MultiChoice (Cyprus) Public Company Limited

Transcription

1 Report and financial statements 31 March Contents Page Board of Directors and other officers 1 Declaration of the members of the Board of Directors 2 Report of the Board of Directors 3 5 Independent Auditors Report 6 8 Income statement 9 Balance sheet 10 Statement of changes in equity 11 Cash flow statement 12 Notes to the financial statements 13 33

2 Board of Directors and other officers Board of Directors Constantinos Bakouris Chairman Willem Johannes Hattingh Managing Director Sheryl Ann Raine James John Volkwyn (resigned 30 June ) Socrates Loizides (appointed 30 June ) Company Secretary Ioannis Clerides 27 Evagorou Street Irene Court, Office 32 CY-1066 Nicosia Auditors PricewaterhouseCoopers Limited Julia House 3 Themistocles Dervis Street CY-1066 Nicosia Cyprus Legal Advisers Antis Tryantafylides & Sons Ioannis Clerides & Sons Registered office 50 Athalassas Avenue CY Strovolos Nicosia Bankers Marfin Popular Bank Public Company Limited Bank of Cyprus Public Company Limited Societe Generale Cyprus Limited Hellenic Bank Public Company Limited Alpha Bank Limited Universal Bank Limited Arab Bank Public Company Limited National Bank of Greece Limited.doc (1)

3 Declaration by the members of the Board of Directors Declaration by the members of the Board of Directors and the Company officials responsible for the drafting of the financial statements In accordance with section 140 (1) of the Cyprus Securities and Stock Exchange Law, we the members of the Board of Directors and the Company officials responsible for the drafting of the financial statements of for the year ended 31 March, based on our knowledge, which is the product of careful and conscientious work, declare that the particulars which are specified in the financial statements are true and complete. Members of the Board of Directors Name and surname Signature Constantinos Bakouris Willem Johannes Hattingh Sheryl Ann Raine Socrates Loizides Responsible for drafting the financial statements Name and surname Capacity Signature Andreas Loizou Financial Controller Nicosia 13 June.doc (2)

4 Report of the Board of Directors 1 The Board of Directors presents its report together with the audited financial statements of the Company for the year ended 31 March. Principal activities 2 The principal activities of the Company, which are unchanged from last year, are the management of subscribers for pay television as well as the importation and distribution of decoders, including any interest earning activities. Review of developments, position and performance of the Company s business 3 Subsequent to the decision by the Commission for the Protection of Competition of Cyprus ( CPC ) on 2 June, declaring the Channel Distribution Agreement between the Company and Lumiere TV Public Company Limited ( LTV ) null and void ab initio, the Company has experienced a turbulent year in relation to subscribers under its management and its ability to earn subscription revenue. The Company paid a fine of imposed by the CPC as a result of the decision by the CPC on 2 June. 4 The loss of the Company s analogue subscriber base on 19 July was as a result of LTV s termination of its cooperation with the Company, the withdrawal of the LTV channel and the loss of the Alfa Channel with key football rights from the Nova Cyprus subscription platform, materially affected the Company s subscription revenue for the year. 5 The Company has renegotiated the cooperation agreement with MultiChoice Hellas SA which amongst others, also include the addition of the premium FilmNet and SuperSport channels to the Nova Cyprus programme offering. During the course of the year, the Nova Cyprus subscription platform was further enhanced through the addition of more FilmNet and SuperSport channels and two Sigma Sports channels. 6 During the year the Company also reduced its special pricing of digital decoders. 7 As a result of the overall reduction in both analogue and digital subscribers and subscription revenue, the Company has implemented strict measures to reduce and control overheads. 8 Legal fees increased significantly for the year as a result of (a) litigation against (i) LTV, (ii) the Company s former Directors Messrs Akis Avraamides, George Xinaris and Constantinos Emilianides, (b) recourse to the Supreme Court to appeal the CPC decision and fine of 02 June and (c) legal costs arising from (i) the LTV Public Offer for the Company s shares and (ii) the Company s written and oral submissions to the CPC, as an interested party, with regard to the application(s) by CYTA and/or LTV for negative clearance or individual exemption for the Channel Distribution Agreement and the Creation of Composition and Provision of Television Content Agreement..doc (3)

5 Report of the Board of Directors (continued) Principal risks and uncertainties 9 The main risk and uncertainty facing the Company arises from the impact on subscriber numbers due to the continued lack of Cyprus Football on the Nova Cyprus bouquet and the escalation of the cost of sports and other key programming content in a competitive market and the number of competitors competing for market share in the small Cyprus market place. Future developments 10 The Company remains committed to its strategy to maintain and grow the digital subscriber base and to work towards the enrichment of the Nova Cyprus content offering. Results 11 The Company s results for the year are set out on page 9. The net loss for the year is carried forward. Share capital 12 There were no changes in the share capital of the Company. Board of Directors 13 The members of the Board of Directors at 31 March and at the date of this report are shown on page 1. All of them were members of the Board throughout the financial year, except for Mr James John Volkwyn who resigned on 30 June. Mr Socrates Loizides was appointed as Director on the same date. 14 In accordance with the Company s Articles of Association Mr Willem Johannes Hattingh and Mrs Sheryl Ann Raine retire and being eligible, offer themselves for reelection. 15 There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors. Events after the balance sheet date 16 Material events which occurred after the end of the financial year are disclosed in Note 24 of the financial statements. Branches 17 The Company did not operate through any branches during the year..doc (4)

6 Report of the Board of Directors (continued) Directors and their related parties interest in the share capital of the Company 18 The Directors and their related parties did not have any direct interest in the Company s share capital at 31 March and at the date of this report. Substantial shareholdings 19 The following shareholders held directly over 5% of the Company s issued share capital. 14 May % 31 March % MultiChoice Holdings (Cyprus) Limited 50,98 50,98 Lumiere TV Public Company Limited (1) 32,41 32,41 (1) LTV controls 30,97% of the issued share capital of MultiChoice Holdings (Cyprus) Limited (the Company s immediate controlling party) and therefore it controls indirectly an additional 15,79% of the Company s issued share capital. The total direct and indirect share - holding of LTV in the Company s share capital is therefore 48,20%. Transactions with the Board of Directors and their related parties 20 Except from the transactions and the balances with related parties referred to in Note 23, there were no other significant transactions in which the Board of Directors and their related parties had any material interest. Auditors 21 The Independent Auditors, PricewaterhouseCoopers Limited, have expressed their willingness to continue in office. A resolution giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting. By Order of the Board Constantinos Bakouris Chairman Nicosia, 13 June.doc (5)

7 2005 Cyprus Export Award for Services Independent Auditors Report To the Members MultiChoice (Cyprus) Public Company Limited PricewaterhouseCoopers Limited Julia House 3 Themistocles Dervis Street CY-1066 Nicosia P O Box CY-1591 Nicosia, Cyprus Telephone: Facsimile: Report on the Financial Statements We have audited the financial statements of MultiChoice (Cyprus) Public Company Limited on pages 9 to 33, which comprise the balance sheet as at 31 March, and the Income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Board of Directors Responsibility for the Financial Statements The Company s Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and the requirements of the Cyprus Companies Law, Cap This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Board Members: Phidias K Pilides (CEO), Dinos N Papadopoulos (Deputy CEO), Tassos I Televantides (Deputy CEO), Panikos N Tsiailis, Christakis Santis, Stephos D Stephanides, Costas L Hadjiconstantinou, George Foradaris, Costas M Nicolaides, Angelos M Loizou, Vasilis Hadjivassiliou, Androulla S Pittas, Savvas C Michail, Costas L Mavrocordatos, Christos M Themistocleous, Panicos Kaouris, NicosA Neophytou, George M Loizou, Timothy D Osburne, Pantelis G Evangelou, Liakos M Theodorou, Stelios Constantinou, Tassos Procopiou, Andreas T Constantinides, Theo Parperis, Constantinos Constantinou, Petros C Petrakis, Philippos C Soseilos, Evgenios C Evgeniou, Christos Tsolakis, Nicos A Theodoulou, Nikos T Nikolaides, Cleo A Papadopoulou, Marios S Andreou, Nicos P Chimarides, Aram Tavitian, Constantinos Taliotis, Stavros A Kattamis, Yiangos A Kaponides, Tasos N Nolas, Chrysilios K Pelekanos Directors of Operations: Adrian Ioannou, Androulla Aristidou, Achilleas Chrysanthou, George Skapoullaros, Bambos A Charalambous, Chris Odysseos, Demetris V Psaltis, Constantinos L Kapsalis, Melina Pyrgou Offices: Nicosia, Limassol, Larnaca, Paphos PricewaterhouseCoopers Ltd is a private company, Registered in Cyprus (Reg. No )

8 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Basis for Qualified Opinion As discussed in Note 24 of these financial statements, during the year ended 31 March, the Company received an undertaking that it will receive a cheque for in full settlement of a receivable for which an 100% impairment loss had been recognised in the year ended 31 March This cheque was dated and cashed after the year end, and the Company has treated this matter as a non adjusting post balance sheet event, and has therefore not reversed in the current year the impairment loss previously booked. This treatment, in our opinion, is not in accordance with IAS39 Financial Instruments: Recognition and Disclosure and IAS10 Events After the Balance Sheet Date. Based on these Standards the Company should have revised its estimate and reversed the impairment loss in the current year. Qualified opinion In our opinion, except for the effect on the financial statements of the matter referred to in the Basis for Qualified Opinion paragraph, the financial statements give a true and fair view of the financial position of as of 31 March, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and International Financial Reporting Standards as issued by the IASB and the requirements of the Cyprus Companies Law, Cap F:\M\MC08809\ASSURANCE\FS\.doc (7)

9 Report on Other Legal Requirements Pursuant to the requirements of the Companies Law, Cap. 113, we report the following: We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The Company s financial statements are in agreement with the books of account. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Law, Cap. 113, in the manner so required, except as stated in the Basis for Qualified Opinion paragraph. In our opinion, the information given in the report of the Board of Directors on pages 3 to 5 is consistent with the financial statements. Other Matter This report, including the opinion, has been prepared for and only for the Company s members as a body in accordance with Section 156 of the Companies Law, Cap. 113 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to. PricewaterhouseCoopers Limited Chartered Accountants Nicosia, 13 June F:\M\MC08809\ASSURANCE\FS\.doc (8)

10 Income statement for the year ended 31 March Note Supplementary information Sales Cost of goods and services sold ( ) ( ) ( ) ( ) Gross profit Other gains net (8.393) (14.454) Selling and marketing costs ( ) ( ) ( ) ( ) Administrative expenses ( ) ( ) ( ) ( ) Operating (loss)/profit ( ) ( ) Finance costs 9 (5.932) (23.429) (10.216) (40.348) (Loss)/profit before tax ( ) ( ) Tax ( ) ( ) (Loss)/profit for the year ( ) ( ) (Loss)/profit per share (cents) 11 (0,96) 0,84 (1,65) 1,45 =========== =========== =========== =========== The notes on pages 13 to 33 are an integral part of these financial statements. F:\M\MC08809\ASSURANCE\FS\.doc (9)

11 Balance sheet at 31 March Note Supplementary information Assets Non-current assets Plant and equipment Intangible assets Deferred tax assets Current assets Inventories Trade and other receivables Deferred expenses Financial assets at fair value through profit or loss Taxation refundable Cash at bank and in hand Total assets ========== ========== ========== ========== Equity and liabilities Capital and reserves Share capital Accumulated losses ( ) (22.964) ( ) (39.546) Non-current liabilities Deferred tax liabilities Current liabilities Trade and other payables Deferred income Current tax liabilities Total liabilities Total equity and liabilities ========== ========== ========== ========== On 13 June the Board of Directors of authorised these financial statements for issue. Constantinos Bakouris, Chairman Willem Johannes Hattingh, Managing Director The notes on pages 13 to 33 are an integral part of these financial statements. F:\M\MC08809\ASSURANCE\FS\.doc (10)

12 Statement of changes in equity for the year ended 31 March Note Share Retained capital earnings (1) Total Balance at 1 April ( ) Profit for the year Balance at 31 March /1 April (22.964) Loss for the year - ( ) ( ) Balance at 31 March ( ) ========= ========== ========= (1) As from 1 January 2003, companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, during the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 15% will be payable on such deemed dividend to the extent that the shareholders (individuals and companies) at the end of the period of two years from the end of the year of assessment to which the profits refer are Cyprus tax residents. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is paid by the Company for the account of the shareholders. The notes on pages 13 to 33 are an integral part of these financial statements. F:\M\MC08809\ASSURANCE\FS\.doc (11)

13 Cash flow statement for the year ended 31 March Note Supplementary information Cash flows from operating activities (Loss)/profit before tax ( ) ( ) Adjustments for: Depreciation of plant and equipment Profit on sale of plant and equipment 12 (3.783) - (6.515) - Amortisation of intangible assets (Profit)/loss on sale of financial assets at fair value through profit or loss 16 (6.012) (10.353) Fair value (gains)/losses on financial assets at fair value through profit or loss 16 (409) (705) Provision for impairment of receivables Provision for obsolete inventories Interest income 6 (46.126) (52.466) (79.434) (90.352) Dividend income 6 (12.178) (40.882) (20.972) (70.403) Interest expense Changes in working capital: ( ) ( ) Inventories ( ) ( ) Trade and other receivables ( ) ( ) Deferred expenses Financial assets at fair value through profit or loss Trade and other payables ( ) ( ) Deferred income ( ) ( ) Cash (used in)/from operations ( ) ( ) Tax paid (3.595) (75.892) (6.190) ( ) Net cash (used in)/from operating activities ( ) ( ) Cash flows from investing activities Purchases of plant and equipment 12 (3.571) (28.132) (6.150) (48.446) Proceeds from sale of plant and equipment Interest received Dividends received Net cash from investing activities Cash used in financing activities Interest paid (5.932) (23.429) (10.216) (40.347) Net cash used in financing activities (5.932) (23.429) (10.216) (40.347) Net (decrease)/increase in cash and cash equivalents ( ) ( ) Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year ========= ========= ========= ========= The notes on pages 13 to 33 are an integral part of these financial statements. F:\M\MC08809\ASSURANCE\FS\.doc (12)

14 Notes to the financial statements 1 General information Country of incorporation The Company was incorporated on 15 November 1993 as a limited liability company and is domiciled in Cyprus. On 3 April 2000 the Company became a public limited liability company in accordance with the provisions of the Companies Law, Cap In July 2000 the Company s shares were listed in the Cyprus Stock Exchange. Its registered office is at 50 Athalassas Avenue, CY Strovolos, Nicosia. Principal activities The principal activities of the Company, which are unchanged from last year, are the management of subscribers for pay television as well as the importation and distribution of decoders, including any interest earning activities. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented in these financial statements. Basis of preparation The financial statements of have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). The financial statements comply with both these reporting frameworks because at the time of their preparation all applicable IFRSs issued by the IASB have been adopted by the EU through the endorsement procedure established by the European Commission. In addition the financial statements have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. F:\M\MC08809\ASSURANCE\FS\.doc (13)

15 2 Summary of significant accounting policies (continued) Adoption of new and revised IFRS In the current year the Company adopted all new and revised IFRS that are relevant to its operations and are effective for accounting periods beginning on 1 April. This adoption did not result in substantial changes to the Company s accounting policies. At the date of authorisation of these financial statements the following Standards were in issue but not yet effective: New standard/ Interpretation Effective date IFRS 7 Financial Instruments: Disclosures and IAS 1 (Amendment) Presentation of Financial Statements 1 January IFRIC Interpretation 8 Scope of IFRS 2 1 May IFRIC Interpretation 9 Reassessment of Embedded Derivatives 1 June IFRIC Interpretation 10 Interim Financial Reporting and Impairment 1 November IFRIC Interpretation 11 IFRS 2 Group and Treasury Share Transactions 1 March IFRIC Interpretation 12 Service Concession Arrangements 1 January 2008 IFRS 8 Operating Segments 1 January 2009 IAS 23 (Amendment) Borrowing Costs 1 January 2009 The Board of Directors anticipates that the adoption of these Standards in future periods will have no material impact on the financial statements of the Company. F:\M\MC08809\ASSURANCE\FS\.doc (14)

16 2 Summary of significant accounting policies (continued) Revenue recognition Revenue comprises the fair value for the sale of goods and services, net of value added tax, rebates and discounts. Revenues earned by the Company are recognised on the following bases: (a) Sales of goods Sales of goods are recognised when significant risks and rewards of ownership of the goods have been transferred to the customer, which is usually when the Company has sold or delivered goods to the customer, the customer has accepted the goods and collectibility of the related receivable is reasonably assured. (b) Sales of services Subscription sales are recognised in the accounting period in which the services are rendered, taking into account the commencement and completion dates of the subscription periods and considering the actual service provided up to the year end, as a proportion of the total services to be provided. (c) Interest income Interest income is recognised on a time proportion basis using the effective interest method. (d) Dividend income Dividend income is recognised when the right to receive payment is established. Employee benefits The Company and the employees contribute to the Government Social Insurance Fund based on employees salaries. In addition, the Company operates a defined contribution scheme the assets of which are held in a separate trustee-administered fund. The scheme is funded by payments from employees and by the Company. The Company s contributions are expensed as incurred and are included in staff costs. The Company has no further payment obligations once the contributions have been paid. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. F:\M\MC08809\ASSURANCE\FS\.doc (15)

17 2 Summary of significant accounting policies (continued) Foreign currency translation (a) Functional and presentation currency Items included in the Company s financial statements are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The financial statements are presented in Cyprus pounds (), which is the Company s functional and presentation currency. The supplementary information presented in Euro in compliance with paragraph 57 of IAS21 The Effects of Changes in Foreign Exchange using as translation rate, the exchange rate announced by the Central Bank of Cyprus at the balance sheet date ( 1 = 1,7221 on 31 March ), for both the current year and the comparatives. (b) 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 recognised in the income statement. 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. Tax Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Dividend distribution Dividend distribution to the Company s shareholders is recognised as a liability in the Company s financial statements in the period in which the dividends are approved by the Company s shareholders. F:\M\MC08809\ASSURANCE\FS\.doc (16)

18 2 Summary of significant accounting policies (continued) Plant and equipment Plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of plant and equipment. Depreciation on plant and equipment is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values, over their estimated useful lives. The annual depreciation rates are as follows: % Furniture and fixtures 10 Computer hardware 20 Motor vehicles 20 Decoders 20 The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Expenditure for repairs and maintenance of plant and equipment is charged to the income statement of the year in which they were incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset 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 Company and the cost of the item can be measured reliably. Gains and losses on disposal of plant and equipment are determined by comparing proceeds with carrying amount and these are included in the income statement. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Computer software Costs that are directly associated with identifiable and unique computer software products controlled by the Company and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditure, which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the computer software. Costs associated with maintenance of computer software programmes are recognised as an expense as incurred. Computer software costs are amortised using the straight-line method over their estimated useful lives, not exceeding a period of three years. Amortisation commences when the computer software is available for use and is included within administrative expenses. F:\M\MC08809\ASSURANCE\FS\.doc (17)

19 2 Summary of significant accounting policies (continued) Investments The Company classifies its investments as financial assets at fair value through profit or loss. The classification depends on the purpose for which the investments were acquired. Management determines the classification of investments at initial recognition and reevaluates this designation at every reporting date. Financial assets at fair value through profit or loss category 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 as held for trading if acquired principally for the purpose of selling in the short term. Financial assets designated as at fair value through profit or loss at inception are those that are managed and their performance is evaluated on a fair value basis, in accordance with a documented investment strategy. Information about these financial assets is provided internally on a fair value basis to the Company s key management personnel. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the balance sheet date. The Company had no financial assets designated as held for trading during the year. Regular way purchases and sales of investments are recognised on trade-date which is the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of financial assets at fair value through profit or loss are included in the income statement in the period in which they arise. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active the Company establishes fair value by using valuation techniques which include the use of recent arm s length transactions. F:\M\MC08809\ASSURANCE\FS\.doc (18)

20 2 Summary of significant accounting policies (continued) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods comprises decoders, spare parts and other direct costs (based on normal operating activity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business less applicable variable selling expenses. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company 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 recoverable amount, being the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. Deferred expenses From year, deferred expenses mainly represent the cost of production of the Company s monthly magazine. In year, deferred expenses mainly represented the cost of pre-billed transmission channels LTV and Alfa. On receipt of the relevant service the corresponding cost is recognised in the income statement. Share capital Ordinary shares are classified as equity. Deferred income Deferred income represents invoiced subscriptions for which the service was not provided at the year end. Subscriptions are invoiced to customers at the start of each period, either monthly, or yearly or depending on the customer s choice at the date of their connection. These invoices are recorded as deferred income until the end of each month, at which, the part of the deferred income which corresponds to the previous month is recognised in the income statement. Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. F:\M\MC08809\ASSURANCE\FS\.doc (19)

21 2 Summary of significant accounting policies (continued) Cash at bank and in hand Cash and cash equivalents include cash at bank and in hand. Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 3 Financial risk management (a) Financial risk factors The Company s activities expose it to market price risk, interest rate risk, credit risk, liquidity risk and currency risk arising from the financial instruments it holds. The risk management policies employed by the Company to manage these risks are discussed below: (i) Market price risk Market price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices. The Company s investments at fair value through profit or loss are susceptible to market price risk arising from uncertainties about future prices of the investments. The Company s market price risk is managed through diversification of its investment portfolio. (ii) Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company s income and operating cash flows are affected by changes in market interest rates as the Company has significant interest-bearing assets. The Company s management monitors the interest rate fluctuations on a continuous basis and acts accordingly. (iii) Credit risk Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. The Company has no significant concentrations of credit risk. The Company monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and the Company has policies to limit the amount of credit exposure to any financial institution. F:\M\MC08809\ASSURANCE\FS\.doc (20)

22 3 Financial risk management (continued) (a) Financial risk factors (continued) (iii) Credit risk (continued) The table below shows the credit limit allowed by the major counter party and the balance at the year end. 31 March 31 March Counterparty Rating Credit limit Balance Credit limit Balance Marfin Popular Bank Public Company Ltd BBB No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. (iv) Liquidity risk Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. The Company s financial liabilities comprise trade and other payables (Note 20). These balances are due within 12 months and approximate their carrying balances, as the impact of discounting is not significant. (v) Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company s functional currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the US Dollar and the Euro. The Company s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The net foreign exchange difference charged to the income statement amounts to (: 1.808) which is included within operating loss (Note 7). F:\M\MC08809\ASSURANCE\FS\.doc (21)

23 3 Financial risk management (continued) (b) Fair value estimation The fair value of financial instruments traded in active markets, such as publicly traded financial assets at fair value through profit or loss is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Company is the current bid price. The nominal value less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year approximate their fair values. 4 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Post balance sheet event As stated in Note 24, the Company received a cheque in full settlement of a receivable for which a 100% impairment loss was recognised in previous years. Based on past experience, in the opinion of the Company s Board of Directors, the reversal of the previously recognised impairment loss relates to the year ended 31 March 2008 since the cheque cashed in on 4 April and settlement of this amount was doubtful and was subject to the debtor having the available funds on 4 April. (b) Going concern Management, as part of its annual review of whether the Company will continue to be a going concern, has prepared financial budgets using future cash flows covering the next financial year, on the basis of historical experience, expectations of future events and a series of projections and assumptions. Although every effort has been made to restrict the impact of significant adjustments to the budgets, future events could occur which might be beyond the control of management that may affect significantly these future plans, assumptions and financial estimates of the Company. 5 Segmental reporting The Company s operations occur in a single sector and take place in the geographical area of Cyprus, therefore the Company has not prepared segmental analysis. F:\M\MC08809\ASSURANCE\FS\.doc (22)

24 6 Other gains net Financial assets at fair value through profit or loss (Note 16): Fair value gains/(losses) 409 (86.481) Profit/(loss) on sale (15.260) ( ) Interest income: Bank balances Interest charged on other receivables Dividend income (8.393) ======= ======= 7 Expenses by nature Depreciation of plant and equipment (Note 12) Profit on sale of plant and equipment (Note 12) (3.783) - Amortisation of intangible assets (Note 13) Legal fees Consultancy fees Bank charges Agency fees Operating lease rentals Maintenance expenses Auditors remuneration Travelling expenses Provision for obsolete inventories (Note 14) Trade receivables impairment charge for receivables (Note 15) Staff costs (Note 8) Marketing and promotion Telephone and telefaxes Other expenses Purchases of decoders and other direct expenses Change in inventories ( ) Magazine expenses Digital transmission costs Analogue transmission fees Net foreign exchange transactions losses on trading activities (included in cost of sales) Penalty by the Commission for the Protection of Competition (Note 23 (d)) Total cost of goods sold, selling and marketing costs and administrative expenses ========== ========== F:\M\MC08809\ASSURANCE\FS\.doc (23)

25 8 Staff costs Wages and salaries Social insurance and other funds Director s remuneration and benefits in his executive capacity (Note 23 (e)) Total (Note 7) ======== ======== The non-executive Directors do not receive any remuneration. The Company has a defined contribution scheme, the MultiChoice (Cyprus) Public Company Limited Employees Provident Fund which is funded separately and prepares its own financial statements and from which employees are entitled to the payment of certain benefits upon retirement or premature termination of their services. 9 Finance costs Interest expense: Bank borrowings ======= ======= 10 Tax Current tax: Corporation tax Corporation tax - previous years (9.264) Deferred tax (Note 19) (53.495) 737 (62.759) ======== ======== The tax on the Company s (loss)/profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows: (Loss)/profit before tax ( ) ========= ========= Tax calculated at the applicable corporation tax rate of 10% (71.318) Tax effect of allowances and expenses not deductible for tax purposes Tax of previous years (9.264) Deferred tax charge (53.495) 737 Tax charge (62.759) ========= ========= F:\M\MC08809\ASSURANCE\FS\.doc (24)

26 10 Tax (continued) From 1 January 2003 onwards the Company is subject to corporation tax on taxable profits at the rate of 10%. Under certain conditions interest may be subject to defence contribution at the rate of 10%. In such cases 50% of the same interest will be exempt from corporation tax thus having an effective tax rate burden of approximately 15%. In certain cases dividends received from abroad may be subject to defence contribution at the rate of 15%. 11 Earnings per share (Loss)/profit attributable to shareholders () ( ) =========== =========== Weighted average number of shares outstanding during the year =========== =========== (Loss)/profit per share (cents) (0,96) 0,84 =========== =========== 12 Plant and equipment Furniture and fittings Computer hardware Motor vehicles Decoders Total At 1 April 2005 Cost Accumulated depreciation ( ) ( ) (64.818) (37.492) ( ) Net book amount ======== ======== ======== ======== ========= Year ended 31 March Opening net book amount Additions Disposals - (219) - - (219) Depreciation charge (Note 7) (33.755) (33.155) (6.706) (1.700) (75.316) Closing net book amount At 31 March Cost Accumulated depreciation ( ) ( ) (51.524) (24.243) ( ) Net book amount ======== ======== ======== ======== ========= Year ended 31 March Opening net book amount Additions Depreciation charge (Note 7) (32.702) (26.061) (9.541) (1.637) (69.941) Closing net book amount At 31 March Cost Accumulated depreciation ( ) ( ) (15.352) (4.533) ( ) Net book amount ======== ======== ======== ======== ========= F:\M\MC08809\ASSURANCE\FS\.doc (25)

27 12 Plant and equipment (continued) In the cash flow statement, proceeds from sale of plant and equipment comprise: Net book amount Profit on sale of plant and equipment (Note 7) Proceeds from sale of plant and equipment ======= ======= 13 Intangible assets Computer software At 1 April 2005 Cost Accumulated amortisation ( ) Net book amount Year ended 31 March Opening net book amount Amortisation charge (Note 7) (27.126) Closing net book amount At 31 March Cost Accumulated amortisation ( ) Net book amount ======== Year ended 31 March Opening net book amount Amortisation charge (Note 7) (6.482) Closing net book amount At 31 March Cost Accumulated amortisation ( ) Net book amount ======== F:\M\MC08809\ASSURANCE\FS\.doc (26)

28 14 Inventories Decoders for sale at cost Provision for obsolete decoders ( ) ( ) Spare parts ======== ======== During the financial year, the Company was accepting back from analogue subscribers, their obsolete analogue decoders as a trade in for new Nova digital decoders. The Company considers these used analogue decoders as obsolete and therefore full provision has been made against their cost. The movement in the provision for obsolete decoders was as follows: At 1 April Additional provision (Note 7) At 31 March /1 April Additional provision (Note 7) At 31 March ======== 15 Trade and other receivables Trade receivables Less: provision for impairment of receivables ( ) ( ) Trade receivables net Other receivables and prepayments Amount due from related companies (Note 23 (c)) ========= ========= The fair value of trade and other receivables approximates their carrying amount at the balance sheet date. Concentrations of credit risk with respect to trade receivables are limited due to the Company s large number of customers. The Company s historical experience in collection of trade receivables falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Company s trade receivables. F:\M\MC08809\ASSURANCE\FS\.doc (27)

29 15 Trade and other receivables (continued) The movement in the provision for impairment of receivables was as follows: At 1 April Additional provision (Note 7) At 31 March /1 April Additional provision (Note 7) At 31 March ======== 16 Financial assets at fair value through profit or loss Listed equity securities Cyprus Stock Exchange: At the beginning of the year Disposals ( ) ( ) Fair value gains/(losses) (Note 6) 409 (86.481) At the end of the year ========= ========= The profit on sale during the year was (: loss ). Changes in fair values of financial assets at fair value through profit or loss are recorded in other gains net in the income statement (Note 6). Financial assets at fair value through profit or loss are presented within the section on operating activities as part of charges in working capital in the cash flow statement. Financial assets designated as at fair value through profit or loss at inception are those that are managed and whose performance is evaluated on a fair value basis, in accordance with a documented investment strategy. Information about these financial assets is provided internally on a fair value basis to the Company s key management personnel. The Company s investment strategy is to invest free cash resources in equity securities as part of the Company s long-term capital growth strategy. F:\M\MC08809\ASSURANCE\FS\.doc (28)