This is an important document and requires your immediate attention. It should be read in its entirety. If you are in doubt about what to do, you should consult your professional advisor without delay.

SCHEME BOOKLET

20 April 2007 in relation to the proposed acquisition of APN News & Media Limited (ACN 008 637 643) by a consortium comprising Independent News & Media PLC, Providence Equity Partners and The Carlyle Group through the acquisition vehicle Independent News & Media (Australia) Limited (ACN 008 637 689)

via a scheme of arrangement between APN News & Media Limited and its shareholders and a Scheme Meeting and a General Meeting of the holders of fully paid ordinary shares in APN News & Media Limited, each to be held on 25 May 2007 The Notices of Scheme Meeting and General Meeting are set out in Annexure E and Annexure F, respectively, of this Scheme Booklet.

The APN Independent Committee UNANIMOUSLY RECOMMENDS that you vote in favour of the Scheme. The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interest of APN Shareholders.

Financial adviser Legal adviser

If you have any questions or require further information, you can call the APN Information Line on 1800 830 977 (within Australia) and +61 2 8280 7492 (from outside Australia) during business hours. Important notices/disclaimers

What is this document? Scheme Booklet has been prepared by INMAL the APN Independent Committee, INMAL, the This document provides APN Shareholders with and its directors and is the responsibility of Consortium Purchasers and the Consortium do INMAL. APN and its directors and officers do not give any undertaking to update or revise any Corporate directory details of two interdependent transactions: not assume any responsibility for the accuracy or such statements after the date of this Scheme (a) the scheme of arrangement between APN completeness of any such INMAL information. Booklet, to reflect any change in expectations and Scheme Participants; and INMAL has been solely responsible for preparing in relation thereto or any change in events, (b) the INMH Sale, which is the sale of all the the information contained in Sections 1.6, 1.11, conditions or circumstances on which any such shares in the holding company of INMAL. 3, 6, 7 and 12 of this Scheme Booklet and is statement is based. These two transactions are designed to give solely responsible for any statements regarding the members of the Consortium ownership of the intentions of INMAL, INM, the Consortium Foreign Shareholders all of the APN Shares following implementation or their Associates. This Scheme Booklet is subject to Australian of the Scheme. Deloitte has prepared the Independent Expert’s disclosure requirements. Financial information in this Scheme Booklet has been prepared As discussed below, this Scheme Booklet is Report in relation to the Scheme contained in in accordance with AIFRS and is presented the explanatory statement for the scheme Section 8 of this Scheme Booklet and takes in abbreviated form and does not contain all of arrangement between APN and Scheme responsibility for that report. the disclosures that are usually provided in an Participants for the purposes of section 412(1) Blake Dawson Waldron has prepared the report annual report prepared in accordance with the of the Corporations Act. It is also provided to on the Australian taxation implications of the Corporations Act. Company Legal adviser meet the requirements of item 7, section 611 of Scheme for Scheme Participants in Section 9.1 the Corporations Act and applicable ASIC policy. of this Scheme Booklet and takes responsibility Australian disclosure requirements and AIFRS APN News & Media Limited Blake Dawson Waldron for that report. may be different from those applicable in other ABN 95 008 637 643 Grosvenor Place No investment advice jurisdictions. Scheme Participants who are Simpson Grierson has prepared the report on subject to taxation outside of Australia should 225 George Street Other than the Independent Expert’s Report, the New Zealand taxation implications of the Registered office the information contained in this Scheme consult their tax advisor as to the applicable tax Sydney NSW 2000 Scheme for Scheme Participants in Section 9.2 consequences of the Scheme. Level 4 Booklet does not constitute financial product of this Scheme Booklet and takes responsibility advice and has been prepared without reference for that report. 100 William Street Financial adviser to your own investment objectives, financial Privacy APN and INMAL may collect personal information Sydney NSW 2011 Grant Samuel Corporate Finance situation, taxation position and particular needs. Forward-looking statements It is important that you read this Scheme Booklet in the process of implementing the Scheme. Pty Limited in its entirety before making any decision, This Scheme Booklet contains both historical and Such information may include the name, contact Telephone: +61 2 9333 4999 including a decision on how to vote on the forward-looking statements. All statements other details and shareholdings of APN Shareholders Facsimile: +61 2 9333 4000 Level 19 Resolution. If you are in any doubt in relation to than statements of historical fact are, or may be and the name of persons appointed by those Governor Macquarie Tower deemed to be, forward-looking statements. these matters, you should consult your financial, persons to act as a proxy, attorney or corporate Company Secretary legal, taxation or other professional advisor. All forward-looking statements in this Scheme representative at the Scheme Meeting and the 1 Farrer Place Booklet reflect the current expectations of General Meeting. The primary purpose of the Yvette Lamont Sydney NSW 2000 Regulatory information APN, the APN Independent Committee, INMAL, collection of personal information is to assist APN This Scheme Booklet is dated 20 April 2007 the Consortium Purchasers or the Consortium and INMAL to conduct the Scheme Meeting and Registry the General Meeting and implement the Scheme. Independent Expert and is the explanatory statement for the scheme as the context requires concerning future results Computershare Investor of arrangement between APN and Scheme and events and generally may be identified Personal information of the type described Deloitte Corporate Finance Participants for the purposes of section 412(1) by the use of forward-looking words such above may be disclosed to the Registry, print Services Pty Limited Pty Limited and mail service providers, authorised securities of the Corporations Act. A copy of the scheme as “believe”, “aim”, “expect”, “anticipate”, GPO Box 2975 Grosvenor Place of arrangement is included in this Scheme “intending”, “foreseeing”, “likely”, “should”, brokers and Related Bodies Corporate of APN Booklet as Annexure B. “planned”, “may”, “estimate”, “potential”, and INMAL. APN Shareholders have certain Melbourne VIC 3001 225 George Street or other similar words. Similarly, statements rights to access personal information that has A copy of this Scheme Booklet was lodged with that describe APN’s, the APN Independent been collected. APN Shareholders should Telephone (within Australia): Sydney NSW 2000 ASIC on 20 April 2007 for registration by ASIC Committee’s, INMAL’s, the Consortium contact the Registry in the first instance, if they under section 412(6) of the Corporations Act Purchasers’ or the Consortium’s objectives, wish to access their personal information. APN 1300 850 505 and will be registered by ASIC under that section plans, goals or expectations are or may be Shareholders who appoint a named person before it is sent to APN Shareholders. ASIC forward-looking statements. to act as their proxy, attorney or corporate Telephone (within New Zealand): has been requested to provide a statement, representative should ensure that they inform (09) 488 8777 in accordance with section 411(17)(b) of the These forward-looking statements involve that person of these matters. Corporations Act, that ASIC has no objection known and unknown risks, uncertainties and Telephone (outside Australia and to the Scheme. If ASIC provides that statement, other factors that may cause APN’s actual Date at which information is stated then it will be produced to the Court at the results, performance or achievements following New Zealand): +61 3 9415 4095 Unless otherwise stated in this Scheme Booklet, Second Court Hearing Date. Neither ASIC implementation of the Scheme to differ materially the information contained in this Scheme nor any of its officers takes any responsibility from the anticipated results, performance or Facsimile: +61 3 9473 2500 Booklet is stated as at 17 April 2007. for the contents of this Scheme Booklet. achievements, expressed, projected or implied by these forward-looking statements. Web: www.computershare.com.au A copy of this Scheme Booklet has also been Defined terms provided to the ASX and the NZSE. None of The operations and financial performance Defined terms used in this Scheme Booklet the ASX, the NZSE or any of their respective of APN are subject to various risks that are are defined in the Glossary in Section 13 or officers takes any responsibility for the contents summarised in this Scheme Booklet and which elsewhere in this Scheme Booklet. of this Scheme Booklet. may be beyond the control of APN. As a result, APN’s actual results of operations and earnings Competing Transaction Responsibility statement following implementation of the Scheme, as well as the actual advantages of the Scheme, may If a Competing Transaction for APN is publicly The information concerning APN and the differ significantly from those that are anticipated announced at any time between the date of this intentions, views and opinions of APN and its in respect of timing, amount or nature and may Scheme Booklet and the date of the Scheme directors contained in this Scheme Booklet has never be achieved. Meeting, APN has agreed to provide ASIC with been prepared by APN and its directors and is all information which is known to APN in relation the sole responsibility of APN. INMAL and the You should review carefully all of the information to the Competing Transaction for APN and to Consortium and their directors and officers do in this Scheme Booklet. Sections 2.2 and 2.3 set consult in a timely manner with ASIC in relation not assume any responsibility for the accuracy out the reasons to vote in favour of the Scheme to the Competing Transaction. or completeness of any such APN information. and reasons not to vote in favour of the Scheme respectively. The information in this Scheme Booklet (other Queries All subsequent written and oral forward- than in Sections 1.6, 1.11, 3, 6, 7, 8, 9 and 12) If you have any questions or require further has been provided and prepared by APN, its looking statements attributable to APN, APN Independent Committee, INMAL, the information, you can call the APN Information directors and its advisors and is APN’s sole Line on 1800 830 977 (within Australia) and responsibility. Consortium Purchasers or the Consortium or any person acting on their behalf are qualified +61 2 8280 7492 (from outside Australia) during The information concerning INMAL and the by this cautionary statement. business hours. Consortium and the intentions, views and If you are in any doubt about anything in this opinions of INMAL and the Consortium and Subject to any continuing obligations under the Listing Rules or the Corporations Act, APN, Scheme Booklet, please contact your financial, their respective directors contained in this legal, taxation or other professional advisor. APN NEWS & MEDIA SCHEME BOOKLET  Contents Key dates

Important notices/disclaimers IFC 20 April 2007 Date of this Scheme Booklet Key dates 1 Scheme highlights 2 23 May 2007, Latest date and time for receipt of proxy Letter to APN Shareholders 11.00am forms for the Scheme Meeting from the APN Independent Committee 4 23 May 2007, Latest date and time for receipt of proxy 11.30am forms for the General Meeting Background to the Scheme Meeting and General Meeting 7 23 May 2007, Date and time for determining eligibility Questions and answers 8 7.00pm to vote at the Scheme Meeting and 1. Summary of the Scheme 15 General Meeting 2. Assessment of the Scheme 22 25 May 2007, Scheme Meeting to be held at the 3. Summary of the INMH Sale 30 11.00am Intercontinental Hotel, Corner of Bridge & 4. How to vote 33 Phillip Streets, Sydney, New South Wales 5. Information on APN 36 25 May 2007, General Meeting to be held at the 6. Information on INMAL and the Consortium 44 11.30am Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales 7. Details of the INMH Sale 51 8. Independent Expert’s Report 56 9. Taxation implications of If Scheme and INMH Sale are approved by APN the Scheme 208 Shareholders: 10. Implementation of the Scheme 213 28 May 2007 Second Court Hearing Date for approval 11. APN additional information 220 of the Scheme 12. INMAL additional information 227 28 May 2007 ASX notified of APN’s intention to lodge 13. Glossary 232 Court order 29 May 2007 Court order lodged with ASIC and announce Annexures (Effective Date) to the ASX and NZSE A. Scheme Implementation APN Shares cease trading at close of trading Agreement 240 on the ASX and NZSE B. Scheme of Arrangement 280 5 June 2007, Record Date for determining entitlements C. INMAL Deed Poll 288 7.00pm to Scheme Consideration D. APN announcement of (Record Date) 17 April 2007 293 E. Notice of Scheme Meeting 295 8 June 2007 Payment of Scheme Consideration (Implementation F. Notice of General Meeting 299 Transfer of APN Scheme Shares to INMAL Date)

Corporate directory IBC All dates following the date of the Scheme Meeting and the General Meeting are indicative only and, among other things, are subject to all necessary approvals from the Court and other Regulatory Authorities. Any changes to the above timetable will be announced through the ASX and NZSE and notified on APN’s website at www.apn.com.au. All references to time in this Scheme Booklet are references to Sydney Time unless otherwise stated. Dates are indicative only.  APN NEWS & MEDIA SCHEME BOOKLET

Scheme highlights

Scheme Consideration The Scheme Consideration is $6.20 per APN Scheme Share. APN has not declared a final dividend for 2006 at this time since the amount of any such dividend would have been deducted from the $6.20 per share consideration.

APN Independent The APN Independent Committee unanimously recommends that Committee unanimously you vote in favour of the Scheme and the members of the APN recommends you vote in Independent Committee who hold APN Scheme Shares intend favour of the Scheme to vote their shares in favour of the Scheme, in the absence of a Superior Proposal.

Independent Expert’s The Independent Expert has concluded that the Scheme is fair and conclusion reasonable and therefore in the best interest of APN Shareholders.

EBITDA multiples are The Scheme Consideration values APN at 13.1 times 2006 comparable to recent Attributable EBITDA which is comparable to multiples for recent similar Australian media similar Australian media transactions and is materially higher than transactions the 10.8 times multiple APN paid for Wilson & Horton in 2001.

Premium to share market The Scheme Consideration represents a premium of 19.0% to prices APN’s volume weighted average share price of $5.21 for the 30 days prior to 20 October 2006, the date of the first approach from members of the Consortium. The Scheme Consideration also represents a premium of 23.3% to APN’s volume weighted average share price of $5.03 for the 30 days prior to the introduction of media legislation into the Commonwealth Parliament on 14 September 2006. The Scheme Consideration is also a premium to the highest price at which APN Shares have traded between APN’s listing on ASX in 1992 and the date of the first approach from members of the Consortium.

Significant premium The Scheme Consideration of $6.20 cash is a significant premium to research analysts’ to the valuation of APN Shares published by research analysts valuations prior to 20 October 2006. The average of these valuations was $4.95 (low end) to $5.15 (high end). APN NEWS & MEDIA SCHEME BOOKLET 

Alternative opportunities Alternative opportunities for APN Shareholders to realise these to realise premiums premiums are considered highly unlikely by the APN Independent Committee.

Fall in the APN Share The APN Independent Committee believes that APN’s share price if the Scheme is price will fall if the Scheme is not implemented and no alternative not implemented and proposal emerges. no alternative proposal emerges The Independent Expert has stated that APN Shares “would likely fall to prices more in line with our estimate of the value of an APN share on a minority basis... of $5.15 to $5.44 per share”.

No Superior Proposal Since announcement of the initial discussions with members of the Consortium in October 2006, no Superior Proposal has emerged. The APN Independent Committee believes the emergence of a Superior Proposal is highly unlikely in view of INM’s advice that: • it is intent on retaining its significant interest in APN; and • its clear intention and strategy are that APN should continue to remain a core asset and feature of the INM Group. In addition, APN has agreed to pay INMAL a liquidated amount of $27.5 million if (amongst other things) a Competing Transaction is announced before the End Date and the person proposing the transaction: • acquires a relevant interest in at least 50% of the APN Shares and the Competing Transaction becomes unconditional; or • acquires an interest in all or a substantial part of APN’s business or assets.

No brokerage or stamp No brokerage or stamp duty will be payable by Scheme duty payable Participants on the transfer of APN Scheme Shares pursuant to the Scheme.

Dividend If the Scheme is not implemented and APN remains a listed company, APN will follow its normal practice in relation to the declaration of a final dividend for 2006. Any decision in respect of a dividend will be made by the APN Board taking into account the likely timing of the satisfaction of the conditions precedent to the Scheme and the possible impact of that timing on the timing of the Scheme Meeting and General Meeting.  APN NEWS & MEDIA SCHEME BOOKLET

Letter to APN Shareholders from the APN Independent Committee

20 April 2007

Dear Shareholder On 12 February 2007, APN announced a proposal from the consortium of INM, Providence and Carlyle to acquire all of the shares in APN for $6.10 cash per share via a scheme of arrangement, other than the shares in APN held by INMAL. On 17 April 2007, APN announced that the consortium had increased the price under the scheme to $6.20 cash per share. The independent directors of APN unanimously recommend this proposal to shareholders for the reasons set out below and this recommendation is supported by the Independent Expert. Background The Scheme represents the culmination of discussions and negotiations over a period of several months: • on 20 October 2006, a consortium including INM made an initial approach to acquire all of the shares in APN for an indicative price of approximately $6.02 per share. The APN Board, mindful of the conflicts that could arise because of INM’s shareholding, formed a committee consisting of directors not affiliated with INM to assess the proposal. Grant Samuel Corporate Finance was appointed as financial advisor to the Committee and Blake Dawson Waldron as legal advisor; • on 24 November 2006, APN announced that discussions had been terminated as the consortium had not been able to make a formal offer in an acceptable time frame; • no further discussions took place and no contact was made with APN until 24 January 2007 when the consortium put forward a proposal to acquire the shares in APN for $6.05 per share. On 6 February 2007, the Committee advised the consortium that the price of $6.05 per share was unacceptable; • on 7 February 2007, the Committee received a further offer from the consortium of $6.08 per share. This offer was again rejected by the Committee. Subsequently, the consortium increased the proposed price to $6.10 per share which was announced on 12 February 2007; and • on 17 April 2007, APN announced that the consortium had increased the price under the scheme to $6.20 cash per share. Assessment of the Proposal The Committee believes that $6.20 cash per share is a price that is in the best interests of shareholders because: • the Scheme values APN at 13.1 times Attributable EBITDA for the year ended 31 December 2006. This multiple is comparable to the earnings multiples implied in other recent media sector transactions such as Seven Media/KKR, PBL Media/CVC and Rural Press/Fairfax Media (net of synergies) and is materially higher than the 10.8 times multiple APN paid for Wilson & Horton in 2001; APN NEWS & MEDIA SCHEME BOOKLET 

• it represents: – a 19.0% premium to APN’s volume weighted average share price of $5.21 for the 30 days prior to 20 October 2006 (the day on which members of the consortium first approached APN); – a 12.7% premium to the highest price at which APN shares had ever traded prior to October 2006 ($5.50); – a 20 – 25% premium to the average of the low and high ends of research analysts’ valuation ranges published prior to 20 October 2006; and – a 23.3% premium to APN’s volume weighted average share price of $5.03 for the 30 days prior to the introduction of media legislation into the Commonwealth Parliament on 14 September 2006. • given INM’s shareholding and stated intentions, the Committee believes that alternative opportunities for shareholders to secure such premiums are highly unlikely; • the Committee believes that APN’s share price will fall if the Scheme is not implemented and no alternative proposal emerges. The Independent Expert has stated that APN shares “would likely fall to prices more in line with our estimate of the value of an APN share on a minority basis... of $5.15 to $5.44 per share”. It should be noted that the average valuations of APN by research analysts from nine of the major brokers prior to speculation about the proposal was $4.95 (low end) to $5.15 (high end); and • no Superior Proposal has emerged since October 2006. Recommendation on the Scheme The APN Independent Committee unanimously recommends that APN shareholders vote in favour of the Scheme in the absence of a Superior Proposal. Each of the members of the APN Independent Committee intends to vote in favour of the Scheme in respect of the APN shares held by them or on their behalf in the absence of a Superior Proposal. The other Directors of APN support the Scheme but do not consider it appropriate to make any recommendation in relation to the Scheme due to their relationship with INM. Independent Expert’s Opinion The Committee commissioned the Independent Expert, Deloitte, to prepare an Independent Expert’s Report. The Independent Expert has determined that the offer of $6.20 per share is fair and reasonable and therefore in the best interest of APN shareholders. The Independent Expert has estimated the minority interest value of APN shares to be $5.15 to $5.44. It is the sale of this interest which shareholders will vote on. Under ASIC Policy Statement 75, the Independent Expert is also obliged to estimate the full underlying value of APN (including a control premium) based on an assumption that 100% of APN is freely available for sale. The Independent Expert has estimated that the fair market value of APN shares on this basis is $6.18 – $6.53 per APN share. While it is clear that 100% of APN is not available for sale given INM’s stated intention to retain its significant interest in APN, the price of $6.20 is in any event within the Independent Expert’s range. Accordingly, the Independent Expert has concluded that the offer is fair and reasonable. Approach of the apn independent committee The Committee had an overriding objective to negotiate the best possible proposal for shareholders that gave an outcome that the Committee recommended was in the best interests of shareholders. At the same time, the Committee was aware of the importance of providing shareholders with the opportunity to determine for themselves whether or not they wish to accept any proposal. In progressing the proposal, the Committee also had regard to the fact that INM has stated in writing that its clear intention is to retain its interest in APN and that its strategy is for APN to remain a core asset and feature of the INM Group. Accordingly, the Committee wishes to direct shareholders’ attention to the fact that the minority interest value of $5.15 to $5.44 contained in the Independent Expert’s Report is, in the Committee’s opinion, the relevant value for shareholders to consider when voting on the offer of $6.20.  APN NEWS & MEDIA SCHEME BOOKLET

Letter to APN Shareholders from the APN Independent Committee (continued)

Implementation of the Scheme The Scheme Meeting will be held on 25 May 2007 at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales at 11.00am (Sydney Time). Shareholders can either vote in person at the Scheme Meeting or complete and return the enclosed proxy form as soon as possible, or in any event by no later than 11.00am on 23 May 2007. As an APN shareholder, your vote is important and we encourage all shareholders to attend the Scheme Meeting. Further details of the Scheme and information on how to vote are given in this Scheme Booklet and shareholders are encouraged to read it in full before voting. Shareholders are also encouraged to consult their financial, legal, taxation or other professional advisor in relation to the Scheme. INMH Sale INMAL is currently a wholly owned subsidiary of INM and owns 27.5% of the issued shares in APN. If the Scheme is approved by shareholders, the Consortium proposes to transfer control of that 27.5% shareholding to the Consortium by the sale of all of the issued shares in INMH, the immediate holding company of INMAL, to certain wholly-owned subsidiaries of the Consortium. Under the Corporations Act, this sale requires the separate approval of APN shareholders (other than INMAL, the Consortium and their associates). The INMH Sale will only occur if the Scheme is approved (and vice-versa). This is explained further in Sections 3 and 7 of this Scheme Booklet. The independent directors of APN unanimously recommend that shareholders vote in favour of the ordinary resolution to approve the INMH Sale and the Independent Expert has concluded that the INMH Sale is fair and reasonable. The General Meeting for approval of the INMH Sale will be held on the same date at the same place as the Scheme Meeting at 11.30am (or as soon thereafter as the Scheme Meeting is concluded or adjourned). Shareholders can either vote in person at the General Meeting or complete and return the enclosed proxy form as soon as possible, or in any event by no later than 11.30am on 23 May 2007. Final Dividend If the Scheme is not implemented and APN remains a listed company, APN will follow its normal practice in relation to the declaration of a final dividend for 2006. Any decision in respect of a dividend will be made by the APN Board taking into account the likely timing of the satisfaction of the conditions precedent to the Scheme and the possible impact of that timing on the timing of the Scheme Meeting and General Meeting. If you have any questions about the Scheme, you can call the APN Information Line on 1800 830 977 (within Australia) and +61 2 8280 7492 (from outside Australia) during business hours. Yours faithfully

Ted Harris AC Sir Wilson Whineray KNZM, OBE Kevin Luscombe AM Chairman of the Member of the Member of the APN Independent Committee APN Independent Committee APN Independent Committee

Sallyanne Atkinson AO Pierce Cody John Maasland Member of the Member of the Member of the APN Independent Committee APN Independent Committee APN Independent Committee APN NEWS & MEDIA SCHEME BOOKLET 

Background to the Scheme Meeting and General Meeting

This section explains why there is a Scheme Meeting and a General Meeting. The Scheme Meeting and the General Meeting are required to approve two transactions: (a) the scheme of arrangement between APN and Scheme Participants; and (b) the INMH Sale which is the sale of all the shares in the holding company of INMAL. These two transactions are designed to give the members of the Consortium ownership of all of the APN Shares following implementation of the Scheme. The implementation of the Scheme is interdependent with the INMH Sale being approved by the APN Shareholders. The INMH Sale will only take place if the Scheme is approved by the requisite majorities of APN Shareholders at the Scheme Meeting (other than the Consortium and their Associates who will not vote) and the Scheme becomes Effective. The Scheme will only be implemented if the Ordinary Resolution approving the INMH Sale is passed at the General Meeting. The INMH Sale does not affect the interests of Scheme Participants since it can only occur if the Scheme is approved and becomes Effective. The Scheme Meeting and the General Meeting will be held on the same day and the General Meeting will follow the close of the Scheme Meeting. Scheme Meeting The purpose of the Scheme Meeting is to seek approval from APN Shareholders to a scheme of arrangement between APN and Scheme Participants under which all of the APN Shares not already held by INMAL will be transferred to INMAL in exchange for the Scheme Consideration of $6.20 cash per APN Scheme Share. APN Shareholders are being asked to approve the Scheme at the Scheme Meeting. The Consortium and their Associates will not vote at the Scheme Meeting. Further details of the Scheme are set out in Section 1 and elsewhere in this Scheme Booklet. General Meeting The purpose of the General Meeting is to seek approval from APN Shareholders for the INMH Sale. The approval of APN Shareholders to the INMH Sale is being sought in accordance with item 7, section 611 of the Corporations Act. This approval is required because INMH owns all the shares in INMAL which in turn holds approximately 27.5% of the APN Shares. APN Shareholders are being asked to approve the Ordinary Resolution at the General Meeting to allow the INMH Sale to proceed. The Consortium and their Associates will not vote at the General Meeting. Further details of the INMH Sale are set out in Sections 3 and 7 and elsewhere in this Scheme Booklet.  APN NEWS & MEDIA SCHEME BOOKLET

Questions and answers

This Scheme Booklet contains detailed information on the Scheme and the INMH Sale. The following section provides summary answers to some basic questions you may have in relation to the Scheme and the General Meeting and will assist you to locate further detailed information in this Scheme Booklet. A. SCHEME QUESTIONS AND ANSWERS Scheme and Scheme Consideration

What will I receive The Scheme Consideration is $6.20 per APN Scheme Share. if the Scheme is approved? APN has not declared a final dividend for 2006 at this time since the amount of any such dividend would have been deducted from the $6.20 per share consideration.

What is the Scheme? The Scheme is a scheme of arrangement between APN and Scheme Participants under which all of the APN Shares not already held by INMAL will be transferred to INMAL in exchange for the Scheme Consideration of $6.20 cash per APN Scheme Share. A summary of the Scheme is set out in Section 1 of this Scheme Booklet and the terms of the Scheme are set out in full in Annexure B.

Who is entitled APN Shareholders other than INMAL are entitled to receive the Scheme to the Scheme Consideration in respect of each APN Scheme Share they hold at the Consideration? Record Date.

If the Scheme is If the Scheme is approved by APN Shareholders and the Court, the Scheme implemented, when Consideration will be paid to Scheme Participants on the Implementation will I receive my Date, which is currently anticipated to be 8 June 2007. money? Scheme Participants should be aware that if the Scheme Meeting is adjourned and the Implementation Date is delayed, payment of the Scheme Consideration will also be delayed (but Scheme Participants will retain ownership of their APN Scheme Shares until the Scheme is implemented). If a Scheme Participant has previously disclosed its bank account details to APN for the purposes of APN making dividend payments, the Scheme Consideration will be electronically transferred into that account unless, before the Record Date, the Scheme Participant directs the Registry otherwise. If a Scheme Participant has not disclosed its bank account details to APN, a cheque will be sent on the Implementation Date to their registered address as shown in the Register. APN NEWS & MEDIA SCHEME BOOKLET 

Why is the Scheme The Scheme is being proposed on the basis that it provides Scheme being proposed? Participants with the opportunity to receive $6.20 cash per APN Scheme Share which the APN Independent Committee believes is in the best interests of APN Shareholders.

What are the reasons The reasons to vote in favour of the Scheme are set out in Section 2.2 to vote in favour of of this Scheme Booklet. the Scheme?

What are the reasons The reasons not to vote in favour of the Scheme are set out in Section 2.3 not to vote in favour of this Scheme Booklet. of the Scheme?

APN Independent Committee/Independent Expert

Who are the Ted Harris, Sir Wilson Whineray, Sallyanne Atkinson, Pierce Cody, Kevin members of the Luscombe and John Maasland. APN Independent Committee? None of these APN Directors is affiliated with INM.

What do members of Members of the APN Independent Committee unanimously recommend the APN Independent that you vote in favour of the Scheme, in the absence of a Superior Committee Proposal. The basis for this recommendation is set out in Section 2.1 recommend? of this Scheme Booklet.

Will the members of Each member of the APN Independent Committee who holds APN Scheme the APN Independent Shares, or on whose behalf APN Scheme Shares are held, intends to vote in Committee be favour of the Scheme, in the absence of a Superior Proposal. voting in favour of the Scheme at the Scheme Meeting?

What is the The APN Independent Committee engaged Deloitte as an Independent Independent Expert to provide a report on the Scheme. The Independent Expert has Expert’s conclusion? concluded that the Scheme is fair and reasonable and therefore in the best interest of APN Shareholders. The Independent Expert’s Report is included in Section 8 of this Scheme Booklet. 10 APN NEWS & MEDIA SCHEME BOOKLET

Questions and answers (continued)

The Consortium

Who is INMAL? INMAL is an Australian unlisted public company and is currently an indirect wholly-owned subsidiary of INM. INMAL currently holds APN Shares representing approximately 27.5% of the issued share capital of APN. If the Scheme becomes Effective and the INMH Sale is completed, on the Implementation Date, INMAL will be an indirect wholly-owned subsidiary of the Consortium.

Who are the The Consortium comprises INM, Providence and Carlyle. In accordance members of the with the terms of the Consortium and Subscription Agreement described in Consortium? Section 12.3(b) of this Scheme Booklet, INM, Providence and Carlyle have agreed to act together in relation to the implementation of the Scheme. If the Scheme is implemented, the effect of the implementation of the Scheme and the INMH Sale will be that the Consortium will acquire, indirectly, 100% of the issued share capital of APN.

Who is INM? INM is a leading international media and communications group, with interests in newspaper and magazine publishing, commercial printing, outdoor advertising, broadcasting and the internet in 21 countries around the world, including Australia and New Zealand (held through APN), Ireland, India, South Africa and the United Kingdom. The shares of INM are listed on the Irish and London Stock Exchanges. As at the date of this Scheme Booklet, INM holds, through two wholly- owned subsidiaries, approximately 40% of the APN Shares. This interest arises because of the APN Shares currently held by INMAL and NMNZ. INM has a long history of involvement with APN and provides APN with resources relevant to APN’s business.

Who is Providence? Providence Equity Partners is a private investment firm specialising in investments in communications and media companies around the world. Providence Equity Partners manages funds with approximately US$21 billion in equity commitments and has invested in more than 100 companies operating in over 13 countries. Providence Equity Partners’ current and previous areas of investment include wireless and wireline telephony, cable television content and distribution, publishing, radio and television broadcasting, and other media and communications sectors. P6 Normandy Lux 1 S.à r.l is a Luxembourg incorporated company which has been formed by Providence Equity Partners for the purpose of investing in the Consortium. Providence Equity Partners holds no APN Shares. APN NEWS & MEDIA SCHEME BOOKLET 11

Who is Carlyle? The Carlyle Group is one of the world’s largest private equity firms. As of 31 January 2007, The Carlyle Group had more than US$51.8 billion under management. Since its founding in 1987, The Carlyle Group has invested US$24 billion in 576 transactions. The Carlyle Group focuses its investments on various industries, including aerospace and defence, automotive and transportation, consumer and retail, energy and power, healthcare, industrial, infrastructure, real estate, technology and business services and telecommunications and media. CA Normandy Lux 1 S.à r.l is a Luxembourg incorporated company which has been formed by The Carlyle Group for the purpose of investing in the Consortium. The Carlyle Group holds no APN Shares.

Scheme Meeting and General Meeting

When and where will The Scheme Meeting will be held on 25 May 2007 at the Intercontinental the Scheme Meeting Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales to and General Meeting approve the Scheme, commencing at 11.00am. be held? The General Meeting will be held on the same date at the same place at 11.30am (or as soon thereafter as the Scheme Meeting is concluded or adjourned).

Am I entitled to If you are registered as an APN Shareholder at 7.00pm on 23 May 2007, vote? you will be entitled to vote at the Scheme Meeting and the General Meeting (except that INMAL, the Consortium and their Associates will not vote at the Scheme Meeting or the General Meeting). You may vote in person at the meetings, or by completing and lodging the proxy forms accompanying this Scheme Booklet.

Who is excluded INMAL, which currently holds approximately 27.5% of the APN Shares, is from voting at the excluded from the Scheme and will not vote at the Scheme Meeting or the Scheme Meeting General Meeting. and the General Meeting? NMNZ, which is also a wholly-owned subsidiary of INM, currently holds approximately 12.5% of APN Shares and will not vote at the Scheme Meeting or the General Meeting as it is an Associate of INM and the Consortium. The Consortium and their Associates will not vote at the Scheme Meeting or the General Meeting. 12 APN NEWS & MEDIA SCHEME BOOKLET

Questions and answers (continued)

What vote is For the Scheme to proceed, it must be approved by: required to approve the Scheme? (a) a majority in number (more than 50%) of those APN Shareholders (excluding the Consortium and their Associates who will not vote) present and voting at the Scheme Meeting in person, by proxy, by attorney or (in the case of corporate APN Shareholders) by a corporate representative; and (b) at least 75% of the total number of votes cast on the Resolution at the Scheme Meeting by APN Shareholders (excluding the Consortium and their Associates who will not vote). The Scheme cannot proceed unless it is approved by the required majorities of APN Shareholders (excluding the Consortium and their Associates who will not vote).

What vote is required The Ordinary Resolution must be approved by a majority of votes cast on the to approve the Ordinary Resolution at the General Meeting by APN Shareholders (excluding Ordinary Resolution? the Consortium and their Associates who will not vote).

Is voting No, voting is not compulsory. However, your vote is important. If you cannot compulsory? attend the Scheme Meeting or General Meeting to be held on 25 May 2007, you are encouraged to complete and return the proxy forms enclosed with this Scheme Booklet. For further details regarding voting and submitting proxy forms for the Scheme Meeting and General Meeting, see Section 4 of this Scheme Booklet.

Are any other The Scheme must be approved by the Court in addition to being approved approvals required? by APN Shareholders. If the Scheme is approved at the Scheme Meeting and the Ordinary Resolution is passed at the General Meeting, APN will apply to the Court for approval of the Scheme as soon as practicable. The Court hearing for approval of the Scheme is expected to be held on 28 May 2007 (although this may change). Further details of the approval process are set out in Section 10.1 of this Scheme Booklet.

Is the Scheme Completion of the Scheme is subject to a number of conditions, including subject to any the passing of the Ordinary Resolution. The key conditions are summarised conditions? in Section 10.2 of this Scheme Booklet and set out in full in clause 2.1 of the Scheme Implementation Agreement. A summary of the Scheme Implementation Agreement is in Section 10.3 of this Scheme Booklet and a copy is in Annexure A.

How do I vote? You may vote in person by attending the Scheme Meeting and General Meeting to be held on 25 May 2007 at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales, commencing at 11.00am (Scheme Meeting) and 11.30am (or as soon thereafter as the Scheme Meeting is concluded or adjourned) (General Meeting). Alternatively, you may vote by completing and lodging the proxy forms that are enclosed with this Scheme Booklet, or by attorney, or in the case of a corporate APN Shareholder, by a corporate representative. Full details of how to vote are set out in Section 4 of this Scheme Booklet. APN NEWS & MEDIA SCHEME BOOKLET 13

What happens if I do If you are a Scheme Participant on the Record Date and the Scheme is not vote, or I vote approved, your APN Scheme Shares will be transferred under the Scheme against the Scheme? and you will receive the Scheme Consideration for your APN Scheme Shares as at the Record Date. This is so, even if you did not vote, or voted against the Scheme. If the Scheme is not approved, you will remain an APN Shareholder.

When will the results The results of the Scheme Meeting and the General Meeting will be of the Scheme available shortly after the conclusion of the General Meeting and will Meeting and the be announced to the ASX and NZSE once available. The results will also General Meeting be be published on APN’s website www.apn.com.au soon after the General available? Meeting.

Dividend

Will a dividend be If the Scheme is not implemented and APN remains a listed company, APN paid if the Scheme is will follow its normal practice in relation to the declaration of a final dividend not approved? for 2006. Any decision in respect of a dividend will be made by the APN Board taking into account the likely timing of the satisfaction of the conditions precedent to the Scheme and the possible impact of that timing on the timing of the Scheme Meeting and General Meeting.

Other Questions

Will I have to pay No. You will not have to pay any brokerage or stamp duty in connection with brokerage fees or the Scheme. stamp duty?

What are the tax Section 9 of this Scheme Booklet provides a description of the general consequences of the Australian and New Zealand tax implications of the Scheme for Scheme Scheme for me? Participants. You should consult with your own tax advisor regarding the consequences of acquiring, holding or disposing of APN Shares in light of current tax laws as they apply to you and your particular investment circumstances.

Where can I get This Scheme Booklet provides detailed information in relation to the Scheme further information? that all APN Shareholders should read. If you have any questions or require further information, you can call the APN Information Line on 1800 830 977 (within Australia) and +61 2 8280 7492 (from outside Australia) during business hours. Alternatively, please contact your financial, legal, taxation or other professional advisor. 14 APN NEWS & MEDIA SCHEME BOOKLET

Questions and answers (continued)

B. GENERAL MEETING QUESTIONS AND ANSWERS General Meeting

What is the INMH The INMH Sale is the sale of all of the issued shares in INMH, the Sale? immediate holding company of INMAL, to the Consortium Purchasers. The Consortium Purchasers are indirect wholly-owned subsidiaries of the Consortium.

What circumstances Since INMH owns all the shares in INMAL, which in turn holds have required the approximately 27.5% of the APN Shares, the acquisition of INMH by the General Meeting Consortium Purchasers requires APN Shareholder approval under the in addition to the Corporations Act. Scheme Meeting?

What is the purpose The General Meeting of the APN Shareholders is to consider, and if thought of the General fit, to approve the INMH Sale. Meeting? For further details of the INMH Sale, see Sections 3 and 7 of this Scheme Booklet.

What happens if the If the Ordinary Resolution is not passed, the INMH Shares will not be sold Ordinary Resolution to the Consortium Purchasers and the Scheme will not become Effective. is not passed?

What is the The APN Independent Committee engaged Deloitte as an Independent Independent Expert to provide a report on the INMH Sale. The Independent Expert has Expert’s conclusion? concluded that the INMH Sale is fair and reasonable. The Independent Expert’s Report is included in Section 8 of this Scheme Booklet.

Will the INMH No, the Consortium has advised APN that the INMH Sale will only occur Shares be sold to if the Scheme becomes Effective. the Consortium Purchasers if the Scheme is not implemented?

What do the Members of the APN Independent Committee unanimously recommend members of the that you vote in favour of the Ordinary Resolution. The basis for this APN Independent recommendation is set out in Section 3.2 of this Scheme Booklet. Committee recommend in relation to the Ordinary Resolution?

Will the members of Each of the members of the APN Independent Committee intends to vote in the APN Independent favour of the Ordinary Resolution in respect of the APN Shares held by them Committee be voting or on their behalf. in favour of the Ordinary Resolution? APN NEWS & MEDIA SCHEME BOOKLET 15

Summary ıof the Scheme 16 APN NEWS & MEDIA SCHEME BOOKLET

ı Summary of the Scheme

1.1 overview On 12 February 2007, APN announced that it had entered into the Scheme Implementation Agreement with INMAL in relation to a proposed acquisition by INMAL of all of the APN Shares not already held by INMAL. On 17 April 2007, APN announced that the Consortium had increased the consideration payable under the Scheme to $6.20 per APN Share. A copy of the announcement is set out in Annexure D of this Scheme Booklet. The Scheme Implementation Agreement was amended to reflect the increased consideration. INMAL is an Australian unlisted public company and, as at the date of this Scheme Booklet, is an indirect wholly-owned subsidiary of INM. All of the issued ordinary shares in INMAL are held by INMH. INMAL currently holds APN Shares representing approximately 27.5% of the issued share capital of APN. Set out below is a diagram which summarises the current ownership structure of INMAL and APN:

INM

100%

INMH Seller

100%

INMH

100% 100%

NMNZ INMAL

12.5% 27.5%

APN Public 60%

In accordance with the order of the Court dated 20 April 2007 APN has convened the Scheme Meeting which will be held on 25 May 2007. If the Scheme is implemented, on the Implementation Date the Scheme will have the following effects: (a) INMAL will acquire all APN Shares held by Scheme Participants on the Record Date; (b) INMAL will pay the Scheme Consideration to the Scheme Participants; APN NEWS & MEDIA SCHEME BOOKLET 17

(c) APN will become a wholly-owned indirect subsidiary of the Consortium; and (d) APN will apply for suspension in trading in APN Shares on the ASX and the NZSE from the close of trading on the Effective Date. This Scheme Booklet contains important information that the APN Independent Committee believes APN Shareholders should consider in deciding whether or not to vote in favour of the Scheme. A copy of the Scheme is set out in Annexure B to this Scheme Booklet. It should be noted that the Scheme is subject to a number of conditions, details of which can be found in Section 10.2 of this Scheme Booklet.

1.2 role of the APN Independent Committee On 20 October 2006, a consortium including INM made an initial approach to acquire all of the APN Shares for an indicative price of approximately $6.02 per share. The APN Board formed the APN Independent Committee, consisting of directors not affiliated with INM, to assess the proposal, to negotiate with the Consortium and to approve the terms of any agreement with the Consortium. The APN Independent Committee comprises Ted Harris, Sir Wilson Whineray, Sallyanne Atkinson, Pierce Cody, Kevin Luscombe and John Maasland. In view of INM’s position as a major shareholder in APN and the conflicts which may arise, none of the APN Directors who are affiliated with INM was a member of the APN Independent Committee or participated in the negotiations with the Consortium. The APN Independent Committee engaged Grant Samuel Corporate Finance as financial advisor and Blake Dawson Waldron as legal advisor to the APN Independent Committee.

1.3 recommendation of the APN Independent Committee The APN Independent Committee unanimously recommends that APN Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal. The APN Independent Committee has received written confirmation from each of the Other Directors that they consider the Scheme is in the best interests of APN Shareholders but do not consider it appropriate to make any recommendation in relation to the Scheme due to their relationship with INM. The APN Independent Committee has considered the advantages and disadvantages of the Scheme and received financial advice from Grant Samuel Corporate Finance and believes that the Scheme is in the best interests of APN Shareholders, in the absence of a Superior Proposal. In making this recommendation, the APN Independent Committee has, in particular, considered the following: (a) the reasons why APN Shareholders should vote in favour of the Scheme, set out in Section 2.2 of this Scheme Booklet; (b) the reasons why APN Shareholders should not vote in favour of the Scheme, set out in Section 2.3 of this Scheme Booklet; and (c) the risks associated with APN’s business, set out in Section 5.3 of this Scheme Booklet. Each member of the APN Independent Committee who holds APN Scheme Shares, or on whose behalf APN Scheme Shares are held, intends to vote in favour of the Scheme, in the absence of a Superior Proposal. Further information in relation to the APN Independent Committee recommendation can be found in Section 2 of this Scheme Booklet. 18 APN NEWS & MEDIA SCHEME BOOKLET

ı Summary of the Scheme (continued)

1.4 Independent Expert’s Report The APN Independent Committee commissioned Deloitte to assess the merits of the Scheme and to prepare an Independent Expert’s Report on whether the Scheme is in the best interest of APN Shareholders. The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interest of APN Shareholders. A copy of the Independent Expert’s Report is included in Section 8 of this Scheme Booklet.

1.5 Scheme Consideration The Scheme Consideration is $6.20 per APN Scheme Share in accordance with the Scheme Implementation Agreement. APN has not declared a final dividend for 2006 at this time since the amount of any such dividend would have been deducted from the $6.20 per share consideration.

1.6 conditions of the Scheme and status Implementation of the Scheme is subject to approval by the required majorities of APN Shareholders (excluding the Consortium and their Associates who will not vote) at the Scheme Meeting and by the Court. It is also subject to a number of conditions precedent including, but not limited to, the ones described below. APN’s understanding of the status of these conditions precedent is also summarised below and is based on advice from the Consortium. (a) The FIRB Condition Precedent: obtaining approval from the Treasurer under FATA and Foreign Investment Policy to the implementation of the Scheme and the INMH Sale. On 20 February 2007 the Consortium lodged an application with FIRB for approval of the Scheme and the INMH Sale. Under FATA, FIRB has a period of 40 days to make a decision to approve the acquisitions or to issue an interim order. On 22 March 2007, FIRB issued an interim order allowing it a further 90 days for examination of the proposed acquisition of APN Shares by INMAL under the Scheme and the INMH Sale. The interim order came into operation on 30 March 2007 and the 90 day period runs from that date. At the time the interim order was issued, the Foreign Investment Policy limited aggregate foreign direct investment in provincial and suburban newspapers to less than 50%. However, on 29 March 2007 the Commonwealth Minister for Communications, Information Technology and the Arts announced that legislation amending the Broadcasting Services Act 1992 (Cth) (BSA) had been proclaimed to commence on 4 April 2007. The Minister also announced that “The newspaper specific ownership restrictions in the Australian Government’s Foreign Investment Policy (FIP) will be removed by the Foreign Investment and Review Board (FIRB) concurrent with the commencement of [the legislation amending the BSA].” APN and the Consortium believe that since the newspaper specific ownership restrictions in the Foreign Investment Policy have been lifted, the application by the Consortium to FIRB will be approved under the Foreign Investment Policy and FATA prior to the Scheme Meeting. As at the date of this Scheme Booklet, FIRB has not made a decision on the application by the Consortium. APN NEWS & MEDIA SCHEME BOOKLET 19

(b) New Zealand foreign investment approval: obtaining approval from the OIO under the Overseas Investment Act 2005 (NZ) to the implementation of the Scheme and the INMH Sale. On 22 February 2007 the Consortium lodged its application with the OIO. The Consortium has informed APN that the usual time for considering an application for approval under the Overseas Investment Act 2005 (NZ) is approximately 10 to 12 weeks. The Consortium has requested that the OIO provide its approval by 29 April 2007. The Consortium has obtained legal advice that because of the nature of APN’s businesses and assets in New Zealand the application should be able to be decided by the OIO under its delegated authority (rather than by Ministerial approval) and that this will result in consent being granted by the OIO earlier than might otherwise be the case. As at the date of this Scheme Booklet the Consortium believes that the OIO will make a decision by 29 April 2007, however there is no assurance that the OIO will be able to provide its decision by that date. (c) EU competition clearance: obtaining the approval of the European Commission under the EC Merger Regulation (139/2004) to the entry by APN and INMAL into the Scheme Implementation Agreement and implementation of the Scheme. On 6 March 2007, the Consortium filed a notification with the European Commission for the purpose of receiving merger control approval. On 12 April 2007, the European Commission issued its decision not to oppose the entry by APN and INMAL into the Scheme Implementation Agreement and implementation of the Scheme. (d) INM shareholder approval: in accordance with the listing rules of the Irish Stock Exchange, approval by INM shareholders of the entry by INMAL into the Scheme Implementation Agreement and implementation of the Scheme by ordinary resolution. Immediately after the despatch of this Scheme Booklet, INM will despatch an information circular and notice of extraordinary general meeting to the shareholders of INM convening the extraordinary general meeting to consider, and if thought fit approve, resolutions in relation to the entry by INMAL into the Scheme Implementation Agreement and implementation of the Scheme. The extraordinary general meeting will be held at least 4 days before the Scheme Meeting and General Meeting. Based on discussions with substantial shareholders in INM, INM believes that INM shareholder approval will be obtained at that meeting. (e) Ordinary Resolution – Corporations Act section 611 item 7 approval: approval of the INMH Sale by the passing of the Ordinary Resolution at the General Meeting in accordance with item 7 of section 611 of the Corporations Act and applicable ASIC policy. Sections 3 and 7 of this Scheme Booklet provide further information on this condition precedent. (f) Other regulatory approvals: obtaining any approvals required from Regulatory Authorities which are necessary or reasonably desirable to implement the Scheme. APN is not aware of any other regulatory approvals that are necessary or reasonably desirable to implement the Scheme. Further information regarding the conditions to the Scheme is set out in Section 10.2 of this Scheme Booklet and the conditions are set out in full in clause 2.1 of the Scheme Implementation Agreement. 20 APN NEWS & MEDIA SCHEME BOOKLET

ı Summary of the Scheme (continued)

1.7 If the Scheme does not proceed If the Scheme does not proceed, APN Shareholders will retain their APN Shares and APN will continue to operate as a stand alone entity listed on ASX and NZSE. APN will continue to focus on its current business plan and strategy. The rights of APN Shareholders will remain unchanged and normal practice in relation to the declaration of a final dividend for 2006 will be followed. INM has advised the APN Independent Committee that it is intent on retaining its significant interest in APN and that its clear intention and strategy are that APN should continue to remain a core asset and feature of the INM Group.

1.8 Scheme approval The Scheme is subject to the approval of the required majority of APN Shareholders (excluding the Consortium and their Associates who will not vote) and the approval of the Court. APN Shareholders are being asked to approve the Scheme at the Scheme Meeting to be held at 11.00am on 25 May 2007 at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales. For the Scheme to be implemented, APN Shareholders (excluding the Consortium and their Associates who will not vote) must approve the Scheme by: (a) a majority in number (more than 50%) of those APN Shareholders present and voting at the Scheme Meeting in person, by proxy, by attorney or (in the case of corporate APN Shareholders) by a corporate representative; and (b) at least 75% of the total number of votes cast on the Resolution at the Scheme Meeting by those APN Shareholders entitled to vote on the Resolution.

1.9 entitlement to vote All APN Shareholders (excluding the Consortium and their Associates) on the Register at 7.00pm on 23 May 2007 are entitled to vote at the Scheme Meeting. For further details on how to vote, please refer to Section 4 of this Scheme Booklet.

1.10 Tax considerations for Scheme Participants Blake Dawson Waldron has provided a taxation report on the general Australian taxation impacts of the Scheme on Scheme Participants. A copy of this report is set out in Section 9.1 of this Scheme Booklet. Simpson Grierson has provided a taxation report on the general New Zealand taxation impacts of the Scheme on Scheme Participants. A copy of this report is set out in Section 9.2 of this Scheme Booklet. Your decision on how to vote on the Resolution should be made only after consultation with your financial, legal, taxation or other professional advisor based on your own investment objectives, financial situation, taxation position and particular needs.

1.11 Change to Media Laws and FIRB approval The Scheme is conditional on approval by the Treasurer under the Foreign Investment Policy and under FATA. The Treasurer exercises his jurisdiction in respect of the Scheme on advice from FIRB, a division of The Treasury. Under the Foreign Investment Policy, the media sector is classified as a sensitive sector of the Australian economy, and as such, all proposals for direct foreign investment in the media sector, irrespective of their size, require the prior approval of the Treasurer. The Scheme triggers this requirement. In addition, under FATA, acquisitions of shares in certain Australian corporations, including APN and INMH, are subject to approval by the Treasurer. APN NEWS & MEDIA SCHEME BOOKLET 21

On 20 February 2007, the Consortium lodged an application with FIRB for approval of the Scheme and the INMH Sale. Under FATA, FIRB has a period of 40 days to make a decision to approve the acquisitions or to issue an interim order. On 22 March 2007, FIRB issued an interim order allowing it a further 90 days for examination of the proposed acquisition of APN Shares by INMAL under the Scheme and the INMH Sale. The interim order came into operation on 30 March 2007 and the 90 day period runs from that date. At the time the interim order was issued, the Foreign Investment Policy limited aggregate foreign direct investment in provincial and suburban newspapers to less than 50%. However, on 29 March 2007 the Commonwealth Minister for Communications, Information Technology and the Arts announced that legislation amending the BSA had been proclaimed to commence on 4 April 2007. The Minister also announced that “The newspaper specific ownership restrictions in the Australian Government’s Foreign Investment Policy (FIP) will be removed by the Foreign Investment and Review Board (FIRB) concurrent with the commencement of [the legislation amending the BSA].” APN and the Consortium believe that since the newspaper specific ownership restrictions in the Foreign Investment Policy have been lifted, the application by the Consortium to FIRB will be approved under the Foreign Investment Policy and FATA prior to the Scheme Meeting.

1.12 Timing of satisfaction of conditions precedent If any of the conditions precedent to the Scheme are not satisfied or waived by 8.00am on the Second Court Hearing Date, the Scheme will not become Effective and will not be implemented. In addition, in accordance with the terms of the Scheme Implementation Agreement certain of the conditions precedent to the Scheme must be satisfied before the Scheme Meeting. The relevant conditions are the FIRB Condition Precedent, New Zealand foreign investment approval, EU competition clearance and INM shareholder approval. The status of these conditions is discussed in Section 1.6 of this Scheme Booklet. If there is a delay in the satisfaction of these conditions precedent, the Scheme Meeting may be adjourned. If the Scheme is approved by the requisite majorities of APN Shareholders at any such adjourned Scheme Meeting, the Implementation Date and the payment of the Scheme Consideration will be delayed (but Scheme Participants will retain ownership of their APN Scheme Shares until the Scheme is implemented). The current Scheme Meeting date assumes that all of these conditions precedent will have been satisfied prior to the Scheme Meeting.

1.13 How to obtain further information If you have any questions or require further information, you can call the APN Information Line on 1800 830 977 (within Australia) and +61 2 8280 7492 (from outside Australia) during business hours. If you are in any doubt about anything in this Scheme Booklet, please contact your financial, legal, taxation or other professional advisor. 22 APN NEWS & MEDIA SCHEME BOOKLET

Assessment 2of the Scheme APN NEWS & MEDIA SCHEME BOOKLET 23

2 Assessment of the Scheme

2.1 apn Independent Committee’s recommendation

The APN Independent Committee unanimously recommends that APN Shareholders vote in favour of the Scheme in the absence of a Superior Proposal.

Each member of the APN Independent Committee intends to vote in favour of the Scheme in respect of the APN Scheme Shares held by them or on their behalf in the absence of a Superior Proposal. All APN Directors’ interests in APN Shares, Options and APN Notes are disclosed in Section 11.2 of this Scheme Booklet. The APN Independent Committee believes that the reasons for APN Shareholders to vote in favour of the Scheme outweigh the reasons to vote against the Scheme. The APN Independent Committee has received written advice from each of the Other Directors that they consider the Scheme is in the best interests of APN Shareholders but did not consider it appropriate to make any recommendation in relation to the Scheme due to their relationship with INM. APN Shareholders should consider the reasons to vote in favour of the Scheme and reasons to vote against the Scheme in the context of their individual financial and taxation circumstances. All APN Shareholders should read this Scheme Booklet in its entirety and seek other professional or investment advice if necessary.

2.2 reasons to vote in favour of the Scheme (a) Earnings multiples are comparable to those in recent similar media transactions The Scheme Consideration of $6.20 cash per APN Scheme Share values APN at $3.8 billion on an enterprise basis and represents a multiple of 13.1 times 2006 Attributable EBITDA for APN. This implied multiple is comparable to the multiples implied by recent similar Australian media transactions. In particular, it is higher than the historical EBITDA multiple for the PBL Media/CVC transaction and slightly below the historical multiple for the Seven Media/KKR transaction. APN’s 2006 Attributable EBITDA multiple is at a premium to the implied historical multiple for the recently announced Fairfax Media acquisition of Rural Press (after adjusting for publicly announced synergies1) but it is lower based on prospective earnings. The business of Wilson & Horton represents a significant portion of APN’s current operations. The multiple of 13.1 times 2006 Attributable EBITDA is materially higher than the historical multiple of 10.8 times APN paid in December 2001 for Wilson & Horton. In fact, as the transaction was announced in October 2001 and closed in December 2001, the 2001 multiple of 10.2 times EBITDA is more in the nature of an historical multiple. The implied multiple of 13.1 times Attributable EBITDA is also at a significant premium to the historical multiple of 10.8 times paid by Fairfax Media for the New Zealander publisher Independent Newspapers Limited (INL) in 2003. 1 Estimated synergies of $35 million per annum referred to in the Rural Press/Fairfax Media announcement on 6 December 2006. 24 APN NEWS & MEDIA SCHEME BOOKLET

2 Assessment of the Scheme (continued)

Implied EBITDA multiples for similar media transactions2

13.8x 13.1x 12.9x 12.6x 12.0x 12.3x 11.7x 11.4x 10.8x 10.8x 10.0x 10.2x

2006 2007 2006 2007 2006 2007 2006 2007 2002 2003 2000 2001 APN PBL Media/ Seven Media/ Rural Press/ INL/Fairfax Media Wilson & ($6.20 Scheme CVC KKR Fairfax Media Horton/APN Consideration) (after synergies)

Historical EBITDA multiple Forecast EBITDA multiple

(b) Premium to previous share market prices The Scheme Consideration of $6.20 cash per APN Scheme Share is: • a 14.2% premium to the closing price of APN Shares of $5.43 on 20 October 2006, the date of the first approach from members of the Consortium; • a 19.0% premium to APN’s volume weighted average share price of $5.21 for the 30 days prior to 20 October 2006, the day of the first approach by members of the Consortium; • a 23.3% premium to APN’s volume weighted average share price of $5.03 for the 30 days prior to the introduction of media legislation into the Commonwealth Parliament on 14 September 2006; and • 12.7% higher than the highest price at which APN Shares had ever traded before October 2006 (of $5.50 on 20 June 2005).

2 For PBL Media/CVC, Seven Media/KKR, Rural Press/Fairfax Media forecast 2007 EBITDA multiples are extracted from Table 23 and related commentary in the Independent Expert’s Report and historical EBITDA multiples are based on data from IRESS, annual reports, company announcements and published transaction documentation. For INL/Fairfax Media and Wilson & Horton/APN, historical EBITDA multiples are extracted from Figure 29 of the Independent Expert’s Report and forecast EBITDA multiples are sourced from company announcements, published transaction documentation and brokers’ reports. For APN, 2006 Attributable EBITDA multiple is set out in Section 5.5 of this Scheme Booklet and 2007 Attributable EBITDA multiple is based on Table 16 and related commentary in the Independent Expert’s Report. For PBL Media/CVC, Seven Media/KKR and Rural Press/Fairfax Media the historical and forecast EBITDA multiples are for the years to 30 June 2006 and 30 June 2007 respectively. For INL/Fairfax Media the historical and forecast EBITDA multiples are for the years ended 30 June 2002 and 30 June 2003 respectively. For Wilson & Horton, the historical and forecast EBITDA multiples are for the years ended 31 December 2000 and 31 December 2001 respectively. APN NEWS & MEDIA SCHEME BOOKLET 25

The chart below shows that the Scheme Consideration of $6.20 cash per APN Scheme Share is significantly higher than the price at which APN Shares have traded during the three year period prior to 20 October 2006:

$6.50 Scheme Consideration = $6.20 $6.00 Closing price on 20 October 2006, the day of the first approach from members of the Consortium = $5.43 $5.50

$5.00 3 year VWAP to 20 October 2006 = $4.71 $4.50

$4.00

$3.50

$3.00 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 26 APN NEWS & MEDIA SCHEME BOOKLET

2 Assessment of the Scheme (continued)

(c) Significant premium to research analysts’ valuations The Scheme Consideration of $6.20 cash per APN Scheme Share represents a significant premium to research analysts’ valuations of APN Shares published in the period from APN’s interim results announcement on 15 August 2006 to 20 October 20063, the date of the first approach from members of the Consortium. $6.20 is a 25% premium to the average of the low end of analysts’ valuation ranges and a 20% premium to the average of the high end of analysts’ valuation ranges.

Research analysts’ valuations of APN shares (prior to 20 October 2006)

$6.50 Scheme Consideration of $6.20 cash per APN Share $6.00

$5.50 25% 20% $5.51 $5.29 $5.34 $5.00 $5.15 $5.16 $5.05 $5.07 $5.09 $5.10 $5.10 $4.95 $4.82 $4.50 $4.71 $4.76 $4.50 $4.00

$3.50

$3.00

$2.50

$2.00 Analyst 1 Analyst 2 Analyst 3 Average Analyst 4 Analyst 5 Analyst 6 Analyst 7 Analyst 8 Analyst 9 Analyst Valuation

(d) Opportunity to realise premium The APN Independent Committee believes that the emergence of a Superior Proposal is highly unlikely. Alternative opportunities for APN Shareholders to realise the premiums to share market prices (in Section 2.2(b) of this Scheme Booklet) are therefore also considered highly unlikely.

3 Based on all publicly available research analyst valuations known to APN from APN’s interim results announcement on 15 August 2006 to the first approach from members of the Consortium on 20 October 2006. Valuations for APN Shares ranged from $4.50 to $5.51 and were based on a range of valuation methodologies including earnings multiples and discounted cash flow analysis. In those cases where a valuation range was estimated both the high and low valuations are shown (Analyst 2, 3, 8 and 9). The valuations by research analysts formed the basis of their price targets for APN. Research from Goldman Sachs JBWere was excluded from the sample set of valuations as it is financial advisor to the Consortium. APN NEWS & MEDIA SCHEME BOOKLET 27

(e) The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interest of APN Shareholders The Independent Expert has estimated the minority interest value of APN Shares to be $5.15 to $5.44. Under ASIC Policy Statement 75 the Independent Expert is also obliged to estimate the full underlying value of APN (including a control premium) based on an assumption that 100% of APN is freely available for sale. The Independent Expert has estimated that the fair market value of APN Shares on this basis is $6.18 – $6.53 per APN share. While it is clear that 100% of APN is not available for sale given INM’s stated intention to retain its significant interest in APN, the price of $6.20 is in any event within the Independent Expert’s range. Accordingly, the Independent Expert has concluded that the offer is fair and reasonable. Section 8 of this Scheme Booklet contains a copy of the Independent Expert’s Report. (f) The price offered is the outcome of extensive negotiations The proposal from the Consortium is the outcome of extensive negotiations that commenced in October 2006 following the initial approach from members of the Consortium to acquire all of the shares in APN for an indicative price of approximately $6.02 per share. On 24 November 2006, APN announced that discussions had been terminated as the consortium had not been able to make a formal offer in an acceptable time frame. No further discussions took place and no contact was made with APN until 24 January 2007 when the Consortium put forward a proposal to acquire all of the APN Shares for $6.05 per share. On 6 February 2007, the APN Independent Committee advised the Consortium that the price of $6.05 per APN Share was unacceptable. On 7 February 2007, the APN Independent Committee received a further offer from the Consortium of $6.08 per share. This offer was again rejected by the APN Independent Committee. Subsequently, the Consortium increased the proposed price to $6.10 per APN Share which was announced on 12 February 2007. On 17 April 2007, APN announced that the Consortium had increased the consideration payable under the Scheme to $6.20 per APN Share. (g) If the Scheme is not approved, the APN Independent Committee believes the APN Share price will fall If the Scheme is not approved by APN Shareholders, you will retain your shares in APN. In this event, the APN Independent Committee believes that, in the absence of a Superior Proposal, APN’s share price will fall. It is not possible to predict at what level APN Shares will trade if the Scheme is not approved but the APN Independent Committee notes that: • on the day prior to the first approach from members of the Consortium on 20 October 2006, APN Shares closed at $5.43; • the Independent Expert has stated that APN Shares “would likely fall to prices more in line with our estimate of the value of an APN share on a minority basis… of $5.15 to $5.44 per share”; and • the average of the top end of research analysts’ valuation ranges of APN Shares prior to 20 October 2006 was $5.15. 28 APN NEWS & MEDIA SCHEME BOOKLET

2 Assessment of the Scheme (continued)

(h) A Superior Proposal has not emerged and is highly unlikely to emerge Since announcement of the initial discussions with members of the Consortium in October 2006, no Superior Proposal has emerged. The APN Independent Committee believes the emergence of a Superior Proposal is highly unlikely in view of INM’s advice to the APN Independent Committee that: • it is intent on retaining its significant interest in APN; and • its clear intention and strategy are that APN should continue to remain a core asset and feature of the INM Group. In addition, APN has agreed to pay INMAL a liquidated amount of $27.5 million if (amongst other things) a Competing Transaction is announced before the End Date and the person proposing the transaction: • acquires a relevant interest in at least 50% of the APN Shares and the Competing Transaction becomes unconditional; or • acquires an interest in all or a substantial part of APN’s business or assets.

2.3 Reasons not to vote in favour of the Scheme Although the Scheme is recommended by the APN Independent Committee and the Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interest of APN Shareholders there may be factors which may lead you to vote against the Scheme, including those set out below: (a) Expectation of a Superior Proposal You may consider that a third party may emerge with a Superior Proposal. As indicated in Section 2.2 of this Scheme Booklet, in view of INM’s significant interest in APN Shares and its stated intentions, the APN Independent Committee believes it is highly unlikely that a Superior Proposal will emerge. In the five months since the initial proposal was received from members of the Consortium, no alternative proposal has been received. (b) You may wish to maintain your investment profile You may wish to maintain your investment in APN in order to have an investment in a publicly listed company with the specific characteristics of APN in terms of geographic footprint in Australia and New Zealand and a range of media operations across publishing, radio and outdoor media. Implementation of the Scheme may therefore represent a disadvantage for APN Shareholders who do not want a change in investment profile. (c) You may disagree with the recommendation of the APN Independent Committee and the Independent Expert You may believe that the Scheme, including the Scheme Consideration, is not in the best interests of APN Shareholders. APN Shareholders may hold a different view from, and are not obliged to follow the recommendation of the APN Independent Committee. APN Shareholders may not agree with the Independent Expert’s conclusions. (d) You may believe that APN Shares will trade at higher prices within the foreseeable future You may believe that APN’s mix of media assets and business performance will lead to an APN Share price in excess of $6.20 cash per APN Share within the foreseeable future. (e) Tax consequences The Scheme may have adverse tax consequences for Scheme Participants. Section 9 of this Scheme Booklet provides a description of the general Australian and New Zealand tax implications of the Scheme for Scheme Participants. You should consult with your own tax advisor regarding the consequences of acquiring, holding or disposing of APN Shares in light of current tax laws as they apply to you and your particular investment circumstances. APN NEWS & MEDIA SCHEME BOOKLET 29

2.4 Other relevant considerations (a) The Scheme may be implemented even if you vote against it You should be aware that even if you do not vote at the Scheme Meeting, or vote against the Scheme at that meeting, the Scheme may still be implemented if it is approved by the requisite majorities of APN Shareholders (excluding the Consortium and their Associates who will not vote) and the Court. If this occurs, your APN Scheme Shares will be transferred to INMAL and you will receive the Scheme Consideration of $6.20 cash per APN Scheme Share even though you did not vote on, or voted against, the Scheme. (b) No brokerage or stamp duty Scheme Participants will not incur any brokerage or stamp duty in connection with the Scheme. (c) Deemed warranty APN Shareholders’ attention is drawn to the warranties that Scheme Participants will be deemed to have given if the Scheme takes effect, in clause 3.4 of the Scheme (see page 283). 30 APN NEWS & MEDIA SCHEME BOOKLET

Summary of 3the INMH Sale APN NEWS & MEDIA SCHEME BOOKLET 31

3 Summary of the INMH Sale

3.1 Background If the Scheme becomes Effective, it is intended that all of the issued shares in INMH (INMH Shares) will be sold by the INMH Seller to the Consortium Purchasers (INMH Sale). The Consortium Purchasers are wholly-owned subsidiaries of the Consortium. The INMH Sale and the implementation of the Scheme will have the result that APN, INMAL and INMH will become indirect wholly-owned subsidiaries of the Consortium. Further details in relation to the INMH Sale are set out in Section 7.3(c) of this Scheme Booklet. The implementation of the Scheme is interdependent with the INMH Sale being approved by the APN Shareholders. The INMH Sale will only take place if the Scheme is approved by the requisite majorities of APN Shareholders at the Scheme Meeting (other than the Consortium and their Associates who will not vote) and the Scheme becomes Effective. The Scheme will only be implemented if the Ordinary Resolution approving the INMH Sale is passed at the General Meeting. The General Meeting will be adjourned if the Scheme is not approved at the Scheme Meeting. Further information on the INMH Sale is set out in Section 7 of this Scheme Booklet.

3.2 Recommendation of the APN Independent Committee The APN Independent Committee unanimously recommends that APN Shareholders vote in favour of the Ordinary Resolution at the General Meeting. Each member of the APN Independent Committee intends to vote in favour of the Ordinary Resolution in respect of the APN Scheme Shares held by them or on their behalf.

3.3 Reasons to vote in favour of the Ordinary Resolution In making its recommendation, the APN Independent Committee considered the following: (a) the APN Independent Committee believes the Scheme is in the best interests of APN Shareholders; (b) the Scheme will not be implemented unless the Ordinary Resolution is passed by the required majority of APN Shareholders (excluding the Consortium and their Associates who will not vote); (c) the reasons to vote in favour of the Scheme set out in Section 2.2 of this Scheme Booklet; (d) the financial terms of the INMH Sale are based on the Scheme Consideration of $6.20; and (e) the transfer of INMH will only occur if the Scheme is approved and becomes Effective. The reasons not to vote in favour of the Scheme are set out in Section 2.3 of this Scheme Booklet. If the Scheme is approved at the Scheme Meeting, each member of the APN Independent Committee who holds APN Scheme Shares, or on whose behalf APN Scheme Shares are held, intends to vote in favour of the Ordinary Resolution. 32 APN NEWS & MEDIA SCHEME BOOKLET

3 Summary of the INMH Sale (continued)

3.4 Independent Expert’s Report The APN Independent Committee commissioned Deloitte in accordance with section 611 of the Corporations Act to assess the merits of the INMH Sale and to advise in the Independent Expert’s Report on whether the INMH Sale is fair and reasonable. The Independent Expert has concluded that the INMH Sale is fair and reasonable. A copy of the Independent Expert’s Report is included in Section 8 of this Scheme Booklet.

3.5 Ordinary Resolution approval The Ordinary Resolution requires the approval of a simple majority of the APN Shareholders (excluding the Consortium and their Associates who will not vote). APN Shareholders are being asked to approve the Ordinary Resolution at the General Meeting to be held at 11.30am (or as soon thereafter as the Scheme Meeting is concluded or adjourned) on 25 May 2007 at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales.

3.6 Entitlement to vote All APN Shareholders on the Register at 7.00pm on 23 May 2007 are entitled to vote at the General Meeting. The Consortium and their Associates will not vote at the General Meeting. For further details on how to vote, please refer to Section 4 of this Scheme Booklet. APN NEWS & MEDIA SCHEME BOOKLET 33

4How to vote 34 APN NEWS & MEDIA SCHEME BOOKLET

4 How to vote

4.1 Procedure for Voting at the Scheme Meeting and the General Meeting APN Shareholders (excluding the Consortium and their Associates who will not vote) may vote at the Scheme Meeting and General Meeting by attending the Scheme Meeting and General Meeting in person, or by proxy, attorney or, in the case of a corporate APN Shareholder, by corporate representative. (a) Voting in person To vote in person at the Scheme Meeting and General Meeting, APN Shareholders must attend the Scheme Meeting and General Meeting to be held on 25 May 2007 at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales. The Scheme Meeting will commence at 11.00am and the General Meeting will commence at 11.30am or as soon thereafter as the Scheme Meeting is concluded or adjourned. An APN Shareholder who wishes to attend and vote at the Scheme Meeting and General Meeting in person will be admitted to the Scheme Meeting and General Meeting and given a voting card upon disclosure at the point of entry of their name and address. (b) Proxies An APN Shareholder is entitled to appoint not more than two proxies in respect of each of the Scheme Meeting and the General Meeting, who need not be APN Shareholders. Where more than one proxy is appointed in respect of either the Scheme Meeting or the General Meeting, each proxy should be appointed to represent a specified percentage or specified number of the APN Shareholder’s voting rights. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half the votes. Fractions of votes will be disregarded. If you wish to appoint a proxy in respect of the Scheme Meeting, APN Shareholders are requested to complete and sign the original loose leaf personalised blue proxy form sent to you with this Scheme Booklet. If you wish to appoint a proxy in respect of the General Meeting, APN Shareholders are requested to complete and sign the original loose leaf personalised yellow proxy form sent to you with this Scheme Booklet. Proxy forms for the Scheme Meeting and General Meeting may be lodged as follows: • deliver the completed proxy form to the Registry at Computershare Investor Services Pty Limited, Level 2, 60 Carrington Street, Sydney, New South Wales 2000 (during normal business hours); • mail the completed proxy form to GPO Box 242, Melbourne, Victoria 3001; or • fax the completed proxy form to (03) 9473 2118, APN NEWS & MEDIA SCHEME BOOKLET 35

in each case so that the validly completed proxy forms (together with any other document(s) specified in the instructions to the proxy forms) are received at an address given above no later than, in the case of the Scheme Meeting 11.00am on 23 May 2007, and, in the case of the General Meeting 11.30am on 23 May 2007. Proxy forms received after these times will be invalid. Further directions for the proper completion of proxy forms are printed on the proxy forms. A proxy will be admitted to the Scheme Meeting and General Meeting and given a voting card upon providing at the point of entry written evidence of their name and address. The sending of a proxy form will not preclude an APN Shareholder from attending in person and voting at the Scheme Meeting and/or General Meeting at which the APN Shareholder is entitled to attend and vote. (c) Voting by attorney An APN Shareholder is entitled to appoint an attorney to vote at the Scheme Meeting and/or the General Meeting. Attorneys should bring an original or certified copy of the power of attorney in respect of the meeting(s) that the APN Shareholder wishes to appoint an attorney. (d) Corporate representative To vote at the meeting(s) a corporation who is an APN Shareholder, or who has been appointed as a proxy by an APN Shareholder, may appoint a person to act as its representative. The appointment(s) of a representative must comply with section 250D of the Corporations Act. Evidence of the appointment(s) must be brought to the meeting(s) that the APN Shareholder is appointing a corporate representative in respect of, together with any authority under which it is signed. A pro forma “Certificate of Appointment of Corporate Representative” may be obtained from the Registry. An authorised corporate representative will be admitted to the meeting(s) and given a voting card upon providing at the point of entry to the applicable meeting(s) written evidence of their appointment including any authority under which it is signed, their name and address and the identity of their appointer.

4.2 Voting entitlement Each APN Shareholder (excluding the Consortium and their Associates who will not vote) who is registered on the Register at 7.00pm on 23 May 2007 is entitled to attend and vote, in person or by proxy or attorney or, in the case of a corporate APN Shareholder, by its representative appointed in accordance with the Corporations Act, at the Scheme Meeting and the General Meeting. Accordingly, registrable transmission applications or transfers registered after this time will be disregarded in determining entitlements to vote at the Scheme Meeting and the General Meeting. If APN Shares are jointly held, only one of the joint APN Shareholders is entitled to vote. If more than one joint APN Shareholder votes, only the vote of the APN Shareholder whose name appears first on the Register will be counted.

4.3 Queries If you have any questions or require further information, you can call the APN Information Line on 1800 830 977 (within Australia) and +61 2 8280 7492 (from outside Australia) during business hours. If you are in any doubt about anything in this Scheme Booklet, please contact your financial, legal, taxation or other professional advisor. 36 APN NEWS & MEDIA SCHEME BOOKLET

5Information on APN APN NEWS & MEDIA SCHEME BOOKLET 37

5 Information on APN

5.1 Background APN is a broad-based media company with operations across Australia, New Zealand and Asia. APN’s operations comprise six main business segments: New Zealand National Publishing, Regional Publishing, Radio Broadcasting, Outdoor Advertising, Online and Print. APN listed on the ASX in 1992 and listed on the NZSE in June 2004.

5.2 Operations (a) New Zealand National Publishing The titles of the New Zealand National Publishing division are The New Zealand Herald, the Herald on Sunday, the New Zealand Woman’s Weekly, The New Zealand Listener, Créme and The Aucklander. The New Zealand Herald is New Zealand’s highest circulating daily newspaper, based in Auckland with an audited circulation of nearly 200,000 copies daily and an estimated daily readership of approximately 568,000. The Herald on Sunday was launched in October 2004 as a Sunday newspaper in Auckland. It is the most read Sunday newspaper in Auckland. The combination of the weekend edition of The New Zealand Herald and the Herald on Sunday reaches 86% of Auckland readers. The Aucklander is a free weekly community paper launched in 2003. It has grown to become the most widely read weekly publication in Auckland with a readership of 414,000 in 2006. New Zealand Magazines publishes the New Zealand Woman’s Weekly, The New Zealand Listener and Créme. The New Zealand Woman’s Weekly has nearly one million readers. The New Zealand Listener is a weekly current affairs publication and Crème is a teen magazine published in New Zealand. (b) Regional Publishing APN’s Regional Publishing division has 14 regional daily newspapers in Australia and nine regional daily newspapers in New Zealand. The division also has over 70 non-daily community titles and magazines in Australia and over 35 community and free titles in New Zealand. APN’s regional publications cover the north eastern coastline of Australia, extending from Cairns in North Queensland to Coffs Harbour in Northern New South Wales and several populous regions in New Zealand’s North Island. 38 APN NEWS & MEDIA SCHEME BOOKLET

5 Information on APN (continued)

(c) Radio Broadcasting APN’s radio division comprises APN’s 50:50 joint venture interests in each of ARN and TRN with Clear Channel Communications Inc, the largest radio broadcaster in the United States. These interests make APN the largest radio broadcaster in Australasia in terms of number of stations and revenue. ARN owns 12 stations in key metropolitan markets in Australia and broadcasts to a weekly cumulative audience of approximately 4.3 million listeners. These stations focus on two streams: Mix and Classic Hits and target the 25-54 year-old demographic. In New Zealand, TRN operates 120 stations in a system which permits operators to own multiple licences in each market. TRN operates eight different formats including news, sport and classic hits to offer a broad range of demographics to advertisers. TRN is the market leader in the markets of Auckland and Wellington. (d) Outdoor APN is a market leader in each of the major outdoor advertising categories and is the largest outdoor advertising group in Australasia. The division offers a range of outdoor advertising formats in Australia, New Zealand and certain Asian countries. The major outdoor formats for the division are transit (Buspak), posters (Tribe), street furniture (Adshel) and large format (Cody). Adshel is a 50:50 joint venture between a wholly-owned subsidiary of APN and Clear Channel Outdoor Pty Limited and is one of the most successful street furniture advertising businesses covering Australia and New Zealand. (e) Online APN’s online business consists of the nzherald.co.nz website, the search4 classifieds businesses and other classified and directory websites in Australia and New Zealand. The nzherald.co.nz website is the most popular news website in New Zealand. Search4 is an online brand utilised in New Zealand and Australia and includes a range of classified listings. Sellmefree and apnfinda are joint ventures in the general classified and directory area. (f) Print APN’s Print division provides specialist printing services to APN and third parties in New Zealand and Australia. During 2006, APN completed new press centres at Yandina and Bundaberg in Queensland. The Yandina facility provides heat set capacity as well as expanded colour printing capability. APN’s commercial printing facility in Ellerslie, New Zealand was upgraded in 2005 to increase colour broadsheet capacity and to produce high quality colour supplements. APN NEWS & MEDIA SCHEME BOOKLET 39

5.3 Risks relating to APN’s business (a) General business risks The financial prospects of any company are sensitive to the underlying characteristics of its business and the nature and extent of the commercial risks to which the entity is exposed. There are a number of risks faced by APN, including those which encompass a broad range of economic and commercial risks. (b) Changes in economic conditions The financial performance of APN could be affected by changes in economic conditions in Australia and New Zealand. Such changes include: (i) changes in levels of economic activity and the resultant impact on advertising market conditions; (ii) changes in inflation, interest rates and foreign currency exchange rates; (iii) changes in employment levels and labour costs, which will affect the cost structure of APN; (iv) changes in aggregate investment and economic output; and (v) other changes in economic conditions which may affect the revenue or costs of APN. (c) Changes in government policy APN may be affected by changes in government policy or legislation applicable to companies in the media industry. This could include those policies and legislation which regulate ownership or control of interests in media organisations. (d) Competition in the media industry The media industry in Australia and New Zealand is competitive and subject to significant change. APN faces competition from both traditional media groups and other organisations using emerging technologies such as the internet. (e) Changes in technology Technology plays an increasingly important role in the delivery of media products to customers in a cost-effective manner. APN’s ability to compete effectively in the future will, in part, be driven by its ability to maintain an appropriate technology platform for the efficient delivery of its products and services.

5.4 Financial information This Section 5.4 sets out summary historical financial information for APN. The summary historical financial information has been extracted from APN’s audited financial statements for the full years ended 31 December 2005 and 2006. APN summary financial information is based on AIFRS and does not take account of the effects of the Scheme. Copies of APN’s annual reports from which the following historical financial information was extracted can be found on APN’s website at www.apn.com.au. These reports contain details of APN’s accounting policies and in each case detailed discussion and analysis by APN management of the financial results for the respective period. The report for the year ended 31 December 2005 includes detailed reconciliations of the effects of the change from AGAAP to AIFRS. APN Shareholders without internet access can obtain copies of these reports by contacting APN directly. 40 APN NEWS & MEDIA SCHEME BOOKLET

5 Information on APN (continued)

(a) Income statement APN’s historical performance for the three years ended 31 December 2006 is summarised below:

Year ended 31 December ($ millions) 2004 2005 2006 Actual Actual Actual Revenue and other income1 1,262.9 1,340.7 1,301.7 EBITDA2 323.8 348.8 348.7 Depreciation & amortisation2 (38.7) (39.4) (34.5) EBIT2 285.1 309.4 314.2 Net finance expense2 (62.5) (64.9) (65.6) Profit before tax2 222.6 244.5 248.6 Tax expense2 (58.3) (58.6) (53.6) Minority interests2 (33.1) (36.2) (37.6) Net profit before non-recurring items 131.2 149.6 157.4 Non-recurring items (1.8) 0.1 2.1 Net profit after non-recurring items 129.4 149.7 159.5 Basic earnings per share3 (cents) 27.1 31.1 34.3 Diluted earnings per share3 (cents) 26.2 30.3 32.9

Historical performance APN’s earnings grew strongly in 2005 driven by strong performance in each of its main divisions. New Zealand National Publishing earnings were supported by growth in The New Zealand Herald’s subscription and readership, and cover price increases effected in April and September 2005. Australian regional publishing enjoyed strong revenue and earnings growth driven by underlying economic strength in its Queensland and northern New South Wales markets. Growth in the radio business was driven by new licences obtained in New Zealand and ratings growth in both Australia and New Zealand. The Outdoor division benefited from the expiry of several unprofitable contracts and a number of major contract wins and renewals. Weaker economic conditions in New Zealand contributed to the slowing revenue and earnings in 2006, with New Zealand National Publishing and The Radio Network both recording weaker earnings. However APN’s other businesses continued to perform well, with the Outdoor division demonstrating strong earnings growth in particular, driven by the full year effect of contracts won and renegotiated in 2005. During 2006 APN completed the development of its printing plant at Yandina on the Queensland Sunshine Coast. A restructuring program was commenced to capture the benefits of this investment and other initiatives through increased automation and a consequent lower cost structure. The restructuring of the print division forms part of a wider change program across all APN divisions to reduce costs and streamline processes. In 2006, APN sold its interest in its New Zealand and Australian Security Plastics business. APN undertook an on market buy-back of its shares in 2005 and 2006. APN Shares to a value of $274 million were bought back and cancelled over this period. Convertible notes were also converted into ordinary shares. These changes resulted in an increase of $6 million in net interest charges in 2006 as a result of the additional debt used to finance the buy-back of the APN Shares.

Notes: 1 Excluding interest income and income from non-recurring items 2 Excluding non-recurring items 3 After non-recurring items APN NEWS & MEDIA SCHEME BOOKLET 41

(b) Financial position APN’s audited financial position as at 31 December 2006 is set out below: As at 31 December 2006 ($ millions) Current assets Cash and cash equivalents 70.7 Receivables 223.7 Inventories 21.9 Tax assets 24.9 Other 28.1 Total current assets 369.3

Non-current assets Receivables 7.2 Other financial assets 22.7 Investments accounted for using the equity method 25.7 Property, plant and equipment 292.6 Intangible assets 1,740.6 Deferred tax assets 36.5 Total non-current assets 2,125.3 TOTAL ASSETS 2,494.6

Current liabilities Payables 197.3 Derivative financial instruments 3.4 Interest bearing liabilities 89.4 Current tax provisions 5.3 Provisions 14.1 Total current liabilities 309.5

Non-current liabilities Payables 5.6 Interest bearing liabilities 801.6 Deferred tax liabilities 203.4 Provisions 2.2 Total non-current liabilities 1,012.8 TOTAL LIABILITIES 1,322.3 NET ASSETS 1,172.3

Equity Contributed equity 817.6 Reserves 25.5 Retained profits 86.5 Total parent entity interest 929.6 Minority interest 242.7 TOTAL EQUITY 1,172.3 42 APN NEWS & MEDIA SCHEME BOOKLET

5 Information on APN (continued)

5.5 Attributable EBITDA, net debt and EBITDA multiple The following table shows 2006 Attributable EBITDA for APN. Attributable EBITDA represents APN’s economic share of the underlying EBITDA of its various businesses. Year ended 31 December 2006 ($ millions) EBITDA1 348.7 50% of Adshel depreciation 4.6 Minority interests in EBITDA (58.6) Disposed/closed businesses (2.8) Attributable EBITDA1 291.9

The table below shows consolidated net debt as at 31 December 2006 adjusted for net debt and cash in joint ventures and the conversion of APN Notes. As at 31 December 2006 ($ millions) Consolidated net debt 820.3 Adjust for: Capitalised borrowing costs 6.7 APN Notes (converted or redeemed under Scheme) (149.2) Adshel net debt (50% held in Adshel but not consolidated) 19.0 Joint venture cash (50% attributable to third parties but which is consolidated) 15.9 Adjusted net debt 712.7

The calculation of 2006 Attributable EBITDA multiple based on 2006 Attributable EBITDA and $6.20 cash per APN Share is shown in the following table. The 2006 Attributable EBITDA multiple is intended to provide APN Shareholders with a meaningful basis of comparison with EBITDA multiples for other similar media transactions. Implied Historical EBITDA Multiple Scheme Consideration $6.20

Equity value2 million $ millions APN Shares 460.3 2,853.8 APN Notes 37.8 234.2 Options (in the money) 15.1 26.1 Total Equity value 513.1 3,114.1 Adjusted net debt 712.7 Enterprise value 3,826.7 2006 Attributable EBITDA 291.9 2006 Attributable EBITDA multiple 13.1

1 Before non-recurring items 2 APN Shares, APN Notes and Options are as of 31 December 2006. Post conversion of APN Notes and assuming the exercise of all Options, the total number of APN Shares on issue would be 512.3 million, comprising the existing 460.3 million APN Shares, 36.9 million APN Shares issued on conversion of the APN Notes and 15.1 million APN Shares that would result from the exercise of all Options. Please refer to section 11.8 for further details on the conversion of APN Notes. APN NEWS & MEDIA SCHEME BOOKLET 43

5.6 Material changes in APN’s financial position since last accounts published (31 December 2006) There has been no material change in APN’s financial position since 31 December 2006 (the date of the last audited financial statements of APN which were released to ASX and NZSE on 30 March 2007). Except as disclosed in the audited financial statements of APN dated 31 December 2006, the financial position of APN has not changed materially since the date of the last balance sheet laid before the APN general meeting on 2 May 2006. On 12 February 2007, APN issued an early redemption notice to holders of APN Notes. For further information on the conversion and redemption of APN Notes as a result of the giving of the early redemption notice please see Section 11.8 of this Scheme Booklet.

5.7 Recent APN Share price performance APN’s share price from 1 January 2004 to 17 April 2007 is shown in the chart below:

APN Share Price from 1 January 2004 to 17 April 2007

$6.50

$6.00 Closing price on 20 October 2006, the day of the first approach from members of the Consortium = $5.43 $5.50

$5.00

$4.50

$4.00

$3.50

$3.00 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07

The closing price of APN’s shares on 17 April 2007 was $6.04.

5.8 APN documents available for inspection The following documents are available for inspection during normal business hours at the registered office of APN: (a) constitution of APN; and (b) APN’s Annual Report for each of the years ended 31 December 2004, 2005 and 2006. These documents, other than the constitution of APN, are also available on the internet at www.apn.com.au. 44 APN NEWS & MEDIA SCHEME BOOKLET

Information on INMAL and 6the Consortium APN NEWS & MEDIA SCHEME BOOKLET 45

6 Information on INMAL and the Consortium

6.1 INMAL (a) Background INMAL will acquire all APN Shares held (as at the Record Date) by Scheme Participants if the Scheme is approved by the Court. INMAL is an Australian unlisted public company. (b) Ownership of INMAL As at the date of this Scheme Booklet, INMAL is an indirect wholly-owned subsidiary of INM. All of the issued ordinary shares in INMAL are held by INMH. If the Ordinary Resolution is passed at the General Meeting and the Scheme becomes Effective, the INMH Shares will be sold to the Consortium Purchasers. After completion of the INMH Sale INMAL will be an indirect wholly-owned subsidiary of the Consortium. Sections 3 and 7 of this Scheme Booklet describe the INMH Sale. (c) INMAL Directors The directors of INMAL are Donal Buggy, Gavin O’Reilly, Stephen Guthrie and Alexander Bathgate. In accordance with the terms of the Consortium and Subscription Agreement described in Section 12.3(b) of this Scheme Booklet, each of Providence and Carlyle has appointed one representative to act as a board observer on the INMAL board of directors. Each observer is entitled to receive all written information which is provided to the INMAL Directors, to attend meetings of the INMAL board of directors and to speak and be heard (but not to vote) at those meetings.

6.2 Consortium In accordance with the terms of the Consortium and Subscription Agreement described in Section 12.3(b) of this Scheme Booklet, INM, Providence and Carlyle have agreed to act together in relation to the implementation of the Scheme. If the Scheme is implemented, the effect of the implementation of the Scheme and the INMH Sale will be that the Consortium will acquire, indirectly, 100% of the issued share capital of APN.

6.3 INM INM is a leading international media and communications group, with interests in newspaper and magazine publishing, commercial printing, outdoor advertising, broadcasting and the internet in 21 countries around the world, including Australia, Ireland, India, New Zealand, South Africa and the United Kingdom. Excluding INM’s Australasian interests which are held through INMH, INMAL, NMNZ and APN, INM’s major establishments are located in Dublin, Belfast, London, Cape Town, Durban and Johannesburg. The shares of INM are listed on the Irish and London Stock Exchanges. The INM Group holds approximately 40% of the APN Shares through INMAL and NMNZ. Its other business interests include significant newspaper interests in Ireland, the UK, South Africa and India. INM publishes over 175 newspaper and magazine titles with a weekly audience of over 100 million consumers. 46 APN NEWS & MEDIA SCHEME BOOKLET

6 Information on INMAL and the Consortium (continued)

The INM Group, through its interests in APN, is also the largest radio operator (132 stations and an audience exceeding five million people) and outdoor advertising operator in Australasia and also has outdoor advertising operations in Hong Kong, Malaysia, India, Indonesia and across Africa. The INM Group has established a strong and growing online presence, with over 70 editorial and classified internet sites.

6.4 Providence (a) Overview of Providence Equity Partners Providence Equity Partners is a private investment firm specialising in investments in communications and media companies around the world. Providence Equity Partners manages funds with approximately US$21 billion in equity commitments and have invested in more than 100 companies operating in over 13 countries. Providence Equity Partners currently has offices in Providence, Rhode Island, London, and New York. The firm is also opening offices in Hong Kong and New Delhi. Providence Equity Partners’ current and previous areas of investment include wireless and wireline telephony, cable television content and distribution, publishing, radio and television broadcasting, and other media and communications sectors. Significant portfolio investment companies of Providence Equity Partners include Bresnan Broadband Holdings, Comhem, Digiturk, Education Management Corporation, eircom, Freedom Communications, Idea Cellular, Kabel Deutschland, Metro-Goldwyn-Mayer, Ono, PanAmSat, ProSiebenSat.1, Recoletos, SunGard, TDC, VoiceStream Wireless, Warner Music Group, Western Wireless and Yankees Entertainment Sports Network. (b) Providence Providence Equity Partners advises Providence Equity Partners VI International L.P., a fund dedicated to buyout investments in communications and media companies around the world. Providence is a Luxembourg incorporated company which has been formed by Providence Equity Partners for the purpose of investing in the Consortium. Providence is owned by a Cayman Islands limited partnership: • Providence Equity Partners VI International L.P. The general partner of this limited partnership is: • Providence Equity GP VI International LP, a Cayman Islands limited partnership. The general partner of Providence Equity GP VI International LP is: • Providence Equity Partners VI International Ltd, a Cayman Islands company.

6.5 The Carlyle Group (a) Overview of The Carlyle Group The Carlyle Group is one of the world’s largest private equity firms. As of 31 January 2007, The Carlyle Group had more than US$51.8 billion under management. Since its founding in 1987, The Carlyle Group has invested US$24 billion in 576 transactions. Globally, The Carlyle Group has more than 400 investment professionals operating out of offices in 16 countries in North America, Europe, Asia and Australia. The Carlyle Group has an office in Australia which is located in Sydney. The Carlyle Group focuses its investments on various industries, including aerospace and defence, automotive and transportation, consumer and retail, energy and power, healthcare, industrial, infrastructure, real estate, technology and business services and telecommunications and media. The Carlyle Group’s current and former media portfolio companies include cable TV operators in the US, Europe and Asia (InSight Communications, Com Hem, Genesis Cable, Prime Communications, Taiwan Broadband Communications and Hyundai Communications and Network), The Nielsen Company (global information and media company), Le Figaro (leading French daily newspaper), Dex Media (directories in the US), Entertainment Publications (coupon books and merchant promotion publications in the US) and Gakusei Engokai (job placement magazine in Japan), among others. APN NEWS & MEDIA SCHEME BOOKLET 47

(b) Carlyle Amongst other funds, The Carlyle Group manages Carlyle Asia Partners II LP, a fund dedicated to buyout investments in the Asian region (but not including Japan). Carlyle is a Luxembourg incorporated company which has been formed by The Carlyle Group for the purpose of investing in the Consortium. Carlyle is owned by two Cayman Islands limited partnerships: • Carlyle Asia Partners II L.P.; and • CAP II Co-Investment L.P. The general partner of each of these limited partnerships is: • CAP II General Partner L.P., a Cayman Islands limited partnership. The general partner of CAP II General Partner L.P. is: • CAP II Ltd, a Cayman Islands company.

6.6 Source of Scheme Consideration If the Scheme becomes Effective, INMAL will pay each Scheme Participant the Scheme Consideration of $6.20 cash per APN Scheme Share. The maximum amount of cash required to be paid by INMAL under the Scheme is $2.3 billion. This assumes that all APN Notes are converted to APN Scheme Shares on or prior to the Record Date and that there is no APN Dividend which has been declared and is payable or has been paid prior to the Implementation Date, but that no Options are exercised and therefore no APN Scheme Shares are issued to Option Holders on or before the Record Date. The maximum amount of cash required to be paid by INMAL under the Scheme would be $2.4 billion if all APN Notes were converted to APN Scheme Shares on or prior to the Record Date, there was no APN Dividend which has been declared and is payable or has been paid prior to the Implementation Date and all Options were exercised and APN Scheme Shares issued to Option Holders on or before the Record Date.

6.7 Funding arrangements INMAL will fund the Scheme Consideration using a combination of equity funding obtained from the Consortium and debt finance. As detailed below, the total amount of equity funding and debt finance available to INMAL under these arrangements is sufficient to pay the Scheme Consideration. (a) Equity funding As set out in Section 12.3(b) of this Scheme Booklet, INMAL, INMH, INM, Providence and Carlyle entered into the Consortium and Subscription Agreement on 11 February 2007. On 16 April 2007 INMAL, INMH, INM, Providence and Carlyle entered into an amendment agreement to that agreement for the purposes of funding the increased Scheme Consideration. Under the Consortium and Subscription Agreement INM is obliged to provide equity funds of approximately $491.90 million, Providence is obliged to provide equity funds of approximately $472.64 million and Carlyle is obliged to provide equity funds of approximately $346.61 million (a total equity commitment of approximately $1,311.15 million), three Business Days after the Effective Date. The equity commitment of the CSA Investors under the Consortium and Subscription Agreement will be used to: • ensure INMAL receives an amount of equity funding which is sufficient, when aggregated with the debt finance, to pay the Scheme Consideration and refinance existing APN debt; • pay the consideration for the acquisition of the shares in INMH and refinance existing debt of INMH; and • pay certain costs and expenses incurred in connection with the Scheme and associated transactions. 48 APN NEWS & MEDIA SCHEME BOOKLET

6 Information on INMAL and the Consortium (continued)

Under the Consortium and Subscription Agreement, INMAL undertakes that the equity funding it receives under that agreement will be applied in paying the Scheme Consideration on the Implementation Date. The obligation of the CSA Investors to provide equity funding under the Consortium and Subscription Agreement is conditional only on the Scheme becoming Effective, and the debt finance being available for drawdown following the satisfaction or waiver of all of the conditions precedent to drawdown of the debt finance (other than the condition related to the provision of equity funding under the Consortium and Subscription Agreement). The Consortium and Subscription Agreement may only be terminated if the Scheme Implementation Agreement has been terminated but will not otherwise terminate. In addition to the Consortium and Subscription Agreement, Providence Equity GP VI International L.P. (as general partner of Providence Equity Partners VI International L.P.) and Providence have executed a legally binding commitment letter dated 11 February 2007 (amended on 16 April 2007) under which Providence Equity Partners VI International L.P. irrevocably commits to cause Providence to receive $472.64 million in cash (being an amount equal to Providence‘s equity commitment under the Consortium and Subscription Agreement). The obligation of Providence Equity GP VI International L.P. to provide funds to Providence under the commitment letter is conditional only on the Scheme becoming Effective and the debt finance for the Scheme Consideration being available in full to INMAL (subject only to the provision of equity funding under the Consortium and Subscription Agreement). The equity commitment letter will terminate if the Scheme Implementation Agreement is terminated or on the provision of the cash amount in accordance with the letter but will not otherwise terminate. CAP II General Partner L.P. (as general partner of Carlyle Asia Partners II L.P.) and Carlyle have executed a legally binding commitment letter dated 11 February 2007 (amended on 16 April 2007) under which Carlyle Asia Partners II L.P. irrevocably commits to cause Carlyle to receive $346.61 million in cash (being an amount equal to Carlyle’s equity commitment under the Consortium and Subscription Agreement) and which is otherwise in identical terms to the equity commitment letter (as amended) executed by Providence Equity GP VI International L.P. and Providence. (b) Debt finance INMAL and INMH have executed a legally binding commitment letter dated 9 February 2007 with Goldman Sachs Credit Partners L.P., Goldman Sachs JBWere Pty Ltd, Barclays Capital, the investment banking division of Barclays Bank PLC, Credit Suisse, Sydney Branch and Deutsche Bank AG, Sydney Branch (each, together with any other financiers which accede to the commitment letters, a Finance Party) to provide debt finance facilities to INMAL for the purposes described below (the Facility). The Facility was amended on 16 April 2007 to permit the funding of the increased Scheme Consideration of $6.20 per Share (the Revised Facility). The Revised Facility includes $2.0 billion senior secured facilities and a $200 million working capital and capital expenditure facility (Senior Facilities) and a NZ$250 million subordinated bridge facility (Bridge Facility). In addition on 16 April 2007: • INMAL executed a legally binding commitment letter dated 14 April 2007 with Goldman Sachs JBWere Capital Markets Ltd (GSJBW) as underwriter and Goldman Sachs JBWere Pty Limited as arranger under which GSJBW is to underwrite an issue of $315 million unlisted mezzanine notes (the Mezzanine Note Facility); and • INMAL and INMH executed a legally binding commitment letter dated 16 April 2007 with INM under which INM irrevocably committed to subscribe for a $50 million loan note to be issued by INMH (the INM Loan Note Facility), in each case for the purposes described below. APN NEWS & MEDIA SCHEME BOOKLET 49

Excluding the working capital and capital expenditure facility, a total of $2,365 million plus NZ$250 million is available under the Senior Facilities, the Bridge Facility, the Mezzanine Note Facility and the INM Loan Note Facility for the purpose of (together with the equity funding referred to above): • funding the Scheme Consideration; • paying the consideration for the acquisition of the shares in INMH; • refinancing existing debt facilities of APN; and • paying certain costs and expenses incurred in connection with the Scheme and associated transactions. The first drawdown under each of the Revised Facility, the Mezzanine Note Facility and the INM Loan Note Facility is required to be made on or before 10 October 2007. Conditions Precedent The commitment letter for each of the Revised Facility, the Mezzanine Note Facility and the INM Loan Note Facility is subject to satisfaction of a number of conditions precedent, which include: • receipt by the Finance Parties, GSJBW and INM of executed financing documentation in a form reasonably satisfactory to them having regard to the term sheets attached to their respective commitment letters and relevant market practice; • in the case of the Revised Facility, evidence that an amount equal to at least 30% of the Scheme Consideration and total costs of INMAL in connection with the Scheme and associated transactions has been contributed (or will be contributed simultaneously with the first drawdown under the Revised Facility) to INMAL or used to acquire INMH, in the form of equity or shareholder debt which is subordinated on satisfactory terms, and in the case of Senior Facilities, evidence that at least NZ$250 million plus $315 million of subordinated debt has been contributed (or will be contributed simultaneously with the first drawdown) to INMAL in accordance with the Bridge Facility and the Mezzanine Note Facility; • satisfaction of other conditions which are procedural in nature and customary for a facility of this kind; and • Court approval of the Scheme. It is expected that these conditions will be satisfied before the Second Court Hearing Date (other than Court approval and certain other conditions which are intended to be satisfied concurrently with the first drawdown under the Revised Facility, the Mezzanine Note Facility and the INM Loan Note Facility on the Implementation Date including the payment of fees and expenses, repayment of indebtedness and releases of security interests). If all of the conditions precedent are satisfied and the equity funding referred to in Section 6.7(a) of this Scheme Booklet has been provided or will be simultaneously provided, then the Finance Parties must provide the funds for their portion of the commitment under the Senior Facilities and Bridge Facility and funds must be provided under the Mezzanine Note Facility and under the INM Loan Note Facility. As at the date of this Scheme Booklet, INMAL is not aware of any reason why any of these conditions precedent will not be satisfied in time to allow payment in full of the Scheme Consideration as and when it is due under the terms of the Scheme. The Senior Facilities, the Bridge Facility, the Mezzanine Note Facility and the INM Loan Note Facility are subject to events of default and termination rights. As at the date of this Scheme Booklet, INMAL is not aware of the occurrence of any event of default or any circumstances that would lead to an event of default or which give rise to a right to the Finance Parties, GSJBW or INM to terminate the applicable facilities. 50 APN NEWS & MEDIA SCHEME BOOKLET

6 Information on INMAL and the Consortium (continued)

Representations and Warranties The representations and warranties to be given by INMAL in relation to each of the Revised Facility, the Mezzanine Note Facility and the INM Loan Note Facility are customary for facilities of this kind. As at the date of this Scheme Booklet, INMAL is not aware of any breach of a representation or warranty nor any circumstances that would lead to a breach of a representation or warranty.

6.8 INMAL’s and the Consortium’s intentions if the Scheme is implemented This Section sets out the intentions of INMAL and the Consortium in relation to: • the continuation of the business of APN; • any major changes to the business of APN and any redeployment of the fixed assets of APN; and • the future employment of the present employees of APN, if the Scheme is implemented. In summary, it is INMAL’s and the Consortium’s intention to continue to operate the business of APN as it is presently conducted by current APN management and executives. INMAL intends to retain all of APN’s existing senior management. INMAL will support APN with a long-term investment horizon and access to significant capital. INM will continue to provide APN with access to resources relevant to APN’s business. The statements made in this Section are statements of present intention only and are based on the information concerning APN (including information obtained in the course of due diligence investigations) and the general business environment which is known to INMAL and the Consortium at the time of preparation of this Scheme Booklet. Final decisions will only be made by INMAL and the Consortium after having conducted a detailed review of APN and its business if the Scheme is implemented. Accordingly, the statements set out in this Section are statements of present intention only, which may change as new information becomes available or circumstances change. (a) APN to be delisted If the Scheme is implemented, INMAL will apply for APN to be removed from the Official List of ASX and NZSE one Business Day after the Implementation Date. (b) Board of Directors If the Scheme is implemented, INMAL intends to reconstitute the APN Board with representatives of INMAL. INMAL has not determined which persons will be appointed to the APN Board. (c) Business continuity/major changes If the Scheme is implemented, INMAL intends to continue to operate the business of APN substantially in the manner in which it is conducted under the existing management and executives of APN. It is the intention of INMAL to retain all of the current business units of APN, and not dispose of any of APN’s material assets to third parties. It is intended that APN’s existing finance facilities will be refinanced on or after the Implementation Date using part of the proceeds of the equity and debt funding referred to in Sections 6.7(a) and 6.7(b) respectively above. If the Scheme is implemented and the APN Board is reconstituted in the manner described in Section 6.8(b) above, INMAL intends to replace the APN Option Plan with a new management incentive plan in which certain officers and employees of APN will be eligible to participate. The terms of the new management incentive plan are yet to be determined by INMAL and will be finalised after the Scheme has been implemented and in consultation with the executives of APN. (d) Future employment INMAL does not intend to change the number of employees currently employed by the APN Group other than in respect of changes which are currently planned by APN’s management. Other than as set out above, INMAL intends to continue the business of APN and not make any major changes to the business of APN, including any redeployment of its fixed assets. APN NEWS & MEDIA SCHEME BOOKLET 51

Details of the 7INMH Sale 52 APN NEWS & MEDIA SCHEME BOOKLET

7 Details of the INMH Sale

7.1 Summary of the Ordinary Resolution and the INMH Sale If the Scheme becomes Effective, it is intended that all of the INMH Shares will be sold by the INMH Seller to the Consortium Purchasers. The Consortium Purchasers are wholly-owned subsidiaries of the Consortium. The INMH Sale and the implementation of the Scheme will have the result that APN, INMAL and INMH will become indirect wholly-owned subsidiaries of the Consortium. The INMH Sale is conditional on the Scheme becoming Effective and on the passing of the Ordinary Resolution at the General Meeting. The Ordinary Resolution is an ordinary resolution of APN Shareholders (other than the Consortium and their Associates who will not vote at the General Meeting) approving the INMH Sale, for the purposes of item 7 of section 611 of the Corporations Act. The implementation of the Scheme is interdependent with the INMH Sale being approved by the APN Shareholders. The INMH Sale will only take place if the Scheme is approved by the requisite majorities of APN Shareholders at the Scheme Meeting (other than the Consortium and their Associates who will not vote) and the Scheme becomes Effective. The Scheme will only be implemented if the Ordinary Resolution approving the INMH Sale is passed at the General Meeting. The APN Independent Committee unanimously recommends that APN Shareholders vote in favour of the Ordinary Resolution. The General Meeting will be adjourned if the Scheme is not approved at the Scheme Meeting.

7.2 Current ownership of INMH The diagram below shows the current ownership of INMH and INMAL. As at the date of this Scheme Booklet INMH and INMAL are indirect wholly-owned subsidiaries of INM.

INM

100%

INMH Seller

100%

INMH

100% 100%

NMNZ1 INMAL

12.5% 27.5%

APN Public 60%

1 Preference shares in NMNZ are listed on the NZSE. Preference shares in NMNZ do not confer any voting rights on holders. APN NEWS & MEDIA SCHEME BOOKLET 53

7.3 Details of the INMH Sale (a) Identity of the Consortium Purchasers The Consortium Purchasers are the following five newly-incorporated Australian proprietary companies. Each of them is an indirect wholly-owned subsidiary of the Consortium: (i) Normandy Newco 1 Pty Ltd; (ii) Normandy Holdco 2 Pty Ltd; (iii) Normandy Holdco 3 Pty Ltd; (iv) Normandy Holdco 4 Pty Ltd; and (v) Normandy Holdco 5 Pty Ltd. None of the Consortium Purchasers has carried on business or incurred any liabilities other than in connection with their incorporation and the matters contemplated in this Scheme Booklet. (b) Identity of the INMH Seller INMH Seller is Independent News & Media Belgium SA, a company incorporated in Belgium. INMH Seller is an indirect wholly-owned subsidiary of INM. INMH Seller’s principal business activity is investment and its principal asset is its shareholding of the INMH Shares. INMH Seller does not undertake any operating activities. (c) Share Acquisition Deed On 3 April 2007 the INMH Seller, the Consortium Purchasers, INMAL and INM entered into the Share Acquisition Deed which sets out the terms and conditions on which the INMH Seller will sell the INMH Shares to the Consortium Purchasers. INMH’s sole business activity is investment and its only material asset is all of the issued share capital of INMAL (and INMAL in turn holds approximately 27.5% of the APN Shares). INMH’s sole material liability is a debt (of approximately $300 million) due by INMH to a wholly owned subsidiary of INM. The purchase price payable by the Consortium Purchasers for the INMH Shares will be determined by reference to the assets of INMH at completion. For the purposes of determining the value of INMH’s assets, the market value of the APN Shares in which INMH has an interest indirectly (through INMAL) will be $6.20 per APN Share (to be reduced by the amount of any APN Dividend) which is the Scheme Consideration. This implies a total purchase price for INMH of approximately $816 million which will be paid by way of purchase consideration of approximately $516 million plus the assumption of approximately $300 million of debt and net working capital of INMH and INMAL. The INMH Seller has agreed to give certain warranties relating to the businesses of INMH and INMAL, including matters related to the financial position of INMH and INMAL and the manner in which INMH and INMAL have conducted their operations since the date on which they were incorporated. The INMH Seller has also agreed to assume full responsibility for all liabilities of each of INMH and INMAL relating to the period ending on the close of business on the date of completion of the INMH Sale (other than liabilities which have been taken into account in calculating the purchase price for the INMH Shares). Under the Share Acquisition Deed INM has guaranteed the performance of the obligations of the INMH Seller. The Share Acquisition Deed will terminate automatically, without the action of any party to it: (i) if the Scheme Implementation Agreement is terminated; or (ii) on the End Date if the Scheme does not become Effective on or before the End Date. The Share Acquisition Deed provides that nothing in the Deed restricts the ability of INMAL to dispose of any or all of the APN Shares it holds at any time on or after the date of the Share Acquisition Deed. 54 APN NEWS & MEDIA SCHEME BOOKLET

7 Details of the INMH Sale (continued)

(d) Completion of the INMH Sale The completion of the sale of the INMH Shares is conditional on the Scheme becoming Effective in accordance with the Corporations Act and the passing of the Ordinary Resolution at the General Meeting. If the Scheme becomes Effective, three Business Days following the Effective Date the INMH Shares will be transferred to the INMH Purchasers and the consideration will be paid by the INMH Purchasers for the INMH Shares.

7.4 Recommendation of the APN Independent Committee The APN Independent Committee unanimously recommends that APN Shareholders vote in favour of the Ordinary Resolution. If the Scheme is approved at the Scheme Meeting, each member of the APN Independent Committee who holds APN Scheme Shares, or on whose behalf APN Scheme Shares are held, intends to vote in favour of the Ordinary Resolution. The Other Directors of APN support the Scheme, which is conditional on the Ordinary Resolution, but do not consider it appropriate to make any recommendation in relation to the Scheme or the Ordinary Resolution due to their relationship with INM which is an Associate of INMH and the INMH Purchasers.

7.5 Interest in APN Shares held by the Consortium Purchasers (a) Before the INMH Sale As at the date of this Scheme Booklet none of the Consortium Purchasers holds any APN Shares or INMH Shares. However, the Consortium Purchasers and their Associates have a relevant interest in approximately 40% of APN Shares. The Consortium Purchasers are indirect wholly-owned subsidiaries of the Consortium. In addition, each member of the Consortium is an Associate of the Consortium Purchasers. The relevant interest of the Consortium Purchasers in APN Shares arises in accordance with the Corporations Act as a consequence of the relevant interests in APN Shares held by each member of the Consortium. Section 12.1 of this Scheme Booklet describes the nature of the relevant interest in APN Shares held by each of the Consortium members. (b) After the INMH Sale If the INMH Sale is completed and the Scheme is implemented, the Consortium and their Associates, including the Consortium Purchasers will have a relevant interest in APN Shares of 100%.

7.6 The Consortium Purchasers’ intentions regarding the future of APN if the Ordinary Resolution is passed The Consortium Purchasers are wholly-owned subsidiaries of the Consortium. If the Scheme is implemented and the INMH Shares are sold to the Consortium Purchasers, APN, INMAL and INMH will become indirect wholly-owned subsidiaries of the Consortium and will therefore be controlled by the Consortium. Accordingly, the intentions of the Consortium Purchasers correspond to the intentions of INMAL and the Consortium in relation to APN if the Scheme is implemented. Those intentions are set out in Section 6.8 of this Scheme Booklet. If the Scheme does not become Effective the INMH Sale will not proceed, the INMH Shares will not be sold to the Consortium Purchasers and the Share Acquisition Deed will terminate. In those circumstances, the APN Board intends to continue to conduct the businesses of APN in the best interests of APN Shareholders. APN NEWS & MEDIA SCHEME BOOKLET 55

7.7 Contracts between APN, the Consortium Purchasers, INMH or any of their Associates which are conditional upon, or directly or indirectly dependent on, the Ordinary Resolution being passed The Share Acquisition Deed for the INMH Sale is described in Section 7.3(c) of this Scheme Booklet. In addition, Section 12.3 of this Scheme Booklet describes certain other agreements between the Consortium members in relation to APN. Other than as described in this Scheme Booklet, there are no contracts between APN, the Consortium Purchasers, INMH or any of their Associates which are conditional upon, or directly or indirectly dependent on, the Ordinary Resolution being passed.

7.8 The interests of the APN Directors in the Ordinary Resolution The interests of APN Directors in INM and APN are set out in Sections 11.2, 11.3 and 11.10 of this Scheme Booklet. Gavin O’Reilly, James Parkinson and Donal Buggy are also Directors of INMH. Gavin O’Reilly is also a director of each of the Consortium Purchasers. Other than as described in this Scheme Booklet, no APN Director has any interest in the Ordinary Resolution.

7.9 Additional information required under the Listing Rules APN is not aware of any further information required under the Listing Rules that has not already been provided to APN Shareholders in this Scheme Booklet.

7.10 Corporations Act application to INMH Sale As INMH holds all of the issued shares in INMAL, and INMAL currently holds approximately 27.5% of APN Shares, under section 608(3) of the Corporations Act INMH is presently deemed to have a relevant interest of approximately 27.5% in APN. If the shares in INMH are sold to the Consortium Purchasers, at the time of completing the INMH Sale the Consortium Purchasers and their Associates will also acquire a relevant interest of approximately 27.5% in APN under section 608(3) of the Corporations Act. Section 606 of the Corporations Act prohibits a person acquiring a relevant interest in more than 20% of a company listed on ASX unless one of the exceptions in section 611 of the Corporations Act applies. Item 7 of section 611 of the Corporations Act contains an exception where the acquisition of the relevant interest in the ASX listed company has been approved by an ordinary resolution of the company’s shareholders in accordance with the conditions set out in that item. Accordingly, APN Shareholders (other than the Consortium and their Associates who will not vote at the General Meeting) are being asked to consider the Ordinary Resolution so that the INMH Sale does not contravene section 606 of the Corporations Act. 56 APN NEWS & MEDIA SCHEME BOOKLET

Independent 8Expert’s Report APN NEWS & MEDIA SCHEME BOOKLET 57

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Information about the general financial product advice we provide Specific contact details for lodging a complaint with the ICAA can be obtained The financial product advice provided in our report is known as “general advice” from their website at http://www.icaa.org.au/about/index.cfm. because it does not take into account your personal objectives, financial situation The Australian Securities and Investments Commission (“ASIC”) regulates or needs. You should consider whether the general advice contained in our report Australian companies, financial markets, financial services organisations and is appropriate for you, having regard to your own personal objectives, financial professionals who deal and advise in investments, superannuation, insurance, situation or needs. deposit taking and credit. Their website contains information on lodging complaints about companies and individual persons and sets out the types of If our advice is being provided to you in connection with the acquisition or complaints handled by ASIC. You may contact ASIC as follows: potential acquisition of a financial product issued by another party, we recommend you obtain and read carefully the relevant Product Disclosure Info line: 1 300 300 630 Statement (“PDS”) or offer document provided by the issuer of the financial Email: [email protected] product. The purpose of the PDS is to help you make an informed decision about Internet: http://www.asic.gov.au/asic/asic.nsf the acquisition of a financial product. The contents of the PDS will include details such as the risks, benefits and costs of acquiring the particular financial product. 58 APN NEWS & MEDIA SCHEME BOOKLET

Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL 241457

Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia

DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 The APN Independent Committee www.deloitte.com.au APN News & Media Limited Level 4, 100 William Street Sydney NSW 2011

19 April 2007

Dear Directors

Independent expert’s report Introduction On 17 April 2007 (the “Announcement Date”), APN News & Media Limited (“APN” or “the Company”) announced that it had received a conditional offer from a consortium comprising Independent News & Media Plc (“INM”), Providence Equity Partners (“Providence”) and The Carlyle Group (“TCG”) (collectively the “Consortium”) to acquire all of the shares in APN via a scheme of arrangement (“the Proposed Scheme”) for a consideration of $6.20 per APN share (the “Offer Price”) upon completion of the Proposed Scheme, which is expected to occur in late May 2007 (“Implementation Date”). On 12 February 2007, APN entered into a Scheme Implementation Agreement (“SIA”) with Independent News & Media (Australia) Limited (“INMAL”), the acquisition vehicle of the Consortium. The Proposed Scheme and the Offer Price have been finalised after extensive negotiations which have taken place since October 2006, followed by an announcement on 12 February 2007 that APN had received an offer from the Consortium to acquire all of its shares for a consideration of $6.10 per APN share (the “Original Offer Price”) subject to similar terms and conditions to those of the Proposed Scheme. We provided a final draft report which included our valuation range on the Original Offer Price to APN on 2 April 2007. After further negotiations the consideration offered was subsequently increased to $6.20 per APN share. This report is in relation to the revised offer of $6.20 per APN share. Independent News & Media Holdings Pty Limited (“INMH”) is an indirect wholly-owned subsidiary of INM and holds all the issued capital in INMAL. INMH’s sole operation is to act as an investment company and its sole material asset is all of the issued share capital of INMAL (and INMAL in turn holds 131,541,073 shares or a 27.5% interest in APN).

Liability limited by a scheme approved under Professional Standards Legislation APN NEWS & MEDIA SCHEME BOOKLET 59

Under a share acquisition agreement to be entered into between Independent News & Media Belgium SA (“INMH Seller”), INM as guarantor and certain other Australian proprietary companies which are not yet incorporated but which will be indirect wholly-owned subsidiaries of the Consortium (“Consortium Purchasers”) as the purchasers, the Consortium Purchasers agree to acquire 100% of the shares in INMH for the consideration offered pursuant to the Proposed Scheme less an amount equal to the liabilities of INMH and INMAL shown on a pro forma balance sheet of each company as at 31 December 2006 (“Proposed Sale”). The Proposed Sale is being implemented by the Consortium in order to achieve the proposed final ownership structure for APN by the Consortium. An overview of the Proposed Scheme, the SIA and the Proposed Sale are provided in Section 1 of this report. Purpose of the report An independent committee of the Board of Directors of APN was formed to assess the proposal from the Consortium (the “Independent Committee”). The Independent Committee has requested that Deloitte Corporate Finance Pty Limited (“Deloitte Corporate Finance”) provide an independent expert’s report advising whether, in our opinion, the Proposed Scheme is in the best interest of APN shareholders excluding INM and its associates (the “Shareholders”). As INMAL has a number of directors in common with APN there is also a legal requirement for an independent expert’s report pursuant to Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cwlth) (“Part 3”) to assist the Shareholders in their consideration of the Proposed Scheme. We have prepared this report having regard to Part 3 and the relevant Australian Securities and Investments Commission (“ASIC”) Policy Statements and Practice Notes. Furthermore, the Proposed Sale is conditional on the passing of an ordinary resolution approving the Proposed Sale by Shareholders (the “Resolution”), for the purposes of item 7 of Section 611 of the Corporations Act. The Directors of APN have appointed Deloitte Corporate Finance to consider the Proposed Sale to fulfil the requirements of Section 611 of the Corporations Act 2001 (“Section 611”) and ASIC Policy Statement 74. This report is to be included in the Scheme Booklet to be sent to Shareholders and has been prepared for the exclusive purpose of assisting Shareholders in their consideration of the Proposed Scheme and the Proposed Sale. The report should not be used for any other purpose. Basis of evaluation The Proposed Scheme There is no statutory or regulatory definition of the expression ‘in the best interest’. Schemes of arrangement regulated by Section 411 of the Corporations Act 2001 (“Section 411”) can include many different types of transactions and the basis of evaluation selected by the expert must be appropriate to the nature of the specific transaction. The interpretation of ‘in the best interest’ is a matter of judgment for the expert having regard to the guidance and alternatives available.

4 Deloitte: APN News & Media Limited 60 APN NEWS & MEDIA SCHEME BOOKLET

In this case the Proposed Scheme has the same effect as a takeover offer for APN. Section 640 of the Corporations Act 2001 (“Section 640”) requires an independent expert’s report in connection with a takeover offer to state whether, in the expert’s opinion, the takeover offer is fair and reasonable. ASIC Policy Statement 75, which is directed primarily towards reports prepared under Section 640, implies that if the Proposed Scheme is fair and reasonable it will be in the best interest of Shareholders. Under ASIC Policy Statement 75, an offer is: x fair, when the value of the consideration is equal to or greater than the value of the securities subject to the scheme. The comparison must be made assuming a 100% ownership interest of the target company is available to be sold x reasonable, if it is fair, or despite not being fair, after considering other significant factors, shareholders should accept the offer under the scheme, in the absence of any higher bids. In interpreting the meaning of ‘in the best interest’ we have considered ASIC Policy Statement 75, Practice Note 43 and common market practice. To assess whether the Proposed Scheme is in the best interest of Shareholders, we have adopted the test of whether the Proposed Scheme is either fair and reasonable, or not fair but reasonable, as set out in ASIC Policy Statement 75. The Proposed Sale Section 606 of the Corporations Act 2001 (“Section 606”) does not allow a person to acquire more than 20% of APN’s voting shares without making a takeover offer. The Consortium Purchasers are acquiring in excess of 20% in APN without making a takeover offer as a conditional step to the successful implementation of the Proposed Scheme. Section 611 would provide an exemption to Section 606 if the Proposed Sale is approved by an ordinary resolution at a general meeting of APN shareholders. Policy Statement 74 issued by ASIC requires that the notice of meeting includes, amongst other things, an analysis of the Proposed Sale by the independent directors or an independent expert. The Directors of APN have appointed Deloitte Corporate Finance to assist them in fulfilling this requirement. The Proposed Scheme will not become effective unless the resolution in relation to the Proposed Sale is passed by the required majority of Shareholders. The transfer of INMH is a commercial requirement of the Consortium which will not result in any financial consequences to Shareholders. In evaluating whether the Proposed Sale is fair and reasonable to Shareholders we have performed a qualitative assessment of the advantages and disadvantages to Shareholders if the Proposed Sale proceeds compared to if the Proposed Sale does not proceed. Summary and conclusion for the Proposed Scheme In our opinion the Proposed Scheme is fair and reasonable and therefore in the best interest of Shareholders. We have estimated the fair market value of an APN share on a full control basis to be in the range of $6.18 to $6.53 per share. Since the Offer Price to be received under the Proposed Scheme is within this range, albeit at the lower end of the range, we have concluded that the Proposed Scheme is fair. In addition, after considering other factors relevant to Shareholders, in particular since the prospect of Shareholders realising a price in excess of the Offer Price, either through a higher alternate offer or the short-term appreciation of APN shares is unlikely, we consider the Proposed Scheme is reasonable.

5 Deloitte: APN News and Media Limited APN NEWS & MEDIA SCHEME BOOKLET 61

The decision as to whether or not to approve the Proposed Scheme is a decision which each of the Shareholders should make having regard to their own investment preference, risk tolerance, liquidity requirements, investment horizon and tax profile. This opinion should be read in conjunction with our detailed report which sets out our scope and findings. In arriving at our conclusion that the Proposed Scheme is in the best interest of Shareholders we have considered the following factors: The Proposed Scheme is fair Our comparison of the estimated fair market value of an APN share on a full control basis and the fair market value of the consideration offered to the Shareholders pursuant to the Proposed Scheme is set out in the table below.

Assessment of fairness

Low High ($) ($)

Estimated fair market value of an APN share (Section 6.2.9) 6.18 6.53 Offer Price 6.20 6.20

Source: Deloitte Corporate Finance analysis The consideration offered under the Proposed Scheme is at the lower end of our valuation range of an APN share on a full control basis. As a consequence, the Offer Price is considered to be fair.

Valuation of an APN share We have estimated the fair market value of an APN share by estimating the value of each underlying operating division of APN and aggregating those values based on a sum-of- the-parts (“SOTP”) approach. In accordance with ASIC Policy Guidelines, this valuation of an APN share assumes a 100% ownership interest of the target company is available to be sold. We have used the capitalisation of maintainable earnings (“CME”) method to estimate the fair market values of the operating divisions of APN, with the exception of the online division. The CME method estimates the fair market value of each division of APN by capitalising their maintainable earnings with an appropriate earnings multiple. Due to the historic and projected operating losses and the uncertainty in respect of the timing and quantum of future profitability for the online segment, we have estimated the fair market value of this division using a replacement cost methodology. We have also had regard to the recent trading history of APN as an overall cross-check to our valuation. We have selected earnings before interest, tax, depreciation and amortisation (“EBITDA”) as an appropriate measure of earnings for all operating divisions with the exception of commercial printing because earnings multiples based on EBITDA are less sensitive to different financing structures, depreciation and amortisation accounting policies and/or effective tax rates than multiples based on earnings before interest and tax (“EBIT”) or net profit after tax (“NPAT”). Due to the capital intensive nature of the commercial printing division, we have selected earnings before interest and tax and amortisation (“EBITA”) as an appropriate measure of earnings for this division.

6 Deloitte: APN News & Media Limited 62 APN NEWS & MEDIA SCHEME BOOKLET

We have assessed the maintainable level of earnings for each operating division of APN based on historical results, prospects for the future, market consensus views and factors specific to each division. The earnings multiple ranges used were based on an analysis of listed companies and previous mergers and acquisitions in the publishing and media industry as well as factors specific to each division. A summary of our estimate of the fair market value of an APN share is set out in the table below.

Summary – fair market value of an APN share

Maintainable Assessed value earnings Earnings multiple Low High Division ($’m) Low High ($’m) ($’m)

New Zealand national publishing 104.0 10.0x 10.5x 1,040 1,092 Regional publishing 120.0 11.3x 11.8x 1,356 1,416 New Zealand radio 16.0 10.0x 10.5x 160 168 Australian radio 28.0 11.0x 11.5x 308 322 Printing 3.0 9.5x 10.0x 29 30 Outdoor advertising 45.0 10.0x 10.5x 450 473 Online n/a n/a n/a 13 13 Corporate (15.0) 10.6x 11.1x (159) (167)

Fair market value of the operating divisions 3,197 3,347 (on a minority basis)

Surplus assets 63 63 Net debt (617) (617) Equity value (on a minority basis) 2,643 2,793

Fully diluted number of shares outstanding (m) 513.1 513.1 Value per share (on a minority basis) ($) 5.15 5.44

Premium for control (20%) 529 559 Equity value (on a control basis) 3,171 3,352

Assessed value per share (on a control basis) ($) 6.18 6.53

Source: Deloitte Corporate Finance analysis The Proposed Scheme is reasonable In accordance with ASIC Policy Statement 75 an offer is reasonable if it is fair. On this basis, in our opinion the Proposed Scheme is reasonable. We have also considered the following factors in assessing the reasonableness of the Proposed Scheme:

Advantages of the Proposed Scheme

APN’s share price would likely fall below current levels If the Proposed Scheme does not proceed it is highly likely that APN shares would trade at prices below those recently achieved and would likely fall to prices more in line with our estimate of the fair market value of an APN share on a minority basis as set out above of $5.15 to $5.44 per share, which represents a discount to the Offer Price of between 12% and 17%.

7 Deloitte: APN News and Media Limited APN NEWS & MEDIA SCHEME BOOKLET 63

There is also a risk that the share price of APN could fall below our minority interest value range in the absence of the Proposed Scheme since our valuation was influenced by current share market trading multiples in the media sector. The share market trading prices of Australian media companies have recently increased due to speculation of corporate activity as a consequence of the media reform legislation. There is a risk that this positive re-rating of media company multiples will deflate over the medium term. An indication of the market re-rating which has occurred is that the relative increase in the average share price of the comparable Australian publishing and radio broadcasting companies was approximately 28% over the period from 17 July 2006 (being three months prior to the passing of the media legislation by Parliament on 18 October 2006) and 2 April 2007 which exceeded the return on the S&P/ASX 200 index (“S&P/ASX 200”) over the same period by approximately 8%.

Offer Price represents a premium to recent trading in APN’s shares The Offer Price represents a premium to the historical share market trading in APN shares. An analysis of recent trading in APN shares and the premium to these prices implied by the Offer Price is set out in the figure below.

Offer price premium to share trading price of APN

$6.50 50%

45%

$6.00 40% Introduction of the media reform legislation into Parliament 35%

$5.50 30%

25%

Share Share price $5.00 The media reforms were passed APN announced that it had been APN announced that discussions 20% by the Australian Parliament approached by the Consortium in with the Consortium had ended respect of an offer for APN Implied premium 15%

$4.50 10%

5%

$4.00 0% 10-Oct-06 24-Oct-06 02-Jan-07 16-Jan-07 30-Jan-07 13-Mar-07 27-Mar-07 13-Feb-07 27-Feb-07 07-Nov-06 21-Nov-06 05-Dec-06 19-Dec-06 01-Aug-06 15-Aug-06 29-Aug-06 12-Sep-06 26-Sep-06

Implied premium APN share price (VWAP) Offer Price Source: Deloitte Corporate Finance analysis The consideration offered pursuant to the Proposed Scheme represents the following premiums to recent trading in APN’s shares: x a 23% premium to both the one month and three month volume weighted average price (“VWAP”) of APN’s shares prior to the announcement that the media reform legislation was introduced into Parliament on 14 September 2006 x a 19% and 23% premium to the one month and three month VWAP respectively for APN’s shares prior to the announcement by APN that they had been approached by members of the Consortium in respect of a potential offer for APN on 26 October 2006.

8 Deloitte: APN News & Media Limited 64 APN NEWS & MEDIA SCHEME BOOKLET

As set out above, the Proposed Scheme provides the minority shareholders with the opportunity to exit APN at a significant premium to the price at which shares in APN traded on the Australia Securities Exchange (“ASX”) prior to the announcement of the Proposed Scheme.

Offer Price represents an implied multiple within the range of recent media transactions An analysis of the implied EBITDA multiple under the Proposed Scheme as compared to the EBITDA multiples implied by the financial terms of other recent transactions in the Australian media sector is set out below.

Comparison of EBITDA multiples (current1) for the Proposed Scheme and other recent media transactions – target companies

15.5x Rural Press (excluding synergies), 15.0x 14.8x

14.5x

14.0x Western Australian Newspapers, 13.2x 13.5x APN, 13.1x

13.0x

EBITDA EBITDA times Southern Cross , Seven Media, 12.3x 12.4x 12.5x Rural Press (including synergies), 12.0x 12.6x Fairfax, 12.3x PBL Media, 11.4x 11.5x

11.0x 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% % acquired

Source: Deloitte Corporate Finance analysis

Notes:

1. The APN transaction multiple is based on the Offer Price of $6.20 per share, fully diluted net debt excluding adjustments for the radio licence renewal pay-out and the expected profit until Implementation Date (as detailed in Table 28 of this report), and the attributable EBITDA for the year ending on 31 December 2006 as detailed in Table 19 of this report.

2. Specific details regarding the above transactions are provided in Table 23 as well as Appendix 3. As set out above, the EBITDA multiple implied by the Offer Price is within the range of multiples implied in transactions in the media sector announced since the media reform legislation was passed by Parliament. We note the following: x with the exception of the pending merger between Fairfax Media Limited (“Fairfax”) and Rural Press Limited (“Rural Press”), whilst significant stakes were acquired, no controlling interests were transferred so the multiples may not fully reflect the premiums required to obtain control

9 Deloitte: APN News and Media Limited APN NEWS & MEDIA SCHEME BOOKLET 65

x the Fairfax-Rural Press transaction is expected to generate synergies of approximately $35 million per annum within 18 months which was likely a factor in the price paid by Fairfax. We have therefore presented this multiple both including and excluding the impact of these synergies. Including synergies in the earnings of Rural Press, the implied EBITDA multiple is 12.6 times. Furthermore, the Fairfax share price has recently been subject to speculation of a takeover offer since the implementation of the media reforms in early April 2007 which has also had an upward impact on the implied multiples set out above x the Seven Media and PBL Media acquisitions are very similar transactions involving a joint venture with a private equity buyer whilst the West Australian Newspapers Limited (“WANL”), Southern Cross Broadcasting Limited (“Southern Cross”) and Fairfax minority interest transactions are considered to be strategic acquisitions aimed at positioning the major media groups for consolidation following the implementation of the media reform legislation. It is likely that the prices paid in the acquisitions of these strategic stakes would incorporate a premium to the pure minority interest value. As set out in our opinion on fairness above, we have concluded that the Proposed Scheme is fair. In addition, the implied EBITDA multiple for the Proposed Scheme is within the range of multiples for other transactions in the media sector which have been announced since the media reform legislation was passed by Parliament.

Higher offer unlikely It is unlikely that the minority shareholders of APN will receive a higher offer either from the Consortium or an alternative bidder. If Shareholders do not approve the Proposed Scheme it is possible that the Consortium will make an alternate offer at some future time. However, a higher offer from the Consortium appears to be unlikely since the Consortium has already raised the offer price three times after extensive negotiations with the Independent Committee since October 2006 and has declared the Offer Price final. It is possible that a higher offer from an alternate bidder may emerge. However, since INM owns a 40.0% interest in APN and that APN is a core asset of INM, these factors would act as a significant deterrent against other prospective acquirers making an offer for APN without prior negotiations with INM. Under these circumstances it would not be likely for a full takeover premium to be realised for APN except through a transaction supported by INM. Accordingly, in the absence of the Proposed Scheme there may be limited alternative opportunities through which Shareholders will be able to realise a value in excess of the share trading prices of APN. INM has publicly stated that it would not sell its 40.0% interest in APN by means of a competing proposal. We have been advised that since the announcement of the Proposed Scheme no other offers for APN have been received.

10 Deloitte: APN News & Media Limited 66 APN NEWS & MEDIA SCHEME BOOKLET

Disadvantages of the Proposed Scheme

Lack of alternate similar reinvestment opportunities APN has an attractive portfolio of assets that are unique in nature, and which have provided shareholders a strong return on capital since its initial listing on the ASX, earning a compound annual growth rate (“CAGR”) in total returns of approximately 14% from 1992 to 2006 as compared to the S&P/ASX 200 CAGR of 13% over the same period as set out in the figure below.

Comparison of APN total return to ASX total return since 1992 500 Annualised 450 total return 14.34% 400

350

300

250 Annualised 200 total return 13.16% 150

100

50

9 0 1 -96 97 -98 -9 0 0 -04 -05 -06 -07 p- ep-93 ep-95 ay an-97 e an ep-03 ay an-05 ep an May-92 Jan-93 S May-94 Jan-95 S M J S May J Sep-99 May- Jan- Sep-01 May-02 Jan-03 S M J S May J

APN S&P/ASX 200

Source: Deloitte Corporate Finance analysis, Bloomberg Whilst the Proposed Scheme offers Shareholders the opportunity to realise a premium to the share trading price prior to speculation of the Proposed Scheme, due to the lack of similar companies listed on the ASX, it may be difficult to reinvest the net proceeds received as a consequence of the Proposed Scheme and obtain a similar investment profile and level of return to that historically achieved by APN shareholders.

Inability to participate in upside growth potential of APN As discussed above, it is likely that APN shares would trade at prices below those recently achieved if the Proposed Scheme does not proceed. Whilst the Proposed Scheme allows Shareholders to exit their investment in APN at a premium to the share price of APN prior to speculation of the Proposed Scheme, Shareholders will not participate in the future growth of APN if the Proposed Scheme proceeds. It is possible that the APN share value may increase over time to a level above the Offer Price.

11 Deloitte: APN News and Media Limited APN NEWS & MEDIA SCHEME BOOKLET 67

Tax consequences The tax implications of accepting the Proposed Scheme will vary depending on the individual circumstances of each of the Shareholders. Accepting the Proposed Scheme may crystallise a tax liability for Shareholders. This may be seen as a particular disadvantage for those Shareholders with the current intention of retaining their shares in APN for the long-term as acceptance of the Proposed Scheme will likely crystallise a tax liability earlier than anticipated. Shareholders should evaluate the taxation consequences of the Proposed Scheme based on their individual circumstances. Conclusion on reasonableness The Offer Price is within our estimated full control valuation range of APN and if the Proposed Scheme does not proceed, it is highly likely that the share price of APN will fall below the Offer Price and the price at which it has recently traded. Based on the current shareholding structure of APN, with INM owning a 40.0% stake, it would appear that the likelihood of Shareholders receiving an alternate offer in excess of the Offer Price from either the Consortium or an alternate bidder is low. Furthermore, whilst it is possible that the APN share price may meet or exceed the Offer Price at some point in the future, even in the absence of an alternate bid for the Company, it is unlikely that the APN share price would exceed the Offer Price in the near term. Since the Offer Price is fair and the prospect of Shareholders realising a price in excess of the Offer Price, either through a higher alternate offer or the short-term appreciation of APN shares is unlikely, the Proposed Scheme is considered to be reasonable. Summary and conclusion on the Proposed Sale In our opinion the Proposed Sale is fair and reasonable. In arriving at this opinion, we have considered the following factors: x we have concluded that the Proposed Scheme is in the best interest of Shareholders. Since the Proposed Scheme will not become effective unless the Resolution is passed by the required majority of Shareholders, we have concluded the Proposed Sale is to the advantage of Shareholders x there are no material disadvantages associated with the Proposed Sale since it does not affect the interests of APN shareholders on the basis that it can only occur if the Proposed Scheme is approved and becomes effective, at which time APN will be an indirect wholly-owned subsidiary of the Consortium. This opinion should be read in conjunction with our detailed report which sets out our scope and findings. Yours faithfully DELOITTE CORPORATE FINANCE PTY LIMITED

Mark Pittorino Rachel Foley-Lewis Director Director

Notes: 1. All amounts stated in this report are Australian dollars (“AUD”) unless otherwise stated. 2. All numbers in tables are subject to rounding

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Contents 1 Terms of the transactions 16 1.1 The Proposed Scheme 16 1.2 The Proposed Sale 17

2 Scope of the report 19 2.1 Purpose of the report 19 2.2 Basis of evaluation for the Proposed Scheme 19 2.3 Basis of evaluation for the Proposed Sale 22 2.4 Limitations and reliance on information 22

3 Overview of the Australasian media industry 23 3.1 Economic outlook for Australia and New Zealand 23 3.2 Media ownership reform in Australia 27 3.3 Advertising in the media industry 28 3.4 The newspaper and magazine publishing sectors 30 3.5 The radio broadcasting sector 37 3.6 The outdoor advertising sector 41 3.7 The online media sector 45

4 Profile of APN 48 4.1 Overview 48 4.2 Company history 48 4.3 Group structure 49 4.4 Operational structure 49 4.5 Principal activities 49 4.6 Management and personnel 62 4.7 Competitive position of APN 63 4.8 Key sensitivities 68 4.9 Capital structure and shareholders 69 4.10 Share price performance 70 4.11 Financial performance 72 4.12 Financial position 78

5 Valuation methodology 80 5.1 Valuation methodologies 80 5.2 Selection of valuation methodologies 81

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6 Valuation of APN 82 6.1 Valuation of APN 82 6.2 Sum of the parts valuation 83 6.3 Analysis of recent share trading 110

7 Evaluation and conclusion 112 7.1 The Proposed Scheme 112 7.2 The Proposed Sale 119

Appendices Appendix 1: Glossary 120 Appendix 2: Comparable entities 123 Appendix 3: Comparable transactions 137 Appendix 4: Control premium studies 148 Appendix 5: Sources of information 150 Appendix 6: Qualifications, declarations and consents 151

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1 Terms of the transactions 1.1 The Proposed Scheme

1.1.1 Summary On 17 April 2007, APN announced that it had received a proposal from the Consortium to acquire all of the shares in APN via a scheme of arrangement for consideration of $6.20 per APN share upon completion of the Proposed Scheme, which is expected to occur in late May 2007. APN has not declared a final divided for 2006 and if any such divided is declared it would be deducted from the $6.20 per share consideration. The Proposed Scheme and the Offer Price have been finalised after extensive negotiations which have occurred since October 2006, followed by an announcement on 12 February 2007 that APN had received an offer from the Consortium to acquire all of its shares for a consideration of $6.10 per APN share subject to similar terms and conditions to those of the Proposed Scheme. We provided a final draft report which included our valuation range on the Original Offer Price to APN on 2 April 2007. After further negotiations the consideration offered was subsequently raised to $6.20 per APN share. APN and INMAL have entered into an SIA dated 11 February 2007 in relation to the Proposed Scheme. The SIA sets out the rights and obligations of APN and INMAL in relation to the Proposed Scheme. The Proposed Scheme is subject to various conditions which include (among others) the following: x approval by the Shareholders x INMAL shareholder approval x Court approval of the Proposed Scheme in accordance with section 411(4)(b) of the Corporations Act x approval from all relevant regulatory bodies, including the Foreign Investment Review Board (“FIRB”) in Australia, the New Zealand Overseas Investment Office, European Union (“EU”) competition oversight bodies, ASIC, and if required the ASX, the New Zealand Stock Exchange (“NZSX”), The New Zealand Commerce Commission and the Irish Stock Exchange. Other key terms within the SIA include: x no material adverse change occurring in relation to the APN group including net assets diminishing by in excess of $50 million or recurring EBITDA reducing by in excess of $10 million x INMAL will make offers to acquire all employee options on terms corresponding to the offer for the ordinary shares of APN under the Proposed Scheme x APN has agreed to pay INMAL an amount of $27.5 million if either: ¾ a competing transaction is announced and the person proposing the transaction acquires a relevant interest in at least 50% of APN’s shares and the competing transaction becomes unconditional or the person acquires an interest in all or a substantial part of APN’s business or assets ¾ the Independent Committee fails to recommend the Proposed Scheme or withdraws its recommendation or makes a public statement that it no longer supports the Proposed Scheme (other than as a result of the independent expert giving an opinion that the Proposed Scheme is not in the best interest of Shareholders)

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¾ any member of the Independent Committee publicly recommends a competing transaction ¾ the court fails (taking into account all appeals) to approve the Proposed Scheme as a result of a material breach of the SIA by APN which would prevent the implementation of the Proposed Scheme ¾ the Proposed Scheme has not become effective by 30 September 2007 as a direct result of a material breach of the SIA by APN which would prevent the implementation of the Proposed Scheme. Full details of the Proposed Scheme and the SIA are provided in Section 1 and Annexure A of the Scheme Booklet.

1.1.2 INMAL’s intentions If the Proposed Scheme is successful it is INMAL's intention to continue to operate the business of APN as it is presently conducted by current APN management and executives and to retain all of the current business units of APN, and not dispose of any of APN's material assets to third parties. INMAL intends to retain all of APN's existing senior management. INMAL will support APN with a long-term investment horizon and access to significant capital. INM will continue to provide APN with access to expertise directly relevant to APN's business. If the Proposed Scheme is implemented, INMAL intends to do the following: x apply for APN to be removed from the official list of the ASX and the NZSX one business day after the Implementation Date x reconstitute the APN Board with representatives of INMAL. We understand that INMAL has not determined which representatives from INMAL will be appointed to the APN Board x refinance APN's existing finance facilities on or after the Implementation Date x if the APN Board is reconstituted in the manner described above, INMAL intends to replace the APN option plan with a new management incentive plan which certain officers and employees of APN will be eligible to participate in. The terms of the new management incentive plan are yet to be determined by INMAL and will be finalised if the Proposed Scheme has been implemented and in consultation with the executives of APN. 1.2 The Proposed Sale INMH is an indirect wholly-owned subsidiary of INM and holds all the issued capital in INMAL. INMH's sole operation is to act as an investment company and its sole material asset is all of the issued share capital of INMAL (and INMAL in turn holds 131,541,073 shares or a 27.5% interest in APN). Under a share acquisition agreement to be entered into between the INMH Seller, INM as guarantor and the Consortium Purchasers, the Consortium Purchasers agree to acquire 100% of the shares in INMH for the consideration offered pursuant to the Proposed Scheme less an amount equal to the liabilities of INMH and INMAL shown on a pro-forma balance sheet of each company as at 31 December 2006. The Proposed Sale is being implemented by the Consortium in order to achieve the proposed final ownership structure for APN by the Consortium. The Proposed Sale of shares in APN is being transacted at values consistent with the Offer Price.

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The completion of the sale of the INMH Shares is conditional on the Proposed Scheme becoming effective in accordance with the Corporations Act and an ordinary resolution being passed by the Shareholders in accordance with item 7 of Section 611 of the Corporations Act. If those conditions are satisfied the completion date for the acquisition of the INMH shares will be a date between the effective date of the Proposed Scheme and the Implementation Date of the Proposed Scheme. We note that the Proposed Scheme itself will be conditional on the approval by Shareholders of the sale of the shares in INMH under item 7 of Section 611 of the Corporations Act.

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2 Scope of the report 2.1 Purpose of the report

2.1.1 The Proposed Scheme Section 411 regulates schemes of arrangement between companies and their shareholders. Part 3 prescribes the information to be provided to shareholders in relation to schemes of arrangement. The preparation of a report by an independent expert stating whether or not, in the expert’s opinion, the proposed scheme is in the best interest of the shareholders of the company subject to the scheme is required where either: x the corporation which is the other party to the scheme has a director in common with the company subject to the scheme of arrangement x the corporation which is the other party to the scheme is entitled to more than 30% of the voting shares in the company subject to the scheme of arrangement. As INMAL has a number of directors in common with APN, there is a legal requirement for an independent expert’s report under Part 3. The Independent Committee has commissioned Deloitte Corporate Finance to prepare an independent expert’s report to assist with their final recommendation to Shareholders and to satisfy the legal requirements set out above.

2.1.2 The Proposed Sale Section 606 does not allow a person to acquire more than 20% of APN’s voting shares without making a takeover offer. INMAL is considered to be an associate for the purposes of Section 606 and together will hold more than 20% of APN if the Proposed Sale is approved. Section 611 would provide an exemption to Section 606 if the Proposed Sale is approved by an ordinary resolution at a general meeting of APN shareholders. Policy Statement 74 issued by ASIC requires that the Notice of Meeting includes, amongst other things, an analysis of the Proposed Sale by the independent directors or an independent expert. The Directors of APN have appointed Deloitte Corporate Finance to assist them in fulfilling this requirement. 2.2 Basis of evaluation for the Proposed Scheme

2.2.1 Guidance Schemes of arrangement can include many different types of transactions and the basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction. As there is no statutory or regulatory definition of the expression ‘in the best interest’ the interpretation is a matter of judgement for the expert, having regard to the nature of the transaction and the guidance available. In determining how to assess whether the Proposed Scheme is in the best interest of Shareholders we have considered the following guidance:

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ASIC Policy Statement 75 This policy statement provides guidance in relation to independent expert’s reports prepared in relation to: x related party takeover offers x related party schemes of arrangement x proposed acquisitions of non-voting shares, renounceable options and convertible notes following a takeover. The policy statement provides detailed guidance on the interpretation of the phrase ‘fair and reasonable’ in the context of related party takeover offers, but does not provide guidance on the interpretation of the phrase ‘in the best interest’. In the context of takeover offers, the policy statement separates the concepts of fairness and reasonableness. The policy statement defines a takeover offer as being fair if the value of the consideration is equal to or greater than the value of the securities subject to the offer, with the assessment being made on the assumption that a 100% ownership interest of the target company is available to be sold (i.e. including a control premium). The policy statement defines an offer as being reasonable if either the offer is fair or, despite not being fair, shareholders should accept the offer in the absence of a higher bid before the close of the offer.

ASIC Policy Statement 74 This policy statement relates to independent expert’s reports prepared in the context of acquisitions of shares in a company that must be agreed to by shareholders. This situation occurs where an individual shareholder acquires an interest in excess of 20% in the company without making a takeover offer. Independent expert’s reports prepared in these circumstances are required to provide an opinion on whether the proposed transaction is ‘fair and reasonable’ to non-associated shareholders. ASIC notes in the policy statement that the assessment of what is fair and reasonable in these circumstances is not as straightforward as in the circumstances discussed in Policy Statement 75. The policy statement does not provide a specific definition of the meaning of ‘fair and reasonable’. However, it does contain the following guidance ‘the report must compare the likely advantages and disadvantages for the non-associated shareholders if the proposal is agreed to, with the advantages and disadvantages to those shareholders if it is not’. The policy statement also requires the expert to state whether the proposed transaction ‘may deter the making of a takeover bid for the company’.

Market practice Schemes of arrangement frequently have the same effect as a takeover offer and are commonly evaluated as such. In these circumstances, the expression ‘in the best interest’ is commonly treated as being equivalent to ‘fair and reasonable’ as defined in ASIC Policy Statement 75. Further, in other circumstances where it is concluded that a proposal is not fair but reasonable it would also be concluded that the proposal is ‘in the best interest’ of shareholders. In this case the Proposed Scheme has the same effect as a takeover offer for APN. To access whether the Proposed Scheme is in the best interest of Shareholders we have adopted the test of whether the Proposed Scheme is either fair and reasonable, or not fair but reasonable, as set out in ASIC Policy Statement 75.

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2.2.2 Fairness ASIC Policy Statement 75 defines an offer as being fair if the fair market value of the offer price is equal to, or greater than, the fair market value of the securities being the subject of the offer. The comparison must be made assuming 100% ownership of the target company. Accordingly, we have assessed whether the Proposed Scheme is fair by comparing the value of the consideration being offered pursuant to the Proposed Scheme with the value of the relevant APN security, being an ordinary share. The securities have been valued at fair market value, which we have defined as the amount at which the securities would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices, to reduce or eliminate competition, to ensure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. Our valuation of APN has not been premised on the existence of a special purchaser.

2.2.3 Reasonableness ASIC Policy Statement 75 considers an offer to be reasonable if either: x the offer is fair x despite not being fair, but considering other significant factors, Shareholders should accept the offer in the absence of any higher bid before the close of the offer. To assess the reasonableness of the Proposed Scheme we have considered the following significant factors in addition to determining whether the Proposed Scheme is fair: x significant shareholding blocks in APN x the likely price and market liquidity of APN securities in the absence of the Proposed Scheme x the likelihood of alternative offers for APN securities x other implications for the Shareholders of rejecting the Proposed Scheme.

2.2.4 Individual circumstances We have evaluated the Proposed Scheme for Shareholders as a whole and have not considered the effect of the Proposed Scheme on the particular circumstances of individual investors. Due to their particular circumstances, individual investors may place a different emphasis on various aspects of the Proposed Scheme from the one adopted in this report. Accordingly, individuals may reach different conclusions to ours on whether the Proposed Scheme is fair and reasonable. If in doubt investors should consult an independent adviser.

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2.3 Basis of evaluation for the Proposed Sale In forming our opinion on whether or not the Proposed Sale is fair and reasonable for the non-associated shareholders we have: x considered the guidance of ASIC Policy Statement 74 as set out above x compared the likely advantages and disadvantages of the Proposed Sale for the Shareholders. We have also considered any advantages or disadvantages if the Proposed Sale does not proceed. In evaluating whether the Proposed Sale is fair and reasonable we have had regard to our conclusion as to whether the Proposed Scheme is in the best interest of Shareholders. 2.4 Limitations and reliance on information The opinion of Deloitte Corporate Finance is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time. This report should be read in conjunction with the declarations outlined in Appendix 6. Our procedures and enquiries do not include verification work nor constitute an audit in accordance with Australian Auditing Standards (“AUS”), nor do they constitute a review in accordance with AUS 902 applicable to review engagements.

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3 Overview of the Australasian media industry APN is a leading diversified multimedia company in Australasia. The Company operates a broad portfolio of businesses across the following sub-sectors of the media industry: x metropolitan and regional publishing – APN publishes the leading metropolitan newspaper in New Zealand, The New Zealand Herald, the leading Sunday newspaper in Auckland, the Herald on Sunday, The Aucklander, The Listener, New Zealand Woman’s Weekly as well as regional newspapers in Australia (primarily in Queensland and northern New South Wales) and New Zealand. The majority of the printing requirements for APN’s publishing operations are met through its in-house printing operations which also undertake printing for external customers when economically feasible x radio – APN operates 132 radio stations across Australia and New Zealand through various joint ventures and is the largest broadcaster in Australasia x outdoor advertising – APN is the market leader in Australasia’s outdoor advertising sector, operating across all major outdoor advertising formats x online – APN established its online division at the beginning of 2006 to manage its Internet interests. These interests now comprise The New Zealand Herald news website and a range of online classifieds and free classifieds businesses in New Zealand as well as a directories and mapping business. Section 4 provides a detailed discussion of each of APN’s businesses. The media industry is impacted by general population growth and economic trends, together with more specific industry trends, including media regulations. Accordingly, in this section we provide an overview of the following: x the economic outlook for Australia and New Zealand x media ownership regulatory reform in Australia x advertising in the media industry x the newspaper publishing sector x the radio broadcasting sector x the outdoor media sector x the online sector. 3.1 Economic outlook for Australia and New Zealand The profitability of companies operating in the media industry is primarily influenced by advertising demand and consumption which in turn is significantly influenced by demographic trends and economic activity. As a consequence, we provide below a brief discussion of the significant demographic and economic indicators in Australia and New Zealand including population growth, migration trends and economic growth.

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3.1.1 Population The population of Australia and New Zealand have shown relatively low levels of growth in recent times.

Australia Australia is home to over 20 million people. In the past decade, Australia’s population has grown by approximately 1.2% per annum, with just over half of this growth a result of a natural increase and the remainder from net migration. There has been a trend towards an ageing of the Australian population due largely to the low levels of fertility and increasing life expectancy. This trend is expected to continue as the median age of Australia’s population is forecast to increase from the current level of 36.9 years to approximately 41 years by 2021. All states and territories recorded positive population growth over the past year, with the largest growth and net interstate migration recorded in Western Australia and Queensland. Queensland is the third largest state in terms of total population and is home to over 4 million people. For the 12 month period ended 30 June 2006, Queensland experienced the second largest growth in population of 1.9% and had the highest positive net interstate migration. The Australian Bureau of Statistics (“ABS”) expects that net interstate migration into Queensland and Western Australia will increase further in the medium term, whilst the more populated states of New South Wales and Victoria are expected to continue to experience negative net interstate migration. With a large proportion of the net migration to Queensland being retired individuals and couples, the ageing population of Queensland is also projected to increase. The ABS forecast the median age of Queensland’s population to rise from approximately 36.1 years in 2006 to approximately 46 years by 2051 and the proportion of people aged over 65 years is forecast to account for between 25% and 28% of the total population by 2051. According to ABS, the concentration of Australia’s population within the capital cities is projected to increase as population growth in capital cities is expected to exceed the non-city growth rates in their respective states. Sydney and Melbourne are expected to remain the two most populous cities in Australia, with expected populations of 5.6 million and 5.0 million people by 2051, respectively whilst the population of Brisbane is expected to almost double by 2051 reaching approximately 3.4 million. Perth is also forecast to experience strong population growth over this period.

New Zealand New Zealand has a population of just over 4.1 million people and approximately one-third of this population is based within the Auckland region. New Zealand’s population is expected to show moderate increases in the medium to long term of approximately 0.8% per annum due to a low birth rate, increased life expectancy and a reduction in net inward migration. Similar to Australia, the average age of the New Zealand population is rising. As at December 2006, the median age of the New Zealand population was 38.8 years compared to a median age of 36.5 years in 1996 and is expected to increase to 40 years by 2020 and 45 years by 2045. Of the population growth in New Zealand in the last five years, almost half has occurred in Auckland, which is the major regional driver of the New Zealand economy. In addition, it has been estimated by Statistics New Zealand that the Auckland region will become home to 37% of New Zealand’s total population by 2026 compared to 32.8% as at June 2006.

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3.1.2 The economy

Australia Australia has one of the most stable economic environments within the Asia Pacific region. The outlook for Australia remains favourable, however a continuation of drought conditions and higher interest rates are likely to continue to limit economic growth in 2007 to less than 3.0%. The figure below sets out the recent historical and forecast real gross domestic product (“GDP”) growth rates in Australia between 1985 and 2008 and highlights the cyclical nature of GDP growth.

Figure 1: Historical and forecast real GDP growth in Australia

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

A A A A A A A A A A A A A A A 2 5 8 7F 8F 9 9 0 0 985 9 9 001 0 0 1 1986A 1987 1988 1989A 1990 1991 199 1993A 1994 1 1996A 1997 1 1999A 2000 2 2002A 2003 2004 2005A 2006 2 2 -1.0%

Source: ABS and Economist Intelligence Unit (“EIU”) As set out above, recent real GDP growth has ranged from less than 0% to 5.0% since 1985 and is projected to expand by 2.5% to 3.0% over 2006 to 2008. Real GDP grew by approximately 2.6% for 2006 and the EIU forecast real GDP growth of 3.0% for 2007. The EIU cites steady export growth and a low unemployment rate as the primary drivers to sustain real GDP growth over the medium term. The Reserve Bank of Australia (“RBA”) raised the official interest rate by 75 basis points to 6.25% during 2006 due largely to the inflationary pressures caused by the tight labour market and high fuel prices. Despite the interest rate rise, high employment levels and government fiscal spending are likely to sustain private consumption growth. Similar to Australia as a whole mentioned above, economic growth for both New South Wales and Victoria is expected to be limited for 2006-2007, underpinned by lost agricultural output from drought conditions, the effect of the strong Australian dollar on exports and decreased spending due to expected interest rate rises. Queensland’s economy has outperformed those of New South Wales and Victoria over the past three years in terms of economic growth, due largely to the mining boom in the state and net migration gains. This trend is forecast to continue due to the state’s current strong export volumes, low unemployment rates and strong tourism market. Queensland accounted for the second largest share of Australia’s mining industry output after Western Australia in 2006.

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Tourism is the second largest source of export revenue for Queensland, behind the coal industry and contributes approximately 8% of the state’s gross state product. Queensland is the most visited state in Australia as approximately 65% of all inbound travellers spend a part of their stay there. In addition, five of the top ten regions visited by international travellers are located in Queensland. The Tourism Forecasting Committee forecasts continued improvement in domestic and international visitor growth in Queensland.

New Zealand With almost half of APN’s earnings derived from its New Zealand’s operations, the outlook for the New Zealand economy is critical to APN’s future financial performance. The figure below sets out the historical and forecast GDP growth rates in New Zealand between 1995 and 2008.

Figure 2: Historical and forecast real GDP growth in New Zealand

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

A A A A A A A A A A 6 8 9 9 1995 1 1997 199 1999 2000A 2001 2002A 2003 2004 2005 2006 2007F 2008F

Source: Reserve Bank of New Zealand, EIU New Zealand experienced a slow down in economic growth during the first half of 2006, with growth in real GDP of 1.6% for 2006, down from 2.2% in 2005. Nevertheless, the EIU forecasts a recovery in 2007 and 2008 as the consumer confidence index has recently surged to its highest level in almost two years and private consumption and investment have shown recovery as reflected in improved GDP growth in the third quarter of 2006. Real GDP is anticipated to grow by 3.1% in 2007 and 2008. The New Zealand dollar is expected to remain weak until 2008, however, this is expected to have a positive influence on New Zealand’s inbound tourism and export market. New Zealand’s unemployment rate is at its lowest in decades at 3.6% as at June 2006. Auckland represents the major regional driver of the New Zealand economy. Auckland currently accounts for approximately 33% of the country’s total population, approximately 50% of New Zealand’s total GDP and approximately 31% of total employment according to the New Zealand Institute of Economic Research and the New Zealand Department of Labour.

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3.2 Media ownership reform in Australia On 14 September 2006, the Australian Parliament introduced three key pieces of legislation that make up the Australian Federal Government’s media reform package which was subsequently passed by Parliament on 18 October 2006 and commenced 4 April 2007. The three key pieces of the media reform package are: x Broadcasting Services Amendment (Media Ownership) Act 2006 x Broadcasting Legislation Amendment (Digital Television) Act 2006 x Communications Legislation Amendment (Enforcement Powers) Act 2006. The most pivotal change stemming from these reforms is the easing of the current restrictions on cross and foreign ownership in the media sector. The key changes in legislation that may have an impact on industry players such as APN are summarised in the table below.

Table 1: Comparison of the current and new media ownership framework

Current regulations New regulations

Cross-media ownership x Prevents an individual (whether as an owner x Cross media ownership may be allowed, or a director of a media company) from subject to the following two safeguards: exercising control of both a television - there remain no fewer than five broadcasting licence and a commercial radio independent players in metropolitan broadcasting licence or newspaper in the same markets and no fewer than four licence area. independent players in regional markets A person may not control commercial x - a prohibition on owning more than two television licences reaching an audience of out of three types of business in the same more than 75% of Australian population. market. x The allowable ownership of radio stations per defined licence area should be two stations. This restriction remains in force with the new legislation.

Foreign media ownership x The Foreign Acquisitions and Takeovers Act x All current restrictions on foreign media 1975 (“FATA”) applies to any significant ownership in both the FATA and the BSA are purchase of an Australian media asset by a to be removed. foreign party. FATA empowers the Federal x Media will be retained as a ‘sensitive sector’ Treasurer to examine proposals by foreign under the Foreign Investment Policy. A persons to acquire any Australian media ‘sensitive sector’ requires any proposal by assets. The effect of the FATA is to limit foreign interest to directly invest within the foreign ownership to 30% in aggregate for Australian media sector, irrespective of size, to national and metropolitan newspapers and be approved by the Federal Treasurer. 50% for provincial and suburban newspapers. x The Broadcasting Services Act 1992 (“BSA”) prohibits a foreign person from exercising control of a commercial television broadcasting licence and two or more foreign persons from having an interest in a company in a commercial television broadcasting licensee that exceeds 20%. x BSA also prevents a foreign person from having a company interest exceeding 20% in a subscription television broadcasting licence.

Source: Deloitte analysis, Broadcast Services Amendment (Media Ownership) Act 2006

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As evidenced by recent transactions announced in this sector, the easing of the cross and foreign media ownership restrictions is expected to encourage consolidation within the Australian media industry and an inflow of foreign direct investment. However, cross-media transactions will not be allowed to the extent that they result in fewer than four commercial media groups in regional markets or five in mainland state capitals. To ensure that the levels of competition and regional coverage are not compromised as a result of the reforms, the Australian Federal Government will maintain the role of the Australian Competition and Consumer Commission (“ACCC”) and provide additional regulatory powers to the Australian Communications and Media Authority (“ACMA”). To ensure that the media reforms do not compromise the level of regional content, the Government will also introduce ‘Regional Service Protections’. The Australian Federal Government intends to legislate some licence conditions for regional commercial television in Queensland, New South Wales, Victoria, South Australia, Western Australia and Tasmania in order to provide minimum levels of content on matters of local significance. These conditions also cover regional commercial radio licensees, which are required to broadcast minimum local content, including news, local community service announcements and local emergency warnings. In addition, regional commercial radio licensees are required to submit a local content plan to ACMA for approval and registration if the following changes occur: x the licensee becomes part of a cross media group x there is a change in the control of the licence x the format of the service is narrowed x the minister directs ACMA to consider imposing greater local content requirements. The ACMA will review and ensure the licensee’s compliance with their local content plans and licence conditions. 3.3 Advertising in the media industry The traditional forms of media being print, television and radio, all compete against each other for advertising dollars. The increased penetration of the Internet into households in the early 1990s has seen the emergence of a new, lower cost advertising medium. Estimates of the level of advertising revenues for each of these types of media as set out in Figure 3 and Figure 4 below show that whilst newspapers and television hold the dominant market shares in Australia and New Zealand, online advertising has captured increasing market share, particularly in Australia. Over the past decade, online advertising has recorded unprecedented growth and is the fastest growing advertising medium. Radio holds a small share of total advertising revenue with approximately 9.0% of advertising revenue in Australia and 12.0% in New Zealand. However, in regional areas radio plays a much more significant role compared to metropolitan areas and radio operators, similar to newspapers and television in certain markets, are often in a monopolistic or duopolistic competitive position within a specific region.

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Online advertising revenue in Australia, excluding search and comprising online display and classified advertising, increased by approximately 60% in the first half of 2006 compared to the same period in 2005. Total online advertising revenue accounted for approximately 6.0% of total Australian advertising revenue. This proportion is expected to grow to 18.0% by 2015 according to “Caught by the Net”, a report by ABN AMRO dated 27 June 2006 (the “ABN AMRO Report”). Due to a lower penetration of broadband Internet, online advertising in New Zealand is in a relatively early stage, accounting for only a small proportion of total New Zealand advertising revenue despite recording significant growth in 2005. Over time, shares of advertising dollars spent on each form of media will vary with economic activity, population demographics and structural changes within the advertising industry. Generally, during times of low economic activity, the impact is greatest on television advertising through a decline in advertising rates. Nonetheless, radio and newspaper advertising are also affected by these factors with a considerable impact on volumes and rates during times of low economic growth. The figures below set out the historical and forecast proportions of advertising revenue captured by each advertising medium in Australia and New Zealand.

Figure 3: Australian advertising composition (%) Figure 4: New Zealand advertising composition (%)

40% 40%

35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 5% 10%

0% 5%

F 5A 06 07F 08F 09F 10F 11F 12F 13F 15F 0% 0 0 20 20 20 20 20 20 2 20 20 2014F 20 03A 04A 07F 08F Television Metropolitan newspapers 20 20 2005A 2006A 20 20 2009F 2010F Regional/community newspapers Radio Magazines Online Newspapers Television Radio Outdoor Other Magazines Other Online Source: Source: Commercial Economic Advisory Service of Australia (“CEASA”), ABN AMRO Report Source: Advertising Standards Authority Inc (“ASA”), UBS analyst report dated 7 September 2006 (“UBS Report”) Figure 3 above highlights the expected increase in penetration of the online sector in the Australian advertising market. The online sector’s main source of market share is expected to come from newspapers, in particular classifieds advertising. Total advertising revenues are forecast to grow at a CAGR of 5.1% to 2015. Regional and community newspapers are expected to achieve a CAGR of 2.7% whilst online advertising and outdoor advertising are expected to grow at significantly higher rates of 14.9% and 6.0%, respectively according to the ABN AMRO Report. In New Zealand, newspapers currently hold the largest market share of advertising revenue at approximately 36%, although this share is expected to decline in the medium term according to the UBS Report as newspapers lose market share to the online sector. Total advertising revenue is forecast to grow at a CAGR of 4.0% over the period to 2010 whilst online advertising is expected to grow at a much higher rate of 37.0% over the same period as this sector is currently in a relatively early stage of development in New Zealand.

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3.4 The newspaper and magazine publishing sectors

3.4.1 Overview The newspaper publishing industry consists of several different newspaper segments based on geographical circulation: x metropolitan and national daily newspapers x metropolitan Sunday newspapers x regional newspapers consisting of daily and non-daily newspapers either distributed free of charge or at the cover/subscription price x suburban newspapers, which are usually distributed free of charge x other newspapers, which do not fall within the classifications above. The magazine publishing industry consists of magazines which are published regularly (more than once a year) and are either sold through retailers or by subscriptions or distributed free of charge to the recipients. The general classifications of magazine types offered by APN are: x women's magazines x business magazines x general magazines. Our discussion in this section focuses on the segments in which APN operates, namely the Australian regional newspaper publishing sector and the New Zealand metropolitan and regional newspaper and magazine publishing sectors.

Australian regional newspaper publishing Australia's newspaper industry includes the following publications: x two national daily newspapers, the Australian and the Australian Financial Review, both of which are circulated from Monday to Saturday x Sydney and Melbourne, Australia’s two most populous cities, are each served by two daily and two Sunday newspapers, while the other capital cities have one daily and one Sunday newspaper each x 35 major regional newspapers, one of the sectors within which APN operates x a wide selection of local community newspapers. In comparison to metropolitan newspapers, regional newspapers generally tend to earn a lower proportion of advertising revenue from classified advertising and a larger proportion from display advertising according to CEASA. Classified advertising is considered to be more strongly driven by economic growth cycles relative to display advertising which causes regional newspapers to be somewhat less sensitive to fluctuations in the economic cycle compared to metropolitan newspapers. The Australian newspaper publishing industry was estimated to generate revenue of approximately $4 billion in 2006 according to the ABN AMRO Report.

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The figure below illustrates the respective shares of the newspaper publishing industry for the above newspaper segments as at December 2005:

Figure 5: Australian newspaper publishing advertising expenditure composition

Suburban newspapers 18%

Regional non-dailies 9%

Total regional 21%

Metropolitan/National Regional dailies dailies 12% 61%

Source: CEASA In 2005, regional newspaper publishing in Australia generated advertising revenue of approximately $785 million, representing an increase of 6.4% compared to 2004. The figure below sets out the circulation details of regional newspaper by state in 2006.

Figure 6: Regional newspaper circulation by state

Western Australia New South Wales 3% (including Australian Victoria Capital Territory) 18% 25%

Tasmania 4% Northern Territory 1% South Australia 5%

Queensland 44%

Source: Audit Bureau of Circulations (“ABC”) Queensland has the largest volume of regional newspapers despite being the third largest state in terms of population. This can be explained by the fact that Queensland is Australia’s most decentralised state with approximately two third of Queensland’s population residing outside Brisbane.

New Zealand newspapers New Zealand has a large number of daily newspapers in relation to its population size, producing 23 daily newspapers, 16 of which are evening papers and seven of which are morning papers. The largest of the seven morning papers is The New Zealand Herald, which is published by APN and has an audited circulation of nearly 200,000 copies daily and an estimated daily readership of 568,000.

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Prior to 2004, there were two national Sunday newspapers, the Sunday Star Times and the Sunday News, with a circulation of approximately 100,000 and 200,000 copies, respectively. During 2004, APN’s the Herald on Sunday was introduced and now has a circulation of over 90,000 copies. The New Zealand market operates largely as a duopoly with APN and Fairfax owning 92% of audited daily press circulation of regional and national newspapers.

New Zealand magazines The Magazine Publishers Association of New Zealand (“MPA”) estimates that there are currently more than 5,500 magazine titles in circulation in New Zealand, of which about 700 are published in New Zealand each year. Despite the fact that more than 1,500 of the circulated magazines are sourced from Australia, the biggest selling titles are those published in New Zealand. The ABC in New Zealand estimates that since 1990 audited magazine titles have increased from 56 to 192. Based on MPA estimates, New Zealand's per capita consumption of approximately 30 magazine copies per annum is greater than that of the United States (23) and Australia (25) and comparable to the United Kingdom (31). This represents an estimated total expenditure by New Zealanders on magazines of New Zealand dollars (“NZD”) 260 million annually. The following figure sets out the relative revenue for the major participants in New Zealand’s magazine publishing sector for the six months to 30 June 2006.

Figure 7: New Zealand magazine industry segmentation by revenues

ACP Media 20%

Other 45% Fairfax Group 15%

APN 6% Pacific Readers Digest 4% Time 3% NZ Rural Press 1% 6% Source: ABC

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3.4.2 Demand determinants The demand for newspapers and magazines and the related advertising expenditure within a particular region is influenced by: x the level of newspaper/magazine concentration within the region x population demographics, in particular the size, age and level of education of the population, which will influence the circulation and readership levels x economic factors, in particular household disposable income and GDP growth will influence advertising demand. For both regional and national publishing, a large proportion of advertising expenditure is spent on classified advertising. The level of classified advertising is affected by consumer spending, the strength of the property market, employment levels and overall economic conditions. For example, real estate classified volumes are affected by the strength of the residential property market which often follows cyclical economic growth patterns. Employment classified volumes, on the other hand, are affected by job availability and unemployment rates x the price of advertising space in newspapers also affects demand for advertising in newspapers and the competitiveness of newspapers relative to other forms of advertising media.

3.4.3 Critical success factors

Newspapers The performance of participants in the national and regional newspaper publishing industry is dependant upon the following factors: x revenue generated through advertising, which is the primary driver of profitability in this sector. Newspapers accounted for approximately 37% of total advertising revenue in New Zealand and 38% in Australia in 2005 as set out in Figure 4 and Figure 3 respectively. The level of advertising revenue generated will be dependent on the attractiveness of the publication to advertisers, in particular retail, employment and real estate advertisers. Factors influencing advertising demand will include circulation and readership figures, the demographic profile of the readership and the relationship with advertising agencies and direct advertisers x revenue generated through circulation levels. National newspapers charge a cover price for purchase and this represents approximately 20% to 25% of revenue. This revenue is dependent on circulation levels which are maintained through the provision of a strong masthead and the quality of the content x regional newspapers also need to develop a regional identity, with relevant content and editorials, in order to remain relevant to readers.

Magazines The performance of participants in the magazine publishing industry in New Zealand is dependant upon the following factors: x revenue generated through advertising. The quality of magazines will affect the level of revenue gained from advertising. Advertisers are willing to pay higher advertising rates in high quality and/or specialist magazines to target selected audience groups rather than a mass audience in general magazines

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x readership levels. Weekly magazines and business weekly newspapers retain the highest circulations and rely on loyalty to brands. Magazine brand loyalty provides advertisers with more certainty which allows them to reach specifically targeted consumers on a weekly basis.

3.4.4 Barriers to entry The major barriers to entry to the newspaper and magazine publishing industry in Australia and New Zealand are detailed below: x high distribution, marketing costs and operating losses during the start-up period, which requires significant capital injections prior to attaining profitability x economies of scale which can be achieved by larger participants can make it cost prohibitive to set up a daily publication in certain markets x the level of concentration in the market is currently high and it will be difficult for new operators to capture market share from incumbents with established customer bases and mastheads, although niche opportunities may still exist x capital costs of large scale printing facilities.

3.4.5 Regulation

Australia Newspapers are subject to the same media regulations discussed in Section 3.2. However, at present there is no specified limit on non-voting foreign ownership in newspapers. Unique to this section of the media industry, environmental pollution control regulations also apply. All major newspaper publishers in Australia are members of the Publishers National Environment Bureau, which considers environmental aspects including increasing recycling and recovery rates for old newspapers and magazines.

New Zealand New Zealand does not have the same cross and foreign media ownership regulations that are present in the Australian industry. Currently, the New Zealand newspaper publishing industry is monitored by The Press Council New Zealand (“The Press Council”). The Press Council is a self-regulatory body founded in 1972 and its primary duty is the investigation and adjudication of complaints against newspapers in New Zealand. The New Zealand magazine publishing industry is largely self-regulated through bodies such as the MPA, the Communication Agencies Association New Zealand, the Association of New Zealand Advertisers and the Newspaper Publishers Association.

3.4.6 Current and future expectations

Australia In recent years, the demand for classified advertisements in newspapers has benefited from strong growth in the employment, real estate and motor vehicle sales markets. In particular, free suburban newspapers have benefited from the strong growth in real estate advertising during this time. Similarly, in this period, demand for employment-related classified advertising have benefited from higher growth in white-collar employment compared to growth in total employment. In the next five years, growth in advertising revenue is expected to be moderate in line with the growth of the overall Australian economy. 34 Deloitte: APN News & Media Limited 90 APN NEWS & MEDIA SCHEME BOOKLET

Any downturn in the employment cycle is likely to have an adverse effect on the volume and yield of employment classifieds. Australia and New Zealand Banking Group Limited’s (“ANZ Bank”) index of job advertisements found that the number of job advertisements in major metropolitan newspapers and on the Internet fell by 3.5% month on month in December 2006. In New South Wales and Victoria, the number of job advertisements fell by 17.5% and 12.0%, respectively, during the year ended 31 December 2006, in contrast to large increases in Western Australia, Queensland and the Northern Territory. In regard to automobile classifieds, the large volumes of new cars sold in 2006 are likely to translate into a decrease in the volume of used automobile classifieds in the short to medium term. Approximately 962,000 new cars were sold in Australia in 2006, slightly less than 2005, which was the strongest year on record for new car sales. Online news services have been seen as emerging competitors for traditional print newspapers for advertising spend. Analysts estimate that online classified advertising and display advertising make up 11.0% and 2.4% of total classified and display advertising in Australia, respectively. It is expected that online classifieds will continue to gain market share from the print media sector and future growth in this sector will be captured by online operators. The increasing popularity of the Internet and online classifieds is likely to have a greater impact on metropolitan newspapers relative to regional newspapers, explained partly by the slower penetration of broadband technology in regional and rural areas. Additionally, in many regional and rural communities, newspapers appear to remain the principal and preferred news medium. However, the penetration of online advertising in metropolitan areas may also be limited by the fact that agencies (such as real estate) use this advertising as a means to build their brand which may be more difficult in an online environment. The figure below sets out the size and growth of the Australian newspaper advertising market by revenue over the period from 2005 and the forecast growth from 2006 to 2015.

Figure 8: Australian newspaper advertising market

5,000 CAGR 2.1% 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500

Australian newspaer advertising market advertising newspaer Australian 0 2006F 2007F 2008F 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2005A

Source: ABN AMRO Report

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According to the ABN AMRO Report, Australian newspaper advertising revenue is expected to grow at 1.7% in 2007 due to moderate economic growth. The CAGR for the newspaper industry during the period 2006 to 2015 is forecast to be 2.1% while newspaper circulation spending and readership are forecast to decline at an average of 1.5% per annum over the next 10 years according to the ABN AMRO Report. The medium term outlook for publishing in Queensland is positive since the economic growth in the short to medium term is expected to outpace the growth in other regions such as New South Wales and Victoria. This is due to strong demand for resources, low unemployment and a strong pipeline of infrastructure development projects in the Queensland region which is expected to contribute to strong growth in advertising demand. In the five years to 2005, commercial printing industry revenue has been estimated to have declined at an average annualised real rate of 3.0% according to IBISWorld Pty Limited (“IBISWorld”). This trend was largely attributable to a decline in real unit price as a result of increased competition from overseas and a continued rise in input costs. Year on year growth for the printing industry is expected to be 2.0% during 2006 to 2010 according to IBISWorld.

New Zealand Newspaper circulation is expected to decline in New Zealand as consumers continue to receive more of their news and information from television and the Internet. The figures below detail the size and industry growth of the New Zealand newspaper and magazine publishing market from 2003 to 2010.

Figure 9: New Zealand newspaper advertising Figure 10: New Zealand magazine advertising market(NZD’m) market (NZD’m)

1,000 CAGR 1.9% 300 900 CAGR 3.0% 800 250 700 600 200 500 150 400 300 100 200 100 50 0 0 New Zealand New market magazine advertising 2007F 2008F 2009F 2010F 2003A 2004A 2005A 2006A New Zealand New publishing market advertising 2007F 2008F 2009F 2010F 2003A 2004A 2005A 2006A

Source: ASA, UBS Report Source: ASA, UBS Report As set out above, the newspaper publishing market achieved relatively high levels of growth during 2003 and 2004, underpinned by a buoyant advertising market in New Zealand over that period. In 2005 these markets continued to grow, albeit at a declining rate. As set out in Figure 9 above, CAGR for the New Zealand newspaper publishing market from 2006 to 2010 is expected to be 1.9%, which is lower than the CAGR for the Australian newspaper publishing market of 2.1%. The revenue of the New Zealand magazine industry is expected to grow at a moderate rate of 3.0% over the same period.

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3.5 The radio broadcasting sector

3.5.1 Overview APN operates, through joint ventures, primarily metropolitan radio stations in Australia and New Zealand and regional radio stations in New Zealand. Since the radio broadcasting industries in Australia and New Zealand vary in terms of their market structure and regulatory regime, we have provided a separate overview of the radio sector in each market.

Australia The Australian radio broadcasting industry is a mature industry that comprises both commercial and public radio broadcasting, with commercial radio broadcasting accounting for over 90% of the industry’s turnover. Statistics from Commercial Radio Australia suggest that radio reaches 78% of the Australian population over the age of 10, which indicates that radio is a highly effective advertising medium. Advertising revenues account for over 90% of commercial radio broadcasting revenues, of which approximately 66% of total advertising revenue is attributed to commercial metropolitan radio with the remaining 34% to regional radio. Commercial metropolitan radio stations generate approximately 62% of their advertising revenue from national business and the approximately 38% from local businesses. On the other hand, regional radio stations generate approximately 23% from national business with the remaining 77% generated from local businesses. There are 261 commercial radio stations in operation across Australia. The majority of Australia’s radio stations are located in regional areas with 48 located in metropolitan areas. However, regional radio stations reach lower numbers of listeners relative to metropolitan radio stations. Currently, there are 35 operators that own commercial radio stations. Of the 35 operators there are 12 major radio networks, which own 80% of the 261 commercial radio stations. In 2006, radio advertising in Australia is expected to have generated annual turnover of $907 million as detailed in the figure below.

Figure 11: Australian radio advertising industry ($’m) Figure 12: Australian radio broadcasting industry metropolitan profile

1,600 CAGR 4.7% 4,500.0 12 1,400 11 11 4,000.0 1,200 10 3,500.0 1,000 3,000.0 8 8 n ('000)n 800 2,500.0 6 6 6 600 opulatio 2,000.0 400 4 4 1,500.0 4 Number of radioNumberofstations

200 p Estimated Australian radio advertising market advertising radio Australian 1,000.0 2 2 0 500.0

0.0 0 2006F 2007F 2008F 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2005A SYD MEL BRI PER ADE HOB DAR CAN

Population ('000) Commercial radio stations

Source: ABN AMRO Report Source: Commercial Radio Australia

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Australian radio advertising revenues have risen steadily in recent years; including 6.7% growth in 2005 which was largely driven by strong advertising demand as a result of buoyant domestic economic conditions. The industry growth rate has since declined reflecting a general slowdown in the Australian economy. The Australian radio advertising industry is expected to grow at a CAGR of 4.7% until 2015 according to the ABN AMRO Report. In calendar year 2006, commercial metropolitan radio stations recorded advertising revenue of approximately $600 million, which represented an increase of 1.4% from the previous year. In terms of capital city focus, approximately 36% of metropolitan advertising dollars spent on radio are in the Sydney market, 28% in Melbourne, 15% in Brisbane and the remainder is split between Adelaide and Perth. Both Perth and Brisbane recorded strong growth of 7% and 6% respectively in 2006, while the Sydney market declined by 5%, primarily driven by the weaker New South Wales economy. Digital radio remains a potential opportunity for radio broadcasters in Australia. Two major trials of digital radio are being conducted in Sydney and Melbourne with full digital radio services expected to be offered from 1 January 2009. Most commercial radio stations are trialling digital radio through Commercial Radio Australia. In October 2005 the Australian Government gave mainstream radio companies exclusive rights to launch digital radio for six years and in April 2006 announced that it would license digital radio services to start from 1 January 2009 in urban areas. The opportunities for generating commercial returns from digital radio are still being evaluated so the future impact on the industry remains uncertain.

New Zealand Since 1989, when radio services in New Zealand were deregulated, there has been a significant change in the structure and market mechanisms of radio broadcasting. In 1989, a range of broadcasting reforms were introduced and as a result frequencies were auctioned and frequency owners were given trading rights. Just prior to the reforms, there were 47 AM and 17 FM stations broadcasting in New Zealand, 30 of which were privately owned. The number increased to approximately 300 commercial stations by 2000, serving a population at the time of 3.5 million people, giving rise to one of the highest ratios of commercial radio stations per capita in the world. Due to the large number of radio stations and formats in New Zealand the cost per listener of radio broadcasters in New Zealand is higher relative to other markets, such as Australia. Commercial radio in New Zealand essentially operates as a duopoly between The Radio Network (“TRN”) and RadioWorks New Zealand Limited (“RadioWorks”). TRN was created as a result of the sale of the commercial operating arm of the state broadcaster Radio New Zealand (“RNZ”) in 1996. TRN operates 120 radio stations across the country and is a wholly owned subsidiary of Australian Radio Network (“ARN”), APN’s joint venture with Clear Channel Communications Inc (“Clear Channel”). RadioWorks operates eight brands and is owned by CanWest MediaWorks Limited (“CanWest”), which is 70% owned by CanWest Global Communications Group (“Canwest Global”). Canwest Global has recently announced its intention to sell all of its assets in Australia and New Zealand, including RadioWorks.

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RNZ, the public radio broadcaster, is a government funded provider of a commercial-free service. RNZ has three principal radio stations: x National Radio, a news and information programme with a strong commitment to New Zealand culture x Concert FM, focusing on classical music x Radio New Zealand International, a shortwave service broadcasting to the Pacific Islands.

3.5.2 Demand determinants The demand for the radio broadcasting sector is influenced by: x advertising trends in Australia. National advertising campaigns comprise approximately 50% of the radio advertising market as a whole. Radio is impacted by shifts in advertising spend but to a lesser extent than other forms of traditional media. Regional radio has less exposure to national advertising relative to metropolitan radio x advertising trends in New Zealand. Whilst there are significant national radio networks in New Zealand, it is possible to target each regional area by broadcasting local commercials in pre-defined time slots which is an attractive feature for advertisers x economic activity. The level of economic activity significantly influences the performance of the radio broadcasting industry in Australia and New Zealand through its impact on advertising expenditure, the main driver of commercial radio revenues. The performance of regional radio stations is further linked to the state of the specific regional economies in which they operate. The macroeconomic conditions in Australia and New Zealand are discussed in Section 3.1 x population and demographic trends. The specific population and demographic characteristics that affect the industry include population growth rates, age structure, educational qualifications and occupation. Variations in these characteristics affect the level and type of advertising and also advertising rates. Population and demographic trends in Australia and New Zealand are discussed in Section 3.1.1 x the relative attractiveness of the listeners from the perspective of the direct and agency advertisers will influence the level of advertising dollars spent on radio.

3.5.3 Critical success factors Commercial radio stations compete on format and use a mix of programming and radio personalities to target a specific demographic which in turn attracts different types of advertisers. The success of a radio station depends on the following factors: x the ability to attract and maintain a dedicated and loyal target audience. The establishment and maintenance of a dedicated audience and, in particular, the broadcaster’s ability to constantly monitor changes in this audience’s tastes and adjust the mix of programming accordingly x having a sales force adept at identifying advertising opportunities for direct and agency advertisers x ensuring an appropriate competitive response to advertising spend on other media sources and new technology x a significant proportion of radio advertising in New Zealand is spent in the Auckland market so having a regional presence in Auckland is critical.

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3.5.4 Barriers to entry The major barriers to entry to the radio broadcasting sector in Australia and New Zealand are detailed below: x access to broadcasting licences, particularly in Australia where there will be a six year moratorium on new licences when digital broadcast commences x high distribution costs, marketing costs and operating losses during the start-up period, which require significant capital injections prior to attaining profitability x the level of concentration in the market is currently high particularly in New Zealand and since most formats are already offered by the incumbents it will be difficult for new operators to capture market share.

3.5.5 Regulation

Australia The Australian Federal Government regulates the entry of new competitors into the radio services market through ACMA, which is responsible for the issuance of new radio broadcast licences under Section 36 of the BSA. Once a licence is granted, it is generally renewed every five years, at no cost. Section 39 of the BSA allows the ACMA to issue a supplementary licence to an existing Section 36 licensee in a licence area, if it believes that an additional commercial licence can be supported. Recently, the ACMA has been issuing a number of new community licences in regional areas and a small number of new commercial licences. Current commercial licences in Australia have in effect been offered into perpetuity. The cost of the licence is based on an initial capital sum and a relatively nominal annuity payment.

New Zealand Broadcasting standards in New Zealand are regulated by the Broadcasting Standards Authority (“BSA NZ”), under the Broadcasting Act 1989. Legal limitations on foreign ownership of New Zealand broadcasting companies were removed in 1991. It is recognised that the current regulatory regime is somewhat dated as the introduction of competing technologies allows access to audio programming from sources other than radio, such as online. Often these sources originate overseas and are beyond the reach of the existing regulatory regime. Radio broadcasting rights take the form of long-term and tradeable property rights for the use of the radio spectrum. Under the current regulatory regime, licence rights allow the holder to broadcast radio transmissions and for those transmissions to be received by listeners without interference. Radio spectrum licences are regulated under the Radio Licensing Regime and an annual administrative fee is payable. Current commercial licences in New Zealand are due to expire in 2011; however, the government has announced it will offer all incumbents the opportunity to renew licences for a further 20 years following a licence fee payment. The amount of the licence fee payment for the industry in total has been capped at NZD96 million. Similar to Australia, digital radio remains a potential opportunity for radio broadcasters in New Zealand. Trials are being conducted over 2006 and 2007 with an engineering and policy position expected to be tabled over 2007.

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3.5.6 Current and future expectations As set out in Figure 11, according to ABN AMRO, radio revenues in Australia are expected to grow at an annual average growth rate of 4.7% until 2015. In New Zealand, the lack of a significant regional television presence has increased the demand for regional radio content and therefore advertising, in regional areas. The introduction of new technology, in particular online, digital radio and satellite radio may have a significant effect on the radio broadcasting industry in Australia and New Zealand. However, the ultimate effect of these new technologies on consumption patterns, other advertising media and internal industry competition remains uncertain and will, in part, be determined by the way in which industry participants adapt to these changes. 3.6 The outdoor advertising sector

3.6.1 Overview The outdoor advertising industry has been traditionally associated with billboards; however, media operators in the past decade have become more innovative in designing other mediums to utilise in the display of advertisements. Advertisements are now being placed on the following outdoor structures: x large format-billboards, supersites and spectaculars. Large format-billboards are larger versions of the traditional size billboards. Supersites are usually 42 square metres in size, illuminated or backlit with panels that can be rotated to add more flexibility. Supersites are generally located on major highways and urban arterial routes. Spectaculars are billboard displays that are larger than 42 square metres x street furniture, including bus and tram shelters, kiosks and telephone booths x posters, which encompass the traditional size billboards, typically under 18 square metres x transport vehicles including buses, taxis and trams.

3.6.2 Demand determinants The demand for outdoor advertising is influenced by the following factors: x economic activity. The level of economic activity significantly influences the performance of outdoor advertising industry through its impact on advertising expenditure x population and demographic trends. The specific population and demographic characteristics that affect the industry include population growth rates, age structure, educational qualifications and occupation which affect the type of advertising and the level of advertising spend x advertising trends. Outdoor advertising is increasingly seen as an attractive and effective advertising medium as evidenced in its historical and forecast growth rates as discussed in Section 3.6.6 x the relative attractiveness of the outdoor sites and locations which is determined by volume of traffic, audience delivery and prices. The profile and position of the advertisement structure affects demand for advertising and is a key determinant of pricing.

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3.6.3 Critical success factors The performance of participants in the outdoor media industry in Australia, New Zealand and other Asian countries is dependent upon following factors: x identifying and commercialising new technologies and outdoor formats x establishing relationships with the relevant Government authorities that oversee the tendering for public land or property advertising increases the likelihood of success in the tendering process x managing the maturity profile of the portfolio of site contracts to minimise the amount of contract renewal risk in any given period x the profile and position of the advertisement structure affects demand for advertising and the rates that can be charged x the relative cost efficiency compared with other advertising mediums can affect the success in the outdoor media industry x ability to identify site traffic by demographic is key to attracting advertisers. This will become increasingly important as the uniform outdoor measurement system is implemented as discussed in Section 3.6.6.

3.6.4 Barriers to entry The following barriers to entry exist to new participants in the Australian and New Zealand outdoor advertising industry: x large capital expenditure requirements to obtain structures in prime locations x local government approvals required to display advertising on outdoor structures x large established companies who can utilise economies of scale and existing relationships with advertising firms x since a large number of counterparties granting outdoor advertising contracts are government agencies, the inability to meet stringent probity, reputational and financial requirements for obtaining government contracts may act as a barrier to entry for some potential participants x a significant majority of the market is currently held by three outdoor advertising operators.

3.6.5 Regulation The outdoor media industry is represented by the Outdoor Media Association in Australia (“OMA”). OMA is an industry body representing the majority of outdoor media contractors and production facilities. The OMA’s charter is to self-regulate and promote outdoor media and protect the interests of its members. As members of the OMA are not advertisers they are not subject to any advertising regulations that advertising agencies are required to follow in producing advertisements on outdoor structures. However, they are subjected to the following government approvals: x structural approval. Outdoor advertising generally consists of both a built form or structure and the advertisement that appears on it. The structural approval process is regulated by local Governments and this legislation varies from state to state (and by territory). The nature of the approvals required depends on the size and location of the structure and sometimes more than one approval may be required

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x public land approval. Displays on public land or property are usually a matter of tender and the subsequent contract will be between the government landowner and the outdoor media owner. Even after a successful tender there may be other statutory approvals required. The Outdoor Media Group (“OMG”) provides a similar function for market participants in New Zealand.

3.6.6 Current and future expectations

Australia and New Zealand The figure below details the size and growth profile of the outdoor advertising market by revenue and industry growth year on year for Australia from 2005 until 2015.

Figure 13: Australian outdoor advertising market

700 CAGR 5.0% 600

500

400

300

200

100

Australian outdoor advertising market advertising outdoor Australian 0 2007F 2008F 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2005A 2006A

Source: ABN AMRO Report , OMA Between 2004 and 2006, revenue generated by the Australian outdoor media industry increased by 15.9%, including growth of 7.1% for 2006. This high level of growth is expected to continue according to the ABN AMRO Report, with outdoor advertising revenue expected to grow at a CAGR of 5.0% over the period 2006 to 2015, which is more than double the forecast CAGR of the newspaper publishing industry. The New Zealand outdoor media industry is expected to grow at a lower rate than the Australian market over this period.

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The breakdown of 2006 forecast revenue by Australian outdoor media format is set out in the figure below.

Figure 14: The breakdown of revenue by outdoor media format in Australia for 2006 Posters 7%

Transit 21% Street furniture 40%

Large format 32% Source: OMA

As set out in the figure above, street furniture accounted for the largest share of outdoor media revenue in 2006. The OMA attributes the upturn in outdoor media revenue to the decision to consolidate its marketing efforts amongst advertisers and media buyers through the Outdoor Marketing Group. In addition, the planned launch of a uniform outdoor measurement system in 2008 is expected to enhance the ability of outdoor media owners to sell the advertising locations on the basis of audience delivery rather than on a heavily qualitative site-by site basis. This in turn is expected to contribute to further growth prospect in the outdoor advertising sector. OMA has seen an increasing number of advertisers incorporating outdoor into their media mix, as well as greater saturation of the medium by individual clients seeking a strategic advantage over their competitors.

Other countries Current and future expectations for specific Asian countries in which APN operates are discussed below: x Hong Kong’s outdoor advertising sector recorded an increase in total revenue from 2004 to 2005 driven by the installation of liquid crystal display billboards in shopping areas, office elevator lobbies, trains and underground train tunnels. Future growth is expected in this segment but at lower rates than recently experienced x Malaysia, with forecast revenue of USD10 million for 2006, is one of the smallest outdoor advertising sectors in the Asia Pacific region x Indonesia has recorded consistent double digit growth, ranging from 16.7% to 25.0% since 2002 and has a forecast CAGR of 13.9% over the period from 2006 to 2010. Indonesia is also one of the smallest outdoor advertising sectors in the Asia Pacific region with 2006 forecast revenue of USD14 million.

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3.7 The online media sector

3.7.1 Overview Online media is a diverse sector, with a wide variety of services offered. This section focuses on the core business areas of APN’s online operations, namely news portals, directories and classified advertisements. Industry participants estimate that the Australian employment classified sector alone had annual revenues of approximately $530 million in 2005, of which approximately 19% was online expenditure according to CEASA. It is expected that online classifieds will continue to gain market share from the print media sector, in particular for line advertisement and future growth in the sector will be captured by online operators. Most publishers have identified this trend and have adopted an online strategy which integrates online and traditional print offerings.

3.7.2 Demand determinants The demand within the online sector is influenced by the following critical factors: x the level of Internet usage and access to broadband services. In Australia, it is estimated that Internet household penetration is 78% and the popularity of broadband in households has increased, while access, through increased competition, has become cheaper. Broadband penetration in New Zealand has been less rapid although recent regulation changes are expected to accelerate this penetration x growth in online expenditure. Coinciding with the increase in broadband connections is the level of expenditure on online advertising. Research has shown that broadband users spend a higher amount of time online than dial-up users. They also visit more websites and purchase more products online. Broadband has also improved the quality of online advertising as it is better able to download full-motion video advertisements. Other trends include sponsored keyword searches, rich-media advertising and the entrance into online advertising by a broad range of advertisers x changing social trends. In addition to increases in the proportion of the population using computers, a higher proportion of people are now looking to the Internet to purchase goods and services. In terms of online classifieds, people are increasingly utilising online real estate, employment and car sales websites as an important tool in their purchase decision. This is particularly the case for lower yielding classifieds, such as rental accommodation and more junior job advertisements, as opposed to upper median house sales and executive job advertisements, which research shows, continue to receive significant benefits from print media advertisements x general economic conditions. The online classifieds market, particularly real estate and employment classifieds, is impacted by the general market outlook for macroeconomic indicators such as economic growth and interest rates. However, the online segment is significantly less sensitive to economic cycles in comparison to other forms of media such as publishing and radio.

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3.7.3 Critical success factors Success and growth within the online sector relies on: x providing a platform for brand building for classified advertisers, in particular real estate agencies x the ability to attract and retain high quality employees. Within the Internet industry there is significant demand for employees with the relevant skills and experience. As such, significant effort is required to ensure low levels of turnover within a company’s workforce x the ability to react to changes in the competitive environment. Online classifieds and news information services are highly competitive with new and existing competitors seeking to increase their market share through innovative offerings x providing incentives for users to access websites such as low cost advertising, convenience and detailed search capability x reaching a critical mass of user traffic quickly provides significant ongoing benefits as economies of scale are achieved and a particular site becomes more relevant to all users (both buyers and sellers).

3.7.4 Barriers to entry While the online media sector has relatively low technology and cost barriers to entry, online classifieds and online news information sectors are considered to have medium level barriers to entry due to the following factors: x the time involved establishing a reputation for a quality site which is easy to navigate and has sufficient, high quality information x demand for individuals with the technical capabilities in Australia and New Zealand is relatively high x existing publishers or other media providers may be able to use existing content and capabilities to cross-sell an online product which may be difficult to overcome for a potential competitor without these resources x incumbent competitors with large market shares in established markets create barriers to entry by reason of their market strength. Companies with an existing brand in the classifieds market, such as local and national newspapers, are likely to have a distinct advantage over start-up companies, regardless of the quality of the technology as they have an existing customer base from which to leverage their growth and achieve the critical mass required for profitability.

3.7.5 Regulation Laws regulating online activities are generally aimed at governing access to gambling and adult websites. Laws are covered by both Federal and State legislation in Australia. Federal law applies to Internet Content Hosts and Internet Service Providers but not to content providers and creators or ordinary Internet users. Organisations are required to delete content from their servers that is considered objectionable or unsuitable for minors on receipt of a take-down notice from the ACMA.

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Australian State and Territory criminal laws apply to content providers and creators and ordinary Internet users. Some laws enable prosecution for making available material that is objectionable or unsuitable for minors and or for downloading content that is illegal to possess. Online regulation in New Zealand generally follows that of Australia but without the distinction between Federal and State legislation.

3.7.6 Current and future expectations The online market in the United States is considered to be the most mature of worldwide markets and historically consumer trends in the United States have been followed in Australia and New Zealand in a lagged manner (i.e. Australia is approximately three years behind the US market). Some recent trends in the United States market include an increase in general Internet usage and Internet classified users are spending more time researching purchases than non-users.

Australia The online sector is the fastest growing advertising medium in Australia, achieving growth of approximately 61.5% in 2006. Online display and classified advertising has captured considerable market share from traditional media over the past decade and made up 6.0% of total Australian advertising during 2005. In the Australian classifieds market, online accounts for 11.0% of total classified advertising and is expected to grow at a CAGR of 10.5% to 2015. Online display advertising in Australia is growing rapidly and is the key driver of forecast growth in this sector. Online display advertising is forecast to grow at a CAGR of 15.9% to 2015. Overall, growth in the online sector is expected to be greater than all other forms of media and is expected to capture market share from traditional media.

New Zealand Consistent with New Zealand’s relatively lower level of household broadband penetration, the New Zealand online market is still in its early stages and currently accounts for only a small proportion of total advertising revenue in New Zealand. A tight labour market, high inflation and relatively weak private consumption and investment forecasts will affect the employment, property and automobile online classified markets, but are likely to be more than offset by strong underlying growth in the online format. Overall, growth of online advertising will be stimulated by the increasing penetration of broadband connection in Australia and, to a greater extent, in New Zealand. It is expected that the Internet will remain the fastest growing advertising medium for some time and that advertising revenue growth will rise sharply over the next three years to 2010. It is believed that the growth in Internet advertising revenue will occur through both taking market share from traditional media channels as well as expanding the market in certain categories

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4 Profile of APN 4.1 Overview APN is one of the largest multimedia companies in Australasia. The Company operates a broad portfolio of businesses across five countries. APN’s portfolio of businesses includes national and regional publishing operations, metropolitan and regional radio broadcasting, outdoor advertising, commercial printing and online. APN listed on the ASX in 1992 and listed on the NZSX in June 2004. 4.2 Company history An overview of the Company history is provided in Figure 15 below.

Figure 15: Significant events in APN’s history

1968 x A number of newspaper families consolidated their printing interests to form Provincial Newspapers. 1988 x Provincial Newspapers was acquired by INM of Ireland. 1992 x Provincial Newspapers listed on the ASX and changed its name to Australian Provincial Newspapers. x Australian Provincial Newspapers changed its name to APN News & Media Limited. 1995 x APN entered the radio sector when it formed ARN, a joint venture with Clear Channel of the United States. x In December 1995, APN entered the outdoor advertising sector with the acquisitions of Buspak and Cody Outdoor. 1997 x APN expanded its radio interests with the purchase of a 25% economic stake in TRN, New Zealand’s largest radio operator. 2001 x In December 2001, APN acquired the Wilson & Horton Limited (“Wilson & Horton”) publishing business in New Zealand for $809 million. The acquisition included The New Zealand Herald, nine regional daily newspapers, 40 non-daily newspapers and magazines, commercial and security printing operations, outdoor advertising and a 25% interest in TRN. 2002 x In February 2002, APN’s Cody Outdoor subsidiary acquired 19 premium sites and neon sky signs in Australia from Claude Neon. x In July 2002, APN acquired the Wairarapa Times-Age in Masterton, New Zealand. 2004 x In June 2004, APN listed on the NZSX. x In July 2004, APN announced that The New Zealand Herald was to launch a Sunday edition. 2005 x In July 2005, APN was awarded a five year contract for all outdoor advertising at Sydney Airport. 2006 x In October 2006, INM confirmed that, in conjunction with private equity interests, it had approached APN concerning a possible leveraged buy-out of APN. x The discussion regarding the possible leveraged buy-out by the Consortium ended. 2007 x On 25 January 2007 APN announced it had received a proposal from the Consortium of $6.05 per APN share via a scheme of arrangement. x On 12 February 2007, the Consortium increased the offer to $6.10 per APN share and the Independent Committee of APN agreed to recommend the Proposed Scheme to Shareholders x On 17 April 2007 the Consortium further increased the offer to $6.20 per APN share. Source: APN

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4.3 Group structure APN is a diverse multimedia company that has an economic interest in a large number of wholly owned subsidiaries, joint ventures and other investments across its operating divisions. 4.4 Operational structure Figure 16 below sets out the operational structure for APN.

Figure 16: APN operational structure

APN News & Media Limited

New Zealand Regional Outdoor Radio Online national publishing publishing advertising

New Zealand Australia Australia Australia NZ Herald newspapers

Commercial Search4 New Zealand New Zealand New Zealand printing businesses

Malaysia, Commercial Worksearch Magazines Indonesia, printing Hong Kong

Maps and business directories

Finda and Sellmefree Source: APN The principal activities of each of the above operational divisions are discussed below. 4.5 Principal activities

4.5.1 Overview APN operates across the following media channels: x publishing, which comprises New Zealand national newspaper publishing and regional publishing in Australia and New Zealand x radio x outdoor advertising x online 49 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 105

x printing. APN’s operations are primarily conducted in Australia and New Zealand. A breakdown of APN’s consolidated revenue and EBIT (before non-recurring items and adjustment for outside equity interests), by principal geographic segments for the financial years ended 31 December 2005 and 2006 are set out in the following figures.

Figure 17: Consolidated revenue by principal Figure 18: Consolidated EBIT by principal geography geography $350 $1,600 Asia Asia 2% 2% $1,400 Asia $300 Asia 5% New 5% $1,200 $250 New Zealand Zealand New New Zealand 46% $1,000 Zealand 55% 52% 49% $200 $800 $150 $600 EBIT EBIT (million) Revenue(million) Australia Australia Australia Australia $400 $100 43% 52% 43% 46%

$200 $50

$0 2005 2006 $0 2005 2006 Source: APN Source: APN

During 2005 and 2006 APN’s revenue was generated in almost the same proportions across Australia and New Zealand as set out above. In 2005, a greater EBIT margin was achieved in the New Zealand businesses due largely to the relatively higher EBIT margins achieved by the New Zealand national publishing segment. However, this trend reversed in 2006, when New Zealand national publishing experienced a slight decline and Australian regional publishing recorded double digit growth in advertising revenue and margins. A breakdown of APN’s EBITDA by each of principal operating division for financial years ended 31 December 2005 and 2006 is set out in the figure below.

Figure 19: Consolidated EBITDA by principal operating divisions

$400

$350 Printing 4% Outdoor 8% Outdoor 12% $300

Radio 25% $250 Radio 26%

$200 Regional Regional publishing publishing 36% 34% $150 EBITDA EBITDA (million)

$100

New Zealand New Zealand $50 national national publishing 31% publishing 28%

$0 Corporate and Corporate and other (2%) other 2005 2006 (2%) -$50

Source: APN

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The above figure shows that APN’s national and regional publishing businesses contributed the majority of APN’s EBITDA during the 2005 and 2006 financial years. Radio’s relative EBITDA contribution remained unchanged while outdoor advertising recorded a slight improvement. A discussion of the operations and outlook for each division is set out below.

4.5.2 Publishing The following figures set out a breakdown of APN’s combined publishing division’s consolidated revenue and EBITDA for the financial year ended 31 December 2006.

Figure 20: Breakdown of APN’s publishing Figure 21: Breakdown of APN’s publishing division’s revenue (AUD equivalent) division’s EBITDA (AUD equivalent)

Regional publishing Regional 54% publishing New Zealand 56% New Zealand national national publishing publishing 46% 44%

Source: APN Source: APN

The majority of the publishing EBITDA is derived from the regional publishing operation. Each publishing sub-division is discussed separately below.

New Zealand national publishing APN’s New Zealand national publishing division produces the following newspapers and magazine publications: x The New Zealand Herald which is New Zealand’s largest daily newspaper and represents approximately 68% of divisional revenues and the majority of EBITDA, since the other national publications (the Herald on Sunday and The Aucklander) are operating in a loss or break-even position x New Zealand Magazines and other magazine titles which represents approximately 9% of revenue for the division x the Herald on Sunday which generates approximately 4% of revenue for the division x The Aucklander which generates approximately 2% of revenue for the division. The division has a co-ordinated strategy to increase market share in Auckland, New Zealand’s largest metropolitan market and is a key driver of New Zealand’s economy. APN’s New Zealand national publishing division’s combined portfolio of newspaper and magazine titles has achieved strong penetration in Auckland, with eight out of every ten residents aged 15 or over reading a copy of an APN daily or weekly newspaper, or magazine title each week. The New Zealand publishing division derives revenue from both advertising and circulation. In 2006, advertising and circulation accounted for 72% and 24% of total revenue respectively. Advertising revenue for this division is driven by demand for classified advertising such as employment, property and motoring as well as retail display advertising. 51 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 107

The profitability of the New Zealand national publishing division is driven primarily by economic conditions in New Zealand, particularly in Auckland and to a lesser extent the level of competition in the area from other publishers and other forms of media competing for advertising customers. Further profit growth may be driven by the current restructuring initiatives designed to achieve cost efficiencies through increased automation of processes.

The New Zealand Herald The New Zealand Herald, established in November 1863, is the largest circulating daily newspaper in New Zealand, reaching nearly one million readers each week. The New Zealand Herald is Auckland’s only daily newspaper with an audited circulation of nearly 200,000 copies daily and an estimated average daily readership of approximately 568,000. The paper is published Monday to Friday and has a weekend issue on Saturdays. Similar to other publishers, The New Zealand Herald has seen circulation figures decline in recent years, however readership figures continue to increase.

The Herald on Sunday APN launched the Herald on Sunday in October 2004 to compete with Fairfax’s Sunday Star-Times. It has the biggest readership in the Sunday newspaper market in Auckland of 203,000 and has a national total of 326,000. The Herald on Sunday is regarded as very successful for a newly launched title. It was launched by APN at a small cost but the expectation is that this publication will become profitable in the near future as it is currently operating near break even.

The Aucklander The Aucklander is a free weekly community newspaper that is published in nine different regions (with a different masthead in each region), covering over 390,000 households across Auckland. It is Auckland’s best read weekly publication with a readership of 414,000. The Aucklander was launched in 2003 as a consolidation of five of APN’s then existing community mastheads to operate under a common strategy and masthead.

New Zealand Magazines APN operates New Zealand Magazines, which contributes approximately 9% of revenue and 7% of EBITDA for the New Zealand national publishing division. APN publishes the following magazine titles in New Zealand: x New Zealand Woman’s Weekly, which is the most read magazine in New Zealand with a readership of approximately one million but declining circulation due to increased competition in this segment x The Listener, which is a weekly current affairs magazine which dominates this magazine segment in New Zealand with circulation nearly two times its nearest competitor x Crème which is a teen magazine currently published in New Zealand.

New Zealand regional publishing APN publishes nine regional daily newspapers in New Zealand and 44 non-daily community titles. Included in the eight regional dailies are Bay of Plenty Times and The Wanganui Chronicle, two of the fastest growing regional newspapers in New Zealand. The table below sets out a list of APN’s regional dailies in New Zealand.

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Table 2: APN’s New Zealand regional daily newspaper titles

Title Type State Town/city Circulation1

Hawke’s Bay Today M-S (PM) North Island Hastings 28,037 Bay of Plenty Times M-S (PM) North Island Tauranga 24,038 The Northern Advocate M-S (PM) North Island Whangarei 14,987 Wanganui Chronicle M-S (AM) North Island Wanganui 12,486 The Daily Post M-S (PM) North Island Rotorua 12,056 Wairarapa Times-Age M-S (PM) North Island Masterton 7,698 The Oamaru Mail M-S (PM) South Island Oamaru 3,517 Horowhenua-Kapiti Chronicle M-S (PM) North Island Levin 2,721

Source: APN

Note 1. Actual circulation for 12 months to 31 March 2006. The New Zealand regional publications have exhibited strong revenue and margin growth in recent years. In 2006, advertising and circulation revenue accounted for 79% and 17% of revenue (with the balance of revenue generated from commercial printing, respectively) which represented approximately 33% of total revenue for regional publishing. The revenue profile for these publications is split almost equally between display and classified, with retail, real estate and employment the largest contributors to advertising revenue. Through regional publications, APN has exposure to the Wellington, Christchurch and Hamilton markets, which are largely dominated by Fairfax.

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Australian regional publishing APN publishes 14 regional daily newspapers in Australia situated along the eastern coastline from northern Queensland to northern New South Wales. These markets include the following: x central Queensland, which includes Mackay, Rockhampton and Gladstone x Wide Bay and Burrett which includes Bundaberg, Fraser Coast and Gympie x south eastern Queensland (“SEQ”), which includes the Sunshine Coast, Toowoomba, Ipswich and Warwick x northern New South Wales, which includes Lismore, Grafton, Coffs Harbour and Tweed Heads. The above markets have experienced significant growth in recent years due to the following: x the coal driven resources boom in northern and central Queensland which has had a strong impact on local communities and economies x major infrastructure projects and tourism demand in Queensland which has significantly increased employment demand in the region x general population and demographic trends which has seen significant net interstate migration to Queensland, in particular older demographics which are more attractive consumers to regional publishing due to their relatively higher levels of disposable income and association with regional communities. The following table sets out APN’s Australian regional daily publishing titles.

Table 3: APN’s Australian regional daily newspaper titles

Title Type State Town/city Circulation1

The Chronicle M-S Queensland Toowoomba 24,308 The Sunshine Coast Daily M-S Queensland Maroochydore 24,520 The Morning Bulletin M-S Queensland Rockhampton 18,956 Northern Star M-S New South Wales Lismore 16,785 The Daily Mercury M-S Queensland Mackay 16,428 The Queensland Times M-S Queensland Ipswich 11,771 News Mail M-S Queensland Bundaberg 12,038 Fraser Coast Chronicle M-S Queensland Maryborough 10,322 The Observer T-S Queensland Gladstone 7,462 Daily News M-S Queensland Warwick 3,592 The Daily Examiner M-S New South Wales Grafton 5,891 The Gympie Times T-S Queensland Gympie 5,994 Tweed Daily News M-S New South Wales Tweed Heads 5,057 The Advocate2 M-S New South Wales Coffs Harbour 4,196

Source: APN

Notes:

1. Actual circulation for the 12 months to 30 June 2006

2. This publication is published twice a week and is distributed free of charge

3. The above table excludes the five weekly titles published in Queensland which were acquired by APN in September 2006.

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In addition to the above newspapers, APN also produces three magazine formats (City Life, Revive and Style JV) and distributes approximately 450,000 copies per month across 14 editions. The regional publishing division derives revenue from both circulation and advertising. The profitability of this segment will be driven primarily by economic conditions in the regional areas, particularly employment and population trends and the level of competition in the area from other publishers and other forms of media competing for advertising budgets. However, due to the small size of some of these regional markets, it is not economic for two competing publications to exist. Nevertheless, News Limited (“News”) and Fairfax do have competing publications in a number of these markets. Approximately 80% of revenue for this division is earned from advertising with an approximately equal split between classified and display advertising. Of the display advertising revenue, approximately two thirds is earned from regional/local display with the remaining one third earned from national display. In 2006, total revenue increased by 8% largely driven by the strong economy and population growth in Queensland which contributed to strong advertising demand over the period.

4.5.3 Radio APN owns 50% of ARN and, indirectly through ARN, 50% of TRN in New Zealand. The partner in the ARN joint venture is Clear Channel which is the largest radio broadcaster in the United States. On 16 November 2006, Clear Channel announced that it had entered into a merger agreement with a group led by Thomas H. Lee Partners, L.P. and Bain Capital Partners, LLC, pursuant to which the group will acquire Clear Channel in a transaction with a total value of approximately $26.7 billion, including the assumption or repayment of approximately $8.0 billion of net debt. The Clear Channel shareholder vote in respect of this proposal is expected to occur in late April 2007. The revenue and relative profitability of APN’s radio segment between ARN and TRN for 2005 and 2006 are set out in the figures below.

Figure 22: Radio revenue Figure 23: Radio EBTIDA

$300 $100 $90 $250 $80 $70 $200 ARN 56% ARN ARN 61% ARN $60 56% 64% $150 $50 $40

$100 (million) EBITDA Revenue (million) Revenue $30 TRN TRN 44% TRN $20 TRN 39% $50 36% 44% $10 $0 $0 2005 2006 2005 2006

Source: APN Source: APN As set out above, ARN contributed approximately 56% of total revenue and approximately 64% of EBITDA for the radio segment in 2006. The lower EBITDA margin earned on TRN is a function of the increased content and distribution costs associated with the large number of stations and regional coverage of TRN as discussed in Section 3.5 above. A discussion of each of these business units is set out below.

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ARN In Australia, ARN owns or managers 11 radio stations in metropolitan markets and one regional station west of Sydney. ARN targets the 25-54 age demographic through the following music streams: x MIX, which focuses on the 25-44 age group (playing artists such as Robbie Williams, Kylie Minogue and Match Box 20) x Classic Hits, which focuses on the 35-54 age group (playing artists such as the Eagles, Fleetwood Mac and Queen) x The Edge, which focuses on the under 30 age group. ARN radio stations reach more than 4 million listeners each week Australia wide. The following table sets out summary data for ARN’s radio stations.

Table 4: ARN’s radio stations

Network AM/FM Format

Sydney MIX FM Mix FM Mainstream Hits WSFM Classic Hits FM Classic Hits The Edge Western Sydney FM Hip hop and R&B

Melbourne MIX FM Mix FM Mainstream Hits Gold FM Classic Hits FM Classic Hits

Brisbane 97.3FM1 Mix FM Mainstream Hits 4KQ Classic Hits AM Classic Hits

Adelaide Mix FM Mix FM Mainstream Hits Cruise 1323 Classic Hits AM Oldies

Perth Nova 93.71 FM NOVA FM Contemporary Pop and Rock

Canberra2 MIX FM Mix FM 16-39 easy listening, rock, talk FM104 Today FM Youth, rock

Source: APN

Notes:

1. For these stations, ARN has 50% joint ventures with DMG Radio (owned by Daily Mail Group and General Trust plc)

2. For these stations, ARN has a 50% joint venture with Austereo Limited.

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ARN has experienced an increase in competition in recent years as all major markets have had an increase in the number of stations. Vega, aimed at listeners between 40 and 60 years old, was launched on 1 August 2006 (by DMG the owner of Nova in Sydney and Melbourne). Sydney, Melbourne and Brisbane have added two new stations and Adelaide has increased from three stations to four stations. This increased competition provides greater supply to advertisers without significantly expanding the overall demand. To address the increased competition, APN has made a concerted effort in recent years to build its brands in each market and to focus on making its product more attractive to advertisers whilst still running a very cost efficient network. In 2007, ARN plans to implement a marketing model and reporting structure with the goal to increase its direct sales market share and to further increase its agency sales. As discussed in Section 3.5, APN, along with other radio broadcasters, are trialling digital radio in certain markets but management does not anticipate there to be any significant commercial benefits in the short-term.

TRN TRN operates 120 radio stations in New Zealand, with eight different formats across the country. Due to the different regulatory regime in New Zealand discussed in Section 3.5.5, TRN is able to operate regional and metropolitan radio stations despite having a publishing presence in some of these markets. TRN operates as a hub structure with metropolitan hubs in Auckland, Wellington and Christchurch supporting regional station in these areas. Due to the absence of a significant regional television presence in New Zealand, regional radio has an increased role in providing content and news relevant to each region. TRN operates the top three stations in the Auckland market. TRN also operates the number one station in both Wellington and Christchurch. TRN has New Zealand’s top talk and music networks: Newstalk ZB and Classic Hits. In the second half of 2006, TRN had 45.2% of the total New Zealand national radio listener market share and a 49.6% in the Auckland market. In addition, TRN represented approximately 54% of the radio advertising market in New Zealand and 70% of the Auckland market. In excess of 60% of revenue for TRN is earned from local advertising with approximately 30% earned from agency revenues and the remaining 10% from national direct advertising. The New Zealand radio licences expire on 31 March 2011 as discussed in Section 3.5.5. Ownership of these frequencies reverts to the New Zealand Government at this time. However a management rights payment was agreed in an industry-wide negotiation which concluded with a capped payment of NZD96 million, of which TRN will pay approximately NZD43 million.

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4.5.4 Outdoor advertising APN operates outdoor advertising sites in Australia, New Zealand and across Asia in Malaysia, Indonesia and Hong Kong. APN’s outdoor advertising division competes across the following sub-categories of the outdoor advertising market: x supersites x billboards x transit x street furniture. These businesses are operated through a number of joint ventures and controlled investments but operate as one fully integrated business across three geographic segments being Australia, New Zealand and Asia. APN is the market leader in terms of market share in all four sub-categories of the outdoor advertising market in Australia. The majority of advertising revenue for these segments is driven by agency sales, primarily national campaigns for large corporates. A breakdown of APN’s products in the outdoor segment is set out in the table below.

Table 5: APN Outdoor products

Share of APN’s actual 2006 economic Country revenue Format Product name interest

Australia 60% Posters Tribe 100% Transit Buspak 100% Large format Cody 100% Street furniture Adshel, Navigator 50% New Zealand 9% Posters Look 100% Transit Buspak 100% Large format Look 100% Street furniture Adshel 50% Asia 31% Transit (Hong Kong) Buspak 50% Large format (Hong Kong) Cody 50% Large format (Indonesia) Rainbow 50% Large format (Malaysia) Kurnia 50%1

Source: APN

Note:

1. APN’s interest is currently being sold down to 30%.

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Further details of APN’s outdoor products and companies are set out below: x Adshel Street Furniture Pty Limited (“Adshel”) is a joint venture between APN and Clear Channel Outdoor. Adshel operates one of Australia and New Zealand's most successful street furniture advertising businesses x Buspak is an outdoor media company that enables clients, predominantly national advertisers, to specifically target the bus and tram commuters in all Australian metropolitan markets. It is a market leader in Australia, New Zealand and Hong Kong x Cody operates some of Australia’s foremost premium large format outdoor advertising sites on primary roads, central business districts and freeways x Tribe provides clients with access to large (18 square metres or below) sites in suburban metropolitan locations x Look provides clients with access to approximately 450 billboards in outdoor sites across every region of New Zealand x Navigator, an Adshel product, markets media assets at the Sydney International Airport and selected sites in the Domestic Airport Precinct owned by Sydney Airport Corporation Limited x Kurnia is medium niche player in large format billboards in Malaysia x Rainbow is a medium size niche player in large format billboards in Indonesia. The outdoor segment is a high fixed-cost business as site rentals represent the majority of the cost base. The contract terms will vary as the required returns will vary depending on the amount of capital tied up in each site. Managing the expiry profile of the portfolio is a key area of focus by APN management. The expiry profiles of APN’s contracts is well diversified across different geographic regions and outdoor platforms reducing its exposure to the risk of losing a large number of major contracts at any one time. In general, billboard and transit contracts typically have a contract term of 3 to 10 years while street furniture is between 10 and 25 years. Management have been successful in renewing key contracts in recent years, such as the Sydney Airport, Sydney Rail, Sydney Buses and the Perth Rail contracts and were able to significantly reduce the losses previously incurred on certain contracts.

4.5.5 Online APN established its online division at the beginning of 2006. The division comprises the following businesses: x the nzherald.co.nz website x search4 classifieds businesses in Australia and New Zealand x Worksearch (to be renamed Search4jobs.com.au) in Australia x other classified, mapping, directory and websites x an ad sales group in New Zealand selling APN and other online inventory. nzherald.co.nz nzherald.co.nz is the website of The New Zealand Herald newspaper. The nzherald.co.nz website is the most visited specialist news website in New Zealand and the fourth most popular domestic site in the New Zealand market according to Nielsen Research.

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Search4 classifieds businesses The search4 classifieds businesses include: x search4jobs.co.nz, which is a job website in New Zealand x search4cars.co.nz, which is a car sales website in New Zealand and Australia (which operates as search4cars.com.au) x search4homes.co.nz, which is a house sales website in New Zealand x search4stuff.com.au which is a general classifieds website in Australia. The online jobs site, search4jobs.co.nz, was relaunched in May 2006 and has become the third largest jobs site in the New Zealand market in both traffic and job volumes. APN management expect that the popularity of the site with recruiters and jobseekers will grow further as new functionality is added. The other search4 classifieds businesses have been well received by the New Zealand market.

Worksearch Worksearch is APN’s common employment brand for both print and online in Australia and already links the regional newspapers, providing job opportunities across the entire coverage area. The site attracts up to 3,000 new job advertisements per week and offers a searchable database by geographical area and category. This website will be rebranded search4jobs.

Directories The directories business comprises the Wises street directory and mapping business and the UBD business directory. APN launched new website designs for these business lines in May 2006. APN has recently acquired 50% of Finda, a business directory and classified website to gain further exposure to local search and directories market. In addition, Finda contains an extensive classifieds database of real-estate, jobs, vehicles and general classifieds. Since acquisition, Finda’s level of traffic has increased significantly from 48,000 unique users in June to 163,000 in September. The Finda business will be merged with UBD and Wises with APN retaining 50% with an option to acquire the remaining 50% at market value.

Other Sellmefree is a joint venture with ACP Media Limited and is a general classifieds website in New Zealand. In 2006, the online division was still operating at a loss however, it has experienced significant growth in online advertising sales, especially in nzherald.co.nz. nzherald.co.nz contributed approximately one third of the total online revenue. Further investment in the online division is expected in 2007 to further improve the capabilities, usability, traffic performance and revenue potential of the online business.

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4.5.6 Commercial printing APN’s commercial printing division provides printing services for the following publications and divisions: x New Zealand publishing x Australian regional publishing x external printing services when unused capacity exists. In 2006, approximately 59% of total printing revenue was generated internally with the remainder earned from external customers. APN has a commercial printing division based in Ellerslie, New Zealand. The print centre was recently upgraded to enable 96 broadsheet pages of back-to-back colour to be printed. Stitching and trimming equipment was also introduced to facilitate high quality, stapled, full colour supplements. APN has recently completed a new printing centre at Yandina on the Sunshine Coast. This plant provides addition colour printing capacity as well as providing heat set printing capability which will enhance the product offering across the region including glossy property guides and community products. This new facility, in combination with other new presses programmed over the next two years, is expected to increase labour efficiency and will allow a further element of third party commercial printing revenues until the additional capacity is required by APN.

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4.6 Management and personnel The figure below sets out APN’s senior management team.

Figure 24: APN’s management personnel

Source: APN

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4.7 Competitive position of APN

4.7.1 New Zealand publishing The table below sets out the strengths, weaknesses, opportunities and threats (“SWOT”) for APN’s New Zealand publishing division.

Table 6: SWOT analysis – New Zealand Publishing

Strengths Weaknesses

x The New Zealand Herald has a dominant x Business is mature with limited organic market position and brand recognition in the growth opportunities. Auckland market. x The Herald on Sunday and The Aucklander x Positive trends in overall readership levels for are still operating in a loss position and the division. The New Zealand Herald reaches operate in a highly competitive environment. one million readers each week and since its x Limited growth in revenue with declining launch in 2004, the Herald on Sunday now margin in 2006 due to a downturn in New reaches over 326,000 readers every weekend. Zealand economy. Diverse product range which includes a number x x Limited exposure to the Wellington and of magazine titles (such as New Zealand Christchurch markets which are dominated by Woman’s Weekly and The Listener) which are Fairfax. the best-read publications in their respective Declining newspaper circulation in New categories. x Zealand over the past ten years; however, the x Regional publications mostly hold market impact of this is mitigated by the fact that leading positions. readership has increased over this period.

Opportunities Threats

x The recovery of the New Zealand economy. x APN is highly exposed to the Auckland The forecast real GDP growth of 3.1% per market. Adverse economic conditions in annum in 2007 and 2008 is likely to have a Auckland may severely affect its earnings. positive impact on advertising spend. x The emergence of competition from other x Potential to increase advertising and circulation publishers (such as smaller local daily revenues from the strong population growth in newspapers, free daily newspapers, etc) and Auckland relative to other regions of New other forms of media (such as online news Zealand. providers) could decrease the advertising spend devoted to national newspapers and put x Ability to leverage The New Zealand Herald as a national brand to create a compact version to further pressure on circulation. increase penetration in the South Island. x Exposure to fluctuations in AUD/NZD exchange rate which may impact Australian reported earnings.

Source: Deloitte Corporate Finance analysis

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4.7.2 Australian regional publishing The table below sets out the SWOT for APN’s regional publishing division.

Table 7: SWOT analysis –Australian regional publishing

Strengths Weaknesses

x Portfolio of market leading mastheads in x Declining circulation in Australia over the regional markets where significant competition past ten years however the impact is mitigated is unlikely to emerge due to the barriers to entry by the fact that readership has increased over in these areas. this period. x Recorded strong revenue and margin growth in x Lack of significant exposure to markets 2006 due to strong economic growth. outside of Queensland. However Queensland is the fastest growing market in Australia and x APN titles continue to lead circulation growth in the Australian regional market. APN’s strategy is regionally focused. x Introduction of new printing presses in Queensland, including the state of the art Yandina facility, which should result in printing cost savings and increase the product offerings, in particular for glossy media.

Opportunities Threats

x Opportunity to continue to capitalise on positive x APN is highly exposed to certain regional economic and demographic trends in markets, in particular, Queensland and Queensland including net interstate migration to northern New South Wales and any Queensland. deterioration in the market and/or economic conditions which adversely impact x Potential to participate in further consolidation of regional publishing businesses and assets to advertising expenditure. improve future earnings. x Competition from online media over the medium term. x The impact of media reform legislation in Australia may provide merger or acquisition x Attractiveness of the publishing market in opportunities. Queensland, particularly in South East Queensland may lead to increased competition from Fairfax and News.

Source: Deloitte Corporate Finance analysis

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4.7.3 Radio The table below sets out the SWOT for APN’s radio division.

Table 8: SWOT analysis – radio

Strengths Weaknesses

x APN is one of the largest radio broadcasters in x APN owns only a 50% interest in ARN and Australasia. TRN is the largest broadcaster in TRN. New Zealand market. x New Zealand has one of the highest levels of x ARN has achieved a very efficient operating radio stations per capita in the world. cost structure whilst maintaining product Therefore, the cost per capita of radio quality. broadcasting in New Zealand is relatively high and the potential to increase market x ARN’s listener profiles are in the 25-54 age group which are considered more loyal than share is limited and highly competitive. younger age brackets. x The entry of the Nova stations, which are owned by DMG Radio, has caused x TRN has the number one rated radio stations in the major metropolitan markets of Auckland considerable disruption in the Australian and Christchurch. radio market, heightening competition and changing listening patterns. However, to date There is minimal regional television in New x DMG’s operations in Australia have been Zealand. Therefore, if companies wish to tailor unprofitable. their advertising to a specific region they are more likely to advertise via radio than television.

Opportunities Threats

x The potential to increase audience numbers x The emergence of new competition for ARN through the introduction of Internet and digital such as Nova and other forms of media (such radio and 3G telephony will facilitate easier as the Internet and digital music players). access to radio programs. x Following the media reform legislation in x The impact of media reform legislation in Australia, market dynamics may evolve if Australia, particularly regarding cross-media ownership of competitors change or may ownership, provides opportunities for change as a consequence of merger and consolidation within the radio market or the acquisition activity. introduction of a second radio station within the same market. x TRN has the potential to benefit from the expected recovery in the New Zealand economy in 2007 and 2008.

Source: Deloitte Corporate Finance analysis

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4.7.4 Outdoor advertising The table below sets out the SWOT for APN’s outdoor advertising division.

Table 9: SWOT analysis – Outdoor Advertising

Strengths Weaknesses

x APN has a strong portfolio of contracts with a x APN does not own 100% of the outdoor diverse maturity profile across different advertising business but rather has joint geographic regions and a range of outdoor ventures with third parties. APN may be platforms. impacted by any change in ownership of joint venture partners. x APN has a number of high-profile contracts for advertising space, including Sydney Buses, x High level of fixed costs required to operate Sydney airport locations and Melbourne’s Yarra this business. Trams. It is the market leader in outdoor x Competitive tender process has resulted in advertising in Australia. some contracts generating losses. x Experienced sales force with track record in managing portfolio contracts and winning tenders. x APN has recently implemented a business streamlining process to extract greater potential from the business in terms of revenue growth opportunities, leadership and cost efficiencies.

Opportunities Threats

x The introduction of a uniform audience x There is a risk that key contracts will not be measurement system in Australia that evaluates renewed when they next come up for tender. the effectiveness of outdoor media as a x Exposure to economic conditions impacting marketing tool for advertisers and media buyers demand for advertising. is expected to have a positive impact on Exposure to fluctuation in certain foreign advertising demand for the industry as a whole. x exchange rates in which APN operates which x Opportunities for growth in the current Asian may impact Australian reported earnings. operations and for entrance into other Asian countries. x Innovative changes to the format of outdoor advertisements, such as the increased use of active advertisements. x Potential to benefit from growth in the outdoor advertising sector which is expected to grow at more than double the rate of growth of the publishing industry according to the ABN AMRO Report x Continued development in road infrastructure in Australia provides opportunities for new strategic advertising locations.

Source: Deloitte Corporate Finance analysis

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4.7.5 Online The table below sets out the SWOT for APN’s online division.

Table 10: SWOT analysis – Online

Strengths Weaknesses

x APN controls the number one specialist news x Limited presence and brand recognition in the website and the number four overall website in Australian online market, which is currently New Zealand. dominated by a few established players. x Strong brand recognition for a number of APN’s x The business is relatively new and is assets, in particular The New Zealand Herald, currently not profitable. may be able to be transformed into a significant online presence.

Opportunities Threats

x The proliferation of the Internet is likely to lead x Increased competition within the New to online advertising continuing to be a high Zealand market from high technology firms growth sector of the media industry. with a focus and core competency in online businesses, both from within New Zealand x Potential to benefit from growth in broadband penetration expected in New Zealand which and internationally. currently lags other Organisation for Economic x Regionally focused businesses in Australia Co-operation and Development (“OECD”) may come under national and international nations, including Australia. competition. x Opportunities to expand online media in regional New Zealand and Australia with existing APN content. x Introduction of 3G telephony and wireless broadband enables easier and remote access to websites.

Source: Deloitte Corporate Finance analysis

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4.7.6 Printing The table below sets out the SWOT for APN’s printing division.

Table 11: SWOT analysis – Printing

Strengths Weaknesses

x Intensive capital expenditure program across x Limited capacity in Australian regional print Australian regional print centres. The program centres, however this is mitigated by ongoing is expected to achieve significant cost savings, capital investments. increases in effectiveness, volume and colour capacity. x The printing segment has a strong commercial focus and in 2006 achieved a reduction in unit cost as a result of restructuring initiatives and further automation.

Opportunities Threats

x Potential to win third party printing contracts. x Rising input costs. x Potential to benefit from strong growth in x Additional capacity provided by competitors. Australian regional publishing division. x Declining circulation numbers in newspapers in Australia and New Zealand. Source: Deloitte Corporate Finance analysis

4.8 Key sensitivities The performance of APN is sensitive to a number of factors, including the following: x strength of the economy, in particular in Auckland, Queensland and northern New South Wales, including population and GDP growth, levels of unemployment and household disposable income all of which influence advertising demand. The advertising market accounts for a significant proportion of APN’s total revenue, is considered to be cyclical and fluctuates in line with the general economy. In particular, the classified market will reflect levels of economic activity within employment, housing and other segments x circulation and readership (newspapers), listener levels (radio), locations (outdoor) and visitors (online). The success of all divisions is ultimately reliant on having a loyal customer base, as the size of the customer base is a major determinant of advertising demand and revenues. High customer levels are achieved and maintained by providing a quality product that is accessible to customers. For example, regional newspapers and radio stations need to provide up to date and relevant news and classifieds to the local population x the level of competition from other media sources and new technology. The traditional forms of media, namely print, television and radio, compete for advertising revenues. The introduction of new technologies may have a significant effect on consumption patterns, other advertising media and internal industry competition.

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4.9 Capital structure and shareholders As at the date of this report APN had 460.3 million ordinary shares on issue. The following table lists the top ten shareholders on that date.

Table 12: Top 10 holders of fully paid ordinary shares at 17 April 2007

No of shares Shareholders (‘000) %

INM 191,541 40.0% RBC Global Services 60,806 12.7% HSBC Custodian Nominees Limited 29,424 6.1% Chase Manhattan Nominees Limited 25,139 5.2% Invia Custodian Pty Limited 19,243 4.0% Citicorp Nominees Pty Limited 12,172 2.5% Australian Foundation Investment Company 10,179 2.1% ANZ Nominees Limited 8,775 1.8% Cogent Nominees Pty Limited 7,579 1.6% UBS Nominees Pty Limited 6,076 1.3% 370,934 77.4% Other 108,100 22.6% Total1 479,034 100.0%

Source: APN

Note; 1. Includes the impact of securities converted since 31 December 2006. Whilst not explicitly included as registered shareholders based on the table above, Perpetual Limited and Maple Brown Abbot hold 66.3 million shares (14.4%) and 37.5 million shares (8.1%) respectively through various nominee accounts. In addition to fully paid ordinary shares, as at 31 December 2006 APN had the following securities on issue: x 37.8 million convertible notes with a conversion price of $3.95 which will convert into ordinary shares and be redeemed as part of the Proposed Scheme x 15.1 million options with a weighted average exercise price of $4.47 which will be bought back or acquired as part of the Proposed Scheme. Since 31 December 2006, approximately 37.0 million of convertible notes were converted into ordinary shares of APN.

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4.10 Share price performance APN’s securities are dually listed on the ASX and the NZSX. In April 2004, APN announced an on-market share buyback of up to 10% of its ordinary shares which was implemented in stages. The buyback prices ranged from $4.60 to $5.20 per share with a weighted average price of $5.00 per share during the period from January 2006 to September 2006. A summary of APN’s share price performance on the ASX is provided in the table below.

Table 13: APN quarterly ASX share price information

Quarter end date High ($) Low ($) Last Trade ($) Volume (million)

31-Mar-04 4.08 3.67 3.82 50.6 30-Jun-04 4.30 3.75 4.22 71.5 30-Sep-04 4.62 4.03 4.54 41.1 31-Dec-04 5.25 4.49 5.15 58.5 31-Mar-05 5.22 4.71 5.10 48.3 30-Jun-05 5.50 4.50 5.14 91.4 30-Sep-05 5.38 4.95 5.00 75.1 30-Dec-05 5.05 4.61 4.80 66.5 31-Mar-06 5.05 4.43 4.73 63.2 30-Jun-06 5.40 4.74 5.08 54.5 29-Sep-06 5.21 4.78 5.08 69.5 29-Dec-06 6.20 5.07 6.05 48.2 31-Mar-07 6.20 5.76 5.88 41.4

Source: Bloomberg These share price movements and trading volumes from January 2006 to March 2007 are presented graphically in the figure below.

Figure 25: APN stock activity on the ASX $6.50 12,000,000 10 11 12 7 9 11,000,000

10,000,000 $6.00 9,000,000 6 3 8,000,000

$5.50 2 5 7,000,000 4 8 6,000,000

1 Volume Shareprice $5.00 5,000,000 4,000,000

3,000,000 $4.50 2,000,000

1,000,000

$4.00 0

6 6 6 6 06 0 -06 -06 -06 -06 -07 l- g p v r ar-0 ay- Ju u o Jan-0 Feb-06 M Apr-06 M Jun-0 A Se Oct N Jan-07 Feb-07 Ma Volume APN VWAP (daily)

Source: Bloomberg

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The significant movements in price or volume identified on the chart above are as follows: 1. On 23 February 2006, APN announced its 2005 financial year result, recording a 16% and 15% growth in net profit after tax and earnings per share, respectively. 2. On 2 May 2006, the chairman of APN made an address to the shareholders highlighting the continued growth prospects and strategic business expansion plans and the on-going share buy back scheme. 3. On 5 June 2006, APN announced the share buy back scheme announced on 31 May 2006 would recommence on 15 June 2006. 4. On 15 August 2006, APN announced a 9% increase in earnings per share for the six months ended 30 June 2006. The strong result was however in line with analysts’ growth expectations of 5% to 10%. 5. On 25 September 2006, APN bought back approximately 4.4 million shares. 6. In October 2006, the Australian Parliament passed the media reform legislation. 7. On 26 October 2006, APN confirmed it received a preliminary approach regarding an offer for its shares from the Consortium. 8. On 24 November 2006, APN announced the discussion with the Consortium regarding the takeover ended; as a result APN’s share price fell sharply from $6.12 to $5.75. 9. On 27 November 2006, INM indicated that the Consortium might return to bid for APN. As a result, APN’s share recovered slightly. 10. On 25 January 2007, APN announced it has received an offer of $6.05 per share. 11. On 12 February 2007, APN announced that it had received a revised offer of $6.10 per share from the Consortium. 12. On 20 February 2007, APN announced its 2006 financial year result, recording a 7% and 10% growth in net profit after tax and earnings per share, respectively. 13. On 17 April 2007, APN announced that it had received a revised offer of $6.20 per share from the Consortium.

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4.11 Financial performance The consolidated financial results of APN for the financial years ended 31 December 2004 to 31 December 2006 are summarised in the table below.

Table 14: Financial results

Audited Audited Audited 2004 2005 2006 ($’m) ($’m) ($’m)

Sales revenue New Zealand national publishing 316.0 339.2 352.81 Regional publishing1 372.0 400.9 412.8 Australian radio 137.5 148.1 143.1 New Zealand radio 108.4 116.0 112.3 Outdoor 219.4 241.2 249.9 Print2 108.5 94.3 - Corporate 1.0 1.0 6.6 Non-recurring items (“NRI”) 4.3 29.1 Interest income 11.3 19.1 8.8 Discontinued - - 24.3 Total Revenue 1,274.2 1,364.1 1,339.5 Revenue growth (%) 9.2% 7.1% -1.8%

EBITDA New Zealand Publishing 103.4 107.9 99.41 Regional publishing 106.3 118.9 125.3 Australian radio 46.1 54.2 57.4 New Zealand radio 31.1 35.0 32.6 Outdoor 25.9 27.3 39.8 Print 18.0 14.0 - Corporate3 (7.0) (8.5) (8.8) NRI (1.9) (0.7) Discontinued - - 3.0 Total EBITDA 321.8 348.8 348.0 EBITDA margin 25.3% 25.6% 26.0% Depreciation and amortisation (38.6) (39.4) (34.5)

EBIT 283.2 309.4 313.5 Margin (%) 22.2% 22.7% 23.4% Net interest expense (62.5) (64.9) (65.6) Profit before tax 220.8 244.4 247.9 Income tax expense (58.3) (58.6) (49.4) Net profit before minority interests 162.5 185.8 198.5 Minority interest (33.1) (36.2) (39.0) Net profit attributable to APN 129.4 149.6 159.5 Basic earnings per share (cents) 27.1 31.1 34.3 Diluted earnings per share (cents) 26.2 30.3 32.9

Source: APN

Notes:

1. New Zealand publishing revenue and EBITDA are inclusive of the results for the online division

2. In 2006, internally generated printing revenue and EBITDA results have been included in New Zealand publishing and regional publishing results and the external revenue and EBITDA have been included in the corporate segment

3. Corporate includes foreign currency translation gains and losses and the impact of property portfolio transactions.

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We note that the actual EBITDA for 2006 as set out in Table 14 above includes a number of non-recurring and other one-off items which need to be adjusted in order to determine the normalised EBITDA for 2006 as set out below: x $4.6 million in depreciation pertaining to the Adshel joint venture which is not otherwise included in APN’s EBITDA x $3.0 million relating to the security plastics division which was discontinued in 2006 x $3.9 million in foreign exchange translation gains which are not expected to occur in the long-run and have been ignored for valuation purposes x $0.7 million in other non-recurring items which include net gains on disposal of investments and properties, restructuring costs, online establishment costs and asset write-offs. For valuation purposes, we have also separated the 2006 results pertaining to the online and printing divisions from the results presented above. In order to separate these divisions, we have made the following reclassifications to the historical divisional EBITDA presented in Table 14: x $3.7 million in respect of the online division which is included in the results for the New Zealand national publishing division x $6.0 million in commercial printing (for external customers) which is included in the New Zealand national publishing ($1.4 million) and regional publishing ($4.6 million) divisions set out above. The table below sets out the normalised EBITDA for 2006 based on the above adjustments.

Table 15: 2006 EBITDA adjustments

Normalised EBITDA EBITDA 2006 2006 Adjustments Actual Division Actual ($’m) ($’m) ($’m) EBITDA New Zealand national publishing 99.4 2.3 101.7 Regional publishing 125.3 (4.6) 120.7 Australian radio 57.4 57.4 New Zealand radio 32.6 32.6 Outdoor 39.8 4.6 44.4 Print - 6.0 6.0 Online - (3.7) (3.7) Corporate (8.8) (3.9) (12.7) Non-recurring-items (0.7) 0.7 - Discontinued 3.0 (3.0) - Total EBITDA 348.0 (1.6) 346.4

Source: Deloitte Corporate Finance analysis, APN In addition, below we provide a brief analysis of the historical results as set out in Table 14.

Revenue Total revenue has remained stable in 2006 due to mixed divisional results. The positive economic environment in Queensland has contributed to growth in regional publishing whilst difficult trading conditions in New Zealand has adversely impacted New Zealand publishing and radio revenues. 73 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 129

EBITDA The following figure sets out APN’s EBITDA for 2005 and 2006 and the movements in each division between these periods.

Figure 26: EBITDA bridge (before NRI)

370

12.5 360

348.8 3.2 2.8 348.7 350 6.4 2.4 14.0 340 8.6

$ million $ 330

320

310

300 2005 New Zealand Regional Australian New Zealand Outdoor Printing Corporate 2006 EBITDA national publishing Radio Radio advertising and other EBITDA publishing Source: APN Note: EBITDA represented above excludes NRI of 0.7 million in 2006. We discuss each division result separately below.

New Zealand publishing Within this division, revenue from The New Zealand Herald was 4% lower in 2006 than in 2005, largely driven by a decrease in advertising revenue and the impact of difficult trading conditions in New Zealand as well as an adverse movement in AUD/NZD foreign exchange rate. Aucklander revenue was slightly down while Herald on Sunday recorded an improvement in revenue, however, both publications are yet to generate profits.

Regional publishing Regional publishing in 2006 outperformed 2005 results in both revenue growth and EBITDA margin largely attributable to strong performance in Australian regional publishing. This has been due to the strong classified revenue reflecting a strong real estate and employment market, while national advertisements increased alongside strong retail consumer spending. The positive result was primarily driven by strong economic growth in Queensland as New Zealand regional publishing EBITDA decreased only slightly over the period due to flat local currency revenues and adverse foreign exchange movements as discussed above.

Australian radio ARN’s overall market share in the Australian radio market declined from 25.6% in 2005 to 24.7% in 2006. Despite the increased competition and the lack of revenue growth, ARN recorded a slight improvement in EBITDA margin from 37% in 2005 to 40% in 2006 due to cost management initiatives implemented in the second half of 2006.

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New Zealand radio In local currency, TRN experienced a slight increase in revenue and EBITDA in 2006 which was largely attributable to flat advertising revenue driven by a decline in the Auckland radio market and slower economic growth in New Zealand economy relative to 2004 and 2005. However, the division recorded a decline in revenue denominated in AUD of approximately 3.2% due to adverse movements in the NZD/AUD foreign exchange rate.

Outdoor In 2006, outdoor advertising revenue has remained stable however EBITDA margin improved from 11.3% in 2005 to 15.9% in 2006. The increase in margin was largely attributable to improved performance in Australia driven by the reduction of the losses incurred on certain contracts which were renewed on more advantageous commercial terms.

Print From 2004 to 2005, EBITDA for the print business has been reported as a separate division including the New Zealand commercial printing business, security printing, security plastics and certain internal group services. However in 2006, it has been allocated across New Zealand national publishing and outdoor advertising while the group services results have been transferred to the corporate division. The results from security printing business, which was disposed of during the year, are shown as discontinued business. The external commercial printing services, which generated approximately $6.0 million of EBITDA in 2006, pertain to the heatset and coldset businesses and are allocated within the New Zealand national publishing and the regional publishing division. Following the completion of the Yandina press in 2006 and other initiatives expected to be implemented over 2007, the division is expected to generate greater efficiencies and higher yields which should contribute to future earnings growth.

Corporate Corporate costs include the impact of movements in the foreign exchange rates for both translation and hedging purposes, listed company costs as well as property portfolio transactions. As discussed above, due to the inclusion of printing results in the corporate division, the result in 2006 is not comparable to 2005.

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2007 budget APN management has prepared a budget for the year ending 31 December 2007 which has been approved by the APN Board of Directors. The 2007 budget includes the following consolidated figures:

Table 16: 2007 budget – consolidated figures

2006 2007 Actual Budget Change Division ($’m) ($’m) (%)

Revenues (excluding interest income) 1,330.7 1,369.1 3% EBITDA1 345.7 378.9 10%

Source: APN Note:

1. EBITDA excludes non-recurring items and earnings from discontinued operations. We understand that the growth profile of the EBITDA attributable to APN for 2007 is expected to be similar to the growth profile of the consolidated EBITDA for 2007. The process for the preparation of the 2007 budget included the following: x the consolidated budget for APN was prepared from the ground up by consolidating the budget for each operating division after considering all known risks and opportunities facing the division x the process for the preparation of the 2007 budget was consistent with the process adopted in previous years x the 2007 budget was reviewed and approved by members of senior management of each operating division as well as the executive committee of APN and the APN Board of Directors. The key factors incorporated in the 2007 budget include the following: x market trading conditions are expected to remain subdued in New Zealand, Sydney and Melbourne for the first half of 2007 with some recovery expected in the second half, which is expected to impact the performance of the New Zealand national publishing and the radio division x further earnings growth is expected in regional publishing in Australia due to favourable market conditions and the impact of further cost savings from recent efficiency initiatives x continued expansion of the outdoor segment due to more profitable contracts and new product initiatives x cost efficiencies from recent restructuring programs will be partially offset by rising wage and newsprint costs.

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The procedures involved in our consideration of the information contained in the 2007 budget consisted of enquiries of APN personnel and analytical procedures applied to the financial data. Based on these procedures and enquiries, Deloitte Corporate Finance considers that there are reasonable grounds to believe that the prospective financial information for APN included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may be different from the prospective financial information of APN referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved. These procedures and enquiries did not include verification work nor constitute an audit in accordance with Australian Auditing Standards, nor did they constitute a review in accordance with AUS 902 applicable to review procedures. Accordingly, Deloitte Corporate Finance does not express any opinion on the prospective financial information referred to in this report.

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4.12 Financial position The audited statement of financial position of APN as at 31 December 2005, the reviewed financial position as at 30 June 2006 and audited financial position as at 31 December 2006 are summarised in the table below.

Table 17: Financial position

Audited Reviewed Audited 31 Dec 2005 30 Jun 2006 31 Dec 2006 ($’m) ($’m) ($’m)

Cash 68.9 98.9 70.7 Receivables 235.9 216.8 223.7 Inventories 30.2 24.7 21.9 Tax assets 26.5 23.9 24.9 Other 25.1 50.8 28.1 Total current assets 386.6 415.1 369.3

Receivables 8.0 11.1 7.2 Investments accounted for using the equity method 19.5 23.7 25.7 Property, plant and equipment 288.9 267.7 292.6 Intangibles 1,784.7 1,643.1 1,740.6 Deferred tax assets 35.4 39.1 36.5 Other financial assets 17.3 17.4 22.7 Total non-current assets 2,153.8 2,002.1 2,125.3

Payables 199.5 191.7 197.3 Derivative financial instruments 4.3 1.1 3.4 Interest bearing liabilities 87.2 101.0 89.4 Provisions 16.6 14.8 19.4 Total current liabilities 307.6 308.6 309.5

Payables 6.6 - 5.5 Interest bearing liabilities 752.4 805.7 801.6 Deferred tax liabilities 214.2 186.1 203.4 Provisions 2.3 2.4 2.2 Total non-current liabilities 975.5 994.2 1,012.7

Net assets 1,257.3 1,114.4 1,172.4 Minority interests 252.3 238.1 242.7

Source: APN

Total assets Current assets decreased by 11% while non-current assets increased by 6% over the six month period ended 31 December 2006. The increase in non-current assets was primarily due to an increase in the value of intangible assets from $1,643.1 million as at 30 June 2006 to $1,740.6 million as at 31 December 2006. Intangible assets comprise acquired mastheads, radio licences and goodwill. Investments in associates have remained relatively stable over the period.

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Total liabilities Total liabilities have remained fairly constant between 31 December 2005 and 30 June 2006. Liabilities predominantly comprise bank loans and convertible notes. Interest bearing liabilities have remained relatively stable. As discussed in Section 4.9, APN has issued a redemption notice to all convertible noteholders allowing all the outstanding notes to be converted to equity and participate in the Proposed Scheme. The deferred tax liabilities relate primarily to deferred tax liabilities on masthead intangibles which are not expected to crystallise in the short to medium term.

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5 Valuation methodology 5.1 Valuation methodologies To estimate the fair market value of the shares in APN we have considered common market practice and the valuation methodologies recommended by ASIC Practice Note 43 regarding valuation reports of independent experts. These methodologies are discussed below.

5.1.1 Market based methods Market based methods estimate a company’s fair market value by considering the market price of transactions in its shares or the market value of comparable companies. Market based methods include: x CME x analysis of a company’s recent share trading history x industry specific methods. The CME method estimates fair market value based on the company’s future maintainable earnings and an appropriate earnings multiple. An appropriate earnings multiple is derived from market transactions involving comparable companies. The CME method is appropriate where the company’s earnings are relatively stable. The most recent share trading history provides evidence of the fair market value of the shares in a company where they are publicly traded in an informed and liquid market. Industry specific methods estimate market value using rules of thumb for a particular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company than other valuation methods because they may not account for company specific factors.

5.1.2 Discounted cash flow methods Discounted cash flow methods estimate fair market value by discounting a company’s future cash flows to a net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

5.1.3 Asset based methods Asset based methods estimate the fair market value of a company’s shares based on the realisable value of its identifiable net assets. Asset based methods include: x orderly realisation of assets method x liquidation of assets method x net assets on a going concern basis x replacement cost approach. The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

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The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the fair market values of the net assets of a company but does not take account of realisation costs. The replacement cost approach measures the value of an asset with reference to the cost to reconstruct or replace it with another of like utility after reflecting any physical deterioration, functional obsolescence, and/or economic obsolescence. The replacement cost approach recognizes that a prudent investor would not ordinarily pay more for an asset than the cost to replace it new. These asset based methods ignore the possibility that the company’s value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goodwill. Asset based methods are appropriate when companies are not profitable, a significant proportion of a company’s assets are liquid, or for asset holding companies. 5.2 Selection of valuation methodologies We have estimated the fair market value of an APN share by estimating the value of each underlying operating division of APN and aggregating those values based on a SOTP approach. We have used a capitalisation of maintainable earnings method to determine the fair market values of APN’s operating divisions, with the exception of the APN online division, due to the following reasons: x each operating division has shown a consistent pattern of historical earnings, which is expected to continue in future x there is an adequate number of publicly listed companies with operations sufficiently similar to those of each operating division to provide meaningful analysis x APN does not have a finite lifespan nor is it required to undertake significant capital expenditure in the near future x reliable long-term cash flow forecasts are not available for APN, thus the discounted cash flow method is not appropriate. The online division is currently operating at a loss and APN’s management team estimate that the online division is unlikely to be profitable until 2008 and will require the investment of additional resources and capital to do so. Furthermore, due to the wide range of possibilities in terms of industry growth in the online advertising segment and for APN’s online operations, reliable cash flow forecasts can not be made. Since insufficient reliable information is available to estimate the maintainable earnings or future cash flows for the online division, the CME and discounted cash flow methods are deemed to not be a reliable valuation approach for this division. As a consequence, we have estimated the fair market value of the online division using a replacement cost methodology. In order to provide further evidence of the estimated fair market value of an APN share, we have had regard to APN’s recent share trading history as it can provide evidence of the fair market value of the shares in a company where they are publicly traded in an informed and liquid market.

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6 Valuation of APN 6.1 Valuation of APN Deloitte Corporate Finance has estimated the fair market value of an APN share to be in the range of $6.18 to $6.53. These values have been estimated on a control basis (being the value based on a controlling interest in APN as opposed to a minority interest as discussed further in Section 6.2.7). As the Proposed Scheme is expected to be completed in late May 2007, we have made allowance in our valuation for the anticipated earnings of APN up until 31 May 2007. For the purpose of our opinion, fair market value is defined as the amount at which an APN share would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment. In determining this amount, we estimated the fair market value of APN using the SOTP method. The SOTP method estimates the fair market value by aggregating the fair market value of each of the operating divisions of APN and any surplus assets and deducting net debt attributable to APN. For the purpose of this valuation we have treated corporate costs which are not allocated to the operating divisions as a separate operating division of APN. We also have analysed recent share trading of APN as a cross-check to our valuation of an APN share. The following table sets out a summary of our assessment of the fair market value of APN.

Table 18: Summary – estimated fair market value of APN

Low High Division Section ($’m) ($’m)

New Zealand national publishing 6.2.4 1,040 1,092 Regional publishing 6.2.4 1,356 1,416 New Zealand radio 6.2.4 160 168 Australian radio 6.2.4 308 322 Printing 6.2.4 29 30 Outdoor advertising 6.2.4 450 473 Online 6.2.3 13 13 Corporate 6.2.4 (159) (167) Fair market value of the operating divisions 3,197 3,347 Add: surplus assets 6.2.5 63 63 Enterprise value 3,260 3,410 Less: net debt 6.2.6 (617) (617) Equity value (on a minority interest basis) 2,643 2,793 Fully diluted number of shares outstanding (m) 6.2.8 513.1 513.1 Value per share (on a minority basis) ($ per share) 5.15 5.44

Premium for control (20% ) 6.2.7 529 559

Equity value (on a control basis) 3,171 3,352

Assessed value per share (on a control basis) ($ per share) 6.18 6.53

Source: Deloitte Corporate Finance analysis

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6.2 Sum of the parts valuation In order to perform the SOTP valuation we have estimated the following: x fair market value of each operating division of APN (other than the online division) using the CME method. To value APN using the CME method requires the determination of the following: ¾ an estimate of future maintainable earnings attributable to the relevant operating divisions ¾ an estimate of an appropriate earnings multiple to apply to each of the relevant operating divisions. x fair market value of the APN online division using the replacement cost method x fair market value of any surplus assets which are not otherwise included within the above analysis x fair market value of the net debt attributable to APN. Our considerations on each of these are discussed separately below.

6.2.1 Future maintainable earnings Future maintainable earnings represent the level of maintainable earnings that the existing operations could reasonably be expected to generate. We have selected EBITDA as an appropriate measure of earnings for all operating divisions with the exception of commercial printing because earnings multiples based on EBITDA are less sensitive to different financing structures, depreciation and amortisation accounting policies and/or effective tax rates than multiples based on EBIT or NPAT. Due to the capital intensive nature of the commercial printing division, we have selected EBITA as an appropriate measure of earnings for this division. We have estimated the future maintainable earnings of the operating divisions after considering the following: x the historical results of each of the operating divisions based on APN’s published financial reports, the actual results for the year ended 31 December 2006 x the 2007 consolidated budget EBITDA for APN as set out in Section 4.11 x discussions with, and additional information provided to us by, APN management as to the current trading position and growth prospects of each operating division x some of the selected comparable company and transaction multiples, in particular for the Australian and New Zealand companies as detailed in Section 6.2.2 below, are based on earnings expectations for the financial year ending 30 June 2007 (“FY07”) whereas the current APN financial year will end on 31 December 2007. Due to the difficulty in quantifying the impact of this difference on the earnings multiples we have considered this difference in the selection of the maintainable earnings for APN’s operating divisions

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x market consensus views for 2007 EBITDA for APN as a whole and for each of the operating divisions of APN based on analysts’ estimates. We have considered all available analyst estimates recently released which contain 2007 EBITDA forecasts for each of APN’s operating divisions. This included EBITDA estimates by nine analysts which were included in reports released over the period from 25 January 2007 to 21 February 2007. We note that not all analyst reports released subsequent to APN releasing their 2006 financial results on 20 February 2007 included EBITDA for each operating division. If this information was not available, the most recently released report for the analyst was included in our analysis below. The table below sets out a summary of the most recently available analysts’ estimates of 2007 EBITDA for APN as a whole and for each operating division:

Table 19: Analyst 2007 forecast results summary

Analyst forecast 2007 results Normalised 2006 Average Actual Min Max Average growth on ($’m) ($’m) ($’m) ($’m) actual 2006

Consolidated EBITDA 348 355 375 369 6.1% Attributable EBITDA1 2922 304 317 311 6.6%

Operating division analysis3 New Zealand national publishing 101.7 88 115 105 n/a Regional publishing 120.7 115 146 133 n/a Radio 90.0 73 93 89 n/a Printing 6.0 n/a 9 4 n/a Outdoor advertising 44.4 20 46 37 n/a Online (3.7) n/a n/a n/a n/a Corporate (12.7) (8) (1) (4) n/a

Source: Deloitte Corporate Finance, APN, analysts’ reports

Notes: 1. Of the nine available analysts’ reports, only six reported EBITDA attributable to APN after reflecting minority interests

2. 2006 attributable EBITDA represents the normalised consolidated EBITDA of $346.4 million as set out in Table 15 plus foreign exchange gains of $3.9 million and an adjustment for minority interests of $58.4 million (as set out in Table 20 below)

3. The forecast EBITDA figures may reflect an aggregation of revenues and costs which differs from the historical breakdown disclosed by APN. In particular, we note that:

x publishing divisions’ results disclosed in the analyst reports may contain part or all of the commercial printing and online division results and the breakdown between New Zealand national publishing and Regional publishing may be different to that historically disclosed by APN

x the allocation of corporate costs between the operating divisions may be different to that historically disclosed by APN.

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x specific risks and opportunities pertaining to each of the operating divisions: ¾ the growth profile of the New Zealand national publishing division and part of the regional publishing division is strongly influenced by the New Zealand economy and in particular that of Auckland. New Zealand has experienced a slow down in economic growth during most of 2006 which has adversely impacted advertising demand but is expected to recover in 2007 and 2008 according to the EIU as set out in Section 3.1.2 ¾ the regional publishing division based in Australia has a recent track record of significant growth in earnings due to a strong market position and favourable operating trends in its markets, particularly in Queensland. Favourable conditions in these markets are expected to underpin strong advertising demand and revenue growth in the medium term. Furthermore, the completion of the Yandina printing facility is expected to contribute additional colour capacity and have a favourable impact on future margins ¾ the New Zealand and Australian radio divisions operate in highly competitive markets and are also heavily influenced by economic factors. Both divisions are not expected to gain significant market share in the short-term and revenue growth is expected to be in line with overall economic growth however some margin increase is expected to be achieved in New Zealand due to the impact of recent restructuring initiatives ¾ the printing division should benefit in 2007 from recent efficiency initiatives ¾ the earnings for the outdoor advertising division have been depressed in recent years due to the financial impact of some uneconomic contracts. Future growth in this division is expected as a result of the recent renegotiation of these contracts at more commercial terms as well as outdoor advertising capturing a larger share of the advertising market through the implementation of a standardised measurement system which will appeal to advertisers.

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In addition, we have adjusted the consolidated earnings for each operating division to reflect the earnings attributable to any minority interests. The table below sets out the relevant historical earnings and the selected future maintainable earnings for each of the operating divisions.

Table 20: Summary – estimated future maintainable earnings and historical earnings

Earnings Attributable Selected 2005 Earnings Earnings maintainable Actual 2006 Actual1 Actual 2006 earnings Division ($’m) ($’m) ($’m) ($’m) EBITDA New Zealand national publishing 107.9 101.7 101.7 104.0 Regional publishing2 113.6 120.7 113.0 120.0 New Zealand radio3 35.0 32.6 16.3 16.0 Australian radio3 54.2 57.4 26.8 28.0 Printing 11.1 6.0 6.0 n/a Outdoor advertising4 27.3 44.4 40.5 45.0 Online - (3.7) (3.7) n/a Corporate (7.1) (12.7) (12.7) (15.0)

Total EBITDA 342.0 346.4 288.0 n/a

Printing (EBITA) 7.5 2.8 2.8 3.0

Source: Deloitte Corporate Finance analysis, APN Notes:

1. Excludes non-recurring items and other reclassifications as discussed in Section 4.11

2. The regional publishing division includes a 50% interest attributable to third parties for Toowoomba Newspapers Pty Limited

3. Both the Australian and New Zealand Radio divisions include a 50% interest attributable to Clear Channel resulting from the ARN and TRN joint ventures as these joint ventures are consolidated by APN. In addition, we have adjusted the Australian Radio EBITDA to take into account of the 50% minority interest in ARN Brisbane Pty Limited (“ARN Brisbane”)

4. The EBITDA of the outdoor advertising division includes 50% of the EBITDA generated by the non-consolidated 50% interest in Adshel Street Furniture Pty Limited as well as $3.9 million attributable to joint ventures in Asia.

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6.2.2 Earnings multiple We have selected earnings multiples ranging from 9.5 times to 12.0 times maintainable earnings, on a minority interest basis to be applied to each of the operating divisions, as set out in the table below.

Table 21: Summary – selected APN earnings multiples

Earnings Low High Division measure (times) (times)

New Zealand national publishing EBITDA 10.0 10.5 Regional publishing EBITDA 11.3 11.8 New Zealand radio EBITDA 10.0 10.5 Australian radio EBITDA 11.0 11.5 Printing EBITA 9.5 10.0 Outdoor advertising EBITDA 10.0 10.5 Corporate EBITDA 10.6 11.1

Source: Deloitte Corporate Finance analysis

General considerations In selecting these multiple ranges we have considered the following factors which are relevant for all operating divisions: x the multiples implied by the share market valuation of listed companies. The share market valuation of listed companies provides evidence of an appropriate earnings multiple to apply to the respective operating divisions. The share price of a listed company represents the market value of a minority interest in that company. We have compiled share market trading multiples for companies comparable to the operating divisions of APN. These companies, together with their earnings multiples, are set out in the discussion regarding the relevant operating division below and further details are provided in Appendix 2 x the multiples implied by mergers or acquisitions of comparable companies. The price achieved in mergers or acquisitions of comparable companies provides evidence of an appropriate multiple to apply to the earnings of the respective operating divisions. The acquisition price of a company generally represents the market value of a controlling interest in that company. We have compiled merger and acquisition multiples for companies comparable to the operating divisions of APN. These transactions, together with their implied earnings multiples, are set out in the discussion regarding the relevant operating division below and further details are provided in Appendix 3.

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In the table set out below we summarise the median current trading earnings multiples and the median transactions earnings multiples for businesses comparable to the operating divisions of APN (except online), excluding the Australian media transactions announced after the media reform legislation was passed by the Australian Parliament on 18 October 2006 which are discussed in further detail below.

Table 22: Median earnings multiples for comparable listed companies and transactions by business

Comparable trading multiples Comparable transactions Australian Australian and and New Zealand International New Zealand International Current Forecast Current Forecast Historical Historical Business Earnings (times) (times) (times) (times) (times) (times)

Publishing EBITDA 14.6x 13.7x 9.7x 8.8x 11.4x 12.7x Radio EBITDA 11.8x 10.8x 10.9x 10.6x 11.4x n/a Printing EBITA 10.0x 9.4x 10.6x 9.3x 11.9x n/a Outdoor advertising EBITDA n/a n/a 11.9x 10.9x n/a 13.9x

Source: Deloitte Corporate Finance analysis, Bloomberg, SDC Platinum, Independent expert’s reports, analyst reports. We note the following general comments in relation to the above multiples: x as discussed in Section 6.2.1 above, some of the selected comparable companies’ current multiples are based on earnings expectations for the financial year ending 30 June 2007 while the current APN financial year will end on 31 December 2007. We note that assuming a positive earnings growth profile, the further in the future the financial year end, the lower the implied multiple. However, we have adjusted for this difference in the selection of the maintainable earnings x many of the listed comparable entities and transactions are considerably larger than the respective operating divisions. In general, larger companies have higher earnings multiples than smaller companies.

Media reforms The earnings multiples implied by the share trading of comparable companies in Australia have been affected by the media reform legislation and the subsequent corporate activity stemming from the announcement that this legislation had been passed by the Australian Parliament which has led to speculation of further corporate activity in this sector.

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As set out below, the median EBITDA multiple implied by recent Australian transactions since the announcement that the media reform legislation was passed by the Australian Parliament is 12.3 times current EBITDA.

Table 23: Transactions post-announcement of the media reform legislation

Implied Transaction Current 1-week 4-week Announcement value EBITDA control control Company Acquired by date ($’m)1 multiple premium2 premium2

Rural Press (100%) Fairfax 6 Dec 2006 2,9972 14.8x3 14.6% 10.8%

Seven Media (50%) Kohlberg Kravis 20 Nov 2006 3,970 12.3x4 n/a n/a Roberts & Co Southern Cross (13.8%) Macquarie Media 16 Nov 2006 1,381 12.4x4 7.8% 13.8% Group Fairfax (7.3%) News Corp 20 Oct 2006 6,756 12.3x4 18.0% 29.0%

PBL Media (50%) CVC Asia Pacific 18 Oct 2006 5,5245 11.4x4 n/a n/a

WANL (14.9%) Seven Network 18 Oct 2006 2,706 13.2x4 18.5% 23.2%

Average 12.7x 14.7% 19.2% Median 12.3x 16.3% 18.5%

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, The Australian Financial Review, Deloitte Corporate Finance analysis Notes:

1. Implied transaction value calculated based on 100% acquisition of equity plus net debt

2. Calculated with reference to the target share price one week prior and four weeks prior to the announcement date and the acquirer share price as at the effective date (in the case of share offers). In the Fairfax-Rural Press transaction, a component of the offer price comprises Fairfax shares and the transaction is still pending. In order to estimate the acquisition price, we have used the Fairfax share price (as at 2 April 2007) 3. The multiple does not incorporate certain cost savings and synergies expected to be achieved from this merger

4. Minority interests were acquired in these transactions. Accordingly, the earnings multiples are on a minority interest basis rather than on a control basis 5. Net of transaction costs

6. n/a –not applicable. We note the following in respect of the above transactions: x in all of these transactions, with the exception of the pending merger between Fairfax and Rural Press, whilst significant stakes were acquired, no controlling interests were transferred so the multiples and the premiums may not fully reflect the premiums required to obtain control x the Fairfax-Rural Press transaction is expected to generate synergies of approximately $35 million per annum within 12 to 18 months. The implied EBITDA multiple incorporating immediate achievement of the estimated synergies would be 12.6 times (on a control basis). Furthermore, the Fairfax share price has recently been subject to speculation of a takeover offer since the implementation of the media reforms in early April 2007 which has also had an upward impact on the implied multiples set out above x the Seven Media and PBL Media acquisitions are very similar transactions involving a joint venture with a private equity buyer whilst the WANL, Southern Cross and Fairfax minority interest transactions are considered to be strategic acquisitions aimed at positioning the major media groups for consolidation following the implementation of the media reform legislation. It is likely that the prices paid in the acquisitions of these strategic stakes would incorporate a premium to the pure minority interest value. 89 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 145

Further to the above analysis, we have also considered specific factors relevant to each of the operating divisions. These factors have been set out in detail below.

Publishing In addition to the general factors discussed above, in selecting an earnings multiple to apply we have also considered factors specific to the publishing division of APN.

Share trading multiples Figure 27 below summarises the market trading multiples for the selected comparable publishing companies including detailed multiples for specific Australian companies and the median for all identified international companies:

Figure 27: Market trading multiples - Publishing

20.0x 17.9x 18.0x

15.7x 16.0x 14.6x 14.6x 13.7x 13.7x 14.0x 12.2x 12.0x 11.4x

9.7x 10.0x 8.8x

8.0x

6.0x

4.0x

2.0x

0.0x West Australian Rural Press Fairfax Median Australia Total International Newspapers median

Current EBITDA (times) Forecast EBITDA (times)

Source: Bloomberg, Deloitte Corporate Finance analysis Notes: 1. Enterprise values were calculated by summing the total of the net borrowings at each company’s most recent reporting date and the market capitalisation at 2 April 2007. Earnings estimates for the current and forecast financial years are based on I/B/E/S estimates, reflecting the average of the most recent current and forecast EBITDA estimates for all brokers contributing to I/B/E/S

2. Specific details regarding the above companies including the international companies are provided in Appendix 2. We note the following in respect of the above share trading multiples: x the international comparable newspaper and magazine publishing entities generally have lower multiples than the Australian comparable entities, possibly because of the following factors: ¾ the Australian publishing industry is relatively consolidated and has a smaller number of larger players that tend to operate in their individual niche markets within the Australian media industry and do not face the same level of direct competition as is often experienced in international markets ¾ recent media ownership reform in Australia has generated a high level of speculation of corporate activity within the sector.

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The figure set out below shows the relative share price performance for Australian publishing companies and the S&P/ASX 200 since the media reform legislation was passed.

Figure 28: Share prices of publishing companies relative to S&P/ASX 200 since the media reform legislation was passed 180%

170% 18 October 2006 The Australian 160% Parliament passed the media reform legislation

150%

140%

130%

120%

110%

100%

90%

6 7 0 0 0 0 2006 2006 2 2006 2006 2006 2006 2006 2006 /2006 2006 2006 2006 1/ 10/ 10/ 10/ 10/ 10/ 11/ 11/ 11/ 12/ 12/ 12/ /03/2007 04/2 2/ 9/ 6/1 4/12 1/01/20078/01/2007 5/02/2007 5 2/ 16/ 23/ 30/ 13/ 20/ 27/ 11/ 18/ 25/ 15/01/200722/01/200729/01/2007 12/02/200719/02/200726/02/2007 12/03/200719/03/200726/03/2007

Fairfax APN WANL Rural Press S&P/ASX 200 Source: Bloomberg, Deloitte Corporate Finance analysis The above analysis shows how all of the listed comparable Australian publishing companies have outperformed relative to the S&P/ASX 200 in the period from approximately two weeks before the passing of the media reform legislation by Parliament. In particular, we note the following: ¾ WANL has been considered by some analysts as a potential target and its dramatic share price appreciation appears to reflect an element of a premium due to takeover speculation ¾ immediately after the announcement that the media reform legislation had been passed by Parliament, Rural Press was considered by some analysts as a potential buyer rather than a target which may explain why the Rural Press share price was somewhat depressed relative to other market participants. As soon as the proposed merger with Fairfax was announced in early December 2006, Rural Press’ share price has been increasing considerably and converging towards the price offered by Fairfax. We are of the view that Rural Press shares are currently trading on a control basis and that its current EBITDA multiple reflects a control premium ¾ Fairfax’s relative performance has been opposite that of Rural Press. Considered by certain analysts as a potential target immediately after the media reform announcement, its share price has increased relative to the S&P/ASX 200. After the announcement of the proposed merger with Rural Press, the relative Fairfax share price has converged towards the S&P/ASX 200 ¾ APN’s share price has been increasing since the announcement of the media reforms and the announcements and speculation in relation to the Proposed Scheme.

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x the Australian comparable companies operate diversified media businesses and accordingly are exposed to different risks and growth opportunities compared to APN’s national publishing and regional publishing divisions x WANL is expected to have the highest EBITDA margin and EBITDA growth profile among the Australian comparable companies over the 2007 to 2008 period, which partly explains their relatively higher earnings multiples.

Merger and acquisition multiples The table below summarises the merger and acquisition multiples for companies comparable to the publishing divisions of APN.

Figure 29: Publishing transactions multiples (historical) – target companies 25.0x

21.3x

20.0x

15.2x 15.0x 13.9x 13.8x 12.7x 11.8x 11.7x 11.4x 10.9x 10.8x 10.8x 10.0x 8.4x 7.0x

5.0x

0.0x Text media Quokka Queensland The Trading The Border Harris Murdoch The Wilsons & Wilsons & INL's New Median Median Press Press Post Morning Mail Magazine Independent Horton Horton's Zealand Australia / international Limited Proprietary News Pty Group newspaper publishing New Pty Ltd publishing buisnesses Zealand business

Australian transactions New Zealand transactions

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, relevant independent expert’s reports and Deloitte Corporate Finance analysis

Notes: 1. Specific details regarding the above companies are provided in Appendix 3

2. The Australian and New Zealand median multiple excludes the Wilson & Horton’s newspaper publishing business transaction multiple. We note the following in respect of the above transaction multiples: x the businesses acquired by APN in the Wilson & Horton transaction in October 2001 constitute the majority of the New Zealand publishing and radio businesses currently operated by APN. Based on the terms of that transaction we have estimated an historical EBITDA multiple of 10.8 times. However, we note the following in relation to this transaction:

¾ the implied EBITDA multiple set out above represents the blended historical multiple for the national publishing, regional publishing, printing (both commercial and security printing) and other assets acquired. In order to facilitate comparison with the existing structure of the New Zealand publishing division, we have estimated the historical EBITDA multiple attributable to the publishing businesses for this transaction to be 11.7 times and have excluded the estimated external printing and other businesses acquired as part of this transaction

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¾ since the Wilson & Horton acquisition in 2001, APN has successfully launched two new mastheads, the Herald on Sunday and the Aucklander. x in Figure 29 we have not included the recent Australian transactions announced subsequent to the announcement that the media reform legislation had been passed by Parliament, as they are summarised in Table 23 above.

New Zealand national publishing multiple selection We have selected an earnings multiple range of 10.0 times to 10.5 times EBITDA, on a minority interest basis, in the valuation of APN’s New Zealand national publishing division after considering the following: x APN’s New Zealand national publishing division operates in a mature industry with stable growth prospects x the independent expert for the Wilson & Horton transaction applied an EBITDA multiple of 11.5 times to 12.5 times on a control basis to the maintainable earnings for the New Zealand national publishing business acquired by APN in 2001. This was a component of the independent expert’s total valuation which was in line with the actual transaction price x APN’s New Zealand national publishing division has a dominant position in the Auckland market. 2006 was characterised by weak advertising demand and due to the already high market penetration and low population growth expectation, future growth is expected to be limited to population movements and general economic growth in the New Zealand economy x due to a lower growth expectation relative to APN’s regional publishing business we have applied a lower multiple compared to that applied to the regional publishing division which is in part located in high growth markets, such as Queensland.

Regional publishing multiple selection We have selected an earnings multiple range of 11.3 times to 11.8 times EBITDA, on a minority interest basis, which represents a weighted average multiple based on 12.0 times to 12.5 times EBITDA for Australian regional publishing and 9.5 to 10.0 times EBITDA for New Zealand regional publishing, after considering the following factors: x the majority of the regional publishing division’s earnings is generated in Australia x the median current and forecast EBITDA multiples for the Australian comparable companies are 14.6 times and 13.7 times respectively and 9.7 times and 8.8 times for the international comparable companies x comparable Australian and New Zealand and international transaction multiples reflect a median of 11.4 times and 12.7 times historical EBITDA (on a control basis), respectively x the implied earnings multiples from share trading of Australian listed comparable companies exceeds the median historical transaction multiple (on a control basis) from Australia comparable transactions whereas our analysis of international comparable companies generally shows significantly lower share trading multiples and higher transaction multiples. This further indicates that the current share trading multiples of Australian companies includes an element of a premium for control x since the division generates the majority of its earnings in Australia, it is more comparable to the Australian newspaper and magazine publishing businesses. However, most of the Australian comparable entities operate diversified media businesses and accordingly are exposed to different risks and rewards to that of APN’s regional publishing division 93 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 149

x the division has a well diversified portfolio of regional publishing titles with a local focus, loyal readers and a leading position in most of its markets. These factors combine to lower the risk of volatility in earnings. In general, companies with lower risk earnings trade at higher multiples than companies with higher risk earnings x the regional publishing division of APN based in Australia may be better positioned for future growth than the New Zealand business and the comparable companies due to its strong competitive position in several regions in Queensland, the low risk of competition arising in these markets and the scarcity of similar assets x Australia’s regional publishing industry in south-east Queensland and northern New South Wales is expected to experience strong growth in the short to medium term. Significant population growth and large infrastructure investments in Queensland are expected to generate substantial economic growth during the next years with exceptional performance expected in the employment advertising market. Generally higher growth companies trade on higher multiples x the regional publishing division based in New Zealand is vulnerable to the slowdown in the New Zealand economy which is expected to continue x the Australian comparable trading companies’ multiples are the result of strong speculation of corporate activity stemming from the media reform legislation and may incorporate an element of a control premium.

Radio In addition to the general factors discussed above, in selecting an earnings multiple to apply we have also considered factors specific to the radio division of APN.

Share trading multiples Figure 30 below summarises the market trading multiples for the selected radio companies which are comparable to the radio operations of APN:

Figure 30: Summary - Radio broadcasting market trading multiples

14.0x

12.3x 11.8x 11.8x 11.8x 12.0x 11.4x 11.1x 10.8x 10.8x 10.9x10.6x 10.4x 10.4x 10.3x 10.0x 9.7x

8.0x

6.0x

4.0x

2.0x

0.0x Southern Cross Macquarie Media Austereo Group Canwest Median Australia Clear Channel Median Broadcasting Group Ltd Limited Mediaworks Nz and New Communications International Ltd Zealand

Current EBITDA (times) Forecast EBITDA (times)

Source: Bloomberg, Deloitte Corporate Finance analysis Notes: 1. Specific details regarding the above companies including the international companies are provided at Appendix 2.

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2. Given the relatively small size and the limited liquidity of Pacific Star Network, an Australian listed company which owns two Melbourne AM commercial broadcasting licences and Macquarie Radio Network, a listed company that owns and operates 2GB and 2CH in Sydney, we have not included these companies in the above analysis. We note the following in respect of the above share trading multiples: x many of the comparable entities, such as Macquarie Media Group (“MMG”), Southern Cross and CanWest, operate diversified media businesses and are likely exposed to different risks and opportunities for growth compared to that of the APN radio division x we note that, similar to the publishing business discussed above, the radio broadcasting sector has been affected by the announcements surrounding the media reform legislation in Australia. As noted in the figure below since October 2006 the share prices of Australian radio broadcasting companies have increased relative to the overall market.

Figure 31: Share prices of radio companies relative to the S&P/ASX 200 since the media reform legislation was passed

180%

170% 18 October 2006 The Australian 160% Parliament passed the media reform legislation 150%

140%

130%

120%

110%

100%

90%

80%

6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 06 0 0 06 0 0 0 0 0 0 07 0 0 0 0 00 0 00 00 0 /20 /200 /2 /20 /20 /20 /20 /2 /2 /20 /20 /20 0 1/20 2 3 /10/2 1 /11 12/2 /12 12 02 /02 /02 /02 /03/2 03 2 9/10/2006 6/ 3/11/2000/11 4/ 1/01/20078/01/20 9/01/2005/ 5 2/04/20 16/1 23/10/200630/10/200 1 2 27 11 18/ 25/1 15/01/200722/01/2002 12 19 26 12/ 19/0 26/03/2007 S&P/ASX 200 Southern Cross Austereo MMG CanWest APN Source: Bloomberg, Deloitte Corporate Finance analysis The above analysis shows how all of the listed comparable Australian radio companies have outperformed relative to the S&P/ASX 200 in the period from approximately two weeks before the passing of the media reform legislation by Parliament. In particular, we note the following: ¾ CanWest recently disclosed its results for the financial year ended 30 November 2006 and despite announcing stable revenues and a slight decrease in EBITDA from the previous year, its share price has been increasing since speculation emerged that CanWest Global would dispose of its 70% interest in CanWest. The implied current EBITDA multiple has risen from a range of 7.0 times to 9.0 times EBITDA for the six months preceding 20 October 2006 up to over 11.0 times EBITDA following the announcement of the potential sale, which indicates that the share trading price of CanWest incorporates an element of a control premium ¾ MMG is perceived by the market more as a potential buyer than a potential target, as evidenced by recent acquisition activity

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¾ on 16 November 2006 MMG announced it had acquired a 13.8% stake in Southern Cross. The transaction value implied a current EBITDA multiple of 12.4 times, as detailed in Table 23 above. The Southern Cross share price increased above $16 per share in early December 2006 due to speculation of a potential takeover by MMG ¾ the Austereo share price has increased from approximately $1.80 to over $2.20 since the announcement of the media reform legislation but has recently stabilised due to the announcement of results which were below market expectations ¾ less synergies from industry consolidation perceived to be able to be achieved by radio companies relative to publishers.

Merger and acquisition multiples The figure below summarises merger and acquisition multiples for companies comparable to the radio division of APN.

Figure 32: Recent transactions within the radio broadcasting industry (historical) – target companies 16.0x

14.0x 12.9x 12.0x 11.9x 12.0x 11.4x 10.9x

10.0x 9.5x

8.0x

6.0x

4.0x

2.0x

0.0x NX FM and KO FM Austereo Group RG Capital Radio RG Capital Radio Median Australia Clear Channel (Newcastle) (IPO) Ltd (IPO) Ltd Communications Inc Source: SDC Platinum, MergerStat, Mergermarket, Bloomberg, Deloitte Corporate Finance analysis

Notes:

1. Clear Channel Communication will hold a meeting in April 2007 for shareholders to vote on the proposed offer for its shares. We note that whilst the EBITDA multiple shown in the above table refers to the historical EBITDA, the EBITDA multiples shown in Figure 30 refer to the current and forecast EBITDA 2. Both the Austereo Group and RG Capital Radio IPOs’ implied multiples are on a minority basis as opposed to the other selected transactions which are on a control basis

3. Specific details regarding the above companies are provided in Appendix 3.

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Radio multiples selection We have selected an earnings multiple range of 11.0 times to 11.5 times EBITDA on a minority basis for APN’s Australian radio division and of 10.0 times to 10.5 times EBITDA on a minority basis for the New Zealand radio division, respectively, after considering the following: x the median current and forecast EBITDA multiples for the Australian and New Zealand comparable companies is 11.8 times and 10.8 times respectively and 10.9 times and 10.6 times for the international comparable companies x comparable Australian transaction multiples reflect a median of 11.4 times historical EBITDA x the Australian radio division is subject to considerable competition relative to the New Zealand radio division x the Australian radio advertising sector is expected to perform better than the New Zealand sector due to more stable general economic conditions. No new licences are expected to be issued in the New Zealand market and therefore there is minimal threat of competition. Although the Australian radio broadcasting sector is expected to be characterised by a high level of competition and a risk of continuing stagnation in the main metropolitan areas, Brisbane, Perth and other regional areas are expected to continue their positive growth trend x the New Zealand radio division generates lower margins than the Australian radio division and growth opportunities are limited compared to the Australian operations as discussed above x CanWest, which operates the main New Zealand competitor to TRN, is currently trading at approximately 10.8 times current EBITDA. This multiple reflects recent speculation of a potential sale of CanWest’s majority equity interest by CanWest Global. The effects of the change of control of CanWest on the operations of TRN are uncertain x the implied EBITDA multiple for CanWest would take account of the market’s expectation of the impact of the New Zealand radio licence renewal cost expected in 2011, as set out in Section 6.2.6. However, we have estimated the fair market value of this payment separately in the SOTP valuation of APN and have not reflected this payment in the selection of the multiple for the New Zealand radio division although we note that this is likely to have reduced the share trading multiples for CanWest.

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Printing In addition to the general factors discussed above, in selecting an earnings multiple to apply we have also considered factors specific to the printing division of APN.

Share trading multiples Figure 33 below summarises the market trading multiples for the selected print companies which are comparable to the print operations of APN:

Figure 33: Summary – Printing market trading multiples

12.0x

10.5x 10.6x 10.0x 10.0x 9.7x 9.4x 9.4x 9.1x 9.3x

8.0x

6.0x

4.0x

2.0x

0.0x Wellcom Group Ltd Pmp Limited Median Australia Median International

Current EBITA (times) Forecast EBITA (times)

Source: Bloomberg and Deloitte Corporate Finance analysis Note: specific details regarding the above companies including the international companies are provided in Appendix 2. We note the following in respect of the above share trading multiples: x margins in this sector are progressively decreasing and the importance of volumes and efficiency is crucial. As demonstrated by the recently announced transactions, discussed below, this sector is highly competitive and there continues to be consolidation in the Australian and New Zealand markets x Wellcom Group Limited (“Wellcom”) is more focused on digital services which generates higher margins compared to that of the APN printing division x PMP Limited (“PMP”) recently incurred significant capital expenditure for the installation of new presses and for the upgrade of its technology platforms. The expected decrease in margins for the printing division is expected to be offset by efficiency gains resulting from these capital expenditures.

98 Deloitte: APN News & Media Limited 154 APN NEWS & MEDIA SCHEME BOOKLET

Merger and acquisition multiples The table below summarises merger and acquisition historical EBITA multiples for companies comparable to the printing division of APN. These companies, together with their earnings multiples, are summarised in the table below.

Figure 34: Recent transactions within the commercial printing industry (historical) – target companies

16.0x

14.0x

12.2x 11.9x 12.0x 11.6x

10.0x

8.0x

6.0x

4.0x

2.0x

0.0x Blue Star Print Group Ltd Promentum Limited Median

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, Deloitte Corporate Finance analysis

Note: specific details regarding the above companies are provided at Appendix 3. x on 4 December 2006, Promentum Limited (“Promentum”) announced it had received a conditional proposal to acquire all of Promentum’s share capital for $2.25 in cash per share, implying a premium of 74% on the three month VWAP to the last trading day before the announcement. Currently, the shares of the company are trading close to the offer price x recently Blue Star Printing Group Limited (“Blue Star”), one of the largest commercial printing operators in New Zealand and formerly listed on the NZSX, was acquired through a management-buy-out backed by a private equity firm. The implied historical EBITA multiple for the transaction was 11.6 times (on a control basis).

Printing multiple selection We have selected an earnings multiple range of 9.5 times to 10.0 times EBITA for APN’s printing division, on a minority interest basis, after consideration of the following: x the median multiples for the listed Australian and New Zealand companies with comparable operations to the printing division is 10.0 times current EBITA and 9.4 times forecast EBITA (both on a minority interest basis) x the median multiple for the comparable transactions was 11.9 times historical EBITA (on a control basis) x APN establishes printing facilities based on internal printing requirements and then secures external work to utilise excess capacity. APN’s external printing operations are smaller than the comparable companies 99 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 155

x large investments have been made recently in APN’s printing operations with the goal of significant gains in efficiencies in the short to medium term. We note that the printing division has significant depreciation compared to the comparable companies and the resulting EBITA margin is significantly lower.

Outdoor advertising In addition to the general factors discussed above, in selecting an earnings multiple to apply we have also considered factors specific to the outdoor advertising division of APN.

Share trading multiples Figure 35 below summarises the market trading multiples for the selected outdoor advertising companies which are comparable to the outdoor operations of APN:

Figure 35: Summary – Outdoor market trading multiples

18.0x

16.0x 14.8x

14.0x 13.4x 13.4x

11.8x 11.9x 11.9x 12.0x 11.7x 10.9x 10.9x 10.3x 9.8x 10.0x 9.2x

8.0x

6.0x

4.0x

2.0x

0.0x Lamar Advertising Clear Channel Clear Media Ltd Tom Group Ltd JC Decaux Median Outdoor Current EBITDA (times) Forecast EBITDA (times)

Source: Bloomberg and Deloitte Corporate Finance analysis

Note: specific details regarding the above companies are provided at Appendix 2. We have excluded Network Limited from the above analysis for the reasons discussed below. We note the following in respect of the above share trading multiples: x both Clear Channel Outdoor and Clear Media (which is based in China) are indirectly owned by Clear Channel. The current proposal to privatise Clear Channel has added speculation to the future of both Clear Channel and Clear Media. In November 2006, JC Decaux expressed an interest in acquiring Clear Channel Outdoor x JC Decaux has a significant market share in the Australian outdoor advertising market. Although the company recently announced unexpected growth in sales, the lower current EBITDA multiple compared to that of other selected comparable companies is likely to be attributable to lower growth expectations. Despite its significant presence in high growth markets, such as China, its operations in the slower growing European market are probably contributing to a lower comparative multiple

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x Network Limited is a listed Australian outdoor advertising company with a minor share of the Australian outdoor advertising market. However, we have excluded this company from the above analysis as the observed trading multiple may not be reflective of its underlying value for the following reasons: ¾ the extremely poor liquidity of its shares ¾ the company had negative or marginally positive EBITDA in 2004 and 2005.

Merger and acquisition multiples We compiled merger and acquisition historical EBITDA multiples for companies comparable to APN’s outdoor advertising division. These companies, together with their earnings multiples, are summarised in the following table.

Figure 36: Summary – Recent outdoor transactions multiples (historical) – target companies 18.0x 16.6x

16.0x

13.9x 14.0x

12.0x 11.1x

10.0x

8.0x

6.0x

4.0x

2.0x

0.0x Media Partners International Holdings,Inc Obie Media Corp Median

Source: Bloomberg and Deloitte Corporate Finance analysis Note: Specific details regarding the above companies and the calculation of the merger and acquisition earnings multiples are provided in Appendix 3

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APN’s outdoor division multiple selection We have selected an earnings multiple range of 10.0 times to 10.5 times EBITDA and for APN’s outdoor division after considering the following: x the median EBITDA multiple for the listed companies with comparable operations to those of APN’s outdoor advertising division is 11.9 times current EBITDA and 10.9 times forecast EBITDA (both on a minority interest basis) x the median multiple for the comparable transactions was 13.9 times historical EBITDA (on a control basis) x the outdoor division is significantly smaller than the comparable companies x despite the business being geographically diversified and well positioned in the high growth area of South East Asia, the relative profitability generated in Asia is small compared to the overall margin generated by the division and to the selected comparable companies x a significant proportion of the outdoor division’s earnings are generated through the Adshel joint venture which is not controlled by APN x the business has significant growth opportunities relative to the other media businesses, particularly the upside growth potential resulting from implementation of the uniform outdoor measurement system and the expected increase in outdoor advertising demand. In addition, there is low risk of cannibalisation from Internet compared to the publishing and radio businesses.

Corporate We have selected a multiple range of approximately 10.6 times to 11.1 times to apply to APN’s maintainable corporate costs on a minority basis, which was based on the weighted average multiples for the operating divisions.

6.2.3 Online As discussed in Section 5.2 we have estimated the fair market value of the APN online division using a replacement cost basis having regard to the following: x the division is not expected to generate positive EBITDA prior to 2008 x in order to achieve growth in the online market, APN will be required to undertake additional capital expenditure and incur further losses x it is difficult to disaggregate the growth potential in the online division from other divisions, given the importance of The New Zealand Herald brand name and the use of radio and publishing networks for advertising as well as the strategic importance for APN to enter the online media business x in 2006 APN acquired an interest in two companies operating in the online business (Finda and Sellmefree).

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The table set out below summarises the replacement costs associated with the online division as at the Implementation Date:

Table 24: Online historical and prospective costs

Tax 2006 2007 shield1 ($’m) ($’m) ($‘m) Total

Operating losses 3.6 3.6 (2.3) 4.9 Non recurring capital costs 6.4 -2 (2.0) 4.4 Acquisitions 3.7 3.7 Total 13.7 3.6 (4.3) 13.0

Source: APN, Deloitte Corporate Finance analysis

Notes: 1. We have assumed a weighted tax rate based on the Australian and New Zealand corporate tax rates

2. We have not included certain development costs and capital expenditures expected to be incurred from 1 January 2007 to the Implementation Date as these costs would create a corresponding increase in net debt which has not been included in our estimate of the net debt as at the Implementation Date as set out in Section 6.2.6 and should therefore be neutral for the purpose of determining the estimated fair market value of an APN share.

6.2.4 Summary: enterprise value of APN The following table sets out a summary of our assessment of the enterprise value of operating divisions excluding any surplus assets or contingent liabilities, which are discussed below.

Table 25: Summary – fair market value of APN’s operating divisions (on a minority basis)

Maintainable Assessed value earnings Earnings multiple Low High Division ($’m) Low High ($’m) ($’m)

New Zealand national publishing 104.0 10.0x 10.5x 1,040 1,092 Regional publishing 120.0 11.3x 11.8x 1,356 1,416 New Zealand radio 16.0 10.0x 10.5x 160 168 Australian radio 28.0 11.0x 11.5x 308 322 Printing 3.0 9.5x 10.0x 29 30 Outdoor advertising 45.0 10.0x 10.5x 450 473 Online n/a n/a n/a 13 13 Corporate (15.0) 10.6x 11.1x (159) (167)

Fair market value of APN’s operating 3,197 3,347 divisions (on a minority basis) Implied current EBITDA multiple1 11.1x 11.6x

Source: Deloitte Corporate Finance analysis Notes

1. Based on APN’s attributable actual results for the year ending on 31 December 2006. We note that we have adjusted the actual 2006 attributable EBITDA for certain non-recurring items as specified in Table 20 above.

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6.2.5 Surplus assets Surplus assets are those assets owned by a company that are surplus to its operating activities, such as unused property, loans or investments. Such assets should be valued separately from the operating activities of the company, after adjusting operating results to remove the net income or expense generated by the surplus assets. The table below summarises the surplus assets identified and their estimated fair market values:

Table 26: Surplus assets

Fair market value ($’m)

Investments 16.0 Tax benefits 47.2

Total 63.1

Source: Deloitte Corporate Finance analysis

Investments As at 31 December 2006, APN had interests in a number of associated companies whose earnings are not captured in the EBITDA or EBITA of the operating divisions. We note that whilst not consolidated, the 50% investment in the share capital of Adshel was included in the value of the outdoor advertising division discussed above. In addition to these investments, APN also has other investments which include portfolio holdings in listed companies. We have set out the carrying value and fair market value of these investments in the following table.

Table 27: Investments

31 December 31 December 2006 carrying 2006 fair market value value Investment Interest owned ($’m) ($’m)

DMG Perth Radio 25% 6.8 6.8 Other n/a 1.1 1.1 Listed investments n/a 8.1 8.1

Total 16.0 16.0

Source: Deloitte Corporate Finance analysis, APN We have assumed that the carrying value of the investments in associates is a fair representation of the fair market value for these investments as the majority of these investments have been recently acquired and the size of these assets is not considered to be material to the fair market value of APN. Listed investments have been estimated using the closing share price as at 31 December 2006 and we understand that there have been no material movements in the underlying share price since this date.

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Tax benefits APN has approximately $57 million in gross tax losses and $152 million in tax deductions available for payments made in respect of the masthead licensing agreement from the acquisition of Wilson & Horton in 2001 which are both available to utilise against future taxable profit. Whilst there exists the risk that the masthead licensing transaction may still be challenged as an allowable deduction for tax purposes in New Zealand, we understand that as part of the Wilson & Horton acquisition in December 2001, APN has received a full indemnity from INM covering all aspects (including the financial benefits) of the masthead licensing agreement and we have therefore included the full benefit from this deduction in our valuation. We have estimated the fair market value of these tax benefits by discounting the present value of these benefits (assuming a corporate weighted average cost of capital for APN equal to 9.0%) over the period of expected use. This results in a net present value of these tax deductions of approximately $47.2 million.

6.2.6 Net debt APN’s attributable net debt position as at the Implementation Date is as follows:

Table 28: APN attributable net debt/(cash)

($’m)

Interest bearing liabilities 748.5 Convertible notes 149.2 Cash (70.7) Consolidated net debt as at 31 December 2006 827.0

Adjustment for net debt attributable to APN 34.8 Expected profit until Implementation Date (42.4) Radio licence renewal pay-out 14.2 Cash from convertible notes and options (216.7)

Attributable net debt as at the Implementation Date (616.9)

Source: Deloitte Corporate Finance analysis

Net consolidated debt The consolidated net debt position as at 31 December 2006 comprises interest bearing liabilities of $748.5 million, convertible notes of $149.2 million and cash of $70.7 million. As discussed in Section 4.9, APN has issued a redemption notice to all convertible noteholders allowing all the outstanding notes to be converted to equity and participate in the Proposed Scheme. Furthermore, INMAL will make an offer to acquire all employee options based on the terms of the Proposed Scheme. Due to the impact of these adjustments and the accounting treatment of minority investments the net debt amounts reported as at 31 December 2006 do not represent the net debt attributable to APN as at the expected implementation date of the Proposed Scheme in late May 2007.

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Adjustment for net debt attributable to APN Based on the SOTP valuation approach we have adjusted the consolidated net debt as at 31 December 2006 in order to take into account the following: x deduction of $15.9 million in cash attributable to third party companies which APN consolidates but owns less than 100% x additional debt of $19.0 million attributable to APN which is held in Adshel but is not consolidated by APN. The adjustment to the reported net debt position of APN to reflect these adjustments is set out in the table set out below:

Table 29: Attributable net debt adjustments

Increase (decrease) in net debt ($’m)

Outside equity interest in cash 15.9 Additional Adshel net debt 19.0

Total 34.8

Source: APN, Deloitte Corporate Finance analysis

Expected profit until scheme implementation We have included the expected profit from the previous balance sheet date (31 December 2006) until the expected implementation of the Proposed Scheme in the net debt calculation. We have estimated the expected profit until the implementation of the Proposed Scheme as the pro-rata portion of forecast NPAT for APN after adjusting for seasonality (based on historical earnings seasonality over 2004 to 2006) and using a full tax rate (since the benefit of the tax losses and masthead licensing deductions as at 31 December 2006 have been captured in the valuation of the tax benefits set out above). The resulting NPAT for the five months ending 31 May 2007 is approximately $42.4 million.

Radio licence renewal pay-out The New Zealand radio licences expire on 31 March 2011. Ownership of these frequencies reverts to the New Zealand Government at this time. However a management rights payment was agreed in an industry-wide negotiation which concluded with a capped payment of NZD96 million, of which TRN will pay approximately NZD43 million. Based on the estimated AUD/NZD exchange rate of 1.15 and considering that APN will bear 50% of the above cost, or $21.5 million, we have estimated the present value of the radio licence payment to be approximately $14.2 million, assuming a discount rate equal to 7.5% which represents the estimated cost of debt for APN assuming approximately 100 basis points spread above the 90 day Bank Bill Swap Reference Rate (“BBSW”) as at 3 April 2007 of approximately 6.5%.

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Cash from convertible notes and options As at 31 December 2006, there were approximately 38 million convertible notes and 15 million call options on issue by APN. APN has issued a redemption notice to all convertible noteholders allowing all the outstanding notes to be converted to equity and participate in the Proposed Scheme. Furthermore, INMAL will make an offer to acquire all employee options based on the terms of the Proposed Scheme. The impact on the net debt position of APN as at the Implementation Date for these proposed transactions is set out in the table below:

Table 30: Impact on net debt from convertible notes and options

Increase / (decrease) in net debt ($’m)

Conversion of convertible notes (149.2) Exercise of options (67.5)

Total (216.7)

Source: APN, Deloitte Corporate Finance analysis The convertible notes have a face value of $3.95 per note and an interest rate of 7.25%. If all of the convertible notes currently outstanding were converted to APN shares, the net debt of APN would be reduced by approximately $149 million, being 38 million notes converted at $3.95 per security. As set out in the SIA, INM will make offers to acquire all employee options on terms corresponding to the offer for the shares of APN. The table below sets out the cash flow impact from the exercise of all outstanding options:

Table 31: APN’s call options

Cash-in from Exercise price exercise Grant date ($) Number of options ($’m)

22 July 2002 3.54 487,200 1.7 24 May 2003 3.34 891,511 2.9 29 April 2004 3.85 5,101,497 19.6 30 September 2004 4.53 100,000 0.5 2 May 2006 5.02 8,510,000 42.7 Total 15,090,208 67.5

Source: APN, Deloitte Corporate Finance analysis Based on the consideration for the Proposed Scheme of $6.20 per share and all outstanding options being exercised, we have adjusted the net debt position for the net cash estimated from the issue of additional shares as discussed above.

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6.2.7 Premium for control Earnings multiples derived from share market trading do not reflect the market value for control of a company as they are for portfolio holdings. The difference between the market value of a controlling interest and a minority interest is referred to as the premium for control. Australian studies indicate the premiums required to obtain control of companies range between 20% and 40% of the portfolio holding values (refer to Appendix 4.) The owner of a controlling interest has the ability to do many things that the owner of a minority interest does not. These include: x control the cash flows of the company, such as dividends, capital expenditure and compensation for directors x determine the strategy and policy of the company x make acquisitions or divest operations x control the composition of the board of directors. The following factors have been taken into consideration in determining an appropriate premium for control for APN: x as discussed above, the trading multiples of the comparable Australian media companies, which have been used as the basis to form our views on the appropriate earnings multiples to apply to APN’s operating divisions on a minority basis, are likely to have been affected by speculation of corporate activity as a consequence of the media ownership reforms. Over the period from 18 July 2006 (being three months prior to the announcement of the media ownership reforms) and 28 February 2007, the average share price of the comparable Australian publishing and radio broadcasting companies grew by 26%, which exceeded the growth in the S&P/ASX 200 by approximately 8% x the control premiums paid in transactions for comparable newspaper and magazine publishing companies (refer to Figure 29 and Appendix 3) do not provide conclusive evidence of an appropriate control premium due to the lack of publicly available information and an insufficient number of directly comparable transactions in order to be able to draw a meaningful conclusion x as detailed in Table 23 above, the median premium implied in the recent Australian media transactions post-announcement of the media ownership reforms was 16.3%, based on the share price of the target one week prior to announcement and 18.5% based on the share price of the target one month prior to the announcement. In these transactions a controlling interest was not transferred, indicating a control premium would be greater than this level x there may be synergies that could be achieved by certain potential purchasers of APN, including both cost synergies, such as optimisation of capacity in printing and distribution and a reduction in corporate overheads (such as listing costs) as well as certain revenue synergies. However, the diversity of APN’s businesses, both in terms of geographic locations and types of media, would limit the synergies available to any single buyer

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x a significant portion of APN, in particular the radio and the outdoor businesses, includes companies owned jointly with third parties, some of which APN exerts control and some only significant influence. Notwithstanding that APN controls the management operations for some of these investments, we believe that this partial ownership would limit the premium for control applicable to these jointly owned businesses x whilst we have assessed the control premium for the equity of APN in aggregate, it is likely that different control premiums would apply to the individual operating divisions of APN due to the differing nature and ownership structures of each division. Based on these considerations, we believe that a premium for control at the low end of the observed range is appropriate particularly in light of the circumstance whereby media company valuation multiples are likely to already reflect an element of control premium relating to speculation of potential transactions. On this basis we have selected a premium for control to apply within the valuation of APN of 20%.

6.2.8 Number of APN shares outstanding We have assumed a fully diluted share capital for APN of approximately 513.1 million ordinary shares. The table below summarises the assumed APN shares outstanding as at the Implementation Date on a fully diluted basis.

Table 32: APN Shares outstanding on a fully diluted basis

Security Number

Shares outstanding as at 31 December 2006 460,286,596 Convertible notes 37,768,396 Call options 15,090,208 Total 513,145,200

Source: APN, Deloitte Corporate Finance analysis

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6.2.9 Valuation: capitalisation of maintainable earnings The fair market value of APN estimated using the CME method is summarised below.

Table 33: Summary – capitalisation of maintainable earnings method

Section Low value High value

Fair market value of the operating divisions 6.2.4 ($’m) 3,197 3,347

Surplus assets 6.2.5 ($’m) 63 63 Net debt 6.2.6 ($’m) (617) (617) Equity value (on a minority basis) ($’m) 2,643 2,793 Fully diluted number of shares outstanding (m) 513.1 513.1

Assessed value per share (on a minority basis) ($) 5.15 5.44

Premium for control (20%) 6.2.7 ($’m) 529 559 Equity value (on a control basis) ($’m) 3,171 3,352

Assessed value per share (on a control basis) ($) 6.18 6.53

Source: Deloitte Corporate Finance analysis 6.3 Analysis of recent share trading In order to provide additional evidence of the fair market value of the shares in APN, we have examined recent share trading in APN shares before the date that the Proposed Scheme was announced. The market can be expected to provide an objective assessment of the fair market value of a listed entity, where the market is well informed and liquid. Market prices incorporate the influence of all publicly known information relevant to the value of an entity’s securities. We consider trading in APN shares to be a reasonable benchmark for the estimated fair market value of an APN share for the following reasons: x APN is followed by a number of equity analysts including ABN Amro, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Macquarie Research, Merrill Lynch and UBS x there is a sufficient level of market liquidity for the trading in APN shares.

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We have compared recent market trading to our assessed values for APN shares, both on a minority basis and on a control basis, in the following figure.

Figure 37: Comparison of APN’s share trading with assessed value

Aug 05 Sept 05 Oct 05 Nov 05 Dec 05 Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep-06 Oct 06 (pre-annoucement) Oct 06 (post-annoucement) Nov-06 Dec-06 Jan-07 Feb-07 Mar-07

$4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50

Assessed Value (no control premium) Assessed value (full control premium) Share trading range

Source: Bloomberg and Deloitte Corporate Finance analysis APN’s closing share price ranged from $4.43 to $5.58 per share for the six months prior to APN confirming to the market that it was in discussions with the Consortium regarding a potential offer for APN on 26 October 2006 and from $5.61 to $6.20 per share after this announcement. The figure above indicates that share trading in APN shares before the announcement of the Proposed Scheme has generally fallen within or below our assessed minority interest value for APN. However, we note that the minority value of APN as set out in 6.2.9 will reflect an element of the re-rating of the media sector since the announcement of the media reform legislation which would not necessarily be fully reflected in the prices prior to this announcement. This analysis therefore broadly supports our assessed valuation range for APN on a minority basis derived using the CME methodology. Movements in the market price of APN shares since the announcement of the Proposed Scheme will incorporate the market’s view of the likelihood that the Proposed Scheme will proceed. As set out above, since the announcement of the Proposed Scheme, APN has generally traded at or below the Offer Price which indicates that the market has assessed the prospect of a higher offer by either the Consortium or an alternate bidder as low.

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7 Evaluation and conclusion 7.1 The Proposed Scheme

7.1.1 Introduction In order to determine whether the Proposed Scheme is ‘in the best interest’ of Shareholders we have evaluated whether it is ‘fair and reasonable’ as follows: x assessed whether the Proposed Scheme is ‘fair’ by estimating the fair market value of an APN share (on a control basis) and comparing that value to the estimated value of the consideration being offered per APN share pursuant to the Proposed Scheme x assessed the reasonableness of the Proposed Scheme by considering other advantages and disadvantages of the Proposed Scheme.

7.1.2 Fairness If the Proposed Scheme is approved Shareholders will receive cash consideration of $6.20 per APN share upon completion of the Proposed Scheme, which is expected to occur in late May 2007. Our comparison of the estimated fair market value of an APN share on a full control basis and the fair market value of the consideration offered to the Shareholders pursuant to the Proposed Scheme is set out in the table below.

Table 34: Assessment of fairness

Low High ($) ($)

Estimated fair market value of an APN share (Section 6.2.9) 6.18 6.53 Offer Price 6.20 6.20

Source: Deloitte Corporate Finance analysis The consideration offered under the Proposed Scheme is at the lower end of our valuation range of an APN share on a full control basis. As a consequence, the Offer Price is considered to be fair.

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7.1.3 Reasonableness In accordance with ASIC Policy Statement 75 an offer is reasonable if it is fair. On this basis, in our opinion the Proposed Scheme is reasonable. We have also considered the following factors in assessing the reasonableness of the Proposed Scheme:

Advantages of the Proposed Scheme

APN’s share price would likely fall below current levels If the Proposed Scheme does not proceed it is highly likely that APN shares would trade at prices below those recently achieved and would likely fall to prices more in line with our estimate of the value of an APN share on a minority basis of $5.15 to $5.44 per share, which represents a discount to the Offer Price of between 12% and 17%. There is also a risk that the share price of APN could fall below our minority interest valuation range in the absence of the Proposed Scheme since our valuation was influenced by current share market trading multiples in the media sector. The share market trading prices of Australian media companies have recently increased due to speculation of corporate activity as a consequence of the media reform legislation. There is a risk that this positive re-rating of media company multiples will deflate over the medium term. An indication of the market re-rating which has occurred is that the relative increase in the average share price of the comparable Australian publishing and radio broadcasting companies was approximately 28% over the period from 17 July 2006 (being three months prior to the passing of the media legislation by Parliament on 18 October 2006) and 2 April 2007 which exceeded the return on the S&P/ASX 200 over the same period by approximately 8%.

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Offer Price represents a premium to recent trading in APN’s shares The Offer Price represents a premium to the historical share market trading in APN shares. An analysis of recent trading in APN shares and the premium to these prices implied by the Offer Price is set out in the figure below.

Figure 38: Offer Price and implied premium to share trading price of APN

$6.50 50%

45%

$6.00 40% Introduction of the media reform legislation into Parliament 35%

$5.50 30%

25%

Share Share price $5.00 The media reforms were passed APN announced that it had been APN announced that discussions 20% by the Australian Parliament approached by the Consortium in with the Consortium had ended respect of an offer for APN Implied premium 15%

$4.50 10%

5%

$4.00 0% 10-Oct-06 24-Oct-06 02-Jan-07 16-Jan-07 30-Jan-07 13-Mar-07 27-Mar-07 13-Feb-07 27-Feb-07 07-Nov-06 21-Nov-06 05-Dec-06 19-Dec-06 01-Aug-06 15-Aug-06 29-Aug-06 12-Sep-06 26-Sep-06

Implied premium APN share price (VWAP) Offer Price Source: Deloitte Corporate Finance analysis The consideration offered pursuant to the Proposed Scheme represents the following premiums to recent trading in APN’s shares: x a 23% premium to both the one month and three month VWAP of APN’s shares prior to the announcement that the media reform legislation was introduced into Parliament on 14 September 2006 x a 19% and 23% premium to the one month and three month VWAP respectively for APN’s shares prior to the announcement by APN that they had been approached by members of the Consortium in respect of a potential offer for APN on 26 October 2006. As set out above, the Proposed Scheme provides the minority shareholders with the opportunity to exit APN at a significant premium to the price at which shares in APN traded on the ASX prior to the announcement of the Proposed Scheme.

114 Deloitte: APN News & Media Limited 170 APN NEWS & MEDIA SCHEME BOOKLET

Offer Price represents an implied multiple within the range of recent similar transactions An analysis of the implied EBITDA multiple under the Proposed Scheme as compared to the EBITDA multiples implied by the financial terms of other recent transactions in the Australian media sector is set out below.

Figure 39: Comparison of EBITDA multiples (current1) for the Proposed Scheme and other recent media transactions – target companies

15.5x Rural Press (excluding synergies), 15.0x 14.8x

14.5x

14.0x Western Australian Newspapers, 13.2x 13.5x APN, 13.1x

13.0x

EBITDA timesEBITDA Southern Cross , Seven Media, 12.3x 12.4x 12.5x Rural Press (including synergies), 12.0x 12.6x Fairfax, 12.3x PBL Media, 11.4x 11.5x

11.0x 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% % acquired

Source: Deloitte Corporate Finance analysis Notes:

1. The APN transaction multiple is based on the Offer Price of $6.20 per share, fully diluted net debt excluding adjustments for the radio licence renewal pay-out and the expected profit until Implementation Date (as detailed in Table 28 of this report), and the attributable EBITDA for the year ending on 31 December 2006 as detailed in Table 19 of this report.

2. Specific details regarding the above transactions are provided in Table 23 as well as Appendix 3. As set out above, the EBITDA multiple implied by the Offer Price is within the range of multiples implied in transactions in the media sector announced since the media reform legislation was passed by Parliament. We note the following: x with the exception of the pending merger between Fairfax and Rural Press, whilst significant stakes were acquired, no controlling interests were transferred so the multiples may not fully reflect the premiums required to obtain control x the Fairfax-Rural Press transaction is expected to generate synergies of approximately $35 million per annum within 18 months which was likely a factor in the price paid by Fairfax. We have therefore presented this multiple both including and excluding the impact of these synergies. Including synergies in the earnings of Rural Press, the implied EBITDA multiple is 12.6 times. Furthermore, the Fairfax share price has recently been subject to speculation of a takeover offer since the implementation of the media reforms in early April 2007 which has also had an upward impact on the implied multiples set out above

115 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 171

Offer Price represents an implied multiple within the range of recent similar x the Seven Media and PBL Media acquisitions are very similar transactions involving transactions a joint venture with a private equity buyer whilst the WANL, Southern Cross and An analysis of the implied EBITDA multiple under the Proposed Scheme as compared to Fairfax minority interest transactions are considered to be strategic acquisitions aimed the EBITDA multiples implied by the financial terms of other recent transactions in the at positioning the major media groups for consolidation following the implementation Australian media sector is set out below. of the media reform legislation. As set out in our opinion on fairness above, we have concluded that the Proposed Scheme Figure 39: Comparison of EBITDA multiples (current1) for the Proposed Scheme and other recent media is fair. In addition, the implied EBITDA multiple for the Proposed Scheme is within the transactions – target companies range of multiples for other transactions in the media sector which have been announced 15.5x since the media reform legislation was passed by Parliament. Rural Press (excluding synergies), 15.0x 14.8x Higher offer unlikely

14.5x It is unlikely that the minority shareholders of APN will receive a higher offer either from the Consortium or an alternative bidder. 14.0x Western Australian If Shareholders do not approve the Proposed Scheme it is possible that the Consortium Newspapers, 13.2x 13.5x will make an alternate offer at some future time. However, a higher offer from the APN, 13.1x Consortium appears to be unlikely since the Consortium has already raised the offer price 13.0x three times after extensive negotiations with the Independent Committee since October EBITDA timesEBITDA Southern Cross , Seven Media, 12.3x 12.4x 2006 and has declared the Offer Price final. 12.5x Rural Press (including synergies), It is possible that a higher offer from an alternate bidder may emerge. However, since 12.0x 12.6x INM owns a 40.0% interest in APN, this would act as a significant deterrent against other Fairfax, 12.3x PBL Media, 11.4x prospective acquirers making an offer for APN without prior negotiations with INM. 11.5x Under these circumstances it would not be likely for a full takeover premium to be realised for APN except through a transaction supported by INM. Accordingly, in the 11.0x 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% absence of the Proposed Scheme there may be limited alternative opportunities through % acquired which Shareholders will be able to realise a value in excess of the share trading prices of APN. Source: Deloitte Corporate Finance analysis Notes: INM has publicly stated that it would not sell its 40.0% interest in APN by means of a competing proposal. 1. The APN transaction multiple is based on the Offer Price of $6.20 per share, fully diluted net debt excluding adjustments for the radio licence renewal pay-out and the expected profit until Implementation Date (as detailed in We have been advised that since the announcement of the Proposed Scheme no other Table 28 of this report), and the attributable EBITDA for the year ending on 31 December 2006 as detailed in Table 19 offers for APN have been received. of this report.

2. Specific details regarding the above transactions are provided in Table 23 as well as Appendix 3. As set out above, the EBITDA multiple implied by the Offer Price is within the range of multiples implied in transactions in the media sector announced since the media reform legislation was passed by Parliament. We note the following: x with the exception of the pending merger between Fairfax and Rural Press, whilst significant stakes were acquired, no controlling interests were transferred so the multiples may not fully reflect the premiums required to obtain control x the Fairfax-Rural Press transaction is expected to generate synergies of approximately $35 million per annum within 18 months which was likely a factor in the price paid by Fairfax. We have therefore presented this multiple both including and excluding the impact of these synergies. Including synergies in the earnings of Rural Press, the implied EBITDA multiple is 12.6 times. Furthermore, the Fairfax share price has recently been subject to speculation of a takeover offer since the implementation of the media reforms in early April 2007 which has also had an upward impact on the implied multiples set out above

115 116 Deloitte: APN News & Media Limited Deloitte: APN News & Media Limited 172 APN NEWS & MEDIA SCHEME BOOKLET

Disadvantages of the Proposed Scheme

Lack of alternate similar reinvestment opportunities APN has an attractive portfolio of assets that are unique in nature, and which have provided shareholders a strong return on capital since its initial listing on the ASX, earning a CAGR in total returns of approximately 14% from 1992 to 2006 as compared to the S&P/ASX 200 CAGR of 13% over the same period as set out in the figure below.

Figure 40: Comparison of APN total return to ASX total return since 1992 500 Annualised 450 total return 14.34% 400

350

300

250 Annualised 200 total return 13.16% 150

100

50

9 0 1 -96 97 -98 -9 0 0 -04 -05 -06 -07 p- ep-93 ep-95 ay an-97 e an ep-03 ay an-05 ep an May-92 Jan-93 S May-94 Jan-95 S M J S May J Sep-99 May- Jan- Sep-01 May-02 Jan-03 S M J S May J

APN S&P/ASX 200

Source: Deloitte Corporate Finance analysis, Bloomberg Whilst the Proposed Scheme offers Shareholders the opportunity to realise a premium to the share trading price prior to speculation of the Proposed Scheme, due to the lack of similar companies listed on the ASX, it may be difficult to reinvest the net proceeds received as a consequence of the Proposed Scheme and obtain a similar investment profile and level of return to that historically achieved by APN shareholders.

Inability to participate in upside growth potential of APN As discussed above, it is likely that APN shares would trade at prices below those recently achieved if the Proposed Scheme does not proceed. Whilst the Proposed Scheme allows Shareholders to exit their investment in APN at a premium to the share price of APN prior to the speculation of the Proposed Scheme, Shareholders will not participate in the future growth of APN if the Proposed Scheme proceeds. It is possible that the APN share value may increase over time to a level above the Offer Price.

117 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 173

Tax consequences The tax implications of accepting the Proposed Scheme will vary depending on the individual circumstances of each of the Shareholders. Accepting the Proposed Scheme may crystallise a tax liability for Shareholders. This may be seen as a particular disadvantage for those Shareholders with the current intention of retaining their shares in APN for the long-term as acceptance of the Proposed Scheme will likely crystallise a tax liability earlier than anticipated. Shareholders should evaluate the taxation consequences of the Proposed Scheme based on their individual circumstances. Conclusion on reasonableness The Offer Price is within our estimated full control valuation range of APN and if the Proposed Scheme does not proceed, it is highly likely that the share price of APN will fall below the Offer Price and the price at which it has recently traded. Based on the current shareholding structure of APN with INM owning a 40.0% interest, it would appear that the likelihood of Shareholders receiving an alternate offer in excess of the Offer Price from either the Consortium or an alternate bidder is low. Furthermore, whilst it is possible that the APN share price may meet or exceed the Offer Price at some point in the future, even in the absence of an alternate bid for the Company, it is unlikely that the APN share price would exceed the Offer Price in the near term. Since the Offer Price is fair and the prospect of Shareholders realising a price in excess of the Offer Price, either through a higher alternate offer or the short-term appreciation of APN shares is unlikely, the Proposed Scheme is considered to be reasonable.

118 Deloitte: APN News & Media Limited 174 APN NEWS & MEDIA SCHEME BOOKLET

7.1.4 Conclusion In our opinion the Proposed Scheme is fair and reasonable and therefore in the best interest of Shareholders. We have estimated the fair market value of an APN share on a full control basis to be in the range of $6.18 to $6.53 per share. Since the Offer Price to be received under the Proposed Scheme is within this range, albeit at the lower end of the range, we have concluded that the Proposed Scheme is fair. In addition, after considering other factors relevant to Shareholders, in particular since the prospect of Shareholders realising a price in excess of the Offer Price, either through a higher alternate offer or the short-term appreciation of APN shares is unlikely, we consider the Proposed Scheme is reasonable. The decision as to whether or not to approve the Proposed Scheme is a decision which each of the Shareholders should make having regard to their own investment preference, risk tolerance, liquidity requirements, investment horizon and tax profile. 7.2 The Proposed Sale

7.2.1 Evaluation In evaluating whether the Proposed Sale is fair and reasonable we considered the following factors: x we have concluded that the Proposed Scheme is in the best interest of Shareholders. Since the Proposed Scheme will not become effective unless the Resolution is passed by the required majority of Shareholders, we have concluded the Proposed Sale is to the advantage of Shareholders x there are no material disadvantages associated with the Proposed Sale since it does not affect the interests of Shareholders on the basis that it can only occur if the Proposed Scheme is approved and becomes effective, at which time APN will be an indirect wholly-owned subsidiary of the Consortium.

7.2.2 Conclusion In our opinion, the Proposed Sale is fair and reasonable to Shareholders.

119 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 175

Appendix 1: Glossary

Reference Definition

ABC Audit Bureau of Circulations in New Zealand ABN AMRO Report ABN AMRO, 27 June 2006, “Caught by the Net” ABS Australian Bureau of Statistics ACCC Australia Competition and Consumer Commission ACMA Australian Communications and Media Authority ACP Australian Consolidated Press Magazines Adshel Adshel Street Furniture Pty Limited AFSL Australian Financial Services Licence Announcement Date 17 April 2007 ANZ Bank Australia and New Zealand Banking Group Limited APN APN News & Media Limited ARN Australian Radio Network ARN Brisbane ARN Brisbane Pty Limited ASA Advertising Standards Authority Inc ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange Limited AUS Australian Auditing Standards BBSW Bank Bill Swap Reference Rate Bidder Independent News & Media Plc Blue Star Blue Star Printing Limited BSA The Broadcasting Services Act 1992 BSA NZ Broadcasting Standards Authority CAGR Compound annual growth rate CanWest CanWest MediaWorks Limited CanWest Global Can West Global Communication CEASA Commercial Economic Advisory Service of Australia Clear Channel Clear Channel Communications Inc CME Capitalisation of maintainable earnings Company APN News & Media Limited Consortium Consortium comprising Independent News & Media Plc, Providence Equity Partners and The Carlyle Group Deloitte Corporate Finance Deloitte Corporate Finance Pty Limited EBIT Earnings before interest and tax EBITA Earnings before interest, tax and amortisation EBITDA Earnings before interest, tax, depreciation and amortisation EIU Economic Intelligence Unit EU European Union Fairfax Fairfax Media Limited Eye Corp Eye Corp Pty Limited FATA The Foreign Acquisitions and Takeovers Act 1975 FICS Financial Industry Complaints Service Final dividend APN’s final dividend for the year ended 31 December 2006 FIRB Foreign Investment Review Board FSG Financial Services Guide FY07 Financial year ending 30 June 2007 GDP Gross domestic product I/B/E/S Institutional Brokers’ Estimates System IBISWorld IBISWorld Pty Limited ICAA Institute of Chartered Accountants in Australia Implementation Date Late May 2007

120 Deloitte: APN News & Media Limited 176 APN NEWS & MEDIA SCHEME BOOKLET

Reference Definition

Independent Committee Independent Committee of the board of directors of APN composed of Directors of APN who are not also directors of INM INM Independent News & Media Plc INMAL Independent News & Media (Australia) Limited KKR Kohlberg Kravis Roberts & Co Lee Enterprises Lee Enterprises, Inc MMG Macquarie Media Group MPA Magazine Publishers Association of New Zealand News News Limited News Corp News Corporation NPAT Net profit after tax NRI Non-recurring items NZSX New Zealand Stock Exchange OECD Organisation for Economic Co-operation and Development Offer price $6.20 per share OMA Outdoor Media Associations in Australia and New Zealand OMG Outdoor Media Group Original Offer Price $6.10 per share Part 3 Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cwlth) PBL Media Publishing and Broadcasting Limited’s media interests PDS Product Disclosure Statement PMP PMP Limited Promentum Promentum Limited Proposed Scheme The Consortium’s offer to acquire all of the outstanding APN shares Providence Providence Equity Partners RadioWorks RadioWorks New Zealand Limited RBA Reserve Bank of Australia RNZ Radio New Zealand Rural Press Rural Press Limited S&P/ASX 200 S&P/ASX 200 index Scheme Booklet Explanatory memorandum prepared by APN Section 640 Section 640 of the Corporations Act 2001 Section 411 Section 411 of the Corporations Act 2001 SEQ South eastern Queensland Shareholders APN shareholders, convertible bond holders and option holders other than INM SIA Scheme Implementation Agreement SOTP Sum-of-the-parts approach Southern Cross Southern Cross Broadcasting Limited SWOT Strengths, weaknesses, opportunities and threats TCG The Carlyle Group Ten Network Ten Network Holdings Limited The Press Council The Press Council New Zealand TRN The Radio Network UBS Report UBS analyst report dated 7 September 2006 UK United Kingdom US United States of America VWAP Volume weighted average price WANL West Australian Newspapers Limited Wellcom Wellcom Group Limited Wilson & Horton Wilson & Horton Limited

121 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 177

Reference Definition

Currencies AUD Australian dollar CAD Canadian dollar CHF Swiss franc EUR Euro GBP British pound HKD Hong Kong dollar NZD New Zealand dollar SGD Singapore dollar USD US dollar

122 Deloitte: APN News & Media Limited 178 APN NEWS & MEDIA SCHEME BOOKLET

Appendix 2: Comparable entities Detailed below are comparable companies to APN’s operating divisions including calculations of the earnings multiples.

Newspapers publishing The following tables provide an analysis of companies with comparable activities to APN’s publishing divisions.

Table 35: Newspaper and magazine publishing earnings multiples – EBITDA market trading

Enterprise EBITDA EBITDA EBITDA value times times1 times1 Company Currency (’m) (Historical) (Current) (Forecast)

Australian West Australian Newspapers AUD 3,690.5 19.4x 17.9x 15.7x Rural Press AUD 3,003,0 15.3x 14.6x 13.7x Fairfax AUD 6,680.5 13.2x 12.2x 11.4x Minimum 3,003.0 13.2x 12.2x 11.4x Median 3,690.5 15.3x 14.6x 13.7x Average 4,458.0 16.0x 14.9x 13.6x Maximum 6,680.5 19.4x 17.9x 15.7x

North American Dow Jones & Co Inc USD 3,327.9 15.1x 9.9x 9.1x Lee Enterprises USD 2,938.4 12.7x 9.9x 9.9x Tribune Co USD 13,707.0 9.6x 10.8x 10.7x New York Times Co USD 4,806.5 6.4x 9.6x 9.7x Meredith Corp USD 3,374.8 10.8x 10.0x 9.8x Washington Post USD 7,284.7 9.8x 9.0x 8.5x Media General Inc USD 1,975.9 10.0x 12.4x 8.5x Journal Register Co USD 976.4 7.2x 8.8x 8.6x Gannett Co USD 18,518.9 8.0x 8.3x 8.1x Belo Corporation USD 3,313.1 8.4x 9.1x 8.2x McClatchy Co USD 2,725.5 8.1x 4.1x 4.1x Minimum 976.4 6.4x 4.1x 4.1x Median 3,327.9 9.6x 9.6x 8.6x Average 5,722.7 9.6x 9.3x 8.7x Maximum 18,518.9 15.1x 12.4x 10.7x

Other international Rcs Mediagroup Spa EUR 3,205.9 12.2x 9.8x 9.1x Sanomawsoy Oyj EUR 4,673.0 11.9x 10.4x 9.9x Daily Mail & General Trust GBP 4,076.4 11.4x 10.6x 10.0x Edipresse S.A. CHF 892.7 7.9x 9.4x 8.3x Gruppo Editoriale L'Espresso EUR 2,008.1 9.1x 9.0x 8.6x Johnston Press Plc GBP 2,129.7 10.7x 10.4x 10.0x Trinity Mirror Plc GBP 2,014.6 6.9x 8.5x 8.5x Minimum 892.7 6.9x 8.5x 8.3x Median 2,129.7 10.7x 9.8x 9.1x Average 2,714.3 10.0x 9.7x 9.2x Maximum 4,673.0 12.2x 10.6x 10.0x Source: Bloomberg, Deloitte Corporate Finance analysis Note:

1. Sales and earnings estimates for the current and forecast financial years are based on I/B/E/S estimates, reflecting the average of the most recent current and forecast EBITDA estimates for all brokers contributing to I/B/E/S as disclosed in Bloomberg. Bloomberg and I/B/E/S are two of the most reliable and recognised sources for collating and publishing brokers’ estimates and have been relied upon as the source for brokers’ estimates throughout this report.

123 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 179

Table 36: Newspaper publishing earnings margins

EBITDA EBITDA EBITDA Sales Sales margin margin margin growth growth (Historical) (Current) (Forecast) (Current) (Forecast) Company (%) (%)1 (%)1 (%)1 (%)1

Australian West Australian Newspapers 48.1% 47.9% 52.3% 8.9% 4.6% Rural Press 33.6% 33.7% 34.2% 4.8% 4.8% Fairfax 26.5% 26.8% 27.3% 6.8% 5.4% Minimum 26.5% 26.8% 27.3% 4.8% 4.6% Median 33.6% 33.7% 34.2% 6.8% 4.8% Average 36.1% 36.1% 37.9% 6.8% 4.9% Maximum 48.1% 47.9% 52.3% 8.9% 5.4%

North American Dow Jones & Co Inc 12.4% 15.8% 16.6% 20.1% 4.2% Lee Enterprises 20.5% 25.7% 25.5% 1.9% 1.0% Tribune Co 25.6% 23.5% 23.5% -3.6% 1.1% New York Times Co 22.4% 15.3% 14.9% -3.2% 2.2% Meredith Corp 19.6% 20.3% 20.1% 4.1% 2.8% Washington Post 20.8% 18.7% 18.2% 21.4% 9.2% Media General Inc 21.5% 14.5% 21.5% 19.2% -1.7% Journal Register Co 24.5% 22.6% 22.8% -11.4% 1.0% Gannett Co 30.4% 28.1% 27.9% 4.8% 2.7% Belo Corporation 25.9% 23.1% 24.7% 4.0% 4.0% Mcclatchy Co 28.4% 26.8% 26.9% 107.8% -0.6% Minimum 12.4% 14.5% 14.9% -11.4% -1.7% Median 22.4% 22.6% 22.8% 4.1% 2.2% Average 22.9% 21.3% 22.1% 15.0% 2.4% Maximum 30.4% 28.1% 27.9% 107.8% 9.2%

Other international Rcs Mediagroup Spa 12.0% 12.7% 13.3% 17.8% 3.0% Sanomawsoy Oyj 15.0% 15.4% 15.6% 11.1% 4.0% Daily Mail & General Trust 16.5% 17.8% 18.5% -1.1% 2.1% Edipresse S.A. 13.4% 10.9% 12.1% 3.5% 1.6% Gruppo Editoriale L'Espresso 20.5% 19.7% 20.2% 4.3% 2.6% Johnston Press Plc 38.2% 33.8% 34.8% 16.0% 1.8% Trinity Mirror Plc 26.0% 22.6% 23.1% -7.0% -1.8% Minimum 12.0% 10.9% 12.1% -7.0% -1.8% Median 16.5% 17.8% 18.5% 4.3% 2.1% Average 20.2% 19.0% 19.7% 6.4% 1.9% Maximum 38.2% 33.8% 34.8% 17.8% 4.0%

Source: Bloomberg, Deloitte Corporate Finance analysis

Note: 1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data We provide the descriptions for each of the above comparables as follows:

WANL WANL is the holding company for various companies that write, publish and sell regional newspapers. The company is also involved in the cinema exhibition, cinema advertising and film distribution. 124 Deloitte: APN News & Media Limited 180 APN NEWS & MEDIA SCHEME BOOKLET

Rural Press Rural Press publishes newspapers and magazines, which are sold in Australia, New Zealand and the United States. Newspapers titles include The Land, Queensland Country Life, Stock Journal, New Zealand Farmer and Farm Equipment Trader. The company also operates radio broadcasting stations and offers outdoor advertising services.

Fairfax Fairfax publishes and prints newspapers, magazines and entertainment publications. The company also provides advertising sales in newspapers, magazines and electronic formats. Fairfax also offers an online business which includes news and classifieds.

Dow Jones & Company Incorporated Dow Jones & Company Incorporated is a global provider of business news and information with operations in print publishing, electronic publishing and general-interest community newspapers. The company publishes The Wall Street Journal and Barron's periodicals, Dow Jones Newswires and Dow Jones Indexes electronic news wires and various other publications.

Lee Enterprises, Inc. (“Lee Enterprises”) Lee Enterprises owns various daily newspapers and a joint interest in several others. The company also owns various weekly newspapers, shoppers and specialty publications. In addition, Lee Enterprises provides related Internet services, primarily from the Midwest to the Pacific Northwest United States.

Tribune Company Tribune Company, a media company, conducts operations in publishing, television, radio stations and interactive ventures. The company publishes newspapers that include The Chicago Tribune, The Los Angeles Times and Newsday. Tribune also offers a variety of local and national news and information web sites.

The New York Times Company The New York Times Company, a diversified media company, conducts operations in newspapers, magazines, television and radio stations and electronic information and publishing. The company's publications include The New York Times, The Boston Globe and The International Herald Tribune. New York Times Company also holds interests in a newsprint mill and a paper mill.

Meredith Corporation Meredith Corporation is a diversified media company primarily focused on publishing and broadcasting. The company's publishing segment includes magazine and book publishing, integrated marketing, interactive media, brand licensing and other related operations. Meredith Corporation also operates network-affiliated television stations and markets and develops syndicated television programs.

The Washington Post Company The Washington Post Company conducts operations primarily in newspaper and magazine publishing and television broadcasting. The company also owns and operates cable television systems and provides educational and career development services. Publications include The Washington Post and Newsweek. 125 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 181

Media General Incorporated Media General Incorporated is a diversified communications company situated primarily in south- eastern US. The company holds interests in newspapers, television stations, interactive media and diversified information services. Media General Incorporated owns various daily newspapers, network-affiliated television stations and interactive media offerings such as online enterprises.

Journal Register Company Journal Register Company publishes daily newspapers and non-daily publications. The company publishes The New Haven Register and The Herald News, among others. Journal Register Company’s operations are clustered in Connecticut, central New England and New York.

Gannett Co., Incorporated Gannett Co., Incorporated is an international news and information company that publishes various daily newspapers in the US and the UK, including USA Today and USA Weekend, a newspaper magazine. The company also operates television stations in major United States markets.

Belo Corporation Belo Corporation conducts operations in television broadcasting, newspaper publishing, interactive media and cable news. The company's television stations are located in major metropolitan areas such as Houston, Texas. Belo Corporation publishes The Dallas Morning News, The Providence Journal and other newspapers. The company also operates local cable news channels.

The McClatchy Company The McClatchy Company publishes daily and non-daily newspapers located in western coastal states, North and South Carolina and Minnesota. The company also owns and operates other media-related businesses, including a national online publishing operation, as well as a national newspaper marketing company.

RCS Media Group S.p.A RCS MediaGroup S.p.A. publishes Italian national newspapers, magazines and books. The company also operates an advertising agency and a radio company. RCS Media Group S.p.A is in the process of focusing on the media sector and has been divesting its operations within the fashion industry.

SanomaWSOY Oyj SanomaWSOY Oyj is a media company. The company publishes and distributes books, maps, magazines, calendars and newspapers including the Finnish papers Helsingin Sanomat and Ilta- Sanomat. SanomaWSOY Oyj publishes over 240 magazines in several countries in Europe, offers educational products and operates Internet services, bookstores, television stations, cinemas and convenience outlets.

Daily Mail and General Trust Daily Mail and General Trust owns and administers a wide range of media interests. The company specializes in the publication and printing of newspapers and periodicals. Daily Mail is active in television, radio, teletext, magazines, exhibitions and book publishing. They also operate a number of Internet sites, including This is London, This is Money, UK Plus and femail.co.uk.

126 Deloitte: APN News & Media Limited 182 APN NEWS & MEDIA SCHEME BOOKLET

Edipresse S.A. Edipresse S.A. operates printing companies and publishes newspapers, magazines and books. The company's online service provides readers with access to newspapers, magazines, compact disks, books, airline tickets, car rental and hotel rooms. Edipresse is active primarily in Switzerland, Spain, Portugal, Greece and Poland.

Gruppo Editoriale L’Espresso S.p.A Gruppo Editoriale L'Espresso S.p.A. publishes daily newspapers such as La Repubblica and periodicals including L'Espresso, National Geographic Italia and MicroMega. The company's other activities include advertising, radio, digital satellite television and publishing music and books on CD- Rom.

Johnston Press Plc Johnston Press Plc operates a publishing company. The company publishes local weekly newspapers, both paid for and free, in addition to offering associated printing operations. Johnston Press has over 70 local websites, which offer news coverage throughout the United Kingdom.

Trinity Mirror Plc Trinity Mirror Plc primarily publishes national and regional newspapers in the UK. The company's other media operations consist of Web sites, magazines and exhibitions.

127 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 183

Radio broadcasting The following tables provide an analysis of companies with comparable activities to APN’s radio broadcasting division.

Table 37: Radio broadcasting earnings multiples – EBITDA market trading

Enterprise EBITDA EBITDA EBITDA value times times times Company Currency (’m) (Historical) (Current) 1 (Forecast) 1

Australian and New Zealand Southern Cross Broadcasting AUD 1,373.2 12.5x 12.3x 11.4x Macquarie Media Group Ltd AUD 2,056.8 n/m 11.8x 10.4x Austereo Group Limited AUD 930.8 12.1x 11.8x 11.1x Canwest MediaWorks NZD 704.3 10.7x 10.8x 10.4x

Minimum 704.3 10.7x 10.8x 10.4x Median 1,152.0 12.1x 11.8x 10.8x Average 1,266.3 11.8x 11.6x 10.8x Maximum 2,056.8 12.5x 12.3x 11.4x

International Gcap Media Plc GBP 434.5 15.6x 15.9x 13.6x Spanish Broadcasting Sys USD 606.3 11.6x 13.6x 11.7x Beasley Broadcast Grp Inc USD 351.1 12.0x 10.9x 10.6x Radio One Inc USD 1,599.2 10.5x 10.9x 11.3x Cumulus Media Inc USD 1,157.9 12.5x 11.5x 11.4x Entercom Communications USD 1,788.8 9.9x 10.4x 10.0x Salem Communications USD 671.2 12.0x 11.6x 10.7x Clear Channel USD 24,736.4 12.2x 10.3x 9.7x Regent Communications Inc USD 234.0 11.7x 8.7x 8.7x Saga Communications Inc USD 336.6 10.5x 8.7x 8.3x

Minimum 234.0 9.9x 8.7x 8.3x Median 638.8 11.8x 10.9x 10.6x Average 3,191.6 11.8x 11.2x 10.6x Maximum 24,736.4 15.6x 15.9x 13.6x

Overall average 2,790.5 11.9x 11.4x 10.7x

Source: Bloomberg, Deloitte Corporate Finance analysis Note:

1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data

128 Deloitte: APN News & Media Limited 184 APN NEWS & MEDIA SCHEME BOOKLET

Table 38: Radio broadcasting earnings margins

EBITDA EBITDA EBITDA Sales Sales margin margin margin growth growth (Historical) (Current) (Forecast) (Current) (Forecast) Company (%) (%)1 (%)1 (%)1 (%)1

Australian and New Zealand Southern Cross Broadcasting 20.2% 20.0% 20.8% 2.4% 3.8% Macquarie Media Group Ltd 22.6% 44.6% 44.6% 123.3% 12.8% Austereo Group Limited 32.4% 32.5% 33.2% 2.3% 4.1% Canwest Mediaworks Nz Ltd 26.2% 25.2% 25.1% 3.3% 3.5% Minimum 20.2% 20.0% 20.8% 2.3% 3.5% Median 24.4% 28.9% 29.1% 2.8% 3.9% Average 25.4% 30.6% 30.9% 32.8% 6.0% Maximum 32.4% 44.6% 44.6% 123.3% 12.8%

International Gcap Media Plc 13.2% 13.2% 15.3% -1.8% 1.0% Spanish Broadcasting Sys 30.8% 24.0% 26.1% 9.5% 6.5% Beasley Broadcast Grp Inc 23.6% 24.5% 24.4% 6.3% 2.2% Radio One Inc 41.0% 38.5% 36.2% 2.9% 2.6% Cumulus Media Inc 28.3% 30.0% 29.6% 2.6% 2.5% Entercom Communications 41.8% 36.5% 36.8% 9.6% 2.3% Salem Communications 26.5% 24.2% 24.9% 13.2% 5.5% Clear Channel 30.6% 32.9% 33.9% 10.5% 3.2% Regent Communications Inc 23.5% 27.7% 27.5% 13.3% 0.4% Saga Communications Inc 22.7% 27.3% 28.1% 0.4% 2.2% Minimum 13.2% 13.2% 15.3% -1.8% 0.4% Median 27.4% 27.5% 27.8% 7.9% 2.4% Average 28.2% 27.9% 28.3% 6.6% 2.8% Maximum 41.8% 38.5% 36.8% 13.3% 6.5%

Source: Bloomberg, Deloitte Corporate Finance analysis

Note: 1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data We provide the descriptions for each of the above comparables as follows:

Southern Cross Southern Cross operates commercial radio and television stations throughout Australia. The company has television interests that cover metropolitan Adelaide and all regional areas of Australia (other than Western Australia) and radio interests covering the Sydney, Melbourne, Brisbane and Perth markets.

Macquarie Media Group Limited Macquarie Media Group Limited is an investment company established for the purpose of acquiring, owning and managing a portfolio of media assets.

Austereo Group Limited Austereo Group Limited operates a commercial FM radio broadcasting network in Australia. The company has approximately 14 radio stations in Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra and Newcastle. Austereo Group Limited also has interests in shopping centre signage, direct marketing and interactive entertainment.

129 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 185

Canwest Canwest through its subsidiary operates in the television broadcasting segment and radio broadcasting segment. The company's subsidiary, Canwest RadioWorks Limited operates a network of over 140 frequencies throughout New Zealand. The company also broadcasts free-to-air digital channels.

GCAP Media Plc GCap Media Plc operates radio stations in the United Kingdom. The company owns digital and analogue stations in the Southeast and Southwest of England, the Midlands, East Anglia, Northern England, Wales and Central Scotland.

Spanish Broadcasting System, Incorporated Spanish Broadcasting System, Incorporated is a Spanish-language radio broadcasting company operating in the United States. The company owns and operates various FM radio stations in Los Angeles, New York, Miami, Chicago and San Antonio, as well as in Puerto Rico. Spanish Broadcasting System, Incorporated, through a subsidiary, also operates a bilingual Spanish-English Internet web site.

Beasley Broadcast Group, Incorporated Beasley Broadcast Group, Incorporated is a radio broadcasting company. The company owns and operates FM and AM radio stations located in large and mid-sized markets in the eastern US.

Radio One, Incorporated Radio One, Incorporated is a radio broadcasting company primarily targeting African Americans. The company owns and operates FM and AM radio stations in urban markets, including Washington, D.C., Baltimore, Atlanta, Philadelphia, Detroit, St. Louis, Cleveland and Richmond.

Cumulus Media Incorporated Cumulus Media Incorporated, a radio broadcasting company, acquires, operates and develops radio stations in mid-size radio markets in the US. The company also provides sales and marketing services under local marketing agreements to various stations in the US.

Entercom Communications Corporation Entercom Communications Corporation is a radio broadcasting company with operations in the US. The company owns and operates FM and AM stations in various markets. Entercom Communications Corporation stations provide a variety of programming such as music and news/talk.

Salem Communications Corporation Salem Communications Corporation is a radio broadcasting company that provides programming targeted at audiences interested in religious and family issues. The company owns and operates radio stations in large metropolitan markets. Salem also operates Salem Radio Network, a national radio network offering syndicated talk, news and music programming to affiliated radio stations.

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Clear Channel Clear Channel is a diversified media company that has equity interests in various international radio broadcasting companies. The company operates in three segments, radio broadcasting, Americas outdoor advertising and international outdoor advertising. The company’s radio operations include radio stations for which it is the licensee and for which the company programs and/or sells air time. The radio broadcasting segment also operates radio networks. The company also owns television stations and a media representation business.

Regent Communications, Incorporated Regent Communications, Incorporated, a radio broadcasting company, acquires, develops and operates radio stations in small and mid-sized markets. The company owns FM and AM radio stations throughout the US.

Saga Communications, Incorporated Saga Communications, Incorporated acquires, develops and operates broadcast properties. The company owns and operates FM and AM radio stations, state radio networks, a farm radio network and television stations in the US.

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Outdoor advertising The following tables provide an analysis of companies with comparable activities to APN’s outdoor advertising division.

Table 39: Outdoor media earnings multiples – EBITDA market trading

Enterprise EBITDA EBITDA EBITDA value times times times Company Currency (’m) (Historical) (Current) 1 (Forecast) 1

Clear Media Ltd HKD 4,343.1 15.3x 11.9x 9.2x Lamar Advertising Company USD 8,153.8 17.8x 14.8x 13.4x Clear Channel Outdoor USD 12,154.7 16.9x 13.4x 11.8x Tom Group Ltd HKD 5,867.7 16.2x 11.7x 10.9x JC Decaux SA EUR 5,603.6 12.4x 10.3x 9.8x

Minimum 4,343.1 12.4x 10.3x 9.2x Median 5,867.7 16.2x 11.9x 10.9x Average 7,224.6 15.7x 12.4x 11.0x Maximum 12,154.7 17.8x 14.8x 13.4x

Source: Bloomberg, Deloitte Corporate Finance analysis Note:

1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data

Table 40: Outdoor media earnings margins

EBITDA EBITDA EBITDA Sales Sales margin margin margin growth growth (Historical) (Current) (Forecast) (Current) (Forecast) 2005 2006 2007 (%) (%)1 Company (%) (%) (%)1

Clear Media Ltd 41.9% 37.0% 37.0% 45.8% 29.9% Lamar Advertising Company 44.9% 45.4% 46.4% 18.5% 8.7% Clear Channel Outdoor 27.0% 30.2% 31.2% 12.9% 9.3% Tom Group Ltd 11.6% 15.6% 15.1% 3.7% 10.8% JC Decaux SA 25.9% 26.3% 26.2% 18.5% 6.1% Minimum 11.6% 15.6% 15.1% 3.7% 6.1% Median 27.0% 30.2% 31.2% 18.5% 9.3% Average 30.3% 30.9% 31.2% 19.9% 12.9% Maximum 44.9% 45.4% 46.4% 45.8% 29.9%

Source: Bloomberg, Deloitte Corporate Finance analysis

Note:

1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data

We provide the descriptions for each of the above comparables as follows:

Clear Media Limited Clear Media Limited. is a large outdoor media company based in Hong Kong that operates in mainland China and provides advertising solutions, including bus shelter advertising, billboard advertising and point-of-sale advertising.

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Lamar Advertising Company Lamar Advertising Company owns and operates outdoor advertising structures in the US. The company provides poster and bulletin displays, as well as logo signs. Lamar Advertising Company also operates tourism signage franchises in the US and Canada.

Clear Channel Outdoor Holdings Incorporated Clear Channel Outdoor Holdings, Incorporated is engaged in advertising through billboards, street furniture displays, transit displays and other out-of-home advertising displays, such as wallscapes, spectaculars and mall displays, which it owns or operates in key markets worldwide. The company's business consists of two operating segments: Americas and international, where the Americas segment consists primarily of billboards, street furniture displays and transit displays and the international segment consists of the company's advertising operations in Europe, Australia, Asia and Africa. In addition, the company owns equity interests in various out-of-home advertising companies worldwide.

TOM Group Limited TOM Group Limited is a Chinese-language media conglomerate in China. The company operates in five business segments: Internet group, publishing group, outdoor media group, sports group and television and entertainment group. The company operates in China, Taiwan and Hong Kong.

JC Decaux SA JC Decaux SA offers advertising services. The company sells advertising on street furniture such as bus shelters, free standing panels, columns and automatic toilets, billboards and posters on buses, trains and subways and at railroad stations and airports.

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Printing The following tables provide an analysis of companies with comparable activities to APN’s printing division.

Table 41: Printing earnings multiples – EBITA market trading

Enterprise EBITA EBITA EBITA value times times times Company Currency (’m) (Historical) (Current) 1 (Forecast) 1

Australian PMP Limited AUD 877.7 10.4x 9.4x 9.1x Wellcom Group Limited AUD 97.0 13.2x 10.5x 9.7x Minimum 97.0 10.4x 9.4x 9.1x Median 487.3 11.8x 10.0x 9.4x Average 487.3 11.8x 10.0x 9.4x Maximum 877.7 13.2x 10.5x 9.7x

International Rr Donnelley & Sons Co USD 10,667.6 12.4x n/a n/a Banta Corp USD 831.8 7.9x n/a n/a Quebecor World Inc CAD 3,936.5 10.9x 10.7x 8.9x Next Media Ltd HKD 6,252.4 11.3x 11.6x 9.7x St. Ives Plc GBP 333.6 12.4x 10.6x 9.8x Fung Choi Media Group Ltd SGD 485.0 2.2x 1.6x 1.4x Minimum 333.6 2.2x 1.6x 1.4x Median 2,384.1 11.1x 10.6x 9.3x Average 3,751.1 9.5x 8.6x 7.4x Maximum 10,667.6 12.4x 11.6x 9.8x

Source: Bloomberg, Deloitte Corporate Finance analysis Notes:

1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data

2. n/a – not available

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Table 42: Printing earnings margins

EBITDA EBITDA EBITDA Sales Sales margin margin margin growth growth (Historical) (Current) (Forecast) (Current) (Forecast) 2005 2006 2007 (%) (%)1 Company (%) (%) (%)1

Australian PMP Limited 9.5% 7.2% 7.2% 3.6% 3.6% Wellcom Group Limited 26.7% 23.2% 23.4% 16.9% 7.6% Minimum 9.5% 7.2% 7.2% 3.6% 3.6% Median 18.1% 15.2% 15.3% 10.3% 5.6% Average 18.1% 15.2% 15.3% 10.3% 5.6% Maximum 26.7% 23.2% 23.4% 16.9% 7.6%

International Rr Donnelley & Sons Co 15.3% n/a n/a 32.4% 3.2% Banta Corp 10.2% n/a n/a n/a n/a Quebecor World Inc 10.6% 5.2% 6.3% 11.5% 0.9% Next Media Ltd 21.0% 16.4% 18.7% -1.2% 5.8% St. Ives Plc 13.3% 7.5% 7.8% 4.9% 2.8% Fung Choi Media Group Ltd 30.3% 27.6% 28.9% 26.9% 15.4% Minimum 10.2% 5.2% 6.3% -1.2% 0.9% Median 14.3% 12.0% 13.2% 11.5% 3.2% Average 16.8% 14.2% 15.4% 14.9% 5.6% Maximum 30.3% 27.6% 28.9% 32.4% 15.4%

Source: Bloomberg, Deloitte Corporate Finance analysis Notes:

1. Refer to Note 1 of Table 35 for details on sources used for current and forecast sales and earnings data

2. n/a – not available

PMP PMP provides commercial printing services throughout Australia and New Zealand for magazines, newspapers, books, retail catalogues, directories and promotional materials. The company also provides letterbox distribution services, digital graphic arts services, magazine distribution and micromarketing.

Wellcom Wellcom is a full service pre-media and print production services company that provides pre-media, digital asset management and specialty print solutions to advertising agencies and corporate entities.

RR Donnelley & Sons Co R. R. Donnelley & Sons Company provides commercial printing and information services. The company provides a range of services from pre-media and content management to distribution and logistics to publishers of catalogues, advertising inserts, magazines, books and directories. The company also provides document and communications-management services for various industries.

Banta Corporation Banta Corporation provides printing and digital imaging services. The company serves publishers of educational and general books, special-interest magazines, consumer and business catalogues and direct marketing materials. Banta Corporation also offers global supply-chain management services, multimedia and software packages, interactive media, online services and single-use healthcare products. 135 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 191

Quebecor World, Incorporated Quebecor World, Incorporated provides commercial print media services through offices located in the US, Canada and other countries around the world. The company specialises in magazines, inserts and circulars, books, catalogues, specialty printing and direct mail, directories, digital pre-media and other value-added services.

Next Media Limited Next Media Limited, through its subsidiaries, prints newspapers, books and magazines and sells advertising space. The company also provides printing and reprographic services, deliveries Internet content and sells advertising space on websites.

St Ives Plc St. Ives Plc is a printing and publishing company and its activities include web-fed and sheet-fed offset magazine printing, book publishing, book binding, direct response and other commercial printing, corporate and financial security printing, packaging and printing for the multimedia and music industries. St. Ives Plc has operations and sales in the UK, US, Europe and Japan.

Fung Choi Media Group Limited Fung Choi Media Group Limited provides commercial printing and publication printing. The group also designs and manufactures corrugated cardboard packaging products including corrugated cardboard sheets, corrugated cartons, die-cut boards and assembled cartons.

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Appendix 3: Comparable transactions Below are the details of comparable market transactions, listed by target company.

Recent transactions post the media reforms announcement The following table sets out the details of recent transactions subsequent to the announcement of the media reforms in Australia.

Table 43: Transactions post-announcement of the media reforms

Implied Transaction Current 1-week 4-week Announcement value EBITDA control control Company Acquired by date ($’m)1 multiple premium2 premium2

Rural Press (100%) Fairfax 6 Dec 2006 2,9972 14.8x3 14.6% 10.8%

Seven Media (50%) Kohlberg Kravis 20 Nov 2006 3,970 12.3x4 n/a n/a Roberts & Co Southern Cross (13.8%) Macquarie Media 16 Nov 2006 1,381 12.4x4 7.8% 13.8% Group Fairfax (7.3%) NewsCorp 20 Oct 2006 6,756 12.3x4 18.0% 29.0%

PBL Media (50%) CVC Asia Pacific 18 Oct 2006 5,5245 11.4x4 n/a n/a

WANL (14.9%) Seven 18 Oct 2006 2,706 13.2x4 18.5% 23.2% Network

Average 12.7x 14.7% 19.2% Median 12.3x 16.3% 18.5%

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, The Australian Financial Review, Deloitte Corporate Finance analysis Notes:

1. Implied transaction value calculated based on 100% acquisition of equity plus net debt

2. Calculated with reference to the target share price one week prior and four weeks prior to the announcement date and the acquirer share price as at the effective date (in the case of share offers). In the Fairfax-Rural Press transaction, a component of the offer price comprises Fairfax shares and the transaction is still pending. In order to estimate the acquisition price, we have used the Fairfax share price (as at 2 April 2007) 3. The multiple does not incorporate certain cost savings and synergies expected to be achieved from this merger

4. Minority interests were acquired in these transactions. Accordingly, the earnings multiples are on a minority interest basis rather than on a control basis 5. Net of transaction costs

n/a – not applicable.

Rural Press On 6 December 2006, Fairfax agreed to acquire the entire ordinary share capital of Rural Press in a stock swap transaction. Under the proposal each Rural Press ordinary and preferred shareholder will be entitled to receive for each share held either two ordinary Fairfax shares and $3.30 in cash or 2.3 Fairfax ordinary shares and $1.80 in cash. In addition, Rural Press’ ordinary and preferred shareholders will be entitled to receive a ‘special dividend’ of approximately $0.57 and $0.63 per share, respectively.

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Seven Media (50%) On 19 November 2006, KKR acquired 50% of Seven Media, a joint venture between KKR and Seven Network Limited, comprising Seven Network’s interest in television, magazine publishing and online interests. The gross proceeds to Seven Network were approximately $4 billion, which, net of its interest in Seven Media, is approximately $3.0 billion.

Southern Cross (13.8%) Macquarie Media Group acquired a 13.8% shareholding in Southern Cross on 17 November 2006 for $16.50 per share. Southern Cross controls regional television stations in Adelaide, Tasmania, Victoria and New South West along with radio stations in Melbourne and Sydney'.

Fairfax On 19 October 2006, News Corp acquired a 7.3% equity interest in Fairfax, the second largest newspaper publisher in Australia. The shares were acquired after the close of trading on 19 October 2006 at $5.20 per share.

PBL Media On 18 October 2006, some of PBL’s media interests (“PBL Media”), including ACP, Nine Network (including its interest in Sky News), a 50% interest in ninemsn and its 41% shareholding in carsales.com.au were transferred to a new company, PBL Media, in which PBL and CVC Asia Pacific each hold a 50% economic interest.

WANL On 18 October 2006, Seven Network Limited bought a 14.9% interest in WANL (which is the maximum allowance under the current Australian media rules) between October 17 and October 18, 2006 for approximately $343 million.

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Newspaper publishing companies The following table sets out the details of recent transactions in the newspaper publishing industry.

Table 44: Recent transactions within the newspaper and magazine publishing industry

Historical 1-week 4-week Transaction EBITDA control control Announcement value multiple premium premium Company Acquired by date (’m) (times) (%) (%)

Newspaper publishing companies - Australia The Independent News Pty Limited Fairfax Media 25 Jul 2006 15.2 7.0x n/a n/a The Border Morning Mail Limited Fairfax Media 3 May 2006 155.0 11.8x n/a n/a Queensland Press Pty Limited NewsCorp 6 Apr 2004 2,950.0 13.9x n/a n/a Murdoch Magazines Pty Limited Seven Network 12 Jul 2004 77.0 8.4x n/a n/a The Trading Post Group Pty Telstra Corp 8 Mar 2004 636.0 13.8x n/a n/a Limited Limited Text Media Group Limited Fairfax Media 1 Sep 2003 71.0 21.3x 11.5% 18.9% The Geelong Advertiser Group NewsCorp 28 Aug 2003 57.3 n/a n/a n/a Harris & Co Rural Press 22 Aug 2003 48.3 10.9x n/a n/a Quokka Press Pty Limited WANL 20 Nov 2002 16.5 15.2x n/a n/a

Median 12.8x 11.5% 18.9%

Newspaper publishing companies - New Zealand Rodney Times NZ newspapers Fairfax Media 3 Sep 2005 NZD10.7 n/a n/a n/a INL’s New Zealand publishing Fairfax Media 11 Apr 2003 NZD757.2 10.8x n/a n/a business Wilson & Horton Group APN 31 Oct 2001 NZD970.8 10.8x n/a n/a Wilson & Horton’s newspaper APN 31 Oct 2001 NZD1,2541 11.7x1 n/a n/a publishing business

2 Median 10.8x n/a n/a

2 Median Australia and New Zealand 11.4x 11.5% 18.9%

International publishing companies – North America West Coast Papers MediaNews Group 26 Apr 2006 and Hearst Corporation USD1,000.0 11.5x n/a n/a 13 Mar 2006 Knight Ridders McClatchy USD6,133.0 10.7 (3.9%) (5.7%) 30 Jan 2005 Pulitzer Lee Enterprises USD1,460.0 13.9 (1.5%) (0.9%) 21st Century Newspaper, Journal Register 6 Jul 2004 USD415.0 11.9x n/a n/a Incorporated Company The Record Group Dow Jones & 16 Apr 2003 USD144.0 13.6x n/a n/a Company Canwest Global Communications Transcontinental 10 Jul 2002 CAD255 8.5x n/a n/a Corp community newspaper Group Limited Sioux City Journal Lee Enterprises 6 Jun 2002 USD120.6 12.7x n/a n/a (50%) Howard Publications Lee Enterprises 12 Feb 2002 USD749.0 14.1x n/a n/a

Median 12.3x (2.7%) (3.3%)

Newspaper publishing companies – United Kingdom Telegraph Plc Press Holdings 22 Jun 2004 GBP729.5 20.8x n/a n/a Limited Independent News & Media Plc Archant Regional 30 Dec 2003 GBP62.0 13.3x n/a n/a London regional newspaper Limited Trinity Mirror Plc Irish regional 3i Group Plc 1 Dec 2003 GBP46.3 n/a n/a n/a newspaper business Guiton Group Claverley Company 28 Oct 2003 GBP78.2 10.5x 36.8% 33.6% SMG Plc publishing business Gannett Co, Inc 23 Dec 2002 GBP216.0 12.2x n/a n/a Regional Independent Media Johnston Press Plc 12 Mar 2002 GBP560.0 14.5x n/a n/a Holdings Limited

Median 13.3x 36.8% 33.6% 139 Deloitte: APN News & Media Limited APN NEWS & MEDIA SCHEME BOOKLET 195

Historical 1-week 4-week Transaction EBITDA control control Announcement value multiple premium premium Company Acquired by date (’m) (times) (%) (%)

International (non Australian/New Zealand) median 12.7x (1.5%) (0.9%) 2 Overall median 12.2x 5.0% 9.0% Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, Deloitte Corporate Finance analysis, independent expert’s reports

Notes:

1. Enterprise value and multiple estimated by Deloitte Corporate Finance based on the relating independent expert’s report published by Arthur Andersen in October 2001.

2. Excluding the Wilson & Horton’s newspaper publishing business transaction multiple.

The Independent News Pty Limited In July 2006, Fairfax acquired the Independent News Pty Limited and its associate Melbourne Community Newspapers Pty Limited, the Australia based newspaper publishers, for a consideration of $15.2 million.

The Border Morning Mail Limited On 3 May 2006, Fairfax reached an agreement with the Border Morning Mail Limited, the publisher of leading regional newspaper, The Border Mail to acquire 100% of the shares of the company at a net consideration of $155 million. The Border Mail published six days per week with a circulation of over 26,500 copies throughout the greater Albury-New South Wales and Woodonga-Victoria area.

Queensland Press In November 2004, News Corporation (“News Corp”) acquired the remaining 58.3% interest in Queensland Press that it did not already own as part of its move of domicile to the US. The acquisition was expected to strengthen News Corp's Australian newspaper business. Queensland Press was the leading publisher of Queensland newspaper. Its titles included: The Courier Mail and the Sunday Mail which served the south east Queensland area and beyond. It also owned the leading newspaper on the Gold Coast in Cairns, The Gold Coast Bulletin and The Cairns Post.

Murdoch Magazines Pty Limited In July 2004, Pacific Magazines Pty Limited, the Australian developer of websites and magazines publisher and a subsidiary of Seven Network Limited, acquired Murdoch Magazines Pty Limited, the Australian magazine publisher, from Handbury Holdings, the Australian holding company, for $77 million. The acquisition was expected to allow Pacific Magazines Pty Limited to become a leader in the core publishing categories of lifestyle, homemaker, women’s fashion and men’s lifestyles.

Trading Post Group Pty Limited In March 2004, Telstra Corp Limited acquired the Trading Post Group Pty Limited, a unit of the Trader Classified Media NV for $636 million in cash. Trading Post Pty Limited was the market leader in Australian classified advertising, operating in 22 state-based, predominantly weekly print publications focuses on local advertising and five online sites. The Trading Post Pty Limited was integrated with Telstra Corp Limited to operate under the Sensis division of Telstra Corp Limited. The acquisition was expected to yield substantial revenue and cost synergy benefit to this division.

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Text Media Group Limited In September 2003, Fairfax announced a takeover offer for the remaining 80.1% in Text Media Group Limited that it did not already own for $2.33 per share plus an additional eight cents per share conditional upon the successful takeover. Text Media Group Limited owned over 80 titles including Melbourne weekly, a book publishing business and customer publishing business. In February 2003, Text Media Group Limited acquired the Metropolis Media Pty Limited, as a result the historical multiples have been biased upward as the historical earnings did not include the full year impact of this acquisition.

Geelong Advertiser Group In August 2003, News Corp had acquired Geelong Advertiser Group from Independent Newspaper Limited for $57.3 million in cash. The Geelong Advertiser Group was Victoria's oldest daily newspaper and the second oldest morning daily news in Australia. It published the Daily Geelong Advertiser and two free weekly newspapers, the Geelong News and the Echo and a number of local magazines.

Harris & Co In August 2003, Rural Press announced a takeover offer for all the issued shares of Harris & Co for $31 cash per share. Harris & Co was an unlisted company based in Burnie North West of Tasmania. Its primary business activity was the publishing of the regional daily tabloid newspaper, the Burnie Advocate, the Western Herald, a weekly newspaper and Western Tiers, a monthly magazine. Rural Press subsequently raised its offer to $31.50 per share and acquired 85.3% of issued shares in Harris & Co.

Quokka Press In November 2001, WANL announced its acquisition of Quokka Press, the publisher of Perth based weekly classified newspaper, called Quokka. It ran an average of 30,000 free lineage classified advertisements per week and generated revenue from paid circulation of about 57,000 copies per week and from paid advertising revenue from display and commercial lineage advertisements.

New Zealand Transactions

Rodney Times On 3 September 2005, Fairfax entered into an agreement with Times Media Group Limited, thereby allowing Fairfax to acquire The Rodney Times newspaper and other publications, for which it paid NZD10 million. The other publications included a weekly newspaper called The Coaster and regional real estate guide Outlook.

Independent News Limited (“INL”) In April 2003, Fairfax announced that it had acquired the New Zealand publishing business from INL for NZD1.2 billion. The business included two metropolitan daily newspaper (The Press and The Dominion Post), two national Sunday newspaper (Sunday Star Time and Sunday News), seven regional dailies, 53 community publications and other associated websites. The acquisition was expected to allow Fairfax to reduce its reliance in Australia by diversifying its product and geographical mix to New Zealand.

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Wilson & Horton In October 2001, APN announced it had acquired Wilson & Horton and its subsidiaries from INM. Wilson & Horton published New Zealand's leading newspaper, The New Zealand Herald, eight regional daily newspaper, 32 non-daily newspaper and two magazines. It also had significant printing operations and a one third interest in the TRN. The acquisition was based on a purchase price for Wilson & Horton’s equity of approximately NZD970 million which excludes net debt of approximately NZD515 million. Wilson & Horton expected EBITDA for the financial year ending on 31 December 2000 was approximately NZD137.1 million. We have estimated a pure newspaper publishing business EBITDA multiple of 11.7 times based on information included in the independent expert’s report published in conjunction with the transaction. Based on our analysis the enterprise value relating to the publishing business was NZD1,254 million and the relating historical EBITDA was NZD107 million. In estimating the above parameters we have excluded the external commercial and security printing division, the investments in TRN and in certain outdoor advertising businesses and other surplus assets.

International publishing companies

West Coast Papers In April 2006, McClatchy announced a definitive agreement with MediaNews Group Inc and Hearst Corporation under which the companies paid McClatchy USD1 billion in cash to acquire four newspapers. MediaNews Group Inc acquired two northern California papers: San Jose Mercury News and Contra Costa Times, and Hearst Corporation acquired Monterey Herald, and the St Paul Pioneer Press.

Knight Ridders In March 2006, the Mclatchy announced a definitive agreement to acquire Knight Ridder for a consideration of cash and scrip, USD40 and 0.5118 McClatchy share for each Knight Ridder's ordinary share. Knight Ridder published 32 daily newspapers in 29 US markets. It also had websites in all of its markets. As part of the announcement McClatchy planned to sell 11 of the acquired newspapers that did not fit with the company's longstanding operating strategies. McClatchy subsequently sold 12 of the acquired newspapers for approximately USD2.1 billion.

Pulitzer On 30 January 2005, Lee Enterprises announced it has entered into an agreement to acquire Pulitzer for a cash price of USD64 per share. Pultizer operated 14 daily newspapers and more than 1000 weekly newspapers, shoppers, and niche publications.

21st Century Newspapers, Incorporated In June 2004, Journal Register Company announced that it had entered into an agreement to acquire 21st Century Newspapers, Incorporated 21st Century Newspaper Incorporated owned four daily newspapers, The Daily Oakland Press, The Macomb Daily, The Daily Tribune and The Morning Sun. The acquisition allowed Journal Register Company to enter into some of Michigan's fast growing market.

The Record Newspapers In April 2003, Dow Jones & Company announced its acquisition of The Record newspaper in California from Omaha World-Herald for USD114 million in cash.

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CanWest In July 2002, Transcontinental Group Limited acquired 32 publications and 12 newspapers from CanWest, an owner and operator of television stations and a holding company, for CAD255 million.

Sioux City Journal In June 2002, Lee Enterprises announced its acquisition of the remaining 50% interest in the Sioux City Journal from its joint venture partner Hagabone Corporation.

Howard Publications In February 2002, Lee Enterprises announced its intention to acquire 100% in Howard Publications, a family owned company. It published 16 daily midsized newspapers in Oceanside and Escondido, northwest of Indiana and Iowa.

Telegraph Plc In June 2004, Press Holdings International Limited acquired Telegraph Plc, a London-based publisher of newspapers, from Hollinger Incorporated of the US for GBP729.5 million in cash. Telegraph Plc published The Daily Telegraph, The Sunday Telegraph and The Spectator magazine. The relatively higher multiple was partly due to the competition with other bidders during the bidding process.

INM In December 2003, INM had agreed to sell its London regional newspaper business to Archant Regional Limited, a privately owned regional newspaper for GBP62 million. The London newspaper business owned five newspaper divisions namely Post, East London, North London, Kent and North West.

Trinity Mirror In December 2003, 3i Group Plc acquired the Northern Ireland newspaper division from Trinity Mirror a London-based publisher of newspapers, in a leveraged buyout transaction. The business published seven newspapers in Northern Ireland and the Republic of Ireland, including The News Letter in Belfast, The Derry Journal and the Donegal Democrat. During the acquisition, the Irish market was experiencing high growth and the acquisition was therefore considered opportunistic.

Guiton Group In October 2003, Claverley Company acquired 65% of equity interest in Guiton Group that it did not already own. Guiton Group was based in the Channel Islands and published daily and weekly newspaper in Jersey and Guernsey. It also had retail and wholesale divisions, newsagents and a technology division.

SMG Plc’s publishing In December 2002, Gannett Incorporated announced its acquisition of SMG Plc's publishing business. SMG Plc's business published three Scotland's regional broadsheet newspapers, namely The Herald, Sunday Herald and Evening Times. It also had 11 specialist consumer and business-to-business magazine titles and an online advertising and content business.

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Regional Independent Media Holdings Limited In March 2002, Johnston Press Plc announced its acquisition of Regional Independent Media Holdings Limited, the fifth largest regional newspaper publishing group in the UK. The acquisition was considered to be a strategic fit for Johnston Press's existing regional newspapers franchise, expanding its market presence and costs saving.

Radio companies The following table sets out the details of recent transactions in the radio broadcasting industry.

Table 45: Recent transactions within the radio industry

Historical Transaction EBITDA 1-week 4-week Announcement value multiple control control Company Acquired by date (’m) (times) premium premium

Radio companies

Clear Channel Thomas Lee Partners LP 16 Nov 2006 USD26,898 12.9x 8.9% 22.8% and Bain Capital LLC RG Capital Radio Limited Macquarie Bank Limited 30 Jun 2004 172.0 9.5x 3.4% 9.9% RedWave Media Limited WANL 11 Jul 2003 11.7 n/a n/a n/a 4BH AM (Brisbane) Southern Cross 13 Feb 2003 10.1 n/a n/a n/a NX FM and KO FM (Newcastle) RG Capital Radio Limited 12 Mar 2002 23.5 12.0x n/a n/a 2UE AM,4BC AM, Sky Radio Southern Cross 26 Mar 2001 89.8 n/a n/a n/a Austereo Group Initial public offering 1 Mar 2001 809.4 11.9x n/a n/a RG Capital Radio Limited Initial public offering 1 Oct 2000 114.6 10.9x n/a n/a

Median Australia and New Zealand 11.4x 6.2% 16.3% Median 11.9x 6.2% 16.3%

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, Deloitte Corporate Finance analysis Note: n/a – not available

Clear Channel On 17 November 2006, Thomas H Lee Partners LP and Bain Capital LLC agreed to buy Clear Channel for about USD19 billion. Clear Channel is a diversified media company. It has equity interests in various international radio broadcasting companies. Its business consists of three operating segments: radio broadcasting, Americas outdoor advertising and international outdoor advertising. The radio broadcasting segment includes radio stations for which it is the licensee and for which the company programs and/or sells air time. The radio broadcasting segment also operates radio networks. The Americas outdoor advertising segment consists of its operations in the US, Canada and Latin America. The international outdoor advertising segment consists of the advertising operations in Europe, Australia, Asia and Africa. It also owns television stations and a media representation business.

RG Capital Radio In June 2004, Regional Media Pty Limited a subsidiary of Macquarie Bank Limited announced its acquisition of RG Capital Radio at a cash offer of $3 per ordinary share. RG Capital Radio operated 35 commercial radio broadcasting license in 20 regional markets in Queensland, New South Wales, Victoria and Tasmania. In October 2000 RG Capital Radio listed on the ASX.

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Redwave In July 2003, WANL announced the acquisition of the unlisted Redwave for a consideration of $11.7 million in cash. Redwave operated AM and FM radio licences in North West towns of Karratha and Port Hedland and Broome, remote mining areas of Western Australia.

Brisbane radio station 4BH In February 2003, Southern Cross announced its acquisition of a Brisbane radio station 4BH from DGM Australia for $10.1 million. 4BH broadcasted an 'easy living' format on AM band to metropolitan Brisbane.

NX FM and KO FM In March 2002, Austereo sold 50% interest in its two Newcastle radio stations, NX FM and KO FM to RG Capital Radio for $11.8 million. The two companies formed a joint venture to operate the two stations, with Austereo overseeing the programming and RG Capital Radio assuming management responsibility.

2UE, 4BC and Sky Radio In March 2001, Southern Cross announced its acquisition of Sydney radio station 2UE, Brisbane radio station 4BC and Sky Radio through its acquisitions of all issued shares in Broadcasting Investment Holdings Pty Limited and United Broadcasting Holdings Pty Limited. The acquisition was expected to allow Southern Cross to expand its news/talk network which consisted of Melbourne's 3AW and 6PR in Perth. The national integrated talk network was expected to provide synergies through higher advertising appeal, programming synergies and resource sharing.

Austereo On March 2001, Austereo was floated on the ASX offering over 191.4 million shares at $1.85, raising just over $809 million. The Village Show Limited retained the controlling interest of the remaining equity of 56.3% in Austereo.

Outdoor advertising companies The following table sets out recent transactions in the outdoor advertising industry.

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Table 46: Recent transactions within the outdoor advertising industry

Historical Transaction EBITDA 1-week 4-week Announcement value multiple control control Company Acquired by date (’m) (times) premium premium

Outdoor advertising companies

Media Partners International JC Decaux SA 21 Sep 2005 HKD1,071.0 11.1x 32.6% 100.0% Holdings,Inc Obie Media Corporation Lamar Advertising Co 20 Sep 2004 USD69.5 16.6x 52.4% 60.9% Eye Corp Pty Ltd Ten Network Holdings 30 Oct 2000 189.0 n/m n/m n/m Limited

Median 13.9x 42.5% 80.4%

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, Deloitte Corporate Finance analysis

Note: n/m – not meaningful.

Media Partners International Holdings Incorporated In September 2005, JC Decaux announced that it has acquired a 73.38% interest in Media Partners International Holdings Incorporated at HKD1.14 per share. Media Partners was a Hong Kong-based public company engaged in managing and operating network of outdoor advertising media in China.

Obie Media Corporation In September 2004, Lamar Advertising Co acquired all the outstanding common stock of Obie Media Corporation, an advertising agency, for around USD 69.52 million.

Eye Corp Pty Limited In October 2000, Ten Network Holdings Limited (“Ten Network”) acquired a 60% interest in Eye Corp Pty Limited (“Eye Corp”) for $189 million, implying a multiple of approximately 10 times the expected full year EBITDA of $40 million. A large proportion of the purchase price represented goodwill. Eye Corp did not meet Ten Network's earnings expectation and performed poorly after the acquisition, recording EBITDA of only $3.5 million for the 10 months since acquisition to the year ended August 2001. As a result, Ten Network wrote off goodwill attributable to Eye Corp’s acquisition amounting to $137.5 million in the second half of 2002. In August 2002, Ten Network acquired the remaining 40% interest in Eye Corp for $10 million, taking Eye Corp total consideration to $199 million. The total consideration price of $199 plus an assumed net debt of $100 million implied estimated multiples of approximately 71 times estimated 2001 EBITDA and 150 times 2002 EBITDA, making this transaction not meaningful for our analysis.

Printing companies The following table sets out recent transactions in the printing industry.

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Table 47: Recent transactions within the printing advertising industry Historical Transaction EBITA 1-week 4-week Announcement value multiple control control Company Acquired by date (’m) (times) premium premium

Printing companies

Blue Star Champ Private Equity 20 Dec 2006 NZD385.0 11.6x n/a n/a Promentum Pacific Print Group 15 Jan 20071 163.2 12.2x 74.4% 80.7%

Median 11.9x n/m n/m

Source: SDC Platinum, MergerStat, Merger Market, Bloomberg, Deloitte Corporate Finance analysis

Note 1: pending transaction

Blue Star On the 20 December 2006 the Australian buyout firm Champ Private Equity Pty Limited has agreed to buy New Zealand's biggest printing company, Blue Star for an enterprise value of NZD385 million. Champ Private Equity Pty Limited will buy 84% of Auckland-based Blue Star, with management, including the majority shareholder managing director, together retaining a 16% stake.

Promentum On 15 January 2007, Pacific Print Group, a New Zealand-based printer, has announced a merger with Promentum, the Australian-listed printer at $2.25 per share. On 12 February 2007 Promentum board unanimously supported the offer from Pacific Print Group. Promentum, through its subsidiaries, provides printing and related services in Australia. The company has plants in New South Wales, Victoria and Queensland and prints commercial, financial and industrial documents. It also prints short to medium run sheet fed books and magazines and also specializes in printing for the finance industry.

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Appendix 4: Control premium studies

Deloitte Corporate Finance study We conducted a study of premiums paid in Australian transactions completed between 1 January 1999 and 31 December 2005. This study was conducted by Deloitte Corporate Finance staff for internal research purposes in 2006. Our merger and acquisition data was sourced from Bloomberg and yielded 246 transactions that were completed between 1 January 1999 and 31 December 2005. Upon further analysis, we excluded three way mergers, acquisitions by joint ventures and transactions where there was insufficient data available from our analysis. We excluded 73 transactions that fell into either one or more of these categories. As a result of this analysis, our data set was refined to 173 transactions where an acquiring company increased its shareholding in a target company from a minority interest to a majority stake. We assessed the premiums by comparing the offer price to the daily VWAP of the target company four weeks prior to the date of the announcement of the offer. Where the consideration included shares in the acquiring company, we used the closing share price of the acquiring company on the day prior to the date of the offer.

Summary of findings As the following figure shows, the distribution of premiums paid in Australian transactions between 1 January 1999 and 31 December 2004 is widely distributed with a long ‘tail’ of transactions with high premiums.

Figure 41: Distribution of data

25

20

15

10

Number Number of transactions 5

0

% % % % 0% 5 5 -5% 5 5 -8 -75% -6 -55% -4 -35% -25% -15% 15% 25% 35% 45% 55% 65% 75% 8 95% < >100% Source: Deloitte Corporate Finance analysis

The following table details our findings.

Table 48: Premium analysis - findings

Control premium

Average 28% Median 20% Upper quartile 42% Lower quartile 8%

Source: Deloitte Corporate Finance analysis

Notwithstanding the relatively wide dispersion of control premiums observed in our study we consider the control premium range of 20% to 40% to be the representative general market practice for the following reasons. 148 Deloitte: APN News & Media Limited 204 APN NEWS & MEDIA SCHEME BOOKLET

Many of the observed control premiums below 20% are likely to have been instances where the market either has been provided with information or anticipates a takeover offer in advance of the offer being announced. Accordingly, the pre-bid share trading price may already reflect some price appreciation in advance of a bid being received, which creates a downward bias on some of the observed control premiums in our study. Many of the observed control premiums above 40% are likely to have been influenced by the following factors which create an upward bias on some of the observed control premiums in our study: x some acquirers are prepared to pay above fair market value to realise ‘special purchaser’ value which is only available to a very few buyers. Such ‘special purchaser’ value would include the ability to access very high levels of synergistic benefits in the form of cost and revenue synergies or the ability to gain a significant strategic benefit x abnormally high control premiums are often paid in contested takeovers where there are multiple bidders for a target company. In such cases, bidders may be prepared to pay away a greater proportion of their synergy benefits from a transaction than in a non-contested situation x some of the observations of very high premiums are for relatively small listed companies where there is typically less trading liquidity in their shares and they are not closely followed by major broking analysts. In such situations, the traded price is more likely to trade at a deeper discount to fair market value on a control basis. Accordingly, the observed control premiums to share trading prices for such stocks will tend to be higher.

Other studies In addition to the study above, we have also had regard to the following: x a study conducted by S.Rossi and P.Volpin of London Business School dated September 2003, ‘Cross Country Determinants of Mergers and Acquisitions’, on acquisitions of a control block of shares for listed companies in Australia announced and completed from 1990 to 2002. This study included 212 transactions over this period and indicated a mean control premium of 29.5% using the bid price of the target four weeks prior to the announcement x ‘Valuation of Businesses, Shares and Equity’ (4th edition, 2003) by W.Lonergan states at pages 55-56 that: “Experience indicates that the minimum premium that has to be paid to mount a successful takeover bid was generally in the order of at least 25 to 40 per cent above the market price prior to the announcement of an offer in the 1980s and early 1990s. Since then takeover premiums appear to have fallen slightly.” x a study conducted by P.Brown and R.da Silva dated 1997, ‘Takeovers: Who wins?’, JASSA: The Journal of the Securities Institute of Australia, v4(Summer):2-5. The study found that the average control premium paid in Australian takeovers was 29.7% between the period January 1974 and June 1985. For the ten year period to November 1995, the study found the average control premium declined to 19.7%.

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Appendix 5: Sources of information In preparing this report we have had access to the following principal sources of information: x APN’s annual reports for 2004 and 2005 financial years x APN’s audited balance sheet as at 31 December 2006 and statement of financial performance for the year ended 31 December 2006 x APN’s historical management accounts and various presentations, including available budgets and forecasts x various publicly available brokers’ reports on APN x various financial statements, annual reports, brokers’ reports and the public available information for comparable companies to APN x publicly available information on comparable and market transactions published in independent experts’ reports, brokers’ reports, SDC Platinum, Mergerstat, ASX announcements and Mergermarket x ABN AMRO , 27 June 2006, “Caught by the Net” x Commercial Economic Advisory Service of Australia, 30 June 2006 Advertising Expenditure in main media x publicly available information on the Australian and New Zealand economy and population published in ABS, Statistics New Zealand, EUI, RBA and Reserve Bank of New Zealand x other publicly available information including IBISWorld, ABC, CEASA, Commercial Radio Australia, ABA, BSA NZ and the press. In addition we have held discussions with management of APN.

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Appendix 6: Qualifications, declarations and consents This report has been prepared at the request of the Directors of APN and is to be included in the Scheme Booklet to be given to Shareholders for approval of the Proposed Scheme and the Proposed Sale. Accordingly, it has been prepared only for the benefit of the Directors and Shareholders to assist them in their assessment of the Proposed Scheme and the Proposed Sale as outlined in the report and should not be used for any other purpose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposed Scheme. The report represents solely the expression by Deloitte Corporate Finance of its opinion as to whether the Proposed Scheme is in the best interest of Shareholders and whether the Proposed Sale is fair and reasonable to Shareholders as a whole. Deloitte Corporate Finance consents to this report being included in the Scheme Booklet. Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte Corporate Finance has relied upon the information provided by the Directors and executives of APN which Deloitte Corporate Finance believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte Corporate Finance does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to APN management for confirmation of factual accuracy. During the course of our engagement the consideration offered under the Proposed Scheme has been increased from the Original Offer Price of $6.10 to $6.20 per APN share. During the time that our analysis was based on the Original Offer Price, our draft report concluded that the relating proposed scheme of arrangement was in the best interest of the Shareholders being not fair but reasonable. Drafts of our report including this opinion were released to the Directors of APN for factual accuracy confirmation and sent to ASIC in accordance with ASIC requirements. After the announcement of the increased Offer Price of $6.20 per APN share on 17 April 2007, we revised our opinion to conclude that the Proposed Scheme is fair and reasonable as the new consideration offered for an APN share is within our estimated valuation range as discussed in this report. Furthermore, recognising that Deloitte Corporate Finance may rely on information provided by and its officers and/or associates, APN has agreed to make no claim against Deloitte Corporate Finance to recover any loss or damage which APN may suffer as a result of that reliance and also has agreed to indemnify Deloitte Corporate Finance against any claim arising out of the assignment to give this report, except where the claim has arisen as a result of any proven wilful misconduct by Deloitte Corporate Finance. References are made in this report to certain forward looking information of APN which was supplied to Deloitte Corporate Finance by APN to assist in the preparation of this report. With the exception of the information pertaining to the budget for the year ending 31 December 2007, APN has not authorised or consented to the public release of any forward looking information of APN and to the extent permitted by law disclaims any responsibility for such information. To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. The procedures involved in Deloitte Corporate Finance's consideration of this information consisted of enquiries of APN personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit in accordance with Australian Auditing Standards, nor did they constitute a review in accordance with AUS 902 applicable to review procedures.

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Based on these procedures and enquiries, Deloitte Corporate Finance considers that there are reasonable grounds to believe that the prospective financial information for APN included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may be different from the prospective financial information of APN referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved. Deloitte Corporate Finance holds the appropriate Australian Financial Services Licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte Corporate Finance principally involved in the preparation of this report were Mark Pittorino, B.Comm., M.App.Fin., CA, Rachel Foley-Lewis, B.Comm., F.Fin, CA, Dave Pearson, B.Comm, CA, CBV and Michele Picciotta, B.Comm. Mark Pittorino and Rachel Foley-Lewis are Directors, Dave Pearson is an Associate Director and Michele Picciotta is a Manager of Deloitte Corporate Finance. Each has many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of independent expert’s reports. Neither Deloitte Corporate Finance, Deloitte Touche Tohmatsu, nor any partner or executive or employee thereof has any financial interest in the outcome of the proposed transaction which could be considered to affect our ability to render an unbiased opinion in this report. Deloitte Corporate Finance will receive a fee of $515,000 exclusive of GST in relation to the preparation of this report. This fee is based upon time spent at our normal hourly rates and is not contingent upon the success or otherwise of the Proposed Scheme.

About Deloitte ‘Deloitte’ refers to the Australian partnership of Deloitte Touche Tohmatsu and its subsidiaries. Deloitte, one of Australia’s leading professional services firms, provides audit, tax, consulting and financial advisory services through around 3000 people across the country. Focused on the creation of value and growth and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit Deloitte’s web site at www.deloitte.com.au. Deloitte is a member of Deloitte Touche Tohmatsu (a Swiss Verein). As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte & Touche,” “Deloitte Touche Tohmatsu,” or other, related names. Services are provided by the member firms or their subsidiaries and affiliates and not by the Deloitte Touche Tohmatsu Verein. Liability limited by a scheme approved under Professional Standards Legislation. Confidential - this document and the information contained in it are confidential and should not be used or disclosed in any way without our prior consent. © Deloitte Touche Tohmatsu. 2007. All rights reserved.

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Taxation implications 9of the Scheme APN NEWS & MEDIA SCHEME BOOKLET 209

9 Taxation implications of the Scheme

9.1 Australian taxation implications Level 36 Grosvenor Place 225 George Street Sydney NSW 2000 www.bdw.com Tel + 61 2 9258 6000 Fax + 61 2 9258 6999 DX 355 Sydney Locked Bag N6 Sydney NSW 1225 Australia

APN Independent Committee 20 April 2007 APN News & Media Limited Level 4 100 William Street SYDNEY NSW 2011

Dear Sir / Madam This letter sets out our views on the main Australian income tax and goods and services tax consequences for Australian resident individuals, companies and trustees of complying superannuation funds who dispose of their APN Shares under the Scheme. We have also provided broad comments in relation to non-residents. The discussion contained in this summary is of a general nature only and does not take into account the specific circumstances of any Scheme Participant. It is based on Australian tax laws operative at the date of this Scheme Booklet. Scheme Participants should seek their own independent advice regarding the tax implications arising from participation in the Scheme in light of current tax laws and their particular circumstances. This opinion does not address Scheme Participants who hold shares or options through an employee share scheme. Capitalised terms which are defined in the Scheme Booklet have the same meaning in this letter unless the context requires otherwise. 1. Shares held on capital account The transfer of APN Scheme Shares by the Scheme Participant will involve a disposal of shares for capital gains tax (CGT) purposes. A capital gain will arise for the Scheme Participant if the Scheme Consideration received (excluding any amount received as an APN Dividend) exceeds the cost base of the shares disposed. On the other hand, a capital loss should arise if the Scheme Consideration received (excluding any amount received as an APN Dividend) is less than the reduced cost base of those shares. 210 APN NEWS & MEDIA SCHEME BOOKLET

9 Taxation implications of the Scheme (continued)

The cost base of a share is generally the cost of its acquisition plus incidental costs associated with the acquisition or disposal. If the APN Scheme Share was acquired on or before 21 September 1999, Australian resident Scheme Participants may include indexation (for Consumer Price Index changes up to the quarter ending 30 September 1999) in determining the cost base of the share. However, if the Scheme Participant is an individual, trust or complying superannuation fund who elects to include indexation, no CGT discount is applicable to the resulting capital gain. The reduced cost base of a share is generally the cost base of the share without indexation adjustments. If Scheme Participants have acquired their shares as a result of a previous CGT rollover, those participants should obtain their own tax advice as to the cost base of their shares. Capital losses may be used to offset capital gains made in the same year or, subject to certain loss utilisation provisions being satisfied, be carried forward for offset against future capital gains. Capital losses may not be used to offset other assessable income. Scheme Participants who are individuals, trusts and complying superannuation funds and who have held their APN Scheme Share for at least 12 months prior to the Implementation Date should be eligible to a CGT discount when determining the capital gain on the APN Scheme Share. As discussed above, the discount only applies if the Scheme Participant does not elect to include indexation in the cost base of the share. The discount is 50% for individuals and trusts and 331/3% for complying superannuation funds. A company is not eligible for the CGT discount. 2. Shares held as trading stock If an Australian resident Scheme Participant holds the APN Scheme Shares as trading stock, the Scheme Consideration (excluding any amount received as an APN Dividend) should be included in the assessable income of the participant. CGT does not apply to the disposal. 3. Shares held on revenue account (other than as trading stock) If an Australian resident Scheme Participant holds the APN Scheme Shares on revenue account (but not as trading stock), any gain on sale of the share should be included as assessable income and any loss on sale of the share should be included as an allowable deduction. The CGT implications discussed above also applies to the disposal but, to the extent of any overlap, the capital gain or loss for CGT purposes should be reduced. 4. Non-resident for tax purposes Assets held by Scheme Participants who are not tax residents of Australia (non-residents) are subject to Australian CGT to the extent that the assets are considered “taxable Australian property”. Very broadly, a share is taxable Australian property if the share is in a company that principally owns (directly or indirectly) Australian real property and the share is part of a shareholding that represents at least 10% of all shares in the company (when taking into account shares owned by the participant or Associates). In our opinion, APN should not be a company that principally owns (directly or indirectly) Australian real property. Accordingly, Australian CGT should not apply to the disposal by non-resident Scheme Participants. A non-resident Scheme Participant who holds their shares on revenue account may however be subject to Australian income tax on the disposal of those shares. This will depend on the particular circumstances of the Scheme Participant, including whether the shares are held through an Australian branch of the participant and whether there is an applicable double tax agreement. 5. Goods and Services Tax (GST) No Australian GST is payable by Scheme Participants in relation to Scheme Consideration received. Yours faithfully

Blake Dawson Waldron APN NEWS & MEDIA SCHEME BOOKLET 211

9.2 New Zealand taxation implications Partner Reference S G Hutchinson – Auckland Writer’s Details Direct Dial: +64-9-977 5063 Fax: +64-9-977 5068 E-mail: [email protected] BY E-MAIL

APN Independent Committee 20 April 2007 APN News & Media Limited Level 4 100 William Street SYDNEY NSW 2011

Dear Sir/Madam New Zealand Tax Implications of the Scheme to APN Shareholders 1. This letter sets out our views on the main New Zealand income tax and goods and services tax consequences for New Zealand resident individuals, companies and trustees who dispose of their APN Shares under the Scheme. 2. The discussion contained in this summary is of a general nature only and does not take into account the specific circumstances of any Scheme Participant. It is based on New Zealand tax laws operative at the date of this Scheme Booklet. 3. Scheme Participants should seek their own independent advice regarding the tax implications arising from participation in the Scheme in light of current tax laws and their particular circumstances. 4. This opinion does not address Scheme Participants who hold shares or options through an employee share scheme. 5. Capitalised terms which are defined in the Scheme Booklet have the same meaning in this letter unless the context requires otherwise. Income Tax 6. Profits or losses on the disposal of the APN Shares by a New Zealand tax resident Scheme Participant will only be included in their taxable income in New Zealand if the Scheme Participant holds the APN Shares on revenue account. The APN Shares will be held on revenue account if: (a) the Scheme Participant is in the business of dealing in shares; or (b) the APN Shares were acquired for the purpose of sale or disposal; or (c) the APN Shares were acquired as part of an undertaking or scheme entered into for the purpose of making a profit. 7. If none of the above apply, the Scheme Participant will be considered to hold the APN Shares on capital account, and the profits or losses on their disposal will not be included in their taxable income in New Zealand. New Zealand does not have a comprehensive capital gains tax. 8. If a New Zealand tax resident Scheme Participant is taxable in New Zealand on the disposal of the APN Shares, and is also subject to Australian income tax on the disposal, the Scheme Participant will be entitled to a New Zealand tax credit in respect of the disposal for the tax paid in Australia (up to the amount of the tax payable in New Zealand in respect of the disposal). 212 APN NEWS & MEDIA SCHEME BOOKLET

9 Taxation implications of the Scheme (continued)

9. New Zealand tax resident Scheme Participants will not be taxable under New Zealand’s foreign investment fund (FIF) rules prior to 1 April 2007. Prior to 1 April 2007, an investment in an Australian company is exempt from the FIF regime. 10. New FIF rules will take effect from 1 April 2007. From 1 April 2007, under the legislation as passed on 18 December 2006, a FIF exemption will still apply, if at all times during the income year, the investment is in a company that is tax resident in Australia and is listed on an approved exchange. 11. APN is a tax resident of Australia and is listed on an approved exchange i.e. the ASX All Ordinaries (of the 500 largest companies). If the Scheme is implemented, APN will be de-listed from the ASX and the NZSE. If APN is de-listed before 1 April 2008, the above FIF exemption in its current form will not be available to Scheme Participants, as APN will not be listed on the ASX for the entire income year. 12. Revenue officials are aware of this issue. We understand they will recommend to the government that the FIF exemption is amended with effect from the implementation of the new FIF rules so that a company that has been listed on an approved exchange at the beginning of the income year will satisfy the listing requirement (i.e. it would not have to be listed for the entire income year). We expect such an amendment will be implemented and that New Zealand tax resident Scheme Participants will not be taxable under the FIF rules after 1 April 2007. Goods and Services Tax (GST) 13. No New Zealand GST is payable by Scheme Participants in relation to Scheme Consideration received. Yours faithfully

Simpson Grierson

Stuart Hutchinson APN NEWS & MEDIA SCHEME BOOKLET 213

Implementation ı0of the Scheme 214 APN NEWS & MEDIA SCHEME BOOKLET

ı0 Implementation of the Scheme

10.1 Steps to implement the Scheme The steps to implement the Scheme are set out below: (a) on 12 February 2007 APN announced that it had entered into the Scheme Implementation Agreement with INMAL in relation to a proposed acquisition of all the issued APN Shares by INMAL (other than the APN Shares already held by INMAL); (b) on 17 April 2007, APN announced that the Consortium had increased the consideration payable under the Scheme to $6.20 per APN Share. A copy of the announcement is set out in Annexure D of this Scheme Booklet. On 18 April 2007 the Scheme Implementation Agreement was amended to reflect the increased consideration. (c) on 17 April 2007, INMAL executed the INMAL Deed Poll pursuant to which INMAL agreed, subject to the Scheme becoming Effective, to provide to each Scheme Participant the Scheme Consideration to which such Scheme Participant is entitled under the terms of the Scheme. A copy of the INMAL Deed Poll is included in Annexure C; (d) on 18 April 2007, the APN Board convened the General Meeting to be held on the same date at the same place as the Scheme Meeting at 11.30am (or as soon thereafter as the Scheme Meeting is concluded or adjourned), for the purposes of considering the Ordinary Resolution. See Sections 3 and 7 of this Scheme Booklet for details of the General Meeting and the INMH Sale; (e) on 20 April 2007, the Court ordered that APN convene the Scheme Meeting at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales on 25 May 2007 commencing at 11.00am, for the purposes of considering the Scheme. See Sections 10.4 to 10.5 for details of the Scheme Meeting and the majorities of APN Shareholders required to approve the Scheme; (f) APN will apply to the Court for an order approving the Scheme on the Second Court Hearing Date if the Scheme is approved by the requisite majorities of APN Shareholders (excluding the Consortium and their Associates who will not vote) at the Scheme Meeting and the Ordinary Resolution is approved. Each APN Shareholder has the right to appear at Court at the application by APN for orders approving the Scheme. The Court has a discretion as to whether to grant the orders approving the Scheme, even if the Scheme is approved by the requisite majorities of APN Shareholders (excluding the Consortium and their Associates who will not vote); (g) if the Court order approving the Scheme is obtained, then APN will lodge with ASIC an office copy of the Court order under section 411 of the Corporations Act. The date on which this occurs will become the Effective Date; (h) no dealings in APN Shares will be permitted after the Effective Date, although the process to register dealings that took place on or before the Effective Date will continue until 7.00pm on the Record Date. APN Shares will be suspended from trading on ASX and NZSE from the close of business on the Effective Date; (i) if the Scheme becomes Effective, then on the Implementation Date: APN NEWS & MEDIA SCHEME BOOKLET 215

(i) all of the APN Scheme Shares will be transferred to INMAL without the need for any further act by any Scheme Participant, by: (A) APN procuring the delivery to INMAL of a duly completed and executed transfer form or forms to transfer all of the APN Scheme Shares to INMAL; and (B) APN entering the name of INMAL in the Register as the holder of all of the APN Scheme Shares. (ii) the Scheme Participants will be paid the Scheme Consideration, being $6.20 cash per APN Scheme Share; (j) the Scheme will not become Effective if the Scheme Implementation Agreement is terminated or other conditions, including the passing of the Ordinary Resolution, referred to in Section 10.2 of this Scheme Booklet, are not satisfied or waived; (k) each Scheme Participant, without the need for any further act, irrevocably appoints APN and all its directors and officers (jointly and severally) as its attorney and agent for the purpose of executing any document necessary to give effect to the Scheme including a proper instrument of transfer of its APN Scheme Shares; and (l) if the Scheme becomes Effective, the INMH Sale will also be completed.

10.2 Conditions of the Scheme The transfer of the APN Scheme Shares and payment of the Scheme Consideration under the Scheme will only occur if the Scheme becomes Effective. The Scheme will only become Effective if all the conditions set out in clause 2.1 of the Scheme are satisfied or waived. Those conditions include all the conditions precedent to the Scheme Implementation Agreement. If any of the conditions (other than the condition relating to the Court approving the Scheme) is not satisfied or waived by the earlier of the date specified in the Scheme Implementation Agreement for its satisfaction or 5.00pm on the last Business Day before the Second Court Hearing Date, INMAL will not have to pay the Scheme Consideration and the APN Scheme Shares will not be transferred to INMAL. The following conditions have either not yet been satisfied or waived as at the date of this Scheme Booklet or are conditions which, although they may have been satisfied as at the date of this Scheme Booklet, must remain satisfied until the Second Court Hearing Date: (a) FIRB Condition Precedent: before the Determination Date any of the following occurs: (i) the Treasurer gives an approval to the acquisition by INMAL of the APN Scheme Shares and the INMH Sale under FATA (that approval to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); (ii) the Treasurer has become precluded by lapse of time from making an order under Part II of FATA (other than an interim order under section 22 of FATA) in respect of the acquisition of the APN Scheme Shares by INMAL pursuant to the Scheme and the INMH Sale; or (iii) the Treasurer indicates to INMAL that there is no objection in terms of the Foreign Investment Policy to the acquisition by INMAL of the APN Scheme Shares and the INMH Sale (that indication to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); (b) New Zealand foreign investment approval: before the Determination Date, the OIO approves the acquisition by INMAL of the APN Scheme Shares and the INMH Sale under the Overseas Investment Act 2005 (New Zealand) (that approval to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); 216 APN NEWS & MEDIA SCHEME BOOKLET

ı0 Implementation of the Scheme (continued)

(c) Other regulatory approvals: before 8.00am on the Second Court Hearing Date all other applicable Regulatory Authorities, as appropriate, issue or provide such consents, waivers or approvals or do other acts which APN and INMAL agree are necessary or reasonably desirable to implement the Scheme; (d) Court approval: the Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act on the Second Court Hearing Date; (e) APN Shareholders approval: the Scheme is approved by the requisite majorities of APN Shareholders (excluding the Consortium and their Associates who will not vote) in accordance with the Corporations Act; (f) Ordinary Resolution – Corporations Act section 611 item 7 approval: the INMH Sale is approved by the passing of the Ordinary Resolution at the General Meeting in accordance with item 7 of section 611 of the Corporations Act and applicable ASIC policy; (g) INM Shareholder approval: in accordance with the listing rules of the Irish Stock Exchange, the entry into the Scheme Implementation Agreement and implementation of the Scheme has been approved by ordinary resolution of INM’s shareholders at least three Business Days before the Determination Date; (h) Restraints: no temporary restraining order, preliminary or permanent injunction or other order issued by any Court or other material legal restraint or prohibition preventing the Scheme is in effect at 8.00am on the Second Court Hearing Date; (i) No APN Prescribed Event: no APN Prescribed Event occurs between the date of the Scheme Implementation Agreement and 8.00am on the Second Court Hearing Date; (j) No APN Material Adverse Change: no APN Material Adverse Change occurs between the date of the Scheme Implementation Agreement and 8.00am on the Second Court Hearing Date; (k) No INMAL Prescribed Event: no INMAL Prescribed Event occurs between the date of the Scheme Implementation Agreement and 8.00am on the Second Court Hearing Date; (l) No breach or termination: no material breach of any material clause of the Scheme Implementation Agreement or of a material representation or warranty given in the Scheme Implementation Agreement by either party has occurred (which has not been remedied to the satisfaction of the other party) and the Scheme Implementation Agreement has not been terminated before 8.00am on the Second Court Hearing Date; (m) Option Holders: before 8.00am on the Second Court Hearing Date, all outstanding Options are either acquired by INMAL or where any Option Holder has not accepted the offer of INMAL to acquire his Options, bought back by APN in accordance with the APN Option Plan or are otherwise dealt with as is agreed between APN and INMAL; (n) Holders of APN Notes: as at 8.00am on the Second Court Hearing Date, APN has complied with its obligations under the Scheme Implementation Agreement in respect of the APN Notes; and (o) No Superior Proposal: as at 8.00am on the Second Court Hearing Date, APN has not entered into any commitment, agreement, arrangement or understanding with a third party in relation to a Superior Proposal. The status of each of the FIRB Condition Precedent, OIO approval and INM shareholder approval is set out in Section 1.6. A description of the treatment of the APN Notes and the Options is set out in Sections 11.8 and 11.9 respectively of this Scheme Booklet. APN NEWS & MEDIA SCHEME BOOKLET 217

10.3 Key Terms of the Scheme Implementation Agreement Conditions Precedent The key conditions precedent are summarised in Section 10.2 of this Scheme Booklet. Adjournment of Scheme Meeting If the FIRB Condition Precedent has not been satisfied by 5.00pm five Business Days before the date of the Scheme Meeting (which has an indicative date of 25 May 2007) or as ordered by the Court under section 411(1) of the Corporations Act (or where the Scheme Meeting has been adjourned for any reason, 5.00pm five Business Days before the date of the adjourned Scheme Meeting), APN has the right in its discretion to adjourn the Scheme Meeting to a date agreed between APN and INMAL (acting reasonably and in good faith), being a date when the satisfaction of that condition is likely to be known. Payment of Scheme Consideration INMAL has executed the INMAL Deed Poll in favour of each Scheme Participant under which, in consideration of the transfer to INMAL of each APN Scheme Share held by a Scheme Participant under the terms of the Scheme, INMAL must on the Implementation Date: • accept that transfer; and • in accordance with the INMAL Deed Poll and the Scheme Implementation Agreement, pay each Scheme Participant the Scheme Consideration of $6.20 cash per APN Scheme Share. INMAL must before 8.00 am on the Implementation Date, deposit an amount sufficient to pay the Scheme Consideration to each Scheme Participant into an account in APN’s name with those funds to be held on trust by APN for the purpose of paying the Scheme Consideration to the Scheme Participants. Implementation of the Scheme APN must take all reasonable steps to implement the Scheme in accordance with the indicative timetable specified in the Scheme Implementation Agreement, including taking the following steps: • prepare and send the Scheme Booklet to APN Shareholders; • apply to ASIC for a statement pursuant to section 411(17)(b) of the Corporations Act stating ASIC has no objection to the Scheme; • if the Resolution is passed by the necessary majorities of the APN Shareholders and each of the other conditions precedent set out in clause 2.1 of the Scheme Implementation Agreement (other than clause 2.1(f) which relates to Court approval) have been satisfied or waived, apply to the Court for orders approving the Scheme, and if that approval is obtained: – promptly lodge with ASIC an office copy of the orders approving the Scheme in accordance with section 411(10) of the Corporations Act; – close the register of members of APN as at the Record Date and determine entitlements to the Scheme Consideration in accordance with the Scheme; – execute proper instruments of transfer of the APN Scheme Shares in accordance with the Scheme and register the transfers; and • do all other things contemplated by or necessary to give effect to the Scheme and the orders of the Court approving the Scheme. INMAL must take all necessary steps within its power to implement the Scheme in accordance with the indicative timetable specified in the Scheme Implementation Agreement, including taking each of the following steps: • promptly provide to APN all information regarding the Consortium and INMAL required by all applicable Australian laws, the Listing Rules and applicable ASIC Policy Statements for inclusion in the Scheme Booklet; • use best endeavours to satisfy all the conditions precedent that are within INMAL’s control; 218 APN NEWS & MEDIA SCHEME BOOKLET

ı0 Implementation of the Scheme (continued)

• do all other things contemplated by or necessary to give effect to the Scheme and the orders of the Court approving the Scheme; and • if the Scheme becomes Effective, pay the Scheme Consideration on the Implementation Date in accordance with the INMAL Deed Poll. Payment of Liquidated Amount APN has agreed to pay INMAL a liquidated amount of $27.5 million if: • before the End Date, a Competing Transaction is announced and the person proposing the transaction: – acquires a relevant interest in at least 50% of the APN Shares and the Competing Transaction becomes unconditional; or – acquires an interest in all or a substantial part of APN’s business or assets; • the APN Independent Committee fails to recommend the Scheme or withdraws its recommendation or any member of the APN Independent Committee withdraws his recommendation of the Scheme or makes a public statement that he no longer supports the Scheme (other than as a result of the Independent Expert giving an opinion that the Scheme is not in the best interest of APN Shareholders); • any member of the APN Independent Committee publicly recommends a Competing Transaction; • the Court fails to approve the Scheme as a result of a material breach of the Scheme Implementation Agreement by APN which would prevent the implementation of the Scheme; • the Scheme has not become effective by the End Date as a direct result of a material breach of the Scheme Implementation Agreement by APN which would prevent the implementation of the Scheme; or • INMAL terminates the Scheme Implementation Agreement as a result of a material breach by APN of its no-shop and no due diligence obligations described below. No-shop and No Due Diligence APN must ensure that during the Exclusivity Period: • neither it nor any of its representatives solicits or encourages any Competing Transaction from any person; and • without INMAL’s prior written consent, it must not solicit or encourage any party to undertake due diligence investigations on APN for the purposes of a Competing Transaction. Right to Respond to Competing Transactions If during the Exclusivity Period the APN Independent Committee wishes to recommend or enter into a Competing Transaction, it must not do so until INMAL has been given three Business Days to make a counterproposal. Termination The Scheme Implementation Agreement may be terminated if the Scheme has not become Effective on or before the End Date. The Scheme Implementation Agreement may also be terminated at any time prior to the Second Court Hearing Date in certain circumstances: • by either of APN or INMAL if: – the other is in material breach of any material provision of the Scheme Implementation Agreement which has not been remedied within seven Business Days; – the Scheme is not approved by APN Shareholders at the Scheme Meeting; – the Court refuses to make orders to convene the Scheme Meeting or approve the Scheme and the party wishing to terminate the agreement obtains an opinion from Queen’s Counsel or Senior Counsel that an appeal would have no reasonable prospect of success before the End Date; APN NEWS & MEDIA SCHEME BOOKLET 219

– the Court or other government agency has taken any action permanently restraining or prohibiting the Scheme or the acquisition of APN Scheme Shares under the Scheme; – a condition precedent is not satisfied and APN and INMAL cannot reach agreement to proceed by way of alternative means; – the Independent Expert opines that the Scheme is not in the best interest of APN Shareholders; – an insolvency event (as defined in the Scheme Implementation Agreement) has occurred in relation to APN or INMAL or any of their Related Bodies Corporate; or – the liquidated amount referred to above is paid by APN to INMAL; and • by INMAL if other than as a result of the Independent Expert giving an opinion that the Scheme is not in the best interest of APN Shareholders, the APN Independent Committee fails to unanimously recommend, or withdraws its recommendation of the Scheme, or makes a public statement that it no longer supports the Scheme, or any member of the APN Independent Committee recommends a Competing Transaction.

10.4 Scheme Meeting and General Meeting On 20 April 2007 the Court ordered that the Scheme Meeting be convened to consider the Scheme. The Scheme Meeting is to be held on 25 May 2007 at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales. The Scheme Meeting will commence at 11.00am. The General Meeting is to also be held on 25 May 2007 at the same place. The General Meeting will commence at 11.30am (or as soon thereafter as the Scheme Meeting is concluded or adjourned). The notices convening the Scheme Meeting and the General Meeting are set out in Annexure E and Annexure F, respectively. For actions to be taken by APN Shareholders who propose to attend and vote at the Scheme Meeting and/or the General Meeting or to appoint a proxy to attend and vote on the shareholder’s behalf, see Section 4 of this Scheme Booklet.

10.5 Resolution and required majorities for Scheme and Ordinary Resolution The Scheme is subject to the approval of the required majority of APN Shareholders (excluding the Consortium and their Associates who will not vote) and the approval of the Court. A copy of the Scheme is set out in Annexure B. For the Scheme to be implemented, APN Shareholders (excluding the Consortium and their Associates who will not vote) must approve the Scheme by: (a) a majority in number (more than 50%) of those APN Shareholders present and voting at the Scheme Meeting in person, by proxy, by attorney or (in the case of corporate APN Shareholders) by a corporate representative; and (b) at least 75% of the total number of votes cast on the Resolution at the Scheme Meeting by those APN Shareholders entitled to vote on the Resolution. The Ordinary Resolution requires the approval of a simple majority of APN Shareholders (excluding the Consortium and their Associates who will not vote) at the General Meeting.

10.6 How to vote at the Scheme Meeting and/or the General Meeting Please see Section 4 of this Scheme Booklet for further information on how to vote at the Scheme Meeting and/or the General Meeting. 220 APN NEWS & MEDIA SCHEME BOOKLET

APN additional ııinformation APN NEWS & MEDIA SCHEME BOOKLET 221

ıı APN additional information

11.1 APN Directors The APN Directors in office at the date of lodgement of this Scheme Booklet for registration by ASIC are: Name Position APN Independent Committee Ted Harris Joint Deputy Chairman Sir Wilson Whineray Joint Deputy Chairman Sallyanne Atkinson Non-executive Director Pierce Cody Non-executive Director Kevin Luscombe Non-executive Director John Maasland Non-executive Director Other Directors James Parkinson Chairman Brendan Hopkins Chief Executive Donal Buggy Non-executive Director Peter Cosgrove Non-executive Director Liam Healy Non-executive Director Cameron O’Reilly Non-executive Director Gavin O’Reilly Non-executive Director

11.2 Interests in APN held by APN Directors APN Directors hold APN Shares, either directly or beneficially, as follows: Name Number of APN Shares held APN Independent Committee Ted Harris 550,9561 Sir Wilson Whineray – Sallyanne Atkinson 13,022 Pierce Cody 105,024 Kevin Luscombe 55,876 John Maasland – Other Directors James Parkinson 100,000 Brendan Hopkins 999,197 Donal Buggy – Peter Cosgrove 50,000 Liam Healy 581,112 Cameron O’Reilly 1,000,000 Gavin O’Reilly 20,000

1 In addition, Ted Harris is a director of a trustee company which holds 335,898 shares for the benefit of other parties. 222 APN NEWS & MEDIA SCHEME BOOKLET

ıı APN additional information (continued)

Brendan Hopkins holds 1,500,000 Options granted 29 April 2004 (exercise price: $3.85) and 1,500,000 Options granted 2 May 2006 (exercise price: $5.02). Peter Cosgrove holds 50,000 Options granted 22 July 2002 (exercise price: $3.54) (which were not granted to him in his capacity as an APN Director).

11.3 Interests in INM held by APN Directors APN Directors hold shares in INM either directly or beneficially, as follows: Name Number of INM shares held APN Independent Committee Ted Harris – Sir Wilson Whineray – Sallyanne Atkinson – Pierce Cody – Kevin Luscombe – John Maasland – Other Directors James Parkinson 101,266 Brendan Hopkins 1,674,467 Donal Buggy 57,148 Peter Cosgrove 442,365 Liam Healy 3,999,211 Cameron O’Reilly 1,000,000 Gavin O’Reilly 844,515 APN Directors hold options in respect of shares in INM as follows: Name Number of options in respect of INM shares held APN Independent Committee Ted Harris – Sir Wilson Whineray – Sallyanne Atkinson – Pierce Cody – Kevin Luscombe – John Maasland – Other Directors James Parkinson 832,275 Brendan Hopkins 3,832,402 Donal Buggy 2,673,880 Peter Cosgrove – Liam Healy – Cameron O’Reilly – Gavin O’Reilly 2,971,305 Sir Wilson Whineray holds 12,500 cumulative exchange preference shares issued by NMNZ which are convertible into either cash or shares in INM (CEPS). James Parkinson holds 2,150,000 CEPS.

11.4 Interests in INMAL held by APN Directors No APN Director holds any shares in INMAL. APN NEWS & MEDIA SCHEME BOOKLET 223

11.5 Interests of APN in INMAL and the Consortium APN has no interests in INMAL or the Consortium.

11.6 APN Board’s intentions If the Scheme becomes Effective, the APN Scheme Shares will be transferred from the Scheme Participants to INMAL, the existing Directors will retire and INMAL has informed APN that it intends to reconstitute the APN Board with representatives of INMAL (see Section 6.8 of this Scheme Booklet). Until that time, the APN Board intends to continue to conduct the businesses of APN in the ordinary course. If the Scheme does not become Effective, the APN Board intends to continue to conduct the businesses of APN in the best interests of APN Shareholders.

11.7 APN Buy-back On 27 April 2005 APN gave an Appendix 3C notice to the ASX announcing an intention to conduct an on- market buy-back. The buy-back was extended by an Appendix 3C notice given to the ASX on 31 May 2006. 54.9 million APN Shares have been bought back and cancelled since the commencement of the buy-back at a total cost of $274 million. APN has not bought back any APN Shares since 26 September 2006 and the Scheme Implementation Agreement contains restrictions on APN buying back any further APN Shares. Under the Appendix 3C notice lodged with the ASX on 31 May 2006, the buy-back was intended to be conducted until 14 June 2007. However, if the Scheme becomes Effective, from the time trading in APN Shares on ASX ceases, no more APN Shares will be bought back by APN under the buy-back.

11.8 APN Notes As at 17 April 2007 APN had on issue 19,020,717 APN Notes which were issued under a prospectus dated 2 November 2001. Each APN Note has a face value of $3.95 and bears interest at 7.25% per annum. The APN Notes are subordinated in right of payment to the claims of all other creditors other than persons, including other holders of the APN Notes, whose claims against APN are subordinated in the event of a liquidation of APN in any manner (other than by statute) to the claims of any unsecured and unsubordinated creditor of APN. Each APN Note is convertible into one APN Share, at the option of the holder on predetermined dates over the term of the APN Note, or repayable on 31 October 2008. In addition, condition 6.2 of the terms of issue of the APN Notes permits APN to issue an early redemption notice to holders of APN Notes in certain circumstances, including where the closing sale price of APN Shares on ASX multiplied by a specified conversion number has exceeded the face value of the APN Notes by more than 140% for 20 Business Days in a period of 30 consecutive Business Days. Where an early redemption notice is issued, holders of APN Notes are entitled to convert their APN Notes into one APN Share per APN Note by returning a noteholder conversion form to APN within 30 Business Days of the early redemption notice. As a condition to the Scheme becoming Effective, APN was required to issue an early redemption notice to holders of the APN Notes in accordance with condition 6.2 of the terms of issue of the APN Notes and to take all necessary action within its control to ensure that all the APN Notes are redeemed or converted into APN Shares on or prior to the Implementation Date (or such other date as is required by the terms of issue of the APN Notes). APN issued an early redemption notice to holders of APN Notes (under condition 6.2 of the terms of issue of the APN Notes) on 12 February 2007 informing them of their right to convert their APN Notes into APN Shares, failing which their APN Notes would be redeemed at face value plus accrued interest. 224 APN NEWS & MEDIA SCHEME BOOKLET

ıı APN additional information (continued)

One APN Share will be issued on conversion of each APN Note in respect of which a noteholder conversion form is validly returned to APN. The holders of those APN Shares will participate in the Scheme as a Scheme Participant if the Scheme is implemented. Holders of 18,747,679 APN Notes validly returned noteholder conversion forms by 28 February 2007 and were issued with a total of 18,747,679 APN Shares on 30 March 2007. Holders of 18,256,297 APN Notes validly returned noteholder conversion forms by 30 March 2007 and will be issued with a total of 18,256,297 APN Shares on or around 30 April 2007. The holders of all APN Shares issued on conversion of APN Notes shall be entitled to attend and vote at the Scheme Meeting. Holders of 764,420 APN Notes have not validly returned a noteholder conversion form to APN, and accordingly those APN Notes will be redeemed for $3.95 per APN Note plus accrued interest on or before the Implementation Date.

11.9 Executive and Director Option Plan The APN Option Plan is operated by APN to allow selected employees and APN Directors to participate in the growth of the company through the issue of options for APN Shares. Eligibility for participation is at the discretion of the APN Board. The Options are granted for no consideration and carry no dividend or voting rights. The Options are generally exercisable between three to five years from the date of grant at the exercise price, subject to the satisfaction of performance hurdles. The Options expire five years from the date of grant. Each Option, if exercised, will result in the issue of one ordinary share. The exercise price of the Options is the weighted average market price of the APN Shares sold on the ASX during the week immediately prior to and including the grant date. The exercise price is payable at the time of exercise of the Options. As a requirement under the Scheme Implementation Agreement, if the Scheme becomes Effective all outstanding Options must be: • acquired by INMAL on or before the Implementation Date; or • where any Option Holder has not accepted the offer by INMAL to acquire their Options, bought back by APN in accordance with the APN Option Plan by no later than one Business Day prior to the Implementation Date; or • otherwise dealt with as is agreed between APN and INMAL. INMAL is making an offer to all Option Holders to acquire their Options at a price per Option of $6.20 cash less the Option exercise price (Option Price). To accept the offer in respect of their Options, an Option Holder must sign and return an acquisition deed to INMAL at any time prior to 5.00pm on the Business Day immediately after the Scheme Meeting. The acquisition by INMAL of the Options is expressed to be conditional upon the Scheme becoming Effective. If an Option Holder accepts the offer from INMAL and the Scheme becomes Effective, INMAL must pay the Option Holder the Option Price on the Implementation Date. If an Option Holder does not accept the offer from INMAL in respect of his or her Options, APN must under the Scheme Implementation Agreement buy-back those Options at a price per Option agreed between APN and the relevant Option Holder or at a price per Option equal to the closing price of APN Shares on the ASX on the day prior to the buy-back date less the Option exercise price. The Rules of the APN Option Plan give APN the right to buy-back Options in these circumstances without the agreement of the Option Holder. APN NEWS & MEDIA SCHEME BOOKLET 225

11.10 Payments to and agreements with APN Directors, the APN secretary and executive officers Except as set out in this Scheme Booklet, it is not proposed that any payment or other benefit be made or given to any director, secretary or executive officer of APN or of any Related Body Corporate as compensation for loss of, or as consideration for or in connection with his or her retirement from, office as a director, secretary or executive officer of APN or of a Related Body Corporate, as the case may be, in connection with or conditional upon the outcome of the Scheme. Non-executive APN Directors may receive retirement benefits in amounts as determined and allocated by the APN Board in accordance with APN’s constitution and the Corporations Act. As indicated at the annual general meeting of APN held on 2 May 2006, the aggregate amount of all retirement benefit entitlements of non-executive APN Directors will be frozen with effect from not later than the next annual general meeting of APN Shareholders.

11.11 Other information material to the making of a decision in relation to the Scheme Except as set out in this Scheme Booklet, there is no information material to the making of a decision in relation to the Scheme, being information that is within the knowledge of any APN Director or director of any Related Bodies Corporate of APN, at the time of lodging this Scheme Booklet with ASIC for registration, which has not previously been disclosed to the members of APN.

11.12 Formal disclosures and consents by APN (a) Interests of advisors Other than as set out in this Section 11.12 or elsewhere in this Scheme Booklet, no person named in this Scheme Booklet as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Scheme Booklet holds, or held at any time during the last two years before the date of this Scheme Booklet, any interest in: (i) the formation or promotion of APN; (ii) any property acquired or proposed to be acquired by APN in connection with its formation or promotion or in connection with the Scheme; or (iii) the issue of APN securities. Other than as set out in this Section 11.12 or elsewhere in this Scheme Booklet, no amounts have been paid or agreed to be paid and no value or other benefit has been given or agreed to be given to any of these persons for services rendered by them in connection with the preparation of this Scheme Booklet or in connection with the formation or promotion of APN or in connection with the Scheme. (b) APN experts and fees The persons performing a function in a professional or advisory capacity in connection with the Scheme and with the preparation of this Scheme Booklet on behalf of APN are Blake Dawson Waldron as legal advisor, Grant Samuel Corporate Finance as financial advisor. Each of them will be entitled to receive professional fees charged in accordance with their normal basis of charging. The fee paid to Deloitte which has provided an Independent Expert’s Report is $515,000. 226 APN NEWS & MEDIA SCHEME BOOKLET

ıı APN additional information (continued)

(c) Consents and disclaimers (i) The following parties have given, and have not withdrawn before the time of registration of this Scheme Booklet with ASIC, their consent to be named in this Scheme Booklet in the form and context in which they are named: (A) Blake Dawson Waldron; (B) Grant Samuel Corporate Finance; (C) Simpson Grierson; (D) Computershare Investor Services Pty Limited; and (E) Deloitte. (ii) Blake Dawson Waldron has consented to the inclusion of the letter on the Australian taxation implications of the Scheme for Scheme Participants in Section 9.1 of this Scheme Booklet. (iii) Simpson Grierson has consented to the inclusion of the letter on the New Zealand taxation implications of the Scheme for Scheme Participants in Section 9.2 of this Scheme Booklet. (iv) Each person named in Section 11.12(c)(i) above: (A) has not authorised or caused the issue of this Scheme Booklet; (B) does not make, or purport to make, any statement in this Scheme Booklet or any statement on which a statement in this Scheme Booklet is based, other than as specified in Section 11.12(c)(i); and (C) to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for, any part of this Scheme Booklet other than a reference to its name and the statement (if any) included in this Scheme Booklet with the consent of that party as specified in Section 11.12(c)(i). (v) INMAL and the Consortium have given, and have not withdrawn before the time of registration of this Scheme Booklet with ASIC, their consent to be named in this Scheme Booklet in the form and context in which they are named, on the basis set out in the Responsibility Statement of the Section entitled “Important Notices / Disclaimers” at the beginning of this Scheme Booklet and as set out in the Scheme Implementation Agreement (a copy of which is contained in Annexure A). APN NEWS & MEDIA SCHEME BOOKLET 227

INMAL additional ı2information 228 APN NEWS & MEDIA SCHEME BOOKLET

ı2 INMAL additional information

12.1 INMAL, the Consortium and INMAL Directors’ interests in APN Shares As at the date of this Scheme Booklet: • INMAL holds 131,541,073 APN Shares; and • NMNZ, a subsidiary of INM, holds 60,000,000 APN Shares. In accordance with section 608(3) of the Corporations Act, INM has a relevant interest of approximately 40% in APN as a consequence of the APN Shares held by INMAL and NMNZ. As at the date of this Scheme Booklet, neither Providence nor Carlyle holds any APN Shares. However, as a result of the entry by INMAL, INMH, INM, Providence and Carlyle into the Consortium and Subscription Agreement (described in Section 12.3(b) of this Scheme Booklet), each party to that agreement has a relevant interest in all of the APN Shares held by INMAL and NMNZ, which is approximately 40% of APN Shares. Section 7 of this Scheme Booklet sets out the interest in APN Shares of the Consortium Purchasers before and after the INMH Sale. Gavin O’Reilly, who is also a director of APN, holds APN Shares, either directly or beneficially, as set out in the table in Section 11.2 of this Scheme Booklet. No other director of INMAL has a relevant interest in any APN Shares.

12.2 APN Shares (a) Dealings in APN Shares During the period of four months prior to the date of this Scheme Booklet, none of INMAL, INM, Providence or Carlyle (or any of their Associates) has provided, or agreed to provide, any consideration for the acquisition of any APN Shares, other than pursuant to the Consortium and Subscription Agreement described in Section 12.3(b) of this Scheme Booklet, the Share Acquisition Deed in relation to the sale of the shares in INMH described in Sections 3 and 7 of this Scheme Booklet and in respect of Options as described in Section 11.9 of this Scheme Booklet. (b) No pre-Scheme benefits Except as set out in this Scheme Booklet, during the period of four months prior to the date of this Scheme Booklet, none of INMAL, INM, Providence or Carlyle (or any of their Associates) has given, offered to give or agreed to give a benefit to another person, or an associate of another person to vote in favour of the Scheme or dispose of APN Shares, and which was not offered to all other APN Shareholders. APN NEWS & MEDIA SCHEME BOOKLET 229

12.3 Agreements in relation to APN (a) ASIC exemptions and modifications Exemption from section 606 of the Corporations Act ASIC has exempted: • INMH; • INMAL; • INM Luxembourg S.à r.l (a wholly-owned subsidiary of INM); • Providence, its limited and general partners and Associates; and • Carlyle, its limited and general partners and Associates, from section 606 of the Corporations Act in relation to the entry by INMAL, INMH, INM, Providence and Carlyle into the Consortium and Subscription Agreement. INM Luxembourg S.à r.l is not presently a party to the Consortium and Subscription Agreement but it is intended that INM will assign its rights under the agreement to INM Luxembourg S.à r.l following the date of this Scheme Booklet. An exemption from ASIC was necessary to permit the execution of the Consortium and Subscription Agreement. The provisions of the Consortium and Subscription Agreement give each of the parties to the agreement a relevant interest in the APN Shares currently held by INMAL and NMNZ (other than INM which already had a pre-existing relevant interest in those APN Shares and INMAL and INMH in respect of the APN Shares held by INMAL). In aggregate, INMAL and NMNZ hold approximately 40% of APN Shares. Accordingly, in the absence of an exemption from ASIC, the entry by the parties into the Consortium and Subscription Agreement would have contravened the 20% relevant interest threshold in section 606 of the Corporations Act. The ASIC exemption is subject to the following conditions: • for the purposes of the Scheme, the parties to the Consortium and Subscription Agreement and their Associates will either: (i) not vote at the Scheme Meeting, or (ii) be treated as a separate and distinct class or classes of members to other APN Shareholders at the Scheme Meeting; • the Scheme Implementation Agreement will contain a clause in substantially the following form: a) If a Competing Transaction is publicly announced at any time between the date on which the Scheme Booklet is despatched to APN Shareholders and the date on which the Scheme Meeting is to be held, APN agrees to provide ASIC with all information which is known to APN in relation to the Competing Transaction, and to consult in a timely manner with ASIC in relation to the Competing Transaction. b) The parties agree that the Scheme Booklet will contain prominent disclosure of APN’s obligations under this clause [*]. • the Consortium and Subscription Agreement: (i) contains a condition that it will terminate automatically and cease to have any effect in the event that the Scheme Implementation Agreement is terminated; and (ii) for avoidance of doubt, will terminate if the Court issues an order, which is final and not appealable, to not approve the Scheme at the Second Court Hearing. • INMAL must use its best endeavours to ensure that APN complies with the obligations of APN under the Scheme Implementation Agreement in relation to a Competing Transaction for APN, as set out above. 230 APN NEWS & MEDIA SCHEME BOOKLET

ı2 INMAL additional information (continued)

• INMAL will use its best endeavours to have APN engage an independent expert to prepare a report on the merits of the Scheme. (b) Consortium and Subscription Agreement The Consortium and Subscription Agreement was entered into on 11 February 2007 (and an amendment agreement to that agreement was entered into on 16 April 2007 for the purposes of funding the increased Scheme Consideration). The material terms of the Consortium and Subscription Agreement are summarised below: Equity commitment INM will provide equity funds of approximately $491.90 million, Providence will provide equity funds of approximately $472.64 million and Carlyle will provide equity funds of approximately $346.61 million, (a total equity commitment of approximately $1,311.15 million), three Business Days after the Effective Date. The equity commitment of the CSA Investors will be used to: • ensure INMAL receives an amount of equity funding which is sufficient, when aggregated with the debt finance, to pay the Scheme Consideration and refinance existing APN debt; • pay the consideration for the acquisition of the shares in INMH and refinance existing debt of INMH; and • pay certain costs and expenses incurred in connection with the Scheme and associated transactions. INMAL undertakes that the equity funding it receives pursuant to the Consortium and Subscription Agreement shall be applied in, amongst other things, paying the Scheme Consideration on the Implementation Date. Debt financing Each of the CSA Investors undertakes to procure that INMAL enters into a final facility agreement or agreements in relation to the third party debt finance and that INMH enters into the final INM Loan Note Facility and contributes the amounts drawn thereunder, required by INMAL to pay the Scheme Consideration (as committed to INMAL in accordance with the debt commitment letters described in section 6.7(b)). The CSA Investors will use all reasonable endeavours to: • ensure INMAL and INMH satisfy the conditions to drawdown of the debt to be provided to INMAL and INMH under the third party debt finance arrangements and the INM Loan Note Facility in each case in sufficient time to enable INMAL to provide the Scheme Consideration in accordance with the Scheme Implementation Agreement and INMAL Deed Poll; and • to cause INMAL to borrow under the facility agreement or agreements and to cause INMH to contribute monies borrowed under the INM Loan Note Facility to INMAL. Implementation of Scheme Each of the CSA Investors agrees to use and to procure that its respective subsidiaries use all reasonable endeavours to implement the Scheme and to give effect to the transactions contemplated by the Scheme Implementation Agreement, debt finance documentation and all other agreements and arrangements to which they are a party in connection with the Scheme (Transaction Documents). In particular, each of the CSA Investors severally agrees to take all action reasonably necessary to enable INMAL to comply with its obligations under the Scheme Implementation Agreement in a timely manner, and further undertakes not to do anything that will cause INMAL to breach its obligations under the Scheme Implementation Agreement. Without the prior written consent of each of the CSA Investors, INMH and INMAL must not: • take any action which may prejudice the interests of the CSA Investors with respect to the Scheme or the Transaction Documents; • take any action or refrain from taking any action which would constitute a breach of any Transaction Document; or APN NEWS & MEDIA SCHEME BOOKLET 231

• exercise any rights under any of the Transaction Documents, including without limitation, determining that any of the conditions precedent in clause 2.1 of the Scheme Implementation Agreement have been satisfied or waiving any of those conditions precedent, and amending any of the Transaction Documents. The parties to the Consortium and Subscription Agreement expressly agree that nothing in the Consortium and Subscription Agreement restricts the ability of INMAL or NMNZ to dispose of the APN Shares they hold prior to the Effective Date as they decide. Corporate governance of INMAL Providence and Carlyle each have the right to appoint a representative to act as a board observer on the INMAL board of directors from the date of the Consortium and Subscription Agreement until the date 10 Business Days after the Implementation Date. INMAL will ensure that any observer appointed by either Providence or Carlyle: • is given at least as much notice of the date, time and place of, and agenda for, all INMAL board meetings as is given to every member of the INMAL board, but in any event at least two Business Days notice; and • is supplied with copies of all written information which is supplied or distributed to members of the INMAL board of directors at the same time as that information is supplied to INMAL board members. Each observer has the right to attend and be entitled to speak and be heard at INMAL board meetings. INMH Sale If the Scheme becomes Effective, following the Effective Date and within six Business Days after the Effective Date (or such other date as the Investors may agree) INM must procure that the INMH Seller sells the INMH Shares to the Consortium Purchasers. The INMH Sale is described in Sections 3 and 7 of this Scheme Booklet. Share dealings Except in connection with the implementation of the Scheme, the sale of the shares in INMH and any associated transactions, the CSA Investors must not and each CSA Investor other than INM must procure that no person controlled by, or acting in concert with, that CSA Investor, acquires or takes any action to acquire, or causes another person to acquire or to take any action to acquire, any interest in any APN Shares or enters into an agreement or arrangement as a result of which it or any person may acquire any interest in any APN Shares until the earlier of the End Date and the date that the Scheme Implementation Agreement is terminated. Termination The Consortium and Subscription Agreement will terminate automatically if the Scheme Implementation Agreement is terminated. The Consortium and Subscription Agreement will not terminate in any other circumstances. (c) INM representation INM has given a written representation to APN that, other than in connection with the Scheme, it does not currently propose to divest of its interests in APN to any third party. It is INM’s present intention that through the Consortium it will continue to retain an interest in APN. There is no restriction in the Consortium and Subscription Agreement or any other documentation which prohibits INM from procuring that INMAL or NMNZ dispose of any of the APN Shares they hold prior to the Effective Date.

12.4 Other information material to the decision in relation to the Scheme Other than as contained in this Scheme Booklet, there is no information material to the making of a decision in relation to the Scheme (being information that is within the knowledge of any director of INMAL) which has not previously been disclosed to APN Shareholders. 232 APN NEWS & MEDIA SCHEME BOOKLET

3Glossary APN NEWS & MEDIA SCHEME BOOKLET 233

ı3 Glossary

$ or cents the lawful currency of the Commonwealth of Australia.

AGAAP Australian Generally Accepted Accounting Principles.

AIFRS the International Financial Reporting Standards as adopted in Australia.

APN APN News & Media Limited ABN 95 008 637 643.

APN Board the board of Directors of APN.

APN Directors the Directors of APN, in office at the date of lodgement of this Scheme Booklet for registration by ASIC, or in office from time to time, as the context requires.

APN Dividend any final dividend per APN Share paid by APN in respect of the financial year ended 31 December 2006 which has been declared and is payable or has been paid (and which is not franked in excess of the available franking credits of APN).

APN Independent each of the following directors of APN, who are not executives, directors Committee or or officers of INM: Committee (a) Ted Harris AC; (b) Sir Wilson Whineray KNZM, OBE; (c) Sallyanne Atkinson AO; (d) Pierce Cody; (e) Kevin Luscombe AM; and (f) John Maasland.

APN Group APN and its Subsidiaries.

APN Material has the meaning given to that term in the Scheme Implementation Adverse Change Agreement.

APN Notes the convertible notes maturing on 31 October 2008 issued by APN pursuant to a prospectus lodged with ASIC on 2 November 2001 and listed on ASX (code ASX:APNG). 234 APN NEWS & MEDIA SCHEME BOOKLET

ı3 Glossary (continued)

APN Option Plan the Executive and Director Option Plan under which the Options were issued.

APN Prescribed has the meaning given to that term in the Scheme Implementation Event Agreement.

APN Scheme Shares all the APN Shares excluding the INMAL Shares but including any APN Shares issued on or before the Record Date upon exercise of any Option or upon conversion of any APN Note.

APN Share a fully paid ordinary share in APN.

APN Shareholder each person who is registered in the Register as the holder of APN Shares.

ARN Australian Radio Network.

ASIC Australian Securities and Investments Commission.

Associate has the meaning given to that term in the Corporations Act.

ASX ASX Limited (ACN 008 624 691).

Attributable EBITDA means the consolidated EBITDA of the APN Group after: • excluding the minority interest in EBITDA generated by non-wholly owned businesses of the APN Group; • excluding the EBITDA of disposed or closed businesses; and • adding back APN’s share of depreciation and amortisation from its Associates not otherwise included in the consolidated EBITDA of the APN Group.

Business Day a business day as defined in the Listing Rules.

Carlyle CA Normandy Lux I S.à r.l., a company incorporated in Luxembourg and associated with The Carlyle Group.

Competing (a) a transaction which, if completed, would mean a person would, Transaction directly or indirectly: (i) acquire all or a substantial part of the assets or business of the relevant company and/or its Related Bodies Corporate; or (ii) acquire Control of the relevant company; or (b) a takeover bid, scheme of arrangement, amalgamation, merger, capital reconstruction, consolidation, purchase of main undertaking or other business combination involving the relevant company and/or its Related Bodies Corporate. APN NEWS & MEDIA SCHEME BOOKLET 235

Consortium each of INM, Providence, its limited and general partners and Associates and Carlyle, its limited and general partners and Associates, and any entity controlled by them together (including the Consortium Purchasers), and a Consortium member means any of INM, Providence or Carlyle.

Consortium and the Consortium and Subscription Agreement between INMAL, INMH, Subscription INM, Providence and Carlyle dated 11 February 2007, as amended by an Agreement amendment agreement dated 16 April 2007.

Consortium (a) Normandy Newco 1 Pty Ltd (ACN 124 378 230); Purchasers (b) Normandy Holdco 2 Pty Ltd (ACN 124 383 231); (c) Normandy Holdco 3 Pty Ltd (ACN 124 383 197); (d) Normandy Holdco 4 Pty Ltd (ACN 124 383 213); and (e) Normandy Holdco 5 Pty Ltd (ACN 124 383 222).

Control has the meaning given to that term in the Corporations Act.

Corporations Act Corporations Act 2001 (Cth).

Court a court of competent jurisdiction.

CSA Investors each of INM, Providence and Carlyle.

Deloitte Deloitte Corporate Finance Pty Limited.

Determination Date 5.00pm on the Business Day before the date for the Scheme Meeting as set out in the indicative timetable at Annexure 3 to the Scheme Implementation Agreement, or as ordered by the Court under section 411(1) of the Corporations Act (or where the Scheme Meeting is adjourned for any reason, before 5.00pm on the Business Day before the date of the adjourned Scheme Meeting).

EBIT earnings before interest and tax.

EBITDA earnings before interest, tax, depreciation and amortisation.

Effective the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) in relation to the Scheme, but in any event at no time before an office copy of the order of the Court is lodged with ASIC.

Effective Date the date on which the Scheme becomes Effective.

End Date 30 September 2007 or such other date as agreed in writing between INMAL and APN.

Exclusivity Period the period from and including the date of the Scheme Implementation Agreement to and including the earlier of the date the Scheme Implementation Agreement is terminated in accordance with its terms and the Effective Date. 236 APN NEWS & MEDIA SCHEME BOOKLET

ı3 Glossary (continued)

FATA Foreign Acquisitions and Takeovers Act 1975 (Cth).

FIRB Australia’s Foreign Investment Review Board.

FIRB Condition the condition precedent to the Scheme Implementation Agreement Precedent described in Section 10.2(a) of this Scheme Booklet.

Foreign Investment the foreign investment policy of the Australian Government, a summary Policy of which is dated January 2007.

General Meeting the general meeting of APN to consider, and if thought fit, to approve the Ordinary Resolution.

Grant Samuel Grant Samuel Corporate Finance Pty Limited. Corporate Finance

GST (a) the same as in the GST Law; (b) any other goods and services tax, or any tax applying to the performance of any obligations under the Scheme Implementation Agreement in a similar way; and (c) any additional tax, penalty tax, fine, interest or other charge under a law for such a tax.

GST Law means the same as “GST law” in A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Implementation Date three Business Days (or earlier if agreed) following the Record Date or such later date as ordered by the Court or agreed between APN and INMAL.

Independent Expert the independent expert appointed by APN to prepare a report for this Scheme Booklet in accordance with clause 4.1(b) of the Scheme Implementation Agreement, the Corporations Act and ASIC policy and practice.

Independent the report prepared by the Independent Expert, a copy of which is set Expert’s Report out in Section 8 of this Scheme Booklet.

INM Independent News & Media PLC.

INM Group INM and its Related Bodies Corporate.

INMAL Independent News & Media (Australia) Limited ACN 008 637 689. APN NEWS & MEDIA SCHEME BOOKLET 237

INMAL Deed Poll a deed to be executed by INMAL under which INMAL covenants in favour of the Scheme Participants to perform its obligations under the Scheme, a copy of which is contained in Annexure C.

INMAL Directors the directors of INMAL being: Donal Buggy; Gavin O’Reilly; Stephen Guthrie; and Alexander Bathgate.

INMAL Prescribed has the meaning given to that term in the Scheme Implementation Event Agreement.

INMAL Shares the APN Shares held by or on behalf of INMAL.

INMH Independent News & Media Holdings Pty Limited ACN 110 638 367.

INMH Sale the sale of the INMH Shares by the INMH Seller to the Consortium Purchasers.

INMH Seller Independent News & Media Belgium SA, a company incorporated in Belgium which is an indirect wholly-owned subsidiary of INM.

INMH Shares all of the issued ordinary shares in INMH.

Listing Rules the official listing rules of ASX as from time to time amended or waived in their application to a party.

NMNZ News & Media NZ Limited.

NZSE New Zealand Stock Exchange.

OIO Overseas Investment Office (New Zealand).

Option an option issued by APN under the APN Option Plan which is on issue as at the date of the Scheme Implementation Agreement.

Option Holder a person who holds Options.

Ordinary Resolution a resolution under item 7, section 611 of the Corporations Act approving the sale of all of the ordinary shares in INMH by the INMH Seller to certain wholly-owned subsidiaries of the Consortium. 238 APN NEWS & MEDIA SCHEME BOOKLET

ı3 Glossary (continued)

Other Directors the APN Directors other than the APN Independent Committee being: Non-Executive Directors James Parkinson; Donal Buggy; Peter Cosgrove; Liam Healy; Cameron O’Reilly; Gavin O’Reilly; and Executive Directors Brendan Hopkins.

Providence P6 Normandy Lux I S.à r.l., a company incorporated in Luxembourg and associated with Providence Equity Partners.

Record Date 5.00pm on the fifth Business Day following the Effective Date or such other date as APN and INMAL agree.

Register the share register of APN and Registry has a corresponding meaning.

Regulator’s Draft the draft of this Scheme Booklet which is provided to ASIC for approval pursuant to section 411(2) of the Corporations Act.

Regulatory Authority a government or a governmental, semi-governmental or judicial entity or authority or any Minister, department, office or delegate of any government. It includes self regulatory organisations established under statute or a stock exchange, ASIC, ASX or the Treasurer.

Related Body has the meaning given to that term in the Corporations Act. Corporate

relevant interest has the meaning given to that term by sections 608 and 609 of the Corporations Act.

Resolution a resolution to approve the terms of the Scheme.

Scheme the scheme of arrangement under Part 5.1 of the Corporations Act between APN and Scheme Participants, a copy of which is set out in Annexure B.

Scheme Booklet this Scheme Booklet including the Annexures, election form and proxy form for the Scheme Meeting.

Scheme the consideration payable by INMAL under the Scheme, being $6.20 cash Consideration per APN Scheme Share less any APN Dividend. APN NEWS & MEDIA SCHEME BOOKLET 239

Scheme the Scheme Implementation Agreement between INMAL and APN Implementation dated 11 February 2007, as amended by the Scheme Implementation Agreement (Amendment) Agreement, a copy of which is contained in Annexure A.

Scheme the Scheme Implementation (Amendment) Agreement between INMAL Implementation and APN dated 18 April 2007. (Amendment) Agreement

Scheme Meeting the meeting to be convened by the Court in relation to the Scheme pursuant to section 411(1) of the Corporations Act.

Scheme Participant each holder of APN Scheme Shares as at the Record Date.

Second Court the first day on which an application made to the Court for an order pursuant Hearing Date to section 411(4)(b) of the Corporations Act approving the Scheme is heard.

Share Acquisition the share acquisition deed between INMH Seller, the Consortium Purchasers Deed and INM dated 3 April 2007.

Subsidiary has the meaning given to that term in the Corporations Act.

Superior Proposal a publicly announced bona fide Competing Transaction in relation to APN which the APN Independent Committee, acting reasonably and in good faith, unanimously determines: (a) is reasonably capable of being completed by the End Date taking into account all aspects of the Competing Transaction; and (b) is preferable to the Scheme having regard to the best interests of APN as a whole and is more favourable from a financial viewpoint to Scheme Participants than the Scheme, taking into account all terms and conditions of the Competing Transaction.

Sydney Time the time in Sydney, Australia.

Treasurer the Treasurer of Australia.

TRN New Zealand Radio Network Limited and its Subsidiaries. voting power has the meaning given to that term in the Corporations Act.

VWAP (volume weighted average price) means the ratio of the total value of shares traded to the total volume of shares traded over the period. 240 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement APN NEWS & MEDIA SCHEME BOOKLET 241

Annexure A – Scheme Implementation Agreement

Date 11 February 2007 Parties APN News & Media Limited ACN 008 637 643 of Level 4, 100 William Street, Sydney New South Wales, Australia (APN) Independent News & Media (Australia) Limited ACN 008 637 689 of, Level 3, 25 National Circuit, Forrest, Australian Capital Territory (INMAL) Recitals A. INMAL has agreed with APN that it will acquire the APN Scheme Shares by means of a scheme of arrangement. B. APN intends to propose a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) between APN and the Scheme Participants, and to issue the Scheme Booklet. C. INMAL has agreed with APN to implement the Scheme upon the terms and conditions of this Agreement. Operative Provisions 1. Agreement to Propose Scheme 1.1 Upon and subject to the terms and conditions of this Agreement: (a) APN must propose the Scheme to its members; and (b) INMAL must: (i) comply with its obligations under the Scheme and the INMAL Deed Poll; and (ii) provide reasonable assistance to APN in proposing and implementing the Scheme.

2. Conditions Precedent 2.1 Conditions precedent to the implementation of the Scheme The Scheme will not become Effective unless each of the following conditions precedent is satisfied or waived: (a) FIRB approval: before the Determination Date any of the following occur: (i) (FATA approval) the Treasurer of Australia gives an approval to the acquisition by INMAL of the APN Scheme Shares and the sale and acquisition referred to in clause 2.1(d) under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) (that approval to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); 242 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(ii) (expiry of notice period) the Treasurer of Australia has become precluded by lapse of time from making an order under Part II of the FATA (other than an interim order under section 22 of the FATA) in respect of the acquisition of the APN Scheme Shares by INMAL pursuant to the Scheme and the sale and acquisition referred to in clause 2.1(d); or (iii) (no objection letter) the Treasurer of Australia indicates to INMAL that there is no objection in terms of the foreign investment policy of the Federal Government to the acquisition by INMAL of the APN Scheme Shares and the sale and acquisition referred to in clause 2.1(d) (that indication to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); (b) New Zealand foreign investment: before the Determination Date, the Overseas Investment Office (NZ) approves the acquisition by INMAL of the APN Scheme Shares and the sale and acquisition referred to in clause 2.1(d) under the Overseas Investment Act 2005 (NZ) (that approval to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); (c) Scheme Participants approval: the Scheme is approved by the requisite majorities of Scheme Participants in accordance with the Corporations Act; (d) Corporations Act section 611 item 7 approval: the sale of all of the ordinary shares in Independent News & Media Holdings Pty Ltd by Independent News & Media Belgium SA to certain wholly-owned subsidiaries of the Consortium disclosed in writing to APN is approved by a resolution passed by the shareholders of APN at the Scheme Meeting in accordance with item 7 of section 611 of the Corporations Act and applicable ASIC policy; (e) INM Shareholder approval: in accordance with the listing rules of the Irish Stock Exchange, the entry into this Agreement and implementation of the Scheme has been approved by ordinary resolution of INM’s shareholders at least 3 Business Days before the Determination Date; (f) Court approval: the Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act on the Second Court Hearing Date; (g) EU competition clearance: before the Determination Date, INMAL has obtained the approval of the European Commission pursuant to the EC Merger Regulation (139/2004) for the entry into this Agreement and implementation of the Scheme (that clearance to be subject to no conditions or only to those conditions that INMAL considers to be acceptable, acting reasonably); (h) INM Banking Syndicate approval: before the Determination Date, INM has received written consent from the INM Banking Syndicate to the sale of all of the ordinary shares in Independent News & Media Holdings Pty Ltd by Independent News & Media Belgium SA to certain wholly- owned subsidiaries of the Consortium disclosed in writing to APN and the transfer of all APN Scheme Shares held by News & Media NZ Limited to INMAL pursuant to the Scheme; (i) Other Regulatory Approvals: before 8.00am on the Second Court Hearing Date ASIC, ASX, NZSE, the New Zealand Commerce Commission, the Irish Stock Exchange (and any other relevant stock exchange) and all other applicable Regulatory Authorities, as appropriate, issue or provide such consents, waivers or approvals or do other acts which APN and INMAL agree are necessary or reasonably desirable to implement the Scheme; (j) Restraints: no temporary restraining order, preliminary or permanent injunction or other order issued by any Court or other material legal restraint or prohibition preventing the Scheme is in effect at 8.00am on the Second Court Hearing Date; (k) No APN Prescribed Event: no APN Prescribed Event occurs between the date of this Agreement and 8.00am on the Second Court Hearing Date; APN NEWS & MEDIA SCHEME BOOKLET 243

(l) No APN Material Adverse Change: no APN Material Adverse Change occurs between the date of this Agreement and 8.00am on the Second Court Hearing Date; (m) No INMAL Prescribed Event: no INMAL Prescribed Event occurs between the date of this Agreement and 8.00am on the Second Court Hearing Date; (n) Independent Expert report: the Independent Expert issues its report which concludes that the Scheme is in the best interest of Scheme Participants before the date on which the Scheme Booklet is registered by ASIC under the Corporations Act; (o) Execution of documents: between the date of this Agreement and the date of dispatch of the Scheme Booklet, INMAL executes the INMAL Deed Poll pursuant to which INMAL covenants in favour of the Scheme Participants to pay the Scheme Consideration; (p) No breach or termination: no material breach of any material clause of this Agreement or of a material representation or warranty by either party has occurred (which has not been remedied to the satisfaction of the other party) and this Agreement has not been terminated before 8.00am on the Second Court Hearing Date; (q) Option Holders: before 8.00am on the Second Court Hearing Date, all outstanding Options are either acquired by INMAL or where any Option Holder has not accepted the offer of INMAL to acquire his Options in accordance with clause 5.1, bought back by APN in accordance with the APN Option Plan or are otherwise dealt with as is agreed between the parties; (r) Holders of APN Notes: as at 8.00am on the Second Court Hearing Date, APN has complied with its obligations pursuant to clause 5 of this Agreement; and (s) No Superior Proposal: as at 8.00am on the Second Court Hearing Date, APN has not entered into any commitment, agreement, arrangement or understanding with a third party in relation to a Superior Proposal.

2.2 Best Endeavours and Waiver of conditions precedent Other than in respect of the conditions precedent in clause 2.1 (c) and (f), which cannot be waived: (a) Those parts of clause 2.1(a) which relate to any conditions imposed by the Treasurer of Australia on an approval or an indication of no objection are for the sole benefit of INMAL and any breach or non-fulfilment of those parts of the condition may only be waived by INMAL giving its written consent, but otherwise the condition precedent in clause 2.1(a) cannot be waived. (b) The conditions precedent in clauses 2.1(i), (j), (n) and (s) are for the benefit of both parties and any breach or non-fulfilment of those conditions may only be waived with the written consent of both parties. APN and INMAL must use their best endeavours to procure that each of those conditions are satisfied (but without in any way affecting the role of the Independent Expert to reach its conclusion independently of the parties). (c) The conditions precedent in clauses 2.1(m) and (o) are for the sole benefit of APN and any breach or non-fulfilment of those conditions may only be waived by APN giving its written consent. INMAL must use its best endeavours to procure that each of those conditions is satisfied. (d) The conditions precedent in clauses 2.1(b), (d), (e), (g), (h), (k), (l), (q) and (r) are for the sole benefit of INMAL and any breach or non-fulfilment of those conditions may only be waived by INMAL giving its written consent. INMAL must use its best endeavours to procure that the conditions in clauses 2.1(b), (e), (g), (h) and (q) are satisfied, APN must use its best endeavours to procure that the conditions in clause 2.1(d), (k), (l) and (r) are satisfied. 244 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(e) The condition in clause 2.1(p) is: (i) in respect of a material breach by APN of this Agreement, for the sole benefit of INMAL, and any breach or non-fulfilment of the condition in that respect may only be relied on or waived by INMAL giving its written consent; (ii) in respect of a material breach by INMAL of this Agreement, for the sole benefit of APN, and any breach or non-fulfilment of the condition in that respect may only be relied on or waived by APN giving its written consent; and (iii) is otherwise for the benefit of both parties, and any other breach or non-fulfilment of that condition may only be waived with the written consent of both parties. (f) APN and INMAL must cooperate, to the extent reasonably practicable, to assist one another with satisfying their obligations under this clause 2.2.

2.3 Regulatory approvals Without limiting the generality of clause 2.1, to facilitate the satisfaction of the conditions precedent, each party must: (a) promptly apply for all its Regulatory Approvals and keep the other party informed of all material matters in relation to the relevant application and with respect to: (i) the FIRB Condition Precedent, INMAL must: (A) lodge on or before 16 February 2007 (or such later date as may be agreed between APN and INMAL acting reasonably and in good faith) an application for the Treasurer of Australia’s approval to the acquisition of the APN Scheme Shares and the sale and acquisition referred to in clause 2.1(d) and the sale and acquisition referred to in clause 2.1(d) under and in accordance with the FATA, the Commonwealth Government’s foreign investment policy and any other applicable requirements; (B) provide to or obtain from the Consortium all information on a timely basis which the Treasurer of Australia or FIRB requires to make a decision on the application; and (C) engage in discussions with the Treasurer of Australia, FIRB and any other Governmental Agency, Minister or official as are necessary or appropriate to enable the Treasurer of Australia to make a decision on the application prior to the Determination Date; and (ii) the EU competition clearance condition precedent in clause 2.1(g), INMAL must lodge a draft of the necessary application for approval as soon as practicable after the date of this Agreement; (b) take all steps it is responsible for as part of the approval process for the Scheme; (c) respond to requests for information from a Regulatory Authority at the earliest practicable time (subject to confidentiality); and (d) use best endeavours to consult with the other party in advance about every material communication with any Governmental Agency about any Regulatory Approval.

2.4 Delay to Scheme Meeting If APN and INMAL become aware at any time prior to the First Court Hearing Date as set out in the Timetable, that the satisfaction (or otherwise) of the FIRB Condition Precedent is unlikely to be known prior to the date of the Scheme Meeting as set out in the Timetable, APN and INMAL will consult in good faith to determine whether the holding of the Scheme Meeting should be delayed until after the satisfaction (or otherwise) of the FIRB Condition Precedent is likely to be known. APN NEWS & MEDIA SCHEME BOOKLET 245

2.5 Adjournment of Scheme Meeting If the parties proceed with the Timetable but the FIRB Condition Precedent has not been satisfied by 5.00 pm 5 Business Days before the date for the Scheme Meeting as set out in the Timetable or as ordered by the Court under section 411(1) of the Corporations Act (or where the Scheme Meeting is adjourned for any reason, 5.00pm 5 Business Days before the date of the adjourned Scheme Meeting) APN has the right in its discretion to adjourn the Scheme Meeting to a date agreed between APN and INMAL (acting reasonably and in good faith) being a date when the satisfaction (or otherwise) of the FIRB Condition Precedent is likely to be known and APN may take such steps it considers necessary in connection with the adjournment of the Scheme Meeting (including any application to the Court).

2.6 Status of conditions precedent (a) Each party must promptly give the other notice: (i) of satisfaction of a condition precedent in clause 2.1; (ii) of a failure to satisfy a condition precedent in clause 2.1; or (iii) of any event that will, or is reasonably likely to, prevent a condition precedent in clause 2.1 being satisfied. (b) INMAL or APN (as the case may be) must give written notice to the other party as soon as reasonably practicable after becoming aware of a matter specified in clauses 2.6(a)(ii) or (iii) (and in any event before 5.00pm on the last Business Day before the Second Court Hearing Date) as to whether or not it waives the breach or non-fulfilment of any condition precedent of this Agreement which it is within its power to waive, specifying the condition precedent in question. (c) INMAL and APN must each provide the Court on the Second Court Hearing Date with a certificate stating that all the conditions precedent in clause 2.1 are satisfied or if not satisfied, are waived. (d) The giving of a certificate by each of APN and INMAL under clause 2.6(c) will in the absence of manifest error be conclusive evidence of the satisfaction or waiver of the conditions precedent referred to in the certificate.

2.7 Conditions precedent not met (a) If any condition precedent contained in clause 2.1 is not satisfied or waived by the earlier of the date specified in this Agreement for its satisfaction or 5.00pm on the last Business Day before the Second Court Hearing Date, or there is an event that will, or is reasonably likely to, prevent a condition precedent in clause 2.1 being satisfied, then the parties will at each of those times consult in good faith: (i) with a view to determining whether the Scheme or a transaction which results in the acquisition of all the issued ordinary shares in APN by INMAL may proceed by way of an alternative approach and, if so, to agree on the terms of such an alternative approach; or (ii) to agree to extend the date for satisfaction of the relevant condition precedent or to adjourn or change the Second Court Hearing Date. (b) If the parties are unable to reach agreement under clause 2.7(a) by the earlier of 5 Business Days: (i) after both parties become aware that the condition precedent in clause 2.1 will not be satisfied or of the relevant event; or (ii) before 8:00am on the Second Court Hearing Date, then unless that condition is waived in accordance with clause 2.2, a party entitled to the benefit of that condition may (subject to clause 2.7(c)) terminate this Agreement. 246 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(c) A party may not terminate this Agreement pursuant to clause 2.7(b) if the relevant condition has not been satisfied as a result of: (i) a breach of this Agreement by that party; or (ii) a deliberate act or omission of that party or by an entity which controls or is controlled by that party which either alone or together with other circumstances prevents that condition being satisfied. (d) Termination of this Agreement under clause 2.7(b) does not affect any accrued rights of either party arising from any breach of this Agreement prior to termination.

2.8 Deemed satisfaction of condition precedents (a) INMAL must make an application to ASIC as soon as practicable after the date of this Agreement for a modification of the Corporations Act to remove the need for the shareholder approval referred to in the condition precedent in clause 2.1(d), and if such modification is granted by ASIC before the Determination Date, the condition precedent in clause 2.1(d) shall be deemed to be satisfied. (b) If INMAL delivers to the APN Independent Committee a letter from McCann FitzGerald (lawyers, Dublin advising INM) addressed to the APN Independent Committee which confirms that the consent referred to in clause 2.1(h) has been duly obtained, then the condition precedent in clause 2.1(h) shall be deemed to be satisfied.

3. SCHEME 3.1 Outline of Scheme Subject to clause 2.1, on the Implementation Date, all of the APN Scheme Shares will be transferred to INMAL and the Scheme Participants will be entitled to receive the Scheme Consideration.

3.2 Scheme Consideration (a) INMAL must execute the INMAL Deed Poll prior to the dispatch of the Scheme Booklet. (b) INMAL undertakes and warrants to APN (in APN’s own right and separately as nominee for each of the Scheme Participants) that in consideration of the transfer to INMAL of each APN Scheme Share held by a Scheme Participant under the terms of the Scheme, INMAL will on the Implementation Date: (i) accept that transfer; and (ii) in accordance with the INMAL Deed Poll and this Agreement, pay each Scheme Participant $6.20 cash less the APN Dividend (if any) per APN Scheme Share which has been declared and is payable or has been paid to each APN Shareholder.

3.3 Deposit of Scheme Consideration into account INMAL must before 8.00 am on the Implementation Date, deposit an amount sufficient to pay the Scheme Consideration to each Scheme Participant into an account in APN’s name with those funds to be held on trust by APN for the purpose of paying the Scheme Consideration to the Scheme Participants, without any set off or counterclaim and free and clear of, and without any deduction or withholding for or on account of any taxes.

4. IMPLEMENTATION OF THE SCHEME 4.1 APN’s obligations APN must take all necessary steps to implement the Scheme in accordance with the Timetable subject to clauses 2.4 and 2.5, including taking each of the following steps: (a) Scheme Booklet: prepare and send to APN Shareholders a Scheme Booklet which: (i) complies with all applicable Australian laws, the Listing Rules and applicable ASIC Policy Statements; (ii) includes the Scheme, notices of meeting and proxy forms; APN NEWS & MEDIA SCHEME BOOKLET 247

(iii) unless the Independent Expert does not conclude that the Scheme is in the best interest of Scheme Participants, includes a statement that each member of the APN Independent Committee unanimously recommends that all Scheme Participants vote in favour of the Scheme in the absence of a Superior Proposal; and (iv) is updated by all such further or new information of which it becomes aware which may arise after the Scheme Booklet has been dispatched until the date of the Scheme Meeting which is necessary to ensure that it is not misleading or deceptive in any material respect (whether by omission or otherwise). (b) Independent Expert: promptly appoint and brief the Independent Expert (and any other specialist expert required) and provide all assistance and information reasonably requested by the Independent Expert (and any such specialist expert) to enable the preparation of the necessary report(s) for the Scheme Booklet. (c) Approval of Scheme Booklet: as soon as practicable after the conclusion of the review by ASIC of the Regulator’s Draft, procure that a meeting of the APN Independent Committee is convened to consider and if thought fit, approve all of the contents of the Scheme Booklet as being in a form appropriate for dispatch to the APN Shareholders, subject to approval of the Court. (d) INMAL Information: without limiting clause 4.4 include the INMAL Information in the Scheme Booklet subject to such changes as are reasonably requested by INMAL or otherwise agreed by the parties. (e) Application for section 411(17)(b) statement: apply to ASIC for the production of a statement pursuant to section 411(17)(b) of the Corporations Act stating that ASIC has no objection to the Scheme. (f) Court direction: in accordance with the Timetable, apply to the Court for an order under section 411(1) of the Corporations Act directing APN to convene the Scheme Meeting and, if so ordered by the Court, convene separate meetings of any classes of members determined by the Court. (g) Scheme Meeting: take all reasonable steps necessary to comply with the orders of the Court including, as required, dispatching the Scheme Booklet to APN Shareholders and convening the holding of the Scheme Meeting. (h) Registration of explanatory statement: request ASIC to register the explanatory statement included in the Scheme Booklet in relation to the Scheme in accordance with section 412(6) of the Corporations Act. (i) Approval and implementation of Scheme: if the resolution submitted to the Scheme Meeting in relation to the Scheme is passed by the necessary majorities of the Scheme Participants and each of the other conditions precedent set out in clause 2.1 (other than clause 2.1(f)) have been satisfied or waived, apply to the Court for orders approving the Scheme, and if that approval is obtained: (i) promptly lodge with ASIC an office copy of the orders approving the Scheme in accordance with section 411(10) of the Corporations Act; (ii) close the register of members of APN as at the Record Date and determine entitlements to the Scheme Consideration in accordance with the Scheme; (iii) execute proper instruments of transfer of the APN Scheme Shares in accordance with the Scheme; and (iv) do all other things contemplated by or necessary to give effect to the Scheme and the orders of the Court approving the Scheme. 248 APN NEWS & MEDIA SCHEME BOOKLET

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(j) APN Prescribed Event: between the date of this Agreement and immediately before the Implementation Date, use its best endeavours to ensure that an APN Prescribed Event does not occur other than in accordance with this Agreement. (k) Information: provide all necessary information about the Scheme Participants to INMAL which INMAL requires in order to facilitate the provision by INMAL of the Scheme Consideration. (l) Registration: register all transfers of APN Scheme Shares to INMAL on the Implementation Date. (m) Consult INMAL: (i) provide to INMAL drafts of the Scheme Booklet for the purpose of enabling INMAL to review and comment on those draft documents; (ii) take the comments made by INMAL into account in good faith when producing revised drafts of the Scheme Booklet and before dispatching the Scheme Booklet to APN Shareholders; and (iii) not submit the Regulator’s Draft to ASIC unless INMAL has had at least 2 Business Days to review and comment on the Regulator’s Draft. (n) Regulatory Review Period: during the Regulatory Review Period, keep INMAL at all times informed of any matters raised by ASIC in relation to the Scheme Booklet, and use all reasonable endeavours, in co-operation with INMAL, to resolve any such matters. (o) Registry details: subject to the Scheme: (i) provide all necessary information about the Scheme Participants to INMAL which INMAL requires in order to assist INMAL to identify the Scheme Participants and facilitate the payment of the Scheme Consideration by INMAL; and (ii) direct the Registry to promptly provide any information that INMAL reasonably requests in relation to the Register including any sub-register and, where requested by INMAL, APN must procure such information to be provided to INMAL in such electronic form as is reasonably requested by INMAL. (p) Court order: in accordance with the Timetable, apply to the court for an order approving the Scheme in accordance with sections 411(4)(b) and 411(6) of the Corporations Act if the Scheme is approved by the requisite majorities of Scheme Participants and each of the other conditions precedent set out in clause 2.1 (other than clause 2.1(f)) have been satisfied or waived. (q) Listing: take all reasonable and appropriate steps to maintain APN’s listing on ASX and NZSE, notwithstanding any suspension of the quotation of APN Shares, up to and including the Implementation Date, including without limitation, making appropriate applications to ASX, NZSE and ASIC; and (r) Access by INMAL to people and APN Information: between the date of this Agreement and the Implementation Date (subject to the Scheme being approved by the requisite majorities of Scheme Participants at the Scheme Meeting), APN must provide INMAL and its Officers and Advisers with reasonable access to APN’s Officers and Advisers and to documents, records, and other information (subject to any existing confidentiality obligations owed to third parties, or applicable privacy laws) which INMAL reasonably requires to the extent necessary for INMAL to meet its obligations under this Agreement and the Finance Documents.

4.2 INMAL’s obligations INMAL must take all necessary steps within its power to implement the Scheme in accordance with the Timetable, including taking each of the following steps: (a) INMAL Information: promptly provide to APN all information regarding the Consortium and INMAL required by all applicable Australian laws, the Listing Rules and applicable ASIC Policy Statements for inclusion in the Scheme Booklet, which information must: APN NEWS & MEDIA SCHEME BOOKLET 249

(i) contain all information necessary to ensure that the Scheme Booklet complies with the requirements of section 411(3) of the Corporations Act and ASIC Policy Statement 60 in respect of that information; (ii) contain all the information that would be required under section 636(1)(f) of the Corporations Act if the Scheme Booklet were a bidder’s statement offering the Scheme Consideration as cash consideration under a takeover bid, to the extent reasonably applicable; (iii) not be misleading or deceptive in any material respect (whether by omission or otherwise) including in the form and context in which it appears in the Scheme Booklet, and to which INMAL has consented; and (v) be updated by all such further or new information of which it becomes aware which may arise after the Scheme Booklet has been dispatched until the date of the Scheme Meeting which is necessary to ensure that it is not misleading or deceptive in any material respect (whether by omission or otherwise); (b) Independent Expert: promptly provide all assistance and information reasonably requested by the Independent Expert (and any other specialist expert required) to enable the preparation of the necessary report(s) for the Scheme Booklet; (c) Review of Scheme Booklet: as soon as practicable after delivery, review the drafts of the Scheme Booklet prepared by APN and provide comments on those drafts in good faith; (d) Approval of Scheme Booklet: as soon as practicable after the conclusion of the review by ASIC of the Regulator’s Draft, procure that a meeting of the board of INMAL (or of a committee of the board of INMAL appointed for the purpose) is convened to consider and if thought fit, approve those sections of the Scheme Booklet that relate to the Consortium and INMAL as being in a form appropriate for dispatch to APN Shareholders, subject to approval of the Court; (e) INM member approval: no later than 4 May 2007 (unless otherwise agreed), convene a meeting of members of INM to approve by ordinary resolution the entry into this Agreement and implementation of the Scheme and immediately notify APN of the outcome of that meeting in accordance with the Timetable; (f) INMAL Prescribed Event: between the date of this Agreement and the Implementation Date, use its best endeavours to ensure that an INMAL Prescribed Event does not occur; (g) Representation: if so requested by APN, procure that it is represented by counsel at the Court hearings convened for the purposes of section 411(1) and 411(4)(b) of the Corporations Act in relation to the Scheme, at which, through its counsel, INMAL will undertake (if requested by the Court) to do all such things and take all such steps within its power as may be necessary in order to ensure the fulfilment of its obligations under the Scheme, and, to the extent that leave of the Court is required for INMAL to be represented at those Court hearings, apply for that leave; and (h) Scheme Consideration: if the Scheme becomes Effective, provide the Scheme Consideration in accordance with clause 3.2 on the Implementation Date, and must refrain, unless this Agreement has been terminated, from giving notice to the underwriters (named in the Commitment Letter) under paragraph 11(d) of the Commitment Letter.

4.3 Co-operation and consultation (a) APN and INMAL must each use all reasonable endeavours and utilise all necessary resources (such as management, shareholder, marketing and corporate relations resources, and the resources of Advisers) to produce the Scheme Booklet and implement the Scheme in accordance with the Timetable. 250 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(b) APN and INMAL must procure that their respective Officers and Advisers work (including by attending meetings and by providing information) in good faith and in a timely and co-operative fashion with each other party to implement the Scheme in accordance with the Timetable and to prepare all documents required relating to the Scheme.

4.4 Dispute as to content of Scheme Booklet If INMAL and APN disagree on the form or content of the Scheme Booklet, they must consult in good faith to try to settle an agreed form of the Scheme Booklet. If complete agreement is not reached after reasonable consultation, then: (a) if the disagreement relates to the form or content of the INMAL Information contained in the Scheme Booklet, APN will, acting in good faith, make such amendments as INMAL reasonably requires; and (b) if the disagreement relates to the form or content of any other part of the Scheme Booklet, the APN Independent Committee will, acting in good faith, decide the final form or content of the disputed part of the Scheme Booklet.

4.5 Options and APN Notes Each APN Share issued on or before the Record Date upon exercise of an Option or upon conversion of an APN Note will rank equally in all respects with all existing APN Shares and will form part of the APN Scheme Shares which are subject to the Scheme.

4.6 Competing Transaction (a) If a Competing Transaction is publicly announced at any time between the date on which the Scheme Booklet is dispatched to APN Shareholders and the date on which the Scheme Meeting is to be held, APN agrees to provide ASIC with all information which is known to APN in relation to the Competing Transaction, and to consult in a timely manner with ASIC in relation to the Competing Transaction. (b) The parties agree that the Scheme Booklet will contain prominent disclosure of APN’s obligations under this clause 4.6.

4.7 APN Board APN must upon the Implementation Date after payment of the Scheme Consideration: (a) cause the appointment of any nominees of INMAL who first consent in writing to act to the APN Board; and (b) procure that the directors of APN retire from the APN Board.

5. APN OPTIONS AND NOTES 5.1 APN Options (a) Unless otherwise agreed, within 7 days of the date of despatch of the Scheme Booklet to APN Shareholders, INMAL must make an irrevocable written offer (Option Offer) to each Option Holder to acquire all of the Options held by that Option Holder for the Option Price. The Option Offer must: (i) remain open for acceptance by Option Holders until 1 Business Day after the Scheme Meeting (Option Offer Period); (ii) be expressed to be conditional upon the Scheme becoming Effective; and (iii) otherwise be on such other terms and conditions as may be agreed between APN and INMAL. (b) APN must take all necessary steps in accordance with the APN Option Plan to permit the Option Holders to accept the Option Offer and to permit the transfer by Option Holders of their Options to INMAL pursuant to the Option Offer. APN NEWS & MEDIA SCHEME BOOKLET 251

(c) Within 2 Business Days after the close of the Option Offer Period, INMAL must provide APN with notice of all Option Holders who have not validly accepted the Option Offer (Dissenting Option Holder). Upon receipt of such notice, APN must take all necessary steps in accordance with the APN Option Plan to buy back all Options held by the Dissenting Option Holders by no later than 1 Business Day prior to the Implementation Date. All Options which are bought back by APN shall be cancelled in accordance with the terms of the APN Option Plan.

5.2 APN Notes (a) Within 1 Business Day of the date of this Agreement, APN must issue a notice to the holders of APN Notes in accordance with Condition 6.2 of the terms of issue of the APN Notes. (b) APN must take all necessary action within APN’s control in accordance with the terms of issue of the APN Notes to ensure that all APN Notes are redeemed or converted into APN Shares on or prior to the Implementation Date or such other date as is required by the terms of issue of the APN Notes.

6. RESTRICTION ON ACQUIRING SECURITIES 6.1 Standstill provision Until the earlier of the End Date and the date on which this Agreement is terminated, (other than as a result of the transfer of APN Scheme Shares under the Scheme) neither party may (and must ensure that their Related Parties do not) acquire or offer to acquire, any securities or property or any right or option to acquire any securities or property of the other party unless it has received the prior written consent of the other party.

6.2 Standstill provisions of Confidentiality Agreement superseded The obligations on INMAL set out in clause 6.1 supersede any obligations on INMAL under any Confidentiality Agreement previously entered into with APN.

7. CONDUCT OF BUSINESS 7.1 Conduct of business From the date of this Agreement up to and including the Implementation Date, APN must conduct its business in the ordinary and normal course and in substantially the same manner as previously conducted.

7.2 Specific obligations Without limiting clause 7.1 and other than with the prior approval of INMAL (which approval must not be unreasonably withheld or delayed), or as required by this Agreement, APN must, from the date of this Agreement up to and including the Implementation Date, use all reasonable endeavours to: (a) Business and assets: maintain its business and assets and conduct its business in the ordinary and proper course; (b) Officers and employees: keep available the services of its Senior Employees; and (c) Relationships: preserve its relationships with customers, suppliers, licensors, licensees, joint venturers and others with whom it has business dealings.

7.3 APN Prohibited actions Other than as disclosed in writing to INMAL prior to the date of this Agreement or with the prior approval of INMAL (which approval must not be unreasonably withheld or delayed), or as provided for or contemplated in the Business Plan, or required by this Agreement or by any existing obligation of any member of the APN Group or by any agreement to which any member of the APN Group is a party which has been disclosed in the APN Due Diligence Information, the APN Group must not, and where relevant must not permit any member of the APN Group to, from the date of this Agreement up to and including the Implementation Date do any of the following (or agree to do so): 252 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(a) Acquisitions and disposals: acquire or dispose of, or offer to acquire or dispose of, any company, business or asset having a book value or for consideration which exceeds the amount provided in the Business Plan by more than $10 million, or, acquire or dispose of, or offer to acquire or dispose of, more than one company, business or asset (or any combination thereof and whether or not in more than one transaction) having an aggregate book value or for aggregate consideration which exceeds the amount provided in the Business Plan by more than $15 million; (b) Joint Ventures: enter into any joint venture, partnership or similar arrangement; (c) Capital expenditure: except as provided for or contemplated in the Business Plan, incur any capital expenditure in respect of any item which exceeds the amount provided in the Business Plan by more than $1 million, or incur any capital expenditure in respect of any number of items of a like kind where the aggregate capital expenditure for those items exceeds the amount provided in the Business Plan by more than $5 million; (d) Hedge contracts: enter into any hedge contract (or similar risk management arrangement) other than in accordance with policies which have been approved by the APN Board as at the date of this Agreement; (e) Employees: terminate any Senior Employee, engage any new Senior Employee or, except by way of the payment of bonuses for the 2006 financial year as included in the Business Plan or the review by the Remuneration Committee of APN of remuneration for the 2007 financial year of any Senior Employee, increase the remuneration of any Senior Employee or issue any securities or options to any director or Senior Employee or otherwise vary any agreement with any of its directors or Senior Employees; (f) Termination payments: pay a director or Senior Employee a termination payment exceeding $100,000, except as provided for in an existing employment contract in place as at the date of this Agreement, a copy of which has previously been provided to INMAL; (g) Financial arrangements: borrow any money, grant any security or encumbrance over any of the assets of any member of the APN Group or enter into any financing arrangements (including off-balance sheet arrangements), other than drawdown under existing financing accommodation (including hedging arrangements and derivatives) or rollover of existing facilities and other than the entry into financial accommodation which can only be drawn after the termination of this Agreement and which can be cancelled by APN without penalty if the Scheme becomes Effective; (h) Dividends: other than the APN Dividend announce, declare or pay any dividend, bonus or other distribution of its shareholder profits or shareholder assets or returning or agreeing to reduce its capital or return any capital to its members; and (i) APN Prescribed Event: permit, but only to the extent that it is reasonably within the control of APN to do so, the occurrence of an APN Prescribed Event (other than in accordance with this Agreement).

8. COURT PROCEEDINGS 8.1 Appeal process If the Court refuses to make orders convening the Scheme Meeting or approving the Scheme, APN must appeal from the Court’s decision to the fullest extent possible except to the extent that APN and INMAL agree otherwise, or Queen’s Counsel or Senior Counsel indicates that, in their view, an appeal would have no reasonable prospects of success before the End Date. APN NEWS & MEDIA SCHEME BOOKLET 253

8.2 Defence of proceedings Each of INMAL and APN must vigorously defend, or must cause to be vigorously defended, any lawsuits or other legal proceeding brought against it (or any of its Subsidiaries) challenging this Agreement or the completion of the Scheme. Neither INMAL nor APN may settle or compromise (or permit any of its Subsidiaries to settle or compromise) any claim brought in connection with this Agreement without the prior written consent of the other, such consent not to be unreasonably withheld.

8.3 Costs Any costs incurred as a result of the operation of this clause 8 will be borne by the parties in equal shares.

9. REPRESENTATIONS AND WARRANTIES 9.1 When INMAL representations are made INMAL represents and warrants to APN each of the matters set out in clause 9.2 as at the date of this Agreement, the date of the Scheme Meeting, 8.00am on the Second Court Hearing Date, the Implementation Date and any other date to which a representation in clause 9.2 is expressed to be given.

9.2 INMAL representations INMAL represents and warrants to APN that except as disclosed in writing prior to execution of this Agreement: (a) INMAL is a validly existing corporation registered under the laws of the Australian Capital Territory; (b) the information provided in writing to APN prior to execution of this Agreement in respect of the direct and indirect ownership structure of INMAL on the Implementation Date is true, complete and accurate in all respects and not misleading and does not omit any material matters required to make the information provided to APN not misleading (when read as a whole) subject to any changes disclosed in writing to APN at least 3 Business Days prior to the Determination Date and which do not have a material adverse effect on the implementation of the Scheme; (c) that the Consortium and Subscription Agreement and each of the Finance Documents has been properly authorised by all necessary corporate action, duly executed and delivered by each Consortium member or Related Body Corporate of a Consortium member which is a party thereto and constitutes legal, valid and binding obligations on each Consortium member or Related Body Corporate of a Consortium member which is a party thereto; (d) the execution and delivery of this Agreement by INMAL has been properly authorised by all necessary corporate action and INMAL has full corporate power and lawful authority to execute and deliver this Agreement and to perform or cause to be performed its obligations under this Agreement; (e) (subject to laws generally affecting creditors’ rights and the principles of equity) this Agreement constitutes legal, valid and binding obligations on it and execution and performance of this Agreement will not result in a breach of or default under INMAL’s constitution or any agreement or deed or any writ, order or injunction, rule or regulation to which INMAL is a party or to which it is bound (except for such breaches or defaults as would not have a material adverse effect on the financial position of INMAL) or require any consent, approval, authorisation or permit from any Governmental Agency, except for the Regulatory Approvals and consents under commercial agreements with Governmental Agencies; (f) the INMAL Information contained in the Scheme Booklet will be included in good faith to the best of the knowledge of the board of directors of INMAL (having consulted with the Consortium) and on the understanding that APN and the APN Independent Committee will rely on that information for the purposes of considering and approving the Scheme Booklet before it is dispatched, and implementing the Scheme, and will comply in all material respects with the requirements of all applicable Australian laws, the Listing Rules and applicable ASIC Policy Statements; 254 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(g) all information provided by INMAL to the Independent Expert will be provided in good faith and on the understanding that the Independent Expert will rely on such information for the purposes of producing its report for the Scheme Booklet; (h) it will provide to APN all such further or new information of which it becomes aware that arises after the Scheme Booklet has been dispatched until the date of the Scheme Meeting which may be necessary to ensure that the Schemes Booklet, in relation to the INMAL Information contained in it, is not misleading or deceptive in any material respect (whether by omission or otherwise); (i) INMAL is the registered holder of 131,541,073 APN Shares representing 28.58% of the issued capital of APN as at the date of this Agreement; and (j) since its incorporation, INMAL has not traded, conducted any business activities or incurred any liability or obligation (contingent or otherwise) or entered into any contract, arrangement or commitment or granted any right or created or agreed to create any encumbrance or undertaken any activities of any sort other than: (i) in connection with its establishment and administrative costs; (ii) in connection with the acquisition of the APN Shares held by INMAL; (iii) in connection with entering into the Consortium and Subscription Agreement, the Finance Documents, this Agreement and any other documents directly incidental thereto; or (iv) as expressly contemplated by this Agreement.

9.3 INMAL’s indemnities INMAL must indemnify and keep indemnified APN from and against all claims, liabilities and loss which APN may suffer or incur by reason of any breach of any of the representations and warranties in clause 9.2.

9.4 When APN representations are made Each of the representations and warranties given by APN in clause 9.5 are given to INMAL as at the date of this Agreement, the date of the Scheme Meeting, 8.00am on the Second Court Hearing Date, the Implementation Date and any other date to which a representation in clause 9.5 is expressed to be given.

9.5 APN representations APN represents and warrants to INMAL that except as disclosed in writing by APN prior to execution of this Agreement: (a) it is a validly existing corporation registered under the laws of its place of incorporation; (b) the execution and delivery of this Agreement by APN has been properly authorised by all necessary corporate action and APN has full corporate power and lawful authority to execute and deliver this Agreement and to perform or cause to be performed its obligations under this Agreement; (c) (subject to laws generally affecting creditors’ rights and the principles of equity) this Agreement constitutes legal, valid and binding obligations on it and execution and performance of this Agreement will not result in a breach of or default under APN’s constitution or any agreement or deed or any writ, order or injunction, rule or regulation to which APN or any of its Subsidiaries is a party or to which they are bound (except for such breaches or defaults as would not have a material adverse effect on the consolidated financial position of APN) or require any consent, approval, authorisation or permit from any Governmental Agency, except for the Regulatory Approvals and consents under commercial agreements with Governmental Agencies other than as provided for in this Agreement; (d) the APN Due Diligence Information has been provided in good faith to INMAL and, to the best of the knowledge of APN (having made due enquiry), has been provided without any deliberate or intentional non-disclosure or omission of any material information or any wilful misconduct by APN or any Officer of APN in relation to the provision of the APN Due Diligence Information; APN NEWS & MEDIA SCHEME BOOKLET 255

(e) APN has provided INMAL with a copy of all Material Contracts or where a Material Contract or a Specified Contract is confidential and has not been disclosed, APN warrants that it considers that no person has a right of termination of the relevant Specified Contract as a result of the change of control arising from the acquisition by INMAL of the APN Scheme Shares; (f) all information provided by APN to the Independent Expert will be provided in good faith and on the understanding that the Independent Expert will rely on such information for the purposes of producing its report for the Scheme Booklet; (g) the APN Information contained in the Scheme Booklet will be included in good faith to the best of the knowledge of the APN Board and on the understanding that INMAL and the INMAL Board will rely on that information for the purposes of considering and approving the INMAL Information in the Scheme Booklet before it is dispatched and approving the entry into the INMAL Deed Poll, and will comply in all material respects with the requirements of all applicable Australian laws, the Listing Rules and applicable ASIC Policy Statements; and (h) it will update the Scheme Booklet with all such further or new information of which APN becomes aware and which may arise after the Scheme Booklet has been despatched to APN Shareholders until the date of the Scheme Meeting which is necessary to ensure that it is not misleading or deceptive in any material respect (whether by omission or otherwise)

9.6 APN’s Indemnity APN must indemnify and keep indemnified INMAL from and against all claims, liabilities and loss which INMAL may suffer or incur by reason of any breach of any of the representations and warranties in clause 9.5.

9.7 Reliance by parties Each party (the Representor) acknowledges that: (a) in entering into this Agreement the other party has relied on the representations and warranties provided by the Representor under this clause 9. The representations and warranties provided by the Representor are not extinguished or affected by any investigation made by or on behalf of the other party into the affairs or business of the Representor or its Related Parties; and (b) any breach of the representations and warranties provided by the Representor under this clause 9 after the Scheme becomes Effective may only give rise to a claim in damages and cannot result in a termination of this Agreement.

9.8 Survival of representations and indemnities (a) The representations and warranties provided by each party under this clause 9: (i) are severable; (ii) will survive the termination of this Agreement; and (iii) are given with the intent that liability under them will not be confined to breaches of them discovered prior to the date of termination of this Agreement. (b) The indemnities provided by each party under this clause 9 will: (i) be severable; (ii) be a continuing obligation; (iii) constitute a separate and independent obligation of the party giving the indemnity from any other obligations of such party under this Agreement; and (iv) survive the termination of this Agreement. 256 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

10. NO RELIANCE ON APN DUE DILIGENCE INFORMATION 10.1 Due diligence investigations INMAL acknowledges and agrees both on its own behalf and on behalf of the Consortium and each of INMAL’s and the Consortium’s Representatives, that: (a) prior to entry into this Agreement, they and their Representatives have undertaken and concluded their own due diligence investigations in relation to the APN Group and have conducted discussions with APN and certain of its Officers (including the Chief Executive Officer and Chief Financial Officer); and (b) in the course of those investigations and the negotiations and discussions prior to entry into this Agreement, APN and its Representatives have provided to the Consortium and INMAL and their Representatives the APN Due Diligence Information.

10.2 No APN warranty or liability INMAL acknowledges and agrees both on its own behalf and on behalf of the Consortium and each of INMAL’s and the Consortium’s Representatives, that each of APN and its Representatives: (a) makes no representation or warranty: (i) as to the accuracy, completeness or relevance of any of the APN Due Diligence Information; (ii) in respect of any Forward Looking Information, as to the reasonableness of any such information or the accuracy, completeness or relevance of any assumptions underlying any such information (and INMAL expressly acknowledges that all such information is necessarily a matter of opinion, is inherently uncertain and subject to change and when provided did not take into account any investment criteria or other considerations which may have determined or influenced the decision of INMAL to enter into this Agreement); (iii) that any of the APN Due Diligence Information has been audited, verified or prepared with reasonable care; or (iv) that the APN Due Diligence Information is the totality of the information that a person would require or expect to find to make a decision to enter into this Agreement or to acquire APN Scheme Shares pursuant to the Scheme, except that the APN Due Diligence Information has been disclosed: (v) in good faith; and (vi) that, unless otherwise notified or already known to INMAL, the APN Due Diligence Information is able to be disclosed by APN in compliance with any existing confidentiality obligations and without the consent of any other person; (b) has no legal liability or responsibility to the Consortium or INMAL, their Representatives or any other person for any false, inaccurate, misleading or deceptive APN Due Diligence Information or for any omission from the APN Due Diligence Information which is or may be misleading or deceptive or for any opinion formed, conclusion drawn or decision made by the Consortium or INMAL to enter into this Agreement, to acquire the APN Scheme Shares pursuant to the Scheme or for any other purpose, as a result of examining the APN Due Diligence Information; (c) has no legal liability or responsibility to inform the Consortium or INMAL of any matter arising or coming to the notice of APN which may affect or qualify any of the APN Due Diligence Information or to update or correct any of the APN Due Diligence Information; and (d) has no legal liability or responsibility for any loss of any kind (including, without limitation, any indirect, consequential or economic loss or loss of profit or opportunity) arising from any inaccuracy, incompleteness or misleading or deceptive nature (including by omission) of any of the APN Due Diligence Information or any default, negligence or lack of care in relation to the preparation or provision of the APN Due Diligence Information. APN NEWS & MEDIA SCHEME BOOKLET 257

10.3 Own enquiries Without limiting clause 10.1 and 10.2, INMAL hereby acknowledges and agrees both on its own behalf and on behalf of the Consortium, that: (a) INMAL and the Consortium have made their own independent assessment of all APN Due Diligence Information; (b) INMAL and the Consortium have carried out, and relied solely on, their own investigation and analysis of the APN Due Diligence Information and the Scheme; (c) INMAL and the Consortium have utilised the APN Due Diligence Information for information purposes only and solely at their own risk; (d) with respect to any Forward Looking Information, clause 10.2(a)(ii) applies and no such information was given as advice to the Consortium or INMAL or as a recommendation or basis for decision to enter into this Agreement, to acquire the APN Scheme Shares pursuant to the Scheme or for any other purpose; and (e) INMAL and the Consortium have not relied on any of the APN Due Diligence Information to make a decision to enter into this Agreement, to acquire the APN Scheme Shares pursuant to the Scheme or for any other purpose.

10.4 Benefit The acknowledgements, confirmations and agreements given and made by INMAL on its own behalf and on behalf of the Consortium in this clause 10 are given to APN on its own behalf and separately as trustee for each of the APN Indemnified Parties.

10.5 Liability for breach of warranty Nothing in clauses 10.2 or 10.3 in any way limits, restricts or modifies APN’s liability for any breach of the warranties given in clauses 9.5(d) and (e) or INMAL’s rights in respect of those warranties.

11. EXCLUSIVITY 11.1 No-shop restriction During the Exclusivity Period, APN must ensure that neither it nor any of its Representatives directly or indirectly solicits, invites, encourages or communicates any intention to do any of those things, with a view to obtaining any offer or proposal from any person in relation to a Competing Transaction.

11.2 No due diligence Without limiting the generality of clause 11.1, during the Exclusivity Period APN must not without INMAL’s prior written consent, solicit, invite or encourage any party (other than INMAL, the Consortium or their Representatives) to undertake due diligence investigations on APN or any of its Related Bodies Corporate in connection with or for the purposes of a Competing Transaction.

11.3 Notification During the Exclusivity Period, APN will promptly advise INMAL of: (a) any approach, inquiry or proposal made to, and any attempt to initiate or continue negotiations or discussions with, APN or any of its Representatives with respect to any current or future Competing Transaction, whether unsolicited or otherwise; (b) subject to preserving the confidentiality of any such information in accordance with APN’s legal obligations, any request for or provision by APN or any of its Representatives of any information relating to APN or any of its Related Bodies Corporate or any of their businesses or operations to any person in connection with or for the purposes of a current or future Competing Transaction. 258 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

11.4 INMAL’s right to respond (a) If during the Exclusivity Period APN receives any proposal in relation to a Competing Transaction which the APN Independent Committee determines is a Superior Proposal and the APN Independent Committee wishes to recommend that Competing Transaction, or enter into any agreement, commitment, arrangement or understanding relating to that Competing Transaction, APN must give INMAL notice of the Competing Transaction, which notice must include all material details of the Competing Transaction, including details of the proposed bidder or acquirer. (b) If APN gives INMAL a notice in accordance with clause 11.4(a): (i) APN must not, until the expiration of 3 Business Days following the receipt of that notice by INMAL, enter into any legally binding agreement with respect to the Competing Transaction or otherwise progress or facilitate the Competing Transaction, including by permitting the bidder or acquirer to undertake due diligence investigations on APN or any of its Related Bodies Corporate; and (ii) INMAL will have the right, but not the obligation, at any time until the expiration of 3 Business Days following receipt of that notice by INMAL to offer to amend the terms of the Scheme or propose any other transaction (each an INMAL Counterproposal), and if INMAL does so, the APN Independent Committee must review the INMAL Counterproposal in good faith to determine whether the INMAL Counterproposal is more favourable to Scheme Participants than the Competing Transaction. (c) If the APN Independent Committee determines in good faith that the INMAL Counterproposal is more favourable to Scheme Participants than the Competing Transaction, then: (i) if the INMAL Counterproposal contemplates an amendment to the Scheme, the parties must enter into an agreement amending this Agreement and reflecting the INMAL Counterproposal; (ii) if the INMAL Counterproposal contemplates any other transaction, APN must make an announcement to ASX as soon as reasonably practicable which states that the APN Independent Committee recommend the INMAL Counterproposal, in the absence of a Superior Proposal, and the parties must pursue implementation of the INMAL Counterproposal in good faith; and (iii) APN must not, and must procure that the APN Independent Committee do not, take any of the actions referred to in clause 11.4(a). (d) For the purposes of this clause 11.4, each successive material modification of any proposal in relation to a Competing Transaction will be deemed to constitute a new Competing Transaction and the provisions of this clause 11.4 will apply to each such new modified proposal.

11.5 Exceptions (a) Nothing in this clause 11 prevents APN from: (i) providing information to its Representatives; (ii) providing information to rating agencies or any Governmental Agency; (iii) providing information to its auditors, Advisers, banks and other financial institutions, customers and suppliers acting in that capacity, in the ordinary and usual course of business; or (iv) making presentations to brokers, portfolio investors or analysts in the ordinary and usual course of business. (b) Nothing in clauses 11.3 or 11.4 prevents APN from undertaking, or requires APN to undertake, any act, if doing so would be inconsistent with the proper exercise of the fiduciary duties of the APN Independent Committee. APN NEWS & MEDIA SCHEME BOOKLET 259

11.6 Compliance with law If a court, arbitral tribunal or the Takeovers Panel determines that the agreement by APN under this clause 11 or any part thereof: (a) constituted, or constitutes, or would constitute, a breach of the fiduciary or statutory duties of any member of the APN Independent Committee to APN; (b) constituted, or constitutes, or would constitute, unacceptable circumstances within the meaning of the Corporations Act; or (c) was, or is, or would be, unlawful for any other reason, then, to that extent (and only to that extent) APN will not be obliged to comply with that provision of this clause 11. To the extent reasonably possible, APN must submit in any relevant proceedings that no such determination should be made or that if any such determination is to be made, it should apply only to the extent that the obligation constitutes any of the matters set out in paragraphs (a), (b) or (c) above.

12. PAYMENT OF LIQUIDATED AMOUNT 12.1 Rationale APN acknowledges and agrees, for the purposes of this clause 12, as follows. (a) INMAL has required the inclusion of this clause 12, in the absence of which it would not have entered into this Agreement or otherwise agreed to implement the Scheme. (b) APN and the APN Independent Committee believe that the Scheme may provide significant benefits to APN and the Scheme Participants and that it agrees to the inclusion of this clause 12 in order to secure INMAL’s execution of this Agreement and its agreement to implement the Scheme.

12.2 Payment If clause 12.3 does not apply and: (a) a Competing Transaction is announced or made, between the date of this Agreement and the End Date (both dates inclusive) and, at any time thereafter, the person announcing or making the Competing Transaction, has (together with its Associates) a Relevant Interest in at least 50% of the issued ordinary shares of APN as a result of a takeover offer or other merger or similar transaction or proposal that is or becomes unconditional (or in respect of which all applicable conditions have been satisfied or waived or some are satisfied and the remainder are waived), or acquires pursuant to the Competing Transaction, directly or indirectly (including by way of joint venture or dual listed company structure) an interest in all or a substantial part of the business or assets of APN, or acquires control of or merges or amalgamates with APN; (b) other than as a result of the Independent Expert giving an opinion that the Scheme is not in the best interest of Scheme Participants, the APN Independent Committee fails to unanimously recommend, or any member of the APN Independent Committee withdraws his recommendation of the Scheme, or makes a public statement that he no longer supports the Scheme; (c) any member of the APN Independent Committee publicly recommends that a Competing Transaction is in the best interests of APN and APN Shareholders (or another form of similar recommendation); (d) the Court fails (taking into account all appeals) to approve the Scheme for the purposes of section 411(4)(b) of the Corporations Act as a direct result of a material non-compliance by APN with a Material Provision of this Agreement; (e) the Effective Date for the Scheme has not occurred on or prior to the End Date as a direct result of a material non-compliance by APN with a Material Provision of this Agreement; or 260 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

(f) INMAL terminates this Agreement in accordance with the provisions of clause 14.1 as a result of a material breach by APN of clause 11.1 or 11.2, then, subject to this Agreement, APN must pay to INMAL the amount of $27.5 million (exclusive of GST) (the Payment) to an account nominated by INMAL. For the avoidance of doubt, that amount will only be payable in the circumstances described above and will not be payable if the Court’s failure to approve the Scheme is as a result of a material non-compliance by INMAL with any of its obligations under this Agreement.

12.3 Compliance with law If a court, arbitral tribunal or the Takeovers Panel determines that the agreement by APN to make the Payment, or the making of any Payment, to INMAL pursuant to clause 12.2: (a) constituted, or constitutes, or would constitute, a breach of the fiduciary or statutory duties of any member of the APN Independent Committee to APN; or (b) constituted, or constitutes, or would constitute, unacceptable circumstances within the meaning of the Corporations Act; or (c) was, or is, or would be, unlawful for any other reason, then, to that extent (and only to that extent) APN will not be obliged to make that payment and INMAL must refund to APN that payment if already made. To the extent reasonably possible, APN must submit in any relevant proceedings that no such determination should be made or that if any such determination is to be made, it should apply only to the extent that the Payment is made or to be made in excess of the amount of the actual costs incurred, directly or indirectly, by INMAL, the Consortium and their Related Bodies Corporate as a result of the Scheme not being implemented in accordance with this Agreement.

12.4 Acknowledgement INMAL acknowledges and agrees on its own behalf and on behalf of the Consortium, to the extent permitted by law, its sole remedy against APN for any breach of this Agreement (including any breach of a warranty or representation), will be to terminate this Agreement under clause 14 and seek and enforce the payment of the Payment.

13. PUBLIC ANNOUNCEMENTS 13.1 Announcements of Scheme Immediately after the execution of this Agreement, the parties must make the Agreed Announcement.

13.2 Public announcement and submissions Subject to clause 13.3, each party must consult with the other prior to making any other public announcements in connection with the Scheme.

13.3 Required disclosure Where a party is required by law, the Listing Rules or any other applicable stock exchange regulation to make any announcement or make any disclosure relating to a matter the subject of the Scheme, it may do so only after it has given the other party as much notice as possible and has consulted with the other party as to the content of that announcement or disclosure.

13.4 Market and analyst briefings Each party must use its reasonable endeavours (subject to its disclosure obligations under the Listing Rules, any other applicable stock exchange regulation and Relevant Companies Legislation) to ensure that any briefing to analysts, the media or shareholders in relation to the Scheme or the subject matter of this Agreement is a joint briefing. APN NEWS & MEDIA SCHEME BOOKLET 261

14. TERMINATION 14.1 Termination for breach This Agreement may be terminated at any time prior to 8.00am on the Second Court Hearing Date by a party if: (a) the other party is in material breach of any material clause of this Agreement or there has been a material breach of a material representation or warranty given by that other party under clause 9.2 or 9.5 (as applicable) before the Second Court Hearing Date; (b) the non-defaulting party has given notice to the other party specifying the breach and stating an intention to terminate this Agreement; and (c) the breach has not been remedied within seven Business Days (or any shorter period ending at 5.00pm on the last Business Day before the Second Court Hearing Date) from the date a notice under clause 14.1(b) is given.

14.2 No-fault termination This Agreement may be terminated if the Scheme has not become Effective on or before the End Date and may also be terminated at any time prior to 8.00am on the Second Court Hearing Date (in each case, as set out below): (a) by either party, if the resolution submitted to the Scheme Meeting is not approved by the requisite majorities of Scheme Participants; (b) by either party, if the Court refuses to make orders convening the Scheme Meeting or approving the Scheme and the party wishing to terminate this Agreement (except where APN and INMAL agree otherwise) obtains an opinion from Queen’s Counsel or Senior Counsel that, in their view, an appeal would have no reasonable prospects of success before the End Date; (c) by either party, if the Court or other Governmental Agency has issued a final and non-appealable order, decree or ruling or taken other action which permanently restrains or prohibits the Scheme or the acquisition of the APN Scheme Shares; (d) in accordance with and pursuant to clause 2.7; (e) by either party if the Independent Expert opines that the Scheme is not in the best interest of Scheme Participants; (f) by either party if an Insolvency Event has occurred in relation to APN or INMAL or any of their Related Bodies Corporate; (g) by either party if the Payment is made in accordance with clause 12 of this Agreement; or (h) by INMAL, if other than as a result of the Independent Expert giving an opinion that the Scheme is not in the best interest of Scheme Participants, the APN Independent Committee fails to unanimously recommend, or any member of the APN Independent Committee withdraws his recommendation of the Scheme, or makes a public statement that he no longer supports the Scheme.

14.3 Effect of termination (a) Termination of this Agreement under clause 14.1 or 14.2 (including under clause 2.7) does not affect any accrued rights arising from a breach of this Agreement prior to termination. (b) Clauses 9.8, 16 and 17 survive termination of this Agreement. 262 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

14.4 Notification of breach and compliance certificate (a) The parties will promptly advise each other in writing of: (i) a representation or warranty provided in this Agreement by either party becoming false; or (ii) a breach of this Agreement by it. (b) By 5.00pm on the Business Day immediately before the Second Court Hearing Date, each of INMAL and APN must execute and deliver to the other party a certificate signed by a director and made in accordance with a resolution of the relevant board confirming that (except as previously disclosed in writing): (i) it has complied in all material respects with its obligations under this Agreement; and (ii) the representations and warranties given by it in clause 9 remain true and correct in all material respects.

15. RELEASES 15.1 APN directors and officers (a) INMAL on its own behalf and on behalf of the Consortium releases INMAL’s and the Consortium’s respective rights, and agrees not to make a Claim, against any APN Indemnified Party as at the date of this Agreement in connection with: (i) any breach of any representations, covenants and warranties of APN or any member of the APN Group in this Agreement; or (ii) any disclosure containing any statement which is false or misleading whether in content or by omission, except where the APN Indemnified Party has not acted in good faith or has engaged in wilful misconduct. (b) This clause operates only to the maximum extent permitted by law and will be read down accordingly. APN receives and holds the benefit of this clause to the extent it relates to each APN Indemnified Party as trustee for them.

15.2 INMAL directors and officers (a) APN releases its rights, and must not make a Claim, against any INMAL Indemnified Party as at the date of this Agreement in connection with: (i) any breach of any representations, covenants and warranties of INMAL in this Agreement; or (ii) any disclosure containing any statement which is false or misleading whether in content or by omission, except where the INMAL Indemnified Party has not acted in good faith or has engaged in wilful misconduct. (b) This clause operates only to the maximum extent permitted by law and will be read down accordingly. INMAL receives and holds the benefit of this clause to the extent it relates to each INMAL Indemnified Party as trustee for them. APN NEWS & MEDIA SCHEME BOOKLET 263

15.3 APN Officers and directors (a) Subject to the Scheme being Effective and the acquisition by INMAL of the APN Scheme Shares under the Scheme, INMAL must: (i) for a period of 7 years from the Implementation Date, ensure that the constitutions of APN and each of the members of the APN Group continue to contain such rules which provide for each of them to indemnify each of their Officers against any liability incurred by that Officer in his or her capacity as an Officer and to any person other than APN or a Related Body Corporate of APN in respect of a period prior to the Implementation Date; and (ii) procure that APN and each member of the APN Group comply with the deeds of indemnity, access and insurance made by them in favour of their respective directors and Officers in existence at the Implementation Date from and without limiting the foregoing, must ensure that directors and officers run off insurance cover for such directors and Officers is maintained for a period of 6 years from the Implementation Date, provided that the cost of such cover does not exceed twice the cost of such cover paid by APN per annum prior to the date of this Agreement. (b) The undertakings contained in this clause 15.3 are subject to any restriction under the Corporations Act or any other applicable legislation and will be read down accordingly. APN receives and holds the benefit of this clause 15.3, to the extent it relates to the Officers of APN and other members of the APN Group, as trustee for them.

16. CONFIDENTIALITY 16.1 APN’s obligations APN acknowledges and agrees that: (a) it will use the INMAL Confidential Information exclusively for the purpose of preparing the Scheme Booklet and for no other purpose (and, without limitation, will not make any use of the INMAL Confidential Information or any part of it to the competitive disadvantage of INMAL or any of its Related Parties); (b) it will keep the INMAL Confidential Information in confidence and will not disclose the INMAL Confidential Information except: (i) to such Representatives of APN as require the INMAL Confidential Information for the purpose of preparing the Scheme Booklet, but only if any such person owes a duty of confidentiality to APN and is aware of the obligations of APN under this clause 16.1; (ii) as required by law; or (iii) with the prior consent of INMAL; (c) it will immediately notify INMAL of any suspected or actual unauthorised use, copying or disclosure of the INMAL Confidential Information; and (d) it will, upon request by INMAL, return to INMAL all INMAL Confidential Information provided to APN and its Representatives, together with any notes, records or copies of the INMAL Confidential Information generated by any such person. 264 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

16.2 INMAL’s obligations INMAL acknowledges and agrees on its own behalf and on behalf of the Consortium, that INMAL and the Consortium: (a) will not make any use of the APN Confidential Information or any part of it except in connection with the Scheme, a Competing Transaction in relation to APN or any other transaction contemplated by this Agreement and will not make any use of the APN Confidential Information or any part of it to the competitive disadvantage of APN or any of its Related Parties; (b) will keep the APN Confidential Information in confidence and will not disclose the APN Confidential Information except: (i) to such Representatives of the Consortium or INMAL as require the APN Confidential Information in connection with the Scheme, a Competing Transaction in relation to APN or any other transaction contemplated by this Agreement, but only if any such person owes a duty of confidentiality to the Consortium and INMAL and is aware of the obligations under this clause 16.2; (ii) as required by law; or (iii) with the prior consent of APN; (c) will immediately notify APN of any suspected or actual unauthorised use, copying or disclosure of the APN Confidential Information; and (d) will, upon request by APN, return to APN all APN Confidential Information provided to either the Consortium or INMAL and its Representatives, together with any notes, records or copies of the APN Confidential Information generated by any such person.

17. GENERAL 17.1 Further acts Each party will promptly do and perform all further acts and execute and deliver all further documents (in form and content reasonably satisfactory to that party) required by law or reasonably requested by any other party to give effect to this Agreement.

17.2 Notices Any communication under or in connection with this Agreement: (a) must be in writing; (b) must be addressed as shown below: APN Address: Level 4, 100 William Street, Sydney New South Wales, Australia Fax No: +61 2 9333 4900 For the attention of: Yvette Lamont INMAL Address: Level 11, 1 York St, Sydney NSW 2000 Fax No: +61 2 9256 6611 For the attention of: Stephen Guthrie (or as otherwise notified by that party to the other party from time to time); (c) must be signed by the party making the communication or by a person duly authorised by that party; (d) must be delivered or posted by prepaid post to the address, or sent by fax to the number of the addressee, in accordance with clause 17.2(b); and APN NEWS & MEDIA SCHEME BOOKLET 265

(e) will be deemed to be received by the addressee: (i) (in the case of prepaid post) on the third Business Day after the date of posting; (ii) (in the case of fax) at the local time (in the place of receipt of that fax) which then equates to the time at which that fax is sent as shown on the transmission report which is produced by the machine from which that fax is sent and which confirms transmission of that fax in its entirety, unless that local time is not a Business Day, or is after 5.00pm on a Business Day, when that communication will be deemed to be received at 9.00am on the next Business Day; and (iii) (in the case of delivery by hand) on delivery at the address of the addressee as provided in clause 17.2(b), unless that delivery is not made on a Business Day, or after 5.00pm on a Business Day, when that communication will be deemed to be received at 9.00am on the next Business Day.

17.3 GST (a) Unless expressly included, the consideration for any supply under or in connection with this Agreement does not include GST. (b) To the extent that any supply made by a party to another party (Recipient) under or in connection with this Agreement is a taxable supply and a tax invoice has been provided to the Recipient, the Recipient must pay, in addition to the consideration to be provided under this Agreement for that supply (unless it expressly includes GST) an amount equal to the amount of that consideration (or its GST exclusive market value) multiplied by the rate at which GST is imposed in respect of the supply. (c) The amount of GST payable in accordance with this clause 17.3 will be paid at the same time and in the same manner as the consideration otherwise payable for the supply is provided.

17.4 Stamp duties INMAL must pay all stamp duties (if any) and any fines and penalties with respect to stamp duty in respect of this Agreement or the Scheme or the steps to be taken under this Agreement or the Scheme.

17.5 Expenses Except as otherwise provided in this Agreement, each party will pay its own costs and expenses in connection with the negotiation, preparation, execution, and performance of this Agreement and the Scheme Booklet and the proposed, attempted or actual implementation of this Agreement and the Scheme.

17.6 Amendments This Agreement may only be varied by a document signed by or on behalf of each of the parties.

17.7 Assignment A party cannot assign, novate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party.

17.8 Governing law (a) This Agreement is governed by and will be construed according to the laws of New South Wales. (b) Each party irrevocably submits to the non-exclusive jurisdiction of the courts of New South Wales and of the courts competent to determine appeals from those courts.

17.9 Business Day Except where otherwise expressly provided, where under this Agreement the day on which any act, matter or thing is to be done is a day other than a Business Day, such act, matter or thing will be done on the next Business Day. 266 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

17.10 Waiver (a) Failure to exercise or enforce or a delay in exercising or enforcing or the partial exercise or enforcement of any right, power or remedy provided by law or under this Agreement by any party will not in any way preclude, or operate as a waiver of, any exercise or enforcement, or further exercise or enforcement of that or any other right, power or remedy provided by law or under this Agreement. (b) Any waiver or consent given by either party under this Agreement will only be effective and binding on that party if it is given or confirmed in writing by that party. (c) No waiver of a breach of any term of this Agreement will operate as a waiver of another breach of that term or of a breach of any other term of this Agreement.

17.11 Consents Any consent referred to in, or required under, this Agreement from either party may not be unreasonably withheld, unless this Agreement expressly provides for that consent to be given in that party’s absolute discretion.

17.12 Counterparts This Agreement may be executed by the parties on separate counterparts. Each counterpart constitutes the agreement of the party who has executed and delivered that counterparty.

17.13 Entire agreement To the extent permitted by law, in relation to the subject matter of this Agreement, this Agreement: (a) embodies the entire understanding of the parties and constitutes the entire terms agreed upon between the parties; and (b) supersedes any prior agreement (whether or not in writing) between the parties.

17.14 No representation or reliance (a) Each party acknowledges that no party (nor any person acting on its behalf) has made any representation or other inducement to it to enter into this Agreement, except for representations or inducements expressly set out or acknowledged in this Agreement. (b) Each party acknowledges and confirms that it does not enter into this Agreement in reliance on any representation or other inducement by or on behalf of the other party, except for any representation or inducement expressly set out or acknowledged in this Agreement. (c) Paragraphs (a) and (b) above do not prejudice any rights a party may have in relation to information which had been filed by the other party with ASIC or the ASX.

17.15 No merger The rights and obligations of the parties will not merge on completion of any transaction under this Agreement. They will survive the execution and delivery of any assignment or other document entered into for the purpose of implementing any transaction.

17.16 Remedies cumulative The rights and remedies provided in this Agreement are in addition to other rights and remedies given by law independently of this Agreement. APN NEWS & MEDIA SCHEME BOOKLET 267

18. INTERPRETATION 18.1 Definitions In this Agreement unless the context otherwise requires, the following words and expressions have meanings as follows: Adviser means, in relation to an entity, its legal, financial and other expert advisers (not including the Independent Expert). Agreed Announcement means the announcement to ASX, NZSE and other relevant stock exchanges by APN in the form set out in Annexure 4 or such other form as the parties may agree. APN Board means the board of directors of APN. APN Confidential Information means any commercial, financial or technical information of APN or any Related Party of APN disclosed or supplied by or on behalf of any such entity to either the Consortium or INMAL or any of their Representatives, whether orally or visually or in documentary or electronic form and including the notes, records or copies made by either the Consortium or INMAL or any of its Representatives of such information but excluding information which is in the public domain (other than as a result of a breach of this Agreement by the Consortium or INMAL) or otherwise previously known to the Consortium or INMAL. APN Dividend means the final dividend to be paid by APN in respect of the financial year ended 31 December 2006 and which is not franked in excess of the available franking credits of APN. APN Due Diligence Information means all information in any form relating to APN or any member of the APN Group which has been obtained by INMAL or the Consortium or any of their Representatives, or to which INMAL or the Consortium or any of their Representatives has had access, including through data rooms, virtual data rooms, site visits, management presentations, interviews and/or discussions with Officers of APN and access to APN Group external auditors and Advisers in connection with the Scheme or relating to the APN Group’s past, present or future financial position, operations, affairs, business and/or strategic plans and includes any Forward Looking Information. APN Group means APN and its Subsidiaries. APN Indemnified Parties means APN and its Subsidiaries and their respective Officers. APN Independent Committee means the following directors of APN to whom the APN Board has delegated the authority to consider and if thought fit recommend the Scheme: (a) Albert E Harris; (b) Sir Wilson J Whineray; (c) Kevin J Luscombe; (d) John Maasland; (e) Sallyanne Atkinson; and (f) Pierce Cody. APN Information means the information included in the Scheme Booklet, other than the INMAL Information and any information derived from, or prepared in reliance on, the INMAL Information. 268 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

APN Material Adverse Change means a matter, event or circumstance which occurs, is announced or becomes known to INMAL (whether or not it becomes public) where that matter, event or circumstance has had, or could reasonably be expected to have, individually, or when aggregated with any other such matters, events or circumstances, a material adverse effect on the business, assets, liabilities, financial or trading position, profitability or prospects of the APN Group, taken as a whole, or to the status or terms of arrangements entered into by the APN Group, or to the status or terms of any Regulatory Approval of a type referred to in the definition of Approval that is applicable to the APN Group (except for matters, events, circumstances or information known to INMAL or any of its Representatives or fully and fairly disclosed by APN to INMAL or any of its Representatives prior to the execution of this Agreement or publicly announced by APN or otherwise disclosed in public filings by APN or any of its Related Bodies Corporate prior to the date of this Agreement). Without limitation, a matter, event or circumstance (or multiple matters, events or circumstances) will have a material adverse effect if: (a) it is (or they are) such that either individually or when aggregated with other matters, events or circumstances of a like kind the net assets of the APN Group will be diminished by an amount of at least $50 million after taking into account any positive financial effect on the net assets of the APN Group of any matter, event or circumstance which has had, or could reasonably be expected to have, individually, or when aggregated with other such matters, events or circumstances such a positive financial effect; or (b) it has (or they have) had or is (or are) reasonably likely to have an adverse financial effect of $10 million or more on the recurring operating earnings before interest, tax, depreciation and amortisation of the APN Group in any financial year (Recurring EBITDA) after taking into account any positive financial effect on the Recurring EBITDA of any matter, event or circumstance which has had, or could reasonably be expected to have, individually, or when aggregated with other such matters, events or circumstances such a positive financial effect. APN Notes means the convertible notes maturing on 31 October 2008 issued by APN pursuant to a prospectus lodged with ASIC on 2 November 2001 and listed on ASX (code ASX:APNG). APN Option Plan means the Executive and Director Option Plan under which the Options were issued. APN Prescribed Event means the occurrence of any of the following, other than as disclosed in writing to INMAL prior to the date of this Agreement or arising out of the implementation of the Scheme: (a) APN converting all or any APN Shares into a larger or smaller number of shares; (b) APN resolving to reduce its share capital in any way; (c) APN: (i) entering into a buy-back agreement; or (ii) resolving to approve the terms of a buy-back agreement under the Corporations Act; (d) APN declaring, paying or distributing any dividend, bonus or other share of its shareholder profits or shareholder assets or returning or agreeing to return any capital to its members, other than the APN Dividend; (e) APN or any of its Subsidiaries issuing shares, or granting an option over its shares to a person outside the APN Group, or agreeing to make such an issue or grant such an option to a person outside the APN Group, other than as disclosed by APN to INMAL prior to the date of this Agreement or pursuant to the APN Option Plan or as a result of the conversion of an APN Note; APN NEWS & MEDIA SCHEME BOOKLET 269

(f) APN or any of its Subsidiaries issuing or agreeing to issue securities or other instruments convertible into shares or debt securities to a person outside the APN Group, other than as disclosed by APN to INMAL prior to the date of this Agreement or as otherwise agreed by APN and INMAL; (g) APN or any of its Subsidiaries disposing, or agreeing to dispose, of the whole, or a substantial part, of its business or property; (h) otherwise than as permitted by clause 7.3(g) or in the ordinary course of business and consistent with past practice, any member of the APN Group or any of its Subsidiaries creating, or agreeing to create, any mortgage, charge, lien or other encumbrance over the whole, or a substantial part, of its business or property; (i) otherwise than as permitted by clauses 7.3(e) and (f) or in the ordinary course of business and consistent with past practice, any member of the APN Group: (i) increasing the remuneration of, or otherwise varying, the employment arrangements with any of its directors or employees; (ii) accelerating the rights of any of its directors or employees to compensation or benefits of any kind (including under any APN executive or employee share plans); or (iii) paying any of its directors or employees a termination or retention payment (otherwise than in accordance with an existing contract in place at the date of this Agreement); (j) otherwise than as permitted by clauses 7.3(a), (b) or (c) or in the ordinary course of business and consistent with past practice, any member of the APN Group: (i) entering into any contract or commitment involving revenue or expenditure of more than $10 million over the term of the contract or commitment; or (ii) terminating or amending in a material manner any contract material to the conduct of the APN Group’s business or which involves expenditure or revenue of more than $10 million over the term of the contract; (k) APN or any of its operating Subsidiaries resolving that it be wound up; (l) a liquidator, provisional liquidator or administrator of APN or any of its operating Subsidiaries being appointed; (m) the making of an order by a court for the winding up of APN or any of its operating Subsidiaries; (n) APN or any of its operating Subsidiaries executing a deed of company arrangement; or (o) a receiver, or a receiver and manager, in relation to the whole, or a substantial part, of the property of APN or any of its operating Subsidiaries being appointed, provided that none of the above events will constitute an APN Prescribed Event where APN has first consulted in detail with INMAL in relation to the proposed event, and INMAL has approved in its absolute discretion the proposed event within five Business Days of having been so consulted. APN Scheme Shares means all the APN Shares excluding the INMAL Shares but including any APN Shares issued on or before the Record Date upon exercise of any Option or upon conversion of any APN Note. APN Shareholder means each person who is registered in the register of members of APN as the holder of an APN Share. 270 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

APN Share means a fully paid ordinary share in APN. Approval means any approval, consent, authorisation, registration, filing, lodgement, permit, franchise, agreement, notarisation, certificate, permission, licence, direction, declaration, authority, waiver, modification or exemption from, by or with a Regulatory Authority. ASIC means the Australian Securities and Investments Commission. Associate has the meaning given to that term in the Corporations Act. ASX means ASX Limited (ACN 008 624 691). Business Day means a business day as defined in the Listing Rules. Business Plan means the November 2006 budget of APN presented to the APN Board, a copy of which has been provided to INMAL. Carlyle means CA Normandy Lux I S.à.r.l., a company incorporated in Luxembourg and associated with The Carlyle Group, and its limited and general partners and associates. Claim means a claim, action, proceeding or demand made against the person concerned, however it arises and whether it is present or future, fixed or unascertained, actual or contingent. Commitment Letter means the debt commitment letter dated 9 February 2007 from the Underwriters named in the Commitment Letter to INMAL and Independent News & Media Holdings Pty Limited together with the terms sheet attached to it. Companies Act means the United Kingdom Companies Act 1985. Competing Transaction means: (a) a transaction which, if completed, would mean a person would, directly or indirectly: (i) acquire all or a substantial part of the assets or business of the relevant company and/or its Related Bodies Corporate; or (ii) acquire Control of the relevant company; or (b) a takeover bid, scheme of arrangement, amalgamation, merger, capital reconstruction, consolidation, purchase of main undertaking or other business combination involving the relevant company and/or its Related Bodies Corporate. Consortium or the Consortium means each of INM, Providence and Carlyle and a Consortium member means any of them; Consortium and Subscription Agreement means the Consortium and Subscription Agreement dated on or around the date of this Agreement entered into between INMAL, Independent News & Media Holdings Pty Limited, INM, Carlyle and Providence under which the Consortium will provide sufficient equity funding to INMAL so that, together with the debt funding available to INMAL under the Finance Documents, INMAL can pay the Scheme Consideration for all the APN Scheme Shares. Control has the meaning given to that term in the Corporations Act. Corporations Act means the Corporations Act 2001 (Cth). Court means a court of competent jurisdiction. APN NEWS & MEDIA SCHEME BOOKLET 271

Determination Date means 5.00pm on the Business Day before the date for the Scheme Meeting as set out in the Timetable or as ordered by the Court under section 411(1) of the Corporations Act (or where the Scheme Meeting is adjourned for any reason, before 5.00pm on the Business Day before the date of the adjourned Scheme Meeting). Effective means the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the court made under section 411(4)(b) in relation to the Scheme, but in any event at no time before an office copy of the order of the court is lodged with ASIC. Effective Date means the date on which the Scheme becomes Effective. End Date means 30 September 2007 or such other date as agreed in writing between INMAL and APN. Exclusivity Period means the period from and including the date of this Agreement to and including the earlier of the date this Agreement is terminated in accordance with its terms and the Effective Date. Finance Documents means the Commitment Letter and the equity commitment letters from Providence and Carlyle each dated 11 February 2007. FIRB Condition Precedent means the condition precedent in clause 2.1(a). First Court Hearing Date means the first day on which an application made to the Court, in accordance with clause 4.1(f), for orders under section 411(1) of the Corporations Act convening the Scheme Meeting to consider the Scheme is heard. Forward-Looking Information means all information provided to INMAL, the Consortium or their Representatives by or on behalf of APN or any of its Officers which relates to the future financial position, operations, affairs, business or strategic plans of the APN Group, including any budget for a future financial period and any forecast or estimate, received by INMAL, the Consortium or their Representatives in writing, as answers to any questions by any of them to APN or any of its Officers or during the course of site visits, management presentations, interviews or discussions with any Officer of APN. Governmental Agency means any Australian or foreign government or governmental, semi- governmental, administrative, fiscal, regulatory or judicial body, department, commission, authority, tribunal agency or entity. Implementation Date means 3 Business Days (or earlier if agreed) following the Record Date or such later date as ordered by the Court or agreed between the parties. Independent Expert means the independent expert appointed by APN to prepare a report for the Scheme Booklet in accordance with clause 4.1(b), the Corporations Act and ASIC policy and practice. INM means Independent News & Media P.L.C. INM Banking Syndicate means the syndicate of banks comprising Allied Irish Banks p.l.c., ANZ Banking Group Limited, Bank of Ireland, Barclays Bank Ireland p.l.c., BNP Paribas, IIB Bank Limited, Lloyds TSB Bank p.l.c. and Ulster Bank Ireland Limited. INMAL Board means the board of directors of INMAL. INMAL Confidential Information means any commercial, financial or technical information of INMAL or the Consortium or any of their respective Related Parties disclosed or supplied by or on behalf of any such entity to APN or any of its Representatives, whether orally or visually or in documentary or electronic form and including the notes, records or copies made by APN or any of its Representatives of such information but excluding information which is in the public domain (other than as a result of a breach of this Agreement by APN) or otherwise previously known to APN. 272 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

INMAL Deed Poll means a deed to be executed by INMAL substantially in the form of Annexure 2 (or in such other form agreed by the parties in writing) under which INMAL covenants in favour of the Scheme Participants to perform its obligations under the Scheme. INMAL Indemnified Parties means INMAL and its Officers. INMAL Information means all information provided by INMAL under clause 4.2(a). INMAL Prescribed Event means the occurrence of any of the following: (a) INMAL resolving that it be wound up; (b) a liquidator, provisional liquidator or administrator or analogous person of INMAL being appointed; (c) the making of an order by a court for the liquidation of INMAL; (d) INMAL executing a deed of company arrangement or taking an analogous step; or (e) a receiver, or a receiver and manager, in relation to the whole, or a substantial part of the property of INMAL being appointed, provided that none of the above events will constitute a INMAL Prescribed Event where INMAL has first consulted in detail, with APN in relation to the proposed event, and APN has approved in its absolute discretion the proposed event within five Business Days of having been so consulted. INMAL Shares means any APN shares held by or on behalf of INMAL. Insolvency Event means in relation to a person: (a) Insolvency official: the appointment of a liquidator, provisional liquidator, administrator, receiver, receiver and manager or other insolvency official (whether under an Australian law or a foreign law) to the person or to the whole or a substantial part of the property or assets of the person; (b) Arrangements: the entry by the person into a compromise or arrangement with its creditors generally; (c) Winding up: the calling of a meeting to consider a resolution to wind up the person (other than where the resolution is frivolous or cannot reasonably be considered to be likely to lead to the actual winding up of the person) or the making of an application or order for the winding up or dissolution of the person other than where the application or order (as the case may be) is set aside within 14 days; (d) Suspends payment: the person suspends or threatens to suspend payment of its debts generally; (e) Ceasing business: the person ceases or threatens to cease to carry on business; or (f) Insolvency: the person is or becomes unable to pay its debts when they fall due within the meaning of the Corporations Act or is otherwise presumed to be insolvent under the Corporations Act. Listing Rules means the official listing rules of ASX as from time to time amended or waived in their application to a party. LSE means London Stock Exchange. Material Contract means any contract to which any member of the APN Group is a party and which entitles any member of the APN Group to revenue exceeding $5 million per annum or which involves expenditure by any member of the APN Group exceeding $5 million per annum. APN NEWS & MEDIA SCHEME BOOKLET 273

Material Provision means any provision of this Agreement where non-compliance with that provision would prevent the implementation of the Scheme. NZSE means New Zealand Stock Exchange. Officer means, in relation to an entity, its directors, officers, partners and employees. Option means an option issued by APN under the APN Option Plan which is on issue as at the date of this Agreement. Option Holder means a person who is the holder of an Option. Option Price means $6.20 less the exercise price payable under the APN Option Plan upon the exercise of the Option. Option Terms means the terms and conditions of issue of an Option to an Option Holder. Providence means P6 Normandy Lux I S.à.r.l., a company incorporated in Luxembourg and associated with Providence Equity Partners Inc., and its limited and general partners and associates. Record Date means 5.00pm on the fifth Business Day following the Effective Date or such other date as APN and INMAL agree. Register means the share register of APN and Registry has a corresponding meaning. Regulator’s Draft means the draft of the Scheme Booklet in a form acceptable to both parties which is provided to ASIC for approval pursuant to section 411(2) of the Corporations Act. Regulatory Approvals means the approvals referred to in clause 2.1(a), (b), and (g) in the case of INMAL and the approvals referred to in clause 2.1(i) in the case of INMAL and APN. Regulatory Authority means a government or a governmental, semi-governmental or judicial entity or authority or any Minister, department, office or delegate of any government. It includes self regulatory organisations established under statute or a stock exchange, ASIC, ASX or the Treasurer of Australia. Regulatory Review Period means the period from the date on which the Regulator’s Draft is submitted to ASIC to the date on which ASIC provides a letter of intent under section 411(17)(b) of the Corporations Act that it does not object to the Scheme. Related Body Corporate has the meaning given to that term in the Corporations Act. Related Party means in relation to a party, its Related Bodies Corporate and each of its and their Officers. Relevant Companies Legislation means the Corporations Act and the Companies Act as they apply to the parties. Relevant Interest has the same meaning as given by sections 608 and 609 of the Corporations Act. Representative means, in relation to an entity: (a) each of the entity’s Related Parties; and (b) each of the Officers and Advisers of the entity or of any of its Related Parties. 274 APN NEWS & MEDIA SCHEME BOOKLET

Annexure A – Scheme Implementation Agreement (continued)

Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act between APN and the Scheme Participants substantially in the form of Annexure 1, which if implemented will give effect to the merger between INMAL and APN as described in clause 3. Scheme Booklet means the explanatory statement with respect to the Scheme to be approved by the Court and dispatched to APN Shareholders. Scheme Consideration means the consideration payable by INMAL under the Scheme, being $6.20 cash less the APN Dividend (if any) per APN Scheme Share which has been declared and is payable or has been paid to each APN Shareholder . Scheme Meeting means the meeting(s) to be convened by the Court in relation to the Scheme pursuant to section 411(1) of the Corporations Act. Scheme Participant means each holder of APN Scheme Shares as at the Record Date . Second Court Hearing Date means the first day on which an application made to the Court for an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme is heard. Senior Employee means the one APN executive director as well as the current APN employees at the date of this Agreement who are Option Holders. Specified Contract means a contract identified in writing to INMAL by APN as being a Specified Contract for the purposes of this Agreement. Subsidiary has the meaning given to that term in the Corporations Act. Superior Proposal means a publicly announced bona fide Competing Transaction in relation to APN which the APN Independent Committee, acting reasonably and in good faith, unanimously determines: (a) is reasonably capable of being completed by the End Date taking into account all aspects of the Competing Transaction; and (b) is preferable to the Scheme having regard to the best interests of APN as a whole and is more favourable from a financial viewpoint to Scheme Participants than the Scheme, taking into account all terms and conditions of the Competing Transaction Timetable means the indicative Scheme timetable and APN Notes timetable set out in Annexure 3.

18.2 Interpretation In this Agreement, headings are for convenience only and do not affect the interpretation of this Agreement, and unless the context otherwise requires: (a) a word or expression to which a meaning is attributed in the Corporations Act will bear that meaning; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other parts of speech and grammatical forms of a word or phrase defined in this Agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, this Agreement and a reference to this Agreement includes any annexure, exhibit and schedule; APN NEWS & MEDIA SCHEME BOOKLET 275

(g) a reference to a statute, regulation, proclamation, ordinance or by-law includes all statues, regulations, proclamations, ordinances or by-laws amending, consolidating or replacing it, whether passed by the same or another Governmental Agency with legal power to do so, and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under that statute; (h) a reference to a document includes all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party’s successors and permitted assigns; (j) no provision of this Agreement will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this Agreement or that provision; (k) a reference to an agreement other than this Agreement includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing; (l) the word “includes” in any form is not a word of limitation; (m) a reference to “$” or “dollar” is to Australian currency; and (n) a reference to any time is a reference to that time in Sydney, Australia. 276 APN NEWS & MEDIA SCHEME BOOKLET

Annexure ı – Scheme

Refer to Annexure B of this Scheme Booklet APN NEWS & MEDIA SCHEME BOOKLET 277

Annexure 2 – INMAL Deed Poll

Refer to Annexure C of this Scheme Booklet 278 APN NEWS & MEDIA SCHEME BOOKLET

Annexure 3 – Indicative timetable

Scheme Timetable

Event Date

Lodge with ASIC – revised Scheme Booklet and IER Tuesday 17 April 2007 First Court Hearing Friday 20 April 2007 Despatch of Scheme Booklet Tuesday 24 April 2007 Consortium notifies APN that INM shareholder approval Monday 21 May 2007 has been obtained. Scheme Meeting Friday 25 May 2007 Second Court Hearing Monday 28 May 2007 Effective Date – lodge court order with ASIC Tuesday 29 May 2007 Record Date Tuesday 5 June 2007 Implementation Date Friday 8 June 2007 APN NEWS & MEDIA SCHEME BOOKLET 279

Annexure 4 – Agreed Announcement

For APN’s most recent announcement regarding the Scheme, see Annexure D of this Scheme Booklet. 280 APN NEWS & MEDIA SCHEME BOOKLET

Annexure B – Scheme of Arrangement APN NEWS & MEDIA SCHEME BOOKLET 281

Annexure B – Scheme of Arrangement

pursuant to section 411 of the Corporations Act between APN News & Media Limited ACN 008 637 643 (APN) and the holders of fully paid ordinary shares in APN as at the Record Date

1. PRELIMINARY 1.1 APN APN is a public company incorporated in Australia and registered in the Australian Capital Territory, having its registered office at Level 4, 100 William Street, Sydney, New South Wales. APN is a public company limited by shares under section 112(1) of the Corporations Act and APN’s Shares are quoted on the official list of ASX.

1.2 INMAL INMAL is a public company incorporated in Australia and registered in the Australian Capital Territory, having its registered office at Level 3, 25 National Circuit, Forrest, Australian Capital Territory (ACN 008 637 689). INMAL is a wholly-owned subsidiary of Independent News & Media Holdings Pty Limited ACN 110 638 367.

1.3 Effect of Scheme If the Scheme becomes Effective, then: (a) in consideration of the transfer of the APN Scheme Shares to INMAL, INMAL will provide, or procure the provision of, the Scheme Consideration to Scheme Participants in accordance with the terms of the Scheme; and (b) APN will enter the name of INMAL in the Register in respect of all of the APN Scheme Shares transferred to INMAL in accordance with the terms of the Scheme; and (c) all of the APN Scheme Shares held by Scheme Participants will be transferred to INMAL and APN will become a wholly-owned subsidiary of INMAL.

1.4 Scheme Implementation Agreement INMAL and APN have agreed, by executing the Scheme Implementation Agreement, to implement the terms of the Scheme and to perform their respective obligations under the Scheme.

1.5 Deed Poll INMAL has entered into the Deed Poll in favour of Scheme Participants pursuant to which it has covenanted to provide to each Scheme Participant the Scheme Consideration to which such Scheme Participant is entitled under the Scheme and to carry out its other obligations under the Scheme Implementation Agreement and do all things necessary or expedient on its part to implement the Scheme. 282 APN NEWS & MEDIA SCHEME BOOKLET

Annexure B – Scheme of Arrangement (continued)

2. CONDITIONS 2.1 Conditions of Scheme The Scheme is conditional on: (a) all of the conditions precedent in clause 2.1 of the Scheme Implementation Agreement having been satisfied or waived in accordance with the terms of the Scheme Implementation Agreement, which conditions precedent include the Court approving the Scheme in accordance with section 411(4)(b) of the Corporations Act, and any other conditions made or required by the Court under section 411(6) of the Corporations Act being satisfied; and (b) as at 8.00am on the Second Court Hearing Date neither the Scheme Implementation Agreement nor the Deed Poll have been terminated. (c) either: (i) no votes being cast at the Scheme Meeting whether in person, by proxy or by its corporate representative, by INMAL or NMNZ or any member of the Consortium or any of their respective Associates in respect of any APN Shares in which any of them have a Relevant Interest; or (ii) votes being cast at the Scheme Meeting whether in person, by proxy or by its corporate representative, by INMAL or NMNZ or any member of the Consortium or any of their respective Associates in respect of any APN Shares in which any of them have a Relevant Interest as a separate class of members from the other holders of APN Shares.

2.2 Effect of conditions The fulfilment of the conditions in clause 2.1 is a condition precedent to the operation of the provisions of clauses 3, 4 and 6.

2.3 Certificate APN and INMAL will each provide to the Court at the Second Court Hearing a certificate confirming whether or not all the conditions precedent in the Scheme Implementation Agreement (other than in relation to the Scheme being approved by the Court pursuant to section 411(4)(b) of the Corporations Act) have been satisfied or waived.

2.4 Conclusive evidence The giving of a certificate by each of APN and INMAL under clause 2.3 will, in the absence of manifest error, be conclusive evidence of the satisfaction or waiver of the conditions precedent referred to in the certificate.

2.5 End Date The Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the End Date.

3. SCHEME 3.1 Lodgement of Court order Following the approval of the Scheme by the Court in accordance with section 411(4)(b) of the Corporations Act, APN will, as soon as possible, and in any event no later than 5.00pm on the Business Day following that approval or such later time as may be agreed between APN and INMAL, lodge with ASIC under section 411(10) of the Corporations Act an office copy of the Court order approving the Scheme. APN NEWS & MEDIA SCHEME BOOKLET 283

3.2 Transfer of APN Scheme Shares held by Scheme Participants On the Implementation Date: (a) the APN Scheme Shares held by Scheme Participants, together with all rights and entitlements attaching to them as at that date, will be transferred to INMAL without the need for any further acts by Scheme Participants; (b) to transfer all of the APN Scheme Shares held by Scheme Participants to INMAL, APN will either effect a valid transfer or transfers of the APN Scheme Shares under section 1074D of the Corporations Act or deliver to INMAL duly completed and executed share transfer forms (or a master transfer form) in accordance with section 1071B of the Corporations Act and INMAL will execute and deliver those share transfer form(s) to APN; and (c) as soon as practicable after receipt of the transfer forms, APN will enter the name of INMAL in the Register in respect of all the APN Scheme Shares transferred to INMAL in accordance with the terms of the Scheme.

3.3 Agreement by Scheme Participants The Scheme Participants agree to the transfer of all of their APN Scheme Shares (together with all rights and entitlements attaching to the APN Scheme Shares) to INMAL in accordance with the terms of the Scheme.

3.4 Warranties by Scheme Participants Each Scheme Participant is deemed to have warranted to APN and appointed and authorised APN as its attorney and agent to warrant to INMAL, that all its APN Scheme Shares (including any rights and entitlements attaching to those shares) which are transferred to INMAL under the Scheme will, at the date of the transfer of the APN Scheme Shares to INMAL, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and any restrictions on their transfer and that it has the full power and capacity to sell and transfer its APN Scheme Shares (including any rights and entitlements) to INMAL under the Scheme.

3.5 Beneficial entitlement by INMAL From the Effective Date, INMAL shall be beneficially entitled to the APN Scheme Shares (together with all rights and entitlements attached to the APN Scheme Shares) transferred to it under the Scheme pending registration by APN of INMAL in the Register as the holder of those APN Scheme Shares.

3.6 Appointment of INMAL as sole proxy From the Effective Date until APN registers INMAL as the holder of all the APN Scheme Shares in the Register, each Scheme Participant: (a) is deemed to have irrevocably appointed APN as attorney and agent (and directed APN in such capacity) to appoint the Chairman of INMAL as its sole proxy and where applicable, corporate representative, to attend shareholders meetings, exercise the votes attaching to APN Scheme Shares registered in its name and sign any shareholders resolution, and no Scheme Participant may itself attend or vote at any of those meetings or sign any resolutions, whether in person, by proxy or by corporate representative (other than pursuant to this clause 3.6(a)); and (b) must take all other actions in the capacity of the registered holder of APN Scheme Shares as INMAL directs. APN undertakes in favour of each Scheme Participant that it will appoint the Chairman of INMAL as that Scheme Participant’s proxy or, where applicable, corporate representative in accordance with clause 3.6(a). 284 APN NEWS & MEDIA SCHEME BOOKLET

Annexure B – Scheme of Arrangement (continued)

3.7 Appointment of APN as sole attorney and agent Each Scheme Participant without the need for any further act, irrevocably appoints APN and each of the directors and officers of APN, jointly and severally, as the Scheme Participant’s attorney and agent for the purpose of: (a) in the case of APN Scheme Shares in a CHESS holding: (i) causing a message to be transmitted to ASTC in accordance with the ASTC Settlement Rules so as to transfer the APN Scheme Shares held by the Scheme Participant from the CHESS subregister of APN to the issuer sponsored subregister operated by APN; and (ii) completing and signing on behalf of Scheme Participants any required form of transfer of APN Scheme Shares; (b) in the case of APN Scheme Shares registered in the issuer sponsored subregister, completing and signing on behalf of Scheme Participants any required form of transfer; and (c) in all cases, executing any document necessary or expedient to give effect to the Scheme (including any other instrument of transfer necessary to give effect to the registration of INMAL as the holder of all the APN Scheme Shares held by the Scheme Participants and any instrument appointing INMAL as sole proxy for or, where applicable, corporate representative of each Scheme Participant as contemplated by clause 3.6) or doing any other act necessary or desirable to give full effect to the Scheme and the transactions contemplated by it.

4. SCHEME CONSIDERATION 4.1 Scheme Consideration On the Implementation Date, INMAL must pay the Scheme Consideration to the Scheme Participants in accordance with the Deed Poll.

4.2 Joint holders In the case of APN Scheme Shares held in joint names the Scheme Consideration is payable to the joint holders and must be paid to the holder whose name appears first in the Register as at the Record Date.

5. DEALINGS IN APN SHARES 5.1 Determination of Scheme Participants For the purpose of establishing who are the Scheme Participants, dealings in APN Scheme Shares will only be recognised if: (a) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Register as the holder of the relevant APN Scheme Shares at the Record Date; and (b) in all other cases, registrable transmission applications or transfers in registrable form in respect of those dealings are received at or before the Record Date at the place where the Register is kept.

5.2 Register (a) Transmission applications or transfers received at or before the Record Date: APN must register registrable transmission applications or transfers of the kind referred to in clause 5.1(b) by the Record Date. (b) Transmission applications or transfers received after the Record Date: APN will not accept for registration or recognise for any purpose any transmission applications or transfers in respect of APN Scheme Shares received after the Record Date, other than a transfer to INMAL in accordance with the Scheme and any subsequent transfer by INMAL, or its successors in title. (c) Maintaining of the Register: For the purpose of determining entitlements to the Scheme Consideration, APN will, until the Scheme Consideration has been provided, maintain the Register in accordance with the provisions of this clause 5 and the Register in this form will solely determine entitlements to the Scheme Consideration. APN NEWS & MEDIA SCHEME BOOKLET 285

(d) Scheme Participant details: APN must procure that as soon as possible after the Record Date and in any event at least two Business Days before the Implementation Date, details of the names, registered addresses and holdings of APN Scheme Shares of every Scheme Participant as shown in the Register at the Record Date are available to INMAL in such form as INMAL may reasonably require. (e) Effect of the Record Date: All statements of holding for APN Scheme Shares (other than statements of holding in favour of INMAL) will cease to have any effect from the Record Date as documents of title in respect of those APN Scheme Shares. As from the Record Date, each entry current at that date on the Register relating to APN Scheme Shares will cease to be of any effect other than as evidence of entitlement to the Scheme Consideration in respect of the APN Scheme Shares relating to that entry.

6. QUOTATION OF SHARES APN will apply for termination of the official quotation of APN Shares on ASX and the removal of APN from the official list of ASX with effect from the Business Day after the date on which all transfers of the APN Scheme Shares to INMAL have been duly registered by APN in accordance with this Scheme.

7. GENERAL 7.1 Appointment of attorney Each Scheme Participant, without the need for any further act, irrevocably appoints APN and all of its directors and officers (jointly and severally) as its attorney and agent for the purpose of executing any document necessary to give effect to the Scheme including a proper instrument of transfer of APN Scheme Shares held by Scheme Participants for the purposes of section 1071B of the Corporations Act (which may be a master transfer of all the APN Scheme Shares held by Scheme Participants) and any instrument appointing INMAL as sole proxy for or, where applicable, corporate representative of each Scheme Participant as contemplated by clause 3.6.

7.2 APN and Scheme Participants bound The Scheme binds APN and all Scheme Participants and will, for all purposes, have effect notwithstanding any provision in the constitution of APN.

7.3 Further assurances APN will execute all documents and do all acts and things necessary or expedient for the implementation of, and performance of its obligations under, the Scheme.

7.4 Authority Each of the Scheme Participants consents to APN doing all things expedient, necessary or incidental to the implementation of the Scheme.

7.5 Communications Where a notice, transfer, transmission application, direction or other communication referred to in the Scheme is sent by post to APN, it will not be deemed to have been received in the ordinary course of post or on a date other than the date (if any) on which it is actually received at APN’s registered office or at the share registry of APN.

7.6 Alterations and conditions APN may, with the consent of INMAL, by its counsel consent on behalf of all Scheme Participants to any modifications or conditions which the Court thinks fit to impose.

7.7 Stamp Duty INMAL will pay any stamp duty payable on the transfer by Scheme Participants of the APN Scheme Shares to INMAL.

7.8 Governing law This Scheme is governed by the laws of New South Wales. The parties submit to the non-exclusive jurisdiction of the courts in New South Wales. 286 APN NEWS & MEDIA SCHEME BOOKLET

Annexure B – Scheme of Arrangement (continued)

8. DEFINITIONS AND INTERPRETATION 8.1 Definitions In this Scheme, except where the context otherwise requires: APN Share means a fully paid ordinary share in APN. APN Shareholder means each person who is registered in the register of members of APN as the holder of an APN Share. APN Scheme Shares means all the APN Shares excluding the INMAL Shares (as defined in the Scheme Implementation Agreement) but including any APN Shares issued on or before the Record Date upon exercise of any Option (as defined in the Scheme Implementation Agreement) or upon conversion of any APN Note (as defined in the Scheme Implementation Agreement). ASIC means the Australian Securities and Investments Commission. Associate has the meaning given to it in the Corporations Act. ASX means ASX Limited (ACN 008 624 691). Business Day means a business day as defined in the Listing Rules published by ASX. Carlyle means CA Normandy Lux I S.à r.l., a company incorporated in Luxembourg and associated with The Carlyle Group, and its limited and general partners and associates. CHESS means the Clearing House Electronic Subregister System, which facilitates electronic security transfer in Australia. Consortium means INM, Providence and Carlyle and a member of the Consortium means any of them. Corporations Act means the Corporations Act 2001 (Cth). Court means the Supreme Court of New South Wales or the Federal Court of Australia (as agreed by the parties). Deed Poll means the deed poll made by INMAL in favour of Scheme Participants, a copy of which is to be annexed to the Scheme Booklet. Effective means the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the court made under section 411(4)(b) in relation to the Scheme, but in any event at no time before an office copy of the order of the court is lodged with ASIC. Effective Date means the date on which the Scheme becomes Effective. End Date means 30 September 2007 or such other date as agreed in writing between APN and INMAL. Implementation Date means 3 Business Days (or earlier if agreed) following the Record Date or such later date as ordered by the Court or agreed between the parties. INM means Independent News & Media PLC. INMAL means Independent News & Media (Australia) Limited ACN 008 637 689. NMNZ means News & Media NZ Limited, a company incorporated in New Zealand. Providence means P6 Normandy Lux I S.à r.l., a company incorporated in Luxembourg and associated with Providence Equity Partners Inc., and its limited and general partners and associates. Record Date means 5.00pm on the fifth Business Day following the Effective Date or such other date and time as APN and INMAL agree in writing. APN NEWS & MEDIA SCHEME BOOKLET 287

Register means the share register of APN and Registry has a corresponding meaning. Scheme means this scheme of arrangement subject to any modifications or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act and agreed or consented to by APN and INMAL which if implemented will give effect to the merger between INMAL and APN as described in clause 3 of the Scheme Implementation Agreement. Scheme Booklet means the explanatory statement with respect to the Scheme to be approved by the Court and despatched to APN Shareholders. Scheme Consideration means $6.20 cash less the APN Dividend (as defined in the Scheme Implementation Agreement), if any, to be paid for each APN Scheme Share pursuant to the Scheme which has been declared and is payable or has been paid to each APN Shareholder. Scheme Implementation Agreement means the scheme implementation agreement between INMAL and APN dated 11 February 2007. Scheme Meeting means the meeting(s) to be convened by the Court in relation to the Scheme pursuant to section 411(1) of the Corporations Act Scheme Participant means each holder of APN Scheme Shares as at the Record Date. Second Court Hearing means the first day on which an application made to the court for an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme is heard.

8.2 Interpretation In this Scheme, unless the context otherwise requires: (a) headings and bolding are for convenience and do not affect interpretation; (b) the singular includes the plural and vice versa; (c) the word “person” includes a body corporate, a partnership, a joint venture, an unincorporated body or association, or any government agency; (d) a reference to a person includes a reference to the person’s executors, administrators, successors, substitutes and assigns; (e) words and phrases have the same meaning (if any) given to them in the Corporations Act; (f) references to any legislation or regulations include any statutory modification of or substitution for such legislation or regulations; (g) references to agreements or deeds are to agreements or deeds as amended from time to time; (h) a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, the Scheme and a reference to the Scheme includes any annexure, exhibit and schedule; (i) the words “including”, “for example” or “such as” when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind; (j) a reference to a holder includes a joint holder; (k) references to a currency are to Australian currency; and (l) a reference to time is a reference to the time in Sydney, Australia. 288 APN NEWS & MEDIA SCHEME BOOKLET

Annexure C – INMAL Deed Poll APN NEWS & MEDIA SCHEME BOOKLET 289

Annexure C – INMAL Deed Poll

DEED POLL Date 17 April 2007 Parties Independent News & Media (Australia) Limited ACN 008 637 689 of Level 3, 25 National Circuit, Forrest, Australian Capital Territory (INMAL) Each person registered as a holder of fully paid ordinary shares in APN News & Media Limited ACN 008 637 643 of Level 4, 100 William Street, Sydney New South Wales, Australia (APN) other than INMAL, as at the Record Date (Scheme Participants) Operative Provisions 1. INTERPRETATION 1.1 Definitions The following definitions apply in this document. Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act between APN and the Scheme Participants. Other capitalised words and phrases have the same meaning as given to them in the Scheme.

1.2 Interpretation In this deed poll, headings and bolding are for convenience only and do not affect its interpretation and, unless the context requires otherwise: (a) words importing the singular include the plural and vice versa; (b) a reference to any document (including the Scheme) is to that document as varied, novated, ratified or replaced; (c) a reference to a clause, party, annexure or schedule is a reference to a clause of, and a party, annexure and schedule to, this deed poll and a reference to this deed poll includes any annexure and schedule; (d) a reference to a party to a document includes that party’s successors and permitted assigns; (e) no provision of this agreement will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this deed poll or that provision; (f) a reference to an agreement other than this deed poll includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing; (g) the word “includes” in any form is not a word of limitation; (h) a reference to “$” or “dollar” is to Australian currency; and (i) a reference to time is a reference to the time in Sydney, Australia. 290 APN NEWS & MEDIA SCHEME BOOKLET

Annexure C – INMAL Deed Poll (continued)

1.3 Nature of this deed poll INMAL acknowledges that this deed poll may be relied on and enforced by any Scheme Participant in accordance with its terms, even though the Scheme Participants are not party to it.

2. CONDITIONS 2.1 Conditions The obligations of INMAL under clause 3 are subject to the Scheme becoming Effective.

2.2 Termination If the Scheme Implementation Agreement is lawfully terminated or the Scheme has not become Effective on or before the End Date, the obligations of INMAL under this deed poll will automatically terminate, unless INMAL and APN otherwise agree in writing.

2.3 Consequences of termination If this deed poll is lawfully terminated under clause 2.2, in addition and without prejudice to any other rights, powers or remedies available to it: (a) INMAL is released from its obligations to further perform this deed poll; and (b) Scheme Participants retain the rights they have against INMAL in respect of any breach of this deed poll which occurs before it is terminated.

3. CONSIDERATION 3.1 Performance of obligations generally INMAL must comply with its obligations under the Scheme Implementation Agreement and must do all things necessary or expedient on its part to implement the Scheme.

3.2 Scheme Consideration The obligation of INMAL to provide the Scheme Consideration will be satisfied by INMAL before 8.00 am on the Implementation Date depositing the Scheme Consideration into an account in the name of APN with those funds to be held on trust by APN for the purpose of paying the Scheme Consideration to the Scheme Participants, without any set off or counterclaim and free and clear of, and without any deduction or withholding for or on account of any taxes, by APN: (a) sending the Scheme Consideration to each Scheme Participant’s registered address as shown in the Register by cheque in Australian currency drawn on an Australian Bank (as defined in the Corporations Act); or (b) making, or procuring the making of, a deposit of it into an account with any Australian ADI (as defined in the Corporations Act) which has been notified to APN (or APN’s agent who manages the Register) by a Scheme Participant not later than the Record Date. In the case of APN Scheme Shares held in joint names the Scheme Consideration is payable to the joint holders and must be paid to the holder whose name appears first in the Share Register as at the Record Date.

4. INMAL WARRANTIES INMAL warrants that: (a) it is validly existing corporation registered under the laws of its place of incorporation; (b) it has the corporate power to enter into and perform its obligations under this deed poll and to carry out the transaction contemplated by this deed poll; (c) it has taken all the necessary corporate action to authorise its entry into this deed poll and has taken or will take all necessary corporate action to authorise the performance of this deed poll and to carry out the transactions contemplated by this deed poll; and (d) this deed poll is valid and binding on it. APN NEWS & MEDIA SCHEME BOOKLET 291

5. CONTINUING OBLIGATIONS This deed poll is irrevocable and subject to clause 2 in full force and effect until: (a) INMAL has fully performed its obligations under this deed poll; or (b) the earlier termination of this deed poll under clause 2.2.

6. NOTICES 6.1 Form Any communications in connection with this deed poll must be: (a) in writing; (b) addressed to INMAL at the address shown below and marked for the attention of Stephen Guthrie: Address: Level 11, 1 York St, Sydney NSW 2000 Fax No: +612 9256 6611 (c) signed by the person making the communication or (on its behalf) by the solicitor for, or by any attorney, director, secretary, or authorised agent of, that person.

6.2 Delivery They must be: (a) left at the address set out or referred to in clause 6.1(b) of this deed poll; (b) sent by prepaid ordinary post (airmail if appropriate) to the address set out or referred to in clause 6.1(b) of this deed poll; (c) sent by fax to the fax number set out or referred to in clause 6.1(b) of this deed poll; or (d) given in any other way permitted by law. However, if the intended recipient has notified a changed postal address or changed fax number, then the communication must be to that address or number.

6.3 When effective They take effect from the time they are received unless a later time is specified.

6.4 Receipt postal If sent by post, they are taken to be received three days after posting (or seven days after posting if sent to or from a place outside Australia).

6.5 Receipt – fax If sent by fax, they are taken to be received at the time shown in the transmission report as the time that the whole fax was sent.

6.6 Receipt – general Despite clauses 6.4 and 6.5, if they are received after 5.00 pm in the place of receipt or on a non-Business Day, they are to be taken to be received at 9.00 am on the next Business Day. 292 APN NEWS & MEDIA SCHEME BOOKLET

Annexure C – INMAL Deed Poll (continued)

7. STAMP DUTY 7.1 Stamp duty INMAL will: (a) pay all stamp duties and any related fines and penalties in respect of this deed poll, the performance of this deed poll and each transaction effected by or made under this deed poll; and (b) indemnify each Scheme Participant against any liability arising from failure to comply with paragraph (a).

8. GENERAL 8.1 Exercise of rights If a Scheme Participant does not exercise a right of remedy fully or at a given time, it may, unless it has waived that right of remedy in writing, still exercise it later.

8.2 Cumulative rights The rights, powers and remedies of INMAL and each Scheme Participant under this deed poll are cumulative and do not exclude any other rights, powers or remedies provided by law independently of this deed poll.

8.3 Assignment The rights and obligations of INMAL and each Scheme Participant under this deed poll are personal and must not be assigned or otherwise dealt with at law or in equity.

8.4 Variation INMAL must not vary a provision of this deed poll, or right created under it unless the variation is agreed by APN, in which event INMAL will enter into a further deed poll giving affect to the amendment.

8.5 Waiver Failure to exercise or enforce or a delay in exercising or enforcing or the partial exercise or enforcement of any right, power or remedy provided by law or under this agreement by any party will not in any way preclude, or operate as a waiver of, any exercise or enforcement, or further exercise or enforcement of that or any other rights, power or remedy provided by law or under this agreement.

8.6 Severability If the whole or any part of a provision of this deed poll is void, unenforceable or illegal in a jurisdiction it is severed for that jurisdiction. The remainder of this deed poll has full force and effect and the validity or enforceability of that provision in any other jurisdiction is not affected. This clause 8.6 has no effect if the severance alters the basic nature of this deed poll or is contrary to public policy.

8.7 Further action INMAL will promptly do all things and execute and deliver all further documents required by law or reasonably requested by any other party to give effect to this deed poll.

8.8 Governing law and jurisdiction This deed poll is governed by the law in force in the State of New South Wales. INMAL irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of the State of New South Wales and courts of appeal from them. APN NEWS & MEDIA SCHEME BOOKLET 293

Annexure D – APN Announcement of 17 April 2007 294 APN NEWS & MEDIA SCHEME BOOKLET

Annexure D – APN Announcement of 17 April 2007

ASX STATEMENT

APN OFFER PRICE INCREASED TO $6.20 PER SHARE INDEPENDENT EXPERT SAYS FAIR AND REASONABLE

17 April 2007

APN News & Media (ASX,NZX: APN) announced today that the consortium of Independent News & Media, Providence Equity Partners and The Carlyle Group has increased the price it is offering to APN shareholders under the proposed scheme of arrangement from $6.10 to $6.20 per share. The consortium has advised that this price is final. The Chairman of the Independent Committee of the APN Board, Mr Ted Harris, said: “The increased offer, which represents 13.1 times 2006 attributable EBITDA, provides shareholders with an opportunity to realise an attractive premium over historical trading prices for APN shares. “The Independent Expert, Deloitte Corporate Finance, has determined that the scheme is fair and reasonable and in the best interest of APN shareholders.” Mr Harris said the APN Independent Committee continued to believe that APN’s share price would fall if the scheme was not implemented and no alternative proposal emerges. The Independent Committee recommends that all shareholders vote in favour of the scheme. The Scheme Implementation Agreement will be amended to reflect the new offer terms. The meeting of shareholders to vote on the scheme will now be held in late May. The Scheme Booklet, containing details of the scheme of arrangement including the Independent Expert’s report, will be circulated shortly to shareholders.

Media enquiries: Luis Garcia or Peter Brookes (Cannings) 02 9252 0622 APN NEWS & MEDIA SCHEME BOOKLET 295

Annexure E – Notice of Scheme Meeting 296 APN NEWS & MEDIA SCHEME BOOKLET

Annexure E – Notice of Scheme Meeting

NOTICE OF SCHEME MEETING APN News & Media Limited ABN 95 008 637 643 Notice is hereby given that by an order of the Federal Court of Australia (Court) made on 20 April 2007 pursuant to section 411(1) of the Corporations Act 2001 (Corporations Act) a meeting of the holders of ordinary shares in APN News & Media Limited ABN 95 008 637 643 (APN) will be held at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales on 25 May 2007 at 11:00 am (Sydney time). BUSINESS OF THE SCHEME MEETING Resolution To consider, and if thought fit, to pass the following resolution in accordance with section 411(4)(a)(ii) of the Corporations Act: “That, pursuant to and in accordance with section 411 of the Corporations Act, the Scheme, the terms of which are contained in and more particularly described in the Scheme Booklet (which accompanies the notice convening this meeting) is approved (with or without modification as approved by the Federal Court of Australia).”

By order of the Court

Y Lamont Company Secretary Dated 20 April 2007 APN NEWS & MEDIA SCHEME BOOKLET 297

EXPLANATORY NOTES These notes should be read in conjunction with this Notice of Scheme Meeting. Terminology Capitalised terms which are defined in the glossary in section 14 of the Scheme Booklet which accompanies this Notice of Scheme Meeting have the same meaning when used in this notice (including these notes) unless the context requires otherwise. Chairman The Court has directed that Mr. Ted Harris act as Chairman of the Scheme Meeting or, failing him, Kevin Luscombe. Majority required In accordance with section 411(4)(a)(ii) of the Corporations Act, the Resolution (which is contained in this Notice of Scheme Meeting) must be passed by: • a majority in number of the those APN Shareholders present and voting (either in person, by proxy or (in the case of corporate APN Shareholders) by a corporate representative) at the Scheme Meeting; and • at least 75% of the votes cast on the Resolution. Entitlement to vote The Court has ordered that, for the purposes of the Scheme Meeting, APN Shares will be taken to be held by the persons who are registered as APN Shareholders at 7:00 pm (Sydney time) on 23 May 2007. Accordingly, transfers registered after this time will be disregarded in determining entitlements to vote at the Scheme Meeting. The following parties will not vote at the Scheme Meeting: INMAL, the Consortium and their Associates. Proxies An APN Shareholder entitled to attend and vote at the Scheme Meeting is entitled to appoint not more than two proxies, who need not be APN Shareholders. Where more than one proxy is appointed, each proxy should be appointed to represent a specified percentage or specified number of the APN Shareholder’s voting rights. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half the votes. Fractions of votes will be disregarded. A blue proxy form accompanies this notice. Proxy forms may be lodged as follows: • deliver the completed proxy form to the Registry at Computershare Investor Services Pty Limited, Level 2, 60 Carrington Street, Sydney, New South Wales 2000 (during normal business hours); • mail the completed proxy form to GPO Box 242, Melbourne, Victoria 3001; or • fax the completed proxy form to (03) 9473 2118, in each case so that the validly completed proxy form (together with any other document(s) specified in the instructions to the proxy form) is received at an address given above no later than 11.00am on 23 May 2007. Proxy forms received after this time will be invalid. Further directions for the proper completion of proxy forms are printed on the proxy form. 298 APN NEWS & MEDIA SCHEME BOOKLET

Annexure E – Notice of Scheme Meeting (continued)

Voting by attorney An APN Shareholder entitled to attend and vote at the Scheme Meeting may appoint an attorney to vote at the Scheme Meeting. Attorneys should bring an original or certified copy of the power of attorney to the Scheme Meeting. Corporate representatives To vote at the Scheme Meeting a corporation who is an APN Shareholder, or who has been appointed as a proxy by an APN Shareholder, may appoint a person to act as its representative. The appointment of a representative must comply with section 250D of the Corporations Act. Evidence of the appointment must be brought to the Scheme Meeting together with any authority under which it is signed. A pro forma “Certificate of Appointment of Corporate Representative” may be obtained from the Registry. Jointly held APN Shares If APN Shares are jointly held, only one of the joint APN Shareholders is entitled to vote. If more than one joint APN Shareholder votes, only the vote of the APN Shareholder whose name appears first on the Register will be counted. Court approval If the Resolution is passed at the Scheme Meeting by the requisite majorities, the implementation of the Scheme (with or without modification) will be subject to among other things, the subsequent approval of the Court. APN NEWS & MEDIA SCHEME BOOKLET 299

Annexure F – Notice of General Meeting 300 APN NEWS & MEDIA SCHEME BOOKLET

Annexure F – Notice of General Meeting

NOTICE OF GENERAL MEETING APN News & Media Limited ABN 95 008 637 643 Notice is hereby given that a meeting of the holders of ordinary shares in APN News & Media Limited ABN 95 008 637 643 (APN) will be held at the Intercontinental Hotel, Corner of Bridge & Phillip Streets, Sydney, New South Wales on 25 May 2007 at 11:30 am (Sydney time) or as soon thereafter as the Scheme Meeting is concluded or adjourned. BUSINESS OF THE GENERAL MEETING Resolution To consider, and if thought fit, to pass the following ordinary resolution: “That, for the purposes of Item 7 of section 611 of the Corporations Act 2001 (Cth) and all other purposes, APN approves, subject to the Scheme becoming Effective, the INMH Sale as described in the Scheme Booklet accompanying this Notice of General Meeting.”

By order of the Board

Y Lamont Company Secretary Dated 20 April 2007 APN NEWS & MEDIA SCHEME BOOKLET 301

EXPLANATORY NOTES These notes should be read in conjunction with this Notice of General Meeting. Terminology Capitalised terms which are defined in the glossary in section 14 of the Scheme Booklet which accompanies this Notice of General Meeting have the same meaning when used in this notice (including these notes) unless the context requires otherwise. Majority required The resolution in this Notice of General Meeting is proposed as an ordinary resolution. Accordingly, the passage of the resolution requires the approval of more than 50% of the votes cast by APN Shareholders present and voting at the General Meeting, whether in person, by proxy or attorney or, in the case of an APN Shareholder which is a corporation, by corporate representative. Entitlement to vote For the purposes of the General Meeting, APN Shares will be taken to be held by the persons who are registered as APN Shareholders at 7:00 pm (Sydney time) on 23 May 2007. Accordingly, transfers registered after this time will be disregarded in determining entitlements to vote at the General Meeting. The following parties will not vote at the General Meeting: INMAL, the Consortium and their Associates. Proxies An APN Shareholder entitled to attend and vote at the General Meeting is entitled to appoint not more than two proxies, who need not be APN Shareholders. Where more than one proxy is appointed, each proxy should be appointed to represent a specified percentage or specified number of the APN Shareholder’s voting rights. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half the votes. Fractions of votes will be disregarded. A yellow proxy form accompanies this notice. Proxy forms may be lodged as follows: • deliver the completed proxy form to the Registry at Computershare Investor Services Pty Limited, Level 2, 60 Carrington Street, Sydney, New South Wales 2000 (during normal business hours); • mail the completed proxy form to GPO Box 242, Melbourne, Victoria 3001; or • fax the completed proxy form to (03) 9473 2118, in each case so that the validly completed proxy form (together with any other document(s) specified in the instructions to the proxy form) is received at an address given above no later than 11.30am on 23 May 2007. Proxy forms received after this time will be invalid. Further directions for the proper completion of proxy forms are printed on the proxy form. Voting by attorney An APN Shareholder entitled to attend and vote at the General Meeting may appoint an attorney to vote at the General Meeting. Attorneys should bring an original or certified copy of the power of attorney to the General Meeting. 302 APN NEWS & MEDIA SCHEME BOOKLET

Annexure F – Notice of General Meeting (continued)

Corporate representatives To vote at the General Meeting a corporation who is an APN Shareholder, or who has been appointed as a proxy by an APN Shareholder, may appoint a person to act as its representative. The appointment of a representative must comply with section 250D of the Corporations Act. Evidence of the appointment must be brought to the General Meeting together with any authority under which it is signed. A pro forma “Certificate of Appointment of Corporate Representative” may be obtained from the Registry. Jointly held APN Shares If APN Shares are jointly held, only one of the joint APN Shareholders is entitled to vote. If more than one joint APN Shareholder votes, only the vote of the APN Shareholder whose name appears first on the Register will be counted. This page has been left blank intentionally

Important notices/disclaimers

What is this document? Scheme Booklet has been prepared by INMAL the APN Independent Committee, INMAL, the This document provides APN Shareholders with and its directors and is the responsibility of Consortium Purchasers and the Consortium do INMAL. APN and its directors and officers do not give any undertaking to update or revise any Corporate directory details of two interdependent transactions: not assume any responsibility for the accuracy or such statements after the date of this Scheme (a) the scheme of arrangement between APN completeness of any such INMAL information. Booklet, to reflect any change in expectations and Scheme Participants; and INMAL has been solely responsible for preparing in relation thereto or any change in events, (b) the INMH Sale, which is the sale of all the the information contained in Sections 1.6, 1.11, conditions or circumstances on which any such shares in the holding company of INMAL. 3, 6, 7 and 12 of this Scheme Booklet and is statement is based. These two transactions are designed to give solely responsible for any statements regarding the members of the Consortium ownership of the intentions of INMAL, INM, the Consortium Foreign Shareholders all of the APN Shares following implementation or their Associates. This Scheme Booklet is subject to Australian of the Scheme. Deloitte has prepared the Independent Expert’s disclosure requirements. Financial information in this Scheme Booklet has been prepared As discussed below, this Scheme Booklet is Report in relation to the Scheme contained in in accordance with AIFRS and is presented the explanatory statement for the scheme Section 8 of this Scheme Booklet and takes in abbreviated form and does not contain all of arrangement between APN and Scheme responsibility for that report. the disclosures that are usually provided in an Participants for the purposes of section 412(1) Blake Dawson Waldron has prepared the report annual report prepared in accordance with the of the Corporations Act. It is also provided to on the Australian taxation implications of the Corporations Act. Company Legal adviser meet the requirements of item 7, section 611 of Scheme for Scheme Participants in Section 9.1 the Corporations Act and applicable ASIC policy. of this Scheme Booklet and takes responsibility Australian disclosure requirements and AIFRS APN News & Media Limited Blake Dawson Waldron for that report. may be different from those applicable in other ABN 95 008 637 643 Grosvenor Place No investment advice jurisdictions. Scheme Participants who are Simpson Grierson has prepared the report on subject to taxation outside of Australia should 225 George Street Other than the Independent Expert’s Report, the New Zealand taxation implications of the Registered office the information contained in this Scheme consult their tax advisor as to the applicable tax Sydney NSW 2000 Scheme for Scheme Participants in Section 9.2 consequences of the Scheme. Level 4 Booklet does not constitute financial product of this Scheme Booklet and takes responsibility advice and has been prepared without reference for that report. 100 William Street Financial adviser to your own investment objectives, financial Privacy APN and INMAL may collect personal information Sydney NSW 2011 Grant Samuel Corporate Finance situation, taxation position and particular needs. Forward-looking statements It is important that you read this Scheme Booklet in the process of implementing the Scheme. Pty Limited in its entirety before making any decision, This Scheme Booklet contains both historical and Such information may include the name, contact Telephone: +61 2 9333 4999 including a decision on how to vote on the forward-looking statements. All statements other details and shareholdings of APN Shareholders Facsimile: +61 2 9333 4000 Level 19 Resolution. If you are in any doubt in relation to than statements of historical fact are, or may be and the name of persons appointed by those Governor Macquarie Tower deemed to be, forward-looking statements. these matters, you should consult your financial, persons to act as a proxy, attorney or corporate Company Secretary legal, taxation or other professional advisor. All forward-looking statements in this Scheme representative at the Scheme Meeting and the 1 Farrer Place Booklet reflect the current expectations of General Meeting. The primary purpose of the Yvette Lamont Sydney NSW 2000 Regulatory information APN, the APN Independent Committee, INMAL, collection of personal information is to assist APN This Scheme Booklet is dated 20 April 2007 the Consortium Purchasers or the Consortium and INMAL to conduct the Scheme Meeting and Registry the General Meeting and implement the Scheme. Independent Expert and is the explanatory statement for the scheme as the context requires concerning future results Computershare Investor of arrangement between APN and Scheme and events and generally may be identified Personal information of the type described Deloitte Corporate Finance Participants for the purposes of section 412(1) by the use of forward-looking words such above may be disclosed to the Registry, print Services Pty Limited Pty Limited and mail service providers, authorised securities of the Corporations Act. A copy of the scheme as “believe”, “aim”, “expect”, “anticipate”, GPO Box 2975 Grosvenor Place of arrangement is included in this Scheme “intending”, “foreseeing”, “likely”, “should”, brokers and Related Bodies Corporate of APN Booklet as Annexure B. “planned”, “may”, “estimate”, “potential”, and INMAL. APN Shareholders have certain Melbourne VIC 3001 225 George Street or other similar words. Similarly, statements rights to access personal information that has A copy of this Scheme Booklet was lodged with that describe APN’s, the APN Independent been collected. APN Shareholders should Telephone (within Australia): Sydney NSW 2000 ASIC on 20 April 2007 for registration by ASIC Committee’s, INMAL’s, the Consortium contact the Registry in the first instance, if they under section 412(6) of the Corporations Act Purchasers’ or the Consortium’s objectives, wish to access their personal information. APN 1300 850 505 and will be registered by ASIC under that section plans, goals or expectations are or may be Shareholders who appoint a named person before it is sent to APN Shareholders. ASIC forward-looking statements. to act as their proxy, attorney or corporate Telephone (within New Zealand): has been requested to provide a statement, representative should ensure that they inform (09) 488 8777 in accordance with section 411(17)(b) of the These forward-looking statements involve that person of these matters. Corporations Act, that ASIC has no objection known and unknown risks, uncertainties and Telephone (outside Australia and to the Scheme. If ASIC provides that statement, other factors that may cause APN’s actual Date at which information is stated then it will be produced to the Court at the results, performance or achievements following New Zealand): +61 3 9415 4095 Unless otherwise stated in this Scheme Booklet, Second Court Hearing Date. Neither ASIC implementation of the Scheme to differ materially the information contained in this Scheme nor any of its officers takes any responsibility from the anticipated results, performance or Facsimile: +61 3 9473 2500 Booklet is stated as at 17 April 2007. for the contents of this Scheme Booklet. achievements, expressed, projected or implied by these forward-looking statements. Web: www.computershare.com.au A copy of this Scheme Booklet has also been Defined terms provided to the ASX and the NZSE. None of The operations and financial performance Defined terms used in this Scheme Booklet the ASX, the NZSE or any of their respective of APN are subject to various risks that are are defined in the Glossary in Section 13 or officers takes any responsibility for the contents summarised in this Scheme Booklet and which elsewhere in this Scheme Booklet. of this Scheme Booklet. may be beyond the control of APN. As a result, APN’s actual results of operations and earnings Competing Transaction Responsibility statement following implementation of the Scheme, as well as the actual advantages of the Scheme, may If a Competing Transaction for APN is publicly The information concerning APN and the differ significantly from those that are anticipated announced at any time between the date of this intentions, views and opinions of APN and its in respect of timing, amount or nature and may Scheme Booklet and the date of the Scheme directors contained in this Scheme Booklet has never be achieved. Meeting, APN has agreed to provide ASIC with been prepared by APN and its directors and is all information which is known to APN in relation the sole responsibility of APN. INMAL and the You should review carefully all of the information to the Competing Transaction for APN and to Consortium and their directors and officers do in this Scheme Booklet. Sections 2.2 and 2.3 set consult in a timely manner with ASIC in relation not assume any responsibility for the accuracy out the reasons to vote in favour of the Scheme to the Competing Transaction. or completeness of any such APN information. and reasons not to vote in favour of the Scheme respectively. The information in this Scheme Booklet (other Queries All subsequent written and oral forward- than in Sections 1.6, 1.11, 3, 6, 7, 8, 9 and 12) If you have any questions or require further has been provided and prepared by APN, its looking statements attributable to APN, APN Independent Committee, INMAL, the information, you can call the APN Information directors and its advisors and is APN’s sole Line on 1800 830 977 (within Australia) and responsibility. Consortium Purchasers or the Consortium or any person acting on their behalf are qualified +61 2 8280 7492 (from outside Australia) during The information concerning INMAL and the by this cautionary statement. business hours. Consortium and the intentions, views and If you are in any doubt about anything in this opinions of INMAL and the Consortium and Subject to any continuing obligations under the Listing Rules or the Corporations Act, APN, Scheme Booklet, please contact your financial, their respective directors contained in this legal, taxation or other professional advisor. This is an important document and requires your immediate attention. It should be read in its entirety. If you are in doubt about what to do, you should consult your professional advisor without delay.

SCHEME BOOKLET

20 April 2007 in relation to the proposed acquisition of APN News & Media Limited (ACN 008 637 643) by a consortium comprising Independent News & Media PLC, Providence Equity Partners and The Carlyle Group through the acquisition vehicle Independent News & Media (Australia) Limited (ACN 008 637 689)

via a scheme of arrangement between APN News & Media Limited and its shareholders and a Scheme Meeting and a General Meeting of the holders of fully paid ordinary shares in APN News & Media Limited, each to be held on 25 May 2007 The Notices of Scheme Meeting and General Meeting are set out in Annexure E and Annexure F, respectively, of this Scheme Booklet.

The APN Independent Committee UNANIMOUSLY RECOMMENDS that you vote in favour of the Scheme. The Independent Expert has concluded that the Scheme is fair and reasonable and therefore in the best interest of APN Shareholders.

Financial adviser Legal adviser

If you have any questions or require further information, you can call the APN Information Line on 1800 830 977 (within Australia) and +61 2 8280 7492 (from outside Australia) during business hours.