GRUPO
TELEVISA FILES INFORMATION REQUIRED BY THE BOLSA MEXICANA DE
VALORES
On February 26, 2010, the Company filed the
following Exhibit 1 and Table 1 with the Bolsa Mexicana de Valores
related to Televisa's deriviative financial instruments as of December 31,
2009.
GRUPO
TELEVISA, S.A.B.
EXHIBIT
1
TO
THE ELECTRONIC FORM TITLED “PREPARATION, FILING, DELIVERY AND DISCLOSURE OF
QUARTERLY ECONOMIC, ACCOUNTING AND ADMINISTRATIVE INFORMATION BY
ISSUERS”
III.
QUALITATIVE AND QUANTITATIVE INFORMATION
i. Management’s discussion of
the policies concerning the use of financial derivative instruments, and
explanation as to whether such policies permit the use of said instruments
solely for hedging or also for trading or other purposes. The discussion must include a
general description of the objectives sought in the execution of financial derivative
transactions; the relevant instruments; the hedging or trading strategies
implemented in connection therewith; the relevant trading markets; the eligible
counterparties; the policies for the appointment of calculation or valuation
agents; the principal terms and conditions of the relevant contracts; the
policies as to margins, collateral and lines of credit; the authorization
process and levels of authorization required by type of transaction (e.g., full
hedging, partial hedging, speculation), stating whether the transactions were
previously approved by the committee(s) responsible for the development of
corporate and auditing practices; the internal control procedures applicable to
the management of the market and liquidity risks associated with the positions;
and the existence of an independent third party responsible for the review of
such procedures and, as the case may be, the observations raised or deficiencies
identified by such third party. If applicable, provide information concerning
the composition of the overall risk management committee, its operating rules,
and the existence of an overall risk management manual.
Management’s
discussion of the policies concerning the use of financial derivative
instruments, and explanation as to whether such policies permit the use of said
instruments solely for hedging or also for trading or other
purposes.
In
accordance with the policies and procedures implemented by the Finance and Risk
area and the Vice President and Corporate Controller, along with the Vice
President of Internal Audit, the Company has entered into certain financial
derivative transactions for hedging purposes in both the Mexican and
international markets so as to manage its exposure to the market risks
associated with the changes in interest and foreign exchange rates and
inflation. In addition, the Company’s Investments Committee has established
guidelines for the investment in structured notes or deposits associated with
other derivatives, which by their nature may be considered as derivative
transactions for trading purposes. It should be noted that in the fourth quarter
of 2009, no such financial derivatives were outstanding. Pursuant to the
provisions of Bulletin C-10 of the Financial Reporting Standards issued by the
Mexican Board for Research and Development of Financial Reporting Standards,
certain financial derivative transactions originally intended to serve as a
hedge and in effect until December 31, 2009, are not within the scope of hedge
accounting as specified established in such Bulletin and, consequently,
are addressed recognized in the accounting based in the standards included
in the aforementioned Bulletin.
General
description of the objectives sought in the execution of financial derivative
transactions; the relevant instruments; the hedging or trading strategies
implemented in connection therewith; the relevant trading markets; the eligible
counterparties; the policies for the appointment of calculation or valuation
agents; the principal terms and conditions of the relevant contracts; the
policies as to margins, collateral and lines of credit; the authorization
process and levels of authorization required by type of transaction (e.g., full
hedging, partial hedging, speculation), stating whether the transactions were
previously approved by the committee(s) responsible for the development of
corporate and auditing practices; the internal control procedures applicable to
the management of the market and liquidity risks associated with the positions;
and the existence of an independent third party responsible for the review of
such procedures and, as the case may be, the observations raised or deficiencies
identified by such third party.
The
Company’s principal objective when entering into financial derivative
transactions is to mitigate the effects of unforeseen changes in interest and
foreign exchange rates and inflation, so as to reduce the volatility in its
results and cash flows as a result of such changes.
The
Company monitors its exposure to the interest rate risk by: (i) assessing the
difference between the interest rates applicable to its debt and temporary
investments, and the prevailing market rates for similar instruments; (ii)
reviewing its cash flow requirements and financial ratios (interest coverage);
(iii) assessing the actual and budgeted-for trends in the principal markets; and
(iv) assessing the prevailing industry practices and other similar companies.
This approach enables the Company to determine the optimum mix between fixed-
and variable-rate interest for its debt.
Foreign
exchange risk is monitored by assessing the Company’s monetary position in U.S.
dollars and its budgeted cash flow requirements for investments anticipated to
be denominated in U.S. dollars and the service of its U.S. dollar-denominated
debt.
Financial
derivative transactions are reported from time to time to the Audit and
Corporate Practices Committee.
The
Company has entered into master derivatives agreements with both domestic and
foreign financial institutions, that are internationally recognized institutions
with which the Company, from time to time, has entered into financial
transactions involving corporate and investment banking, as well as treasury
services. The form agreement used in connection with financial derivatives
transactions with foreign financial institutions is the Master Agreement
published by the International Swaps and Derivatives Association, Inc.
(“ISDA”)
and with local institutions is the Master Agreement published by ISDA and the
form agreement recommended by Banco de México. In both
cases, the main terms and conditions of which are standard for these types of
transactions and include mechanisms for the appointment of calculation or
valuation agents.
In
addition, the Company enters into standard guaranty agreements that set forth
the margins, collateral and lines of credit applicable in each instance. These
agreements establish the credit limits granted by the financial institutions
with whom the Company enters into master financial derivative agreements, which
specify the margin implications in the case of potential negative changes in the
market value of its open financial derivative positions. Pursuant to the
agreements entered into by the Company, financial institutions are entitled to
make margin calls if certain thresholds are exceeded. In the event of a change
in the credit rating issued to the Company by a recognized credit rating agency,
the credit limit granted by the counterpart would be modified.
As of the
date hereof, the Company has never experienced a margin call with respect to its
financial derivative transactions.
In
compliance with its risk management objectives and hedging strategies, the
Company generally utilizes the following financial derivative
transactions:
|
1.
|
Cross-currency
interest rate swaps (i.e., coupon swaps);
|
|
2.
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Interest
rate and inflation-indexed swaps;
|
|
3.
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Cross-currency
principal and interest rate swaps;
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|
4.
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Swaptions;
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5.
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Forward
exchange rate contracts;
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|
6.
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FX
options;
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7.
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Interest
Rate Caps and Floors contracts;
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8.
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Fixed-price
contracts for the acquisition of government securities (i.e., Treasury
locks); and
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9.
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Credit
Default Swaps.
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The
strategies for the acquisition of financial derivatives transactions are
approved by the Risk Management Committee in accordance with the Policies and
Objectives for the Use of Financial Derivatives.
During
the quarter from October to December 2009, there were no defaults or margin
calls under the aforementioned financial derivative transactions.
The
Company monitors on a weekly basis the flows generated by the fair market value
of and the potential for margin calls under its open financial derivative
transactions. The calculation or valuation agent designated in the relevant
Master Agreement, which is always the counterparty, issues monthly reports as to
the fair market value of the Company’s open positions.
The Risk
Management area is responsible for measuring, at least once a month, the
Company’s exposure to the financial market risks associated with its financings
and investments, and for submitting a report with respect to the Company’s risk
position and the valuation of its financial derivatives to the Finance Committee
on a monthly basis, and to the Risk Management Committee on a quarterly basis.
The Company monitors on a regular basis the credit rating assigned to its
counterparties in its outstanding financial derivative
transactions.
The
office of the Comptroller is responsible for the validation of the Company’s
accounting records as related to its financial derivative transactions, based
upon the confirmations received from the relevant financial intermediaries, and
for obtaining from such intermediaries, on a monthly basis, confirmations or
account statements supporting the market valuation of its open financial
derivative positions.
As a part
of the yearly audit on the Company, the aforementioned procedures are reviewed
by the Company’s external auditors. As of the date hereof, the Company’s
auditors have not raised any observation or identified any deficiency
therein.
Information
concerning the composition of the overall risk management committee, its
operating rules, and the existence of an overall risk management
manual.
The
Company has a Risk Management Committee, which is responsible for monitoring the
Company’s risk management activities and approving the hedging strategies used
to mitigate the financial market risks to which it is exposed. The assessment
and hedging of the financial market risks are subject to the policies and
procedures applicable to the Company’s Risk Management Committee, the Finance
and Risk Management areas and the Comptroller, that form the Risk Management
Manual of the Company. In general terms, the Risk Management Committee is
comprised of members of the Corporate Management, Corporate Comptroller, Tax
Control and Advice, Information to the Stock Exchange, Finance and Risk, Legal,
Administration and Finance, Financial Planning and Corporate Finance
areas.
ii. General description of the
valuation methods, indicating whether the instruments are valued at cost or at
their fair value pursuant to the applicable accounting principles, the relevant
reference valuation methods and techniques, and the events taken into
consideration. Describe the policies for and frequency of the valuation, as well
as the actions taken in light of the values obtained therefrom. Clarify whether
the valuation is performed by an independent third party, and indicate if such
third party is the structurer, seller or counterparty of the financial
instrument. As with respect to financial derivative transactions for hedging
purposes, explain the method used to determine the effectiveness thereof and
indicate the level of coverage provided thereby.
The
Company values its financial derivative instruments based upon the standard
models and calculators provided by recognized market makers. In addition, the
Company uses the relevant market variables available from online information.
The financial derivative instruments are valued at a reasonable value pursuant
to the applicable accounting provisions.
In the
majority of cases, the valuation at a reasonable value is carried out on a
monthly basis based on valuations of the counterparties and the verification of
such reasonable value with internal valuations prepared by the Risk Management
area of the Company. Accounting wise, the valuation of the counterparty is
registered.
The
Company performs its valuations without the participation of any independent
third party.
The
method used by the Company to determine the effectiveness of an instrument
depends on the hedging strategy and on whether the relevant transaction is
intended as a fair-value hedge or a cash-flow hedge. The Company’s methods take
into consideration the prospective cash flows generated by or the changes in the
fair value of the financial derivative, and the cash flows generated by or the
changes in the fair value of the underlying position that it seeks to hedge to
determine, in each case, the hedging ratio.
iii. Management’s discussion of
the internal and external sources of liquidity that could be used to satisfy the
Company’s requirements in connection with its financial
derivatives.
iv. As of the
date hereof, the Company’s management has not discussed internal and external
sources of liquidity so as to satisfy its requirements in connection with its
financial derivatives since, in its opinion, based upon the aggregate amount of
the Company’s financial derivative transactions, the Company’s significant
positions of cash, cash equivalents and temporary investments, and the
substantial cash flows generated thereby, Explanation as to any change
in the issuer’s exposure to the principal risks identified by thereby and their
management, and any contingency or event known to or anticipated by the issuer’s
management, which could affect any future report. Description of any
circumstance or event, such as any change in the value of the underlying assets
or reference variables, resulting in a financial derivative being used other
than as originally intended, or substantially altering its structure, or
resulting in the partial or total loss of the hedge, thereby forcing the Issuer
to assume new obligations, commitments or changes in its cash flows in a manner
that affects its liquidity (e.g., margin calls.) Description of the impact of
such financial derivative transactions on the issuer’s results or cash flows.
Description and number of financial derivatives maturing during the quarter, any
closed positions and, if applicable, number and amount of margin calls
experienced during the quarter. Disclosure as to any default under the relevant
contracts.
Changes in the Company’s exposure to
the principal risks identified thereby and their management, and
contingencies or events known to or anticipated by the Company’s management, which
could affect any future report.
Since a
significant portion of the Company’s debt and costs are denominated in U.S.
dollars, while its revenues are primarily denominated in Mexican pesos, the
recent depreciation and any future depreciation in the value of the Mexican peso
against the U.S. dollar could have a negative effect on the Company’s results
due to exchange rate losses. However, the significant amount of U.S. dollars in
the Company’s treasury, and the hedging strategies adopted thereby in recent
years, have enabled it to avoid significant foreign exchange losses as a result
of the recent depreciation of the Mexican peso.
Circumstances
or events, such as changes in the value of the underlying assets or reference
variables, resulting in a financial derivative being used other than as
originally intended, or substantially altering its structure, or resulting in
the partial or total loss of the hedge, thereby forcing the Company to assume
new obligations, commitments or changes in its cash flows in a manner that
affects its liquidity (e.g., margin calls). Description of the impact of such
financial derivative transactions on the Company’s results or cash
flows.
As of the
date hereof, no circumstance or event has given rise to a significant change in
the structure of a financial derivative transaction, caused it to be used other
than as originally intended, or resulted in a partial or total loss of the
relevant hedge requiring that the Company assume new obligations, commitments or
variations in its cash flow such that its liquidity is affected.
Description
and number of financial derivatives maturing during the quarter, any closed
positions and, if applicable, number and amount of margin calls experienced
during the quarter. Disclosure as to any default under the relevant
contracts.
During
the relevant quarter, with
respect to financial derivative transactions, no such transactions matured or
were closed and there were no margin calls or defaults.
v. Quantitative
Information. Attached hereto as Table 1 is a summary
of the financial derivative instruments purchased by Empresas Cablevisión,
S.A.B. de C.V. and Cablemás, S.A. de C.V., whose aggregate fair value represents
or could represent one of the reference percentages set forth in Section III (v)
of the Official Communication.
IV.
SENSITIVITY ANALYSIS
Considering
that the Company has entered into financial derivative transactions for hedging
purposes, and given the low amount of the financial derivative instruments that
proved ineffective as a hedge, the Company has determined that such transactions
are not material and, accordingly, the sensitivity analysis referred to in
Section IV of the Official Communication is not applicable.
In those
cases where the derivative instruments of the Company are for hedging purposes,
for a material amount and where the effectiveness measures were sufficient, the
measures are justified when the standard deviation of the changes in cash flow
as a result of changes in the variables of exchange rate and interest rates of
the derivative instruments used jointly with the underlying position is lower
than the standard deviation of the changes in cash flow of the underlying
position valued in pesos and the effective measures, are defined by the
correlation coefficient between both positions for the effective measures to be
sufficient.
TABLE
1
GRUPO
TELEVISA, S.A.B.
Summary
of the Financial Derivative Instruments as of December 31, 2009.
(In
thousands of pesos/dollars)
|
Type
of Derivative, Securities or Contract
|
Purpose
(e.g., hedging, trading or other)
|
Notional
Amount/Face Value
|
Value
of the Underlying Asset / Reference Variable
|
Fair
Value
|
Maturing
per Year
|
Collateral/
Lines
of Credit/
Securities
Pledged
|
|
Current
Quarter
|
Previous
Quarter(4)
|
Current
Quarter D(H)(3)
|
Previous
Quarter D(H)(4)
|
|
Cross
Currency Swap(1)
|
Hedging
|
Ps.2,435,040
/
$225,000
|
$225,000
3MLIBOR+42.5
BPS
|
$225,000
3MLIBOR+42.5
BPS
|
Ps.
419,974
|
Ps.
536,625
|
$225,000
2012
|
Does
not exist (5)
|
|
Cross
Currency Swap(2)
|
Hedging
|
Ps.541,275
/
$50,000
|
$50,000
3MLIBOR+52.5
BPS
|
$50,000
3MLIBOR+52.5
BPS
|
Ps.
91,804
|
Ps.
116,745
|
$50,000
2012
|
Does
not exist (5)
|
|
Forward(2)
|
Hedging
|
Ps.1,880,375
/
$175,000
|
$175,000
Exchange
Rate:
Ps.10.7450
|
$175,000
Exchange
Rate:
Ps.10.7450
|
Ps
301,144
|
Ps.
339,950
|
$175,000
2015
|
Does
not exist (5)
|
|
Cross
Currency Swap(2)
|
Hedging
|
Ps.1,914,850
/
$175,000
|
$175,000
9.375%
|
$175,000
9.375%
|
Ps.
331,978
|
Ps.
435,173
|
$175,000
2015
|
Does
not exist (5)
|
|
Swaption (TIIE)(2)
|
Trading
|
Ps.1,914,850
|
Ps.1,914,850
7.570%
|
Ps.1,914,850
7.570%
|
Ps.
(65,140)
|
Ps.
(80,738)
|
Ps.1,914,850
2015
|
Does
not exist (5)
|
|
(1)
|
Purchased
by Empresas Cablevisión, S.A.B. de
C.V.
|
|
(2)
|
Purchased
by Cablemás, S.A. de C.V., which became a consolidated subsidiary
effective June 1, 2008.
|
|
(3)
|
The
aggregate amount of the derivatives reflected in the consolidated balance
sheet of Grupo Televisa, S.A.B. as December 31, 2009, included
in the relevant SIFIC, is as follows:
|
| |
S81
FINANCIAL DERIVATIVE INSTRUMENTS
|
|
Ps. |
6,718
|
|
| |
S85
FINANCIAL DERIVATIVE INSTRUMENTS
|
|
|
1,538,678 |
|
| |
S69
OTHER LIABILITIES
|
|
|
(523,628 |
) |
|
|
|
Ps.
|
|
|
| |
|
|
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The
financial derivatives shown in the above table are those whose aggregate value
could represent 5% of the consolidated assets, liabilities or capital, or 3% of
the consolidated sales of Grupo Televisa, S.A.B. for the most recent
quarter.
|
(4)
|
Information
for the third quarter of 2009.
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(5)
|
Applies
only to implicit financing in the ISDA ancillary agreements identified as
“Credit Support Annex”.
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