FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2003
Commission File Number 3337776
TV Azteca, S.A. de C.V.
(Translation of registrant's name into English)
Periferico Sur, No. 4121, Col. Fuentes del Pedregal, 14141 Mexico D.F., Mexico
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ____
NOTE: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): ____
NOTE: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-________________________.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TV AZTECA, S.A. DE C.V.
(Registrant)
Date: December 12, 2003
By: /S/ OTHON FRIAS
------------------------------------
Name: Othon Frias
Title: Attorney-in-fact
================================================================================
DECEMBER 4, 2003
[LOGO]
TV AZTECA
_____________________________
TV AZTECA, S.A. DE C.V.
PERIFERICO SUR 4121
_____________________________
COLONIA FUENTES DEL PEDREGAL
14141 MEXICO, D.F.
_____________________________
BMV(1) TICKER CODE: TVAZTCA
NYSE TICKER CODE: TZA
This information memorandum ("Information Memorandum") was prepared in
accordance with article 35, section I of the General Provisions Applicable to
Stock Issuers and Other Participants on the Stock Market, (2) in connection with
the proposed Spin-Off that is subject to the approval of the General
Extraordinary Shareholders Meeting of TV Azteca, S.A. de C.V. ("TV Azteca,"
"we", "us", "our" or the "Issuer"), to be held on December 19, 2003. To approve
the Spin-Off, an affirmative vote of the majority of the Series "A" shares of
the capital stock of the Issuer is required. The majority shareholder, Azteca
Holdings, S.A. de C.V., intends to vote in favor of the Spin-Off.
The Spin-Off will create a new company known as Unefon Holdings, S.A. de C.V.
("Unefon Holdings"). The Issuer will survive as the spinning-off company. The
main assets to be transferred to Unefon Holdings are shares representing 46.5%
of the paid-in capital stock of Unefon, S.A. de C.V. (BMV ticker code "Unefon")
and shares representing 50% of the paid-in capital stock of Cosmofrecuencias,
S.A. de C.V., owned by the Issuer, respectively.
As a result of the Spin-Off, the shareholders of TV Azteca will have the same
percentage of capital stock of Unefon Holdings as in TV Azteca; however, the
distribution and delivery of the Unefon Holdings Shares will not be carried out
until such shares are listed on the Mexican Stock Exchange and the U.S.
securities exchange or quotation system to be chosen by the Issuer, after
approval from the applicable authorities, as described herein.
The shareholders of the Issuer will receive one share of capital stock of Unefon
Holdings for each share of capital stock of TV Azteca, with respect to the
Series "A", Series "D-A" or Series "D-L" shares.
The Issuer will maintain its capital structure as well as the securities that
currently trade on the Mexican and U.S. stock markets, TVAZTCA CPO and TZA ADR,
respectively. The securities of the Issuer are registered in the Securities
Section of the National Securities Registry and have the ability to be traded
simultaneously on the Mexican Stock Exchange and the New York Stock Exchange.
No payment will be made to TV Azteca or to Unefon Holdings for the Unefon
Holdings Shares issued as a consequence of the Spin-Off.
_____________________________
___________________
(1) Translator's Note: BMV = Bolsa Mexicana de Valores (Mexican Stock
Exchange).
(2) Translator's Note: Disposiciones de Caracter General Aplicables a las
Issuers de Valores and a otros Participantes del Mercado de Valores.
THE REGISTRATION IN THE NATIONAL STOCK REGISTRY DOES NOT IMPLY A
CERTIFICATION REGARDING THE VALUE OR SOLVENCY OF THE ISSUER.
TABLE OF CONTENTS
PAGE
I. TERMS AND DEFINITIONS....................................................................................2
II. EXECUTIVE SUMMARY........................................................................................5
III. DETAILED INFORMATION REGARDING THE TRANSACTION..........................................................10
A. Detailed Description of the Transaction........................................................10
B. Object of the Transaction......................................................................13
C. Expenses Derived from the Transaction..........................................................13
D. Operation Approval Date........................................................................13
E. Accounting Treatment...........................................................................14
F. Tax Consequences...............................................................................14
IV. INFORMATION CONCERNING EACH PARTY INVOLVED IN THE TRANSACTION...........................................16
V. RISK FACTORS............................................................................................22
A. Risks to Issuer................................................................................22
B. Risks Derived from the Transaction.............................................................22
VI. SELECTED FINANCIAL DATA.................................................................................24
VII. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION....................25
VIII. RESPONSIBLE PARTIES.....................................................................................27
IX. EXHIBITS................................................................................................28
A. Opinion of the Independent Auditor.............................................................28
B. General and Pro Forma Balance Sheet............................................................28
-i-
I. TERMS AND DEFINITIONS
For purposes of this Information Memorandum, the following terms will have
the meanings assigned to them below and will retain such meanings whether used
in the singular or plural forms:
"TVA SHARES" means the 9,154,284,479 shares of capital stock of TV AZTECA,
which include 2,228,133,859 CPOs in circulation to December 31, 2003.
"UNEFON SHARES" means the 1,170,000,000 shares of capital stock of
Unefon held by TV Azteca.
"UNEFON HOLDINGS SHARES" means the shares of capital stock of Unefon
Holdings.
"ADS" means the certificates known as American Depositary Shares issued
by BONY, each equal to 16 (sixteen) CPOs and therefore 48 (forty-eight) TVA
Shares.
"ADS UNEFON HOLDINGS" means the certificates known as American
Depositary Shares to be issued by BONY for the distribution of the Unefon
Holdings Shares in the U.S.
"BMV" means Bolsa Mexicana de Valores, S.A. de C.V.
"BONY" means The Bank of New York.
"CNBV" means the National Banking and Securities Commission (Comision
National Bancaria y de Valores).
"CPO" means the Ordinary Participation Certificate (Certificados de
Participacion Ordinaria) issued by National Financiera, S.N.C., representing one
Series "A" share, one Series "D-A" share and one Series "D-L" share, all of
capital stock of TV Azteca.
"COSMOFRECUENCIAS" means Cosmofrecuencias, S.A. de C.V.
"GENERAL PROVISIONS" means the General Provisions Applicable to Issuers
of Securities and Other Participants on the Market, published in the Official
Gazette of the Federation(3) on March 19, 2003.
"ISSUER" means TV Azteca.
"SPIN-OFF" means the Spin-Off to be carried out by TV Azteca subject to
approval by the General Extraordinary Shareholders Meeting to be held on October
19, 2003.
"RADIOELECTRIC SPECTRUM" means the space that allows for the
propagation, without an artificial guide, of electromagnetic waves which
frequency bands are fixed conventionally below 30 GHz.
"INFORMATION MEMORANDUM" means this Information Memorandum.
"GHZ" means gigahertz.
"GRUPO ELEKTRA" means Grupo Elektra, S.A. de C.V.
___________________
(3) Translator's Note: Diario Oficial de la Federation.
2
"INDEVAL" means S.D. Indeval, S.A. de C.V., Securities Deposit
Institution (Institucion para el Deposito de Valores).
"LGSM" means the General Law of Mercantile Corporations (Ley General de
Sociedades Mercantiles).
"MEXICO" means the United Mexican States.
"MHZ" means megahertz.
"NYSE" means the New York Stock Exchange.
"OPERADORA DE COMUNICACIONES" means Operadora de Comunicaciones, S.A.
de C.V.
"MEXICAN GAAP" means "Generally Accepted Accounting Principles"
(Principios de Contabilidad Generalmente Aceptados) in Mexico.
"TV AZTECA ANNUAL REPORT" means the Annual Report presented by TV
Azteca before the CNBV on June 30, 2003 with respect to the fiscal year ended on
December 31, 2002.
"UNEFON ANNUAL REPORT" means the Annual Report presented by Unefon
before the CNBV on July 28, 2003 with respect to the fiscal year ended on
December 31, 2002.
"SEC" means the Securities and Exchange Commission of the U.S.
"MR. SALINAS PLIEGO" refers to Mr. Ricardo Benjamin Salinas Pliego.
"MR. SABA" refers to Mr. Moises Saba Masri.
"COMPANY" means TV Azteca.
"TV AZTECA" means TV Azteca, S.A. de C.V.
"UNEFON" means Unefon, S.A. de C.V.
"UNEFON HOLDINGS" means Unefon Holdings, S.A. de C.V.
"U.S." means the United States of America.
"US$" means US Dollars, legal tender in the U.S.
"$" or "PS.$" means pesos, legal tender in Mexico.
PRESENTATION OF FINANCIAL AND ECONOMIC INFORMATION
In this Information Memorandum, references to "Pesos", "Ps.$" and "$",
refer to the legal currency of Mexico (pesos) and references made to the
"Dollar" or "US$", refer to the legal currency of the United States. Some
figures and the percentages contained herein have been rounded for ease of
reference.
3
ADDITIONAL INFORMATION
Since both TV Azteca and Unefon are subject to the information and
registration requirements established in the Stock Exchange Law (Ley del Mercado
de Valores) and other applicable securities regulations, TV Azteca and Unefon
presented annual and quarterly reports as well as information regarding relevant
events and other information before the BMV and the CNBV (the "Public
Information"). As a supplement to this Information Memorandum and to obtain more
information regarding TV Azteca and Unefon, the Public Information presented
before the BMV may be referenced on the BMV website (www.bmv.com.mx) by means of
the electronic checking systems of the BMV information system located on the
Mezzanine of the Centro Bursatil, located at Paseo de la Reforma numero 455,
colonia Cuauhtemoc, Mexico, D.F., telephones (5255) 5726-6794 and (5255)
5726-3602, or on the website of TV Azteca (www.tvazteca.com.mx) and Unefon
(www.unefon.com.mx), respectively.
Such Public Information is incorporated in this Information Memorandum by
reference.
TV Azteca's investor and analyst contact persons are Bruno Rangel,
telephone number 3099 9167 (jrangelk@tvazteca.com.mx) and Omar Avila, telephone
number 3099 0041 (oavila@tvazteca.com.mx).
Unefon's investor and analyst contact persons are Gerardo Ibarra Gil,
telephone number 8582 5133 (gibarra@unefon.com.mx) and Alan Infante Xibille,
telephone number 8582 5134 (ainfante@unefon.com.mx).
4
II. EXECUTIVE SUMMARY
This summary does not intend to contain all information that may be
relevant regarding the operation described herein. The investing public should
read the Information Memorandum in full including the sections entitled TV
AZTECA ANNUAL REPORT and UNEFON ANNUAL REPORT which are referenced in this
Information Memorandum.
1. TV AZTECA
TV Azteca was incorporated on July, 1993 as a result of a privatization by
the Mexican Federal Government of its media assets.
TV Azteca is a leading producer of Spanish-language television
programming. We are one of the two major producers of Spanish-language content
for television in the world. We operate two television channels in Mexico,
Azteca 13 and Azteca 7, through more than 554 transmissions stations located
around the country.
Our 44 local stations operate as part-time transmissions stations of
regional programming and sell local advertising through our national signal. In
another 63 local transmission sites, we are able to block our national signal
from Mexico City in order to insert local programming.
In addition to our Mexican television transmission operations, TV Azteca
owns capital stock of the following companies:
o Azteca International Corporation ("Azteca America"), 100% ownership.
Azteca America is a company incorporated in the U.S. to operate a
television network focused on the growing Spanish-speaking market in
the U.S. Our affiliate stations reach 69% of the Hispanic population
in the U.S.;
o Unefon, 46.5% ownership, a cellular telephone services operator as
well as provider of an ample variety of telecommunications services
which focuses on the mass market in Mexico;
o Todito, 50% ownership, Todito is a Mexican company which operates an
internet portal in Spanish, an internet connection service and an
e-commerce market; and
o Cosmofrecuencias, 50% participation, Cosmofrecuencias is a
high-speed internet service provider known commercially as
Telecosmo.
(See also "The Company - - History and Development of the Company" "La
Compania - Historia y Desarrollo de la Empresa" in the TV AZTECA ANNUAL REPORT).
The operating strategy of TV Azteca is to increase its income and to
improve the yield of its operations and profitability. TV Azteca seeks to
increase the cash flow generated by its television transmission services by
means of:
o Maximizing advertising earnings.
o Building upon existing cost reduction programs.
o Selling internally-produced programming to television stations
outside Mexico.
5
o Identifying and creating additional income sources that will
complement existing television operations and which do not require
the significant disbursement of capital.
2. UNEFON HOLDINGS
Once the Spin-Off takes effect, Unefon Holdings will be formed a
corporation with variable capital incorporated under Mexican law.
Unefon Holdings, at the onset, will have the same shareholders and
shareholder participation as TV Azteca currently has. Unefon Holdings will have,
as its principle assets, 46.5% of the shares of capital stock of Unefon and 50%
of the shares of capital stock of Cosmofrecuencias.
The capital stock is made up of a single Series with full voting rights
for its holders, whether national or foreign.
Once the Spin-Off takes effect, the securities of Unefon Holdings will be
listed on the BMV and on the securities exchange or quotation system in the U.S.
to be decided.
MAIN ASSETS
By means of the Spin-Off, TV Azteca will transfer to Unefon Holdings 46.5%
of the shares of the capital stock of Unefon and 50% of the shares of the
capital stock of Cosmofrecuencias.
1. UNEFON
Unefon, a Mexican mobile telephone company focusing on the mass market,
was founded in 1997. In 1999, it was restructured as a joint venture between Mr.
Saba and TV Azteca. In December 2000, Unefon placed part of its capital among
the investing public in general, obtaining US$98 million from the sale of 176
million Series A shares (7% of its capital stock) by means of a successful
primary public offering on the BMV.
Unefon has 30 MHz of the Radioelectric Spectrum on the 1.9 GHz frequency
band on the national level, by means of which Unefon offers cellular telephone
services to 16 of the most important cities in the country.
Unefon started commercial operations in February 2000, in the city of
Toluca. At the close of 2000, Unefon offered cellular telephone services in 12
of the most important cities in the country, including Mexico City, Guadalajara
and Monterrey. Through October 2003, Unefon offered services in 15 cities within
Mexico, expecting to initiate operations in the cities of Celaya and Pachuca in
2004.
Since its inception, Unefon has experienced constant growth. For the
fiscal years ended 2000, 2001 and 2002 it had 156 thousand, 825 thousand and 1.5
million users, respectively. Unefon has more than 1.8 million users at the end
of October 2003.
(See also "The Company - - History and Development of the Company" "La
Compania - Historia and Desarrollo de la Empresa" in the TV AZTECA ANNUAL
REPORT).
The capital stock of Unefon is made up of Series "A" common, registered
shares with no par value divided as follows as of December 31, 2002:
6
Shareholder Number of Shares Amount (par value)
---------------------------------------------------------------- -----------------------------------------------
(Thousands of Ps.) (Thousands of Ps.)
TV Azteca 1,170,000 1,161,730
Moises Saba Masri 1,170,000 1,161,730
Various (public at large) 176,129 174,884
Option Plan 310,983 308,784
---------- -----------
Total Authorized 2,827,112 2,807,128
Capital Stock Authorized but not shown (310,983) (308,784)
---------- -----------
Total in circulation 2,516,129 2,498,344
(See also "Management - - Administrators and Shareholders" "Administracion
- Administradores and Accionistas" in the UNEFON ANNUAL REPORT).
When the Spin-Off takes effect, the capital structure of
Unefon will be as follows:
Shareholder Number of Shares Amount (par value)
---------------------------------------------------------------- -----------------------------------------------
(Thousands of Ps.) (Thousands of Ps.)
Unefon Holdings 1,170,000 1,161,730
Moises Saba Masri 1,170,000 1,161,730
Various (public at large) 176,129 174,884
Option Plan 310,983 308,783
---------- -----------
Total authorized 2,827,112 2,807,128
Capital stock authorized but not shown (310,983) (308,784)
---------- -----------
Total 2,516,129 2,498,344
Notwithstanding the Spin-Off, Unefon will keep the securities that
currently trade on the BMV: UNEFON.
2. COSMOFRECUENCIAS
Cosmofrecuencias was incorporated in August 2000. Its current capital
structure is as follows:
SHARES SHARES
SHAREHOLDER FIXED CAPITAL VARIABLE CAPITAL
TV Azteca 25 305,270
Moises Saba Masri 25
Grupo Corporativo Accionario, S.A. de C.V. 305,270
Total ---------- -----------
50 610,540
---------- -----------
When the Spin-Off occurs, the capital structure of Cosmofrecuencias will be as follows:
SHARES SHARES
SHAREHOLDER FIXED CAPITAL VARIABLE CAPITAL
Unefon Holdings 25 305,270
Moises Saba Masri 25
Grupo Corporativo Accionario, S.A. de C.V. 305,270
---------- -----------
Total 50 610,540
---------- -----------
Operadora de Comunicaciones has the main subsidiary of Cosmofrecuencias,
with 99.99% of its capital stock owned by Cosmofrecuencias.
7
Operadora de Comunicaciones has the concession to use and operate the 3.4
GHz frequency band of the Radioelectric Spectrum.
Operadora de Comunicaciones offers its fixed or mobile wireless access
services under the brand name Telecosmo. Telecosmo was the first company to
provide high-speed and broad-band wireless interconnection services in Mexico to
both residential and corporate clients. This type of technology supports various
applications including: video frequencies, voice internet protocol (VolP), file
transmission protocol (FTP), on-demand videogames, video transmission, computer
programs, electronic mail, web hosting among others.
Using state of the art technology, Telecosmo offers its services to the
Mexico City metropolitan area.
The Spin-Off......................The Spin-Off will take place in accordance
with the provisions of article 228-Bis of the
LGSM and requires approval at the General
Extraordinary Shareholders Meeting of TV
Azteca to be held on December 19, 2003.
The Spin-Off will not take full force and
effect until (i) 45 calendar days have passed
from the date on which the approval of the
Spin-Off is published pursuant to article
228-Bis, section V of the LGSM and (ii) the
registration of the certification of the
minutes of the General Extraordinary
Shareholders Meeting are entered into the
Public Registry of Commerce of the Federal
District (Registro Publico de Comercio del
Distrito Federal), so long as no legal
challenge to the Spin-Off has been presented
by the creditors of TV Azteca during such
time.
As a result of the Spin-Off and once the same
is in full force and effect, a new company
will be created known as Unefon Holdings,
whose securities will be registered in the
Securities Section of the National Securities
Registry as well as on a securities exchange
or quotation system in the U.S., subject to
approval by the CNBV and the SEC,
respectively.
The main assets of Unefon Holdings will be the
shares representing 46.5% of the paid-in
capital stock of Unefon (BMV ticker code
"Unefon") and 50% of the paid-in capital stock
of Cosmofrecuencias.
The shareholders of TV Azteca will have the
same percentages of the capital structure
within the capital stock of Unefon Holdings,
keeping, in addition, their ownership
percentage in TV Azteca.
Distribution of the Unefon
Share Holdings....................Initially, after the Spin-Off is approved by
the General Extraordinary Shareholders Meeting
of TV Azteca, the
8
Unefon Holding Shares will not be separated
from the TVA Shares and may only be held or
traded together with the TVA Shares.
The Unefon Holdings Shares will be distributed
and issued to the holders only after (i) the
Spin-Off takes effect and (ii) the Unefon
Holdings Shares have been listed on the BMV
and on the securities or quotation system in
the U.S., after approval is obtained from
applicable authorities.
TV Azteca will timely and publicly publish the
date on which the shareholders of TV Azteca
have the right to receive the Unefon Holdings
Shares ("Registration Date"), as the date on
which the Unefon Holdings Shares may be
delivered ("Distribution Date"), and
therefore, held or traded separately from the
TVA Shares.
TV Azteca expects that such dates will occur
during the month of March 2004; however, it
cannot guarantee such a timeframe.
Approval of the Spin-Off
by the Shareholders...............In accordance with the corporate by-laws of TV
Azteca, the Spin-Off requires approval from
the majority of the Series "A" TV Azteca
shareholders. Azteca Holdings, as the majority
shareholder of such Series "A" shares, expects
to vote its shares in favor of the Spin-Off,
which would result in the approval of the
Spin-Off, even without the approval of any
other shareholder. The holders of the "D-A"
Series shares have no voting rights with
respect to the Spin-Off, in accordance with
the provisions of the corporate by-laws of TV
Azteca.
Certain Creditors' Rights.........During the 45 calendar day period starting the
date the Spin-Off has been approved by the
General Extraordinary Shareholders Meeting of
TV Azteca, the Spin-Off may be subject to
challenge in the Mexican courts by any
creditor of TV Azteca. In the event of any
challenge, a judge, under certain situations,
may temporarily suspend the Spin-Off. TV
Azteca cannot predict the consequences arising
out of any such challenge.
Certain Tax Consequences
in the U.S. and Mexico............The Spin-Off is not a taxable event for Income
Tax (Impuesto Sobre la Renta) purposes in
Mexico. With respect to any tax implications
for non-Mexican shareholders, U.S. tax
attorneys for the Company have reported to the
Company that the Spin-Off may be an event
subject to taxation. Each non-Mexican
9
shareholder should check with a tax specialist
regarding the fiscal implications of the
Spin-Off with respect to applicable tax laws
10
III DETAILED INFORMATION REGARDING THE TRANSACTION
A. DETAILED DESCRIPTION OF THE TRANSACTION
The Spin-Off and Its Effects
The Spin-Off is regulated by the LGSM. TV Azteca will create Unefon
Holdings which may receive, by means of a transfer, a portion of the assets,
liabilities and capital of TV Azteca. The transaction differs from the Spin-Off
procedure in the U.S. where a controlling company distributes the shares of a
subsidiary to its shareholders.
TV Azteca will execute the Spin-Off pursuant to the terms of the Relevant
Corporate Restructuring under article 35, section I of the General Provisions
with the primary objective of separating from its assets the current equity
ownership TV Azteca currently holds in Unefon and Cosmofrequencias.
As a result of the Spin-Off, TV Azteca will survive under the same
guidelines, capital structure and corporate by-laws currently in effect. The new
company Unefon Holdings will be financially and legally independent.
TV Azteca will maintain the listing of the securities that currently trade
on U.S. and Mexican markets: TVAZTCA CPOs on the domestic market, which have
been registered in the Securities Section of the National Securities Registry;
and TZA ADS on the NYSE, respectively.
The shareholders of TV Azteca will own the same percentage of the capital
stock of Unefon Holdings, maintaining, in addition, their percentage of
ownership in TV Azteca and therefore, initially, TV Azteca and Unefon Holdings
will have the same shareholders, shareholder ownership and the same group of
controlling shareholders.
The Spin-Off will take effect once 45 calendar days have passed following
the date of the announcement of the approval of the Spin-Off under the terms of
article 228-Bis, section V of the LGSM and once registration of the
certification of the meeting minutes approving the Spin-Off have been recorded
in the Public Registry of Commerce of the Federal District.
During the 45 calendar day term, any creditor of TV Azteca may challenge
the Spin-Off before a Mexican judge. In the event of any such challenge, a judge
may suspend the Spin-Off temporarily if the party in opposition to the Spin-Off
provides a bond that is sufficient to guarantee the possible payment of damages
such challenge may cause TV Azteca. TV Azteca is unable to predict the
consequences of any such challenge.
Distribution of the Unefon Holdings Shares
Once the Spin-Off is in full force and effect, Unefon Holdings will
commence proceedings in order to register its securities in the National
Securities Registry in Mexico as well as on the securities exchange or quotation
system in the U.S. that has been chosen by the Issuer. During that time, the
Unefon Holdings Shares may not be held or separately traded from the TVA Shares.
Upon authorization by the CNBV and the SEC of the registration of the
Unefon Holdings Shares on the National Securities Registry and on the chosen
securities exchange or quotation system in the U.S., respectively, the Unefon
Holdings Shares will be issued to their holders through INDEVAL, as one Series
"A", ordinary, nominative share with no par value of capital stock of Unefon
Holdings for each share of
11
capital stock of TV Azteca, whether with regard to a Series "A", Series "D-A" or
Series "D-L" share. For such effects, the shareholders will be advised through
publication of the Distribution Date on which the Unefon Holdings Shares will be
at the disposal of such shareholders at INDEVAL. Only as of the Distribution
Date may the Unefon Holdings Shares be held and negotiated separately from the
TVA Shares.
Parties with a right to receive the Unefon Holdings Shares are those
shareholders of TV Azteca that are registered with INDEVAL in accordance with
the registries kept by the securities intermediaries for the purposes of
determining the identity of the shareholders on the Registration Date (that for
such effects will be published in a timely manner by TV Azteca).
Transfer of Assets and Capital
In order for the Spin-Off to take effect, TV Azteca will transfer to
Unefon Holdings the following assets and stock:
1. The assets to be contributed by TV Azteca to Unefon Holdings consist
of:
(a) Investments in shares of the Unefon company equal to
1,170,000,000 Series "A" shares consisting of 46.5% of the
duly subscribed and paid-in capital stock of Unefon owned by
TV Azteca. The value of such shares, according to their book
value as of October 31, 2003 is $513,220,000.00.
(b) Investments in shares of Cosmofrecuencias, equal to 305,295
shares representing 50% of the subscribed paid-in and capital
stock of Cosmofrecuencias owned by TV Azteca. The value of
such shares, according to book value to October 31, 2003, is
$112,078,000.00.
2. The portion of the accounting capital to be contributed by TV Azteca
to Unefon Holdings is in the amount of $625,298,000.00, of which
$68,000,000.00 will come from capital stock and $557,298,000.00 from
other accounting capital accounts.
3. No liabilities will be transferred to Unefon Holdings.
4. TV Azteca as well as Unefon will keep all other assets and capital
other than those mentioned above and transferred as a result of the
Spin-Off to Unefon Holdings.
Certain Relationships Between TV Azteca and Unefon Holdings.
In connection with the Spin-Off, TV Azteca and Unefon Holdings will
maintain a relationship in order to complete the Spin-Off and assure that
related resolutions and agreements are executed. At this time, it is not
expected that TV Azteca and Unefon Holdings will have a material contractual
relationships; however, TV Azteca will continue to maintain the contractual
obligations it currently has with Unefon, which are described below:
1. ADVERTISING AGREEMENT
In June 1998, TV Azteca and Unefon executed a 10 year advertising
agreement for an amount of US$200 million by which TV Azteca agreed to provide
Unefon with advertising spots.
12
The principal terms and conditions of the contract and its modifications
include:
o The Company will provide Unefon with advertising spots for a total
of 120,000 Gross Rating Points ("GRPs") during the term of the
agreement, for a maximum of 35,000 GRPs per year. For purposes of
the agreement, GRPs are equal to the number of total ratings points
obtained during the 60 second transmission of a commercial. 30% of
such GRPs may be used during prime time. Unefon may only use the
GRPs until December 2009;
o TV Azteca receives income over 3% of the gross sales of Unefon, for
which it is obligated to pay the Company 3.0% of its gross income up
to a maximum of US$200 million. As of December 31, 2003, the Company
had transmitted advertisements to Unefon at a total value of Ps.$147
million (nominal). Payments maturing in 2000, 2001 and 2002 will be
paid in a deferred manner in four equal installments every six
months during 2003 and 2004, the first of such payments maturing in
June, 2003. The deferred payments accrue interest at an annual
interest rate of 12%. Starting in 2003, the payments by Unefon to
the Company will mature constantly; and
o The failure of Unefon to pay advance payments will not be considered
a default under the agreement; however, the Company may suspend
television services to Unefon.
2. REAL ESTATE LEASE AGREEMENT
In May 1998, the Company signed a lease agreement with Unefon for Unefon
office space. The lease has a valid term of ten years, which commenced in June,
1998, and may be renewed for an additional ten-year term by prior notice to
Unefon. The rent is for an amount of Ps.$2.5 million per month to be paid in
advance each month.
3. CREDIT BACKING
In July, 2003, the Company and Mr. Saba announced their intent to provide
credit support to Unefon in an amount of up to US$80.0 million each. As of
October 31, 2003, the Company has granted US$31 million as credit backing to
Unefon. The Company has decided not to grant any more credit backing to Unefon.
4. COMMON DIRECTORS
TV Azteca has three directors in common with Unefon: Messrs. Ricardo B.
Salinas Pliego, Pedro Padilla Longoria and Jose Ignacio Morales Elcoro. The
directors of TV Azteca and Unefon are obligated, in accordance with the LGCM and
the corporate by-laws of each of the companies mentioned herein, to disclose to
the Board of Directors any situation that may involve a conflict of interests.
Any directors should abstain from voting on proposals in which they may have a
conflict of interest.
B. OBJECT OF THE TRANSACTION
The principal objective of the Spin-Off of Unefon from TV Azteca is to
separate the investment currently held by TV Azteca in Unefon and
Cosmofrecuencias from the rest of its assets and in this manner convert TV
Azteca into a company dedicated exclusively to media, as it once was.
13
The Company anticipates this separation will allow TV Azteca to continue
to grow as a successful signal transmission and television programming
production company. Once the businesses of TV Azteca, Unefon and
Cosmofrecuencias have been separated, TV Azteca believes it will be able to
focus more efficiently on the improvement and increase of its ownership in its
core business which differs substantially from the businesses of Unefon and
Cosmofrecuencias, which consist essentially of the rendering of basic mobile
telephone services and wireless broad band internet access, respectively.
Furthermore, each company is capable of growing by means of its own
resources, without the existence of internal competition in obtaining additional
resources, whether financial or otherwise and the financial community may focus,
independently and separately, on the analysis and ownership of each of the
projects of such companies.
C. EXPENSES DERIVED FROM THE TRANSACTION
The expenses of the Spin-Off are as follows:
Fees paid to legal and accounting counsel, independent auditors and
notaries (fedatarios publicos), as well as expenses arising out of fees paid for
recording in the Public Registry of Commerce of the Federal District (Registro
Publico de Comercio del Distrito Federal) and publicizing the Spin-Off.
According to the LGSM the amount will be approximately $1 million.
D. OPERATION APPROVAL DATE.
Board of Directors
On October 21, 2003, the members of the Board of Directors of the Issuer
will expressly and unanimously ratify the approval that such members had given
outside of a board meeting during the period of September 30, and October 1, of
this year.
General Extraordinary Shareholders Meeting
TV Azteca published its announcement on December 3, 2003 of the General
Extraordinary Shareholders Meeting to be held on December 19, 2003. During such
Meeting, approval of the Spin-Off will be placed before the holders of the
Series "A" shares of the capital stock of TV Azteca.
In accordance with the corporate by-laws of TV Azteca, the Spin-Off is one
of the matters of which (i) only the holders of the Series "A" shares of the
capital stock of TV Azteca may vote and (ii) require the approval of the
majority of the Series "A" shares of TV Azteca.
Azteca Holdings, the majority shareholder of the Series "A" shares of TV
Azteca, expects to vote in favor of the Spin-Off, which would result in the
approval of the Spin-Off even if all other shareholders do not vote in favor of
the Spin-Off.
E. ACCOUNTING TREATMENT
In order to register the effects derived from the Spin-Off set forth in
this Information Memorandum, the Issuer proposes applying the MEXICAN GAAP in
accordance with the provisions of Bulletin B-8 "Consolidated and Pooled
Financial Statements and Evaluation of Permanent Investments in Shares"
("Estados Financieros Consolidados and Combinados y Valuacion de Inversiones
Permanentes en Acciones") issued by the Mexican Institute of Public Accountants
(Instituto Mexicano de Contadores Publicos, A.C.).
14
The Issuer will recognize, pro rata to its shareholdings in Unefon and
Cosmofrecuencias, the loss relating to the results of those companies,
reflective of the structure of its ownership of those shareholdings, resulting
in the following pro forma effects:
(i) a decrease in the investments in Unefon and
Cosmofrecuencias of $1,242,727,000.00 and $251,097,000.00,
respectively, and (ii) the recognition of a loss of $1,493,824,000.00
in 2003.
Derived from the pro forma registries described above, the investments in
Unefon and Cosmofrecuencias will be equal to $513,220,000.00 and
$112,078,000.00, respectively, for which on a pro-forma basis, the Spin-Off will
cause the following effects in TV Azteca:
(i) a decrease in the capital stock of $68,000,000.00, (ii) a
decrease in other accounting capital accounts of $557,298,000.00 and
(iii) the corresponding unincorporation of the investments in Unefon
and Cosmofrecuencias in the amounts of $513,220,000.00 and
$112,078,000.00, respectively.
F. TAX CONSEQUENCES
The Spin-Off is not a taxable event for Mexican Income Tax purposes.
For those TV Azteca shareholders who are not Mexican residents, the
receipt by Unefon Holdings Shares with respect to the Spin-Off are not subject
to income taxation on individuals, income taxes on companies or value added tax.
TV Azteca will not be subject to Mexican Income Tax for the transfer of
resources in favor of Unefon Holdings based on the Spin-Off as long as at least
51% of the subscribed and paid-in shares of TV Azteca and Unefon Holdings are
not transferred within the following year to the date on which the Mexican tax
authorities have been notified of such Spin-Off.
For Mexican tax purposes, an individual resides in Mexico if he or she has
established a residence therein, unless such person has resided abroad for more
than 183 days, whether consecutive or not in any calendar year and can
demonstrate that he or she has taken residence in such country for tax effects.
A company resides in Mexico for Mexican tax effects if, when incorporated in
Mexico, it has its main office or domicile in Mexico. A presumption exists that
a Mexican citizen resides in Mexico unless such party can prove the contrary. If
a non-resident in Mexico has a permanent establishment or fixed base in Mexico,
it will be subject to Mexican taxation in accordance with the applicable fiscal
legislation.
No fiscal stamp, issuance, registry, tax or similar tariff exists must be
paid by the shareholders of Unefon Holdings with respect to the Spin-Off.
With respect to tax effects on non-Mexican shareholders, the Company's tax
attorneys have informed it that the Spin-Off may be an event subject to taxation
at the time such Spin-Off takes effect; however, each non-Mexican shareholder
should consult with a tax specialist regarding the tax implications of such
Spin-Off in accordance with applicable laws.
15
IV. INFORMATION CONCERNING EACH PARTY INVOLVED IN THE TRANSACTION.
TV AZTECA
The description of the business and its evolution is contained in the TV
AZTECA ANNUAL REPORT.
(See also "The Company - - History and Development of the Company - -
Description of the Business" "La Compania - Historia and Desarrollo de la
Empresa - Descripcion del Negocio"] in the TV AZTECA ANNUAL REPORT).
The corporate structure of the Company as of October 31 is as follows:
A DA DL Total
CPO CP0 CP0 Shares
----------------- ----------------- ------------------ ----------------- -----------------
AH 2,301,957,280 817,835,848 817,835,848 817,835,848 4,755,464,824
RB 23,252,092 142,630,100 142,630,100 142,630,100 451,142,392
COTSA 144,673,530 44,226,751 44,226,751 44,226,751 277,353,782
----------------- ----------------- ------------------ ----------------- -----------------
Majority Shares Held 2,469,882,902 1,004,692,969 1,004,692,699 1,004,692,699 5,483,960,998
----------------- ----------------- ------------------ ----------------- -----------------
Total Paid Shares -- 1,223,441,160 1,223,441,160 1,223,441,160 3,670,323,481
----------------- ----------------- ------------------ ----------------- -----------------
Held Publicly 2,469,882,902 2,228,133,859 2,228,133,859 2,228,133,859 9,154,284,479
================= ================= ================== ================= =================
----------------- ----------------- ------------------ ----------------- -----------------
Total Treasury 234,318,842 475,743,891 475,743,891 475,743,891 1,661,550,517
================= ================= ================== ================= =================
Total Authorized 2,704,201,744 2,703,877,751 2,703,877,751 2,703,877,751 10,815,834,996
================= ================= ================== ================= =================
Grupo Elektra has the right to exchange Series N shares of Comunicaciones
Avanzadas, S.A. de C.V. ("CASA") owned by it, in whole or in part, at any time
until March 26, 2006 for approximately 226.5 million worth of CPOs owned by
Azteca Holdings (the "Reserved Elektra Shares"). This exchange right allows
Grupo Elektra to acquire approximately 7.6% of the capital stock of the Company
owned by Azteca Holdings, which will reduce the direct and indirect ownership of
Azteca Holdings of the capital stock of the Company to 49.8%.
There has been no significant change in the ownership of the principal
shareholders during the last three years.
SECURITIES MARKET
CPOs are operated on the BMV. ADSs are issued by BONY (as depositary) and
operated on the NYSE.
The following table provides, for the periods indicated below, the highest
and lowest sale prices reported for CPOs on the BMV and the highest and lowest
sale prices reported for ADSs on the NYSE. The prices have not been
re-calculated in constant monetary terms, but are presented in the following
manner in order to reflect the division of shares described below.
16
M PESOS PER CP NYSE US$ PER ADS
FISCAL YEAR ENDED DECEMBER HIGH LOW HIGH LOW
1998..................................... Ps. 11.5152 Ps. 2.7780 US$ 23.0625 US$ 4.2500
1999..................................... 5.3100 5.1900 9.0000 8.9400
2000..................................... 5.9400 5.8000 10.0000 9.7500
2001..................................... 6.5800 2.2000 10.6500 3.7800
2002..................................... 4.9200 2.7000 8.8000 4.3000
M PESOS PER CP NYSE US$ PER ADS
QUARTER HIGH LOW HIGH LOW
2001
First Quarter......................... Ps. 6.5 Ps. 4.1 US$ 10.6 US$ 7.3
Second Quarter........................ 5.2 3.6 9.0 6.4
Third Quarter......................... 4.0 2.2 6.9 3.7
Fourth Quarter........................ 3.9 2.2 6.8 3.7
2002
First Quarter......................... 4.8 3.7 8.8 6.6
Second Quarter........................ 4.9 4.0 8.7 6.3
Third Quarter......................... 4.3 2.9 7.0 4.6
Fourth Quarter........................ 3.4 2.0 5.6 4.3
2003
First Quarter......................... 3.3 2.8 5.1 4.2
Second Quarter........................ 4.6 3.0 6.6 4.0
Third Quarter......................... 5.1 4.1 7.5 6.3
M PESOS PER CP NYSE US$ PER ADS
MONTH ENDING ON HIGH LOW HIGH LOW
31 December 2002...................... Ps. 3.0 Ps. 3.0 US$ 4.8 US$ 4.6
31 January 2003....................... 2.9 2.9 4.3 4.2
28 February 2003...................... 3.2 3.2 4.7 4.7
31 March 2003......................... 3.1 3.0 4.7 4.6
30 April 2003......................... 3.7 3.6 5.9 5.7
31 May 2003........................... 3.9 3.8 6.2 6.1
30 June 2003.......................... 4.3 4.1 6.7 6.5
31 July 2003.......................... 4.4 4.2 6.8 6.5
31 August 2003........................ 4.5 4.4 6.6 6.5
30 September 2003..................... 5.1 5.0 7.5 7.3
31 October 2003....................... 5.6 5.5 8.1 8.0
On March 27, 1998, the shareholders of the Company approved a four-for-one
division of the shares of capital stock of TV Azteca. The division was declared
effective on April 22, 1998. As a result of the division, each ADS now
represents 16 CPOs.
17
As of May 2003, approximately 109 million CPOs have been repurchased since
the Company started its repurchasing in April 1998.
Behavior of the Shares on the Stock Market
CORPORATE NAME: TV AZTECA
TICKER TV AZTCA
SERIES CP
TRADES ON BMV
DATE MAXIMUM MINIMUM CLOSE VOLUME
LAST DAY OF THE LAST FIVE FISCAL YEARS
31 12 1997 $11.52 $11.29 $11.29 76,000
31 12 1998 $4.28 $4.17 $4.17 138,000
30 12 1999 $5.31 $5.19 $5.25 438,000
31 12 2000 $5.94 $5.80 $5.84 2,371,000
31 12 2001 $3.88 $3.76 $3.76 2,506,000
31 12 2002 $3.08 $3.04 $3.05 878,020
LAST DAY OF EACH QUARTER OF THE LAST TWO YEARS
30 03 2001 $4.41 $4.12 $4.38 4,922,000
29 06 2001 $3.71 $3.61 $3.62 2,095,000
28 09 2001 $2.29 $2.21 $2.28 5,196,000
31 12 2001 $3.88 $3.76 $3.76 2,506,000
27 03 2002 $4.85 $4.77 $4.83 2,020,000
28 06 2002 $4.28 $4.20 $4.22 9,471,200
30 09 2002 $3.16 $3.00 $3.12 14,211,800
31 02 2002 $3.07 $3.04 $3.05 287,800
31 03 2003 $2.85 $2.70 $2.85 1,748,200
30 06 2003 $4.31 $4.16 $4.16 2,747,100
30 09 2003 $5.17 $5.00 $5.14 7,292,300
LAST DAY OF THE MONTH FOR THE SIX MONTHS PRIOR TO PRESENTATION
30 05 2003 $3.59 $3.50 $3.52
30 06 2003 $4.31 $4.16 $4.16
31 07 2003 $4.43 $4.26 $4.40
29 08 2003 $4.50 $4.43 $4.47
30 09 2003 $5.17 $5.00 $5.14
31 10 2003 $5.64 $5.50 $5.53
18
CORPORATE NAME: TV AZTECA
TICKER TZA
SERIES ADR
TRADES ON NYSE
DATE MAXIMUM MINIMUM CLOSE VOLUME
LAST DAY OF THE LAST FIVE FISCAL YEARS
31 12 1998 $6.94 $6.69 $6.69 55,000
31 12 1999 $9.00 $8.94 $9.00 159,200
29 12 2000 $10.00 $9.75 $9.94 175,700
31 12 2001 $6.90 $6.71 $6.79 74,000
31 12 2002 $4.81 $4.69 $4.79 14,000
On March 27, 1998, the shareholders of the Company approved a four-for-one
division of the shares of capital stock of TV Azteca. The division was declared
effective on April 22, 1998. As a result of the division, each ADS now
represents 16 CPOs.
As of May 2003, approximately 109 million CPOs have been repurchased since
the company started its repurchasing in April 1998.
BEHAVIOR OF THE SHARES ON THE STOCK MARKET
Recent Events as of Last Annual Report.
1. Payment of reimbursements, resulting from the reduction in capital and
preferential dividends to shareholders approved in the General Shareholders'
Meeting held on April 30, 2003.
On June 30, 2003, the Issuer paid the amount of US$122 million for the
reimbursement of reduction in capital and US$3 million for the preferential
dividends.
2. Extinction of shareholder rights of TV Azteca to acquire Unefon Shares.
In October 2000, the Company granted its shareholders rights to acquire,
on a pro-rated basis, ownership held by such Company in Unefon for a total
exercise price of US$177.0 million. The exercise of such rights is subject to,
among other things, the presentation and effectiveness of a declaration of
registration before the SEC, registering the shares of capital stock of Unefon.
The rights to acquire the Unefon Shares would originally have been exercised on
December 11, 2002, but in December 2002, the Company approved a change in the
exercise date to December 12, 2003.
Since, to date, some of these conditions have not been complied with and
it is expected that such conditions will not be complied with, such rights may
not be exercised and will be extinguished.
UNEFON HOLDINGS
Unefon Holdings will be incorporated as a variable capital company
organized under the laws of Mexico. Upon incorporation, Unefon Holdings will
have the same shareholders and division of shares as TV Azteca currently has.
19
Once the Spin-Off has taken effect, Unefon Holdings will be incorporated
as a holding company representing 46.5% of the capital stock of Unefon, with the
shares representing 50% of the capital stock of Cosmofrecuencias. As such, the
main corporate purpose of Unefon Holdings will be the following:
"To promote, incorporate, establish, organize, develop, exploit, manage
and represent all types of companies or corporations and associations of
any other nature both domestic and foreign, including acquiring or
subscribing shares and partnership interests of such companies and
acquiring their own shares under the terms of the Stock Market Law."
Capital Structure
If the Spin-Off had occurred on October 31, 2003, the capital structure of
Unefon Holdings would have been the following:
Unefon Holdings, as the resulting company, would have had capital stock
worth $68,000,000.00.
Therefore, the value of the total assets of Unefon Holdings will be
$625,298,000.00, capital stock in the amount of $68,000,000.00 and total
shareholder equity in the amount of $625,298,000.00.
Shareholders' Rights; Management of Unefon Holdings.
The shareholders of TV Azteca will own the same percentage of shares in
the capital stock of Unefon Holdings.
The shareholders of Unefon Holdings will have the rights conferred upon
them by the Stock Market Law, the LGSM and the corporate by-laws of Unefon
Holdings, which will be substantially similar to those of TV Azteca; provided,
however, that the capital stock of Unefon Holdings will be represented by
common, ordinary shares with full voting rights, which contrasts with the
capital stock of TV Azteca, which is represented by both common, ordinary shares
with full voting rights and by shares with limited voting rights under the terms
of article 113 of the LGSM.
Furthermore, the Unefon shares will be subject to subscription and may be
acquired by any person or company, whether national or foreign, as long as the
applicable legal provisions regarding foreign investment, with respect to
percentages of the participation of foreign investment in the capital stock of
such company, have been complied with.
Unefon Holdings will be managed by a Board of Directors made up of a
minimum of five members and a maximum of twenty members, to be determined by the
General Ordinary Shareholders' Meeting. At least 20% of the Board will be
independent under the terms of article 14 Bis of the Stock Market Law.
All the members of the Board of Directors will have the following
obligations and will follow the following principles: (i) advise the Chairman
and Secretary of the Board of Directors of any situation that may cause a
conflict of interest, and abstain from participating in the related
deliberations; (ii) use the assets or services of the Company solely in
compliance with its corporate purpose and define clear policies when such assets
are to be (exceptionally) used for personal reasons; (iii) dedicate the
necessary time and attention to the tasks assigned to the members of the Board,
particularly attending at least 70% of the meetings that are called; (iv) keep
all information that may affect the Company's operations, as well as any
deliberations carried out by the Board, completely confidential; (v) remain
informed with regard to the matters dealt with in the Board of Directors
meetings; and (vi) support the Board of Directors by means of opinions,
recommendations and references derived from the analysis of the
20
performance of the company, in order for the decisions to be adopted and to be
duly supported by professional criteria and by qualified personnel with a
broader and more independent focus with respect to the operations of the
Company.
Furthermore, Unefon Holdings may form one or more committees to be created
by the Board of Directors, which will each be made up of three members of the
Board of Directors of Unefon Holdings. The committee(s) will act as a single
body, provided that two of the three members be independent directors under the
terms of the Stock Market Law.
Unefon Holdings anticipates the following committees:
1. COMPENSATION COMMITTEE: to review and make recommendations to
the Board of Directors with respect to remuneration (including
incentives and bonuses) to the directors of Unefon Holdings.
2. AUDITING COMMITTEE: to issue opinions regarding operations
with related parties; propose the hiring of independent
specialists in the cases it deems convenient; review financial
reports and financial systems governing internal controls; and
review the activities and independence of the independent
auditors and the activities of the internal auditing team.
3. INVESTMENT COMMITTEE: to review any/all important capital
investment decisions made outside the normal course of
business, which are not included in the annual budget, and
evaluate the riskiness of such business endeavors.
4. TRANSACTIONS WITH RELATED PARTIES COMMITTEE: to review any
important transaction with any related party of Unefon
Holdings or its majority shareholders.
Once the Spin-Off takes effect, the securities of Unefon Holdings will be
sought to be registered on the BMV and on the securities exchange or quotation
system in the U.S. that will be chosen for such effects.
Currently there is no intermediary market for the Unefon Holdings Shares
or the ADS Unefon Holdings, and the establishment of such market cannot be
ensured. TV Azteca is currently trying to receive approval to list or trade (i)
the Unefon Holdings Shares on the BMV and (ii) the ADS Unefon Holdings on a
securities quotation system or exchange in the U.S. The prices at which the
Unefon Holdings Shares and ADS Unefon Holdings may be negotiated after the
Distribution Date cannot be predicted.
At the date of this Information Memorandum, the requests for the registry
of the Unefon Holdings securities both in Mexico and the U.S. have not been
presented to the corresponding authorities. Once such requests are presented, TV
Azteca anticipates they will be modified before the respective authorizations
are issued. Once the securities of Unefon Holdings have been authorized to trade
both in Mexico as well as the U.S., Unefon Holdings will be subject to
periodical reports and other information requirements, in accordance with the
laws governing the stock market applicable to Issuers in the U.S. and in Mexico.
21
V. RISK FACTORS
A. RISKS TO ISSUER
(See Also "Annual Information - - Risk Factors" "Informacion Anual -
Factores de Riesgo" in the TV AZTECA ANNUAL REPORT).
B. RISKS DERIVED FROM THE TRANSACTION
Opposition from Creditors:
In terms of section VI of article 228-Bis of the LGSM, any creditor with a
legal interest can legally oppose the Spin-Off. In the event there is
opposition, the Company cannot envisage the results of such opposition, and in
the event the opposition is duly grounded, the Company does not assert that it
will reach a settlement with the party in opposition.
The Spin-Off Will Substantially Change Operations and the Financial
Situation.
In the event the Spin-Off is agreed upon, Unefon Holdings will receive the
transfer of certain assets and all the Unefon Shares, as well as the shares of
Cosmofrecuencias owned by TV Azteca. As a result of the above, TV Azteca will be
less diversified than it is currently. The Company cannot forecast whether the
results of such a divestment in Unefon and Cosmofrecuencias will be positive.
The Spin-Off May Affect the Price of the TV Azteca Shares.
In the event the Spin-Off is agreed upon, the price of the TV Azteca
securities on the market may fluctuate. In this sense, the Issuer does not claim
that, if such fluctuations occur in the price of the TV Azteca shares, such
fluctuations will be positive.
Sale of the Unefon Shares and/or Cosmofrecuencias Shares Owned by TV
Azteca:
As a result of the Spin-Off, TV Azteca will not continue to maintain its
shareholder interests in Unefon and Cosmofrecuencias; therefore, in the future,
it will not have any cash flows from the sale of the Unefon and/or
Cosmofrecuencias shares.
Dividends, Products or Reimbursements of Capital from Unefon and
Cosmofrecuencias:
As a consequence of the Spin-Off, TV Azteca will not have, in the future,
any cash flows arising out of capital dividends, products or reimbursements
distributed by Unefon and/or Cosmofrecuencias to their shareholders.
Participation in the Results of Unefon and Cosmofrecuencias:
As a result of the Spin-Off, TV Azteca will not continue to maintain its
shareholder interest in Unefon and, in the event Unefon reflects positive net
results, those results may not be reflected by means of the participation
method.
Capital Gains on the Unefon Shares:
As a result of the Spin-Off, TV Azteca may not be able to continue
maintaining its shareholder interest in Unefon and, in the event Unefon reflects
increases in its market price, these increases may not be reflected in such
investment.
22
Lack of Registration of the Unefon Holdings Shares
Once the Spin-Off takes effect, the necessary procedures will be carried
out to register the Unefon Holdings Shares in the Securities Registry of the
National Securities Registry and in a securities or quotation system in the
U.S., after obtaining authorization from the CNBV and SEC, respectively. The
Company does not aver that it will obtain such authorizations, but if it does
obtain them, it cannot predict when they will be granted.
Lack of Liquidity of the Unefon Holdings Shares
Starting in 1995, the Mexican stock market has experienced a considerable
decrease in the amount and number of operations carried out on the same. In
addition, the level of operations on the BMV is less than on other markets. As a
result, the existence of a secondary market for the Unefon Holdings Shares
cannot be guaranteed, nor can any guarantees be granted with respect to the
conditions that may affect the market of the Unefon Holdings Shares in the
future. Further, neither the capacity of the shareholders to assign nor the
conditions under which, as applicable, they may assign such shares can be
guaranteed.
Financial Information Included in This Information Memorandum
This Information Memorandum includes the General Consolidated Balances of
TV Azteca and its Subsidiaries for the years ended December 31, 2001 and 2002,
respectively, as well as the ten-month periods ended October 31, 2002 and 2003,
respectively. Additionally, the Consolidated General Balances before and after
the Spin-Off of TV Azteca and Subsidiaries for the period ended October 31, 2003
and the years ended December 31, 2001 and 2002 are included. The general
balances of Unefon Holdings are prepared as if Unefon had been incorporated on
October 31, 2003, using as a basis the historical financial information of TV
Azteca. As a result, such balances reflect the situation of Unefon Holdings as
if such company would have been operating during the financial years ended in
the years of 2001 and 2002, respectively, and during the ten-month periods ended
October 31, 2002 and 2003, respectively. However, it does not claim that the
financial results of Unefon Holdings would have been the same if it had been
incorporated on said date.
These factors and the other risk factors referred to in the TV AZTECA
Annual Report are not necessarily all the important factors that may cause such
real results to differ substantially from those expressed in any of the
declarations regarding the future of the Company. Other unknown or unpredictable
factors can also negatively affect the future results of the Company. Such
declarations regarding the future included in this Information Memorandum are
made solely as of the date of this Information Memorandum, and the Company does
not represent that such projected results or facts will occur. The Company
waives any obligation to update any of these declarations regarding the future,
whether as a result of new information, future events or otherwise.
23
VI. SELECTED FINANCIAL DATA
TV AZTECA, S.A. DE C.V.
MILLONES DE PESOS CONSTANTES DEL 31 DE
OCTUBRE DE 2003
POR EL ANO QUE TERMINO Y AL 31 DE DICIEMBRE DE:
-----------------------------------------------
AJUSTE AJUSTE
PRO PRO PRO PRO
FORMA FORMA FORMA FORMA
DATOS DEL ESTADO DE RESULTADOS: 2001 2001 2001 2002 2002 2002
MEXICAN GAAP:
Ventas netas PS.6,286 PS.6,286 PS.6,869 PS.6,869
Costo de programacion, produccion y
trasmision 2,536 2,536 2,578 2,578
Gastos de venta y administracion 982 982 1,000 1,000
Depreciacion y amortizacion 620 620 396 396
Utilidad de operacion 2,148 2,148 2,895 2,895
Otros gastos - Neto (250) (250) (453) (453)
Costo integral de financiemiento (340) (340) (1,133) (1,133)
Utilidad antes de provision para impuesto
sobre la renta e impuesto
sobre la renta diferido y partida
especial 1,558 1,558 1,308 1,308
Provision para impuesto sobre la renta e
impuesto sobre la rento
diferido (11) (11) (297) (297)
Partida epsecial - Efecto del
reconocimiento del metodo de
participacion de Unefon y
Cosmofrecuencias PS.(306) (306) PS.(627) (627)
Utilidad neta 1,546 (306) 1,240 1,011 (627) 384
(Perdida) utilidad del interes minoritario (2) (2) 0 0
Utilidad del interes mayoritario 1,548 (306) 1,242 1,011 (627) 384
Utilidad neta por accion de los
accionistas mayoritarios 0.17 (0.03) 0.14 0.11 (0.07) 0.04
Promedio ponderado de acciones en
circulacion 9,025 9,025 9,057 9,057
DATOS DEL BALANCE:
MEXICAN GAAP:
Inmuebles, maquinaria y equipo - Neto PS.2,366 PS.2,366 PS.2,291 PS.2,291
Concesiones de television - Neto 3,843 3,843 3,842 3,842
Inversion en Unefon 1,898 PS.(1,898) - 1,803 PS.(1,803) -
Inversion en Cosmofrecuencias 345 (345) - 364 (364) -
Total activo 22,069 (2,243) 19,826 22,238 (2,167) 20,071
Total deuda 6,355 6,355 6,322 6,322
Anticipos de anunciantes 4,764 4,764 4,565 4,565
Anticipos de anunciantes de Unefon 2,319 2,319 2,225 2,225
Anticipos de Publicidad, programacion y
servicios de Todito 735 735 518 518
Interes mayoritario 5,923 (2,243) 3,680 6,759 (2,167) 4,592
Interes minoritario 9 9 9 9
Total inversion de los accionistas 5,932 (2,243) 3,689 6,768 (2,167) 4,601
OTRA INFORMACION FINANCIERA:
Mexican GAAP:
EBITDA PS.2,768 PS.2,768 PS.3,290 PS. PS.3,290
EBITDA margen 44% 44% 48% 48%
POR EL PERIODO DE DIEZ MESES QUE TERMINO Y AL 31 DE
OCTUBRE DE:
AJUSTE AJUSTE
PRO PRO PRO PRO
FORMA FORMA FORMA FORMA
2002 2002 2002 2003 2003 2003
DATOS DEL ESTADO DE RESULTADOS:
MEXICAN GAAP:
Ventas netas PS.5,455 PS.5,455 PS.5,643 PS.5,643
Costo de programacion, produccion y
trasmision 2,265 2,265 2,263 2,263
Gastos de venta y administracion 813 813 857 857
Depreciacion y amortizacion 438 438 285 285
Utilidad de operacion 1,940 1,940 2,239 2,239
Otros gastos - Neto (327) (327) (306) (306)
Costo integral de financiemiento (1,003) (1,003) (612) (612)
Utilidad antes de provision para impuesto
sobre la renta e impuesto
sobre la renta diferido y partida
especial 609 609 1,321 1,321
Provision para impuesto sobre la renta e
impuesto sobre la rento
diferido (177) (177) (140) (140)
Partida epsecial - Efecto del
reconocimiento del metodo de
participacion de Unefon y
Cosmofrecuencias PS.(598) (598) (1,494) (1,494)
Utilidad neta 432 (598) (166) (313) (313)
(Perdida) utilidad del interes minoritari 1 1 (1) (1)
Utilidad del interes mayoritario 433 (598) (165) (314) (314)
Utilidad neta por accion de los
accionistas mayoritarios 0.05 (0.07) (0.02) (0.03) (0.03)
Promedio ponderado de acciones en
circulacion 9,058 9,058 9,113 9,113
DATOS DEL BALANCE:
MEXICAN GAAP:
Inmuebles, maquinaria y equipo - Neto PS.2,287 PS.2,287 PS.2,263 PS.2,263
Concesiones de television - Neto 3,743 3,743 3,838 3,838
Inversion en Unefon 1,825 PS.(1,825) - 513 PS.(513) -
Inversion en Cosmofrecuencias 362 (362) - 112 (112) -
Total activo 20,413 (2,187) 18,226 19,160 (625) 18,534
Total deuda 6,731 6,731 6,892 6,892
Anticipos de anunciantes 2,579 2,579 2,911 2,911
Anticipos de anunciantes de Unefon 2,259 2,259 2,088 2,088
Anticipos de Publicidad, programacion y
servicios de Todito 574 574 424 424
Interes mayoritario 6,283 (2,187) 4,097 4,809 (625) 4,184
Interes minoritario 9 9 10 10
Total inversion de los accionistas 6,292 (2,187) 4,106 4,820 (625) 4,195
OTRA INFORMACION FINANCIERA:
Mexican GAAP:
EBITDA PS.2,378 PS. PS.2,378 PS.2,524 PS. PS.2,524
EBITDA margen 44% 44% 45% 45%
24
VII. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The Issuer recognizes the following accounting effects in a pro-forma
basis:
a) Participation method, arising out of the results of its investments
in Unefon and Cosmofrecuencias, which causes the accounting effects
detailed below:
i) Recognition of a loss of $305,516,000.00, $626,694,000.00,
$597,571,000.00 and $1,493,824,000.00 for the years ended
December 31, 2001 and 2002, and the ten-month periods ended
October 31, 2002 and 2003, respectively;
ii) The decrease in investment in Unefon of $305,516,000.00,
$626,694,000.00, $597,571,000.00 and $1,242,727,000.00 for the
years ended December 31, 2001 and 2002, and the ten-month
periods ended October 31, 2002 and 2003, respectively; and
iii) The decrease of investment in Cosmofrecuencias of
$251,097,000.00 for the ten-month period ended October 31,
2003. During the years ended December 31, 2001 and 2002, as
well as the ten-month period ended October 31, 2002,
Cosmofrecuencias did not generate any results that affect the
participation method.
b) Pro-forma Spin-Off of the investments mentioned above, which
originated the following accounting effects:
i) A decrease in the capital stock in the amount of
$68,000,000.00, $68,000,000.00, $68,000,000.00 and
$68,000,000.00 for the years ended December 31, 2001 and 2002,
and the ten-month periods ended October 31, 2002 and 2003,
respectively;
ii) A decrease in other accounting capital accounts in the amounts
of $2,174,628,000.00, $2,099,043,000.00, $2,118,661,000.00 and
$557,298,000.00 for the years ended December 31, 2001 and
2002, and the ten-month periods ended October 31, 2002 and
2003, respectively;
iii) the unincorporation of the investment in Unefon in the amounts
of $1,897,840,000.00, $1,802,826,000.00, $1,824,845,000.00 and
$513,220,000.00 for the years ended December 31, 2001 and
2002, and the ten-month periods ended October 31, 2002 and
2003, respectively; and
iv) the unincorporation of the investment in Cosmofrecuencias in
the amount of $344,785,000.00, $364,218,000.00,
$361,816,000.00 and $112,078,000.00 for the years ended
December 31, 2001 and 2002, and the ten-month periods ended
October 31, 2002 and 2003, respectively.
DECLARATIONS RELATED TO FUTURE EXPECTATIONS
Some of the declarations in this Information Memorandum are future
expectations. Furthermore, TV Azteca or Unefon Holdings may make declarations of
future expectations for future proceedings before the CNBV, in written
materials, in the press, and as verbal declarations issued by or in the name of
such companies. The declarations of future expectations include declarations
regarding the current intentions, beliefs or expectations of TV Azteca or Unefon
Holdings, or the officers of such companies (including declarations preceded or
followed by, or that include terminology implying, a future
25
expectation, such as "could", "should", "relieve", "hope" or "expect",
"anticipate", "predict", "continue" or similar expressions or comparable
terminology) with respect to various issues.
It is important to point out that the actual financial results of TV
Azteca or Unefon Holdings may differ materially from those anticipated results
in the future expectations declarations, since they depend on various important
factors. Such factors include economic, political and governmental conditions in
Mexico and any other conditions, inflation rates, exchange rates and exchange
controls in Mexico, adjustments to rates, changes in legislation, technological
improvements, market demand and competition. This list of factors is not
exclusive since risks and uncertainties may cause the results to materially
differ from those declared in the future expectations.
All information and the future expectation declarations container in this
Information Memorandum are based on the information available to the date for TV
Azteca. TV Azteca is not obligated to update such information or future
expectation declaration made by it or in the name of TV Azteca or Unefon
Holdings, in this Information Memorandum or in any other manner, except in the
ordinary course of information that has been publicly revealed.
________________
NO PARTY HAS BEEN AUTHORIZED TO PROVIDE ANY INFORMATION OR TO MAKE ANY
DECLARATION WHATSOEVER THAT HAS NOT BEEN CONTAINER OR REFERRED TO HEREIN, AND IF
IT WERE TO DO SO, SUCH INFORMATION OR DECLARATION WILL NOT BE CONSIDERED
AUTHORIZED BY TV AZTECA OR UNEFON HOLDINGS.
26
VIII. RESPONSIBLE PARTIES
The undersigned declare, under an oath to declare truthfully, that in the
scope of our respective functions, we have prepared the information related to
the Issuer container herein, which, to the best of our knowledge and
understanding, reasonably reflects its situation. Furthermore, we declare that
we are unaware of any relevant information that has been omitted or any false
declarations herein, or that this Information Memorandum contains any
information that may lead to an error by the investors.
---------------------------------------------
Lic. Pedro Padilla Longoria
General Director of TV Azteca, S.A. de
C.V.
---------------------------------------------
C.P. Carlos Hesles Flores
General Director of Administration and
Finance of TV Azteca, S.A. de C.V.
---------------------------------------------
Lic. Francisco X. Borrego Hinojosa
Linage General Legal Director of TV Azteca,
S.A. de C.V.
27
IX. EXHIBITS
A. OPINION OF THE INDEPENDENT AUDITOR
B. GENERAL AND PRO FORMA BALANCE SHEETS
TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED GENERAL BALANCES
Thousands of Pesos as of October 31, 2003
------------------------ -------------------------
DECEMBER 31, OCTOBER 31,
------------------------ -------------------------
2001 2002 2002 2003
----------- ----------- ----------- -----------
no auditados
ASSETS
Circulating
Cash and cash equivalents $ 1,694,949 $ 1,430,473 $ 1,202,230 $ 1,101,159
Accounts receivable 5,059,008 5,052,596 3,441,890 4,005,468
Other circulating assets 1,137,933 953,340 1,092,555 1,209,290
----------- ----------- ----------- -----------
Total circulating assets 7,891,890 7,436,410 5,736,675 6,315,917
Investments in shares of Unefon, S.A. de C.V.
(Unefon), associated company 1,897,840 1,802,826 1,824,845 513,220
Investments in shares of Cosmofrequencias, S.A. de C.V.
(Cosmofrequencias), associated company 344,788 364,218 361,816 112,078
Accounts receivable from Unefon, associated company 1,982,700 2,062,709 2,116,630 1,813,982
Real estate, machinery and equipment - Net 2,365,596 2,291,023 2,287,125 2,263,196
Television concesions - Net 3,842,882 3,841,605 3,742,689 3,837,825
Other assets 3,743,510 4,439,352 4,343,306 4,303,497
----------- ----------- ----------- -----------
Total assets $22,069,206 $22,238,142 $20,413,086 $19,159,715
=========== =========== =========== ===========
LIABILITIES AND INVESTMENT OF SHAREHOLDERS
Short term liabilities:
Short term debt $ 582,009 $ 448,849 $ 626,531 $ 2,248,174
Other accounts payable and accumulated expenses 1,753,932 1,560,382 1,610,677 1,884,250
----------- ----------- ----------- -----------
Sum, short term liabilities 2,335,941 2,009,230 2,237,208 $ 4,133,424
----------- ----------- ----------- -----------
Long term liabilities:
Long term debt 5,772,953 5,873,535 6,104,549 4,643,128
Advances from advertisers 4,763,702 4,564,979 2,578,546 2,910,705
Long term advances from advertisers of Unefon,
associated company 2,318,680 2,225,208 2,259,180 2,088,222
Advances for publicity, programming and services from
associated company 734,548 517,886 574,461 423,792
Other accounts payable 211,581 278,883 366,848 140,570
----------- ----------- ----------- -----------
Total long term liabilities 13,801,364 13,460,491 11,883,575 10,206,417
----------- ----------- ----------- -----------
Total liabilities 16,137,305 15,469,721 14,120,783 14,339,841
----------- ----------- ----------- -----------
Investments by shareholders:
Majority interest 5,923,305 6,759,471 6,283,428 4,809,439
Minority interest 8,596 8,950 8,875 10,435
----------- ----------- ----------- -----------
Total shareholder investment 5,931,901 6,768,421 6,292,303 4,819,874
----------- ----------- ----------- -----------
Total liabilities and shareholder investment $22,069,206 $22,238,142 $20,413,086 $19,159,715
=========== =========== =========== ===========
The attached note is an integral part of these general balances.
28
TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED PRO FORMA GENERAL
BALANCES BEFORE AND AFTER THE SPIN-OFF
AS OF OCTOBER 31, 2003
Thousands of pesos as of October 31, 2003
BASE SUMS
TV AZTECA, S.A. DE UNEFON TV AZTECA, S.A.
C.V. HOLDINGS, S.A. DE DE C.V. AND
Y SUBSIDIARIAS C.V. SUBSIDIARIES
------------------ ----------------- ----------------
BEFORE SPIN-OFF AFTER SPIN-OFF
NOT AUDITED RESULTING COMPANY NOT AUDITED
ASSETS
Circulating:
Cash and Cash equivalents $ 1,101,159 $ 1,101,159
Accounts receivable 4,005,468 4,005,468
Other circulating assets 1,209,290 1,209,290
------------ ------------
Total circulating assets 6,315,917 6,315,917
Investments in shares of Unefon, S.A. de C.V.
(Unefon), associated company 513,220 $ 513,220 --
Investments in shares of de Cosmofrequencias, S.A. de
C.V.
(Cosmofrecuencias), associated company 112,078 112,078 --
Accounts receivable from Unefon, associated company 1,813,982 1,813,982
Real estate, machinery and equipment - Net 2,263,196 2,263,196
Television concesions - Net 3,837,825 3,837,825
Other assets 4,303,497 4,303,497
------------ ------------ ------------
Total assets $ 19,159,715 $ 625,298 $ 18,534,417
============ ============ ============
LIABILITIES AND INVESTMENT OF SHAREHOLDERS
Short term liabilities:
Circulating portion of long term bank loans 2,249,174 2,249,174
Other accounts payable and accumulated expenses 1,884,250 1,884,250
------------ ------------
Total short term liabilities 4,133,424 4,133,424
------------ ------------
Long term liabilities:
Long term debt 4,643,128 4,643,128
Advances from advertisers 2,910,705 2,910,705
Advances from advertisers of Unefon,
associated company 2,088,222 2,088,222
Advances for Publicity, programming and services from
Todito, associated company 423,792 423,792
Other accounts payable 140,570 140,570
------------ ------------
Total long term liabilities 10,206,417 10,206,417
------------ ------------
Total liabilities 14,339,841 14,339,841
------------ ------------
Investments by shareholders:
Majority interest 4,809,439 $ 625,298 4,184,141
Minority interest 10,435 10,435
------------ ------------ ------------
Total shareholder investments 4,819,874 625,298 4,194,576
------------ ------------ ------------
Total liabilities and shareholder investments $ 19,159,715 $ 625,298 $ 18,534,417
============ ============ ============
The attached note is an integral part of these general balances.
29
TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA GENERAL
BALANCES BEFORE AND AFTER THE SPIN-OFF
AS OF DECEMBER 2002
Thousands of Pesos as of October 31, 2003
BASE SUMS
TV AZTECA, S.A. UNEFON TV AZTECA, S.A.
DE C.V. Y HOLDINGS S.A. DE C.V. AND
SUBSIDIARIAS DE C.V. SUBSIDIARIES
--------------- -------------- ----------------
RESULTING AFTER SPIN-OFF
BEFORE SPIN-OFF COMPANY NOT AUDITED
ASSETS
Circulating
Cash and cash equivalents $ 1,430,473 $ 1,430,473
Accounts receivable 5,052,596 5,052,596
Other circulating assets 953,340 953,340
----------- -----------
Total circulating assets 7,436,410 7,436,410
Investment in shares of Unefon, S.A. de C.V.
(Unefon), associated company 1,802,826 $ 1,802,826
Investment in shares of Cosmofrecuencias, S.A. de C.V.
(Cosmofrecuencias), associated company 364,218 364,218
Accounts receivable from Unefon, associated company 2,062,709 2,062,709
Real estate, machinery and equipment - Net 2,291,023 2,291,023
Television concessions - Net 3,841,605 3,841,605
Other assets 4,439,352 4,439,352
----------- ----------- -----------
Total assets $22,238,142 $ 2,167,043 $20,071,099
=========== =========== ===========
LIABILITIES AND SHAREHOLDER INVESTMENTS
Short term liabilities:
Circulating portion of long term bank loans $ 448,849 $ 448,849
Other accounts payable and accumulated expenses 1,560,382 1,560,382
----------- -----------
Total, short term assets 2,009,230 2,009,230
----------- -----------
Long term liabilities:
Long term debt 5,873,535 5,873,535
Advances from advertisers 4,564,979 4,564,979
Advances from advertisers of Unefon, associated company 2,225,208 2,225,208
Advances from publicity, programming and services of
Todito, associated company 517,886 517,886
Other accounts payable 278,883 278,883
----------- -----------
Total, long term liabilities 13,640,491 13,640,491
----------- -----------
Total liabilities 15,469,721 15,469,721
----------- -----------
Shareholder investment:
Majority interest 6,759,471 $ 2,167,043 4,592,428
Minority interest 8,950 8,950
----------- ----------- -----------
Total investment by shareholders 6,768,421 2,167,043 4,601,378
----------- ----------- -----------
Total liabilities and investment by shareholders $22,238,142 $ 2,167,043 $20,071,099
=========== =========== ===========
The attached note is an integral part of these general balances.
30
TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED GENERAL PRO FORMA
BALANCES BEFORE AND AFTER THE SPIN-OFF
AS OF DECEMBER 2001
Thousands of Pesos as of December 31, 2003
BASE SUMS
TV AZTECA, S.A. UNEFON TV AZTECA, S.A.
DE C.V. AND HOLDINGS S.A. DE C.V. AND
SUBSIDIARIAS DE C.V. SUBSIDIARIES
--------------- ------------- ---------------
RESULTING AFTER SPIN-OFF
BEFORE SPIN-OFF COMPANY NOT AUDITED
ASSETS
Circulating
Cash and cash equivalents $ 1,694,949 $ 1,694,949
Accounts receivable 5,059,008 5,059,008
Other circulating assets 1,137,933 1,137,933
----------- ----------- -----------
Total circulating assets 7,891,890 7,891,890
Investment in shares of Unefon, S.A. de C.V.
(Unefon), associated company 1,897,840 $ 1,897,840
Investments in shares of Cosmofrecuencias, S.A. de C.V.
(Cosmofrecuencias), associated company 344,788 344,788
Accounts receivable from Unefon, associated company 1,982,700 1,982,700
Real estate, machinery and equipment - Net 2,365,596 2,365,596
Television concesions - Net 3,842,882 3,842,882
Other assets 3,743,510 3,743,510
----------- ----------- -----------
Total assets $22,069,206 $ 2,242,628 $19,826,578
=========== =========== ===========
LIABILITIES AND INVESTMENT BY SHAREHOLDERS
Short term liabilities:
Circulating portion of long term bank debt $ 582,009 $ 582,009
Other accounts payable and accumulated expenses 1,753,932 1,753,932
----------- -----------
Sum, short term liabilities 2,335,941 2,335,941
----------- -----------
Long term liabilities:
Long term debt 5,772,853 5,772,853
Advances from advertisers 4,763,702 4,763,702
Advances from advertisers of Unefon,
associated company 2,318,680 2,318,680
Advances from publicity, programming and services of
associated company 734,548 734,548
Other accounts payable 211,581 211,581
----------- -----------
Total long term liabilities 13,801,364 13,801,364
----------- ----------
Total liabilities 16,137,305 16,137,305
----------- -----------
Investments by shareholders:
Majority interest 5,923,305 2,242,628 3,680,677
Minority interest 8,596 8,596
----------- ----------- -----------
Total shareholder investments 5,931,901 2,242,628 3,689,273
----------- ----------- -----------
Total liabilities and shareholder investments $22,069,206 $ 2,242,628 $19,826,578
=========== =========== ===========
The attached note is an integral part of these general balances.
31
TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES
NOTE TO THE CONDENSED, CONSOLIDATED PRO FORMA BALANCES
AMOUNTS REFLECTED IN PESOS
NOTE 1. THE SPIN-OFF OF UNEFON AND COSMOFRECUENCIAS
The Company assumed the following accounting effects during the drafting
of the general balances:
a) Recognition of the participation method arising out of the results
of the investments in Unefon and Cosmofrecuencias, causing the
accounting effects mentioned detailed below:
i) Recognition of a loss of $305,516,000.00, $626,694,000.00,
$597,571,000.00 and $1,493,824,000.00 for years ended December
31, 2001, 2002, and the ten-month periods ended October 31,
2002 and 2003, respectively;
ii) the decrease in the investments in Unefon in the amount of
$305,516,000.00, $626,694,000.00, $597,571,000.00 and
$1,242,727,000.00 for years ended December 31, 2001, 2002, and
the ten-month periods ended October 31, 2002 and 2003,
respectively; and
iii) The decrease in the investment in Cosmofrecuencias in the
amount of $251,097,000.00 for the ten month period ended
October 31, 2003. During the years ended December 31, 2001 and
2002 as well as the ten-month period ended October 31, 2002,
Cosmofrecuencias did not generate any results affecting the
participation method.
b) Pro forma division of the investments mentioned above, causing the
following accounting effects:
i) A decrease in the capital stock in the amounts of
$68,000,000.00, $68,000,000.00, $68,000,000.00 and
$68,000,000.00 for the years ended December 31, 2001, 2002,
and the ten-month periods ended October 31, 2002 and 2003,
respectively;
ii) A decrease in other accounting capital accounts in the amount
of $2,174,628,000.00, $2,099,043,000.00, $2,118,661,000.00 and
$557,298,000.00 for years ended December 31, 2001 and 2002,
and the ten-month periods ended October 31, 2002 and 2003,
respectively;
iii) The unincorporation of the investment in Unefon in the amount
of $1,897,840,000.00, $1,802,826,000.00, $1,824,845,000.00 and
$513,220,000.00 for years ended December 31, 2001 and 2002,
and the ten-month periods ended October 31, 2002 and 2003,
respectively; and
iv) The unincorporation of the investment in Cosmofrecuencias in
the amount of $344,785,000.00, $364,218,000.00,
$361,816,000.00 and $112,078,000.00 for the years ended
December 31, 2001 and 2002, and the ten-month periods ended
October 31, 2002 and 2003, respectively.
32