using the
|
|
|
|
|
|
|
|
following
inputs and assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average SAR price (Rand)
|
|
21.55
|
|
23.70
|
|
9.00
|
|
Weighted
average exercise price (Rand)
|
|
21.55
|
|
23.70
|
|
9.00
|
|
Weighted
average expected volatility (%) *
|
|
20.0
|
%
|
14.0
|
%
|
14.2
|
%
|
Weighted
average SAR life (years)
|
|
5.0
|
|
5.0
|
|
5.0
|
|
Weighted
average dividend yield (%)
|
|
-
|
|
-
|
|
-
|
|
Weighted
average risk-free interest rate (%) (based on zero
|
|
|
|
|
|
|
|
rate
bond yield at perfect fit)
|
|
7.8
|
%
|
7.7
|
%
|
7.8
|
%
|
Weighted
average in-the-money rate (%)
|
|
38.0
|
%
|
46.3
|
%
|
40.0
|
%
|
Weighted
average vesting period (years)
|
|
4.0
|
|
4.0
|
|
4.0
|
|
|
|
|
|
|
|
|
|
Expectations
of early exercise are not considered due to the
|
|
|
|
|
|
|
|
unpredictability
of early exercise scenarios.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
The weighted average expected volatility is determined
|
|
|
|
|
|
|
|
using
both historical and future annual (bi-annual) company
|
|
|
|
|
|
|
|
valuations.
|
|
|
|
|
|
|
|
|
Share-based
payment liability
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
|
|
|
|
|
Total
carrying amount of cash-settled transaction
liabilities shares |
|
|
|
108,371
|
|
36,158
|
|
|
|
|
|
|
|
Total
instrinsic value of liability for vested
benefits |
|
|
|
43,459
|
|
13,336
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES
GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The
Group’s consolidated annual financial statements are prepared in accordance with
International Financial Reporting Standards (“IFRS”), which differ in certain
material respects from accounting principles generally accepted in the
United
States of America (“US GAAP”). Such differences include methods for measuring
and presenting the amounts shown in the consolidated annual financial
statements, as well as additional disclosures required by US GAAP. The
principle
differences between IFRS and US GAAP are presented below together with
explanations of certain adjustments that affect total consolidated shareholders’
equity and consolidated net profit as of and for the years ended March
31, 2006
and 2005.
For
the year ended March 31, 2005 the Naspers Limited Group (“Naspers” or “the
Group”) prepared its financial statements under South African Statements of
Generally Accepted Accounting Practice (“SA GAAP”) as effective at that date. In
accordance with the JSE Limited (“JSE”) Listing Requirements, the Group is
required to prepare its first annual consolidated financial statements
in
accordance with IFRS for the year ended March 31, 2006. As the Group publishes
comparative information in its financial statements, the date for transition
to
IFRS is April 1, 2004, which represents the beginning of the earliest period
of
comparative information to be presented as required in terms of the requirements
of the JSE Limited and the Securities and Exchange Commission in the United
States of America.
In
order to describe the impact of IFRS on the Group’s reported results of
operations and financial position, the Group has restated information previously
published under SA GAAP to the equivalent basis under IFRS. This restatement
is
described in note 2 of the annual financial statements and follows the
guidelines set out in IFRS 1 “First-time Adoption of International Financial
Reporting Standards” (“IFRS 1”). Accordingly, the US GAAP adjustments presented
below as of and for fiscal year ended March 31, 2005 have also been adjusted
to
reflect the adjustments between IFRS and the previously reported SA GAAP
information.
For
the convenience of understanding these adjustments, a condensed consolidated
income statement and condensed consolidated balance sheet prepared in accordance
with US GAAP have been presented on pages F-121and F-122.
|
|
|
|
|
|
March
31
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
R’000
|
|
R’000
|
|
Net
profit under IFRS |
|
3,190,188
|
|
2,384,762
|
US
GAAP adjustments: |
|
|
|
|
(a)
|
Business
combinations |
|
–
|
|
(14,858)
|
|
(i) |
Date
of acquisition |
|
–
|
|
–
|
|
(ii) |
Value
of
purchase consideration |
–
|
|
(14,858) |
|
(iii)
|
Exchange
for non-monetary assets |
|
–
|
|
–
|
(b)
|
Goodwill
|
|
(12,492)
|
|
1,817
|
(c)
|
Intangible
assets |
|
(44,734)
|
|
(12,311)
|
(d)
|
Purchase
of minority interests (sucessive acquisition),
net |
|
(90,508)
|
|
(38,403)
|
(e)
|
Share
based compensation |
|
(36,494)
|
|
(27,705)
|
(g)
|
Post-retirement
employee liability |
|
5,598
|
|
(11,934)
|
(h)
|
Property,
plant and equipment |
|
35,470
|
|
16,829
|
(j)
|
Onerous
contracts |
|
(17,795)
|
|
27,015
|
(l)
|
Impairment
of investment |
|
(98,866)
|
|
–
|
(m)
|
Put
option liability |
|
(56,509)
|
|
–
|
(n)
|
Other
|
|
(5,509)
|
|
(28,925)
|
|
Effect
of adjustments on taxation |
|
1,622
|
|
(4,208)
|
|
Effect
of adjustments on minority interests |
|
(4,981)
|
|
1,901
|
Profit
under US GAAP before discontinued
operations |
|
2,864,990
|
|
2,293,980
|
(o)
|
Discontinued
operations |
|
(348,216)
|
|
(8,026)
|
Net
profit under US GAAP |
|
2,516,774
|
|
2,285,954
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES
GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
(continued)
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
|
|
|
|
|
Total
shareholders’ equity under IFRS |
|
7,118,436
|
|
4,865,965
|
|
|
|
|
|
US
GAAP adjustments: |
|
|
|
|
(a)
|
Business
combinations |
|
(306,019)
|
|
(311,210)
|
|
(i) |
Date
of acquisition |
|
224,126
|
|
218,935
|
|
(ii) |
Value
of
purchase consideration |
(27,600)
|
|
(27,600) |
|
(iii)
|
Exchange
for non-monetary assets |
|
(502,545)
|
|
(502,545)
|
(b)
|
Goodwill
|
|
563,382
|
|
845,837
|
(c)
|
Intangible
assets |
|
6,116
|
|
55,372
|
(d)
|
Purchase
of minority interests (sucessive acquisition),
net |
|
1,236,008
|
|
1,471,583
|
(e)
|
Share
based compensation |
|
(249,703)
|
|
(173,633)
|
(f)
|
Adjustment
to dilution gains/(losses) |
|
(149,467)
|
|
(268,287)
|
(g) |
Post-retirement employee
liability |
|
(40,301) |
|
(45,899) |
(h)
|
Property,
plant and equipment |
|
(122,127)
|
|
(156,869) |
(i) |
Proportionate
consolidation |
|
–
|
|
46,397
|
(j)
|
Onerous
contracts |
|
4,755
|
|
22,555
|
(k) |
Consolidation
of entities under FIN 46R |
|
33,172
|
|
(34,530) |
(l)
|
Impairment
of investment |
|
(94,896)
|
|
–
|
(m)
|
Put
option liability |
|
774,276
|
|
–
|
(n)
|
Other
|
|
(2,321)
|
|
25,700
|
|
Effect
of adjustments on taxation |
|
(45,867)
|
|
(54,070)
|
|
Effect
of adjustments on minority interests |
|
(16,947)
|
|
(14,411)
|
Total
shareholders’ equity under US GAAP |
|
8,708,497
|
|
6,274,500
|
(a) Business
combinations
Under
both IFRS and US GAAP, the acquisitions of the Group have been accounted
for
under the purchase method. Both IFRS and US GAAP require the purchase
consideration to be allocated to the identifiable net assets acquired at
their
fair value at the date of acquisition, with the difference between the
consideration paid and the fair value of the identifiable net assets acquired
recorded as goodwill. The Group has applied IFRS 3 “Business Combinations”
(“IFRS 3”) to all business combinations that have occurred since April 1, 2004
(the date of transition to IFRS). In addition, the Group has elected to
apply
IFRS 3 retrospectively to all business combinations that occurred between
December 20, 2002 and the date of transition to IFRS. The date of December
20,
2002 was used because this was the date of the company’s most significant
acquisition; the purchase of the remaining interests in MIH Limited and
MIH
Holdings Limited. This retrospective application of IFRS 3 ensured that
all the
significant business combination transactions entered into by the Group
over the
past three years have been treated in a consistent manner. Business combinations
prior to December 20, 2002 were not affected by the transition to IFRS.
Certain
differences between IFRS and US GAAP in the application of the purchase
method
of accounting for business combinations arise as set out below:
Prior
to December 20, 2002, the date on which earnings of an acquired entity
were
included in the Group’s consolidated results of operations could be based on an
effective date identified in the acquisition agreement when management
control
is ceded. Under US GAAP, when regulatory approval or other substantive
conditions precedent exist, the consummation of the acquisition is not
considered effective until such conditions are satisfied and irrevocable
control
of the company is obtained or consideration is exchanged. This adjustment
includes the shareholders’ equity impact of reversing the results of operations
for the period for which the acquired entities would not have been consolidated
under US GAAP. The impact on goodwill and other intangible assets as a
result of
the different dates of acquisition under US GAAP, net of accumulated
amortization, are included separately in notes (b) and (c) below.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
|
(a)
|
Business
combinations (continued) |
|
|
|
(ii) Value
of
purchase consideration |
|
Previously,
the value of the purchase consideration was determined based
on the market or fair value of the shares issued or cash paid on the date
the
transaction was consummated, normally the date the shares were exchanged
or cash
was paid. The purchase consideration did not include the fair value of
options
issued to replace vested options of the acquired company. Under US GAAP,
the
value of the purchase consideration, using shares, is determined by using
the
average market value of the shares a few days before and after the announcement
date. In addition, under US GAAP, the fair value of options issued to replace
vested options of the acquired company are also recorded as part of the
purchase
consideration based on the fair market value of the vested options outstanding
at the acquisition date.
|
|
(iii) Exchange
of
non-monetary assets |
In
prior years the Group has undertaken a number of transactions involving
the
exchange of non-monetary assets, normally the exchange or swap of shares.
Previously, the gain recorded and cost of investments acquired were based
on the
value of the shares received. Under US GAAP, the gain recorded and cost
of the
investments acquired were based on the market value of the shares surrendered
on
the dates that the exchanges were consummated. This adjustment decreases
the
goodwill previously recognized and subsequently written off to reserves
which
has been reinstated under US GAAP (refer to note (b)).
Goodwill
recorded on acquisitions prior to April 1, 2000 was written off
against retained earnings in the year of acquisition. For purposes of US
GAAP
prior to the adoption of FAS 142, “Goodwill and other intangible assets”, all
goodwill written off against retained earnings has been reinstated as an
asset
on the balance sheet and amortized. Upon adoption of FAS 142 on April 1,
2002,
the Group no longer amortizes goodwill and annually tests goodwill, by
reporting
unit, for impairment. Under IFRS, prior to April 1, 2004, goodwill was
amortized
over an estimated useful life not exceeding 20 years. As of April 1, 2004,
the
Group adopted IAS 36, “Impairment of Assets” and IFRS 3, “Business
Combinations”, with retrospective application to December 20, 2002, and
discontinued the amortization of goodwill which is consistent with the
accounting treatment under US GAAP. Although the statements are similar,
the
difference in the prospective adoption dates will give rise to a continuing
equity difference between IFRS and US GAAP.
Under
US GAAP, the Group has impaired goodwill related to certain Group companies
based on the goodwill impairment tests required by FAS 142. Under US GAAP,
an
indication of impairment exists when the carrying value of a reporting
unit
exceeds its fair value, which is based on undiscounted cash flows or market
values for listed companies. The impairment charge for the reporting unit
is
calculated based on an allocation of the fair value of the reporting unit
to the
underlying tangible and intangible assets and then comparing the remaining
implied goodwill to the recorded goodwill of that reporting unit.
Goodwill
also includes an adjustment related to the recognition of
deferred tax assets at Netmed NV during the 2005 financial year. A portion
of
the deferred tax asset was reversed, however, the classification was recorded
in
different line items on the income statement. For US GAAP income statement
presentation purposes, this transaction was included in the taxation line,
whereas for IFRS it was included in the goodwill amortization and taxation
lines.
Patents,
trademarks, title rights, subscriber bases and similar other
intangible assets acquired before April 1, 2000 were written off against
retained earnings in the year of acquisition. Under US GAAP, all other
intangible assets written off against retained earnings have been reinstated
as
assets on the balance sheet and are being amortized using the straight-line
method over a range of estimated useful lives of three to eight years.
Upon
adoption of FAS 142 on April 1, 2002, these intangible assets were determined
to
have a finite useful life and therefore continue to be amortized over their
remaining estimated useful lives. During the current year, certain brandnames
that were previously considered indefinite lived were determined to have
finite
lives and are now being amortized over the estimated useful lives.
Under
IFRS, prior to April 1, 2004, intangible assets, including goodwill, were
amortized over their estimated useful lives not exceeding 20 years. As
of April
1, 2004, the Group adopted IAS 38, “Intangible Assets” and discontinued the
amortization of intangible assets with indefinite lives which is consistent
with
the accounting treatment under US GAAP. Under both IFRS and US GAAP, the
carrying value of other intangible assets is assessed for impairment whenever
changes in circumstances indicate that the historical carrying value may
not be
appropriate.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
(c) Intangible assets
(continued) |
|
|
|
The
expected intangible amortisation expense, in accordance with US
GAAP, is presented below: |
|
|
|
|
R’000
|
|
|
12
months to: |
|
|
|
|
|
|
|
|
|
March
31, 2007 |
|
181,498
|
|
|
March
31, 2008 |
|
179,787
|
|
|
March
31, 2009 |
|
179,787
|
|
|
March
31, 2010 |
|
109,288
|
|
|
March
31, 2011 |
|
109,288
|
|
|
(d)
|
|
Purchase
of minority interests (successive acquisition),
net |
|
|
Upon
adoption of IFRS effective April 1, 2004, the Group chose to take the IFRS
1
business combination exemption as explained in note 2 of the annual financial
statements. Therefore when undertaking transactions with minorities in
successive acquisitions, the entire difference between the purchase
consideration and the net assets acquired of the remaining interest in
an entity
that it did not own was included within a separate category of equity.
The
minority interest is recorded at the minority’s proportion of the net fair value
of the net assets acquired. Under US GAAP transactions with minorities
are
treated as a purchase business combination. The minority interest is valued
at
its historical cost book value and fair values are assigned upon the step
up
purchase of the minority interest. Therefore, for all successive acquisitions
since December 20, 2002, all the purchase price step-up adjustments recorded
under US GAAP as well as those related to the underlying US GAAP – IFRS
differences have been treated as reconciling adjustments.
The
largest of these successive acquisition differences related to the purchase
of
the remaining minority interests in MIH Limited and MIH Holdings Limited
on
December 20, 2002, the purchase of an additional minority interest in
Multichoice Hellas SA in September 2004 and the acquisition of the remaining
interest in Netmed NV in January 2006 (see (l)). Certain of these acquisitions
also had differences in the value of purchase consideration as discussed
in
(a)(ii).
The
amounts determined in the purchase price allocation under US GAAP were
recorded
to goodwill, brand names, patents and technology, subscriber bases, equity
accounted investments and the related deferred tax accounts. The adjustments
for
these items have been recorded in one line item on the reconciliation of
net
profit and the reconciliation of total shareholders’ equity but have been
presented separately in the related US GAAP condensed consolidated income
statement and condensed consolidated balance sheet presented on page F-121
and
F-122.
(e) Share-based
compensation
The
Group accounts for its share options in accordance with IFRS 2, “Share-based
Payments” and has recognised compensation expense in the income statement,
representing the fair value of share options granted to employees. The
weighted
average fair value of the options granted was based on the inputs and
assumptions as disclosed in note 38.
For
US
GAAP purposes, the Group accounts for its share options granted to employees
under Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to
Employees” (“APB 25”), as permitted by Statement of Financial Accounting
Standards No. 123 “Accounting for Stock Based Compensation” (“FAS 123”). In
general, APB 25 requires that the intrinsic value of the options, defined
as the
market value of the share at the grant date less the exercise price, be
recognised as compensation expense prospectively, over the vesting period
of the
related options. The Group established four new stock appreciation right
plans
during the year. Under US GAAP these plans are considered variable plans
and
compensation expense is calculated using the fair market value movement
in the
shares of these plans. Amounts related to minority interest and to compensation
expense for shares issued to non-employees were immaterial.
As
permitted by FAS 123, for purposes of US GAAP, the Group applies APB 25
and
related interpretations in accounting for its option plans. Had compensation
costs for the Group’s share option plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method
of
FAS 123, the Group’s net profit and net profit per share under US GAAP would
have been adjusted to the pro forma amounts indicated below:
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
|
(e) Share-based
compensation
(continued) |
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
(Rand
thousands except per share data)
|
|
|
|
Profit
as reported under US GAAP |
|
2,516,774
|
|
2,285,954
|
|
|
Add:
|
|
Share-based
compensation expense included |
|
|
|
|
|
|
|
|
in
reported profit under US GAAP |
|
171,988
|
|
155,320
|
|
|
Deduct:
|
|
Total
share-based compensation expense |
|
|
|
|
|
|
|
|
determined
under fair value method |
|
(233,094) |
|
(168,524) |
|
|
Pro
forma profit under US GAAP |
|
2,455,668
|
|
2,272,750
|
|
|
Profit
per N ordinary share (cent) |
|
|
|
|
|
|
-
Basic - as reported |
|
|
|
|
|
|
|
|
-
continuining operations |
|
636
|
|
810
|
|
|
|
|
-
discontinuing operations |
|
253
|
|
15
|
|
|
-
Basic - pro forma |
|
|
|
|
|
|
|
|
-
continuining operations |
|
614
|
|
806
|
|
|
|
|
-
discontinuing operations |
|
253
|
|
15
|
|
|
-
Diluted - as reported |
|
|
|
|
|
|
|
|
-
continuining operations |
|
598
|
|
758
|
|
|
|
|
-
discontinuing operations |
|
238
|
|
14
|
|
|
-
Diluted - pro forma |
|
|
|
|
|
|
|
|
-
continuining operations |
|
578
|
|
759
|
|
|
|
|
-
discontinuing operations |
|
238
|
|
14
|
|
(f)
|
|
Adjustment
to dilution (losses)/gains |
|
|
|
|
In
prior years, certain subsidiaries issued shares to third parties for cash
or
non-cash assets, which resulted in a dilution of the Group’s ownership in these
entities. Under IFRS, the Group has recorded dilution (losses)/gains resulting
from these transactions as the value received for the subsidiaries’ shares
issued were (less than)/greater than the Group’s carrying value prior to the
transactions. Generally, the calculation of, and accounting for, dilution
losses
and gains is similar under US GAAP as it is under IFRS. However, the amount
of
the recognised dilution loss or gain under US GAAP differs from the amount
recognised under IFRS as a result of the different carrying values for
certain
subsidiaries’ net assets under US GAAP.
(g) Post-retirement
employee
liability
The
Group maintains a number of post-retirement medical benefit plans. In
general, there is little difference in the determination of post-retirement
employee benefits under IFRS and US GAAP. However, the amounts recorded
under US
GAAP differ from the amounts recorded under IFRS as under IFRS the full
amount
of service costs and actuarial gains/losses have been recognized in the
financial statements. Under US GAAP the Company has unrecognized past service
gains and unrecognized actuarial losses that are being amortized over a
longer
period.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
(g) Post-retirement
employee benefits (continued)
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
Change
in benefit obligation |
|
|
|
|
Benefit
obligation at April 1 |
|
101,274
|
|
153,710
|
Service
cost |
|
814
|
|
1,316
|
Interest
cost |
|
8,364
|
|
13,506
|
Policy
change |
|
–
|
|
(52,221) |
Actuarial
loss/(gain) |
|
36,861
|
|
(3,533) |
Settlement
gain |
|
–
|
|
(4,220) |
Benefits
paid |
|
(5,749) |
|
(7,284) |
Benefit
obligation at March 31 |
|
141,564
|
|
101,274
|
The
assumptions used to determine the benefit obligation as at, and the net
healthcare costs for the years ended March 31, 2006 and 2005 are listed
below:
|
|
March
31
|
|
|
|
2006
|
|
2005
|
|
Benefit
obligation |
|
|
|
|
|
Rate
of future healthcare inflation per annum (1)
|
|
6.5 |
% |
7.0 |
% |
Discount
rate per annum (2)
|
|
7.5 |
% |
8.5 |
% |
Average
retirement age |
|
60 |
|
60 |
|
Continuaton
at retirement |
|
100 |
% |
100 |
% |
|
|
|
|
|
|
Net
Healthcare Cost
|
|
|
|
|
|
Rate
of future healthcare inflation per annum
(1)
|
|
6.5
|
% |
7.0 |
% |
Discount
rate per annum (2)
|
|
7.5 |
% |
9.0 |
% |
(1)
|
In
regards to the future healthcare inflation assumption, the
initial trend and ultimate trend are the same. |
(2)
|
The
discount rate is based on current bond yields of appropriate
term gross of tax and is determined by reference to current market
yields
on government bonds. The discount rate is based on the yield curve
and not
on a particular benchmark bond. The returns on the yield curve
are
converted to effective rates. The discount rate is set at a level
consistent with the effective yields in a range of medium to long
durations of, say, 5 to 15 years. There is no adjustment for tax
or
expenses. |
The
expected employer benefit payments for the next five years and cumulatively
thereafter following March 31, 2006 is presented below:
|
|
R’000
|
Period
|
|
|
Year
ending March 31, 2007 |
|
6,297
|
Year
ending March 31, 2008 |
|
6,707
|
Year
ending March 31, 2009 |
|
7,143
|
Year
ending March 31, 2010 |
|
7,607
|
Year
ending March 31, 2011 |
|
8,101
|
April
1, 2011 to March 31, 2016 |
|
49,125
|
The
post-retirement medical benefit plans are unfunded. The Group’s best estimate of
expected contributions for the next year equals the expected benefit payment
of
Rand 6.3 million.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
(g) Post-retirement
employee
benefits (continued) |
|
Net
periodic post-employment cost under US GAAP includes the
following components: |
|
|
|
|
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
|
Net
period post-retirement benefit cost charged to operating
profit |
|
|
|
|
Service
cost |
|
814
|
|
1,316
|
Interest
cost |
|
8,364
|
|
13,506
|
Amortization
of transition obligation |
|
–
|
|
2,188
|
Prior
service cost recognized |
|
(2,138) |
|
–
|
Recognized
net actuarial gain |
|
(1,393) |
|
(870) |
Net
post-retirement benefit cost charged to operating
profit |
|
5,647
|
|
16,140
|
The
actuarial and recorded liabilities for post-retirement health care benefits,
none of which are funded, under US GAAP are as follows:
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
Funded
status at March 31 |
|
|
|
|
Funded
status |
|
(141,564) |
|
(101,274) |
Unrecognized
net actuarial losses/(gains) |
|
6,250
|
|
(32,004) |
Unrecognized
past service cost |
|
(31,433) |
|
(33,571) |
Net
amount recognized pension cost |
|
(166,747) |
|
(166,849) |
At
March 31, 2006 an amount of Rand 166.7 million (2005: Rand 166.8 million)
is
recognized in the US GAAP balance sheet relating to the accrued benefit
liability attributable to these plans.
A
one
percentage point increase in the assumed health-care cost inflation rate
would
increase the accumulated post-retirement benefit obligation as at March
31, 2006
by Rand 22.7 million (2005: Rand 11.0 million) and the net period
post-retirement benefit cost for 2006 by Rand 2.6 million (2005: Rand 1.2
million). A one percentage point decrease in the assumed health-care cost
inflation rate would decrease the accumulated post-retirement benefit obligation
as at March 31, 2006 by Rand 18.1 million (2005: Rand 12.5 million) and
the net
period post-retirement benefit cost for 2006 by Rand 1.4 million (2005:
Rand 1.2
million). The valuation of the liability was performed as at March 31,
2006.
(h) Property,
plant and
equipment
In
terms of the requirements of IFRS 1 the Group is required to apply IAS
16
“Property, Plant & Equipment” retrospectively. The Group has reviewed
individual items of property, plant and equipment in terms of their carrying
values (fully depreciated assets), residual values and depreciation lives
and
adjusted the carrying value and useful lives of some items at the date
of
transition to IFRS in terms of the requirements of IAS 16 and IFRS 1 (fair
value
– deemed cost exemption) (see note 2). These adjustments have changed the
previously recorded carrying values and subsequent depreciation charges
for the
years ended March 31, 2006 and 2005. Under US GAAP, the changes in useful
lives
to certain property and equipment have been amended prospectively effective
April 1, 2005. However, the revaluation of fully depreciated assets and
other
selected property and equipment is not allowed under US GAAP.
Under
IFRS, borrowing costs are only capitalized to qualifying assets if the
borrowings directly relate to the financing of the purchase or construction
of
that particular asset. Under US GAAP borrowing costs are capitalized to
qualifying assets if interest charges are incurred at any level within
the Group
and do not need to be specifically related to that particular
asset.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
|
(i)
|
Proportionate
consolidation |
|
|
Under
IFRS, the Group proportionately consolidates its interests in
jointly controlled entities (“Joint Ventures”). This benchmark treatment
in IAS 31, “Interests in Joint Ventures” results in the Group reporting in
its consolidated financial statements the proportionate share of
the
income, expenses, assets and liabilities of the joint venture.
Under US
GAAP, interest in joint ventures is accounted for in accordance
with APB
No. 18 “The Equity Method of Accounting for Investments in Common Stock”.
Under the equity method, the investment is initially recognized
at cost
and the carrying amount is increased or decreased to recognize
the
investor’s share of the profits or losses of the investee after the date
of acquisition. If under the equity method the Group’s share of losses of
a joint venture equals or exceeds the carrying amount of its investment,
the Group ordinarily discontinues equity accounting. Additional
losses are
provided for to the extent that the Group has incurred obligations
or made
payments on behalf of the joint venture that the Group has guaranteed
or
otherwise committed. Accordingly, net profit may differ between
IFRS and
US GAAP with the joint venture losses fully accounted for under
IFRS but
potentially limited under US GAAP. Differences in US GAAP and IFRS
shareholders’ equity relates to the cumulative difference of such losses
allowed for under proportionate consolidation. |
|
|
(j)
|
Onerous
contracts |
|
|
IFRS
defines an onerous contract as a contract in which the
unavoidable costs of meeting the obligations under the contract
exceed the
economic benefits expected to be received under it. The unavoidable
costs
under the contract reflect the least net cost of exiting the contract,
which is the lower of the cost of fulfilling it and any compensation
or
penalties arising from failure to fulfill it. Under IFRS, the Group
has
provided for such onerous contracts which arose as a result of
certain
business combinations. Under US GAAP, FAS 146 “Accounting for Costs
Associated with Exit of Disposal Activities,” allows for creation of a
liability for certain costs that will continue to be incurred under
a
contract for its remaining term without economic benefit only when
the
company ceases using the rights conveyed by that contract. At that
date, a
liability can be recorded for the difference between the lease
payments to
be made reduced by the fair value of sublease rentals that could
be
reasonably obtained from the property. The Group’s onerous leases did not
meet this criteria under US GAAP and therefore the liability and
related
expense recorded under IFRS has been reversed. |
|
|
(k)
|
Consolidation
of entities under FIN
46R |
|
|
The
Group adopted FIN 46R, “Consolidation of Variable Interest
Entities”, prospectively on April 1, 2004 for US GAAP. Under the revised
interpretation, certain entities known as Variable Interest Entities
(VIE’s) must be consolidated by the primary beneficiary of the entity.
The
primary beneficiary is generally defined as having the majority
of the
economic risks and rewards arising from the VIE. |
|
|
In
terms of FIN 46R, the Group has consolidated certain investments
from April 1, 2004. In the past these investments were equity-
accounted.
Under US GAAP, equity accounting was discontinued for certain investments
as these investments were carried at Rnil value due to the entities’
having negative asset value. On adoption of FIN 46R with the application
of full consolidation accounting rules, losses previously limited
have now
been taken into account. |
|
|
The
most significant entity that required consolidation under FIN
46R was MNH Holdings (1998) (Proprietary) Limited (“MNH 98”), a joint
venture in which Naspers holds a 50% interest. MNH 98 is a limited
liability company and exists only to provide a vehicle with which
to hold
a 52.7% investment in both M-Net and SuperSport, both pay television
content providers. In addition to Naspers’ 50% interest in MNH 98, it
directly owns a 33.8% interest in both M-Net and SuperSport. Approximately
70% of the revenues of M-Net and SuperSport are derived from activities
with the Naspers Group of companies. |
|
|
MNH
98’s only activities are to receive and re-distribute
dividends. It has no employees, management, or other inputs and
outputs
associated with an ongoing operation. MNH 98 has been capitalized
with
limited equity and the other investment partners in MNH 98 are
unrelated
third-party competitors. As of April 1, 2005 MNH 98 had negative
shareholder’s equity of Rand 96 million and total assets of Rand 1,794
million. The assets of M-Net and SuperSport of Rand 1,890 million
serve as
collateral for the obligations of MNH 98. The other interest holders
in
MNH 98 have no recourse to the general credit of Naspers in the
event of
default by MNH 98. |
|
|
Because
Naspers has been determined to be the primary beneficiary
of MNH 98 through its direct ownership interests and business transactions
with M-Net and SuperSport, this company was consolidated as of
April 1,
2004 and continues to be consolidated as of March 31, 2006. The
results of
its operations for the years ended March 31, 2006 and 2005 have
also been
consolidated by Naspers. The adjustments to net profit and shareholders
equity under IFRS related to the consolidation of entities under
FIN 46R
were related to the recording of additional losses previously not
recognized under equity method accounting of certain investments
and the
adjustment to treasury shares of 100% of the holdings of Naspers
shares by
the M-Net and SuperSport employee share trusts, respectively. |
|
|
Other
interests that have been consolidated relating to the
adoption of FIN 46R include Free State Cheetahs and Griqualand
West Rugby.
The impact on the Group’s US GAAP balance sheet and income statement
related to the consolidation of these entities was
insignificant. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
39.
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(continued) |
|
|
(l)
|
Impairment
of Investments |
|
|
Throughout
the year the stock price of one of the Group’s equity
method investees, Beijing Media Corporation (“BMC”), declined from its
original purchase price, resulting in an indication of a potential
impairment. The investment was analyzed for impairment under both
IFRS and
US GAAP. Under IFRS, the impairment was assessed in accordance
with IAS 36
“Impairment of Assets” based on estimated discounted cash flows from
holding the investment and its ultimate disposition. It was determined
that the sum of these future cash flows exceeded the current carrying
value and therefore no impairment was recorded. |
|
|
Under
US GAAP, the impairment was assessed in accordance with Staff
Accounting Bulletin No. 59. It was determined that the impairment
was
other than temporary since the carrying value had exceeded the
market
value for nine months during the year and the calculation of the
impairment was based on the market value of BMC at the balance
sheet date,
resulting in an impairment charge for US GAAP purposes. |
|
|
(m)
|
Put
option liability |
|
|
In
January 2006, the minority interest of NetMed NV exercised a put
on their shares to the Group, requiring the Group to purchase a
specified
number of NetMed NV shares. |
|
|
Under
US GAAP, the transaction was accounted for at the time the
option was exercised by recording the fair value of the put option
liability. The transaction was accounted for as a step acquisition
and the
percentage of the assets and liabilities acquired were increased
to their
current fair value, including the recognition of goodwill and other
intangible assets – primarily subscriber base and brand names with the
remainder being recorded as goodwill. The adjustments for these
items have
been recorded in one line item on the reconciliation of net profit
and the
reconciliation of total shareholders’ equity, but have been presented
separately in the related US GAAP condensed consolidated income
statements
and condensed consolidated balance sheet on pages F-122 and
F-123. |
|
|
Under
IFRS this put option with minority shareholders was
considered outstanding from the time it was entered into, based
on the
amended guidance in IAS 32R. However, the Group elected the IFRS
1
allowance to present comparative information for IAS 32 and 39
in
accordance with former GAAP and therefore this derivative liability
has
been recorded as of April 1, 2005 with a corresponding adjustment
to
shareholders’ equity since it is treated as a successive acquisition. The
fair value movement between April 1, 2005 and March 31, 2006 has
been
recorded in the income statement. The movement between April 1,
2005 and
January 2006 has been reversed for US GAAP. |
|
|
Media24
Limited entered into a contract containing a put option
whereby the option holder can require Media24 Limited to purchase
the
option holder’s remaining 7.5% interest in Paarl Media Holdings
(Proprietary) Limited (“Paarl Media”). This put option may be exercised
within 30 days from the date of acceptance by the board of the
annual
financial statements of Paarl Media for the year ending March 31,
2008.
For IFRS purposes, the put option has been considered outstanding
from the
time that it was entered into and has been recorded as a derivative
financial instrument liability in the financial statements. For
US GAAP
purposes, the transaction will not be accounted for until the option
is
exercised. |
|
|
(n)
|
Other |
|
|
There
are a number of other miscellaneous adjustments that are
required to reconcile the Group’s IFRS net profit and shareholders’ equity
to US GAAP which individually are not significant and therefore
have been
presented in aggregate. These adjustments relate to software and
website
development costs, accounting for leases, provision for teach out
costs
and write-back of asset impairment. Should any of these adjustments
become
more substantial in the future, they will be disaggregated and
separately
presented. |
|
|
(o)
|
Discontinued
operations |
|
|
As
discussed in note 28, the Group entered into an agreement to
dispose of its interest in United Broadcasting Corporation (“UBC”) and
MKSC World Dot Com Company (“KSC”) on November 7, 2005 and this
transaction was concluded on January 6, 2006. Under the exemption
allowed
upon adoption of IFRS 1, the cumulative translation adjustment
was reset
to zero, resulting in a difference in the calculation of the profit
on
disposal under US GAAP and IFRS. The profit on disposal included
a release
of the cumulative translation adjustment under US GAAP of Rand
154.6
million. The remainder of the income statement difference between
IFRS and
US GAAP resulted from differing net asset values of the disposed
businesses between IFRS and US GAAP. |
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES GENERALLY
ACCEPTED
ACCOUNTING PRINCIPLES
(continued)
Additional
disclosure
requirements |
Presentation
in the financial statements – condensed consolidated income
statements
Under
IFRS, the presentation of earnings per share is not limited to basic and
diluted
earnings per share on the net profit/(loss) attributable to shareholders.
Presentation of additional earnings per share data is allowed when management
believes that it provides useful information to an investor and presents
a true
and fair view of the Group’s results. Under US GAAP, earnings per share may only
be presented on a basic and diluted basis for profit and loss from continuing
operations, discontinuing operations, cumulative effect of change in accounting
principle and net profit/(loss) for the period. Accordingly, the presentation
of
“headline earnings per N ordinary share”, “dividend per N ordinary share”,
“dividend per A ordinary share”, “proposed dividend per A ordinary share” and
“proposed dividend per N ordinary share” are not allowed under US
GAAP.
Presentation
in the financial statements – treatment of certain financial
asset investments
Under
IFRS, the Group holds certain financial asset investments that are related
to
certain long-term debt arrangements. For financial reporting presentation
purposes these assets have been treated as a contra liability within long-term
debt. Under US GAAP, in accordance with FIN 39, “Offsetting of Amounts Related
to Certain Contracts, an interpretation of APB Opinion No. 10 and FASB
No. 105”,
these financial asset investments do not qualify for right of set-off with
the
long-term debt and therefore would be separately presented as marketable
equity
securities. The impact of this difference would be to increase marketable
equity
securities and long-term debt at March 31, 2006 by Rand 164.9 million (2005:
Rand 417.4 million), presented in accordance with US GAAP. The reclassification
has been presented in the US GAAP condensed consolidated balance
sheets.
Under
FAS 131, “Disclosure about Segments of an Enterprise and Related Information”,
Group management’s primary performance measure is defined as operating
profit/(loss) before amortization and other gains/(losses) - net, but including
finance costs on transponder and transmitter finance leases. Using Group
management’s primary performance measure under FAS 131, the segment results for
the electronic media segment would have been Rand 2,362.9 million (2005:
Rand
1,792.6 million) and for the print media segment Rand 651.5 million (2005:
Rand
635.8 million). The consolidated segment total would have been Rand 2,959.3
million (2005: Rand 2,385.4 million).
The
consolidated segment assets as reported exclude any deferred tax
assets.
|
Certain
risk concentrations |
The
Group’s digital programming is or will be transmitted to customers through
different satellites around the world, and in certain regions the terrestrial
analogue signal is also transmitted to regional broadcast points through
satellites. In addition, the Group receives a significant amount of its
programming through satellites. Satellites are subject to significant risks
that
may prevent or impair commercial operations. Although the Group has not
experienced any significant disruption of its transmissions, the operation
of
satellites is beyond the control of the Group. Disruption of satellite
transmissions could have a material adverse effect on the Group.
|
Programme
and film rights |
The
Group accounts for fixed price programme and film rights contracts and
the
portion of variable price programme and film rights contracts for which
the cost
can be reliably measured as an asset and liability under IAS 38, “Intangible
assets” and IAS 37, “Provisions, contingent liabilities and contingent assets”.
Under FAS 63 “Financial Reporting by Broadcasters” the asset and liability are
recorded when the license period begins, the programme is available for
its
first broadcast and the cost of each program is known or reasonably
determinable. Under US GAAP, sporting and other live event programmes are
therefore only accounted for when available for telecast. The different
treatment does not have an impact on net profit/(loss) or shareholders’ equity.
The total assets as at March 31, 2006 relating to programme and film rights
and
the related total liabilities decreased from the amount reported under
IFRS by
Rand 242.1 million (2005: Rand 127.8 million decrease).
|
Secondary
Tax on Companies
(“STC”) |
STC
is
a tax levied on South African companies at a rate of 12.5% of dividends
distributed. However, in the case of companies liquidated after April 1,
1993,
STC is only payable on undistributed earnings earned after April 1, 1993.
On
declaration of a dividend, the Group includes the tax of 12.5% on this
dividend
in its computation of the income tax expense in the period of such
declaration.
Under
IFRS, a deferred tax liability is not raised on dividends until they are
actually declared. With the adoption of AC501, “Accounting for South African
secondary tax on companies” the Group has recorded a deferred tax asset related
to STC credits where it is probable that a dividend will be declared and
that
the credit would be able to be utilized. Under US GAAP, the Group has adopted
the allowed disclosure only approach related to the deferred taxation impact
of
STC on unremitted earnings of Group companies. All deferred tax assets
recorded
in accordance with AC501 have been reversed for US GAAP purposes.
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES
GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
(continued)
Additional
disclosure requirements
(continued)
Secondary
Tax on Companies (“STC”)
(continued)
If
the
Group distributed all of its undistributed retained earnings as at March
31,
2006, of which Rand 9,854.2 million (2005: Rand 7,591 million) would be
subject to STC, the Group would have to pay additional taxes of Rand 1,095
million (2005: Rand 780 million), net of STC credits the company could
utilize.
If all the earnings attributable to shareholders for the year ended March
31,
2006 were distributed, there would be a Rand 398.8 million STC charge (2005:
Rand 298.1 million).
|
Derivative
financial
instruments |
The
Group uses derivative instruments to reduce exposure to fluctuations in
foreign
currency exchange rates and interest rates. These instruments mainly comprise
foreign exchange contracts, interest rate caps and interest rate swap
agreements. Derivative financial instruments are recognised in the balance
sheet
at fair value. Changes in the fair value of derivatives that are designated
and
qualify as fair value hedges and that are highly effective, are recorded
in the
income statement, along with changes in the fair value of the hedged asset
or
liability that is attributable to the hedged risk. Changes in the fair
value of
derivatives that are designated and qualify as cash flow hedges and that
are
highly effective are recognised in equity, and the ineffective part of
the hedge
is recognised in the income statement. Hedges of net investments in foreign
entities are accounted for similarly to cash flow hedges.
During
the year, there was no ineffectiveness recognised in the income statement
on the
Group’s hedges. Derivative instruments are recorded on the face of the balance
sheet and as part of COGS and Finance costs – net in the income statement. The
cash flows from hedges are recorded as part of operating and investing
cash
flows.
In
the
process of transition to IFRS, the Group identified instances where
reclassifications were required between certain balance sheet items compared
with the classifications that were presented under former GAAP (see note
2).
These reclassifications were also reflected for US GAAP purposes in the
US GAAP
balance sheet on page F-122.
Additionally
during the year, certain prior year amounts were
reclassified to reflect the nature of the items. The reclassifications
included
an adjustment from investment in associates to goodwill for amounts recorded
for
the consolidation of MNet/SuperSport and a reclassification of items recorded
to
reflect the equity accounting of the joint venture.
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES GENERALLY
ACCEPTED
ACCOUNTING PRINCIPLES
(continued)
To
provide a better understanding of the differences in accounting standards
and
the overall impact of the adjustments on the financial statements, the
information below presents the condensed consolidated income statements
under US
GAAP in a format consistent with the presentation of US GAAP consolidated
income
statements and after processing the adjustments in (a) to (o), all of which
are
discussed above.
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
|
|
(in
thousands except for share information)
|
Net
revenues |
|
15,751,272
|
|
13,189,371
|
Operating
expenses |
|
(12,674,608) |
|
(10,725,685) |
Operating
profit |
|
3,076,664
|
|
2,463,686
|
Finance
costs - net |
|
(35,394) |
|
(249,182) |
Share
of equity-accounted results |
|
62,894
|
|
194,159
|
Profit
on sale and dilution of interest in subsidiaries, joint
venture |
|
|
|
|
and
associates, net |
|
72,718
|
|
590,760
|
Profit
from continuing operations before tax and
minority |
|
|
|
|
interest
|
|
3,176,882
|
|
2,999,423
|
Income
tax |
|
(1,002,305) |
|
(523,949) |
|
Profit
from continuing operations before minority
interest |
|
2,174,577
|
|
2,475,474
|
Minority
interest |
|
(373,563) |
|
(231,536) |
|
Profit
from continuing operations |
|
1,801,014
|
|
2,243,938
|
Discontinued
operations |
|
715,760
|
|
42,016
|
Net
profit attributable to shareholders |
|
2,516,774
|
|
2,285,954
|
|
Weighted
average N ordinary shares outstanding |
|
283,297,671
|
|
276,883,635
|
Diluted
weighted average N ordinary shares outstanding
|
|
301,263,329
|
|
294,253,524
|
|
Basic
profit/(loss) per Class N ordinary share
(cent) |
|
|
|
|
Continuing
operations |
|
636
|
|
810
|
Discontinuing
operations |
|
253
|
|
15
|
|
|
889
|
|
825
|
Diluted
profit/(loss) per Class N ordinary share
(cent) |
|
|
|
|
Continuing
operations |
|
598
|
|
763
|
Discontinuing
operations |
|
238
|
|
14
|
|
|
836
|
|
777
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES GENERALLY
ACCEPTED
ACCOUNTING PRINCIPLES
(continued)
To
provide a better understanding of the differences in accounting standards
and
the overall impact of the adjustments on the financial statements, the
information below presents the condensed consolidated balance sheets under
US
GAAP after processing the adjustments in (a) to (o), discussed above and
including other US GAAP disclosures and reclassifications.
|
|
March
31
|
|
|
2006
|
|
2005
|
|
|
R’000
|
|
R’000
|
|
ASSETS
|
|
|
|
|
Non-current
assets |
|
|
|
|
Property,
plant and equipment |
|
3,673,628
|
|
3,313,720
|
Goodwill
and other intangibles |
|
3,411,723
|
|
2,824,993
|
Investments
and loans |
|
1,513,578
|
|
1,820,842
|
Available-for-sale
investments |
|
32,540
|
|
314,796
|
Programme
and film rights |
|
71,072
|
|
32,184
|
Derivative
financial instruments |
|
54,303
|
|
54,179
|
Deferred
taxation |
|
642,876
|
|
524,367
|
Total
non-current assets |
|
9,399,720
|
|
8,885,081
|
Current
assets |
|
|
|
|
Deferred
taxation |
|
73,119
|
|
180,302
|
Inventory
|
|
491,704
|
|
377,653
|
Programme
and film rights |
|
448,974
|
|
608,530
|
Receivables
|
|
2,352,619
|
|
2,114,801
|
Investments
and loans |
|
–
|
|
8,111
|
Derivative
financial instruments |
|
144,324
|
|
178,694
|
Restricted
cash |
|
237,768
|
|
70,665
|
Cash
and cash deposits |
|
6,559,191
|
|
3,766,272
|
Total
current assets |
|
10,307,699
|
|
7,305,028
|
|
TOTAL
ASSETS |
|
19,707,419
|
|
16,190,109
|
|
EQUITY
AND LIABILITIES
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
Share
capital and premium |
|
5,220,735
|
|
4,893,469
|
Other
reserves |
|
(151,207) |
|
54,201
|
Retained
income |
|
3,638,969
|
|
1,326,830
|
Total
shareholders’ equity |
|
8,708,497
|
|
6,274,500
|
Minority
interest |
|
280,966
|
|
295,868
|
Non-current
liabilities |
|
|
|
|
Post-retirement
medical liability |
|
193,766
|
|
207,198
|
Long-term
liabilities |
|
2,590,025
|
|
2,675,876
|
Derivative
financial instruments |
|
16,684
|
|
16,038
|
Deferred
taxation |
|
714,780
|
|
604,511
|
Total
non-current liabilities |
|
3,515,255
|
|
3,503,623
|
Current
liabilities |
|
|
|
|
Current
portion of long-term liabilities |
|
1,775,557
|
|
1,008,014
|
Provisions
|
|
62,553
|
|
69,150
|
Accounts
payable, accrued expenses and other current
liabilities |
|
4,875,367
|
|
4,164,963
|
Derivative
financial instruments |
|
105,471
|
|
404,239
|
Bank
overdraft and short-term loans |
|
383,753
|
|
469,752
|
Total
current liabilities |
|
7,202,701
|
|
6,116,118
|
TOTAL
EQUITY AND LIABILITIES |
|
19,707,419
|
|
16,190,109
|
(CONTINUED)
39.
|
|
DIFFERENCES
BETWEEN INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING
PRINCIPLES
|
|
|
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income |
|
|
|
|
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Net
profit under US GAAP |
|
2,516,774
|
|
2,285,954
|
|
|
Other
comprehensive income: |
|
|
|
|
|
|
Foreign
currency translations |
|
(78,524)
|
|
36,681
|
|
|
Net
change in fair value of cash flow hedges |
|
(20,499)
|
|
16,878
|
|
|
Unrealized
profits on marketable securities |
|
–
|
|
1,723
|
|
|
Comprehensive
income |
|
2,417,751
|
|
2,341,236
|
Amounts
in other comprehensive income have been recorded net of tax at an
average rate of 29% (2005: 30%).
Under
IFRS, the consolidated cash flow statements are presented in accordance
with IAS
7, “Cash flow statements”. The statements prepared under IAS 7 present
substantially the same information as required under US GAAP as interpreted
by
FAS 95 “Statement of Cash Flows.” However, the definition of cash flow differs
between IFRS and US GAAP. Cash flow under IFRS represents increases or
decreases
in cash and cash equivalents, which comprises cash in hand and repayable
on
demand, restricted cash and overdrafts. Under US GAAP, cash flow represents
increases or decreases in cash and cash equivalents, which include short
term,
highly liquid investments with original maturities of less than 90 days,
and
excludes restricted cash and overdrafts. The movement in restricted cash
and
overdrafts have been included within financing activities under US
GAAP.
The
principal non-cash investing and financing activities are the issue of
shares as
consideration for business acquisitions and the acquisition of property,
plant
and equipment using finance leases.
A
summary of the Group’s operating, investing and financing activities, classified
in accordance with US GAAP, are as follows:
|
|
|
|
March
31
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
R’000
|
|
R’000
|
|
|
Net
cash provided by operating activities |
|
3,392,997
|
|
2,346,984
|
|
|
Net
cash used in investing activities |
|
(133,623)
|
|
(683,603)
|
|
|
Net
cash used in financing activities |
|
(420,448)
|
|
(364,272)
|
|
|
Net
increase in cash and cash equivalents |
|
2,838,926
|
|
1,299,109
|
|
|
Cash
and cash equivalents at beginning of year |
|
3,766,272
|
|
2,453,651
|
|
|
Exchange
adjustments |
|
(46,007)
|
|
13,512
|
|
|
Cash
and cash equivalents at end of year |
|
6,559,191
|
|
3,766,272
|
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES GENERALLY
ACCEPTED
ACCOUNTING PRINCIPLES
(continued)
|
Recently
issued accounting
standards |
In
September 2004, the Emerging Issues Task Force (“EITF”) reached a consensus
(EITF 04-10) with regard to applying Paragraph 19 of FASB Statement No.
131
(“SFAS 131”)”, Disclosures about Segments of an Enterprise and Related
Information and Related Information, in determining whether to aggregate
operating segments that do not meet the quantitative thresholds. There
is
diversity in practice regarding how an entity might consider the aggregation
criteria listed in SFAS 131 to operating segments that do not meet the
qualitative thresholds. At the September 2004 meeting the Task Force reached
a
consensus that operating segments must always have similar economic
characteristics and meet a majority of the remaining five aggregation criteria
listed in SFAS 131, in order to be aggregated. The effective date is for
fiscal
years ending after September 15, 2005. The adoption of this standard did
not
have a significant effect on the Group’s financial statements.
In
December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” (“SFAS
123R”) which is a revision of SFAS No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). Statement 123R supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees,” and amends SFAS No. 95, “Statement
of Cash Flows.” Generally, the approach in SFAS 123R is similar to the approach
described in SFAS 123. SFAS 123R requires all share-based payments to employees
to be recognized in the income statement based on their grant date fair
values
over the corresponding service period and also requires estimation of
forfeitures when calculating compensation expense. In April of 2005 the
FASB
revised the adoption date of this revised statement effective the first
annual
reporting period that begins after June 15, 2005. Accordingly, the Group
will
adopt this revised statement on April 1, 2006. The Group will adopt the
modified-prospective application of the standard and is currently evaluating
the
impact of SFAS 123R on its financial position and results of
operations.
In
December 2004, the FASB issued SFAS No. 153 “Exchanges of Non-monetary Assets -
An Amendment of APB Opinion No. 29”. SFAS No. 153 eliminates the exception to
fair value accounting for exchanges of similar productive assets contained
in
APB Opinion No. 29 and replaces it with a general exception for exchange
transactions that do not have commercial substance. The exception in APB
Opinion
No. 29 required certain non-monetary asset exchanges to be recorded on
a
carryover basis with no gain or loss recognition. Under SFAS No. 153, exchange
transactions with commercial substance are required to be accounted for
at fair
value with gain or loss recognition on assets surrendered in exchange
transactions. The group will be required to adopt SFAS No. 153 on April
1, 2006,
and believes the adoption of this standard will not have a material impact
on
the Group’s financial statements.
In
May
2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections – a
replacement of APB Opinion No. 20 and FASB Statement No.3”. Among other things,
SFAS 154 requires voluntary changes in accounting principle to be
retrospectively applied in the financial statements. It also applies to
changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. When a
pronouncement includes specific transition provisions, those provisions
should
be followed. The Group will be required to adopt SFAS 154 on April 1, 2006.
The
Group is currently evaluating the impact of SFAS 154 on its financial position
and results of operations.
In
November 2005, the FASB issued FSP Nos. FAS 115-1 and FAS 124-1, the Meaning
of
Other-Than-Temporary Impairment and Its Application to Certain Investments
(FSP
115-1 and 124-1). This statement amends FASB Statements No. 115, Accounting
for
Certain Investments in Debt and Equity Securities, and No. 124, Accounting
for
Certain Investments Held by Not-for-Profit Organizations, and APB Opinion
No.
18, The Equity Method of Accounting for Investments in Common Stock. The
guidance addresses the determination as to when an investment is considered
impaired, whether that impairment is other than temporary, and the measurement
of an impairment loss. The guidance also includes accounting considerations
subsequent to the recognition of an other-than-temporary impairment and
requires
certain disclosures about unrealized losses that have not been recognized
as
other-than-temporary impairments. The guidance includes three steps in
determining when an investment is considered impaired, whether that impairment
is other than temporary, and the measurement of an impairment loss. FSP
115-1
and 124-1 is effective for reporting periods beginning after December 15,
2005
and will be adopted by the Group on April 1, 2006. The Group believes it
will
not have a material impact on the financial statements.
In
April 2006, the FASB issued FASB Staff Position 46(R)-6 (FSP FIN 46(R)-6)
to
address how a reporting enterprise should determine the variability to
be
considered in applying FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, (FIN 46(R)).
The
variability that is considered in applying FIN 46(R) affects the determination
of (a) whether the entity is a variable interest entity (VIE), (b) which
interests are variable interests in the entity, and (c) which party, if
any, is
the primary beneficiary of the VIE. That variability will affect any calculation
of expected losses and expected residual returns, if such a calculation
is
necessary. The variability to be considered in applying FIN 46(R) is based
on an
analysis of the design of the entity by a) analyzing the nature of the
risks in
the entity and b) determining the purpose(s) for which the entity was created
and determine the variability the entity is designed to create and pass
along to
its interest.
After
determining the variability to consider, the reporting enterprise can determine
which interests are designed to absorb that variability. FSP FIN 46(R)-6
provides examples of the cash flow and fair value methods that can be used
to
measure the amount of variability (that is, expected losses and expected
residual returns) of an entity. However, a method that is used to measure
the
amount of variability does
not provide an appropriate basis for determining which variability should
be
considered in applying
FIN
46(R).
NOTES
TO THE CONSOLIDATED ANNUAL FINANCIAL
STATEMENTS
(CONTINUED)
39. DIFFERENCES
BETWEEN
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND UNITED STATES GENERALLY
ACCEPTED
ACCOUNTING PRINCIPLES
(continued)
|
Recently
issued accounting standards
(continued) |
FSP
FIN 46(R)-6 is effective the first day of the first reporting period
beginning
after June 15, 2006. The Group will adopt the provisions of this statement
on
April 1, 2007. The Group is evaluating the impact of this statement and
believes
that it will not have a material impact on our financial
statements.
In
June 2006 the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes (FIN 48) to clarify the accounting for uncertainty in income
taxes recognized in an entity’s nancial
statements in accordance with FASB Statement No. 109,
Accounting
for Income Taxes. The guidance requires an entity to determine
whether it is more likely than not that a tax position will be sustained
upon
examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. In evaluating
whether
a tax position has met the more-likely-than-not recognition threshold,
the
enterprise should presume that the position will be examined by the appropriate
taxing authority that has full knowledge of all relevant information. A
tax
position that meets the more-likely-than-not recognition threshold is measured
to determine the amount of bene
t to
recognize in the nancial statements. The tax position is measured at the
largest
amount of bene t that is greater than
50
percent likely of being realized upon ultimate settlement.
Tax
positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first
subsequent financial reporting period in which
that threshold is met. Previously recognized tax positions that no longer
meet
the more-likely-than-not recognition threshold should be derecognized in
the
rst
subsequent nancial reporting period in which that threshold is no
longer met.
Use of a valuation allowance as described in Statement 109 is not an appropriate
substitute for the derecognition of a tax position. The Group will be required
to adopt FIN 48 on April 1, 2007 and is currently evaluating the expected
impact
on the financial statements.
In
September 2006, The FASB issued SFAS No. 157 , Fair
Value Measurements, (“SFAS
157”).
This Statement
defines fair value, establishes a framework for measuring fair value and
expands
disclosures about fair value measurements. This Statement does not require
any
new fair value measurements, it emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. SFAS 157 expands
disclosures about the use of fair value to measure assets and liabilities
in
interim and annual periods subsequent to initial recognition. This statement
applies for derivatives and other financial instruments measured at fair
value
under SFAS No. 133, “Derivative
Financial Instruments” at
initial
recognition and in all subsequent periods. The group will be required to
adopt
SFAS 157 on April 1, 2008, and is currently evaluating the impact of SFAS
157 on
its financial position and results of operations.
In
September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”).
The interpretations in SAB 108 express the staff's views regarding the
process
of quantifying financial statement misstatements. The staff believes
registrants
must consider the impact of correcting all misstatements, including the
effect
of misstatements that were not corrected at the end of the prior year.
These
prior year misstatements should be considered in quantifying misstatements
in
current year financial statements. Thus, a registrant's financial statements
would require adjustment when the assessment in the current year or in
prior
years results in quantifying a misstatement that is material, after considering
all relevant quantitative and qualitative factors. The group will be
required to
adopt SAB 108 on April 1, 2007, and is currently evaluating the impact
of SAB
108 on its financial position and results of operations.