<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934
and Rule 13e-3 thereunder)
Cable TV Fund 12-B, Ltd.
------------------------
(Name of the Issuer)
Jones Intercable, Inc. (File No. 0-8947)
and
Cable TV Fund 12-B, Ltd. (File No. 0-13807)
-------------------------------------------
(Name of Person(s) Filing Statement)
Limited Partnership Interests
-----------------------------
(Title of Class of Securities)
Elizabeth M. Steele, Esq.
Vice President and General Counsel
Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, Colorado 80112
(303) 784-8400
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf
of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. X The filing of solicitation materials or an information statement
_____ subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. _____ The filing of a registration statement under the Securities Act of
1933.
c. _____ A tender offer.
d. _____ None of the above.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: X
_____
Calculation of Filing Fee
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- --------------------- --------------------
$20,066,694 $4,013
X Check box if any part of the fee is offset as provided by Rule 0-
_____ 11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $4,013
Form or Registration No.: Schedule 14A
Filing Party: Cable TV Fund 12-B, Ltd.
Commission File No. 0-13807
Date Filed: October 2, 1997
*Pursuant to Rule 0-11(c)(2), the transaction valuation is based upon Cable TV
Fund 12-B, Ltd.'s 9 percent interest in the $222,963,267 sales price that is to
be paid to Cable TV Fund 12-BCD Venture by Jones Intercable, Inc. in connection
with the transaction that is the subject of the proxy solicitation.
<PAGE>
INTRODUCTION
------------
This Amendment No. 1 to Rule 13e-3 Transaction Statement is being filed
jointly by Cable TV Fund 12-B, Ltd., a Colorado limited partnership, and by
Jones Intercable, Inc., a Colorado corporation that is the general partner of
Cable TV Fund 12-B, Ltd., in connection with the sale of assets of Cable TV Fund
12-BCD Venture to Jones Intercable, Inc. upon the terms and subject to the
conditions of a Purchase and Sale Agreement by and between Cable TV Fund 12-BCD
Venture and Jones Intercable, Inc. The sale may be a transaction subject to Rule
13e-3 because it will result in the sale of certain assets of Cable TV Fund 12-
BCD Venture to Jones Intercable, Inc.
The transaction also involves a vote of the limited partners of Cable TV
Fund 12-B, Ltd., which is subject to Regulation 14A of the Securities Exchange
Act of 1934, and the information contained in the revised preliminary proxy
statement filed pursuant thereto is incorporated by reference in answer to the
items of this Amendment No. 1 to Rule 13e-3 Transaction Statement. Attached as
an exhibit to this Amendment No. 1 to Rule 13e-3 Transaction Statement are the
revised preliminary proxy solicitation materials that have been filed
simultaneously herewith. The cross-reference sheet that follows shows the
location in the revised preliminary proxy statement of the information
incorporated by reference in response to the items of this Amendment No. 1 to
Rule 13e-3 Transaction Statement, as permitted by General Instruction F to
Schedule 13E-3.
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<PAGE>
CROSS-REFERENCE SHEET
---------------------
(Pursuant to General Instruction F to Schedule 13E-3)
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------ ---------------
<S> <C>
1. Issuer and Class of
Security Subject to
the Transaction.
(a)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Certain Information About the
Partnership and the General Partner.
(b)-(c)............... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.
(d)................... Special Factors, Prior Acquisitions and Sales.
(e)................... [Not applicable.]
(f)................... [Not applicable.]
2. Identity and Background.
(a)-(d), (g).......... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Certain Information About the
Partnership and the General Partner; Schedule 1.
(e)-(f)............... [The answers to these items are in the negative;
pursuant to the Instruction following Item 2(f),
negative answers to Items 2(e) and 2(f) have not
been furnished to limited partners in the proxy
statement.]
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------ ---------------
<S> <C>
3. Past Contracts,
Transactions or
Negotiations.
(a)(1)................ Certain Related Party Transactions.
(a)(2)................ [None.]
(b)................... [None.]
4. Terms of the
Transaction.
(a)................... Proposed Sale of Assets.
(b)................... [Not applicable.]
5. Plans or Proposals of
the Issuer or
Affiliate.
(a)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Certain Information About the
Partnership and the General Partner.
(b)-(e)............... [Not applicable.]
(f)-(g)............... Vote of the Limited Partners of Cable TV Fund 12-B,
Ltd.; Certain Information About the Partnership
and the General Partner.
6. Source and Amounts of
Funds or Other
Consideration.
(a)................... Proposed Sale of Assets, The Purchase and Sale
Agreement; Proposed Sale of Assets, Purchase Price.
</TABLE>
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<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
(b)................... Special Factors, The Appraisals; Special Factors,
Costs of the Transaction.
(c)................... Proposed Sale of Assets, The Purchase and Sale
Agreement.
(d)................... [Not applicable.]
7. Purpose(s),
Alternatives,
Reasons and Effects.
(a)................... Special Factors, The Partnership's Investment
Objectives; Special Factors, The General Partner's
Objectives; Special Factors, Reasons for the
Timing of the Sale.
(b)................... Special Factors, Reasons for the Timing of the
Sale; Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale
of Assets.
(c)................... Special Factors, The Partnership's Investment
Objectives; Special Factors, Reasons for the
Timing of the Sale; Special Factors,
Recommendation of the General Partner and Fairness
of the Proposed Sale of Assets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
(d)................... Special Factors, Certain Effects of the Sale;
Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets; Federal Income Tax Consequences.
8. Fairness of the
Transaction.
(a)-(b)............... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale
of Assets; Special Factors, The Appraisals.
(c)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Special Factors, Relevant Provisions
of the Partnership Agreement; Proposed Sale of
Assets, Conditions to Closing.
(d)-(e)............... Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets.
(f)................... [Not applicable.]
9. Reports, Opinions,
Appraisals and Certain
Negotiations.
(a)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
(b)................... Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets; Special Factors, The Appraisals.
(c)................... Special Factors, The Appraisals; Available
Information.
10. Interest in Securities
of the Issuer
(a)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Schedule 1.
(b)................... [None.]
11. Contracts, [None.]
Arrangements or
Understandings with
Respect to the
Issuer's Securities.
12. Present Intention and
Recommendation of
Certain Persons with
Regard to the
Transaction.
(a)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.
(b)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.; Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale
of Assets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
-------------------- ---------------
<S> <C>
13. Other Provisions of
the Transaction.
(a)................... Special Factors, Certain Effects of the Sale.
(b)................... [Not applicable.]
(c)................... [Not applicable.]
14. Financial Information.
(a)(1)................ [Pursuant to General Instruction D to Schedule 13E-
3, the audited financial statements of Cable TV
Fund 12-B, Ltd. for the fiscal years ended December
31, 1995 and 1996 are incorporated by reference
from Cable TV Fund 12-B, Ltd.'s Annual Report on
Form 10-K for the fiscal year ended December 31,
1996, which is filed as an exhibit to this Schedule
13E-3.]
(a)(2)................ [Pursuant to General Instruction D to Schedule 13E-
3, the unaudited financial statements of Cable TV
Fund 12-B, Ltd. for its 1997 fiscal quarters are
incorporated by reference from Cable TV Fund 12-B,
Ltd.'s Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997
and September 30, 1997, which are filed as exhibits
to this Schedule 13E-3.]
(a)(3)................ [Not applicable.]
(a)(4)................ Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets.
(b)................... Unaudited Pro Forma Financial Information of Cable
TV Fund 12-B, Ltd.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
15. Persons and Assets
Employed,
Retained or Utilized.
(a)................... Vote of the Limited Partners of Cable TV Fund
12-B, Ltd.
(b)................... [None.]
16. Additional Special Factors, Relevant Provisions of the
Information. Partnership Agreement.
- -------------------------------------------------------------------------------
17. Materials
Filed as Exhibits:
*(a)................... Jones Cable Holdings II, Inc.'s Credit Facility.
*(b)(1)................ Appraisal of the Albuquerque System by The
Strategies Group, Inc.
*(b)(2)................ Appraisal of the Albuquerque System by Western
Cablesystems, Inc.
*(b)(3)................ Appraisal of the Albuquerque System by Bond &
Pecaro, Inc.
(c) [Not applicable.]
*(d)(1)................ Preliminary Proxy Statement to be furnished to the
limited partners of Cable TV Fund 12-B, Ltd.
*(d)(2)................ Cable TV Fund 12-B, Ltd.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
*(d)(3)................ Cable TV Fund 12-B, Ltd.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31,
1997.
*(d)(4)................ Cable TV Fund 12-B, Ltd.'s Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1997.
(d)(5)................ Revised Preliminary Proxy Statement to be furnished
to the limited partners of Cable TV Fund 12-B, Ltd.
(d)(6)................ Cable TV Fund 12-B, Ltd.'s Quarterly Report on Form
10-Q for the fiscal quarter ended September 30,
1997.
(e)................... [Not applicable.]
(f)................... [Not applicable.]
- ------------------
*previously filed
</TABLE>
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<PAGE>
SIGNATURES
----------
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
JONES INTERCABLE, INC.,
a Colorado corporation
Dated: November 24, 1997 By:/s/ Elizabeth M. Steele
-----------------------
Elizabeth M. Steele
Vice President
CABLE TV FUND 12-B, LTD.,
a Colorado limited partnership
By: Jones Intercable, Inc.,
a Colorado corporation,
as general partner
Dated: November 24, 1997 By:/s/ Elizabeth M. Steele
-----------------------
Elizabeth M. Steele
Vice President
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<PAGE>
EXHIBIT 99.(d)(5)
[LOGO OF JONES INTERCABLE, INC. APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF CABLE TV FUND 12-B, LTD.
To the Limited Partners of Cable TV Fund 12-B, Ltd.:
A special vote of the limited partners of Cable TV Fund 12-B, Ltd. (the
"Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Intercable, Inc., the general partner of the Partnership,
for the purpose of obtaining limited partner approval of the sale of the
Albuquerque, New Mexico cable television system (the "Albuquerque System")
owned by the Cable TV Fund 12-BCD Venture, a joint venture in which the
Partnership has a 9 percent ownership interest, for $222,963,267 in cash,
subject to customary working capital closing adjustments that may have the
effect of increasing or decreasing the sales price by a non-material amount.
The Albuquerque System is proposed to be sold to Jones Communications of New
Mexico, Inc., an indirect wholly owned subsidiary of the General Partner.
Information relating to this matter is set forth in the accompanying Proxy
Statement.
If the limited partners approve the proposed sale of the Albuquerque System
and if the transaction is closed, the Cable TV Fund 12-BCD Venture will repay
a portion of its debt and $125,000,000 of net sale proceeds will be
distributed to the three constituent partnerships of the Cable TV Fund 12-BCD
Venture in proportion to their ownership interests. The closing adjustments
will not affect the amount of the net sale proceeds distributed to the
partnerships. The Partnership accordingly will receive 9 percent of such
proceeds, estimated to total approximately $11,474,475, and the Partnership
will distribute this portion of the net sale proceeds to its partners of
record as of the closing date of the sale of the Albuquerque System. Of this
amount, approximately $8,605,856 will be distributed to the limited partners
and approximately $2,868,619 will be distributed to the general partner. It is
estimated that the limited partners will receive $78 for each $500 limited
partnership interest, or $156 for each $1,000 invested in the Partnership.
Once the distribution of the net proceeds from the sale of the Albuquerque
System has been made, limited partners will have received a total of $977 for
each $500 limited partnership interest, or $1,954 for each $1,000 invested in
the Partnership, taking into account the prior distributions to limited
partners made in 1995 and 1996.
<PAGE>
Only limited partners of record at the close of business on December 15,
1997 are entitled to notice of, and to participate in, this vote of limited
partners. It is very important that all limited partners participate in the
voting. The Cable TV Fund 12-BCD Venture's ability to complete the transaction
discussed in the Proxy Statement and the Partnership's ability to make a
distribution to its partners of its portion of the net proceeds of the sale of
the Albuquerque System pursuant to the terms of the Partnership's limited
partnership agreement (the "Partnership Agreement") are dependent upon the
approval of the transaction by the holders of a majority of the Partnership's
limited partnership interests.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership Agreement requires that the
proposal to sell the Albuquerque System be approved by the holders of a
majority of the limited partnership interests, abstentions and non-votes will
be treated as votes against the proposal. A properly executed consent returned
to the general partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Albuquerque System. Because
limited partners do not have dissenters' or appraisal rights in connection
with the proposed sale of the Albuquerque System, if the holders of a majority
of the limited partnership interests approve the proposal, all limited
partners will receive a distribution of the net sale proceeds in accordance
with the procedures prescribed by the Partnership Agreement regardless of how
or whether they vote on the proposal.
Jones Intercable, Inc., as the general partner of the Partnership, urges you
to sign and return the enclosed proxy card as promptly as possible. The proxy
card should be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
[SIGNATURE OF ELIZABETH M. STEELE APPEARS HERE]
Elizabeth M. Steele
Secretary
Dated: December 19, 1997
<PAGE>
[LOGO OF JONES INTERCABLE, INC. APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS OF CABLE TV FUND 12-B, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Cable TV Fund 12-B, Ltd.
(the "Partnership") by Jones Intercable, Inc., the general partner of the
Partnership (the "General Partner"), on behalf of the Partnership, for the
purpose of obtaining limited partner approval of the sale of the Albuquerque,
New Mexico cable television system (the "Albuquerque System") owned by the
Cable TV Fund 12-BCD Venture (the "Venture"), a joint venture in which the
Partnership has a 9 percent ownership interest, for $222,963,267 in cash,
subject to customary working capital closing adjustments that may have the
effect of increasing or decreasing the sales price by a non-material amount.
The Albuquerque System is proposed to be sold to Jones Communications of New
Mexico, Inc., an indirect wholly owned subsidiary of the General Partner.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the General Partner may solicit proxies by mail, by
fax, by telephone or by personal interview. The deadline for the receipt of
proxy votes is January 31, 1998, unless extended, but the vote of the
Partnership's limited partners will be deemed to be concluded on the date, at
least 20 business days from the date the proxy materials are sent to limited
partners, that the General Partner, on behalf of the Partnership, is in
receipt of proxies executed by the holders of a majority of the limited
partnership interests either consenting to or disapproving of the proposed
transaction. The General Partner may extend the deadline for receipt of proxy
votes if a majority of the limited partners fail to express an opinion on the
transaction by January 31, 1998. If the General Partner extends the deadline
for receipt of proxy votes, the limited partners will be informed by mail of
the reason for the extension and the new deadline. The cost of the proxy
solicitation will be paid by the General Partner.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $500 of capital contributed to the Partnership.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
As of November 25, 1997, the Partnership had 111,035 limited partnership
interests outstanding held by 7,635 persons. There is no established trading
market for such interests. To the best of the General Partner's knowledge, no
person or group of persons beneficially own more than five percent of the
limited partnership interests. During late 1996 and early 1997, Smithtown Bay,
LLC and Madison Partnership Liquidity Investors 30, LLC, two firms
unaffiliated with the Partnership, the General Partner and each other,
conducted tender offers for interests in the Partnership. As of November 25,
1997, Smithtown Bay, LLC and its affiliates owned 4,996 limited partnership
interests, or 4.5 percent of the limited partnership interests. As of such
date, Madison Partnership Liquidity Investors 30, LLC and its affiliates owned
617 limited partnership interests, or 0.6 percent of the limited partnership
interests. Pursuant to the terms of agreements between the Partnership and the
General Partner and such firms, all of the limited partnership interests held
by these firms will be voted in the same manner as the majority of all other
limited partners who vote on the sale of the Albuquerque System. Thus, for
example, if the limited partnership interests voted in favor of the
transaction constitute a majority of all limited partnership interests voted
but not a majority of all limited partnership interests, these firms will be
required to vote their limited partnership interests in favor of the
transaction, and in such event the votes of these firms could be sufficient to
cause the transaction to be approved by a majority of all limited partnership
interests, which is the vote necessary to cause the transaction to be
approved. The General Partner owns 6 limited partnership interests. Officers
and directors of the General Partner own no limited partnership interests. The
6 limited partnership interests owned by the General Partner will be voted in
favor of the proposed transaction. Only limited partners of record at the
close of business on December 15, 1997 will be entitled to notice of, and to
participate in, the vote.
As of the date of this Proxy Statement, the Partnership's only asset is its
9 percent ownership interest in the Venture. Cable TV Fund 12-C, Ltd. ("Fund
12-C") has a 15 percent ownership interest in the Venture and Cable TV Fund
12-D, Ltd. ("Fund 12-D") has a 76 percent ownership interest in the Venture.
As of the date of this Proxy Statement, the Venture owns the Albuquerque
System and the cable television system serving areas in and around Palmdale
and Lancaster, California (the "Palmdale/Lancaster System"). The Venture sold
its cable television system serving Houghton and Hancock, Michigan
(the"Houghton/Hancock System") in 1987, the Venture sold its cable television
system serving California City, California (the "California City System") in
1992 and the Venture sold its cable television system serving Tampa, Florida
(the "Tampa System") in 1996. The Partnership sold its cable television system
serving Augusta, Georgia (the "Augusta System") in 1995.
Upon the consummation of the proposed sale of the Albuquerque System, the
Venture will repay its outstanding Senior Notes balance of $47,479,874 plus a
make whole premium that, based on current market interest rates, is estimated
to total $3,354,060 and, subject to an amendment to the Venture's credit
facility to permit a portion of the sale proceeds to be distributed to the
three constituent partnerships of the Venture, the Venture will repay an
estimated $49,767,578 of the then outstanding balance of its credit facility,
leaving an estimated $41,900,000 of debt outstanding under the amended credit
facility secured by the Palmdale/Lancaster System, and then the remaining
$125,000,000 of net sale proceeds will be distributed to the three constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. The closing adjustments will not affect the amount of the net sale
proceeds distributed to the partnerships. The Partnership will receive 9
percent of the net sale proceeds, estimated to total approximately
$11,474,475, and the Partnership will distribute this portion of the net sale
proceeds to its partners of record as of the closing date of the sale of the
Albuquerque System. Because limited partners have already received
distributions in an amount in excess of the capital initially contributed to
the Partnership by the limited partners, the Partnership's portion of the net
proceeds from the Albuquerque System's sale will be distributed 75 percent to
the limited partners and 25 percent to the General Partner. Based upon pro
forma financial information as of September 30, 1997, as a result of the
Albuquerque System's sale, the limited partners of the Partnership, as a
group, will receive approximately $8,605,856 and the General Partner will
receive approximately $2,868,619. Limited partners will receive $78 for each
$500 limited partnership interest, or $156 for each $1,000 invested in the
Partnership, from the Partnership's portion of the net proceeds of the
Albuquerque System's sale. Once the Partnership has completed the distribution
of its portion of the net proceeds from the sale of the Albuquerque System,
limited partners of the Partnership will have received a total of $977 for
each $500 limited partnership interest, or $1,954 for each $1,000 invested in
the
2
<PAGE>
Partnership, taking into account the prior distributions to limited partners
made in 1995 and 1996 from the net proceeds of the sales of the Augusta System
and the Tampa System.
Although the General Partner expects that the Palmdale/Lancaster System will
be sold in the next few years, the General Partner cannot predict when this
remaining asset of the Venture will be sold and thus the General Partner
cannot predict when the Partnership will be terminated and dissolved. Thus,
after the sale of the Albuquerque System by the Venture, the Partnership will
continue to be a public entity subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). A vote of the limited partners will be required in the future to
approve the sale of the Palmdale/Lancaster System prior to its sale regardless
of the entity to which it is sold.
Limited partners should note that there are certain income tax consequences
of the proposed sale of the Albuquerque System, which are outlined herein
under the caption "Federal Income Tax Consequences."
The Board of Directors of the General Partner has approved the proposed sale
of the Albuquerque System and the General Partner recommends approval of the
transaction by the holders of the Partnership's limited partnership interests.
In determining the fairness of the proposed transaction, the General Partner
followed the procedures mandated by Section 2.3(b)(iv)(b) of the Partnership's
limited partnership agreement (the "Partnership Agreement"), which provides
that the Partnership's cable television systems may be sold to the General
Partner or to one of its affiliates if the price paid by the General Partner
or such affiliate is determined by the average of three separate, independent
appraisals of the fair market value of the system to be sold. Because the
purchase price to be paid to the Venture is equal to the average of three
separate, independent appraisals of the fair market value of the Albuquerque
System, the Board of Directors of the General Partner has concluded that the
consideration to be paid to the Venture for the Albuquerque System is fair to
all unaffiliated limited partners of the Partnership.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership Agreement requires that the
proposal to sell the Albuquerque System be approved by the holders of a
majority of the limited partnership interests, abstentions and non-votes will
be treated as votes against the proposal. A properly executed consent returned
to the General Partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Albuquerque System. Because
limited partners do not have dissenters' or appraisal rights in connection
with the proposed sale of the Albuquerque System, if the holders of a majority
of the limited partnership interests approve the proposal, all limited
partners will receive a distribution of the Partnership's portion of the net
sale proceeds in accordance with the procedures prescribed by the Partnership
Agreement regardless of how or whether they vote on the proposal.
The General Partner has also prepared proxy statements that are being
delivered to the limited partners of Fund 12-C and Fund 12-D in connection
with their votes to approve the sale of the Albuquerque System by the Venture.
The closing of the sale of the Albuquerque System will occur only if the
transaction is approved by the holders of a majority of the limited
partnership interests of each of the three constituent partnerships of the
Venture. Copies of the proxy statements being delivered to the limited
partners of the Venture's two other constituent partnerships have been filed
with the Securities and Exchange Commission (the "Commission") and can be
obtained either from the Commission or from the General Partner upon written
request to Elizabeth M. Steele, Secretary, Jones Intercable, Inc., 9697 East
Mineral Avenue, Englewood, Colorado 80112, (303) 792-3111. See also "Certain
Information About the Partnership and the General Partner."
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is December 19, 1997.
3
<PAGE>
SPECIAL FACTORS
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to obtain capital appreciation in the value of the Partnership's cable
television properties; to generate tax losses that could be used to offset
taxable income of limited partners from other sources; and to obtain equity
build-up through debt reduction. It was contemplated from the outset of the
Partnership's existence that capital appreciation in Partnership cable
television properties would be converted to cash by a sale of such properties
at such time as the General Partner determined that the Partnership's
investment objectives had substantially been achieved and after a holding
period of approximately five to seven years. It also was contemplated from the
outset of the Partnership's existence that the General Partner or one of its
affiliates could be the purchaser of the Partnership's cable television
properties.
The Venture was formed to pool the financial resources of three public
partnerships sponsored by the General Partner with identical investment
objectives and to enable them to acquire a greater number of and/or larger
cable television systems than any one of the partnerships could acquire on
their own. The Venture acquired the Albuquerque System in August 1986. Based
upon the track record of prior public partnerships sponsored by the General
Partner that had liquidated or were in the process of liquidating their assets
during the period that limited partnership interests in the Partnership were
being sold and based upon disclosures made to prospective investors about the
Partnership's investment objectives in the Cable TV Fund 12 prospectus and
accompanying sales brochure, investors in the Partnership reasonably could
have anticipated that the Partnership's investment objectives would be
achieved and its assets liquidated after a holding period of approximately
five to seven years. Due to the uncertain and then adverse regulatory
environment that developed in the early 1990s for the cable television
industry, the resultant decline in the prices for cable television systems and
the subsequent inactivity in the cable television system marketplace, the
General Partner determined that it would be prudent to delay the sale of the
Albuquerque System until market conditions improved, and as a result the
Albuquerque System has been held by the Venture for more than 11 years.
The purpose of the sale of the Albuquerque System, from the Partnership's
perspective, is to attain the Partnership's primary investment objective with
respect to the Albuquerque System, i.e., to convert the Partnership's capital
appreciation in the Albuquerque System to cash. The sale proceeds will be used
to repay a substantial portion of the Venture's debt, and the remaining sale
proceeds will be distributed to the three constituent partnerships of the
Venture. The Partnership in turn will distribute its portion of the net sale
proceeds to the partners of the Partnership in accordance with the
distribution procedures established by the Partnership Agreement. The sale of
the Albuquerque System is thus the necessary final step in the Partnership's
accomplishment of its investment objectives with respect to the Albuquerque
System.
PRIOR ACQUISITIONS AND SALES
The Partnership was formed in June 1985 as a Colorado limited partnership in
connection with a public offering of its limited partnership interests. The
Partnership acquired the Augusta System in August 1985, and it sold the
Augusta System in October 1995 to a subsidiary of the General Partner for a
sales price of $142,618,000, which price represented the average of three
separate, independent appraisals of the fair market value of the Augusta
System. The transaction was approved by the holders of approximately 75
percent of the Partnership's limited partnership interests in a vote of the
limited partners held in August 1995. The Partnership subsequently paid all of
its indebtedness and distributed the net sale proceeds to its partners. The
limited partners of the Partnership, as a group, received $96,079,375 from the
Augusta System's net sale proceeds and the General Partner received
$13,520,625 from the Augusta System's net sale proceeds.
In March 1986, the Partnership invested $12,437,500 of limited partner
capital contributions in the Venture, through which it acquired a 9 percent
ownership interest in the Venture. The Venture ultimately acquired five cable
television systems: the Houghton/Hancock System was acquired in May 1986, the
California City System was acquired in April 1986, the Albuquerque System was
acquired in August 1986, the Palmdale/Lancaster System was acquired in April
1986 and the Tampa System was acquired in December 1986.
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The Houghton/Hancock System was sold in August 1987 to an unaffiliated cable
television system operator for a sales price of $5,000,000 and the California
City System was sold in April 1992 to an unaffiliated cable television system
operator for a sales price of $2,608,000. The sale proceeds from the Venture's
sales of the Houghton/Hancock System and the California City System were used
to reduce the Venture's indebtedness. None of the sale proceeds were
distributed to the Venture's three constituent partnerships and thus none of
the sale proceeds were distributed to the Partnership or its partners. No vote
of the limited partners of the Partnership was required in connection with the
sale of either of these systems because neither of these systems constituted
all or substantially all of the Partnership's assets.
The Venture sold the Tampa System in February 1996 to a subsidiary of the
General Partner for a sales price of $110,395,667, which price was determined
by the average of three separate, independent appraisals of the fair market
value of the Tampa System. Because the Venture's debt arrangements did not
allow the Venture to make distributions on the sale of Venture assets, in
February 1996 the Venture's debt arrangements were amended to permit a
$55,000,000 distribution to the Venture's three constituent partnerships from
the Tampa System's sale proceeds, and the balance of the Tampa System's sale
proceeds was used to reduce Venture indebtedness. The Partnership's portion of
this distribution was $5,049,000, of which $3,787,000 was distributed to the
limited partners and $1,262,000 was distributed to the General Partner. No
vote of the limited partners of the Partnership was required in connection
with the sale of the Tampa System because the assets of the Tampa System did
not constitute all or substantially all of the Partnership's assets.
Immediately following its acquisition of the Tampa System, the subsidiary of
the General Partner that had acquired the Tampa System conveyed the Tampa
System, along with certain other cable television systems owned by the
subsidiary of the General Partner, and cash in the amount of $3,500,000, to
Time Warner Entertainment Advance/Newhouse Partnership ("Time Warner"), an
unaffiliated cable television system operator, in exchange for cable
television systems owned by Time Warner serving communities in Prince Georges
County, Maryland and Reston, Virginia. The Venture's sale of the Tampa System
and the subsequent exchange of the Tampa System for Time Warner systems are
the subject of litigation filed by several limited partners of Fund 12-D. See
"Special Factors, Legal Proceedings."
Limited partners of the Partnership have received distributions from the
Augusta System sale and the Tampa System sale totaling $99,866,375. All
distributions to date have given the Partnership's limited partners an
approximate return of $899 for each $500 limited partnership interest, or
$1,798 for each $1,000 invested in the Partnership.
The Partnership intends to make a distribution of the Partnership's portion
of the net proceeds of the sale of the Venture's Albuquerque System to its
partners. Following this distribution, the Partnership will continue to own
its 9 percent interest in the Venture, and the Venture will continue to own
and operate the Palmdale/Lancaster System until it too is sold. A vote of the
limited partners of the Partnership will be required in the future to approve
the sale of the Palmdale/Lancaster System prior to its sale regardless of the
entity to which it is sold.
THE GENERAL PARTNER'S OBJECTIVES
The purpose of the transaction from the General Partner's perspective is to
enable the Venture to sell the Albuquerque System at a fair price and to
enable the General Partner through an indirect wholly owned subsidiary to
acquire a cable television system operating in a marketplace in which the
General Partner itself desires to own and operate a cable television system.
The General Partner currently is one of the ten largest cable television
system operators in the United States, with owned and managed systems totaling
approximately 1.4 million basic subscribers. A key element of the General
Partner's strategy is to increase the number of owned subscribers clustered in
attractive demographic areas. The General Partner is making progress in
clustering its owned subscribers in two primary groups of cable systems. The
General Partner's Maryland/Virginia cluster is based primarily on geography.
The General Partner's suburban cluster is based on similar market and
operating characteristics, rather than geography. The General Partner believes
that its clustering strategy may allow it to obtain both economies of scale
and operating efficiencies, for example in areas such as marketing,
administration and capital expenditures. The General Partner desires to add
the Albuquerque System to its suburban cluster, which currently includes the
cable systems serving the communities of Savannah and Augusta, Georgia, Pima
County, Arizona and Independence, Missouri.
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In contrast to the Partnership, which is a Colorado limited partnership with
a finite term and which sought cable television properties with high growth
potential during a holding period of approximately five to seven years, the
General Partner, a Colorado corporation with perpetual existence, is seeking
to acquire cable television systems that can generate a steady stream of
income and may appreciate in value over a longer holding period. The
Albuquerque System satisfies this objective of the General Partner. The
General Partner also may be in a better position than the Partnership and the
Venture to access both debt and equity to finance the long-term development of
the Albuquerque System. The General Partner may be able to leverage the
Albuquerque System at a higher level than the Venture has done and,
accordingly, the General Partner may be able to generate a greater return on
its investment in the Albuquerque System than the Partnership and the Venture
would be able to do within the same time. Because the General Partner's
investment horizon is much longer term than the Partnership's investment
horizon, and the General Partner will not need to sell the Albuquerque System
to achieve its investment objectives, it can better withstand the costs
associated with meeting the competition and the regulatory risks inherent in
long-term holding and development of the Albuquerque System.
RELEVANT PROVISIONS OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because its investment in the Venture is the Partnership's sole remaining
asset and because the Albuquerque System represents 63.9 percent of the
Venture's assets and 64.3 percent of the Venture's revenues, the sale of the
Albuquerque System is being submitted for limited partner approval to the
limited partners of the Partnership, Fund 12-C and Fund 12-D.
Section 2.3(b)(iv)(b) of the Partnership Agreement permits the Partnership
to sell any or all of its cable television systems directly to the General
Partner or one or more of its affiliates if the system to be sold has been
held by the Partnership for at least three years, or if it is part of, or
related to, another system that has been held for three years, and provided
that the price paid to the Partnership by the General Partner or any such
affiliate is determined by the average of three separate, independent
appraisals of the particular cable television system or systems being sold,
and that the cost of such appraisals is not borne by the Partnership. Because
the Albuquerque System has been held by the Venture for at least three years
and the purchase price to be paid to the Venture is equal to the average of
three separate, independent appraisals of the fair market value of the
Albuquerque System obtained at the General Partner's expense, these
requirements of the Partnership Agreement have been satisfied.
LEGAL PROCEEDINGS
The General Partner is a defendant in a now consolidated civil action filed
by limited partners of Fund 12-D derivatively on behalf of the Partnership,
Fund 12-C and Fund 12-D. The consolidated complaint generally alleges that the
General Partner breached its fiduciary duty to the plaintiffs and to the other
limited partners of the Partnership, Fund 12-C and Fund 12-D and the Venture
in connection with the Venture's sale of the Tampa System to a subsidiary of
the General Partner and the subsequent trade of the Tampa System to Time
Warner. The consolidated complaint also sets forth a claim for breach of
contract and a claim for breach of the implied covenant of good faith and fair
dealing. Among other things, the plaintiffs assert that the subsidiary of the
General Partner that acquired the Tampa System paid an inadequate price for
the Tampa System. The price paid for the Tampa System was determined by the
average of three separate, independent appraisals of the Tampa System's fair
market value as required by the limited partnership agreements of the
Partnership, Fund 12-C and Fund 12-D. The plaintiffs have challenged the
adequacy and independence of the appraisals. The consolidated complaint seeks
damages in an unspecified amount and an award of attorneys' fees, and the
complaint also seeks punitive damages and certain equitable relief.
The General Partner has filed its answer to the consolidated complaint and
has generally denied the substantive allegations in the complaint and has
asserted a number of affirmative defenses. The General Partner believes that
the price paid to the Venture for the Tampa System was fair, that it
represented the fair market value of the Tampa System as determined by the
processes dictated by the partnership agreements of the Venture's three
constituent partnerships and that it has meritorious defenses to this
litigation. The General Partner intends to defend this lawsuit vigorously.
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The case is pending in Arapahoe County District Court in the State of
Colorado. Discovery in the case is continuing and depositions of the parties
and their experts have been or are being taken. A trial is set for February
1998.
Section 2.2 of the Partnership Agreement provides that the General Partner
will not be liable to the Partnership or to the limited partners for any act
or omission performed or omitted by it in good faith pursuant to the authority
granted to the General Partner by the Partnership Agreement. This provision
further provides that the General Partner will be liable to the Partnership
and to the limited partners only for fraud, bad faith or gross negligence in
the performance of the cable television activities of the Partnership or
negligence in the management of the internal affairs of the Partnership.
Section 9.6 of the Partnership Agreement provides that the Partnership "shall
indemnify and save harmless the General Partner and its affiliates and any
agent or officer or director thereof, from any loss or damage incurred by
them, including legal fees and expenses and amounts paid in settlement by
reason of any action performed by the General Partner or any agent, officer or
director thereof on behalf of the Partnership or in furtherance of its
interest; provided, however, that the foregoing shall not relieve the General
Partner of its fiduciary duty to the limited partners or liability for (nor
shall the General Partner be indemnified for) its fraud, bad faith or gross
negligence in the performance of the cable television activities of the
Partnership or negligence in the management of the internal affairs of the
Partnership." In accordance with the foregoing provisions of the Partnership
Agreement, the Partnership, together with Fund 12-C and Fund 12-D, which have
identical partnership agreement provisions with respect to general partner
liability and indemnification, will be obligated to indemnify and save
harmless the General Partner from any loss incurred by it, including its legal
fees and expenses and amounts paid in settlement, in connection with the
litigation concerning the Tampa System sale unless the General Partner is
found to have breached its fiduciary duty to the limited partners in
connection with the Tampa System sale or is found to have committed fraud or
to have acted in bad faith or with gross negligence in connection with the
Tampa System sale. Amounts reimbursed to the General Partner by the three
constituent partnerships of the Venture would be in proportion to their
ownership interests in the Venture and such amounts may be significant, but
the General Partner expects that any such reimbursement will not have a
material adverse effect on the Partnership or the Venture.
In voting on the proposed sale of the Albuquerque System, limited partners
should consider that the General Partner determined both the sales price of
the Tampa System and the sales price of the Albuquerque System in a
substantially similar way, i.e., both prices were determined by averaging
three separate, independent appraisals of the fair market value of the
respective systems obtained in accordance with the provisions of Section
2.3(b)(iv)(b) of the three partnerships' limited partnership agreements.
Limited partners should be aware that The Strategis Group, Inc. and Western
Cablesystems, Inc., two of the three appraisal firms that rendered appraisals
of the Tampa System, also rendered appraisals of the Albuquerque System for
purposes of determining the Albuquerque System's sale price. Limited partners
should also consider that Bond & Pecaro, Inc., the other firm that rendered an
appraisal of the Albuquerque System for purposes of determining the
Albuquerque System's sale price, also serves as the General Partner's expert
witness in the Tampa litigation, aiding the General Partner in the defense of
this litigation.
REASONS FOR THE TIMING OF THE SALE
The Partnership has a finite legal existence of 17 years, 12 of which have
passed. It was not intended or expected, however, that the Partnership would
hold its cable systems for 17 years. Although it was not possible at the
outset of the Partnership to determine precisely how quickly the investment
objectives with respect to any particular system would be achieved, investors
were informed that the General Partner's past experience with prior
partnerships had shown that five to seven years was the average length of time
from the acquisition of a cable system to its sale. Investors in the
Partnership also were able to examine the track record of the General
Partner's prior partnerships because such track record was set forth in the
prospectus delivered in connection with the Partnership's initial public
offering. At the time of the formation of the Partnership, the track record
showed that prior partnerships had rarely held their cable systems for any
longer than six years.
It is the General Partner's publicly announced policy that it intends to
liquidate all of its managed partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace. In April 1997, the General Partner determined that, as part of
this general liquidation plan, it
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would be in the best interests of the Venture and the three constituent
partnerships of the Venture to sell the Albuquerque System. Further, the
General Partner concluded that, because the Albuquerque System met the General
Partner's objective of acquiring cable systems with operating characteristics
like those of the Albuquerque System, the General Partner would exercise its
right under Section 2.3(b)(iv)(b) of the Partnership Agreement to acquire the
Albuquerque System. The General Partner accordingly did not market the system
for sale and did not solicit third party buyers for the Albuquerque System but
instead contracted with independent appraisal firms to prepare appraisals of
the fair market value of the Albuquerque System so that the General Partner
could determine the price it would pay for the Albuquerque System. See
"Special Factors, The Appraisals." No arm's-length negotiations of the terms
of the purchase and sale agreement were conducted; in July 1997, the General
Partner prepared the standard purchase and sale agreement that it uses for the
acquisition of cable television systems from its managed partnerships. This
agreement was executed by officers of the General Partner both on behalf of
the General Partner as buyer and on behalf of the Venture as seller. The
purchase and sale agreement was submitted to the General Partner's Board of
Directors by management of the General Partner with a recommendation from
management that the Board of Directors approve the transaction, which the
Board of Directors did on August 5, 1997. The directors were provided with
copies of the three appraisal reports and a copy of the executed purchase and
sale agreement. As discussed below, the Board of Directors concluded, by
majority vote, that the transaction was fair to the unaffiliated limited
partners of the Partnership. See "Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale of Assets. "
When investing in the Partnership, by virtue of the provisions of Section
2.2(k) of the Partnership Agreement, the limited partners vested in the
General Partner the right and responsibility to determine when the
Partnership's investment objectives had been substantially achieved. The
Albuquerque System was acquired by the Venture because, in the opinion of the
General Partner at the time of the Albuquerque System's acquisition, it had
the potential for capital appreciation within a reasonable period of time. It
is the General Partner's opinion that during the more than 11 years that the
Albuquerque System has been held by the Venture, the Partnership's investment
objectives with respect to the Albuquerque System have been achieved. The
General Partner used no specific benchmarks or measurement tools in
determining that the Partnership's investment objectives have been achieved.
The General Partner conducted a subjective evaluation of a variety of factors
including the length of the holding period, the prospect for future growth as
compared to the potential risks, the cash on cash return to investors, the
after-tax internal rate of return to limited partners and the amount of gain
to be recognized on the sale of assets.
The Albuquerque System was acquired by the Venture in August 1986 for an
aggregate purchase price of approximately $84,625,700. In addition, an
affiliate of the General Partner received a brokerage fee of approximately
$3,217,200 from the Venture in connection with the Albuquerque System's
acquisition. At acquisition, the Albuquerque System consisted of approximately
1,770 miles of cable plant passing approximately 160,000 homes and serving
approximately 57,500 basic subscribers. As of April 30, 1997, the date of the
three appraisals of the Albuquerque System's fair market value discussed
below, the Albuquerque System consisted of approximately 2,640 miles of cable
plant passing approximately 232,200 homes and serving approximately 112,440
basic subscribers. During the holding period, the Venture used approximately
$86,428,400 in capital expenditures to expand the cable plant of the
Albuquerque System. The increase in the value of the Albuquerque System during
the holding period is demonstrated by the fact that the Albuquerque System was
purchased for $84,625,700 and is proposed to be sold for $222,963,267, a
difference of $138,337,567.
In evaluating whether now was the time for the Venture to sell the
Albuquerque System, the General Partner generally considered the benefits to
the limited partners that might be derived by the Venture's holding the
Albuquerque System for an additional period of time. The General Partner
assumed that the Albuquerque System might continue to appreciate in value and,
if so, the Albuquerque System would be able to be sold for a greater sales
price in the future. The General Partner weighed these assumptions about the
Albuquerque System's continuing growth against the risks to investors from a
longer holding period, i.e., the risks that regulatory, technology and/or
competitive developments could cause the Albuquerque System to decline in
value, which
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would result in a lesser sales price in the future. A longer holding period
would expose investors to the risk that competition from direct broadcast
satellite companies, telephone companies and/or neighboring cable companies
could diminish the number of subscribers to the Albuquerque System's basic and
premium services, thereby decreasing the value of the Albuquerque System. A
longer holding period also would expose investors to the risk that changes in
the regulations promulgated by the governmental agencies that oversee cable
operations could make cable systems a less desirable investment, thereby
decreasing the value of the Albuquerque System. The General Partner's decision
to sell the Albuquerque System was greatly influenced by the fact that the
originally contemplated holding period had been exceeded.
The General Partner is in a better position than the Partnership to bear the
risks of investment in the Albuquerque System. The Partnership is limited in
its ability to obtain additional equity financing, in part because the limited
partnership interests are non-assessable. The Partnership Agreement also
contains limits on the amounts that the Partnership can borrow. And the
Partnership has only one asset, its interest in the Venture, and the Venture's
only assets are the Albuquerque System and the Palmdale/Lancaster System, all
of which gives the Partnership limited collateral for borrowings. The General
Partner, on the other hand, is one of the nation's largest cable television
companies with longer term investment objectives. For example, if significant
competition to the Albuquerque System were to develop, the General Partner
would be in a better position than the Partnership and the Venture to finance
the marketing campaigns or technological improvements necessary to meet such
competition.
Therefore, in light of all of the above factors, the General Partner has
determined that now is the appropriate time for the Partnership to convert its
capital appreciation in the Albuquerque System to cash through the sale of the
Venture's Albuquerque System.
CERTAIN EFFECTS OF THE SALE
Upon consummation of the sale of the Albuquerque System, the proceeds of the
sale will be used to repay a substantial portion of the Venture's debts and
then the Venture will distribute the remaining sale proceeds to the three
constituent partnerships of the Venture in proportion to their ownership
interests in the Venture, and then the Partnership will distribute its portion
of the net sale proceeds to its partners of record as of the closing date
pursuant to the terms of the Partnership Agreement. Because the limited
partners have already received distributions in an amount in excess of the
capital initially contributed to the Partnership by the limited partners, the
net proceeds from the Albuquerque System's sale will be distributed 75 percent
to the limited partners and 25 percent to the General Partner. Based upon the
Venture's pro forma financial information as of September 30, 1997, as a
result of the Albuquerque System's sale, the limited partners of the
Partnership, as a group, will receive approximately $8,605,856 and the General
Partner will receive approximately $2,868,619. Limited partners will receive
$78 for each $500 limited partnership interest, or $156 for each $1,000
invested in the Partnership, from the Partnership's portion of the net
proceeds of the Albuquerque System's sale. Once the distributions of the net
proceeds from the sale of the Albuquerque System have been made, limited
partners will have received a total of $977 for each $500 limited partnership
interest, or $1,954 for each $1,000 invested in the Partnership, taking into
account the prior distributions to limited partners made in 1995 and 1996 from
the net proceeds of the sales of the Augusta System and the Tampa System. Both
the limited partners and the General Partner will be subject to federal income
tax on the income resulting from the sale of the Albuquerque System. See the
detailed information below under the caption "Federal Income Tax Consequences.
In determining what portion of the sale proceeds to use to repay the
Venture's debts and what portion of the sale proceeds to use to make
distributions to the three constituent partnerships of the Venture, the
General Partner considered that the terms of both the Venture's Senior Notes
and the Venture's credit facility required that all sale proceeds be used to
extinguish these debts. The General Partner determined, however, that it would
be in the best interests of the limited partners of the three constituent
partnerships of the Venture to receive a portion of the sale proceeds in the
form of distributions. In pursuit of this end, the General Partner contacted
the commercial banks that are lenders under the Venture's credit facility and
reached agreement with them in principle to amend the Venture's credit
facility to allow for a distribution of $125,000,000 of the sale proceeds to
the Venture's three constituent partnerships in return for the Venture's
commitment to use the remaining sale proceeds to repay an estimated
$49,767,578 outstanding under the credit facility, leaving $41,900,000 of debt
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outstanding under the amended credit facility secured by the Venture's
remaining Palmdale/Lancaster System. The distribution and repayment amounts
were arrived at in arm's-length negotiations between the General Partner,
acting on the Venture's behalf, and the lenders and were based primarily upon
the parties' determinations as to what level of debt was appropriate and
necessary for the Venture's continued ownership and operation of the
Palmdale/Lancaster System.
After the sale of the Albuquerque System, the Partnership will continue to
own a 9 percent interest in the Venture until such time as the Venture's
remaining system is sold. No specific date or terms have been set for the sale
of the Palmdale/Lancaster System. Based upon the most recent appraisal of the
current fair market value of the Palmdale/Lancaster System, the General
Partner estimates that limited partners of the Partnership would receive a
distribution on the Venture's sale of the Palmdale/Lancaster System equal to
approximately $50 per $500 limited partnership interest, or $100 for each
$1,000 invested in the Partnership. A vote of the limited partners of the
Partnership will be required in the future to approve the sale of the
Palmdale/Lancaster System prior to its sale. After the Palmdale/Lancaster
System is sold, the Venture and the Partnership will be liquidated and
dissolved.
Another effect of the sale is that it will result in an indirect wholly
owned subsidiary of the General Partner acquiring the Albuquerque System.
Thus, as a result of this transaction, the General Partner will make a
substantial equity investment in the Albuquerque System and it will have a
greater equity ownership interest in the Albuquerque System than it does now
as the general partner of the three partnerships that comprise the Venture.
Instead of the residual 25 percent interest in the net proceeds from the sale
of the Albuquerque System that the General Partner will receive as the general
partner of the three partnerships that comprise the Venture, the General
Partner will have a 100 percent interest in any future capital appreciation of
the Albuquerque System. The General Partner's acquisition of the Albuquerque
System will advance its goal of increasing the number of owned subscribers in
attractive demographic areas and may allow the General Partner to obtain
economies of scale and operating efficiencies by adding the Albuquerque System
to its suburban cluster of systems with similar market and operating
characteristics. The General Partner also will bear 100 percent of the risk of
system losses and any diminution in system value. As the general partner of
the three partnerships that comprise the Venture, the General Partner earns
management fees and receives reimbursement of its direct and indirect expenses
allocable to the operation of the Albuquerque System. The General Partner's
right to receive such fees and reimbursements related to the Albuquerque
System will terminate on the Venture's sale of the Albuquerque System.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the proposed sale of
the Albuquerque System. If the proposed transaction is approved by the holders
of a majority of limited partnership interests, all limited partners will
receive a distribution in accordance with the procedures prescribed by the
Partnership Agreement regardless of how or whether they vote on the proposal.
RECOMMENDATION OF THE GENERAL PARTNER AND FAIRNESS OF THE PROPOSED SALE OF
ASSETS
The General Partner believes that the proposed sale of the Albuquerque
System and the distribution of the net proceeds therefrom are both
procedurally and substantively fair to all unaffiliated limited partners of
the Partnership, and it recommends that the limited partners approve the
transaction. The General Partner's recommendation that the limited partners
approve the sale of the Albuquerque System and its fairness determination
should not be deemed to be free from potential conflicts of interest, however,
in light of the fact that one of its subsidiaries is the proposed purchaser of
the Albuquerque System. Because the purchaser of the Albuquerque System would
benefit from a lower sales price, the General Partner has an economic interest
in conflict with the economic interest of the limited partners.
In determining the substantive and procedural fairness of the proposed
transaction, the General Partner's Board of Directors on August 5, 1997
considered each of the following factors, all of which had a positive effect
on its fairness determination. The factors are listed in descending order of
importance, i.e., the first factor listed was given the most weight in the
determination that the proposed transaction is fair, although, as a practical
matter, this is an approximation of the weight given to each factor because
each factor is relevant and the General Partner's Board of Directors was not
able to weigh the relative importance of each factor precisely:
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(i) The limited partnership interests are at present illiquid and the
cash to be distributed to limited partners as a result of the proposed sale
of the Albuquerque System will provide limited partners with liquidity and
with the means to realize the appreciation in the value of the Albuquerque
System;
(ii) The purchase price represents a fair market valuation of the
Albuquerque System as determined by the average of three separate,
independent appraisals of the Albuquerque System by qualified independent
appraisers;
(iii) The Venture has held the Albuquerque System for over 11 years, a
holding period beyond that originally anticipated;
(iv) The conditions and prospects of the cable television industry in
which the Venture is engaged, including the developing threat of
competition from DBS services and telephone companies, and the working
capital and other financial needs of the Venture if it were to continue to
own the Albuquerque System, which is scheduled for a $30,000,000 rebuild in
the near future to remain competitive;
(v) The terms and conditions of the purchase and sale agreement,
including the fact that the purchase price will be paid in cash, the fact
that the Venture was not required to make many of the representations and
warranties about the Albuquerque System or give indemnities that are
customarily given in transactions of this nature, the fact that the
purchaser's obligation to close is not contingent upon its ability to
obtain financing, and the fact that the Venture will pay no brokerage fees
upon the sale of the Albuquerque System, which it likely would have paid if
the Albuquerque System were being sold to an unaffiliated party; and
(vi) The sale is being conducted in accordance with the terms of the
Partnership Agreement, including the fact that the proposed transaction
will not occur unless it is approved by the holders of at least a majority
of the limited partnership interests.
An officer of The Jones Group, Ltd., the cable brokerage subsidiary of the
General Partner, worked with each of the independent appraisers hired to
prepare fair market value appraisals of the Albuquerque System, providing them
with current and historical profit and loss statements for the Albuquerque
System and with current subscriber reports. Certain officers and all of the
directors of the General Partner received the final appraisal reports. The
members of the Board of Directors of the General Partner adopted the analyses
and conclusions of Bond & Pecaro, Inc., which valued the Albuquerque System at
$221,349,800, because such firm's valuation procedures, assumptions and
methodologies most closely approximate the valuation procedures, assumptions
and methodologies used by the General Partner's management in evaluating cable
television systems. The General Partner's Board of Directors did not
specifically adopt the $221,349,800 value placed on the Albuquerque System by
Bond & Pecaro, Inc., but the Board did consider the fact that the value
determined by this appraisal firm was close to the average of the three
appraisals and concluded that this fact supported its fairness determination.
The General Partner considered the fact that the $222,963,267 purchase price
to be paid to the Venture for the Albuquerque System was determined by the
average of three independent appraisals of the fair market value of the
Albuquerque System to be very persuasive evidence of the fairness of the
proposed transaction. The General Partner reviewed and considered the three
appraisals but it did not consider specific comparable transactions in
reaching its conclusions that the values for the Albuquerque System determined
by the three appraisals are within the range of values seen in the marketplace
for comparable cable television systems in similar condition. The General
Partner is regularly engaged in the sale and/or purchase of cable television
systems in the marketplace both for its own account and for the account of its
various managed partnerships. It is the cumulative experience of the General
Partner's management and Board of Directors in such transactions on which the
fairness conclusions were based. The General Partner considered that the fair
market valuations of the Albuquerque System were done by respected industry
appraisers using customary measures of value. Based upon the General Partner's
knowledge of and experience in the cable television industry, and its review
and consideration of the appraisals, it has concluded that the values for the
Albuquerque System determined by the three appraisals are fair and within the
range of values seen in the marketplace for comparable cable television
systems in similar condition.
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The $222,963,267 purchase price represents the current fair market value of
the Albuquerque System on a going concern basis. The $222,963,267 purchase
price for the Albuquerque System also compares favorably to the $74,519,734
net book value of the Albuquerque System at September 30, 1997. The
liquidation value of a cable television system, i.e., the sale of the system
on other than a going concern basis, is not usually considered to be an
accurate indicator of the value of a cable television system, primarily
because the assets of a cable television system typically are worth less when
considered separately than when considered as a going concern. The assets of a
cable television system consequently are not normally sold or purchased
separately. A fair market valuation of a system should, in the General
Partner's view, be a valuation of the system as a going concern. The
liquidation value of the Albuquerque System therefore was not considered by
the General Partner in reaching its determination of fairness.
Because there has never been an established trading market for the
Partnership's limited partnership interests, the General Partner does not have
access to any reliable, official information about the historical or current
market prices for the Partnership's limited partnership interests in the very
limited secondary market where such interests from time to time have been
sold. The General Partner believes that such secondary market deeply discounts
the underlying value of the limited partnership interests due to their highly
illiquid nature. Therefore, even if trading information were available, the
historical or current market prices for the Partnership's limited partnership
interests would not necessarily be indicative of the value of the
Partnership's 9 percent ownership of the Venture's cable television system
assets. For these reasons, the General Partner did not consider the historical
or current market prices for the limited partnership interests when reaching
its fairness determination.
During the second half of 1996 and the first half of 1997, however, several
limited partners of the Partnership who are not in any way affiliated with the
Partnership or with the General Partner conducted tender offers for interests
in the Partnership at prices ranging from $54 to $70 per $500 limited
partnership interest. The $78 per $500 limited partnership interest to be
distributed to limited partners from the Partnership's portion of the net
proceeds of the Albuquerque System's sale compares favorably to these tender
offer prices, especially in light of the fact that the tender offer prices
theoretically reflect the distribution to be received by limited partners from
the Partnership's portion of the net proceeds from both the Albuquerque System
sale and the future sale of the Palmdale/Lancaster System. Based upon the most
recent appraisal of the current fair market value of the Palmdale/Lancaster
System, the General Partner estimates that limited partners of the Partnership
should receive a distribution on the Venture's sale of the Palmdale/Lancaster
System equal to approximately $50 per $500 limited partnership interest.
The fact that the Venture has held the Albuquerque System for a period
beyond that originally anticipated was another important factor in the General
Partner's fairness determination--the General Partner believes that the
transaction is fair because a sale at this time will convert an illiquid
investment into a liquid one for all partners. And the current state of the
cable television industry also was considered by the General Partner in making
its fairness determination because the General Partner believes that it is
fair to investors that someone other than the Partnership and the Venture take
on the uncertainties and risks involved in continuing to own and operate the
Albuquerque System.
The fairness of the transaction is also demonstrated in an analysis of
certain of the terms and conditions of the purchase and sale agreement, which
generally are more favorable to the Venture than reasonably could be expected
if the purchaser were not an affiliated company. There is no financing
contingency to closing. Because of the General Partner's existing extensive
knowledge about the Albuquerque System, the Venture has not been required to
make many of the representations and warranties about the quality of the
Albuquerque System's tangible assets, the quantity of the Albuquerque System's
subscribers or the validity of the Albuquerque System's intangible assets
customarily found in cable television system transactions. The Venture likely
would have been required to give such representations and warranties to an
unaffiliated party if the Albuquerque System were being sold to an
unaffiliated party. In addition, the Venture is not required to indemnify the
purchaser for defects discovered by the purchaser after the closing. This
frees the Venture from having to reserve a portion of the sale proceeds to
cover typical indemnification obligations. The Venture also will pay no
brokerage fee in connection
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with the sale of the Albuquerque System, which it likely would have paid if
the Albuquerque System were being sold to an unaffiliated party. This will
result in more funds from the sale being available for distribution to the
Venture's three constituent partnerships and thus to their partners.
The General Partner is aware and considered that although consummation of
this transaction will result in a distribution to the Partnership's limited
partners of approximately $156 per $1,000 of limited partnership capital
invested in the Partnership, there are several potential negative consequences
of the transaction to limited partners. For example, the proposed sale will
require the limited partners to recognize, for federal income tax purposes, a
gain resulting from the sale. And although the three fair market valuations
established by the independent appraisals took into account the present value
of the projected future growth of the Albuquerque System and the sales price
(the average of the three appraisals) thus takes into account the present
value of the projected future growth of the Albuquerque System, the proposed
sale will deprive the limited partners of an opportunity to participate in the
actual future growth of the Albuquerque System, if any. The General Partner
nevertheless concluded that the cash distributions to the limited partners of
the Partnership from the sale of the Albuquerque System outweighed these
consequences.
As disclosed above, the proposed transaction is subject to various potential
conflicts of interest arising out of the Partnership's relationships with the
General Partner. Because the General Partner and its affiliates are engaged in
the ownership and operation of cable television systems, they are generally in
the market to purchase cable television systems for their own account. A
potential conflict thus arises from the General Partner's fiduciary duty as
general partner of the Partnership and its management's fiduciary duty to the
General Partner's shareholders when it determines that Partnership cable
television systems will be sold to the General Partner or one of its
affiliates and not to an unaffiliated third party. This potential conflict of
interest was disclosed to limited partners in the prospectus delivered to
investors at the time of the public offering of interests in the Partnership.
Prior to the Partnership's public offering, the General Partner entered into
negotiations with certain state securities administrators as part of the
process of clearing the offering in the "merit" states, i.e., those states
that permit the sale of securities only if the state securities administrator
deems the offering as a whole to be fair, just and equitable. Several of the
merit state securities administrators focused on the potential conflicts of
interest in the event that the Partnership were to sell one or more of its
cable television systems to the General Partner or one of its affiliates. The
General Partner agreed to include the provision in the Partnership Agreement
that permits the Partnership to sell its cable television systems directly to
the General Partner or one of its affiliates only after a three-year holding
period and only if the General Partner or such affiliate pays a purchase price
that is not less than the average of three separate independent appraisals of
the particular cable television system being sold. The General Partner has
concluded that the mechanisms for determining the purchase price to be paid to
the Partnership provide sufficient procedural safeguards to minimize the
effects of the potential conflicts of interest inherent in any such
transaction. The fact that these procedures have been carried out in
connection with the Venture's proposed sale of the Albuquerque System,
together with the fact that the transaction also is conditioned upon receipt
of the approval of the holders of a majority of the limited partnership
interests in the three partnerships that comprise the Venture, enable the
General Partner to conclude that the proposed transaction is both procedurally
and financially fair to all partners.
The directors of the General Partner who are not employees of the General
Partner did not vote separately to approve the transaction, nor did the
outside directors retain an unaffiliated representative to act solely on
behalf of the limited partners for the purposes of negotiating the terms of
the proposed sale of the Albuquerque System and/or preparing a report
concerning the fairness of the proposed sale. While the directors of the
General Partner who approved the sale recognized that the interests of the
General Partner and the limited partners may not in all respects necessarily
be the same, they recognized also that the purchase price was determined in
accordance with the terms of the Partnership Agreement, that is, by averaging
three separate independent appraisals of the Albuquerque System's fair market
value. The members of the Board of Directors who approved the sale relied on
the specific right of the General Partner under Section 2.3(b)(iv)(b) of the
Partnership Agreement to purchase the Albuquerque System. The members of the
Board of Directors who approved the sale reviewed and considered the
appraisals and, based upon their general knowledge of cable television system
transactions undertaken by the General Partner and its affiliates and by
unaffiliated cable television companies, concluded that the values for the
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Albuquerque System determined by the appraisers were fair and were within the
industry norms for comparable transactions. All 13 directors of the General
Partner participated in the August 5, 1997 meeting to discuss and vote on the
Partnership's sale of the Albuquerque System to the General Partner. Each of
Messrs. Glenn R. Jones, James B. O'Brien, James J. Krejci, William E. Frenzel,
Donald L. Jacobs, Howard O. Thrall, Robert E. Cole, Raphael M. Solot, Sanford
Zisman and Robert B. Zoellick voted to approve the transaction. Messrs. Derek
H. Burney and Siim A. Vanaselja abstained on the vote and Mr. Robert Kearney
voted against the transaction. To the best of the General Partner's knowledge
and belief, the abstentions and negative vote were based on the fact that
these three directors wanted more time to analyze the General Partner's
acquisition of the Albuquerque System as it pertained to the General Partner's
overall acquisition strategy in light of the General Partner's finite capital
resources for acquisitions of cable systems. No director of the General
Partner raised any questions or expressed any reservations about the fairness
of the transaction to the Venture, to its three constituent partnerships or to
the limited partners of the Partnership.
It is anticipated that if the proposed transaction is not consummated, the
General Partner's current management team will continue to manage the
Albuquerque System on behalf of the Venture until such time as the Albuquerque
System could be sold. No other alternatives have been or are being considered.
THE APPRAISALS
In determining the price that the General Partner would offer for the
Albuquerque System, in the spring of 1997 the General Partner retained The
Strategis Group, Inc., Kagan Media Appraisals Inc. and Bond & Pecaro, Inc. to
prepare separate appraisals of the fair market value of the Albuquerque System
as of April 30, 1997. Each of the appraisers were asked to determine the cash
price a willing buyer would give a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of relevant
facts, in an arm's-length transaction to acquire the Albuquerque System. Upon
receipt of the appraisal prepared by Kagan Media Appraisals, Inc., which
appraised the Albuquerque System at only $206,600,000, management of the
General Partner reviewed it and, based upon management's experience in and
knowledge of the cable television industry and its conclusions as compared to
the other two appraisals, management deemed this appraisal to be too low and
rejected it. The General Partner then retained a fourth appraisal firm,
Western Cablesystems, Inc., to prepare an appraisal of the fair market value
of the Albuquerque System as of April 30, 1997. Upon receipt of the appraisals
prepared by The Strategis Group, Inc., Bond & Pecaro, Inc. and Western
Cablesystems, Inc., management of the General Partner examined each of them
and discussed among themselves the merits of the appraisals' assumptions,
methodologies and conclusions, and, based on their experience in and knowledge
of the cable television industry, they found each of them to be fair and
reasonable. The appraisal reports prepared by The Strategis Group, Inc., Bond
& Pecaro, Inc. and Western Cablesystems, Inc. were then submitted to the Board
of Directors of the General Partner for review. As disclosed above, a majority
of the Board of Directors of the General Partner approved the transaction
based upon a price determined by averaging these three appraisals.
The written appraisal reports of The Strategis Group, Inc., Bond & Pecaro,
Inc. and Western Cablesystems, Inc. are available for inspection and copying
at the offices of the General Partner during regular business hours by any
interested limited partner of the Partnership or by his or her authorized
representative. Copies of such appraisals will be mailed by the General
Partner to any interested limited partner or to his or her authorized
representative upon written request to the General Partner at the expense of
the requesting limited partner. Copies of these three appraisals also have
been publicly filed with the Securities and Exchange Commission and may be
inspected at the Commission's public reference facilities and at its World
Wide Web site.
The General Partner provided each of the appraisers with the same current
and historical profit and loss statements for the Albuquerque System and with
the same current subscriber reports. The appraisers also gathered information
about the Albuquerque System's subscribers, channel line-up, technology, cable
plant, penetration rates and the local economy from questionnaires that each
individual appraisal firm prepared and provided to the general manager of the
Albuquerque System and from conversations with the Albuquerque System's
management team. From this information, the appraisers used their independent
analyses to project cash flow, determine growth of homes passed, the
Albuquerque System's future penetration and possible rate adjustments. The
appraisals thus reflect the application of the appraisers' expertise to the
data about the Albuquerque System supplied by the General Partner.
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The General Partner's $222,963,267 offer for the Albuquerque System was
based on the three separate, independent appraisals of the Albuquerque System
prepared by The Strategis Group, Inc., Bond & Pecaro, Inc. and Western
Cablesystems, Inc. as of April 30, 1997. The Strategis Group, Inc. concluded
that the Albuquerque System's overall fair market value as of April 30, 1997
was $233,440,000. Bond & Pecaro, Inc. concluded that the Albuquerque System's
overall fair market value as of April 30, 1997 was $221,349,800. Western
Cablesystems, Inc. concluded that the Albuquerque System's overall fair market
value as of April 30, 1997 was $214,100,000.
In the General Partner's view, the assumptions regarding system operations
and the cable television system marketplace underlying the three appraisals
have generally remained unchanged since the date of the appraisals.
The Strategis Appraisal
The Strategis Group, Inc. ("Strategis") has served the communications
industry for nearly 30 years. Its team of financial, engineering and
managerial professionals devotes a substantial portion of its time to the
appraisal of cable television systems, cellular telephone systems, paging
systems, mobile radio and broadcast stations. Strategis was selected by the
General Partner to render an opinion as to the fair market value of the
Albuquerque System in light of such overall qualifications. No limitations
were imposed with respect to the appraisal to be rendered by Strategis. The
firm was selected by the General Partner to prepare an independent appraisal
of the Albuquerque System because of the General Partner's familiarity with
the firm and its good reputation in the cable television industry. Strategis
has prepared independent appraisals of other cable television systems owned
and/or managed by the General Partner. The principals of Strategis are not
affiliated in any way with the General Partner.
Strategis used five generally accepted cable television valuation methods
using the income approach to valuation in establishing the range of fair
market values of the Albuquerque System as a going concern. The first method
used a multiple of the past year's operating income derived from comparable
asset values of privately held and publicly traded cable companies. (The
appraisal report did not disclose and the General Partner did not inquire as
to the identities of the companies Strategis used in determining the
multiple.) The second method used a lower multiple of the Albuquerque System's
annualized current month's operating income. The third method applied a
slightly lower multiple of next year's projected operating income. The fourth
method was a discounted net cash flow analysis in which a purchase price
(estimated fair market value) was calculated to achieve a target after-tax
return on equity, given particular operating and financing assumptions unique
to the Albuquerque System's assets. The fifth method was a discounted cash
flow analysis that measured the net present value of the pre-tax operating
cash flows (less capital expenditures, plus the residual value of the
Albuquerque System) that represent the return on total investment. For each
valuation method, Strategis established a "high" and a "low" estimated fair
market value. The General Partner did not inquire as to the specific details
of how each high and low estimated fair market value for each valuation
methodology was determined because, given Strategis' expertise, the General
Partner concluded that it could rely upon Strategis' analyses and judgment. It
is the General Partner's belief that the specific details of the assumptions
underlying the Strategis appraisal are not material to a voting decision of
the limited partners.
The first valuation method used a multiple of the past year's operating
income of the Albuquerque System derived from comparable asset values of
privately held and publicly traded cable companies. Strategis determined,
based upon its expertise and knowledge of the cable television industry, a
"low" multiple of 10.5 and a "high" multiple of 11.5, concluding that a system
comparable to the Albuquerque System would be unlikely to sell for less than
10.5 times its past year's operating income and would be unlikely to sell for
more than 11.5 times its past year's operating income. While the appraisal
report does not disclose the assumptions of the appraiser in determining these
multiples, the General Partner has no reason to believe that they are not
reasonable. This method resulted in an estimated fair market value ranging
from a low of $222,661,506 to a high of $243,867,363 for the Albuquerque
System.
The second valuation method used a lower multiple of the Albuquerque
System's annualized current month's operating income. Strategis determined,
again based on its expertise and knowledge of the cable
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television industry, a "low" multiple of 10 and a "high" multiple of 11,
concluding that a system comparable to the Albuquerque System would be
unlikely to sell for less than 10 times the dollar amount of its annualized
current month's operating income and would be unlikely to sell for more than
11 times the dollar amount of its annualized current month's operating income.
These multiples are slightly lower than those used in the previous methodology
because of the increased risk and time factors involved in using current as
compared to historical information. While the appraisal report does not
disclose the assumptions of the appraiser in determining these multiples, the
General Partner has no reason to believe that they are not reasonable. This
method resulted in an estimated fair market value ranging from a low of
$226,577,517 to a high of $249,235,269 for the Albuquerque System.
The third valuation method applied a slightly lower multiple of next year's
operating income of the Albuquerque System. For this valuation, Strategis
first estimated, through its own analyses of current financial and operating
data provided by the General Partner, next year's operating income for the
Albuquerque System and then, based on its expertise and knowledge of the cable
television industry, set a "low" multiple of 9.5 and a "high" multiple of 10.5
concluding that a system comparable to the Albuquerque System would be
unlikely to sell for less than 9.5 times the system's projected operating
income for the following year and would be unlikely to sell for more than 10.5
times the system's projected operating income for the following year. These
multiples are slightly lower than those used in the previous methodologies
because of the increased risk and time factors involved in using projected as
compared to historical and current information. While the appraisal report
does not disclose the assumptions of the appraiser in determining these
multiples, the General Partner has no reason to believe that they are not
reasonable. This method resulted in an estimated fair market value ranging
from a low of $229,407,846 to a high of $253,556,040 for the Albuquerque
System.
The fourth valuation method was a discounted net cash flow analysis in which
a purchase price (estimated fair market value) was calculated to achieve a
target after-tax return on equity given particular operating and financing
assumptions specific to the Albuquerque System. This method involved the use
of projected operations for the Albuquerque System and a pre-determined target
return on equity for a hypothetical buyer. Based on the firm's use of typical
debt-to-equity ratios and debt services, it tested various purchase prices,
i.e., potential fair market values, to determine a value that yielded the
desired return on equity. Based on system information made available to
Strategis by the General Partner and on information generally available to
Strategis about the cable television industry, the firm made assumptions and
projections of a variety of factors that will affect future cash flow
including housing growth, plant mileage, growth in the number of subscribers
for basic and pay television, adjustments in subscriber rates, increases in
operating expenses and capital expenditures. Strategis also made specific
assumptions concerning the capital structure that a typical, prudent buyer
might experience, as well as the probable interest rates that would be
applicable in connection with any debt financing that might be incurred.
Strategis did a "high" and a "low" analysis. In its "high" analysis, Strategis
projected that the Albuquerque System's revenues would grow from $55,071,766
in 1998 to $98,776,702 in 2004; that the Albuquerque System's operating
expenses would grow from $30,923,572 in 1998 to $51,702,980 in 2004; and that
net loss would decrease from $(9,639,099) in 1998 to $(553,008) in 2004. In
Strategis' "low" analysis, revenues and operating expenses are projected to
increase to the same levels by 2004, but net loss of $(8,959,488) in 1998 is
projected to become net income of $587,701 in 2004. Strategis projected that
the Albuquerque System would add approximately 97 miles of cable plant per
year between 1998 and 2004, resulting in growth of the Albuquerque System's
cable plant from 2,639 miles in 1997 to 3,313 miles in 2004. Strategis
projected that the number of homes passed by the Albuquerque System would grow
from 233,798 in 1997 to 273,601 in 2004. Strategis projected that basic
subscribers would grow from 112,613 in 1997 to 155,041 in 2004. Strategis
projected penetration of the Albuquerque System increasing from 48.7 percent
in 1998 to 56.7 percent in 2004. Strategis projected that premium television
subscriptions would grow from 60,912 in 1997 to 84,636 in 2004. Strategis
estimated that the Albuquerque System would take moderate rate increases
between 1998 and 2004, with, for example, a 1 percent increase in basic rates
in 1998, a 5 percent increase in basic rates in 1999 and 3 percent increases
in basic rates each year thereafter, and a 2 percent increase in expanded
basic rates in 1998, a 6 percent increase in such rates in 1999, a 3 percent
increase in such rates in 2000, a 10 percent increase in such rates in 2001, a
9 percent increase in such rates in 2002 and a 3 percent increase in such
rates each year thereafter. Strategis estimated that rate increases for pay
television subscriptions would average 1 percent per year. Strategis estimated
that rate increases for pay-per-view showings, converter rentals and
installations would average 3
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percent per year. These projections, if true, would result in an increase in
basic rates from $10.03 in 1998 to $12.16 in 2004, and an increase in the
rates for the expanded basic tier from $15.39 in 1998 to $21.27 in 2004. The
"low" value was determined using a 14 percent return on equity and the "high"
value was determined using a 12 percent return on equity. This method resulted
in an estimated fair market value ranging from a low of $220,489,882 to a high
of $240,054,504 for the Albuquerque System.
The fifth valuation method was a discounted cash flow analysis that measured
the net present value of the pre-tax operating cash flows (less capital
expenditures, plus the residual value of the Albuquerque System) that
represent the return on the total investment rather than those that could
result from an assumed "purchase" with a pre-determined debt to equity ratio.
The same set of financial projections that the firm prepared and used in the
fourth valuation methodology were used for growth in subscribers, revenues,
operating expenses and capital expenditures. The projected pre-tax operating
cash flows for the Albuquerque System, plus the last-year residual value of
the Albuquerque System less capital expenditures, were discounted to the
present time at an acceptable current cost of money. This method indicated the
present value of the future pre-tax operating cash flows, using an acceptable
discounted factor based on the weighted average cost of money. The "high"
value was determined using a 15.1 percent target return on investment and the
"low" value was determined using a 16.6 percent target return on investment.
This method resulted in an estimated fair market value ranging from a low of
$219,992,327 to a high of $238,088,179 for the Albuquerque System.
Strategis' valuation methodologies resulted in differing values for the
Albuquerque System. The reason for this is grounded in the basic approach that
the firm takes. The five different methods allow five different views of a
system's value. The first method looks at past performance, but allows nothing
for future performance. The second method looks at the system as it is as of
the date of the appraisal. The third method looks at the system's projected
operating income in the first year following the proposed sale. Both
discounted cash flow methods fully consider the future value of the system by
recognizing projected operating income and expenses, including capital
expenditures. Based upon all of the available information about a system being
appraised, the appraiser decides how to weight each of the five methods. The
final estimated fair market value is not a straight average of all of the
methods. Although the weighting is not shown in the appraisal report,
Strategis generally prefers the discounted cash flow methods since they
consider a broader range of factors that represent all sources of value,
present and future. Strategis accordingly generally gives greater
consideration to the discounted cash flow methods in its final judgment
concerning the fair market value of a cable television system. Strategis'
conclusions as to the range of values were based upon information and data
supplied by the General Partner, Strategis' onsite inspection of the
Albuquerque System in April 1997, interviews with the Albuquerque System's
onsite management team and general cable television industry information. The
fair market value appraisal of $233,440,000 reached by Strategis was based on
the various valuations generated by it, and Strategis' general knowledge and
expertise in the cable television industry.
As compensation for rendering an opinion as to the fair market value of the
Albuquerque System, the General Partner paid Strategis a fee of $7,500. Such
fee was not contingent upon the conclusion reached by Strategis in its
opinion. As compensation for rendering opinions as to the fair market value of
other cable television systems owned and/or managed by the General Partner and
its affiliates, and completing the analysis of the allocations of purchase
prices between tangible and intangible assets for various cable television
systems owned and/or managed by the General Partner and its affiliates,
Strategis has received fees and expense reimbursements totaling $241,470
during the two years prior to the date hereof.
The Bond & Pecaro Appraisal
Bond & Pecaro, Inc. ("Bond & Pecaro") is a consulting firm specializing in
valuations, asset appraisals and related financial services for the
communications industry. The firm has appraised assets of more than 1,500
media properties. Bond & Pecaro was selected by the General Partner to render
an opinion as to the fair market value of the Albuquerque System in light of
such overall qualifications. No limitations were imposed with respect to the
appraisal to be rendered by Bond & Pecaro. The firm was selected by the
General Partner to prepare an independent appraisal of the Albuquerque System
because of the firm's reputation in the industry. Bond & Pecaro has prepared
independent appraisals of other cable television systems owned and/or managed
by the General
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Partner. Bond & Pecaro also is serving as the General Partner's expert witness
aiding the General Partner in its defense of the litigation filed by limited
partners of Fund 12-D challenging the terms of the Venture's sale of the Tampa
System to a subsidiary of the General Partner. See "Special Factors, Legal
Proceedings." The principals of Bond & Pecaro are not affiliated in any way
with the General Partner.
Bond & Pecaro used both the income and the market methodologies to determine
the fair market value of the Albuquerque System as of April 30, 1997. The firm
developed a discounted cash flow analysis to determine the value of the
Albuquerque System based upon its economic potential. The results of this
analysis indicated that the value of the Albuquerque System as of April 30,
1997 was $221,349,800. In order to verify the results of the discounted cash
flow analysis, Bond & Pecaro also utilized a comparable sales approach,
relying upon an analysis of subscriber multiples. The results of this analysis
supported the firm's conclusions about valuation resulting from application of
the income approach.
Bond & Pecaro reported that the initial parameter upon which its discounted
cash flow projection is based is homes passed. Two factors affect the number
of homes passed: new plant construction and household growth. In preparing its
projection, Bond & Pecaro assumed that the number of households in the
Albuquerque System's franchise area will increase at a rate equivalent to the
average growth projected for the areas served by the system as a whole, or
approximately 1.9 percent per year. Bond & Pecaro concluded that the basic
penetration rate would grow substantially over the 10-year projected period
from the current 49.2 percent to approximately 71.6 percent by 2007. The firm
projected that pay penetration of the Albuquerque System will increase from a
level of 54.1 percent in April 1997 to approximately 64.0 percent by 2007.
Bond & Pecaro concluded that due to regulatory and competitive restrictions,
service rates for basic and expanded basic services are expected to grow with
inflation while premium channel service rates are expected to remain
relatively flat throughout the 10-year projected period. Bond & Pecaro
estimated that pay-per-view service revenue will increase at a 12.5 percent
annual rate through 2007, that commercial advertising will increase at a 12.5
percent annual rate through 2007 and that annual installation revenue would
grow at a compound annual rate of 2.5 percent during the projection period.
The firm concluded that equipment rental revenues as well as other revenues
also should increase by 10 percent annually through 2007. Bond & Pecaro
concluded that total system revenues would increase from $55,000,000 in 1997
to $127,100,000 in 2007. For purposes of its appraisal, Bond & Pecaro assumed
that the Albuquerque System would maintain an operating profit margin of 42.3
percent, which was the system's operating profit margin in 1996. Bond & Pecaro
used an estimated tax rate of 38.1 percent to project the taxable income of
the Albuquerque System because the estimated rate reflects the combined
federal, state and local tax rates in effect on April 30, 1997. Capital
expenditures were projected at approximately $13,400,000 annually during the
ten-year period.
Bond & Pecaro then determined the net after-tax cash flow for the
Albuquerque System. After taxes were subtracted from the system's taxable
income, non-cash depreciation and amortization expense was added back to net
income to yield after-tax cash flow. From the after-tax cash flow, the
provision for subsequent capital expenditures was deducted to calculate the
net after-tax cash flows. Bond & Pecaro used a discount rate of 12 percent to
calculate the present value of the net after-tax cash flows. In order to
account for the risks associated with investments in the cable television
industry and in the Albuquerque System in particular, Bond & Pecaro added a
premium to a base discount rate to develop the 12 percent rate employed in its
analysis. Bond & Pecaro then applied a multiplier of 10 to the Albuquerque
System's 2007 operating cash flow. Bond & Pecaro's appraisal noted that
multiples used in the valuation of cable television systems of a type similar
to the Albuquerque System range from 8 to 12 times operating cash flow,
depending on market conditions and a system's profit potential. Bond & Pecaro
noted also that exceptional circumstances will warrant multiples outside of
this range. The appraisal report indicated that the selected multiple of 10
was used to estimate the value of the system at the end of the investment
period. According to Bond & Pecaro, this multiple reflects the state of the
market for cable television systems as of April 30, 1997, tempered by the
economic conditions of the system's franchise service area, the necessity for
a system rebuild, the uncertainty introduced by re-regulation of the cable
television industry and the prospects for increased competition from wireless
cable companies and direct broadcast satellite operators. The 10-year
discounted cash flow projection of Bond & Pecaro yielded a value of
$221,349,800 for the Albuquerque System.
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In order to correlate this statistical valuation with the realities of the
marketplace, Bond & Pecaro analyzed the sale of six comparable cable
television systems that took place between September 1996 and February 1997.
The sales examined by Bond & Pecaro were selected based upon their
comparability to the Albuquerque System. The six cable television system
transactions examined by Bond & Pecaro were: (i) the transaction between one
of the General Partner's managed partnerships and an unaffiliated third party
relating to the proposed sale of the Roseville, California cable television
system for a sales price of $31,000,000 or a price per subscriber of $1,938,
(ii) the transaction between one of the General Partner's managed partnerships
and an unaffiliated third party relating to the sale of the Rosenburg, Texas
cable television system for a sales price of $5,500,000 or a price per
subscriber of $1,986, (iii) the sale of the Palo Alto, California cable
television system by one unaffiliated cable television system operator to
another for a sales price of $54,100,000 or a price per subscriber of $2,042,
(iv) the sale of the Jonesburo, Arkansas cable television system by one
unaffiliated cable television system operator to another for a sales price of
$41,000,000 or a price per subscriber of $2,000, (v) the sale of the
Independence, Missouri cable television system by one of the General Partner's
managed partnerships to a subsidiary of the General Partner for a sales price
of $171,200,000 or a price per subscriber of $2,004, and (vi) the sale of the
Hickory, North Carolina cable television system by one unaffiliated cable
system operator to another for a sales price of $68,100,000 or $1,946 per
subscriber. With this analysis, Bond & Pecaro concluded that the average price
per subscriber paid for the six comparable cable television systems sales was
approximately $1,971. Bond & Pecaro concluded that the Albuquerque System's
overall fair market value was $221,349,800. This $221,349,800 value reflects a
subscriber multiple of approximately $1,966 per subscriber, which is
consistent with prevailing subscriber multiples of comparable sales.
A representative of Bond & Pecaro visited the offices and technical
facilities of the Albuquerque System in May 1997 as part of its preparation of
the appraisal report. The firm's representative consulted with system
management regarding market factors and system-specific issues that impacted
the value of the system's tangible and intangible assets. Specific data
provided by the system and the General Partner included historical audited
financial statements for fiscal years 1994 through 1996, 1997 year to date
unaudited financial statements, operating statistical summaries, system
technical data, market demographic data and related materials. Other sources
consulted in the preparation of the appraisal included industry factbooks,
government publications and similar reference materials. Bond & Pecaro also
relied upon information furnished by the Albuquerque System's management
relating to the age, condition and adequacy of the system's physical plant.
As compensation for rendering an opinion as to the fair market value of the
Albuquerque System, the General Partner paid Bond & Pecaro a fee of $11,789.
Such fee was not contingent upon the conclusions reached by Bond & Pecaro in
its opinion. As compensation for rendering opinions as to the fair market
value of other cable television systems owned and/or managed by the General
Partner and its affiliates, Bond & Pecaro has received fees totaling $17,122
during the two years prior to the date hereof.
The Western Cablesystems Appraisal
R. Michael Kruger, the owner and president of Western Cablesystems, Inc.
("Western Cablesystems"), has since 1979 appraised hundreds of cable
television systems for a variety of clients including major multiple system
cable operators, independent operators and clients outside the cable
television industry, according to information provided by Western
Cablesystems. In addition to appraising cable television systems, Western
Cablesystems presently operates several small cable television systems and it
is currently active in the cable television system acquisition marketplace.
Western Cablesystems was selected by the General Partner to render an opinion
as to the fair market value of the Albuquerque System in light of such overall
qualifications. No limitations were imposed with respect to the appraisal to
be rendered by Western Cablesystems. The firm was selected by the General
Partner to prepare an independent appraisal of the Albuquerque System because
of the General Partner's familiarity with the firm and Western Cablesystems'
knowledge of the cable television industry. Western Cablesystems has prepared
independent appraisals of other cable television systems owned and/or managed
by the General Partner. Western Cablesystems has informed the General Partner
that it owns 500 shares of the General Partner's common stock purchased
approximately 15 years ago. The General Partner believes that Western
Cablesystems' equity holdings in the General Partner are not material and do
not compromise Western Cablesystems' status as an independent appraiser of the
Albuquerque System's value. The principals of Western Cablesystems are not
affiliated in any way with the General Partner.
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Western Cablesystems used two appraisal methodologies in determining the
fair market value of the Albuquerque System. Western Cablesystems first
examined the market value of the Albuquerque System as determined by
comparable transactions in the cable television system marketplace. Western
Cablesystems' appraisal report states that transaction values are typically
reported on the basis of either a value-per-subscriber or an operating income
multiple. Western Cablesystems considered both but placed more reliance in its
determination of the fair market value of the Albuquerque System on the
operating income multiples of comparable sales. Western Cablesystems also used
what it termed the "income" approach to value the Albuquerque System. This
methodology involved the determination of the discounted present value of free
cash flow generated over ten years, plus an allowance for the terminal value
of the Albuquerque System after ten years.
Western Cablesystems looked at the Albuquerque System's future growth in the
number of homes passed and the number of subscribers (determining that the
Albuquerque System will have average growth rates in the long run), the
system's demographics (determining that the system's demographics are somewhat
below average due to the system's relatively fewer higher-income residents),
the competitive situation (determining that the Albuquerque System may face
slightly more than normal competition, particularly from DBS, given that the
off-air reception in the Albuquerque area is good and the system's channel
lineup is somewhat weak), the system's channel capacity and quality
(concluding that the Albuquerque System is below average in capacity and
quality and that there will be a need for a rebuild and upgrade of the system
prior to franchise renewal negotiations), the system's general operations
(concluding that the system is normal with respect to matters such as staff
and franchise issues), the system's potential for new revenues (concluding
that the Albuquerque System has average potential for new revenue sources) and
the system's marketability (concluding that although the system is of an
attractive size it is relatively isolated and would therefore have average
marketability compared to systems of similar size). Western Cablesystems
concluded that overall the Albuquerque System would be at or slightly below
market norms compared to comparably sized systems. The appraisal report does
not specifically disclose how the Albuquerque System's future growth
prospects, demographics, competitive situation, marketability and channel
capacity and quality were determined to be average, above average or below
average. The General Partner did not inquire about how Western Cablesystems
made its determinations because the General Partner concluded that, given
Western Cablesystems' expertise, it could rely upon Western Cablesystems'
analyses and judgment in making such determinations.
Western Cablesystems then examined several reasonably similar transactions
involving the sale of cable television systems. These transactions involved
the sales of cable television systems at cash flow multiples ranging from a
low of 9 times cash flow to a high of 10 times cash flow. These transactions
had value-per-subscriber rates ranging from a low of $1,471 to a high of
$2,108. Western Cablesystems examined the sale of the 290,000 subscriber
Minneapolis, Minnesota cable television system by one unaffiliated cable
television system operator to another for a price equal to $2,069 per
subscriber and a 10 times cash flow multiple. Western Cablesystems noted that
the Minneapolis system has a 51 percent penetration but is in a better market
than the Albuquerque System with more growth potential. Western Cablesystems
then examined the sale of a cable television system in the Buffalo, New York
and Erie, Pennsylvania area. This 166,000 subscriber system with a 60 percent
penetration was sold for a price equal to $2,108 per subscriber and a 10 times
cash flow multiple. Western Cablesystems also looked at the sale of the 53,000
subscriber Bangor, Maine cable system, which has a 62 percent penetration, for
a 9 times operating income multiple and a price equal to $1,471 per
subscriber. Western Cablesystems also examined the trade of the Myrtle Beach
and Hampton, Virginia cable television systems, each of which serve
approximately 45,000 subscribers, and were traded by unaffiliated cable
television system operators. These systems were valued at 9.5 times cash flow
and at a price equal to $1,600 per subscriber. Western Cablesystems also
looked at the Hickory, North Carolina system, which was sold by one
unaffiliated cable television system operator to another for 9.7 times cash
flow and at a price equal to $1,946 per subscriber. Western Cablesystems also
examined a sale transaction in Michigan between two unrelated parties
involving a cable system serving approximately 40,000 customers, which sold
for a sales price equivalent to $1,875 per subscriber. Given all of this data,
Western Cablesystems concluded that the Albuquerque System should
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command an average multiple of 10 times cash flow which would give the system
a value of $222,360,000. At this price, the value per subscriber for the
Albuquerque System would be $1,909, within the range of reported comparable
transaction prices.
For purposes of its income approach analysis, Western Cablesystems projected
the Albuquerque System's ten year free cash flow by making its own assumptions
about growth in basic and pay revenues, other revenue items, salaries, labor
costs, taxes and other expenses including programming costs, pole rent, office
costs, marketing costs and advertising sales costs. The annual free cash flow
was then discounted using an average cost of capital which Western
Cablesystems determined was 12.7 percent. Western Cablesystems then added a
discounted terminal value which was calculated at 6 times the tenth year's
cash flow. Using this income approach, Western Cablesystems estimated the
potential value of the Albuquerque System at $205,791,000.
The range of values as calculated by the two different approaches taken by
Western Cablesystems is $205,791,000 to $222,360,000. The values are
reasonably consistent and Western Cablesystems placed reliance on each
valuation. Western Cablesystems concluded that the discounted cash flow
approach may better reflect the growth prospects for the Albuquerque System
which, in Western Cablesystems' opinion, are somewhat below some of the
comparable transactions examined. Western Cablesystems noted that the
discounted cash flow analysis also explicitly considers the rebuild costs,
which it deemed to be an important factor in valuation. Western Cablesystems
concluded that a midpoint of the two valuations was appropriate and thus
concluded that the appraised value of the Albuquerque System at April 30, 1997
was $214,100,000. Western Cablesystems' appraisal is based on system financial
and operating data provided to Western Cablesystems by the General Partner.
The appraiser also visited the Albuquerque System in June 1997 for the purpose
of inspecting the general market and system data.
As compensation for rendering an opinion as to the fair market value of the
Albuquerque System, the General Partner paid Western Cablesystems a fee of
$7,500. Such fee was not contingent upon the conclusion reached by Western
Cablesystems in its opinion. As compensation for rendering opinions as to the
fair market value of other cable television systems owned and/or managed by
the General Partner and its affiliates and for other services provided,
Western Cablesystems has received fees and expense reimbursements totaling
$65,724 during the two years prior to the date hereof.
COSTS OF THE TRANSACTION
The following is a reasonably itemized estimate of all expenses incurred or
to be incurred in connection with the proposed sale of the Albuquerque System,
all of which will be paid by the General Partner, including without limitation
the cost of soliciting the votes of the holders of limited partnership
interests:
<TABLE>
<S> <C>
Filing fees $ 4,013
Legal fees $10,000
Accounting fees $10,000
Appraisal fees $26,789
Printing costs $30,000
Postage and miscellaneous costs $ 5,000
</TABLE>
PROPOSED SALE OF ASSETS
THE PURCHASE AND SALE AGREEMENT
Pursuant to the terms and conditions of a purchase and sale agreement dated
as of July 28, 1997 (the "Purchase and Sale Agreement") by and between the
Venture as seller and the General Partner as purchaser, the Venture agreed to
sell the Albuquerque System to the General Partner or to a subsidiary of the
General Partner. The General Partner has assigned its rights and obligations
as purchaser to Jones Communications of New Mexico, Inc., an indirect wholly
owned subsidiary. The purchaser intends to finance the acquisition of the
Albuquerque System using cash on hand and borrowings available under credit
facilities dated as of October 29, 1996 among
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Jones Cable Holdings II, Inc., as the borrower, and several lenders, including
The Bank of Nova Scotia, NationsBank of Texas, N.A. and Societe Generale as
the managing agents. The maximum amount available under the credit facilities
is $600 million. One $300 million facility reduces quarterly beginning March
31, 2000 through the final maturity date and the lenders' commitment under the
other $300 million facility terminates on October 27, 1998. Interest on
amounts outstanding under the credit facilities varies from the "base rate,"
which generally approximates the prime rate, to the base rate plus 1/4 percent
or LIBOR plus 1/2 percent to 1 1/4 percent depending on certain financial
covenants. The effective interest rate on the $134,000,000 outstanding at
September 30, 1997 was 6.19 percent. The credit facilities are secured by a
pledge of the stock of all of the subsidiaries of the borrower. Jones
Communications of New Mexico, Inc. is a wholly owned subsidiary of Jones Cable
Holdings II, Inc., which in turn is a wholly owned subsidiary of the General
Partner.
Based upon amounts estimated as of September 30, 1997, the aggregate cost of
the acquisition of the Albuquerque System to the purchaser, including working
capital adjustments, will be approximately $225,431,599. Amounts borrowed by
the purchaser to acquire the Albuquerque System will be repaid from cash
generated by the operations of the Albuquerque System and other systems owned
by Jones Cable Holdings II, Inc. and from other sources of funds, including
possible future refinancings.
The closing of the sale will occur on a date upon which the Venture and the
purchaser mutually agree. It is anticipated that the closing will occur within
a few weeks after receipt of the approval of the sale by the limited partners
of the Venture's three constituent partnerships. Because the closing is
conditioned upon, among other things, the approval of the limited partners of
the Venture's three constituent partnerships and the consent of governmental
franchising authorities and other third parties, there can be no assurance
that the proposed sale will occur. If all conditions precedent to the
purchaser's obligation to close are not eventually satisfied or waived, the
purchaser's obligation to purchase the Albuquerque System will terminate.
THE ALBUQUERQUE SYSTEM
The assets to be acquired consist primarily of the real and personal,
tangible and intangible assets of the Venture's Albuquerque System. The
purchaser will purchase all of the tangible assets of the Albuquerque System,
including, among other things, the headend equipment, underground and
aboveground cable distribution systems, towers, earth satellite receive
stations, and furniture and fixtures of the Albuquerque System. The purchaser
also will acquire certain of the intangible assets of the Albuquerque System,
including, among other things, all of the franchises, leases, agreements,
permits, licenses and other contracts and contract rights of the Albuquerque
System. Also included in the sale are any parcels of real estate owned by the
Albuquerque System, the subscriber accounts receivable of the Albuquerque
System and all of the Albuquerque System's engineering records, files,
schematics, maps, reports, promotional graphics, marketing materials and
reports filed with federal, state and local regulatory agencies. Certain of
the Albuquerque System's assets will be retained by the Venture, including
cash or cash equivalents on hand and in banks, certain insurance policies and
rights and claims thereunder, and any federal or state income tax refunds to
which the Venture may be entitled.
SALES PRICE
Subject to the customary working capital closing adjustments described
below, the sales price for the Albuquerque System is $222,963,267. The sales
price will be reduced by any accounts payable and accrued expenses and vehicle
lease obligations existing on the closing date. The sales price will be
increased by any accounts receivable existing on the closing date. The sales
price for the Albuquerque System also will be adjusted as of the closing date
with respect to all items of income and expense associated with the operation
of the Albuquerque System. This adjustment will reflect, in accordance with
generally accepted accounting principles, that all expenses and income
attributable to the period on or after the closing date are for the account of
the purchaser and those prior to the closing date are for the account of the
seller. While these adjustments may have the effect of increasing or
decreasing the sales price, any adjustment is not expected to be material.
Please see Note 4 of the Notes to Unaudited Pro Forma Financial Statements for
a detailed accounting of the estimated closing adjustments.
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<PAGE>
CONDITIONS TO CLOSING
The purchaser's obligations under the Purchase and Sale Agreement are
subject to the following conditions: (a) the Venture shall have obtained all
material consents and approvals from governmental authorities and third
parties with whom the Venture has contracted that are necessary for the
transfer of the Albuquerque System, (b) all representations and warranties of
the Venture shall be true and correct in all material respects as of the
closing date and (c) termination or expiration of the statutory waiting period
applicable to the Purchase and Sale Agreement and the transactions
contemplated thereby under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). All waiting periods under the HSR Act have
expired, thereby removing this as a condition to closing. The Venture still
must obtain the consent of the City of Albuquerque and other franchising
authorities to the transfer of the Albuquerque System's cable franchises. The
Venture and the General Partner have filed all documents required to obtain
the consents of the City of Albuquerque and other franchising authorities to
the transfer of the Albuquerque System's cable franchises. It is anticipated
that the Venture will not experience any significant difficulty in obtaining
the necessary consents and approvals to the currently proposed sale. If,
however, the Venture fails to obtain certain non-material consents and
approvals of third parties with whom the Albuquerque System has contracted,
the purchaser likely will waive this condition to closing. In such
circumstances, the purchaser would agree to indemnify the Venture for any
liabilities incurred in connection with a closing without prior receipt of all
necessary consents.
The Venture's obligations under the Purchase and Sale Agreement are subject
to the following conditions: (a) the receipt of the purchase price for the
Albuquerque System, (b) the limited partners of the Partnership, Fund 12-C and
Fund 12-D shall have approved the Venture's sale of the Albuquerque System and
(c) the statutory waiting periods applicable to the Purchase and Sale
Agreement and the transactions contemplated thereby under the HSR Act shall
have terminated or shall have expired.
FEDERAL INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the Partnership
of the federal income tax consequences to the Partnership and to its partners
arising from the sale of the Albuquerque System. The tax information included
herein was prepared by the tax department of the General Partner. The tax
information is taken from tax data compiled by the General Partner in its role
as the Partnership's tax administrator and is not based upon the advice or
formal opinion of counsel. The tax discussion that follows is merely intended
to inform the limited partners of factual information and should not be
considered tax advice.
By the expected date of the Albuquerque System's sale, most of the limited
partners will have received certain tax benefits from their investment in the
Partnership. Assuming maximum federal income tax rates and no other sources of
passive income, original limited partners of the Partnership will have
received $7,328,310 in tax benefits from Partnership losses ($132 per $1,000
invested).
The sale of the Albuquerque System will result in a gain for federal income
tax purposes. The amount of this gain allocated to limited partners is
approximately $12,826,023. The General Partner estimates that $10,598,848
($191 per $1,000 invested) of this gain will be treated as ordinary income.
This amount of ordinary income results from the recapture of depreciation on
personal property under Section 1245. The General Partner estimates that the
remainder of the gain, $2,227,175 ($40 per $1,000 invested), will be treated
as long term capital gain under Section 1231. No significant passive loss
carryforwards from the Partnership should be available to offset these gain
allocations.
Assuming the 31 percent rate applies to ordinary income and the 20 percent
rate applies to long term capital gain income, as a result of the sale of the
Albuquerque System, a limited partner will be subject to federal income taxes
of $67 per $1,000 invested in the Partnership. The taxable income will be
recognized in the year of the closing of the sale, which is expected to be
1998.
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Limited partners that have acquired their partnership interests recently in
the limited partnership secondary market will have allocable income from the
sale of the Albuquerque System in the amounts reported herein. Because the
Partnership does not have an IRC Section 754 election in effect, the purchase
of limited partnership interests in the Partnership places the new limited
partner in the same position as the person from whom he purchased his limited
partnership interests except for passive loss carryforwards and tax basis in
the limited partnership interests. Recent investors will not have their net
tax basis in the partnership interests reflected on their annual Schedule K-
1s. These limited partners must track their tax basis by adjusting their
original costs by allocable income or loss and partnership distributions.
Their adjusted tax basis will be pertinent in the year when they sell their
limited partnership interests or when the Partnership is liquidated.
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a withholding tax on their share of the
Partnership's income from the sale of the Albuquerque System. The withholding
rates are 39.6 percent for individual partners and 35 percent for corporate
partners. The tax withheld will be remitted to the Internal Revenue Service
and the foreign person will receive a credit on their U.S. tax return for the
amount of the tax withheld by the Partnership. The tax withheld will be
treated as a distribution to the limited partner.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP
AND THE GENERAL PARTNER
The General Partner acquires, develops and operates cable television systems
for itself and for its managed limited partnerships. Based on the number of
basic subscribers served by the General Partner's owned and managed cable
television systems, the General Partner is one of the ten largest cable
television system operators in the United States serving approximately 1.5
million basic subscribers. The principal executive offices of the Partnership
and the General Partner are located at 9697 East Mineral Avenue, Englewood,
Colorado 80112, and their telephone number is (303) 792-3111.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Reports and other information filed by
the Partnership can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following regional offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
Commission also maintains a World Wide Web site that contains reports, proxy
statements and information statements of registrants (including the
Partnership) that file electronically with the Commission at
http://www.sec.gov. The Partnership will continue in existence and will
continue to be subject to the informational reporting requirements of the
Exchange Act after the sale of the Albuquerque System. The Partnership's
registration and reporting requirements under the Exchange Act will not be
terminated until the dissolution of the Partnership after the sale of the
Venture's Palmdale/Lancaster System.
The General Partner also is subject to the informational filing requirements
of the Exchange Act and, in accordance therewith, files periodic reports,
proxy statements and other financial information with the Securities and
Exchange Commission relating to its business, financial condition and other
matters. Information, as of particular dates, concerning the General Partner's
directors and officers, their compensation, options granted to them, the
principal holders of the General Partner's securities and any material
interest of such persons in transactions with the General Partner is required
to be disclosed in certain documents filed with the Commission. Such reports,
proxy statements and other information may be inspected at the above-listed
public reference
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<PAGE>
facilities maintained by the Commission and at the Commission's World Wide Web
site. Copies of such materials may be obtained upon payment of the
Commission's prescribed charges by writing to the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The name, business address and principal occupation and employment for the
past five years of each of the directors and executive officers of the General
Partner are set forth in Schedule 1 to this Proxy Statement. To the best
knowledge of any of the persons listed on Schedule 1 hereto, except as
disclosed on such schedule, no persons listed on such schedule beneficially
own any limited partnership interests in the Partnership.
Except as disclosed herein, neither the General Partner nor, to the best of
its knowledge, any of the persons listed on Schedule 1 hereto, has any
contract, arrangement, understanding or relationship with any other person
with respect to any limited partnership interest of the Partnership,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any of such interests,
joint ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies.
CERTAIN RELATED PARTY TRANSACTIONS
The General Partner and its affiliates engage in certain transactions with
the Venture. The General Partner believes that the terms of such transactions
are generally as favorable as could be obtained by the Venture from
unaffiliated parties. This determination has been made by the General Partner
in good faith, but none of the terms were or will be negotiated at arm's-
length and there can be no assurance that the terms of such transactions have
been or will be as favorable as those that could have been obtained by the
Venture from unaffiliated parties.
The purchase price for the Albuquerque System was determined in accordance
with the provisions of the Partnership Agreement but the proposed sale of the
Albuquerque System by the Venture to the General Partner or to one of the
General Partner's subsidiaries was not negotiated at arm's-length and thus
there can be no assurance that the terms of such transaction have been or will
be as favorable as those that could have been obtained by the Venture from an
unaffiliated purchaser.
The General Partner charges the Venture a management fee relating to the
General Partner's management of the Venture's cable television systems, and
the Venture reimburses the General Partner for certain allocated overhead and
administrative expenses in accordance with the terms of the Partnership
Agreement. These expenses consist primarily of salaries and benefits paid to
corporate personnel, rent, data processing services and other facilities
costs. Such personnel provide engineering, marketing, administrative,
accounting, legal and investor relations services to the Venture. Allocations
of personnel costs are based primarily on actual time spent by employees of
the General Partner with respect to cable television systems managed. Systems
owned by the General Partner and its subsidiaries and all other systems owned
by partnerships for which Jones Intercable, Inc. or one of its subsidiaries is
the general partner are also allocated a proportionate share of these
expenses. No duplicate management or other fees or reimbursements are charged
to the Partnership.
The General Partner from time to time also advances funds to the Venture and
charges interest on the balances payable by the Venture. The interest rate
charged the Venture approximates the General Partner's weighted average cost
of borrowing.
Jones Education Company is an affiliate of the General Partner that, through
a subsidiary, owns and operates Knowledge TV, a network that provides
programming related to computers and technology; business, careers and
finance; health and wellness; and global culture and languages. Jones
Education Company sells its programming to certain cable television systems
owned or managed by the General Partner, including the Venture's systems.
The Great American Country network provides country music video programming
to certain cable television systems owned or managed by the General Partner,
including the Venture's systems. This network is owned and operated by Great
American Country, Inc., a subsidiary of Jones International Networks, Ltd., an
affiliate of the General Partner.
25
<PAGE>
Jones Galactic Radio, Inc. is a company owned by Jones International
Networks, Ltd. Superaudio, a joint venture between Jones Galactic Radio, Inc.
and an unaffiliated entity, provides satellite programming to certain cable
television systems owned or managed by the General Partner, including the
Venture's systems.
The Product Information Network Venture (the "PIN Venture") is a venture
among a subsidiary of Jones International Networks, Ltd. and two unaffiliated
cable system operators. The PIN Venture operates the Product Information
Network ("PIN"), which is a 24-hour network that airs long-form advertising
generally known as "infomercials." The PIN Venture generally makes incentive
payments of approximately 60 percent of its net advertising revenue to the
cable systems that carry its programming. Most of the General Partner's owned
or managed systems carry PIN for all or part of each day. Revenues received by
the Venture from the PIN Venture relating to the Venture's owned cable
television systems totaled $153,182 for the nine months ended September 30,
1997 and $191,011 for the year ended December 31, 1996.
The charges to the Venture for related party transactions were as follows
for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
FOR THE NINE MONTHS --------------------------------
ENDED SEPTEMBER 30, 1997 1996 1995 1994
------------------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Management fees....... $3,066,673 $4,118,188 $5,069,985 $4,461,154
Allocation of
expenses............. 3,474,672 5,491,265 7,183,663 6,951,110
Interest expense...... 0 0 220,743 33,627
Amount of notes and
advances outstanding. 0 0 4,198,739 616,810
Highest amount of
notes and advances
outstanding.......... 0 0 4,574,572 929,508
Programming fees:
Jones Education
Company............ 183,800 374,709 428,937 196,004
Great American
Country............ 100,711 141,753 0 0
Superaudio.......... 87,698 116,710 135,861 135,346
</TABLE>
USE OF PROCEEDS FROM ALBUQUERQUE SYSTEM SALE
The following is a brief summary of the Venture's estimated use of proceeds
and of the Partnership's estimated use of its portion of the proceeds from the
Venture's sale of the Albuquerque System. All of the following selected
financial information is based upon amounts as of September 30, 1997 and
certain estimates of liabilities at closing. Final results may differ from
these estimates. A more detailed discussion of the financial consequences of
the sale of the Albuquerque System is set forth below under the caption
"Unaudited Pro Forma Financial Information." All limited partners are
encouraged to review carefully the unaudited pro forma financial statements
and notes thereto.
If the holders of a majority of limited partnership interests of the three
partnerships that comprise the Venture approve the proposed sale of the
Albuquerque System and the transaction is closed, the Venture will repay its
outstanding Senior Notes balance of $47,479,874 plus a make whole premium
that, based on current market interest rates, is estimated to total $3,354,060
and, subject to an amendment to the Venture's credit facility to permit a
portion of the sale proceeds to be distributed to the three constituent
partnerships of the Venture, the Venture will repay an estimated $49,767,578
of the then outstanding balance of its credit facility, leaving an estimated
$41,900,000 of debt outstanding under the amended credit facility secured by
the Palmdale/Lancaster System, and then the $125,000,000 net sale proceeds
will be distributed to the three constituent partnerships of the Venture in
proportion to their ownership interests in the Venture. Because the make whole
premium will be calculated as of the closing date using the then-current
market interest rates, the exact amount of the make whole premium cannot be
determined precisely until the closing date. The closing adjustments will not
affect the amount of the net sale proceeds distributed to the partnerships.
The Partnership will receive 9 percent of the net sale proceeds, estimated to
total approximately $11,474,475, and the Partnership
26
<PAGE>
will distribute this portion of the net sale proceeds to its partners of
record as of the closing date of the sale of the Albuquerque System and
pursuant to the terms of the Partnership Agreement. The estimated uses of the
sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price of the Albuquerque System................. $222,963,267
Add:Cash on Hand............................................... 169,913
Estimated Net Closing Adjustments.......................... 2,468,332
Less:Repayment of Debt......................................... (97,247,452)
Make Whole Premium....................................... (3,354,060)
------------
Cash Available for Distribution to Joint Venturers........ 125,000,000
Cash Distributed to Fund 12-C and Fund 12-D............... 113,525,525
------------
Cash Available for Distribution by the Partnership........ $ 11,474,475
============
Limited Partners' Share (75%)............................. $ 8,605,856
============
General Partner's Share (25%)............................. $ 2,868,619
============
</TABLE>
Based upon financial information available at September 30, 1997, below is
an estimate of all cash distributions that will have been made to limited
partners after the distribution of the proceeds from the sale of the
Albuquerque System is completed.
<TABLE>
<S> <C>
Summary of Estimated Cash Distributions to Limited Partners:
Return of Limited Partners' Initial Capital on the 1995 Sale
of the Partnership's Augusta System......................... $ 55,517,500
Limited Partners' Share of Residual Proceeds on the 1995 Sale
of the Partnership's Augusta System......................... 40,561,875
Limited Partners' Share of Residual Proceeds on the 1996 Sale
of the Venture's Tampa System............................... 3,787,000
Limited Partners' Share of Residual Proceeds on the 1998 Sale
of the Venture's Albuquerque System......................... 8,605,856
------------
Total Estimated Cash Received by Limited Partners............ $108,472,231
============
Total Cash Received per $1,000 of Limited Partnership
Capital..................................................... $ 1,954
============
Total Cash Received per $500 Limited Partnership Interest ... $ 977
============
</TABLE>
The estimated after-tax internal rate of return on an investment in the
Partnership is approximately 5.65 percent. This internal rate of return
includes the distribution to be made on the sale of the Albuquerque System and
the prior distribution of the net proceeds from the sale of the Venture's
Tampa System and the prior distributions of the net proceeds from the sale of
the Partnership's Augusta System.
Based on financial information available at September 30, 1997, the
following table presents the estimated results of the Partnership when the
Venture has completed the sale of the Albuquerque System:
<TABLE>
<S> <C>
Dollar Amount Raised......................................... $ 55,517,500
Number of Cable Television Systems Purchased Directly........ One
Number of Cable Television Systems Purchased Indirectly...... Five
Date of Closing of Offering.................................. September 1985
Date of First Sale of Properties............................. August 1987
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations............................................ $(1,091)
--from recapture............................................. $ 1,963
Capital Gain (Loss).......................................... $ 147
Cash Distributions to Investors
Source (on GAAP basis)
--investment income.......................................... $ 954
--return of capital.......................................... $ 1,000
Source (on cash basis)
--sales...................................................... $ 1,954
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF CABLE TV FUND 12-B, LTD.
The following unaudited pro forma financial statements assume that as of
September 30, 1997, the Venture had sold the Albuquerque System for
$222,963,267. The funds available to the Venture, adjusting for the estimated
net closing adjustments of the Albuquerque System, are expected to total
approximately $225,431,599. Such funds plus cash on hand will be used to repay
indebtedness and to distribute $125,000,000 to the three constituent
partnerships of the Venture pursuant to the percentage ownership interests in
the Venture of each partnership and then each partnership will distribute its
share of the distribution pursuant to the terms of their partnership
agreements. The Partnership will receive $11,474,475 from such distribution.
Pursuant to the terms of the Partnership Agreement, the $11,474,475
distribution will be allocated 75 percent to the limited partners ($8,605,856)
and 25 percent to the General Partner ($2,868,619). The limited partner
distribution of $8,605,856 represents $78 per each $500 limited partnership
interest or $156 for each $1,000 invested in the Partnership.
The unaudited pro forma financial statements should be read in conjunction
with the appropriate notes to the unaudited pro forma financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF SEPTEMBER 30, 1997 AND CERTAIN ESTIMATES OF LIABILITIES AT
CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
29
<PAGE>
CABLE TV FUND 12-B, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $ 55,348 $ -- $ 55,348
Distribution receivable from cable
television joint venture................ -- 11,474,475 11,474,475
---------- ----------- -----------
Total Assets......................... $ 55,348 $11,474,475 $11,529,823
========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
(DEFICIT)
Liabilities:
Loss in excess of investment in cable
television joint venture.............. $2,293,628 $ (292,681) $ 2,000,947
Accrued distribution to Limited
Partners.............................. -- 8,605,856 8,605,856
Accrued distribution to General
Partner............................... -- 2,868,619 2,868,619
---------- ----------- -----------
Total Liabilities.................... 2,293,628 11,181,794 13,475,422
---------- ----------- -----------
Partners' Capital (Deficit):
General Partner........................ (190,748) 2,927 (187,821)
Limited Partners....................... (2,047,532) 289,754 (1,757,778)
---------- ----------- -----------
Total Partners' Capital (Deficit).... (2,238,280) 292,681 (1,945,599)
---------- ----------- -----------
Total Liabilities and Partners' Capital
(Deficit)............................. $ 55,348 $11,474,475 $11,529,823
========== =========== ===========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited balance sheet.
30
<PAGE>
CABLE TV FUND 12-B, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ----------
<S> <C> <C> <C>
EQUITY IN NET INCOME OF CABLE TELEVISION
JOINT VENTURE.............................. $5,722,705 $489,441 $6,212,146
---------- -------- ----------
NET INCOME ................................. $5,722,705 $489,441 $6,212,146
========== ======== ==========
NET INCOME PER LIMITED PARTNERSHIP INTEREST. $ 40.47 $ 43.93
========== ==========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
31
<PAGE>
CABLE TV FUND 12-B, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ---------
<S> <C> <C> <C>
EQUITY IN NET INCOME (LOSS) OF CABLE
TELEVISION
JOINT VENTURE............................... $(141,971) $292,681 $150,710
--------- -------- --------
NET INCOME (LOSS) ........................... $(141,971) $292,681 $150,710
========= ======== ========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP
INTEREST.................................... $ (1.26) $ 1.34
========= ========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
32
<PAGE>
CABLE TV FUND 12-B, LTD.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The Partnership has a 9 percent ownership interest in the Venture through
capital contributions made during 1986 of $12,437,500. The following
calculations present the sale of the Albuquerque System and the resulting
estimated distributions to be received by the Partnership.
2) The unaudited pro forma balance sheet of the Partnership assumes that the
Venture had sold the Albuquerque System for $222,963,267 as of September 30,
1997. The unaudited statements of operations of the Partnership assumes that
the Venture had sold the Albuquerque System as of January 1, 1996.
3) The Partnership will receive $11,474,475 from the Venture. Pursuant to
the terms of the Partnership Agreement, the $11,474,475 distribution will be
allocated 75 percent to the limited partners ($8,605,856) and 25 percent to
the General Partner ($2,868,619). The limited partner distribution of
$8,605,856 represents $78 per each $500 limited partnership interest or $156
for each $1,000 invested in the Partnership.
4) The estimated gain recognized from the sale of the Albuquerque System and
corresponding estimated distribution to limited partners as of September 30,
1997 has been computed as follows:
GAIN ON SALE OF ASSETS:
<TABLE>
<S> <C>
Contract sales price............................................. $222,963,267
Less: Net book value of investment in cable television properties
at September 30, 1997...................................... (74,519,734)
Make whole premium............................................ (3,354,060)
------------
Gain on sale of assets........................................... $145,089,473
============
Partnership's share of gain on sale of assets.................... $ 13,318,604
============
DISTRIBUTIONS TO PARTNERS:
Contract sales price............................................. $222,963,267
Add:Trade receivables, net....................................... 2,395,015
Prepaid expenses................................................. 2,369,309
Less:Accrued liabilities......................................... (2,049,251)
Subscriber prepayments........................................... (246,741)
------------
Adjusted cash received........................................... 225,431,599
Less:Outstanding debt to third parties........................... (97,247,452)
Make whole premium............................................... (3,354,060)
Add:Cash on hand................................................. 169,913
------------
Cash available for distribution to joint venturers............... 125,000,000
Cash distributed to Fund 12-C and Fund 12-D...................... 113,525,525
------------
Cash available for distribution by the Partnership............... $ 11,474,475
============
Limited Partners' share (75%).................................... $ 8,605,856
============
General Partner's share (25%).................................... $ 2,868,619
============
</TABLE>
33
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 are
being mailed to the limited partners of the Partnership together with this
Proxy Statement. Copies of the three independent appraisals of the fair market
value of the Albuquerque System and copies of the Purchase and Sale Agreement
between the Venture and the General Partner have been publicly filed with the
Securities and Exchange Commission and may be inspected at the Commission's
public reference facilities and at its World Wide Web site, and such documents
also are available to each limited partner of the Partnership upon written
request to Elizabeth M. Steele, Secretary, Jones Intercable, Inc., 9697 East
Mineral Avenue, Englewood, Colorado 80112, (303) 792-3111. Copies of these
documents will be provided at the expense of the requesting limited partner.
A Rule 13e-3 Transaction Statement furnishing certain additional information
with respect to the transaction described herein has been jointly filed by the
Partnership and the General Partner with the Securities and Exchange
Commission. This document may be inspected at the Commission's public
reference facilities and at its World Wide Web site.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997 and
the Partnership's Current Report on Form 8-K filed August 1, 1997 are
incorporated by reference in their entirety in this Proxy Statement.
34
<PAGE>
SCHEDULE 1
EXECUTIVE OFFICERS AND DIRECTORS OF THE GENERAL PARTNER
Set forth below is the name, residence or business address, present
principal occupation or employment and five-year employment history of the
executive officers and directors of the General Partner. Also set forth is the
aggregate number of limited partnership interests of the Partnership
beneficially owned by each such person. The present principal occupation of
each executive officer of the General Partner is as an executive officer of
the General Partner. The Partnership has no officers or employees. All persons
listed except for Messrs. Burney, Kearney and Vanaselja are citizens of the
United States. Messrs. Burney, Kearney and Vanaselja are citizens of Canada.
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Glenn R. Jones Mr. Jones has served as Chairman of the Board of 0
c/o Jones Intercable, Directors and Chief Executive Officer of the
Inc. 9697 E. Mineral General Partner since its formation in 1970. He
Avenue Englewood, CO served as President of the General Partner from
80112 1984 to 1988. Mr. Jones has been involved in
the cable television business in various
capacities since 1961.
Christopher J. Bowick Mr. Bowick is the General Partner's Group Vice 0
c/o Jones Intercable, President/Technology and its Chief Technical
Inc. 9697 E. Mineral Officer. Prior to joining the General Partner
Avenue Englewood, CO in 1991, Mr. Bowick worked as Vice President of
80112 Engineering of Scientific Atlanta's
transmission systems business division.
Derek H. Burney Mr. Burney was appointed a Director of the 0
c/o Bell Canada General Partner in December 1994 and he became
International Inc. Vice Chairman of the General Partner's Board of
1000 rue de la Directors in January 1995. Mr. Burney joined
Gauchetiere Bureau 1100 BCE Inc., Canada's largest telecommunications
Montreal (PQ) company, in January 1993, and he is Chairman
Canada H3B 4Y8 and Chief Executive Officer of Bell Canada
International Inc., a subsidiary of BCE Inc.
Prior to joining BCE Inc., Mr. Burney was
Canada's ambassador to the United States from
1989 to 1992.
Robert E. Cole Mr. Cole was appointed a Director of the General 0
c/o Jones Intercable, Partner in March 1996. Mr. Cole is currently
Inc. self-employed as a partner of First Variable
9697 E. Mineral Avenue Insurance Marketing and is responsible for
Englewood, CO 80112 marketing to National Association of Securities
Dealers, Inc. firms in northern California,
Oregon, Washington and Alaska. From 1993 to
1995, Mr. Cole was the director of marketing
for Lamar Life Insurance Company; from 1992 to
1993, Mr. Cole was senior vice president of PMI
Inc., a third party lender serving the special
needs of corporate owned life insurance (COLI);
and from 1988 to 1992, Mr. Cole was the
principal of a specialty investment banking
firm that provided services to finance the
ownership and growth of emerging companies,
productive assets and real property.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Kevin P. Coyle Mr. Coyle, Group Vice President/Finance of the 0
c/o Jones Intercable, General Partner, has been the General Partner's
Inc. 9697 E. Mineral Chief Financial Officer since 1990. Mr. Coyle
Avenue Englewood, CO has been an associate of the finance department
80112 of the General Partner since 1981.
William E. Frenzel Mr. Frenzel was appointed a Director of the 0
1775 Massachusetts General Partner in April 1995. He has been a
Avenue, NW Guest Scholar since 1991 with the Brookings
Washington, DC 20036 Institution, a research organization located in
Washington, DC. Until his retirement in January
1991, Mr. Frenzel served for twenty years in
the United States House of Representatives.
Donald L. Jacobs Mr. Jacobs was appointed a Director of the 0
60435 Tekampe Road General Partner in April 1995. Mr. Jacobs is a
Bend, OR 97702 retired executive officer of TRW. Prior to his
retirement in 1992, he was Vice President and
Deputy Manager of the Space and Defense Sector;
prior to that appointment, he was the Vice
President and General Manager of the Defense
Systems Group; and prior to that appointment,
he was President of ESL, Inc., a subsidiary of
TRW.
Larry Kaschinske Mr. Kaschinske has been the Controller and Chief 0
c/o Jones Intercable, Accounting Officer of the General Partner since
Inc. 9697 E. Mineral 1994. Mr. Kaschinske has been an associate of
Avenue Englewood, CO the finance department of the General Partner
80112 since 1984.
Robert Kearney Mr. Kearney was appointed a Director of the 0
c/o Bell Canada General Partner in July 1997. Mr. Kearney is a
International Inc. retired executive officer of Bell Canada. Prior
1000 rue de la to his retirement in December 1993, Mr. Kearney
Gauchetiere was the President and Chief Executive Officer
Bureau 1100 of Bell Canada. He served as Chairman of BCE
Montreal (PQ) Canadian Telecom Group in 1994 and as Deputy
Canada H3B 4Y8 Chairman of BCI Management Limited in 1995.
James J. Krejci Mr. Krejci has been a Director of the General 0
3100 Arapahoe Avenue Partner since 1987. Mr. Krejci is President and
Boulder, CO 80303 CEO of Imagelink Technologies, Inc., a
privately financed company with leading
technology in the desktop or personal computer
videoconferencing market. Prior to joining
Imagelink Technologies in July 1996, he was the
President of the International Division of
International Gaming Technology headquartered
in Reno, Nevada. Prior to joining International
Gaming Technology in May 1994, Mr. Krejci had
been a Group Vice President of the General
Partner since 1987.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
James B. O'Brien Mr. O'Brien has been President and a Director of 0
c/o Jones Intercable, the General Partner since 1989 and a member of
Inc. the Executive Committee of the General
9697 E. Mineral Avenue Partner's Board of Directors since 1993.
Englewood, CO 80112 Mr. O'Brien has been with the General Partner
since 1982 in various operational management
positions.
Raphael M. Solot Mr. Solot was appointed a Director of the 0
501 South Cherry Street General Partner in March 1996. Mr. Solot is an
Denver, CO 80222 attorney in private practice. He has practiced
law for 32 years with an emphasis on franchise,
corporate and partnership law and complex
litigation.
Elizabeth M. Steele Ms. Steele joined the General Partner in 1987 as 0
c/o Jones Intercable, Vice President/General Counsel and Secretary.
Inc. Prior to that time, Ms. Steele was a partner at
9697 E. Mineral Avenue Davis, Graham & Stubbs, a Denver, Colorado law
Englewood, CO 80112 firm that serves as counsel to the General
Partner.
Howard O. Thrall Mr. Thrall was appointed a director of the 0
c/o Jones Intercable, General Partner in March 1996 and he had
Inc. previously served as a director of the General
9697 E. Mineral Avenue Partner from December 1988 to December 1994.
Englewood, CO 80112 Mr. Thrall is Senior Vice President-Corporate
Development for First National Net, Inc., a
leading service provider for the mortgage
banking industry. From September 1993 through
July 1996, Mr. Thrall served as Vice President
of Sales, Asian Region, for World Airways, Inc.
From 1984 until August 1993, Mr. Thrall was
with the McDonnell Douglas Corporation, where
he was a Regional Vice President, Commercial
Marketing with the Douglas Aircraft Company
subsidiary.
Siim A. Vanaselja Mr. Vanaselja was appointed a Director of the 0
c/o Bell Canada General Partner in August 1996. Mr. Vanaselja
International Inc. joined BCE, Inc., Canada's largest
1000 rue de la telecommunications company, in February 1994
Gauchetiere and he has served in various capacities with
Bureau 1100 that company and its subsidiaries since that
Montreal (PQ) time. He currently serves as Chief Financial
Canada H3B 4Y8 Officer of Bell Canada International Inc., a
BCE Inc. subsidiary. Prior to joining BCE Inc.,
Mr. Vanaselja was a partner in the Toronto
office of KPMG Peat Marwick Thorne.
Ruth E. Warren Ms. Warren has been Group Vice 0
c/o Jones Intercable, President/Operations of the General Partner
Inc. since 1990. Ms. Warren has been with the
9697 E. Mineral Avenue General Partner in various operational
Englewood, CO 80112 management positions since 1980.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Cynthia A. Winning Ms. Winning joined the General Partner as Group 0
c/o Jones Intercable, Vice President/Marketing in December 1994.
Inc. Prior to joining the General Partner, Ms.
9697 E. Mineral Avenue Winning served in 1994 as the President of PRS
Englewood, CO 80112 Inc., a Denver, Colorado sports and event
marketing company. From 1979 to 1981 and from
1986 to 1994, Ms. Winning served as the Vice
President and Director of Marketing for
Citicorp Retail Services, Inc.
Sanford Zisman Mr. Zisman was appointed a Director of the 0
3773 Cherry Creek North Drive- General Partner in June 1996. Mr. Zisman is a
Denver, CO 80209 member of the law firm Zisman & Ingraham, P.C.
of Denver, Colorado. He has practiced law for
32 years, with an emphasis on tax, business and
estate planning and probate administration.
Robert L. Zoellick Mr. Zoellick was appointed a Director of the 0
3900 Wisconsin General Partner in April 1995. Mr. Zoellick is
Avenue, NW Executive Vice President for Housing and Law of
Washington, DC 20016 Fannie Mae, a federally chartered and
stockholder-owned corporation that is the
largest housing finance investor in the United
States. From August 1992 to January 1993, Mr.
Zoellick served as Deputy Chief of Staff of the
White House and Assistant to the President.
From May 1991 to August 1992, Mr. Zoellick
served concurrently as the Under Secretary of
State for Economic and Agricultural Affairs and
as Counselor of the Department of State. From
1985 to 1988, Mr. Zoellick served at the
Department of Treasury in a number of
capacities, including Counselor to the
Secretary.
</TABLE>
S-4
<PAGE>
===============================================================================
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 12-B, Ltd., a Colorado
limited partnership, hereby votes on the sale of Cable TV Fund 12-BCD Venture's
Albuquerque, New Mexico cable television system to Jones Communications of New
Mexico, Inc., an indirect wholly owned subsidiary of Jones Intercable, Inc.,
for a sales price of $222,963,267 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Purchase and
Sale Agreement dated as of July 28, 1997, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
================================================================================
<PAGE>
================================================================================
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME APPEARS
ON LABEL.
DATED: ______________________, 199
___________________________________
Beneficial Owner Signature
(Investor)
___________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
================================================================================
<PAGE>
================================================================================
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 12-B, Ltd., a Colorado
limited partnership, hereby votes on the sale of Cable TV Fund 12-BCD Venture's
Albuquerque, New Mexico cable television system to Jones Communications of New
Mexico, Inc., an indirect wholly owned subsidiary of Jones Intercable, Inc.,
for a sales price of $222,963,267 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Purchase and
Sale Agreement dated as of July 28, 1997, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
================================================================================
<PAGE>
================================================================================
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSED SALE TRANSACTION.
ALL OWNERS MUST SIGN EXACTLY AS
NAME(S) APPEAR ON LABEL.
When limited partnership
interests are held by more than
one person, all owners must sign.
When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corpo-ration,
please sign in full corporation
name by autho-rized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: ______________________, 199
___________________________________
Signature - Investor 1
___________________________________
Signature - Investor 2
___________________________________
Signature - Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
================================================================================
<PAGE>
Exhibit 99.(d)(6)
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to _________ .
Commission File Number: 0-13807
CABLE TV FUND 12-B, LTD.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-0969999
- --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
------------------------------------------------------------------------
Address of principal executive office
(303) 792-3111
----------------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ________
-------
<PAGE>
CABLE TV FUND 12-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------ ------------- ------------
<S> <C> <C>
CASH $ 55,348 $ 55,348
----------- -----------
Total assets $ 55,348 $ 55,348
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Loss in excess of investment in cable
television joint venture $ 2,293,628 $ 2,151,657
------------ ------------
Total liabilities 2,293,628 2,151,657
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Distributions (14,782,875) (14,782,875)
Accumulated earnings 14,591,127 14,592,547
------------ ------------
(190,748) (189,328)
------------ ------------
Limited Partners-
Net contributed capital (111,035 units
outstanding at September 30, 1997
and December 31, 1996) 47,645,060 47,645,060
Distributions (99,879,837) (99,879,837)
Accumulated earnings 50,187,245 50,327,796
------------ ------------
(2,047,532) (1,906,981)
------------ ------------
Total liabilities and
partners' capital (deficit) $ 55,348 $ 55,348
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
<PAGE>
CABLE TV FUND 12-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1997 1996 1997 1996
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
EQUITY IN NET INCOME (LOSS) OF CABLE
TELEVISION JOINT VENTURE $ 4,289 $(185,496) $(141,971) $5,908,601
-------- --------- --------- ----------
NET INCOME (LOSS) $ 4,289 $(185,496) $(141,971) $5,908,601
======== ========= ========= ==========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 43 $ (1,855) $ (1,420) $ 59,086
======== ========= ========= ==========
Limited Partners $ 4,246 $(183,641) $(140,551) $5,849,515
======== ========= ========= ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $.04 $(1.65) $(1.26) $ 52.68
======== ========= ========= ==========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 111,035 111,035 111,035 111,035
======== ========= ========= ==========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements.
3
<PAGE>
CABLE TV FUND 12-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (141,971) $ 5,908,601
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Decrease in closing adjustment receivable - 1,064,238
Equity in net (income) loss of cable television
joint venture 141,971 (5,908,601)
----------- -----------
Net cash provided by operating activities - 1,064,238
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distribution from cable television venture - 5,049,000
----------- -----------
Net cash provided by investing activities - 5,049,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Limited Partners - (4,700,462)
Distributions to General Partner - (1,562,250)
----------- -----------
Net cash used in financing activities - (6,262,712)
----------- -----------
Decrease in cash - (149,474)
Cash, beginning of period 55,348 204,822
----------- -----------
Cash, end of period $ 55,348 $ 55,348
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ -
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements.
4
<PAGE>
CABLE TV FUND 12-B, LTD.
------------------------
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
(1) This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a fair presentation of the Balance Sheets and
Statements of Operations and Cash Flows in conformity with generally accepted
accounting principles. However, in the opinion of management, this data includes
all adjustments, consisting only of normal recurring accruals, necessary to
present fairly the financial position of Cable TV Fund 12-B, Ltd. (the
"Partnership") at September 30, 1997 and December 31, 1996, its results of
operations for the three and nine month periods ended September 30, 1997 and
1996 and its cash flows for the nine month periods ended September 30, 1997 and
1996. Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
The Partnership owns no properties directly. The Partnership owns a 9
percent interest in Cable TV Fund 12-BCD Venture (the "Venture"). The Venture
owns and operates the cable television systems serving certain areas in and
around Albuquerque, New Mexico (the "Albuquerque System") and Palmdale,
California (the "Palmdale System"). The Venture sold the cable television
system serving the areas in and around Tampa, Florida (the "Tampa System") on
February 28, 1996.
(2) On July 28, 1997, the Venture entered into a purchase and sale agreement to
sell the Albuquerque System to the General Partner for a sales price of
$222,963,267, which price represents the average of three separate independent
appraisals of the fair market value of the Albuquerque System. The closing of
this sale is subject to a number of conditions, including the approval of the
holders of a majority of the limited partnership interests in each of the three
partnerships that comprise the Venture and necessary governmental and other
third party consents. Closing is expected to occur late in the first quarter of
1998. Upon the consummation of the sale of the Albuquerque System, the Venture
will repay its outstanding Senior Notes balance of $47,479,874 plus a make whole
premium that, based on current market interest rates, is estimated to total
approximately $3,354,060 and the Venture will repay approximately $49,767,578 of
the then outstanding balance of its credit facility, and then the remaining
$125,000,000 of net sale proceeds will be distributed to the three constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. The Partnership accordingly will receive 9 percent of such proceeds,
estimated to total approximately $11,474,475, and the Partnership will
distribute this portion of the net sale proceeds to its partners of record as of
the closing date of the sale of the Albuquerque System. Because limited partners
have already received distributions in an amount in excess of the capital
initially contributed to the Partnership by the limited partners, the
Partnership's portion of the net proceeds from the Albuquerque System's sale
will be distributed 75 percent to the limited partners and 25 percent to the
General Partner. The limited partners of the Partnership, as a group, will
receive approximately $8,605,856 and the General Partner will receive
approximately $2,868,619. Limited partners will receive $78 for each $500
limited partnership interest, or $156 for each $1,000 invested in the
Partnership, from the Partnership's portion of the net proceeds of the
Albuquerque System's sale. Once the Partnership has completed the distribution
of its portion of the net proceeds from the sale of the Albuquerque System,
limited partners of the Partnership will have received a total of $977 for each
$500 limited partnership interest, or $1,954 for each $1,000 invested in the
Partnership taking into account the prior distributions to limited partners made
in 1995 and 1996 from the net proceeds of the sales of the Augusta System and
the Tampa System. The Venture will continue to own and operate the Palmdale
System.
(3) Jones Intercable, Inc., a publicly held Colorado corporation (the "General
Partner"), manages the Venture and receives a fee for its services equal to 5
percent of the gross revenues of the Venture, excluding revenues from the sale
of cable television systems or franchises. Management fees paid by the Venture
to the General Partner during the three and nine month periods ended September
30, 1997 attributable to the Partnership's 9 percent interest in the Venture
were $94,020 and $281,521, respectively, compared to $88,767 and $286,040,
respectively, for the comparable periods in 1996.
The Venture reimburses the General Partner for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services, and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Such services, and their related costs, are necessary to the operation
of the Venture and would have been incurred by the Venture if it was a stand
alone entity. Allocations of personnel costs are primarily based on actual time
spent by employees of the General Partner with respect to each partnership
managed. Remaining overhead costs are allocated based on the pro rata
relationship of the Venture's revenues to the total revenues of all systems
owned
5
<PAGE>
or managed by the General Partner and certain of its subsidiaries. Systems owned
by the General Partner and all other systems owned by partnerships for which
Jones Intercable, Inc. is the general partner are also allocated a proportionate
share of these expenses. The General Partner believes that the methodology used
in allocating overhead and administrative expenses is reasonable. Amounts
charged the Venture by the General Partner for allocated overhead and
administrative expenses during the three and nine month periods ended September
30, 1997 attributable to the Partnership's 9 percent interest in the Venture
were $100,171 and $318,975, respectively, compared to $102,416 and $371,497,
respectively, for the comparable periods in 1996.
See Note 4 for disclosure of the total management fees and allocated
overhead and administrative expenses paid by the Venture.
(4) Summarized financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
ASSETS September 30, 1997 December 31, 1996
- ------ ------------------- ------------------
<S> <C> <C>
Cash and accounts receivable $ 3,678,296 $ 4,191,019
Investment in cable television properties 113,136,554 113,671,437
Other assets 4,376,837 3,036,880
------------- -------------
Total assets $ 121,191,687 $ 120,899,336
============= =============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 140,344,284 $ 138,345,878
Payables and accrued liabilities 4,785,407 4,944,940
Partners' contributed capital 135,490,944 135,490,944
Accumulated deficit (104,428,948) (102,882,426)
Distributions (55,000,000) (55,000,000)
------------- -------------
Total liabilities and partners' capital $ 121,191,687 $ 120,899,336
============= =============
</TABLE>
6
<PAGE>
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1997 1996 1997 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $20,483,557 $19,339,146 $61,333,466 $62,317,984
Operating expenses 11,170,560 11,214,845 33,857,768 37,638,477
Management fees and
allocated overhead
from General Partner 2,115,364 2,082,596 6,541,345 7,162,703
Depreciation and
amortization 5,112,445 5,212,866 14,777,364 16,473,829
----------- ----------- ----------- -----------
Operating income 2,085,188 828,839 6,156,989 1,042,975
Interest expense, net (2,806,590) (2,770,590) (8,227,095) (8,645,364)
Gain on sale of cable
television system - - - 71,914,391
Other, net 768,128 (78,905) 523,584 51,840
----------- ----------- ----------- -----------
Net income (loss) $ 46,726 $(2,020,656) $(1,546,522) $64,363,842
=========== =========== =========== ===========
</TABLE>
Management fees paid to Jones Intercable, Inc. by the Venture totaled
$1,024,178 and $3,066,673, respectively, for the three and nine month periods
ended September 30, 1997, and $966,957 and $3,115,899, respectively, for the
comparable periods in 1996. Reimbursements for overhead and administrative
expenses paid to Jones Intercable, Inc. by the Venture totaled $1,091,186 and
$3,474,672, respectively, for the three and nine month periods ended September
30, 1997, and $1,115,639 and $4,046,804, respectively, for the comparable
periods in 1996.
7
<PAGE>
CABLE TV FUND 12-B, LTD.
------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
It is the General Partner's publicly announced policy that it intends to
liquidate its managed partnerships, including the Partnership, as opportunities
for sales of partnership cable television systems arise in the marketplace over
the next several years. In accordance with the General Partner's policy, the
Partnership has sold its Augusta, Georgia system, the Venture has sold the Tampa
System and the Venture has entered into a purchase and sale agreement to sell
the Albuquerque System.
On July 28, 1997, the Venture entered into a purchase and sale agreement to
sell the Albuquerque System to the General Partner for a sales price of
$222,963,267, which price represents the average of three separate independent
appraisals of the fair market value of the Albuquerque System. The closing of
this sale is subject to a number of conditions, including the approval of the
holders of a majority of the limited partnership interests in each of the three
partnerships that comprise the Venture and necessary governmental and other
third party consents. Closing is expected to occur late in the first quarter of
1998. Upon the consummation of the sale of the Albuquerque System, the Venture
will repay its outstanding Senior Notes balance of $47,479,874 plus a make whole
premium that, based on current market interest rates, is estimated to total
approximately $3,354,060 and the Venture will repay approximately $49,767,578 of
the then outstanding balance of its credit facility, and then the remaining
$125,000,000 of net sale proceeds will be distributed to the three constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. The Partnership accordingly will receive 9 percent of such proceeds,
estimated to total approximately $11,474,475, and the Partnership will
distribute this portion of the net sale proceeds to its partners of record as of
the closing date of the sale of the Albuquerque System. Because limited
partners have already received distributions in an amount in excess of the
capital initially contributed to the Partnership by the limited partners, the
Partnership's portion of the net proceeds from the Albuquerque System's sale
will be distributed 75 percent to the limited partners and 25 percent to the
General Partner. The limited partners of the Partnership, as a group, will
receive approximately $8,605,856 and the General Partner will receive
approximately $2,868,619. Limited partners will receive $78 for each $500
limited partnership interest, or $156 for each $1,000 invested in the
Partnership, from the Partnership's portion of the net proceeds of the
Albuquerque System's sale. Once the Partnership has completed the distribution
of its portion of the net proceeds from the sale of the Albuquerque System,
limited partners of the Partnership will have received a total of $977 for each
$500 limited partnership interest, or $1,954 for each $1,000 invested in the
Partnership taking into account the prior distributions to limited partners made
in 1995 and 1996 from the net proceeds of the sales of the Augusta System and
the Tampa System. The Venture will continue to own and operate the Palmdale
System.
The Partnership owns a 9 percent interest in the Venture. The
Partnership's investment in the Venture is accounted for under the equity
method. The Partnership's share of losses generated by the Venture have
exceeded the Partnership's initial investment in the Venture; therefore, the
investment is classified as a liability. The Partnership expects to recover
such losses upon the sale of the Albuquerque System and the Palmdale System.
This liability increased by $141,971, which represents the Partnership's share
of losses generated by the Venture for the nine months ended September 30, 1997.
For the nine months ended September 30, 1997, the Venture generated net
cash from operating activities totaling $10,656,576, which was available to fund
capital expenditures and non-operating costs. Capital expenditures for the
Venture totaled approximately $13,603,000 during the first nine months of 1997.
Service drops to homes accounted for approximately 39 percent of the capital
expenditures. New plant construction accounted for approximately 29 percent of
the capital expenditures. The remaining expenditures were used to maintain the
value of the Venture's systems. These capital expenditures were funded
primarily from cash on hand, cash generated from operations and borrowings from
the Venture's credit facility. Expected capital expenditures for the remainder
of 1997 are approximately $4,013,000. Service drops to homes are anticipated to
account for approximately 67 percent. Approximately 13 percent of budgeted
capital expenditures is for the purchase of converters. The remainder of the
anticipated expenditures is necessary to maintain the value of the Venture's
systems until they are sold. Funding for these expenditures is expected to be
provided by cash on hand, cash generated from operations and borrowings from the
Venture's credit facility.
8
<PAGE>
The Venture's debt arrangements at September 30, 1997 consisted of
$47,479,874 of Senior Notes placed with a group of institutional lenders and a
$120,000,000 credit facility with a group of commercial bank lenders. The
Senior Notes and the credit facility are equal in standing with the other, and
both are equally secured by the assets of the Venture.
The Senior Notes have a fixed interest rate of 8.64 percent and a final
maturity date of March 31, 2000. The Senior Notes require payments of interest
and accelerating principal through maturity, payable semi-annually in March and
September. Semi-annual principal payments of $3,956,656 were made in March and
September 1997, respectively. These payments were funded from cash on hand,
cash generated from operations and borrowings from the Venture's credit
facility. Upon the sale of the Albuquerque System, the Senior Notes will be
repaid in full together with a make whole premium.
The balance outstanding on the Venture's $120,000,000 credit facility at
September 30, 1997 was $91,630,620, leaving $28,369,380 available for future
needs. Upon the sale of the Albuquerque System and subject to an amendment to
the Venture's credit facility, the Venture anticipates repaying approximately
$49,800,000 of the then outstanding balance of the credit facility and that
there will be a reduction in the maximum amount available for borrowing. At the
Venture's option, the credit facility will be payable in full on December 31,
1999 or will convert to a term loan that matures on December 31, 2004 payable in
consecutive quarterly amounts. Interest on the credit facility is at the
Venture's option of the London Interbank Offered Rate plus 1.125 percent, the
Prime Rate plus .125 percent or the Certificate of Deposit Rate plus 1.25
percent. The effective interest rates on amounts outstanding on the Venture's
credit facility as of September 30, 1997 and 1996 were 7.59 percent and 7.66
percent, respectively.
The Venture has sufficient sources of capital available through its ability
to generate cash from operations and borrowings under its credit facility to
meet its presently anticipated needs.
RESULTS OF OPERATIONS
- ---------------------
As a result of the sale of the Tampa System in February 1996, the following
discussion of the Venture's results of operations, through operating income,
pertains only to the results of operations of the Albuquerque System and the
Palmdale System for all periods discussed.
Revenues in the Albuquerque System and the Palmdale System increased
$1,144,411, or approximately 6 percent, to $20,483,557 for the three months
ended September 30, 1997 from $19,339,146 for the comparable period in 1996.
Revenues increased $3,900,673, or approximately 7 percent, to $61,333,466 for
the nine months ended September 30, 1997 from $57,432,793 for the comparable
period in 1996. These increases in revenues were due primarily to basic service
rate increases and an increase in the number of basic subscribers. Basic
service rate increases accounted for approximately 50 percent and 51 percent of
the increase in revenues for the three and nine months ended September 30, 1997.
The increase in the number of basic subscribers accounted for approximately 22
percent and 21 percent of the increases in revenues for the three and nine
months ended September 30, 1997. Basic service subscribers increased 1,894, or
approximately 1 percent, to 177,108 for the nine month period ended September
30, 1997 from 175,214 for the comparable 1996 period. No other individual
factor significantly affected the increase in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Venture's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses in the Albuquerque System and the Palmdale System
decreased $44,285, or less than 1 percent, to $11,170,560 for the three months
ended September 30, 1997 from $11,214,845 for the comparable period in 1996.
Decreases in marketing and plant related costs primarily accounted for the
decrease in operating expenses. Operating expenses increased $667,973, or
approximately 2 percent, to $33,857,768 for the nine months ended September 30,
1997 from $33,189,795 for the comparable period in 1996. This increase in
operating expenses was primarily due to increases in programming costs.
Operating expenses represented 55 percent of revenues for the three and nine
months ended September 30, 1997 and 58 percent of revenues for the three and
nine month periods ended September 30, 1996. No other individual factor
contributed significantly to the increase in operating expenses.
9
<PAGE>
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). This measure is not intended to be a substitute or
improvement upon the items disclosed on the financial statements, rather it is
included because it is an industry standard. Operating cash flow increased
$1,188,696, or approximately 15 percent, to $9,312,997 for the three months
ended September 30, 1997 from $8,124,301 for the comparable period in 1996.
This increase was due to the increase in revenues and the decrease in operating
expenses. Operating cash flow increased $3,232,700, or approximately 13
percent, to $27,475,698 for the nine months ended September 30, 1997 from
$24,242,998 for the comparable period in 1996. This increase was due to the
increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from the General Partner increased
$32,768, or approximately 2 percent, to $2,115,364 for the three months ended
September 30, 1997 from $2,082,596 for the comparable period in 1996. This
increase was due to the increase in revenues upon which such management fees are
based. This increase was partially offset by a decrease in allocated overhead
from the General Partner. Management fees and allocated overhead from the
General Partner decreased $44,501, or approximately 1 percent, to $6,541,345 for
the nine months ended September 30, 1997 from $6,585,846 for the comparable
period in 1996. This decrease was primarily due to decreases in allocated
overhead from the General Partner, which was partially offset by an increase in
management fees.
Depreciation and amortization expense decreased $100,421, or approximately
2 percent, to $5,112,445 for the three months ended September 30, 1997 from
$5,212,866 for the comparable period in 1996. Depreciation and amortization
expense decreased $704,727, or approximately 5 percent, to $14,777,364 for the
nine months ended September 30, 1997 from $15,482,091 for the comparable period
in 1996. These decreases were due to the maturation of the Venture's asset
base.
Operating income increased $1,256,349 to $2,085,188 for the three months
ended September 30, 1997 from $828,839 for the comparable period in 1996.
Operating income increased $3,981,928 to $6,156,989 for the nine months ended
September 30, 1997 compared to $2,175,061 for the comparable period in 1996.
These increases were a result of the increases in operating cash flow and the
decreases in depreciation and amortization expense.
Interest expense increased $36,000, or approximately 1 percent, to
$2,806,590 for the three months ended September 30, 1997 from $2,770,590 for the
comparable period in 1996. This increase was due to higher interest rates on
interest bearing obligations. Interest expense decreased $418,269, or
approximately 5 percent, to $8,227,095 for the nine months ended September 30,
1997 from $8,645,364 for the comparable period in 1996. This decrease was
primarily due to lower outstanding balances on the Venture's interest bearing
obligations.
The Venture recognized a gain of $71,914,391 related to the sale of the
Tampa System in February 1996. No similar gain was recognized in the first nine
months of 1997.
Net loss decreased $1,460,516 to $35,298 for the three months ended
September 30, 1997 compared to $1,495,814 for the comparable period in 1996.
This decrease was a result of the factors discussed above. The Venture reported
a net loss of $1,168,274 for the nine months ended September 30, 1997 compared
to net income of $48,651,036 for the comparable period in 1996. This change was
primarily due to the gain on the sale of the Tampa System.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
Report on Form 8-K dated July 28, 1997 reported that on July 28,
1997, Cable TV Fund 12-BCD Venture entered into a Purchase and Sale
Agreement with Intercable to sell the Albuquerque System to
Intercable for a sales price of $222,963,267.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLE TV FUND 12-B, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 12, 1997
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