prospectus

Transcription

prospectus

Prospectus of MNI S.A
PROSPECTUS
FOR SERIES L ORDINARY BEARER SHARES
(Public Offering addressed to existing Shareholders)
registered office at ul. Żurawia 8, Warsaw, Poland
www.mni.pl
67,714,674 Series L Shares with a par value of PLN 1 per share will be offered to the Issuer’s existing Shareholders based on
this Prospectus. The issue price of Series L Shares is PLN 1 (one) per share.
Moreover, based on this Prospectus up to 67,714,674 Series L Shares and Rights to Shares will be sought to be admitted and
introduced to trading on the main market of the WSE. 22,571,558 pre-emptive rights to acquire Series L Shares will be sought
to be admitted and introduced to trading on a regulated market based on this Prospectus.
The Issuer’s Shareholders will have pre-emptive rights to acquire a number of the Offered Shares equal to the number of the
Issuer Shares they hold as at September 15th 2006 (the “Pre-Emptive Right Record Date”). Given the time needed for settling
stock-exchange transactions at the Polish NDS, the investors who intend to acquire the Issuer Shares on the WSE must acquire
them on or before September 12th 2006 in order to obtain the pre-emptive rights. Based on the number of new-issue Series L
Shares, the holders of pre-emptive rights will be entitled to acquire three (3) Series L Shares for each one (1) pre-emptive right.
If the number of Series L Shares to which a given shareholder is entitled under the pre-emptive rights is not an integer, it will
be rounded down to the nearest integer.
The Issuer’s Shareholders as at the Record Date will be entitled to submit Additional Subscription Orders for the Offered Shares
in the subscription periods specified in Section 20.2.2 of this Prospectus. Those Offered Shares which are not subscribed for
pursuant to Basic or Additional Subscription Orders will be allotted by the Management Board at its own discretion.
Pre-emptive rights are to be traded within the period specified in Section 20.2.2 of this Prospectus. The Issue Price of the
Offered Shares is PLN 1 per share.
THIS PUBLIC OFFERING IS CONDUCTED EXCLUSIVELY WITHIN THE TERRITORY OF THE REPUBLIC OF POLAND. OUTSIDE
POLAND, THIS PROSPECTUS MAY NOT BE TREATED AS AN OFFER OR INVITATION TO ACQUIRE ANY SECURITIES. NEITHER
THIS PROSEPCTUS NOR THE SECURITIES OFFERED UNDER THIS PROSPECTUS HAVE BEEN THE SUBJECT OF REGISTRATION,
APPROVAL OR NOTIFICATION IN ANY COUNTRY OTHER THAN THE REPUBLIC OF POLAND, INCLUDING IN PARTICULAR
UNDER THE PROVISIONS OF THE EUROPEAN PROSPECTUS DIRECTIVE OR THE US SECURITIES ACT.
THE SECURITIES COVERED BY THIS PROSPECTUS MAY NOT BE OFFERED OR SOLD OUTSIDE POLAND, UNLESS SUCH
OFFERING OR SALE MAY BE CONDUCTED LEGALLY IN A GIVEN COUNTRY WITHOUT THE NECESSITY TO COMPLY WITH ANY
ADDITIONAL LEGAL REQUIREMENTS. INVESTORS RESIDING OR HAVING THEIR REGISTERED OFFICE OUTSIDE POLAND
SHOULD FAMILIARISE THEMSELVES WITH THE PROVISIONS OF POLISH LAW AND ANY LEGAL REGULATIONS OF OTHER
COUNTRIES WHICH MAY BE APPLICABLE TO THEM.
INVESTING IN THE SECURITIES OFFERED UNDER THIS PROSPECTUS INVOLVES RISKS TYPICAL OF CAPITAL MARKET
INSTRUMENTS AND RISKS RELATED TO THE ISSUER’S BUSINESS AND THE ISSUER’S BUSINESS ENVIRONMENT. A DETAILED
DISCUSSION OF THE RISK FACTORS THAT INVESTORS SHOULD CONSIDER IS PROVIDED IN SECTION 2 OF THIS
PROSPECTUS.
Offeror
Financial Adviser
Dom Inwestycyjny BRE Banku S.A.
ul. Wspólna 47/49, 00-684 Warsaw, Poland
BRE Corporate Finance S.A.
ul. Wspólna 47/49, 00-684 Warsaw, Poland
Prospectus Date: January 18th 2007
1
DISCLAIMER
This Prospectus has been prepared in connection with the Public Offering of the Offered Shares within the territory of
Poland and their admission to trading on a regulated market operated by the Warsaw Stock Exchange (Giełda Papierów
Wartościowych w Warszawie S.A.).
This Prospectus has been prepared in compliance with the provisions of the Commission Regulation (EC) No. 809/2004
and other laws regulating the capital market in Poland, in particular the Public Offering Act. This Prospectus was
approved by the Financial Supervision Authority on January 18th 2007.
Apart from the persons specified in this Prospectus, i.e. the members of the Company’s Management Board, no other
person is authorised to make any public statements related to the Public Offering. Any public disclosure of such
information requires the Management Board’s approval.
This Prospectus has been prepared based on the best knowledge and with all due care, and the information contained
herein is provided as at the Prospectus Date. As there may be changes in the Issuer’s situation after this Prospectus is
published, the information contained herein should be treated as true as at the Prospectus Date, unless stated otherwise
herein.
FORWARD-LOOKING STATEMENTS
WHERE IT DOES NOT RELATE TO HISTORICAL FACTS, THE INFORMATION CONTAINED IN THIS PROSPECTUS
REPRESENTS FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS MAY RELATE IN PARTICULAR TO
THE ISSUER’S STRATEGY, BUSINESS DEVELOPMENT, MARKET PROJECTIONS, PLANNED CAPITAL EXPENDITURE OR
FUTURE REVENUES. SUCH STATEMENTS MAY BE IDENTIFIED BY THE USE OF EXPRESSIONS PERTAINING TO THE
FUTURE, SUCH AS E.G. “BELIEVE”, “THINK”, “EXPECT”, “MAY”, “WILL”, „”SHOULD”, “IS EXPECTED”, “ASSUME”, AND
ANY NEGATIONS AND GRAMMATICAL FORMS OF THESE EXPRESSIONS OR SIMILAR TERMS. THE STATEMENTS
CONTAINED IN THIS PROSPECTUS CONCERNING MATTERS WHICH ARE NOT HISTORICAL FACTS SHOULD BE
TREATED ONLY AS PROJECTIONS SUBJECT TO RISK AND UNCERTAINTY. NO ASSURANCE CAN BE GIVEN THAT THE
PROJECTIONS WILL BE MET, IN PARTICULAR GIVEN THE RISK FACTORS DISCUSSED IN THIS PROSPECTUS.
Investment decisions made by investors regarding the Offered Shares should be based solely on their own conclusions
and analyses related to the Issuer, as well as the terms and conditions of the Public Offering, with particular attention
given to the risk factors. The Public Offering is conducted based on this Prospectus exclusively.
Neither the Issuer nor the Offeror intends to take any action designed to stabilise the price of the securities offered
under this Prospectus before, during or after the Public Offering.
This Prospectus is valid for twelve months from the date when it was made available to the public.
DOCUMENTS AVAILABLE FOR INSPECTION
This Prospectus together with its updates will be made available in electronic form on the websites of the Issuer
(www.mni.pl) and the Offeror (www.dibre.pl) as well as on the websites of the entities taking part in the subscription for
the Offered Shares. Hard copies of this Prospectus will be available at:
−
−
−
−
the
the
the
the
registered office of the Issuer – ul. Żurawia 8, 00-503 Warsaw, Poland;
registered office of the Offeror – ul. Wspólna 47/49, Warsaw, Poland;
Information Centre of the Financial Supervision Authority – pl. Powstańców Warszawy 1, Warsaw, Poland
registered office of the Warsaw Stock Exchange – ul. Książęca 4, Warsaw, Poland.
The non-consolidated financial statements of the Issuer for the financial years 2003-2005 (along with copies of auditor’s
reports) and non-consolidated and consolidated financial statements for Q1-Q3 2006 will be available for inspection at
the Issuer’s registered office during the subscription period.
2
TABLE OF CONTENTS
1.
SUMMARY
1.1
1.2
1.3
1.4
1.5
1.6
2.
8
PRINCIPAL AREAS AND TYPES OF THE ISSUER’S BUSINESS .........................................................................8
SALES REVENUE BY TYPE OF SERVICE .......................................................................................................9
FINANCIAL AND OPERATING REVIEW .......................................................................................................11
DEVELOPMENT STRATEGY .......................................................................................................................15
RISK FACTORS ..........................................................................................................................................17
PUBLIC OFFERING AND THE OFFERED SHARES .........................................................................................18
RISK FACTORS
19
2.1 RISK FACTORS ASSOCIATED WITH THE MARKET ENVIRONMENT .............................................................19
2.1.1
Risk Connected with the Prevalent Social and Economic Conditions in Poland and in Europe
19
2.1.2
Risk Related to Changes of the Legal Environment
19
2.1.3
Competition Risk
19
2.1.4
Risk Inherent in Technological Progress
20
2.1.5
Risk Related to Possible Administrative Price Interventions on the Market of Universal
Telecommunications Services
20
2.1.6
Risk Associated with the Customer Base
20
2.2 RISK FACTORS RELATED TO THE OPERATIONS OF THE ISSUER’S GROUP ..................................................21
2.2.1
Risk Related to Capex Investments
21
2.2.2
Risk Associated with Equipment Failures
21
2.2.3
Risk Related to Loss of Highly Qualified Staff
21
2.2.4
Risk Related to the Credit Facility Agreement with BRE Bank S.A.
21
2.2.5
Risk Arising from Pending Court and Administrative Proceedings
21
2.3 RISK FACTORS RELATED TO INVESTMENT IN THE OFFERED SHARES ........................................................22
2.3.1
Risk Related to Abandonment or Cancellation of the Public Offering by the Issuer
22
2.3.2
Risk of Unsuccessful Issue of the Offered Shares
22
2.3.3
Risk Related to Acquisition of Pre-Emptive Rights to the Offered Shares
22
2.3.4
Risk Related to the Listing of the Rights to Shares
22
2.3.5
Risk Related to Potential Non-Performance or Violation of Specific Obligations Provided for in the
Regulations Governing the Regulated Market
23
3.
REASONS FOR THE OFFERING, USE OF PROCEEDS AND COSTS OF THE OFFERING 24
3.1
3.2
REASONS FOR THE OFFERING AND USE OF PROCEEDS ..............................................................................24
COSTS OF THE ISSUE OR THE OFFERING ....................................................................................................24
4.
DILUTION
25
5.
SELECTED FINANCIAL INFORMATION
27
6.
FINANCIAL FORECASTS
31
6.1 BASIC ASSUMPTIONS FOR THE GROUP’S FINANCIAL FORECASTS .............................................................31
6.2 REPORT OF AN INDEPENDENT ACCOUNTANT OR QUALIFIED AUDITOR ON THE CORRECTNESS OF FINANCIAL
FORECASTS ........................................................................................................................................................31
6.3 COMPARABILITY OF FORECASTS WITH HISTORICAL FINANCIAL INFORMATION .......................................33
6.4 STATEMENT CONCERNING THE RELEVANCE OF THE FORECAST PUBLISHED IN THE PREVIOUS PROSPECTUS33
7.
FINANCIAL AND OPERATING OVERVIEW
34
7.1 FINANCIAL STANDING ..............................................................................................................................34
7.1.1
Financial Standing
34
7.1.2
Operating Result
36
7.2 TRENDS ....................................................................................................................................................38
7.2.1
Key Trends in Sales, Inventories, Selling Costs and Prices, Prevailing in the Period from the End of
the Last Financial Year to the Prospectus Date
38
7.2.2
Factors which Have a Material Bearing on the Group’s Growth Prospects until the End of the
Current Financial Year
39
7.2.3
Other Factors
43
7.3 SIGNIFICANT CHANGES IN THE FINANCIAL AND ECONOMIC STANDING OF THE ISSUER AND ITS GROUP ..44
7.4 THE GROUP’S CAPITAL AND INDEBTEDNESS ..............................................................................................44
7.4.1
Capital
44
7.4.2
Statement on Working Capital
54
7.4.3
Capitalisation and Indebtedness
54
3
7.5
8.
PRESENTATION OF HISTORICAL FINANCIAL INFORMATION ......................................................................55
INFORMATION ON THE ISSUER
55
8.1 HISTORY AND DEVELOPMENT OF THE ISSUER...........................................................................................56
8.1.1
Legal Name (specified in the Articles of Association) and Commercial Name of the Issuer
56
8.1.2
Place of the Issuer’s Registration and Its Registration Number
56
8.1.3
Date of the Issuer’s Incorporation and Period of Incorporation, Unless Such Period Is Unspecified
56
8.1.4
The Issuer’s Registered Office and Legal Form, Legal Basis for the Issuer’s Operations, Country of
Domicile (Incorporation), Address and Telephone Number of the Issuer’s Registered Office Specified in the
Articles of Association (or Principal Place of Business if Different)
56
8.1.5
Key Events in the Issuer’s History
56
8.2 THE ISSUER’S BUSINESS ...........................................................................................................................58
8.2.1
Core Business
58
8.2.2
Principal Areas of Business
65
8.2.3
Extraordinary Factors with a Bearing on the Group’s Business
74
8.2.4
Dependence on Patents or Licences, on Industrial, Commercial or Financial Agreements, or on New
Production Processes
74
8.2.5
Sources of Information for the Issuer’s Statements, Representations and Communications Regarding
Its Competitive Position
77
8.2.6
Development Strategy of the MNI Group
77
8.3 RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES .......................................................................79
8.4 INVESTMENTS ...........................................................................................................................................79
8.4.1
Major Investments in the Period Covered by the Historical Financial Data
79
8.4.2
Current Investment Projects
83
8.4.3
Planned Investments
85
8.4.4
Expected Sources of Financing Required for the Implementation of Investment Projects
86
8.5 PROPERTY, PLANT AND EQUIPMENT.........................................................................................................86
8.5.1
Material Property, Plant and Equipment (Existing and Planned), Including Leased Property, and
Encumbrances
86
8.5.2
Environmental Protection Issues and Requirements Which May Affect the Issuer’s Use of Property,
Plant and Equipment
87
8.6 MATERIAL AGREEMENTS .........................................................................................................................88
8.6.1
Financing-Related Agreements
88
8.6.2
Agreements on Acquisition of Shares in Companies or Interest in Such Companies’ Business
89
8.6.3
Insurance Agreements
90
8.6.4
Other Agreements
91
8.7 COURT AND ARBITRATION PROCEEDINGS ................................................................................................94
8.7.1
Court Proceedings Concerning Marek Dutka’s Claims
94
8.7.2
Court Proceedings against Tele-Pern Sp. z o.o.
94
8.7.3
Criminal Proceedings Concerning Acting to the Detriment of the Issuer
95
8.7.4
Arrangement Proceedings with the Issuer’s Creditors
95
8.8 ORGANISATIONAL STRUCTURE.................................................................................................................96
8.8.1
Overview of the Group and the Issuer’s Place in the Group
96
8.8.2
List of Material Subsidiaries of the Issuer
96
8.9 SHAREHOLDINGS IN OTHER UNDERTAKINGS ............................................................................................98
9.
CORPORATE GOVERNANCE
10. MEMBERS OF MANAGEMENT AND SUPERVISORY BODIES, EMPLOYEES
99
100
10.1 PRACTICES OF THE MANAGEMENT AND SUPERVISORY BODIES ..............................................................100
10.1.1
Duration and Expiry Dates of Terms of Office
100
10.1.2
Agreements for Provision of Services between Members of Administrative, Management and
Supervisory Bodies and the Issuer or any of Its Subsidiaries
100
10.1.3
Information on the Issuer’s Audit and Remuneration Committees
101
10.2 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND SENIOR MANAGEMENT STAFF .......101
10.2.1
Information on Members of Administrative, Supervisory and Senior Management Staff
101
10.2.2
Conflicts of Interests within Administrative, Management and Supervisory Bodies and among Senior
Management Personnel
107
10.3 REMUNERATION AND OTHER BENEFITS .................................................................................................109
10.3.1
Remuneration of Administrative, Supervisory and Senior Management Staff
109
10.3.2
Retirement, Pension and Related Benefits for Administrative, Supervisory and Senior Management
Staff
109
4
10.4 SHARES AND SHARE OPTIONS HELD BY ADMINISTRATIVE, SUPERVISORY AND SENIOR MANAGEMENT STAFF
..................................................................................................................................................................... 109
10.5 EMPLOYMENT .........................................................................................................................................110
10.5.1
Headcount at End of Period
110
10.5.2
Arrangements Concerning Employees’ Share in the Issuer’s Capital
110
11. MAIN SHAREHOLDERS
110
11.1 PERSONS OTHER THAN ADMINISTRATIVE, SUPERVISORY OR MANAGEMENT STAFF, HOLDING SHARES IN THE
ISSUER OR VOTING RIGHTS AT GM .................................................................................................................111
11.2 OTHER VOTING RIGHTS HELD BY MAIN SHAREHOLDERS OF THE ISSUER...............................................111
11.3 EQUITY INTERESTS HELD IN THE ISSUER’S CAPITAL BY OTHER ENTITIES OR CONTROL EXERCISED OVER THE
ISSUER BY OTHER ENTITIES, NATURE OF THE CONTROL AND MECHANISMS PREVENTING ITS ABUSE ............111
11.4 ARRANGEMENTS WHOSE EXECUTION MAY CAUSE FUTURE CHANGE OF CONTROL OVER THE ISSUER ..111
12. HOLDERS OF SECURITIES TO BE SOLD
111
12.1 NAMES AND ADDRESSES OF RESIDENCE OR REGISTERED OFFICE OF THE ENTITIES OFFERING THE SECURITIES
FOR SALE – POSITION, FUNCTION OR OTHER MATERIAL RELATIONS OF SELLING SHAREHOLDERS WITH THE ISSUER OF
THE SECURITIES, ITS LEGAL PREDECESSORS OR RELATED ENTITIES OVER LAST THREE YEARS .....................112
12.2 NUMBER AND TYPE OF SECURITIES OFFERED BY EACH SELLING SHAREHOLDER ..................................112
12.3 LOCK-UP AGREEMENTS, PARTIES TO WHICH SUCH AGREEMENTS APPLY, TERMS OF SUCH AGREEMENTS AND
EXCEPTIONS; LOCK-UP PERIOD.......................................................................................................................112
13. RELATED PARTY TRANSACTIONS
13.1
13.2
13.3
13.4
113
RELATED-PARTY TRANSACTIONS BETWEEN JANUARY 1ST 2006 AND THE PROSPECTUS DATE (PLN ‘000)113
TRANSACTIONS WITH RELATED UNDERTAKINGS IN 2005 (PLN ‘000) ...................................................117
TRANSACTIONS WITH RELATED UNDERTAKINGS IN 2004.......................................................................119
TRANSACTIONS WITH RELATED UNDERTAKINGS IN 2003.......................................................................119
14. ARTICLES OF ASSOCIATION
120
14.1 ISSUER’S BUSINESS PROFILE AND OBJECTIVES .......................................................................................120
14.2 SUMMARY OF ALL PROVISIONS OF THE ISSUER’S ARTICLES OF ASSOCIATION, BY-LAWS OR RULES OF
PROCEDURE WHICH RELATE TO MEMBERS OF ITS ADMINISTRATIVE, MANAGEMENT OR SUPERVISORY BODIES120
14.2.1
Management Board
120
14.2.2
Supervisory Board
121
14.3 RIGHTS, PREFERENCES OR LIMITATIONS CONNECTED WITH EACH TYPE OF EXISTING SHARES .............122
14.4 ACTIONS NECESSARY TO CHANGE SHAREHOLDER RIGHTS ....................................................................122
14.5 RULES GOVERNING CONVOCATION OF ORDINARY GENERAL SHAREHOLDERS MEETINGS AND EXTRAORDINARY
GENERAL SHAREHOLDERS MEETINGS .............................................................................................................123
14.6 PROVISIONS OF THE ISSUER’S ARTICLES OF ASSOCIATION, BY-LAWS OR RULES OF PROCEDURE WHICH COULD
DELAY, POSTPONE OR RENDER IMPOSSIBLE CHANGE OF CONTROL OVER THE ISSUER....................................124
14.7 PROVISIONS OF THE ISSUER’S ARTICLES OF ASSOCIATION, BY-LAWS OR RULES OF PROCEDURE WHICH SPECIFY
SHAREHOLDING THRESHOLDS WHICH, IF EXCEEDED, TRIGGER THE OBLIGATION TO DISCLOSE THE NUMBER OF
SHARES HELD ..................................................................................................................................................124
14.8 TERMS AND CONDITIONS IMPOSED BY THE COMPANY’S ARTICLES OF ASSOCIATION, BY-LAWS OR RULES OF
PROCEDURE, GOVERNING CHANGES OF SHARE CAPITAL IF SUCH TERMS AND CONDITIONS ARE MORE STRINGENT
THAN REQUIRED UNDER APPLICABLE LAWS....................................................................................................124
15. DIVIDEND POLICY
125
16. SHARE CAPITAL
126
16.1 VALUE OF ISSUED CAPITAL FOR EACH CLASS OF SHARE CAPITAL .........................................................126
16.1.1
Number of Shares in Authorised Share Capital
126
16.1.2
Number of Shares Issued and Paid Up in Full and Shares Issued and Not Paid Up in Full
126
16.1.3
Share Par Value or Information that Shares Do Not Have Par Value
126
16.1.4
Number of Shares Outstanding at the Beginning and End of Year. Information whether in the Period
Covered by the Historical Financial Information more than 10% of the Share Capital Was Paid Up with Assets
other than Cash
126
16.2 SHARES WHICH DO NOT REPRESENT SHARE CAPITAL ............................................................................127
16.3 ISSUER SHARES HELD BY THE ISSUER, OTHER PERSONS ON BEHALF OF THE ISSUER, OR BY THE ISSUER’S
SUBSIDIARIES ..................................................................................................................................................127
16.4 NUMBER OF CONVERTIBLE SECURITIES, EXCHANGEABLE SECURITIES OR SECURITIES WITH WARRANTS AND
THE RULES AND PROCEDURES GOVERNING THEIR CONVERSION, EXCHANGE OR SUBSCRIPTION....................127
5
16.5 SUBSCRIPTION RIGHTS AND OBLIGATIONS WITH RESPECT TO SHARE CAPITAL AUTHORISED BUT NOT ISSUED OR
COMMITMENTS TO INCREASE SHARE CAPITAL ................................................................................................127
16.6 INFORMATION ON SHARES IN ANY MEMBER OF THE ISSUER’S GROUP WHICH ARE COVERED BY AN OPTION OR
CONDITIONAL OR UNCONDITIONAL ARRANGEMENT TO GRANT AN OPTION ...................................................127
16.7 HISTORICAL INFORMATION ON THE SHARE CAPITAL ..............................................................................128
17. CAPITAL MARKET REGULATIONS
129
17.1 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES.............................................................................129
17.1.1
Restrictions Provided for in the Articles of Association
129
17.1.2
Obligations and Restrictions Resulting from the Public Offering Act and the Act on Trading in
Financial Instruments
129
17.1.3
Obligations and Restrictions Following from the Anti-Trust and Consumer Protection Act 135
17.2 TAKEOVER OFFERS OR SQUEEZE-OUT AND SELL-OUT PROCEDURES WITH RESPECT TO THE SECURITIES136
17.2.1
Squeeze Out Regulations
136
17.2.2
Sell Out Regulations
137
18. RULES GOVERNING TAXATION OF INCOME RELATED TO THE HOLDING OR SALE
OF SECURITIES
138
19. INFORMATION OF THE SECURITIES
140
19.1 TYPE OF SECURITIES OFFERED OR ADMITTED TO TRADING ...................................................................141
19.2 LEGAL PROVISIONS ON THE BASIS OF WHICH THE SECURITIES WERE CREATED ....................................141
19.3 INFORMATION WHETHER THE SECURITIES ARE REGISTERED OR BEARER SECURITIES AND WHETHER THEY ARE
DEMATERIALISED ............................................................................................................................................142
19.4 CURRENCY OF THE ISSUED SECURITIES ..................................................................................................142
19.5 RIGHTS ATTACHED TO THE SECURITIES, INCLUDING ANY RESTRICTIONS ON SUCH RIGHTS, AND THE
PROCEDURES FOR THEIR EXERCISE ..................................................................................................................142
19.5.1
Commercial Companies Code
142
19.5.2
Act on Trading in Financial Instruments
144
19.5.3
Public Offering Act
144
19.5.4
Dividend Right
144
19.5.5
Date as of Which the Shares Confer Dividend Right
145
19.5.6
Deadline for Exercise of the Dividend Right and Persons Affected by Expiry of the Dividend Right
145
19.5.7
Dividend-Related Restrictions and Procedures Applicable to Non-Resident Shareholders
145
19.5.8
Dividend Rate or Manner of its Computation, Frequency of Payment, Cumulative or Non-Cumulative
Dividend 145
19.5.9
Voting Rights
145
19.5.10
Pre-Emptive Rights
145
19.5.11
Right to Distributions from the Issuer’s Profit
146
19.5.12
Right to Participate in Assets Remaining after the Company Liquidation
146
19.5.13
Retirement of Shares
146
19.5.14
Share Conversion
146
19.6 RESOLUTIONS, PERMITS OR APPROVALS UNDER WHICH NEW SECURITIES HAVE BEEN OR WILL BE CREATED OR
ISSUED .............................................................................................................................................................146
19.7 DATE OF THE SECURITIES ISSUE .............................................................................................................146
19.8 PUBLIC TENDER OFFERS WITH RESPECT TO THE ISSUER’S SHARES ANNOUNCED BY THIRD PARTIES IN THE
PREVIOUS FINANCIAL YEAR AND CURRENT FINANCIAL YEAR ........................................................................146
20. TERMS AND CONDITIONS OF THE OFFERING
20.1 GENERAL TERMS AND CONDITIONS OF THE PUBLIC OFFERING ..............................................................147
20.2 RULES GOVERNING DISTRIBUTION OF SHARES ......................................................................................147
20.2.1
Persons to Whom the Public Offering is Addressed
20.2.2
Public Offering Schedule
20.2.3
Issue Price
20.2.4
Rules Governing Placement of Subscription Orders
20.2.5
Payments for Offered Shares
20.2.6
Allotment Rules for the Offered Shares
20.2.7
Settlement of the Offering and Delivery of Rights to Shares and Offered Shares
20.2.8
Abandonment or Cancellation of the Public Offering
20.2.9
Intentions of Main Shareholders and Memebers of the Issuer’s Management, Supervisory
Administrative Bodies Regarding Their Participation in the Subscription
146
147
148
148
148
149
150
150
151
and
151
6
21. ADMISSION OF SECURITIES TO TRADING, AND TRADING TERMS AND CONDITIONS
151
22. ADDITIONAL INFORMATION ON THE OFFERING
152
22.1 SCOPE OF RESPONSIBILITES OF ADVISERS INVOLVED IN THE ISSUE, IF SUCH ADVISERS ARE SPECIFIED IN THE
OFFERING DOCUMENT .....................................................................................................................................153
22.1.1
Legal Adviser
153
22.1.2
Financial Adviser
153
22.1.3
The Offeror
153
22.1.4
The Auditor
153
22.2 OTHER INFORMATION CONTAINED IN THE OFFERING DOCUMENT WHICH WAS AUDITED BY QUALIFIED
AUDITORS AND WITH RESPECT TO WHICH QUALIFIED AUDITORS PREPARED A REPORT .................................153
22.3 IF THE OFFERING DOCUMENT CONTAINS A STATEMENT OR A REPORT BY A PERSON REFERRED TO AS AN
EXPERT, PROVIDE THE PERSON’S FIRST NAME, SURNAME, BUSINESS ADDRESS, QUALIFICATIONS, AND INTERESTS
HELD IN THE ISSUER, IF MATERIAL. IF THE REPORT WAS COMMISSIONED BY THE ISSUER: PROVIDE RELEVANT
REPRESENTATION ON THE INCLUSION OF SUCH STATEMENT OR REPORT IN THE FORM AND CONTEXT IN WHICH IT WAS
INCLUDED, WITH THE CONSENT OF THE PERSON RESPONSIBLE FOR APPROVING THAT PART OF THE OFFERING
DOCUMENT ......................................................................................................................................................153
22.4 REPRESENTATION ON RELIABILITY OF INFORMATION PROVIDED BY THIRD PARTIES, ALONG WITH SOURCES OF
SUCH INFORMATION ........................................................................................................................................153
23. CONSOLIDATED FINACIAL STATEMENTS
155
23.1 CONSOLIDATED FINANCIAL STATEMENTS FOR 2005, INCLUDING THE AUDITOR’S OPINION AND REPORT155
23.2 CONSOLIDATED FINANCIAL STATEMENTS OF THE MNI GROUP FOR H1 2006, PREPARED FOR THE PURPOSES OF
THE PROSPECTUS .............................................................................................................................................223
23.3 CONSOLIDATED FINANCIAL STATEMENTS OF THE MNI GROUP FOR Q3 2006 PREPARED FOR THE PURPOSES OF
THE PROSPECTUS .............................................................................................................................................266
24. AUDITORS IN THE PERIOD COVERED BY HISTORICAL FINANCIAL INFORMATION
289
24.1 AUDITORS’ FIRST AND LAST NAMES, ADDRESSES AND REGISTERED OFFICES.......................................289
24.2 CHANGE OF AUDITORS ...........................................................................................................................289
25. PERSONS
PROSPECTUS
RESPONSIBLE
FOR
INFORMATION
CONTAINED
IN
THE
ISSUE
290
26. DEFINITIONS
291
27. APPENDICES
297
27.1 ARTICLES OF ASSOCIATION .....................................................................................................................297
27.2 EXCERPT FROM THE NATIONAL COURT REGISTER ...................................................................................304
27.3RESOLUTIONS ...........................................................................................................................................312
27.4 SUBSCRIPTION ORDER FORM ...................................................................................................................314
27.5LIST OF REFERENCES TO THE INFORMATION INCLUDED IN THIS PROSPECTUS BY REFERENCE ..................315
28 INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE OR THE
OFFERING
316
28.1 THE ISSUER ..............................................................................................................................................316
28.2 THE LEGAL ADVISER ...............................................................................................................................316
28.3 THE FINANCIAL ADVISER ........................................................................................................................316
28.4 THE OFFEROR ..........................................................................................................................................316
28.5 THE AUDITOR ..........................................................................................................................................316
7
1.
SUMMARY
This summary should be read as an introduction to this Prospectus.
Any decision to invest in the Issuer Shares offered pursuant to this Prospectus should be based on the consideration of
this Prospectus as a whole.
Any investor who files a claim relating to the contents of this Prospectus will bear the cost of any translation of this
Prospectus required before the commencement of court proceedings.
The persons preparing this summary, including any translation hereof, will be liable for an inflicted damage only if this
summary is misleading, inaccurate or inconsistent with other parts of this Prospectus.
1.1 Principal Areas and Types of the Issuer’s Business
The MNI Group is a media and telecommunications operator providing three basic types of services:
• value-added media services for the telecommunications market (MNI, Legion Polska Sp. z o.o.),
• universal telecommunications services (MNI Telecom),
• call center services (MNI).
Media Services
The media services provided by the MNI Group in the form of interactive services fall into:
• value-added fixed-line services,
• value-added mobile services.
Value-Added Fixed-Line Services
The MNI Group provides value-added fixed-line services through Legion Polska Sp. z o.o., a company acquired by the
Issuer in August 2005. Legion Polska Sp. z o.o. is one of the oldest companies in the Polish market which provide
value-added fixed-line services. The company operates IT platforms supporting connections with premium rate
numbers (special information or entertainment numbers – 0-700xx, 0-701xx, 0-708x, 0-300xx or 0-400xx in fixed-line
networks) and real-time connections between viewers/listeners and hosts of TV programmes, which are increasingly
used in programmes broadcast by TV channels.
Value-Added Mobile Services
The value-added mobile services offered by the MNI Group include both voice (Voice Premium) and text (SMS
Premium) media services, offered as part of an SMS, MMS, WAP or IVR service.
The MNI Group offers advanced telecommunications services, including both telephone and data transmission services.
Call Center Services
As part of the call center services the Company offers IT infrastructure and a team of employees to perform tasks
commissioned by the customer. These services differ from the value-added fixed-line services in that they are not fully
automated but consist in an actual conversation of the operator with the caller. They are a source of cost efficiencies for
companies, which do not need to arrange for their own information lines and can derive additional benefits
proportionately to the market attractiveness of the infoline.
Other Services
Other services provided by the Issuer comprise lease of the telecommunications infrastructure not used by MNI S.A.
8
1.2 Sales Revenue by Type of Service
The tables below present changes in the sales revenue of the Issuer and the Group by type of service in 2003-2005 and
in the first three quarters of 2006.
Table: Structure of the Issuer’s sales revenue (PLN ‘000)
Q1-Q3
2006
%
share
IFRS
Q1-Q3
2005
%
share
%
share
2005
IFRS
PAS
2004
%
share
PAS
2003
%
share
PAS
Sales revenue
75,414
100.0%
48,663 100.0%
69,491
100.0%
36,096 100.0%
18,593 100.0%
Net revenue from sales of
products
74,925
99.4%
48,653 100.0%
69,481
100.0%
36,087 100.0%
18,553
99.8%
25,073
33.2%
16,399
22,411
32.3%
17,527
17,874
96.1%
- media services
44,764
59.4%
28,314
58.2%
41,316
59.5%
14,040
38.9%
- call center services
3,922
5.2%
3,573
7.3%
5,085
7.3%
2,943
8.2%
- other services
1,166
1.5%
367
0.8%
669
1.0%
1,577
4.4%
679
489
0.6%
10
0.0%
10
0.0%
9
0.0%
40
goods for resale and
materials
* The financial statements for Q1-Q3 2006 (together with the comparable data for Q1-Q3 2005) were not audited or reviewed
by auditors.
Source: the Issuer.
0.0%
0.0%
3.7%
- telecommunications services
33.7%
48.6%
0.2%
Table: Structure of the Group’s sales revenue (PLN ‘000)
The first consolidated annual financial statements of the Issuer’s Group (including a presentation of comparable
data) were the financial statements for 2005.
Q1-Q3
2006
%
share
IFRS
Q1-Q3
2005
%
share
IFRS
2005
%
share
IFRS
2004
%
share
IFRS
Sales revenue
115,181
100.0%
53,491
100.0%
83,187
100.0%
43,752
100.0%
Net revenue from sales of products
114,575
99.5%
53,415
99.9%
83,071
99.9%
43,743
100.0%
50,227
43.6%
19,650
36.7%
29,078
35.0%
17,118
48.6%
- media services
59,004
51.2%
29,825
55.8%
48,239
58.0%
14,040
3,922
3.4%
3,573
6.7%
5,085
6.1%
2,943
- other services
1,422
1.2%
367
0.7%
669
0.8%
9,642
Net revenue from sales of goods for
606
0.5%
76
0.1%
116
0.1%
9
resale and materials
by auditors.
Source: the Issuer.
38.9%
8.2%
4.4%
0.0%
The dynamic growth of the Issuer’s and Group’s sales revenue confirms the effectiveness of the development strategy
pursued by the MNI Management Board. In 2005 and 2004, the Issuer’s sales revenue rose by 92.5% and 94.1%,
respectively, year on year, and in the first three quarters of 2006 – by 54.9% compared with the corresponding period of
the previous year. At the Group level, the sales revenue growth dynamics amounted to 90.1% in 2005 and 114.5% in
the first three quarters of 2006 relative to the corresponding periods of the previous years. Growth was seen in the sale
of the telecommunications services, the media services and the call centre services.
The increase in the value of sales of media services by 194.8% at the non-consolidated level and by 243.6% at the
consolidated level in 2005, and by 58.1% at the non-consolidated level and 97.8% at the consolidated level in the first
three quarters of 2006, compared with the corresponding period of the previous year, was attributable to the dynamic
development of this segment of the Issuer’s business and the acquisition of Legion Polska Sp. z o.o. It was a derivative
of a considerable increase in the range of services offered and the number of accounts served. Currently,
telecommunications infrastructure tends to be perceived mainly as a platform for the provision of value-added services
ordered by the customers, which in the case of the MNI Group means the value-added media services. The
telecommunications services provided using the same infrastructure constitute in the case of the MNI Group a far
smaller share of the product portfolio than the constantly growing media services.
9
In 2004, the revenue from sales of the telecommunications services provided by the Issuer was nearly flat year on year.
In 2005, MNI’s revenue in this segment rose by 27.9%, and in the first three quarters of 2006 – by 53.9% relative to the
same period of the previous year. At the consolidated level, the rate of growth of the revenue from telecommunications
services amounted to 69.9% in 2005 and 155.6% in the first three quarters of 2006.
The increase in the sales revenue from the traditional telecommunications services seen in 2005 and in the first three
quarters of 2006 confirms the correctness of the implemented strategy of introduction by the Issuer of interconnect
settlements with TP S.A. according to the RIO principle and abandonment of the „bill and keep” settlements system
(which consisted in each of the operators keeping the entire amount due from a subscriber for the connections to other
operator’s network). The increase of the sales revenue from the discussed business was also achieved thanks to the
introduction of new services, including connections with the use of the network access number (the prefix) or
broadband Internet access. The value of the consolidated revenue from sales of telecommunications services in 2005
was slightly influenced by the acquisition of MNI Telecom (formerly Pilicka Telefonia) completed at the end of that
year, although the revenue increase achieved owing to this transaction became visible only in the results for the first
three quarters of 2006. The high dynamics of growth of the revenue form the sale of the telecommunications services by
the Issuer and by the Group in the first three quarters of 2006 was possible mainly owing to the growth of the wholesale
of traditional telecommunications services and owing to dynamically growing sales of broadband Internet access.
The growth of the Group’s revenue from sales of the call center services amounted to 72.8% in 2005 and 9.7% in the
first three quarters of 2006 compared with the corresponding periods of the previous years. Currently call center
services are provided using a modern IT system by Alcatel, which enables 220 employees to work from two locations.
Given the fact that in 2003-2005 and in the first three quarters of 2006 there was a deep change of the product structure
of the sales markets of the Issuer and the Issuer’s Group, the section below discusses the MNI Group’s offering in the
analysed period.
2003
The Issuer’s business was limited to typical telecommunications services, including voice telephone and dial-up PSTN
Internet access. The offering was addressed to a group of the Issuer’s own subscribers (households and businesses)
located mainly in the province of Białystok. In that period the services offered by MNI included maintenance of the
telecommunications network (subscription), voice telephone services (local, domestic long-distance and international
connections, and connections to mobile networks), and dial-up and broadband Internet access. Other services included
lease of ICT infrastructure (optical fibres and digital channels) to business customers.
2004
In addition to the services described above, the Issuer began to operate as a provider of value-added services for
telecommunications, as part of its commenced integration with the business of Media Net Interactive Sp. z o.o. The
value-added services for the media sector appeared on MNI’s offer in the second part of the year, as the Issuer entered
into an agreement on the acquisition of the entire business of Media Net Interactive Sp. z o.o. and it had to ensure
continuity of the services and efficiently incorporate the new business into its existing structures. The Issuer’s offering
was broadened to include the call center services. Thanks to the larger service portfolio, the group of MNI’s customers
increased sharply (subscribers of all fixed-line telephone and mobile networks in Poland became customers of MNI),
causing a surge in the Company’s sales revenue (94.1%) compared with the previous year.
2005
In 2005, the MNI Group reported further growth of its sales revenue in the media and telecommunications segment on
the back of organic development of the Issuer’s business and the acquisition of Legion Polska and MNI Telecom
(formerly Pilicka Telefonia), which, apart from MNI, are the main entities making up the Issuer’s Group.
Next to the typical telecommunications services provided to its own base of private and business subscribers, the MNI
Group continued to pursue a line of business commenced in the previous year, namely value-added media services for
the subscribers of all telecommunications networks in Poland and abroad. At the beginning of the year, the business of
Media Net Interactive Sp. z o.o. was fully integrated with the operating structures and the service offering of the Issuer.
This enabled the MNI Group to commence operations as a media partner, whose task is to cooperate in the promotion of
services and the arrangement of content, which constitutes the value added. The acquisition of the business of Media
Net Interactive meant entering the market of services for the subscribers of mobile networks in Poland in the area of
voice media services and the SMS/MMS/WAP multimedia services. In the second half of 2005, with the acquisition of
Legion Polska, the activities of the MNI Group were extended to include value-added media services offered to fixedline telephone subscribers. The call center services were consistently developed based on newly built technological and
organisational solutions. A new agreement on the exchange of telecommunications traffic with TP S.A. enabled the
MNI Group to adapt the structure of its telecommunications offering to the needs of the market and to tangibly increase
the level of revenue derived from this business segment. The extension of the offering with new products addressed to
subscribers, such as broadband DSL Internet, translated into higher revenue and increasingly efficient utilisation of the
10
Group’s own telecommunications network. At the end of 2005, the Group embarked on efforts to widen the
geographical reach of its telecommunications services and acquired Pilicka Telefonia, a telecommunications business
operating in four numbering areas in the vicinity of Radom and serving almost 40 thousand subscribers. Thanks to these
initiatives and the ongoing development, the Issuer considerably increased its sales revenue, both on the nonconsolidated (growth of 92.5%) and consolidated level (growth of 90.1%).
2006
In 2006, the Issuer and the Group successfully continued their operations in all existing lines of their business, and at
the same time sought to optimally leverage the rapid expansion of the geographical area where they offered
telecommunications services addressed to their own subscribers. As far as the media services are concerned, the MNI
Group’s activity concentrated on expanding the business into new media and introducing new technologies and
products, in line with the development of the market and technological progress. As a consequence of the steps which
were taken, the value of the Issuer’s sales revenue increased by 54.9% on non-consolidated basis and by 115.3% on
consolidated basis year on year. The very high rate of sales revenue growth at the Group level was also connected with
the fact that the acquisition of MNI Telecom (formerly Pilicka Telefonia) was fully reflected at the consolidated level in
Q1-Q3 2006.
1.3 Financial and Operating Review
The historical financial information presented below was sourced from:
• the Issuer’s non-consolidated financial statements for 2003-2005 and for Q1-Q3 2006 (together with the
comparable data for Q1-Q3 2005);
• the Group’s consolidated financial statements for 2005 (together with the comparable data for 2004) and for
Q1-Q3 2006 (with the comparable data for Q1-Q3 2005).
The Issuer’s non-consolidated financial statements for 2003-2005 are incorporated in this Prospectus by reference.
The Group’s consolidated financial statements for 2005 (together with the comparable data for 2004) have been
included in Section 23.1 hereof.
In 2004, the Company qualified for the exemption from the requirement to prepare consolidated financial
statements for the financial year ended December 31st 2004 provided for in Art. 56 of the Accountancy Act. Thus,
the first consolidated financial statements of the Issuer are the financial statements of the Group for the financial
year ended December 31st 2005.
Chapter 23 of this Prospectus, “Consolidated Financial Statements”, contains the 2005 consolidated financial
statements of the MNI Group prepared in accordance with the IFRS, together with the auditor’s opinion and report.
These financial statements differ:
with respect to the contents of the supplementary information, to which disclosures required under the
International Financial Reporting Standards were added – from the consolidated financial statements
of the MNI Group published in Current Report No. 43/2006 on October 10th 2006;
with respect to the manner of presenting the data for 2004 and 2005, respectively, the adopted method
of consolidating BIA-NET, and the contents of the supplementary information, to which disclosures
required under the International Financial Reporting Standards were added – from the consolidated
financial statements of the MNI Group published in the periodic report of June 1st 2006.
The 2005 financial statements of the MNI Group contained in this Prospectus were prepared with a view to
ensuring comparability of the 2004 data with the 2005 data.
Additionally, the Issuer points out that:
• the financial information of the MNI Group for H1 2006 prepared in accordance with the International
Financial Reporting Standards in the format ensuring its comparability with the financial information derived
from the 2005 consolidated financial statements of the MNI Group published in Current Report No. 43/2006
has been included in Section 23.1 hereof.
Concurrently, the Management Board explains that the aforesaid financial information differs from the information
published in the periodic report of September 27th 2006 containing the H1 2006 consolidated financial statements of the
MNI Group, for the reasons and to the extent specified in Current Report No. 43/2006 in relation to the 2005
consolidated financial statements of the MNI Group prepared by the Company for the purposes of this Prospectus. The
differences concern primarily the MNI Group’s result of operations and equity; their inclusion is intended to ensure
11
comparability of the data published in the periodic report of September 27th 2006 with the data serving as the basis of
this Prospectus.
• the financial information of the MNI Group for Q1-Q3 2006 prepared in accordance with the International
Financial Reporting Standards in the format ensuring its comparability with the financial information sourced
from the 2005 consolidated financial statements of the MNI Group published in Current Report No. 43/2006,
in particular with respect to the balance-sheet data, has been included in Section 23.2 hereof.
The Issuer’s non-consolidated financial statements for 2003, 2004 and 2005 were prepared in accordance with the
provisions of the Accountancy Act, whereas the Group’s consolidated financial statements for 2005 (with the
comparable data for 2004) are compliant with the International Financial Reporting Standards (IFRS). The date of the
Company’s transition to the IFRS was January 1st 2004. Concurrently, the form of presentation and preparation of the
Group’s financial statements for 2005 is consistent with the form adopted for the Group’s financial statements for
2006, with due consideration for the accounting standards and principles as well as the legal provisions applicable to
the Group’s annual financial statements for 2006.
The non-consolidated financial statements for 2003-2005 and the consolidated financial statements for 2005 (with the
comparable data for the previous year) were audited by qualified auditors, whereas the financial statements for Q1-Q3
2005 and for Q1-Q3 2006 were not subject to review or audit.
The analysis of the MNI Group’s financial standing and financial performance in 2003-2005 takes into account the
effect of the Group’s expanding its scope of business in 2004 to include media services and a significant change in its
business scope which occurred in the period 2003-2005.
As the Issuer acquired 100% of shares in MNI Telecom (formerly operating under the name Pilicka Telefonia) in
December 2005, the financial results generated by that company in 2005 had a negligible impact on the Issuer’s
consolidated income statement for the past financial year.
Table: Selected historical financial highlights of the Issuer (PLN ‘000)
Q1-Q3 2006*
IFRS
Net sales revenue
Net revenue from sales of goods for resale and materials
Q1-Q3 2005*
IFRS
2005
2004
2003
PAS
PAS
PAS
75,414
48,663
69,491
36,096
18,593
74,925
48,653
69,481
36,087
18,553
489
10
10
9
40
Profit on sales
10,124
7,788
6,743
52
-2,801
EBITDA
19,096
19,120
23,903
12,083
3,496
EBIT
7,855
11,214
12,490
4,020
-3,418
Pre-tax profit
4,200
10,376
11,254
5,020
-4,287
Net profit
4,282
11,454
12,613
4,975
-4,410
Net cash provided by operating activities
8,929
13,436
17,237
5,528
4,737
-3,617
-16,984
-83,034
-8,700
760
Cash provided by investing activities
1,685
1,986
3,834
129
870
Cash used in investing activities
5,302
18,970
-86,868
-8,829
-110
-4,858
Net cash provided by/used in investing activities
Net cash provided by/used in financing activities
-6,626
3,729
66,862
2,770
Cash provided by financing activities
1,011
9,961
79,445
15,951
0
Cash used in financing activities
7,637
6,232
-12,583
-13,181
-4,858
12
Total assets
Q1-Q3 2006*
2005
2004
IFRS
PAS
PAS
181,204
179,833
2003
PAS
89,099
84,612
Non-current assets
156,605
157,746
75,589
80,064
Current assets
24,599
22,087
13,510
4,548
Inventories
319
366
160
159
Receivables
23,972
19,383
11,945
3,305
Cash and current investments
308
1 596
672
894
107,896
111,270
33,149
53,491
Provisions for liabilities
4,767
4,723
2,793
1,701
Non-current liabilities
61,001
71,914
16,897
27,255
Liabilities and provisions for liabilities
Non-current loans and debt securities
Current liabilities
Current loans and debt securities
57,353
68,397
5,058
6,448
42,128
32,748
12,708
21,645
15,708
9,798
2,027
1,830
Equity
73,308
68,563
55,950
35,717
Share capital
22,572
22,572
22,709
13,209
Number of shares
22,571,558
22,571,558**
22,708,558
13,308,558
Earnings per ordinary share (PLN)
0.19
0.56
0.35
-0.33
Dividend declared or paid per share (PLN)
0.00
0.00
0.00
0.00
* The financial statements for Q1-Q3 2006 (together with the comparable data for Q1-Q3 2005) were not audited or reviewed by
auditors.
**The number of shares decreased following the retirement of 137,000 Series I bearer shares purchased by the Company on January 2nd
2003 and on June 6th 2003 with a view to retiring them upon the settlement of a firm-commitment underwriting agreement; the Shareholders
did not receive any payments for those shares.
Source: the Issuer.
Table: Selected historical financial highlights of the Issuer’s Group (PLN ‘000)
Net sales revenue
Q1-Q3 2006*
Q1-Q3 2005*
2005
2004
IFRS
IFRS
IFRS
IFRS
115,181
53,491
83,187
43,752
114,575
53,415
83,071
43,743
606
76
116
9
Profit on sales
19,080
5,578
3,962
-6
EBITDA
31,234
16,634
22,135
12,713
EBIT
10,918
8,954
9,999
4,378
Pre-tax profit
7,553
8,088
8,588
5,236
Net profit
7,033
9,052
33,868
5,106
Net cash used in investing activities
19,380
10,782
14,399
4,867
-27,513
-14,886
-81,281
-7,864
1,725
2,141
6,579
972
-29,238
-17,027
-87,860
-8,836
-8,156
19,425
67,764
2,583
14,890
11,883
85,333
16,659
-23,046
7,542
-17,569
-14,076
13
Q1-Q3 2006*
2005
2004
IFRS
IFRS
IFRS
Total assets
Non-current assets
225,281
215,634
90,283
173,249
163,631
77,038
Current assets
52,032
52,003
13,245
Inventories
311
375
160
39,227
33,453
12,631
Receivables
12,494
18,175
454
121,848
125,468
33,985
Current liabilities
Equity
5,310
4,881
2,856
61,336
73,339
17,488
57,353
68,396
5,058
55,202
47,248
13,641
17,672
12,262
2,027
103,433
90,166
56,225
22,572
22,572
22,709
Share capital
Q3 2006*
Q3 2005*
2005
2004
IFRS
IFRS
IFRS
IFRS
Weighted average number of shares
22,571
,558
22,585,889
22,645,005
14,276,707
0.31
0.40
1.50
0.40
0.00
0.00
0.00
0.00
* The financial statements for Q1-Q3 2006 (together with the comparable data for Q1-Q3 2005) were not audited or reviewed by auditors.
Source: the Issuer.
Table: Profitability ratios and indicators of the Issuer
Q1-Q3 2006*
Sales revenue (PLN ‘000)
Q1-Q3 2005*
2005
2004
2003
75,414
48,663
69,491
36,096
18,593
Sales margin
13.4%
16.0%
9.7%
0.1%
-15.1%
EBITDA margin
25.3%
39.3%
34.4%
33.5%
18.8%
EBIT margin
10.4%
23.0%
18.0%
11.1%
-18.4%
Gross margin
5.6%
21.3%
16.2%
13.9%
-23.1%
Net margin
5.7%
23.5%
18.2%
13.8%
-23.7%
Return on assets (ROA)
2.4%
9.4%
5.7%
-5.0%
Return on equity (ROE)
6.0%
20.3%
10.9%
-11.6%
Source: the Issuer.
Table: Profitability ratios and indicators of the Issuer’s Group
Q3 2006*
IFRS
Q3 2005*
2005
2004
IFRS
IFRS
IFRS
115,181
53,491
83,187
Sales margin
16.6%
10.4%
4.8%
0.0%
EBITDA margin
27.1%
31.1%
26.6%
29.1%
EBIT margin
9.5%
16.7%
12.0%
10.0%
Gross margin
6.6%
15.1%
10.3%
12.0%
Net margin
6.1%
16.9%
40.7%
11.7%
3.2%
7.3%
_
43,752
22.1%
5.8%
46.3%
11.1%
Source: the Issuer.
14
Formulas of the profitability ratios:
• sales margin = profit on sales for the period/sales revenue for the period
• EBITDA margin = EBITDA for the period/sales venue for the period
• EBIT margin = EBIT for the period/sales revenue for the period
• gross margin = pre-tax profit for the period/sales revenue for the period
• net margin = net profit for the period/sales revenue for the period
• return on assets = net profit for the period/average balance of assets in the period
• return on equity = net profit/average balance of equity in the period
Table: Debt ratios of the Issuer
Q1-Q3 2006*
Q1-Q3 2005 *
Dec 31 2005
Dec 31 2004
Dec 31 2003
IFRS
IFRS
PAS
PAS
PAS
Total debt ratio
0.60
0.40
0.61
0.36
Debt-to-equity ratio
1.41
0.63
1.53
0.53
0.60
1.37
Long-term capital to non-current assets
0.86
0.94
0.89
0.96
0.79
Current debt ratio
0.23
0.16
0.18
0.14
0.26
Non-current debt ratio
0.34
-
0.40
0.19
0.32
Debt service coverage ratio
2.18
-
14.71
7.34
-1.05
Source: the Issuer.
Table: Debt ratios of the Issuer’s Group
Q1-Q3.2006*
Q1-Q3 2005 *
IFRS
IFRS
Dec 31 2005
IFRS
Dec 31 2004
IFRS
Total debt ratio
0.54
0.43
0.58
0.38
1.13
0.72
1.34
0.55
0.95
0.93
1.00
0.96
Current debt ratio
0.25
0.20
0.22
0.15
0.27
-
0.34
0.19
2.94
-
9.57
6.66
Source: the Issuer.
Formulas of the debt ratios:
• total debt ratio = (non-current and current liabilities + provisions for liabilities)/ total equity and liabilities
• debt-to-equity ratio = (non-current and current liabilities)/ equity
• long-term
capital
to
non-current
assets
=
(equity
+
non-current
liabilities)/
non-current assets
• current debt ratio = current liabilities/total equity and liabilities
• non-current debt ratio = non-current liabilities/total equity and liabilities
• debt service coverage ratio = EBIT / interest expense
1.4 Development Strategy
The MNI Group’s development strategy is focused on achieving shareholder value growth by increasing sales and profits
through a dynamic development of the business, mainly in the media sector. The strategy assumes the construction of a
strong media group working for the media and telecommunications markets.
The main assumptions of the MNI Group’s development strategy relate to:
• streamlining of the Group’s structure;
• further development of the Group as an active media market operator.
15
Streamlining of the Group’s structure
As at the Prospectus Date, the Management Board of MNI continues work on the streamlining of the Group’s structure,
which is necessary for the Group to engage in new investments on a scale exceeding by several times the current scale.
These initiatives consist in:
change of the business profile (development of new technologies) of MNI Technology Development Sp. z o.o.
(formerly Szeptel International), a subsidiary;
sale by the MNI Group of MNI Mobile S.A. (formerly OSS S.A.), a subsidiary, to MNI Telecom Sp. z o.o.;
MNI Mobile S.A. is to operate in the mobile telecommunications business as a Mobile Virtual Network
Operator (MVNO);
transfer of the fixed-line telephone infrastructure from MNI S.A. directly to MNI Telecom Sp. z o.o. (formerly
Pilicka Telefonia Sp. z o.o.), an entity in which the entire traditional telecommunications business of the MNI
Group is to be concentrated.
The Issuer will continue its existing media, telecommunications and call centre activities, while Legion Polska Sp. z
o.o. will remain responsible for the media services provided over the fixed-line telecommunications network.
Further development of the Issuer’s Group as an active participant of the media market
The development strategy of the MNI Group assumes in particular concentration of all efforts on developing the
existing and building new technical, organisational and cooperational capabilities, which will allow the Group to:
1.
Develop and commercialise a broader offering of mobile products addressed to the end users of media
services, with respect to services provided over the Internet and mobile data transmission,
2.
Introduce commercial services based on video formats for mobile phones,
3.
Develop and commercialise an entire range of services for customers using the 3G networks, such as
Mobil TV (television in a mobile phone), or VoD (TV programmes on demand),
4.
Develop and commercialise an offering of mobile products based on new functionalities, such as handling
of micropayments, etc.,
5.
Develop and commercialise solutions enabling the Group to target the product offering of MNI and its
cooperators at the users of “new media”, such as Internet television and interactive digital cable television,
i.e. media built on the traditional telecommunications infrastructure. This will involve in particular
development of products which are analogous to those in the mobile offering but are addressed to
customers with interactive receivers supported by cable TV or telecommunications operators.
The objectives of the MNI Group’s development strategy will be pursued in particular through:
1.
Launch of operations as a Mobile Virtual Network Operator (MVNO), using one of the exisiting mobile
networks; the operations would be conducted according to a few market models,
2.
Development (and extension in terms of the offered content) of the multimedia offering for subscribers of
mobile networks – on the basis of SMS, MMS and mobile data transmission solutions, and especially for
3G networks – on the basis of fast data transmission solutions,
3.
Development of the existing interactive services platform to include solutions dedicated to digital cable
television and Internet television networks,
4.
Development of a new structure – the Content Production Centre, which will serve the needs of the Group
and of the entire media services market. The Centre will offer Java games, polyphonic ringtones, music,
wallpapers, video content, films, multi-player games, competitions, communications applications and
entertainment services,
5.
Development of the Group’s own distribution channels for electronic and traditional multimedia products
and of specialised tools to be used in the channels that already exist,
6.
Integration of modern interactive and mobile technologies to provide for quick development and
implementation of advanced applications for media services, for the needs of the Group itself, the Group’s
media partners, third parties operating in the telecommunications business (MVNO) and other external
customers,
7.
Extension of subscriber access infrastructure, including in particular with WiMax Internet access
solutions, and further development of those projects towards the new areas of the Group’s operations,
8.
Acquisitions of other entities from the media and telecommunications sector in Poland and abroad, if they
offer full product synergy with the offering of MNI and generate free cash flows which are available for
financing development projects appropriate to their needs; in the media sector the acquisition targets
would include entities operating in the business of technology development as well as media content
production and distribution; in the case of foreign entities, potential acquisition targets would be
companies which enjoy a significant position on the developed mobile services markets in Western
Europe,
9.
Taking over from TP S.A. of local subscriber loops and launch of alternative (with respect to those of TP
S.A.) voice and broadband Internet access services throughout Poland. These operations will be first
conducted in those areas where the MNI Group already operates telecommunications networks,
10.
Intensification of activity on foreign markets – from the supply of multimedia content, services and
solutions, to development and implementation of turn-key interactive media solutions for local TV
16
channels and Internet portals (involving the supply of an application and technology, and connection to the
local mobile or fixed-line network operators).
The Group’s development strategy assumes a considerable broadening of the existing range of media services it offers,
including through the introduction of new technologically advanced products for the mobile segment, namely services
based on data transmission technology (WAP, WAP-Premium and Videocall for the 3G networks). Another element of
the Group’s strategy is to develop and commercialise a product offering intended for the interactive digital television
and interactive Internet television market, and also – in the form of dedicated applications – for public TV broadcasters
and Internet portals. To effectively pursue the objectives of its strategy, the MNI Group will address its offering and
activity to the subscribers of all other networks operating in Poland and abroad.
As far as the Group’s own subscribers are concerned, the Group will seek to broaden its media and telecommunications
offering based on the development of modern radio access systems, CDMA and WiMAX, extension of the xDSL
broadband Internet access offering, and development of convergent telephony projects based on the Group’s proprietary
mobile solutions (MVNO). The Group plans to launch its own development projects and purchase advanced
technologies in Poland and abroad.
The Group is devoting particular attention to the Mobile Virtual Network Operator (MVNO) model. It intends to
operate as a MVNO under its own name and under a few other brands, already established in other areas of the media
business. Furthermore, the Group’s strategy assumes a launch of the MVNO business in the Western European markets
– the services would be addressed to the Polish population living there.
The strategy for the call centre services assumes the use of a range of new technologies and products, including voice
mailing (which relies on advanced IVR platforms and voice portals), and of mobile multimedia technologies.
To finance implementation of the development strategy for the MNI Group, on June 30th 2006 the Ordinary General
Shareholders Meeting of the Issuer adopted a resolution to increase the MNI’s share capital by PLN 67,714,674, by
issuing 67,714,674 Series L Shares to be acquired by MNI’s existing shareholders in exercise of their pre-emptive
rights, and set the issue price of one share at PLN 1.
The issue of the Series L Shares will allow the Group to implement projects that will spur another sharp growth of the
Group’s revenue and profits. The assumptions concerning the value of the Group’s consolidated net income in 20062008, which is to be earned by pursuing the development strategy, are presented in Section 6.2 of this Prospectus.
1.5 Risk Factors
Prior to making a decision to acquire the Shares, investors should consider the risk factors presented below,
notwithstanding any information contained in the other parts of this Prospectus. The description below does not purport
to be an exhaustive discussion of all risk factors that may apply in the case of the Issuer’s Group and its business. In the
future new risk factors may occur, which are hard to predict now, such as acts of God, and certain risk factors which are
not material now may turn out to be material in the future. Investors should be aware that if any of the risk factors
discussed below materialise, they may have a material adverse affect on the Group’s business, its financial standing and
performance, as well as on the price of the Issuer shares. In addition to the risks described below, investing in the
Shares entails also the risks which are typical of capital market instruments.
The order of the risk factors discussed above was not intended to reflect the Issuer’s opinion on the probability of their
occurrence or their materiality.
Risk factors associated with the market environment of the Issuer’s Group:
Risk connected with the prevalent social and economic conditions in Poland and in Europe;
Risk related to changes of the legal environment;
Competition risk;
Risk inherent in technological progress;
Risk related to possible administrative price interventions on the market of universal telecommunications services;
Risk associated with the customer base;
Risk factors related to the operations of the Issuer’s Group:
Risk related to capex investments;
Risk associated with equipment failures;
Risk related to loss of highly qualified staff;
Risk related to the Credit Facility Agreement with BRE Bank S.A.;
Risk arising from pending court and administrative proceedings;
17
Risk factors related to investment in the Offered Shares:
Risk related to abandonment or cancellation of the Public Offering by the Issuer;
Risk of unsuccessful issue of the Offered Shares;
Risk related to acquisition of pre-emptive rights to the Offered Shares;
Risk related to the listing of the Rights to Shares;
Risk related to potential non-performance or violation of specific obligations provided for in the regulations
governing the regulated market.
1.6 Public Offering and the Offered Shares
Issuer
Public Offering
Pre-Emptive Rights
Basic Subscription
Order
Additional Subscription
Order
Issue Price
Stabilisation Option
Objectives of the Issue
Planned Listing Market
Payment for the Offered
Shares
Clearance of the Public
Offering
MNI Spółka Akcyjna of Warsaw
As part of the Public Offering the Issuer will offer Series L ordinary bearer shares issued in
a rights issue. In line with Resolution No. 8/2006 by the Ordinary General Shareholders
Meeting of MNI S.A. of June 30th 2006, the maximum number of the Offered Shares is
67,714,674 Series L Shares.
Based on the number of the newly issued Series L Shares, each one (1) pre-emptive right
entitles its holder to acquire 3 (three) Series L Shares.
Shareholders will have one pre-emptive right for each share they hold on the Record Date,
i.e. on September 15th 2006, close of the day. Given the time needed for settling stockexchange transactions at the Polish NDS, the investors who intend to acquire the Issuer
Shares on the WSE must acquire them on or before September 12th 2006 in order to obtain
the pre-emptive rights. Pre-emptive rights may be traded at the stock exchange. Preemptive rights are to be traded within the period specified in Section 20.2.2. of this
Prospectus.
Subscription Order for the Offered Shares placed in exercise of the pre-emptive rights,
accepted on the terms specified in Section 20.2.4. of this Prospectus.
Subscription Order for the Offered Shares not subscribed for in exercise of the pre-emptive
rights, placed by investors who are Shareholders in the Issuer on the Record Date.
Additional Subscription Orders will be accepted on the terms specified in Section 20.2.4. of
this Prospectus.
The Issue Price of the Offered Shares has been established at PLN 1.
The Issuer does not plan to take any price stabilisation actions.
A detailed description of the intended use of the issue proceeds is contained in Section 3 of
this Prospectus.
An application will be filed for the introduction of the Offered Shares to trading at the main
market of the WSE. Rights to Shares will be traded until the Company’s share capital
increase is registered. After the registration of the share capital increase, the Rights to
Shares will be replaced by Series L Shares.
Subscription orders placed as Basic and Additional Subscription Orders must be fully paid
up no later than at the moment they are placed. Subscription orders for the Offered Shares
not subscribed on the basis of the Basic and Additional Subscription Orders must be paid
up no later than on the date of their acceptance. Payment for the Offered Shares must be
equal to the product of the number of the Offered Shares subscribed for and their Issue
Price. Payments for the Offered Shares may be made exclusively in the Polish złoty.
The offering will be cleared by the Polish NDS.
18
2.
RISK FACTORS
Prior to making a decision to acquire the Shares, investors should consider the risk factors presented below,
notwithstanding any information contained in the other parts of this Prospectus. The description below does not purport
to be an exhaustive discussion of all risk factors that may apply in the case of the Issuer’s Group and its business. In the
future new risk factors may occur, which are hard to predict now, such as acts of God, and certain risk factors which are
not material now may turn out to be material in the future. Investors should be aware that if any of the risk factors
discussed below materialise, they may have a material adverse affect on the Group’s business, its financial standing and
performance, as well as on the price of the Issuer shares. In addition to the risks described below, investing in the
Shares entails also the risks which are typical of capital market instruments.
The order of the risk factors discussed above was not intended to reflect the Issuer’s opinion on the probability of their
occurrence or their materiality.
2.1
Risk Factors Associated with the Market Environment
2.1.1 Risk Connected with the Prevalent Social and Economic Conditions in Poland and in Europe
As the MNI Group earns the most sizeable part of its revenues on the domestic market, its financial performance is
contingent upon on a variety of factors related to the Polish macroeconomic environment, notably: the GDP growth
rate, the growth in investments, the population’s private incomes, the inflation rate, the budget deficit, and the
unemployment rate.
While it is true that any adverse changes in the macroeconomic variables might be a potential source of risk for the
MNI Group’s business, yet given the high degree of its segmentation, as it comprises both entertainment-related
services (sale of content, competitions, voting polls) and non-entertainment information-driven services (such as
telephone calls, Internet access, information hotlines and credit card payments), in the opinion of MNI’s Management
Board, the potential cumulative impact on the MNI Group of adverse macroeconomic factors is lower than the risk
level typically associated with the conduct of business activities.
2.1.2 Risk Related to Changes of the Legal Environment
Frequent changes of the generally applicable laws, in particular the tax regime, pose a potential threat to all
entrepreneurs operating on the Polish market. In the case of the Issuer, such changes may entail, for example, the risk
of increased business-related expenses, the risk of profit loss or the risk of undermining or limiting the potential for
dynamic growth. In particular, the ambiguous wording of a number of tax regulations, further compounded by a lack
of uniform practice with respect to their construction and application, must be seen as a potential hotbed for disputes
between the Issuer’s Group and the competent tax authorities. Although the Issuer seeks to mitigate the risk stemming
from changes of the legal framework, it is unable to rule it out completely.
2.1.3 Competition Risk
The MNI Group focuses its operations on two markets: the telecommunications market and the market of value-added
media services for the telecommunications market, which – despite having some overlapping areas – are currently at
different stages of development and carry different risks.
Especially the MNI Group’s key-priority market, namely the market of telecommunications-based value-added media
services, is characterised by the presence of a number of business startups having a relatively limited scope of
operations. By comparison, the MNI Group is a larger company with a well-developed organisational structure, a strong
market position and a more extensive base of telecommunications and data transmission infrastructure. Despite a lack of
independent research into the Polish market of telecommunications-based value-added media services, the Company’s
Management Board believes the competition risk on that market to be small as at the Prospectus Date.
On the other hand, the Polish telecommunications market, due to its size and potential for future growth, combined with
the high service pricing, ranks among the most attractive of the deregulated European markets. This involves the risk of
growing pressures from entities engaged in activities competitive to the Group’s business. Compared to the rest of the
EU, Poland’s telephone penetration rate remains rather low, and the customers have no access to the full spectrum of
telecommunications services. The Internet and data transmission market has been experiencing a steady upward trend.
The diffusion of mobile telephony coupled with the demonstrable, albeit slow, reduction in the prices of mobile services
relative to fixed-line telephone services poses a potential risk to future growth of the Group’s revenues from voice calls
via the fixed-line network. Trying to mitigate that risk, the Issuer’s Group is intensifying its activities in new, rapidly
developing segments of the telecommunications market, including the VoIP services market.
Additionally, the Issuer anticipates the arrival of new competitive entrants, as the process of the telecommunications
market deregulation continues and the market of internet services develops.
19
Pursuant to the amended Telecommunications Law, any telecom operator entered in the Register of Telecom
Entrepreneurs maintained by the President of the Office of Electronic Communications (UKE) is free to operate on that
market. The Company is unable to determine to what extent new market entrants will use the opportunity afforded by
the amended laws, taking advantage of the lower costs of entry onto the market of broadly understood
telecommunications services. However, it should be noted that, in the Issuer’s opinion, its extensive network
infrastructure located in the key areas of the MNI Group’s operations and connected to TP S.A. the Polish Telecom’s
infrastructure reduces the actual competition risks on the discussed market.
2.1.4 Risk Inherent in Technological Progress
The MNI Group is a service provider operating in the sector in which the applied technologies are developing at a
staggering rate. This may entail the risk of incurring by the MNI Group of significant unplanned expenditure on
adapting its existing infrastructure to more advanced technological solutions (both on the software and hardware side)
brought by the ongoing technological progress.
2.1.5
Risk Related to Possible Administrative Price Interventions on the Market of Universal
The core business area of the Issuer’s Group is the provision of telecommunications-based value-added media services.
The generally applicable Polish laws preclude the possibility that the Issuer’s activities in that market segment might be
subject to any administrative price setting. In that sense the risk of administrative price control within the Issuer’s core
business is non-existent.
However, it needs to be noted that the Issuer’s business also includes the provision of telecom services on the retail
market within the meaning of the Telecommunications Law of July 16th 2004. As part of that business, the Issuer or
any of its subsidiaries which has the status of a telecom entrepreneur, may participate in tenders announced from time to
time by the President of the Office of Electronic Communications (UKE) for the provision of the so-called universal
telecommunications services as defined in the Telecommunications Law. If the Issuer or its subsidiary, as the case may
be, were awarded such tender, by virtue of a decision by the President of the UKE, they would become an undertaking
designated to provide universal telecommunications services in a given area. The prices charged for such services, set
forth in a tariff, are subject to control by the President of the UKE, pursuant to the provisions of the
Telecommunications Law. An undertaking selected to provide universal telecommunications services sets the price
rates independently, but it must take into account a variety of factors, such as correlation of the prices with reasonable
costs and expenses related to the service provision, the maximum economic burden to the end users are able to
withstand (e.g. through offering various price packages or differently tailored service plans) and the objectives behind
the regulatory policymaking of the communications regulators (as defined in Art. 189.2 of the Telecommunication
Law). Furthermore, a universal service provider is required to submit to the President of the UKE a draft tariff and its
subsequent amendments within 30 days as from their effective date. If the President of the UKE, following review of
the draft tariff, concludes that the prices charged for universal telecommunications services do not meet the conditions
specified above, he may impose on the undertaking concerned the sanctions provided for in the Telecommunications
Law, which include prohibiting that undertaking from setting inflated price rates or from granting unfair preferential
treatment to certain end users. The President of the UKE is also authorised to cap the service prices or to establish the
mandatory service price range based on the actual pricing levels on comparable markets of other EU member states. To
date, neither the Issuer nor any of its subsidiaries has been designated a provider of universal telecommunications
services in any area, however, this situation may change in the future. Accordingly, if the Issuer or any of its
subsidiaries becomes a provider of universal telecommunications services, in practice they will be exposed to the risk of
interventions from the governmental authorities regarding the prices for such service.
2.1.6 Risk Associated with the Customer Base
The current organisational structure of value-added and media services relies on three major contracts concluded with
mobile operators (Polska Telefonia Cyfrowa, PTK Centertel and Polkomtel) and one contract concluded with a fixedline network operator (Telekomunikacja Polska S.A., the Polish incumbent). Via these channels, the Issuer distributes
over 90% of its media and value-added services. Within this model, the MNI Group’s services reach the subscriber base
of the above-named operators through those operators’ intermediation. The services are also billed through those
operators. Given the mutual dependence of the market participants as well as the coherence of the media and valueadded services offering, the Issuer’s Management Board considers the risk of any distribution channel becoming
unavailable (e.g. due to any operator’s withdrawal from its contractual arrangements with MNI or a MNI Group
company) to be negligible. In addition to that, the market Regulator has initiated efforts aimed at defining the position
of a value-added service provider within the entire Telecommunications Market, which would ensure access to endcustomers, irrespective of the operator’s position.
20
2.2
Risk Factors Related to the Operations of the Issuer’s Group
2.2.1 Risk Related to Capex Investments
In line with the development strategy pursued by the Group, further reinforcement of its market position is to be
achieved, inter alia, through acquisitions of companies active on the media and data transmission markets. However, the
strategy designed along these lines may not deliver the anticipated economic benefits in the time horizon assumed by
the Management Board, due to the typical risk factors inherent in capex investments. The execution of acquisition
transactions, replacement of the acquiree’s management personnel and disparity between the organisational cultures of
the companies may adversely impact both the Group’s and the acquiree’s business and financial results. Additionally,
the target companies may be involved in various disputes or proceedings or may have other organisational, legal or
financial problems which may adversely affect the Issuer’s and the Group’s post-acquisition operations.
2.2.2 Risk Associated with Equipment Failures
The equipment used by the MNI Group in its data communications platforms which support value-added services and
its telecommunications network, comes from the most renowned producers. Nevertheless, there can be no assurance
that no unexpected equipment failures occur, leading to telecommunications systems stoppages. Any such failure may
render the Company unable to provide services comprised in its offering. With a view to alleviating potential losses
caused by equipment failures, the MNI Group has a number of emergency procedures in place, ensuring that it receives
adequate technical support under its agreements with key solution vendors. The MNI Group has equipment which
enables quick replacement of faulty hardware. On its own, the Group has also purchased special spare parts kits which
allow it to keep the downtime caused by equipment failures to a minimum. Apart from that, The Group holds valid
insurance policies covering a wide range of risks associated with its business.
2.2.3 Risk Related to Loss of Highly Qualified Staff
The success of the MNI Group’s business and its future growth depend to a large extent upon the work contributed by
its qualified staff and other key personnel. In order to mitigate the risk related to a possible adverse effect of losing
certain members of its management staff and other key personnel, the Groups has implemented appropriate
management and decision-making procedures. Moreover, according to the Company’s Management Board, its
workforce recruitment process and well-developed in-house training system necessitated by the uniqueness of its
technologies, justify the opinion that in the foreseeable time span the MNI Group will be able to employ sufficient
workforce with appropriate expertise and qualifications. Nevertheless, in the light of certain industry-specific features
of the Issuer’s Group, such risk cannot be completely dismissed.
2.2.4 Risk Related to the Credit Facility Agreement with BRE Bank S.A.
In addition to other agreements specified elsewhere in this Prospectus, the Issuer is party to a significant credit facility
agreement concluded with BRE Bank S.A. on August 11th 2005, concerning a long-term investment credit facility in
the amount of PLN 81m, of which PLN 77.3m has been drawn to date. The amount outstanding under the facility as at
the end of November 2006 amounted to PLN 69.6m. To secure repayment of the facility granted under the
aforementioned agreement, the Issuer provided the collateral detailed in Section 8.2.4.4 hereof, which includes in
particular: registered pledges on assets constituting economic entities in the form of organised parts of the business of
the Issuer and its two subsidiaries: MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia) and Legion Polska Sp. z o.o.
The risk connected with those encumbrances consists in the possibility of the Bank’s enforcing its claims against the
collateral, by selling or assuming ownership thereof, in the event of the Issuer’s default or inappropriate performance of
its obligations under the credit facility agreement. The same applies also to the other types of collateral. It should be
noted, however, that for the time being there exist no circumstances which hint at the possibility of the Issuer’s default
or inappropriate performance of its obligations under the existing loan agreements.
2.2.5 Risk Arising from Pending Court and Administrative Proceedings
The Issuer is involved in the court proceedings described in detail in Section 8.7 hereof. In the proceedings concerning
claims pursued by Mr Marek Dutka, the Issuer is the defending party, whereas in the Tele-Pern Sp. z o.o proceedings,
the action was brought by the Issuer. As regards the criminal proceedings against some former members of the Issuer’s
Management Board who face, among other things, charges of malpractice detrimental to the Issuer’s business, the
Issuer, apart from being the injured party, is also acting as an auxiliary prosecutor. As for now, the probability of the
outcome of those proceedings being positive or negative for the Issuer cannot be conclusively determined. In the case of
the proceedings related to Mr Marek Dutka’s claims, the Issuer created a provision for damages which the court may
award to Mr Dutka, in accordance with the applicable legal requirements. The risk arising from the Issuer’s
involvement in the above proceedings is related to uncertainty as to final decisions of the relevant courts and a
possibility of their adverse effect on the Issuer’s financial results.
Additionally, on December 13th 2006, the Issuer was notified that the Financial Supervision Authority had instigated
ex-officio proceedings to determine whether MNI S.A. had duly performed its obligations under Art. 56 of the Act on
21
Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public
Companies, dated July 29th 2005. The proceedings concern the publication of Current Report No. 43/2006. According
to Art. 96 of the said Act, non-compliance with the requirements set forth in Art. 56 of the Act entails the following
sanctions:
- exclusion of the securities from trading on a regulated market for a definite or indefinite period, or
- a pecuniary fine of up to PLN 1,000,000.00.
2.3
Risk Factors Related to Investment in the Offered Shares
2.3.1 Risk Related to Abandonment or Cancellation of the Public Offering by the Issuer
The investors should be aware that until the date of the first listing of pre-emptive rights to the Offered Shares, the
Issuer’s Management Board may decide to cancel the Public Offering without being obliged to provide the reason for
such decision.
Following the opening of the Public Offering, until the allotment of the Offered Shares, the Issuer may decide to
abandon the Public Offering only for a good reason. Such situation may take place if:
Sudden and unexpected changes occur in the economic or political situation of Poland, the region or the world, which
may have an adverse effect on financial markets, Polish economy or the Issuer’s business,
sudden and unexpected changes occur in the Issuer’s situation, which have an adverse effect on the Issuer’s business,
sudden and unexpected changes occur in the Issuer’s environment, which have a direct effect on the Issuer’s operating
activities,
other unexpected circumstances occur, which make the Public Offering and allotment of the Offered Shares impossible
or detrimental to the Issuer’s interest.
In the event of cancellation or abandonment of the Public Offering, the Issuer will publish a relevant decision as
a supplement to this Prospectus, in accordance with Art. 51 of the Public Offering Act. In such case the amounts paid
by investors will be returned within the timeframes and on the terms set forth in Section 20.2.7 hereof. The amounts
will be returned without any interest or compensation.
2.3.2 Risk of Unsuccessful Issue of the Offered Shares
The issue of the Offered Shares may be unsuccessful if:
• no Offered Share is subscribed and duly paid for in line with the rules provided for in this Prospectus,
• the Issuer’s Management Board does not file with the Registry Court the resolution on the share capital
increase by way of the issue of the Offered Shares within six months of the Financial Supervision Authority’s
approval of this Prospectus,
• the Registry Court issues a decision not to register the share capital increase and the decision becomes final.
The registration of the share capital increase by way of the issue of the Offered Shares is also contingent on the
Management Board’s submission of a statement specifying the amount by which the share capital was increased, based
on the number of the Offered Shares subscribed for under valid orders. The statement, submitted in accordance with
Art. 310 of the Commercial Companies Code, in conjunction with Art. 431.7 of the Commercial Companies Code,
should specify the amount of the share capital following the closing of the public subscription, within the limits set forth
in the resolution on the share capital increase. If the Management Board fails to submit such a statement, the share
capital increase cannot be registered, and consequently the issue of the Offered Shares will be unsuccessful.
In the case of unsuccessful Public Offering, the amounts paid by investors will be returned within the timeframes and
on the terms specified in Section 20.2.7 hereof. The amounts will be returned without any interest or compensation.
2.3.3 Risk Related to Acquisition of Pre-Emptive Rights to the Offered Shares
The investors should be aware that the pre-emptive rights to the Offered Shares registered in their investment accounts
will be listed in a continuous trading system on the Warsaw Stock Exchange during the period indicated in Section
20.2.2 of this Prospectus. Following the end of the listing period, the sale of the pre-emptive rights on the WSE will not
be possible – it will only be possible to acquire the Offered Shares in exercise of the pre-emotive rights. The acquisition
of the Offered Shares entails the requirement to pay for the Shares. The pre-emptive rights which are not exercised will
expire.
2.3.4 Risk Related to the Listing of the Rights to Shares
The introduction of the Rights to Shares to trading requires detailed arrangements to be made between the Issuer, the
National Depository for Securities and the Warsaw Stock Exchange. There is a risk that due to the complexity of that
process the Rights to Shares will not be introduced to trading. Failure to introduce the Rights to Shares to stock22
exchange trading may preclude investors from selling the allotted securities until the first day of listing of the Offered
Shares on the Warsaw Stock Exchange.
Investors should be aware that if the issue is announced to be unsuccessful during the period of trading in the Rights to
Shares, investors will be returned only the issue price of each Right to Shares held by them on the terms described in
Section 20.2.7 of this Prospectus, without any interest or compensation. A loss may be incurred by investors who
acquire the Rights to Shares on the Warsaw Stock Exchange at a price higher than the issue price of the Offered Shares.
2.3.5
Risk Related to Potential Non-Performance or Violation of Specific Obligations Provided for
in the Regulations Governing the Regulated Market
2.3.5.1 Powers of the Financial Supervision Authority
If a public company fails to comply with the specific requirements set forth in Art. 157 and Art. 158 of the Act on
Trading in Financial Instruments, the Financial Supervision Authority may impose a financial penalty of up to
PLN 1m on the entity which failed to comply with the requirements, or issue a decision excluding the company shares
from trading on a regulated market, or apply both these sanctions.
Furthermore, pursuant to Art. 20 of the Act on Trading in Financial Instruments, if trading in specified securities is
carried out in circumstances which indicate a possible threat to the proper functioning of the regulated market or the
security of trading on such a market, or a possible compromise of investors’ interests, at the demand of the Financial
Supervision Authority the Warsaw Stock Exchange will suspend trading in such securities or instruments for up to one
month. At the request of the Authority, the Warsaw Stock Exchange will exclude from trading the securities indicated
by the Authority if trading in such securities materially threatens the proper functioning of the regulated market or the
security of trading on such a market, or compromises investors’ interests.
There can be no assurance that such circumstances will not occur in the future with respect to the Shares.
2.3.5.2 Powers of the Warsaw Stock Exchange
According to the Rules of the Warsaw Stock Exchange, the Management Board of the WSE may suspend trading in
securities for up to three months:
• at the issuer’s request,
• if it determines that such suspension is necessary to protect the best interest and safety of market participants,
• if the issuer violates the regulations governing the WSE.
Additionally, in certain situations defined in the WSE Rules, the Management Board of the WSE may exclude securities
from stock-exchange trading.
In accordance with Par. 31.1 of the WSE Rules, the Management Board of the WSE may exclude financial instruments
from stock-exchange trading:
• if the transferability of the financial instruments becomes limited,
• at the request of the Financial Supervision Authority made pursuant to the Act on Trading in Financial
Instruments
• if the financial instruments are no longer dematerialised,
• if the financial instruments are excluded from trading on a regulated market by a competent regulatory body.
Furthermore, the provisions of Par. 31.2 of the WSE Rules provide for the possibility of excluding financial instruments
from stock-exchange trading by the WSE Management Board in the following circumstances:
• if the financial instruments no longer meet the requirements for admission to stock-exchange trading other than
those based on which the securities should be mandatorily excluded from stock-exchange trading,
• if the issuer is persistently in breach of the regulations governing the WSE,
• at the issuer’s request,
• if the issuer’s bankruptcy is declared or the petition in bankruptcy is dismissed by the court on the grounds that
the issuer’s assets are not sufficient to cover the costs of proceedings,
• if the WSE Management Board determines that such exclusion is necessary to protect the best interest and
safety of market participants,
• following a decision on a merger of the issuer with another company, its demerger or transformation,
• if in the last three months no stock-exchange transactions involving the given security were executed,
• if the issuer engages in activities prohibited under applicable laws,
• if the issuer is placed in liquidation.
There can be no assurance that such circumstances will not occur in the future with respect to the Shares.
23
3.
REASONS FOR THE OFFERING, USE OF PROCEEDS AND
COSTS OF THE OFFERING
3.1
Reasons for the Offering and Use of Proceeds
The Issuer expects gross proceeds from the issue of Series L Shares of up to PLN 67.7m and net proceeds of up to
PLN 67.3m. The proceeds of the issue of Series L Shares will be used by the Issuer to:
acquire companies (both domestic and foreign) from the media and telecommunications sector and contribute additional
capital (if required) to such companies;
develop its own infrastructure (service platforms) facilitating the provision of media services, including MVNO (Mobile
Virtual Network Operator) services and third-generation mobile network services (3G).
The Management Board of the Issuer expects that the proceeds from the Public Offering will be used as follows:
PLN 54m – acquisition of companies from the media and telecommunications sector in Poland and abroad, as described
in Section 7.2.2 Internal Factors, including the acquisition of:
50 shares in MoCoHub Sp. z o.o., representing a 25% stake in its share capital, for PLN 1.5m,
57% shares in Breakpoint Sp. z o.o. for PLN 4.7m,
an approx. 88% equity interest in Petrotel Sp. z o.o. and equity interests in other companies form the media
and telecommunications sector, for PLN 47.8m,
PLN 13m – investments in infrastructure – hardware solutions and software facilitating the provision of media services.
In the media sector, the acquisition targets would include entities operating in the business of technology development
as well as media content production and distribution. In the case of foreign entities, potential acquisition targets would
be companies which enjoy a significant position on the developed mobile services markets in Western Europe.
The above investment objectives, and the related use of the proceeds obtained by MNI from the Public Offering, will be
implemented independently (simultaneously). The execution of the planned investments is scheduled for the years
2006–2007.
The successful completion of the issue of Series L Shares will facilitate the execution of projects ensuring another sharp
increase in revenue and profits achieved by the Group in line with the financial forecast presented to investors by the
Management Board of MNI S.A. in Current Report No. 37/2006 of September 5th 2006 and contained in Section 6.2 of
this Prospectus.
In the Issuer’s opinion, if the proceeds of the issue of Series L Shares are in line with the expectations, they should be
sufficient to finance all the above objectives. If the actual proceeds are lower than expected, the Issuer will additionally
use, to the extent possible, debt financing or will make only selected acquisitions. Any potential additional debt
financing would be obtained through bank loans or issue of debt securities. The amount of raised debt financing would
depend on the Issuer’s creditworthiness and would represent a difference between the funds required to finance the
investment objectives and the proceeds of the issue of Series L Shares allocated to finance such objectives.
If the execution of one or more of the acquisitions and the related further investments (if any) turns out to be impossible
or ineffective for any reason, the Issuer reserves the right not to execute such transaction. In such a case, the proceeds of
the issue of Series L Shares not applied to execute the said transactions would be used to purchase treasury shares or
increase the working capital.
24
3.2
Costs of the Issue or the Offering
The Issuer expects gross proceeds from the issue of Series L Shares of up to PLN 67.7m and net proceeds of up to
PLN 67.3m. The Issuer estimates that the total costs of the preparation and execution of the Public Offering, assuming
its gross proceeds at approx. PLN 67.7m, would be approx. PLN 0.4m.
Table: Estimated costs of the Public Offering, assuming proceeds of PLN 67.7m
Item
Preparation of the Issue Prospectus, advisory services and offering
Marketing of the Offering
Underwriters’ fees
Amount (PLN ‘000)
267
25
-
Printing and distribution of the Prospectus, fees to the Financial Supervision Authority, WSE, Polish NDS,
and other
110
TOTAL
402
Source: the Issuer.
25
4.
DILUTION
The main Shareholders in the Company, i.e. com.Investment Sp. z o.o., Andrzej Piechocki, Caterham Financial
Management LTD and Inwest Logistics Sp. z o.o., declare their intention to participate in the planned issue of Series L
Shares. However, if none of the existing shareholders acquired the offered Series L Shares, the absolute and percentage
value of the dilution caused by the issue of Series L Shares would be as follows:
Table: Dilution following the issue of 67,714,674 Series L Shares (acquisition of the Shares by new Shareholders)
Number of
votes at
GM prior
to the issue
% of share
capital
com.Investment Sp. z o.o.*
7,357,590
7,357,590
32.60%
7,357,590
7,357,590
8.15%
Andrzej Piechocki
1,398,812
1,398,812
6.20%
1,398,812
1,398,812
1.55%
Caterham Financial Management LTD
1,250,000
1,250,000
5.54%
1,250,000
1,250,000
1.38%
Inwest Logistics Sp. z o.o.
Number of
shares
following
the issue
Number of
votes at
GM
following
the issue
Number of
shares
prior to the
issue
% of share
capital
704,264
704,264
3.12%
704,264
704,264
0.78%
Other shareholders
11,860,892
11,887,270
52.55%
11,860,892
11,887,270
13.14%
New shareholders
0,00
0,00
0.00%
67,714,674
67,714,674
75.00%
22,571,558
22,597,936
100.00%
90,286,232
90,312,610
100.00%
TOTAL
* Formerly MEDIA-NET INTERACTIVE Sp. z o.o.
Source: the Issuer.
26
5.
SELECTED FINANCIAL INFORMATION
The historical financial information presented below was sourced from:
• the Issuer’s non-consolidated financial statements for 2003-2005 and for Q1-Q3 2006 (together with the
comparable data for Q1-Q3 2005);
• the Group’s consolidated financial statements for 2005 (together with the comparable data for 2004) and for
Q1-Q3 2006 (with the comparable data for Q1-Q3 2005).
The Issuer’s non-consolidated financial statements for 2003-2005 are incorporated in this Prospectus by reference.
The Group’s consolidated financial statements for 2005 (together with the comparable data for 2004) have been
included in Section 23.1 hereof.
In 2004, the Company qualified for the exemption from the requirement to prepare consolidated financial
statements for the financial year ended December 31st 2004 provided for in Art. 56 of the Accountancy Act. Thus,
the first consolidated financial statements of the Issuer are the financial statements of the Group for the financial
year ended December 31st 2005.
Chapter 23 of this Prospectus, “Consolidated Financial Statements”, contains the 2005 consolidated financial
statements of the MNI Group prepared in accordance with the IFRS, together with the auditor’s opinion and report.
These financial statements differ:
with respect to the contents of the supplementary information, to which disclosures required under the
International Financial Reporting Standards were added – from the consolidated financial statements
of the MNI Group published in Current Report No. 43/2006 on October 10th 2006;
with respect to the manner of presenting the data for 2004 and 2005, respectively, the adopted method
of consolidating BIA-NET, and the contents of the supplementary information, to which disclosures
required under the International Financial Reporting Standards were added – from the consolidated
financial statements of the MNI Group published in the periodic report of June 1st 2006.
The 2005 financial statements of the MNI Group contained in this Prospectus were prepared with a view to
ensuring comparability of the 2004 data with the 2005 data.
Additionally, the Issuer points out that:
• the financial information of the MNI Group for H1 2006 prepared in accordance with the International
Financial Reporting Standards in the format ensuring its comparability with the financial information derived
from the 2005 consolidated financial statements of the MNI Group published in Current Report No. 43/2006
has been included in Section 23.1 hereof.
Concurrently, the Management Board explains that the aforesaid financial information differs from the information
published in the periodic report of September 27th 2006 containing the H1 2006 consolidated financial statements of the
MNI Group, for the reasons and to the extent specified in Current Report No. 43/2006 in relation to the 2005
consolidated financial statements of the MNI Group prepared by the Company for the purposes of this Prospectus. The
differences concern primarily the MNI Group’s result of operations and equity; their inclusion is intended to ensure
comparability of the data published in the periodic report of September 27th 2006 with the data serving as the basis of
this Prospectus.
• the financial information of the MNI Group for Q1-Q3 2006 prepared in accordance with the International
Financial Reporting Standards in the format ensuring its comparability with the financial information sourced
from the 2005 consolidated financial statements of the MNI Group published in Current Report No. 43/2006,
in particular with respect to the balance-sheet data, has been included in Section 23.2 hereof.
The Issuer’s non-consolidated financial statements for 2003, 2004 and 2005 were prepared in accordance with the
provisions of the Accountancy Act, whereas the Group’s consolidated financial statements for 2005 (with the
comparable data for 2004) are compliant with the International Financial Reporting Standards (IFRS). The date of the
Company’s transition to the IFRS was January 1st 2004. Concurrently, the form of presentation and preparation of the
Group’s financial statements for 2005 is consistent with the form adopted for the Group’s financial statements for
2006, with due consideration for the accounting standards and principles as well as the legal provisions applicable to
the Group’s annual financial statements for 2006.
27
The non-consolidated financial statements for 2003-2005 and the consolidated financial statements for 2005 (with the
comparable data for the previous year) were audited by qualified auditors, whereas the financial statements for Q1-Q3
2005 and for Q1-Q3 2006 were not subject to review or audit.
The analysis of the MNI Group’s financial standing and financial performance in 2003-2005 takes into account the
effect of the Group’s expanding its scope of business in 2004 to include media services and a significant change in its
business scope which occurred in the period 2003-2005.
As the Issuer acquired 100% of shares in MNI Telecom (formerly operating under the name Pilicka Telefonia) in
December 2005, the financial results generated by that company in 2005 had a negligible impact on the Issuer’s
consolidated income statement for the past financial year.
Table: Selected historical financial highlights of the Issuer (PLN ‘000)
Q1-Q3 2006*
Q1-Q3 2005*
IFRS
Net sales revenue
IFRS
2005
2004
2003
PAS
PAS
PAS
75,414
48,663
69,491
36,096
18,593
74,925
48,653
69,481
36,087
18,553
489
10
10
9
40
-2,801
Profit on sales
10,124
7,788
6,743
52
EBITDA
19,096
19,120
23,903
12,083
3,496
EBIT
7,855
11,214
12,490
4,020
-3,418
Pre-tax profit
4,200
10,376
11,254
5,020
-4,287
Net profit
4,282
11,454
12,613
4,975
-4,410
8,929
13,436
17,237
5,528
4,737
-3,617
-16,984
-83,034
-8,700
760
1,685
1,986
3,834
129
870
5,302
18,970
-86,868
-8,829
-110
-4,858
Net cash provided by/used in investing activities
-6,626
3,729
66,862
2,770
1,011
9,961
79,445
15,951
0
7,637
6,232
-12,583
-13,181
-4,858
Total assets
Q1-Q3 2006*
2005
2004
IFRS
PAS
PAS
181,204
179,833
89,099
2003
PAS
84,612
Non-current assets
156,605
157,746
75,589
80,064
Current assets
24,599
22,087
13,510
4,548
Inventories
319
366
160
159
Receivables
23,972
19,383
11,945
3,305
308
1 596
672
894
107,896
111,270
33,149
53,491
4,767
4,723
2,793
1,701
61,001
71,914
16,897
27,255
57,353
68,397
5,058
6,448
42,128
32,748
12,708
21,645
15,708
9,798
2,027
1,830
Equity
73,308
68,563
55,950
35,717
Share capital
22,572
22,572
22,709
13,209
Current liabilities
28
Q1-Q3 2006
Q1-Q3 2005
IFRS
Number of shares
2005
IFRS
2004
PAS
2003
PAS
PAS
22,571,558
22,571,558
22,571,558**
22,708,558
13,308,558
0.19
0.51
0.56
0.35
-0.33
0.00
0.00
0.00
0.00
0.00
* The financial statements for Q1-Q3 2006 (together with the comparable data for Q1-Q3 2005) were not audited or reviewed by
auditors.
**The number of shares decreased following the retirement of 137,000 Series I bearer shares purchased by the Company on January 2nd
2003 and on June 6th 2003 with a view to retiring them upon the settlement of a firm-commitment underwriting agreement; the Shareholders
did not receive any payments for those shares.
Source: the Issuer.
Table: Selected historical information of the Issuer’s Group (PLN ‘000)
Q1-Q3 2006*
Q1-Q3 2005*
2005
2004
IFRS
IFRS
IFRS
IFRS
Net sales revenue
115,181
53,491
83,187
43,752
114,575
53,415
83,071
43,743
606
76
116
9
Profit on sales
19,080
5,578
3,962
-6
EBITDA
31,234
16,634
22,135
12,713
EBIT
10,918
8,954
9,999
4,378
Pre-tax profit
7,553
8,088
8,588
5,236
Net profit
7,033
9,052
33,868
5,106
Total assets
19,380
10,782
14,399
4,867
-27,513
-14,886
-81,281
-7,864
1,725
2,141
6,579
972
-29,238
-17,027
-87,860
-8,836
-8,156
19,425
67,764
2,583
14,890
11,883
85,333
16,659
-23,046
7,542
-17,569
-14,076
Q1-Q3 2006*
2005
2004
IFRS
IFRS
IFRS
225,281
215,634
90,283
173,249
163,631
77,038
Current assets
52,032
52,003
Inventories
311
375
160
39,227
33,453
12,631
Non-current assets
Receivables
Current liabilities
Equity
Share capital
13,245
12,494
18,175
454
121,848
125,468
33,985
5,310
4,881
2,856
61,336
73,339
17,488
57,353
68,396
5,058
55,202
47,248
13,641
17,672
12,262
2,027
103,433
90,166
56,225
22,572
22,572
22,709
29
Q3 2006
Q3 2005
IFRS
Weighted average number of shares
IFRS
22,571,558
22,585,889
0.31
0.00
2005
2004
IFRS
IFRS
22,645,005
14,276,707
0.40
1.50
0.40
0.00
0.00
0.00
Source: the Issuer
30
6.
FINANCIAL FORECASTS
6.1
Basic Assumptions for the Group’s Financial Forecasts
The forecasts of the consolidated financial results for the MNI Group for 2006–2008 are based on an analysis of the
current financial performance as well as forecasts and analyses of the development of individual market parameters
prepared by such international research and consultancy companies as IDC, Research Pyramid, Instytut Gold Media,
Yankee Group and the Polish research centre TNS OBOP. The forecasts are also based on the Issuer’s activities planned
as part of its development strategy.
Achievement of the forecast increases in financial results should be possible, in particular, thanks to the implementation
of the following objectives:
• Objectives dependent on the Issuer’s administrative, management and supervisory bodies:
acquisition of other companies in the media and telecommunications sectors
expansion of the Issuer’s own infrastructure supporting the provision of media services
provision of services for 3G mobile networks
• Objectives independent of the Issuer’s administrative, management and supervisory bodies:
growth of the media services market, including in particular value-added services market, in line with
the forecasts.
Given the relatively long time span of the forecasts, the MNI Management Board has undertaken to assess the
feasibility of meeting them on a quarterly basis. Such assessments will be published in current reports.
6.2
Report of an Independent Accountant or Qualified Auditor on the
Correctness of Financial Forecasts
MGI AKCEPT
THE AUDITOR’S REPORT ON SELECTED ITEMS OF THE MNI GROUP’S ESTIMATED FINANCIAL RESULTS FOR 2006 AND
FORECAST FINANCIAL RESULTS FOR 2007–2008
To the Shareholders, Supervisory Board and Management Board of MNI Spółka Akcyjna
We have examined the correctness of selected items of the MNI Group’s estimated financial results for 2006
and forecast financial results for 2007–2008, comprising forecasts, prepared in the form of a plan and based
on significant estimates, of the following items of the income statement for 2006–2008.
Table. Selected items of the MNI Group’s income statement for 2006–2008 (PLN ‘000)
Item
2006
2007
Net sales revenue
160,000
180,000
EBITDA*
40,000
50,000
* EBITDA – earnings before income tax, depreciation and amortisation.
2008
225,000
65,000
The estimates and forecasts of consolidated financial results covered the results of the following
undertakings:
♦
♦
♦
♦
MNI S.A., as the Group’s Parent Undertaking (including the planned results of two media companies,
assuming full-method consolidation),
Legion Polska Sp. z o.o.,
MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp. z o.o.), and
dataCOM S.A. of Warsaw (consolidated as of September 1st 2006).
We would like to note that as at the date of this Report the two media companies are not subsidiaries of MNI
S.A. or any other member of the MNI Group.
The forecasts of the consolidated financial results have been prepared in order to be included in this
Prospectus and presented to prospective investors.
31
The Management Board of MNI S.A. is responsible for the preparation of the consolidated prospective
financial information, including the assumptions on which it is based.
Our responsibility was to check the correctness of the MNI Group’s estimated financial results for 2006 and
the MNI Group’s financial forecasts for 2007–2008 where such estimates and forecasts refer to the 20062008 income statement items specified above and are based on significant estimates.
Our examination of the correctness of the consolidated estimates and forecasts was performed in
accordance with the standards and guidelines included in the International Standard on Assurance
Engagements (ISAE 3400), published by the International Federation of Accountants (IFAC). Under these
standards and guidelines, we are obliged to examine the consolidated prospective financial information in
such a manner as to achieve a moderate level of assurance that the consolidated financial estimates and
forecasts are free of material misstatements.
When examining the evidence underlying the consolidated prospective financial information prepared by the
Management Board of MNI S.A. and the assumptions on which it is based, we did not identify anything
suggesting that the evidence does not provide a reasonable basis for preparing the estimates of the MNI
Group’s financial results for 2006 and its financial forecasts for 2007–2008. Therefore, we are not in a
position to express an opinion as to whether the estimated and forecast consolidated financial results will be
achieved.
In our opinion, the MNI Group’s consolidated financial estimates and forecasts including the figures
presented above have been correctly prepared based on the adopted assumptions, and presented in
accordance with principles consistent with the accounting policies applied by the MNI Group in the
preparation of financial statements in accordance with the IAS. The consolidated financial estimates and
forecasts ensure comparability with the MNI Group’s historical financial information for 2005, prepared in
accordance with the IAS.
We would like to note that the forecasts of consolidated financial results were based on the assumption that
the MNI Group acquires two media companies, which would allow it to consolidate these companies with the
full method as of January 1st 2007.
Should the MNI Group fail to acquire these companies or acquire them at other time, the actual financial
results might differ from the forecasts.
We would like to note that the MNI Group’s actual results are likely to be different from the forecasts since
anticipated events frequently do not occur as expected and the difference could be material.
Janusz Wisłowski
Qualified Auditor
Reg. No. 10727/7789
(illegible signature)
Janusz Wisłowski
Member of the Management Board
of MGI Akcept Audyt Sp. z o.o.
ul. Żelazna 54/5, 00-852 Warsaw, Poland
Qualified auditor of financial statements, entered on
the list of qualified auditors of financial statements
under Reg. No. 2835
Qualified Auditor
Reg. No. 10727/7789
(illegible signature)
(Company’s address stamp)
Warsaw, January 11th 2007
MGI AKCEPT AUDYT SP. Z O.O. UL. ŻELAZNA 54/5, 00-852 W ARSAW, POLAND
PHONE NO. +48 22 654 91 05, FAX NO. +48 22 654 55 32
www.mgiakcept.pl
DISTRICT COURT FOR THE CAPITAL CITY OF W ARSAW, XII COMMERCIAL DIVISION OF THE NATIONAL COURT REGISTER,
ENTRY NO. 0000172526
A member of the MGI, a worldwide association of independent auditing, accounting and consulting firms
32
6.3
Comparability of Forecasts with Historical Financial Information
The Issuer’s non-consolidated financial statements for the financial years 2003, 2004 and 2005, presented in this
Prospectus, were prepared in accordance with the Accountancy Act, while the Group’s consolidated financial
statements for 2005 (and the comparable data for 2004) were prepared in accordance with the International Financial
Reporting Standards (IFRS). January 1st 2004 is the date of transition to the IFRS. Moreover, the Group’s financial
statements for 2005 were prepared and presented in the form consistent with the form to be adopted for the preparation
of the Group’s financial statements for 2006, with due consideration of the accounting standards and policies, as well as
legal provisions applicable to these annual financial statements of the Issuer’s Group.
The Group’s financial statements for 2005, audited by a qualified auditor, meet the requirements stipulated in
Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of
International Accounting Standards.
The Group’s financial forecasts were prepared according to the principles ensuring the comparability of the forecasts
with the principles applied in the preparation and presentation of the historical financial information for 2005.
6.4
Statement Concerning the Relevance of the Forecast Published in
the Previous Prospectus
The Issuer did not publish any financial forecasts in the previous Issue Prospectus. Accordingly, this Section applies
neither to the Issuer nor its Group.
33
7.
FINANCIAL AND OPERATING OVERVIEW
7.1
Financial Standing
7.1.1
Financial Standing
Table: Profitability ratios and indicators of the Issuer
Sales margin
EBITDA margin
EBIT margin
Gross margin
Net margin
Q1-Q3 2006*
75,414
13.4%
25.3%
10.4%
5.6%
5.7%
2.4%
Q1-Q3 2005*
48,663
16.0%
39.3%
23.0%
21.3%
23.5%
6.0%
2005
69,491
9.7%
34.4%
18.0%
16.2%
18.2%
9.4%
2004
36,096
0.1%
33.5%
11.1%
13.9%
13.8%
5.7%
2003
18,593
-15.1%
18.8%
-18.4%
-23.1%
-23.7%
-5.0%
20.3%
10.9%
-11.6%
Source: the Issuer.
Table: Profitability ratios and indicators of the Issuer’s Group
Q3 2006
Q3 2005
IFRS
IFRS
2005
2004
IFRS
IFRS
115,181
53,491
83,187
Sales margin
16.6%
10.4%
4.8%
0.0%
EBITDA margin
27.1%
31.1%
26.6%
29.1%
EBIT margin
9.5%
16.7%
12.0%
10.0%
Gross margin
6.6%
15.1%
10.3%
12.0%
Net margin
6.1%
16.9%
40.7%
11.7%
3.2%
7.3%
_
43,752
22.1%
5.8%
46.3%
11.1%
Source: the Issuer.
Formulas of the profitability ratios:
sales margin = profit on sales for the period/sales revenue for the period
EBITDA margin = EBITDA for the period/sales venue for the period
EBIT margin = EBIT for the period/sales revenue for the period
gross margin = pre-tax profit for the period/sales revenue for the period
net margin = net profit for the period/sales revenue for the period
return on assets = net profit for the period/average balance of assets in the period
return on equity = net profit/average balance of equity in the period
The financial and operating restructuring which the Issuer has been undergoing since 2003 is reflected in a significant
increase in the non-consolidated and consolidated profitability ratios for 2003–2005. The restructuring efforts have
primarily consisted in:
• dynamic development of the MNI Group’s activity in the media sector (organic growth and acquisitions within
the sector), which is characterised by higher growth dynamics, higher margins and lower capital intensity
compared with the telecommunications sector;
• debt restructuring commenced in 2003 and connected mainly with debt reduction under arrangement
proceedings assumption, by the Company’s main Shareholders, of MNI’s debt towards Bank Pekao S.A. The
extinguishment of 40% of debts owed to the creditors as a result of the court arrangement was reflected in an
extraordinary gain of PLN 3.5m, disclosed in the Issuer’s 2003 financial statements;
• stricter cost control resulting, in particular, from the cost budgeting procedure introduced in 2005.
Thanks to dynamic expansion (in both media and telecommunications industries), the Issuer and its Group benefited
from economies of scale, which was reflected in the improved profitability ratios for 2003–2005. The restructuring was
necessitated by the difficult financial condition of the Issuer in 2003 (when a net loss was recorded), attributable in
34
particular to the capital-intensive investment programme for the construction of the Company’s own backbone network.
The abandonment of that project and the sale of a portion of redundant assets (mainly telecommunications
infrastructure) benefited the profit generated by the Issuer in 2005. Other factors contributing to the improvement of the
2004 and 2005 results included non-recurring transactions affecting the profit/loss on other operating activities and – in
the case of extinguishment of debt interest – on the profit/loss on financing activities. The non-recurring events
affecting the Issuer’s and the Group’s profitability ratios in the individual periods under analysis included:
• Release of provisions related to valuation allowances on the Issuer’s assets, mainly connected with the unused
backbone network, in the amount of PLN 1.4m in 2003, PLN 2.5m in 2004, PLN 5.1m in 2005 (including
proceeds from the sale of a part of the backbone network in the amount of PLN 3.7m), PLN 0.8m in Q1–Q3
2005 and PLN 0.7m in Q1–Q3 2006. In 2002, the Issuer made valuation allowances on assets in the amount of
PLN 32.4m, including PLN 23.7m relating to unused fibre-optic infrastructure. As at the end of Q3 2006, the
valuation allowances on unused fibre-optic infrastructure totalled approximately PLN 17.2m.
• The extinguishment of a PLN 4.0m debt in H1 2005, and the extinguishment, in 2004, of PLN 1.6m interest
on the debt repurchased by MNI’s main Shareholders, that is com.Investment Sp. z o.o. (formerly Media Net
Interactive Sp. z o.o.), Towarzystwo Inwestycyjne Dedal Sp. z o.o., Caterham Financial Management Ltd and
Inwest Logistics Sp. z o.o. The extinguished debt represented a portion the Issuer’s debt towards Bank Pekao
S.A. repurchased by the aforementioned entities. These arrangements marked the end
of MNI’s debt restructuring process with respect to the debt repurchased by the above entities.
• Amortisation of telecommunication licence fees in 2004 (a PLN 2.1m increase in other operating income).
• Creation of provision for liabilities under court proceedings (increase in other operating expenses by
PLN 1.6m in H2 2005 and PLN 0.1m in Q1–Q3 2006).
• Release of provision for rights of way and use of a fibre-optic line (increase in other operating income by
PLN 1.5m in 2005, including PLN 0.5m in Q1–Q3 2005).
• Expense on infrastructure analysis and advisory services (a PLN 1.3m increase in other operating expenses in
H2 2005).
• loss on the sale of non-current assets, including in particular a part of redundant telecommunications
infrastructure (a PLN 0.9m increase in other operating expenses in 2003).
Due to the above non-recurring events, MNI’s and the MNI Group’s EBIT margins in 2004 and 2005 were significantly
higher than the sales margins.
The Issuer’s and its Group’s profitability ratios in Q1–Q3 2006 were lower than in the same period of 2005 (with the
exception of sales margins), because of the non-recurring events which took place in Q1–Q3 2005. The most important
of them included the arrangements entered into by the Issuer in January 2005 with Towarzystwo Inwestycyjne Dedal
Sp. z o.o., Inwest Logistics Sp. z o.o. and com.Investment Sp. z o.o. Under these arrangements, the total debt of
PLN 6.1m was reduced by PLN 4.0m, which led to a non-recurring increase in other operating income.
Another factor contributing to the Issuer’s and its Group’s lower profitability ratios in Q1–Q3 2006 was a significant
increase in financial expenses attributable to interest on an investment loan contracted principally to finance the
acquisition of MNI Telecom (formerly operating under the name of Pilicka Telefonia). It should also be noted that
following the adjustment of the operating results in Q1–Q3 2006 and Q1–Q3 2005, both the Issuer’s and its Group’s
EBIT grew significantly. Without the non-recurring events, MNI’s operating result would increase from PLN 4.1m in
Q1–Q3 2005 to PLN 6.9m in Q1–Q3 2006, or by 67.2%, while the Group’s result would increase from PLN 1.8m in
Q1–Q3 2005 to PLN 9.9m in Q1–Q3 2006.
The increases in consolidated sales margins in Q1–Q3 2006, compared with the respective results for Q1–Q3 2005 were
driven by multiple factors, including the Issuer’s acquisition of Pilicka Telefonia in December 2005, which, owing to
the expansion of the subscriber base, enhanced the MNI Group’s growth potential. The expansion of the customer base
contributed to an increase in the MNI Group’s sales revenue both in the media and telecommunications sectors.
Moreover, the acquisition of MNI Telecom Sp. z o.o. (operating formerly under the name of Pilicka Telefonia) should
benefit the Group’s profitability ratios in the telecommunications services sector thanks to economies of scale.
The Issuer’s higher sales margins compared with the Group’s sales margins is attributable to the fact that media
services, which are MNI’s main source of revenue, are characterised by margins higher than those achievable on
services provided by other members of the Issuer’s Group, including telecommunications services.
While analysing net consolidated profitability ratios, ROE and ROA, it should be taken into account that in 2005 70.5%
of the Group’s net profit (PLN 23.9m) was related to the negative consolidation goodwill resulting from the acquisition
of MNI Telecom Sp. z o.o. for a price lower than its fair value. It should also be noted that upon the acquisition of MNI
Telecom, the Issuer’s non-current assets increased significantly, which had a material impact on the level of ROA for
Q1–Q3 2006.
35
7.1.2
Operating Result
7.1.2.1 Material Factors with a Bearing on EBIT
Below, the structure of the Issuer’s and its Group’s EBIT in 2003–2005, Q1–Q3 2006 and Q1–Q3 2005 is presented by
main business segments.
Table: The Issuer’s EBIT structure (PLN ‘000)
Q1–Q3 2006
Q1–Q3 2005
2005
2004
2003
IFRS
IFRS
PAS
PAS
PAS
Fixed-line telephone services
2,035
5,111
3,666
1,910
-747
Media services
7,804
6,952
9,845
3,110
0
Call centre services
665
1,945
2,684
923
0
Other
573
309
449
1,508
621
11,077
14,317
16,644
7,451
-126
3,222
3,103
4,154
3,431
3,292
EBIT before unattributed costs
Unattributed costs **
Total EBIT (as disclosed in financial statements)
11,214
12,490
4,020
-3,418
7,855
* The financial statements for Q1–Q3 2006 (together with the comparable data for Q1–Q3 2005) were not audited or reviewed by auditors.
** Selling costs and general and administrative expenses.
Source: the Issuer.
Table: The Group’s EBIT structure (PLN ‘000)
Q1–Q3 2006
Q1–Q3 2005
2005
2004
IFRS
IFRS
PAS
PAS
Fixed-line telephone services
4,526
4,941
3,406***
1,910
Media services
8,420
4,934
7,816****
3,110
Call centre services
665
1,945
2,684
923
Other
573
309
355
2,266
14,184
12,129
14,261
8,209
3,266
3,175
4,262
3,831
10,918
8,954
9,999
4,378
EBIT before unattributed costs
Unattributed costs **
Total EBIT (as disclosed in financial statements)
**
Selling costs and general and administrative expenses, with the exception of MNI Telecom, where, given the company’s uniform business
profile, these costs and expenses were attributed to fixed-line telephone services.
*** The fact that the consolidated net result is lower than the non-consolidated net result is attributable to the negative EBIT recorded by MNI
Telecom (formerly: Pilicka Telefonia) over the period under consolidation, i.e., since December 19th 2005; for the entire year 2005, MNI Telecom
recorded a net profit of PLN 1.9m.
**** Less consolidation adjustments relating to the Issuer’s purchase of intangible assets used in the media segment operations (PLN 2,191
thousand in 2005, including PLN 1,856 thousand in Q1–Q3 2005.)
Source: the Issuer.
In 2003–2005, the Issuer’s and its Group’s operating profit was growing dynamically on the back of improving
operating results in individual business segments.
The negative EBIT recorded in 2003 resulted from the loss reported by the fixed-line telephone business due to a costly
investment programme related to the backbone network. The programme did not lead to achieving the sales revenue
target, and the investment projects under the programme were concluded in 2003. A partial sale of redundant assets
contributed to higher profitability in 2005.
The expansion of the Issuer’s business with media and call centre services, following the acquisition of Media-Net
Interactive Sp. z o.o. in November 2004, contributed to a dynamic increase in the Issuer’s EBIT and to a change in the
EBIT structure in 2005. The share of telecommunications services in MNI’s EBIT (before unattributed costs) decreased
from 25.6% in 2004 to 22.0% in 2005 and 18.4% in Q1–Q3 2006.
On the other hand, the share of media services in MNI’s EBIT (before unattributed costs) increased from 41.7% in 2004
to 59.2% in 2005 and 70.5% in Q1–Q3 2006. This increase is attributable not only to the growing scale of operations in
36
this segment, but also to the profitability of media services being higher than that of telecommunications services.
Another factors contributing to the Issuer’s growing EBIT generated by operations in the media and call centre
segments were the introduction of the new services described in Section 8.2.1.2 hereof and the development of technical
and organisational resources of the call centre.
The share of call centre services in EBIT (before unattributed costs) amounted to 12.4% in 2004, 16.1% in 2005 and
6.0% in Q1–Q3 2006. The decrease in Q1–Q3 2006, when compared with the same period of 2005, resulted from the
following two factors: dynamic growth of sales in the other segments of the Issuer’s business and a decrease in the
Group’s revenue from call centre services (the relatively high share of call centre services in the Group’s EBIT in 2005
was connected with contracts for the execution of large promotional campaigns related, inter alia, to parliamentary and
presidential elections, as well as the promotion of a new press title; in Q3–Q4 2005, those events added PLN 1.3m to
EBIT).
Following the acquisition, as well as functional and technological integration of Legion Polska in H2 2005, the Group
enhanced its existing offering with value-added services, addressed to fixed-line telephone subscribers, which
contributed to a higher share of media services in the consolidated EBIT. It should be emphasised that the acquisition of
Legion Polska had an effect not only on the Group’s financial statements. As part of the restructuring of the MNI
Group, Legion Polska’s business was partially integrated into the Issuer’s organisational structure, which increased
MNI’s revenue from sales of media services and EBIT in 2005.
Following the elimination of non-recurring events described in Section 7.1.1, relating mostly to the reversal of valuation
allowances for assets, partial extinguishment of debt by the Company’s main Shareholders, and amortisation of
telecommunications licence fees, until the acquisition of MNI Telecom, the Issuer’s fixed-line telecommunications
services generated an operating loss. This was attributable to high depreciation of assets used in providing such
services. As a result of the acquisition of MNI Telecom in H2 2005, the necessary economies of scale were achieved,
and thus a net operating profit was generated in Q1–Q3 2006, both by the Issuer (PLN 2.0m) and its Group (PLN 4.5m).
The “Other” item relates to the operations outside the MNI Group’s main business activity. The significant value of the
item in 2004 was attributable to the lease of fibre-optic network (PLN 0.7m) and other assets (PLN 0.8m).
7.1.2.2 Key Factors Contributing to Changes in Sales Revenue
Table: Impact of certain factors on changes in the Issuer’s sales revenue (PLN ‘000)
Q1-Q3
2006*
Q1-Q3
2005*
2005
2004
2003
IFRS
IFRS
PAS
PAS
PAS
Sales revenue
75,414
48,663
69,491
36,096
18,593
Total effect of material events which have a bearing the
value of sales revenue, including:
48,686
31,887
46,401
16,983
-
Launch of new products: media services
44,764
28,314
41,316
14,040
-
3,922
3,573
5,085
2,943
-
Launch of new products: call center services
*The financial statements for Q1-Q3 2006 (together with the comparable data for Q1-Q3 2005) were not audited or reviewed by auditors.
Source: the Issuer.
37
Table: Impact of certain factors on material changes in sales revenue of the Issuer’s Group (PLN ‘000)
Sales revenue
Q1-Q3
2006*
Q1-Q3
2005*
2005
2004
IFRS
IFRS
IFRS
IFRS
115,181
53,491
83,187
43,752
Total effect of material events which have a bearing the
value of sales revenue, including:
81,599
31,887
56,577
16,983
Launch of new products: media services
59,004
28,314
48,239
14,040
3,922
3,573
5,085
2,943
27,517
-
3,253
-
3,112
-
-
-
200
-
-
-
Launch of new products: call center services
Acquisition of Pilicka Telefonia
Acquisition of MoCoHub Sp. z o.o.
Acquisition of DataCOM S.A.
*The financial statements for Q1-Q3 2006 (together with the comparable data for Q1-Q3 2005) were not audited or reviewed
by auditors.
Source: the Issuer.
The factors that contributed the most to the increase in the MNI Group’s sales revenue included:
•
•
•
December 2004 – acquisition of the organised part of Media Net Interactive Sp. z o.o.’s business (currently
operating under the name com.Investment Sp. z o.o.), which facilitated a dynamic development in the sector of
media and call center services;
H2 2005 – inclusion of Legion Polska in the MNI Group’s structure, which accounted for a surge in sales
revenue of the Issuer and its Group in the media services sector;
December 2005 – acquisition of Pilicka Telefonia (currently operating under the name MNI Telecom Sp. z
o.o.), which enabled a significant expansion of operations in the telecommunications sector.
7.1.2.3 Aspects of the Governmental, Political, Economic, Fiscal and Monetary Policies and Other Factors
with a Bearing on the Issuer’s Operations
The Issuer’s Group is not aware of any significant aspects of the governmental, political, economic, fiscal or monetary
policies which would have a material bearing on its operations, other than the factors outlined in Section 8.2.2.3 and
Section 7.2.2.
7.2
7.2.1
Trends
Key Trends in Sales, Inventories, Selling Costs and Prices, Prevailing in the Period from the
End of the Last Financial Year to the Prospectus Date
Given the nature of business operations conducted by the MNI Group (i.e. the sale of media and telecommunications
services), the recently prevailing trends regarding:
• sales, include:
- trends observed in the media and telecommunications industry,
- marketing trends,
• inventories of the Issuer’s Group – not applicable,
• cost of sales, include:
- trends concerning the cost of purchased services,
• prices, include:
- trends concerning the price of services offered by the Group.
Trends Prevailing in the Media and Telecommunications Industry
The recently observed prominent tendencies in the media and telecommunications market pertain to the measures
undertaken both by telecommunications operators and technology producers with a view to adapting the existing
telecom infrastructure to new solutions, other than the traditional voice transmission. Those initiatives include in
38
particular upgrading data transmission capacity so that it can support the use of the Internet and interactive
communication, which may involves sending and receiving multimedia content (including television). Simultaneously,
the technologies developed worldwide increasingly facilitate leveraging the opportunities offered by broadly understood
mobility. What is meant here is not only the mobility in telephone services, but also multimedia services, including
interactive television.
The abovementioned trends trigger off tendencies observed on the domestic media and telecommunications market,
concerning the design and provision of services of a more complex structure, which rely either on Internet access based
on fixed-line networks or its mobile version based on the WAP technology. As the third generation wireless technology
(3G) gradually develops and proliferates, the next tendency will be a more pronounced shift towards multimedia
solutions with moving image content (television content) or even television solutions.
As for the traditional telecommunications services, a strong convergence of fixed-line and mobile telephone services is
to be expected. It will also apply to Internet access modes.
Marketing Trends
In the period from the end of the last financial year to the Prospectus Date, there was a growing demand from
advertisers for alternative channels of reaching the customer. This tendency is expected to gain strength with time. The
Issuer expects a growth in the significance of such distribution channels as mobile phones with Internet access, which
support interactive functions, or niche Internet websites. The Management Board of MNI S.A. also expects an increased
importance and a more widespread use of niche television channels for advertising activities, including interactive
internet television channels (IPTV). In this area MNI S.A. intends to become a major provider of content and solutions
for commercial products.
Trends Concerning the Cost of Purchased Services
In parallel with the processes leading to a reduction of service prices, the cost of services purchased by the MNI Group
is also falling. One of the contributing factors is the administrative actions taken by the telecommunications regulator,
which aim at forcing Telekomunikacja Polska, enjoying a dominant position on the market, to reduce the rates quoted to
its cooperating telecom providers. Another factor is a drop in the prices of wholesale internet access, continuing for
a long time now and caused by intensive competition.
All of the abovementioned recent trends concerning sales and the cost of purchased services of the Issuer’s Group, seen
across various market segments, should have a positive impact on the financial performance of the Issuer’s Group.
Trends Concerning Prices of the Services Offered by the Group
A recent prominent tendency in the telecommunications market is the decrease in prices of both universal
telecommunications services and Internet access services. The MNI Group seeks to offset the impact of this trend by
expanding the scale of its operations.
7.2.2
Factors which Have a Material Bearing on the Group’s Growth Prospects until the End of the
External Factors
Agreement between the Fixed-Line and Mobile Telephone Operators Concerning Mutual Access to Media
Services
The Issuer’s Management Board expects that if the fixed-line and mobile telephone operators reach an agreement
concerning mutual access to media services, there will be a chance to promote those services under a simplified
advertising model and with greater efficiency of reaching the target audience, which in the long run should enable the
Group to achieve a significant increase in revenue, with a substantially unchanged level of advertising expenditure.
Moreover, this model of cooperation will create a possibility of advertising products in many media which so for have
been used for this purposes to a limited extent only, owing to the existing perception barriers (e.g. radio stations).
Practical Possibility of Unrestricted Functioning on the MVNO Mobile Telephone Market
Current expectations concerning the telecoms market include also an effective launch of mobile telecommunication in
the MVNO model (Mobile Virtual Network Operator). Successful implementation of MVNO projects will be dependant
on general cooperation terms between existing mobile telephone operators and potential virtual operators.
With this end in view, on November 8th 2006, the Issuer and its subsidiary MNI Mobile S.A. (formerly operating under
the name Ogólnopolska Sieć Szkieletowa) executed a letter of intent with Polska Telefonia Komórkowa Centertel Sp.
z o.o., in which the parties expressed their intent to conclude a cooperation agreement concerning provision of MVNO
mobile telephone services by MNI Mobile S.A. based on hosting services provided by PTK Centertel. Negotiations
regarding the details of this agreement are in progress.
39
Even though no potential revenue from services provided under the MVNO model is taken into account, and thus there
is no potential negative effect if the MVNO activities are not started, the Issuer attaches particular importance to this
factor.
Commercial Launch of IPTV (Internet Protocol Television) Multimedia Services in Fixed-Line Networks
Given the launch of an IPTV project by Telekomunikacja Polska S.A. and an anticipated launch of analogous services
by Dialog and a few other cable TV operators, the MNI Group may enter into a new area of operations as the provider
of services, content, and solutions, by the end of this year.
Commercial Launch of the Video Call Service in 3G Mobile Networks
The increase in the number of subscribers of the 3G mobile network will go together with the development of the whole
system of multimedia services. In Q4 2006, the Issuer’s Group made a full commercial launch of a package of services
for customers of the 3G networks. This event is seen as vital for the success of the whole project, developed in a longer
perspective of several years.
Further Liberalisation of the Telecoms Market
The most important external factor driving the growth of the MNI Group is the continuing liberalisation of the telecoms
market and the resulting possibility of carrier pre-selection for local calls based on network access number. Another
important effect of the liberalisation is the possibility of taking over the local loops from TP S.A.
The decisions of the President of the Office of Electronic Communications (UKE) concerning Telekomunikacja Polska
S.A., dated July 4th 2006, impose a number of obligations on the incumbent operator, including lowering the rates for
connections between TP S.A.’s and independent operators’s networks and unbundling the loops. Pursuant to those
decisions, TP S.A. is obligated to present a framework offering of telecommunication access within three months.
Thanks to those decisions the Group may acquire a significant number of new subscribers without the need to build the
last-mile network infrastructure or incur the risk of subscriber migration between operators as a result of differences in
their offerings. Moreover, the Group’s growth in this area will also be driven by rapid technological progress in voice
and data transmission. This situation will boost the profitability of telecom services and will create an opportunity for
independent operators to introduce lower call rates and prepare more competitive offerings for their subscribers. In
Western Europe, market liberalisation (consisting in unbundling the local loop) contributed to increased popularity of
broadband Internet services and lower prices of such services.
After the unbundling of the local loop, number portability is also expected to gain importance on the fixed-line
telephone market.
The introduction of new interconnection rates will enable the Group to introduce a new attractively-priced offering for
MNI Telecom subscribers. The Group will decide upon the amount of the reduction after it makes detailed analyses of
how the prices may be affected by other market elements which are subject to liberalisation, such as the obligatory
separation of Internet services from voice services in an operator’s offering.
Greater Flexibility of Telecoms Operators
The Issuer’s Group assumes that in line with the progress of liberalisation on the Polish telecom market, the Group’s
main partners (telecom operators) may adopt a more partner-oriented approach in commercial relations with the MNI
Group, in particular with respect to adopted settlement models and rates. The Issuer’s Group expects that the operators
will adopt such terms and models as are in effect on more developed foreign markets.
Development of Telecommunications Technologies
The Issuer’s Group is constantly monitoring the introduction of new technologies on the telecoms markets. The MNI
Group takes particular interest in solutions which are quickly standardised and are deemed compatible with previously
applied solutions.
Introduction of a New Service Settlement Model - MT SMS (Mobile Terminated SMS)
In the opinion of the Issuer’s Management Board, the anticipated introduction in Poland of the MT SMS services,
which enjoy high popularity in Western European countries, should translate into a sharp increase in the Group’s
revenue from SMS services (for a detailed description of MT SMS see Section 8.2.1.2).
The MT SMS services will be implemented when their commercial version is launched and offered by mobile
operators, which is scheduled for the first quarter of 2007.
40
Internal Factors
Acquisition of dataCOM S.A. by MNI Telecom
On July 13th 2006, MNI Telecom, a subsidiary formerly operating under the name of Pilicka Telefonia Sp. z o.o., and
JUPITER Narodowy Fundusz Inwestycyjny S.A. of Warsaw executed a share purchase agreement concerning shares in
dataCOM S.A. of Warsaw, which, upon fulfilment of the conditions precedent, was fully implemented on August 31st
2006.
Under the Agreement MNI Telecom acquired 2,570,566 ordinary registered shares in dataCOM S.A., with a par value
of PLN 7.00 per share, which represent 76.49% of the entire share capital of the company and the same proportion of
votes at its general shareholders meeting, for a total price of PLN 19m. That price was to be paid in two instalments:
first instalment of PLN 18m has already been paid, while the second instalment of PLN 1m will be paid by July 31st
2007 if the gross margin for the period June 2006–May 2007 is not lower than for the period June 2005–May 2006.
The above price accounts for PLN 8.2m in cash, which dataCOM S.A. had in bank accounts on the transaction date.
Given the excess of receivables over payables, this amount rises to at least than PLN 9.5m. Therefore, net of the cash
acquired, the price for all the shares is PLN 12.5m. MNI Telecom assumes that the remaining 24% of the shares will be
purchased from the minority shareholder at the same price as the price of the majority stake.
dataCOM S.A. is the owner of a plot and an office building in the Ursus district of Warsaw (the company’s registered
office). The plot covers an area of over 4,500 square metres, while the building comprises almost 2,500 square metres.
As at the end of Q1 2006, the net book value of the building was close to PLN 11.8m. In the last year, the company
posted sales revenue of over PLN 32m, while the sales figure for the first half of the current year was nearly PLN 15m.
The acquisition of data.COM S.A. and its inclusion in the MNI Group is part of the MNI Group’s development strategy
for the upcoming years. As regards the sector of telecommunications services, the strategy assumes acquisition of
infrastructure providing direct access to customers – end users of services. Within Warsaw, dataCOM S.A. operates
a fibre-optic bus of 60 km in length, which connects several office buildings and all major Warsaw telecommunications
nodes, which are relevant in terms of telecommunications services, also in the international context. Additionally,
dataCOM S.A. has a professional hosting centre connected to the entire telecommunications network via highperformance fibre-optic buses. These resources will help the Group to fully develop operations in the following areas:
1.
2.
3.
Development of a range of convergent telephone services for a few dozen of large corporate customers
connected to the Company’s own access infrastructure,
Offering hosting services based on the Company’s own facilities to forerunners in the budding market of
MVNO and VoIP operators; a wide offering of ancillary services,
Continued development of the segment of wholesale telecommunications services, which will give advantage
to the MNI Group companies, as the launch of a service offering differentiated in terms of prices is expected.
Below are presented the benefits which the MNI Group expects to derive from the acquisition of dataCOM:
1.
2.
3.
4.
Increased sales revenue of the segment of convergent telephone services (combination of the fixed-line and
mobile telephone offerings),
Reduced costs of collocating the Company’s servers, achieved through migration of servers to dataCOM S.A.’s
hosting centre, and increased revenue from hosting services,
Improved efficiency of telecommunications services as a result of handling higher volumes of traffic,
Direct financial benefits, following from expansion of the offering of services provided to the existing
dataCOM S.A. subscribers, with a focus on multimedia services.
Acquisition of MoCoHub Sp. z o.o. by the MNI Group
On August 24th 2006, the Issuer submitted to Mr Piotr Gruszecki and Mr Julian Kutrzeba an irrevocable offer to
acquire a total of 200 shares in MoCoHub Sp. z o.o. of Kraków, which represent 100% of the company’s share capital.
On September 15th 2006, final agreements concerning the sale of a total of 150 shares were signed. The shares
represent 75% of the share capital of MoCoHub, and their price was set at PLN 3.000.000.00. At the same time, initial
agreements concerning the sale of the remaining 50 shares were executed. Following the transaction, the Issuer will
become a sole shareholder in MoCoHub. The acquisition price of the 50 shares will depend on MoCoHub’s financial
performance in 2006 and in the first six months of 2007, but it must fall in the range of PLN 1,000,000.00 and
PLN 1,500,000.000.00.
MoCoHub Sp. z o.o. has been developing its operations as a provider of content for mobile multimedia services to
a considerable part of the domestic market. It now provides multimedia content to nearly 90% of the companies present
41
on the market. The acquisition of MoCoHub Sp. z o.o. is part of the strategy adopted by MNI’s Management Board,
whereby the company is to effectively increase its market share through strengthening the area of multimedia content
sales and developing an MVNO project. The acquisition of MoCoHub Sp. z o.o. brings the MNI Group closer to
completing the task of launching a multi-tier centre for procuring and producing content for multimedia services,
including mobile telephone, Internet television, the Internet and the traditional media. Strengthening and developing
that part of the MNI Group is closely related to its plans regarding expansion into foreign markets in the near future.
Acquisition of Breakpoint Sp. z o.o. by the MNI Group
On October 26th 2006, the Issuer and Invidia Limited of Limassol, Cyprus, entered into a preliminary share purchase
agreement concerning 57% of shares in Breakpoint, a company producing games for mobile phones.
On December 19th 2006, MNI executed the final agreement, whereby it purchased the shares for PLN 4,664,000.00.
The shares will be transferred to the Issuer upon payment of the price, which should occur on or before January 31st
2007.
The acquisition will enable the Issuer to enter the international market of multimedia services, mainly in Western
Europe. Breakpoint provides solutions to such companies as Vodafone, T-Mobile, Orange and mobile networks in the
Far East and Brazil.
Acquisition of Petrotel Sp. z o.o. by the MNI Group
Currently, the Issuer is participating in a tender launched by PKN Orlen S.A. to select a buyer for PKN Orlen’s
shareholding in Petrotel Sp. z o.o. (ca. 88%). MNI S.A. has been granted exclusivity in the next stage of negotiations on
the final terms and conditions of the agreement. The execution of the final share purchase agreement will be subject to
corporate approvals by MNI S.A. and PKN Orlen, clearance of the transaction by the President of the Office of
Competition and Consumer Protection, a final due diligence and talks with Petrotel employees on a social security
package for the transferred employees, if any.
Acquisition of Companies in the Media and Telecommunications Segments
As at the Prospectus Date, in addition to the foregoing, the Issuer continues its activities aimed at acquiring other
companies in the media and telecommunications sectors. Their extent is currently limited to initial analyses and market
research. These plans are part of the MNI Group’s growth strategy, whose goal is to develop a strong media group
operating in the media and telecommunications market. As far as the media sector is concerned, the MNI Group will
target companies in the segment of technology development and content production and distribution. In the case of
foreign targets, potential acquisition targets will be companies with a significant market presence, which operate in the
developed mobile services markets in Western Europe.
New Product Offering
Another internal factor material to the Group’s growth prospects until the end of the current financial year is the
expansion of the existing product offering and launch of new products so as to fully utilise the Group‘s
telecommunications infrastructure, its highly advanced call centre and unique solutions of state-of-the-art multimedia
platforms.
Numerous factors, which include the recent launch of 3G networks (the most innovative mobile communications
technology) by mobile operators, the development and spreading of advanced multimedia services, further liberalization
of the telecommunications market, and the commercial start of first interactive television projects prepared by CATVs
and Internet networks, will, on the one hand, stimulate the demand for the services offered by the MNI Group and, on
the other, will have impact on the development of its new services.
In the near future, the Issuer’s Group intends to develop and commercialise a group of multimedia products for mobile
customers and to prepare the ground for launching new projects next year. The most important of the products to be
commercialised include:
1.
Launch of services based on the WAP Premium model in the networks of all mobile operators,
2.
Launch of the SMS MT model services,
3.
Launch of VideoCall services in 3G networks and making the developed solutions available to business
partners and providers of content for these services,
4.
Launch of first commercially available WiMax installations,
5.
Launch of first commercial projects involving multimedia services addressed to interactive IPTV customers,
6.
Launch of mobile telecommunications services in the MVNO SP model.
Detailed information on the plans of the Issuer and its Group concerning new products and technologies is set forth in
Section 8.2.1.2 and Section 8.2.6 hereof.
42
Restructuring of the MNI Group
Initiated in 2003, the restructuring of the MNI Group (in the two areas described below) is a major internal factor which
will continue to affect the Group’s growth prospects until the end of the current financial year.
Change in the Group Structure
In order to add further momentum to the growth of the MNI Group and create an efficient structure for its operations,
the Issuer’s Management Board found it necessary to take steps to restructure the group of the Company’s subsidiaries.
In line with the growth strategy adopted by the Issuer’s Group, MNI’s Management Board decided on the following
division of business areas within the Group:
• MNI S.A. – the existing media and telecommunications segments and call centre services;
• MNI Telecom Sp. z o.o. (formerly Telefonia Pilicka Sp. z o.o.) – standard telecommunications services
provided to subscribers in all numbering areas;
• Legion Polska Sp. z o.o. – media services rendered over a fixed-line telecommunications network.
Furthermore:
• For over a year and a half, MNI Technology Development (formerly Szeptel International) Sp. z o.o. has
concentrated on the operation of a call centre. Since the Issuer’s organisational structure includes now a call
centre department of its own, continuing the operation of the MNI Technology Development’s call centre is
not necessary. MNI Technology Development Sp. z o.o. will focus on technological solutions for mobile
services and broadly understood IP segment, which will be provided to the companies of the Issuer’s Group
and external customers.
• MNI Mobile S.A. (formerly Ogólnopolska Sieć Szkieletowa S.A.), which was established in 2000 to develop a
countrywide network, is not conducting any activities now, and the MNI Group does not have any plans
concerning the construction of a wide-area backbone network. MNI Mobile S.A., which was sold to MNI
Telecom Sp. z o.o., will develop MVNO operations.
Sale of Redundant Assets
The strategy of the Issuer’s Group with respect to its assets is centred on the best possible use of the Group’s existing
telecommunications infrastructure. The MNI Group operates a fibre-optic network, which was originally designed to
cover the entire territory of Poland in order to launch an operator which would be able to compete with TP SA.
However, amendments to the telecommunications law eliminated the grounds for that concept, as a result of which
further development of the network by the MNI Group was abandoned and certain sections of its fibre-optic network
were sold in 2004 and 2005. A possible sale of other redundant sections of the fibre-optic network owned by the
Issuer’s Group as at the Prospectus Date can bring about a one-off increase in the Group’s profits in the future.
Increase in Sales Revenues Resulting From Capital Expenditure on Equipment and Network Resources in the
Past
Over the recent years, the Issuer’s Group has made considerable capital expenditure on developing its network and
equipment assets. Since these resources have not been sufficiently exploited so far, the growth potential they offer will
be gradually used to increase the MNI Group’s revenues and profits.
7.2.3 Other Factors
Pursuant to the Public Notice of the President of the Office of Electronic Communications (UKE) of September 13th
2006, on September 18th 2006, the Office launched a consultation process with respect to a draft decision of the UKE
President concerning determination that there is no effective competition on the call termination market in the operating
area of the Company’s public fixed-line telephone network, designation of MNI S.A. as a telecommunications company
enjoying a significant position on that market, and imposition of regulatory obligations on the Issuer.
The draft decision of the UKE President, including a statement of reasons, is available at the UKE’s web site
(www.uke.gov.pl).
On October 18th 2006, the Issuer sent a letter presenting its position on the draft decision of the UKE President. The
Issuer believes that there are no grounds to state that there is no effective competition on the call termination market in
the operating area of the Issuer’s public fixed-line telephone network, to designate the Issuer as a telecommunications
company enjoying a significant position on that market or to impose regulatory obligations on the Issuer. The Issuer
supported its position with relevant arguments contained in the letter.
Given the status of the proceedings concerning the decision, held before the UKE President, it is impossible to estimate
its impact on the Issuer’s Group until the UKE President issues his decision.
Pursuant to the Public Notice of the UKE President of September 13th 2006, on September 18th 2006, the Office
commenced a consultation process with respect to a draft decision of the UKE President concerning determination that
there is no effective competition on the call termination market in the operating area of the public fixed-line telephone
43
network of MNI Telecom Sp. z o.o. (member of the MNI Group), designation of MNI Telecom Sp. z o.o. as
a telecommunications company enjoying a significant position on that market, and imposition of regulatory obligations
on MNI Telecom Sp. z o.o.
The draft decision of the UKE President, including a statement of reasons, is available at the UKE’s web site
(www.uke.gov.pl).
On October 18th 2006, MNI Telecom Sp. z o.o. sent a letter presenting its position on the draft decision of the UKE
President. MNI Telecom Sp. z o.o. believes that there are no grounds to state that there is no effective competition on
the call termination market in the operating area of the public fixed-line telephone network of MNI Telecom Sp. z o.o.,
to designate MNI Telecom Sp. z o.o. as a telecommunications company enjoying a significant position on that market,
or to impose regulatory obligations on MNI Telecom Sp. z o.o. MNI Telecom Sp. z o.o. supported its position with
relevant arguments contained in the letter.
Given the status of the proceedings concerning the decision, held before the UKE President, it is impossible to estimate
its impact on the Issuer’s Group until the UKE President issues his decision.
On November 15th 2006, the Issuer was notified that the UKE instituted administrative proceedings concerning the
imposition of a financial penalty on MNI S.A. in connection with a breach of the provisions of Art. 172.1 of the
Telecommunications Law. The Company questions the grounds of the charges filed against it. Consequently, it intends
to use all its rights to protect its interests. However, under laws and regulations currently in effect, even if the UKE
upholds its position on the matter and imposes an administrative penalty on the Company, its amount and the necessity
to pay it will not affect the implementation of the Company’s growth objectives. Consequently, the proceedings are
immaterial.
As at his Prospectus Date, the Issuer is not aware of any uncertainties, demands, commitments or events that are
reasonably likely to have a material effect on the prospects of the Issuer’s Group until the end of 2007 other than those
disclosed above and in Section 7.2.2 hereof.
7.3
Significant Changes in the Financial and Economic Standing of the
Issuer and its Group
The Issuer and its Group recorded no significant changes in its financial and economic standing in the period from
September 30th 2006 to the Prospectus Date.
7.4
The Group’s Capital and Indebtedness
7.4.1
Capital
7.4.1.1 Sources of Capital
Table: Sources of the Issuer’s capital (PLN ‘000)
Q1-Q3
2006*
Q1-Q3
2005*
IFRS
IFRS
2005
2004
2003
PAS
PAS
PAS
Total long-term financing
-
-
68,396
15,258
-
Increase in equity
-
-
-
15,258
-
Long-term bank loans
-
-
68,396
-
-
11,625
25,383
32,120
6,350
5,607
8,929
13,436
17,237
5,528
4,737
Net cash provided by investing activities
1,685
1,986
3,834
129
870
984
9,781
10,869
693
-
27
180
180
-
-
11,625
25,383
100,516
21,608
5,607
Total short-term financing
Short-term bank loans
Other
Total sources of capital
Current investments (as at beginning of period)
Current investments (as at end of period)
1,596
672
672
894
238
308
646
1,596
672
894
by auditors.
Source: the Issuer.
44
Table: Sources of the Issuer’s capital (PLN ‘000)
Q1-Q3
2006*
Q1-Q3
2005*
IFRS
IFRS
2005
2004
IFRS
IFRS
Total long-term financing
20
-
68,396
15,258
Increase in equity
20
-
-
15,258
-
-
68,396
Total short-term financing
35,975
24,806
37,915
7,240
19,380
10,782
14,399
4,867
Net cash provided by investing activities
Other
1,725
2,141
6,579
972
14,843
11,703
16,757
1,221
27
180
180
180
39,995
24,806
106,311
22,498
Current investments (as at beginning of period)
18,173
672
454
894
Current investments (as at end of period)
12,494
61
18,175
454
Total sources of capital
by auditors.
Source: the Issuer.
In the period 2003–2005 and Q1–Q3 2006, net cash provided by operating activities and proceeds from bank loans had
the largest share in the sources of capital of both the Issuer and its Group.
In 2003, net cash provided by operating activities, and net cash provided by investing activities comprising the sale of
redundant assets were the main source of the Issuer’s capital. The principal source of financing in 2004 was provided by
the proceeds from the issue of Series J Shares and Series K Shares. The Issuer issued 4m ordinary bearer Series J Shares
worth PLN 2.5 per share. The shares were acquired for cash, which enabled MNI to reduce its indebtedness by
PLN 10m. Although the issue was addressed to a qualified investor, Media Net Interactive Sp. z o.o. (the Issuer’s
creditor, currently operating under the name of com.Investment Sp. z o.o.), the Prospectus permitted the acquisition of
Series J Shares by any entities which would acquire from com.Investment Sp. z o.o. all or part of the claims against
MNI under an agreement between MNI and Media Net Interactive Sp. z o.o.. On these grounds, com.Investment Sp. z
o.o. sold a part of the claims to the following entities:
• Caterham Financial Management LTD (PLN 4.3m – 21% of the total claims amount);
• Towarzystwo Inwestycyjne Dedal Sp. z o.o. (PLN 3.0 – 15% of the total claims amount);
• Inwest Logistics Sp. z o.o. (PLN 1.8m – 9% of the total claims amount).
The abovementioned companies concluded agreements with the Management Board of MNI, under which they agreed
to acquire a relevant number of Series J Shares.
The objective of the issue of 5.5m Series K ordinary bearer Shares, with a par value of PLN 1 per share, was to raise
financing for the acquisition of Media Net Interactive Sp. z o.o. for PLN 5.5m.
In 2005, the key source of financing for the Issuer and its Group were bank loans, used mostly to finance the acquisition
of Legion Polska and MNI Telecom (formerly operating under the name Pilicka Telefonia). The acquisitions
contributed significantly to an increase in net cash provided by operating activities of the Issuer and its Group, due to
expansion in the scope of business activities, and in particular, due to higher sales in the media services sector, which is
characterised by higher margins than the telecommunications sector.
In Q1-Q3 2006, net cash provided by operating activities and current bank loans (working-capital loans in current
accounts) were the major sources of financing of the MNI Group’s operations. In comparison with the consolidated
data, the share of net cash provided by operating activities in the non-consolidated financing structure was much lower,
which was mainly attributable to the Issuer’s lower net profit as compared with the results reported by the Group.
45
Table: The Issuer’s equity and external capital (PLN ‘000)
As at end of period
Equity
External capital
Long-term external capital
Provisions
Non-current loans
Other liabilities
Short-term external capital
Provisions
Sep 30 2006 *
Dec 31 2005
IFRS
PAS
Dec 31 2004
PAS
Dec 31 2003
PAS
73,308
68,563
55,950
35,717
107,896
111,270
33,149
48,895
62,563
77,324
18,665
28,173
1,562
4,412
1,721
859
57,353
68,397
5,058
6,369
3,648
4,515
11,886
3,888
45,333
33,946
14,484
20,722
3,205
311
1,072
842
Current loans
15,708
8,798
2,027
1,821
Other liabilities
26,420
24,837
11,385
22,997
by auditors.
Source: the Issuer.
Table: The Group’s equity and external capital (PLN ‘000)
As at end of period
Sep 30 2006 *
Dec 31 2005
IFRS
IFRS
Dec 31 2004
IFRS
Equity
103,433
90,166
56,298
External capital
121,848
125,468
33,985
62,898
74,901
17,497
1,562
1,562
9
57,353
68,396
5,058
Long-term external capital
Provisions
Non-current loans
Other liabilities
Short-term external capital
Provisions
3,983
4,943
12,430
58,950
50,567
16,488
3,748
3,319
2,847
Current loans
17,672
12,262
2,027
Other liabilities
37,530
34,986
11,614
by auditors.
Source: the Issuer.
Except for the end of 2004, external capital, and in particular long-term external capital, was prevalent in the Issuer’s
and its Group’s asset financing structure. A relatively high share (62.8%) of equity in the financing structure in 2004
resulted from the two aforementioned issues carried out by the Issuer, as well as restructuring of MNI’s debts in 2003.
In 2005, the share of external capital in the financing structure grew: it amounted to 61.9% at the non-consolidated level
and 58.2% at the consolidated level. The change was mainly attributable to an investment loan of PLN 77.3m, used to
finance the acquisition of Legion Polska and Pilicka Telefonia.
In Q1–Q3 2006, a slight increase in the share of internally generated funds in the financing structure was recorded, in
the case of both the Issuer and its Group. It followed from an increase in equity, due to the net profit generated in that
period.
46
7.4.1.2
Sources, Amounts and Description of Cash Flows
Table: Structure of the Issuer’s cash flows (PLN ‘000)
Q1–Q3 2006*
Q1–Q3 2005*
2005
2004
2003
IFRS
IFRS
PAS
PAS
PAS
Net profit (loss)
Total adjustments
8,929
13,436
17,237
5,528
4,737
4,282
11,454
12,613
4,975
-4,410
4647
1,982
4,624
553
9,147
Depreciation and amortisation
11,241
7,906
11,413
8,063
6,914
Net cash provided by (used in) investing activities
-3,617
-16,984
-83,034
-8,700
760
1685
1986
3,834
129
870
-5,302
-18,970
-86,868
-8,829
-110
-6,626
3,729
66,862
2,770
-4,858
Net cash provided by (used in) financing activities
1011
9,961
79,445
15,951
0
-7,637
-6,232
-12,583
-13,181
-4,858
Dividend paid
Total net cash flow
-
-
-
-
-
-1,314
181
1,065
-402
639
Cash at beginning of period
Cash at end of period
1,520
455
455
857
218
206
621
1,520
455
857
by auditors.
Source: the Issuer.
Table: Structure of the Group’s cash flows (PLN ‘000)
Net profit (loss)
Total adjustments
Depreciation and amortisation
Net cash provided by (used in) financing activities
Dividend paid
Total net cash flow
Cash at beginning of period
Cash at end of period
Q1–Q3 2006*
Q1–Q3 2005*
2005
2004
IFRS
IFRS
IFRS
IFRS
25,574
10,782
14,399
4,867
7,033
9,052
33,868
5,106
12,347
1,730
-19,469
-239
20,316
7,680
12,136
8,335
-27,513
-14,886
-81,281
-7,864
1725
2141
6,579
972
-29,238
-17,027
-87,860
-8,836
-8,156
4,341
67,764
2,583
14,890
11,883
85,333
16,659
-23,046
-7,542
-17,569
-14,076
-
-
-
-
-16,289
237
882
-414
17910****
-186***
455
868
12,392
36
17,912**
454
by auditors.
**Cash as at the end of 2005 includes amounts resulting from the acquisition of Pilicka Telefonia in December 2005.
*** The difference in the opening balances of cash between Q1–Q3 2005 and the year 2005 is attributable to the inclusion of two new undertakings
in consolidation in 2005: MNI Technology Development Sp. z o.o. (formerly operating under the name of Szeptel International) and Media Personel
Serwis Sp. z o.o.
**** The difference between the closing balance of cash as at the end of 2005 and the opening balance of cash in the period Q1–Q3 is attributable to
the opening balance of cash at BIA-NET, a company in liquidation, excluded from consolidation in Q1 2006.
Source: the Issuer.
Net cash provided by both operating and financing activities was the main source of financing of the operations of the
Issuer (in 2003–2005 and Q1–Q3 2006) and its Group (in 2005 and Q1–Q3 2006). The cash was used to finance the
Issuer’s investing activities, involving primarily investments in state-of-the-art technologies and the MNI Group’s
expansion through acquisitions in the media and telecommunications industries. It should be stressed here that in the
period under analysis the Group’s investments in property, plant and equipment were financed with internally generated
funds (and, to a minor extent, through leases), while the Group’s equity investments were financed mostly with loans.
Moreover, the MNI Group financed its current assets with short-term bank loans. The MNI Group companies did not
hedge interest rate or currency risks. Given the low share of exports (mostly to the EU markets), currency risk was
insignificant in the MNI Group’s business.
47
Owing to significant capital expenditure, in 2004–2005 and in Q1–Q3 2006, the Issuer and its Group recorded negative
investing cash flows. In 2003, the Issuer’s net cash flow from investing activities was positive, as that year MNI
commenced operational and financial restructuring, which limited the possible capital expenditure to the minimum.
Moreover, in 2003–2005, the Issuer disposed of some property, plant and equipment, mostly relating to a part of fibreoptic infrastructure. The assets were deemed redundant given the current business profile of the MNI Group. These
transactions contributed to cash provided by investing activities in 2003–2005 and to MNI’s and the Group’s increased
profitability in 2005. Commencement of the financial restructuring required MNI to apply a significant proportion of
cash towards the repayment of loans and borrowings.
The steady growth of cash provided by operating activities in 2003–2005 reflected the increase in net profit generated
by the Issuer and its Group.
The steady growth of cash provided by financing activities in 2003–2005 resulted from:
• two share issues carried out in 2004 (Series J and Series K Shares);
• contracting a significant investment loan for financing acquisitions in the media and telecommunications
sectors.
Owing to the operational and financial restructuring of the Company performed by the MNI Management Board, and
the recapitalisation of MNI in 2004, the Issuer’s borrowing capabilities improved significantly, which in turn
contributed to the Issuer’s and its Group’s spectacular growth (both organic, through investing in state-of-the-art
technologies, and driven by acquisitions in the media and telecommunications sectors). This situation was reflected in
the dynamic growth of cash used in investing activities in 2003–2005.
A loan totalling PLN 77.3m contracted in December 2005 enabled the MNI Group to make substantial investments in
2005, mostly connected with the acquisition of MNI Telecom (formerly: Pilicka Telefonia) and Legion Polska. These
equity investments led to a strong increase in net cash provided by operating activities in 2005. Owing to the acquisition
of Pilicka Telefonia, the MNI Group recorded a significant surplus of cash; the surplus is to be applied to partially
finance the planned equity investments in the telecommunications and media sectors, as well as investments in property,
plant and equipment.
The decrease in the Issuer’s total net cash flow in Q1–Q3 2006, when compared with the respective figure for Q1–Q3
2005, is mainly attributable to a rise in trade receivables, connected with slight delays in payments due from MNI’s
main customers. In Q1–Q3 2006, the consolidated total net cash flow decreased significantly due to capital expenditure.
The significant increase in the adjustment for depreciation and amortisation, disclosed in the Group’s net cash provided
by (used in) operating activities in Q1–Q3 2006, when compared with the respective figure for Q1–Q3 2005, was
attributable, from December 2005, to the consolidation of Pilicka Telefonia.
In Q1–Q3 2006, the MNI Group’s investment cash flows related mainly to investments in property, plant and
equipment and the purchase of dataCOM S.A., while the financing cash flows related to bank loans contracted and
repaid.
7.4.1.3 Credit Needs and Financing Structure
Table: Debt ratios of the Issuer
Q1-Q3 2006*
Dec 31 2005
Dec 31 2004
Dec 31 2003
IFRS
PAS
PAS
PAS
Total debt ratio
0.60
0.61
0.36
0.60
1.41
1.53
0.53
1.37
0.86
0.89
0.96
0.79
Current debt ratio
0.23
0.18
0.14
0.26
0.34
0.40
0.19
0.32
2.18
14.71
7.34
-1.05
Source: the Issuer.
48
Table: Debt ratios of the Issuer’s Group
Q1-Q3 2006*
Dec 31 2005
Dec 31 2004
IFRS
IFRS
IFRS
Total debt ratio
0.54
0.58
0.38
1.13
1.34
0.55
0.95
1.00
0.96
Current debt ratio
0.25
0.22
0.15
0.27
0.34
0.19
2.94
9.57
6.66
Source: the Issuer
Formulas of the debt ratios:
• total debt ratio = (non-current and current liabilities + provisions for liabilities)/ total equity and liabilities
• debt-to-equity ratio = (non-current and current liabilities)/ equity
• long-term
capital
to
non-current
assets
=
(equity
+
non-current
liabilities)/
non-current assets
• current debt ratio = current liabilities/total equity and liabilities
• non-current debt ratio = non-current liabilities/total equity and liabilities
• debt service ratio = EBIT/interest expense
With the exception of 2003, when the Issuer’s financial standing was poor, in 2004–2005 and in Q3 2006, MNI’s and
the Group’s debt ratios reflected no threats to proper debt servicing.
The significant improvement in debt ratios between 2003 and 2004 was attributable mainly to the following events:
• increase in the operating margin due to the expansion of the Group’s business into the media sector, offering
promising growth prospects and attractive margins;
• arrangement reached with creditors in October 2003 (and approved in November 2003), under which a debt of
approx. PLN 7m was reduced by 40%, and the repayment of the balance was prolonged and divided into 30
equal quarterly instalments;
• two share issues in 2004 (Series J and Series K Shares) with a total value of PLN 15.5m.
The increases in the Issuer’s and Group’s debt ratios between 2004 and 2005, as well as in Q1–Q3 2006, were
attributable to the bank loan contracted by MNI in December 2005, totalling PLN 77.3m. The loan was partially used to
finance MNI’s acquisition of Legion Polska and MNI Telecom (formerly: Pilicka Telefonia).
As at the end of Q3 2006, the Issuer’s debt and the MNI Group’s debt were at levels similar to the respective figures as
at the end of 2005. The decreases in debt service coverage ratio recorded in Q1–Q3 2006 and in 2005 followed from
a significant increase in loans towards the end of 2005 and the resulting growth of interest expense, which was reflected
in the figures for Q1–Q3 2006.
In general, the undertakings acquired by MNI in 2005 have lower debt than the Issuer, which is reflected in the
consolidated debt ratios being lower than the non-consolidated ratios.
Table: The MNI Group’s non-current liabilities under contracted loans and borrowings, and financial
instruments issued as at November 30th 2006
Bank
Type of
liability
Outstanding
amount
(PLN ‘000)
Currency
(‘000)
Interest
Maturity date
Instalments
payable
1M WIBOR +
bank’s margin
Dec 20 2010
Equal monthly
instalments
Liabilities under loans
MNI S.A.
BRE BANK S.A.
Investment and
refinancing
loan
57,353
PLN
Source: the Issuer.
The MNI Group’s non-current liabilities are exclusively liabilities of the Issuer.
49
Table: The MNI Group’s current liabilities under contracted loans and borrowings, and financial instruments
issued as at November 30th 2006
Bank
Type of
liability
Outstanding
amount
(PLN ‘000)
Currency
(‘000)
Interest
Maturity
date
Instalments
payable
Current liabilities under loans
MNI S.A.
BRE BANK S.A.
Current
portion of a
long-term loan
12,270
PLN
1M WIBOR +
bank’s margin
Nov 30
2007
Equal monthly
instalments
BRE BANK S.A.
Revolving loan
308
PLN
1M WIBOR +
bank’s margin
Jun 29 2007
One-off
payment at
maturity
3M WIBOR +
bank’s margin
Dec 31 2006
Equal monthly
instalments
MNI Telecom Sp. z o.o.
Investment
loan
Pekao S.A.
464
PLN
Legion Polska Sp. z o.o.
BRE BANK S.A.
Revolving loan
750
PLN
1M WIBOR +
bank’s margin
Jul 30 2007
One-off
payment at
maturity
BRE BANK S.A.
Workingcapital loan in
current
account
638
PLN
1M WIBOR +
bank’s margin
Oct 27 2006
One-off
payment at
maturity
Source: the Issuer.
The MNI Group renews its short-term bank loans on an annual basis. The Issuer envisages this practice to continue in
the future.
Table: The Issuer’s current liabilities under contracted loans and borrowings, and financial instruments issued
as at November 30th 2006
Bank
Type of
liability
Outstanding
amount
(PLN ‘000)
Currency
(‘000)
Interest
Maturity
date
Instalments
payable
Current liabilities under loans
BRE BANK S.A.
Current
portion of a
long-term loan
12,270
PLN
1M WIBOR +
bank’s margin
Nov 30
2007
Equal monthly
instalments
BRE BANK S.A.
Revolving loan
308
PLN
1M WIBOR +
bank’s margin
Jun 29 2007
One-off
payment at
maturity
Source: the Issuer.
50
Table: The Issuer’s liquidity ratios
Sep 30 2006*
Dec 31 2005
Dec 31 2004
Dec 31 2003
IFRS
PAS
PAS
PAS
Current ratio
0.58
0.67
1.06
0.21
Quick ratio
0.58
0.66
1.05
0.20
by auditors.
Source: the Issuer.
Table: The MNI Group’s liquidity ratios
Sep 30 2006*
Dec 31 2005
Dec 31 2004
MSSF
MSSF
MSSF
Current ratio
0.94
1.10
0.97
Quick ratio
0.94
1.09
0.96
by auditors.
Source: the Issuer.
Formulas of liquidity ratios:
current ratio = current assets/current liabilities
quick ratio = (current assets - inventories)/ current liabilities
Following the financial and operational restructuring of MNI, the Issuer’s liquidity ratios improved remarkably in 2004
when compared with 2003. In 2005, a liquidity at the non-consolidated level declined, while the Group’s liquidity
improved. The deterioration of the Issuer’s liquidity ratios in 2005 was driven primarily by an increase in current
liabilities under bank loans (up by PLN 7.8m compared with the respective figure as at the end of December 2004),
attributable to a long-term investment loan contracted at the end of 2005 and repayable in 2006. In the case of the MNI
Group, the growth dynamics of current assets (292.6%) exceeded the growth dynamics for current liabilities (246.4%),
driving up the liquidity ratios in 2005 relative to 2004. Current assets grew following a rise in current receivables (by
PLN 20.8m), as well as in cash and current investments (by PLN 17.7m) when compared with the respective figures as
at the end of December 2004.
With the purchase of MNI Telecom, the Issuer acquired cash in the amount of PLN 17.5m, held by the acquired
company in bank deposits as at the end of 2005.
As at September 3rd 2006, liquidity ratios of both the Issuer and the Group were lower than as at the end of December
2005.
Given the nature of the Group’s business (media and telecommunications services) and the resulting low inventories,
current and quick ratios are close to each other, for both the Issuer and the Group.
In Q1–Q3 2006, the MNI Group’s liquidity ratios were higher than the Issuer’s due to cash held by MNI Telecom at the
time of its acquisition by the Issuer.
51
Table: Issuer’s working capital (PLN ‘000)
1.
Current assets
2.
Cash and other current investments
3.
Sep 30 2006*
Dec 31 2005
Dec 31 2004
Dec 31 2003
IFRS
PAS
PAS
PAS
24,599
22,087
13,510
308
1,596
672
4,548
894
Adjusted current assets (1-2)
24,291
20,491
12,838
3,654
4.
Current liabilities
42,128
32,748
12,708
21,645
5.
15,708
9,798
2,027
1,830
6.
Adjusted current liabilities (4-5)
26,420
22,950
10,681
19,815
7.
Working capital (1-4)
-17,529
-10,661
802
-17,097
8.
Working capital requirement (3-6)
-2,129
-2,459
2,157
-16,161
9.
Net balance of working capital (7-8)
-15,400
-8,202
-1,355
-936
10.
Share of own resources in financing current assets (7/1)
-71.3%
-48.3%
5.9%
-375.9%
by auditors.
Source: the Issuer.
Table: Working capital of the Issuer’s Group (PLN ‘000)
Sep 30 2006*
Dec 31 2005
Dec 31 2004
IFRS
IFRS
IFRS
1.
Current assets
52,032
52,003
2.
Cash and other current investments
12,494
18,175
13,245
454
3.
Adjusted current assets (1-2)
39,538
33,828
12,791
4.
Current liabilities
55,202
47,248
13,641
5.
17,672
12,262
2,027
6.
Adjusted current liabilities (4-5)
37,530
34,986
11,614
7.
Working capital (1-4)
-3,170
4,755
-396
8.
Working capital requirement (3-6)
2,008
-1,158
1,177
9.
Net balance of working capital (7-8)
-5,178
5,913
-1,573
10.
Share of own resources in financing current assets
(7/1)
-6.1%
9.1%
-3.0%
by auditors.
Source: the Issuer.
Because of MNI’s organic growth and acquisitions, MNI’s current assets and current liabilities increased, both on a
non-consolidated and consolidated basis, in 2003 and 2005 and Q1-Q3 2006. Different trends were recorded in 2004,
when the contribution of additional capital to MNI through two issues of shares with the total gross value of PLN 15.5m
and a significant decrease in the value of interest expense following the arrangement concluded with creditors allowed
the Issuer to reduce its current liabilities relative to the previous year.
The cash financing of the acquisition of MNI Telecom (formerly Pilicka Telefonia) and Legion Polska significantly
reduced the Issuer’s working capital in 2005, relative to 2004. However, the above acquisitions resulted in a substantial
increase in consolidated working capital.
The increase in the working capital deficit recorded by the Issuer and the Issuer’s Group in Q1-Q3 2006 was caused
mainly by higher current liabilities.
52
Table: Issuer’s turnover ratios (in days)
1.
Inventory cycle
2.
Q1-Q3
2006*
2005
IFRS
PAS
2004
2003
PAS
PAS
0.9
1.5
1.6
2.8
Average collection period
51.7
81.1
76.0
66.6
3.
Average payment period
68.1
96.5
152.3
224.1
4.
Operating cycle (1+2)
52.7
82.7
77.6
69.4
5.
Cash conversion cycle (4-3)
-15.4
-13.8
-74.7
-154.7
by auditors.
Source: the Issuer.
Table: Turnover ratios of the Issuer’s Group (in days)
1.
Inventory cycle
2.
Q1-Q3
2006*
2005
IFRS
IFRS
2004
IFRS
0.6
1.2
1.3
Average collection period
56.8
99.7
65.6
3.
Average payment period
67.9
105.9
129.3
4.
Operating cycle (1+2)
57.4
100.9
66.9
5.
Cash conversion cycle (4-3)
-10.5
-4.9
-62.4
by auditors.
Source: the Issuer.
Formulas used in the calculation of ratios:
• Inventory cycle = (average inventories/operating expenses)*days in the period
• Average collection period = (average current receivables/sales revenue)*days in the period
• Average payment period = (average current liabilities net of loans/operating costs)*days in the period
Due to the nature of the Issuer’s and the Group’s operations (media and telecommunications services), inventories do
not represent a significant item in the asset structure, and include mainly materials used in on-going repairs of the
telecommunications infrastructure and investment projects in the telecommunications industry. In the years 2003-2005
and Q1-Q3 2006, there was a significant decrease in the inventory cycle, both on the non-consolidated and consolidated
basis, caused chiefly by the dynamic growth of the operations in the media sector.
In the periods 2003–2005 (non-consolidated data) and 2004–2005 (consolidated data), there was a steady lengthening of
the average collection period. This was caused by a significantly higher share of the media sector in the structure of the
Issuer’s and the Group’s sales revenue, as this industry is characterised by longer payment periods compared with the
telecommunications industry. The shortening of the Group’s average collection period in Q1-Q3 2006 compared with
2005 is connected with the consolidation of MNI Telecom (formerly Pilicka Telefonia) since December 2005. The
company imposes relatively short (14 days) payment periods for its trade receivables.
The operational and financial restructuring carried out by the Issuer allowed it to reduce its debt and increase funds
available for quicker payment of liabilities, which was reflected in a significant reduction of the average payment period
in the years 2003–2005 and Q1-Q3 2006.
7.4.1.4
Restrictions on the Use of Capital Resources
Credit facility agreement No. 17/012/05/Z/IN of December 15th 2005, amended by Annex No. 1 of October 24th 2005,
Annex No. 2 of December 15th 2005 and Annex No. 3 of July 18th 2006, under which BRE Bank S.A. of Warsaw
advanced to the Issuer a long-term investment credit facility of PLN 77,292,296.47, provides for the following
restrictions on the use of capital resources of the Issuer and its subsidiary undertakings:
•
the credit facility was made available to the Issuer in four tranches advanced to finance specific objectives, i.e.
to refinance the Issuer’s existing bank debt, to acquire Legion Polska Sp. z o.o. and MNI Telecom Sp. z o.o.
(formerly operating as Pilicka Telefonia), and to finance the investment projects accepted by the lender. The Issuer
agreed to use the loan proceeds only to finance the aforementioned objectives and the entire amount of the facility
made available to the Issuer by BRE Bank S.A. was used for the above objectives in accordance with the facility
agreement;
53
the Issuer will be required to make a mandatory prepayment of the loan if at the end of the financial year the Issuer
has a surplus of free cash (defined as EBITDA less aggregated capital expenditure and taxes paid and due, plus or
less any changes in the working capital, as computed by the Issuer for each full four calendar quarters) over the
costs and expenditure related to the agreed and planned investment projects in the Issuer’s following financial year,
which were to be financed with the accumulated free cash flows, with a proviso that any such prepayment does not
exceed the debt service coverage ratio and the ratio of the Issuer’s net debt to EBITDA and that the amount of the
prepayment is higher than PLN 500,000.00;
within 14 days of taking any loan by the Issuer, the Issuer is obliged to conclude an agreement providing for
subordination of the new loan to the credit facility advanced by BRE Bank S.A.;
the Issuer is required to use its capital resources to maintain the debt service coverage ratio and the ratio of net
debt to EBITA at the level specified in the credit facility agreement;
without BRE Bank S.A.’s written consent and as long as any amount due under the loan facility remains
outstanding, neither the Issuer nor any of its key subsidiary undertakings (i.e. Legion Polska Sp. z o.o., MNI
Telecom Sp. z o.o. (formerly operating as Pilicka Telefonia), MNI Technology Development Sp. z o.o. (formerly
operating as Szeptel International)) will
assume any financial liabilities (defined as any liabilities under loans, liabilities accumulated under acceptance
credit facilities, liabilities for funds obtained under discount bills or bonds, commercial paper, debt notes or
similar securities, liabilities under lease agreements or hire purchase agreements, which are classified under
accounting standards as financed or capital lease, sold or discounted claims, excluding claims sold without
recourse, proceeds from any transactions, including forward sale or purchase agreements which have the
commercial effect of a loan with the repayment period exceeding 180 days), excluding indebtedness to BRE
Bank S.A. under the agreed limits for guarantees and/or transactions in derivatives and under short-term loans
not secured on property, up to the total amount of PLN 1,000,000.00, contracted by the aforementioned key
subsidiary undertakings of the Issuer;
dispose of any shares in the member companies of the Issuer’s Group,
invest in any tangible or financial non-current assets with a unit value exceeding PLN 100,000.00 or intangible
assets with the value exceeding PLN 8,000,000.00 in the given financial year,
advance a loan or assume liability for third-party obligations, excluding loans advanced to the key subsidiary
undertakings of the Issuer (specified above), up to the amount of PLN 1,000,000.00 of the sum of liabilities
disclosed in the Issuer’s balance sheet in each financial year.
•
•
•
•
7.4.2
Statement on Working Capital
The Issuer hereby represents that - to the best of its knowledge - the projected value of its working capital, understood
as the Issuer’s ability to obtain access to funds and other available liquid resources required for timely repayment of
liabilities, should be sufficient to meet the Issuer’s needs in the ordinary course of business during the next 12 months.
7.4.3
Capitalisation and Indebtedness
Table: Information on capitalisation and indebtedness (PLN ‘000)
Nov 30 2006
No.
Item
Issuer
I.
Total current debt (I.A.+I.B+I.C)
A.
Guaranteed
47,828
B.
Secured (bank loans)
12,270
C.
Not guaranteed/not secured
35,558
II.
Total non-current debt (net of the current portion of long-term debt)
(II.A.+II.B+II.C)
60,964
-
A.
Guaranteed (description of guarantee types)
B.
Secured (description of secured assets)
-
C.
Not guaranteed/not secured
III.
Equity
71,850
A.
Share capital
22,572
B.
Statutory reserves (reserve funds, capital reserves, etc.)
46,454
C.
Other reserves (balance-sheet reserves)
57,353
3,611
2,824
Source: the Issuer.
54
Table: Information on net debt (PLN ‘000)
Nov 30 2006
No.
Item
A.
Cash
B.
Cash equivalents (itemised)
C.
Securities held for trading
D.
Liquidity (A+B+C)
E.
Current financial receivables
F.
G.
Current portion of long-term debt
Issuer
371
37
408
27,818
308
12,270
H.
Other current financial liabilities
35,250
I.
Current financial liabilities (F+G+H)
47,828
J.
Net current financial liabilities (I-E-D)
19,602
K.
57,353
L.
Bonds in issue
M.
Other non-current financial liabilities
3,611
N.
Net non-current financial liabilities (K+L+M)
60,964
O.
Net financial liabilities (J+N)
80,566
Source: the Issuer.
Table: Information on contingent liabilities (PLN ‘000)
Nov 30 2006
No.
Item
A.
Bank and insurance guarantees
B.
Note guarantees (promissory notes under lease agreements)
Issuer
4,121
Source: the Issuer.
7.5
Presentation of Historical Financial Information
The Issuer’s historical financial information for 2003–2005, Q1-Q2 2006 and Q1-Q3 2006 has been incorporated herein
by reference.
The Group’s historical financial information for 2005 (with comparable data for 2004) has been included in Section
23.1 hereof.
The Group’s historical financial information for H1 2006 and for Q3 2006 has been included in Section 23.2 and 23.3
hereof, respectively.
Section 27.5 of this Prospectus contains more information on the data incorporated herein by reference.
55
8.
INFORMATION ON THE ISSUER
8.1
History and Development of the Issuer
8.1.1
Legal Name (specified in the Articles of Association) and Commercial Name of the Issuer
Pursuant to Par. 1.1 of the Issuer’s Articles of Association, it operates under the name of MNI Spółka Akcyjna. The
Issuer may also use the abbreviated name of MNI S.A. and a distinctive graphic logo.
8.1.2 Place of the Issuer’s Registration and Its Registration Number
Originally, the Issuer was entered in the Commercial Register B maintained by the District Court of Łomża, by virtue of
the decision issued on October 11th 1993, under entry No. RHB 248. Subsequently, when the Act on the National Court
Register was enacted, on March 23rd 2001 the entry on the Issuer was transferred to the Register of Entrepreneurs of
the National Court Register maintained by the District Court of Białystok, XII Commercial Division, and the Issuer was
assigned a new entry number, KRS 0000003901.
In connection with the resolution adopted by the Issuer’s General Shareholders Meeting to move the Issuer’s registered
office from Szepietowo to Warsaw, on July 15th 2004 the District Court of Białystok, XII Commercial Division of the
National Court Register made a relevant change to the entry in the Register of Entrepreneurs to reflect the change in the
Issuer’s details.
The Issuer is entered in the national register of the entities of national economy under entry Number REGON
450085143. The Issuer has been assigned Tax Identification Number (NIP) 722-00-03-300.
8.1.3
Date of the Issuer’s Incorporation and Period of Incorporation, Unless Such Period Is
Unspecified
The Issuer originally operated as a limited liability company established by virtue of Resolution No 93/XIX by the
Szepietowo Commune Council dated May 4th 1992, and then incorporated on the basis of a deed of incorporation
(Notarial Deed No. Rep. A 75/93, dated September 30th 1993). On February 20th 1996, on the basis of a notarial deed
(Rep. A No. 386/96, Notary Public Marzanna Grzejszczyk-Glińska), the Issuer was transformed from a limited liability
company into a joint-stock company.
8.1.4
The Issuer’s Registered Office and Legal Form, Legal Basis for the Issuer’s Operations,
Country of Domicile (Incorporation), Address and Telephone Number of the Issuer’s
Registered Office Specified in the Articles of Association (or Principal Place of Business if
Different)
The Issuer’s registered office specified in Par. 1.2 of the Articles of Association is located in Warsaw. The Issuer’s
country of domicile is Poland.
The Issuer was incorporated and operates under the laws of Poland, in particular the Commercial Companies Code, the
Telecommunications Law, and the Act on Public Offering, Conditions Governing Introduction of Financial Instruments
to Organised Trading, and Public Companies.
The Issuer’s registered address is at ul. Żurawia 8 in Warsaw, postal code: 00-503, tel. no. (+ 48 22) 583 37 21, fax no.
(+48 22) 627 09 14, website address: www: http://www.mni.pl, e-mail address: sekretariat@mni.pl.
8.1.5
Key Events in the Issuer’s History
List of significant events in the history of the Issuer’s business:
September 1993 The Commune
Sp. z o.o.
of
Szepietowo
establishes
Przedsiębiorstwo
Telekomunikacyjne
February 1994
The Issuer obtains a licence to provide telecommunications services.
February 1996
The Issuer is transformed from a limited liability company into a joint-stock company.
October 1997
PT Szeptel S.A.’s first listing on over-the-counter-market (CeTO).
April 1999
The Issuer’s first listing on the Warsaw Stock Exchange.
Szeptel
56
March 2000
The Issuer obtains a licence for the construction of a nationwide telecommunications network and for
the provision of services related to domestic and international data transmission.
September 2000 The Issuer is allocated a spectrum in the 28 GHz frequency band for the provision of access services
in Poland’s 9 largest cities.
July 2003
The Issuer and Telefonia Dialog conclude an agreement on networks interconnection and traffic
interchange.
October 2003
The Issuer’s creditors accept the scheme of arrangement in arrangement proceedings.
June 2004
The Issuer has mobilised all resources necessary to fully implement the projects related to the
integration of value-added telecommunications services in the territories of the Czech Republic and
Slovakia.
September 2004 The Issuer concludes an inter-operator framework agreement on networks interconnection with
Telekomunikacja Polska S.A. on the basis of the so-called RIO rates approved by the President of the
Telecommunications and Post Regulatory Authority.
October 2004
Acquisition from Mediaholding S.A. of 100% of shares in Media Personel Service Sp. z o.o.,
a company specialising in the production and support of multimedia services.
November 2004 Acquisition for PLN 5.5m of the business of Media Net Interactive Sp. z o.o. of Warsaw constituting
an organised body of intangible and tangible assets used to conduct business activities involving, in
particular, the provision of broadly understood value-added telecommunications services to
subscribers of all mobile operators.
December 2004 The Company’s name is changed from Przedsiębiorstwo Telekomunikacyjne SZEPTEL Spółka
Akcyjna to MNI Spółka Akcyjna.
March 2005
The Issuer and Austrian VASCON Telekomunikationsdienstleistungs GmbH conclude an agreement
concerning the launch of the Issuer’s value-added services on the Swiss market – the fifth
international market after the Czech Republic, Slovakia, Austria and Germany, where the Issuer
launched value-added services offered to telecommunications networks subscribers.
July 2005
Following a tender procedure, the Issuer and Telewizja Polska S.A. conclude an agreement on
integration by the Issuer of its value-added multimedia services provided to Mobile Operators and
used by all Public Television stations.
August 2005
Acquisition from Polina Trading Limited of 100% of shares in Legion Polska Sp. z o.o.
August 2005
Conclusion of credit facility agreement No. 17/012/05/Z/IN with BRE Bank S.A. of Warsaw, whereby
BRE Bank S.A. granted to the Issuer a credit facility in the aggregate amount of PLN 26,000,000.00,
September 2005 Conclusion of an agreement with Centrum Elektronicznych Usług Płatniczych eService S.A. on the
organisation and support by the Issuer of telecommunications-based authorisation and settlement
traffic pertaining to payment card transactions and originating at eService’s POS terminals. Following
this agreement, the Issuer will provide its services to companies which in aggregate account for more
than two-thirds of the Polish market of such transactions.
December 2005 Execution of Annex No. 2 to credit facility agreement No. 17/012/05/Z/IN concluded between the
Issuer and BRE Bank S.A. of Warsaw. In accordance with the terms and conditions stated in the
Annex and the credit facility agreement, BRE Bank S.A. increased the credit facility granted to the
Issuer to the aggregate amount of PLN 81,000,000.
December 2005 Acquisition of 100% of shares in MNI Telecom Sp. z o.o. (formerly operating under the name Pilicka
Telefonia).
June 2006
The Management Board of the Warsaw Stock Exchange announces the Issuer’s reclassification from
the telecommunications sector to the media sector as of June 9th 2006.
57
June 2006
The general shareholders meeting of Pilicka Telefonia Sp. z o.o., the Issuer’s subsidiary, resolves to
change the company’s name to MNI Telecom.
June 2006
The Issuer’s Ordinary General Shareholders Meeting adopts a resolution on increasing the Issuer’s
share capital by way of an issue of Series L Shares.
July 2006
MNI Telecom Sp. z o.o. and Jupiter Narodowy Fundusz Inwestycyjny S.A. conclude a conditional
share purchase agreement concerning shares in dataCOM S.A. of Warsaw.
August 2006
Finalisation of the acquisition by MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia), the Issuer’s
subsidiary, of shares in data.COM S.A. representing 76.49% of that company’s share capital.
August 2006
Disposal of 100% of shares in Media Personel Service Sp. z o.o.
September 2006 Acquisition of 75% of shares in MoCoHub Sp. z o.o. of Warsaw; execution of preliminary agreements
for acquisition of the remaining 25% of the company’s shares.
October 2006
Conclusion of a preliminary share purchase agreement concerning 57% of shares in Breakpoint
Sp. z o.o. of Warsaw.
November 2006 The Issuer and its subsidiary MNI Mobile S.A. on the one side, and Polska Telefonia Komórkowa
Centertel Sp. z o.o. on the other side sign a letter of intent stating the parties’ intention to enter into
a cooperation agreement related to the provision by MNI Mobile S.A. (as a MVNO) of mobile
telephone services based on PTK Centertel’s hosting services.
December 2006 Conclusion of a final share purchase agreement concerning 57% of shares in Breakpoint Sp. z o.o. of
Warsaw.
8.2
The Issuer’s Business
8.2.1
Core Business
8.2.1.1 Principal Areas and Types of the Issuer’s Business
The MNI Group is a media and telecommunications operator providing three basic types of services:
•
telecommunications-based value-added media services (MNI, Legion Polska Sp. z o.o.),
•
universal telecommunications services (MNI Telecom),
•
call center services (MNI).
The Issuer and its Group are dynamically expanding their media-related business., which, as a consequence, currently
represents the principal source of sales revenue, and in the first three quarters of 2006 accounted for 59.4% of net sales
revenue at the non-consolidated level, and 51.2% at the consolidated level. Despite increased exposure to the traditional
telecom services segment, MNI is consistently transforming from a telecommunications company into a media and
telecommunications company. The sustained significant predominance of the media segment in the Company’s
operations and sales results was the reason why on June 9th 2006 the Warsaw Stock Exchange reclassified MNI from
the “Telecommunications” category to the “Media” category. As the media segment is developing rapidly, it will
continue as the most important growth-driver for the value of sales, revenue and net profit of the Issuer and its Group.
The Issuer expanded into the media services sector after com.Investment Sp. z o.o. (formerly Media Net Interactive Sp.
z o.o.) became an investor in MNI in 2004, which was connected with the acquisition of an organised part of business
of Media Net Interactive Sp. z o.o. by the former Szeptel, as a result of which the scope of the company’s operations
came to include media and call center services.
Media Services
The media services provided by the MNI Group in the form of interactive services fall into:
•
value-added fixed-line services,
•
value-added mobile services.
Value-added media services form a group of premium-rate telecommunications services (voice connections, SMS and
MMS services). In addition to the connection charge, the end user of such services pays for the content received by
means of the connection, such as access to information (content), participation in competitions, or making payments.
58
Media services involve providing ICT infrastructure and/or content, creating marketing solutions supported by mobile
and fixed-line technologies, and handling micropayments, for the media or other customers. Customers interested in
conducting promotion and marketing campaigns are offered an integrated and customised product.
The media services offered by the MNI Group are targeted at television viewers, radio listeners, readers of periodicals
and dailies, participants of customer loyalty programmes and marketing campaigns, Internet users, subscribers of
specialised interactive SMS/MMS services, target recipients of direct marketing campaigns, bank customers, airline and
coach line passengers, persons applying for a visa, etc.
As at the Prospectus Date, the customers to whom the MNI Group provided or is providing media services include:
•
Telewizja Polska S.A. (Polish Television)
•
Polskie Radio (Polish Radio)
•
Radio Zet
•
regional radio stations
•
Agora S.A. (media company)
•
Edipresse ( publishing house)
•
Media Express (publishing house)
•
Bertellsman Media
•
Te-Jot (publishing house)
•
Bauer (publishing house)
The MNI Group also executes media projects, which in 2004–2005 included:
•
•
•
•
•
•
•
Viewer voting part of the 2005 Sopot International Music Festival
Viewer voting part of the Miss Polonia 2005 beauty contest
“Czułe granie” – Radio Zet
“Tylko wielkie przeboje” – Radio Zet
“Intuicja” – the First Programme of the Polish Radio
“Załóż się” – the Polish Television
“M jak miłość” – competitions run by the Polish Television.
Under agreements concluded with telecommunications operators, MNI collects a contractually agreed portion of
revenue from each connection or SMS, and, upon deducting the costs it has incurred, shares the income with the
customer. The benefit of such an arrangement is the possibility of gaining profit on advertising campaigns or infolines
by their organisers, which is not possible if the competition or infoline is arranged by the organiser based on its own
resources.
Value-Added Fixed-Line Services
The MNI Group provides value-added services for fixed-line telephony through Legion Polska Sp. z o.o., a company
acquired by the Issuer in August 2005. Legion Polska Sp. z o.o. is one of the oldest companies in Poland which provide
value-added fixed-line services. The company operates IT platforms supporting connections with premium rate
numbers (special information or entertainment numbers – 0-700xx, 0-701xx, 0-708x, 0-300xx or 0-400xx in fixed-line
networks) and real-time connections between viewers/listeners and hosts of TV programmes, which are increasingly
used in programmes broadcast by TV channels.
Selected information services operated by Legion Polska Sp. z o.o. include:
- information line of the United States Embassy,
- information line of PPKS (the Public Automobile Communication Enterprise) for timetable information,
- information line of PKP (the Polish Railways) for timetable information.
Additionally, Legion Polska Sp. z o.o. offers low-cost international connections. The Legion brand is recognisable on
global markets, which facilitates the MNI Group’s expansion outside Poland. The acquisition of Legion Polska Sp.
z o.o. created an opportunity to broaden the product range to include value-added fixed-line services, while the
integration of the technological infrastructure into a single multimedia platform strengthens the competitive advantage
of the MNI Group. Subsequent to the acquisition, MNI automatically took over responsibility for relations with all
customers and partners of Legion Polska Sp. z o.o., for performing any media-related contracts concerning integration
of interactive communication services as well as for promoting own services. For the MNI Group this means an
opportunity to provide – apart from the information services – an entire spectrum of entertainment services for the
59
media market and a possibility of offering to its existing and new customers a number of new solutions, which
contribute to higher efficiency of the services provided.
Value-Added Mobile Services
The value-added services for mobile telephony offered by the MNI Group include both voice (Voice Premium) and text
(SMS Premium) media services, offered as part of an SMS, MMS, WAP or IVR service. They fall into the following
categories:
• mobile marketing: competitions, quiz shows, lotteries, and massive-sending marketing campaigns (i.e. sending
marketing messages to precisely defined large groups of mobile users),
• information services: theme services (as part of which mobile users are updated on events which fall within areas of
their interest), and phone personalisation products, such as mono- and polyphonic ringtones and logos,
• entertainment: wallpapers, screen savers, games (including Java games), etc.,
• micropayments: SMS messages used in making petty payments for Internet services, such as access to paid website
content.
The MNI Group offers advanced telecommunications services, including both telephone and data transmission services.
The telecommunications services portfolio comprises the following:
1.
2.
3.
4.
Basic voice services – based both on traditional circuit-switched and VoIP technology,
Internet access for retail and business subscribers – comprising both dial-up service (narrow band) and broadband
access relying on DSL technology;
Data transmission services and lease of infrastructure – fibre optic and digital channels (offered to institutional
customers);
Wholesale voice traffic exchange based on the partners’ network infrastructure (offered to institutional customers,
such as telecommunications operators).
The MNI Group has a customer base of 60 thousand retail and business subscribers (including 4.5 thousand of
broadband Internet users), and provides services in seven numbering areas, using the MNI S.A.’s network (former
Szeptel’s network) and the acquired Pilicka Telefonia’s network, which makes the Group the fourth-largest independent
operator in the Polish market (according to the data sourced from the 2005 annual report of UKE). At present
telecommunications services are offered by the following MNI Group’s companies:
•
MNI S.A. – 20 thousand subscribers in the Warsaw, Białystok and Łomża numbering areas;
•
MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp. z o.o.) – 40 thousand subscribers in the numbering areas
of former Provinces of Radom, Łódź, Piotrków Trybunalski and Tarnobrzeg.
The MNI Group also provides services to TP S.A.’s subscribers based on network access number (1042 in the case of
the Szeptel’s network and 1043 in the case of the Telefonia Pilicka’s network).
MNI is expanding its traditional telephone services in the Provinces of Białystok and Warsaw by way of acquiring new
retail subscribers from the small and medium-size enterprise sector. Based on the Białystok-Warsaw network
constructed by MNI, the Issuer provides access to the public internet and telephone network, radio access and lease of
lines for fixed connections and data transmission services.
As the Issuer does not have extensive ICT infrastructure on the Warsaw market, as at the Prospectus Date the Issuer’s
services in this area are provided solely to business customers in the case of which the size of prospective revenue
justifies investment.
Data transmission is a strategic element of the traditional telecommunications services, hence the MNI Group gradually
increases availability of broadband Internet access to its customers. In terms of connection quality, the Group’s offering
is based on connections with networks of recognised Internet providers, such as Telia or Teleglobe.
In December 2005, the Issuer acquired 100% of shares in Pilicka Telefonia Sp. z o.o. (currently MNI Telecom Sp. z
o.o.). The rationale behind the transaction was to obtain cost synergies, including economies of scale, and the
integration of the technological infrastructures of both entities into a single telecommunications network was expected
to enhance the MNI Group’s competitive advantage on the market.
Ultimately the entire traditional telecommunications business segment of the MNI Group is to be concentrated in MNI
Telecom Sp. z o.o. It will provide comprehensive ICT solutions for both retail and business customers, and offer
broadband Internet access, low-cost VoIP voice connections and hosting services.
60
Call Center Services
As part of the call center services the Company offers IT infrastructure and a team of employees to perform tasks
commissioned by the customer. These services differ from the value-added fixed-line services in that they are not fully
automated but consist in an actual conversation of the operator with the caller. They are a source of cost efficiencies for
companies, which do not need to arrange for their own information lines and can derive additional benefits
proportionately to the market attractiveness of the infoline.
The MNI Group provides this type of services based on its own call centre, equipped with state-of-the-art Alcatel
technologies, modern Internet technologies, SMS messages and monitoring tools, as well as a cutting-edge multimedia
platform and IVR platform for massive sending services, such as voice mailing.
The MNI Group’s call centre has 220 work stations, at two locations: in Warsaw and Szepietowo. The Group is
consistently developing the call center services segment, perceiving it as a business area which offers good prospects.
The services involve the execution of specific sale or information requests by a team of employees, automatic IVR
systems or voice portals.
The customers using the MNI Group’s call center services include:
•
telecommunications companies,
•
renowned publishing companies, such as Verlag Dashofer, Bertelsman, Bauer or Wiedza i Praktyka,
•
press publishers, such as AGORA or Media Express,
•
advertising agencies, such as Corporates Profile,
•
companies operating in the FMCG market, such as Philip Morris, Fritto Lay, or Bahlsen,
•
election committees of political parties.
Quarter by quarter, the MNI Group is recording a fast growth dynamics with respect to call center services, which
significantly exceeds the average growth dynamics of such services in Poland. In 2007 a significant emphasis is to be
put on the development of a new massive product (voice mailing) on the basis of advanced IVR platforms.
Other Services
Other services provided by the Issuer include lease of the telecommunications infrastructure not used by MNI S.A.
Other Activities
In 2003–2006, other activities consisted mainly of ancillary services provided by companies wholly-owned by the
Issuer, including:
•
Media Personel Service Sp. z o.o. of Warsaw – development of system and application software to facilitate the
management of the content and functioning of the ICT service platforms in the area of Voice/Data/SMS/MMS
services, and specialised personnel management,
•
MNI Technology Development (formerly conducting business under the name Szeptel International) Sp. z o.o. of
Szepietowo – management of human resources and logistics at the Szepietowo call centre (a 100 % interest).
The Issuer is in the course of disposing of the subsidiary undertakings performing auxiliary services solely to MNI S.A.
and not generating income for the Issuer’s Group. On August 1st 2006, the Issuer sold 100% of its interest in Media
Personel Service Sp. z o.o. to a natural person.
Information on business areas and core services for the periods covered by the historical financial data, pursuant to
Section 6.1.1 of Annex 1 to Regulation No. 809/2004, is presented in Section 8.2.2.1 of this Prospectus (Sales Revenue
by Type of Services).
8.2.1.2
New products and Services
In 2003, MNI did not introduce any new services.
New services launched by the Issuer in 2004 included:
• Value-added media services for the subscribers of mobile networks in Poland and fixed-line networks abroad.
• Call center services for institutional customers.
Those services were included in the Group’s offering as a result of cooperation with Media Net Interactive Sp. z o.o.,
which was started in 2004. In November 2004, the Issuer acquired an organised part of the business of Media Net
Interactive Sp. z o.o. and at the beginning of 2005 the MNI Group started to offer value-added media services to
61
subscribers of all mobile networks in Poland as the Group’s own products. This enhancement of the service mix enabled
the Issuer’s Group to win many new customers and exponentially increase its sales revenue.
New services introduced by the Issuer and its Group in 2005 included:
• Call centre services – the services were included in the offering after the Group’s call centre was expanded by
implementing new infrastructure.
• Value-added media services for fixed-line telephony – following the acquisition of Legion Polska, the MNI
Group’s offering includes a full range of value-added media services which are available to all domestic
subscribers; existing forms of cooperation with the media market are based on the complementariness of the
offering;
• Broadband Internet services based on DSL solutions;
• Enlarging the offering of basic telecommunications services to include domestic long-distance calls,
international calls and calls to mobile networks based on the so-called preselection (using a routing prefix);
this service is addressed to TP S.A. subscribers.
All those actions led to a further increase in revenue from sales of services and strengthened the MNI Group’s
advantage over its competitors, especially in the media sector.
In 2006, MNI launched WAP Premium service (for details of the service see the description of new product and service
development below).
Current Work on Development of New Products and Services
Media Services
The MNI Group’s development work on new services for the media sector concerns the following solutions:
1.
WAP Premium
As at the Prospectus Date, the Issuer’s Group is very advanced in work on the implementation of first commercial
projects based on WAP Premium solutions. WAP Premium is the equivalent of SMS Premium for WAP services
provided to mobile telephone users. In particular, this service enables the user to accept a message displayed on
a website accessed with a mobile phone using WAP connection, to enter a paid Internet zone, or to buy a product or
service in this way.
The MNI Group has prepared detailed plans concerning the launch of WAP Premium-based services, which are to be
implemented from the Prospectus Date until the middle of this year.
The process of implementing WAP Premium services will gain in intensity after those services are commercially
launched in all mobile operator networks (currently the service is not available in the PLUS network). In view of the
commercial WAP Premium-based projects, MNI is expects a growth of revenue from sales of multimedia services
relative to the revenue generated under the existing model.
2.
MT SMS (Mobile Terminated SMS)
The MT SMS model, which enjoys great popularity in Western European countries, will be a novelty in Poland. The
model offers a different method of billing Premium SMS/MMS/WAP services. In essence, the mechanism of this type
of billing involves activating a given service (e.g. by an SMS) and using the service until another SMS is sent to
deactivate it. This model is more flexible than those used currently, and it enables the users to precisely define and
adjust the moment the service is started and terminated, and to activate and deactivate the service many times.
As part of the MT SMS project, the Issuer’s Group is currently working on logistic solutions related to using new
products and on developing interfaces with its existing multimedia services platforms. Moreover, the Group conducts
research into various global solutions related to development of MT SMS-based services. The services are to be rolled
out when their commercial version is launched and offered by mobile operators.
Based on the experience of other foreign markets, the Issuer’s Group estimates that there will be a rapid increase in the
revenue generated by SMS services.
3.
3G VideoCall
3G VideoCall service pertains to video calls (e.g. calls, video messages) made by users of UMTS-enabled (3G) mobile
phones.
As at the Prospectus Date, the MNI Group has performed a business analysis of the new services, prepared detailed
schedules for their implementation, and selected the access platform for providing such services. Moreover, new
62
divisions have been created within the Group’s existing structure, dedicated to implementing and operating new
services based on the 3G VideoCall platform.
Although the 3G VideoCall services were launched commercially in the fourth quarter of 2006, their penetration will be
closely related to the rate of growth of the 3G network subscriber base. Introduction of these services is advantageous
not only because it significantly enhances the Groups’ service offering, but also because of the financial benefits it
offers, which – on account of the size of the targeted subscriber base – should become visible by the end of this year.
4.
IPTV (IP Television)
IPTV stands for Internet Protocol Television and refers to a service which enables broadband Internet subscribers to
access TV programmes or video-on-demand using a set top box.
As at the Prospectus Date, the MNI Group is analysing IPTV models and solutions employed worldwide from two
perspectives:
• as the provider of interactive services for its own IPTV platform and other platforms;
• as a telecommunication operator obliged to provide those services to its subscribers.
The Group expects that the tender process held to select a provider of IPTV solutions for the Telefonia Pilicka and
Szeptel networks will be completed in the first quarter of 2007. By the end of 2007, the MNI Group should finish the
work on developing its interfaces with other operators’ platforms.
When the IPTV service will be launched depends on the execution of agreements with operators who have already
introduced such services (TP, Dialog, Netia).
The introduction of the IPTV service should be reflected in the Group’s results when more than 100 thousand
subscribers enrol for this service.
5.
Integrated Platform for Interactive Services for Mobile and Fixed-Line Telephony
As at the Prospectus Date, the Issuer’s Group is engaged in IT work to combine various individual elements into an
integrated service platform. The work will be completed with the commercial launch of IPTV and 3G Video Call
services. The commercial launch of services provided on the basis of the integrated platform is scheduled for the
beginning of 2007. The new solutions will bring benefits in the form of optimised costs of service provision and greater
flexibility in service implementation. The Issuer’s Group estimates that the integrated platform for interactive services
for mobile and fixed-line telephony will increase revenue from sales of multimedia services over the next two years.
As at the Prospectus Date, the MNI Group’s development work on new services in the telecoms sector concerns the
following solutions:
1.
WiMax
State-of-the-art WiMax systems offer the Group a possibility of expanding the product offering for subscribers of the
MNI Telecom network (operator of Telefonia Pilicka and Szeptel networks) with broadband Internet and related
advanced interactive products, ranging from internet TV to VoIP telephone solutions. The solutions are expected to be
a tool in increasing the retail subscribers base and winning many new business subscribers, which will translate into
greater sales revenue of the Group. What will help attract new customers is the fact that broadband Internet and VoIP
services provided via a wireless WiMax network would be significantly cheaper than such services offered based on
traditional cable technology.
The following work has been conducted on the WiMax project so far:
- installation tests,
- preparation of implementation plans and schedules,
- preparation of financial simulations and business plans,
- obtaining required frequencies in six numbering areas.
As at the Prospectus Date, the MNI Group is in the process of acquiring the first WiMax base stations and terminals.
The time of WiMax roll-out will be contingent upon obtaining information on the technology’s development and
standardisation as well as on a decrease in subassembly prices. Nevertheless, the MNI Group is planning a pilot
implementation of the system in two numbering areas in the first quarter of 2007.
63
2.
WRL (Wholesale Line Rental)
As at the Prospectus Date, the MNI Group is assessing the profitability of using the infrastructure and wholesale access
to TP S.A. network. This research is connected with a decision of the President of the Office of Electronic
Communications (UKE) and a framework offering prepared for the WRL service. If the service is launched, the MNI
Group will be able to offer its products to approx. 1.5m of TP S.A. subscribers without the necessity to construct its
own access infrastructure.
3.
WCDMA – mobile access to the Internet
As at the Prospectus Date, the Issuer’s Group has plans concerning implementation of services based on wireless
WCDMA network. These services comprise voice telephony and broadband wireless Internet access. Thanks to its
CDMA network, the MNI Group has the required network infrastructure and access to a sufficient number of aerial
masts. The implementation date of the WCDMA services depends on when potential suppliers deliver the required
certificates for the equipment used in the project.
The main benefits offered by the solution include the possibility of providing the existing subscribers with access to
more advanced services and an opportunity to increase the number of subscribers potentially covered by the existing
base stations to approximately 30 thousand. This may raise sales revenue by a few hundred percent compared with the
revenue currently earned by that part of the network.
5.
Convergent services: integration of broadband Internet access and voice services
In June 2006, the MNI Group started working on a product which will provide users of broadband Internet with the
possibility of making free voice calls. A technical analysis of the capacities of access systems operated by the MNI
Group companies was performed, and the demand for a product of this type was gauged. The service is planned to be
included in the operator’s offering in Q1 2007.
6.
Technical convergence of fixed-line and mobile telephone services
The MNI Group intends to offer its customers a convergent service comprising fixed-line and mobile telephone services
integrated in a single handset. A technology which supports such a solution already exists, and it is a very likely
direction in which the telecommunications sector will develop. The Issuer’s Group is considering various technology
solutions for combining mobile and fixed-line telephone services. An optimum model can be adopted when the mobile
operator presents a final proposal of the terms of using its wireless network for the provision of mobile services by the
MNI Group. The Issuer will be able to offer this service once it starts to operate as an MVNO. The MNI Group expects
that introducing technological convergence of fixed-line and mobile telephone services will increase loyalty of its
existing subscribers and will make it possible to offer a wider range of services to the existing customers using
telecommunications services.
7.
“Triple play” services
As at the Prospectus Date, the MNI Group companies are actively developing cooperation with CATV operators
involving wholesale of minutes and broadband Internet access. After the installation of first WiMax stations, the system
will be tested to assess its suitability for offering video-on-demand services to subscribers of Pilicka and Szeptel
networks.
8.
VoIP platform
As at the Prospectus Date, the MNI Group is conducting work on launching a module based on a VoIP platform to
support entities interested in selling VoIP services offered by MNI Telecom. The VoIP platform would enable the
operator’s partners to create individual tariff plans tailored to subscribers’ needs, and would facilitate billing and
collection of overdue payments. The MNI Group expects that the implementation of that service will increase sales
revenue and the business reach of the Issuer’s Group. Preceded by a testing stage, the module is planned to be
commercially launched in Q1 2007.
9.
MVNO (Mobile Virtual Network Operator)
MNI sees another opportunity for increasing revenues in improving its competitiveness on the mobile market. This is
why the Issuer’s Group is interested in entering the MVNO segment.
The MNI Group believes that if virtual operators gain access to the infrastructure of the existing mobile operators, many
companies will be willing to provide MVNO services. The Issuer’s Group is of the opinion that its ability to provide
multimedia services will come as a competitive advantage, as it will allow it to offer packaged media services as part of
the subscription or provide its customers with content on preferential terms, Additionally, the MNI Group would not
have to incur large marketing expenditure, which will be necessary in the case of companies providing only traditional
mobile services.
As at the Prospectus Data, the Issuer’s Group is holding talks and formal negotiations in connection with the planned
launch of wireless MVNO services. On November 8th 2006, a letter of intent was signed with Polska Telefonia
Komórkowa Centertel Sp. z o.o., concerning cooperation in establishing a MVNO operator. Under the letter in intent,
64
the parties undertook to continue negotiations concerning the terms and conditions of the agreement. The negotiations
will be held on exclusivity basis, therefore any talks with the other operators will be terminated. The parties undertook
to execute the agreement within three months from the date of the letter of intent, and then to commence operations
within five months from the agreement date.
8.2.2
Principal Areas of Business
8.2.2.1 Sales Revenue by Type of Services
The tables below present changes in the sales revenue of the Issuer and the Group by type of service in 2003-2005 and
in the first three quarters of 2006.
Table: Structure of the Issuer’s sales revenue (PLN ‘000)
Q1-Q3
2006
%
share
%
share
Q1-Q3
2005
2005
%
share
2004
%
share
IFRS
IFRS
PAS
PAS
Sales revenue
75,414 100.0%
48,663 100.0%
69,491 100.0%
36,096 100.0%
products
74,925
99.4%
48,653 100.0%
69,481 100.0%
36,087 100.0%
25,073
33.2%
16,399
33.7%
22,411
32.3%
17,527
48.6%
- media services
44,764
59.4%
28,314
58.2%
41,316
59.5%
14,040
38.9%
3,922
5.2%
3,573
7.3%
5,085
7.3%
2,943
8.2%
- other services
1,166
1.5%
367
0.8%
669
1.0%
1,577
4.4%
goods
for
resale
and
materials
489
0.6%
10
0.0%
10
0.0%
9
0.0%
by auditors.
Source: the Issuer
2003
PAS
18,593
100,0%
18,553
17,874
679
99,8%
96,1%
0,0%
0,0%
3,7%
40
0,2%
Table: Structure of the Group’s sales revenue (PLN ‘000)
Sales revenue
products
Q1-Q3
2006
IFRS
115,181
114,575
%
share
100.0%
99.5%
Q1-Q3
2005
IFRS
53,491
%
share
100.0%
53,415
50,227
43.6%
19,650
- media services
59,004
51.2%
29,825
3,922
3.4%
3,573
- other services
1,422
1.2%
367
goods
for
resale
and
materials
606
0.5%
76
* The financial statements for Q1-Q3 2006 (together with the comparable
by auditors.
Source: the Issuer
99.9%
36.7%
55.8%
6.7%
0.7%
2005
%
share
2004
%
share
IFRS
83,187
100.0%
IFRS
43,752
100.0%
83,071
99.9%
43,743
100.0%
29,078
35.0%
17,118
48.6%
48,239
5,085
669
58.0%
6.1%
0.8%
14,040
2,943
9,642
38.9%
8.2%
4.4%
%
share
116
0.1%
9
0.0%
0.1%
data for Q1-Q3 2005) were not audited or reviewed
The dynamic growth of the Issuer’s and Group’s sales revenue confirms the effectiveness of the development strategy
pursued by the MNI Management Board. In 2005 and 2004, the Issuer’s sales revenue rose by 92.5% and 94.1%,
respectively, year on year, and in the first three quarters of 2006 – by 54.9% compared with the corresponding period of
the previous year. At the Group level, the sales revenue growth dynamics amounted to 90.1% in 2005 and 114.5% in
the first three quarters of 2006 relative to the corresponding periods of the previous years. Growth was seen in the sale
of the telecommunications services, the media services and the call centre services.
The increase in the value of sales of media services by 194.8% at the non-consolidated level and by 243.6% at the
consolidated level in 2005, and by 58.1% at the non-consolidated level and 97.8% at the consolidated level in the first
three quarters of 2006, compared with the corresponding period of the previous year, was attributable to the dynamic
development of this segment of the Issuer’s business and the acquisition of Legion Polska Sp. z o.o. It was a derivative
of a considerable increase in the range of services offered and the number of accounts served. Currently,
telecommunications infrastructure tends to be perceived mainly as a platform for the provision of value-added services
ordered by the customers, which in the case of the MNI Group means the value-added media services. The
65
telecommunications services provided using the same infrastructure constitute in the case of the MNI Group a far
smaller share of the product portfolio than the constantly growing media services.
In 2004, the revenue from sales of the telecommunications services provided by the Issuer was nearly flat year on year.
In 2005, MNI’s revenue in this segment rose by 27.9%, and in the first three quarters of 2006 – by 53.9% relative to the
same period of the previous year. At the consolidated level, the rate of growth of the revenue from telecommunications
services amounted to 69.9% in 2005 and 155.6% in the first three quarters of 2006.
The increase in the sales revenue from the traditional telecommunications services seen in 2005 and in the first three
quarters of 2006 confirms the correctness of the implemented strategy of introduction by the Issuer of interconnect
settlements with TP S.A. according to the RIO principle and abandonment of the „bill and keep” settlements system
(which consisted in each of the operators keeping the entire amount due from a subscriber for the connections to other
operator’s network). The increase of the sales revenue from the discussed business was also achieved thanks to the
introduction of new services, including connections with the use of the network access number (the prefix) or
broadband Internet access. The value of the consolidated revenue from sales of telecommunications services in 2005
was slightly influenced by the acquisition of MNI Telecom (formerly Pilicka Telefonia) completed at the end of that
year, although the revenue increase achieved owing to this transaction became visible only in the results for the first
three quarters of 2006. The high dynamics of growth of the revenue form the sale of the telecommunications services by
the Issuer and by the Group in the first three quarters of 2006 was possible mainly owing to the growth of the wholesale
of traditional telecommunications services and owing to dynamically growing sales of broadband Internet access.
The growth of the Group’s revenue from sales of the call center services amounted to 72.8% in 2005 and 9.7% in the
first three quarters of 2006 compared with the corresponding periods of the previous years. Currently call center
services are provided using a modern IT system by Alcatel, which enables 220 employees to work from two locations.
Given the fact that in 2003-2005 and in the first three quarters of 2006 there was a deep change of the product structure
of the sales markets of the Issuer and the Issuer’s Group, the section below discusses the MNI Group’s offering in the
analysed period.
2003
The Issuer’s business was limited to typical telecommunications services, including voice telephone and dial-up PSTN
Internet access. The offering was addressed to a group of the Issuer’s own subscribers (households and businesses)
located mainly in the province of Białystok. In that period the services offered by MNI included maintenance of the
telecommunications network (subscription), voice telephone services (local, domestic long-distance and international
connections, and connections to mobile networks), and dial-up and broadband Internet access. Other services included
lease of ICT infrastructure (optical fibres and digital channels) to business customers.
2004
In addition to the services described above, the Issuer began to operate as a provider of value-added services for
telecommunications, as part of its commenced integration with the business of Media Net Interactive Sp. z o.o. The
value-added services for the media sector appeared on MNI’s offer in the second part of the year, as the Issuer entered
into an agreement on the acquisition of the entire business of Media Net Interactive Sp. z o.o. and it had to ensure
continuity of the services and efficiently incorporate the new business into its existing structures. The Issuer’s offering
was broadened to include the call center services. Thanks to the larger service portfolio, the group of MNI’s customers
increased sharply (subscribers of all fixed-line and mobile networks in Poland became customers of MNI), causing a
surge in the Company’s sales revenue (94.1%) compared with the previous year.
2005
In 2005, the MNI Group reported further growth of its sales revenue in the media and telecommunications segment on
the back of organic development of the Issuer’s business and the acquisition of Legion Polska and MNI Telecom
(formerly Pilicka Telefonia), which, apart from MNI, are the main entities making up the Issuer’s Group.
Next to the typical telecommunications services provided to its own base of private and business subscribers, the MNI
Group continued to pursue a line of business commenced in the previous year, namely value-added media services for
the subscribers of all telecommunications networks in Poland and abroad. At the beginning of the year, the business of
Media Net Interactive Sp. z o.o. was fully integrated with the operating structures and the service offering of the Issuer.
This enabled the MNI Group to commence operations as a media partner, whose task is to cooperate in the promotion of
services and the arrangement of content, which constitutes the value added. The acquisition of the business of Media
Net Interactive meant entering the market of services for the subscribers of mobile networks in Poland in the area of
voice media services and the SMS/MMS/WAP multimedia services. In the second half of 2005, with the acquisition of
Legion Polska, the activities of the MNI Group were extended to include value-added media services offered to fixedline telephone subscribers. The call center services were consistently developed based on newly built technological and
organisational solutions. A new agreement on the exchange of telecommunications traffic with TP S.A. enabled the
66
MNI Group to adapt the structure of its telecommunications offering to the needs of the market and to tangibly increase
the level of revenue derived from this business segment. The extension of the offering with new products addressed to
subscribers, such as broadband DSL Internet, translated into higher revenue and increasingly efficient utilisation of the
Group’s own telecommunications network. At the end of 2005, the Group embarked on efforts to widen the
geographical reach of its telecommunications services and acquired Pilicka Telefonia, a telecommunications business
operating in four numbering areas in the vicinity of Radom and serving almost 40 thousand subscribers. Thanks to these
initiatives and the ongoing development, the Issuer considerably increased its sales revenue, both on the nonconsolidated (growth of 92.5%) and consolidated level (growth of 90.1%).
2006 and the period from January 1st to the Prospectus Date
In 2006 and in the period from January 1st 2007 to the Prospecuts Date, the Issuer and the Group successfully continued
their operations in all existing lines of their business, and at the same time sought to optimally leverage the rapid
expansion of the geographical area where they offered telecommunications services addressed to their own subscribers.
As far as the media services are concerned, the MNI Group’s activity concentrated on expanding the business into new
media and introducing new technologies and products, in line with the development of the market and technological
progress. As a consequence of the steps which were taken, the value of the Issuer’s sales revenue increased by 66.3% on
non-consolidated basis and by 135.6% on consolidated basis year on year. The very high rate of sales revenue growth at
the Group level was also connected with the fact that the acquisition of MNI Telecom (formerly Pilicka Telefonia) was
fully reflected at the consolidated level in the first half of 2006.
8.2.2.2 Geographical Structure of the Sales Markets
Until 2004, the MNI Group operated exclusively on the Polish market, offering basic telecommunications services. In
2004 and 2005 the Issuer generated revenue from sales of services primarily on the EU markets. An analysis of the
geographical structure of the sales revenue in the entire period between 2003 and 2005 and in Q1-Q3 2006 shows that
the MNI Group’s operations are focused in the Polish market.
Table: Structure of the Issuer’s sales revenue, broken into domestic and export sales (PLN ‘000)
Q1-Q3
2006
%
share
IFRS
Q1-Q3
2005
%
share
IFRS
2005
%
share
PAS
%
share
2004
%
share
2003
PAS
PAS
Sales revenue
75,414
100.0%
48,663
100.0%
69,491
100.0%
36,096
100.0%
18,593
100.0%
products – domestic sales
73,214
97.1%
46,718
96.0%
66,005
95.0%
32,308
89.5%
18,553
99.8%
products – exports
1,711
2.3%
1935
4.0%
3,476
5.0%
3,779
10.5%
-
0.0%
489
0.6%
10
0.0%
10
0.0%
9
0.0%
40
0.2%
goods for resale and materials
– domestic sales
Source: the Issuer
Table: Structure of the Group’s sales revenue, broken into domestic and export sales (PLN ‘000).
Q1-Q3
2006
% share
IFRS
Q1-Q3
2005
% share
IFRS
2005
% share
IFRS
2004
% share
IFRS
Sales revenue
115,181
100.0%
53,491
100.0%
83,187
100.0%
43,761
100.0%
products – domestic sales
112,779
97.9%
51,480
96.2%
79,523
95.6%
39,973
91.3%
products – exports
1,796
1.6%
1,935
3.6%
3,548
4.3%
3,779
8.6%
goods for resale and
materials – domestic sales
606
0.5%
76
0.1%
116
0.1%
9
0.0%
by auditors.
Source: the Issuer.
The Issuer’s Group provides services in the media and telecommunications sector to individuals and businesses, using
both its own infrastructure and the infrastructure of other operators, including in particular mobile telephone operators
and – to a lesser extent – TP S.A.
67
Following the acquisition of MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp. z o.o.), the MNI Group offers
a full range of telecommunications services for fixed-line telephone subscribers in seven numbering zones, in the area
of the Warsaw, Białystok, Kielce and Łódź provinces.
The media and the call center services are offered by the Group countrywide, and the revenue from their sale cannot be
ascribed to any particular province.
8.2.2.3 Description of the Markets on which the Issuer Operates
The Issuer operates in two related markets:
the market of value-added media services for the telecommunications market, and
the telecommunications market.
For the purposes of this Prospectus it was assumed that the market of telecommunications-based value-added services
includes the segments of media services for fixed-line telephone and media services for mobile telephony. On the other
hand, the telecommunications market comprises the segments of voice services for fixed-line telephony, Internet access
services and call centre services.
Media Services Market
The market of media services is characterised by good growth prospects, which should find a reflection in the dynamics
of the Group’s sales revenue growth. On the other hand, the MNI Group itself influences the development of the
market, by offering new specialised and thus very effective marketing tools to companies which have not use such
services to date. The MNI Group makes its services available to new customers, offering them a range of customtailored products that are suited to their needs and appropriate for each target group. Given that the market of media
services is relatively young, there is no strong competition which would materially limit the sales revenue dynamics.
The media services offered via telecommunications tools enjoy excellent growth prospects, because they require no
costly investments in the infrastructure needed to deliver the service to the end customer. Growth of the business scale
on the media services market is being achieved by upgrading the data processing capacities of IT systems and
employment of professional staff.
Market of Value-Added Mobile Services
Research reports published by international consultancies such as IDC and Com MN SM Market Assessment point to
a dynamic growth and good development prospects of multimedia services in Western Europe, as well as in Central and
Eastern Europe. According to Com MN SM Market Assessment, in 2003–2005 the mobile marketing market in
Western Europe doubled in value terms, and is forecast to grow by another 70% in 2006–2008. Taking into
consideration the possibilities offered by the development of the third generation mobile telephony, in 2008–2010 this
market may expand by another 50%.
The charts below present the forecast and historic growth of numbers of SMS and MMS users in Central and Eastern
Europe.
Liczba użytkowników
Number
of MMS usersMMS
in CEE
w Europie Środkowo - Wschodniej
Liczba użytkowników
Number
of SMS users SMS
in CEE
w Europie Środkowo
- Wschodniej
)ml
n
(
mln
mln
)ml
n
(
2003
2004
2005
2006
2007
2008
2003
2004
Republika
Czech
Republic
Czeska
Republika
Czech
Republic
Czeska
Węgry
Hungary
Węgry
Hungary
Polska
Poland
Polska
Poland
Rumunia
Romania
Rumunia
Romania
Pozostałe
Other
Pozostałe
Other
2005
2006
2007
2008
Source : IDC, 2004.
68
According to the information provided by operators and service providers, cited by the Value-Added Services
Committee at the Polish Chamber of IT and Telecommunications, the value of the Polish mobile market will increase
from PLN 580m in 2006 to PLN 730m in 2007, and the number of users of Premium mobile multimedia services will
grow from 9.5m to 11.2m.
Furthermore, according to the data by TSN OBOP, 66% of the Polish Internet users use the Premium Rate mobile
multimedia services. 66% of those using multimedia services spend on them less than PLN 5 a month, and 3% - more
than PLN 50 a month.
The tendency seen in the media services market to offer increasing numbers of commonly accepted interactive services
provided on the basis of the SMS and voice services, fuel a further development of that market. According to the
Issuer’s Management, by offering media services based on high-margin telecommunications products, such as SMS
Premium and Voice Premium, the MNI Group is able to achieve double-digit growth in these market segments in a very
short time. This implies that the media-oriented focus of the Group’s activity will continue to be the most important
driver of sales revenue and net profit.
Furthermore, the ever widespread use of the GPRS, EDGE and UMTS services offers additional potential for
developing multimedia services and increasing the related revenue. According to the Company’s Management Board,
the 3G standard will offer the MNI Group the widest business possibilities with respect to all value-added services it
offers and a considerable growth of the value of the services sold.
The potential for the development of multimedia services is largely attributable to the relatively low saturation of the
mobile market in Poland compared with Western Europe, and also certain other countries of CEE. According to the
Office of Electronic Communications, which cites European Commission data, in 2005 the penetration of the mobile
telephone market in Poland amounted to 76.4%, whereas the European average has already exceeded 91%. According
to estimates by PMR, a consulting firm, the saturation of the mobile telephone market in Poland was 74% in 2005, and
will reach 100% in 2008.
The development of value-added mobile services will also be fostered by the larger functionality of mobile telephone
compared with fixed-line telephone, the growing array of handset functionalities and value-added services, and price
reductions resulting from competition among the operators, which will make the market accessible to lower income
bracket customers. In particular, the development of this market should be promoted by the entry of Mobile Virtual
Network Operators, which gain more loyal customers and generate higher APRUs than the traditional mobile network
operators. This may be attributed to the fact that their product offerings are better suited to customer needs. Virtual
operators buy wholesale services from the non-virtual operators and sell them to their retail customers. According to
Pyramid Research, virtual operators have already won 63m customers, i.e. 2.75% of the total number of mobile
telephone users. Pyramid Research analysts expect that by 2010 this percentage will grow to 3.3%, and virtual operators
will have over 100m customers.
69
Mobile telephony market in Western Europe
EUR
50,00
40,00
Data
and multimedia
30,00
20,00
Transmission of:
Voice
10,00
data
multimedia
voice
0,00
2004
2005
2006
2007
2008
2009
Source: Com MN SM Market Assessment, March 2005.
Source: COM MN SM Market Assessment, March 2005.
Forecasts for the mobile market in Western Europe assume a growth of the revenue from sales of value-added services
and data transmission. Media services will constitute the most important element of the growth of APRU in the case of
mobile subscribers. This tendency should also find its reflection in the developments on the Polish market.
Market of Fixed-Line Value-Added Services
The market of value-added services for fixed-line telephony is the segment of the market of value-added services that
has developed earliest, both in Poland and in the world. In Poland, the beginnings of the market of value-added services
date back to mid 1990s and are associated with Legion Polska. The company has been present on the domestic market
since 1995, when it was launched as a branch of the international Lagerdere concern.
The largest growth in demand for services of this type was seen at the end of the 1990s, when their mobile equivalent,
in particular services based on the SMS Premium model, was not available. According to the Management Board of
MNI, as at the Prospectus Date, a revived interest in this kind of services has been growing for about 1.5 year.
The value-added fixed-line services may include voice connections to automatic IVR systems, voice connections to
specialised call centres and pay-per-call micropayments. The value-added services may be also provided in the pay–perminute model. Assigning particular numbers to each type of services (e.g. information, service, pay-per-call) made them
much to the end users.
The value-added services for fixed-line telephony are used for large-scale, all-Poland polls (voting), TV contests and
quiz shows, as well as for all kinds of entertainment services such as, for example, party-line. A new category of
services includes information services, e.g. access to information on transport or visas. The M2M (machine-to-machine)
services related to authorisation of payment card transactions, are an absolute novelty.
As at the Prospectus Date, in comparison with value-added mobile services, the value-added services for fixed-line
telephony are much more mature in terms of the product range and procedures for settlements with service providers,
and they resemble to a greater extent the model employed in the western European countries. However, it should be
emphasised that in view of the dominant position of Telekomunikacja Polska S.A. on the Polish market, the
interconnect system between TP S.A. and alternative operators for value-added services has been introduced relatively
late. As at the Prospectus Date, full exchange of traffic between operators with respect to all services has not been
introduced yet. Moreover, the relations between mobile and fixed-line telephone operators remain an open issue. As at
the Prospectus Date, no agreement has been reached on joint access to services from networks of various operators.
In Poland, the demand for value-added services for fixed-line telephone networks has been growing, as the application
of value-added services in new products, developed in response to the needs of particular customer groups, is gaining
70
popularity, and new type of services in question, such as for example mass calling, are being introduced. This type of
services is becoming more and more popular as compared with the SMS services. In particular, the well-functioning
market of data transmission, which has application in M2M services, shows a steady growth in the telecommunication
traffic volume.
The value of the value-added services market should be assessed, as is the case with other parts of the market, in terms
of annual sales. As at the Prospectus Date, the Management Board of MNI estimates the market value at PLN 200–
250m, and its annual growth rate at no less than 8–12%.
As at the Prospectus Date, there were a few large service providers active on the value-added services market, and a
group of new entrants. Apart from Legion Polska, the larger companies include Audiotex Polska, GTS, TVN, Phonesat
and Hallo Info. The volumes of telecommunication traffic handled by these companies range from a few million to less
than twenty million minutes/connections per month, and display a constant growing tendency.
As at the Prospectus Date, the development prospects for this market appear to be good, which is attributable to the
present market situation and the factors described below.
Firstly, a number of obstacles to a faster development of the value-added services market are likely to be removed.
These include:
•
lack of access to value-added services from mobile telephone networks, which have three times as many
subscribers as fixed-line networks;
•
lack of uniform access numbers to the services (which requires communicating the numbers in different ways
when advertising the services – separately for fixed-line networks and separately for mobile networks);
•
different rates applied by fixed-line and mobile operators for access to the same category of services;
•
delay in the implementation of a system for blocking access to various categories of value-added services.
The Issuer’s Management Board expects that these obstacles should be removed within about 12 months from the
Prospectus Date, assuming that the market regulator, i.e. the Office of Electronic Communications, will remove them by
way of administrative measures.
Other growth drivers of the market will appear as it develops in the directions described in the strategy for the Issuer’s
Group, in particular through introducing IPTV and IPTV-related services into fixed-line networks. The IP billing
solutions to be launched by a majority of fixed-line operators, along with the new multimedia offering, will give rise to
new opportunities for creating and providing value-added fixed-line services, which will be closer to the model
currently seen in the mobile telephony. However, given the much greater possibilities related to the IPTV offering, the
expected growth in the value of services provided in fixed-line networks should be comparable to that of the much
larger mobile networks.
Based on the forecasts of research centres, the Issuer’s Management Board estimates that after the market is saturated
with interactive IP-based multimedia services, its value will increase to 150% of the current figure. Furthermore, the
elimination of development barriers may result in very rapid growth, by at least 35-45%.
Telecommunications Services Market
Contemporary telecommunications and means of communication are subject to profound and rapid changes related to
intense technological development and the expected abolishment of the market monopolies within a few years. The
condition of the telecommunications sector is constantly improving, primarily due to the continuing good situation on
the mobile market, as well as dynamic development of the data transmission and Internet access segment. The growth
of traditional voice telephony is driven by the Internet telephony based on the VoIP technology. The mobile market is
migrating from 2G to 3G, i.e. from narrowband to broadband access. The Polish telecommunications operators follow
the example of more developed countries, where the focus is on increasing the number of broadband lines. The high rate
of broadband Internet penetration encourages demand for services provided based on broadband technology.
While the telecommunications markets of the developed countries are considered to be mature, with limited growth
potential, the Central and Eastern European countries, where the market saturation is lower, still offer considerable
growth prospects. The chart below presents information prepared by PMR Consulting on the mobile telephony, fixedline telephony and Internet penetration rates in Poland.
71
Mobile telephony, fixed-line telephony and Internet penetration
rates in Poland in 2001–2006 (forecast)
74%
83%
61%
46%
36%
30%
26%
16%
2001
26%
23%
19%
2002
33%
32%
31%
2003
fixed telephony
2004
mobile telephony
33%
34%
33%
30%
2005e
2006f
Internet
Mobile telephony, fixed-line telephony and Internet penetration rates in Poland in 2001–2006 (forecast)
According to PMR, an estimated value of the Polish market of telecommunications services, which includes mobile
telephony, fixed-line telephony, as well as data transmission and Internet services provision, amounted to approx.
PLN 38bn in 2005, and the forecast annual growth rate for the period 2006–2008 is approx. 4%. In this period, the
segment with the highest growth dynamics, of 11% annually, will be data transmission, lease of lines and Internet
services provision (DLISP). The value of the segment at the end of 2008 is forecast to reach PLN 4.4bn. PMR believes
that the high growth dynamics of the DLISP market will be driven primarily by rapid development of broadband
Internet market, which is expected to grow by 27% annually in 2006–2008, to reach PLN 2.3bn at the end of this
period. In Poland, the broadband internet market will grow on the back of a strong expansion of DSL services (Source:
PMR, “Telecommunications Market in Poland 2005 –2008” report). The broadband Internet penetration rate in Poland
is one of the lowest in Europe, and is three times lower than the average for the EU (Source: the Ministry of Transport,
“Regulatory Strategy 2006–2007”).
Number of broadband Internet subscribers in Poland in 2001–2008 (forecast),
in thousand
6000
5000
4000
3000
2000
1000
0
5,040
123%
0,0015
4,040
62%
2,040
50%
210
470
2001
2002
710
0,001
2,960
77%
0,0005
1,260
44%
37%
25%
2003
2004
2005
Number of subscribers
2006f
2007f
0
2008f
Growth rate
e – estimate
f – forecast
Source: PMR, “Telecommunications Market in Poland 2005 –2008” Report
The fixed-line telephony market may be characterised by low penetration rate and lack of significant growth. As regards
fixed-line telephony, a moderate sales revenue growth may be recorded by those alternative operators who will engage
in market consolidation, leverage economies of scale and quickly launch new products and charging structures.
Research carried out in the second half of 2005 by PMR among 200 largest Polish telecommunications companies,
shows that the most serious obstacles to the development of the domestic telecommunications market are problems with
enforcement of regulations, low effectiveness of the market regulators’ actions, and the monopolistic position of TP
72
S.A. (Source: PMR, “Telecommunications Market in Poland 2005 –2008” report). TP S.A. has a particularly strong
position on the fixed-line telephony market; however, alternative operators are gradually increasing their shares in sales
revenue in this segment, from 8.5% in 2001 to 15.2% in 2005 (Source: the Office of Electronic Communications
(UKE)). The high cost of telecommunications services, which is to a great extent related to the monopoly of TP S.A., is
for many Poles still the greatest obstacle, preventing their access to fixed-line telephony, mobile telephony and
broadband Internet services on a daily basis. The activities aimed at liberalisation of the market, described in Section
7.2.2 of this Prospectus, should enhance availability of telecommunications services and their rapid development.
Call Center Services Market
According to Datamonitor, a market research company, there are about 770 call centers in Poland, which employ
approximately 30 thousand staff. According to market growth forecast for 2006-2009 presented by Datamonitor, the
number of call center companies will increase by over 100% and number of their employees will grow to over 50
thousand. According to various estimates, depending on the adopted methodology, the value of the Polish call center
market may be in the range of PLN 250m to 350m. According to Dataquest estimates, the value of the Polish call center
market will double by 2009.
An impulse that spurred the growth of the call center market in Poland was an amendment to the banking law, which
allowed this delivery channel to be used to reach the customers in order to offer them products, financial instruments
and derivatives.
Thus, the call centre market enjoys good growth prospects, partly attributable to the fact that the role of the telephone as
the means to reach the customer is growing as penetration of the mobile telephony market deepens. Companies are able
to organise advertising campaigns which quickly reach a wide group of people and are cost-efficient as compared with
other advertising media. The potential for development of the new-generation mobile technologies (the so-called 2.5G
and the 3G) should translate into a possible steep growth of the MNI revenue in line with the growth of the data
transmission capacities and prices. Attention should also be drawn to the fact that the development of the Polish call
center market will be fostered by the fact that Poland is a highly attractive market for large international corporations,
which seek to locate here their service centres.
8.2.2.4 Competitive Position of the Issuer and the Group
Currently, the MNI Group has no direct competitor on the Polish market that would operate in all the same business
segments as the Group. The Group has competitors in the particular segments: the segment of value-added services for
fixed-line and mobile telephony, the segment of traditional fixed-line telephone services and the segment of call center
services.
Competitive Position in the Sector of Value-Added Media Services for Fixed-Line and Mobile Telephony
As far as entertainment services are concerned, the MNI Group enjoys the leading market position. The Group’s share
in the market of voice value-added services is estimated by the MNI Management at approximately 25-30% in terms of
the volume of the voice traffic handled. The value of the entire market in gross terms (i.e. based on the retail prices of
the services) is estimated at approximately PLN 200m – 250m.
The main market operators which compete with the MNI Group on the market of value-added fixed-line services
include Hallo Info, Phonesat, Audiotex Polska, Teleaudio and TVN. However, none of these companies offers the full
range of voice information and data transmission services or the full market range of products. Similarly, in the segment
of value-added mobile services the MNI Group offers the widest range of its own products and solutions for the broad
mobile marketing market from among all the companies operating on this market. The Group’s competitors in the area
of the SMS/MMS services include One-2-One, Telekom Media, Avantis, Audiotex, Matrix and Creative Team. The
estimated market share of MNI in the SMS/MMS services market, valued at approx. PLN 360m in gross terms, is about
20-25%. Although the market on which the MNI Group operates is attractive and highly prospective, no companies
have emerged yet which would pose a serious threat to its competitive position on the value-added services market.
However, there is a risk that competition from existing and new operators on the market of value-added fixed-line and
mobile services will intensify. Nonetheless, given the strong position of the MNI Group compared with other
companies from the sector and the much larger IT infrastructure owned by the Group, as at the Prospectus Date the
Company’s Management Board estimates the competition risk in the media sector to be small.
Competitive Position in the Telecommunications Services Sector
The acquisition by the Issuer of MNI Telecom (formerly Telefonia Pilicka) considerably strengthened the competitive
position of the MNI Group. As at the date of this Prospectus, the market of fixed-line telephony in Poland is undergoing
a consolidation process (smaller operators merge or are acquired by larger ones, because increased revenue scale allows
companies to achieve higher profitability). The MNI Group is the fourth independent traditional fixed-line operator on
73
the Polish market (after Dialog, Netia and Multimedia Polska), with a market share of approx. 5% (as estimated by the
Issuer on the basis of the number of subscribers; these statistics do not account for the subscribers of TP S.A.).
In the area of data transmission, the MNI Group competes both with telecommunications operators and with cable
televisions, and in the case of Internet telephony – also with Internet portals such as Skype. The development of these
segments of the telecommunications market is connected with the popularisation of the broadband Internet access. The
MNI Group has a 0.1% share in the entire Polish market of broadband Internet access, as measured by subscriber
numbers. This estimate is based on the 2005 annual report of the Office of Electronic Communications.
Competition forces the companies operating on the mobile and fixed-line markets to invest in new technologies in order
to reduce costs and expand their activities on the integrated services market.
Given the progressive liberalisation of the telecommunications market in Poland, it can be expected that the competitive
position of the MNI Group should further improve as the Group is able to increase the number of subscribers without
the need to incur significant investment expenditure on network infrastructure.
Competitive Position in the Call Center Sector
The MNI Group enjoys a competitive advantage in the call center sector due to the following factors:
• the Group does not have to rely on telecommunications services of a third-party provider,
• the Group has built and equipped a modern centre where 220 employees can work simultaneously on
commissioned projects only. Another 100 work posts are used on an ongoing basis for the Group’s own
projects,
• the Group has a team of highly qualified managers and operating staff,
• the Group has access to the most modern IT technologies and product solutions.
8.2.3 Extraordinary Factors with a Bearing on the Group’s Business
Over the last few years the Issuer’s Group went through a phase of far-reaching equity and operational transformations,
which found a reflection in the considerable improvement of the financial performance in 2003–2005 both at the nonconsolidated and consolidated level. The factors and events which had a bearing on the reported results were connected
primarily with the fact that in 2004 com.Investment Sp. z o.o. (formerly Media Net Interactive Sp. z o. o.) became an
investor in the Company (it currently holds 32.6% of the Issuer shares). Its involvement was the effect of acquisition by
the Issuer in late 2004 of an organised part of the business of Media Net Interactive Sp. z o. o., and allowed the MNI
Group to expand its activity in the media services sector, which is now the main source of the Group’s revenue. The
considerable improvement of the financial performance of the MNI Group is also attributable to the debt restructuring
process commenced in 2003.
Another event with a considerable impact on the scale and scope of the MNI Group’s business was the acquisition by
the Issuer of Legion Polska Sp. z o.o. in August 2005 and of MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp.
z o.o.) in December 2005. With the acquisition of 100% of shares in Legion Polska Sp. z o.o., the MNI Group gained
the possibility of expanding its business into value-added services for fixed-line subscribers. The acquisition also
allowed the Group to considerably broaden its product offering addressed to mobile subscribers. On the other hand, the
incorporation of MNI Telecom into the MNI Group enabled the Group to considerably reduce the costs of its
telecommunications products, optimise a number of processes, and enhance the competitiveness of its offering.
8.2.4
Dependence on Patents or Licences, on Industrial, Commercial or Financial Agreements, or
on New Production Processes
8.2.4.1 Dependence on Patents and Licences
The Issuer’s business is not dependent on any patents or licences.
8.2.4.2 Dependence on Licences Granted by Administrative Bodies
Prior to the implementation of the new Telecommunications Law of July 16th 2004, when the formerly applicable
Telecommunications Law of July 21st 2000 was still in effect, the Issuer conducted its telecommunications operations
under the following licences:
(i)
Licence No. 90/96 of July 24th 1996,
(ii)
Licence No. 296/97 of October 14th 1997,
(iii)
Licence No. 396/98 of October 6th 1998,
(iv)
Licence No. 543/00/TI of January 31st 2000,
(v)
Telecommunications Licence No. 10/2002/Z of June 19th 2002, granted by President of the
Telecommunications and Post Regulatory Authority.
74
The Telecommunications Law of July 16th 2004, which was carried into effect on September 3rd 2004, has introduced
a different regulatory model for telecommunications operations, defined as so-called regulated operations, which
includes the obligation to make a relevant entry in the Register of Telecom Entrepreneurs (Art. 10.1 of the
Telecommunications Law).
According to the amended Telecommunications Law, the Issuer as a holder of licences under the former
Telecommunications Law was authorised, subject to the terms and conditions set forth in the amended regulations, to
conduct telecommunications operations within the scope defined in its telecommunications licence or in the notification
of telecommunications activities, which remained fully valid until the relevant entry was made in the Register. The
entry was made ex officio by the President of the Telecommunications and Post Regulatory Authority (current name –
Office of Electronic Communications), who issued a certificate of the Issuer’s registration in the Register of Telecom
Entrepreneurs. The certificate, issued on October 11th 2004, states that the Issuer was entered in the Register of
Telecom Entrepreneurs on October 4th 2004.
8.2.4.3 Trademarks
On June 12th 2006, the Issuer filed a request with the Patent Office of the Republic of Poland to be awarded protection
rights to the text and graphic trademarks “MNI” (the Issuer’s logo) and “Szeptel” (logo identifying the Szeptel
telecommunications network operated by the Issuer).
The Issuer’s subsidiary, MNI Telecom Sp. z o.o. (formerly operating under the name Pilicka Telefonia) was awarded,
by virtue of a decision issued by the Patent Office of the Republic on Poland on May 22nd 2006, protection rights to the
text and graphic trademark “Pilicka TELEFONIA” (Reg. No. Z-260954) and the text and graphic trademark
“InterNeo”. On July 24th 2006, MNI Telecom Sp z o.o. filed two further requests with the Patent Office of the Republic
of Poland for registration of two text and graphic trademarks based on the company name “MNI Telecom” and a
distinctive graphic logo.
MNI Telecom Sp. z o.o.’s subsidiary, dataCOM S.A. holds protection rights, awarded by virtue of a decision issued by
the Patent Office of the Republic of Poland on September 29th 2003, to the trademark “dataCOM” (Reg. No. 148182).
The Issuer’s subsidiary, Legion Polska Sp z.o.o. holds protection rights, awarded by virtue of a decision issued by the
Patent Office of the Republic of Poland on October 23rd 2001, to the text and graphic trademark “Legion” (Reg. No.
187807).
8.2.4.4 Dependence on Financial Agreements
The Issuer is party to credit facility agreement No. 17/012/05/Z/IN dated August 11th 2005, concluded between the
Issuer and BRE Bank S.A. of Warsaw, amended by Annex 1 of October 24th 2005, Annex 2 of December 15th 2005
and Annex 3 of July 18th 2006. Under the agreement the Issuer was granted a long-term investment credit facility in the
aggregate amount of PLN 77,292,296.47. Interest on the borrowed funds accrues on a monthly basis at the rate equal to
current WIBOR rate plus a margin of 1.8%. The Issuer provided the following forms of collateral to secure repayment
of the credit facility:
•
a registered pledge on assets of MNI S.A. constituting an economic entity,
•
a registered pledge on all shares in Legion Polska Sp. z o.o.,
•
a registered pledge on assets of Legion Polska Sp. z o.o. constituting an economic entity,
•
powers of attorney for BRE Bank S.A. with respect to all bank accounts of the Issuer held with BRE,
•
powers of attorney for BRE Bank S.A. with respect to the other bank accounts of the Issuer,
•
the Issuer’s declaration on voluntary submission to enforcement under Art. 96 and Art. 97 of the Banking Law,
up to the amount of PLN 121,500,000.00 (one hundred and twenty-one million, five hundred thousand złoty),
with the right of BRE Bank S.A. to motion for endorsing the execution writ with an enforcement clause until
December 20th 2011,
•
assignment to BRE Bank S.A. of rights under the insurance policies for the Issuer’s property and business,
•
assignment to BRE Bank S.A. of rights under the insurance policies for the property and business of Legion
Polska Sp. z o.o.,
•
a surety agreement guaranteeing repayment of the loan granted by Legion Polska Sp. z o.o. , together with a
declaration on voluntary submission to enforcement under Art. 96 and Art. 97 of the Banking Law, and powers
of attorney with respect to the company’s bank accounts,
•
a registered pledge on all shares in MNI Telecom Sp. z o.o. (formerly operating under the name Pilicka
Telefonia),
•
a registered pledge on assets of MNI Telecom Sp. z o.o. (formerly operating under the name Pilicka
Telefonia) constituting an economic entity,
•
assignment to BRE Bank S.A. of rights under the insurance policies for the property and business of MNI
Telecom Sp. z o.o.
75
Pursuant to Annex 3 of July 18th 2006, MNI Telecom Sp. z o.o. acceded to the Issuer’s debt under the aforesaid credit
facility agreement as a joint and several debtor, providing in this connection the following forms of additional collateral
to secure repayment of the contracted facility:
•
powers of attorney for BRE Bank S.A. with respect to MNI Telecom’s current account held with BRE Bank
S.A.,
•
powers of attorney for BRE Bank S.A. with respect to the other bank accounts of MNI Telecom, exercisable by
the Bank in the event of termination of the credit facility agreement,
•
a declaration on voluntary submission to enforcement under Art. 96 and Art. 97 of the Banking Law, up to the
amount of PLN 121,500,000.00, with the right of BRE Bank S.A. to motion for endorsing the execution writ
with an enforcement clause until December 20th 2011,
•
a registered pledge on accounts receivable credited to MNI Telecom’s current account held with BRE Bank
S.A.,
•
assignment to BRE Bank S.A. of accounts receivable credited to MNI Telecom’s current account held with the
Bank.
The Issuer’s subsidiary, MNI Telecom Sp. z o.o. (formerly operating under the name Pilicka Telefonia) is party to
investment loan agreement No. 170/2003 concluded on December 15th 2003 with PKO S.A. I Radom Branch. Under
the agreement MNI Telecom was granted an investment loan in the amount of PLN 4,350,000.00. Interest under the
loan accrues on a three-monthly basis at the rate equal to 3M WIBOR plus the Bank’s margin of 3.0%. With a view to
securing repayment of the loan, MNI Telecom provided the following forms of collateral:
•
transfer of ownership rights to MNI Telecom’s assets of specified identity,
•
assignment of rights under the insurance policies for assets of specified identity whose ownership was
transferred by way of security,
•
a registered pledge on significant items of MNI Telecom’s property, plant and equipment consisting of the
Ostrówek circuit switching network,
•
assignment of rights under the insurance policies covering the Ostrówek circuit switching network,
•
powers of attorney with respect to MNI Telecom’s bank account held with PKO S.A. I Radom Branch,
•
powers of attorney with respect to MNI Telecom’s bank account held with Bank Handlowy of Warsaw, Radom
Branch,
•
powers of attorney with respect to MNI Telecom’s bank account held with Bank Pocztowy S.A., Lublin
Branch, Customer Service Point in Radom.
8.2.4.5 Dependence on Industrial and Commercial Agreements
The Issuer is party to an agreement on networks interconnection concluded on September 1st 2004 with
Telekomunikacja Polska S.A. The agreement defines the terms and conditions for cooperation between the parties
related to interconnection of their respective fixed-line public telephone networks for the purposes of providing
telecommunications services, including technical conditions for setting up and maintaining the interconnection, as well
as the settlement terms. The agreement was concluded for the period corresponding to the validity periods of the
telecommunications licences held by the parties. The agreement is subject to termination without notice or with
observing specified notice periods in the cases provided for therein.
The Issuer is party to framework cooperation agreement No. 04/10 concerning support for multimedia services,
concluded on June 30th 2004 with Polska Telefonia Komórkowa – Centertel Sp. z o.o. Under the agreement the Issuer
supplies content for the SMS, IVR and WAP multimedia services offered by PTK Centertel to its subscribers, and
provides other services related to the launch and technical support of such services. The agreement was concluded for
a definite period of time until January 31st 2005, but it is automatically extended for subsequent annual periods, unless
either party serves a prior termination notice. Irrespective of the above, each party may terminate the agreement at a sixmonths’ notice.
On the basis of agreement No. 200401037 (dated September 30th 2004) on assignment of rights and liabilities under
framework agreement No. 200100970 (dated October 13th 2001), concluded between com.Investment Sp. z o.o.
(formerly operating under the name of Media Net Interactive Sp. z o.o.), Polska Telefonia Cyfrowa Sp. z o.o. and the
Issuer, the Issuer provides PTC with services related to the creation and supply of content fed into multimedia services
offered by PTC to its subscribers, as well as other related technical support services. The agreement was concluded for
an indefinite period of time and may be terminated by either party subject to a one-month’s notice with effect from the
end of a given calendar month. Additionally, each party may terminate the agreement with immediate effect in the event
that the other party commits a gross breach of thereunder. Furthermore, PTC has the right to terminate the agreement
with immediate effect at any time, in the event that the competent administrative authorities revoke or limit the scope of
licence under which PTC operates, and in the event that such administrative authorities impose a ban or a limitation on
the activities specified in the agreement.
76
On the basis of the agreement (dated September 15th 2004) on assignment of rights and liabilities under the agreement
on the provision of audiotext, information and SMS Premium services (dated December 1st 2001), concluded between
com.Investment Sp. z o.o. (formerly operating under the name of Media Net Interactive Sp. z o.o.) and the Issuer, the
Issuer provides Polkomtel S.A. with audiotext and information services which then become part of Polkomtel’s own
service offering. The agreement was concluded for an indefinite period of time. Each party has the right to terminate the
agreement by giving a six-months’ notice. Additionally, Polkomtel may terminate the agreement without notice in the
event that the Issuer commits a gross breach of its provisions or in the event that, despite the lapse of any additional
period conceded by Polkomtel, the Issuer fails to remedy or discontinue the breach.
8.2.5
Sources of Information for the Issuer’s Statements, Representations and Communications
Regarding Its Competitive Position
The Management Board of MNI S.A. hereby represents that all estimates and data contained in this Prospectus, as well
as all market data referred to in this Prospectus, pertaining to the market of value-added media services or the
telecommunications market, were sourced from materials believed by the Management Board to be reliable, while all
comparisons or approximations were made with due professional care, taking into account the Management Board’s
best knowledge as at the Prospectus Date.
8.2.6 Development Strategy of the MNI Group
The MNI Group’s development strategy is focused on achieving shareholder value growth by increasing sales and profits
through a dynamic development of the business, mainly in the media sector. The strategy assumes the construction of a
strong media group working for the media and telecommunications markets.
The main assumptions of the MNI Group’s development strategy relate to:
• streamlining of the Group’s structure;
• further development of the Group as an active media market operator.
Streamlining of the Group’s structure
As at the Prospectus Date, the Management Board of MNI continues work on the streamlining of the Group’s structure,
which is necessary for the Group to engage in new investments on a scale exceeding by several times the current scale.
These initiatives consist in:
change of the business profile (development of new technologies) of MNI Technology Development Sp. z o.o.
(formerly Szeptel International), a subsidiary;
sale by the MNI Group of MNI Mobile S.A. (formerly OSS S.A.), a subsidiary, to MNI Telecom Sp. z o.o.;
MNI Mobile S.A. is to operate in the mobile telecommunications business as a Mobile Virtual Network
Operator (MVNO);
transfer of the fixed-line telephone infrastructure from MNI S.A. directly to MNI Telecom Sp. z o.o. (formerly
Pilicka Telefonia Sp. z o.o.), an entity in which the entire traditional telecommunications business of the MNI
Group is to be concentrated.
The Issuer will continue its existing media, telecommunications and call centre activities, while Legion Polska Sp. z
o.o. will remain responsible for the media services provided over the fixed-line telecommunications network.
Further development of the Issuer’s Group as an active participant of the media market
The development strategy of the MNI Group assumes in particular concentration of all efforts on developing the
existing and building new technical, organisational and cooperational capabilities, which will allow the Group to:
1. Develop and commercialise a broader offering of mobile products addressed to the end users of media
services, with respect to services provided over the Internet and mobile data transmission,
2. Introduce commercial services based on video formats for mobile phones,
3. Develop and commercialise an entire range of services for customers using the 3G networks, such as Mobil
TV (television in a mobile phone), or VoD (TV programmes on demand),
4. Develop and commercialise an offering of mobile products based on new functionalities, such as handling of
micropayments, etc.,
5. Develop and commercialise solutions enabling the Group to target the product offering of MNI and its
cooperators at the users of “new media”, such as Internet television and interactive digital cable television, i.e.
media built on the traditional telecommunications infrastructure. This will involve in particular development of
products which are analogous to those in the mobile offering but are addressed to customers with interactive
receivers supported by cable TV or telecommunications operators.
The objectives of the MNI Group’s development strategy will be pursued in particular through:
1. Launch of operations as a Mobile Virtual Network Operator (MVNO), using one of the exisiting mobile
networks; the operations would be conducted according to a few market models,
77
2.
Development (and extension in terms of the offered content) of the multimedia offering for subscribers of
mobile networks – on the basis of SMS, MMS and mobile data transmission solutions, and especially for 3G
networks – on the basis of fast data transmission solutions,
3. Development of the existing interactive services platform to include solutions dedicated to digital cable
television and Internet television networks,
4. Development of a new structure – the Content Production Centre, which will serve the needs of the Group and
of the entire media services market. The Centre will offer Java games, polyphonic ringtones, music,
wallpapers, video content, films, multi-player games, competitions, communications applications and
entertainment services,
5. Development of the Group’s own distribution channels for electronic and traditional multimedia products and
of specialised tools to be used in the channels that already exist,
6. Integration of modern interactive and mobile technologies to provide for quick development and
customers,
7. Extension of subscriber access infrastructure, including in particular with WiMax Internet access solutions, and
further development of those projects towards the new areas of the Group’s operations,
8. Acquisitions of other entities from the media and telecommunications sector in Poland and abroad, if they offer
full product synergy with the offering of MNI and generate free cash flows which are available for financing
development projects appropriate to their needs; in the media sector the acquisition targets would include
entities operating in the business of technology development as well as media content production and
distribution; in the case of foreign entities, potential acquisition targets would be companies which enjoy
a significant position on the developed mobile services markets in Western Europe,
9. Taking over from TP S.A. of local subscriber loops and launch of alternative (with respect to those of TP S.A.)
voice and broadband Internet access services throughout Poland. These operations will be first conducted in
those areas where the MNI Group already operates telecommunications networks,
10. Intensification of activity on foreign markets – from the supply of multimedia content, services and solutions,
to development and implementation of turn-key interactive media solutions for local TV channels and Internet
portals (involving the supply of an application and technology, and connection to the local mobile or fixed-line
network operators).
The Group’s development strategy assumes a considerable broadening of the existing range of media services it offers,
including through the introduction of new technologically advanced products for the mobile segment, namely services
based on data transmission technology (WAP, WAP-Premium and Videocall for the 3G networks). Another element of
the Group’s strategy is to develop and commercialise a product offering intended for the interactive digital television
and interactive Internet television market, and also – in the form of dedicated applications – for public TV broadcasters
and Internet portals. To effectively pursue the objectives of its strategy, the MNI Group will address its offering and
activity to the subscribers of all other networks operating in Poland and abroad.
As far as the Group’s own subscribers are concerned, the Group will seek to broaden its media and telecommunications
offering based on the development of modern radio access systems, CDMA and WiMAX, extension of the xDSL
broadband Internet access offering, and development of convergent telephony projects based on the Group’s proprietary
mobile solutions (MVNO). The Group plans to launch its own development projects and purchase advanced
technologies in Poland and abroad.
The Group is devoting particular attention to the Mobile Virtual Network Operator (MVNO) model. It intends to
operate as a MVNO under its own name and under a few other brands, already established in other areas of the media
business. Furthermore, the Group’s strategy assumes a launch of the MVNO business in the Western European markets
– the services would be addressed to the Polish population living there.
The strategy for the call centre services assumes the use of a range of new technologies and products, including voice
mailing (which relies on advanced IVR platforms and voice portals), and of mobile multimedia technologies.
To finance implementation of the development strategy for the MNI Group, on June 30th 2006 the Ordinary General
Shareholders Meeting of the Issuer adopted a resolution to increase the MNI’s share capital by PLN 67,714,674, by
issuing 67,714,674 Series L Shares to be acquired by MNI’s existing shareholders in exercise of their pre-emptive
rights, and set the issue price of one share at PLN 1.
The issue of the Series L Shares will allow the Group to implement projects that will spur another sharp growth of the
Group’s revenue and profits. The assumptions concerning the value of the Group’s consolidated net income in 20062008, which is to be earned by pursuing the development strategy, are presented in Section 6.2 of this Prospectus.
.
78
8.3
Research and Development, Patents and Licences
The research and development strategy of the Issuer’s Group relates to the media sector’s technology, products and
services. The main objectives set as part of the strategy include:
1.
creation of new interactive products, in terms of technology, and application management tools;
2.
development of monitoring tools as well as methods and procedures for verifying the effectiveness of sales
campaigns;
3.
development of new interactive products in terms of content of services, as well as methods and tools used in
communication with the end user.
Table: Completed research and implementation projects carried out in 2003–2006 and in the period from
January 1st 2007 to the Prospectus Date and the amounts of expenditure incurred on the projects (PLN ‘000):
Jan 1 2007 –
Prospectus
Date
2006
2005
2004
2003
Performance of research related to and development of a commercial platform for
voice mailing services together with management systems and online monitoring
systems
-
-
2,320
460
-
Performance of functionality studies on adaptation of the SMS platform to support
mass SMS traffic accumulated in short periods of time, to support mass projects
in electronic media
-
2,124
8,457
842
-
WAP/SMS service platform combining the two functionalities in the same service
-
755
-
-
-
Management of content on the 3G service platform, for the VideoCall services
-
161
-
-
-
Source: the Issuer.
8.4 Investments
8.4.1
Major Investments in the Period Covered by the Historical Financial Data
Table: The Issuer’s investment projects completed by the Prospectus Date (PLN ‘000)
Investment project (domestic/foreign)
Intangible assets
Dec 1 2007
–
Prospectus
Date
2006
2005
2004
2003
0
4,472
11,025
5,995
Goodwill
-
-
-
4,633**
-
Acquired permits, patents, licences and similar assets
-
4,472
11,025
1,362
6
104
Property, plant and equipment
6
0
2,115
3,797
2,683
Buildings and structures
-
58
127
51
31
Plant and equipment
-
2,038
3,199
2,395
73
Vehicles
-
2
420
185
-
Other tangible assets
-
17
51
52
-
Financial assets
0
3,056
72,046
151
-
MNI Telecom Sp. z o.o. *
-
-
55,343
-
-
-
-
16,669
-
-
MoCoHub Sp. z o.o.
-
3,036
Other
-
20
34
151
0
9,643
86,868
8,829
Total
110
*Formerly Pilicka Telefonia Sp. z o.o.
**Relates to the acquisition of an organised part of business owned by com.Investment (formerly operating as Media Net Interactive Sp. z o.o.).
Source: the Issuer.
79
Table: Investment projects of the Issuer’s Group completed by the Prospectus Date (PLN ‘000)
Investment project (domestic/foreign)
Jan 1 2007 –
Prospectus
Dated
Intangible assets
2006
2005
2004
0
6,297
12,017
5,995
Goodwill
-
-
-
4,633**
Acquired permits, patents, licences and similar assets
-
6,297
12,017
1,362
Other
-
-
-
2,683
0
8,145
3,797
Buildings and structures
-
351
127
51
Plant and equipment
-
7,030,
3,199
2,395
Vehicles
-
698
420
185
51
52
Other tangible assets
Financial assets
-
66
0
21,252
72,046
151
MNI Telecom Sp. z o.o. *
-
-
55,343
-
-
-
16,669
-
MoCoHub Sp. z o.o.
-
3,036
-
-
dataCOM S.A.
-
18,196
-
-
Other
-
20
34
151
Total
0
35,694
87,860
8,829
Consolidation exclusions (purchase of shares in companies comprising
the Issuer’s Group)
-
21,252
72,046
151
Total
0
14,442
15,814
8,678
* Formerly Pilicka Telefonia Sp. z o.o.
** Relates to the acquisition of an organised part of business owned by com.Investment (formerly operating as MNI Sp. z o.o.).
Source: the Issuer.
MNI Group’s investments in property, plant and equipment
In 2003-2006 and in the period from January 1st 2007 to the Prospectus Date, MNI Group’s investments in property,
plant and equipment focused on the modernisation and extension of the infrastructure with a view to providing new
types of media services, both as part of the core telecommunications services and the value-added services for the
subscribers of fixed and mobile telecommunications networks.
Issuer’s investments in intangible assets
In 2003, the Issuer almost completely reduced its capital expenditure as a result of the implementation and performance
of its operational and financial restructuring plan. The investments in intangible assets made by the Issuer in 2003
involved only the office software necessary to ensure the proper functioning and security of the Company’s day-to-day
operations. The main capital expenditure on intangible assets made by the Issuer in 2004–2006 included:
1. purchase in 2004 of the software and licence for the voice service platform, which facilitated the development
of value-added voice services offered to mobile network subscribers;
2. purchase in 2004 of the software and licence to support the SMS/MMS platform, allowing the Company to
increase its activity in the area of SMS/MMS multimedia services, which are the basis of the Company’s
operations in that area;
3. purchase in 2004 of the licence and software to support the advanced billing system for the subscribers of the
SZEPTEL telecommunications network, facilitating an expansion of the offering addressed to subscribers and
improvement of the customer relationship processes;
4. purchase in 2005 of the licence and software to support and manage the voice platform, facilitating the
development of more advanced voice service projects;
5. purchase in 2005 of the licence and software to support voice services involving the transfer of calls from the
Premium Rate platform to domestic and international long-distance lines for all subscribers of the fixed-line
networks in Poland;
6. purchase in 2005 of the licence and specialist software supplementary to the voice service platform, supporting
the provision of voice mailing mass services;
7. purchase of the licence and software for database servers, which are the peripheral devices of the IVR/SMS
platform;
8. purchase in 2005 of the rights, licence and software for the creation and management of web pages developed
for the Company’s purposes and commercial projects;
80
9.
10.
11.
12.
13.
14.
purchase in 2005 of the rights, licence and software for the commercial content services, facilitating the
development of many services offered to end users and the media;
purchase in 2005 of the rights and licence for the creation and development of SMS Chat services (provided in
cooperation with Russian mobile operators) – project designed to promote the services on international
markets;
purchase in 2005 of the licence and rights to the software supporting the processes and solutions for the
development and management of services;
purchase in 2006 of the rights and licence to the content of voice and SMS/MMS services for the purpose of
the development and operation of the Premium Rate services;
purchase in 2006 of the rights, licence and software for supporting teletext pages, under the agreement
concluded with 4FUN TV;
purchase in 2006 of various licences and software for graphic workstations and monitoring of services.
Issuer’s investments in property, plant and equipment
The investments in property, plant and equipment carried out by the Issuer in 2003 were mainly connected with the
completion of construction work on the following sections of the fibre-optic network:
1.
Warsaw – Ostrołęka – Łomża – Białystok, with the Łomża – Szepietowo branch line.
2.
Cieszyn – Dwory and a section in Będzin;
3.
Wólka Dobryńska – Biała Podlaska.
The section specified in item 1 is the backbone of the MNI S.A.’s fibre-optic network and was used to provide all the
telecommunications service offered in the Szeptel network. The interconnection points of the MNI S.A.’s network with
TP S.A.’s network were built based on that section. As the section terminates in Warsaw at the LIM facility, the
Company was able to build interconnection points with other independent telecommunications operators. The sections
specified in items 2 and 3 were not placed in service as part of the MNI S.A.’s network. The Company took steps to sell
those assets, considering them redundant. In particular, in July 2005 the Issuer sold to Tele-PERN Sp. z o.o. a section of
the fibre-optic bus situated in the south of Poland, comprising the transborder connection between Poland and the Czech
Republic in the Cieszyn area.
The major capital expenditure on property, plant and equipment made by the Issuer in 2004–2006 included:
• purchase of equipment and construction of connections for new business subscribers (such as Białystok
Municipal Office, Medical University of Białystok, Warsaw Tax Supervisory Authority, Białystok University,
Białystok LOT Tax Office, CATV operators in Białystok),
• purchase of IT, data transmission and switching equipment,
• construction of a broadband Internet access system (DSL) and extension of the Internet nodes,
• extension of existing and construction of new ADSL and WiFi broadband Internet access nodes;
• purchase of equipment and fittings for a call centre in Warsaw.
The expenditure incurred by MNI in 2004 helped the Company to increase its capacity to connect new subscribers for
the core service and prepare the technical infrastructure for new services based on the network access number (the
prefix), and provided the infrastructure and software necessary to offer the ADSL broadband Internet access service to
the FIX network users.
The investment expenditure incurred by the Issuer in 2005 was to a large extent the continuation of the investment
projects launched in the previous year. The investments’ objective was to further increase the accessibility of the
existing and new services. The purchase of equipment for the construction and extension of further ADSL nodes
allowed MNI to expand the provision and sale of the broadband Internet service to the FIX network users. The Issuer
also purchased equipment necessary to continue the extension of the call centre’s technical and organisational
resources, in particular to extend the call centre resources in Warsaw and build a new call centre in Szepietowo.
In order to extend the existing and build new systems for the provision of multimedia services in Warsaw, the necessary
equipment, software and licences were purchased. MNI also undertook projects aimed at providing the carrier preselection service. The extension and modernisation of the telecommunications infrastructure allowed the Issuer to
broaden its service offering addressed to institutional customers and win several prestigious contracts, such as the
contracts with PLL LOT of Warsaw (Polish airlines) and the Białystok Municipal Office.
The main benefit of the investments in property, plant and equipment made by the Issuer in 2006, which were mainly
connected with the extension of the telecommunications and data transmission systems to deliver and promote media
services (the teletext system for 4FUN TV) is the increase in the distribution capacities and the capacity to support and
promote SMS services. In a longer term, this will be reflected in the Issuer’s higher revenue growth rate and MNI’s
greater growth potential in the areas with high sales margins.
81
In the years 2003–2006, the Issuer will make investments in property, plant and equipment using almost entirely
internally generated funds and, to a minimum extent, financed lease.
Investments in property, plant and equipment of other members of the MNI Group
In addition to the expenses incurred by the Issuer, the investments of MNI Telecom (formerly Pilicka Telefonia) are
also a significant driver of the MNI Group’s capital expenditure on property, plant and equipment.
The major capital expenditure on intangible assets incurred by MNI Telecom in 2005–2006 included:
• purchase of software in 2005 and purchase of new solutions for the billing system used at the Company,
purchase of additional software modules, such as traffic statistics and customer service;
• purchase of an integrated financial and accounting system, purchase of software used at the Company and
further extension of the billing system with the accounts receivable collection module.
The main capital expenditure on property, plant and equipment incurred by MNI Telecom in 2005 included:
• construction of additional connections for the existing copper networks to connect new subscribers in rural
areas and new key customers (Radom Waterworks, Ball Packaging of Radomsko, Police 11 Listopada Radom,
County Governor's Office of Sandomierz, Stalowa Wola Steelworks, Ceramika Paradyż 2 of Tomaszów,
Zbyszko Company of Radom, State Forest Agency of Radom, Sandomierz Hospital, Dakot Radom);
• construction of copper telecommunications networks (cable ducts and telecommunications cables) in
Sandomierz, Radom and Piotrków;
• construction of a low-voltage power line in Radom;
• construction of a fibre-optic network and extension of the existing cable ducts in Radom;
• extension of the existing fibre-optic networks;
• construction of new Wipll base stations in Kozienice, Pionki, Tarnobrzeg, Tomaszów, Machów, Małęczyn,
Sandomierz and new Nortel base stations in Piotrków Trybunalski - EC;
• extension of the existing Wipll, Nortel and NEC base stations;
• installation of new or extension of existing Nortel, SAT, Nortel, Wipll, AS 4020, DSLAM, NEC subscriber
terminals;
• modernisation and extension of the switching systems (Potkanów, Piotrków, Sandomierz);
• extension and modernisation of data transmission and wire transmission equipment at the existing base
stations;
• purchase of Dell servers, Dell PCs and laptops;
• purchase of a NCT Clip exchange for Yuko in Piotrków.
The main capital expenditure on property, plant and equipment incurred by MNI Telecom in 2006 included:
• construction of additional connections for the existing copper cable networks to connect new subscribers,
including such key customers as (Iłża Hospital, Alurad, TVN, Fameg Radomsko, Deutsche Bank Radom);
• extension of the existing base stations operating the Wipll, Nortel, AS 4020 radio access systems;
• installation of new and extension of existing SAT, Nortel, Wipll, AS 4020, DSLAM, NEC subscriber
terminals;
• upgrade and extension of the switching systems (implementation of number portability – Potkanów, Piotrków,
Sandomierz, Stalowa Wola, Tuszyn, SKB, Zure, Energo - Asekuracja);
• construction of interconnection points with MNI S.A. (Radom, Warsaw, Stalowa Wola);
• extension and modernisation of data transmission and wire transmission equipment at the existing base
stations.
The direct benefit of the capital expenditure discussed above is an increase in the Group’s capabilities in the area of
telecommunications services, both in the product group connected with the investments in the switching infrastructure
(upgrade of exchanges) and in the access infrastructure, which translates directly into higher capacity for connecting
new customers or providing the existing ones with new services (Internet). The implementation of the above
investments translated into higher sales revenue and profitability of the Issuer’s Group.
The investments of the MNI Group members other than the Issuer were financed with their own funds.
Equity Investments of the MNI Group
The equity investments of the MNI Group in 2004–2006 were primarily connected with the creation of a media group
and the development of telecommunications infrastructure promoting benefits of scale in the telecommunications
sector, as well as the expansion of media services based on the telecommunications subscriber base. Equity investments
of the MNI Group in 2004–2006 were executed exclusively by the Issuer.
82
Following the transactions carried out in January 2004 and May 2005, the Issuer acquired 53.9% of shares in
Bia-Net Sp. z o.o. of Białystok, Poland. The Issuer’s strategy for the cooperation with Bia-Net provided for a gradual
transfer of the latter’s business activity to MNI. The transfer was effected through the sale of Bia-Net’s
telecommunications infrastructure to MNI. Similarly, Bia-Net’s agreements with subscribers and business partners were
transferred onto MNI. Such solution was selected in order to cut costs and avoid competition between the Issuer and its
subsidiary, consisting in the offering of the same telecommunications products in the Province of Białystok. Following
the completion of these integration processes, there was no purpose – from the perspective of the Issuer’s interests – in
Bia-Net Sp. z o.o. continuing its operations. Therefore, in January 2006 a resolution was adopted concerning the
liquidation of Bia-Net and its subsequent windup.
In September 2004, MNI and Media Net Interactive (currently com.Investment) concluded an agreement on the
purchase of the latter’s business. As a result of the transaction, MNI acquired assets supporting the provision of valueadded services for Premium Rate mobile subscribers. The acquisition of Media Net Interactive’s assets marked the first
phase of the establishment of a group operating in the sector of value-added services for fixed-line and mobile
telephony. It enabled MNI to enhance its business beyond the profile of a traditional telecommunications operator and
record high growth dynamics through the provision of value-added services to all domestic mobile operators.
In July 2005, MNI finalised the acquisition of 100 shares in Legion Polska Sp. z o.o. (representing 100% of the share
capital and 100% of the total vote at the General Shareholders Meeting). The preliminary agreement was signed on May
5th 2005, and July 15th 2005 saw the start of integration of the operating activities, offerings and product and sales
strategies of both entities. The integration enabled MNI to add fixed-line services to its business, while the integration
of technological infrastructure in a single multimedia platform helped to strengthen MNI’s competitive edge. Following
the acquisition, MNI took over the provision of services to all customers and business partners of Legion Polska Sp. z
o.o., as well as all media contracts concerning the integration of interactive communication services and promotion of
own services. Following the acquisition of Legion Polska, the process of establishing MNI as a provider of value-added
services for all domestic mobile operators was completed. This enabled the Company to extend its offering to all users
of fixed-line and mobile networks in Poland. MNI is able to provide a full range of entertainment and information
services for the media market.
In December 2005, MNI S.A. acquired 226,491 shares (representing 100% of share capital and 100% of the total vote at
the General Shareholders Meeting) in Pilicka Telefonia Sp. z o.o. of Radom, Poland. The acquisition of Pilicka
Telefonia enabled MNI not only to significantly increase its share in the market of traditional services for fixed-line
telephony, but also to achieve synergy benefits. The integration of telecommunications infrastructure of both entities
into a single telecommunications network strengthened the MNI Group’s competitive edge on the market, enhanced the
competitiveness of the Group’s offering and enabled it to benefit from effects of scale, as well as to reach a broader
subscriber base with its media services offering.
On July 13th 2006, MNI Telecom Sp. z o.o. (a subsidiary of MNI, formerly operating under the name of Pilicka
Telefonia Sp. z o.o.) signed an agreement under which MNI Telecom acquired 2,570,566 ordinary registered shares in
dataCOM S.A., with a par value of PLN 7.00 per share, which represent 76.49% of the entire share capital of the
company and the same proportion of votes at its general shareholders meeting, for a total price of PLN 19m. That price
was to be paid in two instalments: first instalment of PLN 18m has already been paid, while the second instalment of
PLN 1m will be paid by July 31st 2007 if the gross margin for the period June 2006–May 2007 is not lower than for the
period June 2005–May 2006. MNI Telecom financed the purchase of the shares from internally generated funds.
The main benefits of incorporating dataCOM S.A. into the MNI Group include access to new customers, as well as the
acquisition of new necessary telecommunications infrastructure and resources supporting the provision of colocation
services.
On August 24th 2006, the Issuer submitted to Mr Piotr Gruszecki and Mr Julian Kutrzeba an irrevocable offer to
acquire a total of 200 shares in MoCoHub Sp. z o.o. of Kraków, representing 100% of the company’s share capital.
On September 15th 2006, final agreements concerning the sale of a total of 150 shares were signed. The shares
represent 75% of the share capital of MoCoHub, and their price was set at PLN 3.000.000.00. At the same time,
preliminary agreements concerning the sale of the remaining 50 shares were executed. Following the transaction, the
Issuer will become a sole shareholder in MoCoHub. The acquisition price of the 50 shares will depend on MoCoHub’s
financial performance in 2006 and in the first six months of 2007, but it must fall in the range of PLN 1,000,000.00 and
PLN 1,500,000.000.00.
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8.4.2
Current Investment Projects
MNI Group’s Investments in Property, Plant and Equipment, and in Intangible Assets
As at the Prospectus Date, the MNI Group has not incurred any expenditure relating to current investment projects
which would be disclosed in the accounting books. However, the MNI Group has set individual investment tasks and
established work teams to execute the following investment projects related to property, plant and equipment, as well as
intangible assets:
a)
access infrastructure for telecommunications services, including:
extension of transmission platforms,
extension of the Internet access network,
subscriber telecommunications infrastructure (designed to connect business customers),
construction of subscriber access following local loop unbundling;
b)
subscriber access systems, including:
extension of local WiFi systems,
construction of the Białystok and Łomża WiMax systems,
upgrade of the CDMA IS95 system to CDMA2000;
c)
other.
The above investments of the Group are designed to:
• increase the capacity and extend the existing infrastructure of the Internet access network,
• create resources and facilities to provide services to both retail and business customers who are currently not
accessed by the Group’s existing telecommunications infrastructure,
• improve the quality of telecommunications services,
• take advantage of the opportunities brought by the liberalisation of the telecommunications market (local loop
unbundling),
• replacement of IT hardware used in day-to-day operations.
Given the special nature of the investment tasks and contractual provisions in accordance with which payments for the
performance under the agreements will be made after the Prospectus Date, the amounts of the Group’s necessary capital
expenditure on the execution of these tasks are presented in Section 8.4.3.
Equity Investments of the Group
Acquisition of Breakpoint Sp. z o.o. by the MNI Group
On October 26th 2006, the Issuer and Invidia Limited of Limassol, Cyprus, entered into a preliminary share purchase
agreement concerning 57% of shares in Breakpoint, a company producing games for mobile phones.
On December 19th 2006, MNI executed the final agreement, whereby it purchased the shares for PLN 4,664,000.00.
The acquisition will enable the Issuer to enter the international market of multimedia services, mainly in Western
Europe. Breakpoint provides solutions to such companies as Vodafone, T-Mobile, Orange and mobile networks in the
Far East and Brazil.
The MNI Group’s investment projects conducted as at the Prospectus Date are carried exclusively in the territory of
Poland and financed with internally generated funds.
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8.4.3
Planned Investments
Table: Investment Project Schedule of the Issuer (PLN ‘000)
Project (domestic/foreign)
Intangible assets
Software supporting management platform for telecommunications services (MVNO)
Q1 2007
1,021
1,000
Other
Management platform for telecommunications services (MVNO)
21
1,719
1,000
Development and extension of customer access channels and development of technological layer
Financial assets
Management and development platform for content for media and value-added services
719
15,000
15,000
Development of customer access channels and development of technological layer (Wimax, WiFi
and WCDMA)
Total
17,740
Source: The issuer.
Table: Investment Project Schedule of the Group (PLN ‘000)
Project (domestic/foreign)
Intangible assets
Q1 2007
3,536
Software supporting management platform for telecommunications services (MVNO)
1,000
Management platform for content of value-added services
1,000
Management subsystems for content, customer relations and services monitoring
1,500
Other
Management platform for telecommunications services (MVNO)
36
5,587
1,000
Management platform for content of value-added services
500
Management subsystems for content, customer relations and services monitoring
750
and WCDMA)
Financial assets *
Management and development platform for content of services
and WCDMA)
Total
3,337
15,000
15,000
24,123
Source: The issuer.
* The expenditure on financial assets planned for Q1 2007 does not include expenditure of PLN 18m on acquisition by MNI Telecom of 76.49% of
shares in data.COM incurred in August 2006 and presented in Section 8.4.2 hereof.
The investments in intangible assets planned by the Issuer and its Group include:
• Content management platform for value-added services – this investment is necessary given the technological
progress and the Company’s need to adapt its assets to new requirements. Media services form the core of the
Company’s business, therefore this investment is particularly important and indispensable to achieve a large
proportion of the planned increases in sales and profit.
• Management platform for MVNO services – the planned enhancement of the Group’s business profile with the
MVNO services will require investments in new software and licences for the use of service management
applications in a longer term, given the natural development of the project as well as the growing subscriber
and business partner bases.
• Investments in other product areas, connected with content management, management systems for customer
relations, monitoring systems etc.
• Other – including mainly software for a new billing system, radio telecommunications technologies for
accessing a customer (Wimax, WiFi, WCDMA) etc.
85
The Issuer’s and the MNI Group’s investments in property, plant and equipment will involve the execution of
investment projects presented in the tables above. These projects will be connected with the purchase and development
of hardware systems for the installations described above. It will in particular include the purchase of:
• servers,
• drive arrays,
• network hardware supporting the development of Internet access network,
• hardware for the construction of WiMax radio systems,
• hardware for the CDMA2000 radio system,
• hardware for the VoIP system,
• power supply and uninterrupted power supply systems,
• network routers,
• transmission hardware and subscriber equipment,
• other ICT equipment and installations.
The Group intends to acquire and integrate several media or telecommunications companies. In the media sector, the
acquisition targets would include entities operating in the business of technology development as well as media content
production and distribution. In the case of foreign entities, potential acquisition targets would be companies which
enjoy a significant position on the developed mobile services markets in Western Europe. As at the Prospectus Date, the
MNI Group has made no binding commitments connected with the acquisition of media or telecommunications
companies.
8.4.4 Expected Sources of Financing Required for the Implementation of Investment Projects
The Group expects to finance the planned investment projects, executed mostly in the territory of Poland, with
internally generated funds, including in particular the proceeds from the issue of Series L Shares. Certain equity
investments may also be made on foreign markets. Also these investments are to be financed with internally generated
funds, including the proceeds from the issue of Series L Shares. The Group does not rule out raising external financing
for its investment projects, including under bank loans and lease agreements.
8.5
Property, Plant and Equipment
8.5.1
Material Property, Plant and Equipment (Existing and Planned), Including Leased Property,
and Encumbrances
8.5.1.1 Existing Material Property, Plant and Equipment
As at November 30th 2006 the value of Group’s property, plant and equipment amounted to PLN 131,044,615.95
(including the Issuer’s property, plant and equipment, worth PLN 39,937,125.51). The Group has property rights to
99% of its property, plant and equipment. Leased assets represent 1% of the Company’s assets. The aforementioned
amount comprises:
•
land – PLN 99,198.67,
•
buildings and structures (including telecommunications and fibre-optic networks) – PLN 53,605,573.28,
•
plant and equipment – PLN 63,102,933.46,
•
vehicles – PLN 1,215,606.56,
•
tangible assets under construction – PLN 12,648,361.78,
•
prepayments for tangible assets under construction – PLN 50,963.00,
•
other property, plant and equipment – PLN 321,989.20.
The Group owns the following material property, plant and equipment:
Real estate situated at ul. Sienkiewicza 52, Szepietowo, Poland
The Issuer is the owner of real property with the area of 1,359.66 m2, situated in Szepietowo at ul. Sienkiewicza 52,
entered in the Land and Mortgage Register maintained by the District Court of Wysokie Mazowieckie, under No.
31370. The property is free from any encumbrances.
Real estate situated at ul. Ostrówek 3, Sandomierz, Poland
The Issuer’s subsidiary, MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia) is the owner of land with the area of
2,150m2, situated in Sandomierz at ul. Ostrówek 3, entered in the Land and Mortgage Register maintained by the
District Court of Sandomierz, under No. 71296. The property is free from any encumbrances.
86
Material property, plant and equipment owned by the Issuer include:
• Ostrołęka-Kawęczyn-Warsaw fibre-optic network section – PLN 2,038,000.05.
• Szepietowo-Łomża and Ostrołęka-Białystok fibre-optic network sctions – PLN 2,797,326.91.
• host telephone exchange – PLN 4,785,550.89.
• WAM system in Szepietowo – PLN 3,962,635.53.
Material items of property, plant and equipment owned by MNI Telecom Sp. z o.o (formerly Pilicka Telefonia), the
Issuer’s subsidiary, include:
• set of devices for call switching and recording call parameters, designated as Potkanów Switching Centre –
PLN 4,647,259.65.
• set of devices for call switching and recording call parameters, designated as Sulejów Switching Centre – PLN
4,027,218.98.
• set of devices for call switching and recording call parameters, designated as Ostrówek Switching Centre –
PLN 2,873,805.53.
8.5.1.2 Sale of Material Property, Plant and Equipment
On 1st June 2006, the Issuer and its subsidiary, MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia), entered into a
framework agreement providing for, among other things, the sale of the Issuer’s assets used for the provision of fixedline services, for the benefit of MNI Telecom, and takeover by MNI Telecom of a part of the employees operating the
assets. Until the Prospectus Date, in performance of the framework agreement, the Issuer and MNI Telecom concluded
four separate have agreements for the sale of particular assets. The acquisition of all assets by MNI Telecom is to be
carried out by June 30th 2007. The selling prices of the assets correspond to their market value as at the date of sale.
8.5.1.3 Encumbrances on Material Property, Plant and Equipment
A set of the Issuer’s movables and property rights, constituting an economic entity in the form of the Issuer’s business,
is encumbered with a registered pledge established to secure BRE Bank S.A.’s claims arising under Credit Facility
Agreement No. 17/012/05/Z/IN of August 11th 2005.
A set of movables and property rights held by Legion Polska Sp. z o.o., the Issuer’s subsidiary, constituting an
economic entity in the form of Legion Polska Sp. z o.o.’s business, is encumbered with a registered pledge established
to secure BRE Bank S.A.’s claims arising under Credit Facility Agreement No. 17/012/05/Z/IN of August 11th 2005.
A set of movables and property rights held by MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia), the Issuer’s
subsidiary, constituting an economic entity in the form of Legion Polska Sp. z o.o.’s business, is encumbered with a
registered pledge established to secure BRE Bank S.A.’s claims arising under Credit Facility Agreement No.
17/012/05/Z/IN of August 11th 2005.
Pursuant to Agreement No. 12/2005, the Ostrówek Switching Centre, owned by MNI Telecom Sp. z o.o. (formerly
Pilicka Telefonia) is encumbered with a registered pledge (No. 1113974) established to secure the claims of PKO S.A.,
I Radom Branch, under a PLN 4,350,000.00 loan advanced to MNI Telecom on the basis of Agreement No. 170/2003
of December 15th 2003.
Under the agreement of December 15th 2003, the ownership right to the Potkanów Switching Centre and Sulejów
Switching Centre, owned by MNI Telecom, was assigned to PKO S.A., I Radom Branch, to secure the bank’s claims
under the PLN 4,350,000.00 loan advanced to MNI Telecom on the basis of Agreement No. 170/2003 of December
15th 2003.
8.5.2
Environmental Protection Issues and Requirements Which May Affect the Issuer’s Use of
Property, Plant and Equipment
The following factors, which may have effect on the environment, are related to the Szeptel network, operated by the
Issuer:
•
emission of electromagnetic radiation
•
waste management.
With respect to the issues presented above, the Issuer observes the standards applicable to environmental protection, use
of the natural environment and waste management, as specified in the Environmental Protection Act and Waste
Management Act of April 27th 2001, and related secondary legislation.
87
8.5.2.1 Emission of Electromagnetic Radiation
The Szeptel network comprises 13 base stations which are sources of electromagnetic radiation and as such they are
subject to the Environmental Protection Act. For this reason:
•
in all the stations, measurements of electromagnetic fields are taken immediately upon placing the station in
service and after each installation replacement. The results of radiation measurements in 1999–2006 did not
indicate the existence, in any of the base stations, of any electromagnetic radiation which would be classified
as harmful to the environment,
•
pursuant to Par. 2.1.7 and Par. 3.1.8 of the Regulation of the Polish Council of Ministers on projects with
potentially significant environmental impact, dated November 9th 2004, Environmental Impact Reports were
prepared for all of the base stations,
•
environmental impact in the extent specified above does not require submission of combined information
on the use of the natural environment or any environmental charges,
•
all base stations of the Szeptel network are unmanned facilities which do not produce noise, waste or any other
pollution or require water supplies.
8.5.2.2 Waste Management
The Szeptel network is subject to the regulations following from the Waste Management Act of April 27th 2001 due to
the common use of accumulator batteries as a power source at the base stations and use of electronic equipment.
In the Szeptel network, accumulator batteries are used as an emergency power source. After they are exhausted, such
batteries become hazardous waste and have to be utilised by competent companies. Therefore, following the end of the
batteries’ life, the Company is obliged to submit the equipment for utilisation and pay the related costs.
Pursuant to the Act on Waste Electric and Electronic Equipment, the Issuer, as the owner, is responsible for the
utilisation of waste electronic equipment. For this reason, after such equipment’s useful life ends, the Company is
obliged to submit it for utilisation and pay the related costs. The Issuer concluded an agreement with a company holding
appropriate permits for acceptance and utilisation of waste, such as accumulators, batteries and fluorescent lamps.
8.6
Material Agreements
Besides the agreements concluded in the ordinary course of business, during the two years preceding the date of this
Prospectus the Issuer entered into the following agreements which are classified as material based on their scope or
value of related liabilities.
8.6.1
Financing-Related Agreements
On October 22nd 2004, the Issuer entered into agreements on cancellation of interest. The agreements were signed with
the Issuer’s creditors, including com.Investment Sp. z o.o. (formerly Media Net Interactive), Towarzystwo
Inwestycyjne Dedal Sp. z o.o., Caterham Financial Management Ltd. and Inwest Logistics Sp. z o.o., in compliance
with the provisions of Par. 2.2.2.c of the agreements entered into by these creditors and the Issuer on June 23rd 2004
and the annexes to these agreements, respectively of September 15th 2003 in the case of Media Net Interactive Sp. z
o.o. and of January 27th 2004 in the case of the other creditors. As a result of the agreements, PLN 1,567,259.30 of the
total interest of PLN 2,567,259.30 payable by the Issuer on its debt that the creditors purchased from Bank Polska Kasa
Opieki S.A. of Warsaw, was cancelled. The cancellation became effective upon the execution of the agreement.
On January 19th 2005, the Issuer and Towarzystwo Inwestycyjne Dedal Sp. z o.o. entered into an agreement concerning
debt reduction and repayment schedule. Under the agreement, the parties decided to cancel PLN 814,109.29 of the total
debt of PLN 1,164,109.29 representing a portion of Bank Polska Kasa Opieki S.A.’s claim towards the Issuer that was
purchased by Towarzystwo Inwestycyjne Dedal Sp. z o.o. The balance of the debt, i.e. PLN 350,000.00 was repaid by
the Issuer by July 30th 2005. The debt covered by the arrangement, in the amount of PLN 446,706.24, whose payment
was suspended under earlier agreements, will be paid by the Issuer in full, in compliance with the terms of the
arrangement. Performance of the discussed agreement ended all the settlements between the parties relating to the debts
referred to above and thus each of the parties waived any future claims in relation to these debts.
On January 31st 2005, the Issuer entered into agreements with Inwest Logistics Sp. z o.o. and com.Investment Sp. z o.o.
concerning debt reduction and repayment schedule, under which the Issuer’s liabilities towards these creditors were
reduced:
•
of the total debt of PLN 698,465.58, representing the portion of Bank Polska Kasa Opieki S.A.’s claim towards
the Issuer that was purchased by Inwest Logistics Sp. z o.o., PLN 488,465.58 was cancelled under the
agreement made with Inwest Logistics Sp. z o.o. The balance of the debt, i.e. PLN 210,000.00 was paid by the
88
Issuer by July 30th 2005. The debt covered by the arrangement, in the amount of PLN 268,023.74, whose
repayment was suspended under earlier agreements, will be paid by the Issuer in full, in compliance with the
terms of the arrangement;
•
of the total debt of PLN 4,268,400.74, representing the portion of Bank Polska Kasa Opieki S.A.’s claim
towards the Issuer that was purchased by com.Investment Sp. z o.o., PLN 2,718,400.74 was cancelled under
the agreement made with com.Investment Sp. z o.o. The balance of the debt, i.e. PLN 1,550,000 was repaid by
the Issuer by July 30th 2005. The debt covered by the arrangement, in the amount of PLN 365,264.41, whose
payment was suspended under earlier agreements, will be paid by the Issuer in full, in compliance with the
terms of the arrangement.
As a result of these agreements, of the total debt of PLN 6,130,975.61, representing the portion of the Issuer’s liabilities
towards Bank Polska Kasa Opieki S.A. that were purchased by the creditors, PLN 4,020,975.61 was cancelled. The
agreements marked the completion of the restructuring process concerning the debt contracted by the Issuer in the
previous years.
Based on the debt to equity swap agreement of July 12th 2006, made with Caterham Financial Management Ltd. of
Malaysia, Polina Trading Limited of London, a company under British law, holds, under the agreement of January 27th
2004 (amended by virtue of Annex No. 1 of June 23rd 2004 and Annex No. 2 of June 1st 2006), MNI S.A.’s debt of
PLN 1,629,753.01, which is to be swapped for MNI shares of subsequent issues, and the price for which Polina Trading
Limited will purchase the shares may not be lower than PLN 4.50, which means that Polina Trading Limited will be
allocated no more than 362,167 shares. In view of the above, Polina Trading Limited undertook not to demand
repayment of the debt from MNI until December 31st 2006.
Under Credit Facility Agreement No. 17/012/05/Z/IN of August 11th 2005, amended by virtue of Annex No. 1 of
October 24th 2005, Annex No. 2 of December 15th 2005, and Annex No. 3 of July 18th 2006, concluded between the
Issuer and BRE Bank S.A. of Warsaw, the Issuer contracted a long-term investment credit facility in the total amount of
PLN 77,292,296.47. The agreement is described in detail above.
8.6.2
Agreements on Acquisition of Shares in Companies or Interest in Such Companies’ Business
January 9th 2004
Agreement on the acquisition of 26% of shares in Bia - Net Sp. z o.o. of Białystok.
September 27th 2004
Conditional agreement with Media Net Interactive Sp. z o.o. on sale of business (as defined
in Art. 551 of the Civil Code) of Media Net Interactive.
October 27th 2004
Conditional agreement with Mediaholding S.A., on sale of 100 % of shares in Media
Personel Service Sp. z o.o.
November 4th 2004
Final agreement on the acquisition of the business of Media Net Interactive Sp. z o.o. of
Warsaw for the price of PLN 5,500,000.00. The agreement provided for the acquisition of a
business, as defined in Art. 551 of the Civil Code, in the form of an organised set of
intangible and tangible assets used for the purposes of business activities consisting
in particular in the provision of broadly understood value-added telecommunications services
to mobile subscribers. The transfer of all the rights and obligations arising from and
connected with the business onto the Issuer was effected on the date of delivery of the
business, i.e. December 31st 2004. All the benefits and burdens related to the business were
also transferred onto the Issuer on the same date.
May 4th 2005
Preliminary agreement with Polina Trading Limited of London, a British company, on the
purchase by the Issuer of 100% of shares in Legion Polska Sp. z o.o.
May 11th 2005
Agreement on the purchase from com.Investment Sp. z o.o. of Warsaw of 1,167 shares in
Bia-Net Sp. z o.o., with the par value of PLN 500.00 per share, for the price of
PLN 208,818.75.
August 10th 2005
Final agreement on the purchase of 100% of shares in Legion Polska Sp. z o.o. for the price
of PLN 16,500,000.00.
November 14th 2005
Preliminary agreement on the purchase of 100% of shares in MNI Telecom Sp. z o.o.
(formerly Pilicka Telefonia).
December 19th 2005
Final agreement on the purchase of 100% of shares in MNI Telecom Sp. z o.o. formerly
Pilicka Telefonia) for the PLN equivalent of USD 16,834,606.00.
89
July 13th 2006
Conditional agreement on the acquisition by MNI Telecom Sp. z o.o. of 2,570,566 ordinary
registered shares with the par value of PLN 7.00 per share in data.COM Spółka Akcyjna,
representing 76.49 % of the company’s share capital and 76.49% of the total vote at its
general shareholders meeting. The total purchase price of the shares was agreed at
PLN 19,000,000.00. As at the Prospectus Date, all the conditions precedent to the acquisition
by MNI Telecom of shares in data.COM S.A., described in the share purchase agreement of
July 13th 2006, have been fulfilled, and MNI Telecom finally acquired the shares.
August 1st 2006
Agreement on the sale of 100% of shares in Media Personel Service Sp. z o.o.
August 24th 2006
The Issuer submitted to Mr Piotr Gruszecki and Mr Julian Kutrzeba an irrevocable offer to
acquire a total of 200 shares in MoCoHub Sp. z o.o. of Kraków, entered in the Register of
Entrepreneurs maintained by the District Court of Kraków-Śródmieście in Kraków, Division
XI of the National Court Register, under KRS No. 0000157543, representing 100% of the
company’s share capital. The offer was accepted. Concurrently, the Issuer received from
Messrs Piotr Gruszecki and Julian Kutrzeba a reciprocal irrevocable offer to sell to the Issuer
all the shares referred to above. The offer was accepted. The shares will be acquired by the
Issuer or a subsidiary of the Issuer from the existing shareholders of MoCoHub Sp. z o.o. on
the date of execution of the sale agreements attached to the aforesaid offers as their integral
parts. The execution of the agreements is conditional on the Issuer conducting the financial
and legal due diligence of MoCoHub and confirming the truthfulness and accuracy of the
warranties made by the sellers with regard to the standing of MoCoHub and its business.
The share purchase transaction will be executed in two stages:
- stage I – by September 11th 2006 – purchase of 75 (seventy five) shares from each of the
shareholders, jointly 150 (one hundred and fifty) non-preference shares in MoCoHub
Sp. z o.o., with the par value of PLN 500 (five hundred złoty) per share, representing 75% of
the company’s share capital, for the price of PLN 1,500,000.00 to each seller, i.e. jointly
PLN 3,000,000.00, payable within 21 days from the agreement execution date;
- stage II – within seven days from the date of approval by the Shareholders Meeting of
MoCoHub Sp. z o.o. of its financial documentation for 2006 – purchase of the remaining 50
(fifty) shares, i.e. 25 (twenty five) shares from each of the sellers, representing jointly 25% of
the company’s share capital, at a price which is to be determined no later than on the date of
execution of the share purchase agreement as “EBITDA x 8” for each block of 25 shares,
subject to the reservation that it may not be lower than PLN 500,000.00 or higher than PLN
750,000.00.
September 15th 2006 Execution of the final share purchase agreements between Messrs Piotr Gruszecki and Julian
Kutrzeba as the sellers and MNI S.A. as the buyer, concerning a total of 150 shares in the
share capital of MoCoHub Sp. z o.o. of Kraków. These shares represent 75% of the share
capital of MoCoHub. The price for the 150 shares in MoCoHub was set at PLN 3,000,000.00
and is payable within 21 days from the agreements’ execution date. Concurrently with the
agreements on the purchase of 150 shares in MoCoHub, preliminary agreements were
concluded, concerning the purchase of the remaining 50 shares in MoCoHub, following
which MNI S.A. would become the sole shareholder in MoCoHub. The purchase price for
the 50 shares depends on the financial performance of MoCoHub in 2006 and the first six
months of 2007, but may not be higher than PLN 1,500,000.00 or lower than PLN
1,000,000.00.
October 26th 2006
Execution of a preliminary agreement with Invidia Limited of Limassol, Cyprus, concerning
the purchase of 57% of shares in Breakpoint Sp. z o.o.
December 19th 2006 Execution of the final agreement on the purchase of the aforementioned shares, at the price of
PLN 4,664,000.00.
8.6.3
Insurance Agreements
The Issuer holds insurance policies for its telecommunications structures and equipment taken out with Polskie
Towarzystwo Ubezpieczeniowe AIG S.A. and ERGO HESTIA S.A. In addition, the Issuer holds third-party liability
insurance and all-loss car insurance covering its entire fleet of vehicles.
90
8.6.4
Other Agreements
January 22nd 2004
agreement on mutual cooperation in the field of telecommunications services, concluded with
TELEGLOBE, an international telecommunications operator. The conclusion of the
agreement enabled the Issuer to enhance its international telecommunications offering with
respect to voice calls and data transmission;
March 22nd 2004
agreement concluded with Telekomunikacja Polska S.A. whereby the Issuer formally took
possession of the technical and formal/legal infrastructure related to the interconnection point
of the SZEPTEL and TP S.A. networks and telecommunications traffic exchange within the
Numbering Area 85 /Białystok/. The above arrangement enabled direct traffic exchange
between TP S.A. and the Issuer;
May 17th 2004
agreements for the construction and operation of teletext broadcasting systems for Tele 5 and
Polonia 1 TV channels, concluded with Fincast. On the basis of the agreements, the Issuer
constructed the technical infrastructure and integrated it with other operators’
telecommunications systems to enable the use of Premium Rate services to create
commercial solutions for teletext;
May 27th 2004
agreement concluded with DGT, a well-known producer of telecommunications hardware
and software, whereby DGT delivered the software powering the Traffic and Tariff
Calculation System and integrated it with the SZEPTEL telecommunications system.
The state-of-the-art software tool has streamlined the interoperator tariff-setting, invoicing
and settlement processes, enabled access to subscriber billing data in real-time and helped
develop new telecommunications products for subscribers;
June 28th 2004
agreement on networks interconnection and telecommunications traffic exchange, concluded
with PL- NET of Gdynia, a Telecommunications Operator offering its services within
Numbering Areas SN 58 and SN 22. Thanks to the agreement, the Issuer was able to further
complement its offering with respect to access to other operators’ networks, enhance its
offering for own subscribers and establish equal-footing cooperation in the access of PLNET subscribers to Numbering Areas SN 85 and SN 86;
June 29th 2004
agreement with Polska Telefonia Cyfrowa Sp. z o.o., the ERA network operator, defining the
terms and conditions for the provision of PTC with services consisting in the development,
integration and supply of content for multimedia services, as well as the technical conditions
for its supply;
June 29th 2004
agreements with Nextira One Polska Sp. z o.o. for the delivery and implementation in the
SZEPTEL telecommunications system of the infrastructure and necessary software tool for
the provision of broadband access based on the ADSL technology for the residents of the
Podlasie region;
June 30th 2004
agreement concluded with Polska Telefonia Komórkowa CENTERTEL Sp. z o.o., operator
of the IDEA mobile network, defining the terms and conditions for the provision to PTK of
services consisting in the development, integration and supply of content for multimedia
services, as well as the technical conditions for its supply. The agreement concerns voice and
SMS services using Premium Rate numbers;
July 2nd 2004
agreements with PLL LOT for the pilot run of the solution involving the launch of an
international access number for PLL LOT’s Foreign Customer Service Offices, including the
possibility of call reception by the Warsaw-based PLL LOT Call Center. Thanks to the newly
implemented solution, PLL LOT is also able to access the Issuer’s international call offer.
In the initial test phase the solution is to be deployed on the French market only, but later it
will also be implemented in the other countries in which PLL LOT has its offices;
September 3rd 2004
agreement with Austria’s VASCON Telekommunikationsdienst-leistungs GmbH concerning
the integration and deployment of a package of value-added services for customers of
Austrian telecom operators;
September 23rd 2004
framework agreement with Telekomunikacja Polska S.A. on networks interconnection and
telecommunications traffic exchange based on the RIO rates approved this year by the
91
President of the Telecommunications and Post Regulatory Authority (currently the Office of
Electronic Communications);
September 23rd 2004
agreement on interconnection of the IP network with the telecom operator TeliaSonera
International Carrier Poland Sp. z o.o. The conclusion of the agreement made it possible to
develop and offer world-class quality telecommunications services both to own subscribers
and, under interconnection agreements, to customers of other operators;
September 30th 2004
agreement for the provision of multimedia services to Polska Telefonia Cyfrowa Sp. z o.o.,
operator of the ERA GSM network;
October 20th 2004
agreement with Austria’s VASCON Telekomunikationsdienst–leistungs GmbH concerning
the launch of the Issuer’s value-added services on the German market;
October 20th 2004
agreement for the provision of multimedia services to the PLUS GSM network operator
(Polkomtel S.A.);
November 17th 2004
agreement concluded with ELPOS Sp. z o.o., the second largest cable television operator in
the Białystok urban area, concerning the construction and operation of the VoIP solutions for
the network subscribers based on the cable operator’s access infrastructure and “last mile”
connection. Thanks to this agreement and the agreements concluded in April 2004 with two
other cable television operators – DIPOL and SAV – the Issuer secured direct access to 50
thousand potential customers;
November 29th 2004
agreement with PLL LOT for the construction and operation of the interactive SMS-based
customer information system for passengers and customers of the airline. During the initial
phase of their deployment, the interactive services are to provide access to information on
arrivals and departures of scheduled flights;
January 17th 2005
agreement concluded with Radio Zet Sp. z o.o., a nationwide radio station, concerning the
construction, maintenance and operation of commercial services available on the stations’s
website at www.radiozet.pl. As soon as the agreement took effect, the website was hosted on
the Issuer’s servers;
January 31st 2005
agreement with PLL LOT for the provision of fixed-line telephone services to all PLL LOT
organisational units. The services rendered by the Issuer involve local, domestic longdistance and international calls for PLL LOT. Concurrently, the Issuer is already providing
PLL LOT with the service consisting in the transfer of local telephone calls from selected
European countries to the Warsaw-based PLL LOT Call Center;
March 21st 2005
annex to the framework agreement on networks interconnection concluded with TP S.A.,
whereby local calls may be placed by dialing the 1042 prefix, which had so far been used by
the company. Subject to the terms and conditions set out in the framework RIO agreement,
the annex allowed the Issuer to offer basic telecommunications services to TP S.A.
subscribers, including local calls at the lowest price rates compared to the existing market
offers. The new services were first deployed in the Podlasie region, where the Issuer holds
the second largest market share, outdistanced only by TP S.A.;
March 24th 2005
agreement with Austria’s VASCON Telekomunikationsdienstleistungs GmbH concerning the
launch of the Issuer’s value-added services on the Swiss market, the fifth international market
after the Czech Republic, Slovakia, Austria and Germany, where the Issuer has rolled out its
value-added services for subscribers of telecommunications networks;
April 18th 2005
consortium agreement entered into with Tele-PERN Sp. z o.o. with the strategic objective of
collaborating in the implementation of projects involving the use of existing fibre-optic bus
resources to develop and provide data transmission services in international connections;
July 8th 2005
sale agreement whereby the Issuer sold to Tele-PERN Sp. z o.o. the section of its fibre-optic
bus located in southern Poland with a trans-border connection with the Czech Republic
located in the vicinity of Cieszyn;
92
July 15th 2005
agreement entered into with Legion Polska Sp. z o.o., providing a basis for the launch of
integration processes involving the two entities’ operating activities, as well as a common
market offer based on a common product and marketing strategy with respect to value-added
products. As part of the efforts, selected services comprising Legion Polska’ offering have
been migrated to the Issuer’s mobile platform, which represents a better solution from the
point of view of sale processes;
July 28th 2005
agreement concluded with Telewizja Polska S.A., whereby the Issuer integrated its valueadded multimedia services provided to mobile operators and used by all Public Television
stations;
September 27th 2005
agreement concluded with Centrum Elektronicznych Usług Płatniczych eService S.A.,
a specialised subsidiary of Bank PKO BP, on the organisation and support by the Issuer of
telecommunications-based authorisation and settlement traffic pertaining to payment card
transactions and originating from eService’s POS terminals. Under the agreement, the Issuer
is able to integrate its corporate services (including services provided to PolCard S.A. and
CardPoint S.A.), which account for more than two-thirds of the Polish market of such
services,
October 11th 2005
sale agreement whereby the Issuer sold to Tele-PERN Sp. z o.o. a second section of the fibreoptic bus located in southern Poland, which constitutes a whole together with the trans-border
connection to the Czech Republic located in the vicinity of Cieszyn and sold on July 11th
2005. Along with the sale of the second section of the fibre-optic bus, the Issuer assigned, for
the benefit of Tele-PERN Sp. z o.o., the agreements concerning lease of the rights of way
within that area of Poland and the Czech Republic;
April 18th 2006
agreement concluded with Biuro Miss Polonia Sp. z o.o., organiser of the world finals of the
Miss World 2006 beauty contest scheduled for September 2006, which are to be hosted by
Poland. The agreement covers a whole range of projects related to the use of interactive tools
and services which will support the competitions, voting and polls and offer a complete suite
of multimedia products associated with the finals of the Miss World 2006 contest to both
Internet, mobile and fixed phone users;
June 1st 2006
framework agreement with the Issuer’s subsidiary, MNI Telecom Sp. z o.o. (formerly Pilicka
Telefonia) whereby the Issuer sold to MNI Telecom its assets supporting the provision of
fixed-line services and transferred to MNI Telecom some of its staff operating the above
assets. Under the agreement, MNI Telecom is to serve the Issuer’s customers and accede to
the Issuer’s debt under the credit facility granted by BRE Bank S.A. on the basis of Credit
Facility Agreement No. 17/012/05/Z/IN of August 11th 2005, as amended;
January 9th 2007
Framework Cooperation Agreement concluded between Radio ZET Sp. z o.o. and MNI S.A.
Under the agreement, concluded for an indefinite period of time, MNI is to provide
interactive mobile services via SMS channels used in Radio ZET’s on-air commercial
projects.
93
8.7
Court and Arbitration Proceedings
8.7.1
Court Proceedings Concerning Marek Dutka’s Claims
On July 6th 2005, the Court of Arbitration at the National Chamber of Commerce issued a ruling in the proceedings
instigated against the Issuer by Marek Dutka. By virtue of the ruling, Marek Dutka was awarded PLN 1,500,000.00,
along with interest accrued from April 1st 2001 to the date of payment, return of the cost of proceedings and the cost of
representation in proceedings at law. Marek Dutka acquired the claims held against the Issuer by Janusz Dutka, Barbara
Dutka, Wojciech Dutka and Łukasz Dutka, arising under the agreement on the sale of shares in D&D InterCom Spółka
z o.o. of Kraków, dated April 5th 2000, concluded by each of the above persons with the Issuer. In return for the sold
shares, the members of the Dutka family were granted the right to purchase a specific number of newly issued shares at
the issue price. The claims sought in the proceedings arose in relation to the Issuer’s obligation to pay contractual
penalties resulting from unsuccessful issue of Series I Shares, which under the agreement was to be carried out until
March 15th 2001. By virtue of the ruling of July 6th 2005, the Court of Arbitration acknowledged the plaintiff’s claims
and reduced the amount of the contractual penalty by 50%, considering it excessive. However, on August 5th 2005 the
Issuer lodged a complaint to the District Court of Warsaw, I Civil Division, and motioned for a full reversal of the
ruling and for arrest of judgment. The Issuer regards the ruling of the Court of Arbitration as incoherent and unclear,
and claims that the ruling does not settle all the contentious issues between the parties, and – in the first place – it does
not address the objection made by the Issuer in the proceedings under Art. 67.1 of the Arrangement Proceedings Act.
In relation to the arrangement between the Issuer and the Company’s creditors, concluded on November 5th 2003 and
approved by the Regional Court of Łomża, the claims which are the subject of the proceedings, should be reduced by
40% and spread into 30 fixed quarterly instalments. Given that the Court of Arbitration did not issue any decision on
such reduction, the Issuer initiated proceedings in this respect before the District Court of Warsaw. Moreover, the Issuer
applied to the Court of Arbitration for supplementary decision in this case in view of the fact that the court before which
the claims are sought and which were to be recorded in the list of claims covered by arrangement is obliged, given the
existing, final court decision on approval of the arrangement, to assessed whether the terms of the arrangement bind the
plaintiff in relation to the claims sought in the proceedings. By virtue of the decision of September 1st 2005, the Court
of Arbitration at the National Chamber of Commerce did not grant the Issuer’s motion to supplement the ruling of July
6th 2005. On February 15th 2006, the District Court of Warsaw (File II C 120/06) dismissed the Issuer’s complaint and
the decision was upheld by virtue of the decision issued by the Court of Appeals of Warsaw, dated November 29th
2006. The Issuer applied for the preparation of a statement of grounds for the decision and for the delivery of the
decision and the statement of grounds in order to be able to decide whether to file a last resort appeal against the
decision of the Court of Appeals. Furthermore, in relation to the decision of the Court of Appeals, the District Court of
Warsaw issued a decision declaring it enforceable and endorsed it with an enforcement clause. However, the decision
was reversed following a complaint. Notwithstanding the above, in view of the decision unfavourable for the Issuer, i.e.
the final ruling of the Court of Arbitration at the National Chamber of Commerce of July 6th 2005 and the decision of
the District Court of Warsaw of February 15th 2006, the Issuer’s Management Board considered it advisable and
justified, in the light of Art. 35.d.1.1 of the Accountancy Act of September 29th 1994, to create a provision to cover the
liability arising under the ruling of the Court of Arbitration at the National Chamber of Commerce of July 6th 2005.
The provision will enable the Issuer to substantially satisfy Marek Dutka’s claims if the actions undertaken by the Issuer
with a view to reversing the ruling issued by the Court of Arbitration at the National Chamber of Commerce prove
unsuccessful. The provision covers the PLN 1,500,000.00 awarded by the Court of Arbitration at the National Chamber
of Commerce, the cost of arbitration proceedings and the cost of representation in proceedings at law. Moreover, in
view of the decision issued by the Court of Appeals of Warsaw, the Management Board resolved to increase the
provision to PLN 3,000,000.00 with a view to covering all Marek Dutka’s claims.
8.7.2
Court Proceedings against Tele-Pern Sp. z o.o.
Court proceedings initiated by the Issuer against Tele-Pern Sp. z o.o. are pending before the Regional Court of Warsaw,
XX Commercial Division, File Sign. XX GNc 872/05. The Issuer’s statement of claim includes a demand for payment
of a total amount of PLN 628,164.26 and for awarding statutory interest on this amount for the period from the lodging
of the claim to the payment date, cost of proceedings and cost of representation in proceedings at law. On December
12th 2005, the Issuer brought, before the Regional Court of Warsaw, XX Commercial Division, a suit in proceedings by
writ of payment against Tele-Pern Sp. z o.o., claiming payment of monetary claims and interest under commercial
transactions. On December 23rd 2005, in case No. XX GNc 872/05, the Regional Court of Warsaw, XX Commercial
Division, issued against the debtor, Tele-Pern Sp. z o.o., an order for payment in proceedings by writ of payment, as
motioned in the Issuer’s statement of claim. In its judgement, the Court declared that Tele-Pern Sp. z o.o. was obliged to
pay to the Issuer an amount of PLN 617,241.38 plus accrued statutory interest for the period from December 12th 2005
to the payment date, in the amount of PLN 10,922.88 and the cost of proceedings in the amount of PLN 7,215.00.
On January 5th 2006, the Issuer submitted, to the Court Enforcement Officer of the Second Area at the District Court of
Płock, a motion for securing the claim awarded to the Issuer under the order of payment issued by the Regional Court of
94
Warsaw, XX Commercial Division, in case No. XX GNc 872/05. To date, the Court Enforcement Officer has issued no
decision on securing the Issuer’s claim. On January 13th 2006, Tele-Pern Sp. z o.o. submitted defence against the order
of payment and a petition for exemption from costs of court proceedings. The Court did not grant the petition and
obliged Tele-Pern Sp. z o.o. to cover the costs of pending court proceedings. Upon payment of the cost of defence
against the order of payment, on May 15th 2006 the Court delivered to the Issuer’s legal representative
a copy of Tele-Pern Sp. z o.o.’s defence against the order of payment. On May 29th 2006, the Issuer’s legal
representative submitted a letter presenting the Issuer’s position on the objections raised by Tele-Pern Sp. z o.o. The
letter was submitted by the date designated by the Court. It is not currently possible to predict the outcome of the
discussed proceedings and their effect on the Issuer.
8.7.3
Criminal Proceedings Concerning Acting to the Detriment of the Issuer
On July 29th 2005, the Issuer was notified that the Office of District Prosecutor for Warszawa Śródmieście filed with
the District Court for Warszawa Śródmieście, VII Criminal Division, an indictment in the case against Michał
Skolimowski, Andrzej Wyszyński and Maciej Wąż, charged with acting to the Issuer’s detriment, causing it to incur a
loss of over PLN 6m. The proceedings are still pending before the court of first instance (File Sign. VII K 1181/05).
On August 8th 2005, the Company received from the District Court for Warszawa Śródmieście, VII Criminal Division,
a notification that the Łomża Regional Prosecutor’s Office submitted an indictment against Andrzej Wyszyński, former
Vice-President of the Issuer’s Management Board, charged with offences under Art. 296.1–3, in concurrence with
Art. 585.1 of the Commercial Companies Code, in concurrence with Art. 12 of the Criminal Code, against Dariusz
Zych, the Issuer’s former commercial proxy, charged with offences under Art. 296.1–3, in concurrence with Art. 585.1
of the Commercial Companies Code, in concurrence with Art. 18.2 of the Criminal Code,
in conjunction with Art. 12 of the Criminal Code, and against Stanisław Gasinowicz, a shareholder of the Issuer,
charged with offences under Art. 18.2 of the Criminal Code, in conjunction with Art. 296.1–3, in concurrence with
Art 585.1 of the Commercial Companies Code, in conjunction with Art. 12 of the Criminal Code. These persons are
charged with acting to the detriment of the Issuer, causing it to incur a loss of PLN 8,940,944.20.
The proceedings are still pending before the court of first instance (File Sign. VII K 1199/04).
The actions undertaken by the Prosecutors’ Offices based on the documentation delivered by the Issuer are designed to
identify and investigate all abuses, as well as to redress damage inflicted upon the Issuer in 2001–2002 by its
management staff.
8.7.4 Arrangement Proceedings with the Issuer’s Creditors
In its decision issued on November 5th 2003 under Art. 63.2 of the Arrangement Proceedings Act, dated October 24th
1934, the District Court of Łomża approved the arrangement reached on October 15th 2003 in arrangement proceedings
between the Issuer and its creditors. The decision became final on November 13th 2003.
Under the arrangement approved by the District Court of Łomża, the Issuer was obliged to:
1) repay in full individual claims of up to PLN 10,000.00, with a total amount of PLN 168,171.31 within three
months from the end of the quarter in which the decision approving the arrangement became final, that is in the
first quarter of 2004. The Issuer performed this obligation.
2) repay the other creditors’ claims reduced by 40%, in a total amount of PLN 5,319,389.10, in the form of 30
quarterly instalments, each amounting to PLN 177,312.97, payable as follows:
a. first instalment – within six months from the end of the quarter in which the decision approving the
arrangement became final, that is in the second quarter of 2004. The Issuer made this payment within
the prescribed time.
b. the other instalments – in subsequent quarters, by the end of each quarter.
To date, the Issuer has paid a portion of the claims covered by the arrangement in a total amount of PLN 1,573,058.02.
The balance of the claims to be repaid under the arrangement in the future stands at PLN 3,914,502.39. The Issuer has
been performing its obligations under the arrangement in a correct and timely manner. As at the Prospectus Date, no
proceedings concerning the annulment of the arrangement are pending.
Under the decision issued by the District Court of Łomża, from the opening date of the arrangement proceedings no
interest will be charged on the claims covered by the arrangement.
95
8.8
Organisational Structure
8.8.1 Overview of the Group and the Issuer’s Place in the Group
The Issuer’s Group comprises the Issuer and its subsidiaries enumerated in Section 8.8.2 below. As at the date of
acquisition (control assumption), the assets and liabilities of an acquired subsidiary are measured at fair value. The
excess of the acquisition cost over the fair value of the acquired subsidiary’s identifiable assets is recognised in the
balance sheet as goodwill. If the acquisition cost is lower than the fair value of the identifiable net assets of an acquired
subsidiary, the difference is disclosed as profit in the income statement for the period in which the assets were acquired.
Minority interests are accounted for at fair value of the net assets attributable to minority interests. In the following
periods, losses attributable to minority interests which exceed the minority shareholders’ investment in a subsidiary
reduce the consolidated profit or increase the consolidated loss. Subsidiaries sold in a financial year are included in the
consolidation from the beginning of a given financial year until the date on which they are sold. The net profit/(loss) of
subsidiaries acquired in a financial year is disclosed in the financial statements from the moment when a given
subsidiary is acquired.
Where necessary, adjustments are made to the financial statements of subsidiary undertakings to bring the accounting
policies applied by a given subsidiary in line with those applied by the Parent Undertaking (transition from the
Accountancy Act to the IFRS). Subsidiary undertakings are consolidated with the full method – the consolidated
financial statements are prepared in such a manner as if the entire Group constituted a single business. Consequently, all
transactions, balances, income and expenses between the related undertakings included in the consolidation are
eliminated from the consolidated financial statements. The net profit/(loss) of subsidiary undertakings is disclosed as
the net profit/(loss) of the Group in proportion to the equity interests held in subsidiary undertakings. The remaining
portion is reported under profit/(loss) attributable to minority interests.
The financial statements of subsidiary undertakings are prepared for the same reporting period as those of the Parent
Undertaking.
The consolidated cash-flow statement is prepared by aggregating certain items of the cash-flow statements of individual
undertakings consolidated with the full method and by making consolidation adjustments to the aggregated amounts.
The statement of changes in consolidated equity is prepared on the basis of the consolidated balance sheet and
statements of changes in non-consolidated equity.
The consolidation documentation contains data aggregated across multiple reporting periods, which include:
- changes in equity, and
- consolidation goodwill,
as well as disclosures relating to the period covered by the consolidated financial statements.
8.8.2
8.8.2.1
List of Material Subsidiaries of the Issuer
The Issuer’s Subsidiaries
96
consolidation
method applied
(valuation with
equity method or
indication that a
subsidiary is not
subject to
consolidation /
valuation with
equity method)
Control/joint
control/significant
influence exercised
since
Shares at cost
Total valuation
allowances
75
No.
Company name
and form of
incorporation
Registered address
Business profile
Nature of capital
link (subsidiary,
jointlycontrolled, or
associated
undertaking,
direct or indirect)
1
Szeptel Internet
Sp z o.o.
360-126 Kraków
ul. G.Zapolskiej 3
Internet services
subsidiary
undertaking
not consolidated
Apr 5 2000
75
18-210 Szepietowo
ul. Sienkiewicza 52
telecommunications,
call center projects
subsidiary
undertaking
consolidated
Jun 7 2000
101
18-210 Szepietowo
ul. Sienkiewicza 52
web page service
subsidiary
undertaking
not consolidated
Sep 5 2000
101
2
3
MNI Technology
Development
(formerly Szeptel
International)
Sp. z o.o.1
E.PL S.A. in
liquidation 2
Carrying value of
shares
101
101
4
Media Personel
Serwis
Sp. z o.o.3
00-503 Warsaw
ul. Żurawia 8
software services,
human resources
management
subsidiary
undertaking
consolidated
Dec 20 2004
50
6
Legion Polska
Sp. z o.o.
00-503 Warsaw
ul. Żurawia 8
telecommunications
services
subsidiary
undertaking
consolidated
Aug 10 2005
16,669
0
16,669
7
MNI Telecom Sp. z
o.o. (formerly
Telefonia Pilicka
Sp. z o.o.)
26-600 Radom
ul.Potkanowska
54a
telecommunications
services
subsidiary
undertaking
consolidated
Dec 19 2005
55,343
0
55,343
8
MoCoHub
Sp. z o.o.
31-128 Kraków
ul. Karmelicka 45/8
telecommunications
services
subsidiary
undertaking
consolidated
Sep 15 2006
3,030
0
3,030
50
1
On September 29th 2006, the Management Board of MNI Technology Development Sp. z o.o. resolved to adopt the plan of the company’s transformation into a joint-stock company.
By virtue of a decision issued by the District Court of Białystok, XII Commercial Division of the National Court Register, on September 11th 2006, E. PL. S.A. was deleted from the National Court Register following the
completion of the liquidation proceedings.
3
Based on the sale agreement concluded between the Issuer and a natural person on August 1st 2006, 1,000 shares in Media Personel Serwis Sp. z o.o, representing 100% of the company’s share capital, were disposed of.
2
97
8.8.2.2
Subsidiaries of MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia)
Company name
Registered address
Business profile
% of share capital held
% of total vote at GM
Share capital
(PLN ‘000)
MNI Mobile (formerly
Ogólnopolska Sieć
Szkieletowa) S.A
ul. Sienkiewicza 52
18-210 Szepietowo
construction of
nationwide fibre-optic
network
100%
100%
1.000
telecommunications
activities in Warsaw
76.49%
76.49%
23,523.962
Data.Com S.A
8.9
Plac Czerwca 1976 r.
nr 4
02-495 Warsaw
Shareholdings in Other Undertakings
Other undertakings in which the Issuer holds equity interests are enumerated in Section 8.8.2 hereof.
98
9.
CORPORATE GOVERNANCE
Statement on the Issuer’s Compliance with Corporate Governance Rules
The Issuer observes the corporate governance standards as stipulated by the Polish law and the provisions of Par.
29 of the WSE Rules. Additionally, it complies with the entire body of corporate governance rules set forth in
the document entitled “Best Practices in Public Companies”. The most recent statement on the Issuer’s
compliance with the corporate governance rules was published in Current Report No. 27/2006.
99
10. MEMBERS OF MANAGEMENT AND SUPERVISORY
BODIES, EMPLOYEES
10.1 Practices of the Management and Supervisory Bodies
10.1.1 Duration and Expiry Dates of Terms of Office
10.1.1.1
Management Board
As stated in Par. 6.2 of the Issuer’s Articles of Association, the Management Board’s term of office runs for
three years. Members of the Management Board are appointed for a joint term of office. The table below shows
the terms of office of the Issuer’s Management Board in the previous financial year:
First name and surname
Position
Appointment date
Expiry date
Mariusz Pilewski
President
Apr 14 2003
Jun 30 2006
Leszek Kułak
Vice-President
Sep 25 2003
Jun 30 2006
Zdzisław Wójcik
Member
Sep 28 2005
Jun 30 2006
The table below shows the term of office of the current Management Board:
Position
Appointment date
Piotr König
President
Jun 30 2006
Mariusz Pilewski
Member
Leszek Kułak
Member
Term of office
3 years
10.1.1.2
Supervisory Board
As stated in Par. 11.2 of the Issuer’s Articles of Association, the Supervisory Board’s term of office runs for
three years. Members of the Supervisory Board are appointed for a joint term of office. The table below shows
the terms of office of the Issuer’s Supervisory Board in the previous financial year:
Position
Appointment date
Expiry date
Andrzej Piechocki
Chairman
Apr 14 2003
Jun 30 2006
Tomasz Swadkowski
Deputy Chairman
Dec 20 2004
Jun 30 2006
Barbara Dąbrowska
Member
Apr 14 2003
Jun 30 2006
Piotr König
Member
Apr 14 2003
Jun 30 2006
Stanisław Widera
Member
Apr 14 2003
Jun 30 2006
Nov 4 2005
Krzysztof Radziszewski
Member
Apr 14 2003
(resignation)
The table below shows the term of office of the current Supervisory Board:
Position
Appointment date
Andrzej Piechocki
Chairman
Robert Gwiazdowski
Deputy Chairman
Jun 30 2006
Michał Tomczak
Secretary
Tomasz Karasiński
Member
Stanisław Widera
Member
Term of office
3 years
10.1.2 Agreements for Provision of Services between Members of Administrative,
Management and Supervisory Bodies and the Issuer or any of Its Subsidiaries
Mr Michał Tomczak, who sits on the Issuer’s Supervisory Board, as a partner in the law firm Spółka Adwokacka
Tomczak i Partnerzy of Warsaw is party to the agreement concluded on June 28th 2006 between the Issuer and
Spółka Adwokacka Tomczak i Partnerzy, whereby the latter is to provide legal advice on all matters connected
with the issue of Series L Shares by the Issuer. The agreement was concluded on market terms.
100
10.1.3 Information on the Issuer’s Audit and Remuneration Committees
The audit committee consists of the following members: Robert Gwiazdowski, Tomasz Karasiński, Michał
Tomczak
The remuneration committee consists of the following members: Andrzej Piechocki, Stanisław Widera
Rules of Procedure of the Audit and Remuneration Committees
Pursuant to Par. 32 of the Rules of Procedure of the Issuer’s Supervisory Board, the audit and remuneration
committees are set up within the Supervisory Board. The audit committee is composed of at least two
independent members and at least one member qualified and experienced in the field of accounting and finances.
The audit committee has the following responsibilities: supervise, on an ongoing basis, the Issuer’s finances,
review the Directors’ Report on the Company’s Operations and the financial statements for the previous
financial year for their consistency with the accounting books and documents, as well as the actual state of
affairs, review the Management Board’s motions concerning distribution of profit or coverage of loss, submit to
the Supervisory Board a report on the reviews referred to above so that it may adopt appropriate resolutions, and
take any other steps necessary for the assessment of the Issuer’s financial standing.
The scope of responsibilities of the remuneration committee includes: development of the remuneration policy
for the Issuer’s employees, taking into account the rules for and actual possibilities of bonus payments, as well as
supervision, on an ongoing basis, of how the remuneration policy for the Issuer’s employees and members of its
governing bodies is implemented. The remuneration committee may motion with the Issuer’s Management
Board for award of a bonus payment to a particular employee, accompanying each motion with a written
justification. The audit and remuneration committees should submit to the Supervisory Board annual reports on
their activities. Such reports, together with the materials prepared for the purposes of the Ordinary General
Shareholders Meeting convened in a given financial year, are made available to the shareholders.
10.2 Administrative, Management and Supervisory Bodies and
Senior Management Staff
10.2.1 Information on Members of Administrative, Supervisory and Senior Management Staff
10.2.1.1
Management Board
Piotr König
Position:
President of the Management Board
Place of work:
Issuer’s registered office at ul. Żurawia 8, Warsaw, Poland
Professional experience: Piotr König graduated from the Department of Fine Mechanics of the Technical
University of Warsaw. Following graduation, he worked for private companies
specialising in the distribution of computer hardware and consumer electronics. From
1999 he was employed at Nieruchomości i Kapitał S.A., a company specialising in
real-estate investment and development projects, where he was subsequently
appointed President of the Management Board. In 2001, he co-founded Media Net
Interactive Sp. z o.o. (current name com.Investment Sp. z o.o.) and then became
President of its Management Board. Soon afterwards, the company became the
leading player on the market of value-added services for fixed-line and mobile
operators. The company, which is the Issuer’s largest shareholder, contributed
significantly to the Issuer’s current market position. From April 2003 to June 2006,
Mr König was member of the company’s Supervisory Board.
Names of all incorporated companies and partnerships in which Piotr König has served as member of their
administrative, management or supervisory bodies or partner/shareholder at any time in the past five years:
member of the Management Board of Nieruchomości i Kapitał S.A., member of the
Management Board of com.Investment Sp. z o.o., until July 6th 2006 – member of the
101
Management Board of Mediaholding S.A., until July 19th 2006 – member of the
Management Board of Telestar Sp. z o.o., until June 30th 2006 – member of the
Issuer’s Supervisory Board, shareholder in Inwest Logistics Sp. z o.o.
Furthermore, Piotr König represented that in the past five years:
•
•
•
•
no final court judgment has been passed convicting him on fraud charges,
he has not served as member of the administrative, management or supervisory bodies of any entity
declared bankrupt, placed under administration or in liquidation during his term of office,
no court order has been issued barring him from serving as member of the administrative, management
or supervisory bodies of any public company or from participating in the management or conduct of the
affairs of any public company,
no statutory or regulatory body (including professional organisations) has made any official public
charges or imposed any sanctions on Piotr König.
There exist no family ties between Piotr König and the other members of the Issuer’s management, supervisory
or administrative bodies.
Mariusz Pilewski
Position:
Place of work:
Professional experience: Mariusz Pilewski graduated from the Department of Fine Mechanics of the Warsaw
University of Technology. Mr Pilewski began his professional career in 1987 at ZPC
Ursus.
In 1990-1995, he worked for private companies specialising in the sale of
telecommunications equipment and satellite receivers. In late 1990’s, he held the
position of President of a joint-stock company engaged in real-estate investments.
Since 1999, he has been President of the Management Board of Inwest Logistics, a
consultancy offering advisory services in the area of asset management and project
financing to legal persons. Since 2002, Mr Pilewski has been President of the
Management Board of Telestar, established to broadcast the interactive television
channel iTV under the licence awarded by the National Radio and Television
Broadcasting
Board.
From
April
2003
to
June
2006,
Mr Pilewski was President of the Issuer’s Management Board.
Names of all incorporated companies and partnerships in which Mariusz Pilewski has served as member of the
President of the Management Board and shareholder in Inwest Logistics Sp. z o.o.,
President of the Management Board and shareholder of Marengo Sp. z o.o., President
of the Management Board of Telestar Sp. z o.o., President of the Management Board
of Ogólnopolska Sieć Szkieletowa S.A., President of the Management Board of MNI
Technology Development (formerly Szeptel International) Sp. z o.o., member of the
Supervisory Board and shareholder of Nieruchomości i Kapitał S.A.
Furthermore, Mariusz Pilewski represented that in the past five years:
•
•
•
•
charges or imposed any sanctions on Mariusz Pilewski.
102
There exist no family ties between Mariusz Pilewski and the other members of the Issuer’s management,
supervisory or administrative bodies.
Leszek Kułak
Position:
Place of work:
Professional experience: Leszek Kułak holds a diploma from the Electronics Department of the Warsaw
University of Technology, with a major in telecommunications. From the end of
1980’s
he worked for private companies specialising in the distribution of electronic and
telecommunications equipment and provision of related services. In 1995–2001, he
was member of the Management Board of Telemedia Sp. z o.o. Since 1995, Mr Kułak
has worked for companies providing value-added services for telecommunications
operators In 2001-2005, Mr Kułak was member of the Management Board of Media
Net Interactive Sp. z o.o., specialising in the provision of value-added services for
fixed-line and mobile operators. From September 2003 to June 2006, Mr Kułak served
as Vice-President of the Issuer’s Management Board.
Names of all incorporated companies and partnerships in which Leszek Kułak served as member of the
Member of the Management Board and shareholder in Net Interactive Sp. z o.o.,
member of the Management Board of Legion Polska Sp. z o.o.
Furthermore, Leszek Kułak represented that in the past five years:
•
•
•
•
charges or imposed any sanctions on Leszek Kułak.
There exist no family ties between Leszek Kułak and the other members of the Issuer’s management,
10.2.1.2 Supervisory Board
Andrzej Piechocki
Position:
Chairman of the Supervisory Board
Professional experience: Andrzej Piechocki graduated from the Department of Fine Mechanics of the Warsaw
University of Technology. In 1989–1993, he served on management boards of private
companies as their president. In the years 1993–1997, Andrzej Piechocki was an
adviser to a minister of the Polish government. From 1992 through 2001, he
conducted business as a sole trader under the name of Andrzej Piechocki Doradztwo
Finansowe, specialising in finance, tax and investment consultancy services. In 2001–
2002, Mr Piechocki worked for the government administration. Since 2003, he has
been Chairman of the Issuer’s Supervisory Board.
Names of all incorporated companies and partnerships in which Andrzej Piechocki served as member of the
103
member of the Supervisory Board of Zespół Elektrowni PAK S.A., President of the
Management Board of Towarzystwo Inwestycyjne Dedal Sp. z o.o., President of the
Management Board of Dedal Inwestycje Sp. z o.o.
Furthermore, Andrzej Piechocki represented that in the past five years:
•
•
•
•
charges or imposed any sanctions on Andrzej Piechocki.
There exist no family ties between Andrzej Piechocki and the other members of the Issuer’s management,
Robert Gwiazdowski
Position:
Member of the Supervisory Board
Professional experience: Robert Gwiazdowski holds a PhD in law. He is a tax adviser and a reader at the
Faculty of Law and Administration of Warsaw University. Mr Gwiazdowski is the
President of Adam Smith Centre and Chairman of the Supervisory Board at Zakład
Ubezpieczeń Społecznych (the Social Security Authority)
Names of all incorporated companies and partnerships in which Robert Gwiazdowski served as member of the
shareholder in Capital Investments Sp. z o.o., general partner and a shareholder in
Gwiazdowski + Capital Investments SKA, shareholder in RG Service Sp. z o.o.,
general partner at RG Service Sp. z o.o. SK, Chairman of the Supervisory Board of
Gemius S.A., member of the Supervisory Board of Interia S.A., Chairman of the
Supervisory Board of IX Narodowy Fundusz Inwestycyjny E. Kwiatkowskiego S.A.,
member of the Supervisory Board of Nafta Polska S.A., and Chairman of the
Supervisory Board of FK Partners Sp. z o.o.
Furthermore, Robert Gwiazdowski represented that in the past five years:
•
•
•
•
charges or imposed any sanctions on Robert Gwiazdowski.
There exist no family ties between Robert Gwiazdowski and the other members of the Issuer’s management,
104
Michał Tomczak
Position:
Secretary of the Supervisory Board
Professional experience: Michał Tomczak graduated from the Faculty of Law at Warsaw University. In 1984,
he completed the legal training programme for judges, and in 1988 – the legal training
programme for attorneys at the District Bar Council in Płock. He was entered in the
list of attorneys maintained by the District Bar Council in 1989. In 1991, he
established his own law firm. From 1993 through 1994 Michał Tomczak was a partner
at Kancelaria Prawnicza Banku Handlowego i Partnerzy, the other partners being
Marek Furtek and Józef Palinka. In 1995, he resumed his own practice and is currently
running a partnership under the name of Tomczak i Partnerzy Spółka Adwokacka.
Names of all incorporated companies and partnerships in which Michał Tomczak served as member of the
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Ekstraklasa S.A. of Warsaw
Tajro Spółka z o.o. of Warsaw
Noiro Spółka z o.o. (Lumene Spółka z o.o.) of Warsaw
ttsp/HWP Spółka z o.o. of Warsaw
MTKA 0199 Spółka z o.o. of Warsaw (also a shareholder)
MT Operations Spółka z o.o. of Warsaw (also a shareholder)
DPM Spółka z o.o. of Warsaw
HGC S.A. of Warsaw
HPO Spółka z o.o. of Warsaw
HPA Spółka z o.o. of Warsaw
Towarzystwo Inwestycyjne Platan Spółka z o.o. of Warsaw
Mediaholding S.A. of Warsaw
Reba S.A. of Warsaw
Munksjö Packaging Spółka z o.o. of Warsaw
MTKA 0299 Sp. z o.o. of Warsaw
QSJ 1 Sp. z o.o. of Warsaw
TPK 1 Sp. z o.o. of Warsaw
105
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Furthermore, Michał Tomczak represented that in the past five years:
•
•
•
•
served as member of the administrative, management or supervisory bodies of entities declared
bankrupt, placed under administration or in liquidation during his term of office:
Noiro Spółka z o.o. (Lumene Spółka z o.o.) of Warsaw
Munksjö Packaging Spółka z o.o of Warsaw
charges or imposed any sanctions on Michał Tomczak.
There exist no family ties between Michał Tomczak and the other members of the Issuer’s management,
Tomasz Karasiński
Position:
Professional experience: Tomasz Karasiński holds a degree in Banking and Finance from the Faculty of
Economics and Sociology of the University of Łódź. For six years, he was employed
with PriceWaterhouseCoopers as an auditor, and afterwards he worked for three years
as the financial director at @ Entertainment, Inc and Polska Telewizja Kablowa. He
was financial director and a member of the Management Board of Eurozet Sp. z o.o.
for five years. Since September 2005, he has been a consultant for the media and
telecommunications sectors.
Names of all incorporated companies and partnerships in which Tomasz Karasiński served as member of the
Member of the Management Board of Eurozet Sp. z o.o. between June 2001 and
September 2005, member of the Management Board and a shareholder in KMT
Investment Sp. z o.o. since November 2005.
Furthermore, Tomasz Karasiński represented that in the past five years:
•
106
•
•
•
charges or imposed any sanctions on Tomasz Karasiński.
There exist no family ties between Tomasz Karasiński and the other members of the Issuer’s management,
Stanisław Widera
Position:
Professional experience: Stanisław Widera completed higher technical studies with a major in electrical power
engineering. Within the period covered by this information, Stanisław Widera has
conducted business activities involving investment consultancy, particularly in the
power sector.
Names of all incorporated companies and partnerships in which Stanisław Widera served as member of the
Shareholder in and member of the Management Board of Temar Sp. z o.o., in 2001–
2004 – member of the Management Board of Towarzystwo Elektrowni Gazowych Sp.
z o.o., member of the Supervisory Board of Famak S.A.
Furthermore, Stanisław Widera represented that in the past five years:
•
•
•
•
charges or imposed any sanctions on Stanisław Widera.
There exist no family ties between Stanisław Widera and the other members of the Issuer’s management,
10.2.2
Conflicts of Interests within Administrative, Management and Supervisory Bodies and
among Senior Management Personnel
Piotr König
A potential conflict of interests exists with respect to Piotr König as he acts both as President of the Management
Board of com. Investment Sp. z o.o., which is the Issuer’s shareholder, and President of the Issuer’s
Management
Board.
As stated above, the conflict is of a potential nature only and arises from the fact that Piotr König, as President of
the Issuer’s Management Board, has direct access to inside information on the Issuer’s business operations,
which may directly influence his investment decisions and the manner of exercising rights attached to the shares
held by com. Investment. However, since the Issuer fulfils the requirements set forth in relevant regulations on
possession and use of inside information, the conflict is of a potential nature only.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Piotr
König would be appointed President of the Issuer’s Management Board. There are no restrictions agreed to by
Mr Piotr König with respect to the time of selling the Issuer securities held by him.
107
Mariusz Pilewski
No conflict of interest exists between the Issuer and Mariusz Pilewski. Mariusz Pilewski ceased to perform the
function of President of the Management Board of Inwest Logistics Sp. z o.o.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Mariusz
Pilewski would be appointed Member of the Issuer’s Management Board. There are no restrictions agreed to by
Mr Mariusz Pilewski with respect to the time of selling the Issuer securities held by him.
Leszek Kułak
No conflict of interest exists between the Issuer and Leszek Kułak.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Leszek
Kułak would be appointed Member of the Issuer’s Management Board. There are no restrictions agreed to by Mr
Leszek Kułak with respect to the time of selling the Issuer securities held by him.
Andrzej Piechocki
A potential conflict of interests arises with regard to Andrzej Piechocki as he acts both as President of the
Management Board of Dedal Inwestycje Sp. z o.o., which is the Issuer’s shareholder, and as Chairman of the
Issuer’s Supervisory Board. As stated above, the conflict is of a potential nature only and arises from the fact that
Andrzej Piechocki, as Chairman of the Supervisory Board, may have direct access to certain inside information
on the Issuer’s business operations, which may directly influence his investment decisions and the manner of
exercising rights attached to the shares held by Dedal Inwestycje. However, since the Issuer fulfils the
requirements set forth in relevant regulations on possession and use of inside information, the conflict is of a
potential nature only.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Andrzej
Piechocki would be appointed Chairman of the Issuer’s Supervisory Board.
The shares held by Andrzej Piechocki are pledged as collateral for claims under a bank loan.
Robert Gwiazdowski
No conflict of interest exists between the Issuer and Robert Gwiazdowski.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Robert
Gwiazdowski would be appointed Member of the Issuer’s Supervisory Board. There are no restrictions agreed to
by Mr Robert Gwiazdowski with respect to the time of selling the Issuer securities held by him.
Michał Tomczak
No conflict of interest exists between the Issuer and Michał Tomczak.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Michał
Tomczak would be appointed Secretary of the Issuer’s Supervisory Board. There are no restrictions agreed to by
Mr Michał Tomczak with respect to the time of selling the Issuer securities held by him.
Tomasz Karasiński
No conflict of interest exists between the Issuer and Tomasz Karasiński.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Tomasz
Karasiński would be appointed Member of the Issuer’s Supervisory Board. There are no restrictions agreed to by
Mr Tomasz Karasiński with respect to the time of selling the Issuer securities held by him.
Stanisław Widera
No conflict of interest exists between the Issuer and Stanisław Widera.
No agreements with significant shareholders, customers, suppliers or other persons exist, under which Stanisław
Widera would be appointed Member of the Issuer’s Supervisory Board. There are no restrictions agreed to by Mr
Stanisław Widera with respect to the time of selling the Issuer securities held by him.
108
10.3 Remuneration and Other Benefits
10.3.1 Remuneration of Administrative, Supervisory and Senior Management Staff
Remuneration paid and in-kind benefits awarded by the Issuer and its
subsidiaries for any services provided by the person to the Company or its
subsidiaries in 2006
Piotr König, President of MNI S.A.
Management Board
PLN 66 thousand
under a management contract with MNI S.A.
Mariusz Pilewski,
and
Leszek Kułak,
PLN 378 thousand
(under a management contract concluded by the Issuer with
Inwest Logistics Sp. z o.o.)
Zdzisław Wójcik
PLN 147 thousand
Andrzej Piechocki, Chairman of the
Supervisory Board
Robert Gwiazdowski, Deputy Chairman of
the Supervisory Board
Michał Jakub Tomczak, Secretary of the
Supervisory Board
Tomasz Karasiński, Member of the
Supervisory Board
Stanisław Widera, Member of the
Supervisory Board
PLN 37 thousand
10.3.2 Retirement, Pension and Related Benefits for Administrative, Supervisory and Senior
Management Staff
As at November 30th 2006, the Issuer created provisions for:
•
unused holidays in the amount of PLN 591,297.02,
•
retirement severance pays in the amount of PLN 9,208.64.
10.4 Shares and Share Options Held by
Supervisory and Senior Management Staff
Piotr König, President of the Management
Board
Mariusz Pilewski, Member of the
Management Board
Leszek Kułak, Member of the Management
Board
Supervisory Board
Robert Gwiazdowski, Deputy Chairman of
Michał Tomczak, Secretary of the
Supervisory Board
Supervisory Board
Supervisory Board
Administrative,
Issuer shares and share options held
Indirectly, as the President of the Management Board of com.Investment
Sp. z o.o., Mr König holds 7,357,590 Issuer shares, representing 32.60% of
the Issuer share capital
NA
NA
1,398,812 Issuer shares, representing 6.20% of the Issuer’s share capital
NA
NA
NA
NA
109
10.5 Employment
10.5.1 Headcount at End of Period
Job type
Administration
Sales
Technology
Average
headcount,
including:
Province of
Białystok
Warsaw
As at Prospectus Date
7
38
14
Dec 31 2006
7
38
14
Jun 30 2006
11
39
45
Dec 31 2005
15
31
48
Dec 31 2004
12
15
34
Dec 31 2003
14
14
38
76
76
95
94
61
66
31
31
47
42
53
58
45
45
48
52
8
8
As at the Prospectus Date, the employee headcount was 59.
10.5.2 Arrangements Concerning Employees’ Share in the Issuer’s Capital
There exist no arrangements concerning employees’ share in the Issuer’s capital.
110
11.
MAIN SHAREHOLDERS
11.1
Persons Other than Administrative, Supervisory or
Management Staff, Holding Shares in the Issuer or Voting
Rights at GM
Based on the information provided to the Issuer, the following entities held significant blocks of Issuer shares as
at the Prospectus Date:
No.
Shareholder
1.
2.
com.Investment Sp. z o.o.
Andrzej Piechocki
CATERHAM FINANCIAL
MANAGEMENT Ltd.
4.
11.2
Number of
shares
% share
Number of votes
at GM
% share
7,357,590
1,398,812
32.60
6.20
7,357,590
1,398,812
32.56
6.19
1,250,000
5.54
1,250,000
5.53
Other Voting Rights Held by Main Shareholders of the Issuer
Pursuant to Par. 2.2 of the Issuer’s Articles of Association, Series A registered Shares carry voting preference.
One preference share confers the right to three votes at the General Shareholders Meeting, with the proviso that
Series A preference Shares disposed of in transactions between the founders of the Company or to the spouse or
a child retain their preferred status, while preference shares disposed otherwise lose their preferred status,
although they may, by way of exception, retain the preferred status at the Management Board’s motion approved
by
the
Supervisory
Board.
The other Issuer shares are ordinary bearer shares. As at the date of the Prospectus approval, the Issuer shares
confer no other preferences. The Articles of Association grant no personal rights to the shareholders.
11.3
Equity Interests Held in the Issuer’s Capital by Other
Entities or Control Exercised over the Issuer by Other
Entities, Nature of the Control and Mechanisms Preventing
Its Abuse
Within the meaning of Art. 4.16 and Art. 4.14–15 of the Act on Public Offering, Conditions Governing the
Introduction of Financial Instruments to Organised Trading, and Public Companies, dated July 29th 2005 (Dz.U.
No. 184, item 1539), the Issuer is not a subsidiary of any other entity.
11.4
Arrangements Whose Execution May Cause Future Change
of Control over the Issuer
As at the Prospectus Date, the Issuer has no knowledge of the existence of any arrangements or agreements
whose execution might cause change of control over the Issuer in the future.
111
12.
HOLDERS OF SECURITIES TO BE SOLD
12.1 Names and Addresses of Residence or Registered Office of
the Entities Offering the Securities for Sale – Position,
Function or Other Material Relations of Selling Shareholders
with the Issuer of the Securities, Its Legal Predecessors or
Related Entities over Last Three Years
This Prospectus is the basis for the Offering of exclusively new issue shares, therefore there exist no selling
shareholders of those shares. Under this Prospectus, the Issuer’s existing shareholders are not selling any Issuer
shares held by them.
12.2 Number and Type of Securities Offered by Each Selling
Shareholder
There exist no such shareholders.
12.3 Lock-Up Agreements, Parties to which Such Agreements
Apply, Terms of Such Agreements and Exceptions; Lock-Up
Period
No lock-up agreements which would concern the Issuer shares have been concluded.
112
13.
RELATED-PARTY TRANSACTIONS
Within the period from January 1st 2003 to the Prospectus Date, the Issuer concluded with related parties
a number of arms’ length agreements. The nature and terms of those agreements were connected with the
Issuer’s and its related entities’ day-to-day operations. The Issuer’s related entities were selected for the purposes
of this section in accordance with the definition stipulated in Regulation (EC) 1606/2002.
13.1 Transactions with Related Undertakings between January 1st
2006 and the Prospectus Date (PLN ‘000)
The financial data disclosed in this section (with the exception of the data concerning the remuneration of the
MNI Group’s Management and Supervisory Boards, presented for the entire year 2006) show actual balances as
at November 30th 2006. The information disclosed below is the most recent information the Issuer is able to
furnish as at the Prospectus Date.
Revenue
Revenue
Media
Personel
Service
Sp. z o.o.
MNI
Technology
Development
Sp. z o.o.
(formerly:
Szeptel
International)
Legion
Polska
Sp. z o.o.
2,422
1,513
281
-
-
-
-
-
54
7
Issuer
Telecommunications
services
Property,
plant and
equipment
9,740
14,340
Interest
Telecommunications
services
Costs and
expenses
Property,
plant and
equipment
Intangible
assets
Interest
6,298
dataCOM
S.A.
1,572
MoCoHub
Sp. z o.o.
Total
562
9
16,099
-
-
-
14,340
-
30
-
-
30
-
3,055
6,030
94
2
15,479
-
-
214
14,340
-
-
14,608
-
-
-
-
-
-
7
-
-
-
-
-
30
-
-
345
-
-
345
-
30
Materials
MNI Telecom
Sp. z o.o.
-
Revenue
Sales of telecommunications services
market prices
transactions with Legion Polska z Sp. z o.o.
dataCOM Sp. z o.o.
MoCoHub Sp. z o.o.
PLN 3,055 thousand
PLN 6,030 thousand
PLN 94 thousand
PLN 2 thousand
Sales of property, plant and equipment
market prices
transactions with MNI Telecom Sp. z o.o.
PLN 14,340 thousand
PLN 214 thousand
Sales of materials
PLN 345 thousand
113
Costs and expenses
- purchase of telecommunications services
PLN 6 298 thousand
market prices
transactions with Legion Polska Sp. z o.o.
PLN 281 thousand
PLN 1,572 thousand
MPS Sp. z o.o.
PLN 2,422 thousand
MNI Technology Development Sp. z o.o. PLN 1,452 thousand
dataCOM S.A.
PLN 562 thousand
MoCoHub Sp. z o.o.
PLN 9 thousand
- purchase of property, plant and equipment (market prices)
PLN 54 thousand
transactions with MNI Technology Development Sp. z o.o. (formerly Szeptel International Sp. z o.o.)
- purchase of intangible assets (market prices)
PLN 7 thousand
transactions with MNI Technology Development Sp. z o.o. (formerly Szeptel International Sp. z o.o.)
The Issuer’s financial expenses – interest on a loan (as per the agreement)
Transaction with MNI Telecom Sp. z. o.o.
PLN 30 thousand
Balance of unsettled transactions with related undertakings as at November 30th 2006:
- current receivables
PLN 1,598 thousand
- non- current receivables
PLN 12,968 thousand
- current liabilities
PLN 704 thousand
In the period from January 1st 2006 to November 30th 2006, the value of the Issuer’s transactions with related
undertakings was as follows:
- revenue: PLN 24,080 thousand, or 23.4% of the Issuer’s total revenue,
- costs and expenses: PLN 6,389 thousand, or 6.3% of the Issuer’s total costs and expenses.
Transactions with members of the management and supervisory staff, their spouses, blood relatives, direct
in-laws up to the second degree and persons related through adoption, custody or guardianship to
members of the management or supervisory staff of those undertakings or Companies in which they are
significant shareholders or their spouses
Transactions
Management contract concluded with Inwest Logistics Sp. z o.o. As at November 30th 2006, the turnover under
the agreement amounted to PLN 246 thousand.
Piotr König, President of the Issuer’s Management Board, holds 15.9% of shares in Inwest Logistics Sp. z o.o.
Mariusz Pilewski, Member of the Issuer’s Management Board, held 50.2% of shares in Inwest Logistics
Sp. z o.o. Mariusz Pilewski disposed all of the shares held on July 24th 2006.
Management agreement with DORKOM-Piotr König. As at November 30th 2006, the turnover under the
agreement amounted to PLN 0 thousand.
Loans and Advances
No loans or advances were recorded.
114
Remuneration of the Members of the MNI Group’s Management and Supervisory Boards
The Issuer
subsidiaries for any services provided by the person to the Company
or its subsidiaries in 2006
Piotr König, President of MNI S.A.
Management Board
PLN 66 thousand
under a management contract with MNI S.A.
Mariusz Pilewski,
and
Leszek Kułak,
PLN 378 thousand
(under a management contract concluded by the Issuer with
Inwest Logistics Sp. z o.o.)
Zdzisław Wójcik
PLN 147 thousand
Supervisory Board
Robert Gwiazdowski, Deputy
Michał Jakub Tomczak, Secretary of
Supervisory Board
Supervisory Board
PLN 37 thousand
MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp. z o.o.)
Marek Południkiewicz
President of the Management Board,
Janusz Sutkowski
Andrzej Piechocki
Chairman of the Supervisory Board,
Piotr König
Member of the Supervisory Board,
Wiktor Fonfara
Member of the Supervisory Board,
Piotr Majchrzak
PLN 181 thousand
PLN 215 thousand
Tomasz Dąbrowa
PLN 84 thousand
(under an employment contract)
115
MoCoHub Sp. z o.o.
Piotr Gruszecki
January 1st– March 31st 2006: PLN 31 thousand
April 1st – December 31st 2006: PLN 94 thousand
Form of agreement: Resolution of the Extraordinary General Shareholders
Meeting
dataCOM S.A.
First name and surname,
position
Mieczysław Kijek
or its subsidiaries in the period from January 1st 2006
to the Prospectus Date
PLN 545 thousand
under an employment contract
Witold Pytlik, Vice-President of the
Management Board
PLN 461 thousand
under an employment contract
Janusz Sutkowski
0
0
Janusz Koczyk
PLN 38 thousand
Appointed by GM
Zbigniew Niesiobędzki
PLN 18 thousand
Appointed by GM
Tomasz Radwański
PLN 16 thousand
Appointed by GM
Tadeusz Roczniak
PLN 9 thousand
Appointed by GM
Andrzej Piechocki
PLN 7 thousand
Appointed by GM
Piotr König
PLN 5 thousand
Appointed by GM
Piotr Majchrzak
PLN 5 thousand
Appointed by GM
In the other entities of the Issuer’s Group, the members of the Management and Supervisory Boards were not
paid any remuneration.
116
13.2
Transactions with Related Undertakings in 2005 (PLN ‘000)
Issuer
Revenue
Costs and
expenses
MNI
MPS
Technology
Sp.
Development
z o.o.
Sp. z o.o.
Legion
Polska
Sp. z o.o.
BIA-NET
Sp. z o.o.
Total
Telecommunications
services
833
92
3,479
824
199
5,427
Telecommunications
services
2,463
793
-
-
-
3,256
61
40
-
-
-
101
2,070
-
-
-
-
2,070
Property, plant
and equipment
Intangible assets
Revenue
- Sales of telecommunications services
market prices
PLN 833 thousand
PLN 833 thousand
Costs and expenses
- Purchase of telecommunications services
market prices
PLN 2,463 thousand
PLN 92 thousand
transactions with MPS Sp. z o.o.
PLN 1,409 thousand
transactions with MNI Technology Development Sp. z o.o. PLN 763 thousand
transactions with BIA-NET Sp. z o.o.
PLN 199 thousand
- Purchase of property, plant and equipment (market prices) PLN 61 thousand
transactions with MNI Technology Development Sp. z o.o.
- Purchase of intangible assets (market prices)
PLN 2,070 thousand
Loans
- loan advanced to the Issuer by MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp. z o.o.) – under an
agreement of December 21st 2005
Undertaking
Loan amount
Outstanding
amount
Maturity date
Interest rate
Collateral
MNI Telecom
Sp. z o.o.
1,000
1,000
Jul 31 2006
4% p.a.
Assignment of
assets
Balance of unsettled transactions with related undertakings as at December 31st 2005
PLN 1,041 thousand
PLN 1,495 thousand
- loan
PLN 1,000 thousand
Transactions with members of the management and supervisory staff, their spouses, blood relatives, direct
in-laws up to the second degree and persons related through adoption, custody or guardianship to
117
Transactions
Management contract with Inwest Logistics Sp. z o.o. Within the discussed period, the turnover under the
contract amounted to PLN 360 thousand.
Piotr König, Member of the Issuer’s Supervisory Board, holds 15.9% of shares in Inwest Logistics Sp. z o.o.
Until July 24th 2006, Mariusz Pilewski, President of the Issuer’s Management Board, held 50.2% of shares in
Inwest
Logistics
Sp. z o.o.
Financial advisory agreement with PM Piotr Majchrzak. Within the period discussed, the turnover under the
• Piotr Majchrzak, President of the Management Board of MNI Telecom Sp. z o.o. (formerly Pilicka
Telefonia Sp. z o.o.)
Loans and Advances
No loans or advances were recorded.
Remuneration of the Members of the MNI Group’s Management and Supervisory Boards
The Issuer
Mariusz Pilewski
Leszek Kułak
Vice-President of the Management Board
Zdzisław Wójcik
Andrzej Piechocki
Tomasz Swadkowski
Deputy Chairman of the Supervisory Board
Barbara Dąbrowska,
Piotr König, Member of the Supervisory Board
Stanisław Widera,
Krzysztof Radziszewski,
Remuneration paid and in-kind benefits awarded by the
Issuer and its subsidiaries for any services provided by the
person
to the Company or its subsidiaries
in period January 1st – December 31st 2005
PLN 360 thousand
(under a management contract with Inwest Logistics Sp. z
o.o.)
PLN 42 thousand
PLN 4 thousand
MNI Telecom Sp. z o.o. (formerly Pilicka Telefonia Sp. z o.o.)
person
Piotr Majchrzak
President of the Management Board,
PLN 998 thousand
Zdzisław Wójcik
Vice- President of the Management Board
Andrzej Piechocki
Chairman of the Supervisory Board,
Piotr König, Member of the Supervisory Board,
PLN 4 thousand
Wiktor Fonfara, Member of the Supervisory
Board, Piotr Majchrzak, Member of the
Supervisory Board
118
person
Tomasz Dąbrowa
PLN 59 thousand
Media Personel Service Sp. z o.o.
person
Wiesław Kułak
PLN 30 thousand
13.3
Transactions with Related Undertakings in 2004
As at December 31st 2004, the revenue from transactions with related undertakings amounted to PLN 85,000.00,
while the costs and expenses reached PLN 195,000.00.
13.4
Transactions with Related Undertakings in 2003
No transactions with related undertakings were recorded in 2003.
119
14.
ARTICLES OF ASSOCIATION
14.1 Issuer’s Business Profile and Objectives
In accordance with Par.1.3 of the Issuer’s Articles of Association, the Issuer’s business comprises
telecommunications activities (Polish Classification of Business Activities No. 64.20).
14.2 Summary of All Provisions of the Issuer’s Articles of
Association, By-Laws or Rules of Procedure which Relate to
Members of Its Administrative, Management or Supervisory
Bodies
14.2.1 Management Board
The Management Board operates on the basis of the Commercial Companies Code and the Articles of
Association.
The Company’s Articles of Association regulate issues related to the operation of the Management Board as
described below. All issues not provided for in the Articles of Association are governed by the provisions of the
Commercial Companies Code.
The Management Board manages the Issuer’s affairs and represents the Issuer in all actions in or out of court.
Any matters not reserved for the General Shareholders Meeting or the Supervisory Board by the law or the
Articles of Association fall within the powers of the Management Board.
If the Management Board is comprised of more than one person, any representations on behalf of the Issuer must
be made jointly by two members of the Management Board or one member of the Management Board acting
jointly with a proxy. If the Management Board is comprised of one person, the Issuer is represented by one
Management Board member.
A proxy may be appointed by a unanimous decision of all Management Board members. A power of proxy may
be revoked by any Management Board member.
The operating procedures for a Management Board comprising more than one member are defined in detail in
the Rules of Procedure of the Management Board, adopted by the Management Board and approved by the
Supervisory Board.
The Management Board adopts resolutions by an absolute majority of votes, and in the event of a voting tie the
President has the casting vote. Management Board’s resolutions are required in any matters which fall beyond
the ordinary scope the Company’s activities. In particular, resolutions of the Management Board are required for:
•
approval of the Rules of Procedure of the Management Board,
•
approval of the Company Organisational Rules,
•
establishment and closing of branches,
•
appointment of a proxy,
•
contracting loans and borrowings,
•
approval of annual budgets and strategic long-term plans,
•
assuming contingent liabilities, including issuance of guarantees, sureties or promissory notes,
•
disposal and acquisition of non-current assets with the value of PLN 2,000,000 or more,
•
any matters which the Management Board submits for resolution to the Supervisory Board.
The Management Board is composed of one to three persons. Members of the Management Board are appointed
for a joint three-year term of office. Each member of the Management Board may by removed from office or
suspended also by the General Shareholders Meeting.
In agreements between the Issuer and members of the Management Board, the Issuer is represented by the
Supervisory Board, and specifically by its Chairman or another member delegated by virtue of a Supervisory
Board’s resolution, acting on behalf of the Supervisory Board. This applies in particular to employment contracts
and performance of other actions connected with the employment of members of the Management Board.
120
14.2.2 Supervisory Board
The Supervisory Board operates on the basis of the Commercial Companies Code and the Articles of
Association.
The Company’s Articles of Association regulate issues related to the operation of the Supervisory Board as
described below. Any issues not provided for in the Articles of Association are governed by the applicable
provisions of the Commercial Companies Code.
The Supervisory Board exercises ongoing supervision over the Company’s business. Its powers comprise:
•
assessment of the Directors’ Report and the financial statements for the previous financial year in terms
of their consistency with the accounting books, documentation and the actual state of affairs;
•
assessment of the Management Board’s motions concerning distribution of profit or coverage of loss;
•
submission to the General Shareholders Meeting of a written report on the results of the assessments
referred
to
in the preceding two items;
•
selection of an auditor to audit the financial statements;
•
issuance of opinions on long-term strategic plans;
•
issuance of opinions on annual budgets;
•
approval of the consolidated text of the Issuer’s Articles of Association prepared by the Management
Board;
•
approval of the Rules of Procedure of the Management Board;
•
approval of the Company Organisational Rules;
•
appointment and removal of members of the Management Board;
•
establishment of rules of remuneration for the Management Board members and determination of the
remuneration amounts;
•
suspension of Management Board members for important reasons;
•
delegation of Supervisory Board members to temporarily replace the Management Board members who
are unable to perform their duties;
•
approval of establishment of the Company’s foreign branches.
Powers of the Supervisory Board include also authorising the Management Board to:
•
acquire or dispose of real estate or an interest in real estate;
•
acquire or dispose of non-current assets other than real estate if their value exceeds PLN 2,000,000.00;
•
assume contingent liabilities, including through the issuance of guarantees or sureties in excess of
PLN 2,000,000.00 or promissory notes as security for liabilities in excess of PLN 2,000,000.00.
•
acquire or dispose of more than 50% of shares in another company under commercial law.
The Supervisory Board must justify a refusal to grant authorisation to the Management Board with respect to any
of the matters enumerated above or with respect to the establishment of a foreign branch.
For important reasons, the Supervisory Board may delegate its members to individually exercise certain
supervisory duties for a specified period of time. A Supervisory Board member so delegated has the duty to
provide the Supervisory Board with a written report on his or her activities.
The Supervisory Board is composed of five to eight members appointed by the General Shareholders Meeting.
Members of the Supervisory Board are appointed for a joint term of office of three years. A Supervisory Board
member may be removed from office by the General Shareholders Meeting at any time. Members of the
Supervisory Board submit written resignations to the Management Board, with a copy to the Chairman of the
Supervisory Board.
Details relating to the organisation and manner of procedure of the Supervisory Board are specified in the Rules
of Procedure of the Supervisory Board, which are adopted by virtue of a resolution of the General Shareholders
Meeting. The Supervisory Board meets at least once every two months. Unless the General Shareholders
Meeting’s resolution provides otherwise, the first meeting of the Supervisory Board of a new term of office is
convened by the Chairman of the Supervisory Board of the previous term of office within one month from the
date of the Ordinary General Shareholders Meeting. If the meeting fails to be convened in line with this
procedure, it is convened by the Management Board. Supervisory Board meetings are convened by the Chairman
or Deputy-Chairman of the Supervisory Board, who proposes the agenda. A meeting of the Supervisory Board
should be convened at the request of any member of the Supervisory Board or at the request of the Management
Board. If such a request is made and the Chairman of the Supervisory Board fails to convene the meeting, it may
121
be convened by the requesting party. Minutes are taken of every Supervisory Board meeting. For a Supervisory
Board meeting to be convened, all members of the Supervisory Board must be invited to the meeting in writing
at least seven days prior to the planned date of the meeting. For important reasons, the Chairman of the
Supervisory Board may shorten this time to two days, specifying the date by which the invitation must be
delivered. In an invitation to a Supervisory Board meeting the Chairman specifies the time, venue and proposed
agenda of the meeting. The Supervisory Board adopts resolutions if at least half of its members are present at the
meeting and all Supervisory Board members have been invited. The Supervisory Board may also adopt
resolutions without a formal convocation of a meeting if all its members are present and none of them objects to
inclusion of any particular matter on the agenda. The Supervisory Board adopts resolutions in an open vote. A
secret ballot may be ordered at the request of a Supervisory Board member or if the voting concerns a personnel
matter.
The Supervisory Board may adopt resolutions by voting in writing or using means of remote communication,
subject to Art. 388.4 of the Commercial Companies Code. Reasons must be given if any resolution is to be
adopted by voting in writing or using means of remote communication and a draft resolution must earlier be
presented to all members of the Supervisory Board. Members of the Supervisory Board may participate in a
Supervisory Board meeting by casting their vote in writing through the intermediation of another Supervisory
Board member. All resolutions adopted in line with these procedures must be presented at the next Supervisory
Board
meeting,
along
with
the
result
of
the
voting.
In the case of a secret ballot, these special ways of adopting resolutions do not apply.
Members of the Supervisory Board are entitled to receive monthly remuneration in the amounts specified in a
resolution of the General Shareholders Meeting.
Pursuant to Resolution No. 9/2006 of Issuer’s General Shareholders Meeting of June 30th 2006, two new
provisions were added to the rules governing the operation of the Supervisory Board. The new provisions
stipulate that:
•
A member of the Supervisory Board should have appropriate education, professional and life experience
and be a person of undisputed integrity, as well as be able to devote a sufficient amount of time to allow
him/her to properly exercise his or her duties as member of the Supervisory Board. Candidates for
Supervisory Board members should be nominated and their candidacies justified in detail in such a
manner so as to enable those voting on the candidates to make an informed choice.
•
At least half of the Supervisory Board members should be independent members. Independent members
of the Supervisory Board should not have any connections with the Company, its shareholders or its
employees which could materially affect an independent member’s ability to make impartial decisions.
14.3 Rights, Preferences or Limitations Connected with Each Type
of Existing Shares
Pursuant to Par. 2.2 of the Issuer’s Articles of Association, Series A registered Shares carry voting preference.
One preference share confers the right to three votes at the General Shareholders Meeting, with the proviso that
Series A preference Shares disposed of in transactions between the founders of the Company or to the spouse or
a child retain their preferred status, while preference shares disposed otherwise lose their preferred status,
although they may, by way of exception, retain the preferred status at the Management Board’s motion approved
by the Supervisory Board.
Shares of all other Series are ordinary bearer shares.
14.4 Actions Necessary to Change Shareholder Rights
Series A shares are registered shares. All the other Issuer shares are bearer shares. Pursuant to Par. 2.4 of the
Articles of Association, conversion of bearer shares into registered shares requires a resolution of the General
Shareholders Meeting, adopted with the majority of votes required to amend the Articles of Association.
122
14.5 Rules Governing Convocation
Shareholders
Meetings
and
Shareholders Meetings
of Ordinary
Extraordinary
General
General
The Company’s Articles of Association regulate the issues related to the convocation of General Shareholders
Meetings, including participation in such meetings, as described below. All other issues are governed by the
applicable provisions of the Commercial Companies Code.
General Shareholders Meetings may be ordinary or extraordinary. General Shareholders Meetings are held at the
Company’s registered office or in another place in Poland, as specified in the announcement convening a
General Shareholders Meeting. The agenda is proposed by the Company’s Management Board or another entity
convening the General Shareholders Meeting. Without the General Shareholders Meeting’s consent, its
Chairman may not remove any issues from the agenda or change the order of the issues on the agenda. This last
rule, however, was modified pursuant to Resolution No. 9/2006 of the Issuer’s General Shareholders Meeting of
June 30th 2006, which stipulates that removal of an issue from the agenda or change of the order of issues on the
agenda requires ¾ of the total vote at the General Shareholders Meeting.
The debates of the Ordinary General Shareholders Meeting relate in particular to:
•
consideration and approval of the Director’s Report and the financial statements for the previous
financial year;
•
approval of performance of duties by members of the Company’s governing bodies;
•
adoption of the resolution on distribution of profit or coverage of loss;
•
setting the dividend record and payment dates.
A General Shareholders Meeting’s resolution is required:
•
to appoint and remove members of the Supervisory Board and determine their remuneration;
•
to dispose of or lease the Company’s business or its organised part or to encumber such business or its
organised part with limited property rights;
•
for the Company to enter into a credit facility, loan, surety or any other similar agreement with, or for
the benefit of, a member of the Management or the Supervisory Board, a proxy or a liquidator;
•
to increase or reduce the Company’s share capital;
•
to issue bonds of any kind;
•
to create and liquidate capital reserves and determine their application;
•
to use reserve funds;
•
to take decisions regarding claims for redress of any damage inflicted during the establishment of the
Company or exercise of management or supervision;
•
for any merger, transformation or demerger of the Company;
•
for any change to the Company’s business;
•
for any other changes to the Articles of Association;
•
to dissolve and wind up the Company;
•
in any other issues which fall within the scope of the General Shareholders Meeting’s powers pursuant
to the Articles of Association or applicable laws.
A General Shareholders Meeting’s resolution is not required for purchase or sale of real estate or an interest in
real estate.
The Supervisory Board must issue its opinion on the agenda of a General Shareholders Meeting as well as on
any motions relating to issues placed on the agenda. Any such motions should be presented along with a
justification.
A Supervisory Board’s opinion is not required with respect to motions which pertain to members of the
Supervisory Board, including in particular to their removal or appointment, or approval of performance of duties
by them, or which pertain to the Management Board’s request for authorisation of a planned action which the
Supervisory Board refused to authorise.
Once a year, the Supervisory Board presents to the General Shareholders Meeting a concise assessment of the
Company’s standing. Such an assessment should be included in the Company’s annual report, made available to
all the shareholders at such time that they are able to familiarise themselves with its contents before the General
Shareholders Meeting.
123
14.6 Provisions of the Issuer’s Articles of Association, By-Laws or
Rules of Procedure which Could Delay, Postpone or Render
Impossible Change of Control over the Issuer
The Issuer’s Articles of Association and the Rules of Procedure currently in force do not contain any provisions
which could delay, postpone or render impossible a change of control over the Issuer.
14.7 Provisions of the Issuer’s Articles of Association, By-Laws or
Rules of Procedure which Specify Shareholding Thresholds
Which, If Exceeded, Trigger the Obligation to Disclose the
Number of Shares Held
The Issuer’s Articles of Association do not contain any provisions specifying shareholding thresholds which, if
exceeded, trigger the obligation to disclose the number of shares held by a shareholder. This issue is governed
only by generally applicable laws.
14.8 Terms and Conditions Imposed by the Company’s Articles of
Association, By-Laws or Rules of Procedure, Governing
Changes of Share Capital if such Terms and Conditions are
More Stringent than Required under Applicable Laws
The Articles of Association do not specify any conditions governing changes in the share capital which would be
more stringent than required under the Commercial Companies Code.
124
15.
DIVIDEND POLICY
Pursuant to Resolution No. 4/2004 adopted by the Issuer’s Ordinary General Shareholders Meeting of June 30th
2004, concerning distribution of the Issuer’s profit earned in the previous years, the Ordinary General
Shareholders Meeting decided to allocate the entire profit earned in the previous years, in the amount of PLN
774,263.36, to reserve funds.
Pursuant to Resolution No. 3/2005 adopted by the Issuer’s Ordinary General Shareholders Meeting of June 20th
2005, concerning distribution of the Issuer’s profit earned in 2004, the Ordinary General Shareholders Meeting
decided to allocate the entire profit earned in 2004, in the amount of PLN 4,975,639.29, to reserve funds.
Pursuant to Resolution No. 3/C/2006 adopted by the Issuer’s Ordinary General Shareholders Meeting of June
30th 2006, concerning distribution of the Issuer’s profit earned in 2005, the Ordinary General Shareholders
Meeting decided to allocate the entire net profit earned in 2005, in the amount of PLN 12,612,887.68, to reserve
funds.
In the period covered by the historical financial information, dividend was not paid.
Given the fact that the proceeds from the issue of Series L shares contemplated by this Prospectus fully secure
financial resources necessary to implement the Company’s development strategy, the Management Board does
not rule out that if in the next few years the Company earns a profit and funds will be secured for the
implementation of planned investments, the Management Board will apply to the Supervisory Board and
ultimately to the General Shareholders Meeting for distribution of the profit and payment of dividend to the
shareholders. Notwithstanding the above, the Management Board declares that the Company currently does not
have in place any dividend policy which would determine any decisions in this respect in the future. Decisions
on dividend payment will be made ad hoc with respect to every financial year on the basis of financial
performance in a given year and current investment needs of the Company, by its relevant bodies.
125
16. SHARE CAPITAL
16.1 Value of Issued Capital for Each Class of Share Capital
16.1.1 Number of Shares in Authorised Share Capital
Pursuant to the Articles of Association, the Issuer’s Management Board was entitled to increase the share capital
by up to PLN 7,950,000.00 in the period until June 1st 2002. The Issuer’s Management Board was authorised,
subject to approval by the Supervisory Board, to exclude or limit pre-emptive rights with respect to each share
capital increase up to the maximum allowed by the authorised capital.
Moreover, in the period until June 1st 2006 the Issuer’s Management Board was authorised to increase the share
capital by up to PLN 9,500,000.00. By the date and within the limits specified in the above sentence, the
Management Board could carry out one or several share capital increases and issue shares in exchange for cash
or in-kind contributions, it was authorised, subject to approval by the Supervisory Board, to exclude or limit preemptive rights with respect to each of the share capital increases up to the maximum allowed by the authorised
capital and to determine, subject to approval by the Supervisory Board, the issue price of the shares, issued up to
the maximum allowed by the authorised capital.
The Issuer’s Articles of Association preclude the possibility of increasing the Issuer’s share capital up to the
maximum allowed by the authorised capital after June 1st 2006.
Pursuant to Resolution No. 8/2006, the Ordinary General Shareholders Meeting resolved to increase the Issuer’s
share capital from PLN 22,571,558.00 to PLN 90,286,232.00 by way of an issue of up to 67,714,674 Series L
shares.
16.1.2 Number of Shares Issued and Paid Up in Full and Shares Issued and Not Paid Up in Full
The Issuer’s share capital comprises 22,571,558 shares with a par value of PLN 1 per share, i.e.:
•
931,900 Series A shares, issued to the founders as registered preference shares following the
transformation of Szeptel Spółka z o.o. of Szepietowo into a joint-stock company;
•
163,110 Series B shares, 136,590 Series C shares, 763,410 Series D shares, 4,420,000 Series E shares
acquired in exchange for cash contributions in a private placement,
•
3,566,004 Series F shares, 118,986 Series G shares,
•
363,000 Series I shares,
•
2,608,558 Series H shares,
•
4,000,000 Series J shares,
•
5,500,000 Series K shares,
All the shares comprising the Issuer’s share capital have been paid up in full.
16.1.3 Share Par Value or Information that Shares Do Not Have Par Value
The par value of each Issuer share is PLN 1.00.
16.1.4 Number of Shares Outstanding at the Beginning and End of Year. Information whether
in the Period Covered by the Historical Financial Information more than 10% of the
Share Capital Was Paid Up with Assets other than Cash
As at January 1st 2005, 17,208,558 shares were publicly traded.
5,500,000 Series K shares are not admitted to stock-exchange trading pursuant to the provisions of Par. 18 of the
WSE Rules, in conjunction with the “Joint position of the Supervisory and Management Boards of the Warsaw
Stock Exchange on the public nature of new share issues, dated June 4th 2003”. The legal basis specified above
(“Joint Position...”) was repealed pursuant to Par. 35.1 of the WSE Rules by the Supervisory and Management
Boards of the WSE on February 15th 2006. The Issuer has recently undertaken steps to assimilate Series K
shares and admit them to stock-exchange trading.
126
By virtue of a resolution of the Issuer’s Management Board of June 20th 2005, 137,000 Series I shares owned by
the Issuer were retired and the Issuer’s share capital was reduced by PLN 137,000.00, i.e. to PLN 22,571,558.00,
pursuant to Art. 363.5 of the Commercial Companies Code.
As at December 31st 2005, 17,071,558 shares were traded on the stock exchange.
16.2 Shares which Do Not Represent Share Capital
No such shares exist.
16.3 Issuer Shares Held by the Issuer, Other Persons on Behalf of
the Issuer, or by the Issuer’s Subsidiaries
Neither the Issuer, nor any other persons on behalf of the Issuer, nor the Issuer’s subsidiaries hold any Issuer
shares.
16.4 Number of Convertible Securities, Exchangeable Securities
or Securities with Warrants and the Rules and Procedures
Governing Their Conversion, Exchange or Subscription
None of the above types of securities have been issued.
16.5 Subscription Rights and Obligations with Respect to Share
Capital Authorised but Not Issued or Commitments to
Increase Share Capital
The Issuer’s Articles of Association do not provide for any authorisation to increase the Issuer’s share capital up
to the maximum allowed by the authorised capital (reference to Section I.21.1.1. above).
MNI S.A. owes PLN 1,629,753.01 to Polina Trading Limited, a company incorporated under the laws of
England with registered office in London, UK The debt is be converted into new shares to be issued by the
Issuer. The price at which Polina Trading Limited is to subscribe for the shares may not be lower than PLN 4.50,
which means that Polina Trading Limited is to be allotted no more than 362,167 shares.
16.6 Information on Shares in any Member of the Issuer’s Group
Which Are Covered by an Option or Conditional or
Unconditional Arrangement to Grant an Option
No shares in any member of the Issuer’s Group are covered by an option.
127
16.7 Historical Information on the Share Capital
Description
GM’s
date
Issue (number of
shares (‘000) / value
(PLN ‘000)
Price
nominal
issue
Share capital following the
issue (number of shares
(‘000) / value (PLN ‘000)
Date of entry in the
National Court Register
(KRS)
Series A – transformation of
a limited liability company
into a joint-stock company
Sep 30
1993
93,190
931,900.00
10.00
10.00
93,190
931,900.00
KRS:
Aug 7 1996
Series B – subscribers
Jun 17
1996
16,311
163,110.00
10.00
10.00
109,501
1,095,010.00
KRS:
Aug 7 1996
Series C - one municipality,
subscribers from two
municipalities
Oct 15
1996
76,341
763,410.00
10.00
10.00
123,160
1,231,600.00
KRS:
Feb 20 1997
Series D - three
municipalities and new
subscribers
Oct 15
1996
381,705
4,752,227.25
10.00
12.45
199,501
1,995,010.00
KRS:
Feb 20 1997
split (1:5)
Feb 27
1997
-
2.00
-
997,505
1,995,010.00
KRS:
Jul 29 1997
Series E – selected
investors
Feb 27
1997
2,210,000
5,525,000.00
2.00
2.50
3,207,505
6,415,010.00
KRS:
May 14 1997
Series F – pre-emptive right
(5:2), selected investors
Jun 13
1998
1,783,002
17,830,020.00
2.00
10.00
4,990,507
9,981,014.00
KRS:
Nov 19 1998
Series G – Management
Board, employees
Jun 13
1998
59,493
297,465.00
2.00
5.00
5,050,000
10,100,000.00
KRS:
Nov 19 1998
split (1:2)
Apr 10
1999
-
1.00
10,100,000
10,100,000.00
KRS:
-
Series I – management
offering
Mar 18
2000
500,000
500,000.00
1.00
1.00
10,600,000
10,600,000.00
KRS:
Mar 23 2001
Series H – public
subscription (issue
unsuccessful)
Mar 18
2000
10,500,000
357,000,000.00
1.00
34.00
-
KRS:
Jul 27 2001
Series H - public
subscription
Jun 13
2001
2,608,558
78,256,740.00
1.00
30.00
13,208,558
13,208,558.00
KRS:
Jul 27 2001
Sep 14 2001
Series J – creditors (issue
not registered)
Sep 15
2003
4,000,000
10,000,000.00
1.00
2.50
0
0.00
-
-
Series J – creditors
(Management Board
resolution)
Apr 28
2004
4,000,000
10,000,000.00
1.00
2.50
17,208,558
17,208,558.00
KRS:
Sep 16 2004
Series K - Media Net
Interactive sp. z o.o.
(authorised capital)
Oct 22
2004
5,500,000
5,500,000.00
1.00
1.00
22,708,558
22,708,558.00
KRS:
Dec 31 2004
Retirement of shares
Jun 20
2005
137,000
0.00
1.00
0.00
22,571,558
22,571,558.00
KRS:
Jul 14 2005
128
17.
CAPITAL MARKET REGULATIONS
17.1 Restrictions on Transferability of Securities
17.1.1 Restrictions Provided for in the Articles of Association
Pursuant to Par. 2.3 of the Articles of Association, Series A registered shares are shares with a voting preference.
A total of 931,900 Series A preference registered shares have been issued. The shares were delivered to the
founders of the Issuer following transformation of the Issuer from a limited liability company into a joint-stock
company. One preference share confers the right to three votes at the General Shareholders Meeting, with the
proviso that Series A preference Shares disposed of in transactions between the founders of the Company or to
the spouse or a child retain their preferred status, while preference shares disposed otherwise lose their preferred
status, although they may, by way of exception, retain the preferred status at the Management Board’s motion
approved
by
the
Supervisory
Board.
The other shares are ordinary bearer shares and the Articles of Association do not provide any restrictions on
their transferability. Any conversion of bearer shares into registered shares requires a resolution of the General
Shareholders Meeting, adopted by the majority of votes required to amend the Articles of Association.
17.1.2 Obligations and Restrictions Resulting from the Public Offering Act and the Act on
Trading in Financial Instruments
Trading in shares of public companies is subject to restrictions specified in the Public Offering Act and the Act
on Trading in Financial Instruments.
Securities covered by an approved issue prospectus may be traded on the regulated market only after they have
been admitted to trading on such a market (Art. 19 of the Act on Trading in Financial Instruments).
Intermediation of an investment firm is required for public offerings of or trading in securities on the regulated
market in the Republic of Poland (Art. 19 of the Act on Trading in Financial Instruments).
During a restricted period, the members of the management board, supervisory board, proxies or attorneys-infact of the issuer, its employees, qualified auditors or other persons related to the issuer under any mandate
contract or any legal relation of a similar nature may not acquire or dispose of, for their own account or for the
account of a third party, any of the issuer shares, derivative rights attached thereto or other financial instruments
related to such shares, and may not take for their own account or for the account of a third party any other legal
transactions which lead or might lead to the disposal of such financial instruments (Art. 159 of the Act on
Trading in Financial Instruments). The restricted period is understood as:
a)
the period between the time when such a person gains inside information concerning the issuer or the
financial instruments and the time when such information is made public;
b)
in the case of an annual report – the period of two months preceding the publication of such report or, if
shorter, the period between the end of a given financial year and the publication of such report, unless
such a person had no access to the financial data on the basis of which such report was prepared;
c)
in the case of a semi-annual report – the period of one month preceding the publication of such report
or, if shorter, the period between the end of a given half year and the publication of such report, unless
such a person had no access to the financial data on the basis of which such report was prepared;
d)
in the case of a quarterly report – the period of two weeks preceding the publication of such report or, if
shorter, the period between the end of a given quarter and the publication of such report, unless such a
person had no access to the financial data on the basis of which such report was prepared.
Apart from the above restrictions, the Act on Trading in Financial Instruments and the Public Offering Act
provide for a number of other obligations and prohibitions specified below, applying to shareholders executing
transactions in shares or financial instruments related to shares.
Persons who are members of the issuer’s management bodies or who are issuer’s proxies as well as other persons
who hold management posts in the organisational structure of the issuer and who have permanent access to
inside information, related, whether directly or indirectly, to the issuer, and are authorised to make decisions
concerning the issuer’s development and economic prospects will notify the Financial Supervision Authority of
any transactions executed by them or by persons related to them (as defined in Art. 160.2 of the Act on Trading
in Financial Instruments: immediate relatives and persons actually related, as well as any entities related to such
a person and to the immediate relatives) for their own account, whereby they acquire or dispose of any issuer
129
shares, derivative rights attached thereto and other financial instruments related to the issuer shares, admitted or
sought to be admitted to trading on a regulated market (Art. 160 of the Act on Trading in Financial Instruments).
The Public Offering Act (Art. 69) requires that the Financial Supervision Authority and the Company be notified
if specific thresholds are exceeded or specific changes occur in the structure of votes. The above requirement
applies to a shareholder who:
a)
has reached or exceeded 5%, 10%, 20%, 25%, 33%, 50% or 75% of the total vote in a company;
b)
held at least 5%, 10%, 20%, 25%, 33%, 50% or 75% of the total vote in a company, and as a result of a
reduction of its equity interest, holds 5%, 10%, 20%, 25%, 33%, 50% or 75% or less of the total vote,
respectively;
c)
held over 10% of the total vote and this share has changed by at least 2% of the total vote – in the case
of a public company whose shares have been admitted to trading on the official stock-exchange listing
market, or by at least 5% of the total vote – in the case of a public company whose shares have been
admitted to trading on other regulated market;
d)
held over 33% of the total vote and this share has changed by at least 1%.
The notification requirement does not apply if upon the settlement in the depository of securities of a few
transactions executed on the regulated market on a single day, the change of a shareholder’s share in the total
vote in a public company as at the end of the settlement day does not result in reaching or exceeding any
threshold which triggers the notification requirement
The notification should include the information on the date and type of event which led to a change in the share
in the total vote which is the subject of the notification, number of shares held prior to the change and their
percentage share in the company’s share capital, and the number of votes attached to these shares and their
percentage share in the total vote, and number of shares currently held and their percentage share in the
company’s share capital, and the number of votes attached to these shares and their percentage share in the total
vote.
The notification should also include information on any intention to further increase the shareholder’s share in
the total vote within 12 months from the notification date, and on the purpose of such increase – in the case of a
notification submitted in connection with reaching or exceeding 10% of the total vote. The shareholder
submitting the notification is also required to notify the Financial Supervision Authority and the company of any
change in the declared intention or purpose, within three days of such a change.
The Public Offering Act also provides for an additional requirement according to which:
a)
a shareholder whose share in the total vote at the company is less than 33% may acquire a number of
shares in a public company which increases the shareholder’s share in the total vote by more than 10%
within a period shorter than 60 days only by way of a tender offer to acquire or exchange the shares
(Art. 72.1);
b)
a shareholder holding 33% or more of the total vote at the company may acquire a number of shares in a
public company which increases the shareholder’s share in the total vote by more than 5% within a
period shorter than 12 months only by way of a tender offer to acquire or exchange the shares (Art.
72.1);
c)
If a shareholder’s share in the total vote increases by more than 10% or 5% as a result of a legal event
other than a legal action, the shareholder is required, within three months from the occurrence of the
legal event, to dispose of such a number of shares as to ensure that such shareholder’s share in the total
vote does not increase in the period by more than 10% or 5%, respectively (Art. 72.2).
d)
Pursuant to Art. 75.1-3, the above obligations do not apply if the shareholder acquires shares in primary
trading, through a non-cash contribution or as a result of a merger or demerger of a company. The
obligations also do not apply if the shareholder acquires shares from the State Treasury through an
initial public offering and within three years from the closing of the sale of the shares by the State
Treasury through an initial public offering. Furthermore, the obligations do not apply if the shareholder
acquires shares:
•
which have been introduced to an alternative trading system, and in respect of which no application for
admission to trading on a regulated market has been filed or which have not been admitted to trading on
a regulated market;
•
from a member of the same group;
•
by way of a procedure provided for in bankruptcy and recovery regulations, or in enforcement
proceedings;
•
under an agreement on the creation of financial collateral between qualifying entities, concluded on the
terms and conditions defined in the Act on Certain Types of Financial Collateral of April 2nd 2004
(Dz.U. No. 91, item 871; Dz.U. of 2005, No. 83, item 719, and No. 183, item 1538);
130
•
•
encumbered with a pledge in order to satisfy a pledgee entitled, under other statutes, to satisfy its claims
by foreclosure of the pledged asset;
by inheritance.
Moreover, pursuant to the Public Offering Act:
a)
b)
c)
d)
e)
f)
g)
•
•
•
•
•
a shareholder may exceed 33% of the total vote in a public company only as a result of a tender offer to
acquire or exchange shares in such company, concerning a number of shares which confers the right to
at least 66% of the total vote (Art. 73.1);
a shareholder may exceed 66% of the total vote in a public company only as a result of a tender offer to
acquire or exchange the remaining shares in the company (Art. 74.1);
If a shareholder exceeds the 33% (66%) threshold as a result of an acquisition of shares in a public
offering, a non-cash contribution to the company, merger or demerger of the company, introduction of
amendments to the company’s articles of association, expiry of preference rights attached to shares, or
otherwise as a result of a legal event other than a legal action, the shareholder is obliged, within three
months from exceeding the 33% threshold: announce a tender offer to acquire or exchange the company
shares, concerning a number of shares conferring the right to at least 66% of the total vote (acquisition
of the remaining shares), or dispose of a sufficient number of shares as to hold shares conferring the
right to not more than 33% (66%) of the total vote, unless within that period such shareholders’ share in
the total vote decreases below 33% (66%) as a result of a share capital increase, introduction of
amendments to the company’s articles of association, or expiry of preference rights attached to shares
(Art. 73.2 and Art. 74.2);
If a shareholder exceeds the 33% (66%) threshold as a result of inheritance, then the obligation referred
to in item c) applies only if following such an acquisition the shareholder’s share in the total vote
increases further; the time for the performance of the obligation is counted from the day of the event
leading to an increase in the shareholder’s share in the total vote (Art. 73.3 and Art. 74.5);
If within six months from a tender offer referred to in item b) a shareholder acquires further shares in
the company at a price higher than the price set in the tender offer otherwise than by way of a tender
offer, then the shareholder is obliged, within a month from the acquisition, to pay the difference in the
share price to all persons who sold the shares by accepting the tender offer, except for those from whom
the shares were acquired at a reduced price as specified in Art. 79.4;
The obligation to acquire shares in a number resulting in exceeding 33% of the total vote in a public
company only in a tender offer to acquire or exchange shares in such company (referred to in Art. 73.1,
and described in item a) above) does not apply if the shareholder acquires shares from the State
Treasury through an initial public offering and for three years from the closing of the sale of the shares
by the State Treasury through an initial public offering (Art. 75.2);
The obligation to acquire shares in a number resulting in exceeding 33% and 66% of the total vote in a
public company only in a tender offer to acquire or exchange shares in such company (referred to in
Art. 73.1 and Art. 74.1, and described in item a) and b) above) does not apply if the shareholder
acquires shares (Art. 75.3):
which have been introduced to an alternative trading system, and in respect of which no application for
admission to trading on a regulated market has been filed or which have not been admitted to trading on
a regulated market;
from a member of the same group;
by way of a procedure provided for in bankruptcy and recovery regulations, or in enforcement
proceedings;
under an agreement on the creation of financial collateral between qualifying entities, concluded on the
terms and conditions defined in the Act on Certain Types of Financial Collateral of April 2nd 2004
(Dz.U. No. 91, item 871; and Dz.U. of 2005, No. 83, item 719, and No. 183, item 1538);
encumbered with a pledge in order to satisfy a pledgee entitled, under other statutes, to satisfy its claims
by foreclosure of the pledged asset.
131
In tender offers required under Art. 72–74 of the Act on Public Offering:
a)
b)
c)
d)
e)
if any shares in the company are traded on a regulated market, the share price may not be lower than the
average market price from the six months preceding the announcement of the tender offer during which
the shares were traded on the main market, or the average market price from a shorter period if the
shares were traded on the main market for a period shorter than six months (Art. 79.1);
if the price cannot be determined in the manner specified above, or in the case of a company in relation
to which arrangement or bankruptcy proceedings have been instigated, the price may not be lower than
the fair value of the shares (Art. 79.1);
the share price may not be lower than the highest price paid for the shares tendered in the tender offer
by the entity obligated to announce the tender offer, its subsidiary or parent entity, or an entity with
which it concluded the agreement referred to in Art. 87.1.5 of the Act on Public Offering, within 12
months preceding the announcement of the tender offer, or the highest value of assets or rights which
the entity obligated to announce the tender offer or entities referred to in Art. 79.2.1 delivered in
exchange for the shares tendered in the tender offer, within 12 months preceding the announcement of
the tender offer (Art. 79.2);
the share price may be lower than the price determined in the manner specified in Art. 79.1–2 of the Act
on Public Offering for shares comprising at least 5% of all company shares to be acquired in the tender
offer from a specific person accepting such tender offer if the entity obligated to announce the tender
offer and such person have so decided (Art. 79.4)
if a tender offer is connected with an intention to exceed 66% of the total vote, as referred to in Art. 74
of the Act on Public Offering, the offered share price may not be lower than the average market price
from the three months of trade in the shares on a regulated market preceding the announcement of the
tender offer (Art. 79.3).
Until the pledge expires, the encumbered shares cannot be traded, with the exception of their acquisition in
performance of an agreement on the creation of financial collateral within the meaning of the Act on Certain
Types of Financial Collateral of April 2nd 2004 (Art. 75.4 of the Act on Public Offering).
Only the following financial instruments may be acquired in exchange for shares tendered in a tender offer to
exchange shares: dematerialised shares in another company, depository receipts and mortgage bonds. Treasury
bonds may also be acquired (Art. 76.1 of the Act on Public Offering).
If the tender offer is made for the remaining shares in a company, the terms of the tender offer must include an
option for the shareholders accepting the offer to sell the shares at a price defined in accordance with Art. 79.1–3
(Art. 76.2 of the Act on Public Offering).
A tender offer is announced after collateral is created for not less than 100% of the value of the shares covered
by the tender offer. The collateral should be documented with a certificate issued by a bank or another financial
institution which granted, or intermediated in the granting of, the collateral. A tender offer should be announced
and carried out through the agency of an entity conducting brokerage activities in the Republic of Poland, which
is obligated to simultaneously notify, within seven business days before the opening of the subscription period,
the Financial Supervision Authority and the company operating the regulated market on which given shares are
listed, of the intent to announce the tender offer. A copy of the tender offer should be attached to the notification.
A tender offer may not be abandoned, unless another entity announces a tender offer for the same shares after the
first tender offer is announced. A tender offer for the remaining shares in a company may be abandoned only if
another entity announces a tender offer for all the remaining shares in the company at a price not lower than the
price of the first tender offer. In the period between the notification’s delivery to the Financial Supervision
Authority and the company and the closing of the tender offer, the entity obligated to announce the tender offer,
its subsidiary or parent entities, or an entity with which it concluded the agreement referred to in Art. 87.1.5 of
the Act on Public Offering, may acquire shares in the company whose shares are covered by the tender offer
only as part of the tender offer and in a manner defined therein, and may not dispose of shares in the company
whose shares are covered by the tender offer, or enter into any agreement under which they would be obligated
to dispose of the shares, during the tender offer. After the tender offer is announced, the entity obligated to
announce the tender offer and the management board of the company whose shares are covered by the tender
offer are obliged to provide information on the tender offer, including its wording, to the representatives of
employee associations active at the company, and if there are no such associations at the company – directly to
employees (Art. 77 of the Act on Public Offering).
132
The obligations under Art. 69–86 also rest on (Art. 87 of the Act on Public Offering):
a)
any shareholder who reaches or exceeds a threshold of the total vote defined in the Act as a result of the
occurrence of a legal event other than a legal action; acquisition or disposal of bonds convertible into
shares in a public company, depository receipts issued in connection with shares in such a company, as
well as other securities conferring the right or obligation to acquire shares in the company; becoming
the parent entity of an incorporated company or another legal person holding shares in a public
company, or of a different incorporated company or a different legal person, which is the parent entity
of the public company; and performance of a legal action by a subsidiary company or the occurrence of
another legal event in relation to the subsidiary company;
b)
an investment fund – also if it reaches or exceeds a given threshold of the total vote defined in the cited
provisions in connection with shares held jointly by other investment funds managed by the same
management company, and other investment funds established outside of the territory of the Republic of
Poland, managed by the same company;
c)
a shareholder who reaches or exceeds a given threshold of the total vote defined in the cited provisions,
in connection with shares held by a third party on its own behalf, but upon instruction or for the benefit
of the shareholder, except shares acquired in performance of the actions referred to in Art. 69.2.2 of the
Act on Trading in Financial Instruments (execution of orders, within the scope of brokerage activities,
for account of the party placing the order); in performance of the actions referred to in Art. 69.2.4 of the
Act on Trading in Financial Instruments (management of portfolios comprising one or more brokertraded financial instruments) – in relation to shares in a managed securities portfolio, under which the
shareholder, as the manager, may exercise voting rights at the general shareholders meeting on behalf of
the principals; and by a third party with which the shareholder entered into an agreement on the transfer
of right to exercise voting rights;
d)
an entity conducting brokerage activities in the Republic of Poland, which, in its capacity as a
representative of security holders in relations with issuers of such securities, exercises upon instruction
by a third party the voting rights conferred by shares in a public company, unless the third party
provided a binding instruction on how the entity is to vote;
e)
jointly on all entities bound by a written or oral agreement on acquisition of shares in a public company
or on voting in concert at the general shareholders meeting on issues material to the company, even if
only one of the entities has taken or has intended to take actions giving rise to such obligations. The
existence of such an agreement is presumed if the said actions are undertaken by spouses, their
ascendants, descendants, siblings or persons related through marriage in the same line or degree of
kinship, or relatives under adoption, custody or guardianship, persons living in the same household,
principal or its proxy other than an investment company, authorised to dispose of or acquire shares on
the securities account, and related undertakings as defined in the Accountancy Act of September 29th
1994;
f)
entities which enter into the agreement referred to above, holding shares in a public company whose
aggregate number confers the right to such a number of votes which results in reaching or exceeding a
given threshold of the total vote defined in the cited provisions.
Pursuant to Art. 87.2 of the Public Offering Act, the above obligations arise also if the voting rights are attached
to securities comprising collateral; unless the entity for the benefit of which the collateral is established has the
right to exercise the voting rights and has declared its intention to do so, in which case the voting rights are
deemed to be held by the entity for the benefit of which the collateral was established; and to shares which
confer the voting rights on a given entity personally and for life; as well as to securities deposited or registered
with an entity which may dispose of them at own discretion.
In calculating the number of votes which gives rise to the above obligations, the following votes are included:
a)
on part of the parent entity – the number of votes held by its subsidiaries;
b)
on part of an entity conducting brokerage activities in the Republic of Poland, which exercises upon
instruction by a third party voting rights conferred by shares in a public company – the number of votes
conferred by shares covered by an instruction given by a third party;
c)
the number of votes conferred by all shares, even if the exercise of voting rights thereunder is restricted
or excluded under the articles of association or the applicable laws and regulations.
Bonds convertible into shares in a public company, depository receipts issued in connection with shares in such a
company as well as other securities, which confer the right or obligation to acquire shares in a public company,
are deemed securities conferring the right to such a share in the total vote as their holder may come to hold upon
their conversion into shares (Art. 88 of the Public Offering Act).
133
Art. 90 contains exclusions to the application of the provisions of Chapter 4 of the Public Offering Act, except
Art. 69 and Art. 70, and Art. 89 to the extent it relates to the provisions of Art. 69. These provisions do not apply
to shares acquired:
a)
by way of the procedure and on the terms and conditions defined in regulations issued under Art. 94.1.3
of the Act on Trading in Financial Instruments;
b)
by an investment company, in performance of its tasks relating to the organisation of a regulated
market, defined in the rules referred to in Art. 28.1 and Art. 37.1 of the Act on Trading in Financial
Instruments;
as part of a settlement liquidity guarantee system, on the terms defined by the National Depository for
Securities in the rules referred to in Art. 50 of the Act on Trading in Financial Instruments.
c)
The provisions of Chapter 4 of the Public Offering Act, except Art. 69, Art. 70 and Art. 87.1.6, and Art. 89.1.1 to
the extent it relates to the provisions of Art. 69, do not apply to the agreements referred to in Art. 87.1.5
concluded to protect the rights of minority shareholders so that they may jointly exercise their rights defined in
Art. 84 and 85 and in Art. 385.3, Art. 400.1, Art. 422, Art. 425, and Art. 429.1 of the Commercial Companies
Code.
The liability arising in the event of failure to perform the above obligations is specified both in the Act on
Trading in Financial Instruments and in the Act on Public Offering.
The Financial Supervision Authority may impose, by way of a decision, a pecuniary penalty of up to PLN
200,000 for breach of the regulations concerning the restricted period, referred to in Art. 159.1, in conjunction
with Art. 156.1.1a of the Act on Trading in Financial Instruments. The penalty may not be imposed if the person
has the securities portfolio managed by an entity conducting brokerage activities, in a way that excludes the
person’s influence on the decisions made on the person’s behalf (Art. 174.1 of the Act on Trading in Financial
Instruments).
The Financial Supervision Authority may impose, by way of a decision, a pecuniary penalty of up to PLN
100,000 on a person who fails to perform or properly perform the obligation to notify the Financial Supervision
Authority, arising under Art. 160 of the Act on Trading in Financial Instruments, unless the person has the
securities portfolio managed by an entity conducting brokerage activities in a way that excludes the person’s
knowledge of the transactions carried out as part of this service, or did not or could not know, despite exercising
due care, of the execution of the transaction, (Art. 175.1 of the Act on Trading in Financial Instruments).
A pecuniary penalty is also provided for in the Public Offering Act. Pursuant to Art. 97 thereof, the Financial
Supervision Authority may impose, by way of a decision, a pecuniary penalty of up to PLN 1,000,000 (numbers
of articles as in the Public Offering Act) on anyone who:
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
acquires or disposes of securities in breach of the proscription referred to in Art. 67,
fails to make a notification referred to in Art. 69 within the time prescribed or makes such a notification
in breach of the provisions of Art. 69,
exceeds the defined threshold of the total vote in breach of the conditions referred to in Art. 72 through
Art. 74,
fails to meet the conditions referred to in Art. 76 or Art. 77,
fails to announce or carry out a tender offer within the time prescribed, or dispose of shares within the
time prescribed in the events referred to in Art. 72.2, Art. 73.2 and 73.3, Art. 74.2 and 74.5,
discloses to the public the information on his intent to announce a tender offer prior to the notification
referred to in Art. 77.2,
despite receiving the request referred to in Art. 78, fails to introduce necessary changes in or
supplements to the contents of the tender offer or fails to deliver explanations concerning the contents
within the time prescribed,
in the case specified in Art. 74.3, fails to pay a difference in the share price within the time prescribed;
in the tender offer referred to in Art. 72 through Art. 74 or Art. 91.6, proposes a price lower than a price
determined under Art. 79,
acquires his own shares in breach of the procedures, dates and conditions specified in Art. 72 through
Art. 74, Art. 79 or Art. 91.6,
despite the obligation specified in Art. 86.1, fails to make documents available to the special-purpose
auditor or furnish explanations to him,
134
l)
commits the acts specified in Art. 97.1.1-11, while acting on behalf or in the interest of a legal person or
an organisational unit without legal personality.
and, the pecuniary penalty may be imposed separately for each act and on each entity bound by the agreement on
acquisition of shares in a public company or on voting in concert at the general shareholders meeting on issues
material to the company. In the decision imposing a penalty, the Financial Supervision Authority may determine
a deadline for the repeated performance of the obligation or act which is required under applicable regulations
and the breach of which was the reason for imposing the pecuniary penalty. If the obligation or act is not
performed by such deadline, the Financial Supervision Authority may again, by way of a decision, impose a
pecuniary penalty.
Moreover, the Public Offering Act provides for the loss of the right to exercise voting rights attached to (Art. 89
of the Public Offering Act):
a)
b)
shares in a public company, which are the subject of a legal action or other legal event as a result of
which the shareholder will reach or exceed a given threshold of the total vote in breach of the
obligations
defined
in
Art. 69, Art. 72.1 or Art. 73.1, respectively;
all shares in a public company, if the shareholder exceeded the 66% share in the total vote in breach of
the obligations defined in Art. 74.1;
c)
shares in a public company acquired as part of a tender offer at a price determined in breach of Art. 79.
d)
Furthermore, a shareholder whose share in the total vote giving rise to the obligation referred to in Art.
72.1, Art. 73.1 or Art. 74.1 changes as a result of the events referred to in Art. 72.2, Art. 73.2-3 or Art.
74.2-3, respectively, may not exercise the voting rights conferred by all shares held in the public
company until the shareholder performs the obligations defined therein.
If the right to vote conferred by shares in a public company is exercised in breach of these proscriptions, it is not
be counted when establishing the result of a vote on a resolution of the general shareholders meeting, subject to
the provisions of other statutes.
17.1.3 Obligations and Restrictions Following from the Anti-Trust and Consumer Protection
Act
Under the Anti-Trust and Consumer Protection Act, an undertaking is obliged to report an intended
concentration if the combined turnover of the undertakings participating in the concentration exceeds, in the
financial year preceding the year in which the concentration notification is filed, the equivalent of EUR
50,000,000 (Art. 12 of the Anti-Trust and Consumer Protection Act). Within the meaning of the cited article,
concentration is understood as:
a)
merger of two or more independent undertakings;
b)
takeover – through acquisition of or subscription for shares, other securities, all or part of assets, or in
any other manner – of direct or indirect control over one or more undertakings or a part thereof by one
or more undertakings;
c)
creation of a single undertaking by the undertakings;
d)
acquisition of or subscription for shares in another undertaking that results in achieving at least 25% of
votes at the General Shareholders Meeting;
e)
assumption by the same person of membership on management or supervisory bodies of competing
undertakings;
f)
starting to exercise rights attached to shares acquired or subscribed for without prior notification
pursuant to Art. 13.3–4 of the Anti-Trust and Consumer Protection Act.
Pursuant to Art. 13.1 of the Anti-Trust and Consumer Protection Act, the obligation to notify an intended
concentration does not apply in the case of acquisition, takeover or start of exercising rights attached to shares in
an undertaking whose turnover in Poland did not exceed the equivalent of EUR 10,000,000 in either of the two
financial years preceding the notification of intended concentration (the exemption does not apply in the case of
concentrations resulting in the establishment or consolidation of a dominant position on the market where the
concentration takes place, as stipulated in Art. 13a).
The obligation to notify an intended concentration does not apply:
a)
to a financial institution acquiring or subscribing for shares, on a temporary basis, with a view to
reselling them if such institution’s business includes investing in shares of other undertakings for its
own or third party account, provided that such resale takes place within one year of the acquisition, that
135
b)
c)
d)
such institution does not exercise rights attached to such shares, except for the dividend right, and that
such institution exercises the rights solely with a view to preparing the whole or part of the undertaking,
its assets or such shares for resale;
to an undertaking acquiring shares on a temporary basis with a view to securing debts, provided that
such an undertaking does not exercise the rights attached to such shares, except for the right to sell
them;
to a concentration effected as a result of bankruptcy proceedings, except for cases when control is to be
taken over a competitor or a member of the group that includes competitors of the undertaking which is
to be acquired;
to an undertaking belonging to the same group.
Art. 14–15 of the Anti-Trust and Consumer Protection Act contain more detailed provisions regarding the
abovementioned restrictions and stipulate that concentration effected by a subsidiary undertaking is considered
concentration by the parent undertaking (Art. 14), and the amount of the turnover, mentioned above, is
established taking into account both the turnover of the undertakings directly participating in the concentration
and the turnover of other member undertakings of the groups to which the undertakings directly participating in
the concentration belong.
Concentration clearance is granted in the form of a decision issued by the President of Anti-Trust and Consumer
Protection Office. The President:
a)
approves a concentration which will not significantly restrict market competition, in particular through
creation or strengthening of a dominant market position;
b)
approves a concentration which will not significantly restrict market competition, in particular through
the creation or strengthening of a dominant market position, subject to the fulfilment of an obligation
imposed by virtue of the President’s decision, which in particular may consist in the disposal of all or
some of the assets of one or more undertakings; giving up control over a given undertaking or
undertakings, particularly through disposal of a block of shares, or removal of a member of
management or supervisory bodies of one or several undertakings; grant of an exclusivity licence to a
competitor. Simultaneously, in its decision the President imposes on an undertaking(s) the requirement
to provide information on fulfilment of the said obligations within a period specified in the decision;
c)
approves a concentration which will significantly restrict market competition, in particular through the
creation or strengthening of a dominant market position, if there is rationale for refraining from
prohibiting such a concentration, and particularly if it contributes to economic growth and technical
development; and if it may have favourable effect on the national economy.
The President of the Anti-Trust and Consumer Protection Office refuses to approve a concentration which will
significantly restrict market competition, in particular through the creation or strengthening of a dominant market
position.
Decisions approving a concentration expire if the concentration is not effected within two years from the
decision date.
17.2 Takeover Offers or Squeeze-Out and Sell-Out Procedures with
respect to the Securities
Regulations governing mandatory takeover offers are discussed in “Obligations and Restrictions resulting from
the Public Offering Act and the Act on Trading in Financial Instruments”.
17.2.1 Squeeze Out Regulations
Pursuant to Par. 4.418 of the Commercial Companies Code, squeeze out regulations do not apply to public
companies.
Pursuant to Art. 82 of the Public Offering Act, a shareholder in a public company who, individually or jointly
with its subsidiaries, parent companies, or entities with which the shareholder has concluded the agreement
referred to in Art. 87.1.5 of the Public Offering Act, reaches or exceeds 90% of the total vote in the company has
the right to demand that the other shareholders sell all the shares held in the company.
The share price in a squeeze out is determined pursuant to Art. 79.1-79.3 of the Public Offering Act. Acquisition
of shares in a squeeze out does not require the consent of the shareholder to whom the demand is addressed. A
136
squeeze out is announced after collateral is created for not less than 100% of the value of the shares covered by
the squeeze out. The collateral should be documented with a certificate issued by a bank or another financial
institution which granted, or intermediated in the granting of, the collateral.
A squeeze out is announced and carried out through the agency of an entity conducting brokerage activities in
Poland, which is obligated, not later than 14 business days prior to the commencement of the squeeze out, to
simultaneously notify the Financial Supervision Authority and the company operating the regulated market on
which given shares are listed, or if the company shares are listed on more than one regulated market – all such
companies, of the intention to announce the squeeze out. Information on the squeeze out is to be attached to the
notification. An announced squeeze out may not be abandoned. The obligations concerning tender offers to
acquire shares also rest on entities specified in Art. 87 of the Public Offering Act.
17.2.2 Sell Out Regulations
The Commercial Companies Code contains no provisions regulating the right of minority shareholders in public
companies to demand that their shares be acquired by majority shareholders.
Pursuant to Art. 83 of the Public Offering Act, a shareholder in a public company has the right to demand that
his shares be acquired by another shareholder who reaches or exceeds 90% of the total vote in the company.
Such a demand must be made in writing. The obligation to fulfil the demand, within 30 days from the date of the
demand, rests jointly and severally on the shareholder who reaches or exceeds 90% of the total vote, its
subsidiaries and parent companies. The obligation to acquire the shares from the shareholder rests also jointly
and severally on every party to the agreement referred to in Art. 87.1.5 of the Public Offering Act if the parties to
the agreement hold, together with subsidiaries and parent companies, at least 90% of the total vote. The
shareholder who demands that his shares be acquired has the right to receive a price not lower than the price
determined pursuant to Art. 79.1-79.3 of the Public Offering Act.
137
18. RULES GOVERNING
RELATED TO THE
SECURITIES
TAXATION OF INCOME
HOLDING OR SALE OF
Income Tax – Dividends
Personal income tax:
•
Pursuant to Art. 30a.1.4 of the Personal Income Tax Act, dividend income and other income from profit
distributions made by legal persons are subject to income tax at a flat rate of 19%; the flat-rate tax is
calculated without deducting from the amount of income the costs incurred to earn it. Dividend income
and other income from profit distributions is not aggregated with income taxed under general rules; the
regulations are applied taking into account double tax treaties to which the Republic of Poland is a
party.
•
the flat-rate personal income tax on dividend is remitted by the brokerage office which pays out the
dividend.
Corporate income tax:
•
•
•
Pursuant to Art. 22.1 of the Corporate Income Tax Act, income tax on dividend income and other
income from profit distributions made by legal persons with registered office in the Republic of Poland
is charged at the rate of 19% of the income earned, unless the applicable double tax treaty signed by the
Republic of Poland provides otherwise.
The tax paid on received dividends and other income from profit distributions made by legal persons
with registered offices in the Republic of Poland is deducted from the tax computed in accordance with
the general rules set forth in Art. 23.1.
The tax is remitted by the issuer of shares, who is required to withhold the tax due on dividend
payments (Art. 26.1).
However, pursuant to Art. 22.4 of the Corporate Income Tax Act, income (gains) from dividend and other
income from profit distributions made by legal persons are exempt from income tax, provided that all of the
following conditions are satisfied:
1) dividend or other profit distributions are paid out by a company that is a corporate income tax payer with
registered office or management in the Republic of Poland,
2) income (gains) from dividend or other profit distributions is earned by a company that is subject to taxation
with corporate income tax on its entire income, regardless of where such income is earned, in an European
Union member state other than the Republic of Poland,
3) the company that is the recipient of the dividend holds directly not less than 10% of shares in the share capital
of the company referred to in item 1 (from January 1st 2005 to December 31st 2006, to become eligible for the
exemption, such company must hold at least 20% of shares, from January 1st 2007 to December 31st 2008 the
threshold stands at 15%, and from January 1st 2009 the threshold is 10%).
4) income (gains) from dividends or other profit distributions is received by:
a) the company referred to in item 2, or
b) a foreign branch of the company referred to in item 2, located outside of Poland, if the income (gains) earned
is subject to taxation in the European Union member state in which such foreign branch is located.
The exemption referred to in Art. 22.4 of the Corporate Income Tax Act is applied if a company deriving income
(gains) from dividends and other profit distributions made by a legal person holds shares in the company that
makes the distribution for an uninterrupted period of two years. Such exemption also applies if the uninterrupted
period of two years for which the company earning the income has continuously held shares in the amount
specified in Art. 22.4.3 of the Corporate Income Tax Act expires after the date such income has been earned.
Taxation on Income (Gains) Earned by Foreign Persons
The issuer is obliged to withhold 19% tax on distributions to shareholders if, pursuant to Art. 3.2 of the
Corporate Income Tax Act and Art. 3.2a of the Personal Income Tax Act, the amounts related to profit
distributions made by legal persons are paid to foreign investors who are subject to a limited tax obligation in
Poland, namely legal entities whose registered office or management is outside of the Republic of Poland and
natural persons whose place of residence is outside of the Republic of Poland.
138
However, in the event that a double-tax treaty modifies the rules governing taxation of income earned by such
persons from profit distributions by legal entities, the provisions of such a treaty will prevail and exclude the
application of the aforementioned provisions of the Polish tax acts.
Pursuant to Art. 26.1 of the Corporate Income Tax Act, it is possible to apply the tax rate specified in the
appropriate double-tax treaty or refrain from collecting the tax in accordance with the treaty only if the taxpayer
confirms its place of residence for tax purposes by delivering a certificate (tax residence certificate) issued by the
relevant tax authority. In the case of natural persons, pursuant to Art. 30a.2 of the Personal Income Tax Act, it is
possible to apply the tax rate specified in the appropriate double-tax treaty or refrain from collecting the tax only
if the taxpayer has provided a tax residence certificate.
The Issuer is responsible for withholding the tax if, in accordance with the applicable regulations, including
double-tax treaties, dividends and other profit distributions paid to foreign investors by the Issuer are subject to
taxation in Poland.
Duty on Actions under the Civil Law (Polish Transfer Tax) – Sale of Shares
•
Pursuant to Art. 9.9 of the Act on Duty on Actions under the Civil Law, sale of securities to brokerage
houses and banks conducting brokerage activities, as well as the sale of securities performed through the
agency of brokerage houses or banks conducting brokerage activities, is exempt from duty on actions
under the civil law.
Income on Sale of Shares and Rights to Shares Offered in a Public Offering
Taxation on Income (Gains) Earned by Natural Persons on Sale of Shares
Pursuant to Art. 30b.1 of the Personal Income Tax Act, any income earned in the Republic of Poland from
disposal of securities against consideration is subject to taxation at the rate of 19%. This rule is qualified by
double-tax treaties signed by the Republic of Poland. It is possible to apply the tax rate specified in the
appropriate double-tax treaty or refrain from collecting the tax only if the taxpayer has provided a tax residence
certificate. Gains referred to in Art. 30b.1 of the Personal Income Tax Act represent the difference between the
sum of income earned on disposal of securities against consideration and the cost incurred to earn such income
as defined in the Personal Income Tax Act. Gains from disposal of shares are not aggregated with other income
subject to taxation in accordance with general rules. An exception to the above rule is disposal of securities
against consideration performed as part of the disposing entity’s business activities. Pursuant to Art. 30b.6 of the
Personal Income Tax Act, following the end of each fiscal year, the taxpayer must declare in an annual tax
return, referred to in Art. 45.1a.1 of the Personal Income Tax Act, the gains on disposal of securities against
consideration obtained in the fiscal year, and compute and pay the income tax due.
Taxation on Income (Gains) Earned by Legal Persons on Sale of Shares
Pursuant to Art. 19.1 of the Corporate Income Tax Act, any income earned by legal persons in the Republic of
Poland from sale of securities is subject to taxation with corporate income tax at the rate of 19%. This rule is
qualified by double-tax treaties signed by the Republic of Poland. It is possible to apply the tax rate specified in
the appropriate double-tax treaty or refrain from collecting the tax only if the taxpayer has provided a tax
residence certificate. The tax is assessed on the gains representing the difference between the income, i.e. the
amount received in connection with the sale of shares, and the cost incurred to earn the income, that is the cost of
acquisition of the shares, as stipulated in the Corporate Income Tax Act. Gains earned on sale of shares are
aggregated with other income and are subject to taxation in accordance with general rules. Pursuant to Art. 25 of
the Corporate Income Tax Act, legal persons which have sold shares are required to report gains earned on this
account in their monthly tax returns specifying the amount of profit earned or loss incurred since the beginning
of the fiscal year, and to pay tax on the aggregate amount of taxable income earned since the beginning of the
fiscal year to the account of the appropriate Tax Office. The tax amount is calculated as the difference between
the tax due on income earned since the beginning of the fiscal year and the sum of tax paid in the previous
months of a given year.
139
Taxation of Inheritances and Donations
Pursuant to the Act on Inheritances and Donations, the acquisition by natural persons of property rights through
inheritance or donation, including rights related to the holding of shares, is subject to taxation if:
a) at the time of opening of the inheritance or conclusion of the donation agreement the heir or donee was a
Polish citizen or was permanently domiciled in Poland, or
b) the property rights related to the shares are exercised in the territory of Poland.
The rates of the tax on inheritances and donations vary depending on the degree of blood relationship or another
type of personal relationship between the testator and the heir or between the donor and the donee.
Tax Remitter’s Liability
Pursuant to Art. 30.1 of the Tax Legislation Act of August 29th 1997 (consolidated text in Dz.U. of 2005, No. 8,
item 60, as amended), an entity that fails to fulfil its duty to compute and withhold tax from a taxpayer and to
pay such tax to the tax authority in the appropriate timeframe, is liable for the tax that has not been withheld or
has been withheld but not paid. The remitter is liable up to the full value of its assets and this liability arises
irrespective of the tax remitter’s will to pay the tax. The rules concerning the tax remitter’s liability do not apply
only if other regulations provide otherwise or if the tax was not withheld for reasons attributable to the taxpayer.
140
19.
INFORMATION OF THE SECURITIES
19.1 Type of Securities Offered or Admitted to Trading
The following securities are offered on the basis of this Prospectus:
Type and series of
securities
1.
2.
3.
Series L ordinary bearer
shares
Rights to Series L shares
Pre-emptive rights to
acquire Series L shares
Number of
securities
Par value
Issue price
67,714,674
PLN 1
PLN 1
-
-
-
-
Up to
67,714,674
22,571,558
Name of the
regulated market
Public offering /
introduction to
regulated trading
Applicable/
Applicable
Warsaw Stock
Exchange
- / Applicable
- / Applicable
Appropriate ISIN codes will be assigned to the Series L shares by the Polish NDS upon their dematerialisation,
which will be effected at the moment of their registration at the Polish NDS pursuant to an agreement concluded
by the Issuer with the Polish NDS.
19.2 Legal Provisions on the Basis of Which the Securities Were
Created
Series L shares were created on the basis of Resolution No. 8/2006 of the Ordinary General Shareholders
Meeting of the Issuer, dated June 30th 2006 (notarial deed executed by Notary Public Maria Kokoszczyńska,
No. A 2855/2006):
Resolution No. 8/2006
of the Ordinary General Shareholders Meeting of MNI S.A.
Acting on the basis of Art. 430, Art. 431, and Art. 431.7 in conjunction with Art. 310.2 of the Commercial
Companies Code, as well as on the basis of Par. 16.2d) and k) of the Company’s Articles of Association, the
Ordinary General Shareholders Meeting of MNI S.A. resolves as follows:
1.
2.
3.
4.
Par. 1
The Ordinary General Shareholders Meeting of MNI Spółka Akcyjna of Warsaw resolves to increase
the Company’s share capital from PLN 22,571,558 (twenty-two million five hundred and seventy-one
thousand five hundred and fifty-eight złoty) to PLN 90,286,232 (ninety million two hundred and eightysix thousand two hundred and thirty-two złoty), through the issue of up to 67,714,674 (sixty-seven
million seven hundred and fourteen thousand six hundred and seventy-four) Series L ordinary bearer
shares with the par value of PLN 1 (one złoty) per share, i.e. by an amount not higher than
PLN 67,714,674 (sixty-seven million seven hundred and fourteen thousand six hundred and seventyfour złoty), with the existing shareholders’ pre-emptive rights retained.
The share capital increase shall be effected irrespective of the number of the Series L shares acquired
within the limit specified in Par.1.1 of this Resolution, by an amount corresponding to the number of
shares acquired. The Management Board is hereby authorised and obligated to make a statement, in the
form of a notarial deed, on the amount of the share capital acquired as part of the share capital increase,
and on the specification of the final amount of the share capital increase in the Articles of Association,
prior to applying to the registry court for its registration.
Series L shares shall carry no special preferences or obligations apart from those which result from the
provisions of the law, and in particular the Commercial Companies Code.
The issue price of one share shall be PLN 1 (one złoty).
141
5.
6.
7.
8.
9.
10.
The shares shall be issued exclusively in exchange for cash contributions, paid up in full prior to the
registration of the share capital increase.
The shares shall carry the right to dividend from the distribution of profit for 2006 (two thousand six).
The pre-emptive right record date i.e. the date as at which the shareholders holding pre-emptive rights to
acquire Series L shares shall be determined, shall be September 15 (fifteenth) 2006 (two thousand six).
Existing shareholders shall receive 3 (three) Series L shares per each 1 (one) share already held.
The Supervisory Board is hereby authorised to determine the detailed terms and conditions of the issue
of Series L shares, including:
•
the date of opening and closing of the subscription period for Series L shares;
•
the time when the pre-emptive right to acquire Series L shares may be exercised;
•
the detailed terms of allotment of Series L shares, in compliance with the provisions of Art.
436 of the Commercial Companies Code.
The Company’s Management Board shall be responsible for the implementation of this Resolution, and
in particular the performance of any other organisational or legal actions connected with the
implementation of this Resolution. In particular, the Management Board is authorised to:
i.
allot the shares as provided for in Art. 436.4 of the Commercial Companies Code;
ii.
conclude the agreement referred to in Art. 5 of the Act on Trading in Financial Instruments
with the Polish NDS.
Par. 2
The Ordinary General Shareholders Meeting of MNI Spółka Akcyjna of Warsaw hereby resolves to introduce
the Series L shares, the pre-emptive rights to acquire Series L shares and the rights to Series L shares to trading
on the Warsaw Stock Exchange, decides that the Series L shares and the rights to Series L shares shall be
dematerialised, and accordingly authorises the Management Board to take all steps required by law for the
admission and introduction of these securities to trading on the regulated market and their dematerialisation.
Par. 3
This Resolution shall come into force on the date of its adoption, except that the amendment to the Articles of
Association made pursuant to this Resolution shall become effective upon its registration by the court.
The Chairman concluded that the resolution was adopted in a secret ballot with 11,435,749 (eleven million four
hundred and thirty-five thousand seven hundred and forty-nine) votes cast in favour, and no votes against or
abstaining.
19.3 Information Whether the Securities are Registered or Bearer
Securities and Whether They Are Dematerialised
Series L Shares are ordinary bearer shares.
From the moment of their dematerialisation at the Polish NDS, they will no longer exist in the certificated form.
The shares will be dematerialised upon their registration on the basis of the agreement between the Issuer and the
Polish NDS, referred to in Art. 5.4 of the Act on Trading in Financial Instruments.
19.4 Currency of the Issued Securities
The par value of the Issuer Shares is expressed in the złoty.
19.5 Rights Attached to the Securities, Including Any Restrictions
on Such Rights, and the Procedures for their Exercise
19.5.1 Commercial Companies Code
The Commercial Companies Code vests shareholders with certain rights which are traditionally classified into
two main groups: property rights and corporate rights.
The property rights include:
142
•
•
•
the right to share in the company’s profit (Art. 347.1 of the Commercial Companies Code) (right to
dividend);
the pre-emptive right to acquire new shares (Art. 433.1 of the Commercial Companies Code); this right
inures to the benefit of all the Company shareholders proportionately to the number of shares they
already hold, and may be waived by a resolution of the General Shareholders Meeting adopted with the
majority of at least four fifths of the total vote, provided that the resolution was on the agenda for the
General Shareholders Meeting;
the right to participate in the distribution of the Company’s assets in the event of its liquidation (Art.
474.2 of the Commercial Companies Code) – proportionately to the contributions to the share capital
made by the shareholders; the distribution may not be made earlier than a year after the opening of the
liquidation.
The corporate rights include collective rights and rights which are vested in each shareholder individually:
Rights provided for in the Commercial Companies Code:
Art. 6
the right to demand that a company which is a shareholder of the Issuer provides written
information on whether it is a parent or a subsidiary company, as defined in Art. 4.1.4) of the
Commercial Companies Code, of a specific company or cooperative which is an Issuer’s
shareholder. The shareholder entitled to make the demand referred to above may also demand the
disclosure of the number of the Issuer shares or the percentage of the total vote at the General
Shareholders Meeting of the Issuer held by such company, including as a pledgee, usufructuary or
under agreements with other persons;
Art. 34
the right to inspect the share register and to demand an official copy of or excerpt from the share
register;
Art. 385
the right to demand block voting for the appointment of the Supervisory Board;
Art. 395
the right to receive official copies of the directors’ report on the Issuer’s operations and the Issuer’s
financial statements, together with official copies of the Supervisory Board’s report and auditor’s
opinion;
Art. 400
the right (accruing to shareholders with at least a tenth of the company’s share capital) to demand
that a General Shareholders Meeting be convened or a particular issue be placed on the agenda of
the next General Shareholders Meeting;
Art. 401
the right to apply to the Issuer’s registry court for an authorisation to convene a General
Shareholders Meeting, if the General Shareholders Meeting is not convened by the Management
Board within two weeks following the submission of the demand referred to in Art. 400 of the
Commercial Companies Code;
Art. 406
the right to participate in the General Shareholders Meeting;
Art. 407
the right to inspect the list of shareholders at the Company’s offices, the right to demand that an
official copy of the list of shareholders entitled to participate in the General Shareholders Meeting
be prepared, the right to demand official copies of motions concerning issues placed on the agenda
of the General Shareholders Meeting;
Art. 410
the right of shareholders holding a tenth of the share capital represented at the General Shareholders
Meeting to demand that the attendance list of the General Shareholders Meeting be checked by a
committee appointed for that purpose and composed of at least three persons, including one person
appointed by the parties making the demand;
Art. 411
the right to vote at the General Shareholders Meeting;
Art. 416
the right of minority shareholders who voted against a material change of the Issuer’s business
profile to have their shares bought out. In accordance with Par. 18 of the Issuer’s Articles of
Association, a resolution concerning a material change of the Issuer’s business profile may be
adopted without the ensuing obligation to buy out the minority shares, provided that the conditions
specified in Art. 417.4 of the Commercial Companies Code are met;
Art. 421
the right to inspect the book of minutes of the General Shareholders Meetings and to receive copies
of resolutions authenticated by the Management Board;
Art. 422
the right to appeal against a resolution of the General Shareholders Meeting which is in conflict
with the Articles of Association or good practice, and is harmful to the Issuer’s interests or intended
to harm a shareholder – by instituting an action against the Issuer for repeal of the resolution;
Art. 425
the right to institute an action against the Company for declaration of invalidity of a resolution
which is in conflict with statutory provisions;
Art. 428.1 the right to demand that the Management Board disclose specific information on the Issuer at the
General Shareholders Meeting, if such disclosure is relevant for the assessment of an issue included
in the agenda;
143
Art. 429
the right to submit a petition to the registry court to oblige the Management Board to provide the
information referred to in Art. 428.1 of the Commercial Companies Code or to oblige the Issuer to
publish the information disclosed to another shareholder outside the General Shareholders Meeting
on the basis of Art. 428.4 of the Commercial Companies Code;
Art. 463
the right (accruing to shareholders representing at least a tenth of the share capital) to submit a
petition requesting that the number of the Issuer’s liquidators be supplemented;
Arts. 486, the right to institute an action against members of the Issuer’s governing bodies or other persons
487
who harmed the Issuer;
Arts. 505, right to inspect documents related to the merger, demerger or transformation of the Issuer.
540, 561
19.5.2 Act on Trading in Financial Instruments
Pursuant to the Act on Trading in Financial Instruments, participation in the general shareholders meeting of a
public company is conditional upon submission at the registered office of such a company of a certificate
confirming the right of the holder of dematerialised shares to participate in the general shareholders meeting not
later than one week prior to the date of the meeting (Art. 9 of the Act on Trading in Financial Instruments). For
the duration of the certificate validity, the issuer of the certificate blocks trading in such securities (Art. 11 of the
Act on Trading in Financial Instruments).
19.5.3 Public Offering Act
The Public Offering Act grants shareholders in public companies certain rights additional to those provided for
in the Commercial Companies Code:
•
a shareholder who, individually or jointly with its subsidiaries, parent companies, or entities with which
the shareholder has concluded an agreement on voting at the general shareholders meeting or
purchasing shares, reaches or exceeds 90% of the total vote in the company, has the right to demand that
the other shareholders sell all the shares held in the company (the so-called mandatory buyout or
squeeze-out, Art. 82 of the Public Offering Act);
•
a minority shareholder in a public company has the right to demand that his shares be acquired by
another shareholder who has reached or exceeded 90% of the total vote in the company (Art. 83 of the
Public Offering Act);
•
a shareholder or shareholders in a public company holding at least 5% of the total vote may request the
general shareholders meeting to adopt a resolution to mandate an auditor to review, at the company’s
expense, a specific issue related to the company’s incorporation or the conduct of its business (specialpurpose auditor). To this end, the shareholders may also request that an extraordinary general
shareholders meeting be convened or the adoption of such a resolution be placed on the agenda of the
next general shareholders meeting (Art. 84 of the Public Offering Act). If such a resolution is not
adopted, the shareholders may apply to the court and request it to appoint a special-purpose auditor (Art.
85 of the Public Offering Act).
19.5.4 Dividend Right
The Issuer’s Articles of Association do not provide for any dividend regulations other than those contained in the
Commercial Companies Code. The Articles of Association do not provide for any preference attached to the
Issuer shares in terms of dividend distributions. Consequently, the Issuer shareholders have the right to a share in
the profit disclosed in the financial statements and allocated by the General Shareholders Meeting for
distribution to the shareholders.
The terms and conditions of the dividend payment will be defined by the Management Board in consultation
with the Polish NDS. Pursuant to Par. 91 of the Detailed Rules of the Polish NDS (appendix to Resolution No.
79/98 of the Management Board of the Polish NDS, dated January 29th 1998, as amended), the Issuer should
promptly, but no later than ten days before the dividend record date, notify the Polish NDS of the dividend
amount, dividend record date and dividend payment date by submitting a relevant resolution of the General
Shareholders Meeting. At least ten days must elapse between the dividend record date and the dividend payment
date (pursuant to Par. 5.1 of the Rules of the Polish NDS, periods determined in days will not include Saturdays
and days which are non-business days under applicable regulations).
144
19.5.5 Date as of Which the Shares Confer Dividend Right
Pursuant to Par. 1.6 of Resolution No. 8/2006 of the Ordinary General Shareholders Meeting of June 30th 2006,
Series L shares confer the right to dividend for the 2006 financial year.
19.5.6 Deadline for Exercise of the Dividend Right and Persons Affected by Expiry of the
Dividend Right
The claim for dividend payment expires ten years from the date of adoption by the General Shareholders
Meeting of a resolution on allocation of profit for distribution to shareholders.
19.5.7 Dividend-Related
Shareholders
Restrictions
and
Procedures
Applicable
to
Non-Resident
Dividend-related restrictions are discussed in Chapter 18 on taxation of non-residents.
19.5.8 Dividend Rate or Manner of its Computation, Frequency of Payment, Cumulative or
Non-Cumulative Dividend
The dividend rate and the manner of its computation will be set in a resolution of the General Shareholders
Meeting on allocation of profit for distribution to shareholders. Because the shares do not confer any preference
with respect to dividend, the profit allocated for distribution is divided among shareholders pro rata to the
number of shares held by them. The amount of dividend to be distributed to shareholders may not exceed
the profit reported for the last financial year, increased by retained profit brought forward and by the amounts
transferred from capital reserves and reserve funds that are created from the profit and may be applied for
dividend payment. This amount should be reduced by uncovered losses, value of treasury shares, and by the
amounts which pursuant to the Act or the Articles of Association should be distributed from last year’s profit to
reserve funds or capital reserves.
Dividend is payable to shareholders once a year after the end of the financial year, pursuant to a resolution of the
Ordinary General Shareholders Meeting on allocation of profit for distribution to shareholders. A resolution of
the General Shareholders Meeting on dividend payment may stipulate that the amount to be distributed to
shareholders will include retained profit brought forward and the amounts transferred from capital reserves and
reserve funds that are created from the profit and may be applied for dividend payment.
19.5.9 Voting Rights
Each Series L share entitles a holder of the Issuer shares to one vote at the General Shareholders Meeting.
Pursuant to the Act on Trading in Financial Instruments, participation in the general shareholders meeting of a
public company is conditional upon submission at the registered office of such a company of a certificate
confirming the right of the holder of dematerialised shares to participate in the general shareholders meeting not
later than one week prior to the date of the meeting (Art. 9 of the Act on Trading in Financial Instruments). For
the duration of the certificate validity, the issuer of the certificate blocks trading in such securities (Art. 11 of the
Act on Trading in Financial Instruments).
A shareholder may participate in the Issuer’s General Shareholders Meeting and exercise voting rights in person
or by proxy. The powers of proxy should be granted in writing under pain of nullity. Neither a Management
Board member nor an employee of the Issuer may act as a proxy at the General Shareholders Meeting (Art. 412
of the Commercial Companies Code).
A shareholder may not vote, either in person, by proxy or as a proxy, on resolutions concerning any liability of
the shareholder towards the Company, including approval of performance of duties by the shareholder, release
from an obligation towards the Company, and a dispute between the shareholder and the Company (Art. 413 of
the Commercial Companies Code).
19.5.10 Pre-Emptive Rights
The Issuer’s shareholders have the pre-emptive right to subscribe for new shares pro rata to the number of
shares already held by them (pre-emptive right). In the Issuer’s interest, the pre-emptive right may be waived, in
145
full or in part, by virtue of a resolution of the General Shareholders Meeting adopted by the majority of at least
four-fifths of votes. Shareholders’ pre-emptive rights may be waived if such a waiver was included in the agenda
of the General Shareholders Meeting. In such a case, the Management Board presents to the General
Shareholders Meeting a written opinion specifying the rationale for the waiver of the pre-emptive rights and the
proposed issue price or the manner of its establishment.
The pre-emptive right record date, i.e. the date as at which the list of shareholders holding the pre-emptive right
to Series L shares is determined, is set at September 15th 2006. The existing shareholders will be entitled to
acquire three Series L shares for one existing share held by them.
19.5.11 Right to Distributions from the Issuer’s Profit
The Issuer’s shareholders are entitled to distributions from the Issuer’s profit as disclosed in the audited financial
statements and allocated by the Ordinary General Shareholders Meeting for distribution to the shareholders. The
profit is distributed pro rata to the number of Issuer shares. No Issuer shares confer any preference with respect
to profit distribution.
19.5.12 Right to Participate in Assets Remaining after the Company Liquidation
In the event of liquidation, the Issuer’s assets are divided among the shareholders in proportion to their payments
made for the share capital. The Articles of Association do not define any rules of distribution of the Issuer’s
assets in the event of liquidation other than those contained in the Commercial Companies Code. No Issuer
shares give any priority in the distribution of the Issuer’s assets in the event of liquidation.
19.5.13 Retirement of Shares
Pursuant to Par. 2.6 of the Issuer’s Articles of Association, the shares may be retired upon a shareholder’s
consent, following their acquisition by the Issuer.
19.5.14 Share Conversion
Pursuant to Par. 2.4 of the Articles of Association, conversion of bearer shares into registered shares requires a
resolution of the General Shareholders Meeting, adopted by the majority of votes required to amend the Articles
of Association.
19.6 Resolutions, Permits or Approvals under Which
Securities Have Been or Will Be Created or Issued
New
Series L Shares were created under Resolution No. 8/2006 adopted by the Ordinary General Shareholders
Meeting held on June 30th 2006.
19.7 Date of the Securities Issue
The Ordinary General Shareholders Meeting held on June 30th 2006 adopted a resolution on issue of shares.
The shares will be allotted within 14 days from the subscription closing date.
19.8 Public Tender Offers with respect to the Issuer’s Shares
Announced by Third Parties in the Previous Financial Year and
In the previous financial year and current financial year, no public tender offers with respect to the Issuer shares
have been announced.
146
20.
TERMS AND CONDITIONS OF THE OFFERING
20.1
General Terms and Conditions of the Public Offering
67,714,674 Series L Shares with a par value of PLN 1 per share will be offered to the Issuer’s existing
Shareholders based on this Prospectus. The issue price of Series L Shares is PLN 1 (one) per share.
Moreover, based on this Prospectus up to 67,714,674 Series L Shares and Rights to Shares will be sought to be
admitted and introduced to trading on the main market of the WSE.
The Issuer’s Shareholders will have pre-emptive rights to acquire a number of the Offered Shares equal to the
number of the Issuer Shares they hold as at September 15th 2006 (the “Record Date”). Given the time needed for
settling stock-exchange transactions at the Polish NDS, the investors who intend to acquire the Issuer Shares on
the WSE must acquire them on or before September 12th 2006 in order to obtain the pre-emptive rights.
Based on the number of new-issue Series L Shares, the holders of pre-emptive rights will be entitled to acquire
three (3) Series L Shares for each one (1) pre-emptive right. An investor may place a subscription order for a
number of shares lower than the number to which the investor is entitled under his/her pre-emptive rights.
If the number of Series L Shares to which a given shareholder is entitled under the pre-emptive rights is not an
integer, it will be rounded down to the nearest integer.
Trade in the pre-emptive rights on the WSE is planned for the period January 24th – January 30th 2007.
Pursuant to the provisions of Art. 436.1 of the Commercial Companies Code, pre-emptive rights to shares in
a public company have to be exercised on the same day, on which both Basic and Additional Subscription
Orders are submitted.
Pursuant to the provisions of Art. 436.4 of the Commercial Companies Code, Series L Shares which are not
covered by subscription orders submitted in exercise of the pre-emptive rights (both Basic and Additional
Subscription Orders) will be offered and allotted by the Management Board in accordance with the rules
described in Sections 20.2.4., 20.2.5 and 20.2.6. A detailed schedule of the Public Offering is set forth in Section
20.2.2.
Information on the results of the Public Offering will be published within 14 days from the subscription closing
date, in accordance with Par. 33 of the Regulation on current and periodic information.
The Issuer does not intend to execute an underwriting agreement with respect to the Offering.
The Polish NDS is the entity providing depository services in Poland.
20.2
Rules Governing Distribution of Shares
20.2.1 Persons to Whom the Public Offering is Addressed
The Offering of the Offered Shares is addressed to the Issuer’s existing Shareholders.
Persons entitled to submit subscription orders for the Offered Shares in exercise of the pre-emptive rights (Basic
Subscription Orders) are persons who are the Issuer’s Shareholders as at the end of the day on the Record Date
and did not dispose of their pre-emptive rights prior to the submission of a subscription order for the Offered
Shares, and persons who acquired pre-emptive rights and did not dispose of them prior to the submission of a
subscription order for the Offered Shares.
Persons entitled to submit Additional Subscription Orders for the Offered Shares are persons who are the
Issuer’s Shareholders as at the end of the day on the Record Date.
147
If the submitted Basic and Additional Subscription Orders do not cover all of the Offered Shares, persons
entitled to submit subscription orders for such remaining Offered Shares will be investors designated by the
Management Board.
20.2.2 Public Offering Schedule
September 15th 2006
-
Record Date
January 24th–30th 2007
-
Trading in pre-emptive rights on the WSE
January 25th–February 2nd 2007
-
February 14th 2007
-
Within 14 days from the
subscription closing date
-
Acceptance of Basic Subscription Orders and Additional Subscription
Orders for the Offered Shares
Acceptance of subscription orders not covered by Basic and Additional
Subscription Orders
Planned period for allotment of the Offered Shares
The Supervisory Board may decide to change the subscription opening and closing dates, as well as the dates for
acceptance of subscription orders for the Offered Shares. Information on change of the subscription opening date
and the opening date for acceptance of subscription orders will be published in the form of a Supplement to the
Prospectus prior to the subscription opening date or the opening date for acceptance of subscription orders,
respectively. Information on any change in the closing dates will be published in the form of a Supplement to the
Prospectus on or before the subscription closing date or the closing date for the acceptance of subscription
orders, respectively.
20.2.3 Issue Price
Pursuant to Resolution No. 8/2006 adopted by the Ordinary General Shareholders Meeting of MNI S.A. held on
June 30th 2006, the issue price of the Offered Shares is set at PLN 1 (one) per share.
No additional charges are connected with the submission of a subscription order for the Offered Shares.
However, investors should take into consideration that they may have to incur certain other costs indirectly
connected with subscribing for the Offered Shares, including in particular the cost of opening and/or maintaining
an investment account, banking costs related to payment for the subscribed Offered Shares, possible costs of
exchanging foreign currencies into the Polish złoty, stamp duty due in the event of submitting a subscription
order through a proxy, as well as possible costs of acquiring pre-emptive rights. Investors are also advised that
payments for the Offered Shares bear no interest. Accordingly, whenever an overpaid amount is returned,
investors are not entitled to any interest or compensation.
The Offered Shares are not intended for and will not be used in any management or employee stock option plan.
20.2.4 Rules Governing Placement of Subscription Orders
An investor may place a Basic Subscription Order for the maximum number of the Offered Shares resulting from
the shareholder’s pre-emptive rights. Based on the number of new-issue Series L Shares, the holders of preemptive rights will be entitled to acquire three (3) Series L Shares for each one (1) pre-emptive right. An
investor may place a subscription order for a number of shares lower than the number to which the investor is
entitled under his/her pre-emptive rights.
Basic Subscription Orders for the Offered Shares will be placed with the entity maintaining the investment
account in which the underlying pre-emptive rights are recorded. If an investor’s pre-emptive rights are recorded
in the Issue Sponsor’s account, such an investor should place the Basic Subscription Order with the entity
maintaining that account. If an investor’s pre-emptive rights are recorded in a securities account maintained by
depository banks, such an investor should place the Basic Subscription Order for the Offered Shares with the
brokerage house executing orders issued by the customers of a given depository bank.
As at the Prospectus Date, the entity maintaining the issue sponsor register for the Issuer Shares is the Brokerage
House of Bank BPH S.A.
148
An investor who as at the Record Date was a Shareholder in the Issuer may place an Additional Subscription
Order for up to the maximum number of the Offered Shares covered by the Public Offering. A subscription order
for a larger number of the Offered Shares will be deemed an order for the maximum number of the Offered
Shares covered by the Public Offering.
An investor invited by the Management Board to place a subscription order for the Offered Shares not acquired
under the Basic and Additional Subscription Orders may place an order for the number of Offered Shares
indicated in the relevant invitation. Such an investor should place his/her order at the Offeror’s registered office,
that is at Dom Inwestycyjny BRE Banku S.A., ul. Wspólna 47/49, 00-684 Warsaw, Poland.
The scope and form of documents necessary to place a subscription order, as well as the rules for acting through
a proxy are regulated by the procedures effective at the entity with which an order is placed. Relevant
information is available at the Customer Service Point of the entity with which an investor intends to place the
order. An investor may place the subscription order via means of remote communication if the regulations
effective at the entity accepting the order permit such means of submission and the investor and the entity have
signed an agreement authorising the brokerage house to place the order on the investor’s behalf.
Each subscription order for the Offered Shares is irrevocable, unconditional and subject to no reservations.
However, pursuant to Art. 51.5 of the Act, if following the opening of subscription a Supplement to the
Prospectus is published concerning an event or circumstance which has occurred prior to the allotment of
securities and of which the Issuer became aware prior to the allotment, an investor who placed an order prior to
the publication of the Supplement may avoid legal consequences of the order placement if the investor submits,
within two business days from the publication of the Supplement, a relevant statement in writing to the
investment firm offering Series L Shares.
Each investor placing a subscription order for the Offered Shares represents that he has read this Issue
Prospectus and accepts the terms and conditions of the Public Offering, is familiar with the Issuer’s Articles of
Association and accepts their provisions.
Subscription orders for the Offered Shares must be submitted on the subscription order forms shown in
Section 25.4 of this Prospectus. A subscription order must be placed in three (3) copies. A Basic Subscription
Order and Additional Subscription Order are to be placed on separate subscription order forms.
The investor bears all consequences of incorrect completion of the subscription order form.
20.2.5 Payments for Offered Shares
Basic and Additional Subscription Orders must be paid up in full at or before the time of placement.
Subscription orders for the Offered Shares not acquired under Basic and Additional Subscription Orders must be
paid up on or before the date on which they are accepted.
Payment for the Offered Shares must be equal to the product of the number of Offered Shares subscribed for and
the Issue Price.
In the case of Basic Subscription Orders, if an investor fails to make a full payment for the Shares subscribed for,
the order will be deemed invalid. In the case of Additional Subscription Orders and orders for the Offered Shares
not acquired under Basic and Additional Subscription Orders, if an investor fails to make a full payment, such an
investor may be allotted no Offered Shares or an arbitrary number of Offered Shares, but not larger than the
number covered by the payment made.
Payment for the Offered Shares may be made only in Polish złoty, in cash or by bank transfer. Payment will be
deemed to be effectively made when the funds are credited to the bank account of the entity accepting the
subscription order. Where an investor intends to make a payment by a bank transfer, the investor should contact
the entity with which he/she intends to place the subscription order in order to obtain the relevant bank account
number and transfer description to appear on the transfer form. When making payment by bank transfer,
investors should allow for the time required for the execution of the transfer. The investor bears sole
responsibility for any delay in due payment for the Offered Shares.
149
20.2.6 Allotment Rules for the Offered Shares
The Offered Shares will be allotted within 14 days from the closing of subscription.
In the case of Basic Subscription Orders, the Offered Shares will be allotted in accordance with subscription
orders placed.
Should any Offered Shares remain unsubscribed for under Basic Subscription Orders, they will be allocated for
subscription under Additional Subscription Orders.
If the number of Offered Shares covered by Additional Subscription Orders exceeds the number of shares
remaining unsubscribed for under Basic Subscription Orders, the Offered Shares will be allotted to investors
who placed Additional Subscription Orders in accordance with the principle of proportional reduction. Fractional
parts of shares will not be allotted. If as a result of proportional reduction some of the Offered Shares remain
unsubscribed, they will be allotted successively to those investors who placed Additional Subscription Orders for
the highest number of the Offered Shares. In the case of subscription orders for the same number of shares, the
allotment will be made by a draw.
The shares unsubscribed for under Basic Subscription Orders or Additional Subscription Orders will be allotted
by the Company’s Management Board, at its sole discretion, to investors who place subscription orders for the
Offered Shares at the Company’s invitation. The Offered Shares will be allotted to them at a price not lower than
the final Issue Price of the Offered Shares.
Investors will be notified of the allotment of the Offered Shares in accordance with the regulations effective at a
given brokerage house accepting subscription orders. Investors are advised that the start of trading in the Rights
to Shares and Offered Shares is not contingent upon prior notification of the investor of the number of allotted
shares.
20.2.7 Settlement of the Offering and Delivery of Rights to Shares and Offered Shares
Settlement of the Offering will be made through the Polish NDS.
Overpayments and payments made by investors who are not allotted any Offered Shares or whose orders are
reduced will be returned to the investors’ accounts indicated in the subscription order forms within 14 days from
the date of allotment of the Offered Shares.
Should the issue of the Offered Shares prove unsuccessful, the payments will be returned to the investors’
accounts indicated in the subscription order forms within 14 days from the announcement of unsuccessful issue
of the Offered Shares.
The information on the results of the Offering, including unsuccessful issue of the Offered Shares, will be
published in a current report within 14 days from the closing of public subscription for Series L Shares.
Investors are also advised that payments for the Offered Shares bear no interest. Funds will be returned without
any interest, compensation or costs incurred by the subscriber.
Immediately after the allotment of the Offered Shares, the Management Board will take steps to register the
Rights to Shares with the Polish NDS and in the investors’ securities accounts, and arrange for the Rights to
Shares to become listed on the WSE.
Immediately after the allotment of the Offered Shares, the Management Board will apply to the registry court for
the registration a share capital increase at of the Company.
If the issue proves unsuccessful after the Rights to Shares have been admitted to stock-exchange trading,
payments for the Offered Shares will be returned to the investors in whose accounts the Rights to Shares are
registered on the date of settling the transactions executed on the last day of trading in the Rights to Shares. The
amount of returned payments for one Right to Share will be equal to the Issue Price of the Offered Shares.
Upon registration of the share capital increase at the Company by in the registry court, the Management Board
will apply to the Polish NDS for registration of the Offered Shares.
150
Following registration of the Offered Shares with the Polish NDS, they will be registered in the securities
accounts of those investors who hold Rights to Shares. Each Right to Share entitles its holder to one Series L
Share. The day on which the Rights to Shares expire will be the last day of trading in the Rights to Shares. As of
the next trading day, the Offered Shares will be listed.
20.2.8 Abandonment or Cancellation of the Public Offering
From the date of the first listing of pre-emptive rights to Offered Shares, the Issuer’s Management Board may
resolve to cancel the Public Offering without disclosing the reasons for its decision.
Following the opening of the Public Offering, until the allotment of the Offered Shares, the Issuer may decide to
abandon the Public Offering only for a good reason. Such situation may take place if:
•
•
•
•
sudden and unexpected changes occur in the economic or political situation of Poland, the region or the
world, which may have an adverse effect on financial markets, Polish economy or the Issuer’s business,
sudden and unexpected changes occur in the Issuer’s situation, which have an adverse effect on the
Issuer’s business,
sudden and unexpected changes occur in the Issuer’s environment, which have a direct effect on the
Issuer’s operating activities,
other unexpected circumstances occur, which make the Public Offering and allotment of the Offered
Shares impossible or detrimental to the Issuer’s interest.
In the event of cancellation or abandonment of the Public Offering, the Issuer will publish a relevant decision in
a supplement to this Prospectus, in accordance with Art. 51 of the Public Offering Act. In such a case, the
amounts paid by investors will be returned within the timeframes and on the terms set forth in Section 20.2.7
hereof. The amounts will be returned without any interest or compensation.
20.2.9 Intentions of Main Shareholders and Members of the Issuer’s Management, Supervisory
and Administrative Bodies Regarding Their Participation in the Subscription
Intentions of the Company’s main shareholders and Members of the Management and Supervisory Boards as
well as members of other administrative bodies with regard to their participation in the subscription for Series L
Shares are as set forth in the table below:
ENTITY
Intention to
participate in
subscription for
Series L Shares
Intention to acquire over 5% of the
Offered Shares as part of
subscription for Series L Shares
Main shareholders
YES
YES
Andrzej Piechocki and Dedal Inwestycje Sp. z o.o.**
YES
YES
Inwest Logistics Sp. z o.o.
YES
NO
Members of the Management Board
Piotr König
NO
NO
Mariusz Piotr Pilewski
NO
NO
Leszek Wojciech Kułak
NO
NO
Members of the Supervisory Board
Andrzej Piechocki
*
*
Robert Gwiazdowski
NO
NO
Michał Tomczak
NO
NO
Tomasz Karasiński
NO
NO
Stanisław Widera
NO
NO
* The intentions of Mr Andrzej Piechocki, acting together with Dedal Inwestycje Sp. z o.o., are presented in the above line under the heading
“Main Shareholders”
** On October 25th 2006, Dedal Inwestycje Sp. z o.o. disposed of all its shares in the Issuer, however, it intends to exercise all its preemptive rights to Series L Shares.
151
21. ADMISSION OF SECURITIES TO TRADING, AND
TRADING TERMS AND CONDITIONS
The Issuer will file relevant applications with the Polish NDS for the registration of the Rights to Shares and for
the admission and introduction of the Rights to Shares to trading on the WSE. The Issuer’s intention is to
commence trading in the Rights to Shares as soon as reasonably practicable following the allotment of the
Offered Shares.
Upon allotment of the Offered Shares, the Issuer will additionally submit an application to the registry court for
the registration of a share capital increase at the Company. After the application is approved by the registry
court, the Issuer will immediately submit applications for registration of the Offered Shares with the Polish NDS
and for admission and introduction of the Offered Shares to trading on the WSE.
The Offered Shares will be registered in the investors’ accounts in place of the Rights to Shares held by such
investors. One Right to Shares entitles its holder to one Series L Share. The day on which the Rights to Shares
expire will be the last day of trading in the Rights to Shares. As of the next trading day, the Offered Shares will
be listed.
The Issuer’s Shares of the previous issues are currently listed on the WSE.
On November 8th 2005, the Issuer entered into an agreement with PKO BP S.A. Bankowy Dom Maklerski on
the performance of market-making services for the benefit of the Issuer.
The Issuer does not intend to execute an underwriting agreement.
152
22. ADDITIONAL INFORMATION ON THE OFFERING
22.1 Scope of Responsibilities of Advisers Involved in the Issue, If
Such Advisers Are Specified in the Offering Document
22.1.1 Legal Adviser
The Legal Adviser is a party related to the Issuer to the extent following from the agreement on provision of
advisory services to the Issuer in connection with the public offering of Series L Shares. Additionally, the Legal
Adviser provides the Issuer with legal advisory services on an ongoing basis.
22.1.2 Financial Adviser
The Financial Adviser is a party related to the Issuer to the extent following from the agreement on provision of
advisory services to the Issuer in connection with the public offering of Series L Shares, consisting in particular
in preparation of the Issuer for the Public Offering and preparation and execution of the Public Offering.
22.1.3 The Offeror
The Offeror is a party related to the Issuer to the extent following from the agreement on provision of advisory
services to the Issuer in connection with the public offering of Series L Shares, consisting in particular in
preparation of the Issuer for the Public Offering and preparation and execution of the Public Offering.
22.1.4 The Auditor
The Auditor is a party related to the Issuer to the extent following from the agreement mandating the auditor to
audit the financial statements of the Issuer and its Group. The tasks performed by the Auditor included audit of
the financial statements of the Issuer and its Group for 2005 and issuance of an opinion on the forecasts
contained in this Prospectus.
22.2 Other Information Contained in the Offering Document Which
Was Audited by Qualified Auditors and with Respect to Which
Qualified Auditors Prepared a Report
Section 6 of this Prospectus contains a forecast of the Group’s financial performance and the auditor’s report on
the examination of selected items of the prospective financial information of the MNI Group prepared for 2006–
2008.
Section 23 of this Prospectus contains the consolidated financial statements of the MNI Group for 2005
(prepared in accordance with the IFRS), which were audited by the Auditor.
22.3 If the Offering Document Contains a Statement or a Report by
a Person Referred to as an Expert, Provide the Person’s First
Name, Surname, Business Address, Qualifications, and
Interests Held in the Issuer, if Material. If the Report Was
Commissioned
by
the
Issuer:
Provide
Relevant
Representation on the Inclusion of Such Statement or Report
in the Form and Context in Which It Was Included, with the
Consent of the Person Responsible for Approving that Part of
the Offering Document
The Issuer’s Prospectus does not include any statements or reports delivered by a person referred to as an expert.
153
22.4 Representation on Reliability of Information Provided by Third
Parties, Along with Sources of Such Information
The Issuer confirms that all the information obtained from third parties, contained in this Prospectus and related
to the markets on which the Issuer operates, has been accurately reproduced and – as far as the Issuer is aware
and has been able to ascertain based on the information published by a third party – no facts have been omitted
which would render the information reproduced inaccurate or misleading.
The information obtained from third parties is sourced from the following:
•
PMR Report “Telecommunications market in Poland 2005-2008”;
•
Research report by Com MN SM Market Assessment (March 2005);
•
Research report by IDC (2004);
•
Pyramid Research data;
•
Datamonitor data;
•
Dataquest data.
154
23. CONSOLIDATED FINACIAL STATEMENTS
23.1 Consolidated Financial Statements for 2005, including the
Auditor’s Opinion and Report
Consolidated Financial Statements of the MNI Group for 2006
Consolidated Financial Statements
of the MNI Group for 2005
prepared for the purposes of the MNI S.A. Prospectus, in accordance with the regulations governing the preparation
of prospectuses to be published when securities are issued, in accordance with Commission Regulation (EC) No. 809/2004
and other regulations applicable to the Polish capital market, including the Public Offering Act
Date prepared:
Dec 6 2006
Contents:
1.
FINANCIAL HIGHLIGHTS
2.
BALANCE SHEET
3.
INCOME STATEMENT
4.
STATEMENT OF CHANGES IN EQUITY
5.
CASH-FLOW STATEMENT
6.
NOTES
1.
PLN '000
Jan 1 - Dec
31 2005
EUR '000
Jan 1 - Dec
31 2004
Jan 1 - Dec
31 2005
Jan 1 - Dec
31 2004
I. Net sales revenue
83,187
43,752
20,666
II. Operating profit (loss)
33,945
4,389
8,433
971
III. Pre-tax profit (loss)
32,534
5,236
8,082
1,159
IV. Net profit (loss)
33,868
5,106
8,414
1,130
V. Net cash provided by (used in) operating activities
14,399
4,867
3,577
1,077
VI. Net cash provided by (used in) investing activities
81,281
-7,864
20,192
-1,741
VII. Net cash provided by (used in) financing activities
67,764
2,583
16,834
572
882
-414
219
-92
IX. Total assets
215,634
90,283
55,867
22,134
X. Liabilities and provisions for liabilities
125,468
33,985
32,506
8,332
XI. Non-current liabilities
73,339
17,488
19,001
4,287
XII. Current liabilities
47,248
13,641
12,241
3,344
XIII. Equity
90,166
56,298
23,360
13,802
VIII. Total net cash flow
9,684
22,572
22,709
5,848
5,567
22,645,005
14,276,707
22,645,005
14,276,707
XVII. Earnings (loss) per ordinary share (PLN/EUR)
1.50
0.40
0.37
0.09
XVIII. Book value per ordinary share (PLN/EUR)
3.99
2.48
1.03
0.61
XV. Share capital
XVI. Weighted average number of shares
155
2.
BALANCE SHEET
BALANCE SHEET
Note
PLN '000
Dec 31 2005
Dec 31 2004
ASSETS
I. Non-current assets
163,631
77,038
1A,B
10,921
2,769
1C
20,828
4,633
3. Property, plant and equipment
2
122,148
66,243
4. Non-current receivables
3
6,421
2,368
6,421
2,368
1. Intangible assets
2. Goodwill
4.1. From other undertakings
5. Non-current investments
4
210
5.1. Non-current financial assets
210
a) in other undertakings
210
6. Deferred tax asset
5
II. Current assets
3,313
815
52,003
13,245
1. Inventories
6
375
160
2. Current receivables
7
33,453
12,631
33,453
12,631
a) trade receivables
32,625
11,829
b) other receivables
3. Current investments
3.1. Current financial assets
8
828
802
18,175
454
18,175
454
263
b) cash and cash equivalents
Total assets
17,912
454
215,634
90,283
EQUITY AND LIABILITIES
90,166
56,298
9
22,572
22,709
3. Statutory reserve funds
10
32,572
27,251
4. Revaluation capital reserve
11
125
125
5. Other capital reserves
12
1,047
1,047
I. Equity
1. Share capital
2. Treasury shares (negative value)
-137
6. Retained profit (deficit)
7. Net profit (loss)
8. Minority interests
-18
124
33,868
5,106
125,468
33,985
4,881
2,856
2,850
1,712
320
196
12A
II. Liabilities and provisions for liabilities
1. Provisions for liabilities
13
1.1. Deferred tax liability
1.2. Provision for retirement and related benefits, including:
a) non-current
b) current
1.3. Other provisions
a) non-current
73
9
9
311
187
1,711
948
1,553
b) current
158
948
73,339
17,488
2.1. To other undertakings
73,339
17,488
a) loans and borrowings
68,396
5,058
4,943
12,430
2. Non-current liabilities
14
b) other
3. Current liabilities
47,248
13,641
47,248
13,641
12,262
2,027
15
156
b) trade payables
27,783
c) other
Total equity and liabilities
3.
10,823
7,203
791
215,634
90,283
INCOME STATEMENT
INCOME STATEMENT
Note
1. Net revenue from sales of products
16
2. Net revenue from sales of goods for resale and materials
17
II. Cost of sales, including:
1. Cost of products sold
18
2. Cost of goods for resale and materials sold
PLN '000
Jan 1 - Dec 31
Jan 1 - Dec 31
2005
2004
83,187
43,752
83,071
43,743
116
9
72,974
39,927
72,860
39,919
114
8
10,213
3,825
IV. Selling costs
2,055
1,652
V. General and administrative expenses
4,196
2,179
VI. Profit (loss) on sales (III-IV-V)
3,962
-6
35,629
6,021
III. Gross profit (loss) on sales (I-II)
VII. Other operating income
19
1. Gain on disposal of non-current non-financial assets
24
24
2. Other operating income
11,659
5,997
3. Excess of share in fair value of net identifiable assets, liabilities and contingent
liabilities of acquired undertaking over acquisition cost
23,946
VIII. Other operating expenses
5,646
1,626
1. Loss on disposal of non-current non-financial assets
181
296
2. Revaluation of non-financial assets
344
233
5,121
1,097
33,945
4,389
458
1,753
423
22
20
3. Other operating expenses
IX. Operating profit (loss) (VI+VII-VIII)
X. Financial income
21
1. Interest, including:
2. Other
XI. Financial expenses
22
35
1,731
1,869
906
1,045
657
2. Revaluation of investments
446
,
3. Other
378
249
XII. Profit (loss) before extraordinary items (IX+X-XI)
32,534
5,236
XIII. Pre-tax profit (loss) (XII+/-XIII)
32,534
5,236
-1,334
130
25
85
XIV. Corporate income tax
23
a) current
b) deferred
-1,359
45
XV. Net profit (loss) (XIV-XV+XVI+/-XVII)
33,868
5,106
- net profit (loss) attributable to equity holders of the parent
34,021
-153
5,675
-569
22,645,005
14,276,707
1.50
0.40
- net profit (loss) attributable to minority interests
Weighted average number of ordinary shares
Earnings (loss) per ordinary share (PLN)
24
157
4.
PLN '000
Jan 1 - Dec 31 2005 Jan 1 - Dec 31 2004
I. Balance of equity at beginning of period (opening balance)
56,298
36,133
I.a. Balance of equity at beginning of period (opening balance),
after reconciliation to comparable data
56,298
36,133
1. Balance of share capital at beginning of period
22,709
13,209
-137
9,500
1.1. Changes in share capital
9,500
a) increase, including:
9,500
- shares issued
137
b) decrease, including:
137
- shares retired
1.2. Balance of share capital at end of period
2. Treasury shares at beginning of period
22,572
22,709
-137
-137
2.1. Changes in treasury shares
137
a) decrease, including:
137
- shares retired
137
-137
2.2. Treasury shares at end of period
27,251
25,129
3.1. Changes in statutory reserve funds
5,321
2,122
5,321
6,532
3. Statutory reserve funds at beginning of period
5,758
- share premium account
73
- distribution of profit (statutory)
774
5,248
- reclassification of retained profit
4,410
4,410
- covered loss
3.2. Statutory reserve funds at end of period
4. Revaluation capital reserve at beginning of period
32,572
27,251
125
125
4.1. Changes in revaluation capital reserve
4.2. Revaluation capital reserve at end of period
5. Other capital reserves at beginning of period
125
125
1,047
1,047
5.1. Changes in other capital reserves
5.2. Other capital reserves at end of period
1,047
1,047
6. Retained profit (deficit) at beginning of period
5,230
-3,240
6.1. Retained profit at beginning of period
5,248
1,170
73
-254
6.2. Retained profit at beginning of period, after reconciliation to
comparable data
5,321
916
5,321
774
- transfer of profit to statutory reserve funds
5,321
774
18
4,410
a) other adjustments at beginning of period
142
6.3. Retained profit at end of period
6.4. Retained deficit at beginning of period
18
b) correction of fundamental errors
6.5. Retained deficit at beginning of period, after reconciliation to
comparable data
4,428
- transfer of retained deficit to be covered
4,410
- loss covered from statutory reserve funds
4,410
6.6. Retained deficit at end of period
6.7. Retained profit (deficit) at end of period
158
18
18
-18
124
33,868
5,106
73
8. Minority interests at beginning of period
73
a) increase
73
b) decrease
73
8.1. Minority interests at end of period
90,166
II. Equity at end of period (closing balance )
159
56,298
5.
CASH-FLOW STATEMENT
PLN '000
Jan 1 - Dec 31 2005
Jan 1 - Dec 31 2004
CASH-FLOW STATEMENT
A. Cash flows from operating activities - indirect method
33,868
I. Net profit (loss)
II. Total adjustments
1. Depreciation and amortisation
5,106
-19,469
-239
12,136
8,335
2. Foreign exchange (gains) losses
25
-44
3. (Gain)/loss on investing activities
322
-273
3,077
340
5. Change in inventories
-96
-2
6. Change in receivables
4. Change in provisions
-37,399
-16,653
7. Change in current liabilities (net of loans and borrowings)
37,130
12,101
8. Change in accruals and deferrals
-1,196
9. Income tax paid
10. Other adjustments
III. Net cash provided by (used in) operating activities (I+/-II)
-19
-7
-33,449
-4,309
14,399
4,867
6,579
972
B. Cash flows from investing activities
I. Cash provided by investing activities
6,579
972
II. Cash used in investing activities
87,860
8,836
1. Acquisition of intangible assets and property, plant and equipment
15,814
8,685
2. Expenditure on financial assets, including:
72,046
151
a) in related undertakings
71,962
- acquisition of financial assets
71,962
1. Sale of intangible assets and property, plant and equipment
b) in other undertakings
84
84
151
-81,281
-7,864
85,333
16,659
III. Net cash provided by (used in) investing activities (I-II)
C. Cash flows from financing activities
I. Cash provided by financing activities
1. Net proceeds from issue of shares, other equity instruments and additional
contributions to equity
15,258
85,153
2. Increase in loans and borrowings
151
1,221
180
180
II. Cash used in financing activities
17,569
14,076
1. Repayment of loans and borrowings
13,122
2,716
2,150
10,000
958
344
3. Other cash provided by financing activities
2. Other financial liabilities
3. Decrease in financed lease liabilities
70
16
5. Licence fee instalments paid
354
412
6.Arrangement instalments paid
853
408
4. Interest paid
7. Other cash used in financing activities
III. Net cash provided by (used in) financing activities (I-II)
D. Total net cash flow (A.III+/-B.III+/-C.III)
E. Balance-sheet change in cash, including:
F. Cash at beginning of period
G. Cash at end of period (F+/- D)
160
62
180
67,764
2,583
882
-414
17,458
-12
454
868
17,912
454
6.
NOTES
Note 1A
Dec 31 2005
PLN ‘000
Dec 31 2004
10,921
2,708
10,921
2,769
Dec 31 2005
PLN ‘000
Dec 31 2004
a) owned
b) used under lease and rental agreements, including financed lease
agreements
10,921
2,769
Total intangible assets
10,921
2,769
Dec 31 2005
Dec 31 2004
a) goodwill
20,828
4,633
Goodwill
20,828
4,633
INTANGIBLE ASSETS
a) acquired permits, patents, licences and similar assets, including:
b) prepayments for intangible assets
61
Note 1B
INTANGIBLE ASSETS (by ownership)
0
Note 1C
0
PLN ‘000
GOODWILL
In 2004, following the acquisition of an organised part of business by the parent undertaking, goodwill was
recognised.
In accordance with the IFRS, the goodwill is tested for impairment on an annual basis.
- acquisition price
PLN 5,562 thousand
- net assets as at date of control take-over
PLN 930 thousand
goodwill
PLN 4,633 thousand
No material merger costs were incurred other than the contractual acquisition price.
In 2005, following the purchase of shares in Legion Polska Sp. z o.o., an excess of the shares value over the
corresponding portion of the acquired company’s net assets was recognised:
- acquisition price
PLN 16,669 thousand
PLN 474 thousand
goodwill
PLN 16,195 thousand
Note 2A
PROPERTY, PLANT AND EQUIPMENT
a) tangible assets, including:
- land (including perpetual usufruct rights)
Dec 31 2005
PLN ‘000
Dec 31 2004
114,552
63,223
99
99
- buildings and structures
44,497
32,585
- plant and equipment
68,762
30,281
- vehicles
758
129
- other tangible assets
436
129
b) assets under construction
Total property, plant and equipment
161
7,596
3,020
122,148
66,243
Note 2B
ON-BALANCE-SHEET TANGIBLE ASSETS (by ownership)
a) owned
agreements:
Dec 31 2005
PLN ‘000
Dec 31 2004
120,511
65,312
1,637
931
1,637
931
122,148
66,243
Dec 31 2005
PLN’ 000
Dec 31 2004
Net non-current receivables
6,421
2,368
Gross non-current receivables
6,421
2,368
Dec 31 2005
PLN ‘000
Dec 31 2004
financed lease agreements
Total on-balance-sheet tangible assets
Note 3
NON-CURRENT RECEIVABLES
Note 4A
NON-CURRENT FINANCIAL ASSETS
210
shares
210
Total non-current financial assets
210
Note 4B
Dec 31 2005
NON-CURRENT FINANCIAL ASSETS
PLN ‘000
Dec 31 2004
A. Freely marketable, listed (carrying value)
210
a) shares (carrying value)
210
fair value
210
Note 4C
PLN ‘000
Dec 31 2005
NON-CURRENT FINANCIAL ASSETS (BY CURRENCY)
Dec 31 2004
a) in Polish currency
210
Total securities, equity interests and other financial assets
210
Note 4D
PLN ‘000
CHANGE IN NON-CURRENT FINANCIAL ASSETS (BY TYPE)
a) balance at beginning of period
Jan 1 – Dec
31 2005
Jan 1 – Dec
31 2004
210
101
210
101
- shares in related undertakings
- shares in other undertakings
109
b) increase, including:
109
c) decrease, including:
210
- disposal of shares in other undertakings
210
c) balance at end of period
0
162
210
Note 1D
MOVEMENTS IN INTANGIBLE ASSETS (BY TYPE)
a
b
acquired permits, patents,
licences and similar assets
including:
computer
software
a) gross intangible assets at beginning of period
other
intangible
assets
Total
intangible
assets
2,998
2,998
2,998
10,673
10,673
10,673
- purchase
8,955
8,955
8,955
- other
1,718
1,718
1,718
26
26
87
- liquidation
26
26
87
13,645
13,645
13,645
290
290
290
f) amortisation for period, including:
2,460
2,460
2,460
- annual amortisation
1,961
1,961
1,961
499
499
499
decrease, including:
26
26
26
- liquidation
26
26
26
2,724
2,724
2,724
10,921
10,921
10,921
d) gross intangible assets at end of period
e) accumulated amortisation at beginning of period
- other
g) accumulated amortisation at end of period
h) net intangible assets at end of period
163
Note 2C
MOVEMENTS IN TANGIBLE ASSETS (BY TYPE)
owned land
(including
perpetual
usufruct
rights)
a) gross tangible assets at beginning of period
99
buildings
and
structures
plant and
equipment
vehicles
other
tangible
assets
Total
tangible
assets
64,563
52,714
766
256
118,398
20,524
96,688
1,636
2,156
121,004
104
3,388
420
48
3,960
23
871
20,397
92,429
4,366
1,804
- disposal
4,135
- purchase
- transfer from warehouse
- other
- liquidation
- other
d) gross tangible assets at end of period
99
3
897
1,216
2,105
116,147
208
23
6,401
28
1
4,164
93
109
138
1,695
180
22
2,035
202
80,721
147,598
2,194
2,389
233,001
e) accumulated depreciation at beginning of period
9,316
22,433
637
127
32,513
f) depreciation for period, including:
9,501
57,381
1,005
1,845
69,732
- annual depreciation
2,706
7,130
280
59
10,175
- other
6,795
50,251
725
1,786
59,557
424
1,246
206
19
1,895
21
38
g) decrease, including:
- liquidation
- disposal
318
- other
59
28
346
85
1,208
178
19
1,490
g) accumulated depreciation at end of period
18,817
79,814
1,611
108
100,350
h) impairment charges at beginning of period
22,662
- increase
22,662
268
- decrease
268
4,831
i) impairment charges at end of period
4,831
17,831
268
j) net tangible assets at end of period
99
44,497
68,762
758
436
18,099
k) net tangible assets at beginning of period
99
32585
30,281
129
129
114,552
63,223
114,552
l) tangible assets at end of period
164
Note 9 PLN ‘000
SHARE CAPITAL (STRUCTURE) - December 31st 2005
Series/issue
Type of
shares
Preference
A
registered
3:1 voting
preference
A
B
Type of limitation of rights to shares
Number of shares
Value of
series/issue at par
value
Covered with
Registration
date
Rights to
dividend from
13,189
13,189
contribution in kind
1996-08-07
1997-01-01
ordinary
918,711
918,711
1996-08-07
1997-01-01
ordinary
163,110
163,110
cash
1996-08-07
1997-01-01
C
ordinary
136,590
136,590
cash
1997-02-20
1997-01-01
D
ordinary
763,410
763,410
cash
1997-02-20
1997-01-01
E
ordinary
4,420,000
4,420,000
cash
1997-05-14
1997-01-01
F
ordinary
3,566,004
3,566,004
cash
1998-11-19
1998-01-01
G
ordinary
118,986
118,986
cash
1998-11-19
1998-01-01
H
ordinary
2,608,558
2,608,558
cash
2001-07-27
2001-01-01
I
ordinary
363,000
363,000
cash
2001-03-23
2001-01-01
J
ordinary
4,000,000
4,000,000
cash
2004-09-16
2003-01-01
K
ordinary
5,500,000
5,500,000
cash
2004-12-31
2005-01-01
Total number of shares
22,571,558
Total share capital
22,571,558
Par value of one share – PLN 1
As at December 31st 2005 the share capital of MNI S.A. amounted to PLN 22,571,558 and was divided into 22,571,558 Series A, B, C, D, E, F, G, H, I, J and K shares with the par value of PLN 1 per
share.
Shareholders of MNI S.A. holding over 5% of the shares or of the total vote at the General Shareholders Meeting of MNI S.A.
No.
Shareholder
PLN
Number of shares
% of total shares
Number of votes
% of total vote
1
COM INVESTMENT Sp. z o.o. (formerly MEDIA-NET INTERACTIVE Sp. z o.o.)
9,191,590
40.48
9,191,590
40.48
2
Andrzej Piechocki together with Dedal Inwestycje Sp. z o.o.
3,313,144
14.68
3,313,144
14.66
3
Caterham Financial Menagement Ltd.
1,250,000
5.51
1,250,000
5.5
In the reporting period, the par value of the shares did not change and there were no changes in the rights attached to the shares.
165
Note 5
PLN '000
Jan 1 - Dec
31 2005
CHANGE IN DEFERRED TAX ASSET
1. Deferred tax asset at beginning of period, including:
Jan 1 - Dec
31 2004
815
a) recognised in net profit or loss
815
2. Increase
9,796
815
a) recognised in net profit or loss for the period in connection with
deductible temporary differences, including:
9,796
815
deferred tax on costs invoiced after the closing of financial period
5,036
815
deferred tax relating to tax loss for previous years
4,760
3. Decrease
7,298
7,298
4,386
2,912
4. Total deferred tax asset at end of period, including:
3,313
815
3,313
815
Note 6
Dec 31 2005
INVENTORIES
PLN '000
Dec 31 2004
a) materials
375
160
Total inventories
375
160
- there are no restrictions on disposal of the inventories
- the value of the inventories recognised as costs in the period amounted to:
114 - value of materials sold
111 - general administrative expenses and selling costs (value of advertising materials charged to costs)
Note 7A
CURRENT RECEIVABLES
Dec 31 2005
PLN' 000
Dec 31 2004
a) receivables from other undertakings
trade receivables, maturing in:
33,453
12,631
32,625
11,829
up to 12 months
31,839
11,735
over 12 months
786
94
other
828
802
33,453
12,631
Total current receivables, net
b) valuation allowance for receivables
Total current receivables, gross
166
5,652
1,911
39,105
14,542
Note 7B
PLN '000
CHANGE IN VALUATION ALLOWANCES FOR CURRENT
RECEIVABLES
Jan 1 -Dec
31 2005
Jan 1 -Dec
31 2004
Balance at beginning of period
1,911
2,206
a) increase
4,465
198
- valuation allowances for receivables from customers
1,167
198
- other
3,298
b) decrease
724
493
574
430
- other
200
- valuation allowances for interest
39
- valuation allowances for court costs
24
Balance of valuation allowances for current receivables at end of
period
5,652
1,911
Dec 31 2005
PLN '000
Dec 31 2004
38,426
13,767
679
775
Note 7C
CURRENT RECEIVABLES, BY CURRENCY
b) in foreign currencies (in foreign currency and restated in PLN)
b1. unit/currency USD
18
6
PLN '000
60
37
1,552
2,618
b2. unit/currency CZK
206
367
3,478
2,492
355
275
b4. unit/currency EUR
15
24
PLN '000
58
96
39,105
14,542
PLN '000
b3. unit/currency SKK
PLN '000
Note 7D
PLN'000
TRADE RECEIVABLES (GROSS), BY MATURITY AS FROM THE
BALANCE-SHEET DATE
Dec 31 2005
Dec 31 2004
23,578
10,303
Trade receivables maturing in:
a) up to 1 month
b) more than 1 month – up to 3 months
19
10
6,509
450
d) more than 6 months – up to 1 year
191
51
e) more than 1 year
595
94
7,385
1,204
38,277
12,112
5,652
283
32,625
11,829
c) more than 3 months – up to 6 months
f) past due
Total trade receivables (gross)
g) valuation allowances for trade receivables
Total trade receivables (net)
167
Note 7E
PLN '000
PAST-DUE TRADE RECEIVABLES (GROSS), BY PERIOD OF
DELAY
a) delayed by up to 1 month
Dec 31 2005
Dec 31 2004
551
523
1,252
253
c) delayed by more than 3 months – up to 6 months
407
130
d) delayed by more than 6 months – up to 1 year
598
154
b) delayed by more than 1 month – up to 3 months
e) delayed by more than 1 year
4,577
144
Total past-due trade receivables (gross)
7,385
1,204
f) valuation allowances for trade receivables
5,652
283
Total past-due trade receivables (net)
1,733
921
The difference between notes 7E and 7B concerning the valuation allowances for trade receivables
in 2004 results from the fact that note 7B discloses valuation allowances for all receivables while
note 7E shows valuation receivables for trade receivables only.
Note 8A
CURRENT FINANCIAL ASSETS
Dec 31 2005
263
shares
237
loans advanced
PLN '000
Dec 31 2004
26
17,912
454
cash in hand and cash at banks
17,106
454
806
other cash
Total current financial assets
18,175
Note 8B
454
PLN '000
SECURITIES, EQUITY INTERESTS AND OTHER CURRENT
FINANCIAL ASSETS, BY CURRENCY
Dec 31 2005
237
Total securities, equity interests and other current financial assets
237
Note 8C
Dec 31 2004
PLN '000
FINANCIAL ASSETS, BY TRANSFERABILITY
Dec 31 2005
A. Freely transferable, listed (carrying value)
237
237
Total value at beginning of period
237
Total carrying value
237
Note 8D
CURRENT LOANS ADVANCED, BY CURRENCY
Dec 31 2005
26
Total current loans advanced
26
Note 8E
CASH AND CASH EQUIVALENTS, BY CURRENCY
Dec 31 2004
PLN '000
Dec 31 2004
Dec 31 2005
PLN '000
Dec 31 2004
17,912
454
Total cash and cash equivalents
17,912
454
168
Note 10
STATUTORY RESERVE FUNDS
Dec 31 2005
PLN '000
Dec 31 2004
a) other (by type)
32 572
27 251
Total statutory reserve funds
32 572
27 251
There were no additional contributions.
Statutory reserve funds are created from profit distributions and are maintained to cover potential future
losses.
Note 11
REVALUATION CAPITAL RESERVE
Dec 31 2005
PLN '000
Dec 31 2004
a) from revaluation of tangible assets
125
125
Total revaluation capital reserve
125
125
Revaluation of tangible assets in compliance with the Regulation of the Minister of Finance of 1995.
Note 12
OTHER CAPITAL RESERVES, BY PURPOSE
- created from profit distributions
Dec 31 2005
PLN '000
Dec 31 2004
1,047
1,047
Total other capital reserves
1,047
1,047
The capital reserves were created from the net profit for 1994 – PLN 36.7 thousand, for 1996 – PLN
228.6 thousand, for 1997 – PLN 781.6 thousand, in total: PLN 1,046.9 thousand. The capital reserves
were created for coverage of future net losses.
Note 12A
MINORITY INTERESTS
- minority interests
Dec 31 2005
PLN '000
Dec 31 2004
0
73
Minority interests
0
73
Minority interests in 2005 were disclosed as zero, because their value was negative, at -PLN 106
thousand, and were settled against the Group's equity.
Note 13A
Jan 1 – Dec
31 2005
CHANGE IN DEFERRED TAX LIABILITY
PLN ‘000
Jan 1 – Dec
31 2004
1. Deferred tax liability at beginning of period
1,712
851
2. Increase
7,642
1,196
a) recognised in net profit or loss for the period due to taxable temporary
differences, including:
7,642
1,196
- revenue not invoiced
7,565
1,196
- balance sheet valuation – foreign exchange gains/losses
16
- employee benefits – retirement severance pays
2
- provision for unused holidays
59
3. Decrease
6,504
335
6,504
323
6,423
- amortisation charges relating to a licence
81
- amortisation of a licence
81
242
b) depreciation of tangible assets covered by an investment tax credit
4. Total deferred tax liability at end of period
12
2,850
1,712
PLN ‘000
169
Note 13B
CHANGE IN NON-CURRENT PROVISION FOR RETIREMENT AND
SIMILAR BENEFITS, BY CATEGORY
Jan 1 –Dec
31 2005
Jan 1 – Dec
31 2004
9
8
2
1
provision created
2
1
c) release, including:
2
- adjustment to provision balance
2
d) balance at end of period
9
Note 13C
CHANGE IN CURRENT PROVISION FOR RETIREMENT AND SIMILAR
BENEFITS, BY CATEGORY
Jan 1 –Dec
31 2005
9
PLN ‘000
Jan 1 – Dec
31 2004
196
158
176
75
- accrual of cash equivalent for unused holidays
176
75
c) use, including:
52
37
- payment of cash equivalent for unused holidays
52
37
320
196
Dec 31 2005
PLN ‘000
Dec 31 2004
73,339
17,488
Note 14A
NON-CURRENT LIABILITIES
a) to other undertakings
- loans and borrowings
- other
Total curent liabilities
68,396
5,058
4,943
12,430
73,339
17,488
Note 14B
NON-CURRENT LIABILITIES,
BALANCE-SHEET DATE
PLN ‘000
BY
MATURITY
AS
FROM
THE Dec 31 2005
Dec 31 2004
Liabilities maturing in:
a) more than 1 year – up to 3 years
42,883
5,647
b) more than 3 years – up to 5 years
28,778
10,601
1,678
1,240
73,339
17,488
Dec 31 2005
PLN ‘000
Dec 31 2004
73,339
16,997
c) more than 5 years
Total non-current liabilities
Note 14C
NON-CURRENT LIABILITIES, BY CURRENCY
491
b1. unit/currency EUR ‘000
119
PLN ‘000
491
73,339
17,488
Dec 31 2005
PLN ‘000
Dec 31 2004
47,248
13,641
12,262
2,027
- trade payables
27,783
10,823
Note 15A
CURRENT LIABILITIES
- other
Total current liabilities
7,203
791
47,248
13,641
PLN '000
170
Note 15B
Dec 31 2005
Dec 31 2004
47,175
13,069
73
572
b1. unit/currency EUR '000
19
140
PLN '000
73
572
47,248
13,641
CURRENT LIABILITIES, BY CURRENCY
171
Note 14D
Name
PLN '000
NON-CURRENT LIABILITIES UNDER LOANS AND BORROWINGS - DEC 31 2005
Company name
Registered Amount of loan/borrowing as
Amount outstanding
and legal form
office in
per agreement
PLN '000
currency
PLN '000
currency
81,000
PLN
68,396
PLN
Interest
Repayment
date
MNI S.A.
BRE BANK S.A.
Warsaw
1M WIBOR +1.8PA
20.12.2010
Collateral
assignment by
way of security
Note 15C
PLN '000
CURRENT LIABILITIES UNDER LOANS AND BORROWINGS - DEC 31 2005
Amount of loan/borrowing as
Amount outstanding
Company name
Registered
per agreement
and legal form
office in
PLN '000
currency
PLN '000
currency
Interest
Repayment
date
MNI S.A.
BRE BANK S.A.
Collateral
*
PLN
8,798
PLN
1M WIBOR +1.8PA
31.12.2006
(formerly
Telefonia PKO S.A.
Pilicka Sp. z o.o.)
Radom
3,964
PLN
1,964
PLN
3M WIBOR + 3
31.12.2006
Warsaw
750
PLN
750
PLN
1M WIBOR + 1.2
revolving loan,
agreement
valid until Jul
30 2007
assignment of
receivables under
issued invoices
1M WIBOR + 1.2
revolving loan,
agreement
valid until Oct
27 2007
assignment of
receivables under
issued invoices
BRE BANK S.A.
BRE BANK S.A.
Warsaw
750
PLN
750
PLN
Other
assignment by
way of security
Warsaw
Other
assignment by
way of security
In accordance with the loan agreement of August 11th 2005, the contracted loan of PLN 81,000 thousand was presented in the balance sheet under two different items depending on the maturity of a
particular portion of the loan:
- the PLN 8,798 thousand maturing within one year was presented under current liabilities under loans and borrowings,
- the PLN 68,396 thousand maturing after more than one year was presented under no-current liabilities under loans and borrowings,
The Group revalued the non-current portion of the loan at amortised cost (in line with the Group's accounting policies).
172
Note 16A
PLN '000
NET REVENUE FROM SALES OF PRODUCTS, BY
TYPE OF ACTIVITY
Jan 1 - Dec
31 2005
Jan 1 -Dec
31 2004
29,078
17,118
- media services
48,239
14,040
5,085
2,943
669
9,642
83,071
43,743
- call centre services
- other services
Total net revenue from sales of products
Note 16B
NET REVENUE FROM SALES
(GEOGRAPHICAL STRUCTURE)
PLN '000
OF
PRODUCTS
Jan 1 - Dec
31 2005
a) domestic sales
b) exports
79,523
39,971
3,548
3,772
83,071
43,743
Note 17A
NET REVENUE FROM SALES OF GOODS FOR
RESALE AND MATERIALS, BY TYPE OF ACTIVITY
Jan 1 -Dec
31 2004
PLN '000
Jan 1 - Dec
31 2005
Jan 1 -Dec
31 2004
revenue from sales of materials
116
9
Total net revenue from sales of goods for resale and
materials
116
9
Note 17B
RESALE
AND
MATERIALS
(GEOGRAPHICAL
STRUCTURE)
PLN '000
Jan 1 - Dec
31 2005
a) domestic sales
Jan 1 -Dec
31 2004
116
9
116
9
b) exports
materials
Note 18
COSTS BY TYPE
PLN '000
Jan 1 - Dec
31 2005
Jan 1 –Dec
31 2004
a) amortisation and depreciation
12,136
8,335
b) raw materials and energy used
1,524
756
c) contracted services
48,840
26,482
d) taxes and charges
1,640
1,247
e) salaries and wages
11,404
5,495
f) social security and other benefits
2,213
622
g) other costs by type
1,354
813
Total costs by type
79,111
43,750
selling costs (negative value)
-2,055
-1,652
general and administrative expenses (negative value)
-4,196
-2,179
Cost of products sold
72,860
39,919
PLN '000
173
Note 19
OTHER OPERATING INCOME
Jan 1 - Dec
31 2005
1. gain on disposal of non-current non-financial assets
2. other operating income
a) provisions released, including:
Jan 1 -Dec
31 2004
24
24
11,659
5,997
1,651
169
148
163
- provision for holiday leaves
6
- provision for liabilities
- provision for rights of way and use of lines
1,503
b) other, including:
- valuation allowances
10,008
5,625
return of costs from court enforcement officer
38
- VAT
5,828
2,900
1
1
- compensation received under insurance policies
17
- adjustment to previous years' costs
2,051
11
- cancelled debt
4,021
- other
307
864
3. Excess of share in fair value of net identifiable assets,
liabilities and contingent liabilities of acquired undertaking
over acquisition cost
23,946
Total other operating income
35,629
6,021
In 2005, the parent undertaking acquired shares MNI Telekom (formerly Telefonia Pilicka) Sp. z o.o.
- acquisition cost
PLN 55,343 thousand
- value of acquired assets
PLN 79,289 thousand
- excess of share in the net fair value of identifiable assets, liabilities and contingent
liabilities of the acquired entity over the acquisition cost (negative goodwill)
PLN 23,946 thousand
Acquisition-related costs of PLN 560 thousand (foreign exchange losses) and PLN 550 thousand (PCC) were included in the
acquisition cost, reducing the value of the negative goodwill which was recognised in the net profit for the period.
Note 20
OTHER OPERATING EXPENSES
PLN '000
Jan 1 - Dec
31 2005
Jan 1 -Dec
31 2004
1. loss on disposal of non-current non-financial assets
181
296
2. revaluation of non-financial assets
344
233
3. other operating expenses
5,121
1,097
a) provisions created, including
1,677
213
- for retirement severance pays
- for disputed claims
- for unused holidays
2
12
1,553
140
122
61
3,444
884
1,437
233
- court fees
137
68
- receivables written-off
123
448
1
2
- donations
- previous years' costs
177
3
- other
228
130
- cost of analyses of infrastructure
1,341
Total other operating expenses
5,646
1,626
PLN '000
174
Note 21A
FINANCIAL INCOME - INTEREST INCOME
Jan 1 – Dec
31 2005
Jan 1 -Dec
31 2004
a) other interest
423
22
from other undertakings
423
22
Total interest income
423
22
Note 21B
OTHER FINANCIAL INCOME
PLN '000
Jan 1 – Dec
31 2005
Jan 1 -Dec
31 2004
a) foreign exchange gains
35
realised
15
4
unrealised
20
160
1,567
- cancelled interest
1,567
Total other financial income
35
Note 22A
FINANCIAL EXPENSES - INTEREST EXPENSE
164
1,731
PLN '000
Jan 1 - Dec
31 2005
Jan 1 -Dec
31 2004
a) interest on loans and borrowings
583
486
to other undertakings
583
486
b) other interest
462
171
462
171
Total interest expense
1,045
657
Note 22B
REVALUATION
PLN '000
Jan 1 - Dec
31 2005
a) valuation allowances, including:
446
- investment revaluation
446
Jan 1 -Dec
31 2004
This refers to a valuation allowance for shares in BIA-NET Sp. z o.o., a consolidated undertaking.
To eliminate the value of the shares in preparing the consolidated financial statements, the allowance was reversed,
increasing retained profit/deficit.
Note 22c
OTHER FINANCIAL EXPENSES
PLN '000
Jan 1 - Dec
31 2005
Jan 1 -Dec
31 2004
a) foreign exchange losses, including:
64
76
realised
63
65
unrealised
1
11
b) other
314
173
Total other financial expenses
378
249
Note 23A
CURRENT INCOME TAX
PLN '000
Jan 1 - Dec
31 2005
Jan 1 -Dec
31 2004
1. Current income tax shown in the tax return for the
period
25
85
shown in the income statement
25
85
175
Explanatory note to income statement, item XV - Income tax, a) current portion
In 2004, taxable income was recognised by the following undertakings:
1. Media Personel Serwis Sp. z o.o.
- tax base : PLN 374 thousand
- income tax at 19% rate: PLN 71 thousand
2. Szeptel International Sp. z o.o.
- tax base: PLN 74 thousand
In 2005, taxable income was recognised by:
- tax base: PLN 134 thousand
Note 23B
CURRENT INCOME TAX *
PLN ‘000
Jan 1 – Dec
31 2005
Jan 1 –Dec
31 2004
11,254
5,020
2. Differences between pre-tax profit (loss) and tax base,
including:
7,425
8,523
- costs permanently non-tax-deductible
3,141
944
- costs permanently increasing tax-deductible costs
2,200
1,314
6,490
6,090
- costs temporarily non-tax-deductible
3,363
5,366
- other periods’ costs increasing tax-deductible costs
1,050
547
13,639
6,882
3,829
-3,503
1. Pre-tax profit/(loss)
- revenue permanently not classified as taxable revenue
- revenue not recognised as taxable revenue
- revenue permanently increasing taxable revenue
3. Income tax base
4. Income tax at 19% rate
5. Tax assessment or abatement, tax credits, deductions
3,829
and reductions
Reconciliation of net profit (loss) to the taxable income reported for the parent undertaking.
−
Note 23C
DEFERRED INCOME TAX RECOGNISED IN THE
INCOME STATEMENT
PLN ‘000
Jan 1 – Dec
31 2005
decrease (increase) due to emergence and reversal of
temporary differences, including:
-1,359
- increase in deferred tax assets
-2,497
Jan 1 –Dec
31 2004
45
1,138
- increase in deferred tax liability
-1,359
Total deferred income tax
45
NOTE 24
Net earnings per share were calculated by dividing net profit (attributable to equity holders of the parent) by the number of shares.
In 2005, the net profit attributable to equity holders of the parent amounted to PLN 34,021 thousand.
Weighted average number of shares: 22,645,005 shares.
Earnings per share: PLN 1.50.
Weighted average number of shares of MNI S.A. in 2005
change in shares
Jan 1st 2005 - Jul 13th 2005
Jul 14th 2005 - Dec 31st 2005
-137,000
Calculation
(22,708,558 x 193 / 360 ) + (22,571,558 x 167 / 360 ) = 22,645,005
176
balance
number of days in the
period
22,708,558
193
22,571,558
167
In 2005, the weighted average number of shares amounted to 22,645,005 shares.
NOTES TO THE CASH-FLOW STATEMENT
1. The cash disclosed in the cash-flow statement comprised (PLN '000):
Dec 31 2005
Cash in hand
Cash at banks
Dec 31 2004
31
115
17,881
339
17,912
454
Other cash
TOTAL
2. Item A.I.3
The amount of PLN 322 thousand in 2005 comprises the gains on sale of property, plant and equipment and
intangible assets of:
MNI S.A
PLN 126 thousand
BIA-NET Sp. z o.o.
PLN 41 thousand
MNI Telekom (formerly Telefonia Pilicka) Sp. z o.o. PLN 155 thousand
3. Item A.I.10
The amount of - PLN 33,449 thousand in 2005 comprises the following non-cash adjustments to the net profit:
a) negative goodwill on the acquisition of MNI Telekom (formerly Telefonia Pilicka) Sp. z o.o., recognised in
the net profit for 2005
acquisition cost
PLN 55,343 thousand
value of acquired net assets
PLN 79,289 thousand
negative goodwill
PLN 23,946 thousand
b) cancellation of liabilities in connection with arrangement proceedings, in the amount of PLN 4,021 thousand
c) valuation allowance for property, plant and equipment, in the amount of PLN 4,833 thousand
d) other, in the amount of PLN 649 thousand
4. Item B.II.2.a)
The amount of PLN 72,046 thousand in 2005 represents the expenditure on the acquisition of shares in MNI
Telekom (formerly Telefonia Pilicka) Sp. z o.o. and Legion Polska Sp. z o.o., worth PLN 72,305 thousand, for
which PLN 72,046 thousand was paid.
5. Item E
The balance-sheet change in cash of PLN 17,458 thousand comprises:
net cash flow (item D) of PLN 882 thousand
cash acquired in 2005 from MNI Telekom (formerly Telefonia Pilicka) Sp. o.o. of PLN 16,564 thousand
cash acquired in 2005 from Legion Polska Sp. z o.o. of PLN 12 thousand
6. Information on the value of assets and equity and liabilities of consolidated subsidiaries, grouped into major
categories, is presented in supplementary information to the consolidated financial statements of the MNI Group
for 2005, under "Information on the Group".
177
NOTES REGARDING IFRS 3, paragraph 70
revenue in the period January 1st - August 9th 2005
net profit in the period January 1st - August 9th 2005
PLN 9,608 thousand
PLN 1,214 thousand
revenue in the period August 10th - December 31st 2005
net profit in the period August 10th - December 31st 2005
PLN 7,015 thousand
PLN 553 thousand
MNI Telekom (formerly Telefonia Pilicka) Sp. z o.o.
revenue in the period January 1st - December 18th 2005
net profit in the period January 1st - December 18th 2005
PLN 36,346 thousand
PLN 2,657 thousand
revenue in the period December 19th - December 31st 2005
net profit in the period December 19th - December 31st 2005
PLN 3,253 thousand
PLN 1,945 thousand
If control of Legion Polska Sp. z o.o. and MNI Telekom Sp. z o.o. had been taken over at the beginning of the
period, the revenue would have amounted to PLN 142,614 thousand, and the net profit would have been
PLN 58,830 thousand.
Note 25
PRESENTATION OF FINANCIAL ASSETS CLASSIFIED INTO FOUR CATEGORIES
PLN '000
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS
Dec 31 2005
Dec 31 2004
237
0
shares listed on the WSE - ENERGO-PŁD
237
0
Total financial assets at fair value through profit or loss
237
0
PLN '000
Dec 31 2004
Dec 31 2005
FINANCIAL ASSETS AVAILABLE FOR SALE
210
Total financial assets available for sale
210
LOANS ADVANCED
PLN '000
Dec 31 2004
Dec 31 2005
a) current loans
26
Total current loans
26
INVESTMENTS HELD TO MATURITY
a) non-current loans - see note 14A
b) current loans - see note 15A
178
Supplementary Information to the Consolidated Financial Statements
of the MNI Group for 2005
prepared for the purposes of the MNI Prospectus, in accordance with the regulations governing the
preparation of prospectuses to be published when securities are issued,
in accordance with Commission Regulation (EC) No. 809/2004 and other regulations applicable to the
Polish capital market, including the Public Offering Act
I.
INFORMATION ON THE GROUP
The parent undertaking of the Group is MNI Spółka Akcyjna, registered office at ul.
Żurawia 8, Warsaw, Poland.
The Company is entered in the Register of Entrepreneurs maintained by the District Court of Białystok, 12th
Commercial Division of the National Court Register, under No. KRS 0000003901.
The Company’s business is provision of telecommunications services (PKD 6420).
The Company is listed on the Warsaw Stock Exchange.
The MNI Group is composed of the following entities:
Subsidiary undertakings included in the consolidated financial statements:
1.
2.
MNI Telekom (formerly: Telefonia Pilicka) Sp. z o.o. of Radom – telecommunications services –
100% equity interest;
Legion Polska Sp. z o.o. of Warsaw – telecommunications services – 100% equity interest;
3.
Media Personel Service Sp. z o.o. of Warsaw – auxiliary company; development of system and
application software for content and functionality management of data communication service platforms
with respect to Voice/Data/SMS/MMS services, and specialist personnel management – 100% equity
interest;
4.
Szeptel International Sp. z o.o. of Szepietowo – auxiliary company; human resources and logistics
management for the Contact Centre in Szepietowo – 100% equity interest;
5.
OSS S.A. of Szepietowo – telecommunications infrastructure development – 100% equity interest;
6.
BIA-NET Sp. z o.o. of Białystok – telecommunications, IT – 53.9% equity interest.
179
CONSOLIDATED SUBSIDIARY UNDERTAKINGS AS AT DECEMBER 31ST 2005
a
No
Company
name and
form of
incorporation
b
Registered
office
c
d
f
g
h
i
j
k
Business profile
Nature of capital link
(subsidiary, jointlycontrolled, or
associated
undertaking, direct or
indirect)
Control/ joint control/ significant
influence exercised since:
Shares at
cost
(PLN ‘000)
Total
valuation
allowances
(PLN ‘000)
Carrying
value of
shares
(PLN
‘000)
% of share
capital held
% of the total
vote at the
General
Shareholders
Meeting
1
Szeptel
International
Sp. z o.o.
Szepietowo
telecommunications,
call centre projects
subsidiary
undertaking
Jun 7 2000
101
0
101
100.00
100.00
2
OSS S.A.
Szepietowo
telecommunications
infrastructure development
subsidiary
undertaking
Aug 24 2000
1,257
1,257
0
100.00
100.00
3
Media
Personel
Serwis
Sp. z o.o.
Warsaw
software services, human
resources management
subsidiary
undertaking
Dec 20 2004
30
0
30
100.00
100.00
May 11 2005
446
446
0
53.90
53.90
Aug 10 2005
16,669
0
16,669
100.00
100.00
Dec 19 2005
55,343
0
55,343
100.00
100.00
BIA NET Sp.
subsidiary
Białystok
Lease of infrastructure
z o.o.
undertaking
Legion
telecommunications
subsidiary
5 Polska
Warsaw
services
undertaking
Sp. z o.o.
MNI Telekom
(formerly:
telecommunications
subsidiary
6 Telefonia
Radom
services
undertaking
Pilicka)
Sp. z o.o.
NON-CONSOLIDATED SUBSIDIARY UNDERTAKINGS AS AT DECEMBER 31ST 2005
4
a
No
Company
name and
form of
incorporation
b
Registered
office
c
d
f
g
h
i
j
k
Business profile
associated
indirect)
Shares at
cost
(PLN ‘000)
Total
valuation
allowances
(PLN ‘000)
Carrying
value of
shares
(PLN
‘000)
% of share
capital held
% of the total
vote at the
General
Shareholders
Meeting
1
Szeptel
Internet
Sp z o.o.
Kraków
Internet services
subsidiary
undertaking
Apr 5 2000
75
75
0
100.00
100.00
2
EPL S.A.
Szepietowo
Web page services
subsidiary
undertaking
Sep 5 2000
101
101
0
100.00
100.00
180
Non-consolidated subsidiary undertakings – loss of control – companies placed in liquidation:
1.
Szeptel Internet Sp. z o.o. of Kraków
2.
EPL Sp. z o.o. of Szepietowo
Undertakings included in consolidation in the period from December 2004:
1.
2.
3.
MNI Telekom (formerly: Telefonia Pilicka) Sp. z o.o., which in 2005 reported a profit of PLN 1,945
thousand and whose balance-sheet total as at December 31st 2005 was PLN 85,577 thousand,
representing 39.69% of the balance-sheet total of the MNI Group as at December 31st 2005.
Legion Polska Sp. z o.o., which reported a profit of PLN 553 thousand and whose balance-sheet total as
at December 31st 2005 was PLN 7,755 thousand, representing 3.6% of the balance-sheet total of the
MNI Group as at December 31st 2005.
In 2005, MNI S.A. acquired shares in BIA-NET Sp. z o.o., thus increasing its holding in the company’s
share capital by 24.82%. The acquisition price was PLN 209 thousand. As at December 31st 2005, MNI
S.A. holds 53.9% of the share capital of BIA-NET Sp. z o.o.
In 2005, BIA-NET Sp. z o.o. reported a loss of PLN 332 thousand and its balance-sheet total as at
December 31st 2005 was PLN 952 thousand, which accounts for 0.44% of the balance-sheet total of the
MNI Group as at December 31st 2005.
181
Information on the value of assets and equity and liabilities of subsidiary undertakings included in consolidation
in 2005 (summarised by each major category)
PLN ‘000
As at Dec 31 2005
Legion Polska
Sp. z o.o.
5. Deferred tax assets
II. Current assets
1. Inventories
c) cash and cash equivalents *
3.2. Other current investments
4. Current prepayments and accrued income
Total assets
I. Equity
1. Share capital
2. Called-up share capital not paid (negative value)
7. Retained profit/(deficit)
8. Current year net profit/(loss)
4. Current provisions
Revenue for Jan 1 - Dec 31 2005
MNI Telekom
(formerly
Telefonia Pilicka)
Sp. z o.o.
1,209
1,080
129
0
0
0
6,546
0
6,324
222
222
0
200
22
0
0
7,755
603
50
0
0
0
0
0
0
553
7,152
0
0
7,152
0
61,536
259
61,277
0
0
0
24,041
9
6,893
17,139
17,139
1,000
0
16,139
0
0
85,577
78,577
113,246
0
0
132,816
0
0
-169,430
1,945
7,000
0
0
7,000
0
16,623
39,599
* Cash and cash equivalents include cash in bank accounts and cash in hand.
182
PLN ‘000
As at Dec 31 2005
MPS
Sp. z o.o.
OSS
Sp. z o.o.
Szeptel
International
Sp. z o.o.
Bia-Net
Sp. z o.o.
ASSETS
0
0
0
0
0
4
906
II. Current assets
0
4
912
0
0
0
6
2,106
189
233
40
1. Inventories
0
0
2,035
0
38
229
35
71
151
4
5
71
151
4
5
71
151
4
5
2,106
189
237
952
I. Equity
1. Share capital
340
-34
123
-230
30
1,000
100
2,351
272
0
a) cash and cash equivalents *
Total assets
EQUITY AND LIABILITES
-1,000
94
0
-119
-2,249
38
-34
48
-332
1,766
223
114
1,182
0
0
0
158
0
100
0
327
1,766
123
114
697
2,106
189
237
952
II. KEY
RULES
GOVERNING
PREPARATION
OF
THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE MNI GROUP
The key accounting policies applied in the preparation of the attached consolidated financial statements are
presented below:
BASIS OF ACCOUNTING
The MNI Group prepared the attached consolidated financial statements in accordance with the International
Financial Reporting Standards (“IFRS”) and related interpretations published in the form of the European
Commission regulations, in force as at December 31st 2005.
The consolidated financial statements were prepared to cover the period from January 1st 2005 to December 31st
2005.
Comparable data cover the corresponding reporting period of 2004, i.e. the period from January 1st 2004 to
December 31st 2004.
The consolidated financial statements were prepared on a historic cost basis, with the exception of derivative
financial instruments and financial assets available for sale, which are measured at fair value.
Certain comparable data were restated to adjust them the presentation format adopted for the current period.
Detailed information on those restated data is presented in the relevant Notes to the financial statements.
183
CHANGES IN APPLIED ACCOUNTING POLICIES
In the year commenced January 1st 2005, no amendments were made to the International Financial Reporting
Standards which could have a bearing on the Group’s accounting policies, except for those listed below.
In December 2003, the International Accounting Standards Board revised thirteen International Accounting
Standards. The revised standards apply to annual periods beginning after January 1st 2005.
In February 2004, the International Accounting Standards Board issued IFRS 2 – Share-Based Payments (“IFRS
2”). The new standard applies to annual periods beginning on or after January 1st 2005, and retrospectively to
securities issues effected after November 2002 where the instrument had not vested as at January 1st 2005. The
MNI Group companies did not issue such instruments as management stock options.
In 2004 and in H1 2005, the International Financial Reporting Interpretations Committee published several
interpretations, which should apply to annual periods beginning on or after January 1st 2006. The Group
analysed the potential impact of the said amendments on its financial statements and found it to be immaterial.
REPORTING CURRENCY
The financial data contained in the attached consolidated financial statements are reported in the Polish złoty
(PLN), which is the currency used by the Group for the valuation and presentation purposes. The data presented
in the consolidated financial statements are rounded off to the nearest thousand.
CONSOLIDATION PRINCIPLES
Subsidiary Undertakings
Subsidiary undertakings of the MNI Group (i.e. undertakings in which the Group holds more than 50% of the
total vote at the general shareholders meeting or directs their financial or operating policies on some other basis)
are consolidated.
In assessing whether the Group exerts control over a given undertaking, potential voting rights exercisable at
such undertaking’s general shareholders meeting, as well as their impact, are also taken into account.
The subsidiary undertakings are consolidated from the date on which control is assumed by the Group to the date
it is lost. The acquisition of subsidiary undertakings is accounted for with the acquisition method. The
acquisition cost comprises the acquired company’s assets measured at fair value, shares issued or liabilities
contracted as at the acquisition date, and costs directly related to the acquisition. The excess of the acquisition
cost over the fair value of the acquired subsidiary’s assets is recognised as goodwill. Intra-Group transactions,
balances and unrealised profits/losses on intra-Group transactions are eliminated during consolidation. If
required, accounting policies of the subsidiary undertakings are modified to comply with the accounting policies
applied by the Group.
In the case of non-consolidated financial statements, financial interests in subsidiary undertakings are valued at
cost, while in consolidated financial statements investments in subsidiary undertakings are eliminated.
The excess of the acquisition cost over the fair value of the identifiable net assets of a subsidiary undertaking as
at the acquisition date is disclosed as consolidation goodwill and is tested for impairment.
If the acquisition cost is lower than the fair value of the identifiable net assets of a subsidiary undertaking as at
the acquisition date, the difference is disclosed as profit in the income statement.
Goodwill
Goodwill arising on acquisition represents the excess of the acquisition cost over the fair value of the Group’s
share in identifiable net assets of the acquired subsidiary as at the acquisition date. The goodwill relating to
acquisition of subsidiary undertakings is disclosed under intangible assets as a separate item.
The Company’s goodwill resulting from the purchase transactions executed after March 31st 2004 is not
amortised in accordance with IFRS 3 – Business Combinations. Consolidation goodwill which arose before
March 31st 2004 is not amortised after January 1st 2005.
184
As at the date of acquisition, goodwill is allocated to each cash-generating unit. The Company calculates
impairment losses by estimating the recoverable value of the cash-generating unit to which the goodwill pertains.
The Company recognises impairment losses if the recoverable value of a cash-generating unit is lower than its
carrying value. If goodwill comprises a part of a cash-generating unit and the Company sells a part of the cashgenerating unit’s business, the goodwill pertaining to the sold business is included in the carrying value that is
taken into account in calculating gains or losses on the disposal of the business. Goodwill sold in this way is
valued on the basis of the relative value of the sold business and the value of the retained part of the cashgenerating unit.
Goodwill is tested for impairment at least once a year. Impairment losses are charged against other operating
expenses.
If the share in acquired assets, equity and liabilities and off-balance sheet liabilities of a subsidiary exceeds the
cost of acquisition of the subsidiary, the Group:
•
•
carries out revaluation of the identifiable assets, equity and liabilities, off-balance sheet liabilities and
the acquisition cost;
recognises the excess remaining after the revaluation in the income statement.
Sale of Subsidiaries
Profit/loss on sale of a subsidiary includes the carrying value of the sold subsidiary’s goodwill.
Any profits/losses arising from the dilution of shares in subsidiaries are disclosed in the income statement for the
period in which the sale was effected.
a) Owned property, plant and equipment
Property, plant and equipment are carried at cost less depreciation charges and impairment losses (except land).
After initial recognition, any increases in property, plant and equipment are recognised at cost. In 2005, there
were no revaluations of property, plant and equipment.
Costs incurred after an item of property, plant and equipment is placed in service, such as costs of repair or
maintenance, affect the profit or loss for the reporting period in which they were incurred, except for the
situation where the acquisition or production cost of a component of an item of property, plant and equipment is
material relative to the acquisition or production cost of the entire item. In such cases, the cost amount increases
the value of the item and is subject to depreciation.
b) Depreciation
Items of property, plant and equipment, or their material or separable components, are depreciated using the
straight line method over their economic useful lives. Land is not depreciated.
The MNI Group applies the following depreciation rates:
Asset
Depreciation rate
Vehicles
20% and 33%
Computers
30%
Investments in third-party facilities
10%
Buildings
10%
Structures
4 and 4.5%
Road machinery
17% and 20%
Equipment (group 6)
10%
Office equipment
20%
185
c) Property, plant and equipment used under lease agreements
Lease agreements which transfer substantially all the risks and benefits incidental to ownership of items of
property, plant and equipment to the Company, are classified as financed lease. Assets held under financed lease
agreements are initially recognised at the lower of their fair value or the present value of the minimum lease
payments, which are then reduced by depreciation charges and impairment losses.
Property, plant and equipment held under financed lease agreements are depreciated throughout the lease term.
Payments made under operating lease agreements concluded by the Group member companies are charged to the
income statement throughout the lease term.
d) Tangible assets under construction
Tangible assets under construction are measured at the total of the costs directly attributable to their acquisition
or production, less impairment losses. Tangible assets under construction include also investment materials.
Tangible assets under construction are not depreciated until their completion and placement in service.
If any events or circumstances have occurred which give grounds to believe that the carrying value of an asset
may not be recoverable, such assets are tested for possible impairment of their value. Impairment losses are
recognised when the carrying value of an asset exceeds its recoverable value, which corresponds to the higher of
the asset’s net selling price or value in use. In order to determine whether an impairment of value has occurred,
assets are classified down to the lowest level for which separate cash flows can be identified.
Any gain/loss on the sale of an asset is determined by comparing the sale proceeds with the carrying value of
such asset, and recognised in operating profit.
INTANGIBLE ASSETS
After initial recognition, intangible assets are carried at the acquisition or production cost less amortisation and
impairment charges. Intangible assets are amortised on a straight-line basis over their estimated economic useful
lives. Tax amortisation rates are used for amortisation only if they correspond to the economic useful life of an
asset. The appropriateness of the applied amortisation periods and rates is reviewed periodically, but not less
frequently that at the end of each financial year, and the adjustments to the amortisation charges, if any, are made
in the following periods.
If any events or circumstances have occurred which give grounds to believe that the carrying value of an
intangible asset may not be recoverable, such an asset is tested for impairment. Impairment losses are recognised
when the carrying value of an asset exceeds its recoverable value, which corresponds to the higher of the net
selling price or value in use of such asset.
a) Research and development expense
Expenses on research work are charged to costs as they are incurred. Costs of completed development work
conducted for the Group’s own needs which were incurred prior to the launch of production or application of
new technological solutions are classified as intangible assets if the Group is able to demonstrate:
the technical feasibility of completing the intangible asset so that it is fit to be used or sold,
its intention to complete and to use or sell the intangible asset,
its ability to use or sell the intangible asset,
the manner in which the intangible asset will generate probable economic benefits. Amongst other things,
the Group should prove the existence of a market for the products which come into existence thanks to the
intangible asset or for the intangible asset itself, or – if the asset is to be used by the Group itself – its
usefulness,
the availability of appropriate technical, financial and other means which are necessary to complete the
development work and to use or sell the intangible asset,
the feasibility of a reliable determination of the expenditure incurred in the course of the development work
which may be allocated to the intangible asset.
Any costs of development work which fail to meet these criteria are charged to the income statement in the
period in which they were incurred.
The amortisation periods applied to development expenses do not exceed five years.
In 2005, the Group did not record any research and development work.
186
b) Software
Costs incurred in connection with the purchase of licences and software are capitalised.
c) Amortisation
The typical amortisation rates applied to intangible assets are:
Amortisation rate
Purchased licences and software
50%
Other intangible assets
20%
Intangible assets are not subject to revaluation.
The Group holds no assets of considerable value whose useful life is indefinite.
GOODWILL
Goodwill represents the excess of the acquisition cost over the fair value of a Group’s share in identifiable net
assets of an acquired subsidiary on the acquisition date. Goodwill arising on the acquisition of subsidiaries is
recognised in the balance sheet under non-current assets as a separate item.
Goodwill is tested annually for impairment and shown in the balance sheet at cost less cumulated impairment
charges. Any gains or losses on disposal of an undertaking are recognised net of the carrying value of the
goodwill pertaining to the sold undertaking.
INVESTMENT PROPERTY
The Group recorded no investment property.
FINANCIAL ASSETS
The MNI Group classifies its financial assets into the following four categories:
1. financial assets at fair value through profit or loss,
2. investments held to maturity,
3. financial assets available for sale,
4. loans and receivables.
Investments which were acquired to derive economic benefits from short-term price fluctuations are classified as
financial assets at fair value through profit or loss and presented in the balance sheet under current assets. Assets
with specified maturities that the Group has the intention and the capacity to hold to maturity are classified as
investments held to maturity and presented in the balance sheet under non-current assets, unless their maturity
date falls within 12 months from the balance-sheet date. Assets with unspecified maturities which can be
disposed of if cash is needed or in response to changes of interest rates, are classified as available for sale. The
Group presents them in the balance sheet as non-current assets, unless the management has expressed an
intention to hold them for a period shorter than 12 months from the balance-sheet date or they are to be
liquidated in order to raise working capital, in which case they are presented as current assets. Financial assets
arising as a result of delivery of cash, goods or services to the other party, and not intended to be resold in a short
time, are classified as loans and receivables and presented under non-current assets. The management assigns
each particular financial asset to a relevant category upon its acquisition.
Purchase and sale of financial assets is recognised at the transaction date, i.e. the date on which the Group
assumes the obligation to purchase or sell the assets. The acquisition cost comprises the transaction-related fees.
Financial assets at fair value through profit or loss and financial assets available for sale are carried at fair value.
Investments held to maturity are measured at amortised cost using the effective interest rate method. Realised
and unrealised gains and losses arising from changes in the fair value of assets at fair value through profit or loss
are recognised in the income statement, and those arising from changes in the fair value of assets available for
sale – directly in equity for the period in which they arose. Fair value of investments is determined by reference
to buy prices quoted on the stock exchange or on the basis of forecast cash flows. Fair value of equity securities
of private companies is estimated on the basis of relevant Price/Earnings and Price/Cash Flows ratios which are
187
appropriate for a given instrument, or determined using other valuation models. Equity instruments whose value
cannot be reliably measured are carried at cost less impairment losses, if any.
LEASING
Lease agreements which transfer to the Group substantially all the risks and benefits incidental to ownership of
items of property, plant and equipment, are classified as financed lease. Financed lease is disclosed in the
accounting books at the amount of the fair value of the leased asset, as determined at the inception of the lease,
or, if lower, at the present value of minimum lease payments. Lease payments are apportioned between financial
expenses and reduction of the outstanding lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Liabilities under lease payments, less the interest expense component, are
presented under non-current liabilities. The interest expense component of financial expenses is disclosed in the
income statement over the lease term. Tangible assets used under financed lease agreements are depreciated over
the shorter of: their useful economic life or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified by
the Group as operating leases. Operating lease payments made by the Group under such arrangements are
recognised in the income statement over the lease term (net of discounts, if any, offered by the lessor).
INVENTORIES
Inventories are disclosed at acquisition or production cost.
The selling cost of a single unit of inventories is determined using the FIFO method.
All inventories are subject to regular review in terms of their usefulness and market value. If it is found that
inventories require revaluation, a valuation allowance of an appropriate amount is made.
TRADE RECEIVABLES
Current trade and other receivables are carried at amounts due, unless the impact of accrued interest is
substantial. Otherwise, receivables are initially disclosed at fair value and then at amortised cost using the
effective interest rate. According to the rule adopted by the Group, receivables maturing in over 180 days are
discounted.
CASH AND CASH EQUIVALENTS, RESTRICTED CASH
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash-flow statement,
cash and cash equivalents include cash in hand, bank deposits payable on demand and other highly liquid
instruments. For the purpose of cash-flow statement, the Group decided not to disclose current-account loans and
restricted cash under cash and cash equivalents; consequently, these are presented as a separate balance-sheet
item.
TRANSACTIONS IN FOREIGN CURRENCIES
Transactions in foreign currencies are settled at the mid-exchange rate quoted by the National Bank of Poland for
the transaction date.
As at the balance-sheet date, monetary assets and liabilities are valued at the mid-exchange rate quoted for a
given currency by the National Bank of Poland for that date.
DEFERRED INCOME TAX
Deferred tax liability is created using the balance-sheet liability method in relation to all temporary differences
existing as at the balance-sheet date between the tax base of assets and liabilities and their carrying value as
disclosed in the financial statements. The main temporary differences arise from revaluation of certain noncurrent assets, current assets, derivative financial instruments, provisions, accruals and deferred income and tax
losses brought forward.
Deferred tax asset and liabilities are measured at the tax rates that, in the Management Board’s opinion, are
expected to apply on the day when the asset is realised or the liability is settled.
A deferred tax asset is disclosed for all deductible temporary differences to the extent that it is likely that taxable
profit will be available against which the temporary differences can be utilised.
188
An asset is recognised only where its carrying amount can be realised in the form of economic benefits to the
Group in future periods. When the carrying amount of an asset exceeds its tax value, the amount of taxable
economic benefits will be higher that the amount which will be allowed as tax-deductible costs. This difference
is a taxable temporary difference, and the obligation to pay the resulting income taxes in future periods is
reflected in the deferred tax liability. After the Group realises the carrying amount of the asset, the taxable
temporary difference reverses, the Group reports taxable profit, and this creates probability of an outflow of
economic benefits from the Group in the form of tax payments.
EQUITY
Equity is the capital and funds created in accordance with the applicable laws and regulations, applicable statutes
and the articles of association. Equity also includes retained profits and accumulated losses brought forward.
Equity is carried in the accounting books at par value by type and in compliance with the provisions of law or
articles of association.
The share capital of an incorporated company is disclosed in the amount specified in its articles of association
and entered in the court register. Contributions to equity that have been declared but not paid are disclosed as
called-up share capital not paid.
Ordinary shares are presented as share capital.
Proceeds from issues of new shares are disclosed under equity. No adjustment is made in connection with a
difference, if any, between the issue price and the market value of the issued shares.
External costs directly related to a new share issue are disclosed as a component of the acquisition cost.
The statutory reserve funds are created from profit distributions or by transfers from the revaluation capital
reserve. The statutory reserve funds include a fund created from profit distributions which is used to cover
balance-sheet losses.
Treasury shares are valued at acquisition cost and disclosed at negative value under equity.
The following are charged to the revaluation capital reserve:
• differences on revaluation of financial assets available for sale,
• deferred tax,
• effects of revaluation of property, plant and equipment,
• deferred tax connected with temporary differences in the balance-sheet and tax value of revalued assets.
In the event of sale or liquidation of an asset, a relevant part of the revaluation capital reserve is transferred to the
statutory reserve funds. Impairment charges for non-current assets which were earlier revalued, decrease the
revaluation capital reserve by up to the value of the portion of the reserve which relates to a given asset.
The revaluation capital reserve is not distributable.
The share capital of the Group is the share capital of the parent undertaking.
Items of subsidiary undertakings’ equity other than the part of the share capital corresponding to the parent
undertaking’s equity interest in a given subsidiary are added to the relevant items of the parent undertaking’s
equity.
The Group’s equity includes only those parts of the subsidiary undertakings’ equity which were created after the
acquisition of their shares by the parent undertaking. This includes in particular any increases in their capital
attributable to net profit or revaluation.
The consolidated net profit (loss) of the consolidated members of the Group comprises the net profit (loss) of
the parent undertaking and the net profits (losses) of subsidiary undertakings in the amounts corresponding to the
parent undertaking’s equity interests in such undertakings.
The consolidated net profit (loss) comprises:
•
•
•
•
•
operating profit (loss), including net other operating income (expenses),
net financial income (expenses),
write-off of subordinated undertakings’ goodwill,
write-off of subordinated undertakings’ negative goodwill,
mandatory decrease of the net profit (increase of loss), including corporate income tax,
189
•
profit (loss) attributable to minority interests.
MINORITY INTERESTS
Minority interests are disclosed at the total of equity of subsidiary undertakings consolidated with the full
method held by companies other than members of the Group.
The part of the net profit (loss) of subsidiary undertakings held by minority shareholders other than members of
the Group represents the profit (loss) attributable to minority interests.
Equity and capitals also include net profit pending approval, less planned dividend and dividend declared but not
paid.
The net profit (loss) for the financial year is the result disclosed in the income statement for the current year
adjusted for the corporate income tax charge.
Contributions to equity that have been declared but not paid are disclosed as called-up share capital not paid.
BANK LOANS, BORROWINGS AND DEBT SECURITIES IN ISSUE
Long- and short-term bank loans and borrowings are initially disclosed at the net value of received funds. i.e.
less the costs of obtaining them. After the initial disclosure, all bank loans, debt securities and loans are valued at
the adjusted acquisition cost (amortised cost) using the effective interest rate. The difference between the
received net cash (less the costs of obtaining the funds) and the amount to be repaid is disclosed in the income
statement over the loan term. All external financing costs are charged to the income statement of the period to
which they pertain. The Group applies the standard approach in this respect.
PROVISIONS
Provisions are recognised if the Group has an obligation (legal or following from commercial practice) resulting
from past events, and if it is probable that the discharge of that obligation will cause an outflow of funds,
assuming that the amount of such outflow can be reliably estimated.
The Group also creates provisions for contracts that give rise to obligations on its part if it expects the costs
which must be incurred in connection with performance of such contracts to exceed future benefits thereunder.
When preparing the IFRS-compliant consolidated financial statements, the Management Board is required to
make judgments, estimates and assumptions, which affect the adopted accounting policies and the reported
amounts of assets, liabilities, revenue and expenses. The estimates and underlying assumptions are based on
historical experience and various other factors deemed relevant under the circumstances, and their results
provide the basis for making judgment about the carrying values of assets and liabilities which cannot be
established on the basis of other sources. Actual results may differ from such estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of accounting estimates
are recognised in the period in which the estimate is revised.
Provisions for retirement benefits, unused holidays and related benefits are valued at estimated amounts
determined by the companies’ management boards with the use of actuarial methods.
REVENUE
Sales revenue is recognised at the value of payments received or due, less value added tax.
Sales revenue is recognised if:
- its amount can be reliably estimated
- the company is likely to obtain economic benefits
- the completion status of the transaction as at the balance-sheet date can be measured reliably
- the costs incurred in connection with the transaction and the costs of its completion can be measured reliably.
Interest income is recognised as the interest accrues throughout the agreement term, on the basis of the
outstanding amounts receivable and the effective interest rate in the period to maturity, after the income due to
the Group has been determined.
190
OPERATING EXPENSES
The Group undertakings record their expenditures by type and by function. The costs of goods for resale,
products and services sold are the costs directly attributable to the production or acquisition of goods for resale
and services sold. The selling costs comprise commercial costs and costs of advertising and entertainment. The
general administrative expenses comprise the costs associated with the Group undertakings’ management and the
costs of administration and entertainment.
Other factors with a bearing on the Group’s net profit/(loss) include:
• Other operating income and expenses indirectly related to the Group’s activities, including gains and
losses on disposal of non-current non-financial assets, revaluation of non-financial assets, creation and
release of provisions for future risk, penalties, fines, compensation, as well as donations received or
granted,
• Financial income related to dividends (distributions from profit), interest, gains on disposal of
investments, revaluation of investments and an excess of foreign exchange gains over foreign exchange
losses,
• Financial expenses related to interest, losses on disposal of investments, revaluation of investments and
an excess of foreign exchange losses over foreign exchange gains,
• Extraordinary gains and losses resulting from events which are difficult to predict and which are not
related to the general business risk.
The costs of external financing related directly to the acquisition or production of an item of property, plant and
equipment which requires a longer time to become fit for use or resale, increase the production costs of a given
asset, until the date of its placement in service. Any income generated from short-term investments of proceeds
from external financing, which is connected with the production of assets, decreases the capitalised costs of
external financing. The remaining costs of external financing are charged directly against the income statement
in the reporting period in which they are incurred.
SEGMENT REPORTING
A business segment is a distinguishable component of the Group that is engaged in providing products or
services and that is subject to risks and returns that are different from those of other business segments.
The services provided by the Group are uniform. The information disclosed in the consolidated financial
statements at the Group level is consistent with the information relating to a particular business segment.
The Group does not report its financial information by geographical segments, as it is not engaged in the
distribution of goods or provision of services in different economic environments which are subject to different
risks and different returns. The Group’s home country is Poland.
FINANCIAL RISK MANAGEMENT AND FINANCIAL DERIVATIVES
Financial Risk Factors
The Group’s operations are exposed to various financial risks, including the risk of volatile market prices of debt
and equity instruments as well as fluctuations in exchange rates and interest rates. The Group’s overall risk
management programme focuses on the unpredictability of financial markets and is designed to minimise
potential adverse effects of the risks on the Group’s financial performance.
Credit Risk
The Group’s financial assets exposed to credit risk concentration are settlements with related undertakings and
trade receivables.
Trade receivables are presented in the financial statements net of valuation allowances and reflect the nature of
the Group’s operations.
The Group applies a trade credit policy under which it sells its products and provides services and financing only
to customers with proven credit records and high credit ratings.
In the opinion of the Management Board, the Group’s credit risk exposure has been assessed correctly. The
credit risk is reflected in the accounting books by making relevant allowances for receivables.
191
Foreign Exchange Risk
The Group is not engaged in any activities which would require hedging against the risk of exchange rate
fluctuations.
Interest Rate Risk
The Group’s profits and operating cash flows are to a certain extent exposed to changes in interest rates, as most
of the Group’s loans and borrowings bear interest at variable rates.
Moreover, a significant portion of the Group’s assets is comprised of corporate debt securities held to maturity
with fixed interest rates, purchased from related undertakings. Although the maturity dates of the individual debt
securities do not exceed 12 months, the tranches redeemed are usually replaced with the subsequent issues of
securities and, consequently, such securities are classified as non-current assets.
The Group also holds equity instruments, which are not exposed to interest rate risk.
The loans advanced to non-related undertakings bear interest at fixed or variable rates. The loans with variable
interest rates are exposed to the risk of interest rate reductions.
The Management Board of the Company believes that the use of hedging instruments or other similar measures
aimed at mitigating the interest rate risk would not be cost effective.
Liquidity Risk
The principles of prudent management of liquidity risk require that the Group maintain sufficient balances of
cash and marketable securities, and secure the necessary financing in the form of credit facilities. Considering its
dynamic expansion, the Group’s objective is to ensure it has access to flexible financing, such as bank credit
facilities.
Disclosure of Financial Derivatives
Financial derivatives are initially recognised at acquisition cost, to be later measured at fair value. Any changes
in the fair value of financial derivatives are promptly charged to the income statement, as the Group does not use
any financial derivatives meeting the criteria of the hedging accounting under IAS 39. Derivatives are presented
in the balance sheet as financial assets or liabilities measured at fair value through profit or loss.
Fair Value
The fair value of publicly traded financial instruments is determined based on listed market prices as at the
balance-sheet date. The fair value of forward currency contracts is determined based on the market forward rates
of the individual currencies as at the balance-sheet date.
To estimate the fair value of derivatives which are not publicly traded and other financial instruments, the Group
applies various methods and assumptions based on the market conditions prevailing as at each balance-sheet
date. The Group usually uses market or dealers’ quotations for given or similar instruments. In the case of other
instruments, the fair value is established using other techniques, such as option valuation models or the DCF
method.
With respect to certain embedded financial derivatives (forward currency contracts) for which no forward
exchange rates are listed due to the distant maturity dates of the contracts, the Group calculates forward rates
using the interest rate relation model.
In the case of options for securities for which no active market exists, the fair value is usually determined using
the Black-Scholes option valuation model.
It is assumed that the nominal values (net of any potential credit adjustments) of financial assets and liabilities
maturing in less than one year, reflect the fair values of such assets and liabilities. For the purposes of disclosure
in the financial statements, the fair value of financial liabilities is estimated by discounting the expected
contractual cash flows with an interest rate currently applied by the Group to similar financial instruments.
192
The Group does not hold any financial assets or liabilities whose fair value would differ from the book value as
at December 31st 2005 and December 31st 2004.
Financial Instruments Purchased on Regulated Markets
Financial instruments purchased on regulated markets are recognised at acquisition cost, to be later measured at
fair value. The fair value of publicly traded financial instruments is determined based on listed market prices as
at the balance-sheet date.
III. DISCONTINUED OPERATIONS
During the reporting period, neither the parent undertaking nor any of its subsidiary undertakings discontinued
any types of their operations and they do not plan to discontinue any of their existing operations.
IV. COMPOSITION OF THE MANAGEMENT BOARDS AND
SUPERVISORY BOARDS OF THE MEMBER COMPANIES OF THE MNI
GROUP
a)
MNI S.A., Parent Undertaking
as at December 31st 2005
Supervisory Board:
I.
Andrzej Piechocki
– Chairman of the Supervisory Board
II. Tomasz Swadkowski
– Deputy Chairman of the Supervisory Board
III. Barbara Dąbrowska
– Member of the Supervisory Board
IV. Piotr König
V. Stanisław Marian Widera
Management Board:
1. Mariusz Pilewski
– President of the Management Board
2. Leszek Kułak
– Vice-President of the Management Board
3. Zdzisław Wójcik
– Member of the Management Board
b)
MNI Telekom (formerly Telefonia Pilicka) Sp. z o.o.
Management Board:
1.
2.
Piotr Majchrzak
Zdzisław Wójcik
193
Supervisory Board:
1.
2.
3.
4.
Andrzej Piechocki
Piotr König
Wiktoria Fontara
Piotr Majchrzak
c) Legion Polska Sp. z o.o.
1.
Tomasz Dąbrowa
d) Media Personel Service Sp. z o.o.
1. Wiesław Kułaka
e)
Szeptel Internatonal Sp. z o.o.
1. Mariusz Pilewski
f) BIA-NET Sp. z o.o.
1. Sławomir Januszczyk
g)
OSS S.A
1.
Mariusz Pilewski
194
V. EVENTS SUBSEQUENT TO THE BALANCE-SHEET DATE
There were no significant events subsequent to the balance-sheet date which could affect the financial standing
and assets of the MNI Group.
VI. TRANSACTIONS WITH RELATED UNDERTAKINGS
Transactions with related undertakings in 2005 (PLN ‘000)
Revenue
Costs
Szeptel
MPS
International
Sp.z o.o.
Sp z o.o.
BIA-NET Sp.
z o.o.
Issuer
Legion
Polska Sp.
z o.o.
Telecommunications
services
833
92
3,479
824
Telecommunications
services
2,463
793
-
-
-
Property, plant and
equipment
61
40
-
-
-
Intangible assets
2,070
-
-
-
-
Revenue:
sales of telecommunications services by MNI S.A
transactions with Szeptel International z Sp. z o.o.
transactions with BIA-NET z Sp. z o.o.
199
Total
5,427
3,256
101
2,070
PLN 833 thousand
PLN 92 thousand
PLN 3,479 thousand
PLN 824 thousand
PLN 199 thousand
Costs:
purchases of telecommunications services by MNI S.A.
PLN 2,463 thousand
PLN 793 thousand
purchase of property, plant and equipment by MNI S.A. (market prices)
PLN 61 thousand
purchase of intangible assets (market prices)
PLN 2,070 thousand
PLN 40 thousand
Loans:
loan advance by MNI Telecom Sp. z o.o. (formerly Telefonia Pilicka Sp. z.o.o.). to the Issuer – under the
agreement of December 21st 2005
PLN ‘000
Company
Loan amount as
per agreement
Amount
outstanding
Maturity date
Interest
Collateral
MNI Telecom Sp.z
o.o. (formerly
Telefonia Pilicka)
1,000
1,000
Jul 31 2006
4% per annum
Assignment of assets
by way of security
Balance of unsettled transactions with related undertakings as at December 31st 2005:
PLN 1,469 thousand
PLN 2,493 thousand
- a loan
PLN 1,024 thousand
195
VII. TRANSACTIONS WITH MEMBERS OF THE MANAGEMENT AND
SUPERVISORY STAFF, THEIR SPOUSES, BLOOD RELATIVES, DIRECT
IN-LAWS UP TO THE SECOND DEGREE AND PERSONS RELATED
THROUGH ADOPTION, CUSTODY OR GUARDIANSHIP TO MEMBERS
OF THE MANAGEMENT OR SUPERVISORY STAFF OF THOSE
UNDERTAKINGS OR COMPANIES IN WHICH THEY ARE SIGNIFICANT
SHAREHOLDERS OR THEIR SPOUSES
a.
Transactions
- Management contract concluded with Inwest Logistics Sp. z o.o. In the reporting period, the turnover under the
The following persons have equity interests in Inwest Logistics Sp. z o.o.:
• Mr Piotr König, Member of the Supervisory Board of MNI S.A. – 15.9%
• Mr Mariusz Pilewski, President of the Management Board of MNI S.A. – 50.2%
- Financial advisory agreement concluded with PM Piotr Majchrzak. In the reporting period, the turnover under
the agreement amounted to PLN 874 thousand.
• Mr Piotr Majchrzak is the President of the Management Board of MNI Telekom (formerly Telefonia
Pilicka) Sp. z o.o.
b. Balance of Unsettled Receivables and Liabilities
- as at December 31st 2005, liabilities to Inwest Logistics Sp. z o.o. amounted to PLN 73 thousand.
c. Loans and Advances
None.
196
VIII. REMUNERATION OF THE MANAGEMENT
SUPERVISORY BOARD OF THE MNI GROUP
BOARD
AND
a) Parent Undertaking
Remuneration paid and in-kind benefits provided to the management and
supervisory staff by the Issuer and its subsidiary undertakings for any
types of services rendered by them to the Company or the subsidiary
undertakings in the period January 1st 2005 – December 31st 2005
Mariusz Pilewski, President of the
Management Board
Leszek Kułak, Vice-President of the
PLN 360 thousand
(under the management contract concluded with Inwest
Logistics Sp. z o.o.)
Management Board
Zdzisław Wójcik, Member of the
PLN 42 thousand
Management Board
Supervisory Board
Tomasz Swadkowski, Deputy Chairman
of the Supervisory Board
Barbara Dąbrowska, Member of the
Supervisory Board
PLN 24 thousand
Piotr König, Member of the Supervisory
Board
Supervisory Board
Krzysztof Radziszewski, Member
197
b) MNI Telecom Sp. z o.o. (formerly Telefonia Pilicka)
Management Board
January 1st 2005 – December 31st 2005
PLN 165 thousand
Jarosław Bartosiak
(employment contract)
PLN 180 thousand
Krzysztof Lato
PLN 293 thousand
Brian Bode
PLN 360 thousand
Jon G. Tesmer
Supervisory Board
c)
PLN 4 thousand
Management Board
Tomasz Dąbrowa, President of the
PLN 59 thousand
Management Board
Management Board
Wiesław Kułak, President of the
PLN 30 thousand
Management Board
IX. KEY MANAGEMENT PERSONNEL OF THE COMPANIES
The Key Management Staff of the Companies comprise the Members of the Management and Supervisory
Boards. The members of the Key Management Staff have direct or indirect influence on the planning, managing
and controlling of the companies’ operations. The other persons holding managerial positions only execute the
decisions of the Management Board and the Supervisory Board.
X. AVERAGE EMPLOYMENT
In 2005, the average employment at the MNI Group was 312 persons.
The average employment at the MNI Group S.A. by employment categories:
– administration staff
– 64 persons
– technical staff
– 101 persons
– sales staff
– 147 persons
198
XI. CONTINGENT LIABILITIES AS AT DECEMBER 31ST 2005
•
•
promissory notes (blank promissory notes with promissory note declarations) PLN 4,121 thousand
list of liabilities secured on the Group’s assets
Type of liability
Creditor
Liabilities under a loan
Bank advancing the loan
1. Assignment of assets of
specified identity –
Telefonia Pilicka Sp. z
o.o.
2. Registered pledge on
movables – Telefonia
Pilicka Sp z o.o.
specified identity
4. Assignment of
receivables under issued
invoices – Legion Polska
Sp. z o.o.
Type of secured assets
Value of secured assets as
at December 31st 2005
(PLN ‘000)
Property, plant and
equipment
4,697
Property, plant and
equipment
5,097
Property, plant and
equipment
81,000
1,500
XII. CONTINGENT RECEIVABLES
The Group recorded no contingent receivables.
XIII. ASSETS HELD FOR SALE
The Group recorded no assets held for sale.
XIV. EURO EXCHANGE RATES USED IN THE VALUATION OF
BALANCE-SHEET AND INCOME-STATEMENT ITEMS DENOMINATED
IN FOREIGN CURRENCIES
EUR mid-exchange rate in:
2005
2004
PLN 4.0254
PLN 4.5182
Dec 31 2005
Dec 31 2004
PLN 3.8598
PLN 4.0790
EUR mid-exchange rate as at:
199
XV. COSTS OF EXTERNAL FINANCING
The costs of external financing are disclosed as costs in the period in which they were incurred. The Group
applies the standard approach.
XVI. RESTATEMENT OF THE FINANCIAL STATEMENTS TO ENSURE
COMPLIANCE WITH IFRS 1
Effect of Transition to IFRS on Equity
(PLN ‘000)
Balance-sheet items as at Jan 1 2004
Under PAS
Effect of transition
Under IFRS
ASSETS
4. Non-current prepayments and accrued income
II. Current assets
1. Inventories
Total assets
82,893
37
70,266
0
12,590
5,190
419
3,588
899
284
88,083
0
0
0
12,590
-12,590
-49
0
-43
278
-284
-49
82,893
37
70,266
12,590
0
5,141
419
3,545
1,177
0
88,034
III. Liabilities and provisions for liabilities
4. Accruals and deferred income
51,950
1,813
22,969
24,144
3,024
-49
0
156
2,819
-3,024
51,901
1,813
23,125
26,963
0
36,133
36,133
13,209
-137
25,129
125
1,047
-454
-2,786
0
0
0
0
0
0
0
0
36,133
36,133
13,209
-137
25,129
125
1,047
-454
-2,786
Total assets plus total liabilities
I. Equity
1. Share capital
Adjustments
1 - Disclosure of non-current prepayments and accrued income as non-current receivables
2 - Disclosure of current prepayments and accrued income as current receivables
3 - Elimination of receivables under loans advanced from the Social Benefits Fund (ZFŚS) from other
receivables in correspondence with special accounts
4 – Elimination of cash in correspondence with a special account comprising cash of the Social Benefits
Fund (ZFŚS)
5 – Disclosure of accruals and deferred income as other current provisions
As a result of the effects of transition to IFRS:
- the MNI Group’s financial standing deteriorated by approx. PLN 49 thousand
- the MNI Group’s net profit/(loss) did not change jk
- cash decreased by PLN 6 thousand
200
- no change in equity occurred
Effect of Transition to IFRS on Equity
(PLN ‘000)
Balance-sheet items as at Dec 31 2004
Under PAS
Under IFRS
ASSETS
77,038
0
0
77,038
7,402
66,243
0
66,243
0
2,368
2,368
210
0
210
3,183
-2,368
815
13,312
13,245
II. Current assets
7,402
160
-67
0
11,948
683
12,631
467
-13
454
737
-737
0
Total assets
90,350
-67
90,283
34,052
-67
33,985
2,856
0
2,856
17,333
155
17,488
12,537
1,104
13,641
1,326
-1,326
0
1. Inventories
4. Accruals and deferred income
160
Total assets less total liabilities
56,298
56,298
I. Equity
1. Share capital
56,298
II. Minority interests
22,709
0
0
56,298
-137
0
-137
27,251
0
27,251
125
0
125
1,047
0
1,047
22,709
124
0
124
5,106
0
5,106
73
0
73
Adjustments
4 – Elimination of cash in correspondence with a special account comprising cash of the Social Benefits
Fund (ZFŚS)
5 – Disclosure of accruals and deferred income as other current provisions
- the MNI Group’s financial standing deteriorated by approx. PLN 67 thousand
- the MNI Group’s net profit (loss) did not change jk
- no change in equity occurred
201
As at January 1st 2004 and December 31st 2004, the effects of transition did not influence equity.
The major differences between the accounting policies under the Polish Accounting Standards and the
International Accounting Standards concerned disclosure of assets and equity and liabilities, and elimination
from the consolidated financial statements of assets and liabilities related to the Social Benefits Fund. The Social
Benefits Fund is created by the Company in accordance with the International Accounting Standards. The
Company has no effective control over the Fund’s assets, and the liabilities of the Fund do not represent the
Company’s actual liabilities.
The differences do not have any effect on the value of equity or net profit (loss).
(PLN ‘000)
Balance- sheet items as at Dec 31 2005
Under PAS
Under IFRS
ASSETS
II. Current assets
1. Inventories
Total assets
163,168
31,286
122,148
3,580
6,154
52,091
375
32,711
13,113
5,892
215,259
742
5,062
-5,892
375
163,631
31,749
122,148
6,421
3,313
52,003
375
33,453
18,175
0
215,634
125,556
4,881
72,341
-88
0
998
125,468
4,881
73,339
4. Other accruals and deferred income
43,130
5,204
4,118
-5,204
47,248
0
IV.
Negative
undertakings
23,946
-23,946
0
goodwill
of
463
463
2,841
-2,841
-88
subordinated
Total assets less total liabilities
I. Equity
1. Share capital
65,757
65,757
22,572
32,572
125
1,047
-18
9,459
24,409
24,409
90,166
90,166
22,572
32,572
125
1,047
-18
33,868
Adjustments
4 – Elimination of cash in correspondence with a special account comprising cash of the Social Benefits Fund (ZFŚS)
5 – Transfer of accruals and deferred income to current and non-current liabilities
- the MNI Group’s financial standing improved by approx. PLN 67 thousand
- the MNI Group’s net profit (loss) changed by PLN 24,409 thousand
Negative goodwill of PLN 23,946 thousand increased the MNI Group’s net profit
Net profit increased by PLN 463 thousand as a result of discontinued goodwill amortisation
202
- change in equity of PLN 24,409 thousand occurred
XVII.
DIFFERENCES BETWEEN THE FINANCIAL STATEMENTS
PREPARED FOR THE PURPOSES OF THIS PROSPECTUS AND THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL
YEAR 2005, ON WHICH THE AUDITOR ISSUED AN UNQUALIFIED
OPINION ON MAY 29TH 2006
1.
2.
Notes (Nos. 01-25).
Comparable data for 2004
balance-sheet total:
previous figure: PLN 89,045 thousand
current figure: PLN 90,283 thousand
difference:
PLN 1,238 thousand
-
net profit/(loss)
difference:
PLN 131 thousand
- equity
difference:
PLN 348 thousand
3.
Full-method consolidation of subsidiary undertakings (consolidation of 100% of BIA-NET)
Effects of consolidation of 100% of BIA-NET
53.9%
100%
- BIA-NET’s balance-sheet total
% share in the Group’s total
PLN 513 ths
0.18%
PLN 952 ths
0.34%
- BIA-NET’s net profit/(loss)
PLN -179 ths
1.46%
PLN -332 ths
2.72%
Impact on the 2005 financial statements
- balance-sheet total:
current figure:
PLN 215,634 thousand
difference:
PLN 428 thousand
- net profit/(loss)
current figure:
PLN 33,868 thousand
difference:
PLN 153 thousand
- equity
203
current figure:
PLN 90,166 thousand
difference:
PLN 106 thousand
4.
Supplementary Information to the Notes:
- supplementary information on the rules governing the preparation of consolidated
financial
statements
- revenue structure
- discontinued operations
- information on the composition of the Management and Supervisory Boards of the
MNI
Group
companies
- events subsequent to the balance-sheet date
- transactions with related undertakings
- transactions with members of the management and supervisory staff, their spouses, blood relatives,
direct in-laws up to the second degree and persons related through adoption, custody or guardianship to
- remuneration of the MNI Group’s Management and Supervisory Board members
- Key Management Personnel of the Group companies
- average headcount
- average headcount by employee categories
- contingent liabilities
- contingent receivables
- assets held for sale
- costs of external financing
- restatement of the financial statements to ensure compliance with IFRS 1.
204
THE MNI GROUP
AUDITOR’S OPINION AND REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE MNI GROUP FOR
THE PERIOD JANUARY 1ST – DECEMBER 31ST 2005 PREPARED FOR THE PURPOSES OF THE MNI S.A.
PROSPECTUS IN ACCORDANCE WITH THE REGULATIONS GOVERNING THE PREPARATION OF PROSPECTUSES TO
BE PUBLISHED WHEN SECURITIES ARE ISSUED, IN ACCORDANCE WITH COMMISSION REGULATION (EC) NO.
809/2004, AND OTHER REGULATIONS APPLICABLE TO THE POLISH CAPITAL MARKET, INCLUDING THE PUBLIC
OFFERING ACT
Warsaw, November 2006
205
AUDITOR’S OPINION
To the General Shareholders Meeting and the Supervisory Board of MNI S.A.:
We have audited the attached consolidated financial statements for 2005 prepared for the purposes of the
Prospectus of the Group whose parent undertaking is MNI S.A., registered office at. ul. Żurawia 8 in Warsaw,
including:
consolidated balance sheet as at December 31st 2005, showing a balance-sheet total of PLN 215,634
thousand
consolidated income statement for the financial year January 1st – December 31st 2005, showing a net
profit of PLN 33,868 thousand
statement of changes in consolidated equity for the financial year January 1st – December 31st 2005,
showing an increase in equity of PLN 33,868 thousand
consolidated cash-flow statement for the financial year January 1st – December 31st 2005, showing a
net increase in cash of PLN 17,458 thousand
notes to the consolidated financial statements
The following changes were introduced to the financial statements prepared for the purposes of the
Prospectus relative to the consolidated financial statements for the financial year 2005 on which the auditor
issued an unqualified opinion on May 29th 2006: the consolidated financial statements containing comparable
data of the MNI Group for 2004 are presented as comparable data, which include the accounts of the
undertakings controlled by MNI S.A. as at December 31st 2004, and BIA-NET Sp. z o.o. was consolidated with
the full method.
1.
Additionally, Notes 1-24 were added to the financial statements of the MNI Group prepared for the purposes
of the Prospectus.
2.
The following changes were introduced to the comparable data for 2004:
2004
- balance-sheet total
- net profit
- equity
3.
previous figure
(PLN ‘000)
current figure
(PLN ‘000)
difference
% change
(PLN ‘000)
89,045
90,283
1,238
1.39
4,975
5,106
131
2.63
55,950
56,298
348
0.62
The effect of changes in the comparable data for 2004 on the financial statements for 2005:
2005
- balance-sheet total
previous figure
(PLN ‘000)
current figure (PLN
‘000)
difference
% change
(PLN ‘000)
215,206
215,634
428
0.20
- net profit
34,021
33,868
(-) 153
0.45
- equity
90,272
90,166
(-) 106
0.12
206
4. Consolidation of subsidiary undertakings with the full method (consolidation of 100% of BIA-NET Sp. z o.o.)
Effects of consolidation of 100% of BIA-NET Sp. z o.o.:
-BIA-NET Sp z o.o.’s balancesheet total
-BIA-NET Sp z o.o.’s net loss
5.
53.9%
100%
PLN 513 thousand
PLN 952 thousand
0.18%
0.34%
- PLN 179 thousand
- PLN 332 thousand
1.46%
2.72%
The following disclosures were also added to the consolidated financial statements:
-
-
supplementary information on the rules governing the preparation of consolidated financial statements
revenue structure
discontinued operations
information on the composition of the Management Board and the Supervisory Boards of the MNI
Group companies
events subsequent to the balance-sheet date
transactions with related undertakings
transactions with members of the management and supervisory staff, their spouses, blood relatives,
direct in-laws up to the second degree and persons related through adoption, custody or guardianship to
remuneration of the MNI Group’s Management and Supervisory Board members
key management personnel of the Group companies
average headcount
average headcount by employee categories
contingent receivables
contingent liabilities
assets held for sale
costs of external financing
restatement of the financial statements to ensure compliance with IFRS 1.
The consolidated financial statements were prepared using the full method.
The Management Board of the parent undertaking is responsible for the reliability, accuracy and clarity
of the consolidated financial statements prepared in accordance with the IFRS and related interpretations
introduced by way of the European Commission’s regulations.
Our responsibility was to audit those financial statements and to issue an opinion as to their reliability,
accuracy and clarity.
In performing the audit we complied with the International Auditing Standard, as well as the provisions
of the Accountancy Act and the professional auditing standards laid down by the National Board of Statutory
Auditors in Poland. The aforementioned standards require that we plan and perform our audit in such a manner
as to obtain reasonable assurance that the consolidated financial statements are free from any material
misstatements.
We planned and performed our audit of the consolidated financial statements in such a manner as to
obtain reasonably sufficient evidence to issue an opinion thereon. In particular, the audit included checking the
correctness of the accounting policies adopted by the related undertakings and examining – largely on a test basis
– of source documents relevant to the amounts and disclosures contained in the consolidated financial
statements, as well as a global assessment of the consolidated financial statements.
In our view, the consolidated financial statements of the MNI Group prepared for the purposes of the
Prospectus, including figures and explanations, reflect reliably and clearly all information material for the
207
assessment of the Group’s assets and financial standing as at December 31st 2005, as well as its net profit (loss)
for the financial year January 1st – December 31st 2005.
The consolidated financial statements are in all material respects compliant with the EU-endorsed
International Financial Reporting Standards and – where the International Financial Reporting Standards lack
specific regulations – with the provisions of the Accountancy Act of September 29th 1994, together with the
secondary legislation thereunder, as well as the regulations applicable to issuers of securities admitted or sought
to be admitted to trading on an official listing market. Furthermore, the financial statements comply with the
legal provisions applicable to consolidated financial statements of a group of companies.
Without raising any qualifications, we note that the financial statements of the following subsidiaries:
Legion Polska Sp. z o.o., Media Personel Serwis Sp. z o.o., Szeptel International Sp. z o.o., BIA-NET Sp. z o.o.
and OSS S.A., whose joint balance-sheet total represents 4.06% of the consolidated balance-sheet total, were not
audited, whereas the financial statements of MNI Telekom (formerly Pilicka Telefonia) Sp. z o.o. were audited
by PricewaterhouseCoopers Sp. z o.o., which issued an unqualified opinion thereon.
Janusz Wisłowski
Janusz Wisłowski
Qualified Auditor
Reg. No. 10727/7789
ul. Żelazna 54/5, 00-852 Warsaw,
an auditing firm entered in the list of
qualified auditors of financial
statements maintained
by the National Board
of Statutory Auditors, under
entry No. 2855
Qualified Auditor
Reg. No. 10727/7789
Warsaw, November 15th 2006
208
REPORT SUPPLEMENTING AUDITOR’S OPINION ON THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE MNI GROUP FOR THE PERIOD JANUARY 1ST –
DECEMBER 31ST 2005 PREPARED FOR THE PURPOSES OF THE MNI S.A.
PROSPECTUS IN ACCORDANCE WITH THE REGULATIONS GOVERNING THE
PREPARATION OF PROSPECTUSES TO BE PUBLISHED WHEN SECURITIES ARE
ISSUED, IN ACCORDANCE WITH COMMISSION REGULATION (EC) NO. 809/2004,
AND OTHER REGULATIONS APPLICABLE TO THE POLISH CAPITAL MARKET,
INCLUDING THE PUBLIC OFFERING ACT
Warsaw, November 2006
209
TABLE OF CONTENTS
A.
GENERAL INFORMATION
1.
2.
3.
4.
5.
6.
INFORMATION ON THE MNI GROUP .......................................................................................................211
1.1
Parent Undertaking
1.2
INFORMATION ON THE PREVIOUS YEAR’S CONSOLIDATED FINANCIAL STATEMENTS ............................212
THE AUDITOR .........................................................................................................................................212
LEGAL BASIS FOR THE AUDIT .................................................................................................................213
SCOPE OF RESPONSIBILITY AND AIM OF THE AUDIT ...............................................................................213
INFORMATION ON THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE MNI GROUP ..........214
ANALYTICAL INFORMATION
B.
1.
2.
3.
C.
211
211
212
214
PRELIMINARY INFORMATION ..................................................................................................................214
OVERVIEW OF THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................215
SELECTED ECONOMIC AND FINANCIAL RATIOS AND THEIR ASSESSMENT ..............................................218
DETAILED INFORMATION
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
218
ACCOUNTING POLICIES ..........................................................................................................................218
BASIS FOR PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS..........................................219
CONSOLIDATION METHODOLOGY ..........................................................................................................219
CONSOLIDATION GOODWILL AND THE METHOD OF ACCOUNTING FOR CONSOLIDATION GOODWILL.....219
EQUITY CONSOLIDATION AND MINORITY INTERESTS .............................................................................219
CONSOLIDATION ELIMINATIONS.............................................................................................................219
SUPPLEMENTARY INFORMATION AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...........220
THE PARENT UNDERTAKING’S DIRECTORS’ REPORT ON THE OPERATIONS OF THE MNI GROUP ...........220
INFORMATION ON THE AUDITOR’S OPINION ...........................................................................................220
EVENTS SUBSEQUENT TO THE BALANCE-SHEET DATE ...........................................................................220
210
A. GENERAL INFORMATION
1. Information on the MNI Group
1.1 Parent Undertaking
The MNI Group’s parent undertaking is the company operating under the name of MNI Spółka Akcyjna,
registered office at ul. Żurawia 8 in Warsaw.
The Company in its present form is the result of a series of transformations of a company established by virtue of
resolution No. 93/XIX issued by the Szepietowo Commune Council on May 4th 1992, and incorporated on the
basis of a deed of incorporation prepared in the form of notarial deed No. Rep. A 75/93 of September 30th 1993.
The Company is entered in the National Register of Entrepreneurs under entry No. KRS 0000003901, which was
assigned on March 23rd 2001.
The Company has been assigned Tax Identification Number (NIP) 722-00-03-300 by Head of the Second Tax
Office for Warszawa-Śródmieście, and Industry Identification Number (REGON) 450085143.
Furthermore, the Company is a registered EU VAT payer assigned No. PL7220003300.
As stated in the deed of incorporation, the Company’s core business is the provision of telecommunications
services (PKD 64.20).
The Company is entered in the Register of Telecom Entrepreneurs under entry No. 8.
As at December 31st 2005, the Company’s share capital amounted to PLN 22,572 thousand and was divided into
22,571,558 equal shares with a par value of PLN 1.00 per share.
According to the shareholder register, as at December 31st 2005 the following shareholders held more that 5% of
the total vote at the Company’s General Shareholders Meeting.
Shareholder
Com. Investment Sp. z o.o.
Andrzej
Piechocki
and
DEDAL Inwestycje Sp. z o.o.
Caterham
Financial
Management Ltd
Number of shares Number of votes at Par value of shares % of share capital
held
GM
9,191,590
9,191,590
PLN 1.00
40.48%
3,313,144
3,313,144
PLN 1.00
14.68%
1,250,000
1,250,000
PLN 1.00
5.51%
In the period covered by the audit, the Company’s share capital was reduced by PLN 137,000.00 following
retirement of treasury shares, which was registered by the District Court for the Capital City of Warsaw, XIX
Commercial Division of the National Court Register on July 14th 2005.
As at December 31st 2005, the Company’s Management Board was composed of the following persons:
Leszek Kułak
Zdzisław Wójcik
–
–
–
Vice-President of the Management Board
In the financial year 2005, Mr Zdzisław Wójcik was appointed to the Management Board with effect from
September 28th 2005, by virtue of Resolution No. 23 adopted by the Supervisory Board on the same date.
211
1.2 Subsidiary Undertakings
As at December 31st 2005, the MNI Group included the following subsidiary undertakings which were
consolidated with the full method:
No.
1.
Company
MNI Telekom (formerly Pilicka Telefonia) Sp.z o.o.
Business profile
telecommunications
services,
construction,
installation,
maintenance and operation of
a telecommunications network
2.
telecommunications services
3.
Media Personel Serwis Sp.z o.o.
software and HR management
services
4.
Szeptel International Sp.z o.o.
telecommunications services, Call
Center projects
5.
BIA-NET Sp. z o.o.
lease of infrastructure
6.
OSS S.A.
construction of telecommunications
infrastructure
As at December 31st 2005, the parent undertaking held 100% of share capital in all of its subsidiary undertakings
except BIA-NET Sp. z o.o., in which it held 53.9% of the total share capital.
All the subsidiary undertakings were consolidated for the first time, due to the fact that the parent undertaking
prepared its first consolidated financial statements for the financial year ended December 31st 2005.
The Group’s subsidiary undertakings listed below were not included in consolidation due to loss of control by
the parent undertaking:
1. Szeptel Internet Sp. z o.o.
2. EPL S.A.
The MNI Group’s average headcount in 2005 was 312.
2. Information on the Previous Year’s Consolidated Financial
Statements
The parent undertaking did not prepare consolidated financial statements for the previous financial year ended
December 31st 2004, as it considered itself eligible for the exemption provided for in Art. 56 of the Accountancy
Act. The consolidated financial statements for the previous year were prepared solely for the purpose of
presenting the 2004 comparable data in the MNI Group’s consolidated financial statements for 2005 prepared for
the purposes of the Prospectus. The consolidated financial statements for 2004 include the accounts of the
undertakings controlled by MNI S.A. as at December 31st 2004.
3. The Auditor
MGI Akcept Audyt Sp. z o.o., registered office at ul. Żelazna 54 in Warsaw, is a qualified auditor of financial
statements entered in the relevant list maintained by the National Board of Statutory Auditors under Reg. No.
2835. The audit was performed on its behalf by Mr Janusz Wisłowski, qualified auditor Reg. No. 10727/7789.
The consolidated financial statements for the financial year 2005 prepared for the purposes of the Prospectus
were audited on the basis of the agreement concluded with the parent undertaking’s Management Board on
October 3rd 2006.
MGI Akcept Audyt Sp. z o.o. and the qualified auditor performing the audit on its behalf represent that they
meet the criteria of impartiality and independence from the MNI Group’s undertakings within the meaning of
Art. 66.2 of the Accountancy Act of September 29th 1994 (Dz.U. of 2002, No. 76, item 694, as amended).
212
4. Legal Basis for the Audit
Legal basis for the audit of the MNI Group’s consolidated financial statements:
1.
2.
3.
International Auditing Standards,
provisions of the Accountancy Act of September 29th 1994 (Dz.U. of 2002, No. 76, item 694, as
amended),
professional auditing standards laid down by the National Board of Statutory Auditors in Poland.
5. Scope of Responsibility and Aim of the Audit
The Management Board of the parent undertaking is responsible for the reliability and clarity of the consolidated
financial statements prepared for the purposes of the Prospectus (in accordance with Commission Regulation
(EC) No. 809/2004 and other regulations applicable to the Polish capital market, including the Public Offering
Act) in accordance with the EU-endorsed International Financial Reporting Standards. Our responsibility was to
issue, based on the audit findings, an opinion, together with a report supplementing the opinion, on the aforesaid
consolidated financial statements of the MNI Group.
The consolidated financial statements prepared for the purposes of the Prospectus were signed by members of
the parent undertaking’s Management Board appointed on June 30th 2006 and composed of: Piotr König –
President of the Management Board, Mariusz Piotr Pilewski – Member of the Management Board and Leszek
Wojciech Kułak – Member of the Management Board.
On October 5th 2006, the parent undertaking’s Management Board made a representation to the effect that the
data contained in the consolidated financial statements prepared for the purposes of the Prospectus and presented
for audit was clear and reliable and that as at the audit completion date no events occurred which could have a
material effect on the amounts disclosed in the consolidated financial statements for the year covered by the
audit.
During the audit of the consolidated financial statements prepared for the purposes of the Prospectus, the parent
undertaking’s Management Board made available the consolidation documents together with all information
requested in the course of the audit, and provided explanations and representations necessary to assess formal
and legal compliance as well as the substance of the MNI Group’s consolidated financial statements prepared as
at December 31st 2005.
213
6. Information on the Audited Consolidated Financial Statements of the
MNI Group
Differences between the consolidated financial statements of the MNI Group prepared by the parent undertaking
as at December 31st 2005 for the purposes of the Prospectus and the consolidated financial statements for the
financial year 2005 on which the auditor issued an unqualified opinion on May 29th 2006:
PLN ‘000
Financial statements for
the financial year 2005 on
which the auditor issued
an unqualified opinion on
May 29th 2006
consolidated balance sheet as
at January 31st 2005, showing
a balance-sheet total of:
consolidated income statement
for the financial year January
1st – December 31st 2005,
showing a net profit of:
consolidated
cash-flow
statement for the financial
year January 1st – December
31st 2005, showing a net
increase in cash of:
statement of changes in
consolidated equity for the
financial year January 1st –
December 31st 2005, showing
an increase in equity of:
Audited financial
statements for the
financial year 2005
prepared for the
purposes of the
Prospectus
Difference
%
change
215,206
215,634
428
0.20
34,021
33,868
(-) 153
0.45
17,455
17,458
3
0.02
33,890
33,868
(-) 22
0.07
All the undertakings comprising the MNI Group have the same accounting periods and all of them prepared their
financial statements as at December 31st 2005.
The financial statements of the following MNI Group companies were subject to audit:
Company
Auditor
1. MNI S.A.
MGI Akcept Audyt Sp z o.o.
2. MNI Telekom ( formerly Pilicka PricewaterhouseCoopers Sp. z o.o.
Telefonia) Sp. z o.o.
Opinion
unqualified
unqualified
As at the audit completion date, the remaining undertakings of the MNI Group, whose balance-sheet totals
jointly represent 4.06% of the balance-sheet total disclosed in the consolidated financial statements prepared for
the purposes of the Prospectus, did not have their financial statements for the financial year 2005 audited.
B. ANALYTICAL INFORMATION
1.
Preliminary Information
This part of the report contains a concise presentation and assessment of the MNI Group’s assets and financial
standing in 2005, based on the financial information disclosed in the financial statements for the period January
1st – December 31st 2005 prepared for the purposes of the Prospectus, which were audited by our firm.
Given that the audited consolidated financial statements are the first consolidated financial statements prepared
by the MNI Group and that, for the purposes of the Prospectus, these statements contain comparable data
sourced from the MNI Group’s consolidated financial statements for 2004, which include the accounts of the
undertakings controlled by MNI S.A. as at December 31st 2004.
214
2. Overview of the Consolidated Financial Statements
No.
balance-sheet item
1
2
Non-current assets
A.
Intangible assets
2.
Property, plant and
equipment
Non-current
receivables
Non-current
investments
Turnover tax assets
Current assets
Inventories
Current receivables
4.
5.
B.
1.
2.
3.
As at Dec 31
2004
as
disclosed in the
consolidated
financial
statements
including
comparable
data, prepared
for the purposes
of
the
Prospectus
4
As at Dec 31
2005
as
disclosed in the
consolidated
financial
statements on
which
the
auditor issued
an unqualified
opinion
on
May 29th 2006
As at Dec 31
2005
as
disclosed in the
audited
consolidated
financial
statements
prepared for
the purposes of
the Prospectus
5
6
77,038
163,210
163,631
75.88
7,402
31,749
31,749
14.72
64,672
66,243
121,730
122,148
56.64
2,359
2,368
6,418
6,421
2.98
341
815
13,456
160
210
815
13,245
160
0
3,313
51,996
375
0
3,313
52,003
375
0
1.54
24.12
0.17
33,448
18,173
215,206
33,453
18,175
215,634
15.52
8.43
100%
3
75,589
1.
3.
As at Dec 31
2004
as
disclosed in the
parent
undertaking’s
financial
statements
Current investments
Total assets
7,402
12,624
672
89,045
12,631
454
90,283
The structure of the Company’s assets is appropriate to its business.
215
Structure
assets in
(refers
column 6)
of
%
to
7
No.
balance-sheet item
1
A.
As at Dec 31
2004
as
disclosed
in
the
parent
undertaking’s
financial
statements
2
Treasury
shares
(negative value)
Statutory reserve funds
Revaluation
capital
reserve
Other capital reserves
Retained profit (deficit)
Net profit (loss)
Minority interests
Liabilities
and
provisions for liabilities
3.
5
6
56,298
90,272
90,166
41.82
22,709
22,572
22,572
10.46
137
27,231
137
27,251
0
32,572
0
32,572
0.00
15.10
125
1,047
0
4,975
0
125
1,047
124
5,106
73
125
1,047
(-) 65
34,021
0
125
1,047
(-) 18
33,868
0
0.06
0.48
0.01
15.71
0
33,095
2,793
33,985
2,856
124,934
4,808
125,468
4,881
58.18
2.26
13,641
73,189
46,937
73,339
47,248
34.01
21.91
90,283
215,206
215,634
100%
55,950
2.
1.
2.
As at Dec 31
2005
as
disclosed in the
audited
consolidated
financial
statements
prepared for
the purposes of
the Prospectus
3
Share capital
5.
6.
7.
8.
B.
As at Dec 31
2005
as
disclosed in the
consolidated
financial
statements on
which
the
auditor issued
an unqualified
opinion
on
May 29th 2006
Structure
assets in
(refers
column 6)
of
%
to
7
Equity
1.
3.
4.
As at Dec 31
2004
as
disclosed in the
consolidated
financial
statements
including
comparable
data, prepared
for the purposes
of
the
Prospectus
4
Current liabilities
Total
equity
liabilities
22,709
16,944
13,358
17,488
and
89,045
The Company’s equity and liabilities, which are sources of financing for the Company’s assets, include:
1.
2.
equity, which accounts for 41.82% of total equity and liabilities, and which improved significantly
due to the negative consolidation goodwill written off through the 2005 profit/(loss);
external capital, which accounts for 58.18% of total equity and liabilities and which increased
substantially in the financial year covered by the audit as a result of a bank loan contracted by MNI
S.A.’s to finance the acquisition of non-current investments.
216
Income based on synthetic income statement
(PLN’000)
Income statement item
No.
A. Net sales revenue and
equivalents
B. Cost of sales
C. Gross profit (loss) on sales
(A-B)
D. Selling costs
E. General and administrative
expenses
F. Profit (loss) on sales (C-DE)
G. Other operating income
H. Other operating expenses
I. Operating profit (loss)
(F+G-H)
J. Financial income
K. Financial expenses
L. Profit
(loss)
before
extraordinary items (I+JK)
M. Result on extraordinary
items
N. Profit (loss) before tax
(L+M)
O. Other increase of profit
P. Corporate income tax
Q. Net profit (loss) (N+O-P)
R. Net profit (loss) attributable
to equity holders of the
parent
S. Net profit (loss) attributable
to minority interests
As at Dec 31
2004 as
disclosed in the
parent
undertaking’s
financial
statements
As at Dec 31 2004
as disclosed in the
consolidated
financial statements
including
comparable data,
prepared for the
purposes of the
Prospectus
As at Dec 31 2005
as disclosed in
the consolidated
financial
statements on
which the
auditor issued an
unqualified
opinion on May
29th 2006
As at Dec 31 2005
as disclosed in
the audited
consolidated
financial
statements
prepared for the
purposes of the
Prospectus
36,096
43,752
83,187
83,187
32,613
3,483
39,927
3,825
72,992
10,195
72,974
10,213
1,542
1,889
1,652
2,179
2,055
4,160
2,055
4,196
52
(-)6
3,980
3,962
5,251
1,283
4,020
6,021
1,626
4,389
11,676
5,563
10,093
35,629
5,646
33,945
1,743
754
5,009
1,753
906
5,236
458
1,810
8,741
458
1,869
32,534
11
0
0
0
5,020
5,236
8,741
32,534
0
45
4,975
0
130
5,106
5,675
23,946
(-)1,334
34,021
0
(-)1,334
33,868
34,021
(-)569
(-)153
The sales revenue increased considerably in 2005 as a result of expansion of the Company’s scope of business
to include audiotext services.
The net profit (loss) reflects a negative consolidation goodwill written off in the amount of PLN 23,946
thousand, which accounts for 70.7% of the net profit (loss).
217
3. Selected Economic and Financial Ratios and Their Assessment
No.
Ratio
1.
2.
Net sales margin
Return on equity
3.
4.
Equity to assets ratio
Debt ratio
5.
6.
Quick ratio
Current ratio
Formula
Net profit (loss) x 100/net sales revenue
Net profit (loss) x 100/equity (-) net profit
(loss)
Equity/total assets
Liabilities (non-current + current)/total
assets
Current investments/current liabilities
Current assets/current liabilities
2004
2005
including
comparable
data
Prospectus
11.67%
9.98%
40.7%
60.2%
0.63
0.34
0.42
0.56
0.03
0.97
0.39
1.11
The profitability ratios reflect the relation of net profit to sales revenue, assets and equity. They describe
profitability of sales and the rate of return on assets and equity. The strong and growing profitability ratios attest
to the Company’s operating efficiency and a promising development potential. However, it should be noted that
70.7% of the net profit is attributable to the negative consolidation goodwill.
Financial liquidity ratios serve to assess the Company’s capability to timely discharge its current liabilities. In
practice, specific values of the said ratios have been established which are deemed as model. In the case of the
current ratio, these fall within the range of 1.2 – 2.0, and in the case of the quick ratio III, the desirable value
stands at 0.2.
Financing ratios provide information on asset financing sources and are relevant to the assessment of the
Company’s debt level and its ability to service it.
Based on the data presented above, we state that there is no threat to the MNI Group’s continuation as a going
concern in the year following the audit.
C. DETAILED INFORMATION
1. Accounting Policies
The parent undertaking has up-to-date documentation describing the accounting policies it applies. The policies
are presented in the supplementary information to the consolidated financial statements drawn up for the
purposes of the Prospectus within the scope required under the International Financial Reporting Standards.
In 2005, all members of the MNI Group kept their accounting books and prepared their financial statements in
compliance with the Accountancy Act.
For the purpose of preparing the consolidated financial statements for the 2005 financial year and consolidated
financial statements to be included in the Prospectus, all the financial statements were restated to comply with
the IFRS/IAS by introducing relevant adjustments.
Furthermore, the non-consolidated 2004 financial statements of the companies controlled by MNI S.A. were also
restated with a view to their including as comparable data in the consolidated financial statements of the MNI
Group for the 2005 financial year prepared for the purposes of the Prospectus.
Since January 1st 2006, MNI S.A. has been preparing its financial statements in accordance with IFRS/IAS.
The data contained in the MNI Group’s financial statements are presented in thousands of Polish złotys.
All of the MNI Group companies have the same financial year, ending December 31st, and apply uniform
accounting policies.
218
2. Basis for Preparation of the Consolidated Financial Statements
The consolidated financial statements of the MNI Group drawn up for the purposes of the Prospectus were
prepared in compliance with the EU-endorsed International Financial Reporting Standards and – where the
International Financial Reporting Standards lack specific regulations – with the provisions of the Accountancy
Act of September 29th 1994, together with the secondary legislation thereunder, as well as the regulations
applicable to issuers of securities admitted or sought to be admitted to trading on an official listing market.
The consolidated financial statements prepared for the purposes of the Prospectus were drawn up on the basis of
the consolidation documentation, including in particular:
1) non-consolidated financial statements of the parent undertaking and subsidiary undertakings,
2) consolidation notes,
3) consolidation adjustments and eliminations,
4) computation of the consolidation goodwill and the method of accounting for the consolidation goodwill,
5) equity consolidation and determination of minority interests,
6) auditor’s opinions and reports concerning non-consolidated financial statements of the companies
subject to consolidation.
3. Consolidation Methodology
The consolidated financial statements drawn up for the purposes of the Prospectus were prepared using full
consolidation method, which consists in aggregating line-by-line the corresponding items – at their full value –
of individual non-consolidated financial statements of the Group members, and making relevant eliminations and
other adjustments, as stipulated in IAS 27 and Art. 60 of the Accountancy Act. The consolidation principles are
applied in such a manner as to ensure that the consolidated financial statements reflect the financial standing and
assets of the MNI Group as if the Group members constituted a single economic entity.
4. Consolidation Goodwill and the Method of Accounting for Consolidation
Goodwill
The method used to compute and account for the consolidation goodwill is presented in the supplementary
information to the consolidated financial statements prepared for the purposes of the Prospectus and relates to
the following:
-
positive goodwill which arose upon the acquisition of shares in Legion Polska Sp. z o.o. and is
disclosed under assets in the consolidated balance sheet in the amount of PLN 16,195
thousand; at the end of each financial year, the goodwill is tested for impairment;
-
negative goodwill in the amount of PLN 23,946 thousand, which arose upon the acquisition of
shares in MNI Telecom (former Pilicka Telefonia) Sp. z o.o. and was written off through the
consolidated net profit.
5. Equity Consolidation and Minority Interests
The Group’s share capital is represented by the share capital of the parent undertaking. In order to calculate the
other components of the Group’s equity, each of the components of the parent undertaking’s equity was
aggregated with the corresponding equity components of the consolidated subsidiary undertakings, representing
the percentage share of the parent undertaking in the equity of the subsidiary undertakings as at the balance-sheet
date, that is December 31st 2005. Only those components were included into the Group’s equity which
originated after the date of control takeover by the parent undertaking.
6. Consolidation Eliminations
The following consolidation eliminations were made:
1.
2.
3.
shares in and equity of subsidiary undertakings
mutual settlements
results of intragroup transactions (revenue, expenses, unrealised gains)
219
Eliminations were made based on the data sourced from accounting books of MNI S.A. and reconciled with the
information obtained from the subsidiary undertakings.
7. Supplementary Information and Notes to the Consolidated Financial
Statements
The data contained in the supplementary information and notes to the consolidated financial statements prepared
for the purposes of the Prospectus are accurate and complete within the meaning of the International Financial
Reporting Standards. The data constitute an integral part of the consolidated financial statements.
8. The Parent Undertaking’s Directors’ Report on the Operations of the
MNI Group
Directors’ report on the operations of the parent undertaking was prepared for the purposes of the 2005 financial
statements. There was no requirement to redraft the directors’ report for the purposes of the audited 2005
consolidated financial statements to be included in the Prospectus.
9. Information on the Auditor’s Opinion
Based on the audit of the consolidated financial statements of the MNI Group prepared as at December 31st
2005 for the purposes of the Prospectus, we issued an unqualified opinion thereon.
10. Events Subsequent to the Balance-Sheet Date
On February 9th 2006 BIA-NET Sp. z o.o. was placed in liquidation, and on April 24th 2006 an agreement was
executed whereby MNI S.A. sold its shares in OSS S.A. to MNI Telecom (former Pilicka Telefonia) Sp. z o.o.
This report contains 15 numbered pages, initialled by the qualified auditor.
Janusz Wisłowski
Janusz Wisłowski
Qualified Auditor
Reg. No. 10727/7789
an auditing firm entered in the list
of qualified auditors of financial
statements, under entry No. 2835
Qualified Auditor
Reg. No. 10727/7789
220
AUDITOR’S REPORT
on the review of consolidated financial statements, including comparable data, of the MNI Group
whose parent undertaking is MNI S.A.,
covering the period from January 1st 2004 to December 31st 2004,
prepared for the purposes of the MNI S.A. Prospectus
We have audited the attached consolidated financial statements of the Group whose parent undertaking
is MNI S.A., registered office at. ul. Żurawia 8 in Warsaw, prepared for presentation in the Prospectus,
including:
1) consolidated balance sheet as at December 31st 2004, showing a balance-sheet total of PLN 90,283
thousand
2) consolidated income statement for the period from January 1st to December 31st 2004, showing a net
profit of PLN 5,106 thousand
3) statement of changes in consolidated equity for the period from January 1st to December 31st 2004,
showing an increase in equity of PLN 20,165 thousand
4) consolidated cash-flow statement for the period from January 1st to December 31st 2004, showing a
decrease in cash of PLN 12 thousand
The financial statements were prepared using the full method.
The 2004 consolidated financial statements of the MNI Group were prepared for the purpose of
presenting comparable data for 2004 in the MNI Group’s consolidated financial statements for 2005 included in
the Prospectus.
Pursuant to the provisions of the Accountancy Act, the parent undertaking did not prepare consolidated
financial statements for the financial year ended December 31st 2004, as it considered itself eligible for the
exemption provided for in Art. 56 of the Accountancy Act.
The consolidated financial statements for 2004 include the accounts of the undertakings controlled by MNI
S.A. as at December 31st 2004, including:
•
MNI S.A.
•
Media Personel Service Sp. z o.o.
•
Ogólna Sieć Szkieletowa – OSS Spółka Akcyjna
•
Szeptel International Sp. z o.o.
•
BIA-NET Sp. z o.o.
The Management Board of MNI S.A., the parent undertaking, is responsible for the preparation of the
consolidated financial statements.
Our responsibility was to review these financial statements.
221
In performing the review we complied with the International Auditing Standard, as well as the provisions of
the Accountancy Act and the professional auditing standards laid down by the National Board of Statutory
Auditors in Poland. The aforementioned standards require that we plan and perform our review in such a manner
as to obtain reasonable assurance that the consolidated financial statements are free from any material
misstatements.
We performed the review mainly by analysing the data disclosed in the non-consolidated financial
statements of members of the MNI Group, inspecting the consolidation documents and using the information
obtained from the management of MNI S.A., the parent undertaking.
A review of consolidated financial statements differs materially in terms of the scope and methodology from
an audit which is the basis for an opinion on the accuracy and clarity of consolidated annual financial statements,
therefore we cannot issue such an opinion on the attached consolidated financial statements.
Our review did not reveal anything which would indicate a material distortion of the view of the MNI
Group’s assets and financial standing as at December 31st 2004 and its net profit (loss) for the period from
January 1st to December 31st 2004, as disclosed in the attached consolidated financial statements of the MNI
Group, prepared in accordance with the IFRS and related interpretations introduced by way of the European
Commission’s regulations, and the Minister of Finance’s Regulation on current and periodic information to be
published by issuers of securities of October 16th 2001 (Dz.U. No. 139 of 2001, item 1569).
This report contains 3 numbered pages, initialled by the qualified auditor.
Janusz Wisłowski
Janusz Wisłowski
Qualified Auditor
Reg. No. 10727/7789
an auditing firm entered in the list
of qualified auditors of financial
statements, under entry No. 2835
Qualified Auditor
Reg. No. 10727/7789
222
23.2 Consolidated Financial Statements of the MNI Group for H1
2006, Prepared for the Purposes of the Prospectus
Consolidated Financial Statements of MNI S.A. for H1 2006
MNI S.A.
ul. Żurawia 8
00-503 Warsaw
Consolidated Financial Statements of MNI S.A.
Date prepared:
Dec 20 2006
Contents:
1.
2.
BALANCE SHEET
3.
INCOME STATEMENT
4.
5.
CASH-FLOW STATEMENT
6.
NOTES
1. Financial Highlights
PLN '000
H1 2006
H1 2005
Jan 1 –
Jan 1 –
Jun 30 2006 Jun 30 2005
76,958
32,659
EUR '000
H1 2006
H1 2005
Jan 1 –
Jan 1 –
Jun 30 2006 Jun 30 2005
19,798
8,004
8,271
4,466
2,128
6,099
3,975
1,569
974
5,573
5,378
1,434
1,318
11,792
8,235
3,034
2,018
-7,230
4,495
-1,860
-1,102
-2,802
-3,543
-721
-868
1,760
197
453
48
IX. Total assets
213,485
93,205
52,798
23,070
117,484
31,838
29,056
7,881
2,019
1,095
65,257
8,158
16,139
46,921
18,022
11,604
4,461
XIII. Equity
96,001
61,367
23,743
15,189
22,572
22,709
5,582
5,621
22,571,558
22,708,558
22,571,558
22,708,558
XVI. Earnings (loss) per ordinary share (PLN/EUR)
0.25
0.24
0.06
0.06
XVIII. Book value per ordinary share (PLN/EUR)
4.25
2.70
1.05
0.67
XIV. Share capital
XV. Weighted average number of ordinary shares
223
2.
Balance Sheet
PLN '000
BALANCE SHEET
Note
Dec 31 2005
Jun 30 2006
end of
end of H1
previous year /
2006
2005
Jun 30 2005
end of H1
2005
ASSETS
157,525
163,631
77,151
1
11,047
10,921
4,570
20,828
20,828
4,633
2
115,451
122,148
62,886
3
6,350
6,421
2,403
6,350
6,421
2,403
2. Goodwill
4
5.1. Non-current financial assets
6. Deferred tax asset
5
II. Current assets
3,849
3,313
2,659
55,960
52,003
16,054
1. Inventories
6
457
375
197
7
35,766
33,453
15,177
35,766
33,453
15,177
35,527
32,625
14,693
239
828
484
19,737
18,175
680
19,737
18,175
680
221
263
20
19,516
17,912
660
213,485
215,634
93,205
8
Total assets
96,001
90,166
61,367
9
22,572
22,572
22,709
10
32,572
32,572
32,299
11
125
125
125
12
1,047
1,047
1,047
34,112
-18
-54
I. Equity
1. Share capital
-137
5,573
33,868
5,378
117,484
125,468
31,838
5,306
4,881
4,007
3,508
2,850
2,136
245
320
334
9
9
12
236
311
322
1,553
1,711
1,537
1,553
1,553
158
1,537
65,257
73,339
8,158
65,257
73,339
8,158
61,034
68,396
5,598
4,223
4,943
2,560
46,921
47,248
18,022
46,921
47,248
18,022
13
a) non-current
b) current
a) non-current
b) current
14
b) other
15
3.1 To related undertakings
224
17,784
12,262
597
b) trade payables
22,191
27,783
16,382
6,946
7,203
1,043
213,485
215,634
93,205
c) other
1,651
225
3.
Income Statement
INCOME STATEMENT
Note
PLN '000
H1 2006
H1 2005
Jan 1 – Jun 30 2006
Jan 1 – Jun 30 2005
76,958
32,659
32,602
16
76,709
2. Net revenue from sales of materials
17
249
57
62,469
30,385
62,220
30,329
18
2. Cost of materials sold
249
56
14,489
2,274
IV. Selling costs
3,493
772
3,578
1,425
19
20
7,418
77
2,188
5,543
5
17
2,183
5,526
1,335
1,154
1
268
1,335
885
8,271
4,466
1,760
43
380
16
X. Financial income
21
5. Other
1,380
27
3,932
534
2,529
263
2. Loss on disposal of investments
1,257
186
22
4. Other
XIV. Pre-tax profit (loss) (XII+/-XIII)
XV. Corporate income tax
23
146
85
6,099
3,975
6,099
3,975
526
-1,403
a) current
403
16
b) deferred
123
-1,419
5,573
5,378
22,571,558
22,708,558
0.25
0.24
XVIII. Net profit (loss) (XIV-XV-XVI+/-XVII)
24
226
4.
Statement of Changes in Equity
H1 2006
Jan 1 - Jun 30
2006
90,166
PLN '000
2005
Jan 1 – Dec 31
2005
56,298
H1 2005
Jan 1 - Jun 30
2005
56,298
I.a. Balance of equity at beginning of period (opening balance),
after reconciliation to comparable data
90,166
56,298
56,298
22,572
22,709
22,709
I. Balance of equity at beginning of period (opening balance)
a) changes to adopted accounting policies
-137
137
137
- shares retired
22,572
22,572
22,709
137
137
-137
137
- shares retired
137
137
27,251
27,251
5,321
5,048
5,321
5,048
73
5,048
32,572
- distribution of profit (statutory)
5,248
32,572
32,572
32,299
125
125
125
125
125
125
1,047
1,047
1,047
1,047
1,047
1,047
33,850
5,230
5,230
33,868
5,248
5,248
262
73
73
34,130
5,321
5,321
5,321
5,048
5,321
5,048
comparable data
273
34,130
18
18
18
309
a) other adjustments
7.5. Retained deficit at beginning of period, after reconciliation to
comparable data
- transfer of retained deficit to be covered
18
18
34,112
-18
-54
5,573
33,868
5,378
73
73
73
73
90,166
61,367
327
a) increase
b) decrease
96,001
227
5.
Cash-Flow Statement
PLN '000
H1 2006
H1 2005
Jan 1 – Jun 30 2006
Jan 1 – Jun 30 2005
CASH-FLOW STATEMENT
A. Cash flows from operating activities – indirect method
5,573
5,378
6,219
2,857
12,950
4,904
20
7
102
-17
585
722
-118
-37
-16,992
-9,802
10,449
12,187
-601
9. Income tax paid
-403
-16
-374
-4,490
11,792
8,235
385
164
385
164
7,615
4,659
1. Acquisition of intangible assets and property, plant and equipment
7,445
4,575
170
84
20
20
- valuation allowances for shares in subsidiary undertakings
150
150
84
-7,230
-4,495
10,161
1,749
1. Net proceeds from issue of shares, other equity instruments and additional
contributions to equity
20
10,114
84
1,569
27
180
12,963
5,292
11,953
2,113
148
1,900
461
298
18
4. Interest paid
41
354
312
6. Arrangement instalments paid
566
71
20
-2,802
-3,543
1,760
197
1,760
197
17,756
467
19,516
660
-4
- change in cash resulting from foreign exchange gains/(losses)
228
6.
Notes
Note 1A
Jun 30 2006
Dec 31 2005
PLN ‘000
Jun 30 2005
a) acquired permits, patents, licences and similar assets, including:
11,047
10,921
4,570
11,047
10,921
4,570
Jun 30 2006
Dec 31 2005
a) owned
11,047
10,921
Jun 30 2005
4,570
11,047
10,921
4,570
Jun 30 2006
Dec 31 2005
a) goodwill
20,828
20,828
4,633
Goodwill
20,828
20,828
4,633
INTANGIBLE ASSETS
Note 1B
PLN ‘000
INTANGIBLE ASSETS (by ownership)
Note 1C
PLN ‘000
GOODWILL
Jun 30 2005
In 2004, following the acquisition of an organised part of business by the parent undertaking, goodwill was
recognised.
In accordance with the IFRS, the goodwill is tested for impairment on an annual basis.
- acquisition price
PLN 5,562 thousand
PLN 930 thousand
goodwill
PLN 4,633 thousand
In 2005, following the purchase of shares in Legion Polska Sp. z o.o., an excess of the shares value over the
corresponding portion of the acquired company’s net assets was recognised:
- acquisition price
PLN 16,669 thousand
PLN 474 thousand
goodwill
PLN 16,195 thousand
Note 2A
Jun 30 2006
Dec 31 2005
PLN ‘000
Jun 30 2005
114,241
114,552
61,734
99
99
72
- buildings and structures
43,106
44,497
31,853
- plant and equipment
29,602
a) tangible assets, including:
- land (including perpetual usufruct rights)
64,017
68,762
- vehicles
1,026
758
71
- other tangible assets
5,993
436
136
b) assets under construction
Total property, plant and equipment
1,210
7,596
1,152
115,451
122,148
62,886
Jun 30 2006
Dec 31 2005
PLN ‘000
Jun 30 2005
113,524
120,511
62,000
1,927
1,637
886
Note 2B
ON-BALANCE-SHEET TANGIBLE ASSETS (by ownership)
a) owned
agreements:
financed lease agreements
Total on-balance-sheet tangible assets
229
1,927
1,637
115,451
122,148
62,886
Note 3
Jun 30 2006
Dec 31 2005
PLN’ 000
Jun 30 2005
Net non-current receivables
6,350
6,421
2,403
Gross non-current receivables
6,350
6,421
2,403
Jun 30 2006
Dec 31 2005
Jun 30 2005
210
210
210
210
210
210
0
0
NON-CURRENT RECEIVABLES
Note 4
PLN ‘000
CHANGE IN NON-CURRENT FINANCIAL ASSETS (BY TYPE)
230
Note 1D
PLN ‘000
a
acquired permits, patents,
licences and similar assets
including:
c
prepayments
for intangible
assets
other intangible
assets
computer
software
a) gross intangible assets at beginning of period
b
Total
intangible
assets
13,645
13,645
13,645
2,685
2,685
2,685
- purchase
2,685
2,685
- other
2,685
378
378
26
26
- liquidation
26
26
16,304
16,304
e) accumulated amortisation at beginning of period
2,724
2,724
2,724
f) amortisation for period, including:
d) gross intangible assets at end of period
26
26
378
16,682
2,937
2,937
2,937
decrease, including:
26
26
26
- liquidation
26
26
26
5,635
5,627
5,635
10,669
10,669
g) accumulated amortisation at end of period
h) net intangible assets at end of period
231
378
11,047
Note 2C
MOVEMENTS IN TANGIBLE ASSETS (BY TYPE)
PLN ‘000
owned land
(including
perpetual
usufruct
rights)
a) gross tangible assets at beginning of period
99
buildings
and
structures
plant and
equipment
vehicles
other
tangible
assets
Total
tangible
assets
80,721
147,598
2,194
2,389
233,001
57
3,331
459
5,668
9,515
- purchase
28
1,620
459
5,668
- transfer from warehouse
29
1,711
- disposal
- liquidation
d) gross tangible assets at end of period
322
86
18
426
7
86
15
108
315
99
e) accumulated depreciation at beginning of period
7,775
1,737
3
318
80,778
150,607
2,567
8,039
242,090
18,393
78,568
1,436
1,953
100,350
f) depreciation for period, including:
1,891
7,828
184
110
10,013
- annual depreciation
1,891
7,828
184
110
10,013
g) decrease, including:
74
79
17
170
- liquidation
71
2
73
- disposal
3
79
15
97
1,541
2,046
110,193
g) accumulated depreciation at end of period
20,284
86,322
h) impairment charges at beginning of period
17,831
268
18,099
17,388
268
17,656
- decrease
443
i) impairment charges at end of period
443
j) net tangible assets at end of period
99
43,106
64,017
1,026
5,993
k) net tangible assets at beginning of period
99
44,497
68,762
758
436
l) tangible assets at end of period
114,241
114,552
114,241
232
233
Note 5
PLN '000
Jan 1 – Jun
30 2006
CHANGE IN DEFERRED TAX ASSET
Jan 1 – Dec
31 2005
Jan 1 – Jun
30 2005
1. Deferred tax asset at beginning of period, including:
3,313
815
815
3,313
815
815
2. Increase
8,407
9,796
4,100
8,407
9,796
2,520
5,036
b) recognised in net profit or loss for the period in connection with
tax loss (including):
3. Decrease
4,760
1,580
7,871
7,298
2,256
7,871
7,298
2,256
4,386
2,912
4. Total deferred tax asset at end of period, including:
3,849
3,849
3,313
2,659
3,313
2,659
Note 6
Jun 30 2006
INVENTORIES
PLN '000
Jun 30 2005
Dec 31 2005
a) materials
457
375
197
Total inventories
457
375
197
- there are no restrictions on disposal of the inventories
- the value of the inventories recognised as costs in the period amounted to:
PLN 20 thousand - value of materials sold
PLN 40 thousand - general administrative expenses and selling costs (value of advertising materials
charged to costs)
Note 7A
CURRENT RECEIVABLES
Jun 30 2006
Dec 31 2005
PLN' 000
Jun 30 2005
a) receivables from other undertakings
trade receivables, maturing in:
35,766
33,453
15,177
35,527
32,625
14,693
up to 12 months
25,255
31,839
14,693
over 12 months
272
786
other
239
828
484
35,766
33,453
15,177
Total current receivables, net
b) valuation allowance for receivables
1,895
5,652
1,934
37,661
39,105
17,111
Note 7B
PLN '000
CHANGE IN VALUATION ALLOWANCES FOR CURRENT
RECEIVABLES
Balance at beginning of period
Jan 1 – Jun
30 2006
Jan 1 – Dec
31 2005
Jan 1 - Jun
30 2005
5,652
1,911
1,911
a) increase
136
4,465
373
136
1,167
373
- other
3,298
b) decrease
795
724
350
795
574
350
- other
3,090
200
Balance of valuation allowances for current receivables at end of
period
1,895
5,652
234
1,934
Note 7C
CURRENT RECEIVABLES, BY CURRENCY
b1. unit/currency USD
PLN '000
Jun 30 2006
Dec 31 2005
PLN '000
Jun 30 2005
37,314
38,426
16,900
347
679
211
32
18
20
102
60
65
1,552
29
b2. unit/currency CZK
206
4
493
3,478
92
PLN '000
52
355
10
b4. unit/currency EUR
13
15
33
53
58
132
39,105
17,111
PLN '000
b3. unit/currency SKK
PLN '000
1,227
b5. unit/currency HUF
140
PLN '000
37,661
Note 7D
PLN'000
TRADE RECEIVABLES (GROSS), BY MATURITY AS FROM THE
BALANCE-SHEET DATE
a) up to 1 month
b) more than 1 month – up to 3 months
c) more than 3 months – up to 6 months
d) more than 6 months – up to 1 year
e) more than 1 year
f) past due
Total trade receivables (gross)
g) valuation allowances for trade receivables
Total trade receivables (net)
Jun 30 2006
Dec 31 2005
Jun 30 2005
23,007
23,578
10,567
3,026
19
1,390
799
6,509
1,294
5,829
191
133
272
595
164
4,489
7,385
3,079
37,422
38,277
16,627
1,895
5,652
1,934
35,527
32,625
14,693
Note 7E
PLN '000
PAST-DUE TRADE RECEIVABLES (GROSS), BY PERIOD OF
DELAY
a) delayed by up to 1 month
b) delayed by more than 1 month – up to 3 months
c) delayed by more than 3 months – up to 6 months
d) delayed by more than 6 months – up to 1 year
Jun 30 2006
Dec 31 2005
Jun 30 2005
371
551
720
1,131
1,252
308
657
407
117
752
598
181
e) delayed by more than 1 year
2,233
4,577
1,753
Total past-due trade receivables (gross)
4,489
7,385
3,079
f) valuation allowances for trade receivables
1,895
5,652
1,934
Total past-due trade receivables (net)
2,594
1,733
1,145
Note 8A
CURRENT FINANCIAL ASSETS
Jun 30 2006
Dec 31 2005
221
263
shares
156
237
loans advanced
PLN '000
Jun 30 2005
20
65
26
20
19,516
17,912
660
cash in hand and cash at banks
19,496
17,106
596
20
806
64
19,737
18,175
680
other cash
Total current financial assets
235
Note 8B
PLN '000
FINANCIAL ASSETS, BY CURRENCY
Jun 30 2006
Dec 31 2005
156
237
Total securities, equity interests and other current financial assets
156
237
Jun 30 2005
Note 8C
PLN '000
FINANCIAL ASSETS, BY TRANSFERABILITY
Jun 30 2006
Dec 31 2005
A. Freely transferable, listed (carrying value)
156
237
156
237
Total carrying value
156
237
Jun 30 2006
Dec 31 2005
PLN '000
Jun 30 2005
65
26
20
Total current loans advanced
65
26
20
Jun 30 2006
Dec 31 2005
PLN '000
Jun 30 2005
19,516
17,912
660
Total cash and cash equivalents
19,516
17,912
660
Value of
series/issue
at par value
Covered with
Note 8D
CURRENT LOANS ADVANCED, BY CURRENCY
Note 8E
CASH AND CASH EQUIVALENTS, BY CURRENCY
Jun 30 2005
Note 9 PLN ‘000
SHARE CAPITAL (STRUCTURE)
Series/issue
Type of
shares
Preference
A
registered
3:1 voting
preference
A
ordinary
Type of
limitation of
rights to
shares
Number of
shares
Registration
date
Rights to
dividend from
1996-08-07
1997-01-01
1996-08-07
1997-01-01
B
ordinary
163,110
163,110
contribution
in kind
contribution
in kind
cash
1996-08-07
1997-01-01
C
ordinary
136,590
136,590
cash
1997-02-20
1997-01-01
D
ordinary
763,410
763,410
cash
1997-02-20
1997-01-01
E
ordinary
4,420,000
4,420,000
cash
1997-05-14
1997-01-01
F
ordinary
3,566,004
3,566,004
cash
1998-11-19
1998-01-01
G
ordinary
118,986
118,986
cash
1998-11-19
1998-01-01
H
ordinary
2,608,558
2,608,558
cash
2001-07-27
2001-01-01
I
ordinary
363,000
363,000
cash
2001-03-23
2001-01-01
J
ordinary
4,000,000
4,000,000
cash
2004-09-16
2003-01-01
K
ordinary
5,500,000
5,500,000
cash
2004-12-31
2005-01-01
Total number of shares
13,189
13,189
918,711
918,711
22,571,558
Total share capital
22,571,558
Par value of one share – PLN 1
As at June 30th 2006 the share capital of MNI S.A. amounted to PLN 22,571,558 and was divided into 22,571,558 Series A, B, C, D, E,
F, G, H, I, J and K shares with the par value of PLN 1 per share.
236
Shareholders of MNI S.A. holding over 5% of the shares or of the total vote at the General Shareholders Meeting of MNI S.A.
No.
Shareholder
PLN
Number of shares
% of total shares
Number of votes
1
COM INVESTMENT Sp. z o.o. (formerly MEDIA-NET INTERACTIVE Sp. z o.o.)
8,607,590
38.13
8,607,590
38.09
2
Andrzej Piechocki together with Dedal Inwestycje Sp. Z o.o.
3,063,144
13.57
3,063,144
13.55
3
Caterham Financial Management Ltd.
1,250,000
5.54
1,250,000
5.53
In the reporting period, the par value of the shares did not change and there were no changes in the rights attached to the shares.
237
% of total vote
Note 10
STATUTORY RESERVE FUNDS
Jun 30 2006
Dec 31 2005
PLN '000
Dec 31 2005
a) other (by type)
32,572
32,572
32,299
Total statutory reserve funds
32,572
32,572
32,299
There were no additional contributions.
Statutory reserve funds are created from profit distributions and are maintained to cover potential future losses.
Note 11
REVALUATION CAPITAL RESERVE
Jun 30 2006
Dec 31 2005
PLN '000
Dec 31 2005
a) from revaluation of tangible assets
125
125
125
Total revaluation capital reserve
125
125
125
Jun 30 2006
Dec 31 2005
PLN '000
Dec 31 2005
1,047
1,047
1,047
Revaluation of tangible assets in compliance with the Regulation of the Minister of Finance of 1995.
Note 12
OTHER CAPITAL RESERVES, BY PURPOSE
- created from profit distributions
Total other capital reserves
1,047
1,047
1,047
The capital reserves were created from the net profit for 1994 – PLN 36.7 thousand, for 1996 – PLN 228.6 thousand, for
1997 – PLN 781.6 thousand, in total: PLN 1,046.9 thousand. The capital reserves were created for coverage of future
net losses.
Note 13A
Jan 1 - Jun
30 2006
CHANGE IN DEFERRED TAX LIABILITY
1. Deferred tax liability at beginning of period
Jan 1 - Dec
31 2005
PLN ‘000
Jan 1 - Jun
30 2005
2,850
1,712
2. Increase
6,100
7,642
6,100
7,642
5,373
7,565
3,488
16
8
1,712
1,712
- foreign exchange gains/losses
- employee benefits – retirement severance pays
3,496
2
- provision for unused holidays
59
3. Decrease
5,442
6,504
3,072
5,442
6,504
44
41
81
- amortisation charges relating to a licence
23
- foreign exchange gains/losses
21
b) recognised in equity due to taxable temporary differences, including:
3,028
- depreciation of tangible assets covered by an investment tax credit
2
- settlement of income for 2004
3,026
4. Total deferred tax liability at end of period
3,508
2,850
2,136
2,134
b) recognised in equity
2
PLN ‘000
238
Note 13B
CHANGE IN NON-CURRENT PROVISION FOR RETIREMENT AND
SIMILAR BENEFITS, BY CATEGORY
Jan 1 – Jun
30 2006
9
Jan 1 - Dec
31 2005
Jan 1 – Jun
30 2005
9
9
2
3
provision created
2
3
c) release, including:
2
- adjustment to provision balance
2
9
Note 13C
CHANGE IN CURRENT PROVISION FOR RETIREMENT AND SIMILAR
BENEFITS, BY CATEGORY
Jan 1 – Jun
30 2006
9
Jan 1 - Dec
31 2005
12
PLN ‘000
Jan 1 – Jun
30 2005
311
187
187
38
176
135
- accrual of cash equivalent for unused holidays
38
176
135
c) use, including:
52
- payment of cash equivalent for unused holidays
52
d) release, including:
113
e) balance at end of period
236
311
322
Jun 30 2006
Dec 31 2005
PLN ‘000
Jun 30 2005
65,257
73,339
8,158
61,034
68,397
5,598
4,223
4,943
2,560
65,257
73,339
8,158
Note 14A
NON-CURRENT LIABILITIES
- other (by type)
Note 14B
NON-CURRENT LIABILITIES,
BALANCE-SHEET DATE
PLN ‘000
BY
MATURITY
AS
FROM
a) more than 1 year – up to 3 years
b) more than 3 years – up to 5 years
c) more than 5 years
THE
Jun 30 2006
Dec 31 2005
Jun 30 2005
32,075
42,883
4,354
33,005
28,778
2,917
177
1,678
887
65,257
73,339
8,158
Jun 30 2006
Dec 31 2005
PLN ‘000
Jun 30 2005
65,257
73,339
7,782
Note 14C
NON-CURRENT LIABILITIES, BY CURRENCY
376
93
b1. unit/currency EUR ‘000
376
PLN ‘000
65,257
73,339
8,158
Jun 30 2006
Dec 31 2005
PLN ‘000
Jun 30 2005
46,921
47,248
18,022
17,784
12,262
597
- trade payables
22,191
27,783
16,382
6,946
7,203
1,043
46,921
47,248
18,022
Note 15A
CURRENT LIABILITIES
- other
239
Note 15B
CURRENT LIABILITIES, BY CURRENCY
Jun 30 2006
Dec 31 2005
PLN '000
Jun 30 2005
46,881
47,175
17,824
40
73
198
b1. unit/currency EUR '000
19
46
PLN '000
73
192
b2. unit/currency USD '000
1
2
PLN ‘000
2
4
2,638
B3. unit/currency HUF '000
38
PLN ‘000
46,921
240
47,248
18,022
Note 14D
Name
PLN '000
NON-CURRENT LIABILITIES UNDER LOANS AND BORROWINGS
Company name
Registered Amount of loan/borrowing as
Amount outstanding
and legal form
office in
per agreement
PLN '000
currency
PLN '000
currency
81,000
PLN
61,034
PLN
Interest
Repayment
date
MNI S.A.
BRE BANK S.A.
Warsaw
1M WIBOR +1.8PA
20.12.2010
Collateral
assignment by
way of security
Note 15C
PLN '000
CURRENT LIABILITIES UNDER LOANS AND BORROWINGS
Amount of loan/borrowing as
Company name
Registered
per agreement
and legal form
office in
PLN '000
currency
Amount outstanding
PLN '000
Interest
Repayment
date
Collateral
30.06.2007
assignment by
way of security
currency
MNI S.A.
BRE BANK S.A.
Warsaw
*
PLN
14,724
BRE BANK S.A.
Warsaw
1,000
PLN
634
PLN
1M WIBOR
29.06.2007
(formerly
Telefonia PKO S.A.
Pilicka Sp. z o.o.)
Radom
3,964
PLN
964
PLN
3M WIBOR + 3
31.12.2006
Warsaw
750
PLN
712
PLN
1M WIBOR + 1.2
revolving loan,
agreement
valid until Jul
30 2007
assignment of
receivables under
issued invoices
1M WIBOR + 1.2
revolving loan,
agreement
valid until Oct
27 2007
assignment of
receivables under
issued invoices
MNI S.A.
Other
BRE BANK S.A.
BRE BANK S.A.
Warsaw
750
PLN
750
1M WIBOR +1.8PA
PLN
assignment of
receivables under
issued invoices
assignment by
way of security
In accordance with the loan agreement of August 11th 2005, the contracted loan of PLN 81,000,000 was presented in the balance sheet under different items depending on the maturity:
- the amount of PLN 14,724 thousand, maturing within one year, was presented under current liabilities under loans and borrowings,
- the amount of PLN 61,034 thousand, maturing after more than one year, was presented under non-current liabilities under loans and borrowings.
241
Other
Supplementary Information to the Consolidated Financial Statements of the MNI Group for the period from January 1st 2006 to June 30th
2006
Note 16A
PLN '000
NET REVENUE FROM SALES OF PRODUCTS, BY
TYPE OF ACTIVITY
Jan 1 – Jun
30 2006
Jan 1 – Jun
30 2005
31,220
12,030
- media services
42,090
19,187
2,773
1,290
626
95
76,709
32,602
- call centre services
- other services
Note 16B
NET REVENUE FROM SALES
(GEOGRAPHICAL STRUCTURE)
PLN '000
OF
PRODUCTS
Jan 1 – Jun
30 2006
a) domestic sales
b) exports
75,386
31,158
1,323
1,444
76,709
32,602
Note 17A
RESALE AND MATERIALS, BY TYPE OF ACTIVITY
Jan 1 – Jun
30 2005
PLN '000
Jan 1 – Jun
30 2006
Jan 1 – Jun
30 2005
revenue from sales of materials
249
57
materials
249
57
Note 17B
RESALE
AND
MATERIALS
(GEOGRAPHICAL
STRUCTURE)
PLN '000
Jan 1 – Jun
30 2006
a) domestic sales
Jan 1 – Jun
30 2005
249
57
249
57
b) exports
materials
Note 18
COSTS BY TYPE
PLN '000
Jan 1 – Jun
30 2006
12,950
a) amortisation and depreciation
b) raw materials and energy used
c) contracted services
Jan 1 – Jun
30 2005
4,904
474
537
43,452
20,562
d) taxes and charges
1,165
839
e) salaries and wages
10,033
5,185
f) social security and other benefits
484
472
g) other costs by type
733
27
Total costs by type
69,291
32,526
selling costs (negative value)
-3,493
-772
general and administrative expenses (negative value)
-3,578
-1,425
Cost of products sold
62,220
30,329
242
2006
Note 19
OTHER OPERATING INCOME
PLN '000
Jan 1 - Jun
30 2006
Jan 1 - Jun
30 2005
a) provisions released, including:
909
1,395
- provision for receivables
795
350
- provision for holiday leaves
113
1,045
- provision for liabilities
1
- provision for materials at warehouse
1,279
553
- return of costs from court enforcement officer
- VAT
28
293
13
- compensation received under insurance policies
1
- adjustment to previous years’ costs
386
- other
Total other operating income
4,131
5
17
2,188
5,543
- gain on disposal of non-financial non-current assets
Note 20
OTHER OPERATING EXPENSES
4,148
PLN '000
Jan 1 – Jun
30 2006
Jan 1 – Jun
30 2005
a) provisions created, including:
174
512
- for receivables
136
374
38
136
1,161
642
14
268
- court fees
80
9
861
75
- for unused holidays
- for retirement severance pays
2
- receivables written-off
- donations
33
- previous years' costs
150
- contributions to organisations
8
- other
124
- destroyed and damaged materials
48
- audit of the Company
21
- severance pay
5
- identified past due payables
107
Total other operating expenses
1,335
Note 21A
FINANCIAL INCOME - INTEREST INCOME
1,154
PLN '000
Jan 1 - Jun
30 2006
Jan 1 - Jun
30 2005
b) other interest
380
16
from other undertakings
380
16
Total interest income
380
16
PLN '000
243
2006
Note 21B
OTHER FINANCIAL INCOME
Jan 1 - Jun
30 2006
Jan 1 - Jun
30 2005
a) foreign exchange gains
5
realised
2
7
unrealised
3
20
c) other, including:
1,375
- disposal of shares
1,257
- valuation of shares
118
Total other financial income
1,380
Note 22A
FINANCIAL EXPENSES - INTEREST EXPENSE
27
27
PLN '000
Jan 1 - Jun
30 2006
Jan 1 - Jun
30 2005
a) interest on loans and borrowings
2,350
189
2,350
189
b) other interest
179
74
179
74
Total interest expense
2,529
263
Note 22B
OTHER FINANCIAL EXPENSES
PLN '000
Jan 1 - Jun
30 2006
Jan 1 - Jun
30 2005
a) foreign exchange losses, including:
33
44
realised
32
39
1
5
unrealised
b) created provisions, including:
186
revaluation of investments
186
c) other, including:
1,370
loss on disposal of non-current financial assets
1,257
commissions on loans and guarantees
61
annex to agreement with BRE
25
cancelled loan
27
Total other financial expenses
1,403
Note 23A
CURRENT INCOME TAX
41
271
PLN '000
Jan 1 - Jun
30 2006
1. Current income tax shown in the tax return for the
period
403
shown in the income statement
Current income tax
403
Jan 1 - Jun
30 2005
16
16
PLN ‘000
244
2006
Note 23B
CURRENT INCOME TAX *
Jan 1 - Jun
30 2006
Jan 1 - Jun
30 2005
1. Pre-tax profit/(loss)
3,649
5,644
2. Differences between pre-tax profit (loss) and tax base,
including:
3,711
2,153
811
845
1,345
5,310
2,840
7,399
11,031
6,607
- costs permanently non-tax-deductible
- costs permanently increasing tax-deductible costs
- revenue permanently not classified as taxable revenue
- costs temporarily non-tax-deductible
7,711
392
- revenue not recognised as taxable revenue
15,966
9,098
- revenue permanently increasing taxable revenue
12,309
- other periods’ costs increasing tax-deductible costs
-62
3. Income tax base
3,491
4. Income tax at 19% rate
5. Tax assessment or abatement, tax credits, deductions
-62
3,491
and reductions
* Reconciliation of net profit (loss) to the taxable income reported for the parent undertaking.
Note 23C
DEFERRED INCOME TAX RECOGNISED IN THE
INCOME STATEMENT
PLN ‘000
Jan 1 – Jun
30 2006
decrease (increase) due to emergence and reversal of
temporary differences, including:
Jan 1 – Jun
30 2005
123
-1,419
- increase in deferred tax assets
-535
-1,844
- increase in deferred tax liability
658
425
123
-1,419
Total deferred income tax
Explanatory note to income statement, item XV - Income tax, a) current portion – period from January 1st to June 30th 2006
In the period from January 1st to June 30th 2006, taxable income was posted by the following subsidiary undertakings:
1. Media Personel Serwis Sp. z o.o.
1. Legion Polska Sp. z o.o.
- tax base: PLN 1,779 thousand
NOTE 24
Net earnings per share were calculated by dividing net profit by the weighted average number of shares.
The net profit for the first half of 2006 amounted to PLN 5,573 thousand.
Weighted average number of shares: 22,571,558 shares.
Earnings per share: PLN 0.49.
245
2006
NOTES TO THE CASH-FLOW STATEMENT
1. The cash disclosed in the cash-flow statement comprised (PLN '000):
Jun 30 2006
Cash at banks
Other cash
TOTAL
Dec 31 2005
19,496
17,106
20
806
19,516
17,912
Jun 30 2005
660
660
2. Item A.I.3
The amount of PLN 102 thousand in the period January 1st – June 30th 2006 comprises the gains on sale of
property, plant and equipment and intangible assets of:
MNI Telecom (formerly Telefonia Pilicka) Sp. z o.o.: PLN 102 thousand.
Note 25
PRESENTATION OF FINANCIAL ASSETS CLASSIFIED INTO FOUR CATEGORIES
PLN '000
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS
Jun 30 2006
Dec 31 2005
Jun 30 2005
156
237
0
shares listed on the WSE - ENERGO-PŁD
156
237
0
Total financial assets at fair value through profit or loss
156
237
0
Jun 30 2006
LOANS ADVANCED
PLN '000
Jun 30 2005
Dec 31 2005
a) current loans
65
26
20
Total current loans
65
26
20
INVESTMENTS HELD TO MATURITY
a) non-current loans - see note 14A
b) current loans - see note 15A
NOTES REGARDING IFRS 3
In the reporting period, the following undertakings were excluded from consolidation:
-
BIA-NET, which was placed in liquidation, and
-
OSS, which was sold at a selling price of PLN 1.00.
The information on the value of main categories of assets and liabilities of subsidiary undertakings excluded
from consolidation was presented in the supplementary information to the consolidated financial statements of
the MNI Group for the first half of 2006, Section “Information on the Group”.
246
2006
Supplementary Information to the Consolidated Financial Statements of
the MNI Group
for the period from January 1st 2006 to June 30th 2006
I.
INFORMATION ON THE GROUP
The parent undertaking of the Group is MNI Spółka Akcyjna, registered office at ul. Żurawia 8, Warsaw,
Poland.
The Company is entered in the Register of Entrepreneurs maintained by the District Court of Białystok, 12th
Commercial Division of the National Court Register, under No. KRS 0000003901.
The Company’s business is provision of telecommunications services (PKD 6420).
The Company is listed on the Warsaw Stock Exchange.
The MNI Group is composed of the following entities:
Subsidiary undertakings included in the consolidated financial statements:
1.
MNI Telecom Sp. z o.o. (formerly Telefonia Pilicka Sp. z o.o.) of Radom – telecommunications services –
100% equity interest.
As at June 30th 2006, the company posted a balance-sheet total of PLN 85,960 thousand and a net profit of
PLN 1,927 thousand.
2.
Legion Polska Sp. z o.o. of Warsaw – telecommunications services – 100% equity interest.
As at June 30th 2006, the company posted a balance-sheet total of PLN 7,162 thousand and a net profit of PLN
305 thousand.
3. Media Personel Service Sp. z o.o. of Warsaw – auxiliary company; development of system and application
software for content and functionality management of data communication service platforms with respect to
Voice/Data/SMS/MMS services, and specialist personnel management – 100% equity interest;
As at June 30th 2006, the company posted a balance-sheet total of PLN 1,293 thousand and a net profit of
PLN 25 thousand.
4.
Szeptel International Sp. z o.o. of Szepietowo – auxiliary company; human resources and logistics
management for the Contact Centre in Szepietowo – 100% equity interest.
As at June 30th 2006, the company posted a balance-sheet total of PLN 312 thousand and a net profit of
PLN 61 thousand.
Undertakings excluded from consolidation after December 31st 2005:
1. OSS S.A., which posted a loss of PLN 34 thousand for the 2005 financial year and had a balance-sheet
total of PLN 189 thousand as at December 31st 2005.
OSS S.A. did not conduct any activities in the past two years. On April 1st 2006, MNI S.A., the parent
undertaking, sold its equity interest in OSS S.A. to the subsidiary MNI Telecom Sp. z o.o., which
intends to resume the activities of OSS S.A. The loss on the sale of the shares in OSS S.A. was PLN
1,256 thousand.
2.
Placed in liquidation, BIA-NET Sp. z o.o. reported a loss of PLN 179 thousand for the 2005 financial
year and posted a balance-sheet total of PLN 513 thousand as at December 31st 2005.
These figures represented, respectively, 0.25% of the aggregated balance-sheet totals, 0.33% of the
balance-sheet total disclosed in the consolidated balance sheet as at December 31st 2005, 1.7% of the
total net profit/loss, and 0.63% of the consolidated income statement for the 2005 financial year.
247
2006
Non-consolidated subsidiary undertakings – loss of control – companies placed in liquidation:
1.
Szeptel Internet Sp. z o.o. of Kraków
2.
EPL Sp. z o.o. of Szepietowo
3.
BIA-NET Sp. z o.o. of Białystok
248
Supplementary Information to the Consolidated Financial Statements of the MNI Group for the period from January 1st 2006 to June 30th 2006
CONSOLIDATED SUBSIDIARY UNDERTAKINGS AS AT JUNE 30TH 2006
a
Company
name and
form of
incorporation
b
Registered
office
c
d
f
g
h
i
Business profile
j
k
associated
indirect)
Shares at
cost
(PLN ‘000)
Total
valuation
allowances
(PLN ‘000)
Carrying
value of
shares
(PLN
‘000)
% of share
capital held
% of the total
vote at the
General
Shareholders
Meeting
Szeptel
International
Sp. z o.o.
Szepietowo
telecommunications,
call centre projects
subsidiary
undertaking
Jun 7 2000
101
0
101
100.00
100.00
Media
Personel
Serwis
Sp. z o.o.
Warsaw
software services, human
resources management
subsidiary
undertaking
Dec 20 2004
30
0
30
100.00
100.00
telecommunications
services
subsidiary
undertaking
Aug 10 2005
16,669
0
16,669
100.00
100.00
telecommunications
services
subsidiary
undertaking
Dec 19 2005
55,343
0
55,343
100.00
100.00
Legion
Warsaw
Polska
Sp. z o.o.
MNI Telekom
(formerly:
Telefonia
Radom
Pilicka)
Sp. z o.o.
NON-CONSOLIDATED SUBSIDIARY UNDERTAKINGS AS AT JUNE 30TH 2006
a
Company
name and
form of
incorporation
b
Registered
office
c
d
f
g
h
i
j
k
Business profile
associated
indirect)
Shares at
cost
(PLN ‘000)
Total
valuation
allowances
(PLN ‘000)
Carrying
value of
shares
(PLN
‘000)
% of share
capital held
% of the total
vote at the
General
Shareholders
Meeting
subsidiary
undertaking
Apr 5 2000
75
75
0
100.00
100.00
Sep 5 2000
101
101
0
100.00
100.00
May 11 2005
446
446
0
53.90
53.90
Szeptel
Internet
Sp z o.o.
Kraków
Internet services
EPL S.A.
Szepietowo
Web page services
BIA NET Sp.
Białystok
z o.o.
Lease of infrastructure
subsidiary
undertaking
subsidiary
undertaking
249
Information on the value of assets and equity and liabilities of subsidiary undertakings excluded from consolidation in
2006 (summarised by each major category)
As at Dec 31 2005
OSS
Sp. z o.o.
Bia-Net
Sp. z o.o.
ASSETS
0
0
912
906
0
6
189
40
38
35
151
5
151
5
II. Current assets
1. Inventories
0
a) cash and cash equivalents *
Total assets
151
5
189
952
LIABILITIES
I. Equity
1. Share capital
-34
-230
1,000
2,351
-1,000
-2,249
0
-34
-332
223
1,182
0
158
100
327
123
697
189
952
The consolidated financial statements were prepared for the period January 1st – June 30th 2006. The comparable data
cover the corresponding reporting period of 2005.
The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards
(IFRS) and the interpretations adopted by the International Accounting Standards Board (IAS).
The data included in the consolidated financial statements are expressed in the Polish złoty (PLN) and rounded off to
the nearest thousand.
250
II. KEY RULES GOVERNING PREPARATION OF THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE MNI GROUP
The key accounting policies applied in the preparation of the attached consolidated financial statements are presented
below:
BASIS OF ACCOUNTING
The MNI Group prepared the attached consolidated financial statements in accordance with the International Financial
Reporting Standards (“IFRS”) and related interpretations published in the form of the European Commission
regulations, in force as at June 30th 2006.
The consolidated financial statements were prepared for the period from January 1st to June 30th 2006.
Comparable data cover the corresponding reporting period of 2005, i.e. the period from January 1st to June 30th 2005.
The consolidated financial statements were prepared on a historic cost basis, with the exception of derivative financial
instruments and financial assets available for sale, which are measured at fair value.
No financial assets available for sale were disclosed in the reporting period.
In the reporting year, i.e. from January 1st to June 30th 2006, no amendments were made to the International Financial
Reporting Standards which could have a bearing on the MNI Group’s accounting policies.
REPORTING CURRENCY
The financial data contained in the attached consolidated financial statements are reported in the Polish złoty (PLN),
which is the currency used by the Group for the valuation and presentation purposes. The data presented in the
consolidated financial statements are rounded off to the nearest thousand.
Subsidiary undertakings of the MNI Group (i.e. undertakings in which the Group holds more than 50% of the total vote
at the general shareholders meeting or directs their financial or operating policies on some other basis) are consolidated.
In assessing whether the Group exerts control over a given undertaking, potential voting rights exercisable at such
undertaking’s general shareholders meeting, as well as their impact, are also taken into account.
The subsidiary undertakings are consolidated from the date on which control is assumed by the Group to the date it is
lost. The acquisition of subsidiary undertakings is accounted for with the acquisition method. The acquisition cost
comprises the acquired company’s assets measured at fair value, shares issued or liabilities contracted as at the
acquisition date, and costs directly related to the acquisition. The excess of the acquisition cost over the fair value of the
acquired subsidiary’s assets is recognised as goodwill. Intra-Group transactions, balances and unrealised profits/losses
on intra-Group transactions are eliminated during consolidation. If required, accounting policies of the subsidiary
undertakings are modified to comply with the accounting policies applied by the Group.
In the case of non-consolidated financial statements, financial interests in subsidiary undertakings are valued at cost,
while in consolidated financial statements investments in subsidiary undertakings are eliminated.
The excess of the acquisition cost over the fair value of the identifiable net assets of a subsidiary undertaking as at the
acquisition date is disclosed as consolidation goodwill and is tested for impairment.
If the acquisition cost is lower than the fair value of the identifiable net assets of a subsidiary undertaking as at the
acquisition date, the difference is disclosed as profit in the income statement.
251
Goodwill
Goodwill arising on acquisition represents the excess of the acquisition cost over the fair value of the Group’s share in
identifiable net assets of the acquired subsidiary as at the acquisition date. The goodwill relating to acquisition of
subsidiary undertakings is disclosed under intangible assets as a separate item.
The Company’s goodwill resulting from the purchase transactions executed after March 31st 2004 is not amortised in
accordance with IFRS 3 – Business Combinations. Consolidation goodwill which arose before March 31st 2004 is not
amortised after January 1st 2005.
As at the date of acquisition, goodwill is allocated to each cash-generating unit. The Company calculates impairment
losses by estimating the recoverable value of the cash-generating unit to which the goodwill pertains. The Company
recognises impairment losses if the recoverable value of a cash-generating unit is lower than its carrying value. If
goodwill comprises a part of a cash-generating unit and the Company sells a part of the cash-generating unit’s business,
the goodwill pertaining to the sold business is included in the carrying value that is taken into account in calculating
gains or losses on the disposal of the business. Goodwill sold in this way is valued on the basis of the relative value of
the sold business and the value of the retained part of the cash-generating unit.
Goodwill is tested for impairment at least once a year. Impairment losses are charged against other operating expenses.
If the share in acquired assets, equity and liabilities and off-balance sheet liabilities of a subsidiary exceeds the cost of
acquisition of the subsidiary, the Group:
•
•
carries out revaluation of the identifiable assets, equity and liabilities, off-balance sheet liabilities and the
acquisition cost;
Any profits/losses arising from the dilution of shares in subsidiaries are disclosed in the income statement for the period
in which the sale was effected.
Property, plant and equipment are carried at cost less depreciation charges and impairment losses (except land). After
initial recognition, any increases in property, plant and equipment are recognised at cost. In 2006, there were no
revaluations of property, plant and equipment.
maintenance, affect the profit or loss for the reporting period in which they were incurred, except for the situation where
the acquisition or production cost of a component of an item of property, plant and equipment is material relative to the
acquisition or production cost of the entire item. In such cases, the cost amount increases the value of the item and is
subject to depreciation.
b) Depreciation
Items of property, plant and equipment, or their material or separable components, are depreciated using the straight
line method over their economic useful lives. Land is not depreciated.
Asset
Depreciation rate
Vehicles
20% and 33%
Computers
30%
10%
Buildings
10%
252
Structures
4 and 4.5%
Road machinery
17% and 20%
Equipment (group 6)
10%
Office equipment
20%
Lease agreements which transfer substantially all the risks and benefits incidental to ownership of items of property,
plant and equipment to the Company, are classified as financed lease. Assets held under financed lease agreements are
initially recognised at the lower of their fair value or the present value of the minimum lease payments, which are then
reduced by depreciation charges and impairment losses.
Tangible assets under construction are measured at the total of the costs directly attributable to their acquisition or
production, less impairment losses. Tangible assets under construction include also investment materials. Tangible
assets under construction are not depreciated until their completion and placement in service.
If any events or circumstances have occurred which give grounds to believe that the carrying value of an asset may not
be recoverable, such assets are tested for possible impairment of their value. Impairment losses are recognised when the
carrying value of an asset exceeds its recoverable value, which corresponds to the higher of the asset’s net selling price
or value in use. In order to determine whether an impairment of value has occurred, assets are classified down to the
lowest level for which separate cash flows can be identified.
Any gain/loss on the sale of an asset is determined by comparing the sale proceeds with the carrying value of such asset,
and recognised in operating profit.
INTANGIBLE ASSETS
impairment charges. Intangible assets are amortised on a straight-line basis over their estimated economic useful lives.
Tax amortisation rates are used for amortisation only if they correspond to the economic useful life of an asset. The
appropriateness of the applied amortisation periods and rates is reviewed periodically, but not less frequently that at the
end of each financial year, and the adjustments to the amortisation charges, if any, are made in the following periods.
If any events or circumstances have occurred which give grounds to believe that the carrying value of an intangible
asset may not be recoverable, such an asset is tested for impairment. Impairment losses are recognised when the
carrying value of an asset exceeds its recoverable value, which corresponds to the higher of the net selling price or value
in use of such asset.
Expenses on research work are charged to costs as they are incurred. Costs of completed development work conducted
for the Group’s own needs which were incurred prior to the launch of production or application of new technological
solutions are classified as intangible assets if the Group is able to demonstrate:
the manner in which the intangible asset will generate probable economic benefits. Amongst other things, the
Group should prove the existence of a market for the products which come into existence thanks to the intangible
asset or for the intangible asset itself, or – if the asset is to be used by the Group itself – its usefulness,
the feasibility of a reliable determination of the expenditure incurred in the course of the development work which
may be allocated to the intangible asset.
Any costs of development work which fail to meet these criteria are charged to the income statement in the period in
which they were incurred.
253
b) Software
c) Amortisation
Amortisation rate
50%
20%
GOODWILL
Goodwill represents the excess of the acquisition cost over the fair value of a Group’s share in identifiable net assets of
an acquired subsidiary on the acquisition date. Goodwill arising on the acquisition of subsidiaries is recognised in the
balance sheet under non-current assets as a separate item.
Goodwill is tested annually for impairment and shown in the balance sheet at cost less cumulated impairment charges.
Any gains or losses on disposal of an undertaking are recognised net of the carrying value of the goodwill pertaining to
the sold undertaking.
INVESTMENT PROPERTY
FINANCIAL ASSETS
3. financial assets available for sale (no such assets were recognised in the reporting period),
financial assets at fair value through profit or loss and presented in the balance sheet under current assets. Assets with
specified maturities that the Group has the intention and the capacity to hold to maturity are classified as investments
held to maturity and presented in the balance sheet under non-current assets, unless their maturity date falls within 12
months from the balance-sheet date. Assets with unspecified maturities which can be disposed of if cash is needed or in
response to changes of interest rates, are classified as available for sale. The Group presents them in the balance sheet as
non-current assets, unless the management has expressed an intention to hold them for a period shorter than 12 months
from the balance-sheet date or they are to be liquidated in order to raise working capital, in which case they are
presented as current assets. Financial assets arising as a result of delivery of cash, goods or services to the other party,
and not intended to be resold in a short time, are classified as loans and receivables and presented under non-current
assets. The management assigns each particular financial asset to a relevant category upon its acquisition.
Purchase and sale of financial assets is recognised at the transaction date, i.e. the date on which the Group assumes the
obligation to purchase or sell the assets. The acquisition cost comprises the transaction-related fees. Financial assets at
fair value through profit or loss and financial assets available for sale are carried at fair value. Investments held
to maturity are measured at amortised cost using the effective interest rate method. Realised and unrealised gains and
losses arising from changes in the fair value of assets at fair value through profit or loss are recognised in the income
statement, and those arising from changes in the fair value of assets available for sale – directly in equity for the period
in which they arose. Fair value of investments is determined by reference to buy prices quoted on the stock exchange or
on the basis of forecast cash flows. Fair value of equity securities of private companies is estimated on the basis of
254
relevant Price/Earnings and Price/Cash Flows ratios which are appropriate for a given instrument, or determined using
other valuation models. Equity instruments whose value cannot be reliably measured are carried at cost less impairment
losses, if any.
LEASING
Lease agreements which transfer to the Group substantially all the risks and benefits incidental to ownership of items of
property, plant and equipment, are classified as financed lease. Financed lease is disclosed in the accounting books at
the amount of the fair value of the leased asset, as determined at the inception of the lease, or, if lower, at the present
value of minimum lease payments. Lease payments are apportioned between financial expenses and reduction of the
outstanding lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Liabilities
under lease payments, less the interest expense component, are presented under non-current liabilities. The interest
expense component of financial expenses is disclosed in the income statement over the lease term. Tangible assets used
under financed lease agreements are depreciated over the shorter of: their useful economic life or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified by the
Group as operating leases. Operating lease payments made by the Group under such arrangements are recognised in the
income statement over the lease term (net of discounts, if any, offered by the lessor).
INVENTORIES
All inventories are subject to regular review in terms of their usefulness and market value. If it is
found that inventories require revaluation, a valuation allowance of an appropriate amount is made.
TRADE RECEIVABLES
Current trade and other receivables are carried at amounts due, unless the impact of accrued interest is substantial.
Otherwise, receivables are initially disclosed at fair value and then at amortised cost using the effective interest rate.
According to the rule adopted by the Group, receivables maturing in over 180 days are discounted.
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash-flow statement, cash and
cash equivalents include cash in hand, bank deposits payable on demand and other highly liquid instruments. For the
purpose of cash-flow statement, the Group decided not to disclose current-account loans and restricted cash under cash
and cash equivalents; consequently, these are presented as a separate balance-sheet item.
Transactions in foreign currencies are settled at the mid-exchange rate quoted by the National Bank of Poland for the
transaction date.
As at the balance-sheet date, monetary assets and liabilities are valued at the mid-exchange rate quoted for a given
currency by the National Bank of Poland for that date.
DEFERRED INCOME TAX
Deferred tax liability is created using the balance-sheet liability method in relation to all temporary differences existing
as at the balance-sheet date between the tax base of assets and liabilities and their carrying value as disclosed in the
financial statements. The main temporary differences arise from revaluation of certain non-current assets, current assets,
derivative financial instruments, provisions, accruals and deferred income and tax losses brought forward.
Deferred tax asset and liabilities are measured at the tax rates that, in the Management Board’s opinion, are expected to
apply on the day when the asset is realised or the liability is settled.
A deferred tax asset is disclosed for all deductible temporary differences to the extent that it is likely that taxable profit
will be available against which the temporary differences can be utilised.
An asset is recognised only where its carrying amount can be realised in the form of economic benefits to the Group in
future periods. When the carrying amount of an asset exceeds its tax value, the amount of taxable economic benefits
will be higher that the amount which will be allowed as tax-deductible costs. This difference is a taxable temporary
difference, and the obligation to pay the resulting income taxes in future periods is reflected in the deferred tax liability.
255
After the Group realises the carrying amount of the asset, the taxable temporary difference reverses, the Group reports
taxable profit, and this creates probability of an outflow of economic benefits from the Group in the form of tax
payments.
EQUITY
Equity is the capital and funds created in accordance with the applicable laws and regulations, applicable statutes and
the articles of association. Equity also includes retained profits and accumulated losses brought forward.
Equity is carried in the accounting books at par value by type and in compliance with the provisions of law or articles of
association.
The share capital of an incorporated company is disclosed in the amount specified in its articles of association and
entered in the court register. Contributions to equity that have been declared but not paid are disclosed as called-up
share capital not paid.
Proceeds from issues of new shares are disclosed under equity. No adjustment is made in
connection with a difference, if any, between the issue price and the market value of the issued
shares.
The statutory reserve funds are created from profit distributions or by transfers from the revaluation capital reserve.
The statutory reserve funds include a fund created from profit distributions which is used to cover balance-sheet losses.
• deferred tax,
statutory reserve funds. Impairment charges for non-current assets which were earlier revalued, decrease the revaluation
capital reserve by up to the value of the portion of the reserve which relates to a given asset.
undertaking’s equity interest in a given subsidiary are added to the relevant items of the parent undertaking’s equity.
The consolidated net profit (loss) of the consolidated members of the Group comprises the net profit (loss) of the
parent undertaking and the net profits (losses) of subsidiary undertakings in the amounts corresponding to the parent
undertaking’s equity interests in such undertakings.
•
•
•
•
•
•
256
MINORITY INTERESTS
Minority interests are disclosed at the total of equity of subsidiary undertakings consolidated with the full method held
by companies other than members of the Group.
The part of the net profit (loss) of subsidiary undertakings held by minority shareholders other than members of the
Group represents the profit (loss) attributable to minority interests.
Equity and capitals also include net profit pending approval, less planned dividend and dividend declared but not paid.
The net profit (loss) for the financial year is the result disclosed in the income statement for the current year adjusted for
the corporate income tax charge.
Long- and short-term bank loans and borrowings are initially disclosed at the net value of received funds. i.e. less the
costs of obtaining them. After the initial disclosure, all bank loans, debt securities and loans are valued at the adjusted
acquisition cost (amortised cost) using the effective interest rate. The difference between the received net cash (less the
costs of obtaining the funds) and the amount to be repaid is disclosed in the income statement over the loan term. All
external financing costs are charged to the income statement of the period to which they pertain. The Group applies the
standard approach in this respect.
PROVISIONS
Provisions are recognised if the Group has an obligation (legal or following from commercial practice) resulting from
past events, and if it is probable that the discharge of that obligation will cause an outflow of funds, assuming that the
amount of such outflow can be reliably estimated.
The Group also creates provisions for contracts that give rise to obligations on its part if it expects the costs which must
be incurred in connection with performance of such contracts to exceed future benefits thereunder.
When preparing the IFRS-compliant consolidated financial statements, the Management Board is required to make
judgments, estimates and assumptions, which affect the adopted accounting policies and the reported amounts of assets,
liabilities, revenue and expenses. The estimates and underlying assumptions are based on historical experience and
various other factors deemed relevant under the circumstances, and their results provide the basis for making judgment
about the carrying values of assets and liabilities which cannot be established on the basis of other sources. Actual
results may differ from such estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of accounting estimates are
recognised in the period in which the estimate is revised.
Provisions for retirement benefits, unused holidays and related benefits are valued at estimated amounts determined by
the companies’ management boards with the use of actuarial methods.
REVENUE
Interest income is recognised as the interest accrues throughout the agreement term, on the basis of the outstanding
amounts receivable and the effective interest rate in the period to maturity, after the income due to the Group has been
determined.
OPERATING EXPENSES
The Group undertakings record their expenditures by type and by function. The costs of goods for resale, products and
services sold are the costs directly attributable to the production or acquisition of goods for resale and services sold. The
selling costs comprise commercial costs and costs of advertising and entertainment. The general administrative
expenses comprise the costs associated with the Group undertakings’ management and the costs of administration and
entertainment.
257
•
•
•
•
Other operating income and expenses indirectly related to the Group’s activities, including gains and losses on
disposal of non-current non-financial assets, revaluation of non-financial assets, creation and release of
provisions for future risk, penalties, fines, compensation, as well as donations received or granted,
Financial income related to dividends (distributions from profit), interest, gains on disposal of investments,
revaluation of investments and an excess of foreign exchange gains over foreign exchange losses,
Financial expenses related to interest, losses on disposal of investments, revaluation of investments and an
excess of foreign exchange losses over foreign exchange gains,
Extraordinary gains and losses resulting from events which are difficult to predict and which are not related to
the general business risk.
equipment which requires a longer time to become fit for use or resale, increase the production costs of a given asset,
until the date of its placement in service. Any income generated from short-term investments of proceeds from external
financing, which is connected with the production of assets, decreases the capitalised costs of external financing. The
remaining costs of external financing are charged directly against the income statement in the reporting period in which
they are incurred.
SEGMENT REPORTING
A business segment is a distinguishable component of the Group that is engaged in providing products or services and
that is subject to risks and returns that are different from those of other business segments.
The services provided by the Group are uniform. The information disclosed in the consolidated financial statements at
the Group level is consistent with the information relating to a particular business segment.
The Group does not report its financial information by geographical segments, as it is not engaged in the distribution of
goods or provision of services in different economic environments which are subject to different risks and different
returns. The Group’s home country is Poland.
The Group’s operations are exposed to various financial risks, including the risk of volatile market prices of debt and
equity instruments as well as fluctuations in exchange rates and interest rates. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and is designed to minimise potential adverse effects of
the risks on the Group’s financial performance.
Credit Risk
The Group’s financial assets exposed to credit risk concentration are settlements with related undertakings and trade
receivables.
Trade receivables are presented in the financial statements net of valuation allowances and reflect the nature of the
Group’s operations.
The Group applies a trade credit policy under which it sells its products and provides services and financing only to
customers with proven credit records and high credit ratings.
In the opinion of the Management Board, the Group’s credit risk exposure has been assessed correctly. The credit risk is
reflected in the accounting books by making relevant allowances for receivables.
The Group is not engaged in any activities which would require hedging against the risk of exchange rate fluctuations.
Interest Rate Risk
The Group’s profits and operating cash flows are to a certain extent exposed to changes in interest rates, as most of the
Group’s loans and borrowings bear interest at variable rates.
258
Moreover, a significant portion of the Group’s assets is comprised of corporate debt securities held to maturity with
fixed interest rates, purchased from related undertakings. Although the maturity dates of the individual debt securities
do not exceed 12 months, the tranches redeemed are usually replaced with the subsequent issues of securities and,
consequently, such securities are classified as non-current assets.
The loans advanced to non-related undertakings bear interest at fixed or variable rates. The loans with variable interest
rates are exposed to the risk of interest rate reductions.
The Management Board of the Company believes that the use of hedging instruments or other similar measures aimed
at mitigating the interest rate risk would not be cost effective.
Liquidity Risk
The principles of prudent management of liquidity risk require that the Group maintain sufficient balances of cash and
marketable securities, and secure the necessary financing in the form of credit facilities. Considering its dynamic
expansion, the Group’s objective is to ensure it has access to flexible financing, such as bank credit facilities.
Financial derivatives are initially recognised at acquisition cost, to be later measured at fair value. Any changes in the
fair value of financial derivatives are promptly charged to the income statement, as the Group does not use any financial
derivatives meeting the criteria of the hedging accounting under IAS 39. Derivatives are presented in the balance sheet
as financial assets or liabilities measured at fair value through profit or loss.
Fair Value
The fair value of publicly traded financial instruments is determined based on listed market prices as at the balancesheet date. The fair value of forward currency contracts is determined based on the market forward rates of the
individual currencies as at the balance-sheet date.
To estimate the fair value of derivatives which are not publicly traded and other financial instruments, the Group applies
various methods and assumptions based on the market conditions prevailing as at each balance-sheet date. The Group
usually uses market or dealers’ quotations for given or similar instruments. In the case of other instruments, the fair
value is established using other techniques, such as option valuation models or the DCF method.
With respect to certain embedded financial derivatives (forward currency contracts) for which no forward exchange
rates are listed due to the distant maturity dates of the contracts, the Group calculates forward rates using the interest
rate relation model.
In the case of options for securities for which no active market exists, the fair value is usually determined using the
Black-Scholes option valuation model.
It is assumed that the nominal values (net of any potential credit adjustments) of financial assets and liabilities maturing
in less than one year, reflect the fair values of such assets and liabilities. For the purposes of disclosure in the financial
statements, the fair value of financial liabilities is estimated by discounting the expected contractual cash flows with an
interest rate currently applied by the Group to similar financial instruments.
The Group does not hold any financial assets or liabilities whose fair value would differ from the book value as at
December 31st 2005 and December 31st 2004.
Financial instruments purchased on regulated markets are recognised at acquisition cost, to be later measured at fair
value. The fair value of publicly traded financial instruments is determined based on listed market prices as at the
balance-sheet date.
259
III. DISCONTINUED OPERATIONS
During the reporting period, neither the parent undertaking nor any of its subsidiary undertakings discontinued any
types of their operations and they do not plan to discontinue any of their existing operations.
IV. COMPOSITION OF THE MANAGEMENT BOARDS AND SUPERVISORY
BOARDS OF THE MEMBER COMPANIES OF THE MNI GROUP
a) MNI S.A., Parent Undertaking
On June 30th 2006, the Ordinary General Shareholders Meeting of MNI S.A. appointed the Supervisory Board of the
following composition:
1. Robert Gwiazdowski,
2. Tomasz Karasiński,
3. Andrzej Jerzy Piechocki,
4. Michał Jakub Tomczak,
5. Stanisław Marian Widera
On June 30th 2006, the Supervisory Board of MNI S.A. appointed the Company’s Management Board of the following
composition:
1. Piotr König
2. Mariusz Piotr Pilewski
3. Leszek Wojciech Kułak
b) MNI Telecom
1.
2.
Zdzisław Wójcik
3.
Janusz Sutkowski
The Supervisory Board of MNI Telecom Sp. z o.o.
1. Andrzej Piechocki
2. Piotr König
3. Wiktoria Fontara
4. Piotr Majchrzak
c)
1.
Tomasz Dąbrowa
1. Wiesław Kułaka
260
e) Szeptel International Sp. z o.o.
1.
Mariusz Pilewski
f)
BIA-NET Sp. z o.o.
1.
Sławomir Januszczyk
V. EVENTS SUBSEQUENT TO THE BALANCE-SHEET DATE
There were no significant events subsequent to the balance-sheet date which could affect the financial standing of the
entity.
VI. TRANSACTIONS WITH RELATED UNDERTAKINGS
Transactions with related undertakings as at June 30th 2006
(PLN ‘000)
Issuer
Media
Personel
Service Sp. z
o. o.
Szeptel
International
Sp. z o. o.
Legion
Polska
Sp. z o.o.
MNI
Telecom
Sp. z o.o.
Total
Revenue
telecommuni
cations
services
5,015
1,904
968
168
290
8,345
Costs
telecommuni
cations
services
3,273
-
-
2,338
2,463
8,074
property,
plant and
equipment
intangible
assets
50
-
-
214
-
264
7
-
-
-
-
7
Revenue:
– Sales of telecommunications services
market prices
PLN 5,015 thousand
PLN 2,338 thousand
PLN 2,463 thousand
– Sales of property, plant and equipment
market prices
PLN 214 thousand
Costs:
– purchases of telecommunications services
market prices
transactions with MNI Telecom Sp. z o. o.
transactions with Szeptel International Sp. z o. o.
– purchase of property, plant and equipment (market prices)
transactions with Szeptel International Sp. z o.o.
– purchase of intangible assets (market prices)
PLN 3,273 thousand
PLN 168 thousand
PLN 290 thousand
PLN 1,904 thousand
PLN 911 thousand
PLN 50 thousand
PLN 7 thousand
261
Balance of unsettled transactions with related undertakings as at June 30th 2006:
- a loan
PLN 2,439 thousand
PLN 2,135 thousand
PLN 1,000 thousand
VII. TRANSACTIONS WITH MEMBERS OF THE MANAGEMENT AND
SUPERVISORY STAFF, THEIR SPOUSES, BLOOD RELATIVES, DIRECT INLAWS UP TO THE SECOND DEGREE AND PERSONS RELATED THROUGH
ADOPTION, CUSTODY OR GUARDIANSHIP TO MEMBERS OF THE
MANAGEMENT OR SUPERVISORY STAFF OF THOSE UNDERTAKINGS OR
COMPANIES IN WHICH THEY ARE SIGNIFICANT SHAREHOLDERS OR
THEIR SPOUSES
a.
Transactions
- Management contract concluded with Inwest Logistics Sp. z o.o. In the reporting period, the turnover under the
Mr Piotr König, President of the Management Board of MNI S.A., holds an equity interest
in Inwest Logistics Sp. z o.o. (15.9%).
b. Loans and Advances
None.
VIII. REMUNERATION OF THE MANAGEMENT BOARD AND SUPERVISORY
BOARD OF THE MNI GROUP
a)
Parent Undertaking
undertakings in the period January 1st – June 30th 2006
Mariusz Pilewski, President of the
PLN 180 thousand
Management Board
(under the management contract concluded with Inwest
Leszek Kułak, Vice-President of the
Logistics Sp. z o.o.)
Management Board
Zdzisław Wójcik, Member of the
PLN 84 thousand
Management Board
PLN 15 thousand
Supervisory Board
Tomasz Swadkowski, Deputy
Barbara Dąbrowska, Member of the
Supervisory Board
262
Piotr König, Member of the
Supervisory Board
Supervisory Board
Krzysztof Radziszewski, Member
b) MNI Telecom Sp. z o.o.
Remuneration paid and in-kind benefits provided to the management
and supervisory staff by the Issuer and its subsidiary undertakings for
any types of services rendered by them to the Company or the subsidiary
Marek Południkiewicz, President of
PLN 5 thousand
the Management Board
Zdzisław Wójcik, Vice-President of
PLN 60 thousand
the Management Board
Janusz Sutkowski
PLN 55.5 thousand
PLN 32 thousand
Supervisory Board
Piotr König, Member of the
PLN 32 thousand
Supervisory Board
Wiktor Fontara, Member of the
PLN 32 thousand
Supervisory Board
Piotr Majchrzak, Member of the
PLN 25 thousand
Supervisory Board
c) Legion Polska Sp. z o.o.
Tomasz Dąbrowa, President of the
PLN 42 thousand
Management Board
Wiesław Kułak, President of the
PLN 15 thousand
Management Board
263
IX. KEY MANAGEMENT PERSONNEL OF THE COMPANIES
The Key Management Staff of the Companies comprise the Members of the Management and Supervisory Boards. The
members of the Key Management Staff have direct or indirect influence on the planning, managing and controlling of
the companies’ operations. The other persons holding managerial positions only execute the decisions of the
Management Board and the Supervisory Board.
X. AVERAGE EMPLOYMENT
The average employment at the MNI Group was 312 persons.
The average employment at the MNI Group S.A. by employment categories:
– administration staff
– 64 persons
– technical staff
– 101 persons
– sales staff
– 147 persons
XI. PROVISIONS
Other provisions were created for known risks, including provisions for disputes, amounting to PLN 1,553 thousand.
XII. CONTINGENT LIABILITIES
•
•
promissory notes (blank promissory notes with promissory note declarations) PLN 4,121 thousand
list of liabilities secured on the Group’s assets
Type of liability
movables – Telefonia
Pilicka Sp z o.o.
specified identity
4. Assignment of
receivables under issued
invoices – Legion Polska
Sp. z o.o.
Creditor
Value of secured assets as
at June 30th 2006
(PLN ‘000)
Property, plant and
equipment
4,697
Property, plant and
equipment
5,097
Property, plant and
equipment
81,000
1,500
XIII. CONTINGENT RECEIVABLES
The Group recorded no contingent receivables.
XIV. ASSETS HELD FOR SALE
The Group recorded no assets held for sale.
264
XV. EUR EXCHANGE RATES USED IN THE VALUATION OF BALANCESHEET AND INCOME-STATEMENT ITEMS DENOMINATED IN FOREIGN
CURRENCIES
EUR mid-exchange rate in:
H1 2006
H1 2005
PLN 3.8872
PLN 4.0801
Jun 30 2006
Jun 30 2005
PLN 4.0434
PLN 4.0401
EUR mid-exchange rate as at:
XVI. COSTS OF EXTERNAL FINANCING
The costs of external financing are disclosed as costs in the period in which they were incurred. The Group applies the
standard approach.
265
23.3 Consolidated Financial Statements of the MNI Group for Q3 2006
Prepared for the Purposes of the Prospectus
MNI S.A.
ul. Żurawia 8
00-503 Warsaw
Consolidated Financial Statements of MNI S.A. for Q3 2006
Consolidated Financial Statements of MNI S.A.
Date prepared:
Dec 21 2006
Contents:
1.
2.
BALANCE SHEET
3.
INCOME STATEMENT
4.
5.
CASH-FLOW STATEMENT
1. Financial Highlights
PLN '000
three quarters
three quarters
cumulative/
cumulative/
2006
2005
Jan 1 - Sep 30 Jan 1 - Sep 30
2006
2005
115,181
53,491
EUR '000
three quarters three quarters
cumulative/
cumulative/
2006
2005
Jan 1 - Sep 30 Jan 1 - Sep 30
2006
2005
29,405
13,173
10,918
8,954
2,787
2,205
7,553
8,088
1,928
1,992
7,033
9,052
1,795
2,229
19,380
10,571
4,948
2,603
-27,513
-14,675
-7,024
-3,614
1,069
-8,156
4,341
-2,082
-16,289
237
-4,158
58
IX. Total assets
225,281
118,345
56,554
30,216
121,848
52,708
30,588
13,458
61,336
24,062
15,398
6,144
55,202
23,410
13,858
5,977
103,433
65,637
25,965
16,759
97,151
65,042
24,388
16,607
XIII. Equity
- attributable to equity holders of the parent
- attributable to minority interests
XIV. Share capital
XV. Weighted average number of ordinary shares
XVI. Earnings (loss) per ordinary share (PLN/EUR)
XVII. Book value per share (PLN/EUR)
6,282
595
1,577
152
22,572
22,572
5,666
5,763
22,571,558
0.31
22,669,488
0.40
22,571,558
0.08
22,669,488
0.10
4.30
2.87
1.08
0.73
266
2. Balance Sheet
BALANCE SHEET
PLN '000
Jun 30 2006
end of previous
quarter/ 2006
Sep 30 2006
end of Q3/ 2006
Dec 31 2005
end of previous
year/ 2005
ASSETS
173,249
157,525
163,631
11,833
11,047
10,921
2. Goodwill
23,578
20,828
20,828
126,961
115,451
122,148
7,158
6,350
6,421
7,158
6,350
6,421
5. Deferred tax assets
II. Current assets
1. Inventories
3,719
3,849
3,313
52,032
55,960
52,003
311
457
375
39,227
35,766
33,453
39,227
35,766
33,453
37,993
35,527
32,625
1,234
239
828
12,494
19,737
18,175
12,494
19,737
18,175
102
221
263
12,392
19,516
17,912
225,281
213,485
215,634
103,433
96,001
90,166
22,572
22,572
22,572
32,900
32,572
32,572
125
125
125
1,047
1,047
1,047
33,474
34,112
-18
7,033
5,573
33,868
121,848
117,484
125,468
5,310
5,306
4,881
3,528
3,508
2,850
219
245
320
9
9
9
210
236
311
1,563
1,553
1,711
1,553
1,553
1,553
Total assets
I. Equity
1. Share capital
7. Minority interests
a) non-current
b) current
a) non-current
b) current
6,282
10
158
61,336
65,257
73,339
61,336
65,257
73,339
57,353
61,034
68,396
3,983
4,223
4,943
55,202
46,921
47,248
55,202
46,921
47,248
17,672
17,784
12,262
b) trade payables
23,985
22,191
27,783
c) other
13,545
6,946
7,203
225,281
213,485
215,634
b) other
267
3. Income Statement
INCOME STATEMENT
Q3/ 2006
Jul 1- Sep 30
2006
PLN '000
three
quarters
Q3/ 2005
cumulative/
Jul 1 - Sep
2006
30 2005
Jan 1 - Sep
30 2006
115,181
20,832
three
quarters
cumulative/
2005
Jan 1 - Sep
30 2005
53,491
I. Net sales revenue, including:
37,361
37,004
114,575
20,813
2. Net revenue from sales of materials
357
606
19
76
32,770
96,101
17,528
47,913
32,410
95,492
17,509
47,838
2. Cost of materials sold
360
609
19
75
4,591
19,080
3,304
5,578
IV. Selling costs
53,415
410
3,903
366
1,138
2,507
6,085
612
2,037
1,674
9,092
2,326
2,403
1,673
3,751
2,547
8,090
23
28
809
809
841
2,914
2,547
8,073
700
1,925
385
1,539
34
34
87
2. Excess of share in fair value of net identifiable assets,
liabilities and contingent liabilities of acquired undertaking over
acquisition cost
17
110
88
268
556
1,891
298
1,183
2,647
10,918
4,488
8,954
X. Financial income
298
2,058
5
48
199
579
3
19
30
30
2. Gain on disposal of investment
3. Other
69
1,449
2
29
1,489
5,423
380
914
1,189
3,719
137
400
2. Loss on disposal of investment
3. Other
1,257
186
300
447
243
328
1,456
7,553
4,113
8,088
XIII. Pre-tax profit (loss) (XII+/-XIII)
1,456
7,553
4,113
8,088
-4
520
439
-964
185
587
98
114
-189
-67
341
-1,078
XV. Net profit (loss) (XIV-XV-XVI+/-XVII)
1,460
7,033
3,674
9,052
- net profit (loss) attributable to equity holders of the parent
1,420
6,993
3,674
9,052
40
22,571,558
40
22,571,558
22,591,347
22,669,488
0.06
0.31
0,16
0,40
XIV. Corporate income tax
a) current
b) deferred
- net profit (loss) attributable to minority interests
268
4. Statement of Changes in Equity
Q3/ 2006
Jul 1- Sep 30
2006
PLN '000
three
quarters
Q3/ 2005
cumulative/
Jul 1 - Sep
2006
30 2005
Jan 1 - Sep
30 2006
three
quarters
cumulative/
2005
Jan 1 - Sep
30 2005
I. Balance of equity at beginning of period (opening
balance)
96,001
90,166
61,367
56,298
I.a. Balance of equity at beginning of period (opening
balance), after reconciliation to comparable data
96,001
90,166
61,367
56,298
22,572
22,572
22,709
22,709
-137
-137
137
137
- shares retired
137
137
22,572
22,572
22,572
22,572
137
137
-137
-137
137
137
- shares retired
137
137
32,299
27,251
32,572
32,572
328
328
5,048
600
600
5,048
600
600
5,048
272
272
32,900
32,900
32,299
32,299
125
125
125
125
125
125
125
125
1,047
1,047
1,047
1,047
1,047
1,047
1,047
1,047
34,112
33,850
-54
5,230
34,112
33,915
273
5,248
34,112
34,021
273
5,321
comparable data
106
73
91
a) increase
638
638
638
638
33,474
33,474
273
65
327
5,048
5,048
273
18
309
a) other adjustments
6.5. Retained deficit at beginning of period, after reconciliation
to comparable data
65
65
65
327
327
33,474
33,474
-54
-54
1,460
7,033
3,675
9,052
a) net profit
1,660
7,033
3,984
9,171
309
119
b) net loss
200
a) increase
73
595
6,282
6,282
595
73
73
6,282
6,282
595
595
103,433
103,433
65,637
65,637
b) decrease
73
269
5. Cash-Flow Statement
CASH-FLOW STATEMENT
Q3/ 2006
Jul 1- Sep 30
2006
PLN '000
three
quarters
Q3/ 2005
cumulative/
Jul 1 - Sep
2006
30 2005
Jan 1 - Sep
30 2006
three
quarters
cumulative/
2005
Jan 1 - Sep
30 2005
A. Cash flows from operating activities - indirect method
1,460
7,033
3,674
9,052
6,007
12,347
-1,338
1,519
7,134
20,316
2,776
7,680
15
35
11
18
91
194
87
70
-564
21
6
728
16
-102
-14
-51
-4,333
-11,525
-8,461
-18,263
4,113
5,167
5,461
17,648
,
-403
1,083
482
-185
-587
-98
-114
9. Income tax paid
-280
-769
-2,189
-6,679
7,467
19,380
2,336
10,571
1,610
1,725
1,977
2,141
1,610
1,725
1,977
2,141
1. Acquisition of intangible assets and property, plant and
equipment
21,773
29,238
12,157
16,816
3,447
10,892
3,988
8,563
18,326
18,346
8,169
8,253
18,326
18,346
8,169
8,169
18,326
18,346
8,169
8,169
84
84
-20,163
-27,513
-10,180
-14,675
4,730
14,890
10,134
11,883
10,134
11,703
1. Net proceeds from issue of shares, other equity instruments
and additional contributions to equity
20
4,730
4. Interest paid
180
10,083
23,046
2,250
7,542
9,573
21,526
1,714
3,827
148
250
2,150
336
797
131
429
7
25
19
14,843
27
6. Arrangement instalments paid
60
354
156
468
131
697
11
82
5
25
-5,353
-8,156
7,884
4,341
-18,049
-16,289
40
237
-7,124
-5,518
-11
-15
- change in cash resulting from foreign exchange gains/(losses)
-11
-15
19,516
17,910
7
-186
12,392
12,392
36
36
Supplementary Information to the Consolidated Financial Statements of the MNI Group for Q3 2006
270
Supplementary Information to the Consolidated Financial Statements
of the MNI Group for Q3 2006
(prepared as at September 30th 2006)
1. PRINCIPLES FOLLOWED IN THE PREPARATION OF THE REPORT
1.
The consolidated quarterly financial statements for the period ended September 30th 2006 were prepared in
accordance with the International Financial Reporting Standards (IFRS).
2.
The items of the consolidated quarterly report were measured in accordance with the applicable rules governing
the valuation of assets, equity and liabilities and measurement of the net profit (loss) effective as at the balancesheet date, in accordance with the conservative valuation principle, and they reflect the actual assets of the MNI
Group.
3.
In accordance with the applicable regulations, since 2005 MNI S.A. has been preparing its consolidated financial
statements in accordance with the International Accounting Standards, International Financial Reporting
Standards, and related interpretations published in the form of the European Commission regulations.
4.
Accounting policies applied by the MNI Group in 2006.
The key accounting policies applied in the preparation of the attached consolidated financial statements are presented
below:
BASIS OF ACCOUNTING
The MNI Group prepared the attached consolidated financial statements in accordance with the International Financial
Reporting Standards (“IFRS”) and related interpretations published in the form of the European Commission
regulations.
The consolidated financial statements were prepared on a historic cost basis, with the exception of derivative financial
instruments and financial assets available for sale, which are measured at fair value.
No financial assets available for sale were recorded in the reporting period.
In the reporting period, i.e. from January 1st 2006 to September 30th 2006, no amendments were made to the
International Financial Reporting Standards which could have a bearing on the accounting policies of the MNI Group.
REPORTING CURRENCY
The financial data contained in the attached consolidated financial statements are reported in the Polish złoty (PLN),
which is the currency used by the Group for the valuation and presentation purposes. The data presented in the
consolidated financial statements are rounded off to the nearest thousand.
Subsidiary undertakings of the MNI Group (i.e. undertakings in which the Group holds more than 50% of the total vote
at the general shareholders meeting or directs their financial or operating policies on some other basis) are consolidated.
271
In assessing whether the Group exerts control over a given undertaking, potential voting rights exercisable at such
undertaking’s general shareholders meeting, as well as their impact, are also taken into account.
The subsidiary undertakings are consolidated from the date on which control is assumed by the Group to the date it is
lost. The acquisition of subsidiary undertakings is accounted for with the acquisition method. The acquisition cost
comprises the acquired company’s assets measured at fair value, shares issued or liabilities contracted as at the
acquisition date, and costs directly related to the acquisition. The excess of the acquisition cost over the fair value of the
acquired subsidiary’s assets is recognised as goodwill. Intra-Group transactions, balances and unrealised profits/losses
on intra-Group transactions are eliminated during consolidation. If required, accounting policies of the subsidiary
undertakings are modified to comply with the accounting policies applied by the Group.
In the case of non-consolidated financial statements, financial interests in subsidiary undertakings are valued at cost,
while in consolidated financial statements investments in subsidiary undertakings are eliminated.
The excess of the acquisition cost over the fair value of the identifiable net assets of a subsidiary undertaking as at the
acquisition date is disclosed as consolidation goodwill and is tested for impairment.
If the acquisition cost is lower than the fair value of the identifiable net assets of a subsidiary undertaking as at the
acquisition date, the difference is disclosed as profit in the income statement.
Goodwill
Goodwill arising on acquisition represents the excess of the acquisition cost over the fair value of the Group’s share in
identifiable net assets of the acquired subsidiary as at the acquisition date. The goodwill relating to acquisition of
subsidiary undertakings is disclosed under intangible assets as a separate item.
The Company’s goodwill resulting from the purchase transactions executed after March 31st 2004 is not amortised in
accordance with IFRS 3 – Business Combinations. Consolidation goodwill which arose before March 31st 2004 is not
amortised after January 1st 2005.
As at the date of acquisition, goodwill is allocated to each cash-generating unit. The Company calculates impairment
losses by estimating the recoverable value of the cash-generating unit to which the goodwill pertains. The Company
recognises impairment losses if the recoverable value of a cash-generating unit is lower than its carrying value. If
goodwill comprises a part of a cash-generating unit and the Company sells a part of the cash-generating unit’s business,
the goodwill pertaining to the sold business is included in the carrying value that is taken into account in calculating
gains or losses on the disposal of the business. Goodwill sold in this way is valued on the basis of the relative value of
the sold business and the value of the retained part of the cash-generating unit.
Goodwill is tested for impairment at least once a year. Impairment losses are charged against other operating expenses.
If the share in acquired assets, equity and liabilities and off-balance sheet liabilities of a subsidiary exceeds the cost of
acquisition of the subsidiary, the Group:
•
•
carries out revaluation of the identifiable assets, equity and liabilities, off-balance sheet liabilities and the
acquisition cost;
Any profits/losses arising from the dilution of shares in subsidiaries are disclosed in the income statement for the period
in which the sale was effected.
Property, plant and equipment are carried at cost less depreciation charges and impairment losses (except land). After
initial recognition, any increases in property, plant and equipment are recognised at cost. In 2006, there were no
revaluations of property, plant and equipment.
272
maintenance, affect the profit or loss for the reporting period in which they were incurred, except for the situation where
the acquisition or production cost of a component of an item of property, plant and equipment is material relative to the
acquisition or production cost of the entire item. In such cases, the cost amount increases the value of the item and is
subject to depreciation.
b) Depreciation
Items of property, plant and equipment, or their material or separable components, are depreciated using the straight
line method over their economic useful lives. Land is not depreciated.
Asset
Depreciation rate
Vehicles
20% and 33%
Computers
30%
10%
Buildings
10%
Structures
4 and 4.5%
Road machinery
17% and 20%
Equipment (group 6)
10%
Office equipment
20%
Lease agreements which transfer substantially all the risks and benefits incidental to ownership of items of property,
plant and equipment to the Company, are classified as financed lease. Assets held under financed lease agreements are
initially recognised at the lower of their fair value or the present value of the minimum lease payments, which are then
reduced by depreciation charges and impairment losses.
Tangible assets under construction are measured at the total of the costs directly attributable to their acquisition or
production, less impairment losses. Tangible assets under construction include also investment materials. Tangible
assets under construction are not depreciated until their completion and placement in service.
If any events or circumstances have occurred which give grounds to believe that the carrying value of an asset may not
be recoverable, such assets are tested for possible impairment of their value. Impairment losses are recognised when the
carrying value of an asset exceeds its recoverable value, which corresponds to the higher of the asset’s net selling price
or value in use. In order to determine whether an impairment of value has occurred, assets are classified down to the
lowest level for which separate cash flows can be identified.
Any gain/loss on the sale of an asset is determined by comparing the sale proceeds with the carrying value of such asset,
and recognised in operating profit.
INTANGIBLE ASSETS
impairment charges. Intangible assets are amortised on a straight-line basis over their estimated economic useful lives.
Tax amortisation rates are used for amortisation only if they correspond to the economic useful life of an asset. The
appropriateness of the applied amortisation periods and rates is reviewed periodically, but not less frequently that at the
end of each financial year, and the adjustments to the amortisation charges, if any, are made in the following periods.
If any events or circumstances have occurred which give grounds to believe that the carrying value of an intangible
asset may not be recoverable, such an asset is tested for impairment. Impairment losses are recognised when the
273
carrying value of an asset exceeds its recoverable value, which corresponds to the higher of the net selling price or value
in use of such asset.
Expenses on research work are charged to costs as they are incurred. Costs of completed development work conducted
for the Group’s own needs which were incurred prior to the launch of production or application of new technological
solutions are classified as intangible assets if the Group is able to demonstrate:
the manner in which the intangible asset will generate probable economic benefits. Amongst other things, the
Group should prove the existence of a market for the products which come into existence thanks to the intangible
asset or for the intangible asset itself, or – if the asset is to be used by the Group itself – its usefulness,
the feasibility of a reliable determination of the expenditure incurred in the course of the development work which
may be allocated to the intangible asset.
Any costs of development work which fail to meet these criteria are charged to the income statement in the period in
which they were incurred.
b) Software
c) Amortisation
Amortisation rate
50%
20%
GOODWILL
Goodwill represents the excess of the acquisition cost over the fair value of a Group’s share in identifiable net assets of
an acquired subsidiary on the acquisition date. Goodwill arising on the acquisition of subsidiaries is recognised in the
balance sheet under non-current assets as a separate item.
Goodwill is tested annually for impairment and shown in the balance sheet at cost less cumulated impairment charges.
Any gains or losses on disposal of an undertaking are recognised net of the carrying value of the goodwill pertaining to
the sold undertaking.
INVESTMENT PROPERTY
FINANCIAL ASSETS
3. financial assets available for sale – no such assets were recorded in the reporting period,
274
financial assets at fair value through profit or loss and presented in the balance sheet under current assets. Assets with
specified maturities that the Group has the intention and the capacity to hold to maturity are classified as investments
held to maturity and presented in the balance sheet under non-current assets, unless their maturity date falls within 12
months from the balance-sheet date. Assets with unspecified maturities which can be disposed of if cash is needed or in
response to changes of interest rates, are classified as available for sale. The Group presents them in the balance sheet as
non-current assets, unless the management has expressed an intention to hold them for a period shorter than 12 months
from the balance-sheet date or they are to be liquidated in order to raise working capital, in which case they are
presented as current assets. Financial assets arising as a result of delivery of cash, goods or services to the other party,
and not intended to be resold in a short time, are classified as loans and receivables and presented under non-current
assets. The management assigns each particular financial asset to a relevant category upon its acquisition.
Purchase and sale of financial assets is recognised at the transaction date, i.e. the date on which the Group assumes the
obligation to purchase or sell the assets. The acquisition cost comprises the transaction-related fees. Financial assets at
fair value through profit or loss and financial assets available for sale are carried at fair value. Investments held
to maturity are measured at amortised cost using the effective interest rate method. Realised and unrealised gains and
losses arising from changes in the fair value of assets at fair value through profit or loss are recognised in the income
statement, and those arising from changes in the fair value of assets available for sale – directly in equity for the period
in which they arose. Fair value of investments is determined by reference to buy prices quoted on the stock exchange or
on the basis of forecast cash flows. Fair value of equity securities of private companies is estimated on the basis of
relevant Price/Earnings and Price/Cash Flows ratios which are appropriate for a given instrument, or determined using
other valuation models. Equity instruments whose value cannot be reliably measured are carried at cost less impairment
losses, if any.
LEASING
Lease agreements which transfer to the Group substantially all the risks and benefits incidental to ownership of items of
property, plant and equipment, are classified as financed lease. Financed lease is disclosed in the accounting books at
the amount of the fair value of the leased asset, as determined at the inception of the lease, or, if lower, at the present
value of minimum lease payments. Lease payments are apportioned between financial expenses and reduction of the
outstanding lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Liabilities
under lease payments, less the interest expense component, are presented under non-current liabilities. The interest
expense component of financial expenses is disclosed in the income statement over the lease term. Tangible assets used
under financed lease agreements are depreciated over the shorter of: their useful economic life or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified by the
Group as operating leases. Operating lease payments made by the Group under such arrangements are recognised in the
income statement over the lease term (net of discounts, if any, offered by the lessor).
INVENTORIES
All inventories are subject to regular review in terms of their usefulness and market value. If it is found that inventories
require revaluation, a valuation allowance of an appropriate amount is made.
TRADE RECEIVABLES
Current trade and other receivables are carried at amounts due, unless the impact of accrued interest is substantial.
Otherwise, receivables are initially disclosed at fair value and then at amortised cost using the effective interest rate.
According to the rule adopted by the Group, receivables maturing in over 180 days are discounted.
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash-flow statement, cash and
cash equivalents include cash in hand, bank deposits payable on demand and other highly liquid instruments. For the
purpose of cash-flow statement, the Group decided not to disclose current-account loans and restricted cash under cash
and cash equivalents; consequently, these are presented as a separate balance-sheet item.
275
Transactions in foreign currencies are settled at the mid-exchange rate quoted by the National Bank of Poland for the
transaction date.
As at the balance-sheet date, monetary assets and liabilities are valued at the mid-exchange rate quoted for a given
currency by the National Bank of Poland for that date.
DEFERRED INCOME TAX
Deferred tax liability is created using the balance-sheet liability method in relation to all temporary differences existing
as at the balance-sheet date between the tax base of assets and liabilities and their carrying value as disclosed in the
financial statements. The main temporary differences arise from revaluation of certain non-current assets, current assets,
derivative financial instruments, provisions, accruals and deferred income and tax losses brought forward.
Deferred tax asset and liabilities are measured at the tax rates that, in the Management Board’s opinion, are expected to
apply on the day when the asset is realised or the liability is settled.
A deferred tax asset is disclosed for all deductible temporary differences to the extent that it is likely that taxable profit
will be available against which the temporary differences can be utilised.
An asset is recognised only where its carrying amount can be realised in the form of economic benefits to the Group in
future periods. When the carrying amount of an asset exceeds its tax value, the amount of taxable economic benefits
will be higher that the amount which will be allowed as tax-deductible costs. This difference is a taxable temporary
difference, and the obligation to pay the resulting income taxes in future periods is reflected in the deferred tax liability.
After the Group realises the carrying amount of the asset, the taxable temporary difference reverses, the Group reports
taxable profit, and this creates probability of an outflow of economic benefits from the Group in the form of tax
payments.
EQUITY
Equity is the capital and funds created in accordance with the applicable laws and regulations, applicable statutes and
the articles of association. Equity also includes retained profits and accumulated losses brought forward.
Equity is carried in the accounting books at par value by type and in compliance with the provisions of law or articles of
association.
The share capital of an incorporated company is disclosed in the amount specified in its articles of association and
entered in the court register. Contributions to equity that have been declared but not paid are disclosed as called-up
share capital not paid.
Proceeds from issues of new shares are disclosed under equity. No adjustment is made in connection with a difference,
if any, between the issue price and the market value of the issued shares.
The statutory reserve funds are created from profit distributions or by transfers from the revaluation capital reserve.
The statutory reserve funds include a fund created from profit distributions which is used to cover balance-sheet losses.
• deferred tax,
statutory reserve funds. Impairment charges for non-current assets which were earlier revalued, decrease the revaluation
capital reserve by up to the value of the portion of the reserve which relates to a given asset.
undertaking’s equity interest in a given subsidiary are added to the relevant items of the parent undertaking’s equity.
276
The consolidated net profit (loss) of the consolidated members of the Group comprises the net profit (loss) of the
parent undertaking and the net profits (losses) of subsidiary undertakings in the amounts corresponding to the parent
undertaking’s equity interests in such undertakings.
•
•
•
•
•
•
MINORITY INTERESTS
Minority interests are disclosed at the total of equity of subsidiary undertakings consolidated with the full method held
by companies other than members of the Group.
The part of the net profit (loss) of subsidiary undertakings held by minority shareholders other than members of the
Group represents the profit (loss) attributable to minority interests.
Equity and capitals also include net profit pending approval, less planned dividend and dividend declared but not paid.
The net profit (loss) for the financial year is the result disclosed in the income statement for the current year adjusted for
the corporate income tax charge.
Long- and short-term bank loans and borrowings are initially disclosed at the net value of received funds. i.e. less the
costs of obtaining them. After the initial disclosure, all bank loans, debt securities and loans are valued at the adjusted
acquisition cost (amortised cost) using the effective interest rate. The difference between the received net cash (less the
costs of obtaining the funds) and the amount to be repaid is disclosed in the income statement over the loan term. All
external financing costs are charged to the income statement of the period to which they pertain. The Group applies the
standard approach in this respect.
PROVISIONS
Provisions are recognised if the Group has an obligation (legal or following from commercial practice) resulting from
past events, and if it is probable that the discharge of that obligation will cause an outflow of funds, assuming that the
amount of such outflow can be reliably estimated.
The Group also creates provisions for contracts that give rise to obligations on its part if it expects the costs which must
be incurred in connection with performance of such contracts to exceed future benefits thereunder.
When preparing the IFRS-compliant consolidated financial statements, the Management Board is required to make
judgments, estimates and assumptions, which affect the adopted accounting policies and the reported amounts of assets,
liabilities, revenue and expenses. The estimates and underlying assumptions are based on historical experience and
various other factors deemed relevant under the circumstances, and their results provide the basis for making judgment
about the carrying values of assets and liabilities which cannot be established on the basis of other sources. Actual
results may differ from such estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of accounting estimates are
recognised in the period in which the estimate is revised.
Provisions for retirement benefits, unused holidays and related benefits are valued at estimated amounts determined by
the companies’ management boards with the use of actuarial methods.
277
REVENUE
Interest income is recognised as the interest accrues throughout the agreement term, on the basis of the outstanding
amounts receivable and the effective interest rate in the period to maturity, after the income due to the Group has been
determined.
OPERATING EXPENSES
The Group undertakings record their expenditures by type and by function. The costs of goods for resale, products and
services sold are the costs directly attributable to the production or acquisition of goods for resale and services sold. The
selling costs comprise commercial costs and costs of advertising and entertainment. The general administrative
expenses comprise the costs associated with the Group undertakings’ management and the costs of administration and
entertainment.
• Other operating income and expenses indirectly related to the Group’s activities, including gains and losses on
disposal of non-current non-financial assets, revaluation of non-financial assets, creation and release of
provisions for future risk, penalties, fines, compensation, as well as donations received or granted,
• Financial income related to dividends (distributions from profit), interest, gains on disposal of investments,
revaluation of investments and an excess of foreign exchange gains over foreign exchange losses,
• Financial expenses related to interest, losses on disposal of investments, revaluation of investments and an
excess of foreign exchange losses over foreign exchange gains,
• Extraordinary gains and losses resulting from events which are difficult to predict and which are not related to
the general business risk.
equipment which requires a longer time to become fit for use or resale, increase the production costs of a given asset,
until the date of its placement in service. Any income generated from short-term investments of proceeds from external
financing, which is connected with the production of assets, decreases the capitalised costs of external financing. The
remaining costs of external financing are charged directly against the income statement in the reporting period in which
they are incurred.
SEGMENT REPORTING
A business segment is a distinguishable component of the Group that is engaged in providing products or services and
that is subject to risks and returns that are different from those of other business segments.
The services provided by the Group are uniform. The information disclosed in the consolidated financial statements at
the Group level is consistent with the information relating to a particular business segment.
The Group does not report its financial information by geographical segments, as it is not engaged in the distribution of
goods or provision of services in different economic environments which are subject to different risks and different
returns. The Group’s home country is Poland.
The Group’s operations are exposed to various financial risks, including the risk of volatile market prices of debt and
equity instruments as well as fluctuations in exchange rates and interest rates. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and is designed to minimise potential adverse effects of
the risks on the Group’s financial performance.
278
Credit Risk
The Group’s financial assets exposed to credit risk concentration are settlements with related undertakings and trade
receivables.
Trade receivables are presented in the financial statements net of valuation allowances and reflect the nature of the
Group’s operations.
The Group applies a trade credit policy under which it sells its products and provides services and financing only to
customers with proven credit records and high credit ratings.
In the opinion of the Management Board, the Group’s credit risk exposure has been assessed correctly. The credit risk is
reflected in the accounting books by making relevant allowances for receivables.
The Group is not engaged in any activities which would require hedging against the risk of exchange rate fluctuations.
Interest Rate Risk
The Group’s profits and operating cash flows are to a certain extent exposed to changes in interest rates, as most of the
Group’s loans and borrowings bear interest at variable rates.
Moreover, a significant portion of the Group’s assets is comprised of corporate debt securities held to maturity with
fixed interest rates, purchased from related undertakings. Although the maturity dates of the individual debt securities
do not exceed 12 months, the tranches redeemed are usually replaced with the subsequent issues of securities and,
consequently, such securities are classified as non-current assets.
The loans advanced to non-related undertakings bear interest at fixed or variable rates. The loans with variable interest
rates are exposed to the risk of interest rate reductions.
The Management Board of the Company believes that the use of hedging instruments or other similar measures aimed
at mitigating the interest rate risk would not be cost effective.
Liquidity Risk
The principles of prudent management of liquidity risk require that the Group maintain sufficient balances of cash and
marketable securities, and secure the necessary financing in the form of credit facilities. Considering its dynamic
expansion, the Group’s objective is to ensure it has access to flexible financing, such as bank credit facilities.
Financial derivatives are initially recognised at acquisition cost, to be later measured at fair value. Any changes in the
fair value of financial derivatives are promptly charged to the income statement, as the Group does not use any financial
derivatives meeting the criteria of the hedging accounting under IAS 39. Derivatives are presented in the balance sheet
as financial assets or liabilities measured at fair value through profit or loss.
Fair Value
The fair value of publicly traded financial instruments is determined based on listed market prices as at the balancesheet date. The fair value of forward currency contracts is determined based on the market forward rates of the
individual currencies as at the balance-sheet date.
To estimate the fair value of derivatives which are not publicly traded and other financial instruments, the Group applies
various methods and assumptions based on the market conditions prevailing as at each balance-sheet date. The Group
usually uses market or dealers’ quotations for given or similar instruments. In the case of other instruments, the fair
value is established using other techniques, such as option valuation models or the DCF method.
With respect to certain embedded financial derivatives (forward currency contracts) for which no forward exchange
rates are listed due to the distant maturity dates of the contracts, the Group calculates forward rates using the interest
rate relation model.
279
In the case of options for securities for which no active market exists, the fair value is usually determined using the
Black-Scholes option valuation model.
It is assumed that the nominal values (net of any potential credit adjustments) of financial assets and liabilities maturing
in less than one year, reflect the fair values of such assets and liabilities. For the purposes of disclosure in the financial
statements, the fair value of financial liabilities is estimated by discounting the expected contractual cash flows with an
interest rate currently applied by the Group to similar financial instruments.
The Group does not hold any financial assets or liabilities whose fair value would differ from the book value as at
December 31st 2005 and December 31st 2004.
Financial instruments purchased on regulated markets are recognised at acquisition cost, to be later measured at fair
value. The fair value of publicly traded financial instruments is determined based on listed market prices as at the
balance-sheet date.
5.
The consolidated quarterly financial statements contain comparable data for the corresponding period of the
previous year.
6.
Pursuant to the adopted accounting policies, in Q3 the Group recognised deferred tax liability totalling PLN 20
thousand. The Group also adjusted the deferred tax asset by a total of PLN 130 thousand.
7.
In the period covered by these financial statements:
-
the Group’s business was not subject to any seasonality or cyclicality,
-
no debt or equity securities were issued, redeemed or repaid,
-
no events occurred after September 30th 2006 which have not been disclosed in the consolidated quarterly
financial statements and which might have a significant effect on the financial performance of the MNI Group
in the future,
-
in comparison with the previous quarter, the following undertakings were incorporated into the Group in
Q3 2006:
•
MoCoHub Sp. z o.o. of Kraków, whose business consists in telecommunications and media services.
MNI S.A. holds a 75% equity interest in the company’s share capital. The share capital of the acquired
company amounts to PLN 100 thousand and is divided into 200 shares. As at the acquisition date, the
company had a balance-sheet total of PLN 566 thousand and reported a net profit of PLN 123 thousand.
The acquisition cost of the shares was PLN 3,000 thousand.
•
DataCOM S.A. of Ursus, whose business consists in telecommunications services. MNI Telecom Sp. z
o.o. acquired 2,570,566 shares in DataCOM S.A., representing 76.49% of the share capital and of the
total vote at the General Shareholders Meeting. The acquisition cost was PLN 19,000 thousand. As at
the acquisition date, the company had assets of PLN 33,148 thousand and reported a net profit of PLN
2,208 thousand.
280
-
in Q3 2006, MNI S.A. disposed of its 100% equity interest in Media Personel Service Sp. z o.o., a member of
the MNI Group. The company’s share capital amounted to PLN 50 thousand and was divided into 1,000
shares. The selling price was PLN 80 thousand. The balance-sheet total of the sold company stood at PLN
435 thousand and the Q3 net profit was PLN 75 thousand.
2. SUBSIDIARY UNDERTAKINGS
STATEMENTS:
1.
OF THE
MNI GROUP INCLUDED
IN THE
CONSOLIDATED QUARTERLY FINANCIAL
MNI Telecom Sp. z o.o. (formerly: Telefonia Pilicka Sp. z o.o.) of Radom – telecommunications services –100%
equity interest;
2.
Legion Polska Sp. z o.o. of Warsaw – telecommunications services – 100% equity interest;
3.
MNI Technology Development Sp. z o.o. (formerly: Szeptel International Sp. z o.o.) of Szepietowo – auxiliary
company; human resources and logistics management for the Call Centre in Szepietowo, 100% equity interest;
after the change of the company’s name and function within the MNI Group, it became the Content Production
Centre for mobile telephone services;
4.
MoCoHub Sp. z o.o. of Kraków – telecommunications and media services – 75% equity interest.
5.
DataCOM S.A. of Ursus – telecommunications services – MNI Telecom Sp. z o.o. holds 2,570,566 shares in the
company, representing 76.49% of its share capital and total vote at the General Shareholders Meeting.
3. NON-CONSOLIDATED SUBSIDIARY UNDERTAKINGS
1.
Szeptel Internet Sp. z o.o. of Kraków – (placed in liquidation) – no business conducted;
2.
EPL Sp. z o.o. of Szepietowo – (placed in liquidation) – no business conducted;
3.
BIA-NET Sp. z o.o. of Białystok – (placed in liquidation) – no business conducted.
4. COURT AND OTHER PROCEEDINGS
The Company reports that no proceedings are pending before any court or public administration authority concerning
liabilities or claims of the Company or its subsidiary undertakings, whose value would represent 10% or more of the
Company’s equity.
281
5. CONTINGENT LIABILITIES OF THE MNI GROUP AS AT SEPTEMBER 30TH 2006
• promissory notes (blank promissory notes with promissory note declarations)
PLN 4,661 thousand,
• list of liabilities secured on the Group’s assets
Type of liability
movables –
MNI Telecom Sp z o.o.
specified identity – MNI S.A.
4. Assignment of receivables
under issued invoices –
Creditor
PKO S.A.
Value of secured assets
as at Sep 30 2006
(PLN ‘000)
Property, plant and
equipment
4,697
PKO S.A.
Property, plant and
equipment
5,097
BRE BANK
Property, plant and
equipment
81,000
BRE BANK
1,500
6. SIGNIFICANT ACHIEVEMENTS AND FAILURES IN THE REPORTING PERIOD
In line with the adopted strategy, the MNI Group companies consistently develop their operations in the media and
telecommunications segment (value-added media services (including call centre) and universal telecommunications
services).
Thanks to the dynamic growth of operations in the media sector, this area of business is currently one of the main drivers
of the Group’s sales revenue, accounting for nearly 48.34% of net sales revenue in Q3 2006.
Given the sustained significant predominance of the media segment in the Company’s operations and sales results, on
June 9th 2006 the Warsaw Stock Exchange reclassified MNI from the “Telecommunications” category to the “Media”
category.
In Q3 2006, the MNI Group reported sales revenue of PLN 37,361 thousand, which represents an increase of
nearly 80% relative to the revenue generated in the corresponding period of 2005 (PLN 20,832 thousand).
Significant changes in the sales structure, revenue and EBITDA of the MNI Group in Q3 2006 vs. Q3 2005 are
presented in the table and graphs below:
Table: Sales revenue structure of the MNI Group (PLN ‘000)
Q3 2005
% share
Q3 2006
% share
Change (%)
Total revenue
20,832
100.0%
37,361
100.0%
+ 79.34 %
- media and call centre services
- other
11,410
7,620
1,802
54.77%
36.58%
8.65%
18,063
18,145
1,153
48.34%
48.57%
3.09%
+ 58.31 %
+ 138.12 %
- 36.02 %
282
Sales structure in Q3 2005
Sales structure in Q3 2006
8.65%
3.09%
36.58%
Media and call center services
54.77%
Telecomm. services
48.34%
48.57%
Other services
Media and call center services
Telecomm. services
Other services
EBITDA (PLN ‘000)
9,781
37,361
7,264
40,000
35,000
10,000
20,832
8,000
30,000
25,000
6,000
20,000
4,000
15,000
10,000
2,000
5,000
0
0
Q3 2005
Q3 2006
Q3 2005
Q3 2006
The Company’s comment on the results presents above:
•
The largest item in the Group’s revenue structure in Q3 2006 in terms of value is sales of telecommunications
services (PLN 18,145m).
•
The increase in the value of media and call centre services by over 58% in comparison with the corresponding
period of 2005 is related to the acquisition of entities applying premium rate telecommunication tariffs (Legion
Polska) (in 2005) and their further development within the Group, as well as the growth of the media services
market in Poland and consistent implementation of the Group’s development strategy.
•
The growth of over 138% recorded in sales of traditional communications services confirms the effectiveness of
the telecommunications strategy pursued by the Group. Such a high growth rate is attributable primarily to
consistent implementation of the strategy adopted for this segment of the Group’s business: acquisitions
(incorporation of MNI Telecom Sp. z o.o. into the Group), interconnect settlements with TP SA according to the
RIO principle, broadband Internet access, increase in the number of subscribers, lower costs and – the key
driver of this growth – increase in the volume of wholesale exchange of telecommunications traffic.
•
The aggregate increase of nearly 80% in the value of sales of services in Q3 2006 relative to Q3 2005 confirms
correctness of the MNI Group’s strategy and of the decision to pursue acquisitions.
6.1) Significant Events in the MNI Group in the Reporting Period:
1.
July 13th 2006 – execution of a conditional share purchase agreement, whereby MNI Telecom Sp. z o.o.
(formerly Pilicka Telefonia Sp. z o.o.), a subsidiary, acquired shares in dataCOM S.A. of Warsaw from JUPITER
Narodowy Fundusz Inwestycyjny S.A. of Warsaw.
283
2.
August 1st 2006 – execution of an agreement whereby MNI S.A. disposed of a 100% equity interest in the share
capital of Media Personel Service Sp. z o.o. of Warsaw.
3.
Commencement of activities aimed at preparing the Group’s structure logistically for technological development,
focused on achieving the following objectives:
a. Development of Content Production Centre, which will serve the needs of the Group itself and the entire
media services market (Java games, polyphonic ringtones, music, wallpapers, video content, films, multiplayer games, competitions, communications applications and entertainment services, etc).
b. Development of the offering of universal services and content for customers using mobile services and for the
Internet television and interactive digital television market, and also – in the form of dedicated applications –
for public TV broadcasters and Internet portals.
c. Development of the Group’s own distribution channels for electronic and traditional multimedia products and
of specialised tools to be used in the channels that already exist.
d. Integration of modern interactive and mobile technologies to provide for quick development and
customers.
e. Intensification of activity on foreign markets – from the supply of multimedia content, services and solutions,
to development and implementation of turn-key interactive media solutions for local TV channels and Internet
portals (involving the supply of an application and technology, and connection to the local mobile or fixed-line
network operators).
4.
August 11th 2006 – the Management Board of the Warsaw Stock Exchange publishes a quarterly review of the
list of companies to be included in the WIG 20 and MIDWIG indices after the September 15th session, according
to which the parent undertaking MNI S.A. is to be added to the MIDWIG index.
5.
August 11th 2006 – submission of the issue for series L shares in the parent undertaking MNI S.A. to the Polish
Securities and Exchange Commission in Warsaw.
6.
August 22nd 2006 – MNI S.A. and POLKOMTEL S.A. execute an Agreement on Entering into Negotiations with
a view to MNI S.A. commencing provision of mobile telecommunications services based on public mobile
telecommunication network of POLKOMTEL, under the MVNO SP (Virtual Operator) model.
7.
August 29th 2006 – finalisation of the acquisition by MNI Telecom Sp. o.o. of Radom, a subsidiary, of shares in
DataCOM S.A. of Warsaw from JUPITER Narodowy Fundusz Inwestycyjny S.A. of Warsaw.
8.
August 31st 2006 – execution of an agreement on negotiations concerning the purchase of a 51% equity interest
in Breakpoint Sp. z o.o., an experienced producer of Java games for the mobile market (approx. 60 unique game
applications used in networks of dozens of mobile operators worldwide – in Europe, Brazil, Singapore, Hong
Kong, India, and China). The company also has entered into contracts for distribution of its games in the
284
American market. Breakpoint’s distribution network consists of 16 distributors in Poland and 60 distributors
abroad. 90% of the company’s revenue is generated outside Poland.
9.
September 15th 2006 – execution of final agreements on the sale of 150 shares (75%) in MoCoHub of Kraków, a
limited liability company, and two preliminary agreements on the purchase of the remaining 50 shares (25%).
MoCoHub has been building its operations for several years as the provider of content for mobile multimedia
services for a large portion of the Polish market (nearly 90% of the market participants). As part of the Group’s
strategy aimed at organising the Group’s activities in focused areas of competence, MoCoHub will integrate the
entire area of obtaining, localising and providing content for multimedia services (games for mobile phones,
music, films, other multimedia content), for the purposes of MNI and the Group companies and for external
customers.
10.
September 26th 2006 – publication of consolidated semi-annual report for H1 2006.
6.2)
Events Subsequent to September 30th 2006 which May Significantly Affect Future Financial Performance
of the MNI Group
1.
October 11th 2006 – publication of the date of the Company’s Extraordinary General Shareholders Meeting
(November 15th 2006) convened to revise MNI S.A.’s corporate documents so as to make them compliant with
the law and suggestions put forward by the Polish Securities and Exchange Commission in connection with
preparing the prospectus for series L shares.
2.
October 30th 2006 – execution of a preliminary share purchase agreement for 57% of shares in Breakpoint Sp. z
o.o. by MNI S.A.
3.
November 6th 2006 – MNI S.A. is granted exclusivity in the negotiations to select a buyer for PKN Orlen S.A.’s
75% equity interest in Petrotel.
4.
November 8th 2006 – MNI S.A. and its subsidiary MNI Mobile S.A. on the one part, and Polska Telefonia
Komórkowa Centertel Sp. z o.o. on the other part, signed a Memorandum Concluding Negotiations (a Letter of
Intent) concerning cooperation in establishing an MVNO operator. Under the Letter of Intent, the parties undertook
to continue negotiations concerning the terms and conditions of the agreement. The negotiations will be held by
MNI and MNI Mobile on exclusivity basis. The parties undertook to make every effort to execute the agreement on
the provision of services within three months from the date of the Letter of Intent, and to commence provision of
services by MNI Mobile to end users on a commercial basis within five months from the agreement date. The
Management Board of MNI S.A. made an assessment of the project’s maturity and progress and the possibility of
achieving the set objective. Based on the findings of the assessment, the Management Board of MNI S.A.
decided to continue the work on the MVNO project with PTK Centertel. As a consequence, MNI S.A. terminated
its negotiations with other mobile operators in Poland, including in particular POLKOMTEL S.A.
285
7. FINANCIAL FORECAST
On September 4th 2006, the Company revised and published an updated financial forecast for the Group’s
consolidated net profit in 2006-2008. The new forecast accounts for the full-method consolidation of DataCom
S.A. from September 1st 2006:
2006
2007
2008
Value of services sold (PLN ‘000)
160,000
180,000
225,000
EBITDA (PLN ‘000)
40,000
50,000
65,000
The forecast presented above is based on the analysis of H1 2006 results, agreements concerning acquisition of
companies in the media and telecommunications services sector executed to date, and the forecast of the
development of the media and telecommunications services market at the end of 2006 and in 2007 and 2008.
8. PARENT UNDERTAKING SHAREHOLDERS
As at this report date, the following shareholders held more than 5% of shares or more than 5% of the total vote at the
General Shareholders Meeting of MNI S.A.
No.
Shareholder
Number of
shares
% of
shares
Number of votes
% of the
total vote
1.
7,357,590
32.60
7,357,590
32.56
2.
Andrzej Piechocki
1,398,812
6.20
1,398,812
6.19
3.
CATERHAM
MANAGEMENT Ltd.
1,250,000
5.54
1,250,000
5.53
FINANCIAL
9. CHANGES IN THE NUMBER OF PARENT UNDERTAKING SHARES
MANAGEMENT AND SUPERVISORY PERSONNEL
•
AND
SHARE-RELATED RIGHTS HELD
BY THE
On July 10th 2006, the Company received a notification from Piotr König, President of the Management Board
of MNI S.A., also serving as a Member of the Management Board of com.Investment. Sp. z o.o., to the effect
that com.Investment Sp. z o.o. disposed of 1,250,000 shares in MNI S.A. (Current Report No. 26/2006).
•
On October 20th 2006, the Company received a notification from Andrzej Piechocki, Chairman of the
Supervisory Board of MNI S.A., to the effect that Dedal Inwestycje Spółka z o.o. of Warsaw, in which Andrzej
Piechocki serves as a Member of the Management Board, sold 1,310,000 shares in MNI S.A. and Andrzej
Piechocki acquired directly 170,000 MNI S.A. shares (Current Report No. 47/2006).
•
On October 27th 2006, the Company received a notification from Andrzej Piechocki, Chairman of the
Supervisory Board of MNI S.A., stating that Dedal Inwestycje Spółka z o.o. of Warsaw, in which Andrzej
Piechocki serves as a Member of the Management Board, disposed of 524,332 shares in MNI S.A.
286
To the Company’s knowledge, the ownership of MNI S.A. shares by the Company’s Management and Supervisory
personnel as at this report date is as follows:
Supervisory Board
• Andrzej Piechocki, Chairman of the Supervisory Board, is a direct holder of 1,398,812 shares.
• Other Members of the Supervisory Board do not hold any shares in MNI S.A.
Management Board
• Piotr König, President of the Management Board, holds indirectly, as a Management Board Member of
com.Investment Sp. z o.o., 7,357,590 shares in MNI S.A., representing 32.60% of the company’s share
capital.
• Other Members of the Management Board do not hold any shares in MNI S.A.
10. RELATED-PARTY TRANSACTIONS, SURETIES AND LOANS
In the reporting period, the parent undertaking MNI S.A. concluded arms’ length transactions with MNI Telecom
Sp. z o.o., a subsidiary, concerning the sale of property, plant and equipment and sale of telecommunications
services. The value of the transactions made in the reporting period amounted to PLN 9,171 thousand.
The Company and its subsidiaries did not grant credit sureties or guarantees to any single entity or its subsidiary,
whose aggregate value exceeds 10% of the Issuer’s equity.
11. OTHER INFORMATION
In Q3 2006, the Group companies timely paid all amounts due under loans, taxes, and social security
contributions, amounts arising out of approved arrangement proceedings of the parent undertaking, and amounts
payable to suppliers.
12. COMPOSITION OF THE MANAGEMENT AND SUPERVISORY BODIES OF THE PARENT UNDERTAKING (MNI S.A.)
Supervisory Board – appointed on June 30th 2006 by the Ordinary General Shareholders Meeting of the
Company:
•
Mr Robert Gwiazdowski – Vice-Chairman of the Supervisory Board
•
Mr Tomasz Karasiński – Member of the Supervisory Board
•
Mr Andrzej Jerzy Piechocki – Chairman of the Supervisory Board
•
Mr Michał Jakub Tomczak – Secretary of the Supervisory Board
•
Mr Stanisław Marian Widera – Member of the Supervisory Board
287
Management Board – appointed on June 30th 2006 by the Supervisory Board of the Company:
•
Mr Piotr König – President of the Management Board
•
Mr Mariusz Piotr Pilewski – Member of the Management Board
•
Mr Leszek Wojciech Kułak – Member of the Management Board
13. EXCHANGE RATES APPLIED
The method of translating the złoty into the euro is specified in Par. 89.2 of the Regulation of the Minister of Finance of
October 19th 2005 as follows:
- individual items of the balance sheet are translated into the złoty and the euro at the mid exchange rate quoted by
the National Bank of Poland for a given currency for a given balance-sheet date – in the case of the data for Q3
2006 the Group applied the euro exchange rate in effect on September 29th – 3.9835, and in the case of the data
for Q3 2005 – the exchange rate of 3.966;
- individual items of the income statement are translated into the złoty and the euro at the rate equal to the
arithmetic mean of mid exchange rates quoted by the National Bank of Poland for the currency in which the
financial information to be translated was originally prepared, quoted for the last day of each full month of the
financial year – the following euro exchange rates were used to translate the Q3 2006 data: the exchange rate in
effect on July 31st (3.9321), August 31st (3.9369) and September 29th (3.9835); the mid exchange rate for
January 1st–September 30th 2006 was 3.9171 and the mid exchange rate for January 1st–September 30th 2005
was 4.067.
288
24. AUDITORS IN THE PERIOD COVERED BY HISTORICAL
FINANCIAL INFORMATION
24.1 Auditors’ First and Last Names, Addresses and Registered Offices
2003 Non-Consolidated Financial Statements
Zespół Biegłych Rewidentów AUDYTOR Sp. z o.o., registered office at ul. Zwycięstwa 8, 15-703 Białystok, Poland,
an auditing firm entered in the list of qualified auditors of financial statements, maintained by the National Chamber of
Qualified Auditors, under Reg. No. 1224.
Eugeniusz Jaszczuk – qualified auditor, Reg. No. 1407/2847
Stanisław Kuliś – qualified auditor, Reg. No. 2047/4910
2004 Non-Consolidated Financial Statements
Misters Audytor Sp. z o.o., registered office at ul. Migdałowa 4, room 28, 02-796 Warsaw, Poland, an auditing firm
entered in the list of qualified auditors of financial statements, maintained by the National Chamber of Statutory
Auditors, under Reg. No. 63.
Barbara Sieradzka – qualified auditor, Reg. No. 8343/2743
Barbara Misterska-Dragan – qualified auditor, Reg. No. 2581/117
2005 Non-Consolidated and Consolidated Financial Statements
MGI AKCEPT AUDYT Sp. z o.o., registered office at ul. Żelazna 54, room 5, 00-852 Warsaw, Poland, an auditing
firm entered in the list of qualified auditors of financial statements, maintained by the National Chamber of Statutory
Auditors, under Reg. No. 2835.
Maria Janiak – qualified auditor, Reg. No. 7763/2281
Janusz Wisłowski – qualified auditor, Reg. No. 10727/7789
24.2
Change of Auditors
The change of auditors follows from a change in the scope of services provided by the Company in the last three years,
which resulted in the Company’s reclassification by the WSE from the telecommunications sector to the media sector.
Therefore, the Company took steps to find an auditor having experience in providing audit services with respect to the
type of business conducted by the Company, with a view to increasing efficiency of the work related to audits.
289
25. PERSONS RESPONSIBLE FOR INFORMATION CONTAINED
IN THE ISSUE PROSPECTUS
REPRESENTATION COMPLIANT WITH COMMISSION REGULATION (EC) NO. 809/2004 of April 29th
2004
MNI Spółka Akcyjna of Warsaw, responsible for information contained in this Prospectus, hereby represents, having
made every effort to ensure that such is the case, that to the best of its knowledge the information contained in this
Prospectus is true, correct and accurate and nothing that could have a bearing on its content has been omitted.
MNI Spółka Akcyjna
Leszek Wojciech Kułak
Member of Management Board
Member of Management Board
Piotr König
President of Management Board
290
26. DEFINITIONS
Shares
Offered Shares
Series L Shares
Shareholder
Supplement
Auditor
Issue Price
CeTo
Prospectus Date
Financial Adviser
Legal Adviser
Directive 2003/71/EC
Dz. U.
Record Date
EBIT
EBITDA
Issuer, MNI, Company
EURIBOR
euro, EUR
Fund
Warsaw Stock Exchange, WSE
Group, Issuer’s Group, MNI
Group
Polish Central Statistics Office
(GUS)
Retail Investor
Institutional Investor
Polish NDS
Penal Code
Civil Code
Commercial Code
Code of Administrative
Procedure
Labour Code
Commercial Companies Code
Financial Supervision Authority
KRS
KW
Shares in MNI S.A.
MNI S.A. shares to be acquired by investors on the terms set forth in this
Prospectus
Series L ordinary bearer shares in MNI S.A. with a par value of PLN 1
Person holding the Issuer shares
Supplement to the Issue Prospectus, as referred to in Art. 51 of the Public
Offering Act
MGI Akcept Audyt Sp. z o.o. of Warsaw
Issue Price of the Offered Shares
Over-the-counter market (CeTo)
Date of approval of the Prospectus by the Financial Supervision Authority
BRE Corporate Finance Spółka Akcyjna of Warsaw
Tomczak i Partnerzy Spółka Adwokacka of Warsaw
Directive 2003/71/EC of the European Parliament and Council of November 4th
2003 on the issue prospectus to be published when securities are offered to the
public or admitted to trading, and amending Directive 2001/34/EC
Journal of Laws (Dziennik Ustaw Rzeczypospolitej Polskiej)
Day as at the end of which shareholders receive pre-emptive rights. One Share
confers one pre-emptive right.
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation
MNI S.A. of Warsaw
European Inter Bank Offering Rate – interest rate offered on the interbank market
in the euro zone for euro-denominated interbank loans
Single currency of the member states of the European Economic and Monetary
Union
JUPITER Narodowy Fundusz Inwestycyjny S.A. of Warsaw
Giełda Papierów Wartościowych w Warszawie S.A.
The MNI Group within the meaning of the Accountancy Act
The Polish Central Statistics Office (GUS)
Natural persons, both Residents and Non-residents
Legal persons and unincorporated organisations, both Residents and NonResidents, including entities involved in discretionary management of securities
portfolios (in the case of a single subscription on behalf of persons whose
securities accounts they manage and for the benefit of whom they intend to
acquire the Offered Shares)
Krajowy Depozyt Papierów Wartościowych Spółka Akcyjna of Warsaw (National
Depository for Securities)
Act of June 6th 1997 – Polish Penal Code (Dz.U. of 1997, No. 88, item 553)
Act of April 23rd 1964 – Polish Civil Code (Dz.U. No. 16, item 93, as amended)
Regulation of the President of the Republic of Poland of June 27th 1934 – Polish
Commercial Code (Dz. U. of 1946, No. 57, item 502, as amended)
Act of June 14th 1960 – Polish Code of Administrative Procedure (Dz.U. of 2000,
No. 98, item 1071, as amended)
Act of June 26th 1974 – Polish Labour Code (Dz.U. of 1998, No. 21, item 94, as
amended)
Act of September 15th 2000 – Polish Commercial Companies Code (Dz.U.
Polish Financial Supervision Authority (Komisja Nadzoru Finansowego)
Land and Mortgage Register
291
Legion Polska
LIBOR
M.P.
M
IFRS
MNI Telecom
National Bank of Poland
Non-Resident
Extraordinary General
Shareholders Meeting
OECD
Public Offering
Offeror, Dom Inwestycyjny
BRE Banku S.A.
Tax Legislation Act
Polish Press Agency (PAP)
Rights to Shares
GDP
PLN, złoty
Subsidiary
POK
Banking Law
Foreign Exchange Act
Environmental Protection Act
Telecommunications Law
Bankruptcy Law
Bankruptcy and Recovery Law
Industrial Property Law
President
Prospectus, Issue Prospectus
Supervisory Board
Current Report
Regulation S
WSE Rules
Legion Polska Sp. z o.o. of Warsaw
London Inter Bank Offering Rate – interest rate offered on the British interbank
market for interbank loans
Official Journal Monitor Polski
Million
International Financial Reporting Standards
MNI Telecom Sp. z o.o. of Radom (formerly operating as Pilicka Telefonia Sp. z
o.o.)
National Bank of Poland
Persons, entities, and organisational units referred to in Art. 2.1.2 of the Foreign
Exchange Act
Extraordinary General Shareholders Meeting of the Issuer
Organisation for Economic Cooperation and Development
Public Offering, within the meaning of the Public Offering Act, carried out in
relation with the offering of the Offered Shares to the public
Dom Inwestycyjny BRE Banku Spółka Akcyjna of Warsaw, an investment firm
within the meaning of the Act on Trading in Financial Instruments, the offeror of
the Offered Shares
Act of August 29th 1997 – Polish Tax Legislation Act (Dz.U. No. 137, item 926,
as amended)
Polish Press Agency (PAP)
Rights to Series F Shares – transferable property rights having the nature of a
security within the meaning of Art. 3.29 of the Act on Trading in Financial
Instruments
gross domestic product
Złoty, legal tender of the Republic of Poland introduced into circulation on
January 1st 1995, in accordance with the Act of July 7th 1994 on redenomination
of the złoty (Dz. U. No. 84, item 386), equivalent to PLZ 10,000 before
redenomination
Entity in relation to which the Issuer is the parent entity within the meaning of
Art. 4.14 of the Public Offering Act
Customer Service Point
Act of August 29th 1997 – Polish Banking Law (Dz.U. of 2002, No. 72, item 665,
as amended)
Act of July 27th 2002 – Polish Foreign Exchange Act (Dz.U. No. 141, item 1178,
as amended)
Act of April 27th 2001 – Polish Environmental Protection Act (Dz.U. of 2001,
No. 62, item 627)
Act of July 16th 2004 – Polish Telecommunications Law (Dz.U. of 2004, No.
171, item 1800)
Regulation of the President of the Republic of Poland of October 24th 1934 –
Polish Bankruptcy Law (Dz.U. of 1991, No. 118, item 512, as amended)
Act of February 28th 2003 – Polish Bankruptcy and Recovery Law (Dz.U.
Act of June 30th 2000 – Polish Industrial Property Law (Dz.U. of 2003, No. 119,
item 1117, as amended)
President of the Company’s Management Board
This Prospectus, the only legally binding document containing information on the
Public Offering and the Company, prepared in accordance with Commission
Regulation (EC) No. 809/2004,
Supervisory Board of MNI S.A.
Current information submitted by the Issuer, in the form and scope specified in
the Regulation of the Polish Minister of Finance of October 19th 2005 on current
and periodic information to be published by issuers of securities (Dz.U. No. 209,
item 1744)
Secondary legislation issued under the American Securities Act, defining the rules
governing sales and offers of securities made outside the United States without
registration under the American Securities Act
Rules of the Warsaw Stock Exchange adopted by virtue of Resolution
No. 1/1110/2006 of the WSE Supervisory Board of January 4th 2006
292
No. 1/1110/2006 of the WSE Supervisory Board of January 4th 2006
(as amended)
Rules of Procedure of the
Supervisory Board
Commercial Register
Register of Entrepreneurs of the
Register of Pledges
Rep.
Resident
Commission Regulation (EC)
809/2004
Regulation on current
periodic information
and
Regulation on the official stockexchange listing market
Council
Regulation
Concentrations
on
Spółka akcyjna, S.A.
Registry Court
State Treasury
Sp. z o.o.
Issue Sponsor
Articles of Association
Detailed Rules of Operation of
the Polish NDS
Detailed Rules of
Exchange Trading
TP S.A.
Forward transaction
Stock-
Office
of
Electronic
Communications (UKE)
Anti-Trust
and
Consumer
Protection Office
Telecommunications and Post
Regulatory Authority
USD
National Court Register Act
Act
on
Capital
Supervision
Bond Act
Market
Act on Trading in Financial
Instruments
Anti-Trust
and
Consumer
Protection Act
Rules of Procedure of the Supervisory Board of MNI S.A.
The commercial register referred to in the Commercial Code
The register of entrepreneurs referred to in the National Court Register Act
The register of pledges or central information on registered pledges referred to in
the Act on Registered Pledges and Register of Pledges of December 6th 1996 (Dz.
U. No. 149, item 703, as amended)
Repertory
Persons, entities and organisational units referred to in Art. 2.1.1 of the Foreign
Exchange Act
European Commission Regulation (EC) No. 809/2004 of April 29th implementing
Directive 2003/71/EC of the European Parliament and Council regarding
information contained in prospectuses and the format, incorporation by reference
and publication of such prospectuses and dissemination of advertisements
Minister of Finance’s Regulation on current and periodic information to be
published by issuers of securities, dated October 11th 2005 (Dz. U. No. 209, item
1744)
Minister of Finance’s Regulation on detailed conditions to be fulfilled by an
official market of stock-exchange listing and issuers of securities admitted to
trading on such a market, dated October 14th 2005 (Dz.U. No. 206, item 1712)
Council Regulation No. 139/2004 of January 20th 2004 on the control of
concentrations between undertakings (Official Journal of the European Union,
L 24/1 of January 29th 2004)
A joint-stock company
District Court for the capital city of Warsaw, XII Commercial Division of the
Polish State Treasury
A limited-liability company
Entity maintaining the register of holders of the Issuer shares which are not
deposited on securities accounts
Consolidated text of the Issuer’s Articles of Association, attached hereto (Section
25.1)
Detailed Rules of Operation of the Polish NDS, an Appendix to Resolution No.
79/98 of the Executive Board of the Polish NDS, dated January 29th 1998
(as amended)
Detailed Rules of Stock-Exchange Trading, adopted by virtue of Resolution No.
4/2006 of the WSE Management Board of January 10th 2004 (as amended)
Telekomunikacja Polska Spółka Akcyjna (joint-stock company)
Agreement to buy or sell a specific commodity or a financial instrument at a
future date and at a predetermined price. If the price is determined at an earlier
date, it helps to reduce the price volatility risk.
Polish Office of Electronic Communications
Polish Anti-Trust and Consumer Protection Office
Polish Telecommunications and Post Regulatory Authority
American dollar, the monetary unit in the United States of America
Polish National Court Register Act of August 20th 1997 (Dz. U. of 2001, No. 17,
Polish Act on Capital Market Supervision of July 29th 2005 (Dz. U. of 2005,
No. 183, item 1537)
Polish Bond Act of June 29th 1995 (Dz. U. of 2001, No. 120, item 1300, as
amended)
Polish Act on Trading in Financial Instruments of July 29th 2005 (Dz. U. of 2005,
No. 183, item 1538)
Polish Anti-Trust and Consumer Protection Act of December 15th 2000 (Dz. U.
of 2003, No. 86, item 804, as amended)
293
Waste Management Act
Public Offering Act
Stamp Duty Act
Personal Income Tax Act
Corporate Income Tax Act
Act on Duty on Actions under
Civil Law
Copyright Act
Accountancy Act
Act on Freedom of Business
Activity
Remuneration Act
Inventions Act
Act on Employee Benefits Fund
Act on Waste
Equipment
VAT
WIBOR
Electronic
GM, General Shareholders
Meeting
Additional Subscription Order
Basic Subscription Order
Management
Board,
the
Issuer’s
Management
Board,
the
Company’s
Management Board
ZUS
Polish Waste Management Act of April 27th 2001 (Dz. U. of 2001, No. 62,
item 628)
Polish Act on Public Offering, Conditions Governing the Introduction of
Financial Instruments to Organised Trading, and Public Companies (Dz. U. of
2005, No. 184, item 1539)
Polish Stamp Duty Act of September 9th 2000 (Dz. U. of 2004, No. 253, item
2532, as amended)
Polish Personal Income Tax Act of July 26th 1991 (Dz. U. of 2000, No. 14,
Polish Corporate Income Tax Act of February 15th 1992 (Dz. U. of 2000, No. 54,
Polish Act on Duty on Actions under Civil Law (Dz. U. No. 86, item 959, as
amended)
Polish Copyright and Neighbouring Rights Act of February 4th 1994 (Dz. U. of
2000, No. 80, item 904, as amended)
Polish Accountancy Act of September 29th 1994 (Dz. U. of 2002, No. 76, item
694, as amended)
Polish Act on Freedom of Business Activity of July 2nd 2004 (Dz.U. No. 173,
Polish Act on Remuneration of Persons Managing Certain Legal Entities of
March 3rd 2000 (Dz.U. of 2000, No. 26, item 306, as amended)
Polish Inventions Act of October 19th 1972 (Dz. U. of 1993, No. 26, item 117, as
amended)
Polish Act on Employee Benefits Fund of March 4th 1994 (Dz.U. of 1996,
Polish Act on Waste Electronic Equipment of July 29th 2005 (Dz. U. of 2005,
No. 180, item 1495)
Value added tax
Warsaw Inter Bank Offered Rate – the interest rate offered for inter-bank loans on
the Polish inter-bank market
General Shareholders Meeting of the Company
Subscription order placed for the Offered Shares not acquired in exercise of the
pre-emptive rights by investors who were the Issuer’s Shareholders at the end of
day on the Record Date
Subscription order placed in exercise of the pre-emptive rights
The Management Board of MNI S.A.
Polish Social Security Authority (Zakład Ubezpieczeń Społecznych)
294
Glossary of Industry Terms
CDMA
DLISP
IPTV
IVR
Convergence
M2M
Massive sending
MMS
MMS Premium
MT SMS
MVNO
NDS
Premium SMS, SMS Premium
SMS
UKE
WAP
WAP Premium
W-CDMA
Wi-Fi, WiFi
WiMax
Video call
Code Division Multiple Access; a mobile telephone technology enabling
simultaneous multiple access of mobile phones to the transmitter
Data Transmission, Line Rental and Internet Service Provision
Internet Protocol Television; a service providing Internet users with access
to television channels or video-on-demand over the Internet protocol (IP).
IPTV can be watched both on a PC connected to the Internet or on
a standard TV set equipped with a set-top-box.
Interactive Voice Response; a system for interactive services for callers.
The system is used by call centres, customer service offices, banks and
telemarketing companies.
Provision of multiple (e.g. two) services by a single operator. In
telecommunications, convergence typically means provision of fixed-line
and mobile services by a single operator.
Machine-to-machine (M2M); a wireless technology based on digital
mobile network infrastructure, which enables remote exchange of data
between machines (equipment)
Sending marketing and promotional messages to specific, large groups of
mobile users
A multimedia variation of the SMS service; available to those customers
of digital mobile network operators who have appropriate handsets;
the multimedia messaging service supports creation, sending and receiving
messages containing text, images, animation, photographs, or audio and
video files.
A multimedia service equivalent to SMS Premium
A settlement system connected with the use of value-added services by
mobile users; the system is used to initiate a specific service (e.g. by an
SMS) after which the customer can use it until an SMS disabling the
service is sent. While the service is on, the content provider sends ordered
products and data (wallpapers, ringtones etc.) to the user in line with the
schedule defined for the service. The customer is charged for each piece of
data received until he/she discontinues the use of the service.
Mobile virtual network operator; an operator providing mobile services
who has no (or limited) telecommunications infrastructure and provides
the services over other operators’ infrastructure.
network access number (prefix); a sequence of digits (10XX or 10XXX)
which identify a specific telecommunications operator. By dialling a given
prefix, customer selects the network of the operator which will handle the
connection.
A type of SMS which is charged at a premium rate; it is used in telephone
voting and radio and TV competitions. Premium SMSs are based on fouror five-digit numbers (7XXX or 7XXXX). The first digit is always 7,
while the second indicates the cost of the message sent.
Short Message Service; the service of sending short (up to 160 characters)
messages via digital mobile networks.
Office of Electronic Communications; the regulator of the
telecommunications market in Poland, appointed by virtue of the statute
Wireless Application Protocol; a set of standards defining the protocol of
wireless applications; developed for users of wireless equipment
(including mobile phones, palmtops etc.) to access the Internet.
A service equivalent to SMS Premium with respect to services provided to
mobile users based on WAP technology
Wideband Code Division Multiple Access; advanced data transmission
system, a wideband variation of CDMA
Wireless Fidelity; a group of standards developed to create wireless IT
networks; the areas where Wi-Fi can be accessed are called hot spots.
World Interoperability for Microwave Access; a group of standards for
wireless wideband data transmission over large areas. The technology
supports the provision of wireless wideband Internet access service.
Video call service offered by 3G mobile networks
295
Voice mailing
VoIP
Service involving automatic instantaneous transmission of voice messages
of all types to fixed-line and mobile telephones, including transmission to
large groups of addressees.
Voice over Internet Protocol; a technology enabling voice transmission
over the Internet or dedicated networks, using the Internet Protocol. It is
often referred to as Internet telephony.
296
27. APPENDICES
27.1
Articles of Association*
Consolidated Text of the Articles of Association of
MNI Spółka Akcyjna
of Warsaw
The consolidated text of these Articles of Association has been prepared on the basis of:
1) The consolidated text of the Articles of Association of Przedsiębiorstwo Telekomunikacyjne
Szeptel Spółka Akcyjna of Warsaw, as registered by the District Court for the Capital City
of Warsaw, XIX Commercial Division of the National Court Register on December 30th
2004,
2) Resolution No. 7/2005 adopted by the Ordinary General Shareholders Meeting of MNI
Spółka Akcyjna on June 20th 2005 on amendment to Par. 9.2 of the Company’s Articles of
Association,
Spółka Akcyjna on June 20th 2005 on amendment to Par. 16.2 of the Company’s Articles of
Association,
4) Resolution No. 1 adopted by the Management Board of MNI Spółka Akcyjna on June 20th
2005 on amendment to Par. 2.1 of the Company’s Articles of Association,
Spółka Akcyjna on June 30th 2006 on amendment to Par. 11 and Par. 15.4 of the
Company’s Articles of Association,
6) Resolution No. 4/2006 adopted by the Extraordinary General Shareholders Meeting of MNI
Spółka Akcyjna on November 15th 2006 on amendment to Par. 11.1 of the Company’s
Articles of Association and Resolution No. 5/2006 adopted by the Extraordinary General
Shareholders Meeting of MNI Spółka Akcyjna on November 15th 2006 on amendment to
Par. 2.1 of the Company’s Articles of Association.
Par.1
General Provisions
1. The Company shall operate under the name MNI Spółka Akcyjna. The Company may also use
the abbreviated name MNI S.A. and a distinctive graphic logo.
2. The Company’s registered office shall be located in Warsaw.
The Company’s business shall comprise the telecommunications activities (Polish Classification
of Business Activities No. 64.20).
3. The
Company’s
governing
bodies
shall
be
the
Management
Board,
the Supervisory Board, and the General Shareholders Meeting.
Par. 2
Issue
1. The Company’s share capital shall amount up to PLN 90,286,232.00 (ninety million two
hundred and eighty-six thousand two hundred and thirty-two złoty) and shall comprise up to
90,286,232 (ninety million two hundred and eighty-six thousand two hundred and thirty-two)
shares with a par value of PLN 1 (one złoty) per share, i.e.:
297
a) 931,900 (nine hundred and thirty-one thousand nine hundred) Series A shares issued to the
founders as registered preference shares following the transformation of Szeptel Spółka z
o.o. of Szepietowo into a joint-stock company;
b) 163,110 (one hundred and sixty-three thousand one hundred and ten) Series B shares,
136,590 (one hundred and thirty-six thousand five hundred and ninety) Series C shares,
763,410 (seven hundred and sixty-three thousand four hundred and ten) Series D shares,
4,420,000 (four million four hundred and twenty thousand) Series E shares acquired in
exchange for cash contributions in a private placement;
c) 3,566,004 (three million five hundred and sixty-six thousand and four) Series F shares,
118,986 (one hundred and eighteen thousand nine hundred and eighty-six) Series G shares;
d) 363,000 (three hundred and sixty-three thousand) Series I shares;
e) 2,608,558 (two million six hundred and eight thousand five hundred and fifty-eight) Series
H shares;
f) 4,000,000 (four million) Series J shares;
g) 5,500,000 (five million five hundred thousand) Series K shares;
h) up to 67,714,674 (sixty-seven million seven hundred and fourteen thousand six hundred and
seventy-four) Series L Shares.
1¹.1. The Company’s Management Board may increase the share capital by no more than PLN
7,950,000.00 (seven million nine hundred and fifty thousand złoty) in the period until June
1st 2002 /authorised capital/.
1¹.2. The Company’s Management Board shall be authorised, subject to approval by the
Supervisory Board, to exclude or limit pre-emptive rights with respect to each share capital
increase up to the maximum allowed by the authorised capital.
12.1. The Company’s Management Board shall be authorised to increase the share capital by no
more than PLN 9,500,000.00 (nine million five hundred thousand złoty) in the period until
June 1st 2006 /authorised capital/.
2
1 .2. By the date and within the limits specified in Par.2.12.1. above, the Management Board may
carry out one or several share capital increases and issue shares in exchange for cash or inkind contributions. The Management Board shall be authorised, subject to approval by the
Supervisory Board, to exclude or limit pre-emptive rights with respect to each of the share
capital increases up to the maximum allowed by the authorised capital and to determine,
subject to approval by the Supervisory Board, the issue price of the shares, issued up to the
maximum allowed by the authorised capital, in accordance with Par.2.12.1 above.
2. Series A registered shares shall carry voting preference. One preference share shall confer the
right to three votes at the General Shareholders Meeting, subject to the provisions of the next
Section. The other Company shares shall be ordinary bearer shares.
3. Series A preference Shares disposed of in transactions between the founders of the Company or
to the spouse or a child shall retain their preferred status, while preference shares disposed
otherwise shall lose their preferred status, although they may, by way of exception, retain the
preferred status at the Management Board’s motion approved by the Supervisory Board.
4. Conversion of bearer shares into registered shares shall require a resolution of the General
Shareholders Meeting, adopted with the majority of votes required to amend the Articles of
Association.
5. The Company may issue bonds, including bonds convertible into shares.
6. Shares may be retired upon a shareholder’s consent, following their acquisition by the Company
(voluntary retirement).
Par. 3
1. The Management Board shall manage the Company’s affairs and represent the Company in all
actions in or out of court.
2. Any matters not reserved for the General Shareholders Meeting or the Supervisory Board by the
law or these Articles of Association shall fall within the powers of the Management Board.
298
Par. 4
1. If the Management Board is comprised of more than one person, any representations on behalf
of the Company shall be made jointly by two members of the Management Board or by one
member of the Management Board acting jointly with a proxy.
2. If the Management Board is comprised of one person, the Company shall be represented by one
Management Board member.
3. A proxy shall be appointed by a unanimous resolution of all Management Board members. A
power of proxy may be revoked by any Management Board member.
4. The operating procedure of a Management Board comprising more than one member shall be
defined in detail in the Rules of Procedure of the Management Board, adopted by the
Management Board and approved by the Supervisory Board.
5. The Management Board shall adopt resolutions by an absolute majority of votes, and in the
event of a voting tie the President shall have the casting vote.
Par. 5
1. Management Board’s resolutions shall be required in any matters which fall beyond the
ordinary scope the Company’s activities.
2. In particular, resolutions of the Management Board shall be required for:
a) approval of the Rules of Procedure of the Management Board,
b) approval of the Company Organisational Rules,
c) establishment and closing of branches,
d) appointment of a proxy,
e) contracting loans and borrowings,
f) approval of annual budgets and strategic long-term plans,
g) assumption of contingent liabilities, including issuance of guarantees, sureties or promissory
notes,
h) disposal and acquisition of non-current assets with the value of PLN 2,000,000 or more,
i) any matters which the Management Board submits for resolution to the Supervisory Board.
Par. 6
1. The Management Board shall be composed of one to three persons.
2. Members of the Management Board shall be appointed for a joint three-year term of office.
Par. 7
1. Members of the Management Board shall be appointed and removed from office by the
Supervisory Board.
2. Each member of the Management Board may by removed from office or suspended also by the
General Shareholders Meeting.
3. In agreements between the Company and members of the Management Board, the Company
shall be represented by the Supervisory Board, and specifically by its Chairman or another
member delegated by virtue of a Supervisory Board’s resolution, acting on behalf of the
Supervisory Board. This shall apply in particular to employment contracts and performance of
other actions connected with the employment of members of the Management Board.
Par. 8
The Supervisory Board shall exercise ongoing supervision over the Company’s business.
299
Par. 9
1. Powers of the Supervisory Board shall comprise:
a) assessment of the Directors’ Report and the financial statements for the previous financial
year in terms of their consistency with the accounting books, documentation and the actual
state of affairs;
b) assessment of the Management Board’s motions concerning the distribution of profit or
coverage of loss;
c) submission to the General Shareholders Meeting of a written report on the results of the
assessments referred to in the preceding two items;
d) selection of an auditor to audit the financial statements;
e) issuance of opinions on long-term strategic plans;
f) issuance of opinions on annual budgets;
g) approval of the consolidated text of the Company’s Articles of Association prepared by the
Management Board;
h) approval of the Rules of Procedure of the Management Board;
i) approval of the Company Organisational Rules;
j) appointment and removal of members of the Management Board;
k) establishment of rules of remuneration for the Management Board members and
determination of the remuneration amounts;
l) suspension of members of the Management Board for important reasons;
m) delegation of Supervisory Board members to temporarily replace the Management Board
members who are unable to perform their duties;
n) approval of establishment of the Company’s foreign branches.
2. Powers of the Supervisory Board shall also include granting the Management Board the
authorisation to:
a) acquire or dispose of real estate or an interest in real estate;
b) acquire or dispose of non-current assets other than real estate if their value exceeds PLN
2,000,000.00;
c) assume contingent liabilities, including through the issuance of guarantees or sureties in
excess of PLN 2,000,000.00 or promissory notes as security for liabilities in excess of PLN
2,000,000.00;
d) acquire or dispose of more than 50% of shares in another company under commercial law.
3. A refusal to grant authorisation to the Management Board with respect to any of the matters
enumerated in Par. 9.2 or Par. 9.1.n shall require a justification.
Par. 10
1. For important reasons, the Supervisory Board may delegate its members to individually exercise
certain supervisory duties for a specified period of time.
2. A Supervisory Board member so delegated shall provide the Supervisory Board with a written
report on his or her activities.
Par. 11
1. The Supervisory Board shall be composed of five to eight members appointed by the General
Shareholders Meeting.
1
1. A member of the Supervisory Board should have an appropriate educational background,
professional and life experience and be a person of undisputed integrity, as well as be able to
devote a sufficient amount of time to allow him/her to properly exercise his or her duties as
member of the Supervisory Board. Candidates for Supervisory Board members should be
300
nominated and their candidacies justified in detail in such a manner so as to enable those voting
on the candidates to make an informed choice.
2. Members of the Supervisory Board shall be appointed for a joint three-year term of office.
2.1 At least half of the Supervisory Board members should be independent members. Independent
members of the Supervisory Board should not have any connections with the Company, its
shareholders or its employees which could materially affect an independent member’s ability to
make impartial decisions.
3. A member of the Supervisory Board may be removed from office by the General Shareholders
Meeting at any time.
4. Members of the Supervisory Board shall submit written resignations to the Management Board,
with a copy to the Chairman of the Supervisory Board.
5. Details relating to the organisation and manner of procedure of the Supervisory Board shall be
specified in the Rules of Procedure of the Supervisory Board, which are adopted by virtue of a
resolution of the General Shareholders Meeting.
Par. 12
1. The Supervisory Board shall meet at least once every two months.
2. Unless the General Shareholders Meeting’s resolution provides otherwise, the first meeting of
the Supervisory Board of a new term of office shall be convened by the Chairman of the
Supervisory Board of the previous term of office within one month from the date of the
Ordinary General Shareholders Meeting. In the event of failure to convene the meeting in line
with the above procedure, it shall be convened by the Management Board.
3. Supervisory Board meetings shall be convened by the Chairman or Deputy-Chairman of the
Supervisory Board, who shall propose the agenda.
4. A meeting of the Supervisory Board should be convened at the request of any member of the
Supervisory
Board
or
at
the
request
of
the
Management
Board.
If such a request is made and the Chairman of the Supervisory Board fails to convene the
meeting, it may be convened by the requesting party.
5. Minutes shall be taken of every Supervisory Board meeting.
Par. 13
1. For a Supervisory Board meeting to be convened, all members of the Supervisory Board must
be invited to the meeting in writing at least seven days prior to the planned date of the meeting.
For important reasons, the Chairman of the Supervisory Board may shorten this time to two
days, specifying the date by which the invitation must be delivered.
2. In an invitation to a Supervisory Board meeting the Chairman shall specify the time, venue and
proposed agenda of the meeting.
Par. 14
1. The Supervisory Board shall adopt resolutions if at least a half of its members are present at the
meeting and all Supervisory Board members have been invited.
2. The Supervisory Board may also adopt resolutions without a formal convocation of a meeting if
all its members are present and none of them objects to inclusion of any particular matter on the
agenda.
3. The Supervisory Board shall adopt resolutions in an open vote.
4. A secret ballot may be ordered at the request of a Supervisory Board member or if the voting
concerns a personnel matter. In the case of a secret ballot, provisions of Par. 14.5 shall not
apply.
5. The Supervisory Board may adopt resolutions by voting in writing or by means of remote
communication, subject to Art. 388.4 of the Commercial Companies Code. Reasons must be
301
given if any resolution is to be adopted by voting in writing or by means of remote
communication and a draft resolution must earlier be presented to all members of the
Supervisory Board. Members of the Supervisory Board may participate in a Supervisory Board
meeting by casting their vote in writing through the intermediation of another Supervisory
Board member.
6. All resolutions adopted in line with the procedures set forth in Par. 14.5 above shall be
presented at the next Supervisory Board meeting, along with the result of the voting.
7. Members of the Supervisory Board shall be entitled to receive monthly remuneration in the
amount specified in a resolution of the General Shareholders Meeting.
Par. 15
1. General Shareholders Meetings may be ordinary or extraordinary.
2. General Shareholders Meetings shall be held at the Company’s registered office or another
venue in Poland, as specified in the announcement convening a General Shareholders Meeting.
3. The agenda shall be proposed by the Company’s Management Board or another entity
convening the General Shareholders Meeting.
4. Chairman of the General Shareholders Meeting may not remove any issues from the agenda or
change the order of the issues on the agenda without the consent of a three-quarters majority of
the total vote at the General Shareholders Meeting.
Par. 16
1. The debates of the Ordinary General Shareholders Meeting shall relate in particular to:
a) consideration and approval of the financial statements for the previous financial year and the
Director’s Report;
b) approval of performance of duties by members of the Company’s governing bodies;
c) adoption of the resolution on distribution of profit or coverage of loss;
d) setting the dividend record and payment dates.
2. A General Shareholders Meeting’s resolution shall be required:
a) to appoint and remove members of the Supervisory Board and determine their remuneration;
b) to dispose of or lease the Company’s business or its organised part or to encumber such
business or its organised part with limited property rights;
c) for the Company to enter into a credit facility, loan, surety or any other similar agreement
with, or for the benefit of, a member of the Management or Supervisory Boards, a proxy or a
liquidator;
d) to increase or reduce the Company’s share capital;
e) to issue bonds of any kind;
f) to create and liquidate capital reserves and determine their application;
g) to use reserve funds;
h) to take decisions regarding claims for redress of any damage inflicted during the
establishment of the Company or exercise of management or supervision;
i) for any merger, transformation or demerger of the Company;
j) for any change to the Company’s business;
k) for any other changes to the Articles of Association;
l) to dissolve and wind up the Company;
m) in any other issues which fall within the scope of the General Shareholders Meeting’s
powers pursuant to these Articles of Association or applicable laws.
3. A General Shareholders Meeting’s resolution shall not be required for purchase or sale of real
estate or an interest in real estate.
302
Par. 17
1. The Supervisory Board shall issue its opinion on the agenda of a General Shareholders Meeting
as well as on any motions relating to issues placed on the agenda. Any such motions should be
presented along with a justification.
2. A Supervisory Board’s opinion shall not be required with respect to motions which pertain to
members of the Supervisory Board, including in particular to their removal or appointment, or
approval of performance of duties by them, or which pertain to the Management Board’s
request for authorisation of an action which the Supervisory Board refused to authorise.
3. Once a year, the Supervisory Board shall present to the General Shareholders Meeting a concise
assessment of the Company’s standing. Such an assessment should be included in the
Company’s annual report, made available to all the shareholders at such time that they are able
to familiarise themselves with its contents before the Ordinary General Shareholders Meeting.
Par. 18
A material change to the Company’s business profile shall not entail the obligation to repurchase
the
shares,
subject
to
the
fulfilment
of
the
conditions
stipulated
in
Art. 417.4 of the Commercial Companies Code.
Par. 19
1. The Company’s financial year shall be a calendar year.
2. The Company shall create reserve funds and may create other capital reserves for extraordinary
losses or expenses.
Par. 20
1. The Company may be dissolved for reasons provided for in the applicable laws.
2. Unless the General Shareholders Meeting’s resolution provides otherwise, members of the
Company’s Management Board shall serve as its liquidators.
3. Liquidation shall be carried out under the Company name, to which the phrase
“in liquidation” shall be added.
Chairman of the Supervisory Board of MNI
S.A.
________________________
(Andrzej Piechocki)
* The consolidated text of the Issuer’s Articles of Association set out above includes the amendments enacted by virtue
of Resolution No. 4/2006 adopted by the Issuer’s Extraordinary General Shareholders Meeting held on November 15th
2006, i.e. the amendments to Par. 11.1 and Par. 2.1 of the Articles of Association. The consolidated text of the Issuer’s
Articles of Association set out above was approved by the Issuer’s Supervisory Board on November 20th 2006
(in accordance with Par. 9.1.g of the Articles of Association). Currently, the registration of the amendments enacted by
virtue of aforementioned Resolution No. 4/2006 is pending at the National Court Register.
303
27.2 Excerpt from the National Court Register
CODo
WA/09.10/274/2006
Registering officer: JĘDRZEJEWSKA MARIA
Page 1 of 9
CENTRAL INFORMATION DEPARTMENT
NATIONAL COURT REGISTER
ul. Barska 28/30
Warsaw
NATIONAL COURT REGISTER (KRS)
As at October 9th 2006, 12:14:13 p.m.
No. KRS: 0000003901
VALID EXCERPT
FROM THE REGISTER OF ENTREPRENEURS
Date of registration in KRS
March 23rd 2001
Last entry
Entry No.
29
File No.
WA.XII NS-REJ.KRS/28259/06/16
Court:
DISTRICT COURT FOR THE CAPITAL CITY OF WARSAW, 12TH COMMERCIAL
DIVISION OF THE NATIONAL COURT REGISTER
Date of entry
September 29th 2006
Section 1
Subsection 1 – Company data
1. Legal form
JOINT-STOCK COMPANY
2. Industry Identification Number (REGON)
450085143
3. Company name
MNI SPÓŁKA AKCYJNA
4. Previous registration
RHB 248 DISTRICT COURT OF ŁOMŻA
5. Does the entrepreneur conduct business NO
activity together with other entities under an
agreement establishing a partnership under
civil law?
6. Does the company have the status of
a public benefit organisation?
---
Subsection 2 – Principal place of business and registered address
1. Principal place of business
country: POLAND, province: PROVINCE OF WARSAW, county: CAPITAL CITY OF
WARSAW, municipality: CAPITAL CITY OF WARSAW, city/ town: WARSAW
2. Registered address
ul. ŻURAWIA, building no. 8, office no. --; postal code: 00-503 WARSAW
Subsection 3 – Branches
No entry
Subsection 4 – Articles of Association
1. Information on execution of or
amendments to the Articles of Association
1
NOTARIAL DEED OF FEBRUARY 20TH 1996, DRAFTED BY NOTARY
PUBLIC MARZANNA GRZEJSZCZYK-GLIŃSKA; NUMBER IN THE
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 368/96
304
2
3
NOTARIAL DEED OF JUNE 1ST 2001, DRAFTED BY NOTARY PUBLIC
MARZANNA GRZEJSZCZYK-GLIŃSKA OF ZAMBRÓW; NUMBER IN THE
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 798/2001.
INSERTED: PAR. 2.11
AMENDED: PAR. 3.1 AND PAR. 4.1
REMOVED: PAR. 5.4-9
NOTARIAL DEED OF JANUARY 8TH 2002, DRAFTED BY NOTARY
PUBLIC MARZANNA GRZEJSZCZYK-GLIŃSKA OF ZAMBRÓW; NUMBER
IN THE REGISTER OF NOTARIAL DEEDS: REP. A. NO. 27/2002
(AMENDMENT TO PAR. 3.1 AND PAR. 4.1 OF THE ARTICLES OF
ASSOCIATION AND INSERTION OF PAR. 3.4 AND PAR. 4.6-7)
4
NOTARIAL DEED OF JUNE 27TH 2003, DRAFTED BY NOTARY PUBLIC
SYLWIA MARKOWSKA OF WYSOKIE MAZOWIECKIE; NUMBER IN THE
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 2173/2003; AMENDMENT
TO PAR. 3, PAR. 4 (MARKED AS PAR. 8), PAR. 5 (MARKED AS PAR. 15),
PAR. 6 (MARKED AS PAR. 19), PAR. 1.3 AND PAR. 2.6 OF THE ARTICLES
OF ASSOCIATION; INSERTION OF PAR. 2.12 AND PAR. 4, PAR. 5, PAR. 6,
PAR. 7, PAR. 9, PAR. 10, PAR. 11, PAR. 12, PAR. 13, PAR. 14, PAR. 16, PAR.
17, PAR. 18, PAR. 20 TO THE ARTICLES OF ASSOCIATION
5
SYLWIA MARKOWSKA OF WYSOKIE MAZOWIECKIE; NUMBER IN THE
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 2676/2004; AMENDMENT
TO PAR. 1.2
6
SYLWIA MARKOWSKA OF WYSOKIE MAZOWIECKIE, UL. RYNEK
PIŁSUDSKIEGO 15; NUMBER IN THE REGISTER OF NOTARIAL DEEDS:
REP.
A.
NO.
2676/2004;
AMENDMENT
TO
PAR.
2.12.1,
PAR. 2.12 AND INSERTION OF PAR. 17.3 TO THE COMPANY’S ARTICLES
OF ASSOCIATION;
7
8
NOTARIAL DEED OF APRIL 28TH 2004, DRAFTED BY NOTARY PUBLIC
IWONA BOGUSŁAWSKA OF WARSAW, UL. STAWKI 2; NUMBER IN THE
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 4211/2004 – RESOLUTION
NO. 5 OF THE MANAGEMENT BOARD OF SZEPTEL S.A., DATED APRIL
28TH 2004, AND NOTARIAL DEED OF JUNE 23RD 2004, DRAFTED BY
NOTARY PUBLIC IWONA BOGUSŁAWSKA OF WARSAW, UL. STAWKI 2;
NUMBER IN THE REGISTER OF NOTARIAL DEEDS: REP. A. NO. 7513/2004
– AMENDMENT TO PAR. 2.1 OF THE COMPANY’S ARTICLES OF
ASSOCIATION.
NOTARIAL DEED OF DECEMBER 20TH 2004, DRAFTED BY NOTARY
PUBLIC MARIUSZ WRÓBLEWSKI OF ŁÓDŹ, UL. PIOTRKOWSKA 270,
OFFICE NO. 304, 90-391 ŁÓDŹ; NUMBER IN THE REGISTER OF NOTARIAL
DEEDS: REP. A. NO. 7863/2004 – MINUTES OF THE EXTRAORDINARY
GENERAL SHAREHOLDERS MEETING OF PRZEDSIĘBIORSTWO
TELEKOMUNIKACYJNE SZEPTEL S.A. – AMENDMENT TO PAR. 1.1 OF
THE COMPANY’S ARTICLES OF ASSOCIATION;
NOTARIAL DEED OF OCTOBER 22ND 2004, DRAFTED BY ASSISTANT
NOTARY PUBLIC EWA SERAFIN, DEPUTY OF NOTARY PUBLIC ANNA
SIENIAWSKA OF WARSAW, UL. PODWALE 23; NUMBER IN THE
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 4747/2004 – MINUTES OF
THE MEETING OF THE MANAGEMENT BOARD OF PRZEDSIĘBIORSTWO
TELEKOMUNIKACYJNE SZEPTEL S.A., INCLUDING RESOLUTION ON
SHARE CAPITAL INCREASE BY WAY OF ISSUE OF SERIES K SHARES,
AND NOTARIAL DEED OF DECEMBER 21ST 2004, DRAFTED BY NOTARY
PUBLIC MARIUSZ WRÓBLEWSKI OF ŁÓDŹ, UL. PIOTRKOWSKA 270,
OFFICE NO. 304, 90-391 ŁÓDŹ; NUMBER IN THE REGISTER OF NOTARIAL
DEEDS: REP. A. NO. 7893/2004 – MINUTES OF THE MEETING OF THE
MANAGEMENT BOARD OF PRZEDSIĘBIORSTWO
TELEKOMUNIKACYJNE SZEPTEL S.A. – AMENDMENT TO PAR. 2.1 OF
THE COMPANY’S ARTICLES OF ASSOCIATION.
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 5578/2005 – PAR. 9.2 AND
PAR. 16.2, AND
REGISTER OF NOTARIAL DEEDS: REP. A. NO. 5581/2005 – PAR. 2.1
9
MARIA KOKOSZCZYŃSKA OF WARSAW, AL. SOLIDARNOŚCI 117/601;
NUMBER IN THE REGISTER OF NOTARIAL DEEDS: REP. A. NO. 2855/2006
– INSERTION OF PAR. 11.1(1) AND 11.2(1) TO THE COMPANY’S ARTICLES
OF ASSOCIATION AND AMMENDMENT TO PAR. 15.4 OF THE
COMPANY’S ARTICLES OF ASSOCIATION.
305
Subsection 5
1. Period of time for which the company has UNSPECIFIED
been established
2. Journal designated for placing company -communiqués, other than Monitor Sądowy i
Gospodarczy
4. Do the Articles of Association grant NO
personal rights to specific shareholders or
interest in the company’s income or assets
other than resulting from the shares held?
5. Do bondholders have the right to share in NO
profits?
Subsection 6 – Establishing the company
No entry
Subsection 7 – Information on the sole shareholder
No entry
Subsection 8 – Company’s share capital
1. Amount of share capital
PLN 22,571,558.00
2. Amount of authorised share capital
PLN 9,500,000.00
3. Total number of outstanding shares
22,571,558
4. Par value per share
PLN 1.00
5. Amount of capital paid
PLN 22,571,558.00
6. Par value of conditional share capital --increase
Part 1
Information on contribution in kind
1. Value of shares
acquired
for 1
PLN 931,900.00
Subsection 9 – Issue of shares
1
1. Series of shares
A
2. Number of shares in the series
931,900
3. Type of preference and the number of
2
preference shares, or information that the
229,789 – REGISTERED SHARES, CARRYING A VOTING PREFERENCE – ONE
shares are non-preference shares
SHARE CONFERS THE RIGHT TO THREE VOTES
1. Series of shares
B
163,110
-----
3
1. Series of shares
C
136,590
306
-----
4
1. Series of shares
D
763,410
-----
5
1. Series of shares
E
4,420,000
------
6
1. Series of shares
F
3,566,004
-----
7
1. Series of shares
G
118,986
-----
8
1. Series of shares
I
363,000
-----
9
1. Series of shares
“H”
2,608,558
-----
10 1. Series of shares
J
24.2.1.1.1.1.1.1
4,000,000
NON-PREFERENCE SHARES
11 1. Series of shares
K
5,500,000
307
NON-PREFERENCE SHARES
Subsection 10 – Information on adoption of a resolution on an issue of convertible bonds
No entry
Subsection 11
1. Is the Management or Administration --Board authorised to issue subscription
warrants?
Section 2
Subsection 1 - Governing body authorised to represent the company
1. Name of the governing body authorised to MANAGEMENT BOARD
represent the company
2. Form of representation
IF THE MANGEMENT BOARD CONSISTS OF MORE THAN ONE PERSON, TWO
MEMBERS OF THE MANAGEMENT BOARD ACTING JOINTLY OR ONE MEMBER
OF THE MANAGEMENT BOARD ACTING JOINTLY WITH A PROXY ARE
AUTHORISED TO MAKE DECLARATIONS ON BEHALF OF THE COMPANY.
IF THE MANGEMENT BOARD CONSISTS OF ONE PERSON, THE COMPANY IS
REPRESENTED BY THAT PERSON.
Part 1
Information on members of the governing body
1
1. Surname / Name of company
PILEWSKI
2. First and middle name
MARIUSZ PIOTR
3. Personal Identification Number 62022702832
(PESEL)/Industry
Identification
Number (REGON)
4. KRS No.
****
5. Function in the governing body
MEMBER OF THE MANAGEMENT BOARD
6. Has the person been suspended from NO
duties?
2
7. Suspension end date
---
KUŁAK
2. First name and middle name
LESZEK WOJCIECH
(PESEL)/Industry
Identification
Number (REGON)
4. KRS No.
****
MEMBER OF THE MANAGEMENT BOARD
duties?
3
---
KÖNIG
PIOTR
(PESEL)/Industry
Identification
Number (REGON)
4. KRS No.
****
PRESIDENT OF THE MANAGEMENT BOARD
duties?
---
308
Subsection 2 – Supervisory body
1
1. Name of the governing body
SUPERVISORY BOARD
Part 1
Information on members of the governing body
1 1. Surname
PIECHOCKI
ANDRZEJ JERZY
3. Personal Identification Number (PESEL)
63092700513
2 1. Surname
WIDERA
STANISŁAW MARIAN
48012005037
3 1. Surname
TOMCZAK
MICHAŁ JAKUB
55092803617
4 1. Surname
GWIAZDOWSKI
ROBERT ANDRZEJ
60032304178
5 1. Surname
KARASIŃSKI
TOMASZ ANDRZEJ
67080400733
Subsection 3 – Proxies
No entry
Section 3
Subsection 1 – Business profile
1. Entrepreneur’s business profile
1
64.20 – TELECOMMUNICATIONS
Subsection 2 – Information on documents submitted
Type of document
No. in field Submission date
1. Information on submission of 1
the annual financial statements
2
For the period from–to
Jul 23 2002
2001
Jul 2 2003
Jan 1 2002–Dec 31 2002
3
Jul 6 2004
2003
4
Jun 29 2005
Jan 1 2004–Dec 31 2004
5
Jul 3 2006
Jan 1 2005–Dec 31 2005
the auditor’s opinion
2
*****
2001
*****
Jan 1 2002–Dec 31 2002
3
*****
24.2.1.1.1.1.1.2
4
*****
Jan 1 2004–Dec 31 2004
5
*****
Jan 1 2005–Dec 31 2005
the resolution or decision to 2
approve the financial statements
3
*****
2001
*****
Jan 1 2002–Dec 31 2002
*****
2003
4
*****
Jan 1 2004–Dec 31 2004
2003
309
5
*****
Jan 1 2005–Dec 31 2005
the Director’s Report on the 2
company’s operations
3
*****
2001
*****
Jan 1 2002–Dec 31 2002
*****
2003
4
*****
Jan 1 2004–Dec 31 2004
5
*****
Jan 1 2005–Dec 31 2005
Subsection 3 – Information on shares held in the company
No entry
Subsection 4 – Business profile defined in the Articles of Association of a public benefit organisation
No entry
Section 4
Subsection 1 – Payments in arrears
No entry
Subsection 2 – Claims
No entry
Subsection 3 – Information on securing the debtor’s assets in bankruptcy proceedings by abatement
of enforcement proceedings against the entrepreneur, on dismissing bankruptcy petition on the grounds
that the assets of the insolvent debtor do not suffice to satisfy the costs of the proceedings
No entry
Subsection 4 – Discontinuation of enforcement proceedings against the entrepreneur on the grounds that the proceeds from the enforcement
proceedings will not suffice to satisfy the costs thereof
No entry
Section 5
Subsection 1 – Custodian
No entry
Section 6
Subsection 1 – Liquidation
No entry
Subsection 2 – Information on dissolution or winding-up of the company
No entry
Subsection 3 – Executive trustee
No entry
Subsection 4 – Information on mergers, demergers or transformations
No entry
310
Subsection 5 – Bankruptcy proceedings
No entry
Subsection 6 – Arrangement proceedings
1
1. Information on opening of DISTRICT COURT OF ŁÓDŹ, COMMERCIAL DIVISION, APRIL 30TH 2003, V UKŁ. 2/03
arrangement proceedings
2. Information on opening of ---, --arrangement proceedings
3. Information on cancellation of
arrangement
---, ---, ---
311
27.3 Resolutions
Series L Shares were created on the basis of Resolution No. 8/2006 of the Ordinary General Shareholders Meeting of
the Issuer, dated June 30th 2006 (notarial deed executed before Notary Public Maria Kokoszczyńska, No. Rep. A
2855/2006):
of the Ordinary General Shareholders Meeting of MNI S.A.
Acting on the basis of Art. 430, Art. 431, and Art. 431.7 in conjunction with Art. 310.2 of the Commercial Companies
Code, as well as on the basis of Par. 16.2d) and k) of the Company’s Articles of Association, the Ordinary General
Shareholders Meeting of MNI S.A. resolves as follows:
Par. 1
1.
The Ordinary General Shareholders Meeting of MNI Spółka Akcyjna of Warsaw resolves to increase the
Company’s share capital from PLN 22,571,558 (twenty two million five hundred and seventy-one thousand
five hundred and fifty-eight złoty) to PLN 90,286,232 (ninety million two hundred and eighty-six thousand two
hundred and thirty-two złoty), through the issue of up to 67,714,674 (sixty seven million seven hundred and
fourteen thousand six hundred and seventy-four) Series L ordinary bearer Shares with the par value of PLN 1
(one złoty) per share, i.e. by an amount not higher than PLN 67,714,674 (sixty-seven million seven hundred
and fourteen thousand six hundred and seventy-four złoty), with the existing shareholders’ pre-emptive rights
retained.
2.
The share capital increase shall be effected irrespective of the number of the Series L Shares acquired within
the limit specified in Par.1.1 of this Resolution, by an amount corresponding to the number of shares acquired.
The Management Board is hereby authorised and obligated to make a statement, in the form of a notarial deed,
on the amount of the share capital acquired as part of the share capital increase, and on the specification of the
final amount of the share capital increase in the Articles of Association, prior to applying to the registry court
for its registration.
3.
Series L Shares shall carry no special preferences or obligations apart from those which result from the
provisions of the law, and in particular the Polish Commercial Companies Code.
4.
The issue price of one share shall be PLN 1 (one złoty).
5.
The shares shall be issued exclusively in exchange for cash contributions, paid up in full prior to the
registration of the share capital increase.
6.
The shares shall carry the right to dividend from the distribution of profit for 2006 (two thousand six).
7.
The pre-emptive right record date i.e. the date as at which the shareholders holding pre-emptive rights to
acquire Series L Shares shall be determined, shall be September 15 (fifteenth) 2006 (two thousand six).
8.
Existing shareholders shall receive 3 (three) Series L Shares per each 1 (one) share already held.
9.
The Supervisory Board is hereby authorised to determine the detailed terms and conditions of the issue of
Series L Shares, including:
•
the date of opening and closing of the subscription period for Series L Shares;
•
the time when the pre-emptive right to acquire Series L Shares may be exercised;
•
the detailed terms of allotment of Series L Shares, in compliance with the provisions of Art. 436 of the
Polish Commercial Companies Code.
10.
The Company’s Management Board shall be responsible for the implementation of this Resolution, and in
particular the performance of any other organisational or legal actions connected with the implementation of
this Resolution. In particular, the Management Board is authorised to:
i.
allot the shares as provided for in Art. 436.4 of the Polish Commercial Companies Code;
ii.
conclude the agreement referred to in Art. 5 of the Act on Trading in Financial Instruments with the
Polish NDS.
Par. 2
The Ordinary General Shareholders Meeting of MNI Spółka Akcyjna of Warsaw hereby resolves to introduce the Series
L Shares, the pre-emptive rights to acquire Series L Shares and the rights to Series L Shares to trading on the Warsaw
Stock Exchange, decides that the Series L Shares and the rights to Series L Shares shall be dematerialised, and
accordingly authorises the Management Board to take all steps required by law for the admission and introduction of
these securities to trading on the regulated market and their dematerialisation.
Par. 3
This Resolution shall come into force on the date of its adoption, except that the amendment to the Articles of
Association made pursuant to this Resolution shall become effective upon its registration by the court.
312
The Chairman concluded that the resolution was adopted in a secret ballot with 11,435,749 (eleven million four hundred
and thirty-five thousand seven hundred and forty-nine) votes cast in favour, and no votes against or abstaining.
dated November 15th 2006
of the Extraordinary General Shareholders Meeting of MNI S.A.
on amendment to the Company’s Articles of Association following share capital increase and issue of Series L Shares:
Acting on the basis of Art. 431 and Par. 16.2.d) and k) of the Company’s Articles of Association, the Extraordinary
General Shareholders Meeting of MNI S.A. resolves as follows:
Par. 1
The Extraordinary General Shareholders Meeting of MNI S.A. of Warsaw resolves to amend Par. 2.1 of the Company’s
Articles of Association reading as follows:
“The Company’s share capital shall amount to PLN 22,571,558.00 (twenty-two million five hundred and seventy-one
thousand five hundred and fifty-eight złoty) and shall comprise 22,571,558 (twenty-two million five hundred and
seventy-one thousand five hundred and fifty-eight) shares with a par value of PLN 1 (one złoty) per share, i.e.:
a)
931,900 (nine hundred and thirty-one thousand nine hundred) Series A shares issued to the founders as
registered preference shares following the transformation of Szeptel Spółka z o.o. of Szepietowo into a joint-stock
company;
b)
163,110 (one hundred and sixty-three thousand one hundred and ten) Series B shares, 136,590 (one hundred
and thirty-six thousand five hundred and ninety) Series C shares, 763,410 (seven hundred and sixty-three thousand four
hundred and ten) Series D shares, 4,420,000 (four million four hundred and twenty thousand) Series E shares acquired
in exchange for cash contributions in a private placement;
c)
3,566,004 (three million five hundred and sixty-six thousand and four) Series F shares, 118,986 (one hundred
and eighteen thousand nine hundred and eighty-six) Series G shares;
d)
363,000 (three hundred and sixty-three thousand) Series I shares;
e)
2,608,558 (two million six hundred and eight thousand five hundred and fifty-eight) Series H shares;
f)
4,000,000 (four million) Series J shares;
g)
5,500,000 (five million five hundred thousand) Series K shares.”
to read as follows:
“The Company’s share capital shall amount up to PLN 90,286,232.00 (ninety million two hundred and eighty-six
thousand two hundred and thirty-two złoty) and shall comprise up to 90,286,232 (ninety million two hundred and
eighty-six thousand two hundred and thirty-two) shares with a par value of PLN 1 (one złoty) per share, i.e.:
a)
931,900 (nine hundred and thirty-one thousand nine hundred) Series A shares issued to the founders as
registered preference shares following the transformation of Szeptel Spółka z o.o. of Szepietowo into a joint-stock
company;
b)
163,110 (one hundred and sixty-three thousand one hundred and ten) Series B shares, 136,590 (one hundred
and thirty-six thousand five hundred and ninety) Series C shares, 763,410 (seven hundred and sixty-three thousand four
hundred and ten) Series D shares, 4,420,000 (four million four hundred and twenty thousand) Series E shares acquired
in exchange for cash contributions in a private placement;
c)
3,566,004 (three million five hundred and sixty-six thousand and four) Series F shares, 118,986 (one hundred
and eighteen thousand nine hundred and eighty-six) Series G shares;
d)
363,000 (three hundred and sixty-three thousand) Series I shares;
e)
2,608,558 (two million six hundred and eight thousand five hundred and fifty-eight) Series H shares;
f)
4,000,000 (four million) Series J shares;
g)
5,500,000 (five million five hundred thousand) Series K shares;
h)
up to 67,714,674 (sixty-seven million seven hundred and fourteen thousand six hundred and seventy-four)
Series L Shares.”
Par. 2
This resolution shall become effective on the date of its adoption, except with respect to the amendment to the Articles
of Association, which shall become effective upon its registration by the court.
The Chairman concluded that Resolution No. 5/2006 was adopted in an open vote with 7,345,240 (seven million three
hundred and forty-five thousand two hundred and forty) votes in favour, and no votes against or abstaining.
The Resolution was recorded in the form of a notarial deed of November 15th 2006 executed by Assistant Notary
Public Marcin Skurowski, No. Rep. A 5669/2006.
313
27.4 Subscription Order Form
Stamp of the brokerage house
SUBSCRIPTION ORDER FORM FOR SERIES L SHARES OF MNI S.A.
This document is a subscription order for Series L ordinary bearer shares of MNI S.A. (“the Company”) with a par value of PLN 1 per
share, offered to the existing Company shareholders for acquisition in exercise of their pre-emptive rights. The Series L Shares are
issued pursuant to Resolution No. 8/2006 adopted by the Ordinary General Shareholders Meeting of MNI S.A. on June 30th 2006.
The Series L Shares are offered for acquisition on the terms described in the Prospectus for Series L Shares (“the Issue Prospectus”)
and in this Subscription Order form for Series L Shares.
1.
First name and surname / company name (in the case of a legal entity): __________________________________________
(in the case of investment funds, name of the fund on behalf of which the subscription order is placed)
2.
Personal Identification Number (PESEL)/Industrial Identification Number
_________________________________
Number of an identity document:
_________________________________
(REGON)
or
other
identification
number:
3. Address of place of residence/registered office: ____________________________________________________________________
4. Address for correspondence / telephone no.: ___________________________________________________________________
5. Currency status: Resident
6. Type of subscription order:
Non-resident
Basic Subscription Order
Additional Subscription Order
7. Number of pre-emptive rights held at the time of placement of the subscription order: ______________________________________
8. Number of Series L Shares subscribed for:
in words:
at the issue price of:
______________________________________________________
______________________________________________________
PLN _______ (___________________ złoty) per Series L Share
9. Amount of payment for Series L Shares _________________________________________________________
in words:
_________________________________________________________
10. Form of payment for Series L Shares: _______________________________________________________________
11. Form of return of payment in the case of overpayment or unsuccessful issue of Series L Shares:
in cash, to be collected at the brokerage house
bank transfer to the following account:
- account holder: _________________________________________
- account no.:
_________________________________________
- held with:
_________________________________________
Note: if the account number is incomplete or incorrect, the Issuer or persons acting on its behalf will bear no responsibility for delayed
return of the payment.
Investor’s Declaration: I, the undersigned, hereby declare that I have read the Issue Prospectus for the Company’s Series L Shares,
I accept the rules governing the public subscription and I have read and accepted the Company’s Articles of Association. Additionally,
I declare that the aggregate number of Series L Shares covered by all the subscription orders placed by me does not exceed the
maximum number of Series L Shares specified in the Issue Prospectus. I agree to the allotment of Series L Shares in accordance with
the allotment terms stipulated in the Prospectus.
Name and address of entity accepting the subscription order: ___________________________________________________
__________________________________________
Date and signature of the subscribing investor
__________________________________________
Date of order acceptance and signature of the person
accepting the order
The Company Shares covered by this subscription order will be deposited in the account in which the exercised pre-emptive rights have
been exercised.
314
27.5 List of References to the Information Included in this Prospectus
by Reference
The Issuer’s non-consolidated financial statements for the years 2003, 2004, 2005, Q1-Q2 2006 and Q1-Q3 2006,
presented in this Prospectus, were prepared in accordance with the Accountancy Act.
The financial statements for the financial years 2003, 2004 and 2005 as well as for Q1-Q2 2006 and Q1-Q3 2006 were
included in this Prospectus by reference to the published non-consolidated financial statements of MNI S.A. for the
years 2003, 2004, 2005, Q1-Q2 2006 and Q1-Q3 2006.
The 2003 non-consolidated financial statements of MNI S.A. (prepared in accordance with the Accountancy Act), SA-R
Report along with the auditor’s opinion and report were published in a periodic report on April 29th 2004.
Report along with the auditor’s opinion and report were published in a periodic report on May 24th 2005.
Report along with the auditor’s opinion and report were published in a periodic report on May 31st 2006
The non-consolidated financial statements of MNI S.A. for Q1-Q2 2006 (prepared in accordance with the Accountancy
Act), the SA-Q2 2006 Report, were published in a periodic report on August 14th 2006.
The non-consolidated financial statements of MNI S.A. for Q1-Q3 2006 (prepared in accordance with the Accountancy
Act), SA-Q3 2006 Report, were published in a periodic report on November 10th 2006.
315
28
INTERESTS OF NATURAL AND LEGAL
INVOLVED IN THE ISSUE OR THE OFFERING
PERSONS
28.1 The Issuer
It is in the Issuer’s interest that a maximum number of Series L Shares are subscribed for. Therefore, also the Issuer’s
employees involved in the work on the issue, being under the obligation to act with due care for their employer’s
interests, are also interested in a maximum subscription for Series L Shares. The Issuer’s employees involved in the
work on the issue, especially on the preparation of this Prospectus, have no direct financial interest in a successful
outcome of the issue of Series L Shares, as no bonus payments or salary rises are contingent upon such successful
outcome.
The Issuer has no knowledge of its employees’ involvement in the issue of Series L Shares or of the employees’
holdings of the Issuer shares as at the Prospectus Date.
28.2 The Legal Adviser
The Legal Adviser is a party related to the Issuer to the extent following from the agreement on provision of advisory
services to the Issuer in connection with the public offering of Series L Shares. Additionally, the Legal Adviser
provides the Issuer with legal advisory services on an ongoing basis. The Legal Adviser has no financial interest which
would depend on a successful outcome of the Public Offering.
28.3 The Financial Adviser
The Financial Adviser is a party related to the Issuer to the extent following from the agreement on provision of
advisory services to the Issuer in connection with the public offering of Series L Shares. The Financial Adviser’s
consideration
is partly payable in the form of commission, therefore the Financial Adviser is interested in the sale of a maximum
number of Series L Shares.
28.4 The Offeror
The Offeror is a party related to the Issuer to the extent following from the agreement on provision of advisory services
to the Issuer in connection with the public offering of Series L Shares. The Offeror’s consideration is partly payable in
the form of commission, therefore the Offeror is interested in the sale of a maximum number of Series L Shares.
28.5 The Auditor
The Auditor is a party related to the Issuer to the extent following from the agreement mandating the auditor to audit the
financial statements of the Issuer and its Group. The tasks performed by the Auditor included audit of the financial
statements of the Issuer and its Group for 2005 and issuance of an opinion on the forecasts contained in this Prospectus.
The Auditor has no financial interest which would depend on a successful outcome of the Public Offering.
316

prospectus

Transcription

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