investment statement and prospectus - sky bond prospect… · you are entitled to a copy of that...

INVESTMENT STATEMENT AND PROSPECTUSFOR THE ISSUE OF BONDS BY SKY NETWORK TELEVISION LIMITED DATED 11 SEPTEMBER 2006

IMPORTANT INFORMATION(The information in this section is required under the Securities Act 1978)

Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself.

CHOOSING AN INVESTMENTWhen deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below:

What sort of investment is this? Page 30

Who is involved in providing it for me? Page 30

How much do I pay? Page 30

What are the charges? Page 31

What returns will I get? Page 31

What are my risks? Page 34

Can the investment be altered? Page 39

How do I cash in my investment? Page 40

Who do I contact with enquiries about my investment? Page 40

Is there anyone to whom I can complain if I have problems with the investment? Page 41

What other information can I obtain about this investment? Page 41

In addition to the information in this document, important information can be found in the current registered prospectus for the investment. You are entitled to a copy of that prospectus on request.1

CHOOSING AN INVESTMENT ADVISERYou have the right to request from any investment adviser a written disclosure statement stating his or her experience and qualifications to give advice. That document will tell you –

• whether the adviser gives advice only about particular types of investments;

• whether the advice is limited to the investments offered by one or more particular financial organisations; and

• whether the adviser will receive a commission or other benefit from advising you.

You are strongly encouraged to request that statement. An investment adviser commits an offence if he or she does not provide you with a written disclosure statement within five working days of your request. You must make the request at the time the advice is given or within one month of receiving the advice.

In addition -

• if an investment adviser has any conviction for dishonesty or has been adjudged bankrupt, he or she must tell you this in writing; and

• if an investment adviser receives any money or assets on your behalf, he or she must tell you in writing the methods employed for this purpose.

Tell the adviser what the purpose of your investment is. This is important because different investments are suitable for different purposes.

NO REPRESENTATIONSNo person is authorised to give any information or make any representation in connection with the Bonds that is not contained in this Offer Document. Any information or representation that is not in this Offer Document may not be relied upon as having been authorised by any of SKY, the Joint Arrangers, the Joint Lead Managers, the Organising Participant, the Co-Manager or any associates of those entities. SKY, the Joint Arrangers, the Joint Lead Managers, the Organising Participant, the Co-Manager, or any associates of those entities, do not warrant the performance of the Bonds except to the extent required by law or (solely in the case of SKY) under this Offer Document.

JOINT ARRANGERS AND JOINT LEAD MANAGERSEach Joint Arranger and each Joint Lead Manager and/or their related companies may from time to time provide various services to SKY (whether as banker, lender, mortgagee, advisor, investor, fund manager or other service provider) and as a result:

1 This is the wording required by Schedule 3D of the Securities Regulations 1983, which contemplate a separate prospectus and investment statement. For this Offer, the two documents have been combined, and the current registered prospectus is this document.

TABLE OF CONTENTS

Important Dates

Investment Highlights Page 3

Chairman’s Letter Page 4

Main Terms of the Offer Page 8

Business Overview Page 12

Directors and Management Page 18

Financial Information Page 21

Auditors’ Report Page 28

Answers to Important Questions Page 30

Conditions of the Bonds Page 42

Summary of the Trust Documents Page 44

Trustee’s Statement Page 49

Statutory Information Page 50

Glossary Page 56

Capital Noteholder Application Form Instructions Page 62

Capital Noteholder Application Form Page 63

General Application Form Instructions Page 65

General Application Form Page 67

Directory Page 69

• that Joint Arranger or Joint Lead Manager and/or their related companies may rank ahead of Holders of the Bonds and may be entitled to take action to its advantage and to the disadvantage of Holders of the Bonds; and

• proceeds received by SKY from this Offer may be paid to the Joint Arranger or Joint Lead Manager and/or their related companies as compensation for services provided and/or pursuant to financing facilities.

If you are in any doubt as to how to deal with this document, please immediately contact a NZX Firm, an accountant or an investment or other financial adviser.

COMBINED DOCUMENTThis Offer Document is a combined prospectus and investment statement for the purposes of the Securities Act 1978 (the “Securities Act”) and the Securities Regulations 1983 (the “Securities Regulations”). The information required to be contained in investment statements is set out above under the heading “Important Information” and in the section entitled “Answers to important questions” below.

REGISTRATIONThis Offer Document is prepared as at and dated 11 September 2006. A copy of this Offer Document signed by the directors of SKY or their agents for the purposes of the Securities Act (and having endorsed on or attached to such copy the documents required to be so endorsed or attached by section 41 of the Securities Act, being the NZX acknowledgement, Auditors’ report and consent, the Trustee’s statement, copies of the material contracts specified on pages 51 and 52 (other than those that have already been filed with the Registrar of Companies), and agent authorities to sign this Offer Document) has been delivered to the Registrar of Companies at Auckland for registration under section 42 of the Securities Act.

NEW ZEALAND ONLYThe Offer is made only to New Zealand residents. No offer or invitation is made under this Offer Document in any jurisdiction outside New Zealand. No person may offer, sell or deliver any Bonds or distribute any document (including this Offer Document) to any person in any jurisdiction outside New Zealand, except in accordance with all of the legal requirements of that jurisdiction.

LISTINGApplication has been made to New Zealand Exchange Limited (“NZX”) for permission to list the Bonds, and all the requirements of NZX relating thereto that can be complied with on or before the date of this Offer Document have been duly complied with. However, NZX accepts no responsibility for any statement in this Offer Document.

DEFINITIONSCertain words, expressions and terms used in this Offer Document (denoted by initial capital letters) have defined meanings. Those words, expressions and terms are defined in the “Glossary” at the end of this document.

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CAPITAL NOTEHOLDER OFFERTO NEW ZEALAND RESIDENT HOLDERS OF SKY’S CAPITAL NOTES AS AT 15 SEPTEMBER 2006

If you wish to subscribe for Bonds, complete the red Capital Noteholder Application Form included with this Offer Document, specifying whether you wish to use some or all of your Capital Note Repayment Amount for the purpose of applying for Bonds.

You can also use the red form to apply for Bonds in excess of your Capital Note Repayment Amount. SKY has reserved 105 million Bonds for subscription by Capital Noteholders but you should note that in the event of oversubscription for this priority pool, applications for more than your Capital Note Repayment Amount will be subject to scaling. Each Capital Noteholder is entitled to an allocation of Bonds equivalent to their Capital Note Repayment Amount.

Where your Capital Note Repayment Amount is less than the amount of Bonds you apply for, you will need to send a cheque for the difference with your application in accordance with the instructions on the red Capital Noteholder Application Form.

Applications must be for a minimum of 5,000 Bonds and thereafter applications must be made in multiples of 1,000.

Your red Capital Noteholder Application Form must be received by the Registrar before the Capital Noteholder Offer Closing Time (scheduled to be 5.00 p.m. on 3 October 2006). Alternatively, you may send your red Capital Noteholder Application Form to ANZ or ASB Securities (at the addresses specified at the end of this Offer Document) or lodge it with the Co-Manager or any NZX Firm, in each case in time for it to be forwarded to the Registrar before the Capital Noteholder Offer Closing Time.

In addition to making an application on a red Capital Noteholder Application Form, Capital Noteholders may make applications for Bonds on the blue General Application Form. Any such applications will not be eligible to be met out

of the priority pool described above.

WHAT DO YOU NEED TO DO?

GENERAL OFFERTO THE CLIENTS OF NZX FIRMS AND MEMBERS OF THE PUBLIC IN NEW ZEALAND

If you wish to subscribe for Bonds, complete the blue General Application Form at the end of this Offer Document.

Applications must be for a minimum of 5,000 Bonds and thereafter applications must be made in multiples of 1,000.

A cheque for the Bonds subscribed for under the General Offer must be sent with the blue General Application Form in accordance with the instructions on that form.

Your blue General Application Form must be sent to the Registrar before the General Offer Closing Time (scheduled to be 5.00 p.m. on 12 October 2006). Alternatively, you may send your blue General Application Form to ANZ or ASB Securities (at the addresses specified at the end of this Offer Document) or lodge it with the Co-Manager or any NZX Firm, in each case in time for it to be forwarded to the Registrar before the General Offer Closing Time.

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IMPORTANT DATES

Announcement of Margin to NZX 18 September 2006

Opening Date of the Offer 20 September 2006

Capital Noteholder Offer Closing Time 5:00 pm on 3 October 2006

General Offer Closing Time 5:00pm on 12 October 2006

Interest Rate Set Date 12 October 2006

Issue Date 16 October 2006

Expected Date for Quotation and Trading on NZDX 17 October 2006

First Interest Payment Date 16 April 2007

Subsequent Interest Payment Dates Each 16 October and 16 April prior to the Redemption Date

Issuer Call Option Date 16 October 2009 and each subsequent16 October until (and including) 16 October 2015

Scheduled Maturity Date 16 October 2016, subject to SKY’s rightsunder the Call Option described below

These dates are indicative only and are subject to change by SKY at any time prior to the actual Issue Date.

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ISSUER Sky Network Television Limited

TYPE OF SECURITIES OFFERED Unsecured, unsubordinated Bonds

SUBSCRIPTION PRICE NZ$1.00 per Bond

ISSUE AMOUNT Up to an aggregate principal amount of NZ$200 million

CAPITAL NOTEHOLDER OFFER Bonds having an aggregate principal amount of up to NZ$105 million have been reserved for Capital Noteholders who apply for Bonds on the red Capital Noteholder Application Form

SCHEDULED MATURITY DATE 16 October 2016, subject to SKY’s rights under the Call Option described below

INTEREST RATE The Interest Rate will be fixed from the Issue Date until the first anniversary of the Issue Date at a rate equal to the higher of 8%, and the Reference Rate determined on the Interest Rate Set Date plus the Margin (to be finalised between SKY and the Joint Lead Managers). The Interest Rate will be reset each year from the first anniversary of the Issue Date until and including the ninth anniversary of the Issue Date

CALL OPTION SKY will have the right to redeem or repurchase all or some of the Bonds on each anniversary of the Issue Date from and including the Call Option Date upon giving not less than 30 days written notice to Holders. The redemption or repurchase price shall be the principal amount of the Bonds plus all accrued and unpaid interest on the Bonds up to the date of redemption or repurchase

APPLICATIONS Minimum amount of 5,000 Bonds and thereafter multiples of 1,000 Bonds

INTEREST ON SUBSCRIPTIONS Investors will receive interest on application money paid in respect of accepted applications from the date that application money is paid into SKY’s bank account to (but not including) the Issue Date, at the Official Cash Rate

INVESTMENT HIGHLIGHTS 8.0%

Minimum interest rate for the first year.

Capitalised terms are defined in the “Glossary” at the end of this Offer Document.

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06CHAIRMAN’S LETTER

Since commencing broadcasting in May 1990, SKY has become New Zealand’s

pre-eminent provider of pay television services. The past year has been a

tremendous year for SKY. We have achieved a strong result, with a net profit after

tax for the SKY Group of NZ$60.1 million for the year ended 30 June 2006.

The proceeds of the Bond issue will be used to repay the capital notes and

retire some of SKY’s bank debt.

There are two offers available in relation to the Bonds. SKY’s New Zealand resident

capital noteholders as at 15 September 2006 will have the opportunity to

participate in a priority offer of up to 105 million Bonds. Those capital noteholders

will be able to subscribe for Bonds using some or all of the principal they will receive

when the capital notes mature. The remaining Bonds will be available to other

New Zealand resident investors.

The SKY board of directors believes this is an excellent opportunity and

commends this offer to all New Zealand investors.

PETER MACOURT CHAIRMAN

DEAR INVESTOR

On behalf of the directors of Sky Network Television Limited, I have pleasure in inviting you to subscribe for this offer of up to 200 million unsecured, unsubordinated Bonds. The Bonds will have an annually resettable interest rate with a fixed margin, and offer a minimum interest rate for the first year of 8.0%.

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MAIN TERMS OF THE OFFER

The following is a summary of the main terms of the Offer. Investors should also refer to the more detailed information in the other sections of this Offer Document including the sections entitled

“Answers to Important Questions” and “Conditions of the Bonds”.

THE ISSUER

SKY is the issuer of the Bonds. SKY’s business is described in the section entitled “Business Overview”.

THE OFFER

SKY is offering unsecured, unsubordinated Bonds with an aggregate principal amount of up to NZ$200 million. The Bonds will rank equally with SKY’s other unsecured unsubordinated debt, other than indebtedness preferred by law.

The subscription price of each Bond is NZ$1.00. Applications must be for a minimum of 5,000 Bonds and thereafter in multiples of 1,000 Bonds.

The Bonds are issued pursuant to the Trust Documents, the terms of which are more fully described in the section entitled “Summary of the Trust Documents” below.

USE OF PROCEEDS

Proceeds from the issue of the Bonds will be used by SKY to repay the Capital Notes and repay a portion of SKY’s existing banking facilities.

TWO OFFERS

This Offer is comprised of two parts – the first is the Capital Noteholder Offer, which is open only to Capital Noteholders as at 15 September 2006 who are also resident in New Zealand, and the second is the General Offer, which is open to anyone resident in New Zealand.

Capital Noteholder OfferCapital Noteholders should use the red Capital Noteholder Application Form if they wish to use some or all of their Capital Note Repayment Amount for the purpose of applying for Bonds. Capital Noteholders can also use the red Capital Noteholder Application Form to apply for Bonds in excess of their Capital Note Repayment Amount.

Where an investor wishes to use some or all of their Capital Note Repayment Amount to subscribe for Bonds, SKY will arrange for the relevant part of the Capital Note Repayment Amount specified in the completed red Capital Noteholder Application Form to be used on the Issue Date towards payment for the Bonds applied for. If, and to the extent that, SKY accepts an application on a red Capital Noteholder Application Form, the application constitutes an irrevocable direction to SKY to apply the specified Capital Note Repayment Amount in subscription for an equivalent principal amount of Bonds on the Issue Date.

Where the amount of their Capital Note Repayment Amount is less than the amount of Bonds the Capital Noteholder applies for, the Capital Noteholder must pay the difference by cheque, which must accompany the red Capital Noteholder Application Form.

Investors making applications on red Capital Noteholder Application Forms should note that although Bonds having an aggregate principal amount of NZ$105 million will be reserved for subscriptions by Capital Noteholders (see the section entitled “Allocations”), in the event of oversubscription for this priority pool, applications for more than their Capital Note Repayment Amount will be subject to scaling.

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Applications under the Capital Noteholder Offer must be received by the Registrar by the Capital Noteholder Offer Closing Time (scheduled to be 5:00pm on 3 October 2006).

In addition to making an application on a red Capital Noteholder Application Form, Capital Noteholders may make applications for Bonds on the blue General Application Form at the end of this Offer Document. Any such applications will not be eligible to be met out of the priority pool of Bonds reserved for Capital Noteholders who apply using the red Capital Noteholder Application Form, and SKY will not apply any Capital Note Repayment Amount in payment for Bonds subscribed for using the blue General Application Form.

GENERAL OFFER

The terms of the General Offer are all the terms set out in this Offer Document, except those terms that apply exclusively to Capital Noteholders.

Investors who wish to subscribe for Bonds in the General Offer should use the blue General Application Form at the end of this Offer Document.

Applications under the General Offer and accompanying cheques must be received by the Registrar by the General Offer Closing Time (scheduled to be 5:00pm on 12 October 2006).

INTEREST RATE

Each Bond will bear interest from (and including) the Issue Date until (but excluding) its Redemption Date at the applicable Interest Rate from time to time.

The Interest Rate for each Interest Period during the period from the Issue Date until the first anniversary of the Issue Date will be the rate per annum equal to the higher of:

• the aggregate of (A) the Reference Rate on the Interest Rate Set Date and (B) the Margin, and

• 8%.

The Interest Rate will then be reset annually. On (and with effect from) each anniversary of the Issue Date, the Interest Rate for the immediately following year will be set at the rate per annum equal to the

aggregate of the Reference Rate on the Reset Date occurring immediately before that Interest Payment Date, and the Margin.

The Reference Rate is the one-year benchmark swap rate on the Interest Rate Set Date and each subsequent Reset Date, as defined in the “Glossary” at the end of this Offer Document.

MATURITY AND CALL OPTION

The Bonds will be issued with a Maturity Date of 16 October 2016. SKY may elect on each anniversary of the Issue Date from and including the Call Option Date to compulsorily redeem or repurchase some or all of the Bonds before the Maturity Date. SKY may repurchase or redeem Bonds by issuing an irrevocable notice in writing to each applicable Holder not later than 30 days before an Early Redemption Date and paying to the relevant Holder the principal amount of, and all accrued but unpaid interest on, the relevant Bonds on that Early Redemption Date.

TAXATION

SKY assumes no responsibility or liability to any investor for the tax treatment of payments made by such investor in subscribing for Bonds or received by such investor in connection with its holding of Bonds. Tax may be withheld or deducted from payments due under the Bonds. See the section entitled “Tax” below for further details.

ALLOCATION

Bonds having an aggregate principal amount of NZ$105 million will be reserved for subscription by Capital Noteholders who apply using the red Capital Noteholder Application Forms. In the event of oversubscriptions for this priority pool, any Bonds applied for on the red Capital Noteholder Application Form by Capital Noteholders in excess of their Capital Note Repayment Amount will be subject to scaling. Each Capital Noteholder is entitled to an allocation of Bonds equivalent to their Capital Note Repayment Amount.

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All of the remaining Bonds (and any Bonds reserved for subscription by Capital Noteholders that are not subscribed for) may be reserved for subscription by clients of the Joint Arrangers, the Joint Lead Managers, the Organising Participant, the Co-Manager, other NZX Firms and invited financial institutions. The aggregate principal amount of Bonds to be so reserved will be determined by the Joint Lead Managers and will be notified to investors by way of general announcement to NZX on or before the General Offer Closing Time. If this right is exercised in full, there will be no public pool of Bonds available to investors.

If Bonds are available to other members of the public for subscription, applications for Bonds made on blue General Application Forms, if accepted, will be allotted on the basis of the date on which valid applications are received by the Registrar until the General Offer Closing Time (i.e. on a first come, first served basis).

APPLICATIONS

Applicants will receive interest on application money paid in respect of accepted applications, from the date that application money is paid into SKY’s bank account to (but not including) the Issue Date at the Official Cash Rate. Such interest will be paid to the investor named in the completed Application Form no later than 14 days after the Issue Date. See the section entitled “What returns will I get?” for further details.

SKY reserves the right to refuse any application or to accept an application in part only, without assigning a reason. If SKY accepts an application in part only or not at all, the balance of the application money not used will be returned to the applicant named in the Application Form within 14 days of the Issue Date. No interest will be paid on such refunds.

If an application made on a red Capital Noteholder Application Form is accepted in part only, and that application includes payment of application money by cheque, the application money will be used as payment for the successful part of that application before the Capital Note Repayment Amount is used.

SKY will allot the Bonds on the Issue Date. SKY will advise successful investors of the allotment of Bonds to them by FASTER statement sent to them within five Business Days of the General Offer Closing Time, or such later date as SKY may determine with the approval of NZX.

OVERSUBSCRIPTIONS

SKY will not accept oversubscriptions in respect of the Bonds.


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BUSINESS OVERVIEW

The SKY business overview set out below should be read in conjunction with the further information contained in this Offer Document, including the summary financial information set out in the section entitled “Financial Information”.

BUSINESS OVERVIEW

SKY is the pre-eminent pay television broadcasting service in New Zealand. It is listed on NZX and the ASX and had a market capitalisation as at 30 June 2006 of approximately NZ$2.2 billion. SKY’s principal business activity is the distribution of both local and foreign programme content to its subscriber base, predominantly through digital satellite services but also through terrestrial UHF analogue services. SKY’s revenues, which were NZ$548 million for the year ended 30 June 2006, were principally derived from monthly subscription fees (approximately 85%), installation fees and other revenues including advertising sales and the on-sale of programme rights.

In February 2006, SKY expanded its activities into FTA television by purchasing the business of the FTA broadcaster Prime Television New Zealand Limited for approximately NZ$30 million.

OVERVIEW OF THE NEW ZEALAND TELEVISION INDUSTRY

There are approximately 1.5 million households in New Zealand.2 Providing television services to these households are two major FTA broadcast operators, several smaller UHF operators and SKY, the sole nationwide pay television provider and owner of FTA network, Prime.

Government-owned TVNZ is New Zealand’s largest television broadcaster with a combined 50% audience market share3 through its two FTA channels, TV One and TV2. New Zealand’s other major FTA broadcaster is CanWest which broadcasts two channels (TV3 and C4) nationally and has an aggregate audience market share of approximately 21%.4 Other FTA broadcasters include SKY’s FTA channel, Prime, which has a 5%

audience market share,5 MTS and a number of local UHF broadcasters which each have a very small market share.

As at 30 June 2006, SKY’s pay television services have a residential household penetration of approximately 42%6 and an audience market share of approximately 22.5%.7

Under agreements with the broadcasters concerned, all the major FTA television channels – TV One, TV2, TV3, and Maori TV – are available on SKY’s digital satellite service.

TelstraClear transmits SKY programme content via its cable network to customers in the Wellington and Christchurch regions. SKY and TelstraClear have entered into an agreement, expiring in 2009, under which SKY provides all TelstraClear’s pay television content. Telecom and SKY have also agreed to a reselling and retransmission agreement that expires in 2008.

The Government has recently announced its initiative to transition all FTA broadcasters from analogue to digital transmission. To facilitate this transition, the Government is supporting a “free” digital multi-channel television platform. This new platform will be a hybrid terrestrial/satellite platform, with the first stage being the launch of a free multi-channel satellite service, planned for early to mid 2007. A digital terrestrial platform is planned to be launched over the following 12 to 18 months.

At the date of this Offer Document there have been no announcements as to the channels to be offered on the new platform.

2 Source – Statistics New Zealand, July 2006. 3 Source – TVMap/AGB Nielsen Media Research for the year to June 2006. 4 Source – TVMap/AGB Nielsen Media Research for the year to June 2006. 5 Source – TVMap/AGB Nielsen Media Research for the year to June 2006. 6 Source – SKY data. 7 Source – TVMap/AGB Nielsen Media Research for the year to June 2006.

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DISTRIBUTION

SKY’s terrestrial UHF transmission and linking services are contracted to BCL, a subsidiary of a state-owned enterprise operating transmission and network services. Through this distribution infrastructure, SKY’s UHF network can reach over 80% of New Zealand households.8 In March 2010 the transmission contract with BCL will expire. SKY is still considering the best use for the UHF network beyond 2010.

Digital content to SKY’s digital subscribers is transmitted via satellite with coverage that can reach 100% of New Zealand households. SKY estimates that there are around 900,000 homes in New Zealand that have been installed with a satellite dish, which represents approximately 58% of New Zealand homes.

SKY currently leases four transponders on the Optus B1 satellite, which it uses to broadcast its programme content throughout New Zealand. This satellite is coming to the end of its useful life and now has limited internal back-up in the case of failure. Current estimates are that it will be capable of providing services to SKY until at least June 2007. SKY has also agreed a restoration plan with Optus which, if successfully implemented, would restore satellite capacity within a short period (currently estimated at about seven days) at the orbital location where its satellite dishes are currently pointed (at 160˚ east), should there be a failure of the B1 satellite prior to the launch of a new satellite.

SKY has signed a contract with Optus to lease five transponders on the D1 satellite scheduled to be launched and commissioned by November 2006.

Optus has also committed to launching a second satellite, D1R, which is scheduled for physical pre-launch delivery in February 2007 should there be a failure of the D1 launch. Optus have not purchased a back-up launch vehicle in the event of a failure of the D1 launch but are confident that a launch could be secured for D1R in the first half of 2007, if this was required.

Optus also plans to launch, at a later date (to be confirmed), an additional satellite (currently named D2), to be positioned at 156˚ east. When launched

and positioned at 156˚ east this satellite will provide in-orbit back-up for SKY as it has a purpose built pay load designed to replicate SKY’s D1 services, should this ever be required.

SUBSCRIBERS

SKY Group had a total of 667,270 digital and UHF subscribers as at 30 June 2006 representing household penetration of approximately 42%. SKY Group has consistently grown its subscriber base year-on-year since it first began broadcasting in 1990, with a compound annual growth of 22% over this time. The chart below shows SKY Group’s historical total subscriber base since broadcasting was commenced in 1990.

Source: SKY data, Statistics New Zealand

FIGURE 1: SKY GROUP’S TOTAL SUBSCRIBERS

The current level of household penetration is below that of the United States where pay television penetration is currently at approximately 85%.

Since launching its digital service in 1998, SKY has sought to attract new customers and migrate existing UHF customers to this technology platform. This goal has been achieved through a focus on advertising of SKY’s digital packages and through partial subsidy of digital decoders for new and migrating customers. Presented in the chart below is a breakdown of SKY Group’s subscriber composition since 1991.

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Source: SKY data, Statistics New Zealand

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FIGURE 2: SKY GROUP SUBSCRIBER BREAKDOWN

Wholesale subscribers predominantly receive their SKY programmes through either TelstraClear or Telecom, who have entered into retransmission and reselling arrangements (respectively) with SKY as described above.

Commercial subscribers (included in subscribers in the above graph) are generally non-residential customers such as bars and motels. These businesses receive SKY channels in packages that are tailored to their individual needs.

In December 2005, SKY launched “MY SKY”, a hard-drive personal digital recorder. MY SKY subscribers are subscribers who have paid a one-off installation fee to have access to a MY SKY recorder.

A key factor influencing subscriber numbers is the churn rate, that is, the percentage of subscribers who disconnect their service, either voluntarily or due to a failure to pay their account. Reducing the churn rate is important to any company that relies upon subscribers for revenue. SKY’s rolling annual residential churn rate has been decreasing consistently over the past five years as shown in Figure 3 and was 13.5% for the year ended 30 June 2006.

Source: SKY data

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FIGURE 3: SKY’S ROLLING ANNUAL GROSS CHURN RATE (RESIDENTIAL SUBSCRIBERS)

PACKAGES

SKY broadcasts a total of 85 channels on its digital satellite platform and four channels over a terrestrial UHF platform. SKY uses these technology platforms to tailor its programme offering to meet varying customer content and price requirements.

SKY’s UHF service is targeted at price-focused customers, with packages offering a choice between two and four channels. SKY also offers UHF services to its digital subscribers at a discounted rate as part of a tandem package, enabling customers to receive separately both UHF and digital services.

SKY’s digital service represents its premium content offering to customers. Subscribers to SKY’s basic digital package receive a total of 38 channels including news, sports, documentaries, family programmes, general entertainment and music videos. In addition to the basic channels package, SKY offers satellite customers a choice of additional sports and movie programmes, a number of other premium channels and subscription services for which they pay an additional monthly charge. Premium channels offered include three general sports channels, five movie channels, The Rugby Channel, Games, World TV and the Arts Channel. Other services available include interactive weather, and real time access to TAB betting on horse racing and sports events.

BUSINESS OVERVIEW

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In 2000, SKY started to offer selected content to its satellite subscribers on a pay-per-view basis, where subscribers pay a one-off fee to watch a movie or a sporting event. This service has been used primarily for blockbuster premiere movies, boxing and wrestling matches and adult content. SKY currently operates 11 core pay-per-view channels and expects to have the capacity on the Optus D1 satellite, scheduled to be launched and commissioned by November 2006, to add additional pay-per-view channels.

A low cost package is also offered to customers who wish to receive only the FTA channels retransmitted by SKY.

PROGRAMME CONTENT

SKY purchases programme content from both foreign and domestic production studios and also produces some of its own content, such as sports programmes. Through its digital platform, SKY offers subscribers a comprehensive range of sports, movies, entertainment, news, documentary and pay-per-view programme content.

Sports channelsSKY broadcasts a total of six sports channels comprising four general sports channels, a dedicated rugby channel and Trackside, through an agreement with the TAB. SKY has exclusive rights for the next four years to the live broadcasting in New Zealand of Super 14 and Air New Zealand Cup games, and Tri Nations and Bledisloe Cup test matches. In addition to rugby, SKY currently has access to some of the most popular sporting events in New Zealand including NRL rugby league, New Zealand domestic cricket, international cricket played in New Zealand, and English Premier League soccer. This content represents a valuable part of SKY’s programme offering and has been a key factor in the retention and growth of its subscriber base.

SKY purchases sports content on a fixed price basis from international distributors. SKY’s payment obligations are primarily in US dollars, although some content is also purchased in Australian dollars, New Zealand dollars and British pounds sterling.

Movie channelsSKY’s five movie channels offer a comprehensive range of recent blockbuster and classic movies. Most movie rights are acquired from the major United States studios and are paid for in US dollars, predominantly calculated on a per subscriber basis.

Entertainment, news and documentary channelsAll of the packages offered by SKY include at least one basic entertainment channel. SKY 1 is a variety entertainment channel that is broadcast to both UHF and satellite subscribers. Satellite subscribers also receive additional entertainment channels that broadcast content including news, documentaries, music, wildlife and lifestyle material. Entertainment content is acquired both on a fixed cost and per subscriber basis. Content on the entertainment channels is acquired from a mix of global and regional channel providers and studios. SKY’s payment obligations for this content are denominated primarily in US dollars, with some payments denominated in Australian dollars and New Zealand dollars.

ACQUISITION OF PRIME

In February 2006 SKY acquired the business and assets of FTA broadcaster Prime Television New Zealand Limited for approximately NZ$30 million. Prime had a television market share of approximately 5% 9 and had extended its UHF signal coverage to over 90% of New Zealand households.

The acquisition of the Prime business has enabled SKY to schedule the delayed FTA rights to sporting events such as Super 14 and Air New Zealand Cup rugby games, NRL rugby league games and New Zealand cricket on its own network, has provided a second television station facility for SKY and offers a potential home for “first run” television series sold via studio output deals, as future opportunities to do so arise. Prime has now been fully integrated into SKY’s operations providing cost and infrastructure synergies.

9 TVMap/AGB Nielsen Media Research for the year to June 2006.

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REVENUE

SKY’s primary source of revenue is the monthly subscriptions paid by subscribers to its satellite and UHF services.

The subscription packages offered by SKY are priced depending on the channels included in the package. SKY has gradually increased prices as content has been added. The migration of UHF customers to higher priced satellite packages has had a positive effect on total revenue and has been a key driver of the increase in ARPU since the satellite platform was launched. SKY’s monthly satellite ARPU since the year ended 30 June 2000 is shown in the chart below.

Source: SKY data

FIGURE 4: SKY MONTHLY SATELLITE ARPU 2000 TO 2006

In addition to revenue generated by SKY’s core subscription services, SKY also derives revenue from the following sources:

Installation and transfers: SKY charges new subscribers a fee to install the hardware required to receive its UHF or satellite service in their house or business premises. SKY also charges customers a fee to transfer their SKY subscription from one location to another. MY SKY units currently generate revenue from an upfront installation fee.

Advertising: SKY currently sells advertising time on 18 of its channels. Advertising has become an increasingly significant source of revenue for SKY in recent years. From the year ended 30 June 2000 to the year ended 30 June 2006, the compound annual growth rate in advertising revenue on SKY’s pay television platform was 19%. Total advertising revenue for the year ended 30 June 2006 was NZ$47.3 million, with NZ$40.2 million being generated from SKY’s pay television platform and a further NZ$7.1 million being contributed by Prime for the five months to 30 June 2006. Advertising revenue growth has been driven by higher viewership and, consequently, higher revenue per minute, an increased focus on growing advertising revenue internally at SKY, and the increase in the number of channels on which advertisements are inserted.

SkyWatch: SkyWatch is SKY’s monthly programme guide. For the year ended 30 June 2006, there were 399,910 subscriptions to the guide, generating revenue of NZ$10.7 million.

Other Income: Other Income includes revenue from SKY’s on-line DVD rental business DVD Unlimited, revenue from satellite dish sales, the provision of satellite transmission services to third parties (including the New Zealand Fire Brigade and producers of the Arts Channel, Shine Channel, CCTV and Southland TV) and other miscellaneous sources.

A breakdown of SKY’s revenue for the year ended 30 June 2006 is presented below.

Source: SKY data

FIGURE 5: REVENUE BREAKDOWN FOR YEAR TO 30 JUNE 2006

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OPERATING EXPENSES

SKY’s main operating expense is the cost of acquiring programme content.

Other significant operating expense categories include:

Programme operations: Expenses incurred in the production of SKY’s programme content, including costs of producing live sporting events, satellite linking costs, in-house shows, and taping, formatting, editing and adding other features to programmes;

Depreciation and amortisation: The depreciation charges for subscriber equipment, including aerials, satellite dishes and decoders owned by SKY, the finance lease asset relating to the Optus B1 satellite, and studio and broadcasting equipment and other fixed assets;

Broadcasting and infrastructure: Transmission and linking costs for SKY’s UHF network and the costs of operating SKY’s television station facilities located in Mt Wellington and Albany, Auckland and the satellite dish facility at Warkworth;

Subscriber management: Costs associated with customer relations and billing, the costs associated with servicing and monitoring equipment installed at subscribers homes, indirect installation costs and general administrative costs associated with SKY’s 16 offices;

Sales and marketing: The costs of marketing SKY to new and existing subscribers including subscriber acquisition costs including the costs of advertising campaigns, sales commission paid to direct sales and tele-sales agents, the overheads and costs of producing advertisements promoting SKY’s productions and production of the SkyWatch programming guide;

Corporate: Corporate expenses include SKY’s corporate management costs; and

Advertising: Costs of the advertising sales department which includes advertising sales commissions.

As indicated above, a significant portion of SKY’s programme content is acquired in US dollars, and payments on the finance lease relating to the Optus B1 satellite are made in Australian dollars. As most of SKY’s

revenue is earned in New Zealand dollars, SKY has no natural hedge against foreign currency exposure so it enters into hedge contracts to limit volatility in its earnings caused by exchange rate fluctuations.

SKY’s exchange rate policy is to hedge a minimum of 85% of the forecast exposures on a rolling 12 month basis, and 25% to 45% of variable exposures on a rolling 13 to 36 month basis. Fixed-price content purchase contracts denominated in US or Australian dollars are at least 70% hedged for up to 60 months from the time they are entered into.

A breakdown of SKY’s operating expenses for the 2006 financial year is presented below.

Source: SKY data

FIGURE 6: OPERATING EXPENSE BREAKDOWN FOR YEAR TO 30 JUNE 2006

CAPITAL EXPENDITURE

SKY’s capital expenditure over the past seven years has focused on the continued addition of subscribers to the satellite platform. The purchase of new decoders and the installation of these in the homes of new subscribers have been the major capital expenditure categories. Over the five-year period from 2002 to 2006, capital expenditure averaged approximately NZ$90 million per annum.

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PETER MACOURTCHAIRMAN

Mr Macourt was appointed as chairman of the board of SKY in August 2002. He is currently chief operating offi cer of News Limited based in Sydney, Australia.

Mr Macourt joined News Limited in 1983. He was appointed as its deputy chief executive in 1998 andto his current position at News Limited in July 2001.

Mr Macourt is a director of News Limited and other subsidiaries of The News Corporation Limited, Fox Studios Australia Pty Limited, Foxtel ManagementPty Limited and Premier Media Group Pty Limited.

He holds a degree in commerce from the Universityof New South Wales.

ROBERT BRYDENDEPUTY CHAIRMAN

Mr Bryden was appointed a director of SKY in 1990 and deputy chairman in February 2001.

He is the managing director of Todd Capital Limited. He is also a director of Todd Communications Limited and other subsidiaries of the Todd CorporationLimited, Crown Castle Australia Pty Limited,Crown Castle Australia Holdings Pty Limitedand Landco Limited.

Mr Bryden holds a BCA from Victoria Universityin Wellington.

ALBERT (BARRIE) DOWNEYDIRECTOR

Mr Downey has been a director of SKY since 1991.He was chairman of SKY from 1991 to 1997.

Mr Downey has spent most of his working careerin the Fletcher Challenge Group where he became executive director in 1988. He was awarded theCBE and is a Fellow of the Institute of Chartered Accountants of New Zealand and New Zealand Institute of Forestry.

Mr Downey is a director of Salvus Strategic Investments Limited.

JOHN FELLETDIRECTOR AND CHIEF EXECUTIVE

Mr Fellet joined SKY as chief operating offi cer in1991. He was appointed as chief executive inJanuary 2001 and as a director of SKY in April 2001.

Mr Fellet holds a BA degree in Accounting from Arizona State University, United States and has 25 years’ experience in the pay TV industry, includingten years’ experience with Telecommunications Inc.in the United States.

Mr Fellet is a director of Media Finance Limited,SKY Telecommunications (MR7) Limited, CricketMax Limited, INL Holdings Limited, SKY DMXMusic Limited and Independent Publishers Limited,all subsidiaries of SKY.

DIRECTORS ANDMANAGEMENT OFSKY NETWORKTELEVISION LIMITED

BOARD OF DIRECTORS

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JOHN HARTDIRECTOR

Mr Hart was appointed a director of SKY in October 1997. He was also the former coach of the All Blacks and an international rugby selector.

Mr Hart was employed by Fletcher Challenge Limited from 1966 to 1995 in a variety of positions including employee relations director. He currently manages his own consultancy business.

Mr Hart is a director of Bayleys Corporation Limited, Warriors League Limited, Global Rugby Enterprises Limited and Superlife Trustees Limited.

MICHAEL MILLERDIRECTOR

Mr Miller was appointed a director of SKY in September 2004. He is currently the managing director of Advertiser Newspaper Pty Limited (a division of News Limited). Joining News Limited in 1991, he was previously News Limited’s Group Marketing Director for eight years.

Mr Miller is a director of Rugby International Pty Limited, Fox Sports Australia and Premier Media Group Pty Limited.

He has a degree in applied science in communications from the University of Technology in Sydney.

HUMPHRY ROLLESTON DIRECTOR

Mr Rolleston was appointed as a director of SKY in September 2005. He was an independent director of INL from 1999 until INL’s merger with SKY Pre-Merger in July 2005.

Mr Rolleston is a Christchurch-based businessman and is a director of Asset Management Limited, Broadway Industries Limited and subsidiaries, Ledger Acquisitions Limited, Matrix Security Limited, Infratil Limited, Property for Industry Limited and Fraser, McAndrew Ryan Limited.

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JOHN FELLET CHIEF EXECUTIVE OFFICER AND DIRECTOR

John Fellet joined SKY as chief operating officer in 1991. He was appointed chief executive officer of SKY in January 2001 and a director of SKY in April 2001.

JASON HOLLINGWORTH CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY

Jason Hollingworth joined SKY as chief financial officer in 2002. Mr Hollingworth holds a Master of Commerce degree from Canterbury University in Christchurch, is a chartered accountant and has more than 15 years’ experience in corporate finance related activities.

MARTIN WRIGLEY DIRECTOR OF OPERATIONS

Martin Wrigley joined SKY’s field service division in June 1990. His roles have included technician, installation supervisor and field service manager.

In June 1995 Mr Wrigley was appointed to the role of central regional manager and following that became the director of SKY’s customer services in June 2000.

In January 2002 Mr Wrigley was appointed to the role of director of operations.

KEVIN CAMERON DIRECTOR OF SPORT PROGRAMMING

Kevin Cameron joined SKY in 1990 as head of sport and was appointed to the role of director of sport programming in 1993.

Mr Cameron has more than 30 years’ experience in the sports and television industry including 25 years with TVNZ.

TRAVIS DUNBAR DIRECTOR OF ENTERTAINMENT PROGRAMMING

Travis Dunbar joined SKY in 1994 as manager of the SKY movie channel and was appointed to the role of director of the Orange Channel (now SKY 1) in 1997.

In April 2000 Mr Dunbar was appointed to the role of director of entertainment programming. Prior to joining SKY, Mr Dunbar spent over five years in advertising.

MICHAEL WATSON DIRECTOR OF MARKETING

Michael Watson joined SKY in 1990 after immigrating to New Zealand from the UK, following a ten year career in property conveyancing with a law firm in London.

Mr Watson has held a number of roles within SKY including direct sales representative, direct sales manager (Auckland Region) and South Island regional manager. Mr Watson was appointed to the role of director of customer services in 1997 and became director of marketing in June 2000.

RICHARD LAST DIRECTOR OF ADVERTISING SALES

Richard Last joined SKY in 1994 after working in software sales. Mr Last worked for SKY as an account manager in advertising sales until 1998 when he left to take up a dealer management position with IBM in the UK.

Upon his return to New Zealand in December 1999, Mr Last joined Prime TV in the role of national sales manager. In January 2001 Mr Last left Prime to rejoin SKY and was appointed to the role of director of advertising sales.

GREG DRUMMOND DIRECTOR OF BROADCASTING OPERATIONS

Greg Drummond joined SKY in 1990 to set up the broadcast operation, and as director of broadcast operations manages 120 broadcast staff.

Mr Drummond previously held roles with TVNZ and Network 10 in Australia. Mr Drummond has 30 years’ experience in broadcast operations and engineering, encompassing outside broadcast, studio production, post production, presentation and transmission operations.

BRIAN GREEN DIRECTOR OF ENGINEERING

Brian Green joined SKY in 1987 as director of engineering and management information systems. Mr Green’s current role is director of engineering.

Mr Green has more than 35 years’ local and international experience in the electronics and television industry, the last 19 of which have been at SKY.

Since joining the company Mr Green has been responsible for the studios, the UHF transmission network, SKY’s geographical and channel expansion, the design and application of subscriber hardware and the construction and commissioning of SKY’s uplink facility. He oversaw the introduction of SKY’s digital channels in 1998 and interactive services in 2000.

Most recently Mr Green has been responsible for the negotiation and NZ beam design for the replacement of SKY’s current Optus B1 satellite with two new satellites, the first of which is scheduled to be launched and commissioned by November 2006.

Mr Green is a Fellow of the Institute of Electrical Engineers.

TONY O’BRIEN DIRECTOR OF COMMUNICATIONS

Tony O’Brien joined SKY in April 1991. Mr O’Brien has held a number of roles within SKY including commercial manager, business manager and government relations manager.

Mr O‘Brien was appointed to the role of director of communications in March 2000. In his current role Mr O’Brien is responsible for government, media and public relations, represents SKY on the Advertising Standards Authority, and is the chair of SKY’s complaints committee.

CHARLES INGLEY DIRECTOR OF TECHNOLOGY

Charles Ingley was appointed to the role of director of technology in 2003 with key responsibility for IT strategy, systems, infrastructure and operations. He joined SKY as a senior engineer in 1990 and held the position of head of broadcast technology prior to his current role.

Mr Ingley holds a BSc degree in information technology from Massey University and an NZCE in Telecommunications from Auckland Technical Institute (now Auckland University of Technology) and has many years of experience in the broadcasting industry in both the private and state sectors.

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FINANCIALINFORMATION

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FINANCIAL INFORMATION

Sky Network Television Limited is the company that was formed in relation to the merger of INL and SKY Pre-Merger. This transaction occurred on 1 July 2005, and both INL and SKY Pre-Merger ceased to exist on this date. As required by clause 8(2) of the Second Schedule to the Securities Regulations, financial summaries for both INL and SKY Pre-Merger have been included below.

Sky Network Television Limited was incorporated on 25 January 2005, but had the name “Merger Company 2005 Limited” until 1 July 2005, when its name was changed to Sky Network Television Limited.

Audited statements of financial position, financial performance and cash flows for SKY (the company being the Borrowing Group) for the year ended 30 June 2006 have been registered at the Companies Office under the Financial Reporting Act 1993, and can be viewed on the Companies Office website - www.companies.govt.nz. They are also available free of charge on request from SKY at the address specified in the Directory at the end of this Offer Document.

The following summary financial statements provide information extracted from the audited financial statements of SKY for the year ended 30 June 2006. SKY’s financial statements for 2006 are SKY’s first annual financial statements that have been prepared under NZ IFRS.

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Company Income StatementsFOR THE PERIODS ENDED 30 JUNE

SKY NETWORK TELEVISION LIMITED (FORMERLY MERGER COMPANY 2005 LIMITED)

in NZD 000Year ended 2006

(NZ IFRS)Period ended 2005

(NZ IFRS)

Total operating revenue 548,249 –

Total operating expenses 406,605 –

Operating profit 141,644 –

Total interest expense 53,562 –

Other net interest income and financing charges (2,707) –

Other financial income1 (951,442) –

Non operating expenses 1,219 –

Profit before income tax 1,041,012 –

Income tax expense 29,726 –

Profit after income tax 1,011,286 –

Minority interest – –

Profit attributable to equity holders of the Company 1,011,286 –

Dividend paid 15,566 –

Dividend (cents) per share 4.0 –

On 18 August 2006 SKY announced a dividend of 4.0 cents per share totalling $15,565,608 fully imputed to be paid on 8 September 2006.

1 On 23 June 2006, SKY and Independent Publishers Limited transferred their holdings in INL Publishing Limited to another wholly owned SKY Subsidiary, INL Holdings Limited. INL Publishing Limited was transferred at its equity value of $1,206,876,902 resulting in a gain on disposal recorded in SKY of $951,441,567 and in Independent Publishers Limited of $14,157,710. These amounts are eliminated on consolation.

Company Balance SheetsAS AT 30 JUNE

SKY NETWORK TELEVISION LIMITED (FORMERLY MERGER COMPANY 2005 LIMITED)

in NZD 0002006

(NZ IFRS)2005

(NZ IFRS)

Total assets 3,071,301 –

Total tangible assets 1,619,702 –

Total liabilities 1,991,428 –

Total equity 1,079,873 –

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INDEPENDENT NEWSPAPERS LIMITED

Formerly New Zealand’s largest media company, INL was a publicly listed investment company. In June 2003 INL’s shareholders voted in support of a resolution to accept an unsolicited offer of $1.188 billion by Fairfax for INL’s New Zealand publishing business. The business included the flagship newspapers The Dominion Post, The Press, Sunday Star-Times, Sunday News and several regional newspapers, 61 community publications, 12 magazines titles, Gordon and Gotch, New Zealand’s largest magazine distributor, the Stuff website, and a number of commercial printing businesses.

INL subsequently sold its remaining printing and publishing operation, Geelong Newspapers in Australia, in November 2003 to News Limited for $64 million. Following this sale, INL held a 78% shareholding in SKY and NZ$754 million of net cash.

The following summary of financial statements provides information extracted from the audited consolidated financial statements of INL for the four years ended 30 June 2005 prepared in accordance with the requirements of the Second Schedule to the Securities Regulations.

Consolidated Income Statements – Four Year TrendFOR THE YEARS ENDED 30 JUNE

INDEPENDENT NEWSPAPERS LIMITED AND SUBSIDIARIES

in NZD 000

2005 (previous

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2004 (previous

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2003 (previous

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2002 (previous

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Total operating revenue continuing activities 509,620 474,723 426,047 870,948

Total operating revenue discontinuing activities – 13,757 502,977 2,554

Total operating revenue 509,620 488,480 929,024 873,502

Total operating expenses 384,440 397,951 777,316 764,303

Operating profit 125,180 90,529 151,708 109,199

Total interest expense 16,074 22,660 60,113 61,002

Non operating expenses/(income)2 – (23,594) (293,934) 13,699

Profit before income tax 109,106 91,463 385,529 34,498

Income tax expense/(credit) 26,931 11,976 (6,233) 2,287

Profit after income tax 82,175 79,487 391,762 32,211

from continuing operations 82,175 53,581 12,958 33,968

from discontinuing operations – 25,906 378,804 (1,757)

Minority interest and share of profit/(loss) of associated companies 22,526 8,547 3,287 (5,604)

Profit attributable to equity holders of the Company 59,649 70,940 388,475 37,815

Dividend paid 56,528 49,162 38,015 36,072

Dividend (cents) per share 15.5 11.61 9.0 8.5


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Consolidated Balance Sheets – Four Year TrendFOR THE YEARS ENDED 30 JUNE

INDEPENDENT NEWSPAPERS LIMITED AND SUBSIDIARIES

in NZD 000

2005 (previous

GAAP)

2004 (previous

GAAP)

2003 (previous

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2002 (previous

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Total assets 1,512,012 1,550,541 1,932,528 2,133,794

Total tangible assets 654,279 689,354 1,243,035 756,953

Total liabilities 263,330 317,607 443,241 995,177

Total equity 1,248,682 1,232,934 1,489,287 1,138,617

2 On 14 November 2003, the Australian based printing, publishing and distribution operations owned by Geelong Newspapers Limited were sold to News Limited. The profit on this sale was $20.5 million. On 30 June 2003, the entire New Zealand based printing, publishing and magazine operations were sold to Fairfax New Zealand Limited. The profit on sale was $293.9 million.

IMPACT OF NZ IFRS ON SUMMARY FINANCIAL STATEMENTS

The main adjustments required to adjust the above summary financial statements of the continuing operations for NZ IFRS would be:

• Derecognition of programme rights classified as executory contracts

• Capitalisation of overhead installation costs

• Recognition of derivative financial instruments on balance sheet at fair value

• Reclassification of software from property, plant and equipment to intangibles

• Recognition of deferred taxation assets

• Accounting for business combinations and the valuation of intangible assets including the value of brands, subscriber relationships and goodwill

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SKY PRE-MERGER

SKY Pre-Merger was a nationwide pay television broadcasting service in New Zealand. SKY Pre-Merger’s principal business activity was the distribution of both local and foreign programme content to its subscriber base predominantly through satellite digital services but also through terrestrial UHF analogue services. The business of SKY as described in this Offer Document is the business previously operated by SKY Pre-Merger.

The following summary financial statements provides information extracted from the audited consolidated financial statements of SKY Pre-Merger for the four years ended 30 June 2005 prepared in accordance with the requirements of the Second Schedule to the Securities Regulations.

Consolidated Income Statements – Four Year TrendFOR THE YEARS ENDED 30 JUNE

SKY NETWORK TELEVISION LIMITED (PRE-MERGER)

in NZD 000

2005 (previous

GAAP)

2004 (previous

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2003 (previous

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2002 (previous

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Total operating revenue 489,381 440,617 391,272 344,608

Total operating expenses 380,286 383,173 362,607 347,922

Operating profit/(loss) 109,095 57,444 28,665 (3,314)

Total interest expense 14,092 21,062 26,988 26,563

Other net interest income and financing charges 1,146 1,098 983 181

Profit/(loss) before income tax 93,857 35,284 694 (30,058)

Income tax (credit)/expense (9,622) 64 (17) 58

Profit after income tax 103,479 35,220 711 (30,116)

Minority interest 51 (73) 40 58

Profit attributable to equity holders of the Company 103,428 35,293 671 (30,174)

Dividend paid 48,642 – – –

Dividend (cents) per share 12.5 – – –


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Consolidated Balance Sheets - Four Year TrendAS AT 30 JUNE

SKY NETWORK TELEVISION LIMITED (PRE-MERGER)

in NZD 000

2005 (previous

GAAP)

2004 (previous

GAAP)

2003 (previous

GAAP)

2002 (previous

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Total assets 409,580 407,560 477,394 494,871

Total tangible assets 381,837 376,363 442,981 464,756

Total liabilities 262,688 316,135 421,189 439,941

Total equity 146,892 91,425 56,205 54,930

IMPACT OF NZ IFRS ON SUMMARY FINANCIAL STATEMENTS

The main adjustments required to adjust the above summary financial statements for NZ IFRS would be:

• Derecognition of programme rights classified as executory contracts

• Capitalisation of overhead installation costs

• Recognition of derivative financial instruments on balance sheet at fair value

• Reclassification of software from property, plant and equipment to intangibles

• Recognition of deferred taxation assets

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AUDITORS’ REPORT

The Directors Sky Network Television Limited PO Box 9059 Newmarket Auckland

11 September 2006

Dear Directors

AUDITORS’ REPORT FOR INCLUSION IN THE OFFER DOCUMENT

As auditors of Sky Network Television Limited (“the Company”) we have prepared this report pursuant to clause 36 of the Second Schedule of the Securities Regulations 1983 for inclusion in an Offer Document to be dated 11 September 2006.

DIRECTORS’ RESPONSIBILITIES

The Company’s Directors are responsible for the preparation and presentation of:

(a) the financial statements which give a true and fair view of the state of affairs of the Company as at 30 June 2006 and its financial performance and cash flows for the year ended on that date, as required by clauses 16 to 31 of the Second Schedule of the Securities Regulations 1983;

(b) the summary of financial statements of the Company for the year ended 30 June 2006 and the period ended 30 June 2005 as required by clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983;

(c) the summary of financial statements of Independent Newspapers Limited and Sky Network Television Limited (Pre-Merger) Group for the years ended 30 June 2005, 2004, 2003 and 2002 as required by clause 8(2) of the Second Schedule of the Securities Regulations 1983; and

(d) the amounts in respect of the ranking of securities of the Company as at 30 June 2006 as required by clause 12 of the Second Schedule of the Securities Regulations 1983.

AUDITORS’ RESPONSIBILITIES

We are responsible for expressing an independent opinion on the financial statements of the Company for the year ended 30 June 2006 presented by the Directors and reporting our opinion in accordance with clause 36(1) of the Second Schedule of the Securities Regulations 1983.

We are also responsible for reporting, in accordance with clause 36(1)(g) of the Second Schedule of the Securities Regulations 1983, on the following matters which have been prepared and presented by the Directors:

(a) the amounts included in the summary of financial statements of the Company for the year ended 30 June 2006 and the period ended 30 June 2005;

(b) the amounts included in the summary of financial statements of Independent Newspapers Limited and Sky Network Television Limited (Pre-Merger) Group for the years ended 30 June 2005, 2004, 2003 and 2002;

(c) the amounts in respect of the ranking of securities for the Company on pages 52 to 53 as at 30 June 2006.

We carried out other assignments on behalf of the Company in the areas of assurance services. In addition, certain partners and employees of our firm may have dealt with the Company on normal terms within the ordinary course of trading activities of the Company. We had no other relationships with or interests in the Company.

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BASIS OF OPINION ON THE FINANCIAL STATEMENTS

We have undertaken procedures to provide reasonable assurance that the financial statements of the Company referred to in the Offer Document on page 22 comply with the requirements of clauses 16 to 31 of the Second Schedule to the Securities Regulations 1983.

We have conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

BASIS OF OPINION ON THE SUMMARY OF FINANCIAL STATEMENTS AND RANKING OF SECURITIES

We have undertaken procedures to provide reasonable assurance that:

(a) the amounts set out in the summary of financial statements of the Company on page 23, pursuant to clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the Company for the year ended 30 June 2006 and the period ended 30 June 2005;

(b) the amounts set out in the summary of financial statements of Independent Newspapers Limited and Sky Network Television Limited (Pre-Merger) Group on pages 24 to 27, pursuant to clause 8(2) of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of each Group for the years ended 30 June 2005, 2004, 2003 and 2002;

(c) the amounts in respect of the ranking of securities on pages 52 to 53, pursuant to clause 12 of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the Company for the year ended 30 June 2006.

UNQUALIFIED OPINION ON THE FINANCIAL STATEMENTS AND THE SUMMARY OF FINANCIAL STATEMENTS AND RANKING OF SECURITIES

We have obtained all the information and explanations we have required.

In our opinion:

(a) the financial statements of the Company for the year ended 30 June 2006 upon which we issued an audit opinion on 17 August 2006 have been registered under the Financial Reporting Act 1993 and are referred to in this Offer Document and that are required by clauses 16 to 31 of the Second Schedule of the Securities Regulations 1983, have been drawn up to comply with the Regulations;

(b) the amounts or details set out in the summary of financial statements, on page 23 of this Offer Document, as required by clauses 7(2) and 7(3) of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the Company for the year ended 30 June 2006 and the period ended 30 June 2005 from which they were extracted;

(c) the amounts or details set out in the summary of financial statements, on pages 24 to 27 of this Offer Document, as required by clause 8(2) of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of Independent Newspapers Limited and Sky Network Television Limited (Pre-Merger) Group for the years ended 30 June 2005, 2004, 2003 and 2002 from which they were extracted; and

(d) the amounts in respect of the ranking of securities on pages 52 to 53 of this Offer Document, as required by clause 12 of the Second Schedule of the Securities Regulations 1983, have been correctly taken from the audited financial statements of the Company for the year ended 30 June 2006, from which they were extracted.

Yours faithfully

Chartered Accountants Auckland

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1. WHAT SORT OF INVESTMENT IS THIS?

SKY is offering Bonds with an aggregate principal amount of up to NZ$200 million for subscription.

The Bonds are unsecured, unsubordinated debt securities. The Bonds will rank equally with SKY’s other unsecured unsubordinated debt, other than indebtedness preferred by law.

The Bonds offer investors a resettable interest rate on the amount they invest. See the section entitled “What returns will I get?” for further details.

All the Bonds are to be issued on the same date, which will be selected by SKY but is expected to be 16 October 2006.

SKY may elect on each anniversary of the Issue Date from and including the Call Option Date to compulsorily redeem or repurchase some or all of the Bonds before the Maturity Date. SKY may repurchase or redeem Bonds by paying to the relevant Holder the principal amount of, and all accrued but unpaid interest on, the relevant Bonds on an Early Redemption Date, by irrevocable notice in writing to each applicable Holder not later than 30 days before that Early Redemption Date.

The Trust Documents, this Offer Document and the Application Forms contain all the conditions applicable to all Bonds, including in relation to applications for the Bonds. Copies of the Trust Documents may be obtained from SKY on request.

2. WHO IS INVOLVED IN PROVIDING IT FOR ME?

The issuer of the Bonds is Sky Network Television Limited whose address is 10 Panorama Road, Mt Wellington, Auckland. SKY is New Zealand’s pre-eminent provider of pay television services, having commenced broadcasting in May 1990.

The Trustee is The New Zealand Guardian Trust Company Limited whose address is Level 7, Vero Centre, 48 Shortland Street, Auckland. The Trustee does not guarantee the payment of interest or principal on the Bonds.

3. HOW MUCH DO I PAY?

The subscription price for each Bond is NZ$1.00. You must apply for a minimum of 5,000 Bonds and thereafter applications must be made in multiples of 1,000 Bonds.

To make an investment you must complete either a blue General Application Form or a red Capital Noteholder Application Form and pay the subscription price of the Bonds, where required.

Capital Noteholder OfferCapital Noteholders should use the red Capital Noteholder Application Form if they wish to use some or all of their Capital Note Repayment Amount for the purpose of applying for Bonds. Capital Noteholders can also use the red form to apply for Bonds in excess of their Capital Note Repayment Amount. Where the amount of their Capital Note Repayment Amount is less than the amount of Bonds the Capital Noteholder applies for, the Capital Noteholder must pay the difference by cheque, which must accompany the red Capital Noteholder Application Form.

Investors making applications on red Capital Noteholder Application Forms should note that although Bonds having an aggregate principal amount of NZ$105 million will be reserved for subscriptions by Capital Noteholders, in the event of oversubscription for this priority pool applications for more than their Capital Note Repayment Amount will be subject to scaling.

Applications under the Capital Noteholder Offer must be received by the Capital Noteholder Offer Closing Time (scheduled to be 5:00pm on 3 October 2006).

In addition to making an application on a red Capital Noteholder Application Form, Capital Noteholders may make applications for Bonds on the blue General Application Form. Any such applications will not receive the benefit of the Bonds reserved for Capital Noteholders who apply for Bonds using the red Capital Noteholder Application Form.

General OfferInvestors who wish to subscribe for Bonds in the General Offer should use the blue General Application Form at the end of this Offer Document.

Applications under the General Offer, and accompanying cheque, must be received by the General Offer Closing Time (scheduled to be 5:00pm on 12 October 2006).

ANSWERS TO IMPORTANT QUESTIONS

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Payment for BondsApplications for Bonds made on blue General Application Forms by investors who are not members of Austraclear New Zealand must be received by the Registrar before the General Offer Closing Time (scheduled to be 5.00 p.m. on 12 October 2006). Alternatively, application money may be sent with blue General Application Forms to ANZ or ASB Securities (at the addresses specified at the end of this Offer Document) or lodged with the Co-Manager or any NZX Firm, in each case in time for forwarding to the Registrar before the General Offer Closing Time.

Applications made on red Capital Noteholder Application Forms for Bonds in excess of the relevant investor’s Capital Note Repayment Amount, by investors who are not members of Austraclear New Zealand must be received by the Registrar before the Capital Noteholder Offer Closing Time (scheduled to be 5.00 p.m. on 3 October 2006). Alternatively, application money may be sent with red Capital Noteholder Application Forms to ANZ or ASB Securities (at the addresses specified at the end of this Offer Document) or lodged with the Co-Manager or any NZX Firm, in each case in time for forwarding to the Registrar before the Capital Noteholder Offer Closing Time.

Application money must be paid by investors who are not Austraclear members by way of a cheque delivered with an Application Form to which the application relates, and made payable to “SKY Bond Offer” and crossed “Not transferable” and not post-dated, or by another payment method approved by the Joint Lead Managers, Organising Participant, Co-Manager or other selected financial institution to whom the Application Form is being delivered.

Investors who are members of Austraclear New Zealand may settle payment for Bonds on the Issue Date through the Austraclear New Zealand system.

Where Bonds are to be paid for in part or in whole by using an investor’s Capital Note Repayment Amount, SKY will arrange for the relevant part of the Capital Note Repayment Amount specified in the completed red Capital Noteholder Application Form to be used on or before the Issue Date towards payment for the Bonds applied for. If, and to the extent that, SKY accepts an application on a red Capital Noteholder Application Form, that application constitutes an irrevocable direction to SKY to apply the specified

Capital Note Repayment Amount in subscription for an equivalent principal amount of Bonds on the Issue Date.

If payment for Bonds is not received in the manner described above, Bonds will not be issued to the relevant investor.

SKY reserves the right to refuse any application or to accept an application in part only, without assigning a reason. If SKY accepts an application in part only or not at all, the balance of the application money not used will be returned to the applicant named in the Application Form within 14 days of the Issue Date. No interest will be paid on such refunds.

No cooling offApplicants should note that there will not be a cooling off period in relation to applications for Bonds. Consequently, once an application has been lodged it cannot be withdrawn, unless SKY determines otherwise in its sole discretion.

4. WHAT ARE THE CHARGES?

Neither SKY nor the Registrar charges you any fees or commission on your initial investment in the Bonds.

A fee or commission may be charged if Bonds are purchased or sold on the secondary market (that is, if you want to sell your Bonds at a later date). SKY takes no responsibility for the pricing actions of secondary market participants (including any financial adviser through whom you may purchase or sell Bonds), and any fee or commission is to be directly negotiated between you and the relevant secondary market participant.

Holders are not required to pay any fees, charges or commissions to the Trustee.

All fees or expenses payable to the Trustee or the Registrar and all other costs associated with the Offer are payable by SKY. Certain fees and expenses will be payable by SKY to the Joint Arrangers and the Joint Lead Managers, as agreed between them.

No brokerage is payable by any investors in respect of their initial application for Bonds.

5. WHAT RETURNS WILL I GET?

The information set out in this section should be read in conjunction with the information set out in the section entitled “What are my risks?” below. Certain events could reduce or eliminate the returns intended

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to be derived from holding the Bonds.

The principal factors that will determine the returns to Holders are:

• the Interest Rate applicable to the Bonds;

• the term of your investment;

• the performance by SKY of its obligations as the issuer of the Bonds (including the payment of interest on the Interest Payment Dates); and

• your individual circumstances for tax purposes.

It is not possible to quantify as at the date of this Offer Document the exact amount of returns Holders will receive, and therefore such amount cannot be promised by SKY.

Interest RateThe Bonds will bear a resettable rate of interest payable by SKY in arrears on each Interest Payment Date. The Bonds will bear interest from (and including) the Issue Date at the applicable Interest Rate from time to time until (but excluding) their Redemption Date.

Interest shall accrue daily on the basis of a 365 day year. Interest will be payable in arrears on each Interest Payment Date with a final payment being due on the Redemption Date. The interest payable on each Bond on each Interest Payment Date will be half of the annual interest amount payable on that Bond in the year (commencing on the Issue Date or an anniversary of the Issue Date) in which that Interest Payment Date falls.

The Interest Payment Dates will be 16 April and 16 October in each year prior to the Redemption Date of the Bonds unless such date is not a Business Day in which case it shall be the next Business Day. The final Interest Payment Date will be the Redemption Date, which may or may not be the Maturity Date. If the Redemption Date is not a Business Day, amounts payable on the Redemption Date will be paid on the next Business Day.

The Interest Rate for each Interest Period during the period from the Issue Date until the first anniversary of the Issue Date will be the rate per annum equal to the higher of:

• the aggregate of (A) the Reference Rate on the Interest Rate Set Date, and (B) the Margin, and

• 8%.

The Interest Rate will then be reset annually. On (and with effect from) each successive Interest Payment

Date that is an anniversary of the Issue Date, the Interest Rate for the immediately following year will be set at the rate per annum equal to the aggregate of the Reference Rate on the Reset Date occurring immediately before that Interest Payment Date, and the Margin.

Interest will be payable on each Interest Payment Date to the Holder of the Bonds as at the Record Date immediately preceding the relevant Interest Payment Date.

Maturity and Call OptionThe Bonds will be issued with a Maturity Date of 16 October 2016. SKY may elect to compulsorily redeem or repurchase some or all of the Bonds before the Maturity Date. SKY may redeem or repurchase Bonds on each anniversary of the Issue Date from and including the Call Option Date upon giving an irrevocable notice in writing to each applicable Holder not later than 30 days before an Early Redemption Date and paying to the relevant Holder the principal amount of, and all accrued but unpaid interest on, the relevant Bonds on that Early Redemption Date.

The principal amount will be payable on the Redemption Date to the Holder of the Bonds as at the Record Date immediately preceding the Redemption Date.

The interest and principal payable on the Redemption Date will be paid either by cheque or to the bank account nominated by you on the Application Form or such other bank account as you may advise the Registrar in writing from time to time, provided such notice is given prior to the Record Date in relation to a particular interest payment.

Other factorsIf you elect to transfer Bonds, your return may be affected by the then current relevant market interest rates (see the section entitled “What are my risks?” below for further details).

If any amount payable by SKY in respect of a Bond is not paid on its due date, interest will accrue on the unpaid amount at the aggregate of 2% per annum and the Interest Rate, compounded monthly until the relevant amount is paid.

To the extent an application for Bonds is accepted and application money has been paid by cheque, the investor will receive interest on the application money. Such interest will be calculated at the Official Cash Rate, and will be payable in respect of the period from


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(and including) the date the application money was paid into SKY’s bank account to (but not including) the Issue Date. Such interest will be paid to the investor named in the completed Application Form no later than 14 days after the Issue Date.

Liability for returnsAs at the date of this Offer Document, the Issuer, Sky Network Television Limited, is the only person legally liable to pay any amounts due on the Bonds. No other person, including any other member of the SKY Group, is legally liable to pay any amounts due on the Bonds.

There is provision in the Supplemental Trust Deed for Subsidiaries of SKY to guarantee to the Trustee (acting on behalf of Holders) the Bond Monies. Any such guarantee given by any Guarantor would be unsecured and unsubordinated. The “Guaranteeing Group” consists of SKY and its Guaranteeing Subsidiaries from time to time. As at the date of this Offer Document, there are no Guaranteeing Subsidiaries. That is, no person (including, for the avoidance of doubt, any person who is a Shareholder of SKY) guarantees SKY’s obligations under the Bonds.

In the Supplemental Trust Deed, SKY undertakes that it will ensure that:

(a) if, at any time, any member of the SKY Group proposes to become a Guaranteeing Subsidiary (as that term is defined in the Negative Pledge Deed), it will procure that prior to or contemporaneously with that member of the SKY Group becoming a Guaranteeing Subsidiary (as that term is defined in the Negative Pledge Deed), that member of the SKY Group will become a Guarantor; and

(b) if, at any time, the Negative Pledge Deed ceases to be in effect:

(i) Total Tangible Assets of the Guaranteeing Group are, at all times, not less than 90% of Total Tangible Assets of the SKY Group; and

(ii) when calculated for the 12 month period ending on 31 March, 30 June, 30 September and 31 December in each year, EBITDA of the Guaranteeing Group is not less than 90% of EBITDA of the SKY Group.

SKY may at its option join any Subsidiary as a Guaranteeing Subsidiary, whether or not required to do so in accordance with the above.

The Supplemental Trust Deed contains provisions for the release of a Guaranteeing Subsidiary from its guarantee and other covenants under the Trust Documents, upon certain conditions. The identity of the Guarantors may alter during the term of the Bonds (without the consent of, or notice to, the Holders, but in accordance with the Supplemental Trust Deed).

TaxYour returns on the Bonds may be affected by taxation. All sums payable under the Bonds will be paid by or on behalf of SKY net of any withholding or deduction for, or on account of, any present or future taxes or duties of any nature required by New Zealand law to be withheld or deducted. SKY will not be obliged to gross up, or otherwise compensate any Holder for any payment from which any deduction or withholding is required to be made or in respect of which any approved issuer levy is paid.

SKY assumes no responsibility or liability to any Holders for the tax treatment of their investment in Bonds. The following information is designed to be a general summary of the current New Zealand tax implications of holding Bonds and is not (and should not be construed as) legal or tax advice or a complete summary of all of the New Zealand tax consequences relevant to Holders. Holders should consult their own taxation advisers regarding the effect of any relevant taxation legislation on their investment in Bonds (including the relevant tax consequences relating to the acquisition, retention, disposition and maturity of the Bonds). Any reference to “interest” in this section of the Offer Document shall be taken as a reference to interest as defined in the Income Tax Act.

Resident Withholding Tax (RWT)RWT is required to be deducted from interest paid or credited to New Zealand Holders. RWT will be deducted by SKY from each amount of interest paid or credited to a New Zealand Holder.

RWT will not be deducted where the New Zealand Holder holds and produces to SKY (or the Registrar) a copy of a valid certificate of exemption from RWT. SKY will make RWT deductions (as described below) unless it is satisfied by the New Zealand Holder that such deductions are not required by law. Where Bonds are held jointly by a holder of a certificate of exemption and another party who does not hold a certificate of exemption, SKY will deduct RWT from all interest

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payments. The certificate of exemption holder may obtain a refund by filing a return for the appropriate period.

As at the date of this Offer Document, the applicable rates of RWT in respect of interest are as follows:

• for any New Zealand Holder that is a company (other than corporate trustees and Maori authorities) which has provided its tax file number to SKY, the rate of RWT will be 33% (unless the company elects the higher 39% rate);

• for any other New Zealand Holder which has provided its tax file number to SKY (or if the Bonds are held jointly with one or more other persons, one of which has provided its tax file number to SKY), the rate of RWT will be 19.5% (unless the New Zealand Holder elects a higher rate of 33% or 39%);

• for all other New Zealand Holders, the rate of RWT will be 39%.

SKY requires Holders to provide their tax file numbers when completing an Application Form for, or security transfer form in respect of, Bonds.

Non-resident Withholding Tax (NRWT)Interest paid or credited to Non-resident Holders is subject to New Zealand NRWT. NRWT is normally deducted at a rate of 15% of the amount of interest paid or credited (although this can effectively be reduced to 10% for some Non-resident Holders who are resident in certain countries which have double tax agreements with New Zealand).

SKY has obtained “approved issuer” status and will register the Bonds offered under this Offer Document as “registered securities” for the purposes of the approved issuer levy provisions in Part VIB of the Stamp and Cheque Duties Act 1971. SKY intends to maintain the registration of both itself and the Bonds under the approved issuer levy regime. If it does so, and a Non-resident Holder is neither:

• deriving interest under the Bonds jointly with one or more persons, and at least one of those persons is a New Zealand tax resident; nor

• associated with SKY for purposes of the NRWT rules in the Income Tax Act.

SKY will deduct from the gross amount of interest paid or credited to the Non-resident Holder an amount equal to the approved issuer levy payable in respect of

that interest (which is currently calculated as 2% of the interest due on the Bonds) instead of deducting NRWT (which in these circumstances is reduced to 0%). For clarity, the amount of the interest paid or credited will be reduced by the amount of the approved issuer levy paid or payable by SKY.

If the Non-resident Holder derives interest under the Bonds jointly with one or more persons, and at least one of those persons is a New Zealand tax resident, NRWT will be deducted from the interest paid or credited to the Non-resident Holder at the applicable rate of resident withholding tax (see above).

For the purpose of determining SKY’s liability (if any) to make deductions or withholdings on account of taxes or any approved issuer levy in respect of Bonds, SKY will assume that the Holder is a New Zealand Holder (or if there is more than one such Holder, SKY shall assume that all such Holders are New Zealand Holders), and that the Holder (or Holders as the case may be) hold all of the legal and beneficial ownership interests in the Bond, unless the Holder can satisfy SKY otherwise.

The above statements are based on applicable taxation legislation current at the date of this Offer Document. Investors should consult their own taxation adviser regarding their tax residency and status or the effect of any relevant tax legislation on their investment.

6. WHAT ARE MY RISKS?

The principal risks for Holders of Bonds are that:

• they may not receive timely, or any, interest payments on the Bonds; and

• they may be unable to recoup all or any of their original investment amount.

These circumstances could arise for a number of reasons including if:

• The price at which investors are able to sell their Bonds is less than the price they have paid for them due to interest rate movements, market perception that the interest rate being paid no longer accurately reflects the risk of investing in SKY, or other reasons;

• Investors are unable to sell their Bonds due to a lack of demand; and

• SKY becomes insolvent for any reason, or is placed


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in receivership, liquidation or statutory management, or is otherwise not in a position to meet its debts as they fall due.

SKY’s creditworthiness or solvency could be affected by a number of matters, including factors outside its control. Some of the principal factors that may affect SKY’s operational and financial performance, and thus potentially affect the creditworthiness or solvency of SKY, are set out below.

Economic conditionsSKY will be exposed to the risk of a general downturn in the New Zealand economy. This could reduce the value of the business by, for example, reducing the size or rate of growth of SKY’s customer base or by reducing its advertising revenues.

Changes to taxationAny change to the rate of company income tax or other taxes has the potential to impact on the returns of SKY’s business.

Interruption to businessSKY is dependent on the use of an Optus satellite for its digital services. SKY currently leases four transponders on the Optus B1 satellite which it uses to broadcast its programme content throughout New Zealand. This satellite is coming to the end of its useful life and now has limited internal back-up in the case of failure. Current estimates are that it will be capable of providing services to SKY until at least June 2007. SKY has also agreed a restoration plan with Optus which, if successfully implemented, would restore satellite capacity within a short period at the orbital location where its satellite dishes are currently pointed (at 160˚ east), should there be a failure of the B1 satellite prior to the launch of a new satellite. Implementation of the restoration plan would nevertheless have a material adverse effect on SKY’s business, including payment of restoration costs to Optus, disruption to SKY’s operations and loss of revenue.

SKY has signed a contract with Optus to lease five transponders on the D1 satellite scheduled to be launched and commissioned by November 2006.

Optus has also committed to launching a second satellite, D1R, which is scheduled for physical pre-launch delivery in February 2007 should there be a failure of the D1 launch. Optus has not purchased a

back-up launch vehicle in the event of a failure of the D1 launch but is confident that a launch could be secured for D1R in the first half of 2007, if this was required.

Optus also plans to launch, at a later date (to be confirmed), an additional satellite (currently named D2), to be positioned at 156˚ east. When launched and positioned at 156˚ east this satellite will provide in-orbit back-up for SKY as it has a purpose built pay load designed to replicate SKY’s D1 services, should this ever be required. SKY has designed a dual low noise block for use on its satellite dishes so that these can be electronically switched to the 156˚ east location should there ever be a failure of D1 ensuring continuity of satellite services, albeit from the D2 satellite (once launched). SKY is progressively installing these dual low noise blocks on new installations and as it visits customers during normal operations. There are currently approximately 200,000 of these new dual low noise blocks installed. Assuming the D2 satellite is successfully launched and commissioned at 156˚ east, there is a risk that not all subscribers will have the dual low noise blocks installed if capacity on the D2 satellite is required.

A failure of both the B1 satellite and the restoration plan or the failure or delay of the launch and commissioning of the D1 and/or D1R satellites beyond mid 2007, in circumstances where an alternative satellite cannot quickly be placed in the same orbital location as the B1 satellite, is likely to result in a serious disruption or suspension of SKY’s operations for a significant period of time and have a material adverse effect on SKY’s business. Among other things, satellite broadcasts may be disrupted for various reasons, including:

• failure of transponders or other satellite electronics;

• exhaustion of fuel for satellite station keeping;

• premature aging of the solar cells which help power the satellite;

• malfunctions in ground control stations that cause the satellite to drift off its station and therefore become unable to transmit signals to the designated area;

• damage from space debris;

• faulty systems, software, mechanical devices or latent faults in construction; and

• faulty operation or other causes.

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The terms of the contracts that SKY has with Optus, which reflect industry practice, mean that SKY is unlikely to have any significant remedy against Optus in the event of satellite failure or the failure or delay of any restoration plan or the launch and commissioning of the D1 and/or D1R/D2 satellites. SKY is not insured for the risk of such failures or delay due to the prohibitive cost and terms of the insurance.

SKY’s UHF and digital services depend heavily on the equipment and facilities located at SKY’s studios in Mt Wellington and Albany, Auckland and the satellite dish facility at Warkworth, including reception equipment for overseas programming, programming and subscriber management systems, encryption and compression systems and up-linking equipment, much of which would be difficult to replicate or replace in the short term. That equipment and those facilities are subject to the risk of loss, destruction, damage or failure due to factors outside SKY’s control such as unauthorised access, computer viruses, power loss, communication failure, accidents, fire and acts of God. As a result these types of factors have the potential to cause significant interruption to SKY’s business. The risks of this type of business interruption are mitigated by back-up systems, disaster recovery plans (which SKY is continuing to develop and expects to have fully operational within 24 months) and insurance maintained by SKY, although these do not remove the risks completely.

SKY has embarked on projects to upgrade its broadcast infrastructure from its current analogue technology to digital technology and to upgrade its subscriber management system. These projects will occur over several years. While SKY will take advice from international consultants and work closely with equipment vendors, there is a risk that the upgrade projects could result in interruption to SKY’s business. SKY will endeavour to maintain business interruption insurance to cover any disruption during the upgrade. Any failure of infrastructure or equipment prior to completion of the upgrade projects could also result in interruption to SKY’s business.

Reliance on supply and operation of decodersSKY currently has an agreement with one equipment supplier for the digital decoders it purchases for installation at the homes of digital subscribers. Should SKY’s principal supplier fail to provide such equipment on a timely basis, SKY may be unable to find alternative suppliers without considerable delay or additional expense.

SKY is also dependent upon the continued operation of its installed base of UHF and satellite decoders. The UHF decoders are up to 16 years old and the satellite decoders are up to eight years old. The satellite decoders require software to operate and this software is continually upgraded via over-the-air satellite downloads. There is a risk that these software upgrades introduce new software bugs that could impact the operation of the satellite decoders.

Competition and emerging technologiesSKY competes with existing forms of media and entertainment (including FTA television, radio, newspapers, magazines, outdoor advertising, cinema, video and DVD rentals and sales, and the internet) and in the future emerging technologies may increase competition for SKY. Increased competition may have an adverse affect on SKY’s business by reducing subscription revenue, audience share and advertising revenues, by increasing the costs or availability of programme rights for SKY or by forcing SKY to incur other additional costs in responding to increased competition.

These risks are heightened by:

• The Government’s decisions in June 2006 to support the launch of FTA digital television via a hybrid terrestrial and satellite platform. These decisions provide greater possibilities for other broadcasters and new entrants to transmit digital programmes in New Zealand. There is also the risk that this platform is used in the future to provide pay television services.

• The emergence of new distribution technologies, such as IPTV and mobile television via DVB-h technology, which will enable new television services to be offered. SKY will have to negotiate rights to distribute its content over these new platforms as they become available in New Zealand. There is no certainty that SKY will be successful in doing so at competitive prices.

• The Government’s recent decision to unbundle the local loop owned by Telecom is likely to result in a number of new entrants investing in the infrastructure that is required to offer broadband internet services, including IPTV. New wireless technologies, such as 2.3Ghz “Wi-Max” will also enable competitors of SKY to offer pay television services to consumers via wireless platforms. SKY’s strategy is to partner with the owners of these new distribution platforms to ensure that SKY content is


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available to the customers utilising these networks. There is risk associated with SKY’s strategy and there is no certainty that SKY will be successful in entering into these partnering arrangements. SKY may therefore need to change its strategy in the future and incur additional unplanned expenditure to develop its own broadband or wireless networks or services to enable it to provide television using these new technologies.

• The potential for suppliers of programmes to use new distribution platforms (such as IPTV and broadband internet services) to provide pay television services directly to viewers in New Zealand. If video-on-demand services, or other new means of accessing programmes, become available in New Zealand this may reduce the demand for SKY’s services.

• The potential for increased competition for programme content from both existing broadcasters and any new entrants, including those using the new FTA digital platform and other new distribution platforms. This increased competition for content could significantly increase the cost of programme rights and reduce the programmes available to SKY.

Increased regulationWhile currently the New Zealand broadcasting industry is lightly regulated, there is a risk that more stringent regulation will be introduced. The Government has recently announced a review of broadcasting regulation (including the broad areas of competition policy and standards) as it relates to digital technology, to assess its continued appropriateness and adequacy in the digital environment. The Government has stated that the review is not to be undertaken with an implied intention to make changes, and that some objectives are likely to be achievable through industry self-regulation or cooperation.

The introduction of increased regulation could adversely impact the financial performance of SKY. Potential areas of increased regulation include:

• The introduction of restrictions on the availability or use of the radio spectrum licences that SKY requires to operate its business.

• The regulation of access to SKY’s decoders and transmission systems. While such access is not currently regulated, in 2003 the Ministry of Economic Development was directed to monitor

the terms of access to satellite capacity and availability of receivers.

• The introduction of anti-siphoning regulations. Anti-siphoning regulations exist in other countries and require certain major sporting events to be available “live” on a FTA channel. The introduction of anti-siphoning legislation in New Zealand would adversely impact SKY’s business as one of the key selling propositions for SKY is offering exclusive live access to major sports events such as rugby, rugby league and cricket.

• The introduction of mandatory local content requirements for television broadcasters.

• The introduction of greater restrictions on advertising via television. There is currently a Private Member’s Bill before Parliament which proposes to change the earliest time for liquor advertising on television from 8:30pm to 10:00pm. If introduced in its current form this Bill would adversely affect SKY’s revenues from liquor advertising and sponsorship arrangements. In January 2006 the Government also announced a wide ranging review of regulations controlling advertising and promotion of alcohol. The outcome of the review could also adversely affect SKY’s revenues from liquor advertising and sponsorship arrangements.

• The introduction of price controls over pay television or other controls over what pay television services can be provided to consumers.

Maintenance and non interference of radio spectrum licencesSKY holds various radio spectrum licences that are used to provide its satellite and UHF services. SKY’s business could be adversely affected if for any reason SKY was not able to maintain use of these licences in the future or if transmission by third parties caused interference to SKY’s transmissions. While the Government’s current practice protects the licences that SKY needs to provide its satellite services, there is a risk that this practice could change in the future.

SKY’s UHF television licences expire on 11 March 2010. SKY has accepted the Government’s offer to renew these licences to 2020.

Under SKY’s agreement with MTS, under which SKY transmits MTS, MTS has agreed not to use the frequencies held by MTS in a manner that causes

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interference to SKY’s decoders. If this agreement is not renewed beyond 11 March 2010 and after this date MTS transmitted signals using its own frequencies, interference could be caused to SKY’s decoders. SKY will have to consider this issue closer to 2010.

Risk of signal theftTheft or “piracy” of pay television services is recognised to be a risk to any pay television operator. To combat piracy, SKY currently uses encryption systems on its UHF and digital services made by and licensed from NDS Limited, a member of News Group. Should these systems prove to be ineffective in combating piracy of SKY’s UHF and digital signals, SKY’s revenues and its ability to contract for popular programmes could be adversely affected.

Adverse impact of currency fluctuations and interest rate changesAlthough almost all of SKY’s revenues are denominated in NZ dollars, a significant percentage of SKY’s operating expenses and capital expenditures are in foreign currencies. Decreases in the value of the NZ dollar relative to foreign currencies will increase SKY’s NZ dollar payments for its operating expenses and capital expenditures and could therefore materially adversely affect SKY’s operating results. For example, for the year ended 30 June 2006, each US$0.01 movement in the US$/NZ$ exchange rate would have resulted in a change in SKY’s (pre-tax) programme costs of approximately NZ$1.5 million per annum. SKY enters into foreign exchange contracts to fix the NZ dollar cost of a proportion of such operating expenses and capital expenditures.

SKY is subject to interest rate risk on its long-term borrowings. Borrowings issued at variable rates expose SKY to cash flow interest rate risk. Borrowings issued at fixed rates expose SKY to fair value interest rate risk. SKY’s policy is to maintain approximately 45% to 90% of its borrowings in fixed rate instruments. SKY manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps, options and swaptions. Occasionally, SKY also enters into fixed-to-floating interest rate swaps to hedge fair value interest rate risk arising where it has borrowed at fixed rates.

Although such contracts can mitigate the effect of short-term fluctuations in exchange rates and interest rates, there can be no effective or complete hedge against currency and interest rate fluctuations. Such contracts also have their own inherent risks,

such as the risk of counter party default.

Dependence on key managementSKY’s business and its development has, to a large extent, depended over the past several years on the efforts and abilities of certain key management personnel. SKY does not maintain key man life insurance on behalf of these key management personnel or any other employee. The loss of the services of these key management personnel could adversely affect SKY. The success of SKY will also be dependent, in part, on the ability to attract and retain additional or replacement key management personnel. There is competition for qualified and experienced management personnel in the television broadcasting industry. As a result, any inability to attract and retain sufficient key employees could have an adverse effect on SKY.

Relationship with News GroupSKY currently has a strong working relationship with News Group which has a 43.6% holding in SKY through Nationwide News Pty Limited. This relationship has historically been beneficial to SKY, assisting it with securing exclusive broadcast rights to key events such as the Super 14 series of rugby matches and NRL rugby league. Any deterioration of the relationship between SKY and News Group could potentially negatively impact SKY’s access to these, and other sporting events. For the avoidance of doubt, Nationwide News Pty Limited does not guarantee any of SKY’s obligations in relation to the Bonds.

Merger of SKY Pre-Merger and INLOn 1 July 2005 SKY Pre-Merger merged with its parent company, INL, to form SKY, by way of a court-approved scheme of arrangement.

The Inland Revenue Department has reviewed the correctness of the taxation position adopted in relation to the exchange of shares by INL and SKY Pre-Merger shareholders for cash and shares in SKY (the company surviving amalgamation). In particular, the Commissioner of Inland Revenue considered whether any part of that transaction constituted a dividend or otherwise gave rise to a tax consequence for the relevant parties. The Commissioner has advised SKY that the Inland Revenue Department does not propose taking any further action in relation to this matter. However, there is a risk that the Commissioner could decide to re-examine the taxation position that was adopted in the merger and this could have negative implications for SKY.


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Consequences of InsolvencyThe Bonds are unsecured, unsubordinated debt obligations. This means that in a liquidation or the statutory management of SKY, the Holders’ rights to repayment of any Bond Monies will rank after the claims of:

• persons to whom preferential payments must be made (including creditors of SKY preferred by law); and

• secured creditors (if any).

Claims of Holders will rank equally with claims of the general body of unsecured creditors of SKY and ahead of SKY’s shareholders and subordinated creditors.

Neither the Trustee nor the Holders have any recourse to the assets of SKY’s Subsidiaries or the assets of any other person other than:

• SKY; or

• in the event of a substituted obligor (i.e. the person liable to pay the Bond Monies) replacing SKY as the obligor under the Bonds, such substituted obligor; or

• in the event that one or more Subsidiaries of SKY become and continue to be Guaranteeing Subsidiaries in accordance with the terms of the Supplemental Trust Deed, and thereby guarantee the obligations of SKY under the Bonds, such Subsidiaries. See the section entitled “Liability for returns” above for further details.

In the event of the liquidation of SKY and/or any of SKY’s Subsidiaries (and if at that time SKY has not arranged for Subsidiaries to guarantee its obligations under the Bonds), the Trustee and the Holders will not have direct recourse to the assets of such Subsidiaries. They will only have recourse to the assets of SKY (and, if applicable, the assets of any substituted obligor).

The assets of SKY may include distributions in the liquidation of a Subsidiary which are received by SKY as a shareholder in the Subsidiary, or if SKY has made loans to a Subsidiary, as a creditor of the Subsidiary. Distributions received by SKY as a creditor of a Subsidiary will be paid to SKY with distributions paid to other creditors of the relevant Subsidiary. As a shareholder of a Subsidiary, SKY will only receive any distribution if all of the creditors of the relevant Subsidiary have been paid out in full and only to the extent of any surplus assets.

There is no restriction under the Trust Documents or any other documents relating to the Offer on the ability of

SKY (or, for the avoidance of doubt, any of its Subsidiaries) to dispose of any of its assets to any person.

No Holder will be liable to pay any further amounts to SKY or any other person in respect of the Bonds as a consequence of SKY becoming insolvent.

Risks in relation to holding and transferring BondsLiquidity Risk: Depending on market conditions, and the financial position of SKY or the SKY Group, you may not be able to sell your Bonds immediately or at your desired price.

Interest Rate Risk: In circumstances where you do not hold your Bonds until the Redemption Date, the price at which you are able to sell your Bonds may be less than the price you paid, due to market volatility or other reasons. This is because changes in market interest rates can affect the market value of your Bonds. For instance, if market rates go up, the market value of your Bonds may go down, and vice versa.

This loss or gain of capital is a function of the effect of either a change in relevant market interest rates on the value of your investment (over which SKY has no control), or of the market’s perception of the value of the Bonds (which may be affected by a change in SKY’s credit standing or other factors affecting the Bonds or SKY and its business).

7. CAN THE INVESTMENT BE ALTERED?

The Bonds are issued subject to the Conditions as set out in the Trust Documents. The power to alter the Conditions can only be exercised by the Trustee in accordance with the Trust Documents, which include provision for the Trustee to act on the instructions of the Holders given by way of Extraordinary Resolution. In certain circumstances the Holders of the Bonds may form part of a “Class” of holders which also includes holders of other bonds issued by SKY.

In addition, the Trustee and SKY may, without the consent of Holders, agree to alter the Trust Documents in the limited circumstances specified in the Master Trust Deed. These circumstances include where the change:

(a) will not be, and will not be likely to be, materially prejudicial to the interests of such Holders;

(b) will correct a manifest error;

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(c) is of a minor, formal, technical or administrative nature;

(d) is to comply with the requirements of any applicable law; or

(e) is necessary for the purpose of obtaining or maintaining the quotation of the Bonds on any stock exchange.

See the section entitled “Summary of the Trust Documents” for further information.

8. HOW DO I CASH IN MY INVESTMENT?

SKY may elect to compulsorily redeem or repurchase some or all of the Bonds before the Maturity Date. SKY may redeem or repurchase Bonds by issuing an irrevocable notice in writing to each applicable Holder not later than 30 days before an Early Redemption Date and paying to the relevant Holder the principal amount of, and all accrued but unpaid interest on, the relevant Bond on that Early Redemption Date.

You have no right to have your Bonds repaid early except where one of the Events of Default set out in the Trust Documents has occurred and the Trustee has declared the Bonds due and payable in accordance with the terms of the Trust Documents.

Holders are entitled to sell or transfer their Bonds at any time subject to the terms of the Trust Documents and applicable securities laws and regulations. Application has been made to NZX for permission to list the Bonds, and all of the requirements of NZX relating thereto that can be complied with on or before the date of this Offer Document have been duly complied with. However NZX accepts no responsibility for any statement in this Offer Document. If the Bonds are quoted on the NZDX, they will be transferable under the FASTER trading settlement and transfer system operated by NZX. Otherwise Bonds may be transferred using a transfer document in the usual or common form, or by any other method of transfer of marketable securities which is not contrary to any law. To sell your Bonds you should contact a financial adviser or broker.

SKY (or any of its Subsidiaries) may purchase Bonds from any person on any market and at any price but is not required to purchase or repurchase Bonds from investors. Any Bonds so purchased by SKY may be retained or sold or surrendered for cancellation at the discretion of SKY.

Once you have purchased Bonds, the only way that you can cash them in, or reduce your investment prior to the Redemption Date is by selling some or all of the Bonds to a person who is willing to purchase the Bonds. As this is the initial issue of the Bonds, there is currently no established market for the Bonds. However, in the opinion of SKY, a secondary trading market will develop over time as it has with similar securities of other issuers.

Your right to sell Bonds is subject to the conditions that appropriate transfer forms are used and the sale must not result in the transferee holding less than 5,000 Bonds.

You should note that if Bonds are sold or transferred after the relevant Record Date in respect of a payment date, the person selling or transferring the Bonds will receive the interest on the relevant Interest Payment Date or the payment of principal on the Redemption Date.

You should note that charges may apply to any transfer of the Bonds, as set out in the section entitled “What are the charges?”.

9. WHO DO I CONTACT WITH ENQUIRIES ABOUT MY INVESTMENT?

Questions about your investment should be directed to your investment adviser or another financial adviser or broker, or to SKY at the address set out in the Directory at the end of this Offer Document.

Queries concerning entries on the Register applicable to the Holder may be directed to the Registrar at the following address:

Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna North Shore City New Zealand

Private Bag 92119 Auckland 1020 New Zealand

Telephone No: (09) 488 8777

The Registrar (on behalf of SKY) collects and holds personal information about applicants for this investment for the purposes of administering this investment and for providing investors with information about SKY and its business. You may request access to any personal information SKY (or the Registrar, on SKY’s behalf) holds about you by


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calling SKY on the numbers set out in the Directory at the end of this Offer Document or the Registrar on (09) 488 8777 between 9.00 a.m. and 5.00 p.m. on each Business Day. You may also request correction of any personal information SKY or the Registrar holds about you. Depending on the nature of your requests, SKY may impose a charge for providing you with or correcting any personal information.

10. IS THERE ANYONE TO WHOM I CAN COMPLAIN IF I HAVE PROBLEMS WITH THE INVESTMENT?

If you wish to lodge a complaint about your investment you can write to, or contact, the Trustee at the following address:

The New Zealand Guardian Trust Company Limited Relationship Manager - Corporate Trusts Level 7, 48 Shortland Street Auckland New Zealand

Telephone No: (09) 377 7300 Facsimile No: (09) 377 7477

At the date of this Offer Document there is no ombudsman for this type of investment and therefore no complaints can be made to an ombudsman.

11. WHAT OTHER INFORMATION CAN I OBTAIN ABOUT THIS INVESTMENT?

Offer Document and financial statements This Offer Document contains a summary of the terms of issue of the Bonds. A copy of any documents registered with this Offer Document, including the most recent financial statements of SKY, is available free of charge from the Registrar, whose contact details are:

Computershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna North Shore City New Zealand

Private Bag 92119 Auckland 1020 Auckland

Telephone No: (09) 488 8777

In addition, a copy of this Offer Document, the Trust Documents, the financial statements of SKY that have been registered under the Financial Reporting Act 1993, together with all documents that are required

to be registered with those statements and other documents, are filed with the Companies Office of the Ministry of Economic Development. The statements are available either on the website at www.companies.govt.nz or by contacting the Companies Office Contact Centre on 0508 266 726.

Annual informationDuring the term of your investment, you will be sent statements detailing interest paid or compounded and the deductions, withholdings and other amounts made, paid or payable by SKY on account of taxes during the tax year.

SKY is required to make yearly and half-yearly financial announcements to NZX, and such other announcements as are required by the NZX Listing Rules from time to time. During the term of your investment and while the Bonds are quoted on the NZDX, you will be sent yearly and half-yearly reports of SKY, unless you request otherwise.

Information you can request In addition to this Offer Document, in respect of the Offer you are also entitled to:

• a copy of the Trust Documents (and any amendments);

• SKY’s constitution;

• the material contracts referred to in this Offer Document; and

• a copy of the most recent annual report of SKY.

This information is available for inspection during normal business hours at the offices of SKY:

Sky Network Television Limited 10 Panorama Road Mt Wellington Auckland

or the Registrar (whose office is specified above) or a copy is available upon request.

All requests should be made directly, by telephone or in writing to the Registrar (whose contact details are specified above).

There are currently no charges payable for copies of these documents.

Further information about the IssuerFurther information about SKY can be obtained by visiting its website at http://www.skytv.co.nz.

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FORM AND DENOMINATION

Each Holder is to be issued with a number of Bonds which is a minimum of 5,000 Bonds and an integral multiple of 1,000 Bonds, or such other number as SKY determines.

All the Bonds will be issued on the same date, which SKY shall elect.

Each Bond shall be issued in registered book entry form and the series of Bonds shall be a Retail Series. SKY shall issue to each Holder a Certificate in relation to the Bonds held by that Holder as required by and in accordance with the Securities Act and (where applicable) the requirements of NZX, or otherwise at the request of a Holder from time to time, but entitlement to the Bonds shall be determined solely by reference to the Register and, in certain cases, the Austraclear System.

INTEREST

Each Bond will bear interest from (and including) the Issue Date at the applicable Interest Rate from time to time until (but excluding) its Redemption Date. The Interest Rate will be reset annually on each anniversary of the Issue Date, until and including the ninth anniversary of the Issue Date. The Interest Rate shall:

(a) in the case of each Interest Period during the period from the Issue Date until the first anniversary of the Issue Date, be the rate per annum equal to the higher of:

(i) the aggregate of (A) the Reference Rate on the Interest Rate Set Date, and (B) the Margin, and

(ii) 8%; and

(b) thereafter, be reset annually such that, on (and with effect from) each successive anniversary of the Issue Date, the Interest Rate for the immediately following year shall be the rate per annum equal to the aggregate of:

(i) the Reference Rate on the Reset Date occurring immediately before that Interest Payment Date, and

(ii) the Margin.

In addition, no later than 14 days after the Issue Date, the original subscribers for the Bonds, will be paid interest at the Official Cash Rate on their application money paid by cheque. Such interest will be calculated in respect of the period from (and including) the date the original subscribers’ application money was paid into SKY’s bank account to (but not including) the Issue Date.

Interest will be payable on each Interest Payment Date to the Holder of the Bonds as at the Record Date immediately preceding the relevant Interest Payment Date.

Interest payments, and the principal amount payable on the Redemption Date, will be paid either by cheque or directly into the bank account nominated by the Holder in writing to the Registrar from time to time.

Interest shall accrue daily on the basis of a 365 day year. Interest will be payable in arrears on each Interest Payment Date with a final payment being due on the Redemption Date. The interest payable on each Bond on each Interest Payment Date will be half of the annual interest amount payable on that Bond in the year (commencing on the Issue Date or an anniversary of the Issue Date) in which that Interest Payment Date falls.

CONDITIONS OF THE BONDSThe following is a summary of the terms and conditions of the Bonds which are contained in full in the Trust Documents. The Trust Documents are available for inspection at the places indicated in the section entitled

“What other information can I obtain about this investment?”.

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DEFAULT INTEREST

If any amount payable in respect of a Bond is not paid by SKY on its due date, interest will accrue on the unpaid amount at the aggregate of 2% per annum and the Interest Rate, compounded monthly until the relevant amount is paid.

STATUS

The Bonds will constitute unsecured unsubordinated obligations of SKY and will rank equally with all of SKY’s other unsecured unsubordinated debt, other than indebtedness preferred by law. SKY is required to repay the principal amount of the Bonds on the Redemption Date.

None of the Subsidiaries of SKY, nor any other person (including any Shareholder), currently guarantees any of the obligations of SKY under the Bonds (including the payment of principal, interest or otherwise on or in relation to the Bonds). However, in certain circumstances specified in the Supplemental Trust Deed, SKY must arrange for one or more of its Subsidiaries to guarantee its obligations under the Bonds on the terms specified in the Supplemental Trust Deed. See the section entitled “Guarantee” for further details.

If SKY is replaced as the obligor, SKY will be required to guarantee the obligations of that substituted obligor. See the section entitled “Substituted obligor” for further details.

The Bonds have the benefit of certain covenants. Details of these covenants are summarised in the section entitled “Covenants”.

EVENTS OF DEFAULT

The Master Trust Deed and Supplemental Trust Deed set out certain events upon the occurrence of which the Trustee may, and in certain circumstances must, declare the Bond Monies to be due and payable. See the section entitled “Events of Default” below for further details.

TRANSFER

Title to a Bond may be transferred by a Holder by a transfer in any usual or common form signed by the transferor or any other method of transfer of marketable securities which is not contrary to any law or by means of the FASTER system operated by NZX, and which is produced to the Registrar provided that such transfer does not result in the transferee holding less than the minimum investment of 5,000 Bonds.

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The Trustee acts as trustee for Holders of the Bonds. Unless otherwise defined in the section entitled “Glossary” at the end of this Offer Document, words and expressions defined in the Trust Documents have those meanings where they are used in this summary.

INTRODUCTION

The following is a summary of principal provisions of the Trust Documents. Investors requiring further information should refer to the Master Trust Deed and Supplemental Trust Deed, which are available for inspection at the places indicated in the section entitled “Places of inspection of documents” below. Holders are bound by, and are deemed to have notice of, the provisions of the Trust Documents.

THE RANKING OF THE BONDS

The Trust Documents do not create any security over the assets of SKY or any of its Subsidiaries. However, in certain circumstances, and in order for SKY to comply with the negative pledge covenant set out in the Supplemental Trust Deed, security may be created over the assets of SKY or the assets of a member of the Guaranteeing Group in favour of the Trustee.

The Bonds will constitute unsecured unsubordinated obligations of SKY and will at all times rank equally with all of SKY’s other unsecured unsubordinated debt, other than indebtedness preferred by law.

None of the Subsidiaries, nor any other person (including any Shareholder), currently guarantees any of the obligations of SKY under the Bonds (including the payment of principal, interest or other amounts on or in relation to the Bonds). However, in certain circumstances specified in the Supplemental Trust Deed, SKY must arrange for one or more of its Subsidiaries to guarantee its obligations under the

Bonds on the terms specified in the Supplemental Trust Deed. See the section entitled “Guarantee” below for further details.

Where SKY is replaced as the obligor under the Bonds, SKY will be required to guarantee the obligations of the substituted obligor.

FURTHER SERIES OF BONDS

Under the terms of the Master Trust Deed SKY has the power, from time to time, to create and issue further Series of bonds without the consent of the Holders but subject to the execution by SKY and the Trustee of a supplemental trust deed. Under the Trust Documents, a further Series (depending on its terms) may or may not be guaranteed and may (subject to the negative pledge described below) rank ahead of, equally with or subordinate to the Bonds.

None of the Trust Documents or any other documents relating to the Offer restrict the ability of SKY to issue further bonds or to incur other indebtedness pursuant to separate documentation. Any such indebtedness may or may not be guaranteed and (subject to the negative pledge described below) may rank ahead of, equally with or subordinate to the Bonds.

SUPPLEMENTAL TRUST DEED FOR FURTHER SERIES OF BONDS

Each Series of bonds issued under the Master Trust Deed shall be subject to terms set out in a supplemental trust deed to be executed by SKY and the Trustee in respect of that Series.

NEGATIVE PLEDGE

SKY (and each other member of the Guaranteeing Group from time to time) covenants in favour of the Trustee that, subject to certain exceptions (which are referred to below) and while any Bond Monies remain outstanding,

SUMMARY OF THE TRUST DOCUMENTSThe Bonds are constituted by and issued pursuant to the Master Trust Deed and the Supplemental Trust Deed. The Supplemental Trust Deed and (to the extent that it is not modified by the Supplemental Trust Deed) the Master Trust Deed contain the terms of the Bonds. These documents together are referred to in this summary as the Trust Documents.

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each member of the Guaranteeing Group will not, without the prior written consent of the Trustee, create or permit to exist any Security Interest over any of their assets in respect of borrowed money unless at the same time as, or prior to, the creation of that Security Interest, there is created in favour of the Trustee the same or an equivalent Security Interest (ranking at least equally as to priority) for all the Bond Monies.

The exceptions to the negative pledge covenant mentioned above include the following Security Interests (which, in most cases, are subject to certain limitations):

(i) Security Interests arising by operation of law;

(ii) Security Interests created in favour of vendors of goods;

(iii) Security Interests consisting of rights or obligations in the nature of netting, set off, combination or consolidation of accounts;

(iv) Security Interests in favour of SKY or other companies in the Guaranteeing Group (other than companies that owe borrowed monies to persons outside the Guaranteeing Group);

(v) Security Interests over joint venture interests and assets;

(vi) Security Interests existing over assets at the time of their acquisition;

(vii) Security Interests created by persons who become Subsidiaries after the date of the Trust Documents;

(viii) Security Interests in respect of certain concessional finance arrangements;

(ix) Security Interests arising in connection with operating lease transactions or any Transponder Leases;

(x) Security Interests agreed to by a Majority of Holders (as defined in the Negative Pledge Deed) unless they are granted in favour of a Majority of Holders (as so defined);

(xi) Security Interests created in substitution for any of the above; and

(xii) Security Interests over assets to secure indebtedness which does not in aggregate exceed 10% of the Total Assets of the Guaranteeing Group.

The provisions of the negative pledge in the Trust Documents are not the same as those of the negative

pledge in the Negative Pledge Deed. In particular, as mentioned in paragraph (x) above, Security Interests that have been agreed to by a Majority of Holders (as defined in the Negative Pledge Deed) will be permitted under the Trust Documents, without the need for any consent of the Trustee or Holders and without granting security for the Bond Monies.

There is no restriction in the Trust Documents or any other documents relating to the Offer on the disposition by SKY of any of its assets to any person (including its Subsidiaries) nor any restriction on the disposition by the Subsidiaries of any of their assets to any person.

Further, there is no restriction in the Trust Documents or any other documents relating to the Offer on the disposition by the Shareholders of any of their shares in SKY.

GUARANTEE

There is provision in the Supplemental Trust Deed for certain Subsidiaries of SKY to guarantee to the Trustee (acting on behalf of Holders) the Bond Monies. Any such guarantee given by any Guarantor would be unsecured and unsubordinated. The “Guaranteeing Group” consists of SKY and its Guaranteeing Subsidiaries from time to time. As at the date of this Offer Document, there are no Guaranteeing Subsidiaries. In the Supplemental Trust Deed, SKY undertakes that it will ensure that:

(a) if, at any time, any member of the SKY Group proposes to become a Guaranteeing Subsidiary (as that term is defined in the Negative Pledge Deed), it will procure that that member of the SKY Group will become a Guarantor no later than it becoming a Guaranteeing Subsidiary (as that term is defined in the Negative Pledge Deed); and

(b) if, at any time, the Negative Pledge Deed ceases to be in effect:

(i) Total Tangible Assets of the Guaranteeing Group are, at all times, not less than 90% of Total Tangible Assets of the SKY Group; and

(ii) when calculated for the 12 month period ending on 31 March, 30 June, 30 September and 31 December in each year, EBITDA of the Guaranteeing Group is not less than 90% of EBITDA of the SKY Group.

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SKY may at its option join any Subsidiary as a Guarantor, whether or not required to do so in accordance with the above.

Although the Negative Pledge Deed currently requires members of the SKY Group to become Guaranteeing Subsidiaries in certain circumstances, a Majority of Holders under the Negative Pledge Deed can agree to alter these circumstances at any time without notice to the Trustee or Holders.

The Supplemental Trust Deed contains provisions for the release of a Guarantor from its guarantee and other covenants under the Trust Documents, upon certain conditions. The identity of the Guarantors may alter during the term of the Bonds (without the consent of, or notice to, the Holders, but in accordance with the Supplemental Trust Deed).

DUTIES OF THE TRUSTEE

The Trustee is appointed under the Master Trust Deed to act in the interests of the Holders and the holders of further Series of bonds issued under the Master Trust Deed and any relevant supplemental trust deed provided that it shall only be obliged to act in the interests of the holders of Wholesale Bonds if, and to the extent, it agrees to do so in the relevant supplemental trust deed. The principal duties of the Trustee under the Master Trust Deed in relation to the Holders are summarised as follows:

(a) upon the occurrence of any event specified in the Trust Documents entitling the Trustee to declare the Bond Monies immediately due and payable, the Trustee may at its discretion and shall, if directed by an Extraordinary Resolution of Holders or in writing by Holders holding in aggregate not less than 75% of the principal amount of the Outstanding Bonds, declare the Bond Monies immediately due and payable, exercise the powers of enforcement available to it and apply all monies received in accordance with the provisions of the Master Trust Deed;

(b) to receive the regular financial and other reports and certificates furnished to it by SKY;

(c) in addition to the above, to perform a number of functions relating to the ongoing administration of the Master Trust Deed including those in relation to the meetings of Holders, and the exercise of discretions or the giving or withholding of consents (as

appropriate) relating to such administration and other matters out of the ordinary, such as making application to the High Court of New Zealand under the Securities Act, the substitution of an obligor in place of SKY in relation to the Bonds and agreeing to modifications of the Trust Documents, all upon the terms set out in the Trust Documents or as may be otherwise agreed to by the Trustee; and

(d) on being satisfied that all bond monies in relation to each Series have been paid or provided for upon the terms of the Trust Documents, to execute a deed of release of the Trust Documents.

In addition, the Trustee has a statutory duty pursuant to the Securities Act and the Securities Regulations to exercise reasonable diligence to:

(a) ascertain whether or not there has been any breach of the terms of the Trust Documents or of the terms of the Offer of the Bonds and to do all it is empowered to do to cause any such breach to be remedied (except where satisfied that the breach will not materially prejudice the security (if any) of the Bonds or the interests of the Holders); and

(b) ascertain whether or not the assets of SKY and any Guarantors that are or may be available, whether by way of security or otherwise, are sufficient or likely to be sufficient to discharge the principal amounts of the Bonds as they become due.

REPORTING

SKY undertakes to supply to the Trustee a range of regular reports, certificates, financial statements and other information as to the financial condition of SKY and the SKY Group and as to compliance with the Trust Documents. These reporting obligations include a requirement that two authorised signatories of SKY, including at least one director, certify to the Trustee on behalf of SKY’s board of directors, following the end of each financial year and each financial half-year, as to any matter which has occurred which has or is likely to have a material and adverse effect on the interests of the Holders (taken as a whole), as to compliance by SKY with the provisions of the Trust Documents, as to due maintenance of the Register for the Bonds and as to certain other matters.

SUMMARY OF THE TRUST DOCUMENTS

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EVENTS OF DEFAULT

Upon the occurrence of certain events prescribed in the Master Trust Deed and Supplemental Trust Deed, the Trustee may, and, where directed to do so in writing by Holders of in aggregate not less than 75% of the Principal Amount of the Bonds or by an Extraordinary Resolution of the Holders, must, declare the Bond Monies to be immediately due and payable. However, any such occurrence will not constitute an Event of Default, and the Bond Monies shall not become immediately due and payable, unless the occurrence is continuing unremedied and the Trustee has given a notice to SKY declaring such occurrence to be an Event of Default and the Bond Monies to be due and payable.

MEETINGS

The Trust Documents contain provisions for meetings of Holders and the matters which may be determined by Extraordinary Resolutions. (In certain circumstances the Holders of the Bonds may form part of a “Class” of holders which also includes holders of other bonds. Accordingly, in this section reference to “holders” means both Holders of Bonds and, if applicable, holders of any other Series of bonds which may be issued by SKY under the Master Trust Deed and in relation to which the Trustee is appointed to act.) SKY must call a meeting of the holders or all relevant Classes of holders, at the request in writing of the Trustee or of holders of at least 10% in principal amount of the bonds, or any Series of bonds (as the case may be). Except where an Extraordinary Resolution affects either a particular holder, or a particular Series only, as opposed to the rights of holders generally, an Extraordinary Resolution passed at a meeting of holders or a Class of holders is binding on all holders, whether or not they were present at such meeting.

The powers which may be exercised by Extraordinary Resolution (which are set out in full in the Trust Documents) include the power to agree, approve, authorise, ratify, and sanction any act, matter or thing whatsoever in relation to or in connection with the Trust Documents, the Bonds, and the exercise or performance by the Trustee of its powers, duties, and discretions. For example, the Holders may, by Extraordinary Resolution:

(a) release SKY from payment of part or all of the Bond Monies;

(b) postpone the payment of interest on the Bonds and the Maturity Date of the Bonds;

(c) sanction any alteration, release, modification, waiver, variation or compromise in respect of the rights of the Holders or of the Conditions in respect of the Bonds;

(d) sanction, assent to, release or waive any breach or default of SKY, or (subject to section 62 of the Securities Act) any act of commission or omission of the Trustee; or

(e) remove the Trustee and appoint a new Trustee.

An Extraordinary Resolution is a resolution passed at a meeting of holders (or a relevant Class of Holders) duly convened and held in accordance with the rules and procedures for meetings of holders set out in Schedule 1 to the Master Trust Deed at which at least 75% of the persons voting at the meeting upon a show of hands, or if a poll is duly demanded then at least 75% of the votes cast on such a poll, voted in favour of the resolution. A quorum for the purpose of passing an Extraordinary Resolution is the holders holding a majority of the aggregate principal amount of the bonds or, in the case of a meeting of any Class of holders, of the bonds of the relevant Class. Any Bonds for the time being held by SKY or any of its Subsidiaries will not whilst so held confer any right to vote.

AMENDMENT OF TRUST DOCUMENTS

The Trustee may concur with SKY in making amendments to the Trust Documents:

(a) without the consent of Holders, if certain conditions exist, including where such amendment:

(i) will not be, and will not be likely to be, materially prejudicial to the interests of such Holders;

(ii) will correct a manifest error;

(iii) is of a minor, formal, technical or administrative nature;

(iv) is to comply with the requirements of any applicable law; or

(v) is necessary for the purpose of obtaining or maintaining the quotation of the Bonds on any stock exchange; or

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(b) if the Trustee is authorised to do so in writing by not less than 75% of the Holders of a Class of Bonds whose Bonds carry not less than 75% of the votes which could be cast on the relevant resolution, or by an Extraordinary Resolution of the Holders of any relevant Class.

Notice of any amendments of the Trust Documents made under (a) above must be provided to the Holders by SKY within 30 days of the amendment being made.

SUBSTITUTED OBLIGOR

The Trustee may agree, without the consent of the Holders, to another person incorporated in New Zealand (a “substituted obligor”) taking the place of SKY under the Trust Documents in substitution for SKY or a previous substituted obligor. Such substitution may only occur if a number of requirements are met, as set out in the Master Trust Deed. Those requirements include that:

(a) the substituted obligor becomes bound by all the conditions of the Trust Documents;

(b) such amendments are made to the other documents in respect of the Offer as the Trustee may reasonably deem appropriate;

(c) any public rating assigned to the Bonds is maintained or increased;

(d) (if (c) does not apply) the substituted obligor has a public rating for its long term unsecured debt no lower than that of SKY at the relevant time (if SKY has such a rating);

(e) certain officers of the substituted obligor (including at least one director on behalf of all SKY’s directors) certify that the substituted obligor will be solvent immediately after the substitution;

(f) if the Bonds are quoted on a stock exchange at the time of such substitution, the Bonds will remain quoted after the substitution;

(g) the obligations of the substituted obligor are guaranteed by SKY; and

(h) legal opinions are obtained confirming certain matters such as that all required consents have been obtained and that the amounts payable to Holders will not be reduced by taxes (other than taxes that SKY is not already obliged to provide Holders a gross-up for under the terms of the Trust Documents).

MISCELLANEOUS

The Trust Documents also contain detailed provisions relating to transfer and registration of the Bonds and various other matters.

Each Holder will be issued with a Certificate evidencing the Bonds. While the Bonds remain quoted on the NZDX, such a Certificate will be in the form of a FASTER statement.

As the Bonds are registered (rather than bearer) bonds, the Trustee and SKY are entitled to rely on the Register (and in certain cases the Austraclear System) as the sole and conclusive record of the Bonds held by a Holder, notwithstanding any discrepancy between the Register and a Certificate. Any Certificate will not constitute a document of title. Transfers must be effected using a registrable transfer form, by means of the FASTER system operated by NZX, or by any other method of transfer of marketable securities which is not contrary to any law.

Such transfers will not take effect until the transferee is registered as the Holder of the Bond, and so long as the transfer does not result in the transferee holding less than the minimum investment of 5,000 Bonds.

Neither the Trustee nor SKY is liable to the other or to any Holder for relying on the Register or for accepting in good faith as valid the details recorded on the Register if they are subsequently found to be forged, irregular or not authentic.

SUMMARY OF THE TRUST DOCUMENTS

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11 September 2006

To: The investors under this Offer Document.

Clause 13(3) of the Second Schedule to the Securities Regulations 1983 requires us to confirm that the offer of securities (the “Bonds”) by Sky Network Television Limited (“SKY”) set out in the offer document dated 11 September 2006 (the “Offer Document”) complies with any relevant provisions of the Master Trust Deed and the Supplemental Trust Deed between SKY and The New Zealand Guardian Trust Company Limited (the “Trustee”), dated 11 September 2006 (together the “Trust Documents”). The relevant provisions of the Trust Documents are those which:

(i) entitle SKY to constitute and issue under the Trust Documents the Bonds offered under the Offer Document; and

(ii) impose any restrictions on the right of SKY to offer the Bonds,

and are described in the “Summary of Trust Documents” section of the Offer Document.

The Auditors have reported on certain of the financial information set out in the Offer Document and this Trustee’s statement does not refer to that information, or to any material contained in the Offer Document which does not relate to the Trust Documents.

The Trustee confirms that the offer of the Bonds set out in the Offer Document complies with any relevant provisions of the Trust Documents. We have given the above confirmation on the basis:

(a) set out above; and

(b) that the Trustee relies on the information supplied to it by SKY pursuant to the Trust Documents, and does not carry out an independent check of the statements or the figures supplied to it in that information.

The Trustee does not guarantee the repayment of the Bonds offered, or the payment of interest thereon or any other aspect of the Bonds or obligation of SKY.

Signed for and on behalf of the Trustee

The New Zealand Guardian Trust Company Limited

Auckland

Vero Centre, 48 Shortland Street, Auckland 1001PO Box 1934, Auckland 1015, New Zealand Telephone (09) 377 7300, Facsimile (09) 377 7477Email: [email protected]

www.guardiantrust.co.nz

TRUSTEE’S STATEMENT

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The issuer of the Bonds is Sky Network Television Limited. Its registered office is at 10 Panorama Road, Mt Wellington, Auckland. The Bonds are described in the section entitled “What sort of investment is this?” on page 30. SKY is offering Bonds with a principal amount of up to NZ$200 million.

DETAILS OF INCORPORATION OF THE ISSUER

SKY was incorporated under the Companies Act with the name “Merger Company 2005 Limited” on 25 January 2005. Its company number is 1579204. It changed its name to Sky Network Television Limited on 1 July 2005. SKY was formed in relation to the merger of INL and SKY Pre-Merger. The merger occurred on 1 July 2005, and both INL and SKY Pre-Merger ceased to exist on that date.

Copies of the constitution of SKY are filed on a public register with the Registrar of Companies and are available upon payment of a fee either on its website at www.companies.govt.nz, by contacting the Companies Office Centre on 0508 266 726, or free of charge at the registered office of SKY during normal business hours.

GUARANTORS

No person has guaranteed repayment of the Bonds in whole or in part.

DIRECTORS AND ADVISERS

The name and technical or professional qualifications (if any) of each director of SKY are set out in the section entitled “Directors and Management” on pages 18 and 19. Peter Macourt and Michael Miller reside in Sydney, Australia. Robert Bryden resides in Wellington. Humphry Rolleston resides in Christchurch. The remaining directors all reside in Auckland. All of the directors can be contacted at SKY’s address as set out in the section entitled “Directory” at the end of this Offer Document.

John Fellet is the Chief Executive Officer of SKY and is the only director who is also an employee of SKY.

The names and addresses of SKY’s Auditor, Registrar and of the advisers involved in the preparation of this Offer Document are set out in the section entitled “Directory” at the end of this Offer Document.

RESTRICTIONS ON DIRECTORS’ POWERS

The Companies Act and SKY’s constitution impose the following modifications, exceptions and limitations on the powers of its directors:

• the board may not delegate the powers conferred on it by the sections of the Companies Act listed in the Second Schedule to that Act;

• the board may not authorise a dividend in respect of some but not all shares in a class, or that is of a greater value per share in respect of some shares of a class than it is in respect of other shares of that class, otherwise than in proportion to the amount paid on the share in satisfaction of the shareholder’s liability, except where the shareholder has waived its entitlement;

STATUTORY INFORMATIONThe following additional information is included in accordance with the requirements of the Second Schedule to the Securities Regulations.

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• the board may not authorise entry into a “major transaction”, unless the transaction is approved by, or contingent on approval by, a special resolution of shareholders. A “major transaction” is essentially a transaction, the value of which is more than half the value of SKY’s assets before the transaction;

• SKY may not take any action that affects the rights attached to any shares unless the action has been approved by special resolution of each interest group affected; and

• SKY may not buy back or redeem any of its equity securities, or give financial assistance in connection with the acquisition of any of its equity securities, except as permitted by the Companies Act and its constitution.

The Companies Act contains a number of other provisions that could have the effect, in certain circumstances, of imposing modifications, exceptions or limitations on the powers of the SKY board. These provisions apply to any company registered under the Companies Act.

SKY is listed on the NZSX and the ASX. The powers of the SKY board are subject to any applicable modifications, exceptions or limitations imposed by the NZSX Listing Rules and the ASX Listing Rules. As an ASX-listed entity, SKY is also a “disclosing entity” for the purposes of the Australian Corporations Act 2001 (Cth) and certain provisions of that Act apply to SKY.

DESCRIPTION OF ACTIVITIES OF THE BORROWING GROUP

As at the date of this Offer Document the Borrowing Group comprises only SKY.

SKY is the parent company of the various companies that make up the SKY Group which carry on the business described in the section entitled “Business Overview” on page 12.

As at the date of this Offer Document none of SKY’s assets or the assets of any other person are charged as security for the Bonds. However, in certain circumstances, and in order for SKY to comply with the negative pledge covenant set out in the Supplemental Trust Deed, security may be created over the assets of

SKY or the assets of a member of the Guaranteeing Group in favour of the Trustee. See the section entitled “Summary of the Trust Documents” on page 44 for further details.

SUMMARY OF FINANCIAL STATEMENTS

Summary financial statements can be found in the section entitled “Financial Information” on page 21.

ACQUISITION OF A BUSINESS OR SUBSIDIARY

On 1 July 2005, SKY acquired all of the shares in INL and all of the shares in SKY Pre-Merger (other than those owned by INL). INL and SKY Pre-Merger were then amalgamated into SKY under a Court-approved scheme of arrangement. SKY, called Merger Company 2005 Limited, was then renamed “Sky Network Television Limited” and continued to conduct SKY Pre-Merger’s existing and ongoing business. Financial information in relation to the acquired companies as required by clause 8(2) of the Second Schedule to the Securities Regulations is set out on pages 24 to 27.

MATERIAL CONTRACTS

SKY has entered into the following material contracts during the two years preceding the date of this Offer Document, other than contracts entered into in the ordinary course of the business of SKY:

• Master Trust Deed dated 11 September 2006 between SKY and The New Zealand Guardian Trust Company Limited as Trustee providing for the constitution and issue of bonds;

• Supplemental Trust Deed dated 11 September 2006 between SKY and The New Zealand Guardian Trust Company Limited as Trustee in respect of the Bonds offered in this Offer Document;

• Mandate letter offer dated 4 May 2005 from ANZ National pursuant to which ANZ National agreed to make available to SKY, and to underwrite, debt financing facilities totalling NZ$660,000,000 and A$40,000,000 on the basis that ANZ National would syndicate those facilities to other banks in accordance with an agreed syndication strategy.

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These facilities enabled SKY to partially pay the cash portion of the consideration under the merger with INL, and enabled SKY to fund any necessary purchase of the Capital Notes, fund its working capital requirements and have letters of credit issued to certain creditors;

• Accommodation letter dated 5 May 2005, pursuant to which ANZ National agreed to provide SKY with an intra-day accommodation of approximately NZ$260 million to assist with the payment of the cash consideration under the merger with INL;

• Deed of Indemnity dated 9 May 2005 in favour of SKY’s directors and officers under which SKY indemnifies its directors and officers against costs and liabilities they may incur as directors or employees of SKY to the maximum extent permitted by its constitution and the Companies Act;

• Listing Agreement dated 4 May 2005 with NZX relating to the listing of SKY’s shares on NZSX under which SKY agrees to comply with the NZSX Listing Rules; and

• Agreement for Sale and Purchase relating to the acquisition by SKY of the television broadcasting business of Prime Television New Zealand Limited dated 18 November 2005. SKY has been granted an exemption from certain provisions of the Securities Regulations in relation to the disclosure of this agreement pursuant to the terms of the Securities (Sky Network Television Limited) Exemption Notice 2006. A schedule to the sale and purchase agreement sets out details in relation to the television programme inventory acquired from Prime. This information is considered commercially sensitive by SKY as it would enable SKY’s competitors to ascertain key terms of programme licences and use this information to SKY’s disadvantage in programme scheduling and in negotiations with content suppliers. The terms of the exemption permit SKY to delete the commercially sensitive information from the copies of the agreement registered with this Offer Document and made available for inspection. SKY’s directors warrant to investors that non-disclosure of the excluded provisions does not make this Offer Document misleading in any material particular by a failing to refer, or give proper emphasis, to any adverse circumstance.

PENDING PROCEEDINGS

As at the date of this Offer Document there are no legal proceedings or arbitrations pending against SKY that may have a material adverse effect on SKY.

ISSUE EXPENSES

Issue expenses, including legal, accounting, audit, printing, distribution and promotion expenses, and arranger, lead manager and other fees to be incurred are estimated at NZ$1.3 million. In addition, brokerage is payable by SKY as follows:

• 0.25% of the face value of a Bond, to a maximum of 70 million Bonds, payable to the Joint Lead Managers, on accepted applications for Bonds received from Capital Noteholders.

• 1.0% of the face value of a Bond, payable to the Joint Lead Managers, on accepted applications for Bonds received from Capital Noteholders, for any Bonds applied for over 70 million and up to a maximum of 105 million Bonds.

• 1.0% of the face value of a Bond, payable to the Joint Lead Managers, on accepted applications for Bonds issued under a firm allocation, of which 0.50% is a firm allocation fee and 0.50% is brokerage, which will be payable to Primary Market Participants (or other acceptable financial institutions) on applications bearing a valid stamp.

• 0.50% of the face value of a Bond on accepted applications for Bonds not issued under a firm allocation or pursuant to the Capital Noteholder Offer payable to the Joint Lead Managers, which will be payable as brokerage to Primary Market Participants (or other acceptable financial institutions) on applications bearing a valid stamp.

RANKING OF SECURITIES

The Bonds offered in this Offer Document are unsecured. The Bonds rank for payment equally with all SKY’s other unsecured, unsubordinated debt, including its indebtedness to its banks. However, in certain circumstances, and in order for SKY to comply with the negative pledge covenant set out in the Supplemental Trust Deed, security may be created over the assets of SKY or the assets of a member of the Guaranteeing Group in favour of the Trustee.

STATUTORY INFORMATION

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As at 30 June 2006, there were no securities secured by a mortgage or charge over any of the assets of SKY that rank in point of security ahead of or equally with the Bonds offered under this Offer Document.

PROVISIONS OF THE TRUST DEED AND OTHER RESTRICTIONS ON BORROWING GROUP

The Trust Documents, the parties to which are SKY and the Trustee, are dated 11 September 2006. The terms of the Trust Documents and the duties of the Trustee are set out in the section entitled “Summary of the Trust Documents” on page 44. The Trustee’s Statement is set out on page 49.

In general, SKY borrows on an unsecured basis. SKY’s right to borrow is limited by its financing agreements with its banks, but none of the Trust Documents or any other documents relating to the Offer contain any such limitation. The other restrictions on the ability of SKY to borrow which result from any undertaking given, or contract or deed entered into, by SKY are certain negative pledge restrictions and certain financial covenants (including those contained in the Supplemental Trust Deed, the Negative Pledge Deed and certain other deeds and agreements relating to bank and capital markets borrowing).

SKY has undertaken to its banks that, apart from certain exceptions, it will not incur indebtedness for borrowed money without their consent. Such consent has been obtained in relation to the issue of the Bonds.

Further, the ability of SKY and other members of the SKY Group to create, or permit to exist, certain Security Interests over assets as security for borrowed money and certain other types of indebtedness is limited, and the ratio of borrowed money in the SKY Group relative to the earnings of the SKY Group is limited.

In particular, under the terms of the financing agreements that SKY currently has in place with its banks (including the Negative Pledge Deed) SKY has agreed, among other things, and subject to certain exceptions:

• not to give guarantees;

• not to make material acquisitions outside its core business activities;

• not to make materially adverse changes to its licensing and exclusivity rights;

• not to dispose of its assets outside the normal course of its business;

• not to deal with related persons other than on an arm’s length basis;

• not to make distributions to its shareholders when it is in, or is likely to cause a, default;

• not to create or permit to exist a Security Interest over or affecting its, or the other members of the SKY Group’s, assets to secure indebtedness; and

• to comply with certain financial ratios in relation to the SKY Group, including an interest coverage ratio and a debt coverage ratio.

The financing agreements between SKY and its banks do not currently include guarantees of SKY’s obligations to the banks by any of SKY’s Subsidiaries.

Neither the Trustee nor the Holders have the benefit of such financing agreements. Further, neither the Trustee nor the Holders have any recourse to the assets of SKY’s Subsidiaries or the assets of any other person other than:

• SKY; or

• in the event of a substituted obligor replacing SKY as the obligor under the Bonds, such substituted obligor; or

• in the event that one or more Subsidiaries of SKY become and continue to be Guaranteeing Subsidiaries in accordance with the terms of the Supplemental Trust Deed, and thereby guarantee the obligations of SKY under the Bonds, such Subsidiaries. See the section “Guarantee” on page 45 for further details.

Any restrictions imposed on SKY by the Capital Notes trust deed will no longer apply because the Capital Notes will be repaid from the proceeds of the issue of the Bonds or, if such proceeds are insufficient, from further borrowings from SKY’s banks.

In the event of the liquidation of SKY and/or any of SKY’s Subsidiaries (and if at that time SKY has not arranged for any of its Subsidiaries to guarantee its obligations under the Bonds), the Trustee and the Holders will not have direct recourse to the assets of such Subsidiaries. They will only have recourse to the assets of SKY (and, if applicable, the assets of any substituted obligor).

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The assets of SKY may include distributions in the liquidation of a Subsidiary which are received by SKY as a shareholder in the Subsidiary, or if SKY has made loans to a Subsidiary, as a creditor of the Subsidiary. Distributions received by SKY as a creditor of a Subsidiary will be paid to SKY with distributions paid to other creditors of the relevant Subsidiary. As a shareholder of a Subsidiary, SKY will only receive any distribution if all of the creditors of the relevant Subsidiary have been paid out in full and only to the extent of any surplus assets.

OTHER TERMS OF OFFER AND SECURITIES

There are no other terms of the Offer, or the Bonds, which are not set out elsewhere in this Offer Document other than those:

• implied by law; or

• which are set out in a document that has been registered with a public official, is available for public inspection and is referred to in this Offer Document.

FINANCIAL STATEMENTS

Copies of SKY’s most recent financial statements for the financial year ended 30 June 2006 are filed with the Companies Office. The statements are available either on the website at www.companies.govt.nz or by contacting the Companies Office Contact Centre on 0508 266 726.

PLACES OF INSPECTION OF DOCUMENTS

The documents endorsed on or attached to this Offer Document in accordance with section 41 of the Securities Act are:

• the Auditors’ report set out on pages 28 and 29;

• the signed consent of the Auditors to the above report appearing in this Offer Document; and

• the material contracts described in the section entitled “Material Contracts” above, other than those that have already been filed with the Registrar of Companies.

An acknowledgement by NZX has also been registered with this Offer Document in accordance with Regulation 23 of the Securities Regulations.

Copies of the above documents are filed on a public register with the Registrar of Companies and are available upon payment of a fee either on its website at www.companies.govt.nz, or by contacting the Companies Office Contact Centre on 0508 266 726, or free of charge at the registered office of SKY during normal business hours.

OTHER MATERIAL MATTERS

There are no other material matters relating to the Bonds that are not set out elsewhere in this Offer Document.

STATUTORY INFORMATION

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DIRECTORS’ STATEMENT

After due enquiry by the directors of SKY in relation to the period from 30 June 2006 to the date this Offer Document has been delivered to the Registrar of Companies for registration, the directors are of the opinion that no circumstances have arisen that would materially adversely affect the trading and profitability of SKY, the value of its assets, or its ability to pay its liabilities due within the next 12 months.

Signed by each director of Sky Network Television Limited (as issuer) or by his agent authorised in writing:

Peter John Macourt

Robert William Bryden

Albert Barrie Downey

Michael Bruce Miller

John Bernard Hart

Humphry John Davy Rolleston

John Michael Fellet

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ANZ means ANZ Institutional, a part of ANZ National Bank Limited;

Application Form means either the blue General Application Form or the red Capital Noteholder Application Form as the case may be or, where appropriate, both such forms;

ARPU means average revenue earned per month per subscriber;

ASB means ASB Bank Limited;

ASX means the Australian Stock Exchange;

Auditors means the auditors for the time being appointed by SKY;

Balance Sheet means, in relation to a Group, a consolidated statement of financial position of that Group, prepared as at any date, which complies with the Financial Reporting Act 1993 and is prepared on a basis consistent with that applied in the most recent financial statements provided pursuant to clause 10.1 of the Master Trust Deed except to the extent (if any) expressly disclosed to the Trustee and approved in writing by the Auditors. In relation to the Balance Sheet of the Guaranteeing Group, subsidiaries of SKY which are not Guarantors will be accounted for as though they are associates rather than subsidiaries of SKY;

BCL means Broadcast Communications Limited;

Bond Monies means, at any time, all monies (including principal and interest) payable in relation to or in connection with the Bonds under the Conditions, the Master Trust Deed or the Supplemental Trust Deed;

Bonds means the bonds offered in this Offer Document;

Borrowing Group has the meaning set out in the Securities Regulations and as at the date of this Offer Document comprises only SKY;

Business Day means any day (other than a Saturday or a Sunday) on which banks are generally open for business in Auckland except that in the context of the NZX Listing Rules, means a day on which the New Zealand Exchange is open for trading;

Call Option Date means 16 October 2009, being the third anniversary of the Issue Date;

CanWest means CanWest Mediaworks (NZ) Limited;

Capital Notes means the capital notes issued by SKY

pursuant to the Trust Deed Relating to Capital Notes dated 7 September 2001 between SKY and The New Zealand Guardian Trust Company Limited and that remain outstanding at the date of this Offer Document;

Capital Noteholder means each holder of a Capital Note on 15 September 2006;

Capital Noteholder Application Form means the red application form included in this Offer Document, and includes the actual application form provided to Capital Noteholders to be signed by such Capital Noteholders to enable them to invest and pursuant to which the Capital Noteholder makes an application to subscribe for Bonds;

Capital Noteholder Offer means the offer to Capital Noteholders as described in the “Main Terms of the Offer” section and elsewhere in this Offer Document;

Capital Noteholder Offer Closing Time means 5:00pm on 3 October 2006 or such earlier or later time as may be selected by SKY;

Capital Note Repayment Amount means the amount due to be paid to Capital Noteholders in respect of principal on the Capital Notes held by that Capital Noteholder by SKY in relation to the redemption of the Capital Notes on 16 October 2006;

CBA means Commonwealth Bank of Australia;

Certificate means, in respect of any Bond, any certificate, acknowledgement, receipt, statement of holding, notice of registration or other written evidence issued by or on behalf of SKY evidencing the issue of such Bond and includes any replacement Certificate;

Class means a category of bonds which constitutes a separate class of bonds, being:

(a) all Retail Bonds;

(b) all Wholesale Bonds;

(c) in relation to matters affecting a Series only, that Series; or

(d) any category of Bonds which in the reasonable opinion of SKY (in consultation with the Trustee if in relation to a Retail Series) at any particular time, for any particular purpose, constitutes a separate class of Bonds within either Wholesale Bonds or Retail Bonds, or both, as the case may be;

GLOSSARY

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Co-Manager means Direct Broking Limited, whose address is set out in the section entitled “Directory” at the end of this Offer Document;

Companies Act means the Companies Act 1993, and any Act that may replace such Act from time to time;

Conditions means the terms and conditions applicable to the Bonds set out in the Trust Documents, this Offer Document and the Application Forms;

Dollars and NZ$ means the lawful currency of New Zealand from time to time;

Early Redemption Date means, in respect of any Bond:

(a) the Call Option Date; or

(b) each anniversary of the Call Option Date;

EBITDA means, in relation to any Group for any period, the aggregate amount on a consolidated basis of the net operating profit of that Group in that period (as would be disclosed if an Income Statement of that Group were prepared for that period) before:

(a) charging or providing for income tax;

(b) charging Interest and Financing Costs of that Group;

(c) charging for depreciation and amortisation,

and includes all abnormal items except non cash abnormal items, adjusted by:

(d) deducting profits earned by a company within that Group which are properly attributable to a minority interest shareholder outside that Group;

(e) excluding (to the extent otherwise taken into account):

(i) extraordinary items;

(ii) abnormal and extraordinary non cash items;

(iii) equity accounted gains and losses;

(iv) other unrealised gains or losses;

(v) any expensed rental payments under Transponder Leases which are operating leases; and

(vi) Interest Income of that Group;

Event of Default means any of the events or circumstances set out in clause 11.1 of the Master Trust Deed;

Extraordinary Resolution means a resolution passed at a meeting of holders (or a relevant Class of Holders) duly convened and held in accordance with the rules and procedures for meetings of holders set out in the Schedule to the Master Trust Deed at which at least 75% of the persons voting at the meeting voted in favour of the resolution or if a poll is duly demanded then at least 75% of the votes cast on such a poll voted in favour of the resolution;

Financial Statements means, as at any date for any Group or any person, financial statements for that Group or that person (consolidated in the case of the statements for the SKY Group) prepared as at that date in accordance with GAAP;

FTA means free-to-air;

GAAP means generally accepted accounting practice within the meaning of the Financial Reporting Act 1993;

General Application Form means the blue application form included in this Offer Document, which is to be used by investors who are not entitled to apply for Bonds by way of a red Capital Noteholder Application Form, and includes the actual application form provided to the relevant investor to be signed by the investor to enable them to invest and pursuant to which the investor makes an application to subscribe for Bonds;

General Offer means the offer (other than the Capital Noteholder Offer), as described in the “Main Terms of the Offer” section and elsewhere in this Offer Document;

General Offer Closing Time means 5:00pm on 12 October 2006 or such earlier or later time as may be selected by SKY;

Group means the Guaranteeing Group or the SKY Group;

Guaranteeing Group means SKY and the Guaranteeing Subsidiaries;

Guaranteeing Subsidiaries means any companies which become party to the Supplemental Trust Deed by executing a supplemental deed in (or substantially in) the form contained in Schedule 2 to the

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Supplemental Trust Deed or in such other form as the Trustee may approve, but excluding any such person which has been released from its obligations under the Supplemental Trust Deed in accordance with its terms;

Guarantors means, at a particular time, each Subsidiary of SKY that guarantees the Bond Monies by virtue of it being a Guaranteeing Subsidiary under (and as that term is defined in) the Supplemental Trust Deed and Guarantor means any one of them;

Holder means, in relation to any Bond, the person for the time being entered in the Register as the holder of that Bond;

Income Statement means, in relation to a Group, a consolidated statement of financial performance of that Group prepared in respect of any period which complies with the Financial Reporting Act 1993 and is prepared on a basis consistent with that applied in the most recent financial statements provided pursuant to clause 10.1 of the Master Trust Deed except to the extent (if any) expressly disclosed to the Trustee. In relation to the Income Statement of the Guaranteeing Group, subsidiaries of SKY which are not Guarantors will be accounted for as though they are associates rather than subsidiaries of SKY;

Income Tax Act means the Income Tax Act 2004, and any Act that may replace such Act from time to time;

INL means Independent Newspapers Limited, registration number 726, which was removed from the Register of Companies on 1 July 2005 following the merger of SKY Pre-Merger and INL;

Interest and Financing Costs means, in relation to a Group for any period, the aggregate amount on a consolidated basis of all interest and other financing costs in that period calculated on an accruals basis in accordance with GAAP including (without limitation):

(a) discounts and similar allowances on the issue or disposal of debt securities;

(b) dividends and distributions of a revenue nature on redeemable preference shares;

(c) interest which has been capitalised and/or debited to any asset or asset account;

(d) all finance charges under finance leases (including Transponder Leases which are

finance leases) and hire purchase agreements, of a financing nature, calculated in accordance with GAAP;

(e) a notional interest expense adjustment for Transponder Leases which are operating leases calculated on the same basis as set out in the most recent Income Statement of the SKY Group; and

(f) all other expenses and amounts that are required to be treated as interest or financing costs under GAAP,

and takes into account realised and unrealised gains or losses resulting from Treasury Products entered into in order to manage risks in relation to interest payment obligations, less Interest Income of that Group;

Interest Income means, in relation to a Group for any period, the aggregate amount on a consolidated basis of all interest derived by that Group in that period in relation to loans or deposits with banks or financial institutions, or other money market investments;

Interest Payment Date means, in relation to each Bond, each date for the payment of interest in respect of that Bond, being:

(a) each 16 April and 16 October after the Issue Date and prior to the Redemption Date; and

(b) the Redemption Date;

Interest Period means the period from (and including) the Issue Date up to (but not including) the first Interest Payment Date and thereafter each period from (and including) one Interest Payment Date up to (but not including) the next Interest Payment Date thereafter;

Interest Rate means, in relation to a Bond and an Interest Period, the annual rate of interest payable in respect of that Bond for that Interest Period, as determined in the manner described under the heading “What returns will I get?” on page 31 and recorded as such in the Register;

Interest Rate Set Date means the date specified as such in the Conditions and, if applicable, recorded as such in the Register (and anticipated to be on or about 12 October 2006);

IPTV means internet protocol television;

GLOSSARY

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Issue Date means the date on which the Bonds are issued as specified in the Register (and anticipated to be on or about 16 October 2006);

Issuer means Sky Network Television Limited (formerly Merger Company 2005 Limited), registration number 1579204 (or a person substituted as obligor as explained in the section entitled “Substituted obligor” above);

Joint Arrangers means ANZ and CBA, whose addresses are set out in the section entitled “Directory” at the end of this Offer Document;

Joint Lead Managers means ANZ and ASB, whose addresses are set out in the section entitled “Directory” at the end of this Offer Document;

Margin means the fixed margin that will be applied to the Reference Rate at the Interest Rate Set Date and each Reset Date to determine the applicable Interest Rate for the following 12 month period. The margin will be set by agreement between the Issuer and the Joint Lead Managers, and announced by SKY to the NZX on or about 18 September 2006;

Master Trust Deed means the master trust deed executed by SKY and the Trustee dated 11 September 2006 under which SKY may issue Series of bonds including the Bonds;

Maturity Date means, in relation to each Bond, 16 October 2016, being the due date for redemption of the Bonds;

MTS means Maori Television Service;

Negative Pledge Deed means the negative pledge deed made by SKY and dated 29 June 2005;

New Zealand Exchange includes the NZDX;

New Zealand Holders means Holders who are New Zealand residents or who are non-residents engaged in business in New Zealand through a fixed establishment in New Zealand;

News Group means The News Corporation Limited and its subsidiaries and related companies;

Non-resident Holders means Holders who are neither resident in New Zealand for New Zealand tax purposes, nor engaged in business in New Zealand through a fixed establishment in New Zealand;

NRWT means non-resident withholding tax;

NZDX means the New Zealand debt market operated by NZX;

NZ IFRS means New Zealand equivalents to International Financial Reporting Standards;

NZ on Air means the Broadcasting Commission;

NZX means New Zealand Exchange Limited;

NZX Firms has the meaning given to that term in the NZX Participant Rules;

NZX Listing Rules means the New Zealand Exchange Listing Rules and Listing Rule means a rule contained in the New Zealand Exchange Listing Rules;

NZX Participant Rules means the Participant Rules of NZX;

Offer means the offers of Bonds by SKY under this Offer Document;

Offer Document means this offer document dated 11 September 2006 in relation to the offer of the Bonds;

Official Cash Rate means the rate displayed as the official cash rate on the Reuters Monitor Screen Page RBNZ02 (or its successor page) at 10.00am each day;

Organising Participant means ASB Securities Limited, whose address is set out in the section entitled “Directory” at the end of this Offer Document;

Outstanding means, in relation to the Bonds, all such bonds issued in accordance with and pursuant to the Trust Documents other than:

(a) any Bonds which have been repaid or redeemed pursuant to the relevant Conditions; or

(b) any Bonds:

(i) for which the date for repayment or redemption pursuant to the Conditions has occurred; and

(ii) the repayment or redemption monies for which (including any interest accrued thereon to the date for such repayment or redemption) have been duly paid to or to the order of the Trustee or to any relevant paying agent and remain available for payment; and

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(c) any Bonds which have become void or have been purchased by or on behalf of SKY and cancelled pursuant to the Conditions;

Primary Market Participants means a market participant accredited and designated by NZX to bring new offers of securities to market, as defined in the NZX Participant Rules;

Record Date means, in relation to any payment due in respect of a Bond:

(a) the tenth day before the due date for the making of that payment; or

(b) if the day determined by paragraph (a) is not a Business Day, the preceding Business Day,

or such other date as may be agreed between the Trustee and SKY, provided that such date complies with the requirements of, or any waiver obtained from, NZX;

Redemption Date means, in relation to a Bond, the earlier of:

(a) the Maturity Date; and

(b) if SKY exercises its right to redeem or repurchase that Bond as described in the section entitled “Maturity and Call Option” above, its Early Redemption Date;

Reference Rate means the rate per annum expressed as a percentage yield basis and rounded up or down to the nearest two decimal places which is determined by SKY to be:

(a) the average of the bid and offered swap rates displayed at or about 11.00am on the Interest Rate Set Date and each successive Reset Date, on page FISSWAP (or any successor page) of the Reuters Monitor Screen for an interest rate swap with a term of approximately one year; or

(b) if a rate is unable to be determined in accordance with paragraph (a), the average (rounded up or down if necessary to the nearest

two decimal places) of the mean bid and offered swap rates quoted to SKY by three registered banks at or about 11.00am on the Interest Rate Set Date and each successive Reset Date, for an interest rate swap with a term of approximately one year;

Register means any register of Bonds maintained by the Registrar in accordance with the Master Trust Deed and the Registrar and Paying Agency Agreement;

Registrar means Computershare Investor Services Limited, as registrar, calculation agent and paying agent for the Bonds, or any successor appointed under the Registrar and Paying Agency Agreement;

Registrar and Paying Agency Agreement means the registrar and paying agency agreement dated 11 September 2006 under which the Registrar is appointed as registrar, calculation agent and paying agent for the Bonds;

Reset Date means each date that is two Business Days before an anniversary of the Issue Date;

Retail Series means a Series of bonds which may, in accordance with the relevant conditions for those bonds, be offered or sold to members of the public for the purposes of the Securities Act, and Retail Bond means a bond which is part of a Retail Series and Retail Holder means a holder of a Retail Bond;

RWT means resident withholding tax;

Securities Act means the Securities Act 1978, and any Act that may replace such Act from time to time;

Securities Regulations means the Securities Regulations 1983, and any Regulations that may replace such Regulations from time to time;

Security Interest means a mortgage, pledge, charge, lien, hypothecation, encumbrance, deferred purchase, title retention, finance lease, sale-and-repurchase and sale-and-leaseback arrangement or other security interest of any nature, but does not include any security interest (other than a finance lease) which is a security interest

GLOSSARY

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only because it is deemed to be one by virtue of section 17(1)(b) of the Personal Property Securities Act 1999;

Series means the bonds issued under a particular trust deed supplemental to the Master Trust Deed (which may be issued in one or more Tranches) and which, for the avoidance of doubt, consist wholly of either a Retail Series or a Wholesale Series, but not both;

Shareholders means, at any time, the shareholders of SKY for the time being;

SKY means Sky Network Television Limited (formerly Merger Company 2005 Limited), registration number 1579204, and includes, where relevant and where referring to historical information, SKY Pre-Merger;

SKY Group means SKY and its Subsidiaries for the time being;

SKY Pre-Merger means Sky Network Television Limited, registration number 373652, which was removed from the Register of Companies on 1 July 2005 following its merger with INL;

Subsidiary means a company which is:

(a) a subsidiary of SKY as defined in sections 5 and 6 of the Companies Act; or

(b) an “in substance subsidiary” or a “subsidiary” of SKY in accordance with any approved New Zealand financial reporting standard;

Supplemental Trust Deed means the supplemental trust deed executed by SKY and the Trustee dated 11 September 2006 constituting and setting out the terms and conditions of the Bonds;

Telecom means Telecom Corporation of New Zealand Limited;

TelstraClear means TelstraClear Limited;

TMP means Te Mangai Paho;

Total Assets means, at any date for any Group, the aggregate amount on a consolidated basis of all assets of that Group at that date and which would be disclosed as assets by the Financial Statements for that Group if they were prepared as at that date;

Total Tangible Assets means, at any date in relation to a Group, the aggregate amount on a consolidated basis of all assets of the relevant Group which would be disclosed by a Balance Sheet of the relevant Group if one were prepared as at that date, excluding goodwill, brand names, future tax benefits and all other assets which, according to GAAP, are considered to be intangible assets;

Tranches means bonds of the same Series in respect of which all terms are identical in all respects except as to some or all of the issue date, the date for repayment or redemption, interest rate and/or frequency of payment of interest;

Transponder Leases means contracts securing access for SKY or any of its Subsidiaries to satellite capacity in connection with SKY’s direct broadcast service;

Treasury Product means a currency or interest rate swap, futures contract, interest cap collar or floor agreement, currency or interest rate option, foreign currency transaction, dealing line or commodity derivative, or any combination of the above, or any similar or substitute hedging, currency or interest rate risk management or treasury product or derivative;

Trust Documents means the Master Trust Deed and the Supplemental Trust Deed read together (and on the basis that the Supplemental Trust Deed prevails to the extent it modifies the Master Trust Deed or in the event of a conflict between those documents);

Trustee means The New Zealand Guardian Trust Company Limited as trustee for the Holders whose address is set out in the section entitled “Directory” at the end of this Offer Document, or any successor thereto; and

Wholesale Series means a Series of bonds which are not permitted, in accordance with the relevant Conditions, to be offered or sold to members of the public for the purposes of the Securities Act, and Wholesale Bond means a bond which is part of a Wholesale Series and Wholesale Holder means a holder of a Wholesale Bond.

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Applications must be for a minimum of 5,000 Bonds and thereafter in multiples of 1,000 Bonds.

Applications must be lodged with Computershare before 5.00 p.m. on 3 October 2006. Alternatively, applications may be sent to ANZ or ASB Securities (at the addresses specified in the Offer Document) or lodged with the Co-Manager, any NZX Firm or any other channel approved by NZX in each case in time for such applications to be forwarded to Computershare for receipt before 5.00 p.m. on 3 October 2006. Applications will not be accepted if received by Computershare after this time unless SKY determines otherwise. Applications cannot be revoked or withdrawn.

SKY has the right to accept or reject all or part of this Offer without giving any reason.

THE APPLICATION FORM

Please complete all relevant sections of the application form using CAPITAL BLOCK LETTERS.

NameThe red Capital Noteholder Application Form may only be used by the exact legal entity that holds Capital Notes. This name is pre-printed on the application form sent to you by SKY with the Offer Document. If Capital Noteholders wish to apply for Bonds in another name, or through another entity, this form may not be used and such persons must apply and pay for Bonds under the General Offer using the blue General Application Form.

Postal AddressYour currently recorded postal address is also pre-printed on the application form. If necessary, please update in the space provided. All communications to you from SKY will be mailed to the address shown. For joint applicants, only one address is to be entered.

Value of Bonds applied forEnter the value of the Bonds applied for. If you enter an amount that is equal to or less than your Capital Note Repayment Amount, no further payment is required. If, and to the extent that, SKY accepts an application on a red Capital Noteholder Application Form, that application constitutes an irrevocable direction to SKY to apply the specified Capital Note Repayment Amount in subscription for an equivalent principal amount of Bonds on the Issue Date.

If you enter an amount in excess of your Capital Note Repayment Amount, you will need to ensure that payment for the difference accompanies the application form. Payment must be made by a cheque drawn on a

New Zealand bank, for New Zealand dollars, for immediate value. Post-dated cheques will not be accepted. Please ensure that the total of the cheque equals the amount payable. Make the cheque payable to “SKY Bond Offer” and cross it “Not Transferable”.

Sufficient cleared funds should be held in your account as cheques returned unpaid are likely to result in your application being rejected or your allotment being cancelled. Staple your cheque to the application form.

Interest PaymentsIf you would like your interest payments direct credited to your bank account or broker cash management account, please tick the appropriate box and enter your details and attach an encoded bank deposit slip for that account. If no selection is made, payment will be made by cheque to the postal address specified on the form.

DeclarationRead the declaration carefully and sign the application form. It must be signed by applicants personally. Companies or other bodies corporate must sign in the same way they would sign a deed or other formal legal document. Applications may, in either case, be executed by an attorney. If your application form is signed by an attorney the power of attorney document is not required to be lodged, but the attorney must complete the certificate of non-revocation on the application form. Joint applicants must all sign the application form.

CONDITIONS

Each applicant is bound by the terms and conditions set out in the Trust Documents (as defined in the Offer Document), and the Offer Document. Some of the terms and conditions set out in the Trust Documents are summarised in the Offer Document. Expressions used in the Offer Document have the same meaning in this application form. This application form is governed by New Zealand law.

PRIVACY ACT 1993

Computershare Investor Services Limited (on behalf of SKY) collects and holds personal information about applicants for this investment for the purposes of administering this investment and for providing investors with information about the SKY Group and its business. You have the right to access and correct any personal information held about you.

CAPITAL NOTEHOLDER APPLICATION FORM INSTRUCTIONS

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This Capital Noteholder Application Form relates to an offer of unsecured unsubordinated bonds (“Bonds”) by Sky Network Television Limited (“SKY”), and forms part of the combined prospectus and investment statement issued by SKY in relation to the Bonds, dated 11 September 2006 (“Offer Document”).

This form may only be used by existing holders of Capital Notes issued by SKY, to apply for Bonds under the Capital Noteholder Offer (described on page 8 of the Offer Documents). This form may only be used by the exact legal entity which holds existing Capital Notes. If you wish to apply for Bonds under a different name or entity, you must apply and pay for Bonds using the blue General Application Form. Completed Capital Noteholder Application Forms, together with any required payment must be received by Computershare Investor Services Limited (“Computershare”) before 5.00 p.m. on 3 October 2006 or such earlier or later date as SKY may elect to be the Capital Noteholder Application Closing Date.

You may not complete this application form unless you have received a copy of the Offer Document, and this Capital Noteholder Application Form must not be issued, circulated or distributed unless accompanied by the Offer Document.

INVESTOR DETAILS (BLOCK LETTERS PLEASE):

Full name of Capital Noteholder:

CSN:

Corporate Name (if any):

Postal Address: You may amend these details – please use this box

Suburb & City:

Post Code:

Telephone Number Home: ( )

Telephone Number Business: ( )

Email Address (if any):

APPLICATION AMOUNT

Capital Noteholder Repayment Amount: NZ$ (the amount of principal due to be paid to you on maturity of your Capital Notes)

Amount of Bonds applied for: NZ$ (at a subscription price of NZ$1.00 per Bond)

You must apply for at least 5,000 Bonds and thereafter multiples of 1,000 Bonds. Using this Capital Noteholder Application Form you may apply for an amount of Bonds that is equal to, less than, or in excess of, the Capital Noteholder Repayment Amount printed above. Payment for Bonds applied for in excess of the Capital Noteholder Repayment Amount must be made by attaching a cheque to this Capital Noteholder Application Form. Cheques must be in New Zealand dollars, payable to “SKY Bond Offer” and crossed “Not Transferable”. Cheques must not be post-dated.

PRIORITYInvestors making applications on red Capital Noteholder Application Forms should note that although Bonds having an aggregate principal amount of NZ$105 million will be reserved for subscriptions by Capital Noteholders (see the section of the Offer Document entitled “Allocations”), in the event of oversubscription for this priority pool applications for more than their Capital Note Repayment Amount will be subject to scaling. This Application Form constitutes an irrevocable direction to SKY to apply (on the issue date of the Bonds) an amount of the Capital Note Repayment Amount printed above in subscription for the equivalent principal amount of Bonds applied for (up to the total amount of the Capital Noteholder Repayment Amount).

Tick this box if you have other investments registered at Computershare and complete your Common Shareholder Number (CSN) below. If Computershare has your tax details and the bank account details to which you wish payments of interest or principal in respect of the Bonds to be paid DO NOT complete the sections Resident Withholding Tax Rate or Method of Payment of Interest and Principal below.

Please enter CSN here:

RESIDENT WITHHOLDING TAX RATE 19.5% 33% 39%

IRD Number

(tick one) (39% will be applicable

if no IRD number is supplied)

If you hold a current RWT Exemption

Certificate please tick this box

METHOD OF PAYMENT OF INTEREST AND PRINCIPAL – PLEASE COMPLETE ONE OPTION ONLY

OPTION 1 My New Zealand Bank Account Details

Account Name

Bank/Branch

Account

Suffix

OPTION 2 My Cash Management Account Details (If you have an account with a broker)

Name of NZX Firm where account held Cash Management Client Account Number

OPTION 3 Pay by cheque to the address set out above

ANNUAL AND HALF-YEARLY REPORTS

Tick this box if you do not wish to have copies of SKY’s annual and half-yearly reports automatically sent to you each year. Note that even if you tick this box, you may request that

Computershare send you a copy of those reports from time to time, and you can access copies of the reports by visiting SKY’s website at www.skytv.co.nz.

AGREEMENT OF TERMSI/We confirm I/we have received, read and understood the Offer Document and that all the information I/we have given in this Capital Noteholder Application Form is correct. I/We irrevocably apply for the principal amount of Bonds shown above (or such lesser amount as SKY allocates) on the terms and conditions set out in the Offer Document and this Capital Noteholder Application Form.

Signature: Date:

Signature: Date:

Signature: Date:

You may not amend these details

CAPITAL NOTEHOLDERAPPLICATION FORM

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ADDITIONAL APPLICATION TERMS1. By signing this Application Form, the applicant acknowledges:

(a) that this form was distributed with the Offer Document dated 11 September 2006 and that offers to subscribe for Bonds are upon and subject to the terms and conditions set out in the Offer Document, the Master Trust Deed, the Supplemental Trust Deed and this Application Form;

(b) that, if this application is accepted, this application constitutes an irrevocable direction to SKY to apply (on the issue date of the Bonds) the amount of the Capital Note Repayment Amount specified above in subscription for the equivalent principal amount of Bonds applied for;

(c) that he/she has read and understood the Offer Document and the section relating to the Privacy Act 1993 on page 62 of the Offer Document; and

(d) that the information supplied by them on the Application Form is true.

2. An application cannot be withdrawn or revoked by the applicant.

3. SKY reserves the right to reject any application in whole or in part without giving any reason.

4. Securities transaction statements for the Bonds will be dispatched to successful applicants as soon as practicable after allotment, but in any event no later than five working days after the allotment.

5. Applications must conform with the Application Instructions on page 62 of the Offer Document.

6. In the case of joint applicants, only the address of the first named of the joint applicants will be recorded by the Registrar and all distributions and interest payments, notices, etc will be sent to the address of the first applicant.

Expressions defined in the Offer Document have the same meanings in this Application Form. This Application Form, Offer, and any contract arising out of its acceptance is governed by New Zealand Law.

CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEYComplete this section if you are acting on behalf of someone for whom you hold a power of attorney.

I, of

[name of Attorney] [address and occupation of attorney]

CERTIFY

1. That by a power of attorney dated (the “Power of Attorney”),

[name and occupation of person for whom you are signing]

of [address of person for whom you are signing]

appointed me his/her/its Attorney on the terms and conditions set out in the Power of Attorney.

2. That I have executed the application for Bonds printed on the face of this form as Attorney under the Power of Attorney and pursuant to the powers it confers on me.

3. That at the date of this certificate I have not received any notice or information of the revocation of the Power of Attorney by death or liquidation of the donor or otherwise.

Signed at [address]

[date]

[signature of Attorney]

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GENERAL APPLICATION FORM INSTRUCTIONS

Applications must be for a minimum of 5,000 Bonds and thereafter in multiples of 1,000 Bonds.

Applications must be lodged with Computershare before 5.00 p.m. on 12 October 2006. Alternatively, applications may be sent to ANZ or ASB Securities (at the addresses specified in the Offer Document) or lodged with the Co-Manager, any NZX Firm or any other channel approved by NZX in each case in time for such applications to be forwarded to Computershare for receipt before 5.00 p.m. on 12 October 2006. Applications will not be accepted if received by Computershare after this time unless SKY determines otherwise. Applications cannot be revoked or withdrawn.

SKY has the right to accept or reject all or part of this offer without giving any reason.

THE APPLICATION FORM

Please complete all relevant sections of the application form using CAPITAL BLOCK LETTERS.

NameEnter your full name. Up to three applicants can apply jointly. You should refer to the table on the back of the application form for details of the correct form of name that can be registered. Applications using the wrong form of name may be rejected.

Postal AddressEnter your postal address. All communications to you from SKY will be mailed to the address shown. For joint applicants, only one address is to be entered.

Value of Bonds applied forEnter the value of the Bonds applied for.

Payment must be made by a cheque drawn on a New Zealand bank, for New Zealand dollars, for immediate value. Post-dated cheques will not be accepted. Please ensure that the total of the cheque equals the amount payable. Make the cheque payable to “SKY Bond Offer” and cross it “Not Transferable”.

Sufficient cleared funds should be held in your account as cheques returned unpaid are likely to result in your application being rejected or your allotment being cancelled. Staple your cheque to the application form.

Interest PaymentsIf you would like your interest payments direct credited to your bank account or broker cash management account, please tick the appropriate box and enter your details and attach an encoded bank deposit slip for that account. If no selection is made, payment will be made by cheque to the postal address specified on the form.

DeclarationRead the declaration carefully and sign the application form. It must be signed by applicants personally. Companies or other bodies corporate must sign in the same way they would sign a deed or other formal legal document. Applications may, in either case, be executed by an attorney. If your application form is signed by an attorney the power of attorney document is not required to be lodged, but the attorney must complete the certificate of non-revocation on the application form. Joint applicants must all sign the application form.

CONDITIONS

Each applicant is bound by the terms and conditions set out in the Trust Documents (as defined in the Offer Document), and the Offer Document. Some of the terms and conditions set out in the Trust Documents are summarised in the Offer Document. Expressions used in the Offer Document have the same meaning in this application form. This application form is governed by New Zealand law.

PRIVACY ACT 1993

Computershare Investor Services Limited (on behalf of SKY) collects and holds personal information about applicants for this investment for the purposes of administering this investment and for providing investors with information about the SKY Group and its business. You have the right to access and correct any personal information held about you.

GENERAL APPLICATION FORM INSTRUCTIONS

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GENERAL APPLICATION FORM

This General Application Form relates to an offer of unsecured unsubordinated bonds (“Bonds”) by Sky Network Television Limited (“SKY”), and forms part of the Combined Prospectus and Investment Statement issued by SKY in relation to the Bonds, dated 11 September 2006 (“Offer Document”).

You may not complete this application form unless you have received a copy of the Offer Document and this General Application Form must not be issued, circulated or distributed unless accompanied by the Offer Document.

Completed General Application Forms, together with a cheque for the application money payable in respect of the principal amount of Bonds applied for, must be received by Computershare Investor Services Limited (“Computershare”) before 5.00 p.m. on 12 October 2006 or such earlier or later date as SKY may elect to be the General Offer Closing Date.

INVESTOR DETAILS (BLOCK LETTERS PLEASE)

1. Title: First Name(s): Surname:

2. Title: First Name(s): Surname:

Corporate Name (if any):

Postal Address:

Post Code: Telephone Number Home: ( )

Telephone Number Business: ( )

Email Address (if any):

APPLICATION AMOUNT

Amount of Bonds applied for: NZ$ (at a subscription price of NZ$1.00 per Bond)

Cheques must be in New Zealand dollars, payable to “SKY Bond Offer” and crossed “Not Transferable”. Cheques must not be post-dated.

Tick this box if you have other investments registered at Computershare and complete your Common Shareholder Number (CSN) below. If Computershare has your tax details and the bank account details to which you wish payments of interest or principal in respect of the Bonds to be paid DO NOT complete the sections Resident Withholding Tax Rate or Method of Payment of Interest and Principal below.

Please enter CSN here:

RESIDENT WITHHOLDING TAX RATE

IRD Number

(tick one) (39% will be applicable if no IRD number is supplied) 19.5% 33% 39% If you hold a current RWT Exemption Certificate please tick this box

METHOD OF PAYMENT OF INTEREST AND PRINCIPAL – PLEASE COMPLETE ONE OPTION ONLY

OPTION 1 My New Zealand Bank Account Details

Account Name

Bank/Branch

Account

Suffix

OPTION 2 My Cash Management Account Details (if you have an account with a broker)

Name of NZX Firm where account held Cash Management Client Account Number

OPTION 3 Pay by cheque to the address set out above

ANNUAL AND HALF-YEARLY REPORTS

Tick this box if you do not wish to have copies of SKY’s annual and half-yearly reports automatically sent to you each year. Note that even if you tick this box, you may request that

Computershare send you a copy of those reports from time to time, and you can access copies of the reports by visiting SKY’s website at www.skytv.co.nz.

AGREEMENT OF TERMSI/We confirm I/we have received, read and understood the Offer Document and that all the information I/we have given in this general application form is correct. I/We irrevocably apply for the principal amount of Bonds shown above (or such lesser amount as SKY allocates) on the terms and conditions set out in the Offer Document, the Trust Documents and this General Application Form.

Signature: Date:

Signature: Date:

Signature: Date:

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FORM OF REGISTRABLE NAMESNote that only legal entities are allowed to hold Bonds. Applications must be in the name(s) of natural persons, companies or other legal entities acceptable to SKY. At least one full given name and surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable names below:

• Individual – Use given name in full, not initials

• Company – Use company title, not abbreviations

• Trusts – Use trustees’ personal names, not the name of the trust. All trustees must apply as joint applicants.

• Deceased estates – Use executors’ personal names, not the name of the deceased.

• Clubs/unincorporated societies – Use office bearer(s) personal names, not the name of the club

• Superannuation funds – Use the name of the trustee, not the name of the fund.

ADDITIONAL APPLICATION TERMS1. By signing this Application Form, the applicant acknowledges:

(a) that this form was distributed with the Offer Document dated 11 September 2006 and that offers to subscribe for Bonds are upon and subject to the terms and conditions set out in the Offer Document, the Master Trust Deed, the Supplemental Trust Deed and this Application Form;

(b) that he/she has read and understood the Offer Document and the section relating to the Privacy Act 1993 on page 65 of the Offer Document; and

(c) that the information supplied by them on the Application Form is true.

2. An application cannot be withdrawn or revoked by the applicant.

3. SKY reserves the right to reject any application in whole or in part without giving any reason.

4. Securities transaction statements for the Bonds will be dispatched to successful applicants as soon as practicable after allotment, but in any event no later than five working days after the allotment.

5. Applications must conform with the Application Instructions on page 65 of the Offer Document.

6. In the case of joint applicants, only the address of the first named of the joint applicants will be recorded by the Registrar and all distributions and interest payments, notices, etc will be sent to the address of the first applicant.

Expressions defined in the Offer Document have the same meanings in this Application Form. This Application Form, Offer, and any contract arising out of its acceptance is governed by New Zealand Law.

CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEYComplete this section if you are acting on behalf of someone for whom you hold a power of attorney.

I, of

[name of Attorney] [address and occupation of attorney]

CERTIFY

1. That by a power of attorney dated (the “Power of Attorney”),

[name and occupation of person for whom you are signing]

of [address of person for whom you are signing]

appointed me his/her/its Attorney on the terms and conditions set out in the Power of Attorney.

2. That I have executed the application for Bonds printed on the face of this form as Attorney under the Power of Attorney and pursuant to the powers it confers on me.

3. That at the date of this certificate I have not received any notice or information of the revocation of the Power of Attorney by death or liquidation of the donor or otherwise.

Signed at [address]

[date]

[signature of Attorney]

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THE ISSUERSky Network Television Limited 10 Panorama Road Mt Wellington Auckland New Zealand Telephone No: (09) 579 9999 Facsimile No: (09) 579 0910 Website: www.skytv.co.nz

JOINT ARRANGERANZ Institutional (a part of ANZ National Bank Limited) Level 27, ANZ Centre 23-29 Albert Street Auckland New Zealand

JOINT ARRANGERCommonwealth Bank of Australia Level 21, ASB Bank Centre 135 Albert Street Auckland New Zealand

JOINT LEAD MANAGER ANZ Institutional (a part of ANZ National Bank Limited) Level 27, ANZ Centre 23-29 Albert Street Auckland New Zealand

JOINT LEAD MANAGER ASB Bank Limited Level 28, ASB Bank Centre 135 Albert Street Auckland New Zealand

CO-MANAGERDirect Broking Limited Level 14, ANZ Tower 215-229 Lambton Quay Wellington New Zealand

ORGANISING PARTICIPANTASB Securities Limited Level 13, ASB Bank Centre 135 Albert Street PO Box 35 Auckland New Zealand

TRUSTEEThe New Zealand Guardian Trust Company Limited Level 7, Vero Centre 48 Shortland Street Auckland New Zealand

REGISTRARComputershare Investor Services Limited Level 2, 159 Hurstmere Road Takapuna North Shore City New Zealand

AUDITOR TO SKYPricewaterhouseCoopers PricewaterhouseCoopers Tower 188 Quay Street Private Bag 92162 Auckland New Zealand

LEGAL ADVISERSTo SKYBuddle Findlay PricewaterhouseCoopers Tower 188 Quay Street Auckland New Zealand

To the TrusteeBell Gully Vero Centre 48 Shortland Street Auckland New Zealand

To the Joint Arrangers and Joint Lead ManagersChapman Tripp 1-13 Grey Street Wellington New Zealand

DIRECTORY

W W W . S K Y T V. C O . N Z

JOINT ARRANGERJOINT LEAD MANAGERJOINT ARRANGER ANDJOINT LEAD MANAGER

CO MANAGERORGANISING PARTICIPANT

SM