The following tables present our selected historical financial data, which have been derived from audited financial statements. Ibero-American Media Partners was deemed to be the acquiror for accounting purposes in the combination agreement and accordingly, the historical financial statements of Ibero-American Media Partners are presented as the financial statements of Claxson preceding the transaction. In addition, all fiscal years presented reflect the classification of Chilevision’s financial results as discontinued operations. See Note 3 “Acquisitions and Disposals” in the notes to the accompanying consolidated financial statements.

      The selected financial data should be read in conjunction with the consolidated financial statements and Item 5. “Operating and Financial Review and Prospects”. We prepare our financial statements in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America (which is commonly called “U.S. GAAP”).

      Not Applicable

      Not Applicable

      The following summarizes certain risks that may materially affect our business, financial condition or results of operations.

RISKS RELATED TO OUR BUSINESS

      The report of the independent registered public accounting firm with respect to our consolidated financial statements includes a “going concern” explanatory paragraph, indicating that our potential inability to meet our obligations as they become due raises substantial doubt as to our ability to continue as a going concern for a reasonable period of time. Our ability to achieve long-term profitability is dependent on our ability to accomplish our business plan objectives, which includes projected revenue increases, stabilization of the economies in which we operate, and the availability of additional liquidity. Our failure or inability to successfully carry out these plans, could ultimately have a material adverse effect on our financial position and our ability to meet our obligations when due.

      We are highly leveraged. At December 31, 2004, we had approximately U.S.$69.2 million in aggregate principal amount of indebtedness and accrued and unpaid interest, plus U.S.$16.6 million of future interest payments on our 8.75% Senior Notes due 2010 and U.S.$22.6 million in total shareholders’ equity.

      We conduct our operations through subsidiaries, and these subsidiaries are our primary source of cash flow. Our ability to use and distribute funds out of cash flows generated by Imagen Satelital and Radio Chile, two of our subsidiaries that generate a significant portion of our cash flows, is restricted. Our syndicated bank facility also contains covenants that restrict our and our subsidiaries’ ability to utilize cash and the collateralized assets of our Chilean operations. In addition, our subsidiary, Imagen Satelital S.A., had outstanding U.S.$0.3 million in principal amount of 11% Senior Notes due 2005 which matured in May 2005 but which we have not repaid.

      The degree to which we are leveraged has important consequences to us, including the following:

      Our five largest pay television system operators accounted for approximately 38% and 31% of our total revenues in the years ended December 31, 2003 and 2004, respectively. The loss of any of our major

existing pay television system operators, unless replaced by other operators, could have a material adverse effect on our financial performance.

      Our largest pay television system operator, DIRECTV Latin America accounted for approximately 22% and 19% of our total revenues for the years ended December 31, 2003 and 2004. On December 22, 2003, The News Corporation Ltd. completed its acquisition of a controlling interest in Hughes Electronics Corporation (now known as DIRECTV Group, Inc., the majority owner of DIRECTV Latin America). NewsCorp owns a significant interest in Sky Latin America, a direct-to-home satellite programming provider like DIRECTV Latin America, which operates in many of the same markets as DIRECTV Latin America, including Brazil, Chile, Colombia and Mexico. In October 2004, DIRECTV Group, Inc. and NewsCorp announced a series of business combinations and reorganizations, which if completed, will result in the termination of the DIRECTV Latin America platform in Brazil and Mexico and/or the migration of the majority of DIRECTV subscribers to the Sky platform in those territories. We currently have distribution agreements with Sky Latin America in Mexico and Brazil for a limited number of our channels, and have distribution for all of our pan-regional channels with DIRECTV Latin America in those countries as well as the rest of the region, but do not have distribution agreements with Sky Latin America in other markets where we have distribution rights with DIRECTV Latin America. If the announced business combinations and reorganizations are completed and we are unable to negotiate similar distribution agreements with Sky Latin America for Brazil or Mexico or for any other region in which we operate where the DIRECTV Latin America platform is discontinued, we will experience a significant decrease in revenues.

      Our existing distribution agreements with DIRECTV Latin America for our premium channels expired in December 2004. Although the final agreements have not yet been executed, we have negotiated new terms for these agreements and have been operating under these terms since January 2005 which provide us with a lower revenue share percentage for our premium channels than previously received. In addition, our basic channels expire on December 31, 2005. We are currently negotiating these agreements with DIRECTV Latin America and based on those negotiations believe that the new agreements will contain lower per subscriber rates than our current contracts. If we are unable to negotiate new agreements with similar terms as the existing agreements, we will experience a reduction in our revenues. In addition, on October 19, 2004, an affiliate of the Cisneros Group of Companies that is a minority shareholder in DIRECTV Latin America filed a lawsuit against DIRECTV Group Inc. and others, including, The News Corporation Ltd., Sky Multi-Country Partners, Innova S. de R.L. de C.V., Globo Comunicacoes e Participacoes, S.A., and Grupo Televisa, S.A., related to the business combination and reorganization of DIRECTV Latin America with NewsCorp’s affiliates.

      Our businesses have a history of losses and may continue to incur losses, given the costs of servicing our debt and the volatility of currencies in the region in which we operate, if we are unable to increase our revenues. Our businesses incurred total net losses of U.S. $138.4 million for the year ended December 31, 2002 and U.S. $84.9 million for the year ended December 31, 2001.

      Should we experience losses in the future, the extent of such losses will depend, in part, on whether we can increase our revenues. Our business plan contemplates increasing our profitability by increasing our revenues while maintaining our operating expenses at current levels. Our failure to increase revenues or maintain our operating expenses at their current level, or otherwise meet our business plan objectives, may result in our incurring losses in the future.

      Members of the Cisneros Group and Hicks Muse control, in the aggregate, approximately 80% of the voting power on all matters submitted to our shareholders and control the outcome of actions requiring the approval of holders of a majority of our common shares, including a sale or a material acquisition. In

addition, through their ownership of our Class C and Class H common shares, these shareholders are entitled to designate seven of the twelve members of our board of directors. This control could discourage other parties from initiating potential merger, acquisition or other change of control transactions that might otherwise be beneficial to our shareholders. In addition, the Cisneros Group and Hicks Muse could use their ownership position to cause a transaction to occur in which either or both of these shareholders or a third party would acquire most or all of Claxson, in which event other shareholders could be deprived of the opportunity to remain shareholders of Claxson.

      Conflicts may arise between members of the Cisneros Group and Hicks Muse, on the one hand, and our other shareholders, on the other hand, whose interests may differ with respect to, among other things, our strategic direction, significant corporate transactions or corporate opportunities that could be pursued by us or by either or both of our controlling shareholders.

      In addition to their interests in Claxson, members of the Cisneros Group and affiliates of Hicks Muse hold, and may in the future acquire, interests in other media businesses in Ibero America, some of which may compete, or have relationships with strategic partners that compete, with us. In particular, members of the Cisneros Group own an interest in AOL Latin America and DIRECTV Latin America, and funds affiliated with Hicks Muse own interests in CableVisión and Teledigital Cable in Argentina, TV Cidade in Brazil and Intercable in Venezuela. DIRECTV Latin America, CableVisión, Teledigital Cable, and Intercable are significant pay television system operators in Latin America.

      Persons serving as our directors and members of the Cisneros Group or Hicks Muse may have conflicting interests with respect to the above and other matters. These conflicts could limit our effectiveness in capitalizing on opportunities for growth.

      We derive substantially all of our revenue from subscriber-based fees and advertising, for which we compete with various other media, including newspapers, television, radio stations and other pay television channels that offer customers information and services similar to ours. Increased competition could result in price reductions, reduced margins or loss of market share, any of which could have a material adverse effect on our financial performance.

      We face competition on both country and regional levels. In addition, each of our businesses competes with companies that deliver content through the same platforms and with companies that operate in different media businesses. Our competitors may develop content that is better than our content or that achieves greater market acceptance. Some of our competitors may have better brand recognition and significantly greater financial, technical, marketing and other resources than we do. We will have to devote significant resources to maintain the competitive position of our brands. Competition in our businesses and markets may limit our ability to expand our market share and increase revenues in these businesses and markets.

      As a distributor of media content, we may face potential liability for:

      These types of claims have been brought, sometimes successfully, against broadcasters, online services and other disseminators of media content. In addition, we could be exposed to liability in connection with material available through our Internet sites or for information collected from and about our users. Although we carry general liability insurance and errors and omissions insurance, our insurance may not cover potential claims of defamation, negligence and similar claims, and it may or may not apply to a particular claim or be adequate to reimburse us for all liability that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on us.

      We must maintain licenses, permits and approvals from regulatory authorities to conduct and expand our broadcast radio businesses in Chile and Uruguay and may need to obtain additional permits and licenses. The process for obtaining or renewing these licenses, permits and approvals could be complex and unpredictable. In addition, many of our licenses may not be transferred without regulatory approval. If we are unable to maintain the licenses, permits and approvals that we currently hold or to obtain those that we need to conduct and expand our businesses at a reasonable cost and in a timely manner, our ability to achieve our strategic objectives could be impaired. In addition, the regulatory environment in the countries in which our businesses operate is complex and subject to change, and adverse changes in that environment could also impose costs on, or limit the growth of our business.

      Our businesses are regulated by governmental authorities in the countries in which we operate. Regulation relates to, among other things, licensing, access to satellite transponders, commercial advertising, foreign investment and standards of decency/obscenity. Changes in the regulation of our operations or changes in interpretations of existing regulations by courts or regulators, could adversely affect us by reducing our revenues, increasing our operating expenses and exposing us to significant liabilities for noncompliance with such modified or reinterpreted regulations.

      El Sitio and some of its former and current directors and principal executive officers have been named as defendants in several civil cases arising out of its initial public offering in December 1999. The complaints primarily relate to alleged share allocation and commission practices undertaken by the underwriters for the offering. We believe, after consultation with counsel, that the allegations relating to El Sitio and its directors and principal executive officers are without merit. However, these cases could result in significant litigation expense for us and, if not decided in El Sitio’s favor or successfully settled, damage payments which would among other things adversely affect our financial performance. See “Item 8A Financial Information-Consolidated Statements and Other Financial Information-Legal Proceedings” for more information.

      We have chosen to account for stock based compensation expense to employees and non-employees using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. As required by Statement of Financial Accounting Standards No. 123R, Accounting for Stock-Based Compensation, we have presented in the notes to our consolidated financial statements certain pro forma and other disclosures related to share-based compensation plans which show the potential impact of SFAS 123R on our financial results if we

had accounted for stock based compensation under the fair value method. Under the current proposals, adoption of SFAS 123R will become effective for us in the first quarter of 2006. If SFAS 123R becomes effective in its current form, it will result in our reporting lower earnings per share, which could negatively impact our future stock price. In addition, this could also impact our ability or future practice of utilizing broad-based employee stock plans to attract, reward, and retain employees, which could also adversely impact our operations.

RISKS RELATED TO LATIN AMERICA

      For the year ended December 31, 2004, our pay television business derived 33% of its revenues from operations in Argentina. In addition, our broadcast radio business derived 92% of revenues for the year ended December 31, 2004 from our operations in Chile. As a result, changes in Argentine or Chilean government policy affecting trade, investment, taxes, protection of intellectual property or the media industry generally or instability in the Argentine or Chilean currency, economy or government could have a material adverse effect on our results of operations and financial condition.

      Argentina, in particular, has had a history of political and economic instability and has recently experienced political upheaval and a severe economic recession. These events coincided with a serious downturn in global investor sentiment generally, marked by significant declines in international equity markets, pronounced investor risk aversion and a decrease in investor confidence throughout emerging markets. Some other risks of investing in a company with operations in Argentina, as well as other countries in Latin America, include:

RISKS RELATED TO OUR CLASS A COMMON SHARES

      Our Class A common shares are currently traded on the OTC Bulletin Board. Compared to the NASDAQ SmallCap Market, an investor may find it more difficult to sell our securities. Also, since we are no longer traded on the NASDAQ SmallCap Market and the average trading price of our Class A common shares remains below $5.00 per share, trading in our Class A common shares is subject to certain other rules of the U.S. Securities Exchange Act of 1934. Such rules require additional disclosure by broker-dealers in connection with certain trades involving a stock defined as a “penny stock.” “Penny stock” is defined as any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery of a disclosure schedule explaining the penny stock market and the risks associated with that market before entering into penny stock transactions. The rules also impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and must receive the purchaser’s

written consent to the transaction prior to the sale. The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in the securities. This could severely limit the market liquidity of the securities and the ability to sell the securities in the secondary market.

      Our governance matters are principally determined by our memorandum and articles of association and the International Business Companies Act of the British Virgin Islands. The rights of shareholders and the fiduciary responsibilities of directors, officers and controlling shareholders under British Virgin Islands law have not been extensively developed, particularly when compared with statutes and judicial precedents of most states and other jurisdictions in the United States. As a result, our shareholders may have more difficulty in protecting their interests in the case of actions by our directors, officers or controlling shareholders than would shareholders of a corporation incorporated in a state or other jurisdiction in the United States.

      We are a British Virgin Islands international business company with a substantial portion of our assets located outside of the United States. In addition, many of our directors and executive officers, as well as other of our controlling persons, reside or are located outside of the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or these persons or to enforce judgments obtained against us or these persons in U.S. courts predicated solely upon the civil liability provisions of the U.S. federal or state securities laws. We have been advised by Conyers Dill & Pearman, our British Virgin Islands counsel, that there is doubt as to the enforceability in the British Virgin Islands in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated upon the U.S. federal or state securities laws. There is also doubt as to enforceability of judgments of this nature in several of the jurisdictions in which we operate and our assets are located.

      As a “foreign private issuer”, we are exempt from rules under the U.S. Securities Exchange Act of 1934 that impose certain disclosure and procedural requirements in connection with proxy solicitations under Section 14 of the Exchange Act. Our directors, executive officers and principal shareholders also are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder with respect to their purchases and sales of our shares. In addition, we are not required to file periodic reports and financial statements with the U.S. Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. As a result, you may not be able to obtain some information relating to us as you would for a domestic U.S. corporation.

      We were incorporated as an international business company under the laws of the British Virgin Islands on October 16, 2000. Our registered office is at Romasco Place, PO Box 3140, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. Our headquarters and principal executive offices are located at Avenida Melian, 2752, C1430EYH Buenos Aires, Argentina and our telephone number is 011-54-11-4546-8000. We maintain a United States principal executive office located at 1550 Biscayne Boulevard, Miami, Florida 33132. Our telephone number in Miami is (305) 894-3500.

      We were formed in a merger transaction that combined media assets contributed by Ibero-American Media Partners II, Ltd., and other media assets contributed by members of the Cisneros Group and

El Sitio, Inc. For a description of the merger transaction, see the “Introduction” to this annual report on Form 20-F.

      We are a multimedia provider of branded entertainment content to Spanish and Portuguese speakers around the world. We have combined assets in pay television, broadcast radio, and Internet and broadband to create an integrated media company with a portfolio of popular entertainment brands and multiple methods of distributing our content.

      Our pay television business, currently our largest source of revenues, includes 13 pay television channels distributed to approximately 11.7 million pay television households, which account for approximately 53.3 million basic channel subscribers through cable and direct-to-home television platforms. We calculate the number of subscribers based on the number of channels received per household so that if for example a household receives five channels, we count five subscribers for such household. Three of these pay television channels are owned by Playboy TV Latin America, our 81% owned joint venture with an affiliate of Playboy Enterprises Inc.

      Our broadcast radio business includes an eight-station radio network with the largest audience share in Chile, which constitutes the largest radio group in Chile, and three radio stations in Uruguay. We formerly operated the fourth largest broadcast television network in Chile which we sold in May 2005, see Note 3 “Acquisitions and Disposals” in the notes to the accompanying consolidated financial statements.

      Our Internet and broadband business, which is our newest business, is primarily dedicated to support our media assets and the production, distribution and selling of digital content specifically developed for broadband.

      We integrate licensed and proprietary content for pay television, radio and Internet formats. By taking advantage of the complementary nature of our assets and the experience of our management team, we seek to achieve revenue growth and reduce expenses through operational synergies that we believe will lead to enhanced long-term financial performance and better position us to take advantage of emerging trends in media distribution.

      The following tables present historical selected financial information for our business operations for the years and periods indicated (in thousands of U.S. dollars):

      Our vision is to provide high-quality branded content to serve the tastes and needs of our target audience. We tailor multi-media programming to the Ibero American market by creating original content, as well as by dubbing and subtitling third party content into Spanish and Portuguese, while remaining sensitive to local preferences. We seek to fill the need for a pan-regional alternative that can create, gather, package and deliver differentiated content across multiple media platforms. The key elements of our strategy include the following:

PAY TELEVISION BUSINESS

      Our pay television business includes 13 pay television channels distributed throughout various Ibero American countries. We have a strong presence in Latin America with premium and pay-per-view services through our Playboy TV Latin America joint venture, as well as in Argentina and the rest of the southern portion of South America with the basic channels, which is commonly called the “Southern Cone”.

      Our channels are tailored to Spanish- and Portuguese-speaking television viewers throughout Ibero America and offer a diverse mix of programming, including movies, music videos, local news, documentaries, fashion, family series and adult entertainment on a basic, premium or pay-per-view basis. Content for local, regional and international markets, is either originally produced in, dubbed or subtitled into Spanish or Portuguese.

      At December 31, 2004, we wholly-owned seven of the channels that we distributed: Space; I.Sat; Retro (formerly known as Uniseries); Infinito; FTV; MuchMusic and HTV. We control the programming content of our wholly-owned channels. In addition to Venus (a partially owned channel), we distribute two other channels in Ibero America through our Playboy TV Latin America joint venture, the Playboy TV channel and the Spice Live channel. In June 2004, through our Playboy TV Latin America joint venture, we launched a new adult pay-per-view service called “G Channel.” In May 2005, Playboy TV Latin America entered into an exclusive agreement with Private Media Group to operate and distribute the Private channel and to offer it as part of our adult channels bouquet in the market. We also have exclusive distribution rights throughout certain parts of Ibero America with respect to certain channels, including Crónica TV, a channel owned by Estrella Satelital S.A., in the Southern Cone; Venevision Continental (solely with respect to distribution to pay television providers other than DIRECTV Latin America), a channel owned by the Cisneros Group, in the Latin America region; and Utilisima Satelital, a channel owned by HediFam, S.A. in Latin America. Our 31% owned joint venture, DMX MUSIC Latin America, offers digital music channels throughout Latin America. Digital Latin America, LLC, a company in which we have a 48% equity investment, offers a digital solution cable system by operating a digital network through satellite transmission.

      Space offers 24 hours of a varied selection of Hollywood movies and blockbusters from the rest of the world, among a varied programming line-up for the entire family in the Southern Cone. Programming includes thematic blocks featuring horror movies, Italian films, Spanish productions, action movies, major boxing events and artistic specials. With 200 different films aired every month, Space offers its audience an important number of movies with the majority dubbed into Spanish. Space’s live boxing events have often set ratings records in Argentina, frequently surpassing broadcast television.

      I.Sat specializes in current and alternative entertainment designed especially for the 18-35 year old urban market. I.Sat presents contemporary movies, series, music, documentaries and original productions. I.Sat offers its viewers in the Southern Cone not only recent Hollywood blockbusters, but also independent films and movies popular with the 18-35 year old urban market. In addition, all genres of international music are featured including videos and specials showcasing contemporary music artists from all over the world.

      Retro (formerly known as Uniseries) specializes in classic films and series focused on genres such as westerns, gladiators, cult horror, and science fiction of the 50’s, 60’s and 70’s. Retro also showcases such milestone TV series as Mission Impossible, The Untouchables, Combat, The Fugitive and others.

      Infinito offers programming based on themes of the new millennium. Infinito is dedicated to the unknown, the occult and the unexpected and presents an alternative to traditional documentary channels. Bringing viewers closer to the unknown, Infinito features documentaries, interviews, talk shows, series and news. Infinito is available throughout Latin America.

      FTV/ Fashion TV is a global television network entirely dedicated to the fashion world. Since November 2001, we have controlled the distribution and advertising sales rights for Latin America of FTV. Under an agreement with FTV Paris, which expires in December 2005, we develop original content featuring local celebrities and brands to customize the channel to the preferences of the local markets. FTV is a 24-hour international television channel targeting fashion enthusiasts around the world. FTV’s programming highlights include Focus On..., a daily show covering the regional fashion scene; Fashion Clips, Haute Couture Paris, covering fashion events from Paris, Rome and Milan; and major fashion events from Sao Paulo, New York and Buenos Aires.

      MuchMusic Argentina is a channel that integrates music, interactivity and humor. MuchMusic Argentina targets the 12-24 and 25-34 age brackets and combines live productions and localized content with local production packaging, and international flair through a wide spectrum of styles: Rock, Pop, Latin Music, Dance, Hard Core and other new music trends. MuchMusic also offers original non-musical content developed under the same “localist” programming philosophy. We license the MuchMusic brand and certain content from CHUM Limited, a Canadian company and content provider. In addition, we have the right to develop the MuchMusic television service in Latin America and Ibero America and we distribute the MuchMusic Argentina channel pan-regionally on DirectTV Latin America.

      HTV is a vehicle of Latin culture and offers a diverse music mix overcoming geographic barriers and language. Taking advantage of the popularity for all things Latin and Latin music, HTV has established a following in Latin America and the U.S. Hispanic market. HTV programming covers a spectrum of Latin American music genres, including pop, Latin rock, tropical, hip-hop, reggae and ballads. HTV also features current popular crossover hits, introduced by the artists themselves. HTV plays uninterrupted Spanish and Portuguese-language music without “VJ’s” or other non-musical programming.

      Playboy TV Network and Spice Live Network are owned, operated and distributed throughout Latin America, Spain and Portugal by Playboy TV Latin America. Playboy TV Latin America is a joint venture that was created in 1996 between a member of the Cisneros Group and an affiliate of Playboy Enterprises, Inc. Today, a subsidiary of Claxson owns 81% of Playboy TV Latin America, while an affiliate of Playboy Enterprises, Inc. owns the remaining 19%. Playboy TV Latin America offers high quality adult entertainment, which generally can be purchased monthly as a premium channel or on a pay-per-view basis. A portion of Playboy TV Latin America’s programming is tailored to the Ibero American market and is customized according to regional preferences.

      Venus is a premium and pay per view adult content channel that we launched in 1994 and targeted specifically to the Latin American audience. Venus offers themed features, specials and weekly shows to demanding subscribers. Venus brings a wide variety of adult genres and high quality programming, including original productions and a sophisticated on-air look. Venus was transferred to the Playboy TV Latin America joint venture, as part of the overall restructuring of the relationship with Playboy Enterprises, Inc.

      G Channel is an adult content pay-per-view channel targeted specifically to gay males featuring premium films and features containing gay male themes.

      Private is a premium adult channel with hardcore, high quality features and productions offering exclusive content under the Private brand, an adult film producer. Its programming is comprised of a rotating digital library of 500 original films produced by the Private Media Group.

      Crónica TV is a third party channel owned and produced by Estrella Satelital S.A. We are the exclusive sales agent for Crónica TV programming in the Southern Cone. Crónica TV is a 24-hour live news channel, delivering local and international news coverage that is popular, in large part, for its live coverage of events in Argentina. Crónica TV is one of the leading news channels in Argentina.

      Venevision Continental , which is owned by the Cisneros Group, is a general entertainment channel with family programming that integrates highly rated shows from the main Spanish-speaking television broadcasters. Venevision Continental’s programming includes soap operas, magazine and talk shows, variety shows, comedy, children’s programming, beauty contests and news. Venevision Continental is distributed pan-regionally. We represent Venevision Continental for sales to cable operators throughout Latin America.

      Utilisima Satelital , which is a third party channel owned by HediFam S.A., is designed by and targeted to today’s woman, and is the market leader in its category in Argentina. Utilisima combines a mix of content and services in an educational, entertaining format with subjects such as arts and crafts, cooking, beauty, quality of life, and home decor. Utilisima broadcasts 10 daily original hours and 3,000 premiere shows a year through 40 programs with original content. Utilisima was launched in 1996 and we commenced pan-regional and U.S. Hispanic distribution for Utilisima on January 1, 2004.

      Claxson Playout Inc., formerly known as The Kitchen, Inc. , offers network playout and post production services. Claxson Playout Inc. offers broadcast services to customers in Miami. Prior to May 2005, Claxson Playout Inc. also provided language conversion and international master recording traffic services. As a result of the weak performance of this division in the past, and our increased focus on our channel business, we sold our language conversion and international master recording traffic operations in Miami along with The Kitchen trade name in May 2005.

      In Jaus is our creative division in charge of broadcast design (both video and audio) as well as the production services for promotional spots, feature films and made for TV movies, and documentaries or video clips. The original production of documentaries and other programs is also managed by In Jaus , as well as the distribution and sale of these programs and all proprietary programs and television formats to third parties. During the year 2004, In Jaus provided services to external clients, generating revenues of U.S.$0.2 million as well as U.S.$0.3 million in content sales.

      As of December 31, 2004, our channels were distributed in 23 countries in Ibero America and reached approximately 53.3 million basic channel subscribers in over 11.7 million pay television households. We believe that our ability to provide a diversified package of branded channels to pay television operators is a favorable alternative to individual channels that offer a more limited menu of programming choices. We have distribution agreements with pay television operators that distribute our channels in each of our markets.

      The following table identifies the number of subscribers for each of our basic channels as of December 31, 2002, 2003 and 2004. The total number of subscribers for each channel in 2002 was strongly affected by a decrease of approximately 25% in the total subscribers in Argentina as a result of the economic situation during 2002.

      Like most providers of pay television content, we derive substantially all of our pay television revenues from subscriber-based fees and advertising revenue. Subscriber-based revenues currently are the primary source of revenue for our pay television business, accounting for 80% of total pay television net revenue in the year ended December 31, 2004 and 81% in the year ended December 31, 2003. Advertising accounted for 11% of total pay television net revenue in the year ended December 31, 2004 and 8% in the year ended December 31, 2003. In addition, we derived 9% of total pay television net revenue in the year ended December 31, 2004 and 11% in the year ended December 31, 2003 from other sources, including production services, management and other fees for services we provide to third parties.

      Subscriber-Based Fees. We charge pay television operators either a flat or per-subscriber fee for the right to broadcast our channels through their networks. Pricing for basic channels typically involves a lump sum monthly payment per channel or package of channels or fixed price per subscriber. Generally, we enter into long-term distribution agreements with an average term of approximately three years. For premium and other pay-per-view channels, we determine a retail price in each market and receive a percentage of the revenues generated from subscribers of those channels.

      Our channels are distributed by more than 1,100 pay television operators in Ibero America. These operators include, among others, DIRECTV Latin America, CableVisión (Argentina), Multicanal (Argentina), Digital Plus (Spain), Sky Latin America, Net Brasil (Brazil), Cablevisión (Mexico), VTR (Chile) and Intercable (Venezuela). Our five largest pay television distributors accounted for 43% of total pay television net revenue for the year ended December 31, 2004, and DIRECTV Latin America, our largest pay television distributor, accounted for 27% of total pay television revenues for the year ended December 31, 2004. See Item 3D “Risk Factors — We depend on a limited number of pay television system operators for a significant portion of our revenues and the loss of any of our major pay television system operators or renegotiation of existing contractual terms could significantly reduce our revenues.”

      Advertising Revenue. We derive revenues from the sale of advertising on our pay television channels to advertisers and agencies. We believe that our geographic reach enables us to pursue local, pan-regional and global advertising budgets. We offer advertisers pan-regional reach, local focus and the opportunity to incorporate direct marketing and promotional events to create multimedia campaigns. We believe that our channels’ spectrum of highly-rated programming appeals to advertisers that want to target audiences in specific demographic and other focused groups. We seek to offer advertisers maximum value for their advertising expenditures and have implemented a strategy that provides customized options, including the following: on-air spots; program sponsorships; on-air promotions; product integration; customized commercials; special events; and interactive elements.

      For the year ended December 31, 2004, our channels sold advertising to 273 advertisers. In the year ended December 31, 2004, our top ten advertisers accounted for approximately 49% of our pay television advertising revenues. Our strongest advertising sales were made for the Space channel, which accounted for 33% of pay television advertising revenue in the year ended December 31, 2004.

      Production Revenue. We derive other revenues from services that we provide to pay television businesses we partially own and to certain third parties. These revenues include playback, library, satellite space, dubbing, subtitling, creative services, and programming from our partner channels as well as from independent third parties and fees for back office and other services provided to these joint ventures.

      We focus our marketing efforts on increasing pay television operator interest, subscriber levels and brand awareness, maintaining and improving the ratings of our channels, and creating promotional opportunities that are attractive to our target audiences, distributors and advertisers. We conduct multimedia marketing campaigns designed to promote audience loyalty and support the programming of our channels. These campaigns generally combine on-air and off-air events with traditional print, radio and billboard advertising targeted to current and potential viewers. Our channels also have promotional websites that allow our subscribers to learn more about our programming and off-air events, while providing sponsors and advertisers with another medium for interacting with subscribers.

      Our marketing staff works closely with our other departments, including advertising sales, affiliates sales, creative, programming and communications, to coordinate and implement activities that achieve its marketing goals. For example, our marketing, affiliate and advertising sales departments work closely together to create marketing concepts and off-air promotional events that appeal to its advertisers and system operators and reinforce a brand’s key elements. In addition, our marketing staff works with the programming and creative departments to develop strategic programming concepts that strengthen the uniqueness of a channel’s identity, increase viewership and create sponsorship opportunities. We believe that our marketing initiatives achieve their primary goals of growing our brands, retaining viewer loyalty, increasing the distribution of our channels, creating innovative promotional opportunities for their advertisers and affiliates and maintaining or improving ratings and audience.

      Our programming library includes licensed programming, owned films, original productions and other programming totaling approximately 17,400 hours. Approximately 15,660 hours are currently in our possession and 800 hours are to be delivered pursuant to contracts with suppliers.

      We tailor our pay television programming for the Ibero American audience and air most of our programming in Spanish or Portuguese. We believe that our library of customized Spanish-and Portuguese-language programming represents a valuable asset, because many of our competitors air significantly more of their programming with subtitles, which we believe is less popular with television audiences in Ibero America. The availability of an extensive, edited and ready-to-air programming library permits us to schedule movies and other programming quickly for inclusion in theme-oriented programming blocks in response to current events.

      Licensed Programming. We have exhibition rights from third-party programmers totaling approximately 15,100 hours of programming. These rights include approximately 4,400 films, representing approximately 8,700 hours of programming, which allows channels such as Space and I.Sat to air programming with less repetition than many of their competitors. The remaining 6,400 hours of programming consist of approximately 9,100 television series episodes and documentaries, allowing Retro and Infinito not to repeat its episodes of any series or documentary for up to one year. Our exhibition rights also include sports and music entertainment events.

      Our program license agreements generally provide for the non-exclusive right to exhibit programming within a specified period of time by means of basic pay television in the Southern Cone, and sometimes provide for options to extend these rights on a pan-regional basis throughout Latin America. In the case of each of Infinito, FTV and Retro, our pan-regional channels, we obtain exhibition rights on a pan-regional basis throughout Latin America.

      We have entered into programming agreements with key providers of high-quality programming, including Sony Pictures Corp., Warner, CHUM Limited, and FTV Paris. We believe that our relationships with pay television programming suppliers are good.

      Owned Programming. We own approximately 535 classic Argentine films, totaling approximately 700 programming hours, including the San Miguel film library and films from the Lumiton film library that we purchased. Many of these films date from the golden age of Argentine filmmaking in the 1940s and 1950s.

      We own a substantial amount of programming originally produced for the channels, including approximately 1,500 hours of original programming recently produced for Infinito and Fashion TV, as well as boxing and film commentaries produced to air on Space and concert and film commentaries produced for MuchMusic Argentina and I.Sat. We also own certain brief lead-in programming that we produce relating to much of our film library and other interstitial programming material.

      In addition to owned and licensed programs, we have a limited amount of first-run rights relating to boxing matches and other special events, such as music concerts, exclusive interviews and specials featuring music artists.

      Playboy TV Latin America, a joint venture 81% owned by us and 19% owned by an affiliate of Playboy Enterprises, Inc., owns, operates and distributes Playboy TV Network, Spice Live and the Venus channel throughout Latin America, Spain, and Portugal and the recently launched G Channel as a pay-per-view service. In 1999, an affiliate of Playboy Enterprises, Inc. and an affiliate of the Cisneros Group created Playboy TV International LLC, a joint venture to own and operate Playboy TV networks outside of the United States and Canada.

      In December 2002, we negotiated a restructuring of our relationship with Playboy TV. As a result of the restructuring, we:

      As a result of the restructuring, we began to consolidate the Playboy TV Latin America operations into our pay television division, in December 2002. Under the existing Playboy TV Latin America joint venture, Playboy Enterprises has an option to buy up to 49.9% of the joint venture at any time prior to December 2012. In addition, Playboy Enterprises has an option to buy the remaining 50.1% of the joint venture during the year 2008, provided that, the 49.9% option has been exercised. Both options are at the fair market value at the time of exercise. Consequently, we now operate all adult content operations (which includes the Playboy TV, Spice Live and Venus channels) under the Playboy TV Latin America joint venture. An affiliate of Playboy Enterprises, Inc. will distribute the Playboy TV Latin America programs in the U.S. Hispanic market for a 20% distribution fee to our joint venture.

      As part of the restructuring, an affiliate of Playboy Enterprises, Inc. agreed to exclusively license to Playboy TV Latin America its entire Playboy TV television programming library which was in existence as of March 31, 2002. The library consisted of approximately 12,500 hours of Playboy original programming, licensed movies, and other shows. The program supply agreement also requires an affiliate of Playboy Enterprises, Inc. to license exclusively all new programs produced to Playboy TV Latin America each year, subject to a certain minimum number of program hours. In exchange for these rights, Playboy TV Latin America must pay an affiliate of Playboy Enterprises, Inc. 17.5% of the net revenues from the distribution of these programs, with a guaranteed annual minimum of U.S. $4.2 million, subject to annual increases equal to the consumer price index.

      In May 2002, we completed a business combination transaction with DMX MUSIC whereby DMX MUSIC contributed to our joint venture all its existing affiliation agreements with cable and DTH operators in Latin America and the U.S. Hispanic market and cash in the amount of U.S.$0.7 million, in exchange for an additional 19% of the equity interests in the joint venture. After the business combination, the venture re-branded its services as DMX MUSIC Latin America and expanded its channel offerings. We now own 31% of DMX MUSIC Latin America. DMX MUSIC Latin America also intends to develop and deliver music services to retail and commercial establishments in Latin America.

      Digital Latin America, LLC offers a digital equipment and programming solution to cable companies by operating a digital network through satellite transmission, including an interactive programming guide, digital music offerings and pay-per-view Hollywood movies. Digital Latin America reached 224,000 subscribers as of December 31, 2004. On October 29, 2004 Claxson purchased a 48% equity interest in DLA Holdings, Inc., the newly formed holding company of Digital Latin America. Claxson obtained its equity interest in DLA Holdings in exchange for U.S.$3.4 million in funds and an agreement to provide services of up to an aggregate of U.S.$3.0 million (including satellite space, playout of Digital Latin America’s channels and back-office support) over three years. Concurrently with this transaction, Hicks Muse purchased 830,259 newly-issued Class A Common Shares of Claxson. Hicks Muse owns 38% of the

equity interests of DLA Holdings. An affiliate of Motorola owns the other equity interests of DLA Holdings.

BROADCAST RADIO BUSINESS

      We wholly own and operate two integrated broadcast radio businesses: Iberoamerican Radio Chile, S.A., which we refer to herein as “Radio Chile”; and Radio Sarandi. Radio Chile is the radio network with the largest audience in Chile, and we operate two radio stations owned by Sarandi Communications, S.A. in Uruguay, together with a third station that we lease from a third party.

      Our radio broadcast business is presently concentrated in Chile. The advertising market in Chile is seasonal, with advertising expenditures increasing throughout the year and peaking in the fourth quarter when consumer expenditures reach their peak.

      Radio Chile owns and/or operates eight centrally programmed radio networks, namely Pudahuel FM, Rock & Pop, Corazón, FM Dos, Concierto, Futuro, FM Hit , and Imagina , five of which were among the top ten ranked radio networks during 2004 in Santiago, which represents 39% of the national population and 58% of Chile’s purchasing power. The Radio Chile networks deploy a variety of programming formats designed to increase Radio Chile’s market share and to present a wide range of options to advertisers. We believe that our variety of programming formats makes Radio Chile less susceptible to changes in listening preferences than networks focused on a single segment.

      The following table identifies the formats and target audiences of the radio networks.

      Radio Chile’s eight radio networks had a combined 36.4% audience share in the Santiago market for the period from January through December 2004. The following table presents the rank and audience share in Santiago for each Radio Chile radio network for the periods indicated.

      Source: Search Marketing Reports

      Radio Chile is a distant leader in audience share in Santiago, compared to the other radio groups that operate more than one network. The Garcia Reyes Group captures a 7% audience share with the operation of two networks; the Consorcio Radial de Chile (PRISA Group) obtains 9% audience share operating four networks; and the Bezanilla Group has an 8% audience share operating three networks.

      Radio Chile’s networks reach over 90% of Chile’s population in 28 cities through 142 FM concessions. Our three largest networks reach over 90% of the total population, two reach over 70% of the total population, and the rest reach between 40% and 70% of the total population depending on the concentration of the target market of each network. Radio Chile had U.S.$13.7 and U.S.$16.7 million in revenue in 2003 and 2004, respectively, which accounted for an estimated 35% and 37% of the Chilean radio advertising market in 2003 and 2004, respectively.

      Radio Sarandi On September 21, 2001, our Uruguayan subsidiary executed a five-year lease and co-management agreement for the operation of three radio stations owned by Sarandi Communications, S.A: AM 690 (Sarandi), AM 890 (Sport), and FM 91.9 (Music One, today known as Radio Disney). Our chairman of the board and chief executive officer, Roberto Vivo-Chaneton and one of the beneficial owners of our Class F common shares, Guillermo Liberman (the owner of SLI.com), each owns a 25% equity interest in Sarandi. See Item 7B. “Related Party Transactions.” We coordinate the programming and marketing strategy and manage the advertising sales and other operational matters of AM Sarandi and operate the Radio Disney station pursuant to a franchise agreement with an affiliate of Disney, while we sub-lease the AM Sport station to a third party. We have also negotiated an option with Sarandi, (see Item 7B. “Related Party Transactions”) to acquire the company holding the Sarandi radio concession. Should we choose to exercise the option, the option price may be paid, at our election, in cash and/or our Class A common shares, which will be valued at the market price of the shares at the time of exercise and 50% of all amounts previously paid by us in lease monthly payments will be applied towards the option payment. We believe, that the proposed structure for the lease transaction complies with Uruguayan laws and regulations that prohibit foreign (i.e., non-Uruguayan) ownership of broadcasting transmission licenses. However, no Uruguay regulatory authority has approved the terms and conditions of this agreement. In June, 2004 we commenced the operation of Radiofutura 91.1 FM station which we lease from a third party under a five-year contract.

INTERNET AND BROADBAND BUSINESS

      We created and launched El Sitio Digital Channel in the fourth quarter of 2001, with the first broadband operator in Argentina, one of the first concrete efforts in Latin America toward digital-age content production specifically developed for broadband. El Sitio Digital Channel offers features organized along three axes: video and audio streaming and pay per view; 2D and 3D multiplayer games; and a community engine that allows users to personalize their content. This interphase was specially designed to run in broadband platforms such as cable modem, ADSL, wireless and satellite (DirectPC). In addition, for a limited time, we are offering users the option to acquire content by downloading it via a modern e-license system.

      Currently El Sitio Digital Channel is offering through Argentinean and Brazilian multiple system operators and telecommunication networks a wide range of content tailored to the interests of its target audience on a video-on-demand basis (e.g., family, news, sports and adult content) with own and third party brands such as Reuters, Foxsport, Playboy and Utilisima. El Sitio Digital Channel includes more than 2000 digitized videos — in AVH and DVD quality — Venus and Playboy TV clips for adults, Infinito documentaries, current events and information, MuchMusic music, its own radio, channels to upload personal videos and audio files, video tutorials and 2D community tools.

      During 2004 we were able to advance the development of a broadband and narrowband platform to sell originally produced and third party content, as well as improve our technology with respect to the digitalization of our content. In September 2004, we entered into an agreement with Microsoft Corporation pursuant to which the Windows Media Player 10 incorporates El Sitio Digital Channel’s platform to

distribute digital content in Latin America. In October 2004, we entered into an agreement with Brazil Telecom for the license of our El Sitio Digital Channel broadband platform and content to be distributed throughout Brazil Telecom’s client network. We were also able to continue to update and consolidate the El Sitio Digital Channel platform, and renew our relationship with Fibertel, a broadband provider in Argentina.

      Some companies, including other participants in the media industry, use and/or may use trademarks or service marks in English or other languages which, when translated, are similar to certain of our core marks. This usage may hinder our ability to build a unique brand identity and may lead to trademark disputes. If we lose the right to use a trademark or service mark, we may be forced to adopt a new mark which would result in the loss of substantial resources and brand identity. In any event, even if successful, litigating a trademark dispute would result in expenditures and diversion of executives’ time. Any inability to protect, enforce or use our trademarks, service marks or other intellectual property may have a material adverse effect on us.

      We also depend upon technology licensed from third parties for chat, homepage, search and related web services. Any dispute with a licensor of the technology may result in El Sitio’s inability to continue to use that technology. Additionally, there may be patents issued or pending that are held by third parties and that cover significant parts of the technology, products, business methods or services used to conduct our business. We cannot be certain that its technology, products, business methods or services do not or will not infringe upon valid patents or other intellectual property rights held by third parties. If a third party alleges infringement, we may be forced to take a license, which we may not be able to obtain on commercially reasonable terms. We may also incur substantial expenses in defending against third-party infringement claims, regardless of the merit of those claims.

REGULATION

      In general, many of the Latin American markets in which we operate do not have specific pay television laws. As a result, many of the old broadcast laws are applied to the pay television industry. The scope of broadcast regulation varies from country to country, although in many significant respects a similar approach is taken across all of the markets in which we operate. For example, broadcast regulations in most of our markets require cable and direct-to-home system operators to obtain licenses or concessions from the applicable domestic authority. In addition, most countries have regulations which set certain minimum standards regarding programming content, prescribe minimum standards for the content and scheduling of television advertisements and provide that a certain portion of the programming carried by the operators be produced domestically.

      The content regulations concerning programming in the countries in which we operate often prohibit material which contains excessive violence and pornography and usually provide a restricted exhibition schedule for adult-rated content and other material that is deemed inappropriate for children or the population at large. The general scheme of regulations governing the content of television advertising focuses on prohibiting fraudulent and misleading advertising. Many countries also restrict television advertising of alcohol and tobacco products. Generally, the domestic broadcasting licensing authorities have the responsibility for monitoring and enforcing compliance with broadcasting and programming content regulations; however, the level of enforcement varies widely among the different countries in which we operate.

      With the exception of Argentina, we are a foreign programmer of pay television channels in every market in which our pay television channels operate. As a foreign programmer, we are not directly subject to the broadcasting and content laws of the foreign countries where we operate. However, the local cable and direct-to-home system operators that distribute foreign programming, including our pay television channels, are subject to local broadcasting and content regulations and are therefore responsible for

complying with any local programming requirements and advertising laws. Consequently, many of our contracts with our cable and direct-to-home distributors require that our programming comply with domestic programming content and advertising regulations, and require us to indemnify our distributors should they suffer damages arising from our noncompliance with such domestic programming and advertising regulations. In December 2004, the Venezuelan government enacted a new law regulating the content and advertising for television and radio, including pay television. This new law which is called the Radio and Television Social Responsibility Law and became effective on June 8, 2005, imposes significant new restrictions on advertising over television networks in Venezuela, and contains onerous penalties and fines for the distributors in case of noncompliance. As a result, our clients in Venezuela have requested that we comply with the regulations, including those restrictions relating to the advertisement of alcoholic beverages, and have advised us that our failure to comply with such new regulations will result in a breach of our existing agreements and require us to indemnify them for any resulting damages. Since most of our channels are distributed through one feed (i.e., the same content and advertising is used in all regions), and certain of our channels have sponsorships or other forms of indirect advertisement of alcoholic beverages, our advertising revenues may be negatively affected, or our operating costs could increase should we be required to separate the feeds in order to allow different territories to air different advertising.

      There is a bill pending in the Argentine Senate that would require all programming broadcast through pay television in Argentina to be dubbed into Spanish. The Argentine House of Representatives has already approved the bill. A substantial part of our programming (especially the film channels distributed in the Southern cone and our adult channels) is subtitled. Consequently, if this bill were to become effective it would materially increase our programming costs.

      During 2003, the Federal Broadcast Commission in Argentina enacted a resolution which was scheduled to become effective in April 2004 prohibiting commercial breaks during movie broadcasts on pay television. The Argentine Chamber of Satellite Programmers appealed the resolution and its application was suspended until December 2004. The Federal Broadcast Commission extended the suspension pending issuance of an opinion by the Argentine Attorney General which has not yet been issued. Currently, under the interim rules of the Argentine Chamber of Satellite Programmers, we may air up to three commercial breaks during any movie broadcast. If the resolution or a similar law becomes effective our advertising revenues from our film channels will be negatively affected.

      Several Latin American countries began the process of deregulation of their telecommunications industries during 2001. Argentina, Chile, Colombia, Ecuador and Mexico are all opening their telecommunications markets to private competition. While deregulation will not immediately and directly affect the pay television industry, the effects of deregulation, including increased competition, lowered telephone tariffs and connection rates and increased investments in new technologies, could lead to increased opportunities for content distribution and higher Internet and multi-channel penetration rates.

      During 2002 the Brazilian government enacted and amended various regulations affecting the movie theater, home video and pay television industries. With respect to the Brazilian pay television industry, the regulations require cable and other pay television operators in Brazil to withhold 11% of the payments made to foreign programming providers, unless the programming providers elect to reinvest 3% of the revenues generated in Brazil in local productions. The programming provider must register before the National Film Agency (ANCINE) and the local cable operator must deposit such 3% in a bank account in Banco do Brazil. The foreign programming provider has 270 days to utilize such deposited funds for local production projects after which time any unused funds may be utilized by ANCINE.

      We have finalized the registration with ANCINE and the opening of the bank account in Banco do Brazil and our Brazilian pay television clients are withholding the required 3% of payments. Since its inception in early 2002, these regulations have undergone many modifications and further modifications in the future remain possible. If the regulations are further modified, it may affect our business.

      The radio broadcast industry in Chile is regulated by the Subsecretariat of Telecommunications, which is known as “SUBTEL”, which is overseen by the Ministry of Public Works, Transport and Telecommunications. Legislation regarding radio in Chile is contained in the 1982 General Telecommunications Law, as amended. Broadcast radio licenses are currently awarded for 25-year terms.

      A Chilean law, published on June 4, 2001, includes provisions that may be relevant to the ongoing operations of our Chilean broadcast radio businesses. The law provides that any change in ownership or control of a radio business concession is subject to approval of the Chilean anti-trust authorities who must issue a report regarding the impact on the information and news market of the change in control. If this report is not issued within 30 days from the filing of the application it will be deemed that the authorities have no objections. This law also provides that radio broadcasting concessions may only be granted or transferred to entities that have more than 10% non-Chilean ownership if in the country of origin of the foreign nationals, Chilean nationals are granted similar rights. This provision may affect the manner in which Claxson and its affiliates conduct its broadcast radio business in Chile, including the renewal of the existing concession or acquisition of new ones.

COMPETITION

      The media and entertainment business is highly competitive. Each of our pay television, broadcast television and radio businesses competes against companies operating in these and other media segments. For example, our pay television business faces competition from other pay television operators as well as Internet companies, broadcast networks, print media and other forms of entertainment.

      Within the pay television industry, our channels compete with programming from AOL Time Warner, Viacom, Liberty Media, Disney, Globo and Televisa, among others. We compete with their channels for carriage on cable and satellite systems that have limited capacity. We also compete with these channels for viewers and advertising dollars based upon quality of programming, number of subscribers, ratings and subscriber demographics.

      Our broadcast radio business in Chile competes with national and regional broadcasters for audience share and advertising revenues primarily on the basis of program content that appeals to a particular target demographic audience. Radio Chile’s main competitors are the Garcia Reyes Group, the Consorcio Radial de Chile (Prisa Group) and the Bezanilla Group, each of which have established significant audience share.

      Many companies provide websites and services targeted to Spanish- and Portuguese-speaking audiences. All of these companies compete with our websites for user traffic and advertising dollars. Competition for users and advertisers is intense and there are no substantial barriers to entry in this market. We also compete with providers of content and services over the Internet, including web directories, portals, search engines, content sites, Internet service providers and sites maintained by government and educational institutions.

      The following chart presents our current operational structure. The chart omits certain intermediate holding companies. For purposes of this chart, names in italics are brand names.

      A description of the location and use and of our principal offices and facilities is set forth below.

      Our U.S. headquarters are located at 1550 Biscayne Boulevard, Miami, Florida. This facility occupies approximately 25,600 square feet of leased space.

      Our principal executive offices and headquarters in Buenos Aires, Argentina are located at Av. Melian 2752/54 in a 60,000 square foot building that we own, containing both administrative and production functions, including two television studios. We also own two additional offices that are located at Av. Manuel Ugarte 3612/18 and Av. Melian 2760/62. Prior to May 2005, we also leased approximately 8,000 square feet of warehouse space in Buenos Aires and approximately 20,000 square feet of office and production space with a street front television studio for our Much Music channel. As of May 2005, we have moved the operations of Much Music into our Av. Melian location.

      In addition, we lease office space in Mexico, the Bahamas and Brazil to support sales efforts to cable and direct-to-home operators in certain markets.

      Radio Chile’s principal offices are located in Santiago, Chile, where we own an office building containing approximately 1,600 square meters of office space. Radio Chile owns additional office space of

400 square meters in Santiago, Chile and either owns or leases a number of radio transmission towers throughout Chile.

      Radio Sarandi leases office space of approximately 600 square meters in Montevideo, Uruguay.